Sitting of 22 May 1975

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

ROYAL ASSENT
Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Evidence (Proceedings in Other Jurisdictions) Act 1975

2. Farriers (Registration) Act 1975

3. Air Travel Reserve Fund Act 1975

4. Scrabster Harbour Order Confirmation Act 1975

5. Stornoway Trust Order Confirmation Act 1975

6. London Transport (Additional Powers) Act 1975

7. United Dominions Trust Act 1975

8. Merseyside Metropolitan Railway Act 1975

9. Corn Exchange Act 1975

ORAL ANSWERS TO QUESTIONS
  AGRICULTURE, FISHERIES AND FOOD

    Agricultural Production
    Mr. MacGregorasked the Minister of Agriculture, Fisheries and Food if he will make a statement on his estimate of the combined effects of the imposition of the capital transfer tax, the Community Land Bill, and the proposals for wealth tax and re-rating agricultural land on agricultural production in the United Kingdom.
    The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart): The Government announced in the White Paper "Food from our own Resources" (Cmnd 6020) that they were setting up a review of the effect of capital taxation on agricultural production. This interdepartmental study and the work of the Select Committee on Wealth Tax and of the Layfield Committee on local government finance are now in progress. It is not possible, therefore, to give a worthwhile estimate at this stage.
    Mr. MacGregor: Does the Minister not agree that if he is to achieve his home production of food targets, as set out in the White Paper, it is essential that more and not less capital is invested in agriculture? Does he not accept that the measures either already passed in this House or threatened are very likely drastically to reduce the capital invested in agriculture? Will he, therefore, make much stronger representations—the matter cannot wait for the review on the measures which are either going through this House or threatened—than he did in the case of capital transfer tax?
    Mr. Peart: I am aware that there is concern about this and its effect on investment in the industry. As I have said, there will be an examination of this and as soon as that is complete I may be able to make a further statement.
    Mr. David James: In addition to all these potential burdens, will the Minister tell us how he thinks farmers could deal with vastly increased herds of stock if

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    people like herdsmen and shepherds cannot live in close proximity to the animals they look after?
    Mr. Peart: That is another question.
    Mr. Hicks: The House is entitled to know how the Minister reconciles the aims of his Ministry, which were published in the White Paper, to establish a virile, indigenous domestic agricultural industry, with the proposals of other Government Departments in relation to capital transfer tax, wealth tax, the public acquisition of land and the abolition of tied cottages, and so on, which are all intent on destroying the establishment pattern and structure of British agriculture.
    Mr. Peart: I cannot accept that. That is a complete exaggeration, and the hon. Gentleman knows it. As long as I am Minister of Agriculture I shall make certain that nothing like that ever happens.

    Agricultural Land
    Mr. Shepherdasked the Minister of Agriculture, Fisheries and Food if he will give advice on the continued use of agricultural land as such which is obtained by compulsory purchase by local authorities or under the proposed community land legislation before that land is taken up by the local authority for development.
    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Gavin Strang): Local authorities already acquire land under existing powers and are aware of the need to manage it effectively prior to development. My right hon. Friends the Secretaries of State for the Environment and Wales will be giving further advice as necessary to all authorities acquiring land under the community land scheme.
    Mr. Shepherd: Is the Minister aware that local authorities exercising their duties under the Community Land Bill will control approximately 750,000 acres at the current loss rate of 75,000 acres a year? Does he not agree that the short-term usage of land and inability to plan for land so blighted by local authority acquisition will not help the production of food from our own resources and will make nonsense of the Government's White Paper? Does he not further agree that there is a fundamental
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    incompatability between the policy of the Minister of Agriculture, Fisheries and Food and that of the Secretary of State for the Environment on the question of land acquisition?
    Mr. Strang: No, I cannot accept the bulk of what the hon. Gentleman has said although I agree that where land is scheduled for development it is desirable and in the national interest that it should be retained in agricultural production until the last possible day.
    Mr. Graham Page: Does the Parliamentary Secretary realise that unless he persuades his right hon. Friend the Minister for Planning and Local Government to remove agricultural land entirely from the sphere of the Community Land Bill, it will be disastrous for agriculture?
    Mr. Strang: I cannot accept that. I am sure that the right hon. Gentleman will recognise that a substantial proportion of land which has been developed in the past has been agricultural land, and that situation will continue in the future. That problem will remain with us.
    Mr. McNamara: Is my hon. Friend aware that many local authorities already possess agricultural land and have a very good record in its management?
    Mr. Strang: I am grateful to my hon. Friend. That is indeed the case. Under the Community Land Bill there will be greater scope for them to deploy these resources.

    Glasshouse Industry (Aid)
    Mr. Michael Lathamasked the Minister of Agriculture, Fisheries and Food whether he will now make a further statement on the progress of his negotiations with the EEC over aids for the glasshouse sector of horticulture.
    Mr. Peart: I reported my latest discussions with the EEC Council of Ministers to the House on 1st May.
    Mr. Latham: Have not the Lardinois negotiations and the distress in the horticulture sector in the last five months shown absolutely clearly that the subsidy should never have been removed last December?
    Mr. Peart: As the hon. Gentleman knows full well, the subsidy was a temporary one. We acted long before our

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    Community partners and, indeed, the rate given was much higher, too.
    Mr. Jopling: Is it true that when the Minister was in Brussels a short while ago he voted to allow States within the Community to continue to pay the subsidies after the present subsidy expires? If he did that, how can he possibly refuse that subsidy to British growers when, if it is not paid to them, they will be exposed to unfair competition from other countries which he has allowed to pay that subsidy in the Community?
    Mr. Peart: The hon. Gentleman cannot get away with making wild accusations such as that. [Interruption.] I hope that hon. Members will let me answer the question. The hon. Gentleman knows that the deal which has been suggested, and which still has to be examined, is part of a package deal which involves not merely a direct subsidy of the kind about which we are talking but also modernisation of glasshouses, and so on. I shall be discussing this when I go to Luxembourg on Monday.
    Mr. Stephen Ross: Is the Minister aware that our glasshouse growers have not only had to suffer the removal of the subsidy on oil entirely but are also having to face unfair competition from countries such as Romania, from which large quantities of tomatoes are being dumped here, and Colombia which is dumping carnations? If he is not to take action on these subjects, surely he must reintroduce the oil subsidy.
    Mr. Peart: I shall watch closely the events affecting this matter. However, I cannot make any statement at this stage. We take the view that we must remember the national interest as well. There are other industries which could also be subsidised.

    Lamb, Butter and Cheese (Imports)
    Mr. Gouldasked the Minister of Agriculture, Fisheries and Food what imports levies and customs duties on imports of lamb, butter and cheese from outside the Common Market would cease to be payable if the United Kingdom withdrew from the Common Market.
    Mr. Peart: In such circumstances, the import régime for these and other agricultural commodities would be reviewed
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    in the light of domestic agricultural policy and the negotiations for withdrawal.
    Mr. Gould: Is it not a fact that we must pay these levies and duties solely because we are a member of the Community? Does not this give the lie to the myth that these foods are as cheap in the Community as they are outside it? Could we not reduce the prices of these foodstuffs at a stroke simply by withdrawing from the Community? Is it not a fact that these quite unnecessary taxes bring no benefit to the British people, as the British Government are acting simply as tax collectors for the Community, and that this will raise prices to much higher levels by the end of the transition period?
    Mr. Peart: I hope that my hon. Friend and those who are cheering him will remember that we did not have free trade in these products before we went into the Community. [Interruption.] May I give my hon. Friend the facts? There was a tariff for all lamb, including New Zealand supplies, amounting to about 8 per cent. There was a duty of about 15 per cent. on cheese imports—except those from the Commonwealth, which were duty-free. Butter imports were duty-free but strictly controlled by import quotas. I hope that my hon. Friend will realise that there is no cheap food in the world today. [Interruption.] If my hon. Friend will only have the courage to rise and put a supplementary question, I shall be delighted to answer it.
    Mr. Hooson: Will the Minister confirm that the estimates for this year of the price of a carcase of New Zealand lamb show that two-thirds of the cost will arise from transport and handling charges and only one-third will be attributable to the actual production of the lamb?
    Mr. Peart: Of course. The hon. and learned Gentleman is sensible and rational on this matter.
    Mr. Spence: In what quantities are these foods available in the world? Are the quantities available sufficient to meet the needs of the British people at this time, by comparison with, say, 20 years ago? Has not the quantity position become even more important than the prices position?
    Mr. Peart: I agree. That is why I believe that with the terms which we have

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    negotiated—we have recommended to the country that it accepts what we have achieved—we shall guarantee supplies. That is very important in a world in which we see great fluctuations of world prices.
    Mr. Cryer: Does my right hon. Friend accept that I am very willing to ask questions whenever Mr. Speaker cares to call me, and that it is not a question of courage? Will he explain just why the Common Market insists on maintaining the CAP if there is no food outside the Common Market which is cheaper than that within it?
    Mr. Peart: I think it is reasonable to have a market which has been guaranteed, with prices negotiated every year, in a large community. I see nothing wrong in that. [Interruption.] I hope hon. Members will listen. The basic objectives of the CAP, balancing increased production and the interests of consumers, were precisely the basic objectives of the 1947 Act.

    Dairy Herd
    Mr. Nicholas Wintertonasked the Minister of Agriculture, Fisheries and Food what was the reduction in the national dairy herd in 1974.
    Mr. Strang: In December 1974 the United Kingdom dairy herd was 152,000 head smaller than a year before.
    Mr. Winterton: I thank the Minister for that reply. What assurance can he give to dairy farmers that they will receive an adequate price for their milk this autumn, in view of the fact that it is important that dairy farmers should be enabled to produce a higher quantity per cow and produce more cows for the milk herd?
    Mr. Strang: We certainly wish for an expansion in milk production. In order to secure that, we shall have to give producers an adequate return. I remind the hon. Gentleman that since coming into office the present Government have increased the guaranteed price for milk by 32 per cent.
    Mr. Hardy: Will my hon. Friend confirm that the reduction in the dairy herd last year was in line with the previous Government's policy of persuading farmers to go out of dairy production into
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    beef production? The previous Government had a great deal of success in achieving that aim. However, will my hon. Friend confirm that it is the present Government's policy to persuade people to remain in dairy farming? Will he, therefore, comment on the question whether the reduction in the dairy herd is definitely slowing down?
    Mr. Strang: I assure my hon. Friend that expansion of dairy production is central to our White Paper on increased food production. I agree with him that the dairy conversion scheme had an influence but, more significantly, the very severe erosion of dairy producers' returns the previous winter created a lack of confidence in the industry.
    Mr. Peter Millsasked the Minister of Agriculture, Fisheries and Food if, in the light of the March sample survey results of livestock numbers in Great Britain, which showed that the national dairy herd was estimated to have fallen by 126,000 cows, or by 4·4 per cent., and that the number of cows in calf has fallen by 8 per cent. compared with March 1974, he will make proposals designed to expand the national dairy herd in accordance with the recent Government White Paper "Food from our Own Resources".
    Mr. Strang: We have already raised the guaranteed price for milk to a level 32 per cent. higher than that determined by the last administration a year ago. As indicated in the White Paper, we are continuing discussions with the interests concerned to determine what measures it would be right and practicable to take in order to achieve the expansion.
    Mr. Mills: Will the Minister bear in mind that the Government's aim and the record of what has happened simply do not tally, and that if he wants extra milk production much more will have to be done? Regarding the very interesting phrase, "food from our own resources", will the hon. Gentleman bear in mind that the resources must first be given to the British farmer before he can produce the food?
    Mr. Strang: The Government accept responsibility to take action following publication of the White Paper last month, but I am sure that the hon. Gen-

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    tleman will agree that we cannot accept responsibility for the disastrous situation that we took over from the previous Government.
    Mr. Gould: How does my hon. Friend propose to resolve the conflict between the emphasis in the White Paper on expanding dairy production and the objective of the Community stocktaking paper on the common agricultural policy, of reducing dairy production?
    Mr. Strang: My hon. Friend has raised a pertinent and fair point. We, as a nation, must accept that in or out of the Community we have a balance of payments problem. If it is in our national interest to produce more food, we should do so in or out of the Community.
    Mr. Powell: What was the cause of the miscalculation which resulted in the previous as well as the present Government's measures which have reduced the size of the dairy herd?
    Mr. Strang: I suspect that there are a number of answers to that important question. Certainly one factor has been the over-emphasis put on beef by the previous administration.
    Mr. Buchan: Does my hon. Friend accept that we are delighted with his answer that in or out of the Market we intend to pursue our own best interests? Does that mean that we can now have a guarantee from the Front Bench that they will resist proposals to cut back on dairy production in the Market as a whole and that British interests will not be cut back because of our balance of payments problem?
    Mr. Strang: I think that my hon. Friend will accept that if we are in the Community my right hon. Friend will continue to act in the best interests of the British people.
    Mr. Hicks: Will the Minister tell us where these much-needed resources will come from? Is he aware of the need to make the necessary adjustment in the milk price before the autumn?
    Mr. Strang: The hon. Gentleman will appreciate that we are having discussions with the industry. He would not, therefore, expect me to pre-empt those discussions today.

    Grains and Wheat (Import Levies)
    Mr. Hooleyasked the Minister of Agriculture, Fisheries and Food what estimate he has made of the cost to the United Kingdom in 1975 of the reimposition of import levies on grains and wheat.
    Mr. Strang: Up till now any levies have usually been cancelled out by Community subsidies. The extent to which this will continue to be the case will depend on movements in world prices and exchange rates, which I am unable to forecast.
    Mr. Hooley: Will my hon. Friend confirm that the imposition of these levies demonstrates beyond any refutation that world prices are currently below Community prices? Will he also confirm that in so far as tariffs existed previously on the import of food, as suggested by our right hon. Friend, those tariffs accrued to the British Exchequer and not to continental farmers?
    Mr. Strang: I think that my hon. Friend will recognise that in or out of the Community, as he has acknowledged, we must protect our own producers. He will also recognise the fact that what counts in terms of British consumers is the net effective levy. The net effective levy this day on imported wheat is negative. In fact, at present there is a subsidy of about £1 a ton on imported wheat. The position is that the compensatory amount is almost exactly equal to the overall Community levy.

    Beef Production (European Community Grants)
    Mr. Spenceasked the Minister of Agriculture, Fisheries and Food how many dairy farmers have (a) received and (b) applied for the EEC grants available for changing from milk to beef production; how much has been paid out; and whether he intends to continue with this policy.
    Mr. Freudasked the Minister of Agriculture, Fisheries and Food how many applications were received for entry to the Dairy Herd Conversion Scheme; and if he will quantify the reduction to date, and the potential reduction by 30th June 1975 in the size of the United Kingdom dairy herd.
    Mr. Strang: When the Dairy Herd Conversion Scheme closed to applicants on 31st December 1974, 8,724 farmers had applied in respect of 324,306 dairy cows. However, 4,630 applicants have so far taken advantage of this scheme and received grants, of which 50 per cent. is recoverable from FEOGA funds. It is not possible to estimate the effect of the scheme on the national dairy herd, as many of the better milk animals are now to be found in other herds.
    Mr. Spence: I thank the Minister for his answer, each point of which I have carefully noted. In the light of the experience of the Dairy Herd Conversion Scheme and of the present consumption patterns of liquid milk by the consumer, how, and to what extent, have the consumer and the farmer benefited from this scheme?
    Mr. Strang: This scheme was introduced in October 1973. The hon. Gentleman will appreciate that it is in the interests of the industry to strike the right balance between beef production and milk production.
    Mr. Freud: How does the Minister see this helping to solve the cyclical problem of the beef producers?
    Mr. Strang: This does not help to solve the cyclical problem of the beef producers. The breakthrough achieved by my right hon. Friend in Brussels in obtaining a variable premium—which gives, in effect, a guaranteed price, which we used to have—will help.
    Mr. Flannery: Will the Minister explain the way in which the EEC grants for switching from dairy farming to beef will make the beef mountain higher and higher, so that we can sell it more cheaply to the Soviet Union?
    Mr. Strang: My right hon. Friend made it clear that the Government are opposed to the sale of subsidised food to Russia.

    Milk
    Mr. Peter Morrisonasked the Minister of Agriculture, Fisheries and Food what is the level of milk production based on the latest available figures and as compared with a year previously.
    Mr. Strang: The latest estimate is that in 1974–75 the total United Kingdom
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    sales of milk through marketing schemes were 2,891 million gallons. This compares with a figure for 1973–74 of 2·929 million gallons.
    Mr. Morrison: Will the Minister go a little further than he did in answer to my hon. Friend the Member for Macclesfield (Mr. Winterton) and say exactly how he intends to increase milk production so as to make certain that there is sufficient for the production of butter and cheese?
    Mr. Strang: I confirm that those are the Government's objectives. Our White Paper was published only last month. We are at present discussing with the industry how best to achieve its objectives.
    Mr. Ioan Evans: Will my hon. Friend confirm that at the commanding heights of the European food economy we shall find not only butter and beef mountains but a dried milk mountain? Successive Governments have followed a cheap food policy whereby the farmer was subsidised and given deficiency payments. Does my hon. Friend not feel that that represents a better deal for the British consumer than the dear food policy of the Common Market?
    Mr. Strang: I agree that in or out of the Community we wish to secure a balance between supply and demand. Long before we entered the Community this and previous Governments practised support buying. We bought potatoes in the past and took them into intervention—on some occasions on a substantial scale.
    Mr. Wiggin: Will the Minister state his intentions regarding milk production? Cheese production will end earlier this year than for many years past. Creamery equipment will be left standing. Capital which has been invested will be useless. How will the Minister increase the total production of milk this year?
    Mr. Strang: It is a little rich that the hon. Gentleman, whose Government left the milk industry in such a sorry state, should criticise the Government for not yet having taken action on a White Paper which was published last month and which followed three increases in the price of milk.

    Food Production (White Paper)
    Mr. David Jamesasked the Minister of Agriculture, Fisheries and Food what steps he will take to implement the Government's aims expressed in the White Paper "Food From Our Own Resources".
    Mr. Boscawenasked the Minister of Agriculture, Fisheries and Food what proposals he is considering to facilitate the expanson of British agriculture as outlined in the Government White Paper entitled "Food From Our Own Resources": and if he will make a statement.
    Mr. Peart: The Government stated in the White Paper "Food From Our Own Resources" that they would continue discussions with the interests concerned during the coming months to determine whether there are specific measures which it would be right and practicable to take. I have already met the farmers' unions and agreed that among the areas to be further examined are the effectiveness of capital and production grants, the effect of capital taxation and the green pound and beef market prospects.
    Mr. James: Does not the Minister realise that in sparsely populated counties such as Dorset it is not possible to maintain livestock without the provision of tied cottages, so that those people responsible for livestock can live reasonably close to their charges?
    Mr. Peart: I have noted what the hon. Gentleman said. I am dealing specifically with the proposals in the White Paper. I agreed to meet the unions concerned. I have already met their representatives and we shall have continuing discussions. I have met representatives of the farmers' unions not only of England and Wales, but of Scotland and Ulster also.
    Mr. Boscawen: The Minister will be welcome in my constituency next week, when he comes as a guest of the Bath and West Show, for making that statement on the White Paper. Does he realise that he will be 100 times more welcome if he tells my constituents that he has been able to carry the Government with him in suggesting that by giving the farmers a decent return—not by interfering with their capital and trad-
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    ing by means of ridiculous taxes—they will be enabled to produce the results we all desire?
    Mr. Peart: I accept that. I believe that the farmers' unions are right to stress their agreement with the principles of the White Paper. This White Paper, which is a very good document, has been accepted. In the end it will be the way in which we apply our resources which will be important. I am grateful for what the hon. Gentleman said about his constituents. I hope we have a pleasant day.
    Mr. Corbett: Will my right hon. Friend, after his consultations with the industry to turn the hopes of the White Paper into food for the consumers, bear in mind the urgent need to give extra assistance for the development of agricultural co-operation? Will he also strengthen the rôle of the Agricultural Development and Advisory Service?
    Mr. Peart: I am grateful for what my hon. Friend said. He knows that I introduced the central council in my 1967 Act. I believe strongly in agricultural co-operation. The record in this regard has been exceptionally good and all parties have subscribed to it.
    Mr. Joplin: Is the Minister aware that the Opposition welcome the target set out in this important White Paper? Is he further aware that the White Paper has met with a deal of cynicism from the industry, partly because we have seen from previous Labour Governments in 1965 and 1968 similar documents which were not backed by cash and which did not therefore enable the targets to be reached? Is he aware that we all hope that the cash will be produced this time. To show that the Minister has the determination to achieve these targets, will he give us an undertaking that there will be adjustments before the autumn so that we can achieve them?
    Mr. Peart: The hon. Gentleman speaks of cynicism. There is always cynicism in certain quarters. I hope that the hon. Gentleman will look at the history of agriculture in the post-war period. I remember the 1947 Act and the target set in the White Paper which was issued by the late Tom Williams. That was accepted by the industry. The proposals on agriculture were accepted in the national plan

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    produced by the second Labour Government, of which I was a Minister. I agree that the results will depend on what we put into the industry and the state of the market.

    Farm Safety
    Mr. Cryerasked the Minister of Agriculture, Fisheries and Food what representations have been made to him regarding safety on farms.
    Mr. Strang: From time to time my right hon. Friend has received representations from interested organisations on various aspects of farm safety.
    Mr. Cryer: Does my hon. Friend accept that in principle I agree that the Health and Safety Commission should take over the safety rôle of the agriculture safety inspectorate? Does he further accept that the Society of Civil Servants has expressed grave doubts about the recent proposal for the reorganisation of die Factory Inspectorate by the Health and Safety Commission? Will he assure the House that, before the transfer of the agricultural safety office is made, discussions will be entered into so that the reorganisation can be done in conjunction with the agriculture safety inspectorate and not above its head?
    Mr. Strang: I am grateful to my hon. Friend for his remarks. I can give him the assurance that he seeks. I am sure that agricultural workers will benefit from the deep interest that he continues to take in the work of the Health and Safety Commission.
    Mr. Costain: Does the Minister appreciate that no one is keener than the farmer on having safety on farms? Does he also appreciate that the regulations regarding tractors produce certain difficulties, particularly in respect of the noise element, because British tractors, especially in horticulture, do not seem to comply with the regulations? Will he look at this matter with a view to ensuring that British manufacturers comply with the regulations?
    Mr. Strang: I assure the hon. Gentleman that the Government are seized of that point. We shall be making an announcement very shortly indeed.

    Eggs
    Mrs. Kellett-Bowmanasked the Minister of Agriculture, Fisheries and Food what representations he has made to the French Government in an attempt to stop the under-cutting of the British egg market by imports of French eggs.
    Mr. Lawsonasked the Minister of Agriculture, Fisheries and Food what proposals he has to deal with the difficulties facing British egg producers and whether he will make a statement.
    Mr. Brothertonasked the Minister of Agriculture, Fisheries and Food what action he intends to take to safeguard the future of the United Kingdom egg producers.
    Mr. Peart: Prices paid by packing stations for eggs rose in April to profitable levels, but have since fallen. Feedstuff prices have also fallen. Packing station throughput is again increasing. Imports are now at a lower level and eggs are being exported. We are continuing to watch the situation carefully.
    In the meantime, the French Government have completed the procedures necessary to open up their market to imports from this country. For the longer term we have begun discussions with industry representatives about their ideas on how the present arrangements for supporting egg production within the Community might be improved, and these discussions will continue.
    Mrs. Kellett-Bowman: Does the right hon. Gentleman accept that I am delighted that he has succeeded in persuading the French and the Community to take these measures to assist our poultry farmers? Does he further accept that the British egg producer is infinitely more efficient than the French producer, and managed to produce 100,000 tons more eggs than the French from two-thirds as many poultry? If any situation should arise which threatens bankruptcy to our egg producers in the near future, will the Minister take further instant action in the matter to stop them going bankrupt?
    Mr. Peart: I am glad that the hon. Lady has praised the British egg industry. That is why I am not afraid of competition. Indeed, as I have said, exports

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    are increasing. For example, in March we sent over 37,000 boxes of eggs to West Germany, over 23,000 boxes of eggs to the Netherlands, and 42,000 boxes of eggs to Ireland. I am glad to encourage this business.
    Mr. Hardy: Does my right hon. Friend agree that it would have been foolish to have taken hasty action which could have threatened that export market? Will he confirm that, whilst it may be regrettable to import the substantial number of French eggs which were brought into this country this year, over the past 12 months our exports of eggs have been greater than our importation?
    Mr. Peart: I have given the figures. I hope that hon. Members will appreciate that some of our egg producers experienced difficulties, of which I am aware. All I am asking is that we continue to play our part as well in the export sphere.
    Mr. Jopling: Is the right hon. Gentleman aware of indications that the price of eggs may fall drastically within the next week or so? If that happens, will he hold himself ready to take immediate steps to hold up the price of eggs to the British producer?
    Mr. Peart: I hope that the hon. Gentleman will not be gloomy about the matter at this stage. After all, markets are often affected by talk of confidence or lack of confidence. There may be fluctuations. That has always been so, I am glad to pay tribute to the fact that we can be as competitive as the French.
    Mr. Corbett: Is my right hon. Friend aware that, despite the hasty decision by the leadership of the National Farmers' Union regarding the Common Market, egg producers have been attempting to blockade the ports to which French eggs are sent at dump prices? Will he consider using the much-vaunted veto in Brussels to protect the egg producer until the Common Market has been kicked into some sense over the egg régime in Europe?
    Mr. Peart: I hope that my hon. Friend will agree that I object to people adopting violent or illegal methods of protest. I think the whole House agrees with that. However, I pay tribute to the National Farmers' Union because its President, Sir
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    Henry Plumb, has taken the initiative in Europe—
    Mr. Corbett: They walked out.
    Mr. Peart: My hon. Friend should listen. Sir Henry took the initiative. I was talking about his initiative in relation to COPA.

    Deep-Water Fish
    Mr. Dalyellasked the Minister of Agriculture, Fisheries and Food if he will make a statement on the results of the latest research into the commercial prospects for deep-water fish from the Irish Channel and other coastal waters.
    Mr. Peart: Research and development work on non-traditional species is conducted on a continuing basis with the emphasis currently being placed upon the prospects for blue whiting. The results obtained suggest that these stocks offer the better prospects for commercial exploitation.
    Mr. Dalyell: When can the British housewife expect to see blue whiting on the market as a commercial fish?
    Mr. Peart: I cannot say when. It is the most promising of all the species to be fished. There are large stocks, and a lot of research is being done. Blue whiting produces a good fillet. It is rather small, but of good quality.
    Mr. Stephen Ross: Does not the Minister consider that some further investment should be put into fish farming, which is undertaken in many parts of the country, particularly on the West coast of Scotland, where the usual types of fish, such as sole, are being produced easily? Could not fish production be substantially expanded by this method?
    Mr. Peart: I agree, but it must be a commercial proposition, and it will basically have to be undertaken by private enterprise. A tremendous amount of research is being done. In the constituency of the right hon. Member for Lowestoft (Mr. Prior) there is a fine research centre which he has encouraged. It does considerable research on fish farming.
    Mr. James Johnson: Has not the White Fish Authority estimated that there are 12 million blue whiting between North-West Ireland and the

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    Orkneys? Is it not a fact that there is no difficulty in catching them but that the filleting is difficult because the fish are so small?
    Mr. Peart: I know that my hon. Friend, who represents the fishing industry and is chairman of the all-party committee, is interested in this subject. He is right in quoting the assessment of the White Fish Authority. The problem arises from the size of the fish and the difficulty of processing.
    Mr. Clegg: Is not the Minister aware that if other countries unilaterally extend their limits the pressures on British home waters will increase? What progress is being made in the Community about the proposals for protecting our home waters?
    Mr. Peart: I have stated my position. I made a major statement when I last visited the Community. When I put our proposals to the Community I said many Times—and I repeated it yesterday in the Standing Committee, where it was appreciated even by Opposition Members—that I shall defend the British fishing industry because it is the largest in Europe and we have the largest coastline. Any decision on limits must be taken by collective agreement.

    Common Fishing Policy
    Mr. Costainasked the Minister of Agriculture, Fisheries and Food if he is in a position to announce the proposals which he will advance to the European Economic Commission on the new common fishing policy at present under discussion.
    Mr. Peart: No. I made a full report of the statement I made to the EEC Council of Ministers on fisheries matters on 15th April and to add to that at this stage would be premature.
    Mr. Costain: We much appreciate the visits which the Minister and the Minister of State have made to fisheries in various constituencies, but is the right hon. Gentleman aware that our greatest concern is to achieve proper conservation provisions to protect our coastal and other waters?
    Mr. Peart: I agree. Conservation is important. I recognise that there has been a threat to the herring industry
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    because of too much industrial fishing. Only yesterday the North-East Atlantic Fisheries Commission commenced work in London, and this matter will be discussed at that conference. We have to get agreement on this, and I have already had talks in the Community about it with individual Ministers.
    Mr. McNamara: What progress is my right hon. Friend making with the continuation of the subsidy to the fishing industry? Numerous vessels are laid up and, although the fish may be there, we may not have the vessels to catch them.
    Mr. Peart: This matter was raised yesterday. I wish that my hon. Friend could have attended the Standing Committee. I have introduced a scheme which gives £6¼ million to the trawler fishing industry.
    Mr. Grimond: I am grateful to the Minister for the trouble he has taken in talking to our Common Market colleagues about this matter, but will it be possible for him to arrange regular meetings with the industry so that it can be informed about the progress of the negotiations, as it is worried about timing?
    Mr. Peart: I am grateful to the right hon. Gentleman for what he said. I should welcome meetings with the fishing industry. Representatives of the British Trawler Owners' Federation come to see me frequently but, in addition, it would be useful if in this country, as in Scotland, there were a special inshore section. I should welcome an official organisation to which I could talk.

  REFERENDUM
  Mr. Hoyleasked the Prime Minister what engagements he has undertaken as part of the referendum campaign.
  The Prime Minister (Mr. Harold Wilson): I have already made a number of speeches in the country commending support for the Government's recommendation to continue Britain's membership of the European Community and I shall be undertaking further speeches of this kind before 5th June.
  Mr. Hoyle: Will the Prime Minister consider cancelling those future engagements so that he will be in a more neutral

  1609
  position to carry out the wishes of the British people when they vote to come out of the Common Market?
  The Prime Minister: I am grateful to my hon. Friend for his consideration, but the Government made a very clear recommendation in the House, and I am doing the same in the country.
  Mr. Biggs-Davison: As a contribution to the referendum campaign, will the Prime Minister consider republishing and circulating widely his "Won't take 'No' for an answer" speech?
  The Prime Minister: I should be happy to do so, Sir. I used that phrase in 1967 when General de Gaulle announced his veto on negotiations, to make clear that we would not take "No" for an answer but would press until we obtained negotiations. Negotiations were ultimately agreed to and carried out by the Conservatives when in government. We have renegotiated the terms, and what I said in 1967 has been abundantly justified by what has happened since.
  Mr. Speaker: Mr. Skinner.
  An Hon. Member: Come on, Nelson.
  Mr. Skinner: They tell me that Nelson was against the Common Market as well. When my right hon. Friend makes speeches explaining why we should stay in the Common Market, will he please refrain from using the truth-bending remarks that have been made by some of his colleagues? It has been said that one reason for Britain to stay in is to control multinationals. How farcical is such a remark, taken in the context of the multinationals pouring thousands of pounds into the "Keep Britain in Europe" campaign.
  The Prime Minister: I sympathise with my hon. Friend on his affliction and express the hope that on this issue he will now see more clearly through one eye than he sometimes does through two. [An HON. MEMBER: "In the country of the blind the one-eyed man is king."] I am trying to be sympathetic to my hon. Friend.
  Mr. Skinner: I am only suffering from your complaint.
  The Prime Minister: My hon. Friend used the emotive phrase "truth-bending remarks". I find that all those who feel strongly on one side of the Common Market case, whichever it is, regard a statement made by the other side as truth-bending. The country will decide when it has heard the full arguments.
  Mrs. Thatcher: Does the Prime Minister recollect that when I asked him on Tuesday about the assertion of the Secretary of State for Industry that 500,000 jobs had been lost through the European link he rejected the figure? Will he now reject the underlying contention that the link has led to any loss of jobs, bearing in mind that most companies take the contrary view?
  The Prime Minister: This is a matter which is much argued. I do not agree with what my right hon. Friend said. As I made clear, no one can say that no jobs have been lost. Some have been lost. Equally, jobs have been gained as a result of a change in the movement of trade—[Interruption.] I am treating the right hon. Lady's question as serious, unlike some hon. Members sitting behind her. Inevitably, when a market is opened more freely to imports—by the removal of tariffs, or in other ways—there will be more goods coming in, which may throw British people out of work. Equally, because those markets are open to us there will be more jobs at home in Britain. I have no reason to think that the net result has been an increase in unemployment.

  CBI AND TUC
  Mr. Michael Lathamasked the Prime Minister when he next expects to meet leaders of the TUC and the CBI.
  The Prime Minister: I regularly meet leaders of both the TUC and CBI at the NEDC and on other occasions and, as I have told the House, I shall be chairing the next meeting of the NEDC on 17th June.
  Mr. Latham: When the Prime Minister told the CBI last Tuesday that the Government would not nationalise Chrysler if it were bankrupted by industrial militancy, did he really expect to be believed?
  The Prime Minister: I do not know what the hon. Gentleman thinks he is

  1611
  getting at with that rather silly question. However, I shall tell the hon. Gentleman what I said. I said that I would not be a party to a single penny of taxpayer's money being spent if the afflictions that beset Chrysler were caused by a strike which should be settled by appropriate constitutional means.
  Mr. Mike Thomas: Will my right hon. Friend go further than that and explain to the TUC and the CBI, and perhaps to some of his right hon. Friends, that it is not in the interests of this country to fossilise our industrial structure by keeping men employed, seemingly for its own sake, when the goods they make cannot be sold at a profit?
  The Prime Minister: Of course, my hon. Friend is right. There is no question of fossilisation as regards the future use of the NEB or any of these other matters. However, when there is a reasonable prospect that a firm can be profitable or viable in the future, and can maintain employment in the interval, I do not see any reason for objection to be taken by either side of the House. After all, that was surely one of the motives of the famous Sections 7 and 8 of the Conservative's Industry Act of 1972. That measure was supported at least by some Opposition right hon. and hon. Members, although I am not quite sure what their attitude is today.
  Mr. Baker: Has the right hon. Gentleman had reported to him what occurred in Committee on the Employment Protection Bill this morning regarding postal votes, in that the Conservative and Liberal Parties—
  Mr. Speaker: Order. We cannot have any reference on the Floor of the House to what happens in Standing Committee until the Committee has reported to the House.
  Mr. Baker: I give notice, Mr. Speaker, that I shall seek to raise a point of order at 3.30 in view of the Prime Minister's statement on Tuesday.
  Mr. Watkinson: Does my right hon. Friend accept that many of his hon. Friends are very concerned about the rising level of unemployment? When my right hon. Friend next meets the TUC and the CBI, will be discuss further the temporary employment subsidy scheme? Is
  1612
  it the Government's intention to restrict the scheme to development areas, or will it extend to other needy areas?
  The Prime Minister: This problem is being continually discussed with both the TUC and the CBI, and it will no doubt be discussed at the next meeting of the NEDC to which I have referred. The temporary employment scheme will be debated in the House when full authority is sought from the House to introduce it.
  Mr. Prior: At the next meeting of NEDC will the Prime Minister discuss with the TUC and the CBI the whole question of payment from Government funds for votes by post for trade union elections? Does the right hon. Gentleman still stand by the forthright and helpful statement that he made on Tuesday in answer to a question from me, in view of the fact that some Ministers of his Government do not seem to have got the message?
  The Prime Minister: As regards discussing these matters at the NEDC, the right hon. Gentleman, who, I think, has held appointments that qualified him to attend the NEDC, will know that they are not the sort of things that are normally discussed. I have no doubt that other opportunities will arise in other forums and at other meetings. I should make it clear, as a point of order has been raised, that when the right hon. Gentleman asked me the question the other day, I said that I had had no report from the Committee. Of course, that was the position of the House. I have had no report, and that is still the position. The view I expressed is certainly my view. I want to see more postal voting. As we have not had those reports from Standing Committee it is not possible to give an answer on the subject of the provision of Government funds.
  Mr. Grimond: Is the Prime Minister aware that many people think that the initiative of Mr. Jack Jones is of value, and welcome the Government's intention to follow it up, and hope that this will lead to fruitful discussions with all the parties concerned?
  The Prime Minister: I am grateful to the right hon. Gentleman for what he said. When I addressed the CBI the other evening I spoke rather in the same terms as the right hon. Gentleman has

  1613
  used. I hope to have the opportunity to raise this matter in the debate this afternoon if, Mr. Speaker, I am successful in catching your eye.
  Mr. Stallard: When the Prime Minister next meets the TUC, will he assure it that the Government have no intention of interfering with the internal balloting arrangements of any trade union?
  The Prime Minister: I have expressed my view on this matter. I have expressed it in the House previously, and I have confirmed it today. What I said on Tuesday, and what I repeat, is that when we see the reports of the discussions that have taken place in Committee, and when we have heard the views of other people, we shall consider whether there is anything that the Government can do in this matter. We have taken no decision and we have had no collective discussions on the matter. I gave the answer as I felt it to be the right answer to give the right hon. Gentleman.

  NATIONAL ECONOMIC DEVELOPMENT COUNCIL
  Mr. Tim Rentonasked the Prime Minister whether he will take the chair at the next meeting of the NEDC.
  Mr. Radiceasked the Prime Minister when he next expects to take the chair at the NEDC.
  Mr. Stanleyasked the Prime Minister whether he will be taking the chair at the next meeting of NEDC.
  Mr. MacGregorasked the Prime Minister when he next intends to take the chair at the NEDC.
  The Prime Minister: I refer the hon. Members and my hon. Friend to the reply which I gave to my hon. Friend the Member for Gateshead, West (Mr. Horam) on 20th May.
  Mr. Renton: Will the right hon. Gentleman now answer instead of evading the question which was asked of him by my hon. Friend the Member for Melton (Mr. Latham)? How does he expect strikers to believe that the Government cannot be forced into taking over their companies as long as he retains the Secretary
  1614
  of State for Industry as a member of his Cabinet?
  The Prime Minister: I think that the hon. Gentleman is a little obsessive on this question. Indeed, the Conservatives all are, the whole lot of them. If only they would give a little more of their minds to forming a policy on industrial matters! Perhaps we shall get that this afternoon. I made it clear in January in my constituency, where there are many car workers, that we were not going to put money into the car industry in respect of continued strikes. I made that clear, and that is clear in the monitoring arrangements for British Leyland—the proposals for which the Conservative Party voted against last night.
  As regards the Chrysler situation, I saw reports, and hon. Members saw reports—and I have now seen a further report—that there were some people—I am referring not to any individual shop steward but to some people of standing in the city's affairs—who looked forward to a certain situation being created, or who said that if the strike led to such a situation the Government would proceed to nationalise. I have made it clear that not one penny of Government money will go in to sustain a situation created by an unofficial strike of that kind.
  Mr. Radice: Does the Prime Minister agree that if the NEB is to be more than a receptacle for "lame ducks" it needs to work within a carefully worked out industrial strategy, and a strategy that concentrates resources on those sectors which are most essential to our national survival? Does he accept that in this respect the NEDC, with all the planning work that it has done with representatives of both sides of industry, can play an important rôle?
  The Prime Minister: Yes: I agree with what my hon. Friend said about the NEDC. As regards the NEB, the guidelines within which it should work, and its operations, these matters were set out in the White Paper which was published last year. I have made it clear that when the Bill emerges from Committee we shall go through it again and decide what, if any, amendments are needed on Report. However, it has an essential part to play in the regeneration of British industry. If I catch your eye this afternoon, Mr. Speaker—I am not canvassing

  1615
  you in any way—I hope to be able to deal with some of the points that have been made by my hon. Friend.
  Mr. Stanley: Assuming that the Prime Minister was not speaking in a personal capacity on Tuesday, will he confirm that it is the Government's joint view that it is desirable in principle for trade union elections to be conducted by postal ballots?
  The Prime Minister: I have made clear that we have had no effective discussions on this matter since the events in the AUEW over the weekend. I understand that action is being taken within the union. It would be inappropriate for me to comment on the matter now. I have expressed my view and I am sure that it is the view of many hon. Members in all parts of the House.
  Mr. Noble: In view of the infancy of democratic practices in the Conservative Party, when the next election takes place for the replacement of the present Leader of the Opposition do the Government plan to make funds available for the conduct of a postal ballot in the Tory Party?
  The Prime Minister: There is no ministerial responsibility now or in the future for anything affecting the leadership of the Conservative Party. My hon. Friend the Member for Rossendale (Mr. Noble) seems to be a little out of date in his references to the infancy of democracy in the Conservative Party. I thought that last night, at a late hour, when I was in the House, there were signs of incipient democracy breaking out in the party.
  Mr. MacGregor: In view of the overriding importance at present of containing public spending, will the Prime Minister give to the next meeting of the NEDC, and today to the House, a firm assurance that the borrowing requirement for this year is still—and will continue to be throughout the year—not more than £9,000 million, as estimated by the Chancellor of the Exchequer, and not £10,000 million, which has been said to involve unacceptable risks?
  The Prime Minister: These matters are not usually debated at the NEDC in respect of the Budget. I have no information that it is likely to come up at the
  1616
  meeting which I shall be chairing. It will undoubtedly come up this afternoon in the House in the debate on the economy, and I have no doubt that we shall all be dealing with the broad questions of the economic strategy.
  Mr. Ashton: Before the Prime Minister gets too enthusiastic about postal ballots, will he cast his mind back to the days of the old ETU and to what happened when Communists gained control through irregularities in postal voting at a time when the Right Wing had control of the engineers through the ballot box? If it is acceptable for every hon. Member of this House to be voted in by personal visits to the ballot box, why should not the trade unions operate the same system?
  The Prime Minister: I am sure that my hon. Friend and I are in total agreement that, whatever the system, we are opposed to the scandals which took place in the ETU some years ago, or, indeed, to any other scandals in any form of balloting, whether trade union or not.

  TRADE UNIONS (BALLOTS)
  Mr. Speaker: Mr. Baker, on a point of order.
  Mr. Baker: I appreciate your ruling earlier, Mr. Speaker, about reports of Standing Committee proceedings. I was seeking to elicit from the Prime Minister some clarification of the undertaking given at Question Time on Tuesday when in reply to a Question by my right hon. Friend the Member for Lowestoft (Mr. Prior) he gave a clear impression that the Government's policy was to introduce postal voting from public funds as soon as possible. I appreciate that we cannot refer to the Standing Committee proceedings. The House is in some difficulty since the Committee proceedings cannot be read by hon. Members because they are not being printed. Therefore, hon. Members will not realise that there was a vote on this matter which—
  Mr. Speaker: Order. The hon. Gentleman has a clear way of making his point. On business questions he can say to the Leader of the House "In view of what happened in Committee upstairs this morning"—without referring to what it

  1617
  was that happened in the Committee "has the Leader of the House a statement to make?" That is the proper way to go about the matter.
  The Prime Minister (Mr. Harold Wilson): Further to that point of order, Mr. Speaker. I thought I heard the hon. Member for St. Marylebone (Mr. Baker) say that I gave an undertaking on Tuesday that there would be Government funds for postal ballots. I did not say that. I am sure what I said is in the recollection of the House, and it is recorded in the proceedings. I said that I had no report of the proceedings before the Standing Committee on Tuesday morning but that the Government would consider the position. That was the position then and is the position now. I understand that this was repeated not very far from here not many hours ago.

BUSINESS OF THE HOUSE
Mrs. Thatcher: Will the Leader of the House please state the business for the first week after the Adjournment?
The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): The business for the week after the adjournment will be as follows:
MONDAY 9TH JUNE—Second Reading of the Statutory Corporations (Financial Provisions) Bill.
Motion to appoint a Standing Committee on Regional Affairs.
The House may wish to be reminded that this will be the historic day when the proceedings of the House are broadcast for the first time.
TUESDAY 10TH JUNE—Further progress in Committee on the Finance (No. 2) Bill.
WEDNESDAY 11TH JUNE—Remaining stages of the Social Security Pensions Bill.
Motion on the EEC Document on Economic Policy Guidelines (R/731/75).
THURSDAY 12TH JUNE—Motions on Reports of the Select Committees on Members' Interests (Declaration);
and on the right hon. Member for Walsall, North (Mr. Stonehouse).
FRIDAY 13TH JUNE—Second Reading of the Hare Coursing Bill.
Mrs. Thatcher: The Leader of the House has already undertaken to find time to discuss the report of the Committee on the preparation of legislation. Can he give some idea when it will be debated?
Mr. Short: I am afraid that I cannot name any date in the near future, but I shall bear in mind what the right hon. Lady said. It is a very important report and we shall debate it before the Summer Recess.
Mr. Strauss: Further to my right hon. Friend's announcement that there will be a debate on the position of the right hon. Member for Walsall, North (Mr. Stonehouse), is he aware that the Select Committee concerned received yesterday a further letter from the right hon. Gentleman, which does not appear to alter the situation at all and which would not cause the Committee to vary its conclusions set out in its second report? Nevertheless, I am sure, the Committee, in the interest of fairness to the right hon. Member for Walsall. North, will want that letter and any subsequent letter which we may receive to be before the House before the debate takes place on the Thursday when we return—and I certainly propose to take action to see that they will be available.
Mr. Short: If there is any change in the situation I shall reconsider that day's business. I have no doubt that if there is a change the Select Committee will reconsider the matter, too.
Mr. Grimond: Is the right hon. Gentleman aware of how the country will respond to the Government's magnificent lead in our times of difficulty in introducing the Hare Coursing Bill? Why are we still in the process, at this point in the Session, of starting major Bills? Will he give the House some idea whether the Session will end at the normal time, or whether certain Bills will be abandoned, or whether the Session will be extended?
Mr. Short: I answered this question last week. I make no apology for the introduction of the Hare Coursing Bill. Perhaps the right hon. Gentleman will look at the whole of the business for next week. I think it is a very fine thing that for a few hours in one Session the House can pay some attention to the subject of animal welfare.

1619
On the right hon. Gentleman's second point relating to major Bills and the length of the Session, as I said last week—I do not know whether the right hon. Gentleman was here—it is too early to say yet, but I expect that the Session will end at the normal time, though there will be a spillover in the autumn.
Dr. Bray: Will my right hon. Friend confirm that it will be in order to debate the affairs of the British Steel Corporation on the Statutory Corporations (Financial Provisions) Bill? If not, can he say when we shall have a debate on the steel industry?
Mr. Short: It is a matter for Mr. Speaker, but I imagine that discussion of the affairs of BSC will be in order on that day. I listed that matter following a promise which I gave last week. I said that I would table it as early as possible in the first week after the Whitsun Recess.
Mr. Goodhart: According to the Ministry of Transport's figures, 500 people have died unnecessarily because in the past six months we have not been able to find the time to take further the provisions of the legislation concerning safety belts. When are we to be given further time to discuss that measure?
Mr. Short: We have started the Second Reading of that legislation, and I hope to find time very shortly to complete the Second Reading of that Bill. As the hon. Gentleman knows, the compulsory wearing of seat belts begins in the Benelux countries on 1st June.
Mr. Golding: Is my right hon. Friend aware of the strong desire among Labour Members to bring about the ending of the system of agricultural tied cottages? What are the Government's intentions in that respect?
Mr. Short: It is the Government's intention to introduce legislation on this very important matter in the next Session.
Mr. Fletcher-Cooke: Is it not amazing that during the whole of the week after the result of the great referendum is known we are not to debate the consequences of that referendum?
Mr. Short: We have debated the referendum a great deal. As I pointed out last week, we have spent one-tenth of
1620
our time this Session on European matters. As I promised, my right hon. Friend the Prime Minister will make a statement on the referendum on the Monday on which we resume.
Mr. Henderson: Is the Leader of the House aware that there will be great disappointment among Scottish Members that he has not yet found time for the long-promised debate on the Scottish economy, as it is almost 18 months since it was last debated in the House'? Can he give an undertaking about when it will be debated?
Mr. Short: I cannot give an undertaking about when it will be debated, but I can give an undertaking that it will be some time this Session. [Hon. MEMBERS "It will be debated today."] The Scottish Members are in a very fortunate position compared with the English. They have four days when they can have general debates on Scotland in the Scottish Grand Committee.
Mr. R. C. Mitchell: When shall we have the Second Reading of the Bill to take the aircraft and shipbuilding industries into public ownership?
Mr. Short: Not next week.
Mr. Fry: Will the Leader of the House consider giving time after the recess for a debate on the British footwear industry, which is now in a critical position, especially as there has been total inaction by the Government, despite the soothing words of the Under-Secretary of State for Industry in an Adjournment debate many weeks ago?
Mr. Short: There has not been inaction on the part of the Government. If the hon. Gentleman will sit in for the speech of my right hon. Friend the Prime Minister, if my right hon. Friend catches the eye of the Chair, he will find that my right hon. Friend has something to say about it, and he will also say something about it tomorrow.
Mr. Greville Janner: Will my right hon. Friend arrange for a debate at an early date, as promised, on the scandalous state of the law on liquidations, in particular the law that allows a director to liquidate a company one day and start another in exactly the same line of business the next?
Mr. Short: That is a very important point—the sort of point that should be considered in the context of company law generally. The Government will be introducing proposals on company law eventually.
Mr. Madel: Will the Government find time for the Industrial Democracy Bill of the hon. Member for Chester-le-Street (Mr. Radice) to go through all its stages, or introduce a Bill of their own, or do they intend just to leave us in a state of suspended animation on this matter?
Mr. Short: There is another Private Members' Bill day to come. Speaking from memory, I think it is on 11th July. The hon. Gentleman will have an opportunity on that day.
Mr. James Johnson: Following the comments of the right hon. Member for Orkney and Shetland (Mr. Grimond) and his oblique inference concerning the hugger-mugger of legislation in this House, will my right hon. Friend consider liquidating the ancient convention of the massacre of the innocents in October? Is it not foolish to get past 50 per cent. or even 75 per cent. of the stages of a Bill and then suddenly have it all fall down and have to start anew? Will my right hon. Friend consider that matter when he is thinking of his timetable?
Mr. Short: It is an interesting suggestion, but the great merit of that device is that it is a massacre of the guilty as well as the innocent.
Mr. Nicholas Winterton: This afternoon the Prime Minister referred to the regeneration of British industry. When will the Government make a statement on the action they intend to take to assist the textile industry before there is no textile industry to regenerate?
Mr. Short: My reply to the hon. Member for Wellingborough (Mr. Fry), who asked me about footwear, applies here also. In his speech my right hon. Friend the Prime Minister will be referring to footwear and textiles. He will also be making a statement on these matters tomorrow.
Mr. McNamara: Is my right hon. Friend aware that many hon. Members and many people in the country are indebted to the Government for fulfilling
1622
their pledge to give Government time to debate the Bill to ban the abominable practice of have coursing?
Mr. Short: I am grateful to my hon. Friend. I am sure that he is absolutely right.
Mr. Maxwell-Hyslop: Is it a true indication of the Government's priorities that, having published their White Paper "Food from Our Own Resources", they refuse to give time for its implications for Britain's largest industry to be debated, and yet can find a day to chase hares?
Mr. Short: I have never said that we refuse to give time. I have not yet been able to find time. I repeat what I have said many times—that the Opposition still have 12 days left themselves to choose subjects for debate. They are supposed to be the party representing agricultural interests At any rate, they tell us that they are. Why do they not have a debate on agriculture?
Mr. Stallard: When does my right hon. Friend expect to be able to report to the House the findings of the Boyle Commit-teen on Members' salaries?
Mr. Short: I am not sure of the date, but I hope that it will be some time in June.
Colonel Sir Harwood Harrison: May I ask the Leader of the House to observe the dignity and authority of Parliament? We are having a fortnight's recess. On the Friday after we return we are to debate a petty Bill which has not made progress as a Private Member's Bill over many years. Are we right, at this critical time, to take five hours of Government time to consider it?
Mr. Short: It is always right to spend time trying to get rid of cruelty, whether to human beings or to animals, and that is what we are doing.
Mr. Cryer: In view of the private opinion polls showing a swelling "No vote in the referendum, will my right hon. Friend tell us what arrangements he has made for withdrawal from the EEC? In the outlandish and unlikely event of a" Yes" vote, what valedictory rites has he in hand for this Parliament, which will be the last as we know it?
Mr. Short: If the result is "Yes", no parliamentary action is required. If it is "No", the necessary legislation will be placed before Parliament in due course.
Mr. Peyton: I hope that the right hon. Gentleman will give further thought to the point made by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke). To have just a statement by the Prime Minister on this historic occasion might be considered rather anti-climactic.
I remind the Leader of the House of the point made by my hon. Friend the Member for Bedfordshire, South (Mr. Madel) concerning the Industrial Democracy Bill. We seem to have got into a state of some confusion here, with Ministers doubtfully welcoming this strange proposal. I hope that the right hon. Gentleman will make the Government's position clear before long.
In order to tidy up the summer programme, which is congested with a lengthening queue of Second Readings, as the right hon. Member for Orkney and Shetland (Mr. Grimond) pointed out, will the right hon. Gentleman say when we shall have a summer Budget?
Mr. Short: The Industrial Democracy Bill is a Private Member's Bill. There is one day left in early July for Private Members' business, and my hon. Friend the Member for Chester-le-Street (Mr. Radice) must take his chance on that day.
I replied to the hon. and learned Member for Darwen (Mr. Fletcher-Cooke), who asked for a statement. I promised a statement by my right hon. Friend the Prime Minister. I cannot do more than that, can I?

SOCIAL SECURITY BENEFITS
The Secretary of State for Social Services (Mrs. Barbara Castle): With permission, Mr. Speaker, I should like to make a statement about increases in social security benefits.
My right hon. Friend the Chancellor of the Exchequer told the House in November 1974 that we were planning to make a second uprating in December this year to follow the one which took place in the week beginning 7th April. As the Chancellor made clear, the short intervals
1624
between upratings are a recognition of the exceptionally high rate of inflation we are experiencing, but as inflation is brought under control we intend to move back to an annual cycle of upratings. So far as this year is concerned, I am glad to inform the House that we have decided to bring forward the date for this second uprating to the week beginning 17th November 1975. But there will not be a Christmas bonus. A bonus is bound to be somewhat arbitrary in coverage and excludes a number of people who benefit from a general uprating.
The standard single rate of retirement pension and of invalidity pension, as well as a widow's pension, will be increased by £1·70 from £11·60 to £13·30. For a married couple the increase will be £2·70 from £18·50 to £21·20. These increases are in line with the movement in earnings of nearly 15 per cent. that has taken place in the period from August 1974 to March 1975, which is the relevant period for calculating this uprating. Younger widows and pensioners entitled to pensions at modified rates will get proportionate increases, and there will be additional increases for children.
Short-term benefits for sickness and unemployment will be increased in line with the movement in prices of just over 13 per cent. in the period August 1974 to March 1975. The rate for a single person will go up by £1·30 to £11·10, and for a married couple the increase will be £2·10 to £18. Maternity allowance and injury benefit will go up by the same amounts.
War and industrial injuries pensions will go up in line with long-term benefits. As regards supplementary benefit, the increases in the main scale rates will be the same as those in the related national insurance benefits, and they will come into force at the same time. The social security benefit increases will not generally reduce rent and rate rebates and rent allowances, since my right hon. Friend the Secretary of State for the Environment proposes, after consulting his advisory committee, to make corresponding increases in the needs allowances for those schemes.
To coincide with the uprating, the Supplementary Benefits Commission will be making substantial increases in the discretionary additions for extra heating to take account of increased fuel costs. These

1625
increases will be over and above the increases in the scale rates but will operate from the same date. The detailed increases are from 40p to 55p, from 80p to £1·10 and from £1·20 to £1·65 a week. The discretionary additions for special dietary needs will also be increased from 50p to 60p and from £1·12 to £1·35.
The changes in supplementary benefit disregards, which are already enacted, will be implemented from the week beginning 17th November, together with all the other improvements which will then become operative.
The week beginning 17th November will also be the date when our new noncontributory invalidity pension will start to be paid to persons other than disabled housewives. The rate at which this new benefit will be introduced will be £7·90 instead of £6·90 as originally envisaged.
The House will realise that, together with the increases in Family Income Supplement which I have already announced will take place in July, this represents a very heavy programme of work for the local offices of my Department. The programme can only be carried through in the time available as a combined exercise with a single operative date. To attempt to advance any part of the programme would cause duplication of work and inevitable delay in the payment of increases and benefits to large numbers of claimants. I have discussed the programme with the staff associations involved and I am confident that it will be completed in time.
My right hon. Friend the Chancellor of the Exchequer took account of this uprating of benefits in the Budget which he presented last month. The cost of the increases in benefits in the financial year 1975–76 will be about £395 million.
The increase in expenditure needs to be set in the context of an automatically rising income to the National Insurance Fund under the new earnings-related system of contributions. Of the full year cost of the uprating, which is £1,060 million, £910 million will fall on the fund. This latter cost will be taken into account, with other relevant factors, in the review of contributions which, in accordance with the Act, I shall be making during the summer. Following this review, the Government will propose whatever changes for 1976–77 are needed
1626
to ensure that the fund is soundly financed, including, if necessary, increases in the main rates of contributions. The changes will be effected by an order needing affirmative resolution after the Summer Recess, and there will be a report by the Government Actuary.
For the convenience of the House I am circulating details of the new rates of benefits in the Official Report. These, with copies of my statement, are available in the Vote Office. Immediately after the Whitsun Recess I shall be laying a draft uprating order, under Section 124 of the Social Security Act, for affirmative resolution. The order will be accompanied by a separate Government Actuary's report.
I am sure that the whole House will welcome these further measures to mitigate the effects of inflation on pensioners and other beneficiaries.
Mr. Norman Fowler: The whole House will recognise that the last statement was made in November and that the need for these reviews is becoming more frequent.
May I ask the Secretary of State a number of short questions. First, why does the right hon. Lady still resist six-monthly reviews of pensions, for which we have pressed? Is it really only because the proposal comes from the Opposition side? Will she give the assurance that if inflation continues at its present rate she will reconsider her policy for at least 1976?
Secondly, so that we can fully judge the effect of the abolition of the Christmas benefit, which, as the right hon. Lady realises, was introduced by a Conservative Government—can she say how much public expenditure is involved here, as she will be conscious of the very grave disappointment that her announcement will have caused?
Thirdly, is the right hon. Lady aware that the whole House is agreed that the old level of disregards for supplementary benefit purposes is totally inadequate, and, as legislation has been passed some months ago, could she not see her way to making an earlier change of policy here?
Fourthly, will the right hon. Lady confirm that she is continuing to insist that disabled housewives will receive the new non-contributory invalidity pension later than other disabled? Is this not defying

1627
what has been the clearly expressed wish of this House, and is she aware of the great anger that that is causing?
Lastly, is it not a fact that because of the present rate of inflation the real value of pensions and national insurance benefits will have dropped dramatically by November? Is it also not a fact that if the Government fail to get inflation under control not even these increases will suffice for very many people in Britain today?
Mrs. Castle: Considering the fact that the uprating we introduced only last month put pensioners and other beneficiaries, in real terms, in a considerably more favourable position than at the time of the October 1973 uprating of our predecessors, I find this conversion to more generous treatment slightly belated on the part of the Opposition spokesman.
With regard to six-monthly upratings, we have said that we are going to increase pensions and benefits as frequently as is necessary to protect the pensioners from the effects of inflation. This is what we have done. This will be an increase only seven months after the last one, which has, as I have said already, put the pensioners and other beneficiaries in a greatly improved position.
A single person, for instance, will be, in real terms, nearly 12 per cent. better off following the April uprating than he was under the last Conservative Government's uprating, and a married couple nearly 11 per cent. better off in real terms. There is, therefore, a margin here.
The Government's policy is as I have outlined. It is our intention, as inflation is brought under control, to revert to annual upratings, but in the meantime we have once again made the improvements as and when they became necessary. Once again we are increasing supplementary benefit in full line with the increase in the basic pensions, and, as I have announced, there will be substantial increases in the heating and dietary discretionary allowances and continuation of the help over rent and rates, which I believe will insulate the beneficiaries against the present difficulties.
Mr. Norman Fowler: And the disabled housewives?
Mrs. Castle: As for disabled housewives, at the time we debated this matter
1628
I made it clear, as did my right hon. Friend the Minister of State, that it was not administratively possible to include disabled housewives at this stage.
Mr. Greville Jamter: Will my right hon. Friend accept that many Government supporters who have protested against the anomalies in the £10 Christmas bonus will greatly regret its passing? Does she not feel that it would be better to remove the anomalies than to remove the bonus?
Mrs. Castle: I agree with my hon. and learned Friend that there were anomalies. Although we brought a million more people under the Christmas bonus last year, that still left many deserving groups excluded and a grave sense of resentment in many quarters. Yet the cost of that bonus was more than £90 million. I can only assure my hon. and learned Friend that it proved administratively impracticable under both Governments to extend the Christmas bonus to those on supplementary allowances who might be considered to be the most hard hit. It was totally out of the question, and both Governments recognised that. We think that it is better to spend what resources the country has on a general increase through this general uprating.
Mr. McCrindle: Is it not significant that the one benefit which lags behind in the Government's review is family income supplement? As this remains the only, albeit ineffective, weapon to deal with the problem of family poverty, does not the right hon. Lady agree that, until such time as the Government are able to introduce their own scheme, there should not be a situation where FIS increases are announced about six months after the other general upratings?
Mrs. Castle: On the contrary. The hon. Gentleman has it wrong. Obviously he missed my announcement earlier, which I repeated today, that family income supplement will be increased, in advance of the November uprating, in July of this year.
Mr. Powell: Is the right hon. Lady aware that many people will consider that she is to be commended for proposing to eliminate the unsatisfactory method of a Christmas bonus, which caused in many cases great and in some cases justified irritation and a sense of grievance?
Mrs. Castle: I am grateful to the right hon. Gentleman. It is true that, if there is a bonus of that kind, arbitrary distinctions have to be drawn between people. They create anomalies, and they create almost more grievances amongst those left out than they do happiness to those who are included.
Mr. Bidwell: Do these increases in the State retirement pension have any relationship to the declared object of the Labour Party and this Government of raising pensions in real terms in relation to national average earnings? I assure my right hon. Friend that, despite the difficulties of the country and the Government, working people ande the trade union movement as a whole are quite ready to make sacrifices for the 4 million old-age pensioners who are really up against it.
Mrs. Castle: I agree with my hon. Friend. It has been a very important reform to embody in a statute the obligation on the Secretary of State to uprate in line with average national earnings. As my hon. Friend said, we have kept that promise and we are implementing it. Of course, it is impossible to forecast what national average earnings will be in November. But I can give some idea about how this is beneficial to the pensioners concerned by giving the figures for our first two upratings. In July 1974 and April 1975 the upratings amounted to an increase of 50 per cent. for a period in which price increases were 33½ per cent. and average national earnings increased by nearly 35 per cent. In other words, we kept them even further ahead in real terms.
Mr. Hordern: Although the Opposition welcome this uprating in social security benefits and the fact that it has come only seven months after the previous one, does the right hon. Lady accept that the advance has occurred only because of the very high increase in inflation? Assuming that this increase

MAIN INCREASED CONTRIBUTORY AND NON-CONTRIBUTORY BENEFIT RATES

Proposed Weekly Rate

Existing Rate

£

£

Standard rate of invalidity, widow's and Category A retirement* pensions; Category B retirement pension at the higher rate* and widowed mother's allowance

…

…

…

…

…

…

…

…

13·30

11·60

Increase of invalidity pension and Category A retirement pension for wife or other adult dependant; Category B retirement pension at the lower rate*

…

…

…

…

…

…

…

…

7·90

6·90

* An age addition of 25p is payable to retirement pensioners who are aged 80 or over.

is allowed for in the borrowing requirement, can she say how long it will be before she has to come to the House with proposals for another uprating? If it should be after only six months, when that occurs will she be able to say that that sum has been allowed for in the borrowing requirement?
Mrs. Castle: I agree that it is far better to bring inflation under control than to have frequent upratings. Equally, it is right in a period of exceptional inflation to have upratings sufficiently frequently to protect those concerned.
Mrs. Kellett-Bowman: It is not protecting them.
Mrs. Castle: I remind the hon. Member for Lancaster (Mrs. Kellett-Bowman) that, since coming to office, we shall have increased pensions and long-term benefits by 72 per cent. We believe that that is a very good record.
Several Hon. Members rose—
Mr. Speaker: Order. We have a very important debate to follow. I am afraid that we must move on.
Following is the information:
Details of New Rates of Benefit
The Government are committed by law to increasing pensions and other long-term benefits in line with the movement in the general level of earnings unless the movement in the general level of prices would be more advantageous to those concerned. The last uprating took into account the movement in earnings up to August 1974. On the basis of the latest available information on the level of earnings, namely the Department of Employment's provisional monthly index of average earnings for all employees for March, the movement of earnings to be taken into account for the next uprating is nearly 15 per cent. Over the same period prices, as measured by the general index of retail prices, rose by just over 13 per cent.
Thus it will again be to the advantage of pensioners and other long-term beneficiaries for their benefits to be increased by reference to the movement in the general level of earnings, rather than prices.
The following are therefore the new rates:

Standard rate of unemployment and sickness benefits:

£

£

Higher rate

…

…

…

…

…

…

…

…

…

11·10

9·80

Increase for wife or other adult dependant

…

…

…

…

6·90

6·10

Lower rate

…

…

…

…

…

…

…

…

…

7·80

6·90

Widow's allowance (first 26 weeks of widowhood)

…

…

…

…

18·60

16·20

Maternity allowance

…

…

…

…

…

…

…

…

11·10

9·80

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

35

…

…

…

…

…

…

…

…

…

…

2·80

2·40

45

…

…

…

…

…

…

…

…

…

…

1·70

1·50

60 for men or 55 for women

…

…

…

…

…

…

0·85

0·75

Attendance allowance:

Higher rate

…

…

…

…

…

…

…

…

10·60

9·20

Lower rate

…

…

…

…

…

…

…

…

7·10

6·20

Retirement pension for persons over pensionable age on 5th July 1948 and for persons over 80*:

Higher rate

…

…

…

…

…

…

…

…

…

7·90

6·90

Lower rate

…

…

…

…

…

…

…

…

…

4·90

4·30

Non-contributory invalidity pension

…

…

…

…

…

…

7·90

6·90

Invalid care allowance

…

…

…

…

…

…

…

…

7·90

6·90

Increase of non-contributory invalidity pension and invalid care allowance for wife or other adult dependent

…

…

…

…

4·90

4·30

Guardian's allowance

…

…

…

…

…

…

…

…

6·50

5·65

Child's special allowance; increases for children of widows, invalidity, non-contributory invalidity and retirement pensioners, and invalid care allowance beneficiaries:

First child

…

…

…

…

…

…

…

…

…

6·50

5·65

Any other child†

…

…

…

…

…

…

…

…

5·00

4·15

Increases for children of all other beneficiaries:

First Child

…

…

…

…

…

…

…

…

…

3·50

3·10

Any other child†

…

…

…

…

…

…

…

…

2·00

1·60

* Excluding the 25p age addition.

†Family allowances bring the total payments up to the amount payable for the first child.

STATUTORY INSTRUMENTS

Ordered,

That the Value Added Tax (Boats and Outboard Motors) Order 1975 (S.I., 1975, No. 745) be referred to a Standing Committee on Statutory Instruments.—[Mr. Dormand]

ORDERS OF THE DAY
  SUPPLY
  [17th ALLOTTED DAY],—considered.

  THE ECONOMY
  4.5 p.m.
  Mrs. Margaret Thatcher: I beg to move,
  That this House, being gravely disturbed by the total failure of the policies of Her Majesty's Government to curb the accelerating rate of inflation, calls upon Her Majesty's Government to abandon their damaging plans for further nationalisation, to take immediate action to cut public expenditure and to secure a reduction in the level of pay settlements, as essential parts of a programme designed to restore confidence and promote the economic recovery of the nation.
  Mr. Speaker: I have to inform the House that I have not selected any of the amendments to the right hon. Lady's motion:
  To leave out from 'inflation' to end and add
  'demands the urgent introduction of legislation to provide self-government for Scotland to ensure the living standards of the Scottish people through the growth and development of Scotland's oil and other natural resources'.
  To leave out from 'inflation' to end and add
  'takes note with regret that neither Her Majesty's Government nor Her Majesty's Opposition have so far put forward any adequate diagnosis of the causes or remedy of the present inflation which would offer the nation the prospect of effective leadership in overcoming its difficulties'.
  After 'settlements', insert
  'by means of a statutory prices and incomes policy'.
  However, the motion is in very wide terms, and it seems to me that there could be a wide-ranging debate upon it.
  Mrs. Thatcher: We are suffering from what the Prime Minister calls the gravest economic crisis that we have faced since 1931. It is different in its effect. It is different in its cause. But it is equal in its gravity.
  In this country, the level of inflation that we are experiencing now, its persistence and its acceleration are new phenomena. In previous periods of history, periods of sharp price rises have been
  1638
  followed by falling prices and money has regained its value. We are bound to question now whether people will ever again regain their confidence in money as a store of value or whether a degree of inflation is now the normal state of affairs.
  The degree of inflation that we have in this country at present is wholly unacceptable and must be reduced. As Thomas Mann, the great German novelist, said:
  "A severe inflation is the worst kind of revolution … only the most powerful, the most resourceful and unscrupulous, the hyenas of economic life, can come through unscathed. The great mass of those who put their trust in the traditional order … the elderly who hoped to live on what they saved in the past—all these are doomed to suffer."
  The real causes of inflation are not economic. They are social and they are political. Inflation is caused first by Governments, through rapidly rising public expenditure beyond what the taxpayers can bear and, secondly, by groups of people who try to get more out of the economy than it produces.
  With manufacturing production virtually static—and the latest index is 1051 compared with that in February 1974 of 1068—it is not surprising that we have accelerating inflation and, in addition, that we are increasingly having to finance Government expenditure by borrowing from abroad.
  A year ago many democratic countries were experiencing similar inflationary symptoms. I know how difficult it is to make comparable international comparisons which are genuine. I remember one of the Prime Minister's speeches at the beginning of the autumn election campaign, when he said:
  "Next time someone tells you that Britain has the worst record for cost of living increases, tell them to get up to date. Tell them that while in the United Kingdom the rate of inflation has slowed down compared with a year ago—in Canada, America, France, Italy, Belgium, Denmark, Sweden and Switzerland it has speeded up."
  That was at Bury on 26th September.
  Of course, the up-to-date picture is now very different from that of only seven months ago. In the last few months since December the OECD countries as a group have inflated at a rate of less than 10 per cent. per annum. In Britain over the same four-month period the figure was 27 per cent. and, as the Press have already pointed out, the Healey figure for the three

  1639
  months to April was 34 per cent.—almost exactly four times the 8·4 per cent. of which we heard during the election campaign, calculated on the same basis.
  This dramatic slide in Britain's position in the international inflation league table is a very good illustration of how our situation and performance have been worsening, while in other countries the opposite has happened. The facts about our neighbours' sucesses are becoming more and more well known. Japan had grave problems. It had a 30 per cent. wage inflation last year and it has now got the level of settlements down to half that level this year. And all that without any change in unemployment worth mentioning. It has one of the lowest unemployment rates in the world. Italy's catastrophic visible trade deficit has almost been eliminated. France has cut inflation from about 15 per cent. last year to about 10 per cent. per annum this year. In Germany the oil crisis put up prices scarcely at all. In 1974 they were only 1½ per cent. or so up on 1973, and the rate is already back to where it was before the crisis—that is to say, the German rate of inflation is about 7 per cent. a year, the sort of increase we get in a two-month period here.
  Other countries, therefore, have been able to meet and to tackle the problem successfully. Of course there has been a price to pay—a check to growth and, lagging behind it as always, a rise in unemployment in some countries, though not in all. But it is abundantly clear that almost everywhere the natural forces of expansion are working their way through again, and in many countries the underlying situation is so sound that reflationary measures are being taken, a course of action that could not be contemplated here for the reasons set out by the Paymaster-General in his speech in Stoke on 20th May—set out and spelled out, if I may say so, extremely well in a speech which could almost have been made from this side of the House. One just hopes that the Government will act upon the sentiments then expressed.
  While the situation is improving elsewhere, here it is still getting worse. But the successes of our neighbours show that inflation can be tackled and substantially reduced. That means that there are no excuses for the different pattern of
  1640
  events that we have experienced here. We could have acted last year and we did not. It would have been difficult, but far less so than to correct the situation we face now. Indeed, the Bank of England itself pointed Jut in its excellent commentaries, at which we always look very carefully—[Interruption.] I rather thought the Chancellor of the Exchequer was greatly in need of the facilities provided by the Bank of England, first for his overseas borrowing and possibly later as a printing press. The Bank of England said:
  "It is … likely to be more difficult to bring about a deceleration of inflation now that prices are rising rising 20 per cent. a year, than when they were sing at 7 per cent. or 8 per cent.—a rate which some years ago used still to be regarded as excessive. The rate of inflation could then be appreciably reduced by a relatively short period of more moderate growth in money wages and salaries."
  But not so now, and it goes on to explain why.
  The Government have constantly vilified my right hon. Friends for suggesting that it would be better to take a little action earlier than to leave it and to have to take a lot of action later. But the Government in fact left it, and now we are facing a position in which they will not be able to go on very much longer before taking action.
  There were no magic remedies which the other countries took. They took the necessary steps, which are all recorded and set out. The situation in France has been extremely well documented and the situation in other countries is known. The levels to which they have reflated are known. There are no magic solutions, no panaceas. But each of them faced reality, each of them took determined action, explained to the people what was necessary and managed to get the people to follow them and to join with them to win the battle against inflation.
  I turn to the question which I know would be raised if I did not deal with it, the question of unemployment. It is often said that we have not had such a severe rate of unemployment as has been experienced in other countries. In fact, on the figures the seasonally adjusted rate of unemployment is already up to 3·6 per cent. which is above that experienced by some of the other European countries. But at least they are on

  1641
  the way to tackling inflation, while we are on the way still to higher inflation and higher unemployment.
  Japan, of course, is a different case. It has always had a totally different attitude towards these matters, and a very good one. The companies have always looked after their workpeople during difficult periods and the work-people have stayed with the companies. Consequently the rate of unemployment there is only about 1·6 per cent.
  The Chancellor has already warned of the possibility that by the end of the year we might have 1 million unemployed in this country.
  Mr. Sydney Bidwell: Surely we can draw the conclusion from what the right hon. Lady has said that by and large the employers in Britain have not looked after their workpeople, have not sustained the spirit of co-operation that it has been possible to achieve in other countries. That is what is urgently needed here, and the right hon. Lady has a major responsibility for existing attitudes.
  Mrs. Thatcher: I am grateful to the hon. Gentlemen. What the lesson of Japan shows is that there is two-way co-operation. The workpeople have been willing in the battle against inflation to restrain wage claims, and the companies have been willing to look after them during that period. The point is that it was two-way co-operation, and I would be the first to say that that is the only way to tackle inflation. It cannot possibly be done without the co-operation of those who are employed and the co-operation of the unions.
  With the present rate at which unemployment is rising here it is possible that we shall reach I million before the end of the year. Not merely is it rising at record rates for this time of the year on the seasonally adjusted figures, but the fact is that the Government have so little control over the situation at the moment that they cannot take action to deal with it.
  They are powerless to do anything about the situation. Treasury spokesmen have made it clear that they dare not and cannot relate. All they can do is to sit and wait for the world economy
  1642
  to expand, hoping that some of the increasing business will come our way.
  I turn to the balance of payments. The Government's claim last year that they were making a good job of handling the economy rested on three claims. The first was that unemployment was falling. It is not. The second was that prices were moderating. They are not. The third was that the balance of payments was improving—which it is. There has undoubtedly been substantial improvement in the trade deficit this year, and since no other major economic indicator whatever shows any signs of improvement, we shall probably hear a good deal about that. According to a Treasury spokesman two days ago, for the whole of the last year for which figures are available the balance of payments gap was equivalent to 5 per cent. of gross national product, or to £68 for every man, woman and child in the country. We have been living well beyond our means, as the Treasury spokesman stated.
  Now there is some improvement in the balance of payments and comment has come in the Press and from economists about the reason for it. Before we rejoice too much it is as well to analyse that reason and to see whether the improvement is likely to be sustained. A recent article from the London Business School said,
  "The recent improvement in the balance of payments is being brought about by factors which may not be desirable in the longer run."
  It refers to two things, the first being exports. It is not that the volume of exports is rising. That has fallen. The improvement stems entirely from the increased price. But that is not a healthy situation. The faster our export prices rise today, the smaller the quantity of goods we shall sell in the future. We are therefore in difficulty on the export side because the volume is not rising but the price is rising.
  The second factor was imports. They have certainly fallen, and that has been partly brought about by manufacturers reducing the level of stocks, particularly the stocks of oil which, for reasons we understand, became very great and had to be reduced. The improvement is also associated with the slowing of economic growth and increasing domestic recession.

  1643
  The London Business School forecasts also strongly suggested that such improvement as there may be in 1975 will not last. Whether or not the exchange rate slips, it forecasts a worsening current balance of payments over the years to 1977. Its conclusions only go to show that one cannot build a healthy lasting balance of payments on a foundation of declining production and runaway inflation. Even the cheer on the balance of payments front is therefore very muted.
  I turn to a subject which the Prime Minister forecast I might mention—public sector borrowing. Overseas holders of sterling are not only worried about the current rate of inflation; they are increasingly concerned at the borrowing situation inside the country, particularly the Government's own finances. They know that it can lead to a substantial fall in the value of their money.
  At the time of his first Budget the Chancellor aimed for a massive reduction in the public sector borrowing requirement, and I think we all applauded him for that. He aimed to have a public sector borrowing requirement of £2·7 billion in 1974–75. It now seems that he no longer cares very much about the public sector borrowing requirement because the acid test of his and the Government's attitude lies in the figures produced for the latest Budget. He set out to plan for £2·7 billion. By November the figure had risen to £5·5 billion. The out-turn was £7·6 billion for the last year. This year he planned for a further £9 billion, and since he announced that figure there have been numerous proposals for further expenditure in the last weeks. Already the papers are forecasting a rate of £10 billion before we go any further.
  Of course, even the £9 billion was a figure in real terms, and if one adds to it the degree of inflation—
  The Chancellor of the Exchequer (Mr. Denis Healey): No.
  Mrs. Thatcher: It must have been the figure in real terms. If not, on what terms was it based? [HON. MEMBERS: "Answer".] What level of inflation did the Chancellor build into it?
  Mr. Healey: It assumed that inflation would be governed by a continuation of settlements at the current rate.
  Mrs. Thatcher: Which settlements and which current rate—the three months or the annual rate? If it is the annual rate of inflation, it is 21·7 per cent. If it is the Healey rate of inflation it is 34 per cent. Perhaps the Chancellor will tell us when he winds up the debate whether he still stands by a public sector borrowing requirement of £9 billion for this year.
  Mr. Healey: Yes.
  Mrs. Thatcher: He does? Well it is already too high. The Paymaster-General had a great deal to say about it in his recent speech and I am amazed that a Chancellor who set out to have a public sector borrowing requirement of £2·7 billion 15 months ago should be so happy with his planning that the figure is now £9 billion.
  He knows full well that this figure will be very difficult to finance by a mixture of the balance of payments deficit and personal savings. There is a danger that the gap between these two figures will be financed by other means. As the Paymaster-General so aptly put it the day before yesterday, when this happens the Government have
  "to borrow from the banks.… This is where the problems start. This method of finance enables the public authorities to settle their bills, but it tends to leave a corresponding flood of cash and bank deposits in the economy. It is known"
  —and this is a Treasury Minister—
  "figuratively as resorting to the printing press."
  As last year's borrowing requirement jumped from £2·7 billion to £7·6 billion in 12 months—an unforeseen increase of £5 billion—we are entitled to apply that kind of planning to this year. On the most generous basis, if one were to add not the same percentage figure but the same amount of increase to the public sector borrowing requirement, it would end at the fantastic figure of £14 billion. We know full well that at the level at which wage settlements are proceeding in the public sector, the Government are apt to be in considerable difficulties about whether their revenue will be sufficient to match their expenditure when it comes to meeting these claims.
  I come to public expenditure. A fundamental reason why the Government are having to borrow so much is that they are spending too much. At present public

  1645
  spending amounts to 60p in the pound of national income, about 35p being taken up by making transfers and 25p by goods and services. But this figure of 60p is almost certainly beyond the tax capacity of this country. The Government's decision not to match their increased expenditure last year by increased taxation is evidence that they, too, realise that the population has nearly reached the limit of what it can take in increased taxation.
  Mr. John Pardoe: Does the right hon. Lady recall the time when as Secretary of State for Education she helped to increase the borrowing requirement of the Conservative Government, which they inherited as a minus quantity, to £4·5 billion? Will she say why the Conservative Government did not have the guts to increase taxation to pay for their profligate schemes?
  Mrs. Thatcher: The hon. Member will remember that the Conservative Government had to announce its public expenditure cuts one month after the oil crisis had started, on 17th December 1973—cuts greater in real terms than those which the Chancellor has now announced. They are all on the record. I took the view, I believe rightly, that at a time when growth in the economy was going well and we were expanding, education should be a major beneficiary, and the nation did very well at that time. That is the view of my colleagues, too. We took the view that when we had to have cuts, education also had to share more in those cuts than it had on 17th December 1973. I notice that some of the cuts which were made, although they were greeted with howls of derision by the then Opposition, have never been restored, even though this Government have added some £20,000 million of expenditure to their plans over the current two years.
  The present level of public expenditure is well beyond the country's tax capacity and the Government's decision not to match it by increasing taxation really reveals that. It is evident that the population has nearly reached the limit of what it will take in increased tax. One cannot go on increasing public expenditure in times of no growth in the same way as, or even faster than, when the economy was growing. To do that is to redistribute the nation's income from the people to the public sector in
  1646
  a way which the people and the private sector will not accept and which they will strain by wage increases to correct.
  The Government have no alternatives in this deteriorating situation but to reduce public expenditure, first because they cannot get enough in tax and, secondly, because they will not be able to borrow enough on a sound financial basis and therefore may be forced to use the printing press. Of course, the Government challenge us about where we would make cuts, implying that if political decisions were too difficult we need not make any decisions to cut. But in the present deteriorating situation they will make them anyway. They have been listed in the Official Report on 15th April—£1,100 million that could be brought forward to this year but are not.
  In the present deteriorating economic position we have no choice but to make some cuts and, like the Economist this week, I have no doubt that at least the Treasury is preparing a substantial contingency package for later in the year. As a start, the Chancellor of the Exchequer could bring forward his £1,100 million in cuts, at present prices. I understand that effectively they will be worth only £900 million at 1974 prices. He could bring those forward and implement them now. Beyond that, all who have sat on the Front Bench know the processes that go on when there are Treasury cuts, and doubtless those on that Front Bench will have had experience of the process that goes on.
  Those who were upstairs in the Public Expenditure Committee the other day heard evidence given in public by the Chief Secretary about how the Treasury goes about it. It would seem that times have not changed, and that the usual procedure has been followed. In practice, individual Departments are told to cut expenditure by a certain amount, and the choice of cuts is left to them, in the light of the state of current contracts and commitments and the costs of dislocation. Things are still the same, but the Chancellor of the Exchequer knows that below the Blue Book on Public Expenditure there is a Public Expenditure Survey Red Book which gives far more detail, at which I would love to have a look now. Below that there is a great sheaf of papers from each and every Department dealing with everything.

  1647
  The Chancellor knows full well that when a direction goes out to cut expenditure it cannot be done just like that. Certainly, in my own Department one had to go through contracts pending, contracts signed, costs of compensation and cost of transfer payments to see where cuts could be made. There are certain places where one can cut, and then one is left with making cuts on things such as procurement. It is my suspicion that that is exactly what is going on now. If the Chancellor would give us access to those figures it would give us great pleasure to go through them and to see where cuts could be made.
  Mr. Ioan Evans: Before the hon. Lady gets to the point, is she going to itemise the places where she thinks the Government should make cuts, in view of the fact that earlier her Front Bench colleague was demanding additional social services expenditure and her party is demanding an increase in defence expenditure?
  Mrs. Thatcher: I understand that the process is already under way. I was looking at The Guardian of 4th May dealing with cuts in education. According to reports—and I know that the Government can neither confirm nor deny unless they make a statement—the exact process that I have indicated is already under way. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) gave a number of examples of cuts when he spoke on the Second Reading of the Finance Bill. It would take a long time to go through them all in detail. If I may precis them it will be quicker.
  He said we would bring forward into the current year as much as possible of the £1,100 million cuts planned for next year. He said that there are some things we cannot afford and that it would be better for us to recognise that. He said that sometimes the Government seem to go about public expenditure in the wrong way; they never seem to ask, "What can we afford to spend as a nation?", only "What must we spend and what must people be made to pay for? What must we borrow abroad or print?"
  We would reduce now some of the £2,000 million being spent this year on subsidies for council rents, food and
  1648
  nationalised industry prices. All this is in the Official Report. The hon. Gentleman might not know that housing subsidies have doubled in the past two years. They have gone up tenfold in the last ten years, and have done precious little to sort out the housing situation. It would have been far better if the Government had saved that money and used it to follow our proposals at the last General Election. I note as I see him sitting there that in a letter—
  Mr. Douglas Jay rose—
  Mrs. Thatcher: May I just finish and then I shall be perfectly willing to give way, although I have a long way to go. [Hon. Members: "Hear, hear."] I am glad that hon. Members think I have a long way to go. I wish to refer to a letter of 11th April about houses from the hon. Member for Manchester, Ardwick (Mr. Kaufman) who is an Under-Secretary of State at the Department of the Environment. He was asked about the cost to the public purse of purchasing council houses and providing financial assistance to house purchases, and he said:
  "On our estimates, the net cost of a new council house in its first year of occupation will, on average, amount to about £700, i.e. loan charges and management and repair costs of about £1,000 per annum and £300 per annum for unrebated rents."
  He went on at the beginning of the next paragraph,
  "Turning to the private sector, the estimated amount of benefit received, on average, by mortgagors in England and Wales in 1973/74 was £101."
  So that it is very much cheaper, certainly in the earlier days—although the hon. Gentleman made a different comparison in later years—to help people to purchase their own homes than it is to have these massive council house subsidies.
  My right hon. and learned Friend the Member for Surrey, East went on to tell the Government what we would not do with some of their expensive schemes. We would not carry through the Petroleum and Submarine Pipeline Bill which will create a borrowing requirement of £900 million. We would not nationalise the aircraft and shipbuilding industries at a cost of £550 million. We would not

  1649
  carry through the Community Land Bill which would mean employing 14,000 administrators at a cost of £660 million a year when put into effect. We would not endlessly dole out money to enable nationalised industries to run into bigger and bigger debts and we would not, out of spite, cut out pay beds from hospitals at a cost of £40 million. Part of the problem—
  Mr. Jay: Does the right hon. Lady also recall that the previous Conservative Government took decisions in favour of immense expenditure on Maplin, the Channel Tunnel and exceedingly extravagant motorways in London all of which have been cancelled by the present Government?
  Mrs. Thatcher: As the right hon. Gentleman knows, the Channel Tunnel would not have been heavy on public expenditure. It was the rail link that would have involved the expenditure. In the early years Maplin would not have cost very much. I accept that in the later years it would have done. What was the other point?
  Mr. Jay: The motorways.
  Mrs. Thatcher: We cut the motorways severely on 17th December 1973. I remember that future expenditure on motorways was severely cut then. We did not hesitate to make cuts when they were necessary. It is quite a different matter to increase public expenditure during the period of growth that we were experiencing then in the period of virtually no growth such as we are currently experiencing.
  It is important to stop further nationalisation measures coming forward. They are far more expensive than anything the right hon. Gentleman mentioned as having been cut and they place tremendous burdens on the Exchequer in future years as well as adding a great deal to the public sector borrowing requirement. Many of those measures were announced after the Budget measures. For a Government whose chief objective is to fight inflation the question is not whether the Chancellor is to make further cuts in public expenditure but how long it will be before he announces them.
  1650
  I turn now to the social contract and wages.
  Mr. J. Enoch Powell: Before the right hon. Lady leaves the question of the public sector borrowing requirement, having indicated that in her view £9,000 million is a grossly excessive figure, may I ask whether she can give some guidance as to what, in the view of the official Opposition, is the acceptable, safe, size this year of that net borrowing requirement?
  Mrs. Thatcher: It would be that size which could be financed without resorting to the printing press. Neither the right hon. Gentleman nor I know that amount. If we succeed in getting down public expenditure, that amount in any event would be less. The right hon. Gentleman knows that full well.
  The motion also refers to the effect of the social contract. I have dealt with the monetary route to higher inflation but that is only part of the story. We are also suffering at the same time from the failure of the social contract to curb wages and prices. If we take as an illustration the period before the social contract, 1964–74, because it gives a much better average, we find that prices rose at the same rate as earnings, less about 3 per cent. which was the average increase in productivity.
  We have therefore some means of calculating the expected rise in prices from the increase in earnings with a suitable time lag. We now turn to look at the figures for the past year. They speak for themselves. When the Government came into power the increased cost of living year on year was 131 per cent. Wage increases were running at 14 per cent. They were approximately the same. Now the wage rate increases over the year are 32 per cent. while prices have risen over the year 21·7 per cent. I am taking the annual figure. This means, taking the criterion I have given, that many of the wage increases for the past year have still to work through into prices. These are social contract wage increases. This is the past 15 months.
  The Prime Minister (Mr. Harold Wilson): The right hon. Lady will be aware that many of the increases last summer were the result of actions taken by her Government. The Pay Board had

  1651
  already started the reference on London weighting allowance. It had to consider the nurses, the teachers and the postal workers. The railway arbitration restructuring was already on. Many of those came last summer so that, taking year on year, the right hon. Lady must take responsibility for many of the things her Government started.
  Mrs. Thatcher: Is the Prime Minister saying that many of the wage claims now are below that figure? Many of them coming in the next wage round are well above it. They were already rising towards the end of the period. Those wage rates have still to work through into increased prices.
  If we find, as we do, that the increased wage rates will soon be reflected in the same figures for prices less about 3 per cent., we find that the social contract becomes an engine for creating inflation not for curbing it. The second guideline automatically allows wage rates to rise as much as the cost of living. In theory if they rise no more than that we might get the rate of inflation down by 3 per cent. a year, if that were held to absolutely. We know that it is not held to absolutely.
  Second, we know that that is an absolute minimum and that the other guidelines often add things so that the wage increases permitted by the social contract are well above the minimum. We find that the social contract becomes a method—as its guidelines are at present—of increasing the rate of inflation still higher. That is why a number of us, myself and some trade union leaders apparently, say that the guidelines must be altered if we are serious in our wish to tackle inflation.
  Mr. Ron Thomas: When the right hon. Lady is talking about wage rates would she make it absolutely clear that she is talking about the minimum wage rates? If she is, and I suspect that that is the case, the impact of a 30 per cent. increase in minimum wage rates is far less on unit costs of production because the majority of workers in most industries are already receiving above the minimum.
  Mrs. Thatcher: Wage rates are up by about 32 per cent. Average earnings are up by about 27 per cent. to 28 per cent.
  1652
  —still well ahead on the year-on-year level of increase in inflation. That means that they still have to work through. It still means that the terms of the social contract, even if its clauses are adhered to, will be an engine for creating inflation because the minimum which it permits is the increase in the cost of living for the past year. When we add the amounts which can be gained under the other guidelines, reforming pay structures and so on, the hon. Gentleman knows full well that the maximum increase will be well above that. Also, the contract permits people absolutely to recoup the very tax increases which the Chancellor asked them not to recoup but which the guidelines say they may. Therefore, we are locked into a circle in which the contract has become not a device for reducing inflation but an engine for increasing it.
  Taking one thing with another, we find that the inflation rate is accelerating sharply. An interesting table was published in the leading article in this week's edition of the Economist putting the rate in 1973 as 9 per cent., in 1974 as 16 per cent. and in 1975—on the same basis—as about 25 per cent. If we look at it year by year, from 9 per cent. one year to 16 per cent. the next year and to 25 per cent. the following year, and continue that forward in progression, it means that we shall rapidly be on the verge of hyperinflation, unless the Government take serious steps to reduce it and to renegotiate the guidelines so that they positively cut down the rate of inflation. Unless that is done we shall have very little hope of tackling inflation in this country.
  First, the Government have to reduce public expenditure. They may say that they do not want to do so—no one likes to do it—but they have to in the present situation. Secondly, they must renegotiate the guidelines if inflation is to be reduced. Thirdly, they must stop the schemes for nationalisation, which transfer more and more money from the private sector into the public sector and make it extremely difficult for private industry to continue operating and to undertake the necessary investment that they so need if we are to have industries fit for tomorrow and fit to give us rising standards of living.
  The Prime Minister's policy has been to nationalise more, to spend more and to tax more and then to borrow more.

  1653
  When confronted by a really tough situation he is apt to waffle and retreat. Not for him is there the long-term strategy that would lead to flourishing, profitable industry, which is the only source of secure and stable jobs and the only way to rise in prosperity in tomorrow's world. He prefers the short-term expedients that might get him through the day without too much difficulty. That is the lesson of the last year or so.
  If, like other countries, we had faced reality and had taken steps with the same determination as they did, inflation would now be falling instead of rising and we could look forward to falling inflation and falling unemployment. It would, perhaps, be too much to hope for tax reductions or real tax incentives to create wealth. That is not the way of a Socialist Government. However, at least we might have been able to pay our own way instead of being so dependent on borrowing from abroad, and we might not have leaned so heavily on future generations for repayment of our debts.
  After we had been in office for a few months the right hon. Gentleman the Prime Minister asked my right hon. Friend the Member for Sidcup (Mr. Heath)—[Interruption.]—he is helping to win the referendum; the Government cannot rely on their own troops to carry out their work—this question:
  "Last spring, when the Prime Minister had been in office for just a few months, I asked him a question, which he then evaded, and I ask him to answer it today. How many more years, if they were vouchsafed to him, would he have to be in office before he was prepared to take his own personal responsibility, and accept his Government's responsibility, for the state of the nation under his Government, as a result his Government's policies—and, above all, his and their responsibility for unemployment?"—[Official Report. 2nd November 1971; Vol. 825, c. 32.]
  The Prime Minister has now been in office for over—[Interruption.] That was the point which the present Prime Minister asked my right hon. Friend the Member for Sidcup when he was Prime Minister. The present Government have now been in office during two periods amounting, together, to over 15 months. During that time inflation has become a record, unemployment is rising fast, borrowing is unprecedented and public expenditure is out of control. These are the results of Socialist measures and the Socialist administration led by the present Prime
  1654
  Minister for which he must take responsibility.
  This is not a time to talk, talk, talk. This is a time for action. The Government are in a position to take that action if they have the courage and the determination. If not, the people will continue to suffer.
  4.57 p.m.
  The Prime Minister (Mr. Harold Wilson): Before I reply to the speech made by the right hon. Lady the Member for Finchley (Mrs. Thatcher)—I hope she will forgive me if I do not follow her entirely—I want to remind the House of the background to this debate. I shall not follow her because I want to talk about the policies of the Conservative Party and my party, and not some of the other things she wanted to talk about.
  It will be recognised that a week or two ago great concern—and this is the background to the debate—was being expressed at home and abroad about the state of the pound sterling. A great deal of this was, of course, related to anxieties about inflation, to which the right hon. Lady referred, as I shall.
  However, first, I should like to take up the references the right hon. Lady made earlier in her speech to what is, and must be, the main determinant of the foreign exchange position; that is, the progress of Britain's overseas trade. I should like to ask the House objectively to review that progress.
  In the fourth quarter of 1973 our visible trade deficit was £976 million; that is, an annual rate of over £3,900 million. I remind the House that the effect of the increase in oil prices had hardly been felt at that time. This was natural trade, not the increase in oil prices. Even so, by that time our trade balance on normal trade was heavily negative.
  Therefore, we had nearly £4,000 million a year deficit, with hardly any effect from increased oil prices. The right hon. Lady will concede that even by her rather idiosyncratic notions of collective responsibility, she had at that time—[HON. MEMBERS: "Oh."] I shall have something to say about this later. The right hon. Lady will concede, I think, that she had full responsibility as a member of the Government which had produced this situation in 1973, even though I am prepared to be now—as I

  1655
  was then—generous about the effects of the increase in commodity prices. That was the position—an annual rate of deficit, before the oil price increases, of £4,000 million.
  On 9th November 1973 the Institute of Directors was told, on behalf of the Government of which the right hon. Lady was a member:
  "There are two kinds of problems and they feel very different. There are the problems of failure and the problems of success. Today if only we could all realise it, we are facing the problems of success."
  So all right hon. Members of the Opposition, whether they sit on the Front Bench or have retreated elsewhere, have that phrase strung around their necks" the problems we are facing are the problems of success." That is what the right hon. Lady was associated with—a deficit of £4,000 million a year, before oil. I wonder what she considers, therefore, to be the position about the present balance of payments situation. Incidentally, the right hon. Lady quoted the Economist just now. It rather surprised me that she quoted the Economist, because within a few weeks of that "problems of success" boast all the quality Conservative papers, from the Economist upwards, were headlining inflation rates of 20 per cent. in 1974, and they were calling for an anticipatory election before we reached the 20 per cent. inflation which the right hon. Lady has been talking about. They were also warning at that time—I have the cuttings in front of me—of a heavy lurch into unemployment in 1974. So, £4,000 million a year, by her standards, therefore, was a problem of success—unless she wants to dissociate herself from that statement—and 20 per cent. inflation already committed.
  Let us now judge, therefore, the country's current performance. I started by referring to the fact that this debate began because of the position of sterling. Let us judge the country's current performance against that criterion.
  In 1974 as the full effect of the fivefold increase in oil prices worked through, this by itself imposed, on top of the Conservative's deficit, an extra cost of some £2,500 million on our balance of payments. Yet the balance on the rest of our trade, excluding oil, was better in every
  1656
  quarter of 1974 than the Conservatives achieved in the last quarter of 1973.
  Therefore, we started from a prospect of a £6,500 million trade deficit; £4,000 million already reached without the oil surcharge, and an additional £2,500 million with the oil surcharge. In the first four months of 1975, this year, the country's visible trading deficit, when we include oil, has been £972 million, an annual rate of less than £3,000 million. That is a substantial improvement, including oil, on the last quarter of 1973, when the increase in oil prices had hardly begun to work through. In these four months of 1975 we have been in surplus on our non-oil visible trading account, in surplus compared with that multi-billion deficit we inherited, which, by Conservative standards, was just "a problem of success."
  The House will recall that my right hon. Friend the Chancellor of the Exchequer said in his first Budget more than a year ago:
  "as with the oil deficit, we cannot hope to eliminate the whole of the underlying deficit this year."—[Official Report, 26th March 1974; Vol. 871, c. 285.]
  That was the inherited £4,000 million a year rate. But in the first four months of 1975 we have done just that, and it would be right for the House to recognise the magnitude of that achievement. I wish the right hon. Lady had said more about that instead of trying to depreciate it. Tory parties, we have noticed, are always somewhat cyclical in their readiness, rhetorically, to sell Britain short. The cycle starts on the day they get into office—[Interruption.] Cyclical patriotism", says my right hon. Friend the Chancellor.
  Mr. Julian Amery: The right hon. Gentleman is speaking as though the rate of £4,000 million a year deficit was something which would have been continued through 1974, irrespective of oil. However, he will he aware that the Treasury forecasts against the background of the last quarter of 1973 as regards investment intentions showed that we would have been in balance early in 1975.
  The Prime Minister: Something must have happened between the right hon. Gentleman seeing the forecasts which he saw the day after the election, four days

  1657
  before we came into office—there was that long delay—and over those four days, because the forecasts that we were given were very much worse than that, and they said that we should not be in balance even without the oil situation. That was the forecast we were given on coming into office in March 1974.
  On top of what I have mentioned, there is the substantial surplus in our balance of invisible trade, which increased last year, and to all those responsible I paid tribute in my speech on Tuesday night. When account is taken of that, the deficit on our total current account so far this year has been £492 million; so our current account deficit this year, including oil, is running at a rate 25 per cent. below the rate in the last quarter of 1973, when the oil price increases had had no major effect. This is a significant improvement. I am surprised that we have not heard more about it from the right hon. Lady. Compared with the same four months last year, 1974, the current account deficit has been cut by over 60 per cent. We had no credit for that this afternoon.
  On this basis, therefore, including invisible earnings, the non-oil current balance has been transformed from a deficit of £784 million at an annual rate in the last quarter of 1973 to an estimate surplus at an annual rate of £1,506 million so far this year.
  Mr. Powell: Will the Prime Minister, in addition, point out that the record of his Government would be even better if on the same basis he would allow for the very large deficit with the EEC?
  The Prime Minister: I hope to come to one or two points about that shortly, in relation to the export figures, if the right hon. Gentleman will bear with me.
  There is another fact which is relevant. I have been quoting so far monetary figures. If we take export and import volumes, the House can take some encouragement from recent trends. At a time when the volume of world trade has surely been declining we have done well in maintaining the volume of our exports. This must suggest that our share of world trade over these past months has been maintained, and possibly increased. On the other hand, import volumes have been falling steadily in every quarter since the end of 1973.
  1658
  Taking particular markets—I can respond to the right hon. Member for Down, South (Mr. Powell), as this is the next bit of my speech anyway—in 1974 the EEC took more than one-third of our exports, more than the rest of Western Europe and North America put together, and in the most recent three months the value of our exports to the other members of the EEC increased by 4 per cent. on the previous three months at a time when exports to North America fell by 5½ per cent. and to Australia, New Zealand, South Africa and Japan, taken together, by 9½ per cent.
  I should like to come to OPEC markets. As I understand it, this is not part of the Common Market debate this afternoon. The House will agree that it is particularly important to turn the OPEC countries' monetary surpluses into extra trade with us. The opportunities are clearly there provided we can shift the necessary resources into exports. These countries are estimated to have imported goods and services worth around $40 billion in 1974, an increase in volume of around 40 per cent. on the previous year. We have tried to respond—our traders, exporters and industrialists.
  Last year our performance in these markets was a bit disappointing and we appeared to be losing market shares and not taking full advantage of increasing opportunities. My right hon. Friend the Secretary of State for Trade, who has visited many of these countries in recent months, has reported that while our goods at present fully meet requirements on price and quality—let no one discount that—they fall short on availability and delivery performance, a point to which I shall come later.
  More recently, however, the figures have been rather better. In the three months February to April, exports to oil-exporting countries were 27 per cent. higher than in the previous three months and were 111 per cent. higher than in the same period last year. We must do everything possible to ensure that this upward trend continues.
  I am not claiming these export figures as problems of success, or even achievements of success. I am citing them as a tribute to British exporters, and British industry, and everyone at every level and on both sides of industry, because I believe

  1659
  they deserve the praise of this House. I believe these are an essential component in a fair and balanced picture of how Britain is meeting the challenge which hit us so hard 18 months ago. And not our exporters only. The House will know of the help now being given to exporters by developing direct intergovernmental arrangements; by seeking to involve public corporations and Government agencies in support of large-scale projects; by helping with the vital training needs of these countries: and by various more specific measures to help exports such as the schemes for cost-escalation cover, for help with performance bonds, and for the provision of pre-shipment finance, which are particularly directed towards OPEC markets.
  The House will be aware of the opening up of the Soviet market to our exporters. Senior Russian Ministers are now talking of the prospect as being even better for our exporters than was envisaged when the trade agreements were signed in Moscow three months ago. Even better than that, there has been an encouraging quickening of response to these opportunities by British exporters, ranging from some of the largest firms in the country to quite small businesses.
  Of course, it can be said, and will be said—I thought that there was a hint of this in the speech of the right hon. Lady—that the improvement in import volumes, or the reduction in import volumes, reflects the level of production in British industry. It is a fact that the world as a whole is suffering from the deepest recession since the 1930s. I mean the world as a whole. This affects us all. This warning was given during the last General Election by leaders of all major parties. It cannot now be in doubt that it has happened. But it is also a fact that in terms both of unemployment and of declining industrial production, other major countries have suffered more than the United Kingdom.
  Mrs. Elaine Kellett-Bowman: Is the Prime Minister aware that male unemployment in my constituency is double what it was in the equivalent period a year ago? The figure for female unemployment is also double. The figure
  1660
  is now over 7 per cent. This unemployment exists in a part of the country which the Prime Minister is supposed to know. What is he going to do about it?
  The Prime Minister: The hon. Lady is right to say that. If she will bear with me while I deal with the point raised by her right hon. Friend, I shall say something about some of the problems in her area and the surrounding areas.
  The Leader of the Opposition challenged me in a convoluted set of questions, and referred to "her", "him" and "the Prime Minister". It was fascinating to listen. She challenged me about unemployment during the period in which the Labour Government had been in office. Earlier in her speech she said that unemployment in Britain was now above that of some of our overseas neighbours. She ignored the fact that when the Labour Government came to office we were told how serious unemployment would be as a result of what the Conservatives left behind. Let us forget that. What she said this afternoon does not correspond with what her right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), mentor and Svengali, said about unemployment today. [HON. MEMBERS: "Where is he?"] He was here. He has now probably gone to the BBC to fill in what he said at lunchtime today.
  Today the right hon. Gentleman referred to today's unemployment figures. He said that the figures were thoroughly misleading, and had been so for years, in measuring the slack in the economy, and that the published unemployment figure greatly exaggerated the number of people available, willing and ready for work, and, on the other hand, it greatly understated the number of jobs for them to do. So he went blathering on and on about the statistics. This was his conclusion—[interruption.] I want to see the Conservative Party more united. It might then produce a coherent policy.
  After a certain amount of analysis, the right hon. Gentleman said there were about 400,000 job vacancies. He compared that figure with the number of unemployed. The interviewer, who was called Mr. "H" said:
  "And in percentage terms how do you judge unemployment?"

  1661
  The right hon. Gentleman replied:
  "Well, the official figure is that we have got 3·7 per cent. unemployed and my figure, taking everything into account, is that we have got about 1·6 per cent. unemployed. It gives a very different reality."
  The right hon. Lady always waits before she speaks in the House. Quite rightly, she takes her time. I suggest that she should sort out this matter with her right hon. Friend, who, we are told, is her personal, private "think tank". Perhaps we shall hear whether what the right hon. Lady said this afternoon is the view of the Conservative Party on unemployment, or what her right hon. Friend said—
  Mrs. Thatcher: What does the right hon. Gentleman think about the Government's statistic of 3·6 per cent.? I did the Prime Minister the compliment of using Government figures throughout.
  The Prime Minister: I shall come in a moment to what the right hon. Lady said about the unemployment figures in her article in the Sunday Express, when she depreciated it. I replied to her when she did that in February. I do so now. These are the figures accepted by successive Governments over the past years. I accept them. The right hon. Lady, in her article in the Sunday Express, did not accept them. Today, for other purposes, she accepted them, but her right hon. Friend did not. Perhaps she could take a little time off to sort it out with her right hon. Friend.
  Before referring to this fascinating broadcast I said that in the latest three months production had not fallen as much in this country as in other countries. The right hon. Lady did not concede that. Compared with last year, Japan's production has fallen by 20 per cent., and that of the United States, Germany, Italy and France by between 10 per cent. and 15 per cent. In Britain, by contrast, production has fallen by only 4 per cent.
  At this point—bowing to the hon. Member for Lancaster (Mrs. Kellett-Bowman)—I should like to say a word about certain associated industries.
  As hon. Members representing Lancashire, Yorkshire and other areas know, the textile industry is going through one of its most virulent cyclical depressions, like so many in the past, not unconnected with violent swings in raw materials
  1662
  prices. This depression is, in fact, the most violent which has hit some of the industries, areas and businesses concerned since 1931, and it has, of course, worldwide repercussions.
  The Government have given the most urgent and careful study to the problem, and I hope, with permission, to make a statement tomorrow about the action which we propose. For reasons which I shall more fully explain to the House tomorrow, which in our view are decisive, I shall not be announcing controls on imports. But I shall be informing the House of other action we propose to take which will be of more direct help to the industry and more appropriate to the nature of the problem.
  There is reason to begin to hope—
  Mr. Peter Hordern rose—
  The Prime Minister: I shall deal with this matter in detail tomorrow. Perhaps the hon. Gentleman will try to catch the eye of Mr. Speaker then. I should now like to continue with my speech. I have already given way three times. I do not know why the hon. Gentleman cannot wait for tomorrow's statement.
  Mr. Deputy Speaker (Mr. George Thomas): Order. There must be only one hon. Member on his feet at a time.
  The Prime Minister: It would be helpful if the hon. Gentleman would wait for my statement tomorrow.
  I was referring to the fact that the world depression has hit this country far less hard than most other countries. I gave the figures.
  There is reason to begin to hope that some of our major trading partners are, or shortly will be, moving out of the worst depth of their own recession into a period of expansion. Following the measures taken by the United States, Germany and the Netherlands, France has now introduced a reflationary package though on a more modest scale and directed primarily to next year.
  Other factors which should help to promote recovery—I mean world recovery, including our own—include what appears to be the completion of the downward adjustment of stocks in the United States and the continued rapid growth of imports by the oil-producing

  1663
  countries. Because of this and, indeed, the most recent action taken only today by Germany there seem to be good reasons for hoping that the recovery in world trade will have got under way by the end of this year and will be accelerating next year. As my right hon. Friend the Chancellor has said, by the standard of previous cycles there will be nothing exceptional to be surprised about if we were to see a growth of world trade in the range of 10 per cent. to 15 per cent. during the next year. But, and here I agree with the right hon. Lady, all these possibilities, improvements and achievements once again underline, as she said, the need for us to maintain and improve our competitiveness and to be able to fulfil export demand during the resurgence in world trade and demand, when that comes, as we now have reason to think it might come very quickly. This is partly a question of ensuring that the resources are there and industrial capacity is there, recalling how lack of capacity affected our exports in 1973 and 1974. Indeed, what we hope to do for the textile and associated industries is related to seeing that the capacity does not go out of production, because it will be needed when world trade recovers in the next few months.
  Still more, it depends on the fullest co-operation of all our people in bringing down the rate of inflation at least to a level comparable with that of our competitors. The fundamental issue—there is no disagreement between the two Front Benches—is that of industrial costs.
  As I said in an intervention to the right hon. Lady, the outcome last year was distorted by action which had to be taken, perfectly fairly and which we supported, to deal with special cases left over from the period of statutory incomes control. The Conservative Government, before leaving office, were committed to special action on the London weighting allowance. I always felt that they agreed with what had to be done with the long-overdue settlements in respect of nurses, teachers and postal workers. I do not think that the Opposition ever dissociated themselves from that. Of course, the biggest single item in increased wages and costs over last autumn was the thresholds with which they left us. I do not think that anyone doubts that. Indeed, they
  1664
  have in some cases been written into permanent income agreements further on. I am not complaining about that. However, I do not want them to throw at us the consequences in the wages index of things with which they left us when they left office.
  Having said that, it is the fact that the overall level of wage settlements has been too high. The TUC made no bones about the gaps in the observance of the guidelines in the very tough statement which the General Council issued yesterday.
  Many commentators at home and abroad, many critics, friendly and otherwise, are urgently demanding statutory control over wages and other incomes. Some of us have expressed our views or suggested that a statutory policy is not the way out of our difficulties. I will quote:
  "We had that before … I think we have a similar experience to what one or two other countries have had: you can put on and operate a freeze for a comparatively short time. You can even have one stage out of the freeze but, when it comes to the second stage out, if you are careful you have to put in so many exceptions and variations that you get such a high permitted guideline that it can in fact produce inflation which it is meant to curb. You also get … a lot of rigidities introduced and you, if you are not careful do not manage to get the people where the jobs are. So you can operate it for a short time, but no country in the world has been able to do it for very long."
  That is a sound statement. [Interruption.] It may have sounded a little long-winded. Those are not my words, even though long-winded, although they are a carbon copy of the words that I used in a television interview a week last Sunday. Almost word for word the words that I have quoted against statutory controls were the words of the right hon. Lady in her television interview a week ago. So both of us agree, and I believe that practically the whole House agrees with what we have both said.
  But rejection of a statutory policy—if that is what these words mean, as they must—carries with it an acceptance—here I think we are in agreement again—of the need for greater voluntary restraint and greater voluntary acceptance of the kind of settlements that the country can afford within our democracy.
  Above all, it means more concern to be shown by some who are in a position to

  1665
  exercise their industrial and financial muscle and more regard on their part to the fact that every penny which they take out in excess of what can be afforded by the country prejudices the interests of their working comrades who cannot assert the same degree of industrial power. At the same time, it directly penalises pensioners and others unable to help themselves, in addition to harming our fight for exports and economic recovery.
  The challenge that all of us in this House have to face, against the background of these statements by the two main party leaders, is how to achieve this within a democracy, within a system of voluntary collective bargaining, without sending trade unionists or anyone else to gaol.
  In the past week or two, ideas have been put forward, commended, attacked and mulled over throughout industry.
  There have been a number of proposals. There was my own, which happened to be the first, for consultation with the CBI and the TUC. I suggested—I meant it seriously—that the Government, the CBI and the TUC should aim to agree on the best forecast of the national product that we could. Against that forecast of GDP and against the background of our joint determination to reduce inflation and to make the necessary provision for exports and investment, I should like to see more consultation on the right division between essential public expenditure, on the one hand, and the total of private consumption, on the other, and on the allocation between spendable personal incomes of all kinds and the profits which are required for investment. When such a system was fully working, all of us should then be able to consult on this every year and to monitor the outcome at regular quarterly intervals. But there is no reason why we should not start this process soon.
  When I said that 10 days ago it was immediately welcomed by the Director General of the CBI and the General Secretary of the TUC. I hope that we shall see these ideas further discussed at the next meeting of the NEDC, which I shall be chairing.
  There was also the suggestion put forward by Mr. Jack Jones this past weekend, when he said that attention should
  1666
  be paid not so much to percentages as to cash approach. Again, ideas of that kind are welcome and deserve full consideration. His argument—others have said it—is that if £X a week is required in an annual settlement to maintain the living standards of those who are hardest hit, there is no reason why the percentage that the increase bears to their incomes—the lower paid—should go right through the whole of industry and society. That raises the whole question of differentials, because where there is insistence on exactly maintaining differentials in percentage terms, this inevitably increases the gross pay differential in cash terms.
  Yesterday the CBI put forward its proposals. Other trade union leaders are doing this. There was the statement by the General Council. I believe that what we are seeing today is a genuine realisation—the right hon. Lady in her broadcast called for this as much as I am calling for it—in almost every section of our society of the need for a joint endeavour to overcome the evils of inflation.
  I turn now to the proposals put forward by the Opposition in their motion, as elaborated in the speech that we have just heard.
  They began by expressing their disturbance about the failure of Government policies to
  "curb the accelerating rate of inflation".
  So far as industrial costs are concerned, including incomes of all kinds, clearly, from what we have heard the Opposition have nothing to propose, apart from fiscal changes which have been discussed and voted on in long days and nights of debate over the past few months on the Finance Bill, and so on. But I will come to one or two taxation questions later.
  We read an advance copy of the right hon. Lady's speech in the Press, which published with great authority all the main points. In this advance forecast we were told that the right hon. Lady was going to tell us—I thought she did—that what was needed was that the
  "commonsense majority should be encouraged to tackle militancy at its source."
  That is fine. Most of us agree with that. I am delighted that the right hon. Lady agrees that there is no difference between us on mindless militants who

  1667
  threaten the very future of their jobs and the jobs of others.
  We made that clear in the massive investment assistance to British Leyland, when we said that the performance of the corporation would be strictly monitored and that co-operation, in terms of both industrial peace and manning and productivity problems, would be an essential part of that performance and a criterion judged by us for continuing help.
  I have also made clear our position in relation to Chrysler. If the right hon. Lady, or the right hon. Gentleman who is to wind up, has in concrete terms any more clear ideas for strengthening the voice of moderation against the clamour of militancy, the House will wait to hear them.
  All we know from yesterday is that the Conservatives are against what we have done in the case of British Leyland and other concerns. Indeed, 50 of them are even more against than the official leadership. In our view, all of them show far too little concern for the industrial and social consequences of the unemployment which would inevitably have followed had we not acted, for example, in the cases of Leyland and Ferranti. Their attitude would render us still more dependent upon imports and lose the nation essential exports.
  To me it seems to recall a philosophy more than once expressed in the House by members of the previous Government, I think about 1971, in those halcyon, anti-lame duck years which preceded Rolls-Royce and Upper Clyde, when it was even suggested that the country would do better to run down our steel industry, if not to do without it altogether, and rely on imports, without saying where we would get the necessary exports to pay for our essential steel imports.
  Again, I gather from what the Opposition have said on the subject this afternoon that they are ideologically opposed to the principles of NEB, but then, I remember that they were ideologically opposed to the creation of IRC. They fought the IRC Bill with all-out opposition day and night, as back-door nationalisation. That same ideology caused them immediately they took office, on doctrinal grounds, to scrap IRC without a moment's considera-
  1668
  tion, a decision which I believe, to be fair to them, they later came to regret. Certainly, the whole nation had cause to regret it when we had to face the industrial problems of 1974 with nothing but the Conservative 1972 Industry Act, for which—I do not want to be churlish—we are grateful. Opposition ex-Ministers who normally sit below the Gangway or on the back benches are significantly absent, but I am sure that they are proud of that 1972 Act. I should like to know whether the new Tories on the Front Bench are proud of the 1972 Industry Act. They will have plenty of opportunity in the present situation of being able to approve recommendations under the Act which they so wholeheartedly supported in 1972.
  Whatever the answer, I am sure that most hon. Members on both sides of the House will agree that, apart from the overriding short-term problem of inflation, our competitiveness as a nation over many years, under successive Governments, has been undermined by a total inadequacy of industrial investment, both to create capacity and, above all, to advance modernisation.
  It is not only a question of the amount of new investment. I fear that what has been significant about Britain's performance under successive Governments—this is not a party point—is that even when we have had a higher rate of investment the physical return on that investment in terms of productivity and real earnings was much lower than that recorded in many other countries. The NEB will play a major rôle not only in raising the rate of investment but in revising, too, the physical return on that investment.
  More than 30 years ago the war-time coalition Government of all parties in their White Paper on full employment accepted the Keynesian doctrine that where investment of all kinds was insufficient to maintain employment the State must step in with capital spending programmes. With Keynes the emphasis was on roads, bridges, the draining of swamps and the rest. The NEB concept is an updating of what we all agreed in the 1944 White Paper. [Interruption.] Will hon. Gentlemen, even those who have just emerged on the Opposition Front Bench, listen seriously? The NEB concept is an updating of what we all agreed in the

  1669
  1944 White Paper. The NEB concept is designed to maintain and increase the volume of investment, certainly with the idea of safeguarding employment, but the difference from the macro-economic approach of Keynes is that the NEB has the special facility of being an instrument for channelling investment directly to where it is most needed in terms of productivity, employment and an improvement in our national competitiveness—where it has not been going up to now.
  Keynes, who was concerned only with the general level of employment, had no more to offer as his answer to unemployment to a skilled toolroom fitter than the prospect of a job as an unskilled labourer building a road. The NEB is concerned to give the skilled man, and his mates, in industry more power to his arm and more power to his skill by modernisation. We do not see the rôle of NEB as a people's dispensary for sick businesses. It will be the instrument through which the Section 7 and Section 8 powers of Mr. Chataway's 1972 Act will be carried through, on an agency basis, at the request of the Government, and with appropriate accounting arrangements. It is the right agency to do it. Its main purpose is modernisation and expansion.
  Perhaps the best opportunities will come with existing companies where there is a strong management anxious to expand and a willingness to see NEB finance for the company's investment programme or to form a joint venture to carry out a particular project. In all those joint ventures the willingness must be mutual; it cannot be forced.
  The Opposition's views in the House and outside on this NEB proposal for public ownership, including the Aircraft and Shipbuilding Industries Bill are well known. They are fundamentally doctrinaire and totally ignore the fact that what we are doing we set out unequivocally in two manifestos in two successful General Elections last year. The same is true of their opposition to public participation in North Sea oil—and ultimately Celtic Sea oil. Ideology apart—and I always allow for that when studying the views of right hon. Gentlemen and right hon. Ladies on the Conservative benches—some of their arguments are economically unsound. For example, they talk about checking the swelling public expenditure on nationalisation. Surely they under-
  1670
  stand that there is no additional direct demand on resources by purchasing existing shares by stock. Although there may be some secondary effects on demand because some holders of shares will choose to sell some of the compensation stock in order to spend the proceeds, this is unlikely to be substantial. There is no difference between the transfer of resources in a measure of this kind and the transfer of resources when a big merchant bank buys up a small firm in the ordinary process of the market.
  Even where the Conservatives are prepared to concede that there is a case for action—they were the nationalisers of Rolls-Royce, and we went along with them after due consideration—they reject the right of the community to take an appropriate share in the equity and control. Yet what they resist is happening every day in private industry and in the City of London. Few prudent merchant banks, investment banks or big investors would agree to provide a majority share in the capital of the business without ensuring an adequate share in the profits and an adequate voting power to ensure control. Only this morning I read in the newspaper of an important national bank which has taken greater control of one of its subsidiaries, which had been losing money, by taking an increased shareholding so that it had the effective control. One of the most distinguished figures in the whole history of the Conservative Party—Lord Aldington—presided over that operation.
  That is happening in private industry, and that is what we are asserting in the case of NEB on behalf of the community, and it is what we are asserting no less in the case of the two major industries, shipbuilding and aircraft, which for years have largely subsisted on Government aid and Government orders.
  Mr. Nigel Lawson: As the Prime Minister is saying that there is no difference between the NEB taking participation in a company and a private merchant bank taking participation, is he saying that the NEB will conduct its operations solely and exclusively according to commercial criteria?
  The Prime Minister: It will conduct its operations according to commercial criteria and in accordance with the

  1671
  instructions given to it in the Bill at present before the House. The hon. Member for Blaby (Mr. Lawson) used to be very progressive in these matters when he was City editor of the Sunday Telegraph before he became a Tory politician. He would have understood in those days that anyone who takes a lot of the risk capital is entitled to a share in control whether it be public or private.
  Let me explain the difference between the two parties in historic terms. This year is the 150th anniversary of the first passenger railway, the Stockton and Darlington. The motto of that company, which I have translated from the Latin, was "Private risk, public benefit". That was the philosophy in 1825, and the hon. Member for Blaby has just about caught up with it. The Conservative approach to these matters, whether in Government or in Opposition, is based on the principle "Public risk, private gain". The public take the risk of the adventurous or difficult situations, and then there is a private profit. It is the taxpayer that pays the losses; it is the shareholder that gets the gain.
  For these reasons I reject the Opposition's claims that investment in North Sea oil is, in effect, non-productive expenditure. That, again, is a transfer of control and part of the profits from one set of owners to another, from private owners to the community as a whole.
  Mr. Kenneth Lewis: They do not make any profits.
  The Prime Minister: I am prepared to make an agreement to exclude all the shores of Rutland from the Bill dealing with North Sea oil.
  Their arguments about the cost of community ownership of land betray a similar confusion of thought. The finance of transfer of land to public ownership does not make a net additional demand on national resources. What it will mean is that the development profits created by the community will remain with the community. When our proposals for community land are fully operational—they will take effect over a five-year period—it is expected that the costs will be fully covered and recouped on disposals of land.
  1672
  Finally, I come to the Opposition's panacea—this is referred to in their resolution and in the right hon. Lady's speech—on cuts in public expenditure. After listening to the right hon. Lady I am still no clearer on the exact areas of expenditure where she would make cuts which would have some meaning in support of her argument. I must press the right hon. Lady a little further. I hope that she will be more forthcoming than she was in her speech. I must deal with an important contradiction, as I see it, in her philosophy. The right hon. Lady's motion attacks inflation—very right and proper. She proposes to attack inflation by cutting public expenditure—no doubt arguing that that will reduce demand inflation. Of course, everything that she said about unemployment suggests that demand inflation is the last thing from which we are suffering. But nearly every area of public expenditure which she has said she would like to cut, some of which have been emphasised publicly by her Front Bench colleagues, would increase price inflation and would, therefore, risk more income inflation.
  Let me give one example. Before the Conservatives fought the February General Election last year they were against food subsidies. In October they were equivocally in favour of them. The right hon. Member for Lowestoft (Mr. Prior) distinguished himself in this matter. First he was against food subsidies, and then he said that he would propose to keep them if elected.
  Apparently the right hon. Lady now wants to eliminate food subsidies. From what she has said I gather that she also wants to end rent subsidies. Indeed, that was endemic in her attack during the last election, when she attacked the whole concept of local authority housing, except for her proposals that local authority housing should be confined to ghettos uniquely inhabited by the old, the sick, the disabled and what she calls "special cases", whatever that means. I remember that Aneurin Bevan a generation ago rejected the concept of council estates inhabited exclusively by elderly people peering, as he put it, through curtains at their neighbours' funerals. We thought that that was the end of the argument when he said that. Aneurin Bevan failed to foresee the emergence of the right hon. Lady and her latter-day

  1673
  Bourbon supporters. The right hon. Lady must realise that if we are to end rent subsidies there will be an increase in the cost of living.
  The right hon. Lady referred this afternoon in her quaint way to speeches that were made in the last election. Indeed, she was good enough to quote some of mine. Of course, to do all that they promised in the election—and the right hon. Lady played a leading part in this—would add more than 3 per cent. to the rate of inflation. The immediate elimination of all subsidies to the nationalised industries beyond the rate at which they are already being phased out would only add further to the difficulty. As regards the nationalised industries, we are following exactly the proposals that were announced, as the right hon. Lady has fairly said, on 17th December by Mr. Anthony Barber, as he then was, the then Chancellor of the Exchequer.
  Was the right hon. Lady saying this afternoon that her party would cut house building? Would they reduce the assistance given to local authorities for the house building programme, assistance which has led us in the first quarter of this year to increase public sector completions by 28·9 per cent. compared with the first quarter of last year, enabling us to increase new starts by 24·4 per cent. over the same period? I should have thought that on the evidence of their October election speeches they would cut house building.
  But what about mortgages? What about that 9½ per cent.?
  Mrs. Thatcher: Before the Prime Minister goes much further, he said that if we cut subsidies it would involve putting up prices. Yes, it would; but will the Prime Minister tell us what his suggestions are for bringing the nation to live within its means, when the Paymaster-General, on 20th May, pointed out that the nation was living beyond its means? One of the ways of doing so is to reduce subsidies and to put up prices. Hugh Gaitskell acknowledged that in 1951 and Rab Butler did it in 1952. The result was that we were out into growth again in 1953.
  The Prime Minister: All that is really very touching, but what I am trying to say to the right hon. Lady is that we are
  1674
  being criticised by her party for carrying out the Barber announcements and making the nationalised industries pay their way. The figure that Mr. Anthony Barber quoted of £500 million turned out to be a much larger figure when we took office. We are now taking the odium for that, and for rents and rates, as a result of what he announced on 17th December. This is a matter for the whole House, of course, but it is particularly a matter between the right hon. Lady and myself at this moment. Of course, it is a matter between us in public.
  The right hon. Lady did not have the generosity to say how much the balance of payments situation has improved—
  Mr. Reginald Eyre rose—
  The Prime Minister: No, I am concerned with the right hon. Lady. I do not want this both ways do not want it with the hon. Gentleman. I am concerned with the right hon. Lady.
  I ask the right hon. Lady about mortgages. I understand her embarrassment. What about that 9½ per cent.? Was this the face that launched a thousand Tory canvassers on every owner-occupied estate last October, to promise, first, a reduction in the rate from 11 per cent. to 91 per cent., and then, as the light of battle entered her eyes, to do it by Christmas? The mortgage subsidy, she promised, would certainly reduce the living costs of the families concerned—and indiscriminately across the board—but, far from providing the immediate action she has now called for to cut public expenditure in the terms of the motion, it would have meant, on one estimate, increasing Government expenditure by £180 million net of tax. The building societies talked of £300 million.
  Mrs. Thatcher: No.
  The Prime Minister: It would have put up Government expenditure by £180 million, and the building societies' estimate was £300 million. Is the right hon. Lady still supporting that? If that is so, I hope she will stop talking about cutting public expenditure.
  Mrs. Thatcher: We had this out during the General Election. The building societies supported my figure and the Housing Research Foundation's figure and accepted that it was very much

  1675
  cheaper to have a 9½ per cent. mortgage to help people purchase their own home than for the council to build a home at a comparable price.
  The Prime Minister: Of course, that is what one would expect. The building societies are in the mortgage business. It seems that the right hon. Lady thinks that the whole country should be exclusively within the mortgage business and that we should cut the provision of council houses. She has made that clear.
  I ask the right hon. Lady another question. Would her party cut defence expenditure? Of course it would not. In fact, Conservatives want more expenditure and not less. They voted against the Defence White Paper and in favour of an open-ended commitment to defence, unconfined by any views about the level of public expenditure involved, in 1975–76.
  We have had such learned expositions built up for this debate and it seemed that the right hon. Lady was going to tell us, when she finally decided to speak, everything that we needed to do to deal with expenditure. I want to ask what it all means. We have cut defence—indeed, the right hon. Member for Farnham (Mr. Macmillan) voted against it—so do not let us hear Conservatives talking about public expenditure.
  Mr. Maurice Macmillan rose—
  The Prime Minister: No, I cannot give way. I have given way enough. I have now gone on for nearly as long as did the right hon. Lady and I want to conclude.
  The Government have cut £300 million in defence spending this year and will cut £380 million next year. The Conservative Party's policies will mean not a cut but an increase in expenditure.
  What do the Conservatives intend to do about the social services and health? Do they intend to cut those services? They are always asking for more expenditure in that respect. Furthermore, they ignored our advice on an earlier occasion that in present circumstances we could not afford to relax the earnings rule. That action alone will mean additional expenditure of £145 million within three years.
  Mr. Eyre rose—
  The Prime Minister: I am sorry; I cannot give way. I have given way as often as did the right hon. Lady in her speech, and she was very generous, too. I am trying to put some questions to the Opposition. I have stated the Government's policy. I am trying to deal with the evasions of the Conservative Front Bench on the motion which they have put before the House and which I am asking the House to reject.
  Will they explain their policy on the tax credits scheme? According to the last Conservative Chancellor of the Exchequer, that would mean an extra £2,300 million on the public sector borrowing requirement. How is that to be raised? Is it intended to bring in the money by means of taxation? Will it mean reducing take-home pay? What about the right hon. Lady's pledge to abolish local authority household rates, and also to transfer teacher's salaries to the Exchequer?
  The right hon. Lady's proposals would cost the Exchequer £1,500 million and involve that kind of borrowing requirement. It would mean another 4p in the pound in income tax or another 5 per cent. on VAT. This is why she was so edgy this afternoon on the question of Maplin and the Channel Tunnel and all the other expenditure commitments to which she was committed. I know that she can say that she was not committed to those pieces of expenditure—or that, although she was committed at the time, she is not so committed now. But she cannot live the rest of her life in a posture of rejecting any guilt by association with the then Conservative Prime Minister. The right hon. Lady tabled the motion that is before the House and it is right that it should be answered. It is right that these hollow pretensions should be exposed to the House.
  I am asking the Opposition to confirm that their policies will involve the spending of far more money than the sums involved in our proposals. The reductions in expenditure proposed by the right hon. Lady would be offset, in part, if not in whole, by large increases in public expenditure for which the Tories have been asking ever since the Labour Government came to power.

  1677
  It is significant that we have heard nothing this afternoon about the Conservative Party's basic economic philosophy. We have heard nothing about monetarism or about unemployment. We have made the situation clear in successive Budget speeches and debates. There has been no matching performance by the right hon. Lady. We surely should expect her to know the answer to these questions. One of the functions of the Opposition is that they should have an alternative policy to put before the country.
  We understand that there has been a shift on the question of monetarism. We know what that means in the mind of the right hon. Member for Leeds, North-East—the right hon. Lady's Rasputin, who has been kennelled up for this debate so that we are unable to ask him about his policy. We have at least had the benefit of the right hon. Lady's views as set out in the Sunday Express. In that article she discounted the problem of unemployment by saying that the figures did not mean very much.
  I have gone on for two minutes longer than the right hon. Lady's remarks and I wish to conclude, although the House will know that I have had a few more interruptions than the right hon. Lady had to contend with.
  We have heard a lot from the Conservative Party in recent weeks about the Cabinet's agreement to differ over the Common Market. I have explained the reasons, and that episode will end with the referendum. But the Conservatives' agreement to differ with their previous Government—with themselves—is a continuing phenomenon. When there is a little more time in which to do so, I shall draw to the right hon. Lady's attention the generally accepted doctrine on collective responsibility laid down by a Conservative Prime Minister, the Marquess of Salisbury—a doctrine which she preaches every day of her life.
  Mr. Maurice Macmillan: Oh!
  The Prime Minister: That is what happens when a man has been a distinguished Cabinet member and is sacked from the Tory Front Bench.
  I now wish to conclude my remarks. Those on the Opposition Front Bench now seem to dissociate themselves from everything the previous Tory Government
  1678
  did, when they were members of that very Government. I do not know of any precedent in maritime history of rats leaving the ship after it has sunk. [Laughter.] Well, it is original. It has never happened before, so it must be original.
  Mr. Eyre: What about some leadership, Harold?
  The Prime Minister: The hon. Member for Birmingham, Hall Green (Mr. Eyre) no doubt cast his vote in February and he must take the responsibility. I did not have a vote in that election. Certainly the policies put forward by the Leader of the Opposition this afternoon were no recipe for getting the country out of the crisis which all of us have emphasised the country is facing. In my view, they would be a recipe for a permanently weakened Britain in a divided and unjust society. I ask the House to reject them by rejecting the motion.
  5.58 p.m.
  Mr. Jeremy Thorpe: I am grateful—
  Mr. Deputy-Speaker: I hope that hon. Members who are leaving the Chamber—those who feel they have to—will leave quietly to enable the right hon. Member for Devon, North (Mr. Thorpe) to be heard.
  Mr. Thorpe: I am grateful to you, Mr. Deputy Speaker, for calling me before the winding-up speeches in the debate. It appears that the opportunity of making remarks will not accorded to as many hon. Members as one might at first have expected.
  We have listened to speeches which, in their brevity and scintillating nature, have been unparalleled in this House in debates on economic affairs for a very long time. Whether they contained any recipe aimed at getting our country through its present crisis is a matter of opinion. Certainly anybody listening to the Prime Minister's remarks would not feel that the country was facing a devastating crisis and very real problems. Furthermore, anybody listening to the right hon. Lady the Leader of the Opposition would not have been aware of any blueprint contained in her remarks to deal with our problems.
  Having begun on that totally non-controversial note, I should like to put before

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  the House certain facts which are surely agreed on both sides. Because of the gravity of our economic situation, the sooner we revert to debating the economy the better. The first point I wish to make is that the rate of inflation in this country is far above that of any of our European counterparts. The second factor is that most European countries are beginning to control inflation but we show no signs of exercising a similar control.
  The United Kingdom has a borrowing requirement of £9,000 million—a requirement which shows every indication of rising, whatever the Chancellor of the Exchequer may say, to £11,000 million within a year. I should be very surprised if the figure were much less. We have seen public expenditure from 1973–74 to 1974–75 increase by over £10,000 million. What is highly significant is that one-quarter of the £10,000 million is accounted for by increased pay settlements in the public sector. We have a wage-push inflation of 27 per cent. It is now, according to the latest figures, over 30 per cent., and within a period of three years the nation's wage bill will probably double. What the effects of that will be on our investments, on our competitive ability in the markets of the world and on employment in this country is a terrifying prospect. All that is against an economic position in which the growth rate of our economy is roughly 2 per cent. a year.
  The Government certainly have plenty of intentions for Government expenditure. In the immediate future their various plans for nationalisation, some of which the right hon. Lady herself mentioned, will cost over £2,000 million. It is against that pattern that the Chancellor of the Exchequer, in his Budget speech, told us that he believed that the unemployment total in this country would be 1 million by Christmas. My view is that it will probably be very much higher.
  The Conservatives' Supply Day motion calls on the Government
  "to abandon their damaging plans for further nationalisation".
  That is perfectly explicit and I find myself in agreement with it. It also calls on the Government to cut public expenditure, but there was no indication in the right hon. Lady's speech of where they
  1680
  should cut it. The right hon. Lady has talked about council house subsidies and nationalisation, but she has not gone into those matters in the detail which I certainly hope to do and which I believe it is the duty of any Opposition to provide when they put down such a motion asking for a reduction in the level of pay settlements. Even the Prime Minister had more to say about that matter than the right hon. Lady when he spoke about what I think one could call the national dividend which he has in mind. Perhaps he has answered the question for the Opposition and they do not find themselves in agreement with the amendment which my hon. Friends and I have tabled, which has not been called but which certainly will be one of the great debating issues in running the economy of this country.
  The right hon. Lady quite properly talked about the level of public expenditure, and my hon. Friend the Member for Cornwall, North (Mr. Pardoe) pointed out that the former Conservative Government inherited from the present Home Secretary, when he was Chancellor of the Exchequer at the time, a situation in which there was a payments surplus and a nil borrowing requirement.
  In the four years of Tory Government—it is right to remind ourselves of this, because they are now the people who are the monetarists of this country—the borrowing requirement rose from £840 million in the first year to £1,000 million in the second year, £2,500 million in the third year and £4,500 million in the fourth year, without any question of an oil deficit.
  The fact remains that the two largest spending Ministries were those of the Leader of the Opposition and of the right hon. Member for Leeds, North-East (Sir K. Joseph) who accounted for nearly £3,000 million out of the total £5,500 million increase. One is entitled to ask whether the right hon. Lady, with her new-found monetarist policies, believes that there should have been cuts in the expenditure to which she was committed as a Minister or whether she believes that it was a perfectly proper programme which should have been continued but that there should have been an increase in Government revenue to deal with it. Unless she has been converted by the error of her own ways

  1681
  when she was a Minister, I believe, with great respect, that she is not in a position to accuse others of committing the same error now.
  The right hon. Lady said that it was all very well to increase the borrowing requirement provided that if we borrowed we did not have to resort to the printing presses. It is also right to say that during 1971–72 and 1972–73, under the then Chancellor of the Exchequer, now Lord Barber, there was a 60 per cent. increase in the money supply. That is what turning the printing presses mean. Therefore, at that time there was a greater increase in the money supply and we saw the beginning of this disease of public borrowing expenditure, which, I believe, the present Government have inherited and for which the right hon. Lady herself must bear a very large share of the blame.
  It is not without significance, when talking about public expenditure, that of the £10,000 million which I mentioned was the two-year increase in public expenditure, one-quarter of it or £2,500 million was accounted for by pay increases at the rate of 29 per cent. The Prime Minister would be the first to agree that if it had been possible for those wage increases not to be 29 per cent. but to have been kept down to 15 per cent., that would have immediately taken £1,255 million off the public borrowing requirement. That figure would be more than the total increased tax yield of the Chancellor in the last Budget.
  I come now to a point which is of crucial importance. While one wishes the Prime Minister every possible success in the discussions which he is to have about what I think one could accurately call a national dividend, so that at the beginning of the year we decide what we can afford to pay ourselves, it will be as ineffective as the social contract has been unless there is some way whereby those who cause inflation suffer through the tax system for causing it.
  The Conservative Party has not come very far on prices and incomes, save to say that five out of the six right hon. Members who signed today's motion were all members of the Heath prices and incomes Cabinet and those five have now departed from the policies of which they were in favour. On 17th May 1974 the Shadow Chancellor said that the social
  1682
  contract needed to be replaced. On the same day the right hon. Lady, when addressing the Scottish conference, said that new wage guidelines were urgently needed. That is about the totality of the movement that we have had from the Tory Party on this issue.
  I believe that the suggestions of Jack Jones are fresh thinking on his part. They are not entirely fresh, because the idea that there should be some form of automatic increase in wages when food prices rose above a certain level was first put forward by my hon. Friend the Member for Cornwall, North, during our conference in 1973. Mr. Jack Jones's proposals deserve serious consideration because they would help the lower paid. I believe that no Government will have the moral authority to expect restraint further up the wage scale unless and until they have shown that they have looked after the lower paid.
  The most difficult problem raised by the proposals of Jack Jones is that they would cause a reduction between differentials. Mr. Clive Jenkins has already indicated his immediate view of that aspect. I do not dissent. He is acting, as one would expect, on behalf of his members and he is putting their interest first. That is his job.
  The third point is that these proposals would ensure that the better off in our society contributed most, because, as I see it, there would be an actual increase and not a percentage increase. In my view this is a variant of an indexed freeze. That being so, I do not believe that it could last for more than six to nine months. It would be a very temporary measure.
  If the Prime Minister is successful in his national dividend—and I hope that he is—there will have to be some means whereby those who make more out of the economy than the nation can afford will find it clawed back in taxation. The French have recently introduced an anti-inflation levy which is a temporary confiscation of part of the gross margins made by manufacturing industry, to be repaid when inflation has not exceeded 1·5 per cent. during three consecutive months. This is a deterrent to people against putting up prices.
  The signs are that in Canada there will be some form of agreement between

  1683
  the Government and the trade unions about what they think the rate of inflation will be and certainly what the target is below which they will keep it. Wage claims and wage awards will be below that target. If Ministers or the Government go beyond it, there will be compensating factors a year afterwards.
  In this country we shall have to have an inflation tax on pay, prices and dividends for those who exceed the statutory limit. The Chancellor moved in this direction by what he called his anti-inflation tax during the Budget. It was not an anti-inflation tax. It was an incentive to inflation, because it put up the cost of living by 2 per cent. for everybody, irrespective of whether people settled inside or outside the social contract. Therefore, there is no reward for those who keep within the social contract, and there is no deterrent to those who go beyond it.
  I believe that if prices and dividends go beyond the norm they will have to be subject to a surcharge on the corporation tax of the firms involved. Those who have excessive wage or pay awards—from management downwards and upwards—will have to be surcharged on their national insurance contributions. I see no reason why a quarterly six-monthly or annual return cannot be made by every major industry in this country. I see that the Prime Minister is leaving the Chamber and I quite understand why he has to go.
  The great failure of this debate so far is that no one has discussed how the social contract will be made fair but effective. We must get on top of wage inflation. All hon. Members on both sides of the House, certainly on the Front Benches, now agree that it is the major cause of inflation in this country. The Leader of the House said with great clarity when he was answering Questions on behalf of the Prime Minister, during the Prime Minister's absence in Jamaica, that having got the thresholds out of our system, having accepted the problem of commodity prices and having come to live with the oil deficit, we should find that the major part of our inflation would be wage inflation. I think that in the next six months that will be the issue on which every right hon. and hon. Mem-
  1684
  ber will have to vote in the House. Many people will have to make up their minds where they stand. My right hon. and hon. Friends and I know exactly where we stand. We believe that an inflation tax is inevitable and will be introduced in a Budget by a Labour Chancellor—if not in July, probably in October.
  That leads me to two short points. If we are to make the national dividend work, if we are to have an effective prices and incomes system, we must change not the doctrine of collective bargaining but the monopoly power of certain trade unions. Collective bargaining must be decided much less on muscle and much more on merit. That will cause a fundamental restructuring of industry, with the sharing of power right down to works councils and plant bargaining.
  The Amalgamated Union of Engineering Workers antics of Mr. Scanlon this week have indicated how more democracy is needed, not less. I hope that the Government will allow a free postal ballot for any union which wishes to avail itself of it. It costs the Electrical, Electronic, Telecommunication, Plumbing Union £20,000 a year to ballot its members. It is in favour of that system because it believes that it brings about more interest and a wider franchise. A free postal ballot would save it £20,000 a year, a small expenditure to ensure democracy.
  Sterling has been mentioned. I think that the Morgan Guaranty report is right and that sterling still has a long way to fall. We have not seen it hit the bottom yet. But the sterling exchange rate is inevitably associated with the rate of inflation. We shall not see sterling restored in value until we conquer inflation. We shall not do that until we can control wage inflation, and we shall never do that until we have a prices and incomes policy backed by statute.
  This is certainly not a debate on the Common Market. But I saw in my newspaper this morning that the Government were considering satisfying part of their borrowing requirement by borrowing from a European fund to which the Arab nations have recycled their petrodollar surplus, funds which will be available to the Nine collectively but which I should have thought would not be available to Britain on our own. There could hardly be more eloquent testimony that this

  1685
  country requires the strength of the European Community behind it. In our present condition, with the economy as it is now, the uncertainty of 18 months' renegotiating in the hope that we might get more favourable trading arrangements, while investment was held up, while we were forgoing training grants and while tariffs were going against us, seems to me to have been a recipe for economic chaos.
  The Conservative Opposition have rightly drawn attention to the gravity of the economic situation, but they have put forward no constructive proposals for dealing with it. We see a total absence of policy to deal with it, a total absence of policy on wage inflation in particular. This is the subject on which they are hedging. They cannot carry on hedging much longer. They will have to come to a decision.
  Therefore, my right hon. and hon. Friends and I have not the slightest intention of voting for the motion, which is woolly and puts forward no constructive proposals. We shall certainly not vote for the Government. Therefore, we shall abstain.
  Just as the Liberal Party has saved the Tory Party on its European policies, just as a Conservative and Liberal Opposition have saved a Labour Government on their European policies, so, in the very near future, we shall be part of a spearhead which will have a Budget from the Government which will introduce a form of prices and incomes policy for which they will not have a majority among their own Members. They will certainly have our support. The sooner they do it, the better.
  6.15 p.m.
  Mr. Hugh Fraser: There is no question but that from the Prime Minister we had the most Panglosian speech of a brilliant and Panglosian career. We heard that nothing was wrong. Easter had risen. The spirit of Whitsun was about. All criticisms were by the way and beside the point.
  I should like to touch on a few matters that the Prime Minister raised. First, he said that all was well with the balance of payments. But it is certain that we shall see the effect of the central deficit of Government spending appearing in a balance of payments situation which must deteriorate by the end of the
  1686
  year. The right hon. Gentleman also said that the answer to the wage problem was undoubtedly further talks, further discussions—all the sorts of things that happened in 1967, when he was discussing with the CBI and TUC a plan for a national dividend or something of the kind.
  It is good that we should go away inspired by the Prime Minister with the absolute certainty of all being well. But the facts are totally different from what he supposes. He was so gracious in the way he said that other countries were having their little difficulties while we were having none. The fact is that the country and the Government will soon have to come to grips with an inflation which has got out of hand and a borrowing requirement which is almost out of control. I trust that when the Government take action they will deal with the imminent crisis in a far more orderly fashion than they dealt with the last, which began in March 1967 and which they did not get on top of until November 1968 because of indecision.
  I do not want to bore the House, but I should like to give some examples of the indecision. We had the cut in Government expenditure of about £2·4 billion after devaluation in November 1967 running through to an indecisive end of October 1968 when the currency exchanges had to be closed for three whole days and further restraints were imposed—a masterful display. My great fear is a repetition of the sort of indecision which was so disastrous then. The Prime Minister again and again rejected devaluation until finally, when, as far as I can remember, he was on a trip to Moscow, the Chancellor of the Exchequer was forced to perform the ghastly act.
  Fortunately, the present Government are protected to some extent by the floating exchange rate, which is definitely an advantage when a Government cannot face up to the problem. It prevents the sort of holocaust of our currency that we saw in November 1967, but that is no reason to suppose that action should not be taken, and it must be taken on a very wide front.
  As I look back over the years I see that the fundamental thing that has happened is that we have engaged in a regime of public expenditure which the country could no longer afford. That

  1687
  is the root of our troubles. In 1958 the right hon. Member for Down, South (Mr. Powell), whom I see beside me, Lord Thorneycroft and Lord Rhyl resigned over an unfilled borrowing requirement of £100 million. It was published as £50 million. The Chancellor of the Exchequer of the last Conservative Government had in unfilled borrowing requirement of £3,000 million. The present Chancellor of the Exchequer has one which I think is much nearer £10,000 million than the £9,000 million publicly announced. Is it supposed that the right hon. Gentleman is 200 times more dishonest than my right hon. Friend, or that the pound has depreciated in these years by 20,000 per cent?
  What has happened, quite simply, is that over these years there has grown up a consensus between the two main parties to spend Government money as it comes—or as it does not come. Today we are faced with a breakdown not of the capitalist system but of the multi-welfare State, in which as long as someone arrives in a Rolls-Royce and asks for £15 million, he gets it—just like that. It is not just the old-age pensioner who has been protected. It is industry as well. Throughout the economy today and in this House, in the party system, there is this theme, this consensus, which has to be broken, and until it is broken the country will simply go from worse to worse.
  We have seen it happen again and again. We have had stop-go, whether under a Conservative Government or a Labour Government, caused by fiscal extravagance. No wonder some of our industries are in difficulty. No wonder we have the problem drawn to the attention of the world not just by my humble voice but by the ASTMS. Its distinguished General Secretary, Mr. Clive Jenkins, has been very good on this aspect. Today we face the fact that at the moment we simply have not the productive wealth in this country to sustain the sort of public extravagance upon which all Governments are now engaged.
  I will mention two very simple statistics which bear out what I have to say. The point has also been made by Mr. Clive Jenkins and others. In 1957 the productive manufacturing industry, of this country provided 37 per cent. of the gross domestic product. Today that has
  1688
  dropped to 30 per cent. Agriculture in 1957 provided 5·4 per cent. of the gross domestic product. It has now dropped to something like 3 per cent.
  The amount of investment going into productive manufacturing industry today is absolutely static. It has been declining since 1970. This is what is happening. The true productive wealth of this country has not increased. There are various reasons for this. In this connection I should like to touch on one of the answers put forward by the right hon. Gentleman this afternoon. He said that the answer to this problem was the National Enterprise Board and more State interference, or nationalisation if need be.
  I should like to compare for a moment the figures just given by the British Steel Corporation with those of Bethlehem Steel in America, a unit of precisely the same size, producing 22 million tons of raw steel a year. For the British Steel Corporation there is a deficit forecast to the taxpayer for this year of £375 million. In America precisely the same size unit, employing exactly half as many people as are employed in the British Steel Corporation, has just reported profits last year of $350 million.
  It is no use saying that the answer is the NEB or what the right hon. Gentleman, in one of his more extravagant passages of bad economics, called "the rebirth of Keynes by the micro-economics of the NEB". The fact is that the microeconomics of the NEB are based on the fallacy that the Government can run things better than private enterprise. It will take a very long time for the NEB to come into effective operation, and it will undoubtedly have great difficulty in recruiting the necessary people to run these industries. That is the second fallacy in the argument.
  The NEB, looked at in relation to the ideas put forward by the ASTMS for increasing investment in manufacturing industry, is the worst possible, the slowest possible and the most incompetent machine. We have seen this type of interference at work under both Conservative and Labour Governments. The last Conservative Government made the mistake of nationalising Rolls-Royce. We have seen the same sort of thing done by other Governments. Not one of these measures has worked effectively.

  1689
  The only answer is to have better investment, and investment will be essential this year, because whatever may be said in this House now I believe that by the end of this year its main concern will not be inflation but massive unemployment. That is why it is so important to prepare schemes now for getting investment moving against that eventuality. This massive unemployment is bound to come as the currency of this country is dissipated by the extravagance of Government expenditure.
  Therefore, I believe that the most important thing the Government can do is to see that proper assistance is given to manufacturing industry in the Budget that they are bound to bring forward this autumn. They will have to take it from somewhere to be unfair if necessary—but this manufacturing base is the base which has to be built up by giving special help to investment.
  In the past, as we know, the grants poured out by this Government and the last Government to industry as a whole have often been wasted. How much better it would be to cut out these grants and provide a proper tax advantage by reducing taxation on manufacturing industry.
  These are some of the thoughts which we must all have in our minds this afternoon, having listened to the Prime Minister and witnessed his amazing leap into optimism at this time. I believe the situation is so serious that before the year is out the Government will have to do what we have suggested. They will have to cut Government expenditure. They will have to come forward with a new Budget. When they do, I hope they will base that Budget on giving encouragement to our manufacturing industries. That is the only way in which wealth can be produced and our economic balance restored.
  6.28 p.m.
  Mr. Dalyell: The right hon. Member for Stafford and Stone (Mr. Fraser) will understand that we do not agree with his sweeping charges of extravagance in public expenditure, but I very much agree with some of his remarks about investment. One of our problems in this country is not only the amount of our investment but the quality
  1690
  of the investment we make and the rate and timing of return on capital. This must give us all reason to think rather deeply compared to the timing of return in similar German investment.
  I had the enormous good fortune to be chosen as leader of the Inter-Parliamentary Union delegation to Brazil, which returned earlier this month. Before the Minister of State, who was there in 1969, or the Treasury officials, think that they spy any bee in my bonnet, I ought to make clear in my next breath that I am not proposing that a system which has produced a double-digit growth rate over 10 years, with an average 30 per cent. inflation rate, can be transplanted lock, stock and barrel with any success to this country, where the political, trade union, stage of development, resource and central banking circumstances are wholly different.
  Having protected myself from having charges laid against me of being overenthusiastic about the Brazilian economic system, now that we ourselves are experiencing what we used smugly to think of as a Latin American rate of inflation I wonder whether we have not something to learn from at any rate part of the Brazilian experience.
  I have in mind the question of saving and of consumption. One new feature in British society which bothers me greatly is the number of people, far from wealthy, who, when they have a little money to spare, go out and buy goods or services regardless of whether they need those goods or services.
  Frankly, I thought that the Leader of the Opposition was right to be concerned about money as a store of value. We face the problem that there are people who feel that they are using their money rationally if they spend it. There is a loss of faith among too many members of the public in the monetary system as such. This is a very dangerous development, because, if we are not careful we shall come to experience the flight from money. I am not casting aspersions on or even blaming people who make the decision to spend. Who is to say that it is wrong from their point of view? It may look sensible and prudent to buy a new fridge, even though the old one is working well, simply because the money is available. Cumulatively, however, we have to face the fact

  1691
  that such an attitude swells domestic demand and unnecessary imports.
  Therefore, there is a case for looking very seriously at one aspect of the Brazilian system whereby, we were told, the Brazilians have succeeded in getting some 12 million small accounts protected by indexation or monetary collection against inflation. Clearly such protected accounts would have to be limited to a very modest top figure of, say, £5,000. Not to have a ceiling would be both expensive from the point of view of the Treasury and socially unfair. I am not claiming too much for such a scheme as a source of investment funds, but it might help to achieve some brake on less than necessary consumption.
  It is up to us to put forward concrete suggestions. In view of that, whatever the merits or demerits, my first suggestion is that Treasury experts could not do better than to pick the brains of economic heavyweights such as Roberto Campos, the current Ambassador in London, Delfin Netto, currently the Ambassador in Paris, and Carlos Langoni, of the Getulias Vargas Institute, who is coming here in August. Albeit in different circumstances, these are men who have coped with some success and who have brought inflation under control while maintaining growth.
  The House would not thank me for going into detail about an enormously complex subject, so I suggest that the Government ought to ask some of its senior economic advisers to put a series of questions to Messrs. Campos, Netto and Langoni.
  I suggest that they be asked, first, "Given your knowledge of Western Europe, have we anything to learn, from the experience of monetary correction and indexation in Brazil, about our current problem of the erosion of working capital?" Let us face the fact that it is this erosion of the purchasing power as much as any other factor which was the root cause of our spending eight hours yesterday on the problems of British Leyland. One of the most serious effects of inflation throughout British industry is the erosion of purchasing power of working capital.
  I must reflect that the Japanese Brazilians, who are very active in that
  1692
  economy, asked us, both in the light of Brazilian experience and in that of Japanese experience, why in the long term we were so shy about financing growth out of bank lending. In our present situation, I feel that that is a fairly reasonable question to put to our banks.
  The second question which I should like Treasury officials to ask the Brazilians is "How have you allowed for inflation when it comes to taxation, and to what extent have your tax measures encouraged investment?" it is a bit too easy to dismiss the success of the rate of investment in Brazil simply as being the result of a tough military régime in the late 1960s. I am aware of this. But I believe that we should look at a system which gives tax advantages both to companies who pay their taxes promptly, without lags, in this kind of inflationary situation, because June's pound may be significantly less valuable than January's and equally to those companies which fit in with the criteria of investment and re-equipment in the national interest.
  Thirdly, I happen to be one of those who support the idea to which the Prime Minister alluded again today and which he put forward on television with Peter Jay on 11th May and in 1967 shortly after one of his more controversial speeches to the Parliamentary Labour Party which perhaps overshadowed it. If we are serious about my right hon. Friend's suggestion, it would be eminently sensible to talk in depth to the Brazilians about the concept of filling out the social contract.
  During his interview with the Prime Minister, Peter Jay said:
  "… the Prime Minister was talking about his new ideas for what I suppose could be regarded as a kind of successor to the social contract—a national wage fixing plan and I would like to follow that up with him a little bit if I can."
  My right hon. Friend said:
  "This is not a replacement of the social contract. It's filling it out. It's making it more based on consent and prior discussion as to what can be afforded. It would rely still on leadership and education if you are going to ask people to work their guts out, as we need to do."
  The reflection which I make is that the Brazilians have tried not exactly the same scheme but a similar one which is worth investigating. Minimum wage levels, the

  1693
  remuneration of Government employees and all wages subject to collective bargaining are adjusted only once a year. For the latter a wage-control formula is applied, aiming to maintain constant the real purchasing power of wage earners. The average of the variation in the cost of living over the preceding 24 months and an estimate of the rate of inflation for the ensuing year are taken as the basis for the wage adjustment. To this average is added a percentage corresponding to the average increase in national productivity in the preceding two years. Adjustments to minimum wages and to the remuneration of Government employees are usually made to parallel the ones obtained in applying the wage-control formula. Special considerations and improvements eventually may be incorporated in this formula to deal with certain circumstances.
  This is not a statutory wages policy. It is much more a kind of prior agreement on the national product. The House will acquit me of being silly enough to suppose that a system of national wage bargaining which has contributed to Brazil's economic stability in the last decade can be transplanted here. It cannot. For one thing, British trade union leaders are in business to negotiate on behalf of their members and will not lightly allow that function to slip away from them.
  Having said that, if the Prime Minister is in earnest—and I am sure that he is bearing in mind that he put forward the same concept in March 1967—it would be wise to get his senior economic advisers to talk to the Brazilians about their achievements and shortcomings in this area. It might also be sensible to discuss with them their investment strategy and their export strategy.
  Here I come to a second worry. A good picture was rightly given by the Prime Minister of British exporting. However, we have to face the fact that much of it is extremely itsy-bitsy. At the moment, the Scottish Council (Development and Industry) is in Brazil and endless chambers of commerce are going to endless countries, all subsidised by the Department of Trade. We never hear of the Osaka trade delegation, the Kyoto trade delegation, the Yokohama Chamber of Commerce trade delegation, the Wurtemburg Chamber of Commerce or the Hamburg trade delegation. We hear of the
  1694
  Japanese or the German specialist trade delegation or, more likely, of resident Japanese or Germans involved in a joint venture.
  If we are to increase our exports, we have to do something about the package deal of the joint venture. This is the modern way to success in exports. Countries in Latin America and Asia want to persuade their people that joint projects are their own. We are far too amateurish about it even in this day and age. Coupled with this we have to apply very stringent criteria for public investment, taking into account the return of capital.
  To change the subject slightly, looking at us the Brazilians who had travelled in Europe time and again asked members of the delegation this question: "Why is it that you spend so much on sheer administration in your country? I have to say that local government reform, right or wrong, whether we like it or not, has been an exceedingly inflationary operation. Every hon. Member of this House can recount examples from his own area of local government officers—I do not criticise individuals—who are drawing higher salaries for less responsibility.
  Moreover, local government reform has contributed its share to the rapid growth of non-industrial employment in this country, which has outpaced similar growth in other industrialised countries. The 1962–73 figure from the "Year Book of Labour Statistics" are alarming enough. Whereas the growth in non-industrial employment in the United Kingdom totalled 29 per cent. over that period, in Germany and Japan the growth of non-industrial employment was less than 8 per cent. The TUC has produced some very interesting figures to the effect that our manufacturing sector was 36·4 per cent. in 1959 and 33·7 per cent. in 1973; that public administration had gone up from 5·8 per cent. of total employment in 1959 to 6·8 per cent. in 1973; and that other services had gone up from 30·7 per cent. in 1959 to 37 per cent. in 1973. Hugh Scanlon, worried about manufacturing industry's burdens, carrying the rest of us, is very right on this particular occasion to be worried about these figures, as he has expressed himself in public.
  So I ask my right hon. Friends, before introducing any schemes for Assemblies in Scotland or Wales, yet another tier

  1695
  of government, yet another level of bureaucracy, to ask whether we can afford it. The answer may be "Yes", but the question must be asked. The Government, who are understandably concerned as to what they do when they receive the Boyle Report on Members' salaries, really ought to ask themselves whether 140 MPs in Edinburgh paid not less than MPs in the United Kingdom, and the whole paraphernalia of government that goes with it, really is an economic priority.
  Lastly, I raise what I know is a very delicate issue, because questions of liberty, freedom of speech, a reputation for truthfulness and other values are involved. I gently question, however, whether our trade and currency can ever really prosper while the BBC goes on as it does. Having talked to members of the World Service, I quite understand that they have 12 million or more listeners throughout the world precisely because of their good reputation. But if one talks, as the delegation was able to do, to the British business community in Sao Paolo, the members of which are in a position to put massive amounts of trade our way, they have a picture of an unreliable Britain, where nothing ever goes right. What is certain is that no other nation on this planet talks itself down in world markets as we do, and the cumulative effect of much of what the BBC puts out really breaks the heart of many of those who are trying to handle our exports.
  It is not only the World Service. Most of us, I suspect, listen to the early-morning radio programme. As an example, last Thursday Pierre-Paul Schweitzer, formerly Director of the International Monetary Fund and now president of some private bank in Paris, was being interviewed. He said that the British had had all this before and would get through it somehow. I have not got the script, but the interviewer then went on to press him, saying "If there is a run on the pound", 'When there is a run on the pound". When this goes on day after day, it becomes a very gloomy start for those who have to make decisions in this country. The impression left was that Schweitzer was relaxed and sensible and that the interviewer talking on chirpily about a run on the pound
  1696
  was really pressurising him into predicting some kind of doom.
  That is not an isolated case. Again this morning I woke up, as I suspect others did, to hear an item on Chrysler, and the first words I heard on gaining consciousness were "If Chrysler goes bankrupt". If an economy depends on confidence it really does not do any good to have people wallowing in gloom. I think it would be a good thing if an all-party delegation of some kind talked seriously to the BBC, particularly those in the World Service, and asked them if they think that is the right way to carry out their duty.
  I speak as one who in 13 years as an MP has never complained about a journalist, a particular article in a newspaper or a television item, but I think we have a straight choice. We must ask ourselves which is the more important—the unsullied purity of the BBC, leaning over backwards to be critical of Britain and faithfully reporting everything that goes wrong, or the employment of tens of thousands of our people resulting from more confidence in British industry. I feel this is a question which has to be put.
  6.45 p.m.
  Mr. Geoffrey Johnson Smith: I have listened with very great interest to what the hon. Member for West Lothian (Mr. Dalyell) had to say about Brazil. It is a dynamic country, and I think that many lessons could be learned from it on how to live with inflation. Travel broadens the mind, and it is a pity that some of his hon. Friends have not had the same experience. I hope he will not mind if I do not follow him all the way to Brazil and back, although there is one aspect I should like to touch on—the consistency which ran as a thread through his experience in Brazil. The people of Brazil have the quality of consistency, and they know the policy, and people in the private and public sectors can plan accordingly. I believe that one of our great defects is the lack of consistency in government.
  On the question of the BBC the hon. Gentleman touches a special corner of my mind, as he knows, from my previous connection with that organisation—or previous incarnation, if he likes to put it that way, although I hope no one would

  1697
  ever, as one hon. Member unkindly and harshly did, refer to me as the hon. Member for Lime Grove. That organisation is capable of mistakes, misjudgments, just as is any other organisation. But I would answer his question very simply. So far as the quality of overseas broadcasts is concerned there can only be one guiding principle, and that I have always believed to be the principle uppermost in the organisation's mind; it is the truth, whether palatable or unpalatable. That, I insist, can be the only principle if it is to be a free broadcasting corporation which will continue to win the respect of the world. If he has reason to believe that it has departed from this principle, he has every right to question it in this House and we can have a debate about it.
  Mr. Dalyell: There are many aspects to this and some may be frankly masochistic, but one must confess that the Germans, the Japanese, and many other exporters do not do the same thing.
  Mr. Johnson Smith: They are exporters. I am talking about the BBC broadcasting and truth. It is one of our most precious possessions, and we have nothing to learn from the Germans or the Japanese on that score.
  Leaving aside the Prime Minister, who increasingly dwells in this matter, as in others, in a Walter Mitty mood, there have been many reasons put forward in this debate explaining why our economy is in such a mess: the level of public spending, wage and consumption inflation, the huge borrowing requirement, the oil deficit, the effect of the commodity price explosion, and lack of investment. All these have been mentioned, and running through the debate quite clearly we have seen different theoretical and technical economic hypotheses.
  Whatever the cause of the mess, the story has a depressing familiarity. That is why this country is deeply anxious and expects us in one form or another during the next weeks to agree on a few fundamental measures which we might take.
  When I first came to this House some years ago we had just entered the period which the right hon. Gentleman the Member for Stafford and Stone (Mr. Fraser) refered to as "stop-go". It was stop-go economics, with brisk and rather unexpected changes from the brake to the
  1698
  accelerator, which it was alleged was the main cause of our problems. The answer, we were told, was to go for growth, and we did for a time, until we hit the buffers. Then we were informed by a distinguished economist that if we could only run our economy just a few points below full employment level we would avoid overheating the economy and would not have to slam on the brakes and have all that trouble with our balance of payments.
  Then I recall being told that we should cut our cloth to meet our reduced status in the world by ridding ourselves of those awkward overseas military bases, certainly the increasingly intransigent colonial possessions, and all the other trappings of an erstwhile imperial power—including, of course, the rôle of banker to half the world's trade and most of the world's developing countries. We therefore progressively dispossessed ourselves of the colonial terroritories. We evacuated most of the bases, and the pound ceased to play the predominant rôle it had done in the fifties. There was talk of the crawling peg, and eventually we ended up with the floating pound.
  Finally, there were those during this period who saw our problems more as of industrial relations. They put the emphasis on incomes policies of different varieties from the declaration of intent some nine years ago to the present social contract, via—and it affected both Front Benches at different times—various comprehensive statutory prices and incomes policies which caused us all so much grief.
  It seems that during this short period we have tried just about everything except, perhaps, trying a little harder to live within our means. I know that mentioning that topic usually provokes many hon. Members to ask precisely where the cuts in expenditure should fall. We had quite a lot of that earlier in the debate. No one at this stage will challenge me, however, if I say that anyone looking at our history must surely come to the conclusion that we would not necessarily get top marks for our performance in this respect.
  Perhaps we might, therefore, have tried harder to live within our means—we have to whether we like it or not—and we have never tried a reasonably consistent policy for any length of time. That at least might have helped to provide some stability. That is what the Brazilians have

  1699
  achieved, and they seem to be doing pretty well by it.
  This is a most depressing story. I do not want to tempt the hon. Member for West Lothian from his sedentary position, but the BBC keeps telling it that way because it happens to be the truth. We are living in a profoundly depressed economy, and this is a depressing time in which to live. What makes it all the more depressing is that there is still too wide a gap between too many of us in this House. In recent years the House has become more ridden with dogma, and the impression that the public gets is that we seem not to have learnt very much from our past experience. There is still a tendency to put a major portion of the blame on one single phenomenon—whatever happens to be the fashionable trendy nostrum of the day. That all depends on the individual's degree of trendiness, and that in turn depends on which part of the political spectrum he believes he fits into.
  If one is close to the Secretary of State for Industry one would agree with him that the main cause of our industrial deficiency is the lack of investment. That is the cry. Of course, if one took up the right hon. Gentleman's approach one would forget all the stories about the level of overmanning in both private and public sectors, even after modern plant has been installed. Despite what the right hon. Gentleman may say, many plants in this country have very efficient management and a great deal of up-to-date plant but a record of productivity which, compared to some other countries, is very poor. That may have something to do with the relationship of management and the unions.
  Since I do not believe that this blessed plot, this tiny corner of the world, is blessed, by some strange act of God, with the world's most incompetent managers, or the most work-shy workers, and since I do not subscribe to the view that all City men are sharks, I find it difficult to accept the over-simplified diagnoses of either the Secretary of State for Industry or the "ultras" of the monetarist school, who, I suspect, in practice would be compelled to dilute some of their theories.
  We get into real trouble, if I may be permitted a political philosophical reflection which might prove a trifle disturbing to some Labour Members, when the cure
  1700
  propounded, such as more investment, is wrapped up in a package deal containing more nationalisation, more State controls and more powers for the State to intervene. To me the blind faith of some Labour Members, mostly below the Gangway—and I am glad to see that one of them is here at least—is one of the main causes of our inability to adapt to the changed conditions of the 1970s.
  I say that because there seems to be no recognition of what is happening in the more successful economies of Western Europe. There it is certainly recognised that the State plays more than a passive rôle in industry, but the motivation seems so very different from that which so often emanates from Labour Members who, like some of their friends outside, still regard industry as a battlefield between capital and labour.
  In the countries to which I refer the rôle of government, just as those I meet in the EEC believe it to be the rôle of the Commission, is that of a partner which understands the limits of its authority and which expects others—management and trade unions—to understand theirs. The Governments of France and Germany do not denigrate profits. They do not make it more difficult than it needs to be to create wealth, to compete freely, nor are they hostile to entrepreneurial skills. These Governments recognise that in the end they depend on consent and consultation. Discussion is the accepted procedure, as it is for managements in their relations with trade unions. Consultation is also a traditional rôle of trade unions in Britain, but those who analyse our industrial affairs and economic performance objectively see too many examples of trade union power, often allied to political dogma, pushed to the limit.
  In this connection there is a most interesting and, in the context in which it is written, startling article written by Mr. Paul Johnson in the current edition of the New Statesman. It is entitled "A Brotherhood of National Misery". and in it the author has something to say about the manner in which sections of the trade union movement operate in this country. On the question of pushing power to the limit he says:
  "We call the process 'free collective bargaining' but it is really nothing of the sort. It is groups of people using their strength to

  1701
  force other groups, or society as a whole, into compliance with their will".
  He goes on later to say
  "We have seen in recent years, whole new categories of workers joining in the competition for wage increases, demonstrating their militancy and smashing their fists in the community's face".
  If management must take its share of the responsibility for the failures in the economy, so should we recognise the effects of the minority of the trade union movement who use their powers to the limit to frustrate the plans both of Government and of management. It is this negative, if not hostile, attitude which has done so much to embitter the atmosphere in British industry that makes it so difficult to make the social and economic progress we so badly need. Surely we can now all appreciate that if the Government, management or trade unions in any enterprise push their powers to the limits we shall never succeed in creating the right economic climate to enable fiscal and other policies to work towards the common good.
  As I see it, the real challenge to our ingenuity and skill is not so much a challenge to the Treasury. It is a challenge to the interface of the Government, management and the unions. That means creating the right institutions and the methodology which will enable communication and constructive co-operation to take place. But there must be the will and the good will. I am not suggesting that there is no room in this country, and certainly not in this place, for rival philosophies, that there are no big economic or financial decisions for a Government to take based on the firm support of the electors. Governments by their very nature must work out their political priorities.
  I am suggesting that not one of the Chancellor's schemes will have a truly lasting beneficial effect if the Government insist, with 39·6 per cent. of the electorate allegedly supporting them, on ramming through this Parliament policies which are deeply disturbing to, if not a majority of the electorate, at least a sizeable minority.
  I believe that the Confederation of British Industry was right in pointing out recently that it was the frequency with which Governments have changed their plans that had done so much to damage industry's long-term plans and the ability
  1702
  of successive Governments to sustain a favourable investment climate. The threats which have come from some quarters, including some trade union leaders, to destroy what they choose to call the capitalist system, as though we were still living in a laissez-faire society, are bound, I would have thought, to undermine industry's morale.
  This is no doubt why, with such thoughts in mind, Mr. Paul Johnson should write these words referring to some men in some trade unions:
  "Smug and self-assured; oblivious of any criticism, they have encouraged British industrial workers in habits and attitudes, in rules and procedures, in illusions and fantasies, which have turned the British working class into the coolies of the Western world, and Britain into a stinking bankrupt industrial slum".
  Strong words, and no doubt if they went out over the BBC many would question whether they were, in fact, a truthful description of the British scene. I find them exaggerated. Nevertheless they tell us that things are nowhere near as good as they ought to be, and they come from a well-trained observer of the British scene.
  Mr. Dalyeil: Would not the hon. Gentleman agree that there are trade union officials who do a first-class job?
  Mr. Johnson SmithI prefaced my remarks by saying that that was true of some and suggesting that one of the reasons why we do not make the progress that we ought to is the embittered atmosphere in British industry. It is little wonder that some of our best brains and most capable people have chosen not to work in British industry, to avoid submitting themselves to the vilification which so often goes with industrial management at every level. If they help steer a company into healthy profitability they are charged with cupidity and favouring the interests of a particular class. If they make a loss, even where it is the fault of the Government, they are charged with failing the nation. Either way they lose.
  The climate is no better in the public sector, as the Chairman of British Rail, Mr. Richard Marsh, said recently:
  "None of the 5-year investment plans we have produced has remained intact for more than six months because of the inability and unwillingness of Government to settle investment plans for more than an inadequate period

  1703
  ahead. The cost to the taxpayer of the present short-term nature of the Government's … method of allocating investment to the nationalised industries is frightening."
  No doubt at some suitable date we shall have a not dissimilar comment from Sir Monty Finniston. I imagine that Mr. Marsh's criticisms were not just addressed to the present Government. He might have been addressing himself to Governments in general.
  For my part, I would gladly support a Chancellor who would let common sense and not dogma be his guide and who would have at least the quality of consistency. As my right hon. Friend said in opening the debate, the time has come for the Government to face reality. If it does so it will certainly not find us lacking in a constructive response from these benches.
  7.5 p.m.
  Mr. John Tomlinson: I do not want to follow in detail what the hon. Member for East Grinstead (Mr. Johnson Smith) has said but I would like to take up one point he made early in his speech about the country being anxious and looking to this House to agree upon some kind of solution to our problems.
  I would suggest to the House that, however we agree and whatever we agree, the decisions that are made in this House will only marginally alter the real problems that the country has to face. The real solutions to our problems will largely be determined by the attitude of 50 million people in this country, how they are prepared to visualise their own levels of personal consumption at a time when we are living 5 per cent. beyond our means and how, in their collective organisations at their places of work, they are prepared to respond within the framework which the Government themselves can change by the decisions that they have taken and will be taking in the area of economic affairs.
  I do not believe it is within the collective capacity of 635 people in this House to find a solution. What 635 people between them can do is to change the framework within which people outside will have to find a solution. If we are encouraging people to look to this House to come forward with some kind of panacea, we are encouraging them in a
  1704
  process of self-delusion that there is something that can be decided as a neat package which we merely impose by some legislative form and which somehow will produce a result. A result will come through changes of attitude of management and men and through people in our community combining to use the limited resources that we have far more effectively than they manage to do at the moment.
  Mr. John Stokes: I am following the hon. Gentleman carefully and partly agreeing, but surely in this House both the Government and the entire House must give a lead to the nation, and that is the fundamental factor which is missing now.
  Mr. Tomlinson: I agree entirely with the hon. Gentleman, and if I have ever suggested anything to the contrary I cannot recall it. I was merely commenting on the suggested need for some kind of solution to emerge from this House. Of course, there are things the Government can do, and have already done, and there are further things that I hope they will be doing to create the kind of framework within which people are more likely to combine together to find a collective solution to the problems of the country than they are at present doing.
  There are some encouraging signs, and my right hon. Friend the Prime Minister went through some of them during his speech to the House this afternoon. There can be no doubt that the balance of payments situation is improving. It is certainly nothing like sufficiently improved for anybody to have any long-term confidence, and I still regret the general tendency of people to distinguish between oil deficits and non-oil deficits. As I have said in the House before, the oil situation is a permanent factor in life now and we have to learn to live with the total trading situation without somehow trying to excuse our problems by saying that our trading situation, excluding oil, is coming into surplus. We have to be able to balance our trading position on all factors, oil and non-oil alike.
  Nevertheless, the trend is an encouraging one and one which I am sure everyone will welcome. Equally, the way that the levels of industrial production have stood up in this country compared with levels of industrial production in

  1705
  other countries during the recession of the past 12 months is in itself encouraging, as is the way that our level of unemployment has stayed relatively low—although far too high in absolute terms for anyone to be happy with it—compared with many of our competitor nations.
  Notwithstanding those encouraging features, the facts are fairly clear. They are that we have a dangerous level of inflation which is clearly wages-led at this point, whatever historical reasons there may be leading up to that situation. It is clearly wages-led now and clearly being fuelled by the level of the public sector borrowing requirement.
  It is to this that I wish to address a few remarks. On the wages side we have a general comment in the motion calling upon us:
  "to secure a reduction in the level of pay settlements".
  That is a form of words which can mean all things to all men. In practice we have three alternatives that can be examined. We can look at a statutory incomes policy. I hope that everyone will combine to reject the concept of statutory regulation of pay. The horrific public sector settlements we are going through are clearly the consequence of the discrimination of a statutory incomes policy against public sector settlements.
  We had a Halsbury Report because the Whitley Council system could not deal with the consequences of a statutory incomes policy and the discrimination that it led to in the public sector. We had a Houghton Report with 35 per cent. for teachers and all the back pay that went with that because of the discrimination of a statutory incomes policy against the public sector. If those who are concerned with industrial relations examine the pattern of industrial disputes of the past five years they will find that it has changed dramatically. It has not been the usual repetition of car workers, printers and dockers who have been the centre of industrial disputes. It has been the local government workers, the miners, the railwaymen, the Post Office workers, health service workers, teachers and civil servants. Go through the list: almost every major official dispute has been a public sector dispute arising from the discrimination of an incomes policy.
  Mr. Alastair Goodlad: Will the hon. Gentleman tell the House why he thinks that a future incomes policy needs necessarily discriminate against the public sector?
  Mr. Tomlinson: I am waiting for someone to come up with the formula which will show that we can treat with equity those areas of private sector employment with plant bargaining and those areas of public sector employment with national bargaining, with the Government being directly or indirectly the paymaster. In the private sector there was no real attempt at that. The whole experience of the Labour Government's statutory incomes policy was that when there was a nil norm in the public sector there was a 6 per cent. rise in earnings in the private sector.
  We all know how that was done, by "phoney" productivity deals, job regrading and a whole series of what we could term "fiddles". At the end of the day we got a year-by-year 6 per cent. discrimination against public sector employment. That has been largely the cause of the public sector-led wage inflation which we have been suffering recently.
  Once there are 30 per cent. to 35 per cent. settlements from Halsbury and Houghton they become the norm for which other public sector employees will look. When they get that such figures become the norm which private sector employees will expect. So the process goes on. I hope that we have a large measure of agreement against the return to a statutory incomes policy.
  Then there is this peculiar beast, the so-called voluntary incomes policy. I am never quite sure what that means. A voluntary policy which has no sanctions is, for my money, no policy. If there is agreement there is no need for it. We are left with the third alternative, which is to get to the people who are running a system of wage bargaining which they choose to call free collective bargaining. I agree with the hon. Member for East Grinstead about how far we can define that. That is the system of wage determination which will remain with us.
  In such circumstances we have to make it abundantly clear to those who have the responsibility for exercising so-called free collective bargaining that the consequences of their decisions to bargain in excess of what a particular institution can

  1707
  afford to pay will be unemployment of their creation. That is the only discipline that exists in free collective bargaining.
  No one wants to see an extension of unemployment. We hope that there will be a moderation of pay claims and a reduction of wages-led inflation. The Government should not represent themselves as a body who will automatically provide bail. This may sound a harsh philosophy but it is consistent, if consistently applied. I must confess that I am somewhat confused by the philosophy which spells that out firmly to the Chrysler company but takes a totally different view with British Leyland. We need to have a clear understanding of exactly what is to be the attitude of the Government to unemployment arising from excessive wage-led inflation. I believe that it has to be that the consequences of such inflation must be faced by those responsible for creating it.
  I come now to the public sector borrowing requirement. This has clearly risen, is rising and needs to be reduced. There is not a great deal of division between many of us about the need to reduce this requirement. Where there are differences between us is in the views we take about how this should be done. I am not convinved that we can reduce the public sector borrowing requirement by trying to meet it through increased taxation or trying to play about with current expenditure.
  If we are to make any significant impact on a public sector borrowing requirement of £9 billion we have to be talking about cuts on capital account. That is why I must repeat what I said earlier, that we must find capital account programmes that we can attack dramatically. The one which I would select as a priority is the motorway programme. We can achieve substantial savings here without dramatic consequences on the quality of life, particularly on the quality of life of many poorer people.
  In our economic debates there is a cyclically fashionable argument which emerges. That which seems to be emerging now and which distresses me somewhat is the argument that somehow all investment is good and that all we are short of is a bit of investment. That argument suggests that if we can get a bit more investment somehow we shall be
  1708
  a bit more productive. This is dangerous and self-deluding nonsense. My information is that there is no shortage of capital. There is no shortage of supply. The problem in British industry at the moment is a shortage of demand. In those circumstances we ought not to be talking about how we can get money to invest. We have to be examining the factors which inhibit people taking up the available investment capital.
  The major inhibiting factor is the problem of productivity and how, productively, to find investment opportunities. Certain improvements have happened, partly in consequence of my right hon. Friend the Chancellor's Budgets and certainly because of the changes in the terms of world trade. Cash flow problems in British industry have improved dramatically over recent months. However, there still has not been a sufficient upturn in confidence for people to start to take advantage of the investment funds available. People do not fully understand exactly where our long-term future lies.
  I should like to reassert my belief, as a Labour Member of Parliament, in the mixed economy. The mixed economy depends on the profitability of investment in the private sector. Any fool can invest money. The National Enterprise Board has an unlimited propensity to invest public funds. We have to find profitable opportunities to invest public funds and useful areas of public sector investment where we can invest those funds for some social purpose rather than for some grandiose idea of extending the public sector. It has to be far more meaningful than that.
  Many of my right hon. and hon. Friends believe in a mixed economy, but the mixed economy will only generate the investment that is needed when there is a conviction within it that people can get a profitable return on their investment. Before they seek new investment there will have to be a clear understanding on the part of those involved that they will want to see profitable returns on their existing investment.
  The major inhibiting fact to new investment is not the lack of its availability but the fact that at present there is not the opportunity to get an adequate return on investment capital that is already there. People will not throw good money after

  1709
  bad, if that is how they regard their existing investment.
  This brings me to the question of how to use our existing means of production more effectively and profitably. Like the hon. Member for East Grinstead, I do not believe we have the world's worst products or the world's worst workers or management. In many areas we have exceedingly good products. In most areas we have exceedingly good workers with high levels of skills and training, and good quality management. However, we seem to have a system of industrial relations that prevents those three combining with maximum effect to produce goods profitably, with high levels of return to workers and to investors, and a capacity to sell those goods competitively overseas.
  It is to this industrial relations problem and the consequential problem of productivity that most people outside this House have to turn their attention while the Government, in turn, turn their attention to the areas within their control—the areas of public sector borrowing requirement and public expenditure. However, to expect the Government to come up with a solution encourages people to believe in a panacea that is not there. There will have to be a reciprocation of the Government taking the steps that they have already begun to take and that, within the next few months, they will further go along the road towards taking. Those steps, in turn, although generating confidence overseas and among some of our creditors, will not produce the solution but will produce an environment in which a solution is possible. The solution will come by people outside accepting that lead and using their combined resources to work together collectively to produce the goods and services competitively on which all our futures depend.
  7.26 p.m.
  Mr. Maurice Macmillan: First, I must apologise to you, Mr. Deputy Speaker, and to the House for my somewhat unseemly laughter in the middle of the Prime Minister's speech. I was suddenly struck by the ridiculousness of a comparison between him and the late Lord Salisbury as Prime Minister in a united Government who believed in the doctrine of collective responsibility.
  The Prime Minister's speech was an absolutely brilliant performance, almost
  1710
  totally frivolous and irrelevant and irresponsible, but as a public relations production certainly deserving an Oscar. He gave us the sort of soft-focus view of the economy that we have got used to in those sentimental rather than sexy television commercials which are shot through a gauze screen, blurring the hard lines of economic reality. I am glad that hon. Members later in the debate returned to reality.
  A good deal has been said about wage restraint. Since the debate on the Finance Bill a fortnight ago I have detected a slightly greater sense of urgency in this House, by commentators and writers outside and by those in industry who are responsible for and affected by these matters. It was a great pleasure for me to hear Mr. Jack Jones talking of the kind of flat-rate wage increases which would help the lower paid. It took me back to 1972 and the time when Mr. Jones was saying, at all those meetings which my right hon. Friend the Member for Sidcup (Mr. Heath) and others of us had with trade unions, that this was not quite the thing, although in those days Sir Sidney Greene was putting forward this same concept. However, late conversions are always welcome and better than none at all.
  It is right that we should examine all these matters and all suggestions, from wherever they may come. I do not think that we are, in fact, going quite far enough; nor do I think that on wage restraint, pay restraint or incomes policy we are necessarily moving in exactly the right direction. It is not high wages or high wage settlements that are the problem, but high wage costs in industry. Therefore, as the hon. Member for Meriden (Mr. Tomlinson) was the first to mention this afternoon, the problem is equally one of production, productivity and profitability in the private sector and above all, in our present circumstances, of how to cope with overmanning and how to restore this situation without causing undue hardship and dislocation.
  I was appalled to read a report in the Press today—I hope it is untrue—that the Chancellor of the Exchequer apparently intends to encourage overmanning in the private sector by using public funds to pay private industries to employ people they do not need. If this is true, it is a

  1711
  retrograde step and I hope that the right hon. Gentleman will be able to deny this as a calumny when he comes to wind up.
  Our production is roughly at what used to be called the three-day week level. Investment in industry is for various reasons—and I agree with the hon. Member for Meriden that lack of funds is not the main reason—lower in the United Kingdom than that of our competitors. One reason, as the hon. Member said, is lack of confidence. We have a level of demand which clearly cannot be sustained indefinitely in this country without improvement in our economic effort.
  The Chancellor of the Exchequer is left with very little choice, and he has narrowed the choice even further. Obviously he cannot reflate without causing an enormous increase in the current inflation rates. He dare not deflate and follow policies which one of his predecessors, Lord Snowden, followed because of unemployment, which he does not wish to cause and which, though he can by no means avoid it, he would be frightened to seem to cause. He will not go for any sort of incomes policy, despite the recommendations of the Leader of the Liberal Party and the views of some of his own back benchers. He is left with one alternative, namely, to let the pound float slowly downwards—after, of course, June 5th. It is now down to about 25 per cent. below Smithsonian. Even without any run on the pound, it could no doubt drift down to about 30 per cent. I am not saying that this is necessarily wrong or need cause great alarm, but this is what may happen. Perhaps it could go even lower.
  If the Chancellor is relying on that happening, he is doing so because he hopes that in that way he can escape the blame for the unemployment which will inevitably follow from the devaluation caused by such a policy, and that he can use this indirect method of domestic deflation to hide behind as the unemployment figures mount.
  However, my fear is that this will not do the trick for the Chancellor and that it will not bring down the rate of inflation and will not even begin to halt the rate at which it is increasing to any significant extent. Indeed, it may well not prove of any great benefit to our exports. If it is
  1712
  true that it is not primarily prices that are making our exports uncompetitive, nor even quality, but delivery dates, after-sales service and general unreliability, no amount of devaluation will cure that.
  Lower prices will not make our foreign customers buy if the reasons why they are not buying are simply that they cannot get the goods when they want them or the spares or the after-sales service when they want them. Therefore, it will not help us and, indeed, it may in the end make it difficult for us to be able to price our goods competitively, because the raw materials and the part-finished work which we import will become so expensive—four or five times as expensive as those of our competitors if the pound floated far enough down. Therefore, in the end the Chancellor will be forced into other policies.
  My fears are that meanwhile inflation will continue, and, as has been repeatedly pointed out, it is the weak who will suffer. The policies which the Chancellor in the end will have to use will be of an unnecessarily savage nature, because they will have been too long delayed, and will damage not only the weak but the small, not only the consumer and the pensioner but also business. I am worried that in this process of dilatory dealing with problems that require a great sense of urgency we shall find that it is the smaller and medium-sized businesses that are being hurt, that it is the confidence to which reference has been made that is being once more shattered, that investment is not coming and that the expansion and growing innovation of the middle and smaller end of the private sector, which is so important as the seed corn of our future great industries, will be once more discouraged from playing its proper part.
  One factor has not really been mentioned in the debate though it inhibits confidence and investment and the whole of our future recovery. The Leader of the Liberal Party referred in rather delicate terms to the need to have merit rather than monopoly power as the criterion for wage settlements. The Prime Minister referred to industrial and financial muscle being used against the interests of work-people's working comrades. These are fine words. They are true. But I think that they conceal the urgency and depth of the problem which we all face.

  1713
  I am not here particularly seeking to cast blame on the trade union movement for the position in which its history and that of management has put it and has put managements too and their relations between the two. However, much of our industry is facing rather more than the type of minor difficulty which was implied by the Prime Minister. It is facing a situation not unlike that of the clothing industry in New York when Mr. Lucky Luciano was drawing his living from protecting it. Costs are rising in any case. Customers are finding it difficult to pay the prices. If one pays the protection money, one goes bust. If one does not pays it, one's shop gets broken up and one goes bust anyway.
  If this House or, preferably, the unions themselves really cannot curb this abuse of monopoly power, we shall be continually in a situation in which it is not worth while investing. No one in his senses will make new industrial investment if he is compelled to continue to pay more people than are required to operate the new machines. No country can continue unless there is a degree of mobility of labour. No country can remain competitive if overmanning is the rule and not the exception. That is widely accepted by all concerned in principle, but in practice far too little is actually done about it, and I doubt whether it can be done without some special policy, if necessary with statutory backing to bring it into action.
  I am talking here not so much about the limitation of incomes—that is part of it, perhaps—but more important is their relation to productivity, investment and increased output. There is no point in holding down incomes if it can only be done by making overmanning a permanent feature of our economy and preventing the mobility of labour. Yet that seems to me to be the underlying idea behind a great deal of the Government's thinking. I agree that it requires a great effort by management, a great deal more of what is called worker participation and a great deal more effort on the part of boards of directors and managers at every level to take workpeople whose future is affected into their confidence and to work together and have a sharing of responsibility. But it also requires that where there is the power there should rest the responsibility.
  1714
  We in this House, and the country, know that power lies now not here in Parliament, nor with the Government, nor with employers; it lies with the unions: there too must be responsibility. It is up to the Government, if that responsibility is rejected, to ensure by one means or another, by fiscal, monetary or incomes policy, that power is not able to be used against the rest of the country. It is up to us in this House to see that the Government fulfil this duty, and to support them when they do.
  Like the hon. Member for Meriden, I believe that we can achieve solutions by agreement, by discussion and by policies which will prove acceptable, but we must recognise that this puts a very heavy burden of responsibility on all those who are in a position to exercise power.
  7.37 p.m.
  Mr. James Kilfedder: I sympathise with the right hon. Member for Farnham (Mr. Macmillan) for being forced into uncontrolled laughter at one ridiculous remark made by the Prime Minister towards the end of his speech. I certainly felt disappointed by what we heard from the Prime Minister. It did not match up to the kind of speech one expects from a person in that office. It did not strike the note one would expect at a time of economic crisis.
  The forecast has been made that there could be more than 1 million unemployed before the end of this year. Northern Ireland, with 500,000 insured workers, already has 40,000 people unemployed. Last week a further 1,100 men and women were sacked. I deliberately use the word "sacked" because it conveys some idea of the misery which unemployment brings and of the psychological impact of losing one's job after contributing much to a particular firm or factory. The threat of unemployment creates a feeling of insecurity and breeds suspicions which alienate employees from employers, and it brings more support for militancy.
  Northern Ireland's redundancies and short-time working are not brought about by high wages in the Province. That cannot be said about Northern Ireland. In some cases the headquarters of a company in England has decided to economise or is perhaps forced into it because of recession. The first to suffer are the branch factories in the Province.

  1715
  In engineering the chief culprit is high capital costs coupled with low investment. The clothing, textile and footwear industries in Northern Ireland, as well as in the rest of the United Kingdom, have suffered badly. That has been due to the influx of cheap products from the Far East, South America and Eastern Europe. Many of the imports are sold in the United Kingdom at little above cost price. If we are to avoid the double tragedy of trade recession and uncontrolled inflation, we must control the imports of foreign goods. British jobs must be protected from foreign competition when such competition is based on sweated labour. I look forward to the statement on the textile trade which the Prime Minister intends to make tomorrow.
  Northern Ireland has always had a severe unemployment problem. There has generally been between 8 per cent. and sometimes 11 per cent. unemployment. That does not mean that we have accepted the situation. Far from it. We have a large and successful industrial training programme which is proportionately the largest in the United Kingdom. However, all too often the apprentices and the other trained men and women have no jobs to go to when they leave the Government training centres or the technical schools. That is disheartening for the people who have been trained and for those engaged in training them.
  Special industrial development measures have increased the employment potential of the Province. Those measures have provided an incentive for investment. However, all that will count for nothing if we cannot tackle the problem of raging inflation, which we all agree has reached crisis proportions.
  We have heard a range of suggestions as to what should or might be done. I agree with much that has been said by the hon. Member for Meriden (Mr. Tomlinson). I was impressed by an answer which I received to a recent Parliamentary Question to the Chancellor of the Exchequer about the relationship of Government expenditure to the gross national product. I was told that in the past 10 years the proportion had risen from about 35 per cent. to about 50 per cent. The rise has been dramatic in the past two years. That clearly indicates
  1716
  that Government expenditure is far too high. It means that the time has come for a long hard look at the results and at what must be done. It means that action must be taken now—not next year.
  Mr. Jack Jones has suggested a method of controlling wages inflation without a statutory policy. That suggestion seems to have been sympathetically received by the Government and many other people. It is well worth examining. With one third of the working population employed in the public sector, or in circumstances where the Government are the paymaster in one way or another, a non-statutory wages policy should be possible, but its implementation will need guts, determination and regard for the lower-paid worker.
  Pay settlements outside the social contract, such as those of the Liverpool and Glasgow bin men, should not have been allowed to happen.
  I believe that the economic crisis requires a separate Department, with a Minister in charge of a national wages policy, to control wages inflation.
  Consultation and consent are vital ingredients, and the Government's remoteness from the shop floor must be overcome by the setting up of local income committees. Local consultation will help to bridge the gap between Westminster and the individual firms.
  In the case of Northern Ireland I have advocated a change of direction of Government expenditure. This is especially important if total expenditure is to be reduced. The Government must concentrate more expenditure on manufacturing industries, agriculture, fisheries and foreign trade. It is the creation of wealth which should receive the major share of our resources at this time of economic crisis. Since as a nation we must live within our means, we must get better value for the money we spend and put it to better use. That will mean a much closer liaison between budgeting for income and decisions on expenditure.
  Some time ago I asked the Prime Minister to consider appointing local economic advisers for the regions such as Northern Ireland, under Sir Don Ryder. The Prime Minister would not entertain the idea at the time, but perhaps the time is now ripe for him to reconsider this matter.

  1717
  In his speech the Prime Minister quoted the motto of the Stockton and Darlington Railway, which was "Private risk, public gain". He twisted it to mean today, "Public risk, private gain". I do not believe that such cheap jargon will get us anywhere. I believe that if this country is to escape from its present economic mess everyone must be involved in resolving the situation. Unles there is a civil contract, and unless everyone makes his contribution, we shall find ourselves in a far worse mess than we are in now.
  7.46 p.m.
  Mr. Brian Sedgemore: Unemployment rising to 1,500,000 by 1978, falling living standards and an import-led decline accentuated and accelerated by the Common Market are glum thoughts with which to start the Whitsun Recess. There will be 1½ million people unemployed because of the shift of resources needed to deal with the balance of payments problems. On past experience, the Government's export targets of 10 per cent. per annum compound are not achieveable.
  The Government appear to have ruled out the devaluation which might be involved, partly because of the existence of foreign balances in the United Kingdom and partly because of its effect on inflation in Britain. Import controls appear to have been ruled out. An import surcharge of 20 per cent. to 30 per cent. all the way across the board in manufacturing industry, such as some hon. Members believe is necessary, is ruled out by our membership of the EEC. I thought that that point was brought out by Professor Neild when he mercilessly bullied the truth out of my right hon. Friend the Minister of State for Foreign and Commonwealth Affairs in a recent television programme. That seems to provide a fundamental reason to leave the Common Market after 5th June.
  However, if we rule out the export projections made by the Government, devaluation, and import controls, we are left only with unemployment. It is difficult to see how the Government have worked out a logical solution to the economic mess in which the country finds itself.
  1718
  Secondly, I refer to falling living standards. It does not matter who is to blame. However, we shall experience falling living standards in the next few years. The social contract or compact was perhaps badly worded. These phrases are nice but they do not mean very much. If we had to have a social contract, we should have decided to limit the rise in unemployment by means of a policy or tariff protection whilst we re-equipped and reinvested in our major manufacturing industries. Here I refer to selective investment, and almost certainly massive public investment in British manufacturing industry with public accountability.
  That is one side of the social contract. If it held out a genuine hope of prosperity at the end of the tunnel, we might legitimately ask the trade unions, by consent, not for falling living standards but for a moratorium on increases in living standards during the next few years. Unless the Government are prepared to introduce that kind of social contract—which I believe Jack Jones and other trade union leaders would be prepared to accept—I shall not support any new proposals.
  The third point, on which I want to spend a little time, concerns what I call the import-led decline. That worries me, and it is a matter about which the Secretary of State for Industry seems to upset so many Opposition Members.
  It is a truism that the bulk of our productive resources comes from manufacturing industry. Equally, it is a truism that manufacturing industry is trapped in a spiral of decline. Rightly or wrongly, I take the view that we need to protect manufacturing industry behind a tariff barrier whilst we re-equip and reinvest. If not, as a manufacturing nation we may find ourselves finished.
  Historically a number of countries—the United States, Japan in various ways and West Germany—have built up their industrial empires behind tariff barriers. We cannot and certainly would not be able to do that, whatever the Market regulations are about what we can and cannot do in a crisis. We could not have the kind of tariff barriers which I am suggesting for a five-year period inside the Common Market. Therefore, we should reject its ideal world because it could cripple British manufacturing industry.

  1719
  The decline is serious. We should look not at the depression but at the figures at the height of the previous two booms in 1969 and 1973 and compare what happened. Comparing what happened in 1973 with 1969, we find that one-quarter of manufacturing industry showed an absolute fall in output and 90 per cent. showed a fall in employment. It is extraordinary that 90 per cent. of manufacturing industry should show a fall in employment at the height of a boom. Overall the increase in manufacturing output in 1973 was 7 per cent. less than would be necessary to achieve what most people would regard as a target of full employment. There was also a 7 per cent. shortage in industrial capacity. In the years 1970 to 1974 we were losing 180,000 jobs per year in manufacturing industry and replacing less than one in three of those jobs by any new form of manufacturing industry.
  Throughout each industrial sector we find a horrifying picture regarding trade. From 1970 to 1974 the volume of imports of manufactures to Britain rose by 67 per cent.—twice as much as the volume of British manufactured exports, which rose by only 35 per cent.
  We cannot pick out one sector of manufacturing industry here and there and say that it is in decline. Almost every sector is in decline. If we continue with our current policies—I believe that if we stay in the European Economic Community basically we shall have to continue with those policies—in the decade 1970 to 1980 we shall have shut down 15 per cent. of our manufacturing capacity and made 2 million industrial workers redundant. That does not strike me as a happy thought.
  Some people say that it is scare-mongering and gross exaggeration to suggest that the EEC is in any way causing unemployment either in particular industries or in general. My right hon. Friend the Prime Minister appeared to be having some difficulty today when he said that it was true that, if we went into a new trading area and reduced trade barriers, imports of certain goods would go up and unemployment correspondingly in the whole market would rise, and vice versa with certain exports.
  The balance of those jobs is represented by the trade figures. One does not
  1720
  need to be an economist to realise that if we have a 38 per cent. import of foreign cars—that was the latest trade figure which came out last week—and at the same time unemployment in the car industry is rising, there might be some correlation between the two.
  One does not have to be an economist to look at the unloading of steel at our ports and relate it to the massive threatened redundancies in our steel industry. One does not have to be an economist to see that this year there is a 25 per cent. increase in the quota for textiles, cotton yarns, and to realise that in February 18,700 textile workers were out of work. It may be that tomorrow the Prime Minister will announce that the quota has been changed. Who knows?
  It is important that we should look at the 1975 trade figures, because when we use the 1970 to 1974 trade figures people say that the situation has changed since then. The January to March trade figures show that we are importing net 120,000 cars, which I calculate as being a loss of 40,000 jobs. We are importing net 3 million tons of steel, which I calculate as a loss of another 30,000 jobs. Over manufacturing industry as a whole it would appear that, as a result of the trade deficit, according to the January to March trade figures and working out the rate of change, we are in the process of losing 150,000 jobs. Applying a foreign trade multiplier of three, that takes us to 450,000 jobs.
  People have been coming to me, since I wrote an article on this matter last week, saying that the concept is invalid and that one cannot translate trade figures into jobs. The Prime Minister, at the Dispatch Box this afternoon, said he was not sure that he agreed with certain figures published by the Secretary of State for Trade which are not all that different from the figures I published.
  The right hon. Member for Finchley (Mrs. Thatcher) said that she saw no evidence at all that the European Economic Community was causing a loss of jobs. I believe that if one spread the evidence on her eyeballs she probably would not see it. I do not think that she should seek to wash her hands clean as if she were the daughter of Pontius Pilate.
  That aside, a number of distinguished economists have checked the figures.

  1721
  Economists can be wrong and produce concepts which have no validity. There is a Government economist who advises the Chancellor of the Exchequer. I believe he is called Mr. Wynne Godley. He had nothing to do with the production of these figures. However, I suspect that he and some of his former colleagues would say that the technique behind those figures was valid. The Chancellor of the Exchequer has not been too aggressive about the nature of the effect of membership of the European Economic Community. He may be slightly concerned about the economic effect.
  Economists all the way from the Left to the Right of the political spectrum talk about the need to have export-led growth if we are to grow. Equally, just as we can have export-led growth, so we can have import-led decline. For some reason or other we do not wish to talk about that concept because it interferes with some metaphysical free trade concept which we have had for over 100 years with a few interruptions.
  If I were to publish in a learned document that, as a result of entering into a certain trading organisation, we were about to increase our exports by £100 million and if I were to translate that into jobs and then apply an economic multiplier—macro-economists do that every day of the week—everybody would say that that was perfectly valid. But because some of us have done that in reverse by using the import figures and translating them into jobs through value-added figures and have used the economic multiplier, and because that upsets their concepts of a particular trading bloc, people throw up their hands in horror. They do not bother to make an analysis to see why the concept and the figures are wrong. They simply will not tolerate a truth which gets in the way of a serious issue about which there happens to be a referendum in two weeks' time.
  To say that there is no correlation between trade and jobs or that the correlation cannot be statistically quantified would be absurd, and no one would risk making that statement. If, however, someone did so, I would invite him to give a reasoned critique or to work out alternative figures and not simply to say that he does not believe the Secretary of
  1722
  State for Trade or that a particular bunch of economists do not know what they are talking about. Let him say that it is true that the flood of imports from certain sectors of the world causes unemployment in this country but that he has different figures and different arguments. Let him produce his figures and arguments. Let him get away from mass hysteria and straightforward propaganda for the referendum.
  Mr. Denis Skinner: I think my hon. Friend will agree with me that, contrary to the rather explosive denials made by some of his right hon. Friends on the point he is pursuing, when they wanted to defend their position as instanced by the possible downfall of British Leyland they used the multiplier to which my hon. Friend refers and talked not just in terms of British Leyland jobs directly but of the multiplying and secondary effects on a whole range of industries.
  Mr. Sedgemore: There is a slight difference. Throughout the figures I have used I have erred on the side of caution so that the actual loss of jobs is probably higher than the figures suggest, whereas almost certainly the reverse is true for British Leyland and the exaggeration has probably gone too much the other way.
  I am not saying that if we had not entered the EEC there would be 400,000 people unemployed or that there would be a gap of 500,000. Some people have sought to read that into the figures. I am talking about jobs lost, jobs about to be lost and jobs that would be created had the trade been different.
  The trade figures are frightening because they tend to show that we are in danger of economic and political domination by a Franco-West German hegemony. I say "political" because politics stems from economics. Our trade figures with West Germany showed a deficit of £46 million in 1970 which became a deficit of £881 million in 1974, almost the whole of which came from chemicals, manufactured goods, machinery, transport and other manufactured goods. We are concerned not with raw materials or food but with the sort of goods that if we are to survive as a manufacturing nation we must be exporting and not importing.

  1723
  For the whole of our motor trade with West Germany, a deficit of £21 million in 1970 had become a deficit of £129 million in 1974. If one breaks that down by category, one finds that the increase is not in one product but is in every product in the motor industry. It is in cars, trucks, road tractors and, even more important given the way the motor industry is developing in the world, it is in parts and engines.
  Mr. Bob Cryer: Does my hon. Friend accept that under Article 93 of the Treaty of Rome, which was not the subject of renegotiation, the Commissioners can intervene to stop any State investment which they regard as distorting competition but that under Article 92 West Germany has specific advantages which allow extra State investment because of its relationship to Eastern Germany which is now a purely historical accident?
  Mr. Sedgemore: My hon. Friend is right. One problem is that the history of the twentieth century has been the struggle between Russia and Germany for industrial dominance. Russia won the struggle partly because Germany was divided. Competition between the two halves of Germany is likely to intensify as existing markets in Western capitals of Europe do not expand at the same rate as they have been expanding. From the point of view of West Germany there is some virtue in entering and penetrating British markets.
  If one did the same trade analysis for textiles, chemicals, machine tools or other sectors of manufacturing industry, one would find the same truth. Therefore, the Government Front Bench should ask what will happen over the next two years to change this. Are we to say that it is a coincidence that this trade deficit has arisen with the EEC in textiles, a coincidence that it has arisen in motor cars, a coincidence that it has arisen in chemicals, a coincidence that it has arisen in other manufactured goods? Are all the coincidences of the world combining by coincidence to damage the image of the EEC? Will it stop tomorrow, next year or the year after, or are we in a genuine import-led decline?
  We are in serious economic difficulties. We are supposed to get help from the
  1724
  EEC but we are not getting it. We have a pitiful share of the regional fund of £262 million which will build one mile of motorway. What sort of future is in store for us if there should be a "Yes" vote on 5th June?
  On the continental mainland there is a lot of talk about a golden triangle. From what Mr. Giscard d'Estaing said yesterday, there will be a golden circle. I understand that he is now determined that the EEC countries will go ahead with monetary and political union, if necessary with Britain outside that monetary and political union. In some circumstances that could be a blessing in disguise. I am sure that the thinking behind the French President is that we have an endemic ailing economy which could not stand the strain of such a monetary and political union and that we, possibly with Italy, will become one of the weaker partners outside that inner union.
  We can solve our economic problems if we are prepared to have a massive increase in investment and to adopt the right tactics. If we decide to stay in the EEC, all we shall do is to put off our problems for another 10 years and we shall have to take part in a similar debate in the House 10 years hence.
  Mr. Deputy Speaker (Sir Myer Galpern): I dare say that my predecessor has indicated to the House the number of right hon. and hon. Members who are still anxious to take part in the debate. There will be two winding-up speeches commencing at nine o'clock. That means that we are left with 50 minutes for 10 hon. Members who have indicated a desire to take part. I do not need to indicate how long each of them should take if they are all to take part. If they take longer than five minutes some hon. Members will be left out.
  8.10 p.m.
  Mr. John Biffen: I shall try to obey your injunction, Mr. Deputy Speaker. The hon. Member for Luton, West (Mr. Sedgemore) said that he wished to err on the side of caution. I shall try to reciprocate by erring on the side of brevity.
  It would be a disservice to the hon. Gentleman's speech if I did not comment on it by way of introduction and say that I believe that he has touched on an issue

  1725
  —namely, the import and export relationship between this country and the Community—which will persist after 5th June whatever the result. I happen to think that it will be a "Yes" result. Further, I believe that the hon. Gentleman will find himself in the most exotic company. Already the National Farmers' Union is committed to a plan of domestic agricultural expansion which is fascinating alongside the known existence of a dairy surplus in Western Europe. That paradox will be one of the ongoing attractions of post-5th June politics in which, no doubt, the hon. Gentleman and I will be engaging with as good a judgment as we can bring to it.
  I now turn to the main point of the debate—namely, the motion submitted by my Front Bench. It has been the subject of a certain amount of speculation on the part of the Press, as though there would be some gladatorial contest between my right hon. Friend the Leader of the Opposition and the Prime Minister. However, I think that we would do the House a disservice if we overlooked the concern which led to the request, and finally the agreement, to have this debate—namely, the shadow which fell over the exchange rate a few days ago.
  The one major point that I wish to make is the virtue, the desirability and the necessity that the exchange rate should be discussable in the House. I quote with approbation the remarks of Mr. Samuel Brittan in The Financial Times of Monday 19th May, when he wrote:
  "Critics of Government policy in next Thursday's Commons debate will have every justification for pointing to the thermometer reading."
  He was referring to the movement in the sterling exchange rate. He continued:
  "It would be extremely unfortunate if they either refrained from discussing the state of sterling in the mistaken belief that it was unpatriotic to do so, or if their strictures took the form of demanding official action to 'protect' the exchange rate."
  The House has a prime responsibility to determine whether it still proceeds with its faith in a free exchange rate. In my judgment, the events of the past few days and the past few weeks have been a vindication of the virtues and advantages of a free exchange rate. Had the rate been fixed there would have had to be the most massive rescue and protection operations mounted by the authorities.
  1726
  There are good grounds for believing that we have a marginally overvalued currency. Such a judgment has been endorsed by the Morgan Guaranty Trust Company of New York, which is suggesting that we may be approximately 5 per cent. overvalued.
  It is not given to me to judge what will be the market's judgment, but what I do know is that if the authorities had been obliged to protect an exchange rate which had been marginally overvalued, there would have been crisis talk which would have completely obliterated even the nonsensical crisis talk with which we have been bemused by certain aspects of the media—here I agree with the hon. Member for West Lothian (Mr. Dalyell)—over the past few days.
  Consideration of the virtues of our having a free exchange rate, and how that has helped ease us through the difficulties of the past few days, touches upon the whole question of whether we shall try to have an exchange rate which is half bond and half free by returning to the "snake" and by being linked with the Community currencies. This is a major consideration when upwards of 30 per cent. of our exports and imports are related to the Community currencies.
  My advice is that we should persist with the virtues of a free exchange rate and make it clear that, whatever may be the decision of the French as to whether they go back into the "snake", we shall discuss these matters, and shall continue to do so after 5th June, without having an emotional spasm. There are good, sound, patriotic and Gaullist European reasons for this country to maintain its own exchange rate and to have a free rate. I make that as a point, and I relate it to the fact that the movement in the exchange rate was an indication of foreign views and foreign confidence in sterling that was of particular moment to this country as the Government's finances are so heavily dependent upon foreign borrowing.
  That is the real message that we have to take to heart. We have to ask "Is it wise for this country to proceed for the rest of this year with a borrowing requirement, set by the Government, of £9,000 million?" The right hon. Gentleman the Leader of the Liberal Party and my right hon. Friends the Members for Stafford and Stone (Mr. Fraser) and Farnham (Mr.

  1727
  Macmillan) are all prepared to say that our borrowing requirement is now at least £10,000 million. I think that they are probably being conservative in that judgment.
  In those circumstances, is it prudent still to proced so heavily dependent upon foreign borrowing? There is no doubt that the inflation that we are now suffering derives from the printing of money of bygone days that is still working its way through the system. In fairness, the Chancellor of the Exchequer has replaced printing by borrowing, but he could be forced into printing on a scale which would make Lord Barber's printing look miserly if funds were to be withdrawn from this country on any substantial scale by the Arabs or by Continental Europeans.
  My advice to the Government is that, although they must go through the charade of contesting the wise, prudent and far-sighted motion of my right hon. Friend, they should none the less take cognisance of the central request set out in the motion to
  "take immediate action to cut public expenditure …".
  I accept that my right hon. Friend the Member for Down, South (Mr. Powell) is anxious that we should fill in a few figures. I do not think that that is pedantry on his part. I believe that there have to be early and substantial cuts in the borrowing requirement. I believe that they must come from public expenditure. That means accelerating as early as possible those cuts which have been promised for the end of the year. Further, it means increases in the prices of nationalised industry products to eliminate part of the remaining subsidies, and certainly in respect of nationalised industries outside transport. It means cutting the food subsidies over and above what has already been proposed by the Government.
  I note with satisfaction the Written Question that has been tabled by my hon. Friend the Member for Leek (Mr. Knox) on the Order Paper today—namely:
  "To ask Mr. Chancellor of the Exchequer whether he will consider the imposition of current price ceilings on public expenditure programmes".
  That is an area where the Chancellor himself has already indicated that he
  1728
  wishes to proceed. Where the validity of the case presented by my Front Bench lies is in its timing. The longer this exercise is postponed the greater becomes the risk. Out of that will eventually come panic, and out of panic comes fear. Once again, for the benefit of Labour Members below the Gangway, I shall quote Aneurin Bevan. He said:
  "Fear is a very bad adviser. Its companion is hate, and hate is the father and mother of cruelty and intolerance."
  There are forces in our public life today which would like to see an authoritarian resolution of our social and economic problems. They must not be given their opportunity. The longer we postpone decisive action in this House the more we play into the hands of extra-parliamentary forces which have neither affection nor respect for this House or those who sent us here.
  8.20 p.m.
  Mr. Ioan Evans: I wish to make a brief contribution to the debate. I always like to hear the hon. Member for Oswestry (Mr. Biffen), particularly on the Common Market, on which he talks a good deal of sense.
  I appreciate the hon. Gentleman's reference to Nye Bevan—a quotation which no doubt came from the book "In Place of Fear". It is as well for us to realise in the debate on whether we should remain in the Common Market that the pro-Marketeers are playing on the politics of fear and creating imaginary dangers which will arise if we come out of the Community. We were all told before we went into the Community that it would be disastrous if our efforts were repulsed. Now we are told that it will be disastrous if we come out. What we have found is that entry into the Common Market has been disastrous.
  Let me turn to the motion which we are now discussing. I understand that the right hon. Lady the Leader of the Opposition was a little reluctant to participate in today's debate. I understand that in the Shadow Cabinet pressure was brought to bear on the right hon. Lady to speak. I think that probably her judgment in not wishing to take part was right. Probably she would have preferred the debate not to take place just before we go into recess.

  1729
  We all heard my right hon. Friend the Prime Minister carry out a complete demolition job on the Opposition motion. He went through the motion sentence by sentence and word by word and completely demolished the right hon. Lady's arguments. Therefore, it is a little difficult for Labour back-benchers to participate in this debate because our job has already been done for us by the Prime Minister. Certainly the Leader of the Opposition did not propound any alternative or put forward the Conservative Party's philosophy. Indeed, we have to look at the contribution she made to the annual conference of Tory women at Central Hall yesterday to discover her economic philosophy.
  The right hon. Lady in addressing that conference began by saying that people had a right to personal ownership. She said:
  "We do not need statistics to tell us that vast numbers of people in this country own homes in which they can take pride."
  She said that such a desire may sound a little strange to Socialists—with the implication that the Labour Party does not like the idea of personal property. However, what I must point out to the right hon. Lady is that it is the duty of Socialists to try to enable more people to take a share of that personal property. In a Tory society on the one side there are those with great wealth and possessions and, on the other side, there is the multitude of people who are denied access to cars, houses and other possessions. We are seeking to bring about a system of fair shares.
  Despite the troubles which the country faces, we should not be gloomy, for the living standards of our people have improved. For example, over 30 per cent. of our people have colour television in their homes. This is not only the case in the South-East of England; the rise in living standards can be seen in other areas.
  The right hon. Lady then dealt at yesterday's conference with the question of enterprise. She said that our writers, painters and journalists added colour and inspiration to our lives and were vital to our prosperity. She sought to imply that a Labour Government were against such enterprise. But many of those journalists and writers are Socialists, and they
  1730
  condemn the type of economic system which the Tory Party has stood for over the years. Certainly those people will have a large part to play as we move forward to a more Socialist society in the years ahead.
  The right hon. Lady yesterday went on to assert that her third belief lay in the individual's obligation to his family and community. She quoted examples of voluntary work carried out by people in the Conservative Party. It is great to find people giving their services without thinking of the profit motive—giving to the needy because there are needs to be met and because it is a service to the community. That is what Socialism is all about. We want to create a society which extends the welfare of our own families to all families. One of our principles is a belief in the brotherhood of man. We do not believe that if charity begins at home it should stay at home. We are concerned with the welfare of other people.
  We saw this factor clearly in the statement which was made just before this debate began. My right hon. Friend the Secretary of State for Social Services announced that old-age pensioners were to receive a pension increase, bringing the pension to a figure about £1,000 for a married couple. That is as it should be. We are concerned with the well-being of pensioners who have not the means to ensure that in the autumn of their lives they can enjoy the standard of living to which they are well entitled.
  The Leader of the Opposition, in addressing the Tory Women's Conference, spoke about the
  "spirit of a real social contract—service not strife, giving not grabbing, creating not classifying."
  I wondered whether she was speaking to the right conference. We as Socialists believe wholeheartedly in those concepts. The hon. Member for Blaby (Mr. Lawson) shakes his head, but perhaps he will be making his comments a little later. As a party and a Government we believe that we have a responsibility to fulfil our obligations.
  The right hon. Lady went on to tell the conference that her fourth belief lay in the protection of the weak and of our country. I repeat that my right hon. Friend the Secretary of State for Social

  1731
  Services has already announced measures to the House which, despite our economic crisis, will give assistance to those who really need it. We seek to ensure that those with low means will not have to bear the brunt of the difficulties which we face as a nation. Therefore, the Labour Government's record, despite those difficulties, should command the respect and support of the people.
  The Leader of the Opposition went on to tell the conference that in today's inflation it was the strong who gained and the weak who lost. But she surely supports a society which is based on the profit motive—a society in which the Devil takes the hindmost and others are sent to the wall. That is a situation which we seek to change, and in so doing we wish to bring about a better response from our people.
  I should like to deal shortly with the question of public expenditure. I sought to intervene in the right hon. Lady's speech this afternoon to ask her to detail where she believed public expenditure cuts should be made. But a short time before the right hon. Lady made her speech one of her Front Bench colleagues had asked my right hon. Friend the Secretary of State for Social Services, following her statement about assistance to old-age pensioners, for a six-monthly rather than an annual review. Obviously there was a desire for the Government to spend even more rather than to suggest any cuts.
  What did the right hon. Lady tell the Tory Women's Conference about defence? She said that defence expenditure was always one of the first candidates for cuts in a time of Labour rule. In the recent defence debate, when the Government faced a Left-wing amendment for extra cuts, there were more Tory Members of Parliament defending the Government than there were Labour Members of Parliament taking a similar stance. We must get our priorities right—and it appears that the priority for the Tories is that of guns before butter. They want a cut-back in public expenditure on food subsidies but they want to increase defence spending.
  The right hon. Lady ended by referring to Europe, but there was no reference to Europe in her contribution to this debate. As this is the last full day before
  1732
  we embark on the full referendum campaign, the Leader of the Opposition, who has been campaigning throughout the country, might have had something to say about the Common Market in the debate.
  We face many difficulties, which I sincerely believe have been aggravated by the Conservatives taking us into the Common Market. I shall not refer to the future, because who knows whether in 10, 20 or 30 years' time a decision to stay in will prove to be tragic, as some of us think, or the best thing for mankind?
  I am not sure that "European Community" is the right title. It is not European. There are about 30 nations in Europe, and the Common Market comprises nine. Europe stretches from Gibraltar to the Urals. There are many countries outside the Common Market. It is not a community but a cartel.
  The build-up of food stocks was referred to by the hon. Member for Oswestry. We have 301,000 tons of beef, 225,000 tons of cheese, 400,000 tons of dried milk, 500 million litres of wine—the rumour has it that Lake Killarney will be run dry so that the wine can be stored in Ireland—980,000 tons of soft wheat and 59,000 tons of butter.
  By consenting to remain in the Common Market we shall abandon a cheap food policy that we have had in this country since the end of the war under successive Governments. We had deficiency payments for the farmers, guaranteend prices. The British housewife has had a square deal because she has had the cheapest food in Europe. We are in the honeymoon period of the Market. After 6th June we shall have to face reality. Already we are beginning to see our food prices creeping towards those in Europe. There have been no benefits in this regard.
  It is not just a question of a food cartel. An article in the Financial Times said:
  "EEC steel producers, including the British Steel Corporation, have accepted the principle of voluntary restraints on production in the Community to help cope with the crisis in the industry caused by plummeting demand".
  A report is to be prepared by officials in Brussels. It may be produced before the referendum, but it will probably come out

  1733
  afterwards. The British Steel Corporation's production will be restricted. The Economist said a few weeks ago that the steel producers of Europe will pursue the same policy as the Arab oil producers, restricting production in order to force up prices. It will look good for the balance sheets, but the effect of the cartel will be that manufacturing industries in this country will have to buy dearer steel. Steel workers will see their production curbed, with loss of jobs. British Leyland and other motor car companies will have to buy dearer steel.
  My right hon. Friend the Prime Minister has answered point by point the Opposition's policies. I have dealt with what the Leader of the Opposition said when she put her economic policies to the Tory Women's Conference.
  Unfortunately, the country may well decide to stay in the Market. With The Times, the Financial Times, the Daily Telegraph, the Daily Express, the Sun, the Daily Mirror and the Daily Mail in favour, it is not easy for us to get the facts home to the people. Whether we stay in the Market or come out, we must pursue a policy which is Socialist, which is concerned with the welfare of the individual and which tries to ensure that every man has a proper deal. We do not want to perpetuate the possession by some people of a mass of property while the vast majority are denied.
  The Government have made a good start. It is diabolical that the Conservatives, after their record in Government, when they transformed the tremendous surplus that the Labour Government left behind in 1970 to the highest deficit we have had in this country in 1974, should a year or so later criticise the Government. What a nerve the right hon. Lady has! She has taken the place of yet another leader of the Tories. When I looked at the Opposition benches I could see that they thought they had made a mistake. I am sure that it will not be long before the Conservatives elect another leader.
  I disagree with my right hon. Friend the Prime Minister about the Common Market but I agree completely with the Government that in economic policy matters we have many achievements. I hope that we shall carry on with the
  1734
  good work, despite the destructive opposition of the Conservative Party.
  Mr. Deputy Speaker: Despite my appeal for brevity, the hon. Member for Aberdare (Mr. Evans) took 17 minutes. The debate is as important to other hon. Members as it is to the hon. Gentleman. I feel that regard should be paid to requests from the Chair for brevity.
  8.36 p.m.
  Mr. Michael McNair-Wilson: I shall not take up what the hon. Member for Aberdare (Mr. Evans) said, except to say that I hope to see an Early-Day Motion in his name condemning the Secretary of State for Defence for daring to buy the maritime Harrier aircraft which our Navy needs, the Hawker Siddeley workers need and our country needs. Because the hon. Member believes that defence is so unimportant, I hope he will put his signature against his voice.
  Mr. Ioan Evans rose—
  Mr. McNair-Wilson: I shall not give way. The hon. Gentleman has taken up enough time.
  We all agree that the debate is taking place against the back-cloth of the worst economic crisis our nation has seen since the war. My hon. Friend the Member for Oswestry (Mr. Biffen) brilliantly detailed that crisis, especially in terms of the borrowing situation which the nation is now in.
  When a nation is creditworthy, it is because it shows signs of controlling its economic situation in such a way as to encourage people either to lend money or to leave their money in the country so that the nation can make use of it. When, however, the Chancellor of the Exchequer is spending £100 for every £80 that he gathers in taxation, I cannot believe that our creditworthiness in the world is likely to last indefinitely. When we are no longer creditworthy, when we can no longer obtain a further overdraft to carry us on our way, we shall have to do some thinking and make the decisions which the Prime Minister so lamentably failed to produce this afternoon and which cannot be put off indefinitely.
  If we do not take those measures, we shall be facing not inflation the next time we debate our economy but hyperinflation. I suspect that the panic about

  1735
  which my hon. Friend talked will by then have seized us and that none of us will be sure which way to turn. Therefore, I bitterly regret that we heard nothing from the Prime Minister to encourage Members or our great nation that the Government are taking the matter as seriously as it should be taken.
  Far from talking about reductions in public spending, the Prime Minister made excuses for their not being made. He tried to argue that the massive proposals for nationalisation—the nationalisation of the aircraft and shipbuilding industry, the Community Land Bill and the British National Oil Corporation—could not in any way affect the public borrowing requirement. He said that they could all be handled by Government stock of one sort or another. I remind him that in his own Bill there is a borrowing requirement for the shipbuilding and aircraft industries of £500 million. Whether or not he chooses to buy those industries with Government paper, he will have to find money with which to operate them. He is already making allowances for that in his Bills.
  The Prime Minister knows that cutting out doctrinaire measures of nationalisation could make an enormous difference not only to the public borrowing requirement but, much more important, to the view abroad that Britain is serious about her economic situation and is making plans to put matters right, never mind housing subsidies and food subsidies. Just let us drop some of this unnecessary Socialism whereby industries that are helping the nation are to be taken into public ownership to satisfy a strange political dogma that seems more and more foreign to our country.
  Then what about the real earners of wealth for our nation, our great industries? When will this Government give them a chance to produce their wealth? When will they relieve them of some of the tax burden that they have imposed on them and which is forgotten when they dare to accuse them of not investing? When will the Government wake up to the fact that investment in industry does not produce immediate results and that it takes at least five years for a company to get back its investment, let alone earn more?
  And what about that other aspect of our economy which I want to touch on
  1736
  more briefly than I had intended but about which each of us must be concerned—the question of how we control the costs of our goods? We are often told that one of the tragedies of the Common Market is that so many foreign cars are flooding into our market and that this is harming British car workers. But that argument presupposes that if we closed the market to those products we should be competitive, that our workers would be all right and that our car industry would be bustling with activity.
  Why do we not grasp the fact that British cars are becoming uncompetitive in cost terms? I am talking now about buying a car in this country. Why do we not grasp the fact that a Polish car is now coming in which will make even the West European cars look expensive? Why will we not grasp that we are not now producing the goods that people want. Until we produce them, and at the right price, we shall not win back markets, never mind the Common Market. That is the task our industry faces. That is the challenge we must all understand.
  I come to the question of the effect of wages upon costs. Everyone today—Government, TUC and CBI—finally agrees that excessive wage demand pushes up costs and prices. I used the word "excessive", because therein lies the problem. High wages as such are not harmful to industry—indeed, quite the reverse. They encourage industry to be efficient, because normally if one is paying a great deal for one's labour force one will get the best out of it. Therefore, high wages paid out of a company's real profits are beneficial to industry and to those working in it. But excessive wage rises that demand higher prices are now damaging our industry and our competitive position to an unacceptable degree.
  What is more, it is clear that the trade unions are no longer making wage claims which one might say have been bargained with their members' employers. They are making wage claims that owe their size to their comparability with other wage claims from other unions. Thus, from a position of collective bargaining within an industry we have reached a position in which one union is looking over its shoulder at the next to see what figure is being demanded. This gives rise to the figure of around 30 per cent.

  1737
  The essential guideline under the social contract was that wage claims should enable workers to maintain their real income level in terms of rising prices—no more, no less. But that position has been eroded. Wage claims now are, as I have said, running at 30 per cent., far above the rise in the cost of living and, perhaps worse, containing a built-in element against inflation.
  Since that is the situation, I suggest that one at least of the means that the Government must use to solve the economic problems confronting us is to seek a renegotiation of the social contract. I suggest that the CBI must be brought into those meetings immediately and that in place of this very flexible guideline there must be introduced either a flat rate, as Mr. Jack Jones suggests, or, better still, a specifiec norm, perhaps 12 per cent., which allows a measure of flexibility in wage negotiations.
  Finally, unless we get wages under control, unless we persuade those who demand wage rises that these increases are simply pushing up prices, and thus creating the very inflationary spiral they are aiming to defeat, we shall not come to grips with inflation in our country. If we do not do that, the harm is not only to those gaining the wage rises but to every man, woman and child in our nation.
  Several Hon. Members rose—
  Mr. Deputy Speaker: Three useful contributions could be made before nine o'clock.
  8.48 p.m.
  Mr. John Watkinson: Like many Members, I came here this afternoon to hear the new Tory philosophy on the economy unraveled before us. After the plethora of statistics and confused arguments from the Tory Front Benech, I am still at a loss to know the general direction in which the Tory Party's economic policy is moving. I hope that the right hon. and learned Member for Surrey, East (Sir G. Howe), in winding up for the Opposition, will inform us clearly of the alternative policy of the Conservative Party at this time, whether it be monetarism or some form of backing for the social contract.
  1738
  The Prime Minister referred to the balance of payments and told the House how well it was doing in the first quarter of this year. The figures speak for themselves. But there are certain worrying underlying factors to which he did not refer and which I hope will be dealt with in the winding-up speeches. To what extent is the competitive edge which was given to us under the Smithsonian Agreement now being undermined?
  Further, it should be emphasised that our exports are being maintained at their present level because of the sliding pound. This enables us to continue exporting, but at the same time it has to be accepted that there is a massive increase in the cost of our imports, and as a nation we must continue to import.
  The oil deficit was mentioned by my hon. Friend the Member for Meriden (Mr. Tomlinson). There is talk now of a £2,000 million deficit as something of a triumph. The simple brute fact is that this deficit has to be met and to be paid for at some time. We cannot go on ignoring it.
  It has to be admitted that the public sector borrowing requirement is of enormous proportions. It will have to be brought under control. To a certain extent the Government have been fortunate in that the public sector borrowing requirement has been largely met through foreign institutions and home institutions outside the banking sector, which has effectively meant that the Chancellor of the Exchequer's monetary policy has remained intact to a certain extent. If, however, we have to go on borrowing and increasing the borrowing requirement, can we keep it out of the banking sector whereby we would lose control over the money supply? This is a very important consideration.
  The Government are bringing before this House several measures which I support but they are measures which, I have to concede, will involve increased public expenditure. If that be the case, how do the Government expect to find the money when a Treasury Minister said in a recent financial debate that there were no means whereby £1,000 million could be found to reflate the economy on the selective basis suggested by the TUC? I want to know where the money for these schemes can be found when it cannot be found to

  1739
  bring about a selective reflation in our economy.
  I agree with a great many right hon. and hon. Members on both sides of the House that inflation is now wage-led. For a long period I have despaired that we would be able to get that message across to the people. It appears from the policy decisions which have been made by the TUC and from certain undertakings given by the CBI that at last the message is being got across that we are in a crisis. The unions must accept that they have a basic responsibility to bring wage inflation under some measure of control. If they do not, we are entitled to ask them where they think they are leading us. If they say that they want to lead us to some controlled paradise, they must be told that the first thing that will go in their so-called paradise is the freedom to bargain for wages.
  It is said that warnings have been given and that they have not been heeded, that if they have been heard they have not been believed, and that if they have been believed they have been thought not to apply to the believer. But the message has to be got home that we have to do something to bring our inflation under control.
  8.54 p.m.
  Mr. Charles Fletcher-Cooke: The hon. Member for Gloucestershire, West (Mr. Watkinson) made the shortest and the best speech that I have heard from the Government benches in this debate. It is almost impossible to quarrel with him. I hope that I do not embarrass him by saying so.
  The inflation that the hon. Gentleman fears, he fears because it is economically and socially undesirable and very dangerous. I want to put yet another point, which is not merely that it is undesirable and dangerous as it has been practised of late but that it is positively unconstitutional and in some senses actually illegal.
  My thesis is that inflation as it is now practised involves a secret taxation of the people. It removes from the money in every citizen's pockets its value, and the Government take that value without any of the procedures involved in levying a tax.
  I imagine that lop at today's value will be worth in a year, if we are lucky,
  1740
  perhaps 6½p. Its value will have been reduced directly by Government action, or inaction, by about the same as the standard rate of income tax, if there now be a standard rate of income tax.
  It is a secret taxation levied not on those who normally pay direct taxation but upon the whole population. It is a most regressive form of secret taxation, instead of being a progressive one, and it has the additional demerit of being levied without any of the familiar mechanisms that we in this House have developed over centuries for the control of the raising of taxation and for its disbursement and expenditure by means of Select Committees of one sort or another. Yet it is due to Government action, as all Governments know who have practised it in recent years. It is the duty of the Government, perhaps for that reason—because otherwise it becomes secret taxation—to preserve the currency. That is the second duty of the Government, the first duty being the defence of the realm, both externally and internally. The second duty, historically and in fact, is to preserve the currency and if a Government do not preserve the currency then they are acting illegally.
  Admittedly, there is no sanction which one can bring against the Government, as one can if they raise taxation openly without the authority of the House or without the mechanisms of which I have spoken. They can raise this sort of taxation and get away with it, although I believe it in a fundamental sense to be totally unconstitutional.
  Why, then, is it done? It is done partly because it produces a secret redistribution of income. It produces not only secret taxation but a secret dispersal from the people in whose pockets it orginally was to other people who are the favoured of the Government. That is one reason. But, much more effective than that, because I do not believe it is done deliberately by this or any other Government, it is done because Governments have lost the power, or think they have, to stop it. They can no longer control their own weapons for the reason that Mr. Paul Johnson gave in his terrifying article in the New Statesman this week. The reason he summarised in these words:
  "In the British Labour movement it is absolutely forbidden to criticise the trade union movement in any respect whatsoever."

  1741
  That was the single-sentence message of that very long article.
  He is not quite right about that, because in the past week not only has the hon. Member for Gloucestershire, West made some suggestions which would have been quite impossible a year ago even though they were made in the most moderate language, but, of course, there were the words of the Prime Minister himself at his banquet with the CBI, and, perhaps more important than that, the Secretary of State for Energy yesterday referred to the "brute force" of the leaders of the unions of skilled workers. That is language which could not possibly have been used by people in positions of authority such as that even a month ago.
  So I think there is hope. I have a feeling that once the referendum is out of the way the Government are going to take courage, as they certainly ought to, and show that they are in control of expenditure, and particularly in control of that much the largest part of the expenditure which goes to the satisfying of very high wage claims in the public sector. If they can screw up their courage to say "No" in that regard, if they can actually bring themselves not merely to criticise but to act against the inordinate demands of the public sector—and the public sector is big enough now to make a very large impact both in fact and in example on the whole economy—I believe that the Government will be able to use their weapons for countering inflation and thus the secret taxation which I for one regard as unconstitutional and illegal and as something which should be stopped as soon as may be.
  9.0 p.m.
  Sir Geoffrey Howe: During the course of this debate we have had a number of interesting and valuable contributions. Among them one certainly cannot include the gravely disappointing speech by the Prime Minister. It was irresponsible in its style, and its lack of substance and seriousness showed no respect for this House or for the intelligence and deep concern of the people of this country.
  The right hon. Gentleman failed, as my hon. Friend the Member for Newbury (Mr. McNair-Wilson) pointed out, to begin by recognising the essential gravity
  1742
  of our situation. He failed to acknowledge that which we urge upon him and his Government—the need for action to be taken. Action, to be effective, can be taken only by the Government. Such action when it is taken—and it will be—is bound to be severe. Governments of all parties have in the end been driven to it, and this Government will be driven to it again. Our fear is that when it is taken it will be too little and too late.
  I am sorry to have missed the speech by my hon. Friend the Member for Oswestry (Mr. Biffen), but I agree with him, as I have said in this House before, that the longer that action is postponed, the worse it will have to be. My fear is that when it is taken, even then it will be applied too briefly and will leave the underlying problems of our economy unsolved. The action which is now needed is certainly of a kind which will need to be sustained, spread over a period of years. It is for that reason that in our motion we call for it to be taken as part of a programme for economic recovery. If it is to be sustained it will need to be upheld and enforced with the authority of this House. It will be immensely difficult to take because it will place a huge strain upon our democratic institutions.
  If it is to succeed, the most important factor will be that it should be explained, argued and driven home with total honesty and brutal candour. It was on these standards that the Prime Minister's speech fell so far short of what is necessary. The candour which is called for must begin with the diagnosis and be carried through into presentation. Actions and words have to march together. As a result, we make as our first criticism not merely that the actions being taken by the Government are quite insufficient and misdirected but that the Prime Minister's insight and exposition are self-deceptive and thus deceive the nation. We are familiar with the fact that he and his Chancellor have deceived themselves all too lamentably in the past.
  On 9th October last year the Prime Minister committed himself to the now somewhat embarrassing observation that
  "Unemployment … is beginning to fall, the balance of payments shows a substantial improvement; the pace of inflation and price rises is moderating".

  1743
  He must look back on that now with some misgivings.
  On 24th September last year the Chancellor of the Exchequer, basing so much upon a comfortable hypothesis, said:
  "If the social contract is maintained we can get inflation down close to 10 per cent. by the end of next year."
  He knows from his own Budget speech how far above that figure his own forecasts now run. The time for comfortable hypotheses and self-deceptive observations is past and our indictment of the Government begins from the fact that that attitude is still continuing today.
  Of course the Prime Minister acknowledged certain features of the situation, which even he could hardly fail to do. He acknowledged his concern—we all share it—at the high and rising level of unemployment. Let there be no misunderstanding of how high that is. An increase of 59,000 people out of work in the United Kingdom, seasonally adjusted, in the last month, means that by that same standard the Chancellor's expectation of 1 million people out of work will be fulfilled not by the end of the year but by the middle of August.
  The Prime Minister acknowledged that investment was falling far behind what he would like. He could hardly fail to say that when the CBI in its latest forecast has pointed out that a very substantial fall must be expected. The Prime Minister acknowledged in a passing reference, referring to the main thrust of our motion, the fact that inflation was accelerating—3·9 per cent. in the last month, 21·7 per cent. year on year and an annual rate, upon what is now universally regarded as the Healey basis, of 34·4 per cent. What is more important, it is far worse than that of our competitors, about twice their average rate. While they are improving their position, ours is getting worse.
  Perhaps I may remind the Chancellor of these words:
  "The Chancellor must halt inflation, and be seen to be halting it, because if he does not do so the £ will sink right down to the ocean bed and Britain will become the Brazil of Europe."—[Official Report, 29th June 1972; Vol. S39, c. 1726.]
  Let the Chancellor reflect upon the comfortable days when he said that to Lord Barber in June 1972, when inflation was running at 6·1 per cent., and set it in
  1744
  the context of today with a rate four times as high. There lies the architect of the Brazil of Europe.
  But if those things were acknowledged by the Prime Minister, however rightly, his fatal complacency became very much apparent when he came to consider the state of production within the country. It is true that it is not significantly down on a year ago, but that is a pretty moderate tribute. It is, in fact 5½ per cent. down on what was achieved in the quarter from August to October 1973.
  In so far as the Prime Minister can claim that as a success, it is only a symptom of the failure of the Government to act, and to act soon enough, on other, more important fronts. It is the fact that other countries during the last 12 months have seen a sharper fall in their level of production, but generally they have begun to get their inflation effectively under control. They have got their balance of payments under control. They are ready to begin resuming expansion of their domestic and world trade, the very expansion on which the Chancellor's fragile strategy for this country critically depends.
  The Prime Minister was equally complacent when he came to consider the position of the balance of payments. In this quarter certainly the deficit is less than it was in the last quarter, but as his hon. Friends the Members for Gloucestershire, West (Mr. Watkinson) and Meriden (Mr. Tomlinson) pointed out during the part of the debate when the right hon. Gentleman was absent, it is still a very substantial figure; and their anxiety, and mine, is that it may yet be expected to grow, the more so if trade expands as the Chancellor of the Exchequer expects and commodity prices start to rise.
  It is no answer in the long term, in the present state of world trade, to point only to the non-oil deficit when the oil price rise which has taken place is irreversible and there could well be more oil price rises to come. It is for that reason that other countries—France, Japan, Germany and Italy—have acted as we ought to have done and we must now act, in a way that the Government have failed to do; because my further reason for concern is the extent to which correction in the trade deficit is due to an expansion in the price of our exports and a reduction in the last quarter in volume terms.

  1745
  The CBI is becoming increasingly concerned at the loss of price competitiveness of our exports. It is, therefore, a pretty fragile foundation on which to found optimism about our balance of trade. It is a manifestation of the underlying, fundamental weakness—the failure—of the Government's policies, as we put it in our motion, to control inflation.
  As my right hon. Friend the Member for Worcester (Mr. Walker) pointed out in a speech the other day, the correct way of looking at what has happened to production and to the balance of trade over the last year is that while production has been effectively static, pay levels in this country have gone up by about 30 per cent.
  We have been paying ourselves for goods we have not produced and we have been financing that payment by increasing dependence on borrowing from abroad to the extent of 5 per cent. of our gross national product, or, as the Paymaster-General pointed out the other day, £68 per head of the population. That is not a situation that can be allowed to continue.
  The fundamental instability of our position depends upon three elements that are closely linked. First—we can quote again from the speech of the Paymaster-General on this—we are intolerably dependent on borrowing from abroad. Second, the scale of that borrowing is to a significant extent set by the size of the public sector borrowing requirement. The larger that borrowing requirement is allowed to become so as to increase our need to borrow, the greater will become our incapacity to borrow. It will in itself be further evidence that the central management of our economy is getting out of control. It will probably provide further fuel for domestic, publicly-financed inflation which will destroy our capacity to borrow. That will diminish the willingness of overseas lenders to lend us money in the face of a further fall in the value of the pound. What makes me equally concerned is that the volume of funds available to borrow is likely to be less this year.
  There is a fatal temptation with a floating pound, a sinking pound, to think that we shall be able to drift along indefinitely in this way. The fact that the rate of
  1746
  exchange of the pound is no longer fixed may enable us in one way to postpone the moment of truth, but unless we act, unless the Government are willing to summon the will to act firmly and now, the moment of truth will eventually come and the measures that we now urge upon the Government and far more besides—the unthinkable—will become inevitable.
  Either the Government will be compelled to resort to the International Monetary Fund and accept the conditions that will then be imposed, as they were in the autumn of 1967, or, quite simply, confidence will be withdrawn. As the Paymaster-General pointed out in his speech to the National Union of Mineworkers on Tuesday:
  "The price of losing that confidence should not be under-estimated. It would be austerity and high unemployment with a vengeance."
  Cuts in public spending as a whole would be quite literally imposed upon this country from outside.
  Those are the reasons why we call for action now and for action on all three of the fronts proposed in the motion. No single proposal, no one aspect of our motion, will be sufficient by itself. Each proposal needs the support of the others. I shall deal with each in turn. They are, first, a reduction in the level of pay settlements; second, cuts in public spending; and third, an abandonment of further nationalisation proposals.
  No one now argues that wage inflation is something that can happen by itself and that it is the only cause of our problems, although it was pointed out that it is becoming increasingly perceived as an important aspect of them. Clearly, as a matter of theory, if the total of money is controlled the total of inflation is eventually controlled too.
  That balance can be achieved, however, in a number of eventually harmful and destructive ways. For example, wages could be allowed to grow so as to destroy profitability and hence investment. That would be unacceptable. The growth of Government, non-productive investment can be such as to destroy the profitable sector. That would be equally unacceptable. Rising unemployment for most people could be allowed to grow to the advantage of a few who still win high pay. That too is equally unacceptable. At the end of all those roads there is

  1747
  disaster and the need for painful reconstruction. But the balance can and should be achieved in a more sensible way with sufficient resources going to investment in profitable private industry, no more than the nation can afford—which is the central point—to public services and no more than can be afforded to private consumption. Those things can be in balance without inflation.
  We ask, why has that not come about? Essentially—and this is the important point made by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke)—it is because those who control the amount of money spent by the Government—that is, the Government and no one else—have been persuaded, and in the last resort coerced, by those who are prepared, and have learned how, to use industrial power to override the will of the Government and to seize effective control of the Chancellor's cheque book, even of the Government's printing presses.
  At the end, therefore, if inflation is to be averted, the authority of the Government and of this House has to be restored. The question that will not go away is, who governs Britain? It still remains to be answered. [Interruption.] The Chancellor may well laugh but he knows how directly he faces the difficulties involved.
  Against that background, what, if anything, is the rôle of an incomes policy? Several things are clear. First, if the Government control their expenditure right, an incomes policy is substantially unnecessary. If the Government fail to control their spending, an incomes policy is ineffective. In circumstances of dire and urgent emergency, almost no alternatives can be rejected out of hand. However, today certain kinds of so-called incomes policy can be totally counterproductive and can lead to an entrenched expectation about incomes that is quite inconsistent with the necessary control of public spending. This is what has happened.
  The Chancellor has been disabled from taking effective action about inflation because of the impact of the social contract. The social contract, in so far as it is other than a political presentation, has not so much failed but, as my right hon. Friend the Leader of the Opposition pointed out, has literally been the cause
  1748
  of failure of the Government's policy to control inflation. That is now universally recognised. The CBI wishes it to be replaced. The TUC wants it to be tightened. Mr. Jack Jones and Mr. Hugh Scanlon want it to be redefined. Mr. Murray points out one of the consequences. I quote from a report published in The Times yesterday:
  "The growing view is that that 30 per cent. is the going rate and there will be more on top of that."
  The Chancellor wants it to be redefined, but not yet. The Prime Minister wants it to be redefined, but at the beginning of the next financial year. This is a measure of the failure of the social contract.
  One wonders where to look for an alternative. Some people think that a total freeze would be the answer. How far is that conceivably acceptable without matching action on prices, and what would be the consequence, in present circumstances, of a prices freeze? A renewed growth of the deficit of the nationalised industries, which the Chancellor knows would be intolerable, and a last mortal blow to the profitability of the private sector. Therefore, that is quite unacceptable. If there is no matching action on prices, how long could a total freeze be expected to last, and with what could it be replaced, except by the problems we have to face today?
  What about the other alternative of a new reformalised voluntary contract? At least that would have the merit of including those who had been excluded from the social contract. How far could one expect it to be any more successful? I remember the almost miraculous qualities attributed to the social contract by the Prime Minister not so long ago. Speaking at Bury on 26th October, he said:
  "The social contract is working"—
  and, almost as though it was the secret of eternal life—
  "it is our answer—in the short term, the medium-term, and the long-term—to the problems of"—
  The Prime Minister: When?
  Sir G. Howe: 26th October.
  The Prime Minister: October?
  Sir G. Howe: 26th September. The Prime Minister is very easily amused. It

  1749
  is high time he faced up to the substance of the charge. What he said in that speech is totally derisive. He said—and I am not surprised that he is anxious to divert attention from it:
  "It is our answer—in the short-term, the medium-term, and the long-term—to the problems of a modern industrialised society. Industrialised and civilised."
  If he still has any conviction about the validity of that expectation, he is even further adrift from the truth than I had previously thought.
  Let the Prime Minister think also of what he had to say about the comparable commitment way back in 1966. He then said:
  "The Declaration of Intent of December 16th, 1964 was a great landmark when, for the first time in our history, employer, trade union and Government signed a pact designed to restrain the growth of incomes to a norm."
  On 20th July 1966 he announced:
  "Yet ever since that time wage increases have outrun the figure allowed for and preempted the amount available. The time has come to call a halt."
  As my hon. Friend the Member for East Grinstead (Mr. Johnson Smith) said, we can hardly face another disillusionment like that.
  If one looks at the alternative of a statutory policy, one finds that the experience of that is scarcely encouraging, as has been pointed out from both sides of the House. The rigidities and anomalies will continue to multiply. The implication will remain that freedom lies ahead, and once again a seemingly easy option will turn out as ashes in our hands.
  That is why there is at the end of the road no substitute for the re-establishment by the Government of control of the one instrument on which all else depends: basic control of the economy, based on control of the money that the Government spend for themselves. That is the key in our society to an effective control of inflation.
  Of course, more than that is involved. It must be supported by understanding, acceptance and consent. That is why it is essential for the Government to promote and secure understanding and acceptance of their policies by making clear their determination to pursue them over a period of time and making clear the consequences of those policies by spelling out, as the hon. Member for Meriden
  1750
  courageously made clear, the consequences of failing to accept those policies, and doing so in every possible forum of debate—industry, the unions, local government, and this House—and with a united voice.
  That is why the second feature of our proposal is this. An inescapable and essential feature of the policy that the Government should be adopting must be a determination to control their own spending. Unless they do so, their capacity to borrow will come to an end and the non-productive sector of the economy will destroy the rest and it will be impossible to restore control. They found that that was the cause of their problems last year.
  It is no use Ministers continuing to say that that cannot be done. It has been done before. It was done because it had to be done in 1966 by a Labour Government, and again in 1968 at the behest of the International Monetary Fund. The Treasury, in evidence given last year to the Public Expenditure Committee, equally made it clear. What is more, it needs to be done. The Paymaster-General pointed this out again in his speech on Tuesday:
  "The Government must bring public expenditure under better control because it is at present making too great a demand on the total resources of the country."
  That is the thrust of our case, from a member of the present Government.
  Let me tell the Government where and how they should set about that. First, it is essential—I make no apology for repeating the point—to move now to cash controls of public spending. It does not mean discarding real resource planning as well, but cash controls are an essential first element.
  Secondly, it means a determination by the Chancellor to reject new public spending commitments. It means a determination to dismiss as folly the decision to phase out pay beds, for example, at a cost of £40 million; to dismiss as folly the introduction at this point of time of the Community Land Bill, involving a huge army of public servants; to dismiss as folly the Employment Protection Bill, with its further burden on industry and more public servants to be employed.
  The Government must also reinforce, instead of discarding, the systems upon which control of public spending essentially depends. How can they possibly

  1751
  expect to control public spending throughout local government when they are pressing ahead with their Clay Cross legislation? It is not only constitutionally improper but grotesquely irresponsible to weaken, if not destroy, the very instruments of control upon which this or any other Government will eventually depend.
  If the Government want to know what should be done, I am perfectly prepared to defend the manifesto upon which we faced the country last year in that respect. It was a balanced and responsible manifesto. But what we tell the Government to do now is this. Let them bring forward now the £1,100 million cuts proposed for next year and let them recognise that they are not in a position to choose what their policy should be. Of course, they may want to strive and should strive to make some exceptions from the impact of public spending cuts, but it will become eventually essential for every Department of State to cut expenditure. That is why they should start this year rather than next on the reduction of food subsidies, on nationalised industry prices and on housing subsidies.
  The Prime Minister says that would raise prices. So it would, for the standard of living must be reduced. He must not fail to understand the strategy of his own Chancellor. The Chancellor is raising nationalised industry prices and taking credit for that. He is heaping huge burdens on indirect taxation. All those things are aimed in the direction in which policy ought to be going. That is why it is folly to complain of the cuts which the Opposition propose in burgeoning public expenditure. Housing is one of the clearest examples. Some tenants need help. That was the object and effect of the Housing Finance Act. But it cannot possibly be right to continue with a situation in which average municipal rents amount to no more than 7 per cent. of average incomes, when 20 per cent. of local authority tenants enjoy incomes in excess of £100 a week, and when twice as much is being spent on housing subsidies as two years ago. Housing provides one example of the growth of local government spending, which should be cut.
  1752
  Last year we planned initially for a growth in local government spending of 6 per cent. in real terms. The cuts we introduced in May 1973 proposed to bring the figure down to 4 per cent. and then in December 1973, to 2½ per cent. in real terms. The outcome was an increase of 10 per cent. under this Government. There was overspending and a growth in real terms of 10 per cent. Such expenditure must be reduced. That expenditure was directly financed by the Government. There was an increase in the rate support grant from 60½ per cent. to 66½ per cent., which meant that the Chancellor of the Exchequer paid for the Secretary of State for the Environment's party. That is why the Chancellor must take responsibility for the growth in public spending.
  This is the importance of the final central point which must be made. Every plan for further public ownership should now be withdrawn. A reason to support that was given by the Paymaster-General. In his speech at Bournemouth he said:
  "Extensions of Government influence need ideally to be proportioned timewise to the Government's capacity to take on new responsibilities."
  In other words, he implied that the Government had not made much of a success in running the public sector. It is, therefore, crass folly to contemplate extending it. Wages in the public sector have been allowed to race ahead. Strikes in the public sector have proved most difficult to resist. The commanding heights of the economy have become its soft underbelly.
  There are many reasons why further nationalisation would be wrong. Nationalisation must be funded by an extension of the public sector borrowing requirement. The Prime Minister did not understand that future investment in extensions of nationalisation will become a charge upon the Exchequer. Profitability of the industries taken into public ownership will disappear. Above all wage claims will become even more difficult to resist. We have only to look at the situation in the steel industry, as was pointed out by my right hon. Friend the Member for Stafford and Stone (Mr. Fraser).
  Is it conceivable that if the steel industry had remained in private ownership it would have faced a deficit of £375 million

  1753
  in one year, proposed to put up prices, and been in a weak position to resist wage increases? It is no wonder that the Prime Minister spoke as he did about Chrysler recently. He said to the CBI that there is
  "an idea in the minds of some of those involved that if their actions can drive Chrysler into desperate economic straits then the Government would be forced to bring the firm into public ownership. I hope no-one will harbour such illusions.… The sooner this is realised, the better it will be for the livelihood and security of the workers, and their families."
  Of course, he was right. However, it is more difficult to make that assertion credible when the world can see the way in which he is acting in other aspects of his policy. How can the Chrysler workers be expected to regard that as entirely convincing when they see the irresponsible way in which the affairs of British Leyland have been carried through? When he made that speech the Prime Minister was crying out for salvation from the twisted logic of the policies to which he and a large part of the Labour Party have been committed for years and to which this House has been prepared for too long to subscribe.
  This nation now finds itself in an economic morass—a morass of rising unemployment, roaring inflation and soaring indebtedness. If we are to escape from that morass we need a decisive change of course. It is a change of course which will test our democratic institutions very severely, but it must be undertaken. If it is undertaken, even by this Government at this time, it should receive the support of every Member of this House who is genuine in his commitment to the survival of a free society. I believe that, even now, it will receive the support of our people.
  We must face the real gravity of our situation, and that the Prime Minister totally failed to do. We must take firm control of Government spending, and that the Prime Minister flatly refused to do. We must reject the disastrous commitment to yet another bout of Socialism, and that this Government are not equipped to do.
  Those are the reasons why I call upon the House to support the motion.
  9.31 p.m.
  The Chancellor of the Exchequer (Mr. Denis Healey): After five and a half hours of debate and two speeches from the Opposition Front Bench, I confess that I still do not understand why they forced this debate. But I understand very well why the right hon. Member for Finchley (Mrs. Thatcher) decided last week not to speak in the debate. I dare say that she is now bitterly regretting that she changed that decision.
  When the Opposition first announced their intention to force yet another general debate on the economy—we have already had three in the past month—two questions were difficult to understand. The first was why do it at all when they were hopelessly divided on every major economic issue. The second was why the Leader of the Opposition announced that she had more important things to do than to speak in the debate.
  The first question is more difficult to understand now than it was even last week. It could have been that the Opposition wanted the opportunity to make a serious contribution to a discussion of the nation's problems and to put forward specific proposals for dealing with them, perhaps on the basis of some defined area of agreement with the Government as they saw it.
  All that we have had from the Opposition Front Bench is stale party rhetoric. Every real issue has been dodged. Every point made today had been made and rebutted at least three times in the past month. That was particularly true of the speech that we have just heard from the right hon. and learned Member for Surrey, East (Sir G. Howe), although I am bound to say that he made a better speech than the Leader of the Opposition—but he had already made it twice before.
  At least it is some comfort to have the other mystery cleared up. We know now why the Leader of the Opposition told the world last week that she did not intend to speak in the debate. It was because we did not get from her this afternoon either a clarion call to the nation or a battle cry to her own divided and demoralised supporters. All we had was a monotonous recitation of disconnected little homilies on each of the major

  1755
  economic abstractions studded with indigestible quotations from the whole gamut of Tory house journals from the Sunday Telegraph to the Economist and charged with all the moral passion and intellectual distinction of a railway timetable.
  One characteristic ran through the whole of the right hon. Lady's speech giving it a particularly disagreeable flavour—a steadfast determination to ignore and play down any aspect of the nation's performance which does credit to Britain. As the Prime Minister suggested this afternoon, the patriotism of the Tory Party, like its loyalty to its leadership, is strictly a cyclical phenomenon.
  The right hon. Lady and the right hon. and learned Gentleman know as well as anyone in this country that there are three major criteria of economic success in which Britain has done well in recent months by comparison with almost any of her competitors, all of whom faced the same problems created by the oil crisis and the world recession but none of whom entered the oil crisis with the handicaps that we inherited.
  Our output has fallen less than that of most other countries—by only 4 per cent. in the last three months compared with 24 per cent. in Japan and between 10 per cent. and 15 per cent. in America, Germany, France and Italy. Our employment has fallen less than that in many other countries, and our balance of payments position has improved more when we consider that, as the Prime Minister told the House, we entered 1974 with a deficit already running at about £4,000 million, before the oil crisis had exerted more than a minor effect, as the Governor of the Bank of England pointed out to the nation in January last year.
  There is, however, one very black spot on which the debate rightly concentrated, and that is inflation. Last year Britain was one among a fairly large group at the higher end of the world inflation table. This year we are almost alone among the industrial countries with a rate of inflation which could be double that of most others unless we do something about it.
  The most interesting speech on this matter—indeed, the only one from the Opposition—came from a member of the Government in exile rather than from a
  1756
  member of the Shadow Cabinet. I refer to the right hon. Member for Farnham (Mr. Macmillan). He rightly pointed out—and this is the core of the nation's problem—that the level of wage settlements is only half the problem of inflation. The most important element is the level of productivity. We in this country since the war, by and large, have not had wage settlements higher than those in most other industrial countries. We have had a far lower rate of productivity because we have had too little investment, too much investment in the wrong places, and, when investment has gone into the right places, it has not been fully exploited.
  We cannot put that problem right in a matter of months. I have made money available for investment, and the CBI agrees with me that there is now no problem for business in obtaining money if it wishes to invest. I made £100 million available in the Budget to stimulate investment in those areas in which we know it to be possible immediately and in which we know it to be desperately urgent, such as the ferrous foundry industry, on which the engineering industry depends.
  The fact is—a point made from the Opposition benches but not seriously discussed—that as long as we have a level of inflation as high as it is at the moment, and no certainty as to where it will move during the coming year, there will be a great disincentive to business to use money which is available for investment. That, I hope, is common ground between the two sides of the House.
  We had every right to expect, and indeed to insist, as the Opposition had put this motion on the Order Paper, that the Leader of the Opposition or another Front Bench spokesman would tell us tonight how the Conservative Party proposed to get the rate of inflation down. For one moment only in the right hon. Lady's speech did hope flicker. That was at the beginning of her speech when she said, very rightly, that inflation is a political and social problem rather than an economic problem. I entirely agree with her about that.
  However, nothing followed from that flash of insight. All that we had beyond that was the familiar and dreary chanting of abstract slogans about public expenditure and the public sector borrowing requirement, and the ritual denigration of

  1757
  the social contract, without which no speech from the Opposition has been complete for many months. There was no suggestion either from the right hon. Lady or from her right hon. and learned Friend the Member for Surrey, East as to what they would put in place of the social contract. Indeed, at the end of the right hon. Lady's speech she appeared to suggest that she supported it. She said that one of the three pedestals on which her policy stood was the renegotiation of the guidelines which are the TUC's contribution to a social contract in which, of course, the Government are also involved.
  The right hon. Lady then had the effrontery—if I could have her attention and that of her right hon. Friend—to talk to us of the need to keep the money supply under control. The right hon. Lady, along with the right hon. Member for Yeovil (Mr. Peyton) and the right hon. and learned Member for Surrey, East, is representative of a Government who allowed the money supply to rise to 34 per cent. in 1973, three times higher than the increase in GDP in money terms. The right hon. Lady has the effrontery to talk about controlling the money supply which on no definition has come close to the increase in GDP in money terms since we have been in power.
  We had the usual monetarist lecture from the right hon. and learned Member for Surrey, East. I suggest that he looks at what the high priest of his church, Professor Laidler of Manchester, wrote last week—namely, that inflation this year in Britain is the direct consequence of the monetary profligacy of his Government in 1973. That is a view to which the right hon. Member for Leeds, North-East (Sir K. Joseph), the Mephistopheles to that shabby Faust, would subscribe.
  The plain fact is that our public sector borrowing requirement is too high for comfort, but it is the consequence and not the cause of inflation. I cut it by £1,000 million in my Budget a month ago by increases in taxation, many of which the Opposition opposed and are continuing to oppose in Committee. Moreover, the right hon. and learned Gentleman went further. He was reported in yesterday's Evening Standard as saying that he pledges the next Tory Government to lighten the tax on incomes and savings, to aim for a single rate of VAT, to abolish the capital transfer tax and to
  1758
  ease the burden of the self-employed. I am glad to say that on those matters at least it is taking him more than 24 hours to change his mind.
  The right hon. and learned Gentleman made clear today that he would solve the whole problem by cutting public expenditure. However, he has given us no indication of how he plans to cut public expenditure. When the right hon. Member for Down, South (Mr. Powell) asked the Leader of the Opposition by how much she would cut it, she was, and not for the first time, completely at a loss for words. She gave no indication—
  Sir Geoffrey Howe: The Chancellor said that he has cut the borrowing requirement by £1,000 million in his Budget. Will he tell the House now by what amount, as a result of the policies consciously or unconsciously undertaken since then, he estimates it has once again increased, and whether he is happy with the picture as it stands today? Does he propose to do absolutely nothing to reduce public expenditure during the months that lie ahead?
  Mr. Healey: I shall answer that question of detail later, but I can tell the right hon. and learned Gentleman now that it has increased since the Budget by about £100 million. I shall explain the detailed facts in a moment, although a few days ago the hon. Member for Leek (Mr. Knox) was given the facts in great detail in answer to a Written Question.
  The fact is that the right hon. and learned Gentleman once again dodged the question. What does he think the public sector borrowing requirement should be reduced to? He gives no answer whatever to that important question. [An HON. MEMBER: "You are the Chancellor; you should know."] I repeat that we have had no indication whatever where the net cuts should be made.
  We had a long rambling historical account from the right hon. Lady, and we heard how she used to talk to Chancellor Barber a few years ago about the problem when she was once in a spending Department. It was about as relevant to our current problems as Dick Crossman's diaries—but not half as exciting.
  We had a suggestion from the right hon. Lady and also from her right hon.

  1759
  and learned Friend the Shadow Chancellor that we could bring forward cuts which the Government have decided to make next year. But the right hon. Lady explained why it was impossible to make cuts of that size in the current year. If that is not a satisfactory answer, let me quote from the all-party Expenditure Committee's report published only the other day. Paragraph 19 of the Ninth Report said:
  "We recommend, therefore, that in managing the economy … changes in the level of public expenditure should be used only as a tool of the last resort. No means of managing a complex economy can be ignored but it should be regarded as a confession of failure when changes in the level of public expenditure (usually restricted to capital items or purchases of goods and services) are made and then reversed on a counter-cyclical basis. It follows that the short-term demand management of the economy by fiscal means should primarily be carried out by changes in taxation. We do not, of course, mean to imply that changes in public expenditure cannot be made on a planned, long-term basis."
  Mr. F. A. Burden: What are you going to do about it?
  Mr. Healey: The hon. Gentleman should sit here more often in these debates. He would then have heard me describe in detail how I propose to cut public expenditure next year by £1,000 million. The reason why it is not possible to make cuts in the current year is that there would be great cancellation charges, redundancy payments, immensely unecomic disruption of construction contracts, and so on.
  In the end the right hon. and learned Gentleman came to one item of public expenditure on which he seemed fairly secure namely, cuts in food subsidies and council rents. He admitted, and indeed gloried in the fact, that it would add 3 per cent. to the retail price index and would raise the cost of living for the poorest members of our community. But he also made clear that this money would be used not to reduce the public sector borrowing requirement, but to cut mortgage interests for the private householder to 91 per cent. In other words, it would go to people who were mainly the better off. So this great device for cutting the public sector borrowing requirement turns out to be a device for taking money from the pockets of the poor and putting it into the pockets of the better off.
  1760
  There is every indication that under the Tory Party the public sector borrowing requirement would increase because the small savings which might be possible if we were foolish enough to adopt its proposals would be offset by tax concessions and far bigger additions to public expenditure: £2,300 million in tax credits, £1,500 million in terms of rates and £100 million at least according to the Tory Party in additional spending on the defence budget. Furthermore, they would involve hundreds of millions of pounds for all sorts of other extras, such as the £145 million which the Tories imposed on the Government by relaxing the earnings rule last summer.
  The whole of the public expenditure element in the Conservative Party's policy for inflation—indeed, the only element in the policy so far as the right hon. and learned Member for Surrey, East is concerned—is revealed as a colossal sham. We are left with only one element of policy, and that is the one which the right hon. Lady referred to as "renegotiating the guidelines." The Labour Party welcomes the right hon. Lady's conversion to the principle of renegotiation. The guidelines are one half of the social contract. They were laid down unanimously by the Trades Union Congress in response to the adoption and carrying out of policies by the Government according to priorities which were shared between the Government and the trade union movement.
  Mr. Burden rose—
  Mr. Healey: What we got no hint of today—and it is surprising when we consider what suggestions have been made in recent days on this question—is precisely how the Opposition would aim to renegotiate the guidelines. From the right hon. Lady we had the phrase "renegotiate the guidelines" and no more. From the right hon. and learned Gentleman we got the usual mass of flabby rhetoric which in the end collapsed into another appeal for cutting public expenditure still further. However, the fact remains that hon. Members on both sides of the House agree that we must get the rate of settlements down in the next wage round. [HON. MEMBERS: "How?"] I am coming to that. We also appear to agree that we cannot do this by compulsion—at least, that is what

  1761
  I understood from both Opposition Front Bench speakers. Therefore, we can do it only by persuasion, and that means by sitting down with those who do the wage bargaining in the trade unions and in industry to consider how the problem can be handled better in the coming year.
  What is most encouraging is that we have noticed in all sections of the community, and not least inside the trade union movement, a growing recognition that we cannot permit a situation to continue in which the inability of a minority to carry out the undertakings it voluntarily made last September must lead to the Government imposing penalties on the majority which did carry out its undertakings and in which the inability or the unwillingness of the minority to carry out its undertakings compels the Government to cut public expenditure and to renounce every opportunity for combating unemployment.
  In the last few days, in particular, we have had some very interesting and valuable ideas from both sides of industry, especially from members of the General Council of the TUC, notably from Mr. Jack Jones. My right hon. Friend the Prime Minister has already declared his intention to meet the CBI and the TUC next month to see how far matters can be progressed. [Interruption.] The silly titter from the hon. Gentleman opposite does no credit to his intelligence or to that of his party, because if we renounce compulsion we can solve this problem only by negotiation and persuasion, and that requires a spirit of conciliation in all parties.
  Mr. Victor Goodhew: On a point of order, Mr. Speaker. Is it not a tradition that those addressing the House should address you, Mr. Speaker? Would it not be simpler—to enable all hon. Members to hear the right hon. Gentleman's speech, instead of just the Tribune Group—if the right hon. Gentleman kindly addressed the Chair?
  Mr. Speaker: The important thing is that the Chair should hear, not necessarily see, and I have means of hearing.
  Mr. Healey: Thank you, Mr. Speaker, for your tribute to my vocal powers.
  On both sides of industry there is
  1762
  evidence of a readiness to talk together about these vital problems and to seek a solution in common. We now see the development of that type of will for united action on both sides which it has been our purpose to obtain ever since we won office in March last year.
  But the debate has demonstrated that as the search for agreement proceeds in the coming months we shall receive no contribution whatever from Her Majesty's official Opposition. They lose no opportunity to insult the trade union movement and to denigrate the social contract, within the framework of which alone it is possible to find a solution to the pay problem. The Opposition have pledged themselves to policies on taxation and public expenditure which would rule out constructive co-operation in the search for agreement as effectively as their policies made agreement impossible when they were last in power.
  That is the real lesson of the debate, and it is perhaps the reason why in the end it will prove to have been worth while. The Conservative Party has demonstrated that it has nothing to contribute to the vital search for a solution to the problem of inflation. It has proved that it is nothing but a tedious and partisan irrelevance at a time when the whole nation is crying out for a combined national effort.
  For these reasons, I ask the House to reject the motion with the contempt that it deserves. I am confident that when the House has done so—[Interruption.]—when I sit down at precisely 10 seconds to 10 o'clock, the nation, no less than all parties in the House, will recognise that the only relevant policies for dealing with the problem are those of Her Majesty's Government. I have no doubt also that many Members of the Conservative Party, reflecting on the humiliation suffered in this debate by their newly-elected Front Bench, will consider once again how soon it may be possible for them to accelerate the next ballot for the leadership.
  Mr. Norman Tebbit: On a point of order, Mr. Speaker. May I spin out the time, as the Chancellor has obviously used up all his material and has nothing more to say? I will stand up—
  Mr. Speaker: Order.
  Mr. Healey: I am grateful to you, Mr. Speaker, for allowing me to finish my speech in the atmosphere of order for which the House is famous.
  Once again, I call upon all thinking Members to join the Labour Government in rejecting the motion with the contempt that it deserves.
  Question put.
  That this House, being gravely disturbed by the total failure of the policies of Her Majesty's Government to curb the accelerating rate of inflation, calls upon Her Majesty's Government to abandon their damaging plans for further nationalisation, to take immediate action to cut public expenditure and to secure a reduction in the level of pay settlements, as essential parts of a programme designed to restore confidence and promote the economic recovery of the nation:—
  The House divided: Ayes 244. Noes 278.

  Division N. 218.]

  AYES

  [10.0 p.m.

  Aitken, Jonathan

  Finsberg, Geoffrey

  Knox, David

  Alison, Michael

  Fisher, Sir Nigel

  Lane, David

  Amery, Rt. Hon. Julian

  Fletcher, Alex (Edinburgh N.)

  Latham, Michael (Melton)

  Arnold, Tom

  Fletcher-Cooke, Charles

  Lawrence, Ivan

  Atkins, Rt. Hon. H. (Spelthorne)

  Fookes, Miss Janet

  Lawson, Nigel

  Awdry, Daniel

  Fowler, Norman (Sutton C'f'd)

  Le Marchant, Spencer

  Baker, Kenneth

  Fox, Marcus

  Lester, Jim (Beeston)

  Banks, Robert

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

  Lewis, Kenneth (Rutland)

  Bell, Ronald

  Fry, Peter

  Lloyd, Ian

  Bennett, Dr. Reginald (Fareham)

  Galbraith, Hon. T. G. D.

  Loveridge, John

  Benyon, W. L.

  Gardner, Edward (S. Fylde)

  Luce, Richard

  Berry, Hon. Anthony

  Gilmour, Sir John (East Fife)

  McAdden, Sir Stephen

  Biffen, John

  Glyn, Dr. Alan

  McCrindle, Robert

  Biggs-Davison, John

  Godber, Rt. Hon. Joseph

  Macfarlane, Neil

  Body, Richard

  Goodlad, Alastair

  MacGregor, John

  Boscawen, Hon. Robert

  Gorst, John

  Macmillan, Rt. Hon. M. (Farnham)

  Bowden, A. (Brighton, Kemptown)

  Gow, Ian (Eastbourne)

  McNair-Wilson, M. (Newbury)

  Boyson, Dr. Rhodes (Brent)

  Gower, Sir Raymond (Barry)

  McNair-Wilson, P. (New Forest)

  Braine, Sir Bernard

  Grant, Anthony (Harrow C.)

  Madel, David

  Brittan, Leon

  Gray, Hamish

  Marshall, Michael (Arundel)

  Brotherton, Michael

  Grieve, Percy

  Marten, Neil

  Brown, Sir Edward (Bath)

  Griffiths, Eldon

  Mates, Michael

  Bryan, Sir Paul

  Grist, Ian

  Mather, Carol

  Buck, Antony

  Grylls, Michael

  Maude, Angus

  Budgen, Nick

  Hall, Sir John

  Maudling, Rt. Hon. Reginald

  Bulmer, Esmond

  Hall-Davis, A. G. F.

  Mawby, Ray

  Burden, F. A.

  Hamilton, Michael (Salisbury)

  Maxwell-Hyslop, Robin

  Carlisle, Mark

  Hampson, Dr. Keith

  Mayhew, Patrick

  Carr, Rt. Hon. Robert

  Hannam, John

  Meyer, Sir Anthony

  Churchill, W. S.

  Harrison, Col. Sir Harwood (Eye)

  Miller, Hal (Bromsgrove)

  Clark, Alan (Plymouth, Sutton)

  Harvie Anderson, Rt. Hon. Miss

  Mills, Peter

  Clark, William (Croydon S.)

  Hastings, Stephen

  Miscampbell, Norman

  Clarke, Kenneth (Rushcliffe)

  Havers, Sir Michael

  Mitchell, David (Basingstoke)

  Clegg, Walter

  Hawkins, Paul

  Moate, Roger

  Cockcroft, John

  Hayhoe, Barney

  Montgomery, Fergus

  Cooke, Robert (Bristol W.)

  Heseltine, Michael

  Moore, John (Croydon C.)

  Cope, John

  Hicks, Robert

  More, Jasper (Ludlow)

  Cordle, John H.

  Higgins, Terence L.

  Morgan, Geraint

  Cormack, Patrick

  Hordern, Peter

  Morris, Michael (Northampton S.)

  Corrie, John

  Howe, Rt. Hon. Sir Geoffrey

  Morrison, Charles (Devizes)

  Costain, A. P.

  Howell, David (Guildford)

  Morrison, Hon. Peter (Chester)

  Crawford, Douglas

  Howell, Ralph (North Norfolk)

  Mudd, David

  Critchley, Julian

  Hunt, John

  Neave, Airey

  Crouch, David

  Hutchison, Michael Clerk

  Nelson, Anthony

  Crowder, F. P.

  Irvine, Bryant Godman (Rye)

  Neubert, Michael

  Davies, Rt. Hon. J. (Knutsford)

  Irving, Charles (Cheltenham)

  Newton, Tony

  Dean, Paul (N. Somerset)

  James, David

  Normanton, Tom

  Dodsworth, Geoffrey

  Jessel, Toby

  Nott, John

  Douglas-Hamilton, Lord James

  Johnson Smith, G. (E. Grinstead)

  Onslow, Cranley

  Drayson, Burnaby

  Jones, Arthur (Daventry)

  Osborn, John

  du Cann, Rt. Hon. Edward

  Jopling, Michael

  Page, John (Harrow West)

  Durant, Tony

  Joseph, Rt. Hon. Sir Keith

  Page, Rt. Hon. R. Graham (Crosby)

  Dykes, Hugh

  Kaberry, Sir Donald

  Pattie, Geoffrey

  Eden, Rt. Hon. Sir John

  Kellett-Bowman, Mrs. Elaine

  Percival, Ian

  Edwards, Nicholas (Pembroke)

  Kershaw, Anthony

  Peyton, Rt. Hon. John

  Elliott, Sir William

  Kilfedder, James

  Pink, R. Bonner

  Emery, Peter

  Kimball, Marcus

  Prior, Rt. Hon. James

  Eyre, Reginald

  King, Evelyn (South Dorset)

  Raison, Timothy

  Fairbairn, Nicholas

  King, Tom (Bridgwater)

  Rathbone, Tim

  Fairgrieve, Russell

  Kirk, Peter

  Rawlinson, Rt. Hon. Sir Peter

  Farr, John

  Kitson, Sir Timothy

  Rees, Peter (Dover & Deal)

  Fell, Anthony

  Knight, Mrs. Jill

  Rees-Davies. W. R.

  Renton, Rt. Hon. Sir D. (Hunts)

  Sims, Roger

  Thomas, Rt. Hon. P. (Hendon S.)

  Renton, Tim (Mid-Sussex)

  Sinclair, Sir George

  Townsend, Cyril D.

  Rhys Williams, Sir Brandon

  Skeet, T. H. H.

  Trotter, Neville

  Ridley, Hon. Nicholas

  Smith, Dudley (Warwick)

  Tugendhat, Christopher

  Ridsdale, Julian

  Speed, Keith

  van Straubenzee, W. R.

  Rifkind, Malcolm

  Spence, John

  Vaughan, Dr. Gerard

  Rippon, Rt. Hon. Geoffrey

  Spicer, Jim (W Dorset)

  Viggers, Peter

  Roberts, Michael (Cardiff NW)

  Spicer, Michael (S Worcester)

  Wakeham, John

  Roberts, Wyn (Conway)

  Sproat, Iain

  Walker-Smith, Rt. Hon. Sir Derek

  Rodgers, Sir John (Sevenoaks)

  Stainton, Keith

  Warren, Kenneth

  Rossi, Hugh (Hornsey)

  Stanbrook, Ivor

  Watt, Hamish

  Rost, Peter (SE Derbyshire)

  Stanley, John

  Weatherill, Bernard

  Sainsbury, Tim

  Stewart, Ian (Hitchin)

  Wells, John

  St. John-Stevas, Norman

  Stokes, John

  Winterton, Nicholas

  Scott, Nicholas

  Stradling, Thomas, J.

  Young, Sir G. (Ealing, Acton)

  Shaw, Giles (Pudsey)

  Tapsell, Peter

  Younger, Hon. George

  Shaw, Michael (Scarborough)

  Taylor, R. (Croydon NW)

  Shelton, William (Streatham)

  Taylor, Teddy (Cathcart)

  TELLERS FOR THE AYES:

  Shepherd, Colin

  Tebbit, Norman

  Mr. Adam Butler and

  Shersby, Michael

  Temple-Morris, Peter

  Mr. Cecil Parkinson.

  Silvester, Fred

  Thatcher, Rt Hon Margaret

  NOES

  Allaun, Frank

  Delargy, Hugh

  Irvine, Rt. Hon. Sir A. (Edge Hill)

  Anderson, Donald

  Dempsey, James

  Irving, Rt. Hon. S. (Dartford)

  Archer, Peter

  Doig, Peter

  Jackson, Colin (Brighouse)

  Armstrong, Ernest

  Dormand, J. D.

  Janner, Greville

  Ashley, Jack

  Douglas-Mann, Bruce

  Jay, Rt. Hon. Douglas

  Ashton, Joe

  Duffy, A. E. P.

  Jeger, Mrs. Lena

  Atkins, Ronald (Preston N.)

  Dunnett, Jack

  Jenkins, Hugh (Putney)

  Atkinson, Norman

  Dunwoody, Mrs. Gwyneth

  John, Brynmor

  Bagier, Gordon A. T.

  Edelman, Maurice

  Johnson, James (Hull West)

  Barnett, Guy (Greenwich)

  Edge, Geoff

  Johnson, Walter (Derby S.)

  Bates, Alf

  Edwards, Robert (Wolv SE)

  Jones, Alec (Rhondda)

  Bean, R. E.

  Ellis, John (Bragg & Scun)

  Jones, Barry (East Flint)

  Benn, Rt Hon Anthony Wedgwood

  Ellis, Tom (Wrexham)

  Jones, Dan (Burnley)

  Bennett, Andrew (Stockport N)

  English, Michael

  Judd, Frank

  Bidwell, Sydney

  Evans, Fred (Caerphilly)

  Kaufman, Gerald

  Blenkinsop, Arthur

  Evans, Ioan (Aberdare)

  Kelley, Richard

  Boardman, H.

  Evans, John (Newton)

  Kerr, Russell

  Booth, Albert

  Ewing, Harry (Stirling)

  Kilroy-Silk, Robert

  Boothroyd, Miss Betty

  Faulds, Andrew

  Kinnock, Neil

  Bottomley, Rt Hon Arthur

  Fernyhough, Rt Hon E.

  Lambie, David

  Boyden, James (Bishop Auck)

  Fitch, Alan (Wigan)

  Lamborn, Harry

  Bradley, Tom

  Fitt, Gerard (Belfast W)

  Lamond, James

  Bray, Dr. Jeremy

  Flannery, Martin

  Latham, Arthur (Paddington)

  Brown, Hugh D. (Provan)

  Fletcher, Raymond (Ilkeston)

  Leadbitter, Ted

  Brown, Robert C. (Newcastle W)

  Fletcher, Ted (Darlington)

  Lee, John

  Brown, Ronald (Hackney S)

  Foot, Rt Hon Michael

  Lestor, Miss Joan (Eton & Slough)

  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, Jim (Middleton & P)

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

  Litterick, Tom

  Campbell, Ian

  Freeson, Reginald

  Lomas, Kenneth

  Canavan, Dennis

  Garrett, John (Norwich S)

  Loyden, Eddie

  Cant, R. B.

  Garrett, W. E. (Wallsend)

  Lyon, Alexander (York)

  Carmichael, Neil

  George, Bruce

  Lyons, Edward (Bradford W)

  Carter, Ray

  Gilbert, Dr John

  Mabon, Dr J. Dickson

  Carter-Jones, Lewis

  Ginsburg, David

  McCartney, Hugh

  Cartwright, John

  Golding, John

  McElhone, Frank

  Castle, Rt Hon Barbara

  Gould, Bryan

  Maguire, Frank (Fermanagh)

  Clemitson, Ivor

  Gourlay, Harry

  Mackenzie, Gregor

  Cocks, Michael (Bristol S)

  Grant, George (Morpeth)

  McMillan, Tom (Glasgow C)

  Cohen, Stanley

  Grocott, Bruce

  McNamara, Kevin

  Coleman, Donald

  Hamilton, James (Bothwell)

  Madden, Max

  Concannon, J. D.

  Hamilton, W. W. (Central Fife)

  Magee, Bryan

  Conlan, Bernard

  Hardy, Peter

  Mahon, Simon

  Cook, Robin F. (Edin C)

  Harper, Joseph

  Mallalieu, J. P. W.

  Corbett, Robin

  Harrison, Walter (Wakefield)

  Marks, Kenneth

  Cox, Thomas (Tooting)

  Hart, Rt Hon Judith

  Marquand, David

  Craigen, J. M. (Maryhill)

  Hatton, Frank

  Marshall, Dr Edmund (Goole)

  Crawshaw, Richard

  Hayman, Mrs Helene

  Marshall, Jim (Leicester S)

  Cryer, Bob

  Healey, Rt Hon Denis

  Meacher, Michael

  Cunningham, G. (Islington S)

  Hooley, Frank

  Mellish, Rt Hon Robert

  Cunningham, Dr J. (Whiteh)

  Horam, John

  Mendelson, John

  Dalyell, Tam

  Howell, Denis (B'ham, Sm H)

  Mikardo, Ian

  Davidson, Arthur

  Hoyle, Doug (Nelson)

  Millan, Bruce

  Davies, Bryan (Enfield N)

  Huckfield, Les

  Miller, Dr M. S. (E Kilbride)

  Davies, Denzil (Llanelli)

  Hughes, Rt Hon C. (Anglesey)

  Miller, Mrs Millie (Ilford N)

  Davies, Ifor (Gower)

  Hughes, Mark (Durham)

  Mitchell, R. C. (Solon, Itches)

  Davis, Clinton (Hackney C)

  Hughes, Robert (Aberdeen, N)

  Molloy, William

  Deakins, Eric

  Hughes, Roy (Newport)

  Moonman, Eric

  Dean, Joseph (Leeds West)

  Hunter, Adam

  Morris, Alfred (Wythenshawe)

  1766

  1767

  Morris, Charles R. (Openshaw)

  Rooker, J. W.

  Tinn, James

  Morris, Rt. Hon. J. (Aberavon)

  Roper, John

  Tomlinson, John

  Mulley, Rt. Hon. Frederick

  Rose, Paul B.

  Tomney, Frank

  Murray, Rt. Hon. Ronald King

  Ross, Rt. Hon. W. (Kilmarnock)

  Torney, Tom

  Newens, Stanley

  Rowlands, Ted

  Urwin, T. W.

  Noble, Mike

  Ryman, John

  Varley, Rt. Hon. Eric G.

  Oakes, Gordon

  Sandelson, Neville

  Wainwright, Edwin (Dearne V.)

  Ogden, Eric

  Sedgemore, Brian

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

  O'Halloran, Michael

  Selby, Harry

  Walker, Harold (Doncaster)

  Orbach, Maurice

  Shaw, Arnold (Ilford South)

  Walker, Terry (Kingswood)

  Orme, Rt. Hon. Stanley

  Sheldon, Robert (Ashton-u-Lyne)

  Ward, Michael

  Ovenden, John

  Short, Rt. Hon. E. (Newcastle C.)

  Watkins, David

  Owen, Dr. David

  Silkin, Rt. Hon. John (Deptford)

  Watkinson, John

  Padley, Walter

  Silkin, Rt. Hon. S. C. (Dulwich)

  Weetch, Ken

  Palmer, Arthur

  Sillars, James

  Weitzman, David

  Park, George

  Silverman, Julius

  White, Frank R. (Bury)

  Parker, John

  Skinner, Dennis

  White, James (Pollok)

  Parry, Robert

  Small, William

  Whitehead, Phillip

  Pavitt, Laurie

  Smith, John (N. Lanarkshire)

  Whitlock, William

  Pendry, Tom

  Snape, Peter

  Willey, Rt. Hon. Frederick

  Perry, Ernest

  Spearing, Nigel

  Williams, Alan Lee (Hornch'ch)

  Phipps, Dr. Colin

  Spriggs, Leslie

  Williams, Rt. Hon. Shirley (Hertford)

  Prescott, John

  Stailard, A. W.

  Williams, W. T. (Warrington)

  Price, C. (Lewisham W.)

  Stewart, Rt. Hon. M. (Fulham)

  Wilson, Alexander (Hamilton)

  Price, William (Rugby)

  Stott, Roger

  Wilson, Rt. Hon. H. (Huyton)

  Radice, Giles

  Strang, Gavin

  Wilson, William (Coventry SE)

  Rees, Rt. Hon. Merlyn (Leeds S.)

  Strauss, Rt. Hon. G. R.

  Woodall, Alec

  Richardson, Miss Jo

  Summerskill, Hon. Dr. Shirley

  Woof, Robert

  Roberts, Albert (Normanton)

  Swain, Thomas

  Wrigglesworth, Ian

  Roberts, Gwilym (Cannock)

  Taylor, Mrs. Ann (Bolton W.)

  Young, David (Bolton E.)

  Robertson, John (Paisley)

  Thomas, Jeffrey (Abertillery)

  Roderick, Caerwyn

  Thomas, Mike (Newcastle E.)

  TELLERS FOR THE NOES:

  Rodgers, George (Chorley)

  Thomas, Ron (Bristol NW)

  Miss Margeret Jackson and

  Rodgers, William (Stockton)

  Tierney, Sydney

  Mr. David Stoddart.

  Question accordingly negatived.

  BUSINESS OF THE HOUSE
  Ordered,
  That the New Towns Bill may be proceeded with at this day's sitting, though opposed, until any hour.—[Mr. John Ellis.]

  NEW TOWNS BILL
  Considered in Committee; reported, without amendment.
  Motion made, and Question proposed, That the Bill be now read the Third time.
  10.16 p.m.
  Mr. Arthur Jones: The debate follows the most interesting and wide-ranging review of new town policies which was discussed in the House on Monday 12th May when, in addition to the terms of the Bill, we considered the Government's consultation document on new towns in England and Wales.
  I welcome to our proceedings the Under-Secretary of State for the Environment. He brings a wide knowledge and great experience of local government affairs and he is renowned on both sides of the House for his reasonableness and the consideration which he gives to representations.
  Our debate tonight may be on a more restricted basis than was our debate on Second Reading. The Bill raises the the limit of advances to development corporations and the Commission for the New Towns to meet capital expenditure, and covers, quite properly, the payment of pensions, allowances and gratuities to some of those serving on these important organisations.
  I was chided somewhat on Second Reading by the Minister of State, Scottish Office, who said:
  "But it was a pity, to say the least, that the hon. Member for Daventry was so obsessed with the financial provisions that he said very little about new towns policy."
  I do not take those remarks too much to heart. They were a statement of fact which I acknowledge. The Bill is completely concerned with financial provisions. In reply to my query about how long the additional allowance of £250 million from public funds was likely to last the Minister of State was kind enough
  1770
  to indicate that on present expectations a further sum would be required in 1975–76. He went on to say
  "but perhaps we can deal with such matters in Committee "
  I am sure we could deal with such matters in Committee. It would not be unfair to say that the Minister of State has passed the buck to the Under-Secretary who has the job tonight of replying to the debate.
  I hope I can prevail upon the Under-Secretary to deal with some of my points in detail. First, would it be true to say that the first £250 million is already committed by the development corporations and the New Towns Commission? In other words, will it last only for the current financial year, and is it, therefore, right to assume that that amount must already have been committed? Secondly, is the Under-Secretary now able to answer the question that I put on Second Reading, when I asked the Minister:
  "is the right hon. Gentleman able to tell the House whether or not resources will continue to be made available for new towns?"—[Official Report, 12th May 1975; Vol. 892, cc. 54 and 103.]
  No assurance was forthcoming at that time on this question, which is of considerable concern particularly to new towns which are in their early stages and have these very heavy capital commitments.
  There is widespread uncertainty with regard to public expenditure, and rightly so. It is in evidence in new towns as elsewhere, and if confidence is to be maintained and planning work to proceed apace it must be against a background of a firm commitment. Can an assurance in that respect be given this evening? New town programmes in their early stages are unremunerative and demand a high level of investment, with all borrowing for a term of 60 years, via the Public Works Loans Board, at current interest rates, which I believe I am correct in saying lie somewhere between 14 and 15 per cent. When we discussed it on Monday of last week the rate was 14⅜ per cent., and this is a very heavy burden for new towns to bear over the full length of the period of the loan.
  My third question is: are the Government prepared to let development corporations borrow or raise capital from other sources which are available on more

  1771
  favourable terms? Further, would they consider recommending leasehold sales of industrial and commercial properties, thereby making available resources from the private sector, from pension funds and institutional investors? Even in present-day circumstances capital raised in this way would cost significantly less than it does through the PWLB, and one could sell long leaseholds on a 10 per cent. basis, which would mean that capital forthcoming from the private sector would be at an interest rate as low as 10 per cent. I believe such a proposal is not contrary to Government policy as set out in paragraph 4(14) of their consultative document.
  I turn finally to the other question of significance in the Bill, the provision for the payment of pensions, allowances and gratuities to chairmen of development corporations, and the payment of remuneration and allowances to members of a local committee appointed by the New Towns Commission. I am indebted to the Library for the following information with regard to the remuneration paid to people who come within this category. I am informed that the chairman of the Commission for the New Towns receives £5,190 per annum plus £7·66 per month under a threshold agreement, that the chairman of the development corporation receives £4,340 per annum plus a similar amount by way of a threshold agreement, and that neither of these office holders has any pension arrangements at the present time.
  Members of local committees are unpaid except for the chairman, who receives £1,000 per annum plus a further £1,000 if he sits on the commission. I am told that ordinary members of development corporations are paid £700 per annum. Can the hon. Gentleman give any details of the pensions, allowances and gratuities proposed for the chairmen and members of these various corporations and committees on whom we rely for the past performance and future fulfilment of objectives in the new towns? Prospective expenditure of public funds in the region of £2,250 million, to which must be added significant contributions in terms of private capital, shows the measure of commitment to the new town idea and to the schemes which are under way, some of them mainly completed
  1772
  and others only just beginning. Clearly, we must ensure that such resources are spent wisely in both financial and social terms.
  10.25 p.m.
  Mr. Michael Morris: I am glad to have this opportunity to contribute to the debate. I had thought that after this evening's economic debate I would be able to say that the Bill before us was a case of the last of the big spenders. It seems that, far from having any cuts announced by the Government, we are to continue as before so that this Bill is just one of the large spenders.
  We are concerned with the capital side, and I want to refer the Minister to three aspects affecting capital expenditure. I refer first to industrial policy. My hon. Friend the Member for Daventry (Mr. Jones) has already spoken about the selling of long leaseholds. Are the Government prepared to have another look at their industrial policy with a view to improving the financial contribution to new town development by way of the expansion of existing towns in expanding areas? I am sure that the Under-Secretary is aware that there are restrictive covenants affecting the granting of industrial development certificates to local firms wishing to expand in development areas.
  The Chancellor said that there was too much investment in the wrong places. Where there are viable local firms wanting to expand and invest, it should be part of Government policy to allow that to happen. Within the context I hope that the Government will consider the financial contribution that nonconforming users from the central redevelopment areas such as my own town of Northampton could make in terms of their being given some provision for expanding their facilities in industrial areas.
  The Secretary of State for the Environment referred recently to the restrictions on building for sale. He made the point that there was no permanent restriction on building for sale in development areas, even today. I have the Press release 14/75 from the Northampton Development Corporation stating that 160 homes previously earmarked for private occupation are now to be rented. Yet a start is not to be made until the end of 1975.

  1773
  The Under-Secretary knows as well as I do that there is now an upturn in private sales and an increasing demand in development areas.
  It would be to the financial advantage of us all if the Government's policy were to be reviewed now that the housing market is perhaps showing signs of coming up from the bottom. I say with respect to my hon. Friend the Member for Daventry, in his capacity as Chairman of the Expenditure Committee Sub-Committee on the Environment, that I very much hope that he and his colleagues will look at the cost effectiveness of money spent on new towns.
  I have the highest praise for the work that has been done in my own area, but I and many other hon. Members are conscious that things are not as good as they should be. I hope that my hon. Friend and his colleagues will leave no stone unturned and will not be afraid to tell the House the implications of what they find. I hope that, in turn, the Government will allow a full debate when the report comes to the House. This is one area of financial costing which will produce some interesting findings.
  Lastly, I come to my perennial plea. Those who represent new towns in this House believe that we have shouldered an unfair financial burden on behalf of the country. The Government can no longer expect the people in the counties that support the new towns, who are willingly taking in those from city and urban areas, to carry this unfair burden. I hope that this evening the Under-Secretary will tell us that once again the rate support grant is being looked at in this context.
  10.30 p.m.
  Mr. Hal Miller: In congratulating you, Mr. Deputy Speaker, on the swift passage of the Bill through its Committee stage, by comparison with the Industry Bill which the hon. Member for Wood Green (Mrs. Butler) has been chairing so effectively, I hope that you will extend some tolerance to me if some of my remarks are more suitable to a Committee stage than Third Reading. I shall be confining myself largely to the financial aspects of Clause 1.
  In regretting that the commitments of the Minister for Planning and Local
  1774
  Government prevented him from attending this debate, we are well aware of his very close interest in this subject, and we welcome it. None the less, we extend a welcome to the Under-Secretary, more particularly in my case as some of my remarks will reflect on the consequences for the rates of the transfer of assets proposed under the consultative document. I know that the Under-Secretary is closely concerned with the whole question of rates.
  On Second Reading the right hon. Gentleman the Minister referred to the Greek Nicias. My advice to local authorities, ratepayers and taxpayers is that they should beware of Greeks bearing gifts. The proposal before us that there should be an additional £250 million of capital expenditure under Clause I, with a back-up of a further £500 million, needs to be examined rather more closely than was possible on Second Reading. In particular, I think that the House would wish to know whether there was a Treasury view on the proposal that the transfer of housing assets, part of the capital of these corporations, should be at the valuation proposed—that is, of outstanding debt. It is not immediately clear to some Opposition Members why that transfer should be effected at that valuation, except for reasons of administrative convenience—except perhaps that some of us fear that the Treasury may be seeking to slough off the continuing subsidy commitment.
  I realise that the question of recurrent subsidy is not immediately connected with the capital expenditure, but the connection lies in the fact that all the capital is being transferred to the local authorities, and there are consequences arising from that transfer. If the subsidy to the corporation is not continued to the local authority, there will inevitably be a rise in the local rates as a result of such transfer.
  At the same time, I think that the House would wish to know why the transfer of housing assets should not be made at the valuation that sitting tenants, for instance, were offered, under the Conservative administration at least, in relation to purchasing their houses. Would that not be a better method of valuation, in view of the very sharp increase in values since the new towns were begun? For

  1775
  instance, under the Redditch Development Corporation values have risen from about £6,000 to well in excess of £12,000 capital cost for a house built for rent under the latest scheme.
  That frightening figure demonstrates clearly the loss to the nation of the increment in value with the transfer to local authorities on the basis proposed.
  The whole question of housing values, capital value, raises very acutely, in the form mentioned by my hon. Friend the Member for Northampton, South (Mr. Morris), the question whether corporations can continue to afford, even with the additional finance proposed under Clause 1, to finance construction for rent at the present rate, quite regardless of the political implications or the preferences of either side of the House.
  I have already given the capital cost of a corporation dwelling for rent. It is well in excess of £12,000—the average figure for new construction on the latest project. However, houses sold leasehold by developers in the new towns are currently selling at £8,000. It is ludicrous that there should be this situation whereby people who are willing to undertake the responsibility of owning their own houses are willing to pay £8,000 whereas for those who are able and wish to rent the corporation has to pay £12,000. There is a limit to the amount of construction for rent that is possible within the terms of the capital expenditure proposed in the Bill. The Government will be forced to think again on the question of rented housing in corporation-designated areas.
  I now refer to infrastructure facilities. The development of Redditch New Town has been severely hampered by the Government's insistence that capital expenditure should be devoted to housing for rent instead of providing the balanced infrastructure about which the hon. Member for Basildon (Mr. Moonman) spoke on Second Reading. The hon. Gentleman was complimented on his speech by the Minister.
  Unless there is a balanced provision of infrastructure—I refer not to amenities but to roads, sewers, schools and hospitals—and unless capital provision is made concomitant with the construction of housing, it will not be possible to achieve
  1776
  the necessary balance. Development in Redditch has been concentrated on the eastern side of the town. There is now a danger that the target population will not be achieved within the designated area because of the difficulties of development on the western side, which involves capital expenditure on infrastructure.
  Finally, I made the point on Second Reading that the provision of infrastructure should include medical facilities. The position is that those facilities have not been provided on a par with educational and transport facilities. There is a need to look again at the provision of medical facilities, by means of the envisaged capital expenditure, to ensure that new towns do not become deprived areas.
  I shall not again refer to the points which I made in the Adjournment debate on 28th March 1974 about the unfair consequences for local authorities of a great deal of capital expenditure proposed in connection with new towns. Replying to that debate, the Minister for Planning and Local Government said that he would examine the problem. Many months have now elapsed. I had hoped that the right hon. Gentleman would be here to reply to that point today.
  Finally, under the heading of capital expenditure, for which provision is made in the Bill, I should like to deal with the provision of amenities. I request the House to pay attention to some of the consequences of the proposed transfer of housing capital assets to the local authorities. Is it proposed that the tenants should be consulted about the transfer of such capital assets? Our experience of the transfer of footpaths and play areas to local authorities has been far from happy. It has caused much concern and dissatisfaction among the tenants.
  I should also mention, while talking about the transfer of capital values, that tenants came to Redditch with the commitment and undertaking that they would be able to purchase their rented houses. I should like to know whether that commitment will be honoured.
  Finally, arising from the financial provisions in the Bill are the effects of the proposed transfer of capital assets on the staffing of the corporations. For instance, in Redditch half the housing programme has yet to be completed. If the proposed transfer of assets is to take place on 1st

  1777
  April 1977, it will be exceedingly difficult to recruit, let alone retain, the staff needed by the corporation to complete its development programme for which expenditure is being provided in the Bill. I understand that to date the staff associations have been consulted only on possible redundancies, not on other matters which will be affected.
  Finally, I see that I have left out a point that I wished to make about the need to ensure that the capital resources of the corporations are assisted by the practice adopted in Redditch of releasing land to builders by tender to be made available to the public at an agreed figure for owner-occupation. I have already quoted the figure of £8,000 for a private house. The whole point is that not only the purchaser but the construction industry will benefit from the corporation holding the land bank. Builders, not afflicted with the financing of the land bank, will be able to continue building in the new town and at the same time make additional resources available to the corporation.
  The final point—
  Mr. J. D. Dormand: What, again?
  Mr. Miner: There was one final point.
  Mr. Deputy Speaker (Mr. George Thomas): Order. I do not wish to be unkind. I congratulate the hon. Gentleman the Member for Bromsgrove and Redditch (Mr. Miller) on his fifth final point.
  Mr. Miller: Some of us have to take our finals more times than others, Mr. Deputy Speaker, especially if we are doing them by correspondence, as I did for my degree in estate management, if I may have the immodesty to recall it.
  The conclusion of my remarks tonight rests upon the capital provision in the Bill. We need a decision urgently about the future size of the Redditch New Town, whether the designated area needs to be expanded, and how the target population is to be achieved in the light of the restrictions on the capital expenditure imposed by the Government under the Bill. Unless we have satisfactory answers to these points, I shall feel obliged to join my hon. Friends in opposing the Third Reading.
  10.45 p.m.
  Mr. Mark Carlisle: As the only Member present, I think, who represents a constituency which includes two new town designated areas, one of them wholly—namely, the new town of Runcorn—and one of them partly—namely, the new town of Warrington—and as someone who sat through the whole of the Bill's Second Reading, I hope that I am within the terms of order in making a strong protest to the Government about the way in which they have conducted the Bill's passage.
  We had less than three hours on Second Reading. That meant that it was impossible to be called by the Chair. It is regrettable that the problems of new towns are seldom debated in the House. If I attempted tonight to make the speech that I wanted to make on Second Reading I would rightly be ruled out of order. I do not propose to do so, but I say to the Under-Secretary of State, if I might call him in non-parliamentary terms "my hon. Friend", who sits for the neighbouring constituency of Widnes, that I feel it is extremely hard when hon. Members are not given the opportunity to express their views. When the Government produced a consultative document dealing with new towns we were invited to consult our local authorities, and I did so. I consulted the local authority that the Minister and I represent, and I went to the trouble of getting the views of the other local authorities concerned, only to find that the House had been given such a short time to debate the matter.
  To keep within the terms of order on Third Reading I merely make three comments. First, I take up the comment made by my hon. Friend the Member for Northampton, South (Mr. Morris). The Minister will know that a request has been made by certain of the county councils involved with new town developments to meet the Minister to discuss the serious problem of providing local authority services within the overall problem that any county council now has from a rating point of view. I have written to the Minister about that matter and I hope he will agree to see the deputation. Cheshire has immense additional claims on its resources from the new town development corporations in Runcorn and Warrington in providing local authority services, together with the

  1779
  much-needed development of a housing industry to be provided by the development authorities.
  I am sure that the Minister will agree, sharing as we do the representation of a similar area, that one of the great difficulties within the district council which we both represent is the feeling that all the resources go to the new town of Runcorn rather than to the older parts of Runcorn or the borough of Widnes which the Minister represents. There is a real strain on county councils. I hope that the hon. Gentleman's right hon. Friend will agree to see the deputation to which I have referred and discuss its problems.
  My second point is to take up what was said by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) regarding the sale of houses to existing tenants. I intervened in the winding-up speech of the Minister of State, Scottish Office on Second Reading, and I had the impression from his reply that his right hon. Friend was saying that he supported the view of the new town authorities that tenants of new town corporation houses should be able to buy their houses. I immediately tabled a Question to ask whether the right hon. Gentleman would announce that they could do so, only to receive the answer "Not at this moment."
  We now have a situation where chairmen of all the new town development corporations, right across the spectra of political affiliation, have jointly recommended to the present Government that the ban imposed by the Labour Government on the sale of houses to tenants should be lifted. It can be nothing but the worst type of Socialist dogma that means that the Minister is not prepared to accept their advice to allow tenants to purchase houses from new town development corporations. There are to my knowledge many tenants of the Runcorn New Town Development Corporation who are anxious to buy their own houses—and who, indeed, had the opportunity to do so under the Conservative Government and are now being deprived of that chance by the political diktat of the present Government.
  I notice that part of the Bill deals with possible pension arrangements for chairman
  1780
  of new town development corporations. I merely wish to draw attention to the service put in by the first Chairman of the Runcorn New Town Development Corporation during his 10-year tenure of office. I hope that if there is some intention to provide some form of recognition to chairmen, the efforts made by the first chairman of the Runcorn corporation will be fully recognised.
  10.57 p.m.
  Mr. Tim Sainsbury: The Minister in moving the Second Reading of the Bill on 12th May 1975 is quoted in col. 53 of the Official Report as referring to the "foundling fathers" of the new towns. I feel that that was not perhaps what he said. If those founding fathers had had any idea that today we would have been talking of the sums of money set out in the Bill, some people might have been orphaned by the shock.
  We are talking of considerable sums of money at a time when there is general agreement that resources are scarce. It is not inappropriate to recall that the vision of those founding fathers was not restricted to the new towns. Their vision was concerned with the existing urban areas as much as with the new towns which they saw working in conjunction with those urban areas.
  I am reminded of a quotation from a recent publication "More Help for the Cities"—which includes among its distinguished authors my hon. Friends the Members for Sutton Coldfield (Mr. Fowler) and Aylesbury (Mr. Raison), both of whom are in different ways particularly interested in this subject. On page 8 of the document we see the following passage:
  "Central government must greatly increase the resources available to help areas of urban stress; within total government spending (inevitably constrained for some time ahead) these areas need to be given higher priority."
  I feel that in the light of what was said in the House today in the debate on the economy, there is unlikely to be great disagreement about the nature of that constraint. Therefore, it is right when we come to consider the financial implications of the Bill to do so against the background of a need to argue carefully the cost-effectiveness of any expenditure.
  My hon. Friend the Member for Daventry (Mr. Jones) has reminded us that this is a financial matter. Although

  1781
  we should all like to spend a great deal more time in discussing the social aspects of new towns and urban stress areas, today we must concentrate on discussing the allocation of considerable sums of money to the new town programme. It is right that we should look on this money first, as to whether it should be spent on new towns, and, secondly, as to how effectively it should be spent among new towns. Thirdly, we must consider the allocation of resources not only to the new town corporations but to the local authorities in whose areas this—some would say—cuckoo is placed. I hope that the Under-Secretary will be able to say something more about that and about the other points raised by my hon. Friends, including the whole problem of cost-effectiveness.
  We perhaps do not have enough opportunities to discuss the important and much-admired programme of new towns, involving not only many constituencies but a great deal of public money, and, because of the rôle of the new towns in relieving urban stress, affecting many other areas that hon. Members would like to speak about.
  One question that I should like the hon. Gentleman to give particular attention to is that of resources, the possibility of the sale of homes and commercial and industrial assets, at a time of scarce financial assets. I said on Second Reading that I had been the author of a pamphlet called "The need for new cities", but I was properly modest in refraining from quoting from it. My restraint has now run out, and I should like to quote the following statement:
  "Growth centres can be the principal method of achieving these objectives, but only if they are successful in attracting and sustaining employment growth."
  In the consultative document it is suggested—one could say that it is more than suggested—that there should be a restricted programme of making available commercial and industrial premises. Paragraph 4.14 says:
  "An important consideration in the industrial and commercial field is to ensure that the right proportion of benefits that may accrue over the years is shared by the community."
  That is a commendable concept in the abstract, but, for the benefit to the community that we seek, surely the most important thing is the creation of new
  1782
  towns that provide attractive environments to the people who live there, that provide them with the sort of homes and social infrastructure that they want, and—one would almost say "precedent to that"—jobs.
  It is failing to appreciate the needs of industry to adopt for perhaps doctrinaire reasons a rigid approach requiring industrial and commercial premises to be, as far as we can understand, rack-rented. I am sure that the hon. Gentleman is aware that there are good commercial and industrial reasons why this form of tenure is inappropriate to many commercial and industrial ventures, and presents considerable difficulties to them.
  Therefore, it seems to me that there are two advantages to be derived from reconsidering this aspect of the policy. The first is that it would reduce the borrowing requirement. It would reduce the amount of money that must be produced from Government resources for the new town programme. Secondly, it would make those new towns more attractive to employers. As my hon. Friends have said, based on their experiences of the new towns in their constituencies, this argument is doubly strong when it comes to the homes, on the one hand providing what people need and on the other providing relief to the Government at a time when any relief should be more than welcome. So I would put to the Under-Secretary that we need considerable further examination of the financial aspects of this whole field of new town expenditure.
  I am sure that we are all extremely grateful for the study being given to this by the Committee under the chairmanship of my hon. Friend the Member for Daventry, and we look forward with interest to his report. I hope that when it is available there will be ample time to debate it, but I hope also that those in the Under-Secretary's Department who have responsibility in these areas will give us a little more financial data than has been forthcoming in the documents put forward so far on the new towns programme. I find it not very satisfactory that the whole of the consultative document is totally lacking in this sort of financial appraisal. Bearing in mind the sums of money involved, this House is not being given, in any of the plethora of publications on new towns, the hard financial

  1783
  analysis and comparisons that we ought to look for in these times. New town publications are notable for their glossy and attractive photographs. I hope that in future editions we shall have more charts and financial analyses.
  I ask that the Under-Secretary should not only answer the questions put to him by my hon. Friend the Member for Daventry and my other hon. Friends but give us some indication of how the Government intend to approach the problems that are faced now by the new towns in our present climate, particularly with regard to the sale of homes, the tenure on which they make available commercial and industrial property, and the further consideration that they are going to give to the cost-effectiveness of the programmes for new towns at this time.
  11.3 p.m.
  The Under-Secretary of State for the Environment (Mr. Oakes): First, I thank the hon. Gentleman the Member for Daventry (Mr. Jones) for the kind words he said at the beginning. I apologise that my right hon. Friend the Minister for Planning and Local Government is not answering this debate, but at least I am a Member for a constituency—as my hon. and learned Friend and neighbour the Member for Runcorn (Mr. Carlisle) has said—which, although not a new town itself, nevertheless is part of a district which comprises one of the new towns and, therefore, I have a very close interest in new towns, and particularly the effect of new towns on the county in which they are situated and on the district in which they are situated. The hon. Gentleman has put a number of specific points to me. He asked whether the first £250 million is already committed. Yes, indeed, it is really committed in the 1975–76 programme. He asked whether resources will continue to be made available for new towns. I should have thought that the very fact that this Bill is being brought before the House was proof positive of the Government's firm resolve that new towns shall continue to be supported not only because of the vitally important rôle they play in housing, in the attraction of industry, and in environmental considerations, but because they have proved in the past, and will continue to prove in the future, an exciting and interesting way to develop our urban environment.
  1784
  The financial provisions of this Bill extend over two to three years, but I can assure the hon. Gentleman that the intentions of the Government are that resources will continue to be made available for new towns.
  The hon. Member for Daventry also asked whether the Government were prepared to allow borrowing from other sources than Government ones. I am afraid not—except with Treasury consent. If the Treasury consents, that is allowable. But, at present, within the Act borrowing is not possible other than from Treasury sources. Other sources are not allowed.
  Then I come to the interesting question of leasehold sales. Here, there is a difference between the two sides of the House. It is the Government's policy, as regards industrial and commercial development, not only in new towns but within the terms of the Community Land Bill, to adopt a leasehold basis and not a sale basis. It is important that the new town or, in the context of the Community Land Bill, the local authority concerned should be able, as a community, to reap the benefit of changes in value which occur from year to year. A sale cannot possibly benefit the community in the way that a lease can.
  In the present state of the economic climate, it is surprising to find the Opposition arguing that industry should divert its resources to the purchase of freeholds or long leases when it may be better for those resources to be spent on plant and machinery for the benefit of industry.
  Mr. Arthur Jones: I was not suggestting that an industry should itself make the acquisition, but that resources would be forthcoming from institutional investors, pension funds and resources of that kind. As for leasehold sales, in circumstances where factories have been nut up by a development corporation, it can by means of a leasehold sale ensure a proportion of the rack rent. It would get some benefit, even under the terms of a sale of that kind.
  Mr. Oakes: I did not realise that the hon. Member for Daventry was referring to institutional investment in addition to the actual purchase of premises. I shall look into his point about a sale and a rack rent. I understood him to mean the

  1785
  sale of the freehold or a long lease at a nominal rent, as distinct from the terms of an ordinary letting of industrial or commercial premises. I shall write to the hon. Gentleman about it. But certainly the Government are against the sale of land, either freehold or on a long lease, from which the community will not benefit in the future when changes occur in the economic situation.
  Mr. Sainsbury: This is an important matter for some industrialists. Has the hon. Gentleman taken into account the very high value and the rather fixed nature of the plant which many industries have to put inside relatively low-value factories? They are looking for a degree of certainty in their occupation of buildings, bearing in mind that they have put into them considerable resources in financial and planning terms. They need to be able to project cash flows over a longer period than the three or five years between rent reviews.
  Mr. Oakes: In the general run of events, I think that the lease is longer than the life of the machinery, given the pace of technological change, and so on. The hon. Gentleman has raised an important point. This matter has not escaped the attention of the Government or of the individual new town corporations which have to make a decision about the rent and the length of lease of particular industrial developments. Where certain types of process machinery are installed this question can be of vital importance, and regard must be had to that fact when the rent and the term of the lease are being considered.
  The final point of the hon. Member for Daventry was about the payment of pensions, allowances and gratuities. Under the Bill pensions are paid only to chairmen or past chairmen. The standard basis of calculation of entitlement to pension is virtually whether the person involved devoted two full days a week to the work. Under the provisions payment does not run to members of the board or deputy chairman. The hon. and learned Member for Runcorn mentioned the distinguished Chairman of Runcorn Development Corporation. I have the very highest regard for that gentleman. I do not know how he would fare under the calculations, but I would imagine he would come out very
  1786
  well, knowing as I do the time that he has devoted to these affairs.
  The hon. Member for Northampton, South (Mr. Morris) raised a number of points, including the question of building for sale and the sale of existing assets and property of the development corporations. The hon. and learned Member for Runcorn and the hon. Member for Bromsgrove and Redditch (Mr. Miller) both raised the same point. I shall deal with it briefly, because the question comes not within the context of the Bill but within the scope of the consultative document. As its name suggests, that document contains the Government's views, and we shall be receptive to comments advanced by the development corporations and the authorities of areas in which those corporations are sited.
  My right hon. Friend the Minister said on Second Reading that many of these matters would require very careful consideration, particularly the transfer of assets between a development corporation and the local authority, and the basis of that transfer. I know from first-hand experience that in the case of Runcorn New Town there could be difficulties, unless the matter is carefully handled, over the cost of new town houses and the basis on which they are transferred to the new authority compared with the existing stock of council houses within that authority. This matter falls within the scope not of the Bill but of the consultation document.
  The points raised by hon. Members will be taken into account along with the views of the development corporations and the district councils which are at present the owners of other council houses within a district.
  Mr. Carlisle: I was not talking about the transfer of the assets of the new town development corporations to the local authorities, on which subject I share the Under-Secretary's views. I was talking about the right of the individual tenant to buy his house.
  Mr. Oakes: I shall be moving on to that point in a moment. I am sorry but I thought the hon. and learned Gentleman had been concerned about this matter. The hon. Member for Bromsgrove and Redditch certainly was, and I thought that the hon. and learned Gentleman was to some extent echoing

  1787
  some of the fears his hon. Friend had expressed.
  I now come to the question of the sale of council houses to existing tenants. The policy of the last Government was the virtually unrestricted sale of the assets of new towns and thereby the depletion of those assets at a time when there were houses available for sale—and empty houses in most new towns—but waiting lists for houses to rent. We agree with a proportion of owner-occupation. We agree with building on plots for owner-occupation, because a new town must have a balanced community. But it is lunacy, when there is a desperate need for rented accommodation in new towns, to be selling off the seed corn and thereby depriving ourselves of the availability of housing accommodation for our people.
  My right hon. Friend made it clear that we do not set our faces against owner-occupation. It would be foolish for any development corporation to embark upon a policy of selling houses that are available for renting. That was why we made it clear that as a Government we set our faces against such a policy.
  Mr. Sainsbury: We are all interested in what the Under-Secretary has said about the proportion of home ownership in the new towns. Could he say what sort of proportion he has in mind?
  Mr. Oakes: I cannot at the moment. What I say is that there is not the slightest objection if a person wants to build a house on a plot bought from the development corporation. What the hon. Gentleman was talking about was the sale of existing rented accommodation to sitting tenants. Those sitting tenants who want to own houses can avail themselves of other facilities to buy properties within the new towns. There is a clear policy division between us, and I could talk until 11.15 tomorrow evening without being able to obtain agreement from Tory Members about this.
  Mr. Robin Corbett: Would my hon. Friend agree that the policy of flogging off existing houses is self-defeating because it costs far more to replace those houses than it did to build them?
  Mr. Oakes: My hon. Friend is right, and that is why I spoke of selling off the
  1788
  seed corn. It is also palpably wrong to do this when there is a waiting list for rented accommodation. The issue of cost-effectiveness—
  Mr. Michael Morris: May I raise the point about virgin land originally designated for private housing? The private housing sector is picking up again yet, because of Government's directives, there is no private housing in these areas. The houses will be rented. This seems totally wrong when the local development corporation wants to build private housing.
  Mr. Oakes: The difficulty arises not from directives given by the Government but from the inability of the building industry to sell houses which it has built, not only in new towns but in non-designated areas and other places.
  The hon. Member for Northampton, South referred to cost-effectiveness. We are concerned with cost-effectiveness, and a review is being undertaken in the South-East of the cost-effectiveness of new towns. New towns provide housing in a better environment for people who have been living in cities in overcrowded conditions. They attract industry so that the people may live and work in the same place. It may be said that environmental amenities and landscaping are not necessary because they are not cost-effective. But a new town is a community of people as much as a community of buildings. We must have regard to cost-effectiveness but not be slaves to it.
  The hon. Gentleman spoke of the unfair burden which is placed upon the county and the district and asked for an assurance that we would continue to bear that in mind when considering the rate support grant. The present rate support grant provides an infinitely better allocation of the needs element than did its predecessor which we inherited, but it is not perfect. What strikes me forcibly is the effect of rapid development on an area, whether that development is organised within the context of a new town or is generated from outside economic forces. We are examining that matter and the question of a proportion of the needs element going to the district as distinct from the county in certain cases.
  The problems of Northamptonshire, which are curiously akin to those of Cheshire, are receiving the Government's attention.
  Mr. Ronald Brown: I hope that the current examination of the new towns element of the rate support grant is not taking precedence over the long-awaited review of the London element, on which I have been pressing the Department for years.
  Mr. Oakes: I guessed that was what my hon. Friend would say. I cannot go into London matters, but I assure my hon. Friend that London and the new towns are receiving equal attention.
  The hon. Member for Bromsgrove and Redditch referred to the transfer of assets and mentioned the phrase Timeo Danaos et dona ferentes. He fears the Greeks, especially when they are bearing gifts. This matter must be looked at very carefully within the context of the consultative document, and the Government will do so very closely.
  The hon. Member for Bromsgrove and Redditch and the hon. Member for Northampton, South raised the question of a contribution from a development corporation to the infrastructure that the county has to bear. The corporations already have the power, subject to the approval of the Secretary of State and the Treasury under the terms of Section 3(3) of the New Towns Act 1965, to make contributions to local authorities when the latter have incurred expenditure resulting from new town development.
  Such contributions have been made in the past and will be made again in appropriate circumstances. They are regarded more favourably by the Government in a partnership situation. In recent months Northamptonshire, for example, has been a case in point. But it is open to any local authority which feels that it is from the corporation, and if the corporation is agreeable the case will come unduly burdened to seek a contribution to the Department for consideration.
  Mention was made also by the hon. Member for Bromsgrove and Redditch about the future size of Redditch. My right hon. Friend is in consultation about this, and there will be full consultation with the local authorities and other interested parties on expansion proposals.
  I do not think that the hon. and learned Member for Runcorn did it deliberately, but, in speaking about the policy within his local authority on the non-sale of tenanted houses, he referred
  1790
  to the Socialist or Labour Chairman of the Runcorn Development Corporation. I do not think that he meant that the policy pursued locally by the corporation was a personal policy. It is not a personal fad of the present chairman, who, I am sure the hon. and learned Member will agree, is doing a good job, as did his long-serving predecessor, but Government policy.
  Mr. Carlisle: I have great personal respect for the present Chairman of the Runcorn Development Corporation. My point was that he and his predecessors—both of them are supporters of the Labour Party—recommended to the Government that they should be allowed to sell their development corporation houses to sitting tenants. I made only a passing comment about their political persuasion.
  Mr. OakesI apologise to the hon. and learned Gentleman. I misunderstood what he was saying. I have equal regard for the present Chairman of the Runcorn Development Corporation, but I cannot agree with him in the present circumstances. I assure the hon. and learned Gentleman that my right hon. Friend and I are willing to see a deputation to deal with some of the problems of the new town in his constituency.
  I think I have answered at some length most of the matters raised in the debate, and I will write to any hon. Member who feels that I have failed to answer a point he has made. The hour is somewhat late on this last but one day before the recess.
  Mr. Arthur Jones: By leave of the House, I should like to thank the hon. Gentleman for dealing so fully and competently with the questions raised by hon. Members and for the assurance he gave in respect of the Greater London area as well. We are much obliged to him.
  Question put and agreed to.
  Bill accordingly read the Third time and passed.

  SEA FISHERIES
  Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Statutory Instruments):
  That the White Fish and Herring Subsidies (United Kingdom) Scheme 1975, a copy of which was laid before this House on 6th May, be approved.—[Mr. Coleman.]
  Question agreed to.

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

  HOME LOSS PAYMENTS
  11.30 p.m.
  Mrs. Joyce Butler: Section 29 of the Land Compensation Act 1973 provides for home loss payments to be made for three sets of cases where people are displaced from home—where they are displaced for the compulsory acquisition of a dwelling, for the making of a housing order, or for redevelopment. Claims must be made within six months of the date of displacement. The minimum payment possible is £150 and the maximum payment is £1,500.
  My constituents, Mr. Holdstock and his family, were moved by the Haringey Council to another property because of redevelopment in July 1973. Unfortunately, Mr. Holdstock was not aware of his entitlement to a home loss payment until more than six months after the date of his removal. When he heard about it he immediately put in an application. This was in April 1974.
  The council refused to make a payment because the application was beyond the permitted time. Considerable correspondence ensued between Mr. Holdstock and the council. I took Mr. Holdstock's case up on his behalf and on 1st October 1974 I received a letter from the borough valuer and estates surveyor in which he repeated the facts about Mr. Holdstock's rehousing and said:
  "During October and November 1973, the existence of and general categories of entitlement to Home Loss Payments were announced by this Council in the North London press. In addition, notices were placed in Post Offices and Public Libraries and the subject of Home Loss Payments received coverage on television and in the national press. However the Council has made representations to the Department of the Environment, with a view to obtaining authority to make a payment in this case."
  So the council was now satisfied that although Mr. Holdstock had made a late claim he should receive a payment.
  I took the matter up. When I wrote to the Department, my hon. Friend the Under-Secretary replied to the effect that
  1792
  ex gratia payments of this kind were sanctioned only in exceptional circumstances. I know that in this case it was not thought that there was sufficient justification.
  Mr. Holdstock maintains—I think rightly—that people displaced in this way should be directly informed at the time of their right to claim. Comparatively few people read the local Press. Mr. Holdstock does not read the local Press. It is not always easy for ordinary members of the public to connect the terms of a national advertisement about an Act of Parliament with their own problem.
  As for notices in post offices and libraries, Mr. Holdstock was able to prove that no such notices had been displayed in the libraries and post offices in his area. He is entitled to £471 for home loss. The council is willing to make a payment, but the Department will not sanction it. The Department says:
  "I am afraid the question of whether or not a Council gave adequate local publicity to home loss payments would not necessarily be regarded as relevant to a decision on an application for sanction to make an ex grotto payment."
  I asked the Secretary of State for the Environment
  "how many applications have been made to him by local authorities to use his powers under Section 161 of the Local Government Act 1973 to sanction ex grotto payments where claims for home loss payments have been made later than six months after the date of displacement."
  My hon. Friend the Under-Secretary replied:
  "Some 300 applications, of which 190 have been sanctioned."—[Official Report, 15th January 1975; Vol. 884, c. 104.]
  If the councils concerned in these cases feel justified in paying, surely they should be permitted to do so. It would be very interesting to know what criteria were used to sanction the 190 payments to which my hon. Friend referred in his reply to me and to refuse the 110 which make up the balance of the 300.
  Mr. Brook and his family had a similar experience to that of Mr. Holdstock. They, too, do not read the local paper. Indeed, Mr. Brook points out that some people cannot read or write. What do they do? Presumably they will not get a payment, or any chance of it. Mr. Brook heard about the home loss provision only when he met an old neighbour. It appears that most applicants obtain

  1793
  information in a similar haphazard way. Mr. Brook, too, is entitled to £471. I may say that both these families are very much in need of the money because they were involved in considerable expense in having to change from one home to another.
  I am grateful for the opportunity of speaking about these two constituency cases tonight, and I ask my hon. Friend the Minister when he replies to consider three things. First, will he reconsider his refusal to sanction an ex gratia payment in these and similar cases, and will he give the councils greater discretion to make these payments, having satisfied themselves that there is adequate ground for doing so?
  I also ask my hon. Friend to urge local authorities to take greater care in making such benefits known directly to people entitled to receive them, because a great deal of correspondence takes place between councils and people in this position at the time when they have to move. There are personal visits and many opportunities when this information could be given to the people concerned.
  Thirdly, I ask my hon. Friend and his colleagues in the Department to try to devise a better system of informing those concerned of their rights when they are considering future legislation, because at present it is haphazard in the extreme. It seems to me important that if Parliament makes a decision about benefits for certain people, means should be found of ensuring that those people know of their rights to those benefits.
  Therefore, although this may seem a small matter, it is very important to the people concerned and it is important for Parliament sometimes to hear the end result of the way in which the Acts which it puts through work out in practice. I shall be grateful to have my hon. Friend's comments.
  11.38 p.m.
  Mr. Ronald Brown rose—
  Mr. Deputy Speaker (Mr. George Thomas): Has the hon. Gentleman reached an agreement with the Minister and his hon. Friend?
  Mr. Brown: Yes, Mr. Deputy Speaker. I am grateful to my hon. Friend the
  1794
  Member for Wood Green (Mrs. Butler) for offering me a few moments in which to raise two similar cases to her own. In one of them I have been in discussion with the Department concerning my constituent, Mr. Elliott, and his family who were removed from their home, a bungalow, at the behest of the local authority in October 1973. Mr. Elliott is still fighting it out with the various people involved to try to get his home loss payment, to which he feels that he is entitled and on which I support him.
  The problem in this case is that all the authorities and the Department are playing silly beggars. First, the Greater London Council refers the matter to Hackney, Hackney then refers it to the Department and the Department then refers it back to the GLC. And so we go on from October 1973 until nearly June 1975, and we are still no nearer settlement.
  I took up the case on behalf of Mr. Elliott and I had an answer from the GLC saying "It is not really us after all. We moved him, it is true, but we moved him only because the Department told us to do so." The council wrote to Mr. Elliott:
  "The reason that you, and adjoining occupiers of these bungalows, were displaced from Trederwen Road was that the London Borough of Hackney had been instructed by the Department of the Environment to clear these bungalow sites".
  The Department wrote to me:
  "I am afraid that the question of Mr. Elliott and his possible entitlement to a home loss payment is entirely a matter for the local authority."
  Then the local authority wrote to me saying that it was nothing to do with the authority at all because it could not do it.
  Therefore, I ask my hon. Friend to look again at this ridiculous situation. Apparently there is some collusion between both local authorities and the Department with a view to showing that none of them is responsible. They say that there appears to have been a lease on the land, that the lease came to an end and that therefore the authority was bound to rehouse the occupiers through the bungalows being demolished. That is apparently the collusion—to make sure they do not pay these elderly families the £519 to which they are entitled under the 1973 Act.

  1795
  I come to another case, which is tragic. My hon. Friend the Under-Secretary has examined the case of Mr. Montgomery. He has lived in a very ancient GLC flat for about 12 years. As the years have advanced he has become seriously ill. He was housed on the third floor and was unable to leave his flat because his legs were becoming seriously affected and no lift was available. I, among others, petitioned on his behalf to get him brought down to the ground floor. It seemed the only humanitarian thing to do. The council very wisely and kindly agreed to this. After some delay in finding a suitable place in the same old ramshackle building, the council moved Mr. Montgomery to the ground floor, which allowed him to lead at least some form of civilised life.
  In the meantime, I was pressing the GLC to pull down this block of flats because it was a disgrace. After 12 months I achieved this object. As a result, all the tenants of that block are receiving home loss payments—except Mr. Montgomery, because I petitioned so hard on his behalf in order that he could be moved. By being moved from the third floor to the ground floor he is excluded from any payment. This is heinous.
  I have reminded my hon. Friend that during the passage of the Rent Act 1957 he and I marched in London opposing the principle that any tenant moved on humanitarian grounds to another flat was automatically decontrolled and could have his rent raised and could be put on the streets.
  This case is on exactly the same principle. I cannot believe that my hon. Friends at the Department are prepared to put up with this. In Mr. Montgomery's case, I believe that it would be possible under Section 32(5) of the Act to interpret the word "building" as being the building in which Mr. Montgomery was living. He was living in a flat within the said building.
  I ask my hon. Friend to review both these cases and give an answer in favour of my two constituents.
  11.43 p.m.
  The Under-Secretary of State for the Environment (Mr. Gordon Oakes): I am very grateful to my hon. Friends the
  1796
  Members for Wood Green (Mrs. Butler) and Hackney, South and Shoreditch (Mr. Brown) for raising this matter on the Adjournment. I know that it is of concern to a number of hon. Members who have written to me on behalf of their constituents.
  I entirely agree that this is certainly not a small matter. It is a very important matter, because not only have some people lost their homes; they feel deprived of the compensation that their neighbours have received for losing their homes, which they, for one reason or another, have not been able to obtain.
  The Department looks at these cases with the greatest possible sympathy. I am glad to have this opportunity to explain the reasoning behind the Department's approach to the problems which have been referred to, particularly the question of late claims for home loss payments.
  My hon. Friend the Member for Wood Green rightly spoke of the difficult and often distressing circumstances in which many ordinary people find themselves when they are forced to move from homes to which they have naturally grown attached over the years and have to adjust to living in new and strange surroundings. It matters little whether it is a clearance scheme or a new road which leads to their being displaced. The upset and distress are the same.
  I know these problems well. I was a member of the Committee which considered the previous Government's Bill—now the Land Compensation Act 1973—which introduced home loss payments. I assure hon. Members that those provisions, which dealt with the new payments, although welcomed by both sides of the House, were nevertheless very closely examined and keenly debated. We were able to make a significant advance on the previous Government's original proposals by reducing the qualifying period from seven years' to five years' residence.
  I am glad to say that as a Government we have been able to extend the provisions still further through the Housing Act 1974. As a result, home loss payments can now be made to council tenants who have to move home so that essential improvements can be carried out.

  1797
  Section 32(1) of the 1973 Act provides categorically that no home loss payment shall be made except on a claim in that behalf made by the person entitled thereto before the expiration of the period of six months beginning with the date of displacement. The only exception made was for people who were displaced between the commencement date for home loss payments—that is, 17th October 1972—and the date when the Act was passed, which was 23rd May 1973. By virtue of Section 32(8) they had six months from the date of Royal Assent in which to make their claims.
  There are no provisions in the Act for any discretionary payments to be made in respect of late claims. Some limit needed to be set on the claim period, for practical reasons. As I explained in reply to a Question by my hon. Friend the Member for Stockport, North (Mr. Bennett) on 7th May, it would have been very difficult, and in some cases virtually impossible, to establish the validity of a claim made long after the facts of the original displacement had become obscure. Nor would it have been reasonable to impose a duty on authorities to inform claimants of their entitlements under the Act. Authorities do not, by any means, rehouse all potential claimants. Many move out of the area entirely and cannot be traced. Moreover, many potential claimants may be quite unknown to the authority—for example, private tenants.
  With any new benefit like the home loss payment there is always the problem, at first, that people just do not know that they are entitled to claim. The Department therefore asked local authorities to make every effort to publicise the new provisions in their areas. The first circular which referred to this was Circular 73/73, issued soon after the Act received Royal Assent. Authorities were reminded again in October and November of that year of the specially extended time limit for claiming for people displaced before the Act came into force, and the Department itself put advertisements in the national Press drawing attention to the time limits. Advertisements were also put in the Press last December to publicise the new rights to home loss payments given by the Housing Act 1974, and again it was stressed that claims had to be made
  1798
  within six months of displacement. Moreover, the Department have issued a series of booklets in layman's language explaining for the public their rights to compensation, including the circumstances in which they may be entitled to a home loss payment, and these can be obtained free from the Department, local authorities and citizens advice bureaux. I hope therefore that my hon. Friend will accept that the Department has made every effort to ensure that these provisions were well publicised.
  The fact remains that as the Act stands authorities have no power to make home loss payments if claims are not made within six months. My right hon. Friend does, however, have power under Section 161 of the Local Government Act 1972 to authorise expenditure by a local authority which might otherwise have been subject to challenge by the district auditor.
  The district auditor's duty is to consider, in relation to items of account, whether a council's actions have been ultra vires. He has powers—by application to the court, or by certifying that money should be recovered from a person or persons—to seek redress wherever he finds that an item of account is contrary to law. All London councils are subject to the scrutiny of the district auditor. Any item of account which is sanctioned by the Secretary of State under Section 161 is thereby removed from the purview of the district auditor. In other words, he cannot apply to the court or certify items which the Secretary of State has sanctioned.
  These powers, I am sure my hon. Friends will agree, are used only in the most exceptional circumstances and only after the individual circumstances of each case have been thoroughly and carefully examined. This is a very important point. If Section 161 were widely invoked and extensively applied, the effect would be virtually a circumvention of statute—in short, legislation by administration. I am sure that no hon. Member on either side of the House would willingly sanction that. Accordingly, we are obliged to be very strict in invoking that section.
  A number of authorities have applied to the Department for consent to make ex gratin home loss payments where claims made outside the statutory period

  1799
  would otherwise have been valid. These have all been considered on their individual merits, and to date—I shall revise the figures for my hon. Friends—sanction has been given for the making of 685 extra-statutory payments out of 1,039 for which approval has been sought. That is nearly 70 per cent. of the applications coming to the Department. I hope that my hon. Friends will accept that these figures show that we have not been either unreasonable or ungenerous in our decisions.
  We have, however, taken the view that simple ignorance of the home loss provisions is not in itself a sufficient justification for sanctioning an extra-statutory payment. The circumstances of the individual claimant must have been such that it would have been unreasonable to expect him to make a claim within the six months' period. My hon. Friend the Member for Wood Green asked how that criterion was applied. One obvious example would be a case in which the claimant had been seriously ill or otherwise incapacitated. But it is difficult to generalise; every case has to be looked at on its merits.
  My hon. Friend referred to two cases in particular in which the London borough of Haringey applied for, but was not given, consent to make an ex gratia payment—the cases of Mr. Holdstock and Mrs. Brook.
  Mr. Holdstock was the tenant of a privately-owned property and was displaced in June 1973 as a result of the compulsory purchase of the property for redevelopment by Haringey. He did not, however, make his claim for a home loss payment until the end of April 1974—some four months after the statutory claim period had expired. The reason given for his failure to submit his claim in time was that he had not seen the council's publicity about home loss payments. However, as I explained to my hon. Friend in the letter to which she referred, the question whether a council gave adequate local publicity to home loss payments would not necessarily be regarded as relevant on an application for sanction to make an ex gratia payment. As there did not seem to be anything in Mr. Holdstock's personal circumstances which might have prevented him from
  1800
  making a claim, we did not feel able to agree to a payment being made.
  My hon. Friend asked about the people who could not read. That, indeed, might be a circumstance which would be taken into account by the Department if an application were made for an extra-statutory payment to be made.
  Similar considerations applied in the case of Mrs. Brook, who was displaced from her home at 58 Clarendon Road in November 1972. She did not make her claim until April 1974, by which time it was some five months out of date. As in Mr. Holdstock's case, the reason given for the claim being made out of time was simply that Mrs. Brook was unaware of the existence of the home loss payment provisions, and again there did not seem to be sufficient justification for sanctioning an ex gratia payment. I can assure my hon. Friends that if any further evidence comes to light and the council decides to re-apply, the decision will be carefully reconsidered. However, I do not want to raise any false hopes. I must emphasise again that simple, straightforward ignorance of the right to claim a home loss payment would not be enough, in itself, to justify a payment being made.
  My hon. Friend the Member for Hackney, South and Shoreditch raised two other matters, one of which I remember very well and which caused me a great deal of concern. I refer to the case of Mr. Montgomery, about which I have written to my hon. Friend. As I have said, we are bound by the provisions of the Act. I shall look again at what my hon. Friend says about removal from one place to another within one block of flats, but it is almost certain—I want to raise no false hopes—that the criterion is removal from one home to another home. If a person was to move even next door within a block of flats—namely, from one flat to another—that would constitute a change of home.
  I remember that the right hon. Member for Crosby (Mr. Page) described the home loss provision provided under the Act as similar in law to what is called loss of consortium. It is the loss of something with which a person is familiar—something which he has grown to love. If a move takes place from one place to another within the five-year period, I

  1801
  fear that it is almost impossible in law to make a claim.
  If any further evidence becomes available my right hon. Friend and I will be as sympathetic as possible to the cases which have been mentioned. I must point out that simple ignorance, by itself, under the terms of the 1973 Act and the policy of the Department, cannot be sufficient claim for an ex gratia payment being made.
  Mr. Ronald Brown: My hon. Friend must understand that my hon. Friend the Member for Wood Green and I represent working-class constituencies. We represent people who cannot go to lawyers. They have no lawyers on tap. They have probably been council tenants
  1802
  for most of their lives, and were probably in slums before that. My hon. Friend must understand that we are dealing with a special category of person. We do not represent middle-class areas where everyone has the money to buy the advice that he requires. We are talking about working-class people who do not have that opportunity.
  Mr. Oakes: I find that within the working-class community from which I come the grapevine is often more effective than any lawyer.
  Question put and agreed to.
  Adjourned accordingly at three minutes to Twelve o'clock.

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Preamble
The House met at eleven of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Wakefield.

BRITISH AIRWAYS TERMINAL FACILITIES
Baroness BURTON of COVENTRY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will make a statement concerning the continuance of check-in facilities at the British Airways terminal in Buckingham Palace Road.
Lord LOVELL-DAVIS: My Lords, understand that British Airways intends to retain indefinitely the present check-in facilities at the Buckingham Palace Road terminal. Since my noble friend Lady Burton, who has played such an important rôle on behalf of airline passengers, was pressing for "an indefinite retention" when she raised this matter in your Lordships' House on 13th June last year, I hope that the Answer I am able to give will please her.
Baroness BURTON of COVENTRY: My Lords, it is certainly a better Answer than I have ever had before. May I ask the Minister whether he is aware that of course I did not table this Question without what seemed to me to be adequate reasons? Arising from that, may I ask him whether, in view of what happened at the West London air terminal, we can be given an assurance that no arbitrary decision will be taken to withdraw these facilities at Buckingham Palace Road without the relevant consumer opinion being consulted?
Lord LOVELL-DAVIS: My Lords, I cannot speak for British Airways, but I am sure they will take these matters into consideration. The noble Baroness is a member of the Airline Users' Committee.
1400
If any such questions should arise, by that time the new National Consumer Council will no doubt be in full operation, and I am sure that it will take an interest in the matter.
Baroness BURTON of COVENTRY: My Lords, I thank the noble Lord.
Earl FERRERS: My Lords, while some of us are glad to see the noble Baroness returning to her old hobbyhorse and "having a go" at somebody else, can the noble Lord tell us whether the decision to continue the check-in facilities at the air terminal was made by British Airways alone, or was it the result of Government pressure upon British Airways?
Lord LOVELL-DAVIS: No, my Lords, there was no Government pressure. This was entirely a decision of British Airways. The Buckingham Palace Road terminal is an important facility; 60 per cent. of overseas traffic goes through it and of course it is important that these facilities should be kept as part of the long haul service.

TEXTILE INDUSTRIES: CHEAP IMPORTS
11.8 a.m.
Viscount AMORY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will reply at the earliest possible date to the representations of the British Textile Confederation about the effect on production and employment in the traditional textile industries in this country of the greatly increased volume of imported cheap fabrics and garments.
Lord LOVELL-DAVIS: Yes, my Lords. This matter is being urgently considered by the Government and they hope to reach conclusions very soon.
Viscount AMORY: My Lords, while recognising fully the difficulties involved in any import restrictions, are the noble Lord and his colleagues aware that there are at present over 150,000 people on short time out of a total workforce of, I think, approximately 830,000? Furthermore, there is a considerable number of skilled personnel leaving the industry

1401
every week, and is the noble Lord aware that if that situation continues it is bound, one fears, to inflict permanent damage on the productive potential of the industry?
Lord LOVELL-DAVIS: My Lords, we are indeed aware of this and, as I have said, the matter is under active consideration. As noble Lords will know, and as has been pointed out by the noble Viscount, Lord Amory, there are difficulties in using import restrictions, which are a blunt instrument, in these cases, and the fact remains that the textile industry is very heavily protected at this moment.
Viscount AMORY: My Lords, I believe there is an adjective which goes beyond "active", if I remember rightly—" urgent "or" very urgent ". Would the noble Lord he prepared to substitute the adjective which means a few months quicker than "active "?
Viscount ECCLES: My Lords, may I ask the noble Lord two questions? First, has there been any application for a case under the anti-dumping legislation; and, secondly, from which countries does the main problem of cheap imports come, which so distresses our own industry?
Lord LOVELL-DAVIS: My Lords, we must distinguish between dumping and low cost selling. Exporting a product at prices below those obtained for comparable sales on the exporters' home market is dumping. The Department of Trade has received only one anti-dumping application in recent months; that was in connection with acrylic yarn from the Far East. The Department, or the EEC, need only reasonable evidence—not proof—of dumping in order to act. So far as the figures are concerned, rather than taking up a lot of your Lordships' time by quoting them, perhaps I might write to the noble Viscount. But I can tell him that restrictions are being applied right across the world on the markets from which we are receiving these imports.
Viscount ECCLES: My Lords, can the noble Lord say whether the bulk of the imports are coming from outside Europe?
Lord LOVELL-DAVIS: Yes, my Lords. I think it is true to say that they are coming from outside Europe.
Lord BARNBY: My Lords, will the Minister convey to his right honourable friend the dismay with which the dilatoriness in coming to a decision is regarded in the textile industries, which, as the authoritative questioner has explained, extends to some 830,000 workers of which, as he said, 150,000 are either unemployed or under-employed? Does the noble Lord remember that these representations have received the endorsement of all the leading textile trade organisations and the trade union organisations—and I emphasise that fact—in addition to being strongly pressed in both Houses of Parliament, and is lie aware that this delay is dangerous and is causing great concern?
Lord LOVELL-DAVIS: Yes, my Lords. I recognise there is a delay. These are very complex and difficult matters. In considering the BTC proposals a large number of factors have to be taken into account. Import restriction is a blunt instrument. I would remind your Lordships that United Kingdom textile and clothing exports amounted to over £1,000 million in 1974. The effects of retaliation, if they were to occur as they have in the case of Turkey, could be very harmful to us. We must take these matters into consideration.
Lord BARNBY: My Lords, as the noble Lord has raised the question of the possibility of retaliation, will he remember that under Article XII of the GATT we should not be in a position likely to attract retaliatory action? Could he make some further comment on the apparent tardiness in this case, as against the alacrity with which Government action was taken in the steel industry, where modernisation involving the introduction of new prototypes must, and properly should, if it is effective, produce a reduction in the work force?
Lord LOVELL-DAVIS: My Lords, in answer to the first point of the noble Lord, Lord Barnby, on the subject of Article XII of the GATT, it is true that import restrictions may be imposed if severe balance of payments difficulties exist; but one must not lose sight of the fact that these restrictions would have to he applied right across the board. They cannot apply just to textiles. One can imagine what the results would be on all our trading. On the other matter raised

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by the noble Lord, I cannot agree that the Government have done little. The Government have done a great deal to encourage investment in the industry. As I have said, the basic effect is that no other private sector industry has such a history of high protection or of protection which is about to be extended.
Lord LEE of NEWTON: My Lords, is the noble Lord aware that in the areas of Lancashire where we find the textile industry there are also many other industries which are now in great trouble? A number of these areas are not development areas and therefore they become depressed. It would help a great deal if we could have a speedy decision on this important matter.
Lord LOVELL-DAVIS: My Lords, we are pressing forward with this matter as speedily as we can. As I said in my first Answer, it is being urgently considered by the Government.

LIFE SENTENCE PRISONERS AND PAROLE
11.15 a.m.
Lord CHORLEY: 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—

(1) how many cases of life sentence prisoners who had served seven years of imprisonment were referred to a local review committee of the Parole Board in 1972;

(2) what proportion this number bears to the total number of life sentence prisoners who completed seven years of imprisonment during the same year; and

(3) whether they will give the same information for the first full year after the procedure for the review of such cases was changed in 1973.

The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, the figures asked for in parts (1) and (2) of the Question are, 68 prisoners and 97 per cent. For 1974, which was the first full year after the change in the review procedure, the corresponding figures are 88 prisoners and
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94 per cent. These figures relate to England and Wales only.
Lord CHORLEY: My Lords, I thank the noble Lord for that Answer. I do not propose to take him up on the actual figures. As he has probably realised, I am trying to get material for use in the debate on the parole system which we are to have immediately after the Recess. Since putting down the Question, I have seen the Reports of the Parole Commission for 1972 and 1973. Incidentally, I should be glad if the noble Lord could tell us when the 1974 Report is likely to appear. Will it be in time for the debate to which I have just referred? On the figures given, is it not reasonably clear that a substantial number of prisoners are now having to wait until they have completed 10 years of their sentences before they get their parole submission considered? This is clear particularly from the Reports to which I have referred. Does it not stand to reason that it is very frustrating and upsetting, not only for the prisoners but for their families who are supporting them from without and looking forward every day to the time when parole will be agreed upon? These are heart-rending matters—
Several Noble Lords: Order!
Lord CHORLEY: My Lords, I hope the noble Lord is bearing this in mind, particularly as an astonishing number of prisoners—
Several Noble Lords: Order!
Lord CHORLEY: My Lords, is the noble Lord aware that an astonishingly high proportion of life-sentence prisoners are working hard on further education and that a number of them work—.
Several Noble Lords: Order!
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Lord Beswick): My Lords, I wonder whether the noble Lord, Lord Chorley, would have regard to the fact that this is Question Time. Could the noble Lord put a question? It might be helpful.
Lord CHORLEY: My Lords, I will put it in the frame of a question. Is the noble Lord aware that this is largely a matter for discussion? I will conclude by thanking the Minister. We shall have

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a full discussion on this topic at a rather later stage.
Lord HARRIS of GREENWICH: My Lords, on the latter point raised by the noble Lord, Lord Chorley, as he rightly indicated, there will be a debate in the near future and I will reply to the points he raised then. So far as the Parole Board Report for 1974 is concerned, I cannot pretend to know offhand when it will be published, but I will find out and let him know.
Lord FOOT: My Lords, the noble Lord told us, if I have rightly understood it, that in the year 1972 only 3 per cent. of the prisoners serving life sentences were not referred to the Parole Board or the local committee. If it is the case that only 3 per cent. were not referred, on what principles were those 3 per cent. discriminated against, as against the 97 per cent. who were referred?
Lord HARRIS of GREENWICH: My Lords, the noble Lord, Lord Foot, is referring to the situation before the change in practice announced by the then Home Secretary, Mr. Carr. The current situation is described in the latter part of the answer. This will deal with the point he raised.
Lord FOOT: My Lords, in that case, since the proportion, as I understand the second lot of figures, is that 94 per cent. were referred and 6 per cent. were not, may I ask the Minister what principle was applied in deciding not to refer that 6 per cent.?
Lord HARRIS of GREENWICH: My Lords, this is the procedure which was announced by the previous Home Secretary on 21st June 1973, and the explanation for the change of policy, which the present Government support, is that the new procedure prevents false hopes being raised in the minds of prisoners who are unlikely to be recommended for release, particularly in a case where the trial judge has made a recommendation that someone should be kept in prison for a very substantial period of time. It was then the view of the Home Secretary, Mr. Carr, that the new procedure would avoid false hopes being raised in the minds of such prisoners. In addition, the new procedure enables the sub-committee which exists between the Parole Board and the Home Office to identify such cases where
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early release can be considered, which was not previously a possibility.
The Lord Bishop of WAKEFIELD: My Lords, may I ask whether the Minister is aware that a Category B prisoner, by name Michael Luvaglio, who is at present in Her Majesty's prison in Wakefield and known to me personally, and who was sentenced to life imprisonment in March 1967, did not receive his review under the procedure obtaining prior to June 1973? Furthermore, is the Minister aware that when the Home Secretary agreed with the Parole Board in June 1973 that it would no longer be necessary for every case to be reviewed after a fixed period, it was stated that this would not apply to prisoners already in the seventh year of their imprisonment, as was the case with Luvaglio? Therefore, could the Minister give an undertaking that the Parole Board will be asked to grant this prisoner a review at the earliest possible date?
Lord HARRIS of GREENWICH: My Lords, as the right reverend Prelate will, I am sure, recognise, it would be impossible for me to comment now on any individual case of which he has not previously given me notice.
Baroness WARD of NORTH TYNESIDE: My Lords, may I also ask the noble Lord, in regard to the case of Michael Luvaglio, in which I am also interested and made representations to the Home Secretary, why the action has not been taken, because it seems most extraordinary. Would the Minister please refer to the letter which I have written to the Home Secretary so that I should know all the facts, as I think there has been some misunderstanding and a wrong decision has been taken. I wish action to be taken in the case of Michael Luvaglio.
Lord HARRIS of GREENWICH: My Lords, as the noble Baroness will, I am sure, recognise, it is impossible to deal with the factors underlying the decision in an individual case without notice being given. But, as the noble Lord who put the Question indicated, there is to be a debate on this subject and no doubt this matter can be raised then.
Baroness WARD of NORTH TYNESIDE: My Lords, may I just add that I do not want to wait for the debate.

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I want an answer to the question I put to the Home Secretary on the subject.
Lord HARRIS of GREENWICH: My Lords, I note the noble Baroness's point. I will try to ensure that she gets a reply to her letter as soon as possible.
Baroness WARD of NORTH TYNESIDE: I thank the noble Lord.

VIETNAM: REFUGEES
11.24 a.m.
Lord MONSON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they propose to take to offer sanctuary to refugees from South Vietnam, over and above those few who have some previous connection or tie with the United Kingdom.
Lord HARRIS of GREENWICH: My Lords, my right honourable friend has decided to give priority to those refugees who had a connection or tie with the United Kingdom. He announced his policy in these terms in a reply given in another place on 8th May. Upwards of 100,000 refugees have left Vietnam and we do not yet know how many of them have a connection or tie with the United Kingdom, or will wish to come here. We have indicated that, as in the Chilean situation, we are prepared to play a reasonable part, with other countries, in alleviating the distress to refugees, but we have to take into account our existing obligations to United Kingdom passport holders overseas and to the dependants of Commonwealth citizens already settled in this country.
Lord MONSON: My Lords, I thank the Minister for his reply, although it is a somewhat unsatisfactory one. Is he aware that there are a great many people in this country who think that a great deal more ought to be done to assist these uphappy victims of totalitarian aggression, particularly in view of the Western World's moral commitment to help those in South-East Asia who were encouraged to declare themselves openly on the side of the West and against Communist
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imperialism at considerable risk to themselves and their families? Is he further aware that a high proportion of the refugees at present sitting on leaking ships in Singapore Harbour, or in Army bases in Thailand, have threatened to commit suicide rather than be forced to return to South Vietnam? Could he, therefore, undertake to try to persuade his right honourable friend the Home Secretary to think again?
Lord HARRIS of GREENWICH: My Lords, the staff of the United Nations High Commissioner for Refugees are at the moment trying to assess the dimensions of this problem. So far as the refugees in Hong Kong are concerned, the present indications are that quite a substantial number of them wish to go to the United States, Canada, Australia or France.
Baroness GAITSKELL: My Lords, would it not be true to say, though many of us do not believe that charity only begins at home, that nevertheless we have responsibilities to, and money to be spent on, immigrants who are already here in this country and their children, particularly the young school-leavers?
Lord WADE: My Lords, may I raise one general point? I think the feeling in regard to these unfortunate refugees is that they should be accepted on humanitarian grounds. May I ask whether I am right in understanding that this is to be limited to those with a tie with the United Kingdom? Where application for entry is made by a person wishing to ask for political asylum, is it normal to link that with a tie with this country? It is very difficult in this case, is it not, to distinguish between those who are at a loss for a home and have humanitarian grounds for being accepted, and those who are, in effect, political refugees? It would be helpful if the Government could outline their position on that.
Lord HARRIS of GREENWICH: My Lords, of course I accept the point made by my noble friend Lady Gaitskell, if I may deal with that first. Dealing with the noble Lord's point, I think cases of political asylum are looked at individually on their merits. One could not conceivably apply the rules of political asylum to the many thousands of people involved in this case.
Lord SEGAL: My Lords, since this country has already had a direct commitment in this matter, having sent a paediatric unit out to Saigon, which did magnificent work there and which many of us feel was closed down prematurely, do we not still have a remaining moral obligation to continue this good work on our own soil?
Lord HARRIS of GREENWICH: My Lords, I have indicated that the Government are certainly prepared to accept some obligation in this matter. But, clearly, a very large number of other countries must be involved in this problem, and that is the way in which we are approaching it.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, has the noble Lord any information to give the House about the children in Surrey concerning whom there was a well published article in the Guardian last week? I think some of us would be interested to know what the situation is.
Lord HARRIS of GREENWICH: My Lords, I will certainly look into this matter which the noble and learned Lord has raised. As he rightly says, there has been comment in the Press on this point. I will go into the matter.
Earl FERRERS: My Lords, would the noble Lord agree that, while we all wish to fulfil our obligations to these people, removing them from their own environment and putting them into a wholly different one is not necessarily the best way to help them?
Lord HARRIS of GREENWICH: Yes, my Lords.

BROOKWOOD CEMETERY BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

AIR TRAVEL RESERVE FUND BILL
11.30 a.m.
Lord BESWICK: My Lords, I beg to move that the Commons Reason for disagreeing to the Lords Amendment be now considered.
Moved, That the Commons Reason for disagreeing to the Lords Amendment be now considered.—(Lord Beswick.)
On Question, Motion agreed to.

COMMONS REASON FOR DISAGREEING TO THE LORDS AMENDMENT
[References are to Bill (159) as first printed by the Lords. The Commons Reason is printed in italics.]

LORDS AMENDMENT
[Nos. 1 and 2]
Clause 4, page 7, line 4, at end insert—
("( ) Sums payable in respect of contributions from air travel organisers to whom this section applies shall be paid by instalments at intervals of not more than three months and no such sum shall be payable before 1st September 1975.")
The Commons disagree to this Amendment for the following Reason:
Because it is desirable in the interests of flexibility to leave the times at which and the manner in which contributions are to be paid by air travel organisers for the purposes of the Air Travel Reserve Fund to be determined by regulations made by virtue of clause 4 of the Bil l.
Lord BESWICK: My Lords, I beg to move that this House doth not insist on their Amendment to Clause 4 to which the Commons have disagreed. Noble Lords will probably have seen the Reason for the Commons disagreement stated on the Order Paper; namely;
"Because it is desirable in the interests of flexibility to leave the times at which and the manner in which contributions are to be paid by air travel organisers for the purposes of the Air Travel Reserve Fund to be determined by regulations made by virtue of clause 4 of the Bill."
I dealt with this before the Bill left this House, and I think we had reached some understanding on the Motion, That the Bill do now pass. On that basis, I hope that the Motion will be accepted.
Moved, That this House doth not insist on the Amendment to which the Commons have disagreed.—(Lard Beswick.)
Lord BELSTEAD: My Lords, although the House of Commons have not agreed to write this Amendment into the Bill, the Government have given a firm undertaking in another place that they accept the second half of this Amendment, and that regulations will provide that the levy is not to be paid before 1st September. May I just say that this is welcome, because it will enable air

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travel organisers to make sensible arrangements to prepare to pay the levy without in any way altering the purpose of the Bill. The Fund will come into effect immediately this Bill receives Royal Assent, because it is underwritten by £50 million. May I also say that I welcome the Government's undertaking in another place to discuss the intention of the first half of the Amendment with the travel trade. I believe that quarterly payments can be arranged, and I trust that the Government will be able to listen to what the air travel representatives have to say before the regulations are made.
On Question, Motion agreed to.

PUBLIC SERVICE VEHICLES (ARREST OF OFFENDERS) BELL [H.L.]
11.33 a.m.
Lord HARRIS of GREENWICH: 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 Harris of Greenwich.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Earl of Listowel in the Chair.]
Clause 1 [Arrest without warrant of suspected offenders]:
Lord HARRIS of GREENWICH Lord HARRIS of GREENWICH moved Amendment No. 1:
Page 1, line 9, after (" vehicles ") insert (" or of byelaws made under section 46 of the Tramways Act 1870 with respect to the conduct of persons in tramcars").
The noble Lord said: I beg to move this Amendment in my name. If I may, I think it will probably be sensible for me to deal also with the second Amendment in my name, which relates to it. The purpose of these Amendments is to extend the provisions of the Bill to cover tramcars. Their effect is to give a power of arrest in respect of breaches of the bye-laws governing misconduct on trams, from such date as the Secretary of State appoints. As noble Lords may know, trams are still running in Blackpool, which is the only town in England and Wales where they are still in operation. There are 85 trams in service there and.
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I am glad to say, no plans at present to withdraw them. However, a tram is not a public service vehicle for the purposes of the Road Traffic Act 1960, but the conduct of passengers is governed by regulations and byelaws made under Section 46 of the Tramways Act 1870. Both the Chief Constable of Lancashire and Blackpool Borough Council consider that there is as much need of a power of arrest in respect of misconduct on trams as on buses.
The second of these two Amendments provides that the words relating to tramcars, which the first Amendment will insert in the Bill, shall not come into operation until such date as the Secretary of State appoints. This is to enable Blackpool Borough Council to draw up new byelaws and regulations in a satisfactory legal form to serve as the basis for the power of arrest provided by the Bill. The borough council have agreed to revise their byelaws and regulations for this purpose; and as soon as this has been done, and the rvised byelaws have been approved by the Secretary of State for the Environment, the necessary order to bring into force the words in the Bill relating to tramways will be made.
On Question, Amendment agreed to.
Clause 1, as amended, agreed to.
Clause 2 [Short title, repeal and extent]:
Lord HARRIS of GREENWICH: I beg to move Amendment No. 2.
Amendment moved—
Page 2, line 3, at end insert—
(" ( ) In the preceding section the words from "or of byelaws" to "tramcars" shall come into force on such date as the Secretary of State may appoint by order made by statutory instrument.")—(Lord Harris of Greenwich.)
On Question, Amendment agreed to.
Clause 2, as amended, agreed to.
House resumed: Bill reported, with the Amendments: Report received.
Then Standing Order No. 44 having been suspended (pursuant to Resolution):
Lord HARRIS of GREENWICH: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Lord Harris of Greenwich.)
Viscount SIMON: My Lords, the noble Earl the Chairman of Committees took the matter with his usual skill and speed, but ought not the Title of the Bill to be altered now that we have included in it tramcars as well as public service vehicles?
Lord HARRIS of GREENWICH: My Lords, I understand that that is not necessary.
On Question, Bill read 3a, and passed, and sent to the Commons.

INTERNATIONAL ROAD HAULAGE PERMITS BILL
Report received: Then, Standing Order No. 44 having been suspended (pursuant to Resolution), Bill read 3a with the Amendments, and passed, and returned to the Commons.

POLICYHOLDERS PROTECTION BILL [H.L.]
11.38 a.m.
Lord BESWICK: My Lords, I beg to move that the House do again resolve itself into Committee on this Bill.
Moved, That the House do again resolve itself into Committee.—(Lord Beswick.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Earl of LISTOWEL in the Chair.]
Clause 15 [Interim payments to protected policyholders of companies in financial difficulties]:
Lord BELSTEAD Lord BELSTEAD moved Amendment No. 52:
Page 13, line 9, after (" liquidator ") insert (" or the provisional liquidator ").
The noble Lord said: The reference to a provisional liquidator ought to be made here as, in the interests of policyholders, we think it may be desirable to make payments before a liquidator is in fact appointed. I wonder whether the Government have a view on this. I beg to move.
Lord BESWICK: My information is that the matter is clear as it now stands, but if it is not clear to the noble Lord,
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in order to make it absolutely clear I should be glad to accept this Amendment.
Lord BELSTEAD: I am most grateful to the noble Lord.
On Question, Amendment agreed to.
11.40 a.m.
Lord LYELL Lord LYELL moved Amendment No. 53:
Page 13, line 11, at end insert:
("( ) In exercising either of the powers conferred on them by subsection (2) above the Board shall, so far as it appears to them to be practicable, ensure that the expenditure thereby incurred does not exceed the expenditure which might be incurred in discharge of any relevant duty imposed on them by any provision of sections 6 to 11 above.")
The noble Lord said: The main purpose of this Amendment is to ensure that policyholders who are contributing to the levies which will be necessary to rescue life companies which have got themselves into difficulties shall obtain the maximum advantages of an orderly rundown of the business. If necessary this might mean that under the earlier clauses which we discussed. Clauses 11 and 12, the contracts could be reduced—if necessary, agreed upon by an independent actuary—and I hope that the Committee will forgive me if I do not become too deeply involved in the methods and mechanics of reducing such contracts. I think it would be better to concentrate on the advantages of allowing any company in difficulty to run off its existing business, particularly where the long-term financial prospects and the overall position warrant such treatment.
Where a company is wound up, the investments of that company will have to be realised, and in realising those investments there could be some problems, in that the sum of the realisation might be reduced when compared with a longer-term realisation, when more time could be taken to wind up the company and realise the assets in an orderly way. But if there is a problem of rushing the realisation, the policyholders who will have to contribute to the rescue of the company may well have to pay out more than might be necessary if a longer-term view could be taken. This might be of considerable advantage to the liquidation procedure. I believe that problems of tax repayments in respect of losses could also occur when investments are being realised. There will furthermore be the

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problem of unrelieved management expenses, but this is more a mechanical taxation problem.
The combination of these aspects—the tax aspect and the payments by innocent policyholders—could be of benefit to the policyholders who are contributing to the levy. The court already has power to reduce contracts, together with guidance from an independent actuary, instead of winding up the company immediately, and this Amendment seeks to improve the interests of the innocent policyholders who are contributing to the levy, first by appointing a provisional liquidator who could anticipate the powers he would eventually obtain; secondly by bringing the provisional liquidator within Clause 15(2)(b)—in this clause the liquidator is mentioned but we hope that a provisional liquidator could carry out the powers that he would eventually have—and, thirdly, by limiting the payments by the Board to what would be the amounts payable by the liquidator or even the provisional liquidator and not allowing the Board to overspend in the short-term. This is a complicated matter but I hope that I have explained it clearly enough.
Lord CACCIA: I support this Amendment which, as the noble Lord, Lord Lyell, said, is somewhat complicated, although its object is perfectly clear. That object is to try to help the individual policyholder, and that of course is the main object of the Bill. So without going over all the ground again and repeating the fact that certain powers already exist, I hope that the noble Lord, Lord Beswick, will view this Amendment with the same sympathy he has shown to other Amendments which seek to improve the Bill.
Lord BESWICK: I made a note of something I had intended to say, but the noble Lord, Lord Caccia, has taken the words out of my mouth. I was about to say that this is a rather complex matter but that the object is quite simple. However, I believe that the object could be achieved as the Bill is drafted and without the Amendment, and I will explain why. The Amendment would impose, and is intended to impose, a restriction on the Board's discretion, but of a very uncertain effect, and I think it could go much wider in scope than is intended. It would often be difficult for the Board to calculate at the stage when
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it is considering making interim payments the amount of the expenditure which will eventually be required. It may not even know for certain that its duties under Clauses 6 to 11 will ever arise in the case in question. If, for example, the provisional liquidator is negotiating for the transfer of the business—indeed, the clause is partly designed to allow for the situation where doubts of this sort exist—the uncertainties involved would be such that the provision that is proposed would often be virtually meaningless.
The clause already contains a provision which enables the Board, where appropriate, to ensure that any payments it makes under this clause will not exceed what it may be required to pay in the discharge of its duties. That is what the noble Lord seeks to achieve, and I am advised that that objective is achieved. Any payments it makes can be on such terms, including terms requiring repayment—I emphasise again that we should bear in mind the nature of the Board with which we are dealing and its responsibilities in this matter—and it can make sums available and require them to be repaid if the sort of situation should arise which the noble Lord has in mind. It can make the money available on such conditions as it thinks fit. It will no doubt wish, where necessary, to include requirements as to repayment to allow for the possibility that an interim payment might be greater than the amount the Board was eventually required to pay. The clause as drafted gives the Board the means of achieving the effect which the noble Lord, Lord Lyell, and the noble Lord, Lord Caccia, are obviously seeking to achieve, and on the basis of this assurance I hope that the Amendment will not be pressed.
Lord LYELL: I am grateful to the noble Lord, Lord Beswick, for the assurances he has given. However, we should like to study the matter further, and in the meantime I seek leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 15, as amended, agreed to.
Clause 16 [Companies at risk: transfers of business, etc.]:
On Question, Whether Clause 16 shall stand part of the Bill?
11.49 a.m.
Lord ABERDARE: This is the clause in The Bill which aroused the greatest opposition when we considered it on Second Reading, and I think that every speaker at that stage, with the possible exception of my noble friend Lord Limerick, who had some small sympathy for it, condemned this clause as being highly undesirable. The basic reason why we consider it to be undesirable is that it would extend the scope of the Bill far beyond the limited objective which we consider the Bill is intended to fulfil. It has been stressed, time and again, on Second Reading and in Committee on Tuesday, that there is sympathy for the objective in the Government's mind in bringing this Bill forward as a measure of consumer protection, and in so far as the Bill limits itself to the protection of the private policyholder we have sought to approve those provisions. But because it goes beyond that we have set down the Amendment and have sought to keep the Bill to its limited objectives. Many people have objected to the principle behind the Bill, but even they may be persuaded to admit that it is a political necessity today to have some form of consumer protection in the insurance world, but limited to the private policyholder. We do not wish to see the Bill going any wider or offering protection to corporate bodies, trade creditors, even possibly shareholders. Yet that is what we believe would be the result if the clause remained in the Bill. Its wording is very wide.
Subsection (1) says,
" If it appears to the Secretary of State in the case of any authorised insurance company, that the company may be unable to meet its liabilities to protected policyholders, he may refer its case to the Board … "
Our fear is that it would become pretty well standard practice to do so. The Secretary of State would find a company in financial difficulties and would be under great pressure to take the simple action, which would be well understood by the public, of simply referring the case to the Board. The discretion of the Board also appears to us to be much less than seems apparent, because there would again be tremendous pressure to see what it could do to rescue the company before it went into liquidation. One can imagine the sort of political pressure so to do. The
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result would be that in every, or nearly every, case a rescue would be carried out and there would be assistance from the levy—in other words, from the sums contributed by other policyholders—to rescue the company and thereby to give a 100 per cent. guarantee to the policyholders in the company in question, whether they were private individuals or corporate bodies. Equally, the trade creditors would be protected, and I believe that the shareholders would also be protected unless there were an arrangement whereby they were allowed to fade out of the picture.
I do not think that we should feel it right that policyholders in soundly-run companies should be used to finance the rescue of a company which has got into financial difficulties of this sort. The noble Lord, Lord Beswick, has on occasion pointed out—I believe he did so on Second Reading—that the majority of members of the Board will be representatives of the insurance industry and will be able to exercise their discretion in the case of a company at risk being referred to the Board. That is true, and later we shall be welcoming the Amendment to this effect which the noble Lord has put down, but I still think that the outside pressure on the Board automatically to rescue companies will be very heavy. For instance, one can imagine considerable pressure from Members of another place whose constituents were involved. I believe that it would be a much better way of dealing with the matter were the Bill to do as the other clauses suggest and do without the possibility of rescue.
As I understand it, the idea behind the provision is that the Secretary of State would only in certain cases refer companies to the Board. That would be done where it was cheaper to rescue the company concerned, where it was in the interests of the industry as a whole and where the underlying account was sound. In my opinion, however, if those three conditions obtained the industry itself would have come to the rescue of the company and the situation would never have reached the point where there was a possibility of liquidation. In the past there have been many instances in which the insurance industry has rescued a company which has been in temporary difficulties. That is usually not publicised but it is an effective way of operating and I am sure that it is much the better way

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of dealing with the matter. It would only be a company which was badly run, which was offering excessive benefits or, possibly, one which was fraudulently run which would reach the stage of being referred to the Board. All past experience goes to show that it is better to leave the present commercial arrangements between the companies to deal with those companies which are only in temporary difficulty. The other companies which have been badly or uneconomically run should go into liquidation. After all, remarkably few insurance companies have failed in the past, and we may hope that, when we get the regulations under the 1974 Act, even fewer will do so.
I do not believe that the clause will add anything to the present safeguards and I feel that it is open to possible grave difficulties because we fear that, were it to become the normal arrangement that companies in difficulties were referred to the Board by the Secretary of State and the Board were almost inevitably to take steps to rescue them, that would have the two very undesirable effects which we have been fearing all through the discussion. First of all, it would encourage companies to offer policies at cut rates and to increase benefits and run commercial risks in the knowledge that there was a long-stop and that the Secretary of State, through the Board, could come to the rescue if they got into difficulties. Secondly, it would have the corresponding effect of encouraging people to insure with such companies in the belief that if they got into difficulties there would be a 100 per cent. rescue operation which could be mounted through the Board. I believe, therefore, that if the noble Lord, Lord Beswick, wishes to be helpful to the insurance industry—and he has been very moderate and accommodating so far—it would be meeting with all our wishes to see the clause removed from the Bill.
Lord BESWICK: I am not winding up the discussion—no doubt there will be a discussion in depth on this matter—but it might be of advantage if I set down at the outset the Government's point of view. Then, at the end of the debate I will comment on what has been said. I shall listen with care to what is said against the case which I should like to
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have set down. We regard the clause as an essential feature of the Bill. After all, it may sometimes be in the interests both of the policyholders and of the industry as a whole to rescue a company rather than allow it to go into liquidation, but that is only a secondary feature of the Bill. I emphasise that the powers in the clause are discretionary, whereas in a liquidation the Board will have duties to fulfil. The Board will be able to use the rescue powers only in strictly limited circumstances.
The noble Lord, Lord Aberdare, said that this rescuing operation would become standard practice. But there is no reason to suppose that it will become the norm. On the contrary, there are a number of reasons why the rescue power will be used only sparingly. First, there are important restrictions in Clause 16 itself. The Board may only exercise its powers under this clause for the purpose of safeguarding protected policyholders—although it is in the nature of a rescue operation that other policyholders, and indeed other types of creditor, might benefit incidentally. It will not be possible to give assistance directly to the company at risk unless any necessary changes in management, control or membership have occurred. Even after such changes, moreover, the Board must ensure so far as is reasonably practicable that the existing members of the company will not benefit as such. It may be asked how the Board can ensure these things. in practice I do not believe it will be difficult: in a number of rescues that have been mounted in the last year or so there has been no such difficulty—and I can give as examples the Vavasseur Life and the Welfare companies. But if it proved too difficult and the shareholders were recalcitrant. then Clause 16 would not be available in that case.
Secondly, subject to the specific limitations in Clause 16, the use of the rescue powers will be at the Board's discretion. The majority of the Board's members will be from the insurance companies, as the noble Lord. Lord Aberdare. has said, and we are prepared to concede the principle—and I have put the Amendment down already—that this should he specified in the Bill. I emphasise that the Board will not be compelled to rescue a company if they do not want to rescue a company.

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The Board will wish to take acount not only of the interests of protected policyholders, but also of the wider interests of the industry as a whole; and, accordingly, in weighing up the alternatives open to them in a particular case should be able to consider the implications of each course for the stability of the insurance industry in Britain and for the health of the industry's business overseas. They would also of course have regard to the net cost of each course to the industry through the levy. The expense involved in rescuing a company may well be less, as the noble Lord says, than that incurred on paying claims once the process of liquidation has started. A number of elements are involved; first, the mere fact of a liquidation often causes a sharp reduction in the value of a going concern, due to the loss of good will and accumulated tax losses; secondly, the costs of the liquidation itself can be substantial, perhaps running into millions of pounds; and thirdly, dealing with claims individually could entail a considerable extra cost to the levy.
These factors must be taken into account by the Board who are considering their own industry and indeed their own interest before they decide what action should be taken. Moreover, in a case where a company with good but liquid assets was faced with a run of surrenders, the Board might be able to retrieve the situation by providing a bridging loan to another company to take over its business or by giving a guarantee. Thus, there might be no net expenditure by the Board at all.
May I refer to a point which was made by the noble Lord, Lord Aldington—and I am sorry that he is not in his place today—in column 1266 of our discussions on 20th May, where he said that:
" Inside each of the big insurance company groups … there is complete protection within that group's resources."
I know that the resources of these big groups are very considerable indeed. Nevertheless, they are not unlimited. One of the largest saw its solvency margin fall during 1974 from over 50 per cent. to under 20 per cent., although of course there has been a significant recovery since then. That was a time when certain values—property values—fell. Now the trouble is inflation and the difficulties that arise from that.
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The other day I was reading the report by the Chairman of the Phoenix Assurance Company, the noble Viscount, Lord De L'Isle, whom we should have been pleased to have had take part in our discussions. He had this to say in talking of the dangers of inflation:
" Under such conditions there is no reliable method of estimating the eventual cost of claims settlements."
That is a fact. That is what we have to take into account. In other words, he is in difficulties in estimating the company's liabilities. By itself that would be very worrying, but the noble Viscount goes on to say that the company has very properly adopted a cautious policy towards its liabilities and that reserves have been substantially increased. That was a company of outstanding reliability and outstanding reputation. But if that is a situation which faces one of the largest of the insurance groups, what is the position with the smaller companies? They may be very well run also, but they do not have the resources of the large groups and, inevitably, they must be much more vulnerable.
The point I am making is that insurance is the business of taking risks in an uncertain world, and even the best run companies could get into trouble, without any question of mismanagement or negligence. The larger companies should have the resources to overcome their difficulties, but the smaller ones may not. If Clause 16 is dropped, such a company may be forced into liquidation when it could have been saved.
It has been argued that all policyholders will benefit to 100 per cent. in a rescue and not suffer as the result of dealing with an unsuccessful company. But I might point out that this is what has happened in certain rescue schemes financed by individual companies in the past. The Board, in any case, under the terms of Clause 16, will be able to make it a condition of assistance that the benefits are reduced if the Board consider that is a justifiable course. There is no reason in principle why such voluntary rescues should not take place in future, although the British Insurance Association has repeatedly warned the Government that it is likely to be increasingly difficult to arrange rescues—and that was a factor in the Government's decision to propose this legislation. I hope the noble

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Lord, Lord Aberdare, will bear that in mind. I understood him to say that voluntary rescues can be mounted, but here we have advice from the Association that it would be increasingly difficult in the future to carry out that operation.
Rescues under Clause 16 differ from voluntary rescues in two respects. Clause 16 discourages recklessness by making it a prerequisite to a rescue that the shareholders should lose their money and the managers responsible for the difficulties should lose their jobs, whereas that is not necessarily the case with a voluntary rescue. I emphasise that, because time and again in this House on Second Reading it was stated that the shareholders would benefit and those responsible for the operation of an ailing company would benefit, if a rescue was mounted. The situation is as I have described it and we should take that into account. Moreover, as I have indicated, the "willing horses" in the insurance world which have participated in voluntary rescues in the past have found them exceedingly difficult to organise, with so many interests involved. If Clause 16 were to be deleted they would find it even more difficult in the future, whereas the Board could operate more efficiently and perhaps deal with one purchaser of the company at risk and spread a subsequent burden fairly.
I hope that noble Lords who have legitimate fears about this clause will be kind enough—perhaps I have not spoken out sufficiently clearly—to see the argument in Hansard before we come back at Report stage. There is a case to be made out for this clause which I think should be recognised. Nevertheless, I know that there are doubts in the minds of a number of my noble friends, and of noble Lords opposite, and I shall listen to them with care. I shall be glad to see whether I can give an assurance on any points when I reply.
12.10 p.m.
Lord CACCIA: I am sure that every, body in every part of the Committee—not only noble Lords on the Benches opposite, but also those on the Cross Benches and elsewhere—will respond to what the noble Lord said about looking carefully at his explanation in support of the clause. All the same, I hope that, equally, he will be ready to listen to what
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has been said against the clause. I do not wish to delay the Committee, particularly at this moment, by rehearsing the arguments which have been clearly stated by the noble Lord, Lord Aberdare. But perhaps I may bring one or two general observations into this argument.
First, certain noble Lords—and even the noble Lord, Lord Belstead, who is among those who moved the Amendment; and the noble Lord, Lord Houghton of Sowerby—have on occasions said that they are proud to speak, having no interest except as consumers. It is an advantage to your Lordships to have speaking those people who have only that interest in this measure. There are others of us—and not Party Members on this occasion; and I speak from the Cross Benches—who are proud to say that they are associated with this industry, and they hope that the result of any new legislation will be to improve it. In that general sense, I think the object is the same on all sides of the Committee. The question, as we go from clause to clause, is: will this Bill in fact do so? There is a genuine legitimate doubt, because this clause gives very wide powers indeed, and we must ask whether this is for the health of the industry. I think it is doubtful, on two grounds at least.
A healthy industry should have a high repute abroad and enjoy the confidence of the people of this country. This is what we in the industry seek to achieve, and this is why those who are involved are proud to be connected with it. Will this Bill lead to that end? I think that it will not necessarily do so. I do not think that at this moment it is wise to give such wide powers in a Bill, because we have to consider it in the climate of the time. I quite sec that the Board would not necessarily have to act in the sense that they would give 100 per cent. protection. But there must be that anxiety, because of what is happening elsewhere in the industrial field.
Therefore we should be exceedingly careful before giving such wide powers, unless it can be proven that they are inescapable and really necessary. Are they so? I do not think history so far suggests that they are. I believe that what is already in the 1974 legislation—for example, regulations which make it necessary to give an accounting situation of

1425
the assets of a company at regular intervals—will show whether or not firms are in a proper position to meet their liabilities. If such action is taken in good time, there is no need for anything more. I suggest that the 1974 Act, and the regulations already in force under it, make it doubtful whether anything more is necessary. My main contention is that while we are ready to look at what the noble Lord, Lord Beswick, has said before we come back on Report, I hesitate to be a willing partner to wide powers which are doubtfully necessary at this moment.
Lord BALFOUR of INCHRYE: The noble Lord. Lord Aberdare, has deployed very clearly the objections to Clause 16, but I have another objection, if I may put it to the Minister. Clause 16 states:
"If it appears to the Secretary of State, in the case of any authorised insurance company, that the company may be unable to meet its liabilities … "
I am concerned with the phrase:
" If it appears to the Secretary of State … "
The Board must then treat the company as a company at risk. But let us go back to Clause 2(1), which we discussed on Tuesday when we had a very considerable debate on the difference between "guidance" and "direction ". I think the general conclusion of the Committee was that the Board is really under the orders of the Secretary of State. The noble Lord, Lord Aberdare, has put forward the possible heavy political pressures upon the Secretary of State to rescue the interests of his constituents, which are in danger. As at present drafted, Clause 16 means that the Secretary of State could give directions—I call them" directions "; the Minister may call it "guidance ", but do not let us split hairs on the difference between "guidance" and "directions "—to the Board to take a certain company and label it as "at risk ".
He could then continue his "guidance "—or "directions" as the case may be—as to what the Board should, or should not, do in that case. If Clause 16 is to remain. I wonder whether we could divorce it from the powers given to the Secretary of State in Clause 2(1), in order to ensure the independence of the Board in the consideration of any particular case.
Lord HOUGHTON of SOWERBY: This clause, as well as other clauses in the Bill, has to be tested against the first principles of the Bill. That means that anything that the Board do involving a charge on their funds is utilising the proceeds of a compulsory levy on policyholders—directly, or on their behalf—for the purpose of protecting other policyholders. This is not a Bill for the promotion of the good name of the insurance industry. I submit that it must take care of its own reputation by its own practices and its own prudence and commercial and administrative integrity. The Bill, as its Title implies, is for the protection of policyholders; and so the question is: what are the reasonable limits of the protection to be given, and what are the reasonable limits of the protection to be given to some policyholders at the expense of all policyholders? These are the questions we must answer.
One can fully understand that there are occasions when a rescue operation, carried out in time, could be less expensive to the Board and to the Fund than if a company were allowed to go into liquidation. It is this matter that we must take care of in this clause. I am not concerned with the general wellbeing of the industry in this context. We have to look at this as a legitimate charge on the Fund to perform a certain function of protection of policyholders who are at risk.
I think that the reasonable principle would be that no rescue operation should be undertaken which would cost more to the fund than allowing a company to go into liquidation. To use money to protect policyholders beyond the prescribed limits of the Bill in a rescue operation is to use the funds for a wider purpose than is really intended. This is a difficult equation to be struck. Of course, I understand that the Board has no mandatory obligation to do so, but I take the point made by a noble Lord a moment ago about Secretaries of State. In the present system of Parliamentary administration the trend is for Ministers to gather more and more power and more and more patronage. I think this must be watched; otherwise there will be Boards of various kinds, ostensibly independent, nicely represented by all the interests concerned with the predominance of the insurance interests on the Board, if you like. Nevertheless, when it comes to the crunch the

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Secretary of State will be the person with the power—and, if not the power, the influence and probably the Parliamentary strength to enforce whatever he believes to be the result of the benefit of his discretion.
I think that we must beware of this. Whatever our political views, we are not in favour, surely, of endowing Ministers with more power than it is reasonable for them to have and to exercise in the interests of the community or in the interests of a section of the community. Therefore I think that when giving power to the Secretary of State which indicates that he is going to have influence or power of direction, it is reasonable that those powers should be prescribed. I would suggest that the remedy to Clause 16 is not to remove it entirely from the Bill, because to deprive the Board of the opportunity of undertaking this kind of exercise would be harmful to certain purposes of the Bill. My anxiety is that the Board should not be encouraged, or even have their elbows twisted, by the Secretary of State to undertake a rescue operation which is against their better judgment and which might be more costly to the Fund than if they allowed the company to go into liquidation and protected the shareholders according to the conventional pattern of the compensation available under the scheme. That is the issue and it should be incorporated in the clause.
The Earl of ONSLOW: Having been referred to by the noble Lord, Lord Aldington, the day before yesterday as a "siren voice ", I should like to make two or three comments on this Amendment. First—and this is the "siren voice" one—as I said before, I think that a slightly larger number of policyholders ought to be protected; but, having said that, it seems to me that this clause is an accompanying protection measure. Arising from that, this could encourage companies to offer higher terms of brokerage or higher brokerage percentages and put themselves more at risk to attract more business on unsound underwriting policies. Secondly, the noble Lord, Lord Beswick, was saying that the rescue of companies was becoming more difficult without this clause. I am not sure that it would not be more difficult with this clause. The industry could say: "There is the Board. Let it pick up our chestnuts! "This is the worry.
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The noble Lord also, wisely, produced the argument about reserves being put at serious risk by very high rates of inflation. On Tuesday, the noble Lord, Lord Winterbottom, mentioned Germany in 1923, which unfortunately is obviously too much in the forefront of our minds at the moment. Could he perhaps produce some of the nearest historical precedents for this appalling inflation, perhaps some figures as to what happened to insurance companies at that time—and I know that this is being thrown at him out of the blue—to see what sort of effect there was and how many companies went broke and so on? I think that information of that sort would be a guidance.
Several companies have been rescued by the industry. Companies' difficulties normally have been either through lack of cash flow or unsound underwriting policy; but enormous numbers have been rescued. I am worried whether perhaps this might discourage the industry from rescuing and encourage it to give higher rates of agency commission.
12.25 p.m.
Lord PEDDLE: My noble friend, Lord Houghton, in making his comments made reference to his own personal doubts concerning this particular clause. While he would deplore any action in using the resources of policyholders for rescue operations that went beyond protecting the interests of policyholders, he felt that this might conceivably be able to achieve that objective at less cost. I know that the noble Lord, Lord Houghton, shares my view and the views of others of my noble friends on this side of the Committee in our attitude towards this Bill; but I would urge him to give greater weight to the first part of his considerations.
I believe that this is a bad clause. It is one that should be withdrawn. I put down an Amendment along similar lines to that of the noble Lord, Lord Aberdare, but in view of the fact that he put his down first I withdrew mine. I am appreciative of the comments made by my noble friend Lord Beswick. They require considerable study, and I would delay pressing this matter until I have given some thought to what has been said. However, I would take this opportunity of underlining a point that I have made on a previous occasion; namely, that I consider this clause to be wholly

1429
bad because it goes well beyond the concept of protecting the policyholders.
When, in terms of the Bill, we speak of protecting the policyholders, we think in terms of what it is going to cost policyholders in other, sound organisations. It is not a hand-out by the Government; it is a contribution by other quite innocent, usually small, savers, and that must be borne in mind. I said on Second Reading—and my noble friend Lord Beswick challenged it—that this was just as likely to benefit shareholders. That point of view was rejected. I can appreciate his argument; but he went on to say in his own explanatory comment that if a shareholder is recalcitrant then this clause would not be operated. The mere fact that one accepts the possibility of a shareholder being recalcitrant indicates that he is urging for something more than the Board would be pleased to give him. That would indicate that the shareholders would have some influence on whether or not the rescue operation was performed. You cannot have it both ways. If the Board's policy is going to be varied by the attitude of the shareholders, then one must inevitably concede that the shareholders have not only some involvement but also some influence. Where you have a widely dispersed shareholding it is obvious that some would hang out for a higher price, because if a rescue operation must be performed there must be a buying out.
Lord BESWICK: I cannot follow what my noble friend is saying. We are dealing with the liability towards the policy holders. The interests of the shareholders do not come into this at all.
Lord PEDDIE: I know that that is what my noble friend is saying; but I am saying that you cannot avoid the fact that the shareholders will benefit. That is my point.
Lord BESWICK: There would be no shareholders. They will have lost. They disappear so far as any protection purpose is concerned. The shareholders, the managers, if they were culpable, go out of it. They have lost. The only individuals who come in for consideration are the policyholders.
Lord PEDDIE: Is it suggested it is expropriation? Is it suggested that the shareholders get nothing at all and the
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Board have the right and power to say, "You get nothing; we take it over and you have nothing to do with it "?
Lord BESWICK: That is exactly what I am saying.
Lord PEDDIE: It should be made more clear in this clause. I am sure the opposition to it would then be far more strenuous, if those powers are to be given. However, let us forget the shareholders for the moment; there may be arguments on that, but there is no argument at all on the fact that if we extend it along the lines indicated by the clause there will certainly be benefit to a wider range of policyholders. There would be overseas business, trade risks, reinsurance and marine business and there would also be trade creditors. Trade creditors would be paid in full. By the application of this clause there will be a considerable extension. I share the fears of the noble Lord opposite when he seemed to imply that if this clause stays in you may as well forget the rest of the Bill, because there will be such pressure for the operation of these powers that the others will never be called into operation. Frankly, I think it is bad because of that, and it goes well beyond what was in the minds of those who prompted this Bill, that it was to provide some protection for the policyholder. There are many other points which can he made. I do not intend to pursue them except to say that I will read with very great care indeed the points that have been made by my noble friend. At the same time, I have great reservations.
12.32 p.m.
Lord BANKS: After listening carefully to the discussion which we have had, I am left very unhappy about Clause 16. The noble Lord, Lord Beswick. made the point that the majority on the Board would be representatives of the insurance industry who would be able to decide whether or not to apply Clause 16. But, as other noble Lords pointed out, the validity of that argument depends to a great extent on the degree to which the Board are subject to direction by the Minister. The noble Lord, Lord Beswick, said that the procedure in this clause would not become standard practice and would be used sparingly. The point which came out from the Second Reading debate was that people felt that the principle of the clause was wrong, and that has again been repeated during our

1431
discussions today. If the principle is wrong, even if it is used sparingly, its use is wrong.
The fears people have had about this clause have been twofold: first, that the shareholders, creditors of non-private policyholders, would benefit as a result of a rescue operation. Now the noble Lord, Lord Beswick, says, as I understand him that the shareholders will get nothing at all for their shares and the shares will be expropriated. If they get anything at all for their shares they are getting some advantage from the rescue operation. The fact that the words, "as far as it is reasonably practicable" are used in the clause must throw some doubt on the argument that shareholders will get no benefit in any circumstances.
Lord BESWICK: What I am saying is that they will not get any benefit out of this rescue operation.
Lord BANKS: The point the noble Lord has been making is that if the company is saved from complete failure, and prevented from going into liquidation, the shareholders could conceivably benefit from that, even though they do not get any further benefits under the new arrangements which take place once the rescue operation is carried out. That is the fear which is there: that any benefit of that kind is to be prevented "so far as reasonably practicable ". That suggests that there is a possibility that to some degree it will not be found to be reaonably practicable.
The second objection is to the diversion of the funds away from people who have paid premiums to sound companies for the purposes of rescue operations which seem to go far beyond the purposes for which the Bill has been introduced. It is the feeling that this clause is wrong in principle which has caused the objection to it and the feeling that it should be withdrawn. The fact that there may be people from the insurance industry on the Board and that the power may not be used very often does not overcome the fact that if it is wrong in principle it ought not to be put into practice at all.
Lord SINCLAIR of CLEEVE: I will not detain the Committee for more than a few minutes. I must declare an interest: up until two years ago for some 15 years
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I was a director of an insurance company and, in the course of that time, I learned a little about the industry and conceived a high regard for the general standard operating in that industry. The cases which have given rise to Clause 16 have been, fortunately, very few. I think it is very important that nothing should be done as a result of this Bill which would increase the danger of such cases becoming more numerous in the future. I agree very much with all that the noble Lord, Lord Aberdare, said in speaking to this Amendment.
I shall study carefully the reply which the noble Lord, Lord Beswick, made. My impression, in listening to him, was that it was an extremely fair exposition of Government policy which would appear, in general, to be reasonable in the circumstances. Yet, from such knowledge as I have of the industry, I should not think that if this clause remains we should expect to see any result other than an increasing number of unsatisfactory cases where a rescue operation would become necessary. I agree with every word which my noble friend Lord Caccia said on the subject. I hope, subject to what we may read and understand between now and Report stage, eventually due consideration will be given to the abandonment of this clause.
Lord HAWKE: I have a small interest which I forgot to declare on Tuesday. On what grounds will the Board be able to act? A company is alleged, in the opinion of the Minister, to be at risk, not in liquidation. Then the Board have to do various things to safeguard the policy; holders, either seeing that they are paid out or that their business is transferred to somebody else. What is the legal basis for that? If the company is in liquidation it is clear, but if it is not in liquidation I should have thought that the only legal basis was by consent of the shareholders who, aparently, are supposed to be pushed aside entirely. The shareholders may be rather obdurate; they may say:" We are not going to consent to having all our policies taken away from us unless there is some safeguard for our own position." I leave that thought with the noble Lord because I am uneasy about it.
Viscount SIMON: May I also ask one short question before the noble Lord replies? In his clear exposition, which

1433
we shall all need to study in Hansard before we decide what ought to be done with this clause, he mentioned, in balancing the different cost of taking various options, the cost of liquidation. But surely the cost of liquidation will not fall upon the Board and the levy. They have nothing to do with that. Their obligation is to pay policyholders their dues. But if there is no money to pay the liquidator, it is not going to come out of the levy fund, is it?
Lord AUCKLAND: I spoke of this clause on Second Reading and I used a rather racy expression, "shoring up ", which on reflection I think could have been modified. The noble Lord, Lord Beswick, quite rightly reprimanded me for having used it. However, one point has occurred to me. There can be two main reasons why a company gets into difficulty. One is gross mismanagement. or possibly even malpractice, on the part of those concerned in the company. The other is an abnormally large third party risk which was not envisaged at the time but which could put a company into difficulties and in need of rescue under the terms of this Bill. The question I should like to put to the noble Lord may be hypothetical; nevertheless, it is important. If a company is rescued and then later finds itself solvent, is it possible under the terms of this Bill for that company to set itself up again, and perhaps he the object of a further rescue operation? As I see it, this is not set out in the terms of the Bill, but in ordinary commercial practice it would seem to be a point worth considering.
Lord BESWICK: I wonder whether I might reply to some of these points at this stage. First, as to the question of a voluntary rescue, there is no reason in principle why one should not take place in the future. I thought I had made that plain in what I said earlier. I went on to say that the British Insurance Association has made it clear that it is becoming increasingly difficult to arrange rescues. In answer to my noble friend Lord Peddle, who still has this fear about the shareholders, may I repeat what I said in my opening remarks that one of the essential differences between a rescue under Clause 16 as against a voluntary rescue is that under Clause 16 it would be a pre-requisite that the share
1434
holders should lose their money—I cannot put it any clearer than that—and, moreover, the managers should lose their jobs if they were responsible for the company's difficulties.
Having said that, may I say that I have listened with great interest to what has been said. I did not agree with the noble Lord, Lord Banks, when he said that the objection running, through the speeches he had heard was one of principle, and that the principle was wrong. As I have understood it the great fear, which was expressed by the noble Lord, Lord Caccia, for example, was that the powers were too wide. The noble Lord, Lord Aberdare, thought the pressures on the Board would be too great and that they might mount operations which they would not otherwise have mounted. The noble Lord, Lord Balfour, said that the Board would be "under orders" from the Secretary of State to do things, which they would not otherwise wish to do. As I understand it, although I am sure we shall all read very carefully what has been said, it seems that the anxiety here is not so much against the principle of rescue—for, after all, I have before me representatives of companies who have themselves mounted rescue operations, so they cannot he against rescue in principle—it is rather a question of whether this Board will be compelled or persuaded to rescue a company, either by the Secretary of State or by the pressure of public opinion, in cases where they do not wish to follow such a course.
It might be possible to help if we were to limit in some way the circumstances in which the Board would carry out a rescue. This is a matter for consideration. I listened with great interest to the whole of the Second Reading speeches and I have since read what was said by the noble Earl, Lord Limerick. If I understood him correctly, he suggested that the possibility of rescue should be left to the Board, but he went on to express doubts as to whether it would be easy in practice to extinguish the interests of the shareholders. He appeared to share the fear expressed by my noble friend Lord Peddic—and it must be a very real fear since it exists on both sides—but I should like to make it absolutely clear that the fear is not justified. The noble Earl, Lord Limerick. suggested that the rescue operation should not come in

1435
until some precise stage, which would be specified in the Bill. I should like, if I may, to give some thought to the possibilities that would be open there.
For example, it might be possible to say that the powers of the Board under Clause 16 would come into operation only in the same circumstances as the powers under Clause 15; namely, if a company is in liquidation or if a provisional liquidator has been appointed. I put that forward as a possibility. I should have thought that would meet almost' all the fears that have been expressed—that about the width of fears, for instance—that the Board will be under pressure or that the Secretary of State will wield undue powers, if the question of rescue comes in only at that point. It is possible that there may have been a voluntary rescue before, and there may have been all sorts of things before, but if we reached that stage the Board would then be under an obligation to consider, and then only to consider, whether the circumstances justified a rescue operation. That seems to me reasonable and I wonder whether, on Report stage, we could agree on some Amendment which would make this possibility a statutory fact.
Another point was made by. I think, the noble Lord, Lord Aberdare—certainly, it came from his side—and it also seemed to be in the mind of my noble friend Lord Peddie, which was that the cost of rescue could be much more than the cost of liquidation. This would need to be studied and I am not sure whether it could be written into a Bill. But, certainly. I think my right honourable friend would agree that if it could be stated in some way—in the Bill if possible, or in some other way if that is not possible—that the course of rescue would be followed only if it were cheaper than liquidation. That is another interesting and, I hope, constructive point which could be considered before Report stage. Perhaps noble Lords will look at what I have said. I hope that we can reach some agreement and perhaps it may be possible to withdraw this Amendment in the meantime.
Lord HAWKE: Before the noble Lord sits down, could he answer my point. Is it a flaw in the Bill or have I misconstrued it? Legally it would seem extremely
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difficult for those operations to take place without the consent of the proprietors of the company.
Lord BESWICK: If the proprietors did not agree there would be no rescue, so the question does not arise. I am sorry that I did not answer the point.
Viscount SIMON: Could the noble Lord answer one short question? He referred to rescue being cheaper than liquidation. May I ask, cheaper to whom?
Lord BESWICK: Cheaper to the industry, the industry being the body from which the levy is raised. I was speaking from that point of view. As a rescue operation it would be cheaper than to allow the process of liquidation to take place.
Lord BALFOUR of INCHRYE: Does the Minister close his mind to the possibility of excluding the powers of Clause 2(1) of the Minister to give guidance to the Board in respect of their administration of Clause 16?
Lord BESWICK: I am not sure that that point does not arise under another Amendment, and I would certainly be able to say something on that. But on this narrower point of when the rescue operation would be mounted, guidance would not be possible outside the provision which I am suggesting we might consider should be put into Clause 16.
12.51 p.m.
Lord ABERDARE: We have had a very full debate on this clause. There are immense difficulties, and even greater difficulties than one imagined have appeared in the course of the debate. I still find it difficult to understand this matter of the position of the board of directors and the shareholders. As I understood what the noble Lord, Lord Beswick, just said, it would require the assent of the board of directors for this rescue operation to be mounted; at the same time, the shareholders as a result would receive nothing. I cannot see how any board of directors could agree to a rescue operation taking place if their shareholders were to get nothing at all. However, this is only one difficulty that seems to me to have arisen in the course of our discussions which needs looking

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into a good deal more closely. I think also that there are—
Lord BESWICK: May I interrupt to put a point? The noble Lord, Lord Aldington, will probably correct me if I am wrong, but I believe that in a recent case a board of directors and a company actually paid to be taken over—there was a negative transaction—because it was thought to be in the fair interests of the policyholders.
Lord ABERDARE: I understand that to be correct.
Lord ALDINGTON: There were special circumstances, but the noble Lord has not mis-stated a set of facts.
Lord ABERDARE: That may have been so in a special case—not one, I am afraid, with which I am familiar. But—
Lord PARGITER: If I may intervene, can we define the word "rescue "? The term "rescue" is used in regard to the rescue of something or somebody. If the noble Lord is using the argument that one could rescue the company and still leave the shareholders with nothing, that is no longer a rescue operation. I presume that a rescue operation entails keeping a company in existence, as distinct from some other type of operation which lets it go out of existence. "Rescue" must surely mean maintaining the body politic, as it were.
Lord ABERDARE: As I understand the Bill, and what the noble Lord, Lord Beswick, has said, that is not so and the shareholders lose everything. The noble Lord does not believe me. Will he kindly ask his noble friend Lord Beswick, or read the Bill, because this is exactly what we are speaking about. The shareholders lose everything, whereas in the case of what he—
Lord PARGITER: May we be clear? I am not now concerned with the rescue of policyholders as distinct from the rescue of something else. We were speaking in the rather narrower terms of the rescuing of an insurance company. At least, that is what I understood we were talking about.
Lord ABERDARE: That is what Clause 16 is all about. But where there is a company which is worth rescuing, it seems to me that the industry itself can
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be left to rescue it, keep it in being or take it over, with the added advantage that there are people, maybe debenture holders, whose interests are looked after in that case. I do not know what happens to them under Clause 16. Certainly, the shareholders in certain circumstances might have, or would have, a residual claim. There are innumerable difficulties. I would much prefer the noble Lord, Lord Beswick, to say that he will remove this clause and have a look at it again. We will certainly discuss it, if we may, in the intervening period between Committee and Report, but I think from what has been said from all parts of the Committee that it would be a much cleaner and happier operation, giving a good deal more confidence to those in the industry who have grave doubts about this clause, if we agreed to take it out at this stage and discuss the matter again before Report stage.
Clause 16 disagreed to.
Clause 17 [The insurance industry levies]:
12.55 p.m.
Lord PEDDIE Lord PEDDIE moved Amendment No. 54:
Page 15, line 3, after (" the ") insert (" net income of the company, such net income being equal to the ").
The noble Lord said: I hope we may take Amendments Nos. 54, 56 and 57 together. Amendment No. 54 would change the basis of the long-term business levy, which is the levy in respect of life assurance business. The Bill provides for the long-term business levy to be based on the premiums received on long-term policies effected after 31st December 1974—although there is a further Amendment after mine which would change the year from 1974 to 1975. At Second Reading it was pointed out by many noble Lords that one of the fundamental objections to the Bill was the fact that millions of small savers, saving through traditional life insurance companies, and entitled under their policies to a share in the profits of those companies, could in no circumstances secure any benefit from the guarantee scheme.
If their companies struck adverse circumstances, the position would be met by reducing bonuses to policyholders; and if the circumstances were so adverse that

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even this was not sufficient, then the financial circumstances would be so serious that the entire insurance industry would be in difficulty and no guarantee scheme would be of any use to anybody. Yet under this Bill it is these policyholders and many millions of small savers saving through traditional life insurance policies who have to meet the great bulk of the cost of any levies that may be imposed in respect of life assurance business.
As was pointed out on Second Reading, this is an objection in principle to the Bill. We cannot, I suppose, correct that at Comittee stage. It is however possible at Committee stage to modify the basis of the levy to make it less unfair to the policyholders in the traditional life assurance companies where, because of the high proportion of with-profit business, there is very little chance of failure. This is what my Amendment seeks to do. Instead of the levy being based on the premiums received on life assurance policies, it would base the levy on premiums received on life assurance policies, less the amount of profit distributed to the holders of life assurance policies. As compared with the basis of the Bill, this would reduce the amount payable by insurance companies with a high proportion of with-profit business, and increase it in those companies with little or no with-profit business. Incidentally, these are just the companies which can be driven insolvent in adverse conditions unless they are very carefully managed.
Some noble Lords will. I am sure, have seen the statement issued by the Scottish Provident Institution—one of the most respected of the life insurance companies; it was issued on Tuesday and I think reported in the Press yesterday. This states fully and clearly the point I have endeavoured to make, although in fairness I must say that the Institution is arguing against the guarantee scheme in principle; not arguing, as I am at this moment, for a modification in the basis of the levy. I would say at the outset that I do not propose to press this Amendment to a Division. We have set down the Amendment, because my colleagues and I are anxious to know what the Government have in mind. The Secretary of State indicated quite recently—I think at a lunch—that he is willing to consider
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other bases for this levy. Therefore, I shall be glad to know what the Government have in mind. Judging from the utterances of the Secretary of State, it appears that there is something basically wrong and that there is a willingness to give consideration to the study of some other basis. Because of that, I beg to move.
Lord WINTERBOTTOM: With the permission of the Committee, may I speak to Amendments Nos. 54, 56 and 57 together? If I understand correctly the intentions of my noble friend, the purpose of this Amendment is to vary the impact of the levy between companies carrying on long-term business according to the amount of their surplus that is allocated year by year to policyholders.
Lord PEDDLE: That is correct.
Lord WINTERBOTTOM: The effect is to lessen the impact of the long term levy on companies run on mutual lines. As my noble friend has said, through the Secretary of State the Government have already expressed considerable sympathy with the purpose of this Amendment, Which is to reduce the impact of the long-term business levy on companies run on mutual lines, where all or most of a company's profits accrue to the policyholder. Indeed, the Government have already given some thought to working out a formula to achieve this result, but have found it difficult to do so equitably. However, the Government are prepared to look at the matter again in the light of the proposal contained in these Amendments, in order to see whether we can work out a fair and acceptable scheme. I know that the Government would be most grateful for any positive suggestions coming from the sources for which the noble Lord, Lord Peddie, is speaking. I make no commitment, because there are great difficulties in devising formulæ which are applicable to all the various kinds of long-term business. However, with all the assistance that they can possibly get, the Government will try to work out something and. if possible, propose an Amendment at Report stage
Lord ABERDARE: I have great sympathy with the point which has been put by the noble Lord, Lord Peddie, and I am very pleased to hear that the

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Government will try to find some formula which will satisfy the point. I know that there are very grave difficulties over obtaining an acceptable arrangement, but I hope that we shall be able to make some progress towards it.
Lord WINTERBOTTOM: May I say to the noble Lord, Lord Aberdare, and to the Committee that any positive advice or assistance that the Government can obtain will be appreciated.
Lord PEDDIE: I appreciate very much indeed this indication of support, and I welcome the statement which has been made by my noble friend that this point is open for consideration. I look forward to our discussions, during which we shall probably he able to find a satisfactory solution to this problem. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
1.4 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 55:
Page 15, line 6, leave out (" 1974 ") and insert (" 1975 ").
The noble Lord said: I beg to move Amendment No. 55. Subsection (4) of Clause 17 deals with the long-term business levies. It says that the first levy may be made on
" the net premium income of the company for the year ending last before the beginning of that financial year in respect of long term policies effected after 31st December, 1974. … ".
On the premium income of a company, the current year is from 1st January, 1975. Therefore this would mean that a company would be paying a levy on policies written before the Bill was published and certainly before it passed into law. It means that in drawing up its contracts with its policyholders a company would have had no chance to consider how it could meet a possible levy.
May I give an example? In a linked life policy the contract between the company and the policyholder states the proportion of the premium which is allocated to units in the investment fund and the proportion that is kept for management expenses, life insurance cover and so on. The latter figure may be as little as 5 per cent., thus leaving 95 per cent. to be invested and 5 per cent. to cover risks and management
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expenses. If a levy of 1 per cent. was placed on a company and the company had to find it, it would have to come out of the 5 per cent. which had been put aside for management expenses—and that is 20 per cent. of the company's own essential financial backing
The reason for the Amendment is to suggest that in the long-term business area it would be fairer to these companies that they should have a chance to reconsider their contracts with their policyholders, and that the levy should not start to operate until after 31st December of this year. I beg to move.
Lord BESWICK: I hope that I have been able to follow what the noble Lord has said. As I understand it, if this Amendment were included in the Bill it would prevent any long-term business levy from being raised before the financial year 1977–78, since levies relate to income in the previous calendar year. Consequently it would reduce the potential size of the levy in future years. We have already accepted that it would be wrong for insurance companies to be levied in respect of policies effected before they had knowledge of the scheme. The Government's proposals were announced on 29th October, 1974. Therefore so far as policies effected this year are concerned, companies should have had ample opportunity to adjust their premiums or other policy conditions to take account of the forthcoming levy. I see no reason for delaying the imposition of the long-term levy for another year. Indeed, the Board's duties arise in relation to companies whose liquidation begins after 29th October, 1974. It seems wrong that they should have no access to funds to pay for the protection of long-term policyholders of such companies before 1st April, 1977. They would have no access to levies; and if they did not have the money from levies, they would have to borrow and the result would probably be more expensive to all concerned.
With that explanation, I hope that the noble Lord will feel able to withdraw his Amendment.
Lord ABERDARE: I will certainly have a look at what the noble Lord has said. I appreciate the difficulties. It was in my mind that the Board would have to borrow. As the noble Lord has

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rightly said, the levy would not be imposed until 1976 on the premiums of the year 1976, which means, as the noble Lords says, that the levy would bite in 1977. I see the objections to that. On the other hand, there is still the difficulty that many of these contracts with policyholders have been made and, so far as I know, have not been altered to meet the possible levy. However, I will have a look at it.
Lord BESWICK: They have been made since the date on which it was known what was going to happen.
Lord ABERDARE: I acknowledge that they have been made since the date the Government announced their intentions, but that does not mean to say that necessarily it will happen. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
1.10 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 58:
Page 15, line 25, leave out (" given") and insert (" recorded")
The noble Lord said: This is a technical Amendment, to meet what I understand is the normal practice of insurance companies and it would be better to use the word "recorded" than "given ". I beg to move.
Lord WINTERBOTTOM: As I think the noble Lord, from his brief introduction, would agree, this is a technical point which does not raise points of policy or principle. The Amendment in its present form is not entirely satisfactory since it should be made clear where the refunds and reinsurance premiums in question are to be recorded. However, in the light of the Committee's view and the views of the insurance industry, we undertake to consider the tabling of a suitable Government Amendment at Report stage.
Lord ABERDARE: I am grateful to the noble Lord. Perhaps we may take it that the same consideration would apply to Amendment No. 60, which I intended to speak to at the same time. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord ABERDARE Lord ABERDARE moved Amendment No. 59:
Page 15, line 28, at beginning insert (" in the case of general business ")
The noble Lord said: This Amendment refers to paragraph (c) of subsection (6) of this clause which defines the expression "net premium income ". It says that from the gross premium income you may deduct various things—paragraph (a) is rebates, paragraph (b) is refunds, and paragraph (c) is reinsurance premiums. This Amendment would leave paragraph (c) as it is in the case of general business. In other words, a company conducting general business could deduct from its gross premium income any premiums that it had paid towards reinsurance before arriving at the net premium income on which the levy would be calculated. But since the Amendment confines this to general business I have excluded long-term business from the general proposition. The reason is that, as I understand it, a great many life insurance companies reinsure their risks on a standard basis by arrangement with another company or companies, and very often a fairly large proportion of the sum assured. Therefore it would be more convenient to the life insurance company if, in their case, the levy was calculated on their gross premium income, leaving them to reclaim the correct proportion from the company with which they conduct reinsurance. It would also have the advantage that if the levy was not calculated on the gross premium income in this case you might find that a company was reinsuring a large proportion of its risks and would therefore pay a very small levy, and the levy would thereby be reduced. I hope that is a sufficiently clear explanation of a fairly complicated matter. I beg to move.
Lord WINTERBOTTOM: The noble Lord, Lord Aberdare, managed to make a fairly complicated clause fairly clear. I think I have grasped his point, but I understand that the original decision that the levy should be calculated by reference to premium income net of reinsurance was made in consultation with the insurance industry. If the industry now believes that it would be more practical for it to be calculated gross of reinsurance then the Government have no objection in principle. However, we

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believe that the Amendment is not satisfactory as drafted, since it is not consistent with the structure of the subsection—that is purely a technical drafting point—and in particular with the words at the beginning. I would therefore propose to consider the opinions expressed by the noble Lord, coupled with the opinion of the industry, with a view to incorporating any necessary change in a Government Amendment at the Report stage of the Bill.
Lord ABERDARE: I am most grateful. I accept that and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 17 shall stand part of the Bill?
1.15 p.m.
Lord LYELL: Before we finally decide whether this clause should or should not stand part of the Bill, is it in order for me to seek guidance and clarification as to what is in the mind of the Government with regard to treatment of such levies as are to be paid so far as the tax computations of the companies are concerned? I know the industry would care to seek some gentle guidance as to what is in the Government's mind. I think the simplest way, as noble Lords may be aware, is to allow the payment of such a levy as a legitimate deduction against the profit computation for corporation tax. I think noble Lords will be aware that a legal argument will immediately ensue over the treatment of these levies. If they are considered legally and for tax purposes as a tax, then I understand that such levies will have to be paid out of income after tax. I think that would be inconsistent with the present position of the life companies, whereby the investment income can be accumulated free of tax. This is for life companies' pension fund business.
Noble Lords will be aware that it is already accepted that tax is payable by life insurance companies on the basis of investment income less the management expenses. But where new costs are incurred, which is possible and, unhappily, likely, and these levies might be payable, then I think the industry believes that, where possible, they should be treated on the same basis as management expenses. In other words, the industry would seek to ask whether the
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levies can be treated as management expenses and as allowable expenses against corporation tax, just as insurance premiums to provide for such an eventuality would be an allowable expense.
I think the answer is a simple "Yes" or "No" as to whether such a levy, which is a completely new concept in any tax computation, will be, or is likely to be, treated as an insurance premium. I can see perfectly logical arguments for that. The Government might take the view that this is not an allowable expense; that it is in the nature of a levy or a tax and therefore should not be allowable against the corporation tax.
I believe the first formula that I set out, which was that the levies should be allowable, would be a move towards clarity and some consistency—at least I hope so—particularly where, in the case of life insurance companies, the corporation tax is already computed on a very specialised basis. I see that the noble Lord might have some clue of an answer and therefore I seek at this stage just to know what is in the noble Lord's mind.
The Earl of ONSLOW: If I understand this correctly—and I am sure I shall be corrected if I do not—this levy is on the net premium income of all direct business in Great Britain, other than marine, aviation and transport. What percentage of that direct business in Great Britain is corporate and what percentage is private? Therefore how much is the corporate sector, by its levy of premium income, subsidising the private sector?
Lord BESWICK: The noble Lord, Lord Lyell, would be very interested in what is going through my mind at the moment, but I do not propose to tell him. The general answer to his question must be that what is allowable and what is not is a matter for the decision of the Commissioners of Inland Revenue. But my view, supported by advice, is that a levy would be a deductible expense. If I am wrong, I will write to the noble Lord. So far as the question put by the noble Earl, Lord Onslow, is concerned, I cannot give an answer.
Lord LYELL: I am grateful for the explanation.
Viscount SIMON: May I ask one question before we agree to this clause? It has worried me a good deal, and has not

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been referred to at all. The provision of subsection (3) is that the levies are based on the previous year's income. The noble Lord, Lord Winterbottom, was at pains to remind us on Tuesday last that there is no levy unless there is a claim, and unless there is a failure. We are all hoping that there will be no failure. But since the levy is based on the previous year's income, would it not be necessary at the end of each year to make provision in the accounts for a contingent liability throughout the following year, in case a claim were made? If at the end of that year no claim has been made the provision can be released, but at that point a further provision has to be made in respect of 1 per cent. of the premium income of the next year, and so on indefinitely. So a sum, which will vary from year to year because the premium income will not always be the same, but which will be substantial, will at all times and continuously be taken away from the fund out of which participating policyholders will be entitled to draw their bonuses. Is it not a little misleading—and I am sure the noble Lord, Lord Beswick, never intended to mislead the Committee—to say that there is no loss to the policyholders until a claim is made on the fund?
Lord BESWICK: I am sorry, but I cannot answer categorically the question put. It would seem to me that any company makes provision for contingencies. One may say that this comes out of the pockets of policyholders, but nevertheless it is an inherent requirement for an insurance company to make such provision, and part of that provision would be used in the case of a call for a levy. That is how I see it working out, but I will look at what the noble Viscount said to see whether I can give him a fuller answer.
Viscount SIMON: Of course, the company has to make provision for contingencies, but this is an additional provision which will have to be made under this Bill. Therefore, it is an additional amount withdrawn from the fund which is available for the participating policyholders.
Lord BESWICK: This is a subject for an interesting discussion. I should not have thought it was additional in that sense here. In fact, with this legislation
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we are covering certain contingencies, are we not?
Lord DRUMALBYN: Reverting to the question put by the noble Lord, Lord Lyell, can the noble Lord, Lord Beswick, say whether it is not well precedented that any charge imposed by Statute, by an Act, should be declared to be deductible for the purposes of the calculation of taxation? I seem to remember having seen such provision. Can the noble Lord look into it? It seems far more satisfactory that this should be made clear in the Bill, rather than that it should be left to the Commissioners.
Lord BESWICK: That is a point. I was asked a somewhat complicated question and I am sure that if he had still been on these Benches the noble Lord, Lord Drumalbyn, would have given the same answer, that to give a categorical answer to a hypothetical question would be unwise. But I take his point, and will look into the matter.
The Earl of ONSLOW: May I just say that I did not expect the noble Lord to give me an answer now, but I shall be glad if he will undertake to write to me, of to let the Committee know.
Clause 17 agreed to.
Clause 18 agreed to.
1.25 p.m.
Lord PEDDIE Lord PEDDIE moved Amendment No. 62:
After Clause 18 insert the following new clause—
(" Levy on intermediaries to finance business expenditure of companies in liquidation
—(1) Subject to the following provisions of this section and to Schedule (Additional provisions with respect to contributions from intermediaries) to this Act, the Board shall, for the purpose of financing general business expenditure in respect of a company in liquidation require a contribution from certain intermediaries, such intermediaries being persons not in the employ of the company who have received any commission or other remuneration in any form from the company in respect of general business (hereafter in this Act referred to as a "general business contribution."
(2) Subject to the following provisions of this section and to Schedule (Additional provisions with respect to contributions from intermediaries) to this Act, the Board shall, for the purpose of financing long term business expenditure in respect of a company in liquidation require a contribution from certain

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intermediaries, such intermediaries being persons not in the employ of the company who have received any commission or other remuneration in any form from the company in respect of long term business (hereafter in this Act referred to as a "long term business contribution").
(3) The amount each intermediary shall be required to pay under general business contribution in respect of a company in liquidation shall be calculated by reference to the commission or other remuneration in any form received by that intermediary from the company in respect of general business in the three years prior to the beginning of the liquidation of the company; and any such income is thereafter in this Act referred to, in relation to any intermediary, as income of the intermediary which is income liable to the general business contribution.
(4) The amount each intermediary shall be required to pay under long term business contribution, in respect of a company in liquidation shall be calculated by reference to the commission or other remuneration in any form received by that intermediary from the company in respect of long term business in the three years prior to the beginning of the liquidation of the company; and any such income is thereafter in this Act referred to, in relation to any intermediary, as income of the intermediary which is income liable to the long term business contribution.
(5) The proceeds of general business contributions may be applied by the Board only on general business expenditure, and the proceeds of long term business contributions may he applied by the Board only on long term business expenditure.
(6) Schedule (Additional provisions with respect to contributions from intermediaries) to this Act shall have effect with respect to the requirement and enforcement of general business contributions and long term business contributions.").
The noble Lord said: With this Amendment I should like to take Amendment No. 96 which introduces a new Schedule after Schedule 2. This is an entirely new clause intended to give the Board power to recover part of the commissions paid by an insurance company in liquidation during the three years preceding the liquidation. The maximum amount which the Board can recover is the whole of the commissions paid during the year preceding the liquidation; two-thirds of the commissions paid during the previous year, and one-third of the commissions paid during the year before that. The Board cannot recover commissions except in respect of expenditure incurred by them in connection with an insurance company in liquidation.
It is well known that insurance companies which have failed in recent years
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have, almost without exception, paid substantially higher rates of commission than the industry generally, and this has been an important contributory factor in their failure. Moreover, there is little doubt that some insurance brokers were influenced by the very high rates of commission paid, and placed business with the fringe insurance companies, sometimes without proper regard to the suitability of the policies offered to their clients, or for the financial services of the insurance company. In these circumstances, it is desirable that the Board should have power to make at least a partial recovery of these commissions. In some cases, an insurance broker may be treated unfairly in that he may have acted perfectly properly and done work for which the commission was an appropriate remuneration, but the unfairness there is no greater than that inherent in the guarantee scheme, in that it charges the costs of the guarantee to policyholders in other insurance companies who bear no responsibility whatever for the failure. Those brokers who place business with a company which fails in that sense bear at least some measure of responsibility.
The Board would not he able to recover any of th se commissions unless they incurred expenditure in connection with the failed company. Any recovery of commissions that the Board decided to make in those circumstances would therefore reduce the amount of money which they would have to raise by way of levy on the insurance companies, namely, in practice, on the policyholders of the insurance companies. Therefore, overall I think the Amendment will reduce the degree of unfairness. I commend it to the Committee, and beg to move.
Lord BESWICK: I can understand the spirit behind what the noble Lord has said, even though I do not believe that this Bill is the right way of securing either the discipline or improvements in the sphere of insurance brokers. I have to say that insurance policies are issued by companies and not by intermediaries, and I cannot see that we can use this Bill as a vehicle for a drive against the intermediaries. That said, I agree with him that certain of those intermediaries have excessively pressed the merits of some policies in the past, and indeed the willingness of some of them to take part

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in voluntary rescue operations was welcome. The Government are well aware of the need to take a closer look at the operations of intermediaries and have been engaged in discussions to see whether in this area it is possible to define exactly what is a broker. That is important, as the present lack of firm definition may mean that some people may believe that they are receiving independent advice when in fact this is not the case. My right honourable friend has decided that the discussions have reached the stage when it would now be appropriate for him to ask the brokers' associations to examine the problem together with his Department.
There are at least two possible ways of dealing with the situation that we have in mind. One possibility would be for standards of education, training, financial security, conduct, et cetera, to be administered by, say, a professional brokers' institute and for membership or not to be a guide to the standing of the broker. An alternative approach, which would require further legislation and might take longer but is not ruled out, would be an official licensing scheme. We shall have to see what ideas the brokers bring forward and what views are expressed by the other interested parties who will be consulted. The Secretary of State wrote to the President of the Corporation of Insurance Brokers on 21st May inviting them to make suggestions on this matter. When their suggestions are received they will be considered in the light of views expressed and of what has been said by my noble friend. I recognise that this does not deal with what has happened in the past, but I hope that if we can tighten up in this way in the future the injustice or unfairness to which my noble friend has referred will be eliminated.
Lord PEDDIE: I thank my noble friend for that comment. I am pleased to hear that the whole problem is being examined. I welcome the inference that he is alive to the significance of the principle that lies behind this Amendment. I will make a special study of what he has said. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord PEDDIE Lord PEDDIE moved Amendment No. 63:
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After Clause 18 insert the following new clause
Levy on shareholders to finance business expenditure of authorised insurance companies in liquidation
" .—(1) Subject to the following provisions of this section and to Schedule (Additional provisions with respect to contributions from shareholders) to this Act, the Board shall for the purpose of financing both general and long term business expenditure in respect of a company in liquidation. which was an authorised insurance company, require a contribution from certain shareholders, such shareholders being persons who were shareholders of the company on the date of liquidation of the company or at any time in the three years prior to the date of liquidation (hereafter in this Act referred to as "general and long term business shareholders' contributions ".
(2) The amount each shareholder shall be required to pay under general and long term business shareholders' contribution in respect of a company in liquidation shall he calculated by reference to the income, by way of dividend or otherwise, received by that shareholder from the company in the three years prior to the beginning of the liquidation of the company; and any such income is hereafter in this Act referred to, in relation to any shareholder, as income of the shareholder which is income liable to the general and long term business shareholders' contribution.
(3) The Board may apply the proceeds of general and long term business shareholders' conributions on general business expenditure or on long term business expenditure, or partly on the one and partly on the other, in such manner as may appear to them to be reasonable in the circumstances of the case.
(4) Schedule (Additional provisions with respect to contributions front shareholders) to this Act shall have effect with respect to the long term business shareholders' contributions".
The noble Lord said: With Amendment No. 63, which is also a new clause, I should like to take Amendment No. 97, which introduces a further new Schedule after Schedule 2. I recognise that this Amendment has many similarities with the Amendment I have just moved and withdrawn, in that it provides on a similar basis for recovery of certain dividends paid to shareholders by an insurance company which has gone into liquidation if the Board incur expenditure in connection with that insurance company. As with the recovery of commissions, the maximum amount that can be recovered is the whole of the dividends received in the year before liquidation, two-thirds of dividends received in the previous year and one-third of dividends received in the year before that. The Board also may not recover any part of those dividends except in respect of expenditure

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which the Board incurred in connection with a particular insurance company.
Here is the nub of the point I want to make. There have been quite a number of insurance company failures over the last ten years or so, and in almost every case the shareholding, or most of the shareholding, has been held by a small number of people who have in practice managed the company and been responsible for the management practices which led to the failure of the company. In all these companies the shareholders received very substantial sums by way of dividends on their shares, some of which, in many cases, they themselves had voted. When the companies failed, these shareholders, namely, the proprietors, were not called upon to repay any of the dividends they had received, even though in at least one case, the Vehicle and General, the estimated deficiency is over £20 million. That figure is a measure of the loss suffered by the unfortunate policyholders in the failed company, a loss which will, if this Bill is passed, be spread a little more widely in the future because of the operation of the guarantee scheme. But the persons really responsible for the failure, namely, the proprietors, did not make a loss; they made a substantial profit.
So far as I know, there is no provision for recovery from shareholders generally if a company, not necessarily an insurance company, fails. If, therefore, this Amendment was accepted, the provision would be special to insurance. But then, it has been admitted on both sides of the Committee and by my noble friends on the Front Bench that insurance is special in many different ways, and certainly the guarantee scheme in the Bill is very much a special provision. As with the brokers' commission, my view is that there is a great deal of justice in recovering some of the dividends paid to shareholders. Indeed, I would urge this even more strongly than in the case of the brokers' commission. We are dealing in many cases with proprietors, the people who often were responsible for the failure. If we were levying policyholders to meet the results of that failure, it seems to me sad to have innocent policyholders in other companies having to bear the burden of that failure and those responsible suffering no loss; indeed, in some cases, as I have indicated, they make a
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substantial profit. I am sure the Committee would agree that that demands attention. I beg to move.
Lord HAWKE: Although there may be a moral case for getting money back from the proprietors of certain small companies that have gone into liquidation, I think the clause as it is would transfer the shares of all the principal insurance companies on the market into partly paid up shares, and that might have repercussions on the ability of people to hold them under various trusts. I am afraid it would have very wide repercussions on insurance companies' shares generally which would be most unfortunate.
Lord MONSON: I am strongly opposed in principle to this Amendment, as I am strongly in favour in principle of the previous Amendment moved by the noble Lord, Lord Peddie. As the noble Lord, Lord Hawke, has indicated, this would affect innocent shareholders in companies who were in no way responsible for the misconduct of the company concerned. If the noble Lord's Amendment were confined to the shareholders who are at the same time directors of the companies, there might well be something to he said for it; but ordinary shareholders are in no way responsible and in no way comparable with those amateurish, or in some cases unscrupulous, insurance brokers whose inefficiency, or in some cases malpractices, are responsible for guiding their clients into unsound contracts. For that reason I oppose the Amendment.
1.40 p.m.
Lord WINTERBOTTOM: As I understand it, my noble friend is arguing a case from a situation which is not a general one, where a major shareholder is a controlling shareholder and is therefore in a position to appoint managers and to determine policy to his own benefit. I think it is unwise to argue from a particular case to a wider general case. What my noble friend is proposing is to penalise shareholders who are in no position to influence the policies of the company. As with a number of these Amendments, this one appears to have been prompted by the effects of the issue of certain guaranteed income bonds with guaranteed surrender values. The Bill is designed to look to the future rather

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than to concentrate on one or two past cases. The Amendment also proposes certain arbitrary powers for the Board which accord ill with the desire of some noble Lords to define the Board's sphere of action precisely and in advance.
In the case of companies with many small shareholders the exacting of contributions could be a laborious business, the cost of which might often exceed the money obtained. The extra delay and expense involved in proceeding in this way may not always therefore be in the interests of the policyholders and of sound companies. The Government believe that the best way to protect policyholders is not to attempt to confiscate the dividends of shareholders of insolvent companies after the event, but so to regulate and supervise the conduct of insurance business that, so far as possible, insolvencies do not occur. This is a point which we have already discussed. With this object in view, my right honourable friend the Secretary of State for Trade is making more and more use of his considerable powers under the Insurance Companies Act 1974. I am sure that this is the right approach. Given the practical problems and the explanation that I have given of the Government's broad strategy, I hope that the Amendments will be withdrawn. May I add that the Amendment would also mark a departure from the principle of the limited liability of shareholders which, in itself, is a dangerous innovation.
Lord PEDDIE: I thank the noble Lord for his comments. It is rather interesting that he argues that it is confiscation if you pull back some of the dividends that were paid out just prior to the disaster, but that it is justifiable expropriation if the remaining shareholders are deprived of all their shares and all their rights. It seems an incredible distinction between the two. I realise the difficulties here, and I appreciate that, quite frequently, a shareholder is innocent. He has had no direct involvement and he may have been completely in the dark as to what was going on. But, as I pointed out, there have been many cases where the shares have been held by a small number of persons and surely, arising out of the points that I have made here, there could be some consideration which would ultimately result in clauses in legislation to deal with this factor.
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It was also stated by my noble friend that it is wrong to argue from a particular case to the general, as I appear to have done. I know that that may be right in theory, but is not that what this Bill is all about? Have we not, because of some particular failures, sought to introduce a general Bill to cover the entire industry? Therefore, I do not think there is anything wrong in my picking out a particular case in order to arrive at a general conclusion. However, I have ventilated the point. I feel that if you are going to penalise small policyholders and call on them to make a contribution, then at least those people who derive considerable profit from it should make their contribution. With that comment, I beg leave to withdraw this Amendment.
Amendment, by leave, withdrawn.
1.45 p.m.
Lord PEDDIE Lord PEDDIE moved Amendment No. 64:
After Clause 18 insert the following new clause:
Restrictions on issue of long term: policies
" .—(1) An authorised insurance company established in the United Kingdom shall not issue a long term policy of any description, and an authorised insurance company established in a country outside the United Kingdom shall not issue a long term policy of any description where the contract of insurance evidenced by the policy was made in the United Kingdom—

(a) if the premium chargeable under the policy is not in accordance with premium rates fixed for that description of policy with the approval of the person who is for the time being the actuary to the company under section 15(1) of the Insurance Companies Act 1974 or section 3(5) of the Insurance Companies Amendment Act 1973; or

(b) if the policy terms are not in accordance with policy terms fixed for that description of policy with the approval of the actuary to the company.

(2) An authorised insurance company shall be deemed to have the approval of the actuary to the company for the premium rates and policy terms for any description of policy only when it has obtained and submitted to the Secretary of State—

(a) a certificate for that description of policy signed by the actuary to the company certifying that in his opinion the premium rates are adequate and in accordance with sound insurance principles and that the policy terms are in accordance with sound insurance principles; and

(b) a statement for that description of policy signed by the actuary to the company setting out the terms of the policy and the formula and basis by which the premium

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rates have been calculated, including for this purpose the mortality and interest bases, a statement of the provisions for taxation and expenses, and the maximum rate of commission provided for.

(3) The actuary to the company shall not for the purposes of this section approve premium rates for any description of long term policy unless he is satisfied that they are adequate and in accordance with sound insurance principles, nor shall he approve policy terms for any description of policy unless he is satisfied that they are in accordance with sound insurance principles.
(4) Where in the case of any authorised insurance company premium rates for any description of long term policy are approved by the actuary to the company, the company shall not pay or allow in respect of any policy of that description any commission or other remuneration in any form to persons not in the employ of the company, greater in cost to the company than the maximum rate of commission certified by the actuary.
(5) The actuary to the company in giving his approval in respect of the premium rates or policy terms for any description of long term policy shall state whether, in his opinion, there are any circumstances in which it would become unsound for the authorised insurance company to continue to issue policies of that description on the basis of the certificate and statement required by subsection (2). and the company shall not in those circumstances continue to issue policies of that description.
(6) An authorised insurance company which issues a long term policy or pays or allows a commission or other remuneration in contravention of this section shall be guilty of an offence.
(7) A person guilty of an offence under this section shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or to both;

(b) on summary conviction, to a fine not exceeding £400.")

The noble Lord said: Amendment No. 64, and this series of Amendments, are in my opinion the most important which I have the responsibility of moving on behalf of my noble friends and myself. In my opinion, they are also among the most important Amendments that have been put down. Therefore, I hope that the Committee will bear with me when I try to argue the case closely and in some detail.
Throughout the discussion on this Bill, there has been constant criticism that the Bill does nothing to prevent the irresponsible management practices which led to the failure of the two fringe life insurance companies last year. It has been stated on both sides of the House on Second Reading and during the Committee stage
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that prevention is better than cure, but there is nothing in the present legislation which, even after all the regulations are made, will enable the irresponsible management practices to be prevented. That is a statement of fact. Therefore, there is an obvious need for a clause preventing such practices, and it is surprising that the Government have not seen fit to include one in this Bill.
What this clause does in substance is to prohibit an insurance company from issuing life assurance policies except on terms approved by the actuary to the company. Noble Lords will not be surprised to learn that quite a number of foreign countries have a provision similar to this in their legislation, and that other foreign countries go further and prohibit insurance companies from issuing policies except on terms approved by the Government; in practice, of course, the insurance division of the appropriate Government Department. I do not think that it is necessary to go so far as Government control of premium rates; I certainly would not care to see that. But the proposed new clause provides for the actuary to be required to state the basis on which he has calculated the premiums.
As in all other professions, there are actuaries and actuaries. The requirement to state the basis which, if anything went wrong, the actuary would have to justify, is some safeguard against a weak actuary being pressurised by a strong proprietor. I stress that in no sense does this proposed new clause put an actuary on some sort of pedestal where he would have the job of running the company and controlling the management, or having to veto the decision of the company's directors, unless those directors proposed to stray beyond the bounds of safety, putting at risk people's life savings which have, in effect, been entrusted to them by taking out life insurance policies. To my way of thinking, that is the kernel of what I have to propose in this Amendment.
If people's life savings are to be protected, then there must be some limits beyond which a company should not be allowed to go. The actuary to the company is in the best position to decide where those limits should lie in respect of long-term life insurance business. The noble Lord, Lord Brown, put his finger on this point on Second Reading when

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he said that Clause 12 of the Bill provided for the scaling down of excessive benefits if an independent actuary reported that they were excessive. He wondered, since it was known that the granting of excessive benefits contributed to the recent failures of life insurance companies, would it not be better to have the actuary's report before the policies were issued and then stop them from being issued if the benefits proposed to he promised were excessive.
The seriousness of this matter—and it is a very serious matter—is exemplified by the circumstances leading to the failure of London Indemnity last year. This company failed, because it issued large numbers of guaranteed bonds at substantial single premiums carrying a guaranteed surrender value. When interest rates grew, many policyholders surrendered their policies in order to invest the proceeds of surrender to better advantage, and this broke the company. The company had also cut the premium rates too fine and had paid excessive commissions to brokers, and I need not belabour that point. It is precisely this sort of thing that leads to failures and to the loss of people's life savings, and it must be stopped.
Obviously, there is a grey area in the sense that actuarial opinions may differ to some extent, and what may be sound in some circumstances may be unsound in others. The proposed new clause allows for this latter point in subsection (5). Let me make it clear that from discussions on this matter I understand that the Institute of Actuaries has some reservations about requiring prior actuarial certification of interest premium rates and policy terms. I confess that I simply cannot understand the reasons for their reservations. We all know from practice that professional bodies tend to have reservations about everything under the sun, particularly if it means change, but what we are dealing with here is not a matter which solely or even primarily concerns the professional body. What we are concerned with is people's life savings being put at risk by irresponsible management and the appropriate legislative steps that should be taken to prevent this from happening.
In any case—and this is important—I
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understand that the Department of Trade, with the agreement of the Institute of Actuaries, wishes to include in the quarterly returns, which, when the regulations are made, insurance companies will be required to submit, a question to be answered by the directors stating whether or not the terms of all long-term policies issued during the previous quarter have been approved by the actuary to the company. If the Government and the Institute of Actuaries are prepared to accept this, I cannot see why they should baulk at a requirement for prior actuarial certification. Either method requires the keeping of precisely the same records and involves the actuary in precisely the same way, because presumably if, under the Government's methods, a quarterly return stated that all the policies issued during the previous quarter had not been actuarially approved, then obviously the Department of Trade would be down on the company like a ton of bricks—one would hope so, anyway—and there seems little point in having the question on the quarterly return unless the Department of Trade intends to do this.
There is, however, one vital difference between the two methods, apart from the fact that prior actuarial certification requires further legislation, whereas quarterly returns can be introduced by regulations under the 1974 Act. The vital difference is that once a fringe company has issued a substantial block of single premium bonds or immediate annuities, or some other sort of policy requiring substantial single lump-sums from policyholders, on unsound terms, then one can have quarterly returns until one is blue in the face, but that company will be in serious trouble if circumstances become adverse. Surely it is much better to stop the company from doing that in the first place, and that is what the noble Lord, Lord Brown, suggested on Second Reading.
A further multiplication of form filling, which is already, I am informed, almost overwhelming in the insurance industry, is not the answer. It may increase the number of civil servants and so on, but it does not stop unsound practices which imperil people's savings. I hope that the Government will accept this Amendment, which I regard as being of the greatest importance. I say straight away that it is more than likely that its wording is not

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in the best form, although a great deal of care has been taken in its drafting. If there is anything wrong with its wording, I hope that we can have discussions about it. What I am concerned about is the principle involved and I am positive that both sides of the Committee will agree with that principle. In my opinion, this proposed new clause is one of the corner stones of genuine policyholder protection and I sincerely hope that the Government will accept it. I beg to move.
Lord ABERDARE: I have great sympathy with the point of view put forward by the noble Lord, Lord Peddie, who made a powerful case. He will have everyone's sympathy in trying to put prevention ahead of any sort of later rescue. I do not know how well drafted his proposals are and I will listen with great interest to what the noble Lord, Lord Beswick, says, but I should like briefly to express my sympathy with his proposals, although there are many difficulties in the way. Like him, I have been in touch with the Institute of Actuaries who, as he said, have some reservations; I think mainly a feeling that it is really for the board of a company to run the company and for the actuary to advice the board, and they foresee some difficulty if the actuary is to be given the responsibilities that will be laid on him by these proposals. But we have general sympathy with the noble Lord.
Lord BESWICK: I agree with my noble friend Lord Peddie that these are important Amendments, and I also agree with the noble Lord, Lord Aberdare, that my noble friend made a very powerful case in their support. The difficulty is that they do not fit into this Bill. They are important matters and they will need to be dealt with but, as we said at the outset, this Bill is only part of the armoury which the Secretary of State has in enabling him to cope with the problems with which we are dealing. These Amendments deal simply with the premiums, policy conditions and surrender values which companies may properly offer in the course of their ordinary business; whereas this Bill relates explicitly to the consequences of an insurance company's insolvency. I am advised that in another place it is
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extremely unlikely that the Amendments will be accepted, because they fall outside the scope of the Bill. Nevertheless, I hope I can go a long way to meet what my noble friend wishes to achieve.
As I have said, there are other possibilities; in particular, there is the Companies Act 1974 and he has rightly said that the Secretary of State proposes shortly to lay regulations before Parliament under that Act. Those regulations will require companies to submit to him quarterly returns and accompanying certificates from appointed actuaries, designed to ensure that long-term insurance business is conducted in accordance with sound insurance principles in regard to premiums and policy conditions. The Secretary of State is guided by the advice of the Government Actuary in such matters and the Government Actuary will of course be examining the quarterly returns. It seems to me, therefore, that there is little difference between what my noble friend seeks to achieve and what the Government propose to do. But as to the details of what he said, I undertake that we will give careful consideration to it and bear his remarks in mind when the regulations are drafted. I feel certain he will find that to a very large extent what he seeks to achieve will in fact be achieved through the 1974 Act regulations.
Lord PEDDIE: I should like to thank the noble Lord, Lord Aberdare, for his general support of the principle underlying the Amendment. I also very much appreciate the comments of my noble friend Lord Beswick. I understand his difficulty, but I am greatly encouraged by his obvious recognition of the need for a clause of this character. I do not accept—and I am sure no one else in this Committee does either—the idea that it goes outside the scope of the Bill because the Bill is concerned with the protection of the policyholder. Perhaps the Bill has the wrong Title and should really be called the Compensation for Policyholders Bill. If it is for protection, this provision would be just right. However, I need say no more but thank my noble friend for his comments. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord PEDDIE Lord PEDDIE moved Amendment No. 65:
After Clause 18 insert the following new clause—
Restrictions on alterations of policies by authorised insurance companies.
(" .—(1) An authorised insurance company established in the United Kingdom (in respect of a long term policy of any description) and an authorised insurance company established in a country outside the United Kingdom (in respect of a long term policy of any description where the contract of insurance evidenced by the policy was made in the United Kingdom) shall not—

(a) grant a surrender value, unless the amount of such surrender value is in accordance either with a scale guaranteed on the issue of the policy which scale is one of the policy terms, or with a scale in being at the time of surrender and fixed for that description of policy with the approval of the person who is for the time being the actuary to the company under section 15(1) of the Insurance Companies Act 1974 or section 3(5) of the Insurance Companies Amendment Act 1973;

(b) grant a paid-up policy, unless the amount of such paid-up policy is in accordance either with a scale guaranteed on the issue of the policy which scale is one of the policy terms, or with a scale in being at the time of conversion to a paid-up policy and fixed for that description of policy with the approval of the person who is for the time being the actuary to the company; or

(c) otherwise make a financial alteration to the policy, unless the terms of such alteration are in accordance either with a basis guaranteed on the issue of the policy which basis is one of the policy terms, or with a basis in being at the time of alteration and fixed for that description of policy with the approval of the person who is for the time being the actuary to the company.

(2) An authorised insurance company shall he deemed to have the approval of the actuary to the company for the scales of surrender values and paid-up policies for, and the basis for the financial alteration of, any description of long term policy only when it has obtained and submitted to the Secretary of State a certificate for that description of policy signed by the actuary to the company certifying that in his opinion such scales and basis are in accordance with sound insurance principles.
(3) The actuary to the company shall not for the purposes of this section approve scales of surrender values and paid-up policies for, and basis for the financial alteration of, any description of long term policy unless he is satisfied that they are in accordance with sound insurance principles.
(4) The actuary to the company in giving his approval in respect of the scales of surrender values and paid-up policies for, and basis for the financial alteration of, any description of long term policy shall state, if in his opinion, there are any circumstances in which it would become unsound for the authorised insurance company to continue to use such scales and basis for that description of policy, and the
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company shall not in those circumstances continue to use such scales and basis.
(5) An authorised insurance company which uses a scale of surrender values for. a scale of paid-up policies for, or a basis for the financial alteration of, any description of long term policy in contravention of this section shall be guilty of an offence.
(6) A person guilty of an offence under this section shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or to both;

(b) on summary conviction, to a fine not exceeding £400.")

The noble Lord said: This new clause is, in a sense, subsidiary to the previous proposal which I withdrew. However, I feel that it is equally important, so I must briefly indicate the reasons for having put it down. The previous new clause covered the financial terms of a policy at the time it was issued, while the present proposed clause covers the financial terms if a policy is changed while it is in force. A policy can be issued on sound terms and at sound premium rates but if it is later altered and the new terms are unsound the safety of the company can be imperilled. The clause is necessary to complete the protection in this area supplied by the new clause proposed in Amendment No. 64. I beg to move.
Lord BESWICK: As my noble friend said, this Amendment should have been taken with the previous Amendment and what I said on that applies to this. On that basis, I have no doubt that my noble friend will withdraw the Amendment in the knowledge that what he wants to achieve will, in large part, be achieved by the regulations which are to be laid under the 1974 Act. With regard to the present Bill, as my noble friend said, it is for the purposes of protecting policy holders, but it is also for the purpose of protecting others who have been or may be prejudiced in consequence of the inability of authorised insurance companies to meet their liabilities. We are not dealing with the sort of situation in which the policing regulations which my noble friend has in mind would be appropriate. Nevertheless, I hope he will take it that what I have said in regard to Amendment No. 64 applies equally to the present Amendment.
Lord PEDDIE: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord PEDDIE Lord PEDDIE moved Amendment No. 66:
After Clause 18, insert the following new Clause—
Restriction on investment of long term business
(" .—(1) Every actuary who in his professional capacity signs a certificate after the passing of this Act relating to an authorised insurance company in accordance with Regulations made under section 13(3) of the Insurance Companies Act 1974 or under section 4(3) of the Insurance Companies Act 1958 shall at the same time inform the company in writing of the nature of the changes in the investments of its long term business which may affect the validity of his certificate, and in so doing shall have regard to the nature of both the liabilities and the assets of the long term business of the company.
(2) An authorised insurance company shall not make a change in the investments of its long term business of the kind specified in subsection (1) above without first obtaining and submitting to the Secretary of State a certificate signed by the actuary referred to in subsection (1) above certifying that in his opinion the proposed change does not affect the validity of his certificate referred to in subsection (1) above, or if the actuary referred to in subsection (1) above is not the person who at the time of the proposed change in investments is the actuary to the company appointed under section 15(1) of the Insurance Companies Act 1974 or section 3(5) of the Insurance Companies Amendment Act 1973, a certificate from the actuary so appointed certifying that in his opinion the proposed change would not affect the validity of the certificate referred to in subsection (1) above.
(3) Any person who makes a change in the investments of the long term business of an authorised insurance company in contravention of this section, or is aware that such a change is being made and does not inform the Secretary of State, shall be guilty of an offence.
(4) A person guilty of an offence under this section shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or to both;

(b) on summary conviction, to a fine not exceeding £400.")

The noble Lord said: This new clause has some similarities to the previous two, in that it is concerned with the need to set limits—in this case in the investment area beyond which life assurance companies should not be permitted to stray because they may endanger the savings which their policyholders have entrusted to them. Investments are a sensitive area with many people. I stress at this point that there is nothing in the proposed new clause that would enable the Government in any way to control the investments of
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insurance companies. The clause simply sets safe limits for investments in cases where that is necessary, so that policyholders' savings shall not be endangered. We must remember that Nation Life failed partly because, in the same way as London Indemnity, it acted rashly, but largely because it invested far too high a proportion of its life assurance fund in a speculative property investment in Bournemouth. That kind of thing must be stopped, but there is no power in the present legislation to stop it. I repeat: within the compass of the Bill we can introduce this kind of clause to add to the protection of the policyholder. I believe that that is what it is all about.
The regulations under the present legislation require the annual accounts of every life assurance company to contain a certificate from the actuary stating, in effect, that the assets exceed the liabilities—that is, that the company is sound. To check the solvency of a life assurance company is not simply a question of comparing cash assets and immediate liabilities. The assets, which are mainly investments, and the liabilities, which are the policies in force, both involve a long series of receipts and payments stretching far into the future. That is why an actuary is needed to certify the solvency of a life assurance company. However, the actuary's solvency certificate can be invalidated, especially if there is not a large margin of solvency or a substantial proportion of with-profits business, by a switch of investment into investments which are unsuitable to cover the liabilities of the company. That is especially so if too high a proportion of the investments is concentrated in one place, and it is worse still if that one place is a speculative investment.
I should like to focus attention upon the following point. It seems ridiculous to have a statutory requirement that a life assurance company must submit an actuarial solvency certificate each year when that certificate can be invalidated, even immediately after it has been given, by a switch in investments made by the proprietors, possibly without the knowledge of the actuary. If that is not a ridiculous situation, I do not know what is. The proposed new clause provides that when an actuary gives a solvency certificate, he shall inform the insurance company of the nature of the changes in its investments which might affect the

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validity of the solvency certificate. The company would then be prohibited from making changes in its investments without checking with the actuary that his solvency certificate would still be valid. There is no restriction upon the company's investment policy except in so far as the clause demands consultation with the actuary who has to give the certificate.
I know that it is proposed, when the new regulations are laid, to provide for actuarial solvency certificates quarterly instead of yearly. That certainly narrows the risk a little, but it does not protect the company's policyholders if the proprietor decides to switch the investments into highly speculative or unsuitable investments just after the actuary's certificate has been given. I have already commented on that, and the only way of stopping it is by prohibiting insurance companies from making a switch of investments, which may invalidate the actuary's solvency certificate, without first clearing it with the actuary. I have repeated that because it is so fundamental, so important.
I know also that the Institute of Actuaries has reservations about this clause. I am particularly concerned about the responsibility thrown on the actuary if he is required to state the nature of the changes in the company's investment which may affect the validity of his certificate. Here I can understand the Institute's reservation, although in the great majority of traditional insurance companies the safe limits of investment will be very wide indeed because of a substantial proportion of with-profit business which gives the company a very large buffer with which to ride out almost any contingency.
The actuary would have a problem only with the fringe company with little or no profit or with-profit business and barely adequate capital and free reserves, where the limits of investments would need to be fairly narrow. But if the actuary is not prepared to specify these limits when it is well known that investing outside these limits can easily imperil people's life savings, what alternative is there? I hope we all agree that the proprietors of life insurance companies should not be permitted to invest in such a way as seriously to imperil their
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policyholders' savings. If the actuaries are not prepared to set limits in these cases, it seems to me the only alternative is for the Government to set limits—and that I should like much less.
As with the previous clauses, this is not simply a matter for the actuaries; it is a matter of finding the best way of preventing irresponsible management practices that have led to the failure of life insurance companies and caused such hardships to their policyholders. I repeat what I said in regard to a previous clause: the actual wording of the clause may be imperfect, but I should like the Committee and my noble friends to consider the spirit that lies behind it. It is justifiable and in my opinion, without any question at all, would add enormously to the efforts which we are all seeking to make, to give greater protection to the policyholder. I beg to move.
Lord BESWICK: I have to say that, here again, we are dealing with the supervision of insurance companies and not with the protection of policyholders, and that this is a matter which would fall within the powers of the 1974 Act and not under the Bill we are now considering. But having said that, again let me say that I entirely share the spirit of the Amendment, and so do the Government. The noble Lord has explained what he wants to do; namely, to exercise proper control over insurance companies' investments. He wants to strengthen that control. On that matter some important work is already in progress. On 1st February this year we brought into operation new regulations made in December on the valuation of the assets of insurance companies. We hope to follow this up later in the year with regulations on the admissibility of assets. It is also our intention—and I stress this to my noble friend—to revise the terms of the appointed actuary's statutory balance sheet certificate so as to include specific reference to the long-term business assets, although the precise wording is still under consideration.
Under existing powers we are already going a long way to achieve the objectives which my noble friend is seeking. The regulations that the Secretary of State will be laying before Parliament on the quarterly actuarial certificate—to

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which I have already made reference—from the companies' actuaries will co r changes in companies' investments during the quarter and the effect of those changes on the financial condition of the long-term business. I believe that is in accordance with what my noble friend wishes, and it is in accordance with one of the recommendations of the Scott Committee. Here again, there is nothing between my noble friend and myself. The question is simply how to achieve what he seeks, and I have indicated to him that I hope under the regulations we shall obtain the situation that he wants.
Lord PEDDLE: I am very glad to hear my noble friend state that there is nothing between us on this matter. Realising that there may be a necessity for further consideration regarding the redrafting of the clause, and in the light of the assurances I have been given—which I greatly appreciate—I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
2.14 p.m.
Lord PEDDIE Lord PEDDIE moved Amendment No. 67:
After Clause 18 insert the following new clause:
Insolvency of authorised insurance company
" . If an authorised insurance company becomes insolvent in such circumstances that in consequence a levy under section 17 is made, this shall be treated as prima facie evidence of negligence by the Department of Trade in the discharge of its responsibilities under the Insurance Companies Acts, and the Secretary of State shall make a statement to Parliament explaining why the Department has not acted in sufficient time to avoid the necessity for a levy to be made."
The noble Lord said: My first reaction on reading this Amendment was that it might sound a little offensive to many of my good friends who are civil servants, and so I take the opportunity to assure them that nothing was further from my mind. Having personally spent six or seven years with the Prices and Incomes Board I could not fail to have a wholesome respect for the abilities of civil servants. The wording of the Amendment may be improved, but we are seeking here to treat an insurance company's insolvency, if sufficiently severe to lead to a levy under Clause 17, as prima facie evidence of negligence by the Department of Trade.
That might seem strong meat, but I believe that the explanation I shall give will show that the clause is certainly not intended to be offensive but that it can indeed protect the Department of Trade officials in circumstances where it would be proper to do so. The Department of Trade has the responsibility for administering the insurance companies Acts and thereby for ensuring, so far as practicable, that insurance companies do not become insolvent. Only the Department of Trade can police the insurance industry, because only the Department has the necessary statutory powers. The industry itself cannot prevent irresponsible practices by individual insurance companies. Even if it knew what was going on—which in most cases it would not—it has no power whatever to prevent such practices.
Nevertheless, the insurance industry has expressed willingness to assist and, in so far as it is proper, to share the responsibility with the Department of Trade. The industry has done this by offering to serve on an advisory body, and this is provided for in a later clause. Although the Department of Trade has the final responsibility, if an insurance company fails and the Department has been following the advice of its advisers, then although the proposed new clause would require a statement to be made, the statement could easily justify the actions taken by the Department. It is a matter of public concern that when an insurance company fails many ordinary people may lose a lot of money, yet the Department of Trade, which has the final responsibility, normally makes no statement whatever about what it has done.
When the Vehicle and General failed a few years ago, the tribunal, which was set up for an entirely extraneous reason, found one civil servant negligent in carrying out his duties and censured others. When London Indemnity failed last year—largely because of the heavy run on guaranteed surrender values, as a result of which the company's funds fell from £96 million to £70 million during the first eight months of last year—no statement was made and the public did not know what actions had been taken by the Department of Trade. On the face of it, it appears that if the Department of Trade had acted more quickly, the

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insolvency of London Indemnity would have been less and, in consequence, the losses suffered by the policyholders would have been less. No one knows whether or not the Department of Trade acted correctly. Surely in such circumstances it would be better if a full statement were made by the Secretary of State. I beg to move.
Lord BESWICK: I have expressed considerable sympathy with other Amendments which my noble friend has put forward, but I am afraid that on this occasion I cannot extend my sympathy, sympathetic a person though I am. I wonder whether we could not have put into some other piece of legislation some phrases about the responsibilities which my noble friend carries out in his capacity as chairman of the Post Office Users' National Council. In my view, he performs those functions absolutely admirably, and he is a splendid chairman, but I wonder whether I ought not to impose upon him an obligation to make a statement every time I have a letter which has been delayed for more than a day. Ought he not to account for his stewardship? Why should I suffer without his having to say what has gone wrong?
My noble friend will appreciate that apart from the fact that the Amendment as drafted would be considered inadmissible in another place within the framework of this Bill, there is every opportunity within the Parliamentary process to call for the Secretary of State to make a statement in particular cases. We have all the procedures of Parliamentary questioning, and I should have thought he would be content to use them without seeking to put this rather novel form of words into an Act of Parliament.
Lord HOUGHTON of SOWERBY: Before this Amendment goes the way of other Amendments—and never have more Amendments been withdrawn by so few—I have some sympathy with the Minister's argument a moment ago that it would be tiresome to hold anybody accountable for anything. It is always tiresome to have to hold anybody accountable for anything. With respect to my noble friend, I do not think that anything in this clause can be compared with the position of my noble friend as the Chairman of the Post Office Users'
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National Council. If my noble friend were in charge of the Post Office, then perhaps we could call him to account for increased charges. But as Chairman of the Post Office Users' National Council he is the watchdog on behalf of the public, who tries to restrain the bureaucrats from putting their hands unnecessarily into the pockets of the people—which is quite another function.
It would he unduly harsh on the Secretary of State to regard the failure of an insurance company as prima facie evidence of his failure; it probably would he, but I think it would he a little cruel always to regard it as prima facie evidence of his failure. It would also be awkward to ask the Secretary of State to explain himself. That, again, is something that Ministers usually do not like being required to do by Statute. Your Lordships will understand that I am about to form a trade union for the protection of Secretaries of State. Nevertheless, on a serious note I see no reason why the Secretary of State should not be asked to make a report to Parliament when there is a failure, an insolvency, which requires a charge on the funds of the Board. I think this could probably be done by some statutory requirement that a Report should be made by the Board—probably it is in the Bill; but I have not got as far as that yet. The public are entitled to know what the Board are doing and the Secretary of State should be the person responsible to Parliament for the things done under this Bill when it becomes an Act. I suggest that there is something here which ought to he given serious consideration; and, with that, I am sure my noble friend will now beg leave to withdraw his Amendment.
Lord CACCIA: May I add a further reason? Not only, surely, as the clause is drafted is there a question arising of a trade union to protect Secretaries of State, but the question is raised of the Department itself. I should have thought that that perhaps raised an issue of another character; that is, whether the Secretary of State is or is not responsible for his Department and held to be so before Parliament. Therefore, on another ground as well, I should have thought that as drafted this new clause might need to be withdrawn.
Lord PEDDIE: In the light of the comments made I will withdraw my

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Amendment; but I have taken note of the support expressed by my noble friend Lord Houghton. He joins with me in believing that all parties would be well served if the Secretary of State were called upon to make a statement to Parliament under the conditions I have described. I thank him for his references to the Post Office Users' National Council; but, discretion being the better part of valour, I had better not pursue that any further. I therefore beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
2.25 p.m.
Lord PEDDIE Lord PEDDIE moved Amendment No. 68:
After Clause 18 insert the following new clause.
Transfer of functions
(" . From a date to be prescribed, which shall not be later than six months after the passing of this Act, all powers and responsibilities which by the Insurance Companies Acts 1958 to 1973, by the Insurance Companies Act 1974, and by this Act, are exerciseable by or placed on the Secretary of State, shall be exercisable by or placed on the Industrial Assurance Commisioner, whose title from the same date shall be changed to Insurance Commissioner.")
The noble Lord said: Never was so much done by so few! I must apologise for wearying the Committee with this series of Amendments. It is a pity that noble Lords opposite did not break up the monotony a little. However, this is an Amendment which encompasses a point of view which was supported by a number of speakers at Second Reading, that it is better if the supervision of insurance companies is placed in the hands of a more independent body than a section of the Department of Trade, which is concerned with a vast range of trade matters and is subject to some political pressures. We already have an independent body in the form of the Industrial Assurance Commissioner, who is also the Chief Registrar of Friendly Societies, who is responsible for the supervision of industrial assurance business; namely, life insurance business, the premiums of which are paid at intervals of less than two months and are collected by house-to-house callers. His position was created by the Industrial Assurance Act 1923 and he is directly responsible to Parliament. As Chief Registrar, he is directly respon-
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sible for friendly societies, trade union societies, co-operative societies, working men's clubs and so on.
There is much to be said for transferring the responsibility of administering the Insurance Companies Acts to this official. It would have the advantage, especially for industrial assurance companies, of bringing all the regulations to which they are subject under the same heading. It would also have the possible advantage of bringing the practice of this country into line with the practice in most other countries. I do not intend to press this Amendment. I put it down because I hope the Committee will discuss the appropriate body to administer the Insurance Companies Act. I shall appreciate the views of noble Lords opposite, and certainly of my noble friend the Minister.
Lord WINTERBOTTOM: It seems that my noble friend is using this Bill to sow ideas in the heads of a number of people. This is a perfectly acceptable and agreeable way of doing things, provided one admits at the end that it is an exercise in cross-fertilisation rather than an attempt to amend major legislation.
If this Amendment were accepted, a fundamental change would be effected in the organisation of Government business. Whatever the merits of this proposal, I am sure your Lordships will agree that it would be quite inappropriate to introduce, in a Bill specifically concerned with the protection of policyholders, a radical change in a quite different area. It is a matter which requires the most careful thought and study both within Parliament and outside. But even if it were generally agreed that the Secretary of State's functions in relation to insurance companies should indeed be transferred to the Industrial Assurance Commissioner, this is surely something that should properly be dealt with in separate legislation. Your Lordships have been pressing in other areas for separate and specific legislation. This surely must fall in the same category.
Having said this, I think that I should refrain from any detailed comment. I would only observe that I find it difficult to see what would in practice be achieved by the transfer of responsibilities. The supervision of insurance companies is carried on according to legislation enacted

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by Parliament, and that legislation is the same whether the responsible authority is the Secretary of State, the Industrial Assurance Commissioner or anyone else. It seems to me that the legislation, not the executive authority, is the most important thing. We have new legislation passed in 1973 which is progressively being brought into force; we should give that legislation a chance to work before introducing radical changes of this sort. For these reasons, the Government must resist this Amendment.
Lord CACCIA: May I be allowed to put forward one more consideration besides this one of general principle, with which I entirely agree. There must be a limited number of people who are well acquainted with the insurance industry but who are not themselves engaged in it or in promoting the business which is now to be supervised and whose policyholders are to be protected. Are we not running into the danger of a "Parkinson" situation? Not only would there need to be members in the Department of Trade in order to assist the Secretary of State, but a whole number of other expert people would be needed, presumably largely recruited from the industry, to help the proposed Commissioner. Before we enter that road, I hope some very careful thought will be given to the memory of Parkinson.
Lord PEDDIE: I endorse the comment made by my noble friend, in that a number of Amendments have been put down for the purpose of drawing attention to the importance of the protection of policyholders. I do not recollect any Bill coming before this House which has had such universal condemnation as this Bill has. Therefore we have the problem of amendment. Someone made the comment about moving Amendments and then withdrawing them, but I think we would all agree on the appalling problem which lies before this Committee in trying to deal with the matter piecemeal. It was almost impossible merely by, say, securing a single Amendment or perhaps two Amendments, to achieve what we wanted. I hope that what we shall be able to do is to emphasise the feeling, which has been expressed on both sides of the Committee, of the need for greater stress on protection. Arguments
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have been advanced and pressed only so far, not because of any feeling of weakness on our part or because of a belief that an Amendment, if pressed to a Division, would not carry. I do not want the wrong impression to be given. We are doing it also because we are seeking to provide an opportunity for a full-scale reconsideration of the whole Bill. That is what we are after, and that is the sole reason why I personally may appear to be adopting the rather weak method of moving an Amendment and then withdrawing it. Having explained my action, I now beg leave to withdrawn the Amendment.
Amendment, by leave, withdrawn.
2.33 p.m.
Lord PEDDLE Lord PEDDLE moved Amendment No. 69:
After Clause 18, insert the following new clause:
Priority of debts to policyholders of protected policies in winding up
" .—(1) In the winding-up of a company in liquidation, every liability of the company in liquidation towards any policyholder under tile terms of any protected policy evidencing a contract the effecting of which constituted the carrying on of general business of any class, being a liability in respect of a contractual obligation of the company in liquidation existing before the beginning of the liquidation to make a payment to a policyholder (all such liabilities being hereafter in this section referred to as "outstanding claims shall be paid in priority to all other debts other than those specified in section 319 of the Companies Act 1948.
(2) The liquidator of a company in liquidation, as soon as practicable after the beginning of the liquidation, shall ascertain whether the assets of the company in liquidation, other than the assets representing the fund or funds maintained by the company in respect of its long term business, are sufficient to pay the debts specified in section 319 of the Companies Act 1948 and the outstanding claims.
(3) If the said assets are sufficient for this purpose, the liquidator shall pay the debts specified in section 319 of the Companies Act 1948 and the outstanding claims as soon as practicable after he has ascertained that the said assets are sufficient for this purpose, and before paying any other debts owing by the company in liquidation.
(4) If the said assets are insufficient for this purpose, or if the liquidator is uncertain whether or not the said assets are sufficient for this purpose, but the assets are sufficient to pay the debts specified in section 319 of the Companies Act 1948, the liquidator shall pay these debts and such percentage of the outstanding claims as the liquidator considers the remainder of the said assets will cover provided such percentage is 90 per cent. or more.
(5) If the percentage ascertained in accordance with subsection (4) above is less than 90

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per cent. the liquidator shall pay 90 per cent. of all outstanding claims in respect of which the Board is prepared to grant an indemnity covering such payments, and the percentage ascertained in accordance with subsection (4) above of all other outstanding claims."
The noble Lord said: I beg to move Amendment No, 69—
Lord BESWICK: This was dealt with with Amendment No. 51, I think.
The DEPUTY CHAIRMAN of COMMITTEES (Lord St. Helens): Does the noble Lord wish to move Amendment No. 69?
Lord PEDDIE: We are moving backwards and forwards; I am speaking on Amendment No. 69. When I moved Amendment No. 13 I mentioned then that that Amendment was the first of a long series which included this Amendment, No. 69, which I quoted at the time and which was to achieve three things. First, it would oblige the Board to operate the guarantee scheme only by means of indemnities to the liquidator. Therefore the money to operate the guarantee would in the first place come from the assets of the failed company. The second point was that it would give outstanding insurance claims on non-life policies a priority in liquidation. Thirdly, it would require the liquidator to accept an indemnity and make payments accordingly, if the Board were prepared to grant an indemnity. The new clause in Amendment No. 69 would provide for the second and third of these objectives: that is, priority in liquidation for outstanding claims, and the obligation on the liquidator to accept an indemnity from the Board.
This new clause can stand on its own; that is why I am moving it now in spite of my action on previous Amendments. It is independent of the earlier Amendments which would have obliged the Board to operate solely by means of granting indemnity to the liquidator. Indeed, from one point of view there would be advantages in dealing with the matter solely by means of the new clause in Amendment No. 69. If outstanding insurance claims are given a priority in liquidation and the liquidator is required to accept an indemnity from the Board, then the problem is largely solved, because the Board would almost certainly then choose to implement the guarantee
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scheme by means of giving the liquidator an indemnity. The defect in the Bill, as drafted, is that unless the outstanding claims are given a priority in liquidation. the liquidator would be unlikely to accept an indemnity by the Board. The Board would then be forced back on the method of making payments themselves and taking an assignment of policies' rights in the liquidation, which, as your Lordships will appreciate, would be more costly to the Board and consequently to the policyholders in other insurance companies.
I should like to make two points clear at the outset. The first line of this proposed new clause refers to "a company in liquidation "; but this is defined by Clause 5(4) of the Bill as an authorised insurance company going into liquidation on or after 29th October 1974. The new clause would therefore not alter the general liquidation laws but only the liquidation laws applying to insurance companies going into liquidation after that date.
Secondly, the words "protected policy" are used in the third line of the proposed new clause, and the new clause would give a priority in liquidation to outstanding claims on such a policy. These policies are not, however, confined to policies entitled to the protection of the guarantee scheme in the Bill. By Clause 4(2) of the Bill, as modified by subsections (3) and (4), protected policies are defined as all policies effected in the United Kingdom other than marine, aviation, transport and policies of reinsurance. The proposed new clause would therefore give a priority in liquidation to outstanding insurance claims on virtually all United Kingdom non-life policies including outstanding claims on policies taken out by business firms to cover trade risks. The proposed new clause does not, however, extend to life assurance policies. The words, "general business" at the beginning of the fifth line of the proposed new clause refer back to definitions earlier in this Bill and in the Insurance Companies Act and confine this proposed new clause to insurance other than long-term in the life assurance business.
I mention these points particularly because, in commenting on Amendment No. 13, which I moved, my noble friend Lord Beswick suggested that Amendment No. 69—the Amendment I am dealing with now—would make a fundamental

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change in the liquidation laws and have all kinds of dire results favouring particular policyholders against others and as against other creditors, and even, he said (and I hope I have quoted him correctly), damaging severely the conduct of companies in the insurance world. With all respect, I just cannot accept that statement. It is common practice in most other countries for outstanding insurance claims to be given priority in winding-up, with none of the dire results that Lord Beswick mentioned in reply to me when I was moving Amendment No. 13. Indeed, before many years have passed—or many months, probably; I do not know—it is quite likely that we shall be required to alter in this way the winding-up rules as they apply to insurance companies in this country. However, in view of the divided opinion on this subject among my friends on this side of the Committee, perhaps I ought not to pursue that point.
The new clause would alter the liquidation laws as they apply to insurance companies but not to companies other than insurance companies. What is fundamentally wrong in that? The last Insurance Act—the Insurance Companies Amendment Act 1973—altered quite substantially the liquidation laws as they apply to insurance companies. Indeed, if the Department of Trade had made the regulations and the provisions in that Act relate to liquidation, many of the difficulties of the Nation Life liquidation would have been avoided.
The reason why this new clause is so necessary, and the reason why most other countries give priority to outstanding insurance claims in a winding-up is surely obvious. If an insurance company fails—here I must emphasis that I am talking not about a life assurance company but about an insurance company transacting fire, accident, motor insurance and so on—serious hardship is caused to persons who have outstanding insurance claims. If a man's house is burned down and before his fire claim is paid his insurance company goes into liquidation, under the present law he is in terrible trouble. He gets nothing at all for many years, and then his claim ranks equally with the claims of all other creditors. It is true that the guarantee scheme would give him a limited measure of protection. However, the guarantee scheme does not
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extend to the fire insurance of a little corner shop. If a shopkeeper, who may be a man working on his own account, has chosen to operate as a limited company—as he might well have chosen to do for all sorts of reasons quite unconnected with insurance—and has his shop burned down, and possibly loses all his stock in trade as well, he gets no protection under this Bill. He would certainly be ruined because of the outrageous liquidation laws of this country as they apply to insurance, which, as I have said, are out of line with the rest of the world. I regard this Amendment as being of the greatest importance and it makes a substantial contribution to the intention which I think is held by all Members of this House, to add to the protection of the policyholder. Therefore, I beg to move.
Lord BESWICK: I am in something of a difficulty because, as the Committee will recall, we dealt with Amendments Nos. 13, 14, 16, 17, 21, 22, 24, 25, 28, 29, 45 and 51 and related those to Amendment No. 69. And when my noble friend spoke to Amendment No. 13 and subsequent Amendments I endeavoured to give him an answer to the substantial point which, as he rightly said, is embodied in Amendment No. 69. I am afraid I can only repeat the argument—if he wishes it—exactly as I gave it on Tuesday.
He made an interesting point about the difficulties of the little shopkeeper on the corner who may suffer fire damage and have difficulty in getting proper protection. I am not sure whether he is seeking to widen the scope of the Bill. It is conceivable that this is his intention, but Amendment No. 69 is unacceptable for the reasons I then gave. It would effect a fundamental change in the basic rule relating to the priority of creditors in a winding-up, that ordinary creditors rank equally, which would result, in effect, in money, which, under the present law would have been paid to non-protected policyholders and other creditors, being used to compensate protected policyholders. To that extent, it would be inequitable. It would worsen substantially the position of ordinary creditors in a winding-up, could well lead to such creditors being less willing to extend credit to insurance companies, and could thus have a damaging effect on the conduct of business of such companies. Indeed, the

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creditors might well seek to counteract the effect of the clause by insisting on the provision of security for their debts which would give them priority over protected policyholders. It would worsen the position of policyholders to whom the protection of the Bill does not extend; for example, the marine, aviation and transport policyholders and holders of overseas policies. I am certain that that is not the intention of my noble friend.
Finally, the clause does not even appear to achieve the objectives set out in Clauses 6 to 8. No provision is made for ensuring that insurance policyholders receive 100 per cent. of their claims. Further, in the event of funds available to the liquidator being insufficient to pay the protected policyholders up to 90 per cent., no provision is made for their receiving the balance. For those reasons, as I said on Tuesday, we do not think the clause should be accepted.
Lord PEDDIE: I am sorry if my emphasis on this matter has given my noble friend some embarrassment. I took the opportunity of emphasising how the liquidation laws operate and the need for some improvement. I do not accept the arguments that have been advanced as a counter to the points that I put forward. However, I will study them and I realise this is not the point at which to press this Amendment. I take note of what has been stated and give notice that we shall return to the matter at Report stage. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
2.48 p.m.
Lord PEDDIE Lord PEDDIE moved Amendment No. 70:
After Clause 18 insert the following new clause
Payment by liquidator of reduced sums out of assets of company in liquidation.
" . If the liquidator of a company in liquidation is given an indemnity by the Board in accordance with the duty placed on the Board by section 11(5) above, and the indemnity is in the terms specified in that section, the liquidator shall pay from the assets of the company in liquidation such reduced sums as specified in that section."
The noble Lord said: This Amendment applies only to long-term insurance business—that is, life insurance business—because Clause 11 of the Bill applies only to this class of business. The new clause
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corresponds broadly to the new clause in the previous Amendment, which applied to insurance other than life insurance. The new clause is of equal importance to the previous one, although it may require some minor modification in wording, because the Amendment which I moved to Clause 11(5) has for the present been withdrawn. Nevertheless the substance, and I hope the importance, of the proposed new clause is clear enough.
Clause 11 provides—and with this I entirely agree—that if a life insurance company fails the Board shall endeavour to arrange for the life insurance business to be transferred to another life insurance company, or for another life insurance company to institute substitute policies. This is clearly the best way to go about it. However, if this is not possible what needs to be done is for the policies of failed life insurance companies to be continued by the company in liquidation, albeit on a reduced basis, so that life insurance cover may be continued, annuities and pensions can continue to be paid and, in due course, maturity benefit and the like may be paid. That is clearly what was intended by the provisions in the 1973 Act, but these have never come into force because the necessary regulations have not been made. As a consequence, when Nation Life failed the liquidator was forced back on earlier and totally inappropriate provisions under which Nation Life policyholders will receive a proportion of the capitalised value of their life insurance policies. This is a dreadful state of affairs. It means that persons who have purchased an annuity in Nation Life, and perhaps are living on a regular annuity payment, will receive nothing at all for many years and then, at the end of the day, will receive a lump sum. I should add that that is what would have happened if a group of insurance companies had not been prepared to make special arrangements to mitigate this obviously undesirable result.
Clause 11(6) of the Bill appears to go back to the pre-1973 Act position, however, and seeks to perpetuate this arrangement, which I have described as dreadful of paying out lump sums. The new clause which is Amendment No. 70 may not be the best way of achieving a desirable result. It may be better to tackle the problem by amending Clause 11, or possibly Clause 15. In my opinion, which I

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know is shared by the entire life insurance industry, it is essential to ensure that the Bill is amended to provide that, if it is not possible to arrange for the transfer of the life insurance business of the company in liquidation, or the issue of substitute policies, then the business of the life assurance company must he continued so that the existing policies can be run off on a reduced basis, and with the protection of the guarantee scheme. I sincerely hope that the Government will be prepared to look very closely and sympathetically at these suggestions. I beg to move.
Lord BESWICK: This clause could have been taken, had my noble friend wished, with Amendment No. 69, and the objections which I put to that new clause apply largely to this clause, except in so far as Amendment No. 70 applies to long-term business. Under present company legislation, the liquidator's duty is to exercise his powers for the benefit of the creditors as a whole. The proposed new clause would interfere with the carrying out by the liquidator of this duty, and would be liable to prejudice the interests of other creditors. It may be that the proposers and my noble friend who speaks for them, envisage that losses suffered by other creditors in this way would be covered under the indemnity. If so, there is a risk that in certain circumstances the compulsory indemnity would in practice prove more expensive to the Board than if they made payments to the policyholders. The system proposed seems likely to give rise to complex and expensive disputes between the Board, the liquidator and the other creditors.
In any case, the Amendment is defective in so far as it refers only to Clause 11, and makes no provision at all for policyholders' claims under Clause 10. Under the Bill as drafted, there is nothing to prevent the Board performing their duties by indemnifying the liquidator if they so decided, and they would no doubt wish to do so where possible, if this would serve to minimise the need for calls on the levy. As my noble friend Lord Peddie said in his earlier remarks, it is true that some countries have arrangements for priorities for insurance creditors. It is also true, as anyone who trades with such countries knows, that one does so against the background of, for example, special funds within insurance company assets
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which are appropriated to insurance creditors of particular classes.
There may well be a case for some alteration of the law on winding-up, but before contemplating such far-reaching alterations as my noble friend envisages it is necessary to have proper discussion. In fact, discussions are now going on, as I think my noble friend knows, between my right honourable friend and the representatives of the British Insurance Association. These discussions will also cover such action as is possible by regulation under existing legislation. I am certain that the case made by my noble friend in this regard will be taken into account. On that basis, I hope he will be able to withdraw the Amendment.
Lord PEDDIE: I thank my noble friend for the comments he has made. I take particular note of the statement that there may be, or could be, a case for consideration; he argues that it needs discussion. With that I completely agree. That is a point of view that is certainly accepted by me, and, if such discussions are to take place. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord MONSON: Before we move on to Clause 19, would the Minister be kind enough to indicate whether, at Report stage, the Government might be prepared to look favourably upon an Amendment drawn so as to achieve substantially, although in a different manner, the objectives sought by the noble Lord, Lord Peddie, in Amendment No. 63, now withdrawn?
Lord BESWICK: I am not sure to what Question the noble Lord is addressing himself.
Lord MONSON: I was merely asking the Minister whether he would be prepared to consider an Amendment.
Lord BESWICK: We have no Question before the House, and therefore I am not able to speak.
Clause 19 agreed to.
Clause 20 [Application of surplus funds by the Board]:
2.56 p.m.
Lord LYELL: Amendment No. 72 is akin to a drafting Amendment. It seeks

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to inquire from the Government whether they would agree that where the Secretary of State is about to apply surplus funds acquired by the Board he should obtain the leave of Parliament before instructing the Board over the distribution of these funds. I have in mind the Minister's remark to Lord Peddie that the Secretary of State should not necessarily apply too often to Parliament, but I hope the application of these funds will apply only in rare cases. I beg to move.
Amendment moved—
Page 17, line 4, at end insert (" by order ").—(Lord Lyell.)
Lord WINTERBOTTOM: The Board are unlikely ever to accumulate sufficient funds to justify distribution; but the Government took the view that if this were to happen it would be in accordance with the interests and wishes of the insurance companies that the Secretary of State should be in a position to arrange readily that a distribution he made. I appreciate the importance of the formula for distribution and the conditions that may be attached to it by the Secretary of State, and I understand the desirability of subjecting the process to some form of Parliamentary control. I should therefore be glad to consider introducing at Report stage an Amendment to make the Secretary of State's powers requiring and directing the Board under this clause subject to the Negative Resolution procedure. The Affirmative Resolution procedure seems to be cumbersome and time-consuming for such a subsidiary, and probably uncontroversial, matter.
Lord DRUMALBYN: Could the noble Lord say on what principles it would be proposed that the Government should arrange for the distribution of funds, or what would be the principles of the distribution? In passing, may I say that I am surprised to hear the noble Lord say that he does not expect any substantial funds to be built up. If, as we all hope, there are no claims, or if there is one failure, that levy would presumably go on being collected, and one would hope that there would not be a further liquidation. If that were so, the funds could quite easily be built up to the point where it would be desirable for them to be redistributed. I am a little surprised
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to hear the noble Lord say that it seems unlikely that funds would be distributed back to the contributors. Perhaps he could say on what principles they would be redistributed?
Lord AUCKLAND: Before the noble Lord replies, may I say that I spoke to Clause 20 in the course of the Second Reading of this Bill because at that time I found it difficult to understand quite what Clause 20 was trying to achieve. After consultation, I have a little more knowledge of it. Line 1 of this clause talks about consultation with the Board, which is perfectly proper. If funds are to be distributed, the Board must have discretion and the Department must be consulted, but I am puzzled with the last words of the clause,
"in accordance with the Secretary of State's directions".
Surely if there is to be a distribution of these funds—and, as my noble friend said, one hopes that this will not in fact have to be the case—the Board should have the maximum discretion, because otherwise the Secretary of State of whichever Department deals with it will be put into all sorts of difficulties, because presumably if the worst happens funds of all shapes and sizes will be involved. I hope that when the Government look at this clause again the last part will be particularly closely looked into.
Lord WINTERBOTTOM: I find it difficult to give a concrete answer to the somewhat hypothetical question from the noble Lord, Lord Drumalbyn. The noble Lord will remember that the levy will not be imposed except where it is needed, and to that extent only. Something has happened, a levy is imposed and money is collected which one hopes would be approximately equivalent to the actual amount of money to be paid out to policyholders who have experienced damage. I think that the noble Lord would agree that an exact calculation would not be possible and a situation could easily arise whereby, after the policyholders had had their deficiencies made up from the levy, the company in question might be found to possess assets larger than was thought at the time of liquidation, or certain assets might have appreciated in value, and for that reason a surplus might arise at the end of the day.

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I think it is of general agreement that it is not desirable that the Board should have substantial funds under their control, and that is why the power to redistribute, or pay back, the funds is being included. The power of direction or guidance in this case is important, because as I understood the Bill it was intended that the Secretary of State's powers of guidance, or direction, according to the word you use, were designed to be of assistance to the Board to protect them, if necessary, from criticism and because a situation might arise when the Board themselves might welcome the help of the Secretary of State. That is why the Secretary of State comes in. I think we also agree with the Amendment tabled by the noble Lord, Lord Aberdare, that some sort of control is desirable. We believe that an Affirmative Resolution is a bit too powerful a weapon, and that perhaps the Negative Resolution procedure is adequate. It is on that basis that I propose this new Amendment.
Lord LYELL: We are grateful for the noble Lord's assurances that the Government are going to look at this matter, and with that assurance I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 20, agreed to.
Clause 21 agreed to.
Clause 22 [Disclosure of documents and information to the Board]:
3.5 p.m.
Lord BELSTEAD Lord BELSTEAD moved Amendment No. 76:
Page 17, line 45, at end insert (" but nothing in this section shall be taken to authorise the disclosure by the Board or their servants of any such information or the contents of any such document.")
The noble Lord said: This Amendment will in no way prevent the Board from obtaining the information for which Clauses 22 or 23 allow; but it would improve the security of the documents which may be concerned. I beg to move.
Lord BESWICK: Would the noble Lord agree that I should deal with Amendments Nos. 76 and 79? The note I have is that the Amendments are misconceived. By that is meant that they rest on a misunderstanding of the 1967 Act. There is nothing in Clauses 22 and
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23 as drafted that could be deemed to authorise the Board or the Secretary of State's insurance advisers to disclose to others information they had received from the Secretary of State by virtue of these clauses. I am advised that the limitations on disclosure of information in Section 111 of the Companies Act 1967 would apply to the Board and the advisers in relation to information they receive under these clauses as they apply to the Secretary of State himself. I have the 1967 Act here if the noble Lord would wish me to quote from it. I hope he will be able to accept my assurance.
Lord BELSTEAD: On that assurance, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 22 agreed to.
Clause 23 [Disclosure of documents and information to insurance advisers appointed by the Secretary of State]:
3.7 p.m.
Lord PEDDLE Lord PEDDLE moved Amendment No. 77:
Page 18, line 1, at beginning insert—
(" (1) The Secretary of State may appoint persons to advise him on the exercise of his powers under the Insurance Companies Act 1974, but the names of any persons so appointed shall be reported by the Secretary of State to Parliament, and the Secretary of State shall also report to Parliament if and when any such persons cease to be so appointed.
(2)").
The noble Lord said: I propose, if I may, to take Amendments Nos. 77 and 78 together. Clause 23 has nothing to do with the rest of the Bill which introduces a guarantee scheme. The purpose of this clause is to permit the Secretary of State to disclose to persons appointed to advise the Department of Trade confidential details about certain insurance companies without offence being committed under Section 111 of the Companies Act 1967, which requires Ministers and civil servants not to disclose confidential information which they have obtained in the course of their duties.
I understand the need for the appointment of advisers from the insurance industry. It was felt strongly last year, because of the substantial fall in the stock market, when the Department of Trade officials found difficulty in distinguishing between those small insurance companies

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which were probably quite sound and trading profitably and which had been affected by the fall in share values, and other small insurance companies which might appear similar but were, in fact, being badly managed and going downhill. It was desirable for the Department of Trade to intervene as early as possible.
I support the principle of this clause and I hope that everybody else does, but I think that it is important that the names of the advisers are made known if only to protect the advisers themselves. I am sure that they will be persons of the highest integrity and standing, and if in the course of their duties they happen to be in possession of information which might be used for their own or for their company's advantage I am sure they will be scrupulous in dealing with this. Nevertheless, it would be better from everybody's point of view if the names of the advisers were made known. This is quite a small point, but it is a useful one and is certainly not controversal. I beg to move.
Lord ABERDARE: I agree with the noble Lord that this is a useful new subsection. I would support him in what he has said.
Lord WINTERBOTTOM: This Amendment is unnecessary. The Secretary of State already has powers to appoint advisers if he wishes without express provision of this kind. The inclusion of an express provision here would be undesirable as casting doubt on the general power. The Secretary of State will naturally make whatever public announcement he considers appropriate of the appointments which he makes or may make. In my view it is unwise, in a situation of this kind, to enclose the Secretary of State in too tight a corset of legislative control. If the Amendment were accepted, it might inhibit the Secretary of State from seeking advice which could be valuable on an informal basis. The result would be that, every time the Secretary of State took advice, on an informal basis, he might have to make a declaration and this would inhibit his powers. For that reason, we must resist the Amendment.
Lord PEDDIE: I am amazed at that reply. It is incredible. Here is a simple
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suggestion. It is one which, if accepted, would enable the Secretary of State to give an indication to Parliament and public that he had confidence in the men concerned, yet we get the reply that it would put him in too tight a corset. I really do not know what to do about this. I am almost inclined to break my rule, though I have been very accommodating so far. But this is a trivial matter and I have confidence that common sense will prevail. I have confidence that, after reading the arguments, my noble friends on the Front Bench will come to the conclusion that the response that has been given is utterly inadequate.
The Earl of LONGFORD: I have not been present during the discussion. May I ask what exactly is the rule in question? Is it a rule against using foul language? What is the rule which my noble friend is proposing to break?
Lord PEDDIE: It has nothing to do with foul language, pornography or anything else. It merely deals with the matter which is here indicated. My noble friend was not in the Chamber when it was explained, but I am sure that I have spoken so much this afternoon that it would be intolerable if I were to repeat my arguments merely because my noble friend had come in late.
Lord BESWICK: I wonder whether my noble friend has understood what has been said. We are not opposing this, and I am agreeing with what he wants. All I am saying is that the Secretary of State can now appoint an adviser and he would naturally announce whom he had appointed. There is no difference between us. What my noble friend went on to say was that if this power was in the Bill. the Secretary of State might, if he stopped someone in the street and asked his advice, be thought to be going outside his powers because he had not named the adviser in question.
Lord PEDDIE: I am sure that it is not intended that we should ask the Secretary of State to give a public declaration of anybody he happened to chat with. In the light of my noble friend Lord Beswick's statement, in which there is apparently complete agreement with my proposal, and in the light of the statement that Parliament will be informed

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of the names of the people appointed—and I emphasise the word "appointed ", because one does not appoint a person with whom one has a chat in the street—I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
3.20 p.m.
Lord PEDDLE Lord PEDDLE moved Amendment No. 80.
Page 18, line 9, at end insert—
(" Provided that section 111 of the Companies Act 1967 shall still prevent the disclosure to any person who is a director, controller or manager of an insurance company of any information or document obtained by the Secretary of State by virtue of the powers conferred by section 36 of the Insurance Companies Act 1974, if those powers were exercised by the Secretary of State on the ground stated in section 28(3) of the Insurance Companies Act 1974 ").
The noble Lord said: I hope that this Amendment will be as non-controversial as Amendment No. 77 turned out to be. It is a small point, but I think it useful. Section 36 of the Insurance Companies Act 1974 gives very extensive powers to the Secretary of State to require insurance companies to supply him with information. It can be invoked on a number of grounds connected with doubts about the way in which a company is being managed; also on the grounds stated in Section 28(3), which section empowers the Secretary of State to obtain information from insurance companies, about whose solvency there is no question, to assist the Department of Trade to gain experience and knowledge about the practices of sound companies. Information obtained on the grounds stated in Section 28(3) can be highly sensitive. I am sure that anyone connected with insurance will realise that information about investments and so on ought not to be disclosed to competitors.
Although I am sure that the advisers will be persons of the highest integrity who will be scrupulous in not making use of any such information, in a matter such as this everything should be seen to be entirely above board if only to protect the advisers themselves. There will be no need for information obtained on the grounds stated in Section 28(3) of the 1974 Act to be passed to the advisers. There will not be any need for it, because presumably the advisers themselves will
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be experienced senior managers in the industry and will know the practices of sound companies; otherwise they would not have been appointed as advisers. Therefore, I see no disadvantages in the Amendment at all and, in fact, I see quite substantial advantages. I beg to move.
Lord BESWICK: I can probably say that there is nothing in the present situation which is contrary to the position which my noble friend seeks to ensure. When he says that he wants everything above board, what he means is that in certain cases something should be below board and, of course, that is exactly how the relationship between the Secretary of State and his advisers will work. There is nothing in Clause 23 which compels the Secretary of State to disclose information to an insurance adviser, and he will obviously call on the adviser only when he has need for advice on the use of his powers under the 1974 Act, and will disclose to him only information which seems relevant for the purpose, and appropriate in other respects. If there were reason to think that the disclosure of information to certain people might needlessly embarrass or harm the company from which it had been obtained, that consideration would obviously weigh heavily with the Secretary of State against the disclosure. In any case, if information were given to the adviser and there was a balance of advantage or disadvantage and if it were thought at all sensitive, the situation would be covered by the Official Secrets Act and the advisers would have to conform to that Act.
Lord PEDDLE: I thank the noble Lord for those comments and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 23 shall stand part of the Bill?
Lord DRUMALBYN: May I ask the noble Lord whether this is not a rather odd clause? It has nothing to do with the rest of the Bill. Can the noble Lord explain to the Committee why it is here, and what it is intended to achieve?
Lord BESWICK: Having been protesting throughout this morning and night—whatever it is at the moment—that certain matters could not be brought within the scope of the Bill, I must confess that I am nonplussed when the noble Lord asks me why certain things are in the

1493
Bill. I should have thought the answer was fairly straightforward. They are held to facilitate the protection of the policyholder. They are procedural matters, machinery matters, helping the Secretary of State to discharge his obligations.
Lord DRUMALBYN: I hoped that the noble Lord might have said that the experience of the 1974 Act had shown that this power was needed, and that the Government were taking the opportunity to bring it in here. If this is not so, perhaps the noble Lord will write to me.
Clause 23 agreed to.
Clause 24 [Orders and regulations]:
3.20 p.m.
Lord BALFOUR of INCHRYE Lord BALFOUR of INCHRYE moved Amendment No. 81:
Page 18, line 20, leave out subsection (4).
The noble Lord said: This Amendment aims at asking the Minister why subsection (4) is necessary? What is gained by the writing into Clause 24 of subsection (4)? This subsection, which I wish to eliminate, gives power to the Secretary of State
" … to make an order or to make regulations under any provision of this Act includes power—

(a) to make different provision for different circumstances; and

(b) to include therein such incidental, supplementary or consequential provisions as the Secretary of State considers appropriate."

In the very wide powers we have given to the Secretary of State in other provisions of the Bill, surely what is provided for in subsection (4)(a) and (b) is already included. I do not see what is gained in defining the lesser within the greater. Why is this definition of specific powers needed when we already provide the powers for the Secretary of State, including those in the subsection? I beg to move.
Lord BESWICK: I confess that when I read the words I have a lot of sympathy with what the noble Lord says, but I am told that they are common form and do not have the meaning which is ascribed to them.
Lord BALFOUR of INCHRYE: Common form or not common form, the Minister has not really told me why it
1494
is necessary to include these powers and why they should not be eliminated.
Lord BESWICK: I have said that I have a good deal of sympathy with what the noble Lord says, but the fact of the matter is that they cover minutiae which may require Orders. I will look into this point and sec whether they are absolutely necessary, but it looks to me as if they are enshrined in Parliamentary practice.
Lord DAVIES of LEEK: I wonder whether I may have just half a minute in which to support the contention of the noble Lord? I hope that my noble friend will look into this matter and bring back to us a more up-to-date explanation than that of merely accepting common form.
Lord REIGATE: I hope that when the noble Lord refers to this matter again on Report stage he will give us some choice examples of where it is common form, because this is exactly the sort of thing for which this House exists—to stop the expansion of unnecessary powers. The noble Lord might put ideas into the heads of some of us as to reforms which could be carried out on other occasions.
Lord BALFOUR of INCHRYE: I am willing to withdraw the Amendment provided the Minister will look at the question of unnecessary powers being given to the Executive over the Legislature merely because they have been given in the past.
Amendment, by leave, withdrawn.
Clause 24 agreed to.
Clauses 25 and 26 agreed to.
Schedule 1 [Additional provisions with respect to the Policyholders Protection Board]:
Lord BESWICK Lord BESWICK moved Amendment No. 82:
Page 20, line 9, at end insert—
(" (1A) Of the persons appointed to be members of the Board—

(a) at least three shall be persons who are directors or managers of authorised insurance companies; and

(b) at least one shall be a person appearing to the Secretary of State to he qualified to represent interests of policyholders of authorised insurance companies.")

The noble Lord said: I wish to speak to this Amendment and to Amendment No. 83. The question was asked and

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assurances were given that the composition of the Board would be such as to command the confidence of the industry and that a majority of the members of the Board should be drawn from the industry. That is the purpose of these Amendments. I hope it is thought that I have fulfilled the undertaking which I gave on Second Reading regarding this point. There is one difference here as between my Amendment and others on the Marshalled List. The Government Amendment refers to persons
" … who are directors or managers of authorised insurance companies … ".
while one of the Amendments tabled refers to "directors, controllers or managers "of companies in this context. I understand that "controllers" includes chief executives, even if they are not directors, and persons who control one-third or more of the voting power in a company. If the Committee feels that it would be valuable to extend this to include some or all controllers, I should be glad to hear any voices that are raised to support that contention. Being anxious to accommodate everybody. I should even be prepared to amend my Amendment if that was thought necessary.
There is another feature of my Amendment, in that it makes provision for the representation of another important interest on the Board, the policyholders themselves. It could be said, of course, that nearly everybody is a policyholder, and it may be thought that the field of choice for somebody qualified to represent their interests is almost unlimited. We have had considerable discussion of this point on another Bill for which I have been responsible and I know that there are difficulties here, but to the best of his ability and knowledge the Secretary of State will endeavour to find somebody who could genuinely be held to represent the interests of the policyholders, and in the course of this search he will consult the Secretary of State for Prices and Consumer Protection. I hope that with this explanation the Committee will accept the Amendment.
Lord ABERDARE: I am grateful to the noble Lord because he has certainly carried out the undertaking which he gave on Second Reading, and I thank him for that. As for the wording of the Amendment, we had noticed that "con-
1496
trollers" had been omitted, and in my view, at any rate at this stage, I think it is a pity. Indeed, I think it is wrong. The "controller" under Section 7 of the Insurance Companies Act 1974 includes the managing director, who anyway will qualify as a director, or the chief executive, as the noble Lord said, and it seems odd to say that the Board can have as its members directors or managers and not have the chief executive. He might be the right man to have. Thus I accept the noble Lord's invitation and ask him kindly to include controllers in his Amendment.
Lord CACCIA: Like the noble Lord, Lord Aberdare, I thank the noble Lord, Lord Beswick, for bringing forward this Amendment in accordance with his previous undertaking. However. I. too, hope that he will include controllers. If necessary he can return to the point at a later stage if, for some reason, he wishes to exclude this particular person.
The Earl of ONSLOW: Will the noble Lord. Lord Beswick, be more specific about who will be found as the representatives of policyholders? I recognise that this may be extraordinarily difficult, but perhaps he can give a little more information about how these people will be found and who they are likely to be.
Lord BANKS: I welcome the fact that it is clear from this Amendment that the insurance companies' representatives will be in the majority on the Board. I should like to give an even warmer welcome to the fact that there will be representation for policyholders, in the sense that the Minister will appoint somebody whom he believes to be qualified to represent the policyholders. It had seemed to me that although this was the Policyholders Protection Bill, up to this point there was very little policyholder representation. However, I suppose that this representative to be appointed by the Minister will not necessarily be somebody who has been chosen by policyholders, and I will return to this point when we come to discuss Amendment No. 85.
3.30 p.m.
Lord BESWICK: If the noble Lords, Lord Aberdare and Lord Caccia, think, that in this one particular and narrow respect my Amendment is misconceived,

1497
I will undertake to return to the point and see whether we can improve it on the next occasion. So far as the noble Earl is concerned, I cannot say any more than I have said. I have indicated frankly that we are all consumers and, apart from the fact that I have indicated that my right honourable friend the Secretary of State at the Department of Trade will consult with my right honourable friend who has a special responsibility for consumer legislation, I cannot indicate any formula or procedure. I shall be glad to have any ideas that are put up as to what interests or people it is thought might most adequately carry the confidence of the policyholders.
Viscount SIMON: We all believe Secretaries of State are generally sensible but, regarding appointments, there is no provision here that the different types of insurance should be represented on the Board. The three members representing the insurance industry may be all in the long term life business or general business. I am sure that would not be so, but it seems odd that it is not made clear that there should be representatives from both branches of the insurance industry.
Lord ABERDARE: Before the noble Lord replies, perhaps I may be able to interest the noble Viscount in my Amendment No. 85A which, if he supports it, would meet this point.
Lord BESWICK: I was going to ask the noble Viscount whether he would allow me to reserve whatever arguments I can muster until a later Amendment.
On Question, Amendment agreed to.
Lord BESWICK: I beg to move Amendment No. 83.
Amendment moved—
Page 20, line 15, at end insert:
(" ( ) A person appointed as an alternate member of the Board in respect of a person who is a director or manager of an authorised insurance company shall himself be such a director or manager; and a person so appointed in respect of any such person as is mentioned in sub-paragraph (1A)(b) above shall himself be a person appearing to the Secretary of State to be qualified as there mentioned.")—(Lord Beswick.)
On Question, Amendment agreed to.
Lord BANKS Lord BANKS moved Amendment No. 85:
Page 20, line 15, at end insert:
(" ( ) At least one of the five persons appointed to be members of the Board shall be an officer of an authorised mutual insurance company and any person appointed as an alternate to him shall also be an officer of an authorised mutual insurance company.")
The noble Lord said: As I said a moment or two ago, Amendment No. 82 has ensured that one member of the Board shall be a person appearing to the Secretary of State to be qualified to represent the interests of policyholders of authorised insurance companies. That person need not be a direct representative of the policyholder, and need not be a person chosen by policyholders. This Amendment would ensure there was such a person on the Board, since mutual companies have no shareholders and those who are appointed to run the mutual companies are directly responsible to policyholders and to nobody else. It would be up to the Minister, I suppose, to decide at any given time whether the mutual company representative should be the person appointed by him to represent the policyholders' interests. He may feel the mutual insurance company representative should be regarded as additional policyholder representation. Apart from that, since mutual insurance companies are a very distinct category of companies from proprietary companies, provision ought to be made for them to be represented on the Board. I beg to move.
Lord HAWKE: The Secretary of State will obviously have regard to the remarks of the noble Lord, Lord Banks. But, going back to 1947, when we had the nationalisation Bills, we used to argue for hours in this House as to the precise constitution of the Board. Looking back on it, I realise that those hours were entirely wasted. We needed to have certain categories of people; somebody had to be skilled in the organisation of workers. The only thing we did not have in those days was a woman on the Board. We put in all sorts of categories and I am sure they have been an embarrassment to the Secretary of State ever since. I am all in favour of giving him the widest possible choice. If he makes a bad one he should be held to account in Parliament.
Lord BESWICK: I am deeply moved. I have been in this House now for some years and I have the greatest possible respect for the noble Lord, Lord Hawke; but I think this is the first occasion when he has ever agreed with what I was proposing to do. But if we are going to stipulate that there should be this or that person, I do not see why we should not designate the others by category. One might even say that one must be a Christian, one a Moslem and so on. I can give no formal undertaking about it and I have no authority from my right honourable friend to do so, bat it seems inconceivable to me that there should not be someone representing the mutual and life assurance aspect. Certainly, the idea is to get as wide a spread as possible, and I hope the noble Lord will accept the intention.
Lord BANKS: I should like to thank the noble Lord very much for that reply. It is desirable to put a great deal of emphasis on policyholder participation, as we have been doing in the last few minutes. In view of what he has said about the possibility of mutual insurance company representation on the Board, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord ABERDARE Lord ABERDARE moved Amendment No. 85A:
Page 20, line 15, at end insert—
("( ) Before making any appointments to the Board of persons who are qualified as set out in sub-paragraph (2A) above the Secretary of State shall consult with and have regard to the opinion of persons appearing to the Secretary of State to be representative of the interests of authorised insurance companies.")
The noble Lord said: I beg to move this Amendment which is self-explanatory, and I hope it goes some way towards satisfying the demands of the noble Lord, Lord Banks, and the noble Viscount, Lord Simon, in that it merely asks that the Secretary of State should "consult" with people in the insurance industry before making appointments to the Board. I hope that this will also commend itself to the noble Lord, Lord Beswick, and I beg to move.
Lord BESWICK: I assume that my right honourable friend would consult, but if the noble Lord wishes to have this put into the Bill I am prepared to see
1500
that it is done. However, I suggest that he might reconsider the wording so as to fit in more closely with our own text. I will give him an undertaking to see that what he asks for is included in the Bill, but that the drafting is in the same sort of language as we have used. I will do that very thing on Report stage.
Lord DAVIES of LEEK: May I briefly say how grateful I am to my noble friend for the assurance he has given, because it seems to those of us who have watched the appointments of boards over 30 years that bodies on the boards have been clutched out of the skies, and they have jobs not at all relevant to the responsibilities which are ultimately thrust upon them.
Lord HAWKE: Most of them have one thing in common; they succeed in making massive losses nearly every year.
Lord ABERDARE: I beg leave to withdraw the Amendment, in view of the noble Lord's assurance.
Amendment, by leave, withdrawn.
Lord ABERDARE Lord ABERDARE moved Amendment No. 86:
Page 20, line 26, leave out sub-paragraph (1) and insert—
(" (1) The members of the Board shall elect their own chairman.").
The noble Lord said: Again, this is a quite simple and self-explanatory Amendment. It seems extraordaniary, if we are going to have a Board of the calibre of people one hopes to have, after consultation with the industry and with three of its members drawn from the industry, that they should not be entrusted with the election of their own chairman. There is no cause at all for the Secretary of State to appoint the chairman of the Board. I hope that this is also a well-conceived Amendment, and I beg to move.
Lord BESWICK: There are practical difficulties here, and I hope the noble Lord will not press the Amendment. The chairman may well have to devote more time to his duties than the other members, and this may be a factor that the Secretary of State will have to take into account when appointing members. Members also may need to take it into account when considering whether they can accept an appointment. If the appointment were left to the Board, they might find that

1501
none of them was prepared to take on the responsibilities of the chairman. Therefore, I think it is advisable to ensure that when a person is appointed he is willing to take on the full responsibilities of the chairman.
Lord ABERDARE: I accept that there may be difficulties and I should like to think further about it. In the meantime, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
3.40 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 87:
Page 22, line 10, leave out from (" Schedule ") to (" the ") in line 12.
The noble Lord said: I beg to move Amendment No. 87 and, if I may, I will join it with No. 88. No. 87 is a paving Amendment for No. 88 which seeks to leave out paragraph 8(2) on page 22. The paragraph reads:
" The Secretary of State may give to the Board from time to time general directions with respect to the manner in which they are to conduct their proceedings."
Again, it seems unnecessary to bring in the Secretary of State, if we have a responsible Board, to tell them how to conduct their proceedings. I should have thought they would be capable of conducting their own proceedings without any instructions, and I am rather astonished that this paragraph should be in the Schedule. I beg to move.
Lord BESWICK: I wonder whether I can so brace myself to accept these two Amendments.
On Question, Amendment agreed to.
Lord ABERDARE: I beg to move Amendment No. 88.
Amendment moved—
Page 22, line 13, leave out sub-paragraph (2).—(Lord Aberdare.)
On Question, Amendment agreed to.
Lord PEDDIE: Having recovered from my shock, I would say that Amendment No. 89 was a consequential Amendment and I do not propose to move it.
On Question, whether Schedule 1, as amended, shall stand part of the Bill?
Lord DRUMALBYN: Am I right in thinking that the Board will be serviced
1502
by the Department? Unlike most Schedules of this kind, this one does not seem to make provision for employees and the like, and I therefore concluded that the Board would be serviced by the Department. I do not know whether or not that is so. Secondly, when is it intended that the Board should be incorporated? If, as the noble Lord, Lord Winterbottom, told us, the Board will not really be called into action until it has funds to collect and distribute, this would not seem to be a very immediate matter. On the other hand, the probability is that it would be advisable to appoint a chairman, at any rate, so that the Department could be in touch with him on a continuing basis. Perhaps the noble Lord could tell us whether it is intended to give the Board premises, and so on, before any need for its use and services arises. This is not quite clear from the Bill as it stands, so perhaps the noble Lord could tell us.
Lord BELSTEAD: May I add just one question to what my noble friend Lord Drumalbyn has asked? With reference to paragraph 14(3) of the Schedule, will the report which is to be produced be published? It depends on how wide the powers of the Board are to be when this Bill eventually becomes law, but if they are going to be wide powers I should have thought that the report for which paragraph 14 provides ought also to be published.
Lord BESWICK: I confess I am not advised on that latter point, but I will find out the answer and let the noble Lord know. So far as the servicing of the Board is concerned, their independence will be emphasised by giving them their own secretariat. As regards the other practical point which the noble Lord raised as to where they are to sit, and what sort of a table they are to have I am afraid I cannot answer that but I will try to find out.
Lord DRUMALBYN: But this is a fairly important point, surely. The main purpose of the Board is to deal with cases of liquidation, which may or may not arise. Is it seriously suggested that there should be a permanent secretariat sitting in premises waiting for a liquidation to take place when it may never take place? I think that more consideration should be given to this point.
Lord BESWICK: As I have said, I think this is an eminently practical point, although I have not taken advice upon it. I shall have to inform the noble Lord.
Schedule 1, as amended, agreed to.
Schedule 2 [Additional provisions with respect to the insurance industry levies]:
3.45 p.m.
Lord ABERDARE: I beg to move Amendment No. 90. May I speak also to Amendment Nos. 91 and 93. This is quite a simple matter. Under the Bill companies are required to make returns of their premium income by 31st January each year. There are practical reasons why it would be much more satisfactory to leave them a little more time, and I am suggesting that they should be allowed to make their returns by 31st March instead of 31st January. I beg to move.
Amendment moved—
Page 24, line 26, leave out (" January ") and insert (" March ").—(Lord Aberdare.)
Lord WINTERBOTTOM: With the permission of the Committee may I comment on Amendments Nos. 90, 91 and 93 together? They deal with the same point.
Lord ABERDARE: Yes, indeed.
Lord WINTERBOTTOM: In view of the fact that I personally think that one month is a very short time after the year's end for an audit statement of premium income to be prepared, I have considerable sympathy with these Amendments. Although I have no direct experience of it. I am certain that this is a complicated matter. The reason why the Bill is drafted as it is is because the Amendments as drafted by the noble Lord, Lord Aberdare. and his noble friends would cause an undesirable delay in the Board's ability to raise a levy in any year. Any levy imposed by the Board during a given financial year will be calculated by reference to premium income for the previous calendar year. If, however, companies' annual statements of premium income were not required before the beginning of the next financial year, there would clearly be delay, probably amounting to several weeks, while the returns were processed, before any levy could be raised. At the same time, the Government appreciate that some companies may find difficulty
1504
in providing accurate returns only one month after the end of the year in question. Therefore, the Government are willing to consider putting down a Government Amendment, in the light of the opinion of the industry and the views expressed by the noble Lord, to extend more moderately the time allowed to companies for preparing their returns—perhaps to the end of February.
Lord ABERDARE: If the Bill says January and I am asking for March, a good compromise would be February! However, I am grateful for what the noble Lord has said and perhaps we may look at it later. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord ABERDARE: This is also an endeavour to safeguard companies which are making returns of premium income. Again it is an attempt to meet a practical difficulty, in that companies will find it difficult to produce a completely exact premium income figure, even if we allow them until the end of February. This is an attempt to safeguard the position of companies by allowing them to return as accurate an estimate of income as is practicable. I beg to move.
Amendment proposed—
Page 24, line 39, at end insert—
(" ( ) For the purpose of a statement under sub-paragraphs (1) and (2) above a company may use an estimate of income which is as accurate as may be practicable.")—(Lord Aberdare.)
Lord BESWICK: I have another, much stronger note about this Amendment, but I will not use it. I do not think it is "on" to allow a company to decide what its liabilities should be. We might as well lay it down by Statute that we should all make our declarations of income for Inland Revenue purposes and leave it at that. Clause 17 sets out with considerable precision the income of insurance companies which is income that is liable to the levies.
In determining how the relevant income should be defined, we have been guided by the wishes of the industry. In particular we have, in the light of the industry's views, defined "net premium income "as the gross amounts recorded in a company's accounts as paid or due by way of premiums, less any amounts deductible by way of rebates, refunds or

1505
reinsurance premiums. We understand that this formulation is the most convenient indication of the extent of a company's business during a year, and we have today undertaken to consider certain technical Amendments to Clause 17 which have been moved to clarify the position still further. Moreover, we have agreed, on Amendments Nos. 90 to 93, as my noble friend has just said, to consider a reasonable extension to the one-month period allowed for the preparation of returns by companies. I think, therefore, that we should not be justified in leaving the matter still further open to the companies in the way suggested by the noble Lord, and I hope that on reflection he will be prepared to withdraw his Amendment.
Lord ABERDARE: I am left to speculate on the other words that appeared in the noble Lord's brief, and perhaps he could tell me some other time. In the meantime, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord ABERDARE Lord ABERDARE moved Amendment No. 95:
Page 26, line 5, at end insert—
(" and
(c) the purpose for which the levy is being raised and the name of the company or companies in respect of which it is required.")
The noble Lord said: This, again is quite self-explanatory and merely seeks to impose a duty on the Board to make clear the purpose for which the levy is being raised, and the name of the company or companies in respect of which it is required. I beg to move.
Lord BESWICK: I am happy to accept this Amendment in principle. It is consistent with the provision of paragraph 3 of Schedule 2 that the Board may impose a levy only when a need arises. However, if I may be allowed to say so, the wording is not entirely satisfactory because of the reference to,
" the name of the company or companies in respect of which it (the levy) is required ".
There may be occasions when a levy is required not in respect of any particular company, but in respect of the Board's administrative expenses. When, on the other hand, a levy is in respect of a company or companies, it will be quite
1506
sufficient if the Board is required to state, "the purpose for which the levy is being raised ". The Board would clearly have to name any companies concerned in order to comply with this provision. Therefore, I give the undertaking that an Amendment to give effect to the principle will be brought forward on Report stage.
Lord ABERDARE: I am most grateful, and beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Schedule 2 agreed to.
In the Title.
3.50 p.m.
Lord PEDDLE Lord PEDDLE had given notice of his intention to move Amendment No. 98:
Line 8, after (" industry ") insert (" and on intermediaries and shareholders ").
The noble Lord said: This and the following Amendments are alterations to the Long Title, and they were intended to accommodate the new clauses which my noble friends and I tabled. But, obviously, since the Amendments introducing those new clauses have been withdrawn it will not be necessary to move these Amendments. However, I wish to make a comment at this point, because it is essential to make quite clear to the Committee and to my noble friend the purpose that lay behind our frequent interventions. We hoped that out of the discussions there would arise some substantial fundamental changes in the Bill.
On Second Reading, fundamental criticism was voiced by every speaker. It was felt that the Bill did not get to the root of the problem in dealing with the protection of policyholders. It did nothing to stop the recklessly irresponsible management practice which led to the failure of London Indemnity and Nation Life. That is why we had some difficulty in effecting amendment of this Bill during this Committee stage. I hope that we have voiced a considerable number of points of view. I appreciate the extremely sympathetic reaction we have had from the Front Bench. I can only hope it will be interpreted in the manner of having close and constructive discussions between now and Report stage. I hope that during Report stage we will be able to produce a Bill which will at least get a

1507
few steps nearer to the achievement of those objectives which we have in mind, and bring about the effective protection of policyholders.
I do not think I can do better at this point than to read the short final paragraph of the statement of the Scottish Provident Institution, which so clearly represents my views. This expresses so much better than I can what I feel. The statement says:
" We do not object to the guarantee scheme out of indifference to the fate of the policyholders. The life office is in difficulties. We object because,

(a) the scheme will do nothing to discourage the irresponsibility which is the root cause of the problem;

(b) due to the heterogeneous nature of the life insurance industry, the scheme must be fundamentally inequitable in its operation, and

(c) it fails to tackle the real source of distress in a life office insolvency, cumbersome and costly liquidation procedures."

As I have already said, I sincerely hope that between now and Report stage we will have constructive discussions so that we can have a Bill which will achieve all that we have in mind.
House resumed: Bill reported with the Amendments.

ROYAL ASSENT
4.0 p.m.
Lord NUGENT of GUILDFORD: My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Evidence (Proceedings in Other Jurisdictions) Act 1975,

Farriers (Registration) Act 1975,

Air Travel Reserve Fund Act 1975,

Scrabster Harbour Order Confirmation Act 1975,

Stornoway Trust Order Confirmation Act 1975,

London Transport (Additional Powers) Act 1975,

United Dominions Trust Act 1975,

Merseyside Metropolitan Railway Act 1975,

Corn Exchange Act 1975.

4.1 p.m.
Lord ELTON: My Lords, I beg to move that this Bill be now read a second time. We stand on the brink of the holiday. It is an invidious task to stand between your Lordships and the freedom of the countryside and I shall endeavour to be brief, but your Lordships will, I am sure, agree that this small but none the less important and humane piece of legislation should not receive only scant attention. The Bill is concerned with residential caravan sites, of which there are 5,000 licensed, and among those 1,700 have residential plots or pitches with something between 170,000 and 200,000 residents in them. It is not, therefore, a small question affecting a small number of people.
Your Lordships will doubtless have seen numerous of these settlements from time to time and have noticed that they vary from, on the one hand, a rather idealised suburban situation in the middle of the country—not so much rus in urbe as urbs in ruri—and, on the other hand, something that looks like a rather rundown gypsy encampment. In both types the interests of the parties concerned—that is to say, the site owner on the one side and the home occupant on the other—while potentially in conflict are in fact interdependent. The site owner without the home occupant would have a field worth a great deal less than it now is in capital terms, and a very much reduced income. On the other hand, the home owner without the site owner would have nowhere to live. Each party can abuse his position. The occupant, by flagrantly anti-social activity, can degrade the character of the site, and indeed by failing to maintain a factory-made dwelling he may enable it to slide gently but rapidly into the condition of a slum, and that is to the detriment not only of the site owner but also of his neighbours. On the other hand, the site owner, by overcharging or harassment or interruption of service, or by other means, or even by eviction, can from a stronger position exert a stronger influence to the detriment of the occupant of the home.
The homes of which we speak are not simply caravans. I hope to disabuse the mind of any Member of your Lordships' House who believes they are. They may

1509
be caravans, but they may also be much more elaborate and commodious. In fact, a two-unit mobile home, factory constructed, is something which arrives on a lorry and is lowered by a crane on to the four corners which form its base. It may have for its occupants between 700 and 800 square feet of floor space, which is equivalent to, or rather larger than, many two-bedroomed bungalows. It is connected to the site by a sort of umbilical collection of drainage and plumbing and electricity lines, maybe gas as well.
Supposing somebody in one of these habitations is told overnight that he must leave; supposing, being reluctant to leave, he is forced to leave; or supposing his own personal circumstances are such that the initiative conies from him—he may have been posted from let us. say, Devonshire to, let us say, Scotland, and he must go. In those circumstances, if the occupant has no agreement defining his relationship with the site owner and the site owner says, "Remove your mobile home; prove its mobility, and vacate the site. I want to let it again ", what is he to do? There is a waiting list as long as your arm for most of these sites. The thing is not inherently mobile, in spite of the name by which it is known. All he will have on his hands is at the best a parking obstruction and at the worst a public nuisance. Therefore the site owner can offer a ridiculously small sum to the occupant of the mobile home. He can also profit from a change of occupancy of a pitch by a forced sale, either by buying cheap and selling to a new owner at a realistic price, or buying cheap and selling to a holiday site and replacing it with a new unit bought from the factory, on which he gains a handsome commission. Indeed, he may also charge a premium to the new arrivals on the site. This is a question which your Lordships will want to look at fairly closely, and I cite it merely as being one of the principal reasons for the need of regulation.
Like almost all good legislation, this Bill is an attempt to find an equitable balance between legitimately opposite but complementary interests. The preparation and consultation which have gone into the drawing up of this Bill and its passage through another place have been no mean accomplishment. I have heard criticism in the corridors of your Lord-
1510
ships' House of the speed, not with which it has traversed the other place but with which it has traversed the corridor between another place and this House. I ought to say that this is by design rather than accident, and I accept the responsibility for it.
I do not think that the speed is excessive for a Bill which has been under consideration since last November and for which the Committee stage is not expected to be before the 20th of next month. But we arc, as any who have read the Economist over the last few weeks will have realised, in a legislative log jam, and any Private Member's Bill which loses time in its progress in this House cannot possibly expect to get Government time in another place, and therefore would stand a very real risk of being lost in the Dissolution. Since this is a Bill, as I said before, of some importance, and also of some expense since it is not supported by an outside body but merely with the £200 allowance to the sponsor in another place, I feel, for many reasons, that it would be a great pity if that were to come about. If there are any points which your Lordships wish to raise with me before Committee stage I shall be only too delighted to discuss them with you.
I shall briefly, because I believe it is the convention, summarise the contents of the Bill. The first clause imposes a duty on the site owner to offer a written draft agreement to the home occupant. Under this clause we shall take a closer look in the Committee stage at one particular aspect, which is the apparent necessity of granting an eight-year agreement for mobile homes which may have a life which is visibly less. The second clause imposes a duration of five years, extendable at will on the part of the occupant under Clause 3 (c) on the agreement, or a shorter period if the interest of the site owner expires before that or if his planning permission expires before that.
The third clause—and a crucial one—consists of a recitation of the matters which must be made explicit in the agreement. This is not an inclusive list and it is important to understand that other matters may be brought in specifically, and indeed should be brought in specifically by the parties to the agreement, though they cannot be, I believe, and I should not expect them to be, in contradiction of

1511
anything already in the clause as specified. The method of charging and the frequency of reviewing the amounts of charges made by the site owner is one area upon which I may wish to detain your Lordships briefly at Committee stage, as I believe it may be possible to improve on the formula at present laid down under Clause 3(d) and (e).
Clause 4 provides for the resolution of disputes arising out of either the unreasonable failure of either party to make an agreement, or disagreement under the terms of the agreement itself. I have had notice that some of your Lordships may wish to consider further both the advisability of permitting the appointment of an arbitrator other than the court for such purposes, and also the wisdom of asking the court to give judgment in some matters upon which the Bill gives it no guidance. These points we shall consider in Committee, and our considerations will doubtless be the more lucid and rapid if any of your Lordships who wish to advance a new position will let me know in advance. Clause 5 deals with the case where a party to the agreement dies, when the successor in title to the site owner, or a relict or kinsman of the late occupant, assumes responsibility.
Clause 6 gives to the Secretary of State a series of order-making powers for the purpose of varying in the light of experience and by means of Statutory Instrument under the Negative Resolution procedure the periods and terms laid down in the Bill. Under Clause 7 similar powers can be used to lay down minimum standards for sites. Although model standards do exist, they have so far been a dead letter, and this power, if widely used, can only be beneficial. Clause 8 extends various parts of the 1968 Act to Scotland. Clause 9 deals with interpretation, and your Lordships will note that the term "model home" is here given the same meaning as in the Caravan Sites and Control of Development Act 1960, as amended by the Caravan Sites Act 1968—I mention this for those noble Lords who wish to do some homework during the Recess—and that "a protected site" is one licensed for permanent residential occupation under those Acts. Under Clause 10, the Bill is to become law—except in Northern
1512
Ireland, where it does not apply—two months after receiving the Royal Assent.
My Lords, I have outlined at some speed the general purposes and intentions of the Bill. I have recited its main contents clause by clause and I do not imagine that your Lordships will wish me to dwell on the subject longer than to commend it as a small but important and humane piece of legislation. It is capable of avoiding both uncertainty and hardship for a growing population of occupants and of giving a clear code of conduct consistent with profitable operation by site owners. It will serve this purpose unless and until it is overtaken by Government legislation. I believe, as will most of your Lordships who, like me, have read the Shelter Report which was published last February, or who, like me, have visited sites of caravans for various purposes at various times, that this Bill is needed. I believe that, properly regulated, the mobile homes sector can provide a disproportionate relief of pressure on the housing lists, principally because the well-to-do who move into these very agreeable residential sites normally do so after their children have grown up, and they thereby vacate on retirement accommodation which will house more people than just themselves. I also believe that it is a valuable way of giving a first toe-hold into home property owning for young marrieds on housing waiting lists, and for others. It is important that such people should not be put in jeopardy of being exploited, and this will serve to protect them.
I hope that your Lordships will view this Bill in your customary kindly but thorough manner and that I have set an example, which your Lordships will feel free to follow, of taking the business somewhat apace, though not without due care and attention. I hope, too, that it will be possible for those of your Lordships who wish to put forward views, in advance or retardment of the position taken by the Bill, to do so reasonably concisely and to expatiate on the merits of your positions at greater length in Committee. My Lords, I beg to move.
Moved, That the Bill be now read 2a.—(Lord Elton.)
4.13 p.m.
House adjourned during pleasure and resumed by the Lord Chancellor.
Lord MELCHETT: My Lords, I will do my best to follow the injunction of the noble Lord, Lord Elton, and not take up too much of your Lordships' time. I suppose the fact that this Private Member's Bill has reached this House is in itself a clear sign of Government good will towards it. I wish, first, to place on record that this good will will be maintained during the Bill's passage through your Lordships' House. The aims outlined by the noble Lord, Lord Elton, are common to the Bill's sponsors and the Government. We welcome a measure which seeks to end the kind of exploitation which some residents have been subjected to, while at the same time offering to the decent site operators every incentive to carry on their business.
We recognise that in attempting to find a balance between the sometimes conflicting interests and demands of residents and operators, the Bill cannot be expected to please all of the people all of the time. But if it is going to prove an effective measure which will work when it is put into practice, it must clearly be seen at least to try to reconcile these conflicts in a fair-minded way. The Bill's sponsors have, I know, made every effort to get this balance right and we believe that they have so far achieved their object. There are, I gather, still some matters where common ground has not yet been staked out; in particular, as the noble Lord mentioned, the form and timing of site charges has already been aired at some length in another place without any necessarily final conclusion having been reached. The Government do not hold any fixed views on these matters, though I hope we will be able to contribute constructively to any debate which takes place in Committee.
Several noble Lords have considerable expertise on mobile homes. We shall listen to them attentively, and I am sure the Bill will benefit from their contributions. As the Parliamentary Secretary to the Department of the Environment indicated on Third Reading in another place, there may well still be scope for improving the Bill even though its main principles are now common ground. The sponsors of the Bill are to be congratulated on the speed with which they worked to prepare their measure, and for the remarkably effective results which they produced in so short a time. But,
1514
frequently, fast concentrated work does mean that attention to certain of the details may have to be sacrificed. I hope, therefore, that your Lordships' House will be able to look carefully at the detail of the Bill to see whether any improvements are needed. From the Government side, we shall certainly be glad to play our part in assisting any such examination. But, as I said earlier, any help we offer will be in support of, and not in criticism of, the Bill, and will in no way detract from our sympathy with its main principles.
When I spoke at the outset of this Bill's attempt to strike an immediate balance, I wanted quite deliberately to avoid giving the impression that this was a measure for all time. It is essentially and necessarily an interim Bill, which does not claim to be comprehensive. I know that interim Bills are not always regarded with favour. But I hope that noble Lords will not succumb to the temptation to transform what is already, by Private Member's Bill standards, quite an ambitious measure into a definitive piece of legislation. The fact is that we simply do not know enough about mobile home living, its problems and the extent of those problems, its economics, or its present and potential usefulness as a contribution to housing problems generally, to attempt the production of a comprehensive system of statutory regulation. The filling of this gap in our knowledge is one of the objectives of the review of mobile home residence now being undertaken by the Parliamentary Under-Secretary to the Department of the Environment. Only when we have studied, and have considered as necessary with those involved, adequate and reliable information about mobile home living, can we hope to be able to produce soundly-based, definitive, long-term legislative proposals.
I cannot forecast when this will be. Work on the review is inevitably being delayed by the switching of staff resources to the Bill. I should be misleading your Lordships if I encouraged any hopes that, once the necessary information is available, the production of comprehensive legislation will be a simple matter. On the contrary, everything we already know about mobile home living sugeests that it will be a complex and difficult task. But we have started along the road, and mean to continue to the end.

1515
Meanwhile—and because it gives some hint of the size of the field we are now working in—noble Lords may like to have the first small fruits of my honourable friend's study, which is a very preliminary estimate of the number of residential mobile homes. The initial findings of an inquiry to local authorities—based on extrapolation from a response of 80 per cent. to date—suggest that some 70.000 mobile homes in England and Wales are occupied as residences.
When all the material we need is available, and has been examined and discussed with the various bodies concerned with this matter, it should be possible to frame viable recommendations for action. But extensive statutory intervention would be unwise when we do not have adequate knowledge of the situation. It could easily prejudice the considered legislation introduced when the necessary knowledge had become available and, at the worst, could create problems greater than those it solved. I hope, therefore, that noble Lords will understand why the Government cannot endorse any measures more extensive than those already embodied in this Bill.
My Lords, the sponsors of this Bill have already been active and sensitive in taking soundings of those who will be most affected by their proposals. I am sure that noble Lords in assisting the Bill on its way will complement these efforts by scrutinising the Bill objectively and constructively. I look forward to the Government's joining in the scrutiny.
4.20 p.m.
Lord AVEBURY: My Lords, I am not sure whether it is strictly necessary for me to do so, but to be absolutely on the safe side I would begin by declaring an interest, as having the honour to be President of the National Mobile Home Residents Association, a body which has fought long and hard to improve the lot of the people with whom this Bill is concerned. The noble Lord, Lord Elton, said that he felt it was necessary to argue the case for some further regulation before your Lordships' House, but I am sure he would agree with me that nobody who has been concerned to investigate the plight in which mobile home residents have had to exist for
1516
many years could have any doubt whatsoever about the need for further regulations, in the absence of solutions being devised voluntarily between the site operators' organisations and the National Mobile Home Residents Association—negotiations which have proceeded for so many years without leading to concrete results. Therefore, one must warmly welcome the advent of this Bill which goes some way along the road to a satisfactory position for those people.
I hope that the Government will be prepared to listen to some Amendments on Committee stage when we reach it. I was a little alarmed by the threat of the noble Lord, Lord Melchett, that the Government could not tolerate any fundamental revision of the legislation. It is to be hoped he does not mean that most of the Amendments that we shall find it necessary to put forward in Committee will receive polite answers and nothing else. It is fair enough to say we must wait until the Kaufman Committee has produced its final results, but I hope that does not mean that we cannot make some alterations to the Bill to improve it as we go along.
May I now make a little historical digression? In 1967, when I had discussions with the late Arthur Skeffington and the late Jim MacColl, about the form of the Caravan Sites Bill as it was then, and which became the Act of 1968, we were forced to agree that within the time scales we had available it was impossible to draft comprehensive legislation that would deal with the inequalities of bargaining power between the site operators and the mobile home residents. We settled at that time for a holding operation, purely to stop instant evictions and harassment. I was sorry to hear the phrase "holding operation" used yet again, knowing it has taken eight years since the passage of what was intended to be a holding measure at that time to make the further progress which is embodied in this Bill. It was always the understanding between us when I had those discussions with Arthur Skeffington and Jim MacColl that, just as the Protection from Eviction Act 1964 had been followed by the Rent Act 1965, so the Caravan Sites Act would be followed up in the near future by Government legislation to complete the work which had

1517
been begun then for the occupiers of mobile homes. Unfortunately, alas! both Jim MacColl and Arthur Skeffington died before those intentions could be fulfilled.
It was mentioned in another place that Dick Crossman showed in his diaries that he, also, was very sympathetic to the needs of caravan dwellers. I should like to mention that after the Second Reading of my Bill in 1967 it had to wait a long time in the queue to go to Standing Committee because the Divorce Reform Bill was taking up the whole of the time available. I went to Dick Crossman, who was then Leader of the House, and asked him whether he would set up a separate Standing Committee to deal with that Bill. He readily complied, saying that he welcomed its intentions, and therefore I should like to pay my tribute to Dick Crossman for the work he did in assisting that legislation to get on to the Statute Book. I also wish warmly to congratulate Mr. King, the author of the Bill, on his success in the ballot. I very much welcome the Bill personally, because it deals with some of the matters which I should have liked to cover myself eight years ago, had it been possible within the time.
The provision of written agreements and the detailed specification of the matters to be covered in those agreements will be very helpful, particularly on those sites not run by either members of the National Caravan Council or the National Federation of Site Operators, because those latter organisations have always suggested that written agreements should be universal. I am pleased to understand that they accept the obligations which are laid down in this Bill including particularly the right of assignment subject to the payment of commission to the site owner. This is a very important step forward, as the noble Lord, Lord Elton, has said, and it will be warmly welcomed by mobile home residents.
Secondly, I believe that the establishment of machinery for the settlement of disputes is right in principle. However, I am not altogether happy—as, I believe, some other noble Lords are not—that the county court should be the sole body to act as the final arbiter. This could be an unnecessarily expensive and cumbersome process in many instances, particularly when it comes to determining the payment which is to be made for the
1518
occupation of a pitch and for any services provided by the owner. I have always believed that the rent officer and the rent assessment machinery—established originally under the Rent Act 1965, and now in the 1968 consolidation Act—could be read across to mobile homes, with an appropriate variation of the fair rent formula.
One would need to replace the "age, character and locality of the dwelling house ", as referred to in the 1965 Act, by reference to the amenities and locality of the site; otherwise, the wording could be very similar, including the disregard of scarcity which is such an important feature of the Rent Act, and which also very much applies to the provision of mobile homes. As we know, the demand very greatly exceeds the supply, and in the absence of any provision requiring scarcity to be disregarded this can have an effect on the charges made.
As the Bill stands, the county court has power to fix charges for the occupation of a pitch and for any management services that may be provided in association with it. But the court is given no guidance at all on how those amounts are to be determined. That was the position under the 1968 Act when the court suspended the execution of an order for possession. But I submit that the cases are not parallel, because we were considering that as being intended to apply for only a couple of years, and, we hoped, to a very limited number of eviction cases which came before the county courts, and not to the much larger number of cases, which I imagine will arise under this Bill, of determinations where the site owner and the residents cannot agree between themselves. I give notice to the noble Lord, Lord Elton, that I shall try to frame some rules for the court to apply in deciding these charges, as a second best to the more difficult drafting job of substituting the rent officer and the rent assessment committee for the court. In doing that, I am obeying the injunction of the noble Lord, Lord Melchett, that we should not attempt to transform an ambitious measure into something which is definitive.
My next point concerns the five-year minimum period of the agreement. Mr King said on a number of occasions that we are looking at a situation where residents may have already been on a site for

1519
a number of years at the time when these agreements are brought into force, and that is a reason for having shorter leases than one may otherwise have chosen. I look upon this as an argument for saying that people should have the right to stay in their homes indefinitely, unless they commit some flagrant breach of an agreement, as they would do if they were living in a house or a flat.
As the Bill is framed, at the end of the five-year period there is an option to renew for a further three years, so that the minimum could well have been eight years without any right of renewal. But as I understand it, at the end of the eight years the site operator can decline to renew the agreement and issue a notice to quit within 28 days. Therefore, one would be saying, in effect, that a family who had lived on a site for upwards of eight years—bearing in mind that they were already there when the Bill came into force—and who, one may assume, had paid all the charges regularly and faithfully observed all the other terms of the agreement, could then be kicked off the site within a month, subject to any delay imposed by the county court. I do not think that is good enough. I hope the Government will agree that this is something that we should try to improve as the Bill goes into Committee.
If indefinite security of tenure is granted so that the caravan resident is in the same position as somebody in a house or flat, the site operator will have no grumble so long as the resident in complying with the agreement. Conversely, a site operator already has in the Bill a means of recovering possession if the resident is in breach of any undertaking in the agreement, either within the initial five-year period or during the three-year renewal period, as the case maybe, since he has that power, it is for the Promoters of the Bill to say under what circumstances, other than breach of agreement or failure to pay the rent or termination of the site licence by the local authorities they envisage a site operator declining to offer a further renewal at the end of eight years. If they cannot produce a reason these time limits should be left out of the Bill.
My next criticism is of the omission of any prohibition in the Bill of exorbitant siting fees which may amount to several hundreds of pounds. I can pro-
1520
duce examples. It is common, as your Lordships know, for the site operator also to be an agent for the sale of mobile homes so that he is already making a profit out of every new tenant. I should like to ask why, in addition, he should receive separate payment in consideration of the granting of an agreement to occupy a pitch, when he is to receive money regularly under that agreement to cover his costs and make his profit. It is already illegal under Section 85 of the Rent Act to charge a premium for the rent or renewal of a protected tenancy. I do not see why there should be a similar provision in this Bill.
It could be argued on behalf of the Promoters that in granting these eight year leases the site operators are conferring on the residents valuable benefit which they did not previously enjoy, and the site operator is therefore entitled to receive some consideration for that benefit. That is true only if the charges made during the lifetime of the lease are below what they might have been if the present situation continued. The same could be said of tenancies. In granting to somebody a tenancy of a flat or house, one may be giving him a valuable benefit which he would not otherwise have enjoyed; but that does not stop us making a prohibition on the payment of a premium for the granting of such tenancy. Another objection which I have heard is that by allowing people, indefinite tenances without payment you would encourage them to maintain decrepit mobile homes and not to renew or keep them in proper repair. If one looks at the matters to be covered by the agreement, one of them is that the owner of a home should maintain that mobile home in a proper state of repair and maintenance. I do not think that this objection carries much force.
Then, referring to the provisions of Clause 7, which gives the Secretary of State power to lay down the minimum standards referred to by the noble Lord, Lord Elton, the local authorities already have these powers and model standards are suggested by the Department to which, generally speaking, they try to adhere, except in the case where only a temporary site lease is granted. If the Secretary of State intends to be more generous in granting permanent site licences, then I shall be very pleased indeed. The position at the moment is

1521
very far from that. If I may give some satistics, in 1973 for residential caravan sites 619 permissions were given without time limit, and 4,139 for a limited period only. The equivalent figures in 1972 are as follows: without time limit, 677; for a limited period only, 3,841.
In spite of undertakings which I understand the Secretary of State has given in the past, the rule is very much that only temporary licences are given, and under these circumstances if the operator is made to conform with the model rules I am afraid the effect will simply be that the capital cost which he incurs will be passed on to the occupiers over the short period which may remain for that licence to run. This policy could be a very expensive one from the point of view of the residents.
There are two answers to this problem. First, the Secretary of State could announce and adhere to a more generous policy in granting appeals against time limits on the licences which are often imposed by local authorities out of their hostility to mobile homes, rather than on general planning grounds. Secondly, we can provide much stiffer penalties against such operators who fail to comply with the conditions imposed on them under this Act. The fines are still at the levels fixed in 1960 of £100 for a first offence, and £250 in the case of a second or subsequent offence. It will be useless for the Secretary of State to prescribe the higher minimum standards that we all want to see unless proper means are laid down in the Bill for enforcing those standards. This is a point to which I shall return in Committee.
One final point which arose in another place, and to which I cannot see an ideal solution, is treatment of the basic occupation charge and management services respectively. As the Bill stands, the two have to be separately identified. This is because the other place felt is was desirable to provide for a two-year review in the case of the basic occupation fee, and an annual review in the case of the management charge, the logic of the distinction being that the management charges would be more affected by inflation that the basic rents, which are more likely to be predetermined in advance by the interest and amortisation of long-term loans which the site operator raised at the time of the original development.
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Unfortunately, if these two elements are separated VAT becomes chargeable on the service component, whereas if they are lumped together it is not.
On balance, I am inclined to the view—although I have not definitely come down on this side—that a unified charge would be desirable and one can expect a review every 12 months provided that any increases imposed on the residents are limited to those which can be fully justified by reference to the costs incurred by the site operator, plus a reasonable increase in his profit to cover the effects of inflation. There is nothing in the Bill which obliges the site operator to justify the extra charges he seeks to impose at the time of a review. Without such provision, the residents would still be in the weak bargaining position from which they suffer at the moment. Here again, we are proposing to treat the site operators more favourably than we do the landlords of houses who are still entitled to a rent increase every three years.
My Lords, within the time available, and in trying to obey the injunction of the noble Lord, Lord Elton, I have had to concentrate on the scope for improvement of the Bill, as I see it, rather than draw attention to its very many good points. Even with its defects, it represents a very considerable advance on the 1968 Act and I hope it can be improved even more by your Lordships' House.
4.40 p.m.
Lord WAKEFIELD of KENDAL: My Lords, like the noble Lord, Lord Avebury, I have an interest to declare in that I am a member of the Executive Committee of the National Caravan Council, and I am also chairman of a company which operates caravan estates of a holiday kind, not a mobile kind as referred to in this Bill, which are not affected by it. The National Caravan Council represents the industry as a whole, that is to say, the manufacturers, the supplier of parts and trailers and some of the park operators. The National Federation of Site Owners represents some of the park operators. Some of the park operators are members of the National Federation of Site Operators as well as of the National Caravan Council. I thought it desirable for your Lordships to have this brief explanation of

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the position of these two bodies, to avoid any misunderstanding.
I should like to say right away that I am not proposing at any length to go into the principles of this Bill which the noble Lord, Lord Elton, has put before your Lordships' House. I should like to say, on behalf of the Caravan Council, that there is general agreement with the philosophy of the Bill and with the requirement that a written agreement should be entered into. However, there are one or two matters of substance yet to be resolved, which were the subject of last-minute Amendments made to the Bill on Report stage in another place. The noble Lords, Lord Elton and Lord Avebury. have referred to some of these matters, and I should like to say that the interested parties have been in some difficulty because of the speed with which this Bill went through its stages in another place. This has already been referred to by the noble Lord, Lord Elton. The Amendments were put down overnight for the Report stage and there was no opportunity at all to consult with interested parties. Therefore the fact that there is the Recess available for discussion is very much welcomed; there will be that interval between the Second Reading and Committee stage. I hope, though, that the Report stage will not follow too quickly on the Committee stage; so that if, as a result of discussions at Committee stage, it is necessary to hold further consultations between the interested parties, there may be a reasonable opportunity for such consultations before the Report stage.
I should just like to comment that it seems to me there are three main points on which Amendments are needed and discussion required on Committee stage. First, in Clause 3 on page 4, paragraphs (d) and (e) separate the charges already referred to by the noble Lord, Lord Avebury. Separate charges are to be made for the occupation of a pitch on mobile home parks, and the Caravan Council believe that this is undesirable in that it will put up the cost to the caravan occupier because VAT will be attracted by the service element of the charge. Also, instead of a two-year period of review, it is hoped that the review period could be more frequent, say annually. We are again very much concerned with the effect of inflation if
1524
charges have to be raised, and particularly in respect of the service element. We would hope that increases could be by small amounts rather than by making too large a jump at any one time.
Lord AVEBURY: Would the noble Lord allow me to ask this: if the Caravan Council were to have the annual reviews they seek, would they be prepared to accept some numerical rules limiting the amount of the increase at the annual intervals? Would they be prepared to have some rules written into the Bill to make sure that the amount of the increase is fairly determined?
Lord WAKEFIELD of KENDAL: My Lords, that no doubt is a matter which could be discussed between now and the Committee stage. I hope there will be opportunities for informal discussions, and perhaps the noble Lord, Lord Elton, can give us some observations on that point.
Lord ELTON: My Lords, may I intervene to make two points? First, I shall be returning to this building on a number of occasions during the referendum campaign and I shall eagerly await messages on my desk announcing the willingness of noble Lords to speak to me on the matter. The other point is that I think we are now approaching a Committee stage debate. This is a debate on Second Reading, on the principles of the Bill, and I hope we can avoid going into such detail.
Lord WAKEFIELD of KENDAL: My Lords, I entirely agree with the noble Lord, Lord Elton. I am merely giving warning of points where I think Amendments should be made to the Bill. I am not proposing to go into any detail at all on these suggested Amendments. I was about to say that because of last-minute Amendments made to Clause 4 (Disputes) which were put down overnight before the Report stage in the Commons, provision is made for the courts to decide the terms of agreement in certain circumstances where owners or occupiers have failed to complete the process. The National Caravan Council fear that, as now worded, these clauses will give insufficient guidance to the courts as to what may be included in such agreements. As I have already said, I am not proposing to go further into these details; they

1525
can of course be quite properly dealt with at Committee stage.
We, too, fear that the same clause may also create an anomalous situation in the procedures for entering into agreements. The noble Lord, Lord Avebury, referred to that. Here again, this is a situation which can be amplified in detail in Committee. There are other minor matters on which clarification is needed, and these, too, can of course be dealt with at the Committee stage. I therefore will not detain your Lordships any longer but give general approval, as I have already said, to the principles of this Bill.
Baroness VICKERS: My Lords, I have no interest to declare like the last two speakers, but I should like there to he better safeguards for mobile homes and more accommodaiton to be provided for the homeless. In view of the lateness of the hour and the excellent explanations given by the noble Lord, Lord Elton, I should like simply to convey our congratulations to the sponsors in another place on bringing the Bill forward. I wish it every success, but I reserve my right to put down some Amendments on the Committee stage.
4.48 p.m.
Lord ELTON: My Lords, I would briefly express my gratitude to your Lordships for your general, if qualified, approval of this Bill. The noble Lord, Lord Melchett, encouraged me greatly by his general favour and his open mind on a number of points. I think we should accept his view that this is not the time to extend the powers of this Bill; but then I also think that this is not the time to extend one's arguments about its details. May I thank the noble Lord, Lord Avebury, for his qualified approval and for saying that this Bill is an advance on the 1968 Act? We shall go more closely at Committee stage into his views on the six points he raised, as we shall also the three points raised by my noble friend Lord Wakefield of Kendal. I thank the noble Baroness, Lady Vickers, for her support in principle. I think, my Lords, that I can do nothing but incur your odium if I do not now sit down, and that is what I shall now do.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

EXPORT GUARANTEES BILL [H.L.]
4.49 p.m.
THE LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I understand that no Amendment has been put down to this Bill and that no noble Lord has indicated a wish to move a manuscript Amendment, or to speak in Committee on the Bill. Unless, therefore, any noble Lord objects, I beg to move, That the Order of Recommitment be discharged.
Moved, That the Order of Recommitment be discharged.—(The Lord Chancellor.)
On Question, Motion agreed to.
Then, Standing Order No. 44 having been suspended (pursuant to Resolution), Bill read 3a, and passed, and sent to the Commons.

SOLICITORS (AMENDMENT) BILL [H.L.]
Lord HOY: My Lords, I understand that no Amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript Amendment, or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the Order of Commitment be discharged.
Moved, That the Order of Commitment be discharged.—(Lord Hoy.)
On Question, Motion agreed to.
Then, Standing Order No. 44 having been suspended (pursuant to Resolution), Bill read 3a, and passed, and sent to the Commons.

PERSONAL STATEMENT
Lord LOVELL-DAVIS: My Lords, with the leave of the House, may I correct a figure which I gave during Question Time this morning in answer to a Question put down by my noble friend Lady Burton of Coventry. I stated that 60 per cent. of overseas passengers passed through the British Airways Terminal in Buckingham Palace Road. I am now advised by British Airways that the correct figure should be 15 per cent. I apologise for giving in good faith a figure which turns out to be erroneous.
WHITSUN RECESS
Lord STRABOLGI: My Lords, I beg to move that this House do now adjourn. In doing so, on behalf of the Government Front Bench, I should like to wish noble Lords in all parts of the House a pleasant Recess.
  NATIONALISED INDUSTRIES: PROFITS OR LOSSES
  NATIONALISED INDUSTRIES: PROFITS OR LOSSES
  NATIONAL DEBT AND LOANS FUND STATISTICS
  NATIONAL DEBT AND LOANS FUND STATISTICS
  INCITEMENT TO DISAFFECTION ACT
  INCITEMENT TO DISAFFECTION ACT
  MANUFACTURING INDUSTRY INVESTMENT
  MANUFACTURING INDUSTRY INVESTMENT
  HOSPITAL ACTIVITY ANALYSIS AND COMPUTER FILES
  HOSPITAL ACTIVITY ANALYSIS AND COMPUTER FILES
  TOURIST EARNINGS
  TOURIST EARNINGS
  THE MISSES PATEL
  THE MISSES PATEL
  EXPERIMENTS ON ANIMALS: LICENCEES
  EXPERIMENTS ON ANIMALS: LICENCEES
  EXPERIMENTS ON ANIMALS AND OFFICIAL SECRETS ACT
  EXPERIMENTS ON ANIMALS AND OFFICIAL SECRETS ACT
  EXPERIMENTS ON ANIMALS: LICENSED ESTABLISHMENTS
  EXPERIMENTS ON ANIMALS: LICENSED ESTABLISHMENTS