Sitting of 19 July 1976

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

  National Energy Conference
  Mr. Formanasked the Secretary of State for Energy if he will place in the Library a complete transcript of the proceedings at the recent National Energy Conference.
  The Secretary of State for Energy (Mr. Anthony Wedgwood Benn): Yes, Sir. I shall do so as soon as possible.
  Mr. Forman: I am grateful to the right hon. Gentleman for that answer. Will he assure the House that he will give due weight to the pronouncement of Sir Brian Flowers at the National Energy Conference to the effect that for something as basic as energy nobody should rely on a product with a by-product as dangerous as plutonium unless he can be satisfied about the existence of a foolproof method of waste disposal and unless he has taken full account of the long-term social implications of a move towards an international plutonium economy?
  Mr. Benn: I listened to Sir Brian Flowers' speech and fully recognised the importance of what he said. Any Minister with the responsibilities which I have for nuclear power is bound to take the safety question extremely seriously. I met the Nuclear Inspectorate the other day on this general question, and I had in mind that I should formulate, with the assistance of those who would like to write in with their own questions, a series of questions to the Nuclear Inspectorate with a view to those questions and the answers of the inspectorate being published. It would be wrong for questions of safety
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  to be put and received privately. Therefore the hon. Gentleman, along with other hon. Members and others who might like to do so, will be able to contribute to the questionnaire.
  Dr. John A. Cunningham: Does my right hon. Friend agree, however, that in the same speech the Chairman of the Royal Commission on Environmental Pollution accepted that hitherto Britain's nuclear programme had had an excellent safety record and that there was no reason for any alarm in that connection? Does he also accept that nobody is proposing that Britain should become dependent on plutonium fuel reactors but only that one reactor should be built and demonstrated in use in the next 30 years? That would hardly make us dependent upon it.
  Mr. Benn: I entirely accept what my hon. Friend has said, namely, that the safety record in the nuclear industry in terms of the number of deaths compares very favourably with other fuel industries. The House appreciates that the nature of the safety problems of the nuclear industry is different in character from other fuel industries where industrial accidents may take place, because of the long-term hazards that might follow certain decisions. Nobody should read into the answer given to the hon. Member for Carshalton (Mr. Forman) anything other than my desire to see that all the relevant information is published, so that when decisions are arrived at people will know the basis on which they have been made.
  Mr. Cormack: Does the right hon. Gentleman expect to be in office long enough to publish the information?
  Mr. Benn: I do not claim that the duration of the life of toxic waste—namely, 24,000 years—would cover my period as a Minister, but I shall be happy to consider any proposal put forward by the hon. Gentleman.
  Mr. Palmer: Does my right hon. Friend agree that a great deal more was discussed at that conference than the alleged danger of the fast breeder reactor? Since this country has been working on such reactors for 25 years, should we not keep these matters in perspective?
  Mr. Benn: Yes, I agree with my hon. Friend, but as Chairman of the Select

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  Committee which handles energy matters he has played a notable part in bringing to public attention factors that should be taken into account and I am sure I can count on him to support me in seeing that these factors are made public by the Department of Energy when important issues are concerned.

  Oil Production Platforms
  Mr. Grayasked the Secretary of State for Energy if he has considered offering further incentives to those companies likely to be in the market for oil production platforms to bring forward their orders.
  The Minister of State, Department of Energy (Dr. J. Dickson Mabon): Extensive discussions which are continuing with the operators on the United Kingdom Continental Shelf have not revealed any potential order the advancement of which would be ensured by any reasonable incentive that the Government might be able to offer.
  Mr. Gray: Will the Minister give particular attention to the study published on 10th July by the Fraser of Allander Institute in which Mr. Alexander Kemp of Aberdeen University, having considered 12 North Sea oilfields, concluded that petrol revenue tax as at present constituted is not working towards one of its prime objectives—namely, the encouragement of the development of marginal fields?
  Dr. Mahon: I have a high regard for that institute, and some of its previous papers have been useful, but I have not had time to study that one. Almost all operators inform us that they are appraising fields. No company has gone so far as to say that economic considerations are holding it back. There is in existence the Oil Taxation Act, and we have a provision for marginal fields, which we shall examine if asked. We also have the Offshore Supplies Interest Relief Grants Scheme and the Accelerated Project Scheme. Furthermore, we might be able to help, if asked by any of the companies, with the possibility of a refund of royalties. In other words, if it appeared in a specific case that incentives might lead to the advancement of a platform order, we would consider a refund of royalty.
  Mr. Dalyell: Will my right hon. Friend say anything more about the talks he had with Mr. Robert Sneddon, other officials of the AUEW and shop stewards at Redpath Dorman Long, Methil?
  Dr. Mahon: I have nothing further to report. It may be that we shall have another meeting shortly. We are hoping that there may be some other work coming in for the yard. I shall not go any further than that at present.
  Mr. Gordon Wilson: Since the Government threw away £26 million of public money in providing facilities at Hunterston and Portavadie which have not been used, and are not likely to be used in current circumstances, may I ask the Minister to give an undertaking that sums of that order will be made available for helping all existing yards in Scotland, particularly in relation to the development of new technologies such as that of sub-sea completion units?
  Dr. Mabon: The money is committed and cannot be spent twice over. The Scottish National Party, with other parties, pressed for an increased capacity to handle platform building orders.
  Mr. Gordon Wilson
  Dr. Mahon: I withdraw that. It was certainly the case that most other parties did so. He would be a brave man who said that there will be no need for these sites within the foreseeable future. I agree that they will not be needed in 1977, but I would not rule out later years.
  Mr. William Hamilton: Does my hon. Friend realise that a serious situation is developing at Methil, where there has been a complete cessation of platform orders? Can he say whether it is possible for this yard to diversify into other aspects of the North Sea oil operation?
  Dr. Mabon: I am concerned about Methil, as I am about Graythorpe for that matter. We have given strenuous advice to the company and the work force to the effect that if they can diversify in the short term it is possible that they may be able to take advantage of orders for steel platforms that may come in 1977.

  Coal and Nuclear Power (Investment)
  Mr. Laneasked the Secretary of State for Energy by what criteria he will decide the long-term investment programmes for coal and nuclear energy.
  Mr. Benn: I expect both coal and nuclear power to play an important rôle in the long-term supply of energy. The balance between the different fuels will be the subject of progressive decisions over the years. I would expect the same investment and other criteria to apply to both.
  Mr. Lane: To make things quite clear, may I ask the Secretary of State to confirm that he has made no prior commitment, either at the Durham miners' gala or elsewhere, to give undue preference to coal and that the paramount criterion in these decisions must be the interest of the consumer?
  Mr. Benn: I fully accept that the consumer interest should be dominant in our thinking on energy policy. At the same time, the House must appreciate that with 300 years of coal reserves available to us it would be foolish to do anything to the mining industry that made it difficult for the industry to contribute coal not only for domestic use and electricity generation but, later, for use in petrochemicals or the development of synthetic natural gas. It would be difficult to give a private assurance at the Durham miners' gala, which is attended by 100,000 people.
  Dr. Bray: Would my right hon. Friend give an estimate of the date by which he expects to reach a decision on the commercial aspect of the fast breeder reactor? Does he agree that it is an important development for those who work at Dounreay? Does he accept that this is a rather different time scale of decision in that it is very much an insurance policy for the 1990s and beyond rather than something which affects the immediate energy demands of the country?
  Mr. Benn: I accept much of what my hon. Friend says. The time scales in the nuclear industry vary from the immediate need for thermal reactors through to the rôle of the fast breeder and the development of fusion. The balance between the
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  time scale and the demand for the energy that these systems might provide is one of the central questions of energy policy. I shall certainly take note of what my hon. Friend has said.

  Coal Industry Development
  Mr. Patrick McNair-Wilsonasked the Secretary of State for Energy if he is satisfied that sufficient funds are available under existing legislation to enable the National Coal Board to implement to the full the development plans for the industry for the years 1976 to 1980 in line with his stated policy.
  The Under-Secretary of State for Energy (Mr. Alex Eadie): As was explained when the National Coal Board (Finance) Bill was under consideration last December, the present borrowing limits for the board are expected to accommodate its borrowing requirements for about two years. Requirements beyond that will be covered by further legislation that the Government will place before the House in due course.
  Mr. McNair-Wilson: Can the Minister confirm that the cost of expanding the industry is now nearly 100 per cent. higher than was estimated two years ago and that the £300 million which was announced by the chairman last month is far and away above the £219 million mentioned in the February White Paper on Public Expenditure? Can the hon. Gentleman confirm that the Government will not affect this programme by any of the public expenditure cuts which are to be announced shortly?
  Mr. Eadie: I can confirm that the Government's commitment to the plan for coal holds. We are thoroughly committed to it. It is true that the original estimate of the cost of the plan for coal has been subject to inflation, like anything else. In addition, the National Coal Board has now been able to make a more realistic estimate of the total costs.
  Mr. Skinner: Will my hon. Friend also confirm that there is another side to this equation which has not been made public to any great extent? Does he agree that the National Coal Board has handed over about £13 million to the State as a result of the new so-called partnership deal with Gulf and Conoco in the North Sea? Will he also confirm that the NCB

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  has not taken up several million pounds worth of stocking aid grants which could have been taken up in the past financial year? In view of all of this, is it not worth recording that the Government have a further debt to the miners? Would not my hon. Friend do well to lend his support to mine and try to ensure that the miners attain their goal of an earlier retirement age shortly?
  Mr. Eadie: That was a long supplementary question, raising some important points. My hon. Friend knows that there have been various conference commitments on the part of the miners to an earlier retirement age and that the Government have said that they are not unsympathetic to this. They believe that men who work in the bowels of the earth should be considered for early retirement in due course. The point about the North Sea holdings of the NCB has been answered on an earlier occasion. The Government have given a firm commitment about the stocking aid grant or any other form of assistance. They have put their money where their mouth is.
  Mr. Michael Latham: May I ask whether, as part of the plan for coal, the board is looking seriously at the question of reopening pits which have been closed although resources are still in the earth? If the board has been doing this, may I inquire as to the degree of seriousness in this approach?
  Mr. Eadie: There has been, naturally, an examination into the question of new reserves of coal in existing pits. It is more economical and profitable to obtain coal in this way. The board has looked at all aspects of this which would be beneficial to the nation. The coal industry examination gave a specific target for the commitment to coal. I can assure the hon. Gentleman that that policy is being operated.

  Electric Overhead Ceiling Heating
  Mr. Atkinsonasked the Secretary of State for Energy if he will issue a general direction to electricity boards to cease to install overhead ceiling heating systems.
  Mr. Eadie: Developers and consumers should be free to choose this system if it is properly installed in suitably insulated buildings.
  Mr. Atkinson: I am sure that that answer must be born out of ignorance of the criticism that has spread throughout the country, in Scotland and elsewhere, particularly among council tenants and tenants of private housing associations. All of them agree that these schemes are totally unsatisfactory for the kind of structures now being erected by local authorities. Will my hon. Friend reconsider his answer and extend some sympathy to those who have criticised these systems? Will he offer local authorities assistance in providing alternatives likely to produce heating systems better than those which have been installed?
  Mr. Eadie: While I have a great deal of sympathy with many of my hon. Friend's comments about the costs of energy, I should point out that any guidance to developers and builders is a matter for my right hon. Friend the Secretary of State for the Environment, who is responsible for the building regulations.
  Mr. Grimond: Is the hon. Gentleman saying that this method of space heating by electricity is comparable in efficiency with other methods? Is it not the case that, even with changes in prices, this is a most unsatisfactory method of heating?
  Mr. Eadie: I am not saying that it is more efficient than any other system. All I said was that the consumer should have a choice. The electricity supply industry has a statutory obligation to operate economically and efficiently. It is aware of the need for conservation of resources. I agree with the right hon. Gentleman that there is a need for information to be given to consumers about what is the best buy. We try to help all we can.

  Electricity Supply Industry
  Mr. Palmerasked the Secretary of State for Energy if he will make a statement on the Plowden Report on the reorganisation of the electricity supply industry.
  Mr. Biffenasked the Secretary of State for Energy when he expects to conclude his consideration of the Plowden Report on the organisation of the electricity industry; and if he proposes to introduce appropriate legislation in the next parliamentary Session.
  Mr. Benn: The Government are still considering the report. We recognise the need to end the present uncertainty in the industry, and proposals will be brought forward without unnecessary delay, but any Bill to reorganise the electricity supply industry will have to compete with other claims on legislative time.
  Mr. Palmer: Does my right hon. Friend agree that the report has now been with him for some months and that delay is unsettling both for the management of the industry and for the trade unions? Would it not be as well, whatever my right hon. Friend's view of the Plowden recommendations, to issue a White Paper fairly soon?
  Mr. Benn: I appreciate what my hon. Friend has said, although in an article which he wrote in February he recognised that I would need time to consider the recommendations. It is a very large piece of reorganisation that is proposed, including the abolition of all the statutory distribution and supply boards, and it would very much impact upon relations with the Government. I ask my hon. Friend to give me a little more time for discussions, but I shall bear in mind the point he has raised.
  Mr. Rost: Has the Department considered the part of the report which suggests that the electricity supply industry has not been using its fuel as efficiently as it should because it has not done enough to promote a satisfactory power scheme? Is the right hon. Gentleman aware that for this reason Plowden has recommended that there should be changes in the industry?
  Mr. Benn: Every part of the report has been discussed. Dr. Walter Marshall, my chief scientific adviser, is examining the heat and power point that the hon. Gentleman makes very much his own in questions, and I respect him for doing so. We expect Dr. Marshall's report later this year, but, as the hon. Gentleman will appreciate, any change would be a fairly major one and immediate results cannot be expected.
  Mr. Biffen: Is the right hon. Gentleman aware that the secretaries of the EPTU and the Electrical Power Engineers Association have anxiety about the shortage of senior executives on the Electricity Council? Is he aware of their
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  keen anxiety that the present uncertainty should be resolved as speedily as possible? Therefore, will he reconsider the answer he gave to his hon. Friend the Member for Bristol, North-East (Mr. Palmer) and place before the House at least the expectation that we can have legislation on the Plowden Report next Session?
  Mr. Benn: I have already dealt with the legislative point. By the normal methods that Ministers adopt, and not being able to anticipate the Gracious Speech, I cannot go beyond what I have said. I saw the letter in The Times. I discussed appointments with the two joint authors of that letter beforehand. I have discussed the whole question of the Government's approach to Plowden with the unions and with the industry. I think it is fairly widely understood that a change of this magnitude, which would involve the abolition of all the statutory boards in the various regions of the country, would need to be considered carefully, especially in the context of devolution, where the desire has been for decisions to be taken closer to the areas that are affected. In those circumstances, I think that I am entitled to take a little more time. I have pointed that out to Mr. Prior, who is the full-time member of the Electricity Council with responsibility for industrial relations, and to Mr. Richardson, who is a part-time member.

  Gas and Electricity Disconnections
  Mr. Skeetasked the Secretary of State for Energy whether he has yet reached a conclusion on whether to instruct the gas and electricity boards to discontinue the practice of disconnection for non-payment; and what plans he has to implement other recommendations contained in the Oakes Report.
  Mr. Mike Thomasasked the Secretary of State for Energy when he expects to announce the Government's proposals to implement the Oakes Report on fuel payments.
  Mr. Frank Allaunasked the Secretary of State for Energy whether he has yet reached a conclusion about instructing the electricity and gas boards to discontinue the practice of disconnection for non-payment; and what plans

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  he has to implement other recommendations outlined in the Oakes Report.
  The Under-Secretary of State for Energy (Mr. Gordon Oakes): The report is still being considered and my right hon. Friend will make a statement as soon as possible.
  Mr. Skeet: Is the hon. Gentleman aware that many traders do not have the powers that are available to the gas and electricity industries but that they collect their debts? Does he accept that these two industries are overloaded with bad debts? Will he consider the possibility of having special categories of exemption, such as old-age pensioners and single-parent families? Will the Secretary of State accelerate a decision on this matter as it is of importance to the industry as well as to the consumer? It is particularly important to people on lower earnings.
  Mr. Oakes: As the hon. Gentleman and the House know, I have reported on this matter to my right hon. Friend. The industries have put their point of view, and I am hopeful that the Secretary of State will make a decision as soon as possible.
  Mr. Thomas: Is my hon. Friend aware that, although there have been various reports of this kind, we have gone through a difficult winter for poorer people and we are now about to embark on another winter of disconnections and misery for many people if a decision is not made shortly? The Government must get on and make a decision. Is my hon. Friend determined to hear yet again the rearguard action of the industries to the sensible proposal that he is making?
  Mr. Oakes: I have made my report to my right hon. Friend, and the industries are entitled to put forward their point of view on the report. I agree that there is an acute need for urgency in this matter. A decision must be taken before the autumn and winter months.
  Mr. Peter Bottomley: Can there be any justification of the energy boards' claim that the cost of fuel will have to go up by 10 per cent. if the automatic disconnection policy is changed? Has the hon. Gentleman had any evidence from the electricity or gas boards as to
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  the number of people who could equally well pay if there were a threat of being taken to court?
  Mr. Oakes: The industries have put forward that point of view. However, there is some doubt as to how they arrive at the arithmetic of the figures.
  Mr. Allaun: What is my hon. Friend's attitude towards providing pensioners living on their own with free gas and electricity, as urged by Jack Jones and others, especially as both industries are working at less than full capacity? If ICI can be granted a rebate of £91 million a year by the gas board on its gas bill, the boards should surely grant something to pensioners rather than apply disconnection.
  Mr. Oakes: I do not want to go into the long-term contract question that my hon. Friend has raised. The issue of free supplies of electricity and gas were not in my report. Possibly that is a matter for decision for the Department of Health and Social Security rather than by my Department.

  Drilling Rigs and Production Platforms
  Mr. Arnoldasked the Secretary of State for Energy what additional orders for drilling rigs and production platforms can reasonably be expected from the next round of licences for oil and gas exploration in the Continental Shelf.
  Dr. J. Dickson Mabon: It is not possible to make firm estimates at present because there are too many uncertainties involved. The number of rig orders will depend on the response to this round, the drilling obligations agreed with successful applicants and the availability of existing rigs. Orders for production platforms will depend on the number and nature of any hydrocarbon deposits discovered.
  Mr. Arnold: How can the Government be so certain that the process of consultation with the oil companies, the trade union movement and other industries will of itself automatically ensure success and get the best possible bargain without endangering the success of the next round of licensing?
  Dr. Mabon: Frankly, I cannot understand that question. If the hon. Gentleman cares to rephrase it in a way that I can appreciate, I shall be happy to reply.
  Mr. Arnold: How can the Government be so certain that the process of consultation with all the parties concerned will of itself succeed in getting the best possible bargain without endangering the success of the round of licences to which the Minister has referred?
  Dr. Mabon: I think that all industries, not only the oil companies—I shall do my best to answer the question—including the trade unions and those involved with the ancillary industries, prefer to be consulted. We have had some rather disappointing experiences from the fourth round. There was a great deal to learn from that, and we are anxious to learn from the past. The consultations will not prove everything, but they will help us in making the fifth round a success.
  Mr. Dalyell: On the basis of the last part of my hon. Friend's answer, if it is true that further hydrocarbon discoveries will make the outlook better, will this help Methil?
  Dr. Mabon: Yards such as Methil are involved in steel platform orders. There may be one in 1977. Methil will be competing for that. If it is successful, its future will be assured for some time. However, as I said to my hon. Friend the Member for Fife, Central (Mr. Hamilton), Methil and similar yards get on with ancillary work if they can compete successfully for it.
  Mr. Viggers: Does not the hon. Gentleman agree that there might have been employment advantages if the fifth round could have been brought forward instead of the Government having a row about participation with the companies?
  Dr. Mabon: That is not true. The hon. Gentleman is not being fair to us. I am not blaming the Tory Party in any way, as we might have made the same error, but the great mistake was that the fourth round was too large and was spread over too long a period. We are trying to conduct smaller rounds more quickly, and I hope that the fifth round will be allocated later this year.
  Mr. Skinner: If I may try to clarify the situation stated by the hon. Member
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  for Hazel Grove (Mr. Arnold), perhaps my hon. Friend could understand it better if he appreciated that what the hon. Member was trying to say was that the Government having taken the oil away from the oil companies, why should the oil companies, on the basis of losing all this wealth, discuss further licences with the Government? Is it not the case that, if only the hon. Member for Hazel Grove would divert his attention away from the Daily Telegraph and look at what is really happening, he would find that we are not taking sufficient oil away, contrary to what we said we would do in our manifesto, and my hon. Friend would be able to appreciate, understand and answer the hon. Gentleman's supplementary question?
  Dr. Mabon: The fact is simple. If one reads the Daily Telegraph, as the hon. Member for Hazel Grove (Mr. Arnold) recommends, and the Morning Star, to which my hon. Friend the Member for Bolsover (Mr. Skinner) contributes, one finds that the truth lies in the middle.
  Mr. Gray: May I suggest to the Minister that he should draw the attention of all firms concerned to the initiative shown within the last few days by Highland Fabricators of Nigg Bay, which has made an arrangement with EMH of France to promote in this country a new and highly sophisticated articulated column design which will help considerably in the exploration of marginal fields?
  Dr. Mabon: I welcome that development very much and I congratulate the hon. Gentleman on adding yet another boost to his constituency.

  Gas and Electricity Meters
  Mr. Cartwrightasked the Secretary of State for Energy if he will take action to evaluate the scheme, proposed by the National Consumer Council, for the use of self-cancelling token meters in the supply of gas and electricity to domestic consumers.
  Mr. Oakes: The Electricity Council is taking the lead in a study of the practicability of using token meters. As the recent report on payment and collection methods said, there is clearly no question of token-operated meters being available in the short term.
  Mr. Cartwright: Will not my hon. Friend accept that the record of the fuel boards on this issue so far can hardly be said to reveal any burning enthusiasm for radical change? Will he reconsider his answer in the light of the recommendation of the Select Committee on Nationalised Industries for a thorough-going evaluation of this proposal, to be carried out by his Department and the Department of Prices and Consumer Protection, whereby added weight would be given to the needs of consumers in this very important matter?
  Mr. Oakes: I think that the series of reports which have been coming forward on fuel problems has concentrated the minds of the industries. Research is taking place, and rather than that each board should conduct its own research it was agreed that the Electricity Council should take the lead.
  Mr. Peter Bottomley: Would not a greater use of token meters, prepaid meters or self-cancelling token meters lead to an improvement in the cash flow of the boards and, therefore, help to reduce prices?
  Mr. Oakes: I think that it would help the boards themselves and I am certain that it would help many consumers as well.
  Mr. Loyden: Do not the wide implications of my hon. Friend's report, which contains many recommendations beyond the one on disconnection, emphasise the fact that some early action has to be taken on this problem? Does not my hon. Friend also agree that the House should debate the Oakes Report in order that we could determine what is the Government's attitude?
  Mr. Oakes: I should be delighted to have a debate, but that is a matter for my right hon. Friend the Leader of the House, and this week the House is pressingly busy. We have recommended that investigations should take place into the question of token meters, but there could not be results in the short term because it would be an enormous job to convert meters throughout the country and there is the problem of getting the right kind of token and so on. Research into the matter is, however, being conducted by the Electricity Council.

  Energy Policy
  Mr. Rostasked the Secretary of State for Energy if he proposes to take any initiatives as a follow-up to the recent energy forum.
  Mr. Benn: Yes, Sir. I believe—and this was a view widely expressed at the conference—that there is a need for a more permanent body which can consider energy policy and the decisions to be taken in the energy field. I am considering what form this body should take and am meeting representatives of some of the principal interests concerned later this month to seek their advice on this.
  Mr. Rost: While welcoming that reply, may I ask the right hon. Gentleman whether the energy forum has made it easier or harder for him to reach some of the major policy decisions which are awaiting him, particularly on whether the SGHWR programme is to be scrapped?
  Mr. Benn: My general response is that the conference contributed to the education of all those present, including the Ministers and the civil servants involved. In addition, people who had hitherto had a specialist interest in energy may, by listening to others, have come to appreciate the wide range of interests in this matter, and the Minister will be assisted, in reaching his decisions, if there is some opportunity of discussing them with a smaller body representing the same general interests. I am about to send out invitations to 20 or 21 people who represented a wide range of interests at the conference, and I hope that the resultant meeting will help to bring forward proposals for an advisory commission.
  Mrs. Millie Miller: Will my right hon. Friend bear in mind the growing awareness of the extreme danger of nuclear waste, which has been raised in the House many times, and take it into account when considering any further development of the nuclear energy programme, including our taking into this country nuclear waste for reprocessing?
  Mr. Benn: The first public discussion, which was held after I was appointed to my office, arose out of the proposal to take the Japanese fuels for reprocessing. As a result of that public discussion, we managed to make arrangements to meet the problem which my hon. Friend

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  has raised about the return of toxic waste when the vitrification process is complete. A knowledge of that issue helped. By publication of all the information, Ministers have the opportunity of knowing public feeling before decisions are made, while the public know the basis on which those decisions are being made.
  Mr. Biffen: Arising from the supplementary question put by my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) about the SGHWR programme, can the right hon. Gentleman say when he expects to receive the assessment of Britain's nuclear reactor generation now being undertaken by the United Kingdom Atomic Energy Authority? Will he have that report made public? Does he not agree that the interests of open government are best served when his decisions are not trailered to journalists, however distinguished, even when the journalist is Mr. Chapman Pincher?
  Mr. Benn: It has never been my pleasure to meet Mr. Chapman Pincher, so one may say that I am not tinged with feelings of guilt about what he has written. I am happy to make information available to the House. The hon. Gentleman will not be surprised when I say that the significant body of opinion which two years ago wished us to buy American reactors and cancel our SGHWR programme is still very active. There has been renewed activity on that front. I ask the hon. Gentleman to take my word for it that I shall not be easily persuaded that the purchase of American reactors would be the right decision.

  Gas Prices
  Mr. Teddy Taylorasked the Secretary of State for Energy if he will make a further statement on gas prices.
  Dr. J. Dickson Mabon: I expect a further increase in tariffs in the autumn, but it is too soon to predict its details.
  Mr. Taylor: Is it not very distressing when prices for essentials are rising so much and are causing hardship? Can the hon. Gentleman give us two assurances: first, that the public expenditure review in which the Secretary of State took part today did not include any process for a gas tax and, secondly, that in the autumn, when prices go up yet again, there will
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  be complete removal of the differentials between Scottish and English gas prices?
  Dr. Mabon: The answer to the first part of the supplementary question by the hon. Gentleman is "Yes". The answer to the second part is that it is not the Government's present intention to impose a gas tax. I have some sympathy with the hon. Gentleman on the third part of his supplementary question concerning the differentials in domestic tariffs between the Scottish Region and the English regions. They have been narrowed in the last two tariff reviews, and at least five of the 10 English regions are paying the same domestic tariffs as Scotland and Wales, which are on a common tariff. I hope that the process will continue in this matter, which is being considered by the Price Commission under a new Price Code not yet formally promulgated and by the National Gas Consumer Council.
  Mr. Madden: Can my hon. Friend give any idea of the range of increases in gas prices to which he has referred? Can he assure us that any increase which is agreed to will reflect an increase in costs and will in no way reflect the increase in gas tariffs which is being urged by the electricity industry in particular? If this occurred, it would be totally unacceptable to consumers and to many of us on this side of the House because workers are being asked to limit their wage increases.
  Dr. Mabon: The Government are not primarily responsible. In the first instance it is for the British Gas Corporation to make proposals. We expect that the increase will be well below the average of 20 per cent. made last time.
  Mr. Donald Stewart: Will the Minister guarantee to Scottish consumers that, as a result of having paid up to 50 per cent. more for gas over the years and thereby contributing to the gas grid network, we shall receive a corresponding concession when Scottish gas is piped south of the border?
  Dr. Mabon: These are matters for future consideration. When one takes the average revenue per domestic therm, which is the basis used by the hon. Member for Glasgow, Cathcart (Mr. Taylor)—[Interruption.] Yes, I would associate myself with what has been said. I

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  deplore the differentials in the prices over the years, and I hope that we shall move towards homogeneity of prices, even though it is English gas we are consuming. Gas prices in Scotland have been somewhat distorted by the fact that in Scotland average domestic consumption of gas is lower, and that is not an unfair point.

  National Coal Board
  Mr. Canavanasked the Secretary of State for Energy when he next intends to meet the Chairman of the National Coal Board.
  Mr. Benn: I have regular meetings with the chairmen of all the industries for which I am responsible.
  Mr. Canavan: Will my right hon. Friend suggest to the National Coal Board that it should do its own opencast mining instead of contracting it out to private enterprise? Some private contractors are very hostile to the trade union movement and are forcing workers to work 12-hour shifts and more than 60 hours a week. Will the right hon. Gentleman investigate the activities of J. Murphy and Son, Ltd., some of the management of which were recently convicted for tax swindling?
  Mr. Benn: This is a matter primarily for the National Coal Board. In view of the fact that my hon. Friend gave me one or two hours' notice, I shall raise this matter with the board and the National Union of Mineworkers, and will let him know the outcome.
  Mr. Rost: Will the Secretary of State persuade the National Coal Board to introduce a meaningful incentive scheme on a localised pit basis, so that there is a real incentive to workers to earn and produce more?
  Mr. Benn: This is a matter for the board, in conjunction with the NUM. There was discussion on this subject last year, and a pithead ballot on the matter. I am sure that, on reflection, the hon. Gentleman would not wish me to assume management responsibilities in the nationalised industries on matters such as this.
  Mr. Hardy: In the light of his recent visit to Silverwood colliery, in my con-
  1274
  stituency, will my right hon. Friend re-emphasise that this Government have taken a series of helpful and wise actions to ensure that Britain maintains a vigorous coal industry and a capacity for energy that will enable this country to be self-sufficient?
  Mr. Benn: I can confirm that. Although I cannot pretend that there are not outstanding problems in the coal industry, the latest of which is the very strong pressure for early retirement, in general the NUM and the NCB recognise that this Government have helped the coal industry to contribute considerably to national energy needs.

  Gas Bills
  Mr. Raphael Tuckasked the Secretary of State for Energy if he will give a general direction to the British Gas Corporation to send quarterly bills to all consumers without prepayment meters.
  Mr. Oakes: It is already the normal practice of British Gas to render bills quarterly to credit customers, apart from the larger commercial and industrial users, who are billed monthly.
  Mr. Tuck: Is my hon. Friend aware that in certain cases the Gas Corporation waits 11 months before sending out accounts? Recently, after 11 months, I received an account for £112. I shall find it very difficult to pay this. [Interruption.] Yes, I shall. This applies to many people who are in a less fortunate position than myself. Can my hon. Friend ensure that in future accounts are sent quarterly or monthly?
  Mr. Oakes: I shall try to ensure that my hon. Friend is not disconnected. It is normal practice to render a bill quarterly, but in every organisation there will be occasions when something goes wrong with the administrative arrangements. If my hon. Friend wishes, I shall raise his case with the British Gas Corporation.
  Mr. Tuck: Yes, please.
  Mr. Mike Thomas: On the general question of prepayment meters, can my hon. Friend confirm that the Electricity Council will take two years and spend a mere £15,000 on the study of token meters? If that is the case, will it meet the criteria that my hon. Friend is hoping to get?
  Mr. Oakes: I do not have the available figures in front of me, but I shall write to my hon. Friend.

  OVERSEAS DEVELOPMENT

    Aid Target
    Mr. Tim Rentonasked the Minister for Overseas Development when he expects the Pearson target for overseas aid to be reached by the United Kingdom.
    Mr. Canavanasked the Minister for Overseas Development when he expects his Department to reach the United Nations target of 0·7 per cent. of gross national product in aid to underdeveloped countries.
    The Minister for Overseas Development (Mr. Reg Prentice): The Government have always made it clear that, while they accept the 0·7 per cent. target in principle, they cannot set a date for its achievement. Our progress towards it must be determined by the pace of our own economic recovery and by the other calls on our resources.
    Mr. Renton: The Minister's commitment to overseas aid is widely known and respected. However, at a time when public funds are desperately short, would it not be realistic for our limited aid programme to be concentrated on the development overseas of mineral resources of which Britain is increasingly short? This would help our aid programme to survive the public expenditure cuts unscathed.
    Mr. Prentice: In making the choice between countries and sectors, we take account of many factors, including our own long-term economic self-interest. However, the main motivation, set out in the White Paper a few months ago, is to devote an increasing amount of our aid to the poorest countries of the world. This is accepted widely on both sides of the House and among enlightened opinion throughout the country.
    Mr. Canavan: In view of the insane proposals for further massive cuts in public expenditure, will my right hon. Friend give an assurance to the underdeveloped countries that he will resist any Treasury moves to cut back our already inadequate overseas aid programme,
    1276
    otherwise we shall never reach the United Nations target?
    Mr. Prentice: I cannot anticipate any statement that will be made by the Chancellor shortly on public expenditure. These matters are being discussed in the Cabinet, and my hon. Friend can rest assured that I shall play my full part in those discussions.
    Mr. Luce: Will the Minister confirm that it is the Government's main objective to concentrate help on agricultural sectors of the poorest countries in the world? Is it not true that much could be achieved by encouraging private trade and investment, alongside Government aid?
    Mr. Prentice: Yes. I do not see a conflict between development of private investment and official aid. The two are complementary, and the developing world needs more of both. I confirm that we are trying to devote a growing proportion of our assistance to the rural sector.
    Mr. Hooley: Is my right hon. Friend aware that back in 1970 the Labour Party set a target date for reaching the United Nations aid target? That target date was 1975, since which we have gone backwards instead of forwards. Will my right hon. Friend use his influence to see that we move towards the aid target rather than away from it?
    Mr. Prentice: I confirm that the Labour Party, the Government and the country are committed to reach the United Nations target as soon as we can manage to do so. This commitment is shared by other countries in the industrialised world, and so far only Sweden and Holland have reached the target. This country and others will reach it as soon as possible.
    Mr. Donald Stewart: I fully support the right hon. Gentleman in his wish to reach his target, but will the Government exercise more discretion in overseas aid? For instance, will they tie in the application from Argentina with a promise from Argentina that it will cease its pressure on the people in the Falkland Islands?
    Mr. Prentice: I do not wish to answer that question without notice, except to say that we are very discriminating in the use of our aid funds. We take account of

    1277
    the needs of the recipient country and also of our own political and commercial interests. All these factors play a part in the determination of our programme.
    Mr. Tugendhat: Is the right hon. Gentleman aware that this programme, like others, is having to be cut because of the profligacy of the Government's policies in their first year of office, especially the policies advocated by hon. Members below the Gangway?
    Mr. Prentice: No. For very many years this country has not applied the necessary economic self-discipline. We are now undergoing the process of trying to make a long overdue adjustment in that respect. That involves hard choices on public expenditure and elsewhere. In making those hard choices the Government will be guided by morality and long-term self-interest as well as by short-term expediency.

  Tanzania (Farms)
  Mr. Michael Spicerasked the Minister for Overseas Development whether it remains his policy that British funds will be used only for the purchase of "mixed" British-owned farms in Tanzania.
  Mr. Prentice: It has been agreed between Her Majesty's Government and the Government of the United Republic of Tanzania that British project aid funds will be made available to the Tanzanian Government for the development of British-occupied mixed farms. Purchase is only the first step towards such development.
  Mr. Spicer: Is the Minister aware that British farmers in Tanzania believe that the United Kingdom Government have ratted on a commitment made at Arusha on 28th November 1974 under which British farmers whose land was to be expropriated would be compensated? Does he accept that that kind of precedent is very dangerous since a similar commitment might have to be made one day to white farmers in Rhodesia?
  Mr. Prentice: I do not accept that premise. At the meeting to which the hon. Member referred, Mr. Mungai, who was then the Tanzanian Minister of Agriculture, expressed the intention of the Tanzanian Government to take over the
  1278
  ownership of British-owned farms in general. That policy involved no commitment to an aid programme. There has since been an agreement that we should apply aid funds to the purchase of mixed farms because we believe that category to be the most relevant to development. Taking over these farms will promote more intensive use of the land, and that is conducive to the rural development of Tanzania, whereas the simple transfer of ownership of a ranch or plantation would not have that effect.

  UNCTAD IV
  Mr. Formanasked the Minister for Overseas Development if he will make a further statement on the implications for his Department of the follow-up to UNCTAD IV.
  The Parliamentary Secretary to the Ministry of Overseas Development (Mr. Frank Judd): The United Kingdom intends to participate fully in the discussions in all the various international fora in which follow-up action to UNCTAD IV is to be considered. As I said in the House on 14th June, the conference referred the proposals of the developing and developed countries on the main policy issues concerning aid to the next meeting of the UNCTAD Trade and Development Board in October 1976.
  Mr. Forman: In the light of the rather disappointing stance of the Government at Nairobi, will the Minister assure the House that he will fight, fight and fight again for this country's rather meagre aid budget in the present discussions? Will he ensure that the point is got across that aid is not only a moral imperative but an example of enlightened long-term self-interest for this country?
  Mr. Judd: Clearly it is important that in overcoming our present economic difficulties we should not tread still more on the backs of the already deprived elsewhere in the world. It is and always has been the Government's view that we must do everything we can as rapidly as possible to move towards fulfilment of the 0·7 per cent. target when our economic situation permits.
  Dr. Bray: Does my hon. Friend agree that, even though the Government might not be able to take constructive initiatives within UNCTAD's preparatory

  1279
  committees, they can nevertheless fulfil a useful role by trying to organise in the EEC a position which is sympathetic to the common fund?
  Mr. Judd: We have reservations about the effectiveness of the common fund as an instrument for its declared objective. We believe that it is sensible to put those reservations clearly on the table. As on other issues, having done that we shall work closely with our colleagues in the EEC to see whether a co-ordinated position can be reached.

  Students' Fees
  Mr. Hooleyasked the Minister for Overseas Development what will be the additional charge on the overseas aid budget as a result of the increase in fees for overseas students studying in the United Kingdom and subsidised by his Department: (a) in 1976–77 and (b) in a full year.
  Mr. Judd: The fee increases announced on 16th December last year are likely to increase the charge to the aid programme for overseas students supported from my Department's current programmes of technical co-operation by about £600,000 for the academic year 1976–77 and by similar amounts in subsequent years. Those announced by my right hon. Friend the Secretary of State for Education and Science on 5th July last would result in a further addition of the order of £1·75 million starting in the academic year 1977–78.
  Mr. Hooley: Does my hon. Friend agree that this represents a cut in the aid budget unless countervailing increases are made available to offset the scheme? Is he pressing the Treasury for these increases?
  Mr. Judd: I agree that the scheme represents an increased allocation from within the aid programme for this purpose, but it is an important purpose and I have no doubt that the Government will be bearing that in mind in their present considerations.
  Mr. Dalyell: Is my hon. Friend aware that a lot of us think that the Government are right in this matter?
  Mr. Judd: We are always grateful for my hon. Friend's support on this and other issues.

  Latin America (Medical Equipment)
  Mr. James Johnsonasked the Minister for Overseas Development if he will make a statement concerning aid in British medical equipment and expertise to Latin America; and whether this conforms with the recent white Paper "The Changing Emphasis in British Aid Policies—More Help for the Poorest".
  Mr. Judd: There are three such capital aid projects now in course of implementation, in Colombia, Nicaragua and Peru. I am providing further details of these and of technical co-operation in the Official Report. All schemes approved by the present Administration conform with the White Paper policy.
  Mr. Johnson: Who advices my hon. Friend, apart from the usual departmental advisers? Is there a panel of outside personnel qualified in the industry which is making this sort of equipment?
  Mr. Judd: I can assure my hon. Friend that the most highly qualified and expert advice is available within the Department and that we draw on this freely. But in coming to our conclusions we take account of a wide variety of considerations.
  Following are the details:
  Colombia:
  Medical equipment loan 1973. £4 million is provided for medical equipment for up to 70 hospitals and the National Laboratory of Health.
  Nicaragua:
  Hospital equipment loan 1974. This £,000 loan is for hospital equipment for two hospitals constructed after the 1972 earthquake.
  Peru:
  Health vehicles loan 1976. £3 million for the purchase of vehicles and ambulances for use in the rural areas of Peru.
  Technical Assistance and Training:
  An expert in Chagas disease, a disease associated with poverty and overcrowding, is working in the University of Rio de Janeiro (Brazil). There are now 77 persons from Latin America training under ODM auspices in the medical field and two in the para-medical field.

  Government Aid (International Comparisons)
  Mr. Bryan Daviesasked the Minister for overseas Development what were the contributions per head of population

  1281
  to official Government overseas aid and development programmes in 1975 for each of the following countries: Australia, Belgium, Canada, Denmark, Luxembourg, France, West Germany, Italy, Ireland, Japan, Netherlands, New Zealand, Norway, Sweden, Switzerland, United States of America and the United Kingdom; what was the percentage of gross national product of each of these countries devoted to these official programmes in the same year; and whether he will make a statement.
  Mr. Prentice: I have arranged for this information to be published in the Official Report.
  Mr. Davies: Will my right hon. Friend also arrange for the Cabinet to be kept fully informed of the figures?
  Mr. Prentice: Yes. My hon. Friend will not be surprised to know that I have made certain of that.
  Mr. Onslow: Has the right hon. Gentleman ever thought of copying the example of Switzerland and having a referendum on the expenditure on aid, or is he afraid that it might produce the same result in this country?
  Mr. Prentice: I hope that a referendum in this country would not produce the depelorable result of the recent one in Switzerland. I hope and believe that the majority of citizens in this country would have sufficient sense of the moral issues and long-term self-interest involved to give a different verdict.
  Mr. Lane: Will the Minister bear in mind that a number of us on the Opposition Benches hope that he will be left with a still expanding aid programme after the current review of public expenditure?
  Mr. Prentice: I think that one of the most important factors in the aid debate in this House over the years has been the general agreement between those who have participated in them on the need to have a programme which increases steadily in quantity to meet the United Nations target and increases in its quality and effectiveness.
  Mr. Cryer: Is my right hon. Friend aware that we hope that his aid programme will be maintained and that he will not rely on private enterprise to bolster it? Is he aware that private enter-
  1282
  prise investment here or abroad is designed not to benefit the people but to exploit them? Is he further aware that it is far better for underdeveloped countries if aid is generated where it is most needed and is not left to the whims and exploitation of private enterprise capitalism?
  Mr. Prentice: In many cases private investment can be to the benefit of developing countries and should not be described as exploitation. At the same time, it is not a substitute for official flows of aid. As I indicated in a reply to an earlier question, the developing countries need more of both.
  Mr. Ian Lloyd: Irrespective of moral judgments or hypothetical referenda, in our present economic circumstances would it not be an excellent idea to publish our overseas aid not only as a percentage of our own gross national product but as a percentage of what we are borrowing?
  Mr. Prentice: No, Sir. I think it is important to recognise that there is an international commitment to the United Nations target in this matter, and that this country has an obligation—as have all other countries in the richer one-third of the world—to meet that target as soon as its circumstances permit.
  Mr. Tugendhat: When the Minister publishes the figures, will he also include figures which show that the United Kingdom gains a quite disproportionately large share of the orders placed by the developing countries out of the multilateral aid they receive from institutions to which we contribute?
  Mr. Prentice: This will not arise in the reply because it was not in the original Question, but I am grateful to the hon. Member for drawing attention to it. It is not sufficiently realised among those who make ill-informed criticism of the aid programme that we get a very considerable direct economic return in the sense that the hon. Gentleman has mentioned, as well as in other senses. On top of that there is an imponderable return in trade and in goodwill which cannot be precisely measured. I am absolutely convinced that if there had been no aid programme from this country in the last 20 years our balance of payments and

  1283
  many other problems would be worse today than they are.
  Following is the information:

  Country

  Net Official Development Assistance as percentage of GNP Percent.

  Net Official Development Assistance per head of population $

  Australia

  0·61

  38

  Belgium

  0·59

  39

  Canada

  0·57

  39

  Denmark

  0·58

  41

  France

  0·63

  40

  West Germany

  0·40

  27

  Italy

  0·11

  3

  Japan

  0·24

  10

  Netherlands

  0·75

  45

  New Zealand

  0·52

  22

  Norway

  0·66

  46

  Sweden

  0·82

  69

  Switzerland

  0·19

  16

  United States of America

  0·27

  19

  United Kingdom

  0·38

  15

  1975 figures are still provisional and the OECD, which has recently provided an indication of 1975 aid flows, does not have figures for Ireland or Luxembourg who are not members of the OECD's Development Assistance Committee.

STEEL INDUSTRY (WALES)
The Secretary of State for Industry (Mr. Eric G. Varley): With permission, Mr. Speaker, I should like to make a statement about capital investment in the steel industry in Wales.
The Government have been faced with a very difficult and complex decision over the British Steel Corporation's proposals for major developments at Port Talbot and for the closure of steelmaking at Shotton. The corporation's plans and several alternative schemes have been most carefully examined in the light of the many representations made to us from the areas concerned. It is the Government's view that the assumptions about capital costs and market prospects which lay behind the corporation's proposals require a thorough re-examination in the light of inflation and of market prospects as the steel industry recovers from the severe recession of last year.
I have therefore asked the corporation to carry out a further review both of its own proposals and of alternative schemes involving continued steelmaking at Shotton, in the light of the latest available information. It has agreed to do so.
1284
This review will inevitably take some time to conduct in the necessary depth and detail. We have therefore proposed to the corporation that it should undertake, without awaiting the review, those elements of its proposed investment at Port Talbot which would not prejudge in any way the decision on the future of steelmaking at Shotton.
The corporation has informed me that it is willing to proceed on this basis with the second phase of the coke oven replacement scheme, of which a first phase was authorised in February 1975. This will reduce pollution in the vicinity of the works and will contribute to operating efficiency. It is also prepared to consider the economic and operational feasibility of introducing some continuous casting to feed the existing mill at Port Talbot, giving some improvement in product quality. The new coke ovens and the continuous casting machine, together with necessary modifications to the steelmaking, scrap and slab handling facilities, would represent an investment of some £100 million in total.
The Government informed the corporation of our readiness immediately to authorise expenditure of a further £250 million for the proposed new hot strip mill at Port Talbot. The corporation has agreed to consider this proposal within the re-examination that it has undertaken to carry out.
Mr. Heseltine: Will the Secretary of State understand that his statement today is a classic example of Government ownership producing the worst of all worlds for British industry? How can the Secretary of State possibly justify a delay of two and a half years in pursuing a review which was political in its original conception and which throughout the period of its conduct has not produced a single fact to question the original decision taken by the previous Government?
Will the Secretary of State confirm that the cost figure in the original announcement in February 1973 about modernising the British steel industry through a 10-year programme, of £3 billion, is now estimated to be nearer £6 billion, and is increasing with every month that the Government delay that programme?
Will the Secretary of State agree that the critical decision which the British

1285
Steel Corporation wants is an announcement about the investment in industry to produce primary iron and steel, and that this announcement today largely avoids any decision in this direction?
Will the Secretary of State acknowledge that the arrangements that he has announced will bring dismay to the British Steel Corporation and to the customers in this country who depend on its supplies, and that they will bring satisfaction only to our overseas competitors, who once again see that Britain's competitive position is undermined by its own Government?
Mr. Varley: I am prepared to take lectures from most people about delays and interference concerning the British Steel Corporation, but not from Conservative spokesmen. When we examine the joint steering group of 1970—the hon. Gentleman was not directly associated with it, but some of his hon. Friends were—it is clear that the Conservatives have no reason to complain.
From our point of view, this thorough re-examination is necessary in the light of the worst recession that the steel industry has gone through for 40 years, and in the light of inflation and the market prospects. This in no way calls into question the overall development plans of the British Steel Corporation. We are keen to approve every item in the proposed Port Talbot development which does not necessarily prejudge the necessary decision about Shotton.
I never cease to be amazed when I see how easily the hon. Gentleman and some of his hon. Friends willingly contemplate, without much hesitation, the throwing on to the scrapheap of some 6,000 people.
Mr. Roy Hughes: If there is to be all this money available for investment in the steel industry, why is no iron-ore terminal being provided for the Llanwern works, the most modern in the country?
Further, when are the people who have mismanaged our nationalised industry for so long to be brought to book?
Mr. Varley: My hon. Friend's first question does not arise out of the statement, but I am prepared to have a look at the specific point raised by him. We
1286
want to see a competitive—and internationally competitive—British Steel Corporation, but it will take time to get to that position. If the British Steel Corporation had been allowed to go ahead with its original development programme, which was laid before the last Labour Government in 1969, instead of having the procrastination and delay which took place, associated with the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), we should have been well down this road.
Sir A. Meyer: Is the Secretary of State aware that this non-decision will be interpreted at Shotton as a "thumbs down"? Is the Secretary of State further aware that Shotton now needs to know whether it has a bright future either as an integrated steel works or purely as a finishing works? What it needs above all is certainty. When will it get it?
Mr. Varley: I know what kind of certainty it would have had under the previous Government's decision. I know that when the White Paper was produced in 1973, the hon. Gentleman actually voted for the closure of steelmaking at Shotton. What I have said today justifies this further re-examination, so that we have the full facts before a final decision is made.
Mr. Cledwyn Hughes: Will my right hon. Friend totally disregard the callous reactions of the Opposition Front Bench, and bear in mind that the uncertainty of the last few months, the splendid record of steelmaking in Shotton, and the high unemployment in North Wales fully justify this review? Will my right hon. Friend tell the House when we are likely to get the result of the review?
Mr. Varley: My right hon. Friend is right. I have to disregard the reactions of the Opposition, which are wholly predictable on a matter of this kind, because they are not concerned with preserving any opportunities in that part of Wales. What we want is a thorough re-examination.
My right hon. Friend asked how long the further study will take. I have discussed it at some length with the British Steel Corporation. The corporation must have time to re-examine its plans and its market prospects thoroughly. It would be wrong to limit the period available

1287
for this work. We need the best possible information before a final decision is taken by the Government.
Mr. Peter Walker: Is the Secretary of State aware that, when, in February 1973, after 10 years of dithering by all Governments on steel investment, I gave the go-ahead to a modernisation programme and announced a programme of 38 million tons by the early 1980s, he condemned that programme as not being ambitious enough and went round the country talking about 48 million tons by the early 1980s? Is he aware also that, next year, as a result of two and a half years of dithering, we shall have 6 million tons less capacity than we would have had, so that, if there is an upturn in world trade, instead of benefiting our exports and enabling us not to have to import, we shall have an adverse feature of £520 million on our balance of payments?
Mr. Varley: There has not been two and a half years of dithering. The proposals which have been put to us were not put to us until January 1975. Then we had the further re-examination of those proposals. So the right hon. Gentleman is wrong about that.
I never went round the country talking about 48 million tons of steel. It is true that I talked about 43 million tons of additional steel. But the right hon. Gentleman is wrong to believe that the British Steel Corporation in the future may not want higher capacity than was envisaged under his scheme. In fact, the proposals by the corporation, which were put to us more than 12 months ago, envisaged a capacity build-up in Port Talbot of about 5·75 million tons, and he knows that there are other proposals which have been put forward by the Shotton work force for continued steelmaking there of 2·25 million tons, with an alternative scheme for 1·8 million tons. That is why we want the examination. We want to see whether it is possible for steelmaking to continue at Shotton.
Mr. Pardoe: Is the right hon. Gentleman aware that the swapping of accusations between the two sides of the House about whose interference in the management of steel has produced the greatest calamity is singularly futile? May we, therefore, look to the future and ask him
1288
some questions about it? In relation to Port Talbot, can he tell us the present value of production per man-hour worked there? What is the present capital productivity there? What return does he expect from the very large investment of public expenditure at Port Talbot which he has announced today?
Mr. Varley: I am afraid that I cannot answer those questions without specific notice because they are detailed matters. I shall see that the hon. Gentleman gets the information. What he has to bear in mind is that, as a result of today's announcement, a further £100 million investment will take place at Port Talbot. We were ready for another £250 million of investment to take place there on the new strip mill. But the corporation has told us that it would like us to consider that additional investment in the light of the review which we have asked it to undertake.
I shall see that the hon. Gentleman gets answers to his more detailed questions, as I say.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: I shall call two more questions. We have a great deal of business in front of us.
Mr. Kinnock: Is my right hon. Friend aware that there will be a certain welcome at Shotton amongst the workers there for this announcement which permits an opportunity for further representations to be made, bearing in mind that they have made representations with great expertise before, and at Port Talbot because, after a 21-month wait, it brings the first opportunity for the implementation of the changes which the workers there want, but that neither group nor the Welsh steel industry in general can be delighted—nor would my right hon. Friend expect it—by the announcement?
As one who does not think that Government interference in major decisions of this kind is the worst evil ever visited on the country, may I ask my right hon. Friend, for the sake of saving the Welsh steel industry and permitting the prosperous parts of it to expand and its workers to have security, what would be the Government's recommendation to the British Steel Corporation about the decision which it should reach to save steelmaking at Shotton and to permit Port

1289
Talbot to have the kind of future that it richly deserves?
Mr. Varley: The social consequences in Shotton were a factor which we had to take into account in considering this review. My hon. Friend is right. We are convinced that the changes which have taken place—certainly the very severe recession over the past 12 months and its impact on the corporation—fully justify this review. We are anxious to see the corporation's development programme go ahead and also to see that the investment goes ahead in Port Talbot. At Shotton, steelmaking and its future will arise out of this examination, and, if the corporation comes up with a recommendation that it can be preserved, we shall look at it very seriously.
Mr. Wyn Roberts: Is not this decision to cut back and to delay investment in steel in Wales clean contrary to the Government's declared policy and to what the Prime Minister was saying at Durham over the weekend about directing resources to the major industries? Is the Secretary of State aware that his indecision will be greeted with derision throughout the whole of Wales?
Mr. Varley: I do not know the extent to which the hon. Member for Conway (Mr. Roberts) speaks for Wales, but I know from my discussions with sonic of my hon. Friends who are concerned that this will be very welcome. The fact that we have allowed a further £100 million worth of development at Port Talbot and that we are on record as saying that another £250 million worth of investment could go ahead is fully in line with what my right hon. Friend the Prime Minister said over the weekend.

FINANCE BILL (PROCEDURE)
Mr. Dodsworth: On a point of order, Mr. Speaker, of which I have given you prior notice. I seek your guidance about your intentions in certifying the Finance Bill as a Money Bill under the Parliament Act 1911.
There are three reasons that lead me to ask for your ruling. First, under Clause 52 and Schedule 6, Inland Revenue inspectors are allowed, after application to a court, to enter private premises and to take away private papers.
1290
This is clearly an issue of constitutional change and of individual freedom.
Secondly, it is possible to divide the Finance Bill between taxing resolutions and a Revenue Bill. That Revenue Bill could have been the subject of the normal procedures of scrutiny by another place, after approval by this House.
Thirdly, it is clear from page 791 of "Erskine May" that where actions such as the provisions of the present Finance Bill passing outside its normal scope are contemplated a resolution may be passed beginning with the words:
"notwithstanding anything to the contrary in the practice of the House relating to matters which may be included in Finance Bills, any Finance Bill of the present Session may contain the following provision…".
The procedural resolutions approved by the House do not make reference to the Taxes Management Act 1970, which is relevant to Schedule 6 and Clause 52. "Erskine May" goes on:
"In such a case the matter covered by the resolution must not be so far removed from central finance as to make its inclusion indefensible. Nor can this procedure be used other than sparingly without inviting complaints from Members."
Finally, Mr. Speaker, I ask your ruling as a matter of constitutional importance on what I suggest is an infringement of the privileges of this House, as clearly set out on page 802 of "Erskine May", which refers to the "tacking" of foreign matter to Finance Bills, and says:
"respect for constitutional practice prevents the inclusion of such matters among their original provisions".
Mr. Speaker: I am grateful to the hon. Member for Hertfordshire, South-West (Mr. Dodsworth) for giving me warning of his intention to raise this point of order. I am, however, sorry that I cannot help him at this stage.
It has been the invariable practice of my predecessors to defer any consideration of certification as a Money Bill until after a Bill has received its Third Reading and is ready to go to another place. Indeed, Mr. Speaker Lowther gave a ruling to that effect in 1912 shortly after the passing of the 1911 Parliament Act, which lays down the procedure for certification.
If the House gives a Third Reading to the Bill today, I shall, however, be considering the Bill throughout the course of tonight and tomorrow morning and I

1291
shall take a decision tomorrow. I shall, of course, take into consideration the points raised by the hon. Member for Hertfordshire, South-West.
Mr. Dodsworth: I am grateful for your patience and kindness and your observations, Mr. Speaker. In view of the other pressing matters before the House, I say merely that I hope to have the opportunity to enlarge on some of these points in the course of a later debate on the Finance Bill.

STANDING ORDER No. 44 (MR. SPEAKER'S RULING)
Mr. Speaker: On Thursday last I undertook to give a ruling on whether the provisions of Standing Order No. 44 remain applicable if more than one Bill is included in an Allocation of Time Order. Following the points of order in the House, I also received representations to which I have given the most serious and anxious attention.
The ruling which I am now going to give to the House is therefore a considered ruling after long deliberation.
The question is whether in this Order the words
"provision for the allocation of time to any proceedings on a bill"
admit a motion which provides for the allocation of time to proceedings on more than one Bill.
It has been represented to me that it was clearly not the intention expressed either in the Report of the 1970–71 Procedure Committee, which recommended the revised form of Standing Order No. 44, or of the debate of 16th November 1971 which preceded the passing of this Order, that a guillotine motion should encompass more than one Bill.
I have studied the debate on 16th November 1971 with great care. There is nothing there that appears to me to suggest that the House had in mind either one interpretation or the other: in so far as the Standing Order was debated, it was referred to in general terms.
On the other hand, the recommendation of the Procedure Committee was most specific. I quote the relevant passage in full omitting references to Business Committees which are not relevant:
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"Your Committee further recommend that Standing Order No. 43"—
as the Standing Order was then numbered—
"should be amended to provide as follows:—
(4) Debate on any allocation of Time Motion should be restricted to three hours."
The House will note, however, that the reference in so far as it concerns a time limit is simply to an Allocation of Time Motion: no mention is made of the contents of the motion, nor to the number of Bills it might contain.
Finally, I wish to refer to the point raised by the hon. Member for Tiverton (Mr. Maxwell-Hyslop) on Thursday. If I may use his own summary of his argument, he claimed that never before had the Chair been asked to put to the House a motion embodying allocation of time on more than one Bill, except when one or more of the following circumstances had been present. The first was when the Bills put together in the timetable motion had been rejected or blocked by the House of Lords. The second was when the Bills were related to each other by their content.
The hon. Member suggested that it would be an abuse of the due process of the House if I were to put to the House a motion which had no basis in precedent at all and did violence to all the precedents.
I have examined the precedents carefully and do not think that the hon. Member's contention is entirely correct. In the Session 1961–62, the Commonwealth Immigrants Bill and the Army Reserve Bill were included in one Allocation of Time Order, and previous to that, in 1946–47, the Transport Bill and the Town and Country Planning Bill were included in one motion.
For all of the reasons which I have given above, I must rule that each of the allocation Orders appearing on the Order Paper will, when they are debated tomorrow, be subject to the provisions of Standing Order No. 44 and in consequence I must proceed to put any question necessary to dispose of proceedings on each motion not more than three hours after the commencement of those proceedings.
It is not for me as Speaker to pass any comments on the propriety of the

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motions which are down for consideration tomorrow; that must be a matter for argument in debate.
Mr. Peyton: While we are naturally deeply disappointed by your ruling, Mr. Speaker, we accept it without reservation.
However, it leaves quite a number of points unanswered. We accept that you have construed the meaning of Standing Orders, but I am obliged to put to you the question of the extent to which the singular must be taken to mean the plural throughout Standing Orders. This is a serious point. We are concerned to know to how many Bills a motion of the kind contemplated could be made to apply at any one time.
I ask the Leader of the House for an assurance that the position now reached as a result of your ruling of the meaning of Standing Order No. 44 should be referred to the Select Committee on Procedure as a matter of high priority in order that this confusing position should be cleared up.
My second point concerns the opportunity the House will have tomorrow to vote on a number of possible variants. I shall not seek to detain the House at great length, but I must put these points. There is not only the main Question on the first motion but also the proposed number of days which the Bill should have allotted to it and the length of each day. The second motion is even more complicated because there is the possibility of leaving out one or other of the Bills included in that motion. The same applies to the third motion, with the additional fact that it has only just appeared on the Order Paper and we have not yet had a chance to put down amendments which we think appropriate.
Does your construction of Standing Order No. 44 allow you to put amendments other than those under discussion when the guillotine falls? If not, the House will not only be deprived of the opportunity to discuss these amendments but deprived of the opportunity to express an opinion—which would be intolerable.
Mr. Speaker: I am deeply grateful to the right hon. Gentleman for the way in which he accepted, as is traditional in
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this House, the ruling of Mr. Speaker on a difficult issue.
I should welcome any reference to the Procedure Committee if the House feels that there is any difficulty on this matter, but it is for the House to decide.
If an amendment is under discussion when the guillotine falls tomorrow, I shall obviously put the question on that amendment, but I shall not be able to call or put to the House any other amendments once the three hours has passed. I could put only the amendment under discussion and the motion before the House. It may be that there will be earlier Divisions.
Later—
Mr. Pardoe: On a point of order, Mr. Speaker. I was not aware that you were changing from the subject that we had in mind. I hope, therefore, that you will allow us to go back to the point.
Mr. Speaker: Order. There can be no discussion on a ruling that I have given. I had no expectation that anyone would wish to raise any further questions. I called the Shadow Leader of the House out of courtesy. If this is a different point of order, not to do with my ruling, I will listen to the hon. Gentleman.
Mr. Pardoe: I am merely seeking information, Mr. Speaker. I understood the Shadow Leader of the House to ask you a question. Does your ruling mean that Standing Order No. 44 now means that at the start of a Session the Government could introduce a guillotine motion to cover all the Bills that they considered introducing in the course of the Session? If so, we might as well dispense with the whole charade of parliamentary democracy and go home without any pay at the end of the first week.
Mr. Speaker: It is not for me to speculate on what future actions will be taken in the House. It is for the House itself to decide whether it wishes matters to be referred to the Select Committee on Procedure. Obviously the hon. Gentleman considers that such a course of action is necessary. But it is a matter for the House if it wishes the Select Committee on Procedure to tighten up the Standing Order to which reference has been made.

MOTOR-CYCLE CRASH-HELMETS (RELIGIOUS EXEMPTION) BILL (PROCEEDINGS)
Mr. Stanbrook: On a point of order, Mr. Speaker. I gave your office some notice of my intention to raise this point of order. I apologise if it was not sufficient for you to be apprised by this stage.
I wish to draw your attention to proceedings in this House on Friday on the Motor-Cycle Crash-Helmets (Religious Exemption) Bill, which was given a Third Reading by 40 votes to 11. It was passed without a debate because, although there was a motion on the Order Paper requisitioning a debate, it was signed by only five hon. Members.
On the previous day, that motion had been signed by the requisite six names. In the course of Thursday to Friday, the name of the hon. Member for Birmingham, Perry Barr (Mr. Rooker) was withdrawn. Why he withdrew his name, I know not. The fact is that he voted against the Bill on Friday. As I have not spoken to the hon. Gentleman since, I shall leave that matter there.
The effect of the hon. Gentleman's withdrawing his name at the last moment was to prevent this issue from being debated at all. As the Bill was passed on the nod on Second Reading and was therefore passed without debate on Third Reading, an important principle has been decided without any word having been spoken in this House either for or against it. I refer to the exemption of a particular minority community from the application of the criminal law which otherwise applies to everyone in this country. The
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consequences are very important and arise apparently because the hon. Member for Perry Barr withdrew his name from the motion at the last moment before anyone had an opportunity of substituting another name, which could have been done.
Therefore, I ask you, Mr. Speaker, whether this matter may be referred to the Select Committee on Procedure and whether in any event you will instruct the Table Office that when one Member out of six whose signatures appear on such a motion withdraws his name at the last moment, the name should not be taken off the motion until after the principal sponsor of the motion has been informed.
Mr. Speaker: The hon. Gentleman has raised a matter which is not a point of order for me. If any hon. Member wishes to withdraw his name from a motion, he may do so at any time. The hon. Gentleman's further suggestion is a matter for the Leader of the House.

NEW MEMBER
The following Member made the Affirmation required by law: Miss Oonagh Anne McDonald for Thurrock.

NATIONAL HEALTH SERVICE (VOCATIONAL TRAINING) BILL [Lords]
Ordered,
That the National Health Service (Vocational Training) Bill [Lords] be referred to a Second Reading Committee.—[Mr. Robert Sheldon.]

ORDERS OF THE DAY

  FINANCE BILL
  Order for Third Reading read.
  4.6 p.m.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): I beg to move, That the Bill be now read the Third time.
  This is the first occasion in this Parliament on which we are having a debate on Third Reading of a Finance Bill. The last time that we had such a debate was on 11th July 1973. Perhaps it might be worth spending a few minutes discussing the way the Opposition have seen fit to have such a discussion on this Bill for the first time in this Parliament.
  We know that on previous occasions there has been a need for a debate on Third Reading partly to discuss as a suitable time, the economic issues facing us, partly because there may have been occasions when parliamentary time was a little more readily available then we find at the moment, and partly because it is always useful, given the existence of those two earlier conditions, to have last thoughts on a Bill before it passes into legislation.
  During the later discussions that we had on the progress of the Bill there was a certain amount of criticism about the time available for Finance Bills generally. Various comments were made about the way in which the Finance Bill might be split up. I look forward to hearing further discussion in due course on these matters.
  These are issues primarily for Parliament as a whole. We know that there is always pressure upon Government and parliamentary time generally. The problem with Finance Bills, even assuming that there are few new measures of substance, lies in dealing with the accumulations of past measures and the changing ways in which these have to be dealt with. This in itself entails a large increase in the number of pages that we have to discuss, arising purely from existing provisions.
  As a House, we enjoy our discussions of Finance Bills generally. We note that progress after midnight tends to be greater than before that time. We have seen this
  1298
  in a heightened form perhaps in recent weeks and months. I have sometimes thought that the importance of a subject has often varied inversely according to the lateness of the hour. It may be that if we had started later in the evening progress would have been that much quicker.
  I take issue about the third of my propositions—that this is an occasion for looking back over the progress of the Bill and seeing how it is fitted to deal with some of the important issues of our time. I think that the most important will not be the provisions regarding benefits in kind—useful measure as I believe it to be since it provides for the taxation not only of income but of those benefits most akin to income—or even Schedule 6, which gives powers to enter premises. I fully accept the seriousness and importance of the extension of those powers, even though they are much less than most other Western industrial countries take for granted.
  In my view, those are not the most important aspects of the Bill. I regard as most important the conditional reliefs, on which we spent relatively less time, perhaps, than we might have done, and I regard them in that light both because of their constitutional importance and the way in which they reflect the manner in which Governments will have to deal with these issues as they come before us.
  In relation to pay increases and the attitude of the trade unions which negotiate them, we have laid down the way in which those who concern themselves with these matters have to consider not the fictional gains which pay increases represent but with the real value of the money in the pay packet of workers, taking into account the price rises and the taxation inevitably resulting from those pay increases if they are not justified by increases in national production.
  For many years, there has been a need to establish a link between the actual pay negotiated by members of trade unions and the resulting taxes and prices. Whatever importance we think should be attached to the relation between monetary policy, incomes policy and other aspects of economic and financial management, it is now essential to bring the trade unions into this consultative process, and I believe that that view is coming to be

  1299
  more widely shared on both sides of the House. What I consider to be of the utmost importance is that the trade unions are concerning themselves with the development of an approach to industry which should command the widest acceptance. Even though some of us knows the extent of future developments, we must not underestimate the importance of the first steps which have so far been taken.
  All this ought to be common ground, and the conditional reliefs were designed to be a means for the implementation of the accord which has been reached with the Trades Union Congress. It is worth spending a moment or two to consider the sort of reception which this accord actually received.
  Right from the beginning, we noticed the cold reception which it received from the Leader of the Opposition on Budget day itself. We noted also that the right hon. and learned Member for Surrey, East (Sir G. Howe) called these conditional reliefs a devaluing of the Budget. On 7th July, on the other hand, we noted that the right hon. Member for Sidcup (Mr. Heath) fully and unequivocally supported the agreement, and in the same debate the right hon. Member for Lowestoft (Mr. Prior) said:
  "All of us on the Conservative side of the House recognise that the TUC has once more delivered to the Government an exceptional pay deal. I pay tribute to the TUC for what it has done."—[Official Report, 7th July 1976; Vol. 914, c. 1489.]
  Since then, a wide variety of views has been expressed. I think it is worth recalling the speech of the right hon. and learned Member for Surrey, East when, referring to incomes policy, he said:
  "It is not a subject on which we should be wholly dogmatic"—
  I am not sure what he meant by "wholly dogmatic" in this context, but let that pass—
  "… on questions of this kind there are divisions of opinion, and always have been, in both parties."—[Official Report, 3rd May 1976; Vol. 901, c. 862.]
  The right hon. and learned Gentleman is right—there have been divisions within each party—but what is clear is that the Government stand behind this policy agreed with the TUC, and what we find disturbing is that on the central economic
  1300
  issue of our time nobody, even at this late stage, knows what is the policy of those calling themselves an alternative Government. Some say one thing and some another. To many of us on this side of the House, the Conservative Party seems to be awaiting the prophet of Leeds, North-East (Sir K. Joseph) bringing down the tablets on which all will be made clear.
  We look at this state of affairs with some amusement, while the Conservatives work out their own salvation in their own way, but what the country knows is that industry and the Government are now closer together than they have been for some years. I believe that the Bill has played its part in that understanding, and in that spirit I move the Third Reading.
  Mr. John Page: The Financial Secretary was talking about the tablets of stone, and I wonder whether, if the tablets were dropped on the way down after they had been agreed, that would make any difference to the reception at the bottom.
  Mr. Speaker: Order. I think that it does to the answer.
  4.15 p.m.
  Mr. John Nott: As the Government proudly present their Bill for its last rites this afternoon, I am sure that the Chief Secretary at least must feel that it is a relief to escape from the carnage of the Cabinet Room to the relatively quiet security and sanctity of the House of Commons. Sandwiched as we appear to be today between meetings of the Cabinet to discuss public spending and what I understand from the Press will be tonight's meeting of the home policy committee of the Labour Party, we can feel some sympathy for Treasury Ministers, and I think that we can also excuse the Chancellor's absence on this occasion since it is clear that he has more important matters to deal with elsewhere.
  It is a pity, however, that, because of the pressing nature of his engagements in the Cabinet, with the Parliamentary Labour Party and with the home policy committee of the Labour Party, the Chancellor will not be here to see the measure as he originally presented it pass on to the House of Lords in an entirely different form. It has been a long and arduous process. We have said many times

  1301
  already that great difficulty has been created for us and for the world outside by the delays in publication of amendments for Report. However, I do not think that we need go over that today.
  The Bill has been mishandled, but it could not have been mishandled by two more genial, if incompetent, Ministers than the Chief Secretary and the Financial Secretary, who throughout our sittings, though admittedly sometimes heavily tried, have retained their patience and good manners. I can say at least that of them today.
  As for the content of the Bill itself, the attack on business men's perks, which has been loudly trumpeted at successive Labour Party conferences for many years, has been transformed during the passage of the Bill into a disorganised retreat—almost a headling flight, indeed—under the combined wrath of the National Union of Railwaymen, the Transport and General Workers' Union and other unions, which suddenly woke up to find that this tax was an attack on their members' pay-packets. It appears that only miners' coal and Ministers' cars have remained unscathed—we know why Ministers' cars have remained unscathed; it would be uncomfortable for Ministers to change the law—but we do not understand the position regarding miners' coal. Why cannot miners' coal be brought within the Bill? We are still wondering why every fringe benefit is within the Bill save miners' coal.
  The turning point in the long-heralded attack on fringe benefits will be remembered as the moment when the hon. Member for Ealing, Southall (Mr. Bidwell) rushed into the Chamber to announce that the shop stewards at London Airport were in revolt and that, although they favoured the principle of taxing fringe benefits, they did not like the way it affected them. From that point onwards, the whole of the attack on the business men of this country was reversed and the Government went into headlong retreat.
  I am glad, that, as a result of that and other diversions, we have been able to save parts of the British motor industry—notably, Rolls-Royce and Jaguar—from severe damage, and, equally important, we have prevented the Government from further eroding the take-home pay of middle management, which, of course,
  1302
  would have been severely damaged had the original proposals gone through.
  The clause to increase the powers of the Inland Revenue has been substantially amended. We owe something to the belated good sense of the Chief Secretary in that he was prepared to concede amendments in Committee, but it shows something either of the negligence of Treasury Ministers or perhaps the low quality advice that comes to them from Somerset House that the original clauses on the seizure of documents, search and entry ever found their way in to the Bill.
  I find it difficult to believe that those clauses were entirely the invention of Treasury Ministers, because although the two Treasury Ministers now on the Government Front Bench are not wholly free of guile, are not as innocent and naive as they would have us believe, these clauses had something of that new aggressiveness that seems to be emanating from the Inland Revenue these days, and I think that some of the authorship of Chapter II derives from the Board of the Inland Revenue itself. I can see that senior officials of that Department in Somerset House are sensitive to political criticism, but if they abandon all resistence to the more outrageous rantings of the Inland Revenue Staff Federation and include disreputable politically motivated clauses in the Bill, they must expect to come into the political firing line.
  The debate on powers of entry has been immeasurably damaging to the Inland Revenue for no apparent gain. Certainly it will not be any easier to collect revenue either from honest or dishonest taxpayers as a result of these clauses. We are still somewhat astonished that the Chief Secretary believes that these great big tax evaders, whom we understand he is hell bent on catching, will leave all these incriminating documents lying around their homes now that they know that a tap may come on their door in the middle of the night by the appointed officer of the Inland Revenue. It is stretching our imagination very far to believe that this incriminating evidence will be left there for the Board of the Inland Revenue to find. It must be clear from all that has been said in our debates that future Governments will not leave these clauses in the Bill in their present form, so all these discussions have largely been wasted and have done great

  1303
  damage to the Inland Revenue in the process.
  I suppose that we must count the errors in the life insurance clauses as just an aberration. I think that was an aberration of the Financial Secretary, not the Chief Secretary. I find it difficult to understand how we can have been told that the insurance industry was in full agreement with the proposals that were being made when the opposite was the case, and the Government changed the whole basis of the Bill as it related to the taxation of premiums.
  Then there were the bankruptcy provisions in the old Clause 58. These would have changed retrospectively the tax law and driven into bankruptcy many of our senior executives. Here, again, I think that the Financial Secretary, who is traditionally responsible for the Bill, might have read it before he presented it to the House.
  I found it very tedious reading the Finance Bill when I was a Minister—even more tedious than I do now—but I think that ministerial office imposes some obligation upon Ministers, when their names are on the Bill, to read it through before they come and make speeches about it. I understand that the briefs that were given to the Financial Secretary did not touch on all those elements of the Bill that had been badly and incorrectly drafted, but he could have found that out for himself.
  As the Financial Secretary said in opening the debate, the most important change of major economic principle in the Bill lies in the clauses on personal allowances, and at the time of the Budget we were assured by the Chancellor of the Exchequer and the Paymaster-General that these provisional tax reliefs, as they were then, could be borne by the nation only if the pay deal was concluded at 3 per cent.
  When we discussed the Budget Resolutions, the Paymaster-General said:
  … I emphasise that 3 per cent. is the highest which can be conceded if we are to be able to rely on meeting our inflation target."—[Official Report, 7th April 1976; Vol. 909, c. 467.]
  I do not know whether the promotion that followed two days later to the Cabinet was connected with that remark, but within 24 hours the Treasury was
  1304
  back-pedalling on that commitment and, as we know, the deal was finally concluded at 5 per cent. with the provisional tax reliefs that were related to a 3 per cent. arrangement.
  We are now told that we should understand that 5 per cent. is the same as 3 per cent. and that there is no difference between the two figures, but we have yet to discover precisely how the Government worked that out. It may be that this is why the Chancellor, according to the Press, is trying to claw back £1,000 million that he is giving away in lower tax reliefs, and he is apparently trying to get it back in lower public spending.
  At the time of the Budget debates we warned of the consequences of negotiating in public in this way, and how right we were! Every word that we said during those economic debates has, I fear, proved absolutely true. In winding up the debate on 12th April I said:
  "Because the Chancellor's strategy is seemingly dependent on a promise from the TUC, every statement against the norm by a union leader will be studied with concern, not just in the gilt-edged market but in New York, Zurich, Jeddah, Lagos and Hong Kong, and this period of instability will last until July."—[Official Report, 12th April 1976; Vol. 909, c. 1029.]
  Indeed, the period of instability arose about one week later when sterling plunged to an entirely new low, and it was only following the borrowing of another $5 billion—the standby credit that we shall very shortly have to repay—that sterling rose again. The whole process by which these tax reliefs and the offsetting pay deal were negotiated has done great damage to this country, and we shall see in October or November—or whenever it is—precisely how the Government will either roll over the standby credit or replace it with a loan from the IMF.
  In spite of tax reliefs, the real burden of taxation has increased on the British people, and particularly on the poorer income groups. Some of the sense of outrage felt in the Labour Party at the tax which now falls, for instance, on a war widow's pension was shown the other night. Here we have taxation arising on a weekly income of £18, and it is an astonishing commentary on some members of the Labour Party that on that occasion they protested—and rightly so—that as a result of the Government's

  1305
  policies the tax threshold had fallen to less than one-third of the national average wage.
  Yet some of them seem totally unable to grasp the fact that the tax threshold will be raised only if public spending is cut back. Hon. Members below the Gangway who protested at the lowering of the tax threshold are the very people who are now opposing public expenditure cuts. The dilemma that we face is the interaction between tax and benefits, and I feel sure that if my hon. Friend the Member for Norfolk, North (Mr. Howell) is called to speak in the debate he will have something to say about this problem.
  I notice that among the reported alternative put forward by the TUC Economic Committee to the Chancellor's impending cuts is a demand for more job creation, which seems to be the Treasury's chosen way of placing palliatives before the Labour Party. Under the job creation programme in my constituency—and I am sure that this applies in many others—projects there are paying local people £36 a week. Unemployment in my constituency ranges between 16 per cent. and 20 per cent. and people are coming to me and saying that job creation projects paying £36 a week are providing less than a man can earn in social benefits. Indeed, a combination of unemployment benefit, rent rebates, children's dinners—which the person does not have to pay for if he is unemployed—and the cost of travelling to work means that my constituents are better off on unemployment benefit than in a job creation project—and this is in my constituency where the wages are particularly low.
  We are now back in the economic debate on the familiar ground of public spending. The Chancellor, who has castigated us in innumerable debates for being evil and wrong-headed about seeking more cuts next year, is now hoping that his right hon. and hon. Friends and Members of the Cabinet will rally behind him in doing the very thing that he has been castigating in debate after debate. It must be hard for his right hon. and hon. Friends, having heard him slate us for our evil views on this very subject, now to rally behind him with enthusiasm when he is trying to do the very thing that he has condemned. It is the way in which he speaks, with two tongues—
  1306
  to one audience here and another there—which makes his task all the more difficult.
  As we go along, the Labour movement creates new heroes. Today's hero is the Secretary of State for the Environment. We all read in Friday's Guardian about his gallant defence of his Department's programme. He is now depicted as a colossus—a handsome, brilliant figure, comparable with the great men of history, defending his programme against the vandals of the Treasury who wish to destroy civilised society. According to the leak, no doubt emanating from his own Department, it has all been done in an underhand way by announcing the cuts publicly without his prior agreement.
  We understand that the right hon. Gentleman is prepared to make almost any sacrifice—to use every weapon in his armoury to defend his Department—with the exception of his own job. He will not resign but he will do anything else to defend his Department against the Chief Secretary, who sits there today with such a benign look.
  In fact, as every working man knows, the Department of the Environment is an empire of profligate waste, inefficiency and chronic bureaucracy. It does not need a Minister of that Department—the Minister for Transport—to come here to tell us about the workings of the Swansea Licensing Centre for us to know just how bad the Department is. I have never seen such an adequate demonstration of the incompetence of that Department as our debates on the taxing of cherished number plates, a subject which has had more than its fair share of publicity.
  Nor do we need my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn), who is not here today, to tell us about the profligacy of the Department in our own backyard. All we need is the Minister for Transport to come here now and again to enlighten us on the procedures under which people apply for cherished number plates.
  As I have told the Chief Secretary privately many times before, in my constituency, the South-West Regional Road Construction Unit, which has been busy over the past few years building roads, now has its representatives crawling all over the farmland between Penzance and

  1307
  Land's End in order to plan a dual carriageway across this virtually empty tract of West Cornwall. All that can happen when the dual carriageway is built is that the motorists will go on to the roundabout at Land's End, turn around and go back up the dual carriageway because there is nowhere to go when one reaches Land's End except back the way one has come. Hon. Members may believe it or not but that is what they are doing.
  The idiocies of the Department, the way in which public spending is out of control, have to be seen on the ground to be believed. Yet the Secretary of State is defending this programme against the incursions of the Chief Secretary, who is trying to put the situation right.
  Mr. Peter Rees: Could it be that the Department envisages a land link between Land's End and the Isles of Scilly in deference to the right hon. Member for Huyton (Sir H. Wilson)?
  Mr. Nott: I have no doubt that to keep the Department employed it is already preparing plans to build a bridge between Land's End and the Isles of Scilly. Only by such exaggerated means can they keep everybody fully and uselessly employed.
  Since the Budget Statement, this nation has continued on its path of long-term economic decline. I do not think that the British people are really deluded by the Chancellor's prospect of an economic miracle. If it is a miracle that the rate of inflation is running rather lower on an annual basis than a year ago, the British housewife still has to meet unprecedented increases in the shops. The Chancellor himself at Question Time last Thursday boasted that he had the rate of inflation down to what he described as "only" 50 per cent. above the OECD average.
  If it is a new dawn that the economy is now growing at 5 per cent., or whatever it may be, it is hardly a remarkable achievement when the production base from which that growth is measured is lower than it was during the time of the three-day week. If the balance of payments has improved, it must be unprecedented for this country, and perhaps for any other—even the Argentine, for all I know—to run a deficit of this size in the deepest recession since the war.
  1308
  We do not even need to question the Chancellor's great handling of the money supply. It is hardly surprising that that has been kept in line when bank advances have hardly been moving forward.
  Again and again, we are attacked by the Government for having set off these high rates of inflation and the rising level of unemployment. The Chancellor blames us for having produced what the Government inherited. But we must always remind the Government that the then Prime Minister, the right hon. Member for Huyton (Sir H. Wilson) said on 9th October 1974, the day before the election:
  "Unemployment is beginning to fall. The pace of inflation and price rises are moderating."
  The Chancellor himself was boasting then of an inflation rate of 8·4 per cent.
  So out of their own mouths we know that the blame falls entirely upon the Government. They fought and won the last election on a platform which was false and now they are having to meet the consequences of their own profligacy during the period of the social contract.
  For all the achievements about which we hear so much from the Government, the truth is plain. If it cannot be seen by the Ministers on the Treasury Bench, it is perfectly clear to the electors of Thurrock and Rotherham, who have given their views about this Government only recently. The hon. Member for Thurrock (Dr. McDonald) just squeezed past the post but the electors of Thurrock are under no misapprehension about the Government's record.
  The country is still slowly clawing its way back from the precipice to which the social contract took us. We still face record unemployment and inflation. If the Labour Party is to be accorded any laurels after two years in office, it can be only for, first, persuading the right hon. Member for Huyton to resign—that was a major achievement of benefit to the country—and, secondly, for uniting with the leaders of the trade union movement in halting that rush towards mutual self-destruction which began when the Labour Party was first in Opposition.
  The problem confronting the new Prime Minister—he does not have much competition, but he is an improvement on the last one—and which will confront us

  1309
  when we come to office is the very scale of our problems. They were bad enough in the early 1970s, but they are now quite daunting. Profits have sunk to nil and public spending has risen in two years by £25,000 million. The rush of people from the wealth-generating private sector into the public sector still goes on apace.
  In the present talks in the Cabinet the Chief Secretary no doubt sits mute and uncomprehending—uncomprehending not the figures but the fact that he can have such foolish colleagues who simply do not understand that it is impossible for this country to go on spending 20 per cent. more than it is earning. We are glad that we had the right hon. Gentleman's company during the course of the Finance Bill. We look forward to his winding-up speech, although I do not know what he can say. We sympathise with him in the difficult times he is presently having with his colleagues in the Cabinet and, as always, we wish him well in his latest endeavours.
  4.40 p.m.
  Dr. Jeremy Bray: In the better tempered passages of his speech the hon. Member for St. Ives (Mr. Nott) referred to the representations which we had in Committee from the Transport and General Workers' Union, railwaymen, lorry drivers and airline employees. He did not bring his representations up to date by suggesting how many Rover 3500 cars would have to go into a raffle to make the prizes from the raffle taxable. No doubt that will be a matter for a future Finance Bill.
  My hon. Friend the Financial Secretary said that questions had been raised from time to time during the proceedings on the Bill and earlier whether there might be a means whereby the procedure on the Finance Bill could be made more useful to the House and lead to the better government of the country. We must pursue these thoughts further at an appropriate time.
  Suggestions have been made and many times repeated from both sides of the House that Select Committee rather than Standing Committee procedure is appropriate for parts of the Bill or for some stages in the consideration of the Bill. It has also been suggested that fuller
  1310
  notes on clauses should be made available and perhaps be readable into the record so that they can be widely disseminated to people who follow the proceedings of the Committee inside the House and outside.
  Before going too far along these lines, we should consider the difference between the approach on either side of the House to the Finance Bill. It is notable that the Government Benches are empty, whereas the Opposition Benches are adequately filled by the cohorts of the young Turks who wish to win their spurs on the Finance Bill.
  Mr. Nigel Lawson: Old.
  Dr. Bray: Ageing, and surely Greeks, not Turks. This arises from the innovation of Mr. Iain Macleod who, in his handling of the Finance Bill, instead of having Front Bench spokesmen dealing with the party position and Back Bench spokesmen representing special interests, parcelled round the speaking from the party point of view to members of the Committee on the Opposition side as a whole. This has meant that hon. Gentlemen opposite have been speaking from the Back Benches for the position which their party broadly represents.
  I commend this thought to my right hon. Friend the Chief Secretary. I know how hard-pressed he is and how many hours of the night he has to spend reading notes on the clauses and dealing as well with other Government business. I can think of no group of men and women so inefficiently used as Government Back Benchers on the Finance Bill Committee. Woe betide any Government Back Bencher who complains of that. We should rather rejoice in our lot, at being able to stand and wait, but it is not an efficient use of Members' time, nor does it produce efficient legislation. Had we had before us some of the considerations involved in the Finance Bill—for example, benefits in kind—we could perhaps have arranged for the Bill as it emerged to be more acceptable and to have had a greater effect in the intended directions. For example, had the threshold been set not at £5,000 but at £10,000, the balance of representations received would have been very different as, I suspect, would have been the outcome of the Bill as it emerged from Committee.
  Mr. Lawson: The hon. Gentleman may be right, but why did not he and his colleagues on the Government Back Benches in Committee upstairs say something about it? There was nothing to prevent them doing so. Was the hon. Gentleman scared of the basilisk stare of the Chief Secretary, or of the Government Whips?
  Dr. Bray: No. We were unaware of the nature of the concessions which were going to be made until they were announced in Committee. It was not for us to know whether the Government would meet the suggestions that some of us had put that the exemption limit should simply be raised, or whether the whole structure of the provisions would be changed.
  Mr. Peter Rees: Will the hon. Gentleman clarify his views, because some of us are listening to what he says with considerable interest? Is the hon. Gentleman saying on the benefits in kind provisions that he finds the principle wrong, or is he merely saying that the principle should be applied to those earning over £10,000 a year?
  Dr. Bray: I shall come later to a related point in my speech which will perhaps help the hon. and learned Gentleman.
  On the Government side of the House the position is entirely different. Many Members of the party outside complain that Ministers are a weak link between the party's intention as they campaigned for it in the country and the Government's policy as it emerges from Cabinet decisions. Were the matter left to Back Bench Committee work, Select Committees and so on, the link could well turn out to be weaker still, and the contribution that hon. Members have to make from the Government Benches to make sure that the party's intention and the Government's programme are fully implemented calls for a different pattern of behaviour from Back Benchers in Select Committees and Standing Committees.
  In Committee on the Finance Bill a Back-Bench view from the Government side on war widows pensions, supported by the Opposition, was adopted and a change was made in the Bill. Inevitably, any change which the Opposition favour
  1312
  is more likely to get through than is a move from Back Benchers which seeks to strengthen the Government's position. The Government will not necessarily pay attention to that. However, if Government supporters feel that their representations in the Select Committee or in earlier discussion will influence Government policy, they can contribute to working out a stronger and more coherent policy, which might better stand up to detailed criticism in Committee than do some proposals at present.
  I support my contention of the need for a stronger attitude from Government Back Benchers and greater attention by Ministers to it by referring to two major problems in the taxation system which undoubtedly are on the agenda for future Finance Bills. The first is the higher rates of income tax and the way in which these are used repeatedly by Opposition Members in calling for concessions for people whom perhaps they represent more strongly than we do. Another is the whole structure of capital taxation.
  On the higher rates of income tax, the narrowing of the differentials over the past two years, while we have had an incomes policy effectively restricting higher rates of pay and inflation increasing the cost of living, will build up public pressure for relaxation and changes in the higher rate of income tax much more extensive than those which occurred on the Finance Bill this year.
  I am strongly opposed to any attempt to restore the differentials to where they were before the rapid inflation of the last few years. A move to restore differentials after tax to what they were before 1974 would result in a strong, uncontrollable reaction in the country and produce another inflationary wage round at a much earlier date than would otherwise occur. We have to challenge Opposition Members who argue that the effect of higher rates of tax is to lead to all sorts of tax avoidance and undesirable features of the tax law like benefits in kind, and so on. It is up to hon. Gentlemen opposite to deal with how one can adjust pre-tax rates of pay which have been set in the light of taxation at the same time as one can adjust the rates of taxation themselves.
  Rates of pay are set on the assumption that people will be taxed at 83 per cent. If one then reduced that tax rate to 75 per cent. or 70 per cent. there would

  1313
  be enormous increases for very wealthy people.
  If hon. Gentlemen opposite can suggest some kind of comparable deal by which the post-tax pay of the best-paid people in the country is effectively frozen while higher rates of income tax are brought down, then they can command serious attention. I do not see the practical possibility of their putting forward any such proposal. I and my hon. Friends warn the Government that we would be very critical of any move to reduce higher rates of taxation to the relativities which prevailed before the current round of inflation.
  On capital taxation if the concessions that have now been made on capital transfer tax were applied to a newly introduced wealth tax, that wealth tax would simply not be worth raising. My right hon. Friend the Chief Secretary is well aware of the cost of collecting the wealth tax. I fully expect to hear the Government announce that they will not proceed with the introduction of the wealth tax in this Parliament. I fear that this is a consequence of the way in which the capital transfer tax has not been fully thought out in the terms of what the Government wanted to achieve.
  If we tax assets, the ownership of the assets necessarily passes into other hands. I would expect the Government to say what is the pattern of ownership which they wish to achieve and what would be the effect of the different instruments in the redistribution of the assets. I would also expect the Government to say what their policies were for productive assets and for the national heritage. As it is, we have had the pressures on productive assets on national heritage, points have been given away by the Government and now the floodgates are wide open for some concessions to be applied to the wealth tax with the effect of capital taxation as a whole neutered.
  The only conclusion that I could draw from this is that like hon. Members opposite, we on this side of the House would also like to see a thorough review of capital taxation as a whole. However, the purpose should be to set up a structure where changes in rates do not produce the most enormous distortions in the market for different types of assets, for
  1314
  forestry or for land or close companies, or whatever they are. We want to see a capital tax system which has the absolute minimum of exemptions, raised, no doubt, at a minimal rate when hon. Gentlemen opposite are in office, but which when we get into office can be raised at very much higher rates without causing the great instability in the markets for different assets, such as that which we have seen in the property market in recent years.
  If we made major changes in capital taxation rates with the same kind of exemptions for a wealth tax as we now have for capital transfer tax, and the rates were varied from year to year, the results would be quite catastrophic in terms of the losses some would make and the enormous speculative gains that the cleverer people would make.
  I hope, therefore, that if, as I fear, the Government announce that the wealth tax is to be postponed for another Parliament, they will use the time meanwhile to rethink the structure of capital taxation which they are trying to achieve, that they will think out what the principles are and then let us stick by those principles in the details of the legislation as it emerges. I hope that my right hon. Friend the Chief Secretary will say something about the view that the Treasury takes on the procedural questions which, as the Chief Secretary knows, have led to some dissatisfaction on the Government side about the procedure for the Finance Bill.
  4.56 p.m.
  Mr. Tony Newton: I do not want to follow the hon. Member for Motherwell and Wishaw (Dr. Bray) at length, particularly in the second part of his remarks. I would just like to observe that his argument about higher rates of income tax, and his suggestion that what we require is a long-term freeze on higher incomes while something is done on tax rates, does not give sufficient attention to the excessive narrowing of differentials in our society; Ministers have recognised this problem far more clearly than he or his colleagues. Far from there being an explosion if something is done, I believe that there will be an explosion if something is not done about differentials, not just for those on higher incomes but for all sorts of people

  1315
  who are a long way short of being wealthy.
  I shall follow to some extent the hon. Gentleman's remarks on our procedures in dealing with the Finance Bill, and not merely with its subject matter, about which I shall say something later. I have been a Member of Parliament for slightly over two years, and this is the fourth Finance Bill with which I have been concerned as a member of the Standing Committee. This one has brought home to me, and I suspect to many hon. Members, more forcibly than any other in recent years just how inadequate our procedure is for dealing with this legislation which is of great importance to many individuals, groups, firms and industry outside. They are finding themselves increasingly disgruntled at the way in which the House deals with their affairs and I do not feel able to quarrel with them. Certainly no one, including the Chief Secretary and the Financial Secretary and everyone on this side of the House, can conceivably be satisfied at the way in which this Bill has been handled.
  The underlying problem is the congestion of Government business, and the attempt to force too much business through the House in any one year. But that is only part of the background, not the whole background, to the unsatisfactory way in which we have dealt with the Bill. It has aggravated a problem which would in any case have arisen. The problem is largely caused by the fact that the Finance Bill is not one Bill with one purpose but what would in any normal, sensible world be regarded as several separate Bills doing different things.
  Broadly, the Finance Bill seems to me to do three things. First, it sets the general rates of taxation and allowances for the current year, 1976–77—the rates of income tax and allowances, rates of corporation tax, VAT, and so on. Second, it does a good deal of tidying up, closing up loopholes and making minor changes. Third, it introduces major changes or reforms—in this case, two of them.
  If we look at this fat jumbo measure we find that it is four separate Bills rolled into one, and I give them separate
  1316
  titles to illustrate the argument: the Taxation (Rates and Allowances, 1976–77) Bill; Taxation (Miscellaneous Provisions) Bill; Taxation (Benefits in Kind) Bill; Capital Transfer Tax (Amendment) Bill.
  The division between the broad categories I have outlined would sometimes be a matter of judgment. But I do not think that there would be serious differences between the two sides of the House on the argument that there are a number of distinct tasks performed by this and most Finance Bills.
  The consequences of our failure to divide the different types of proposal into different Bills are quite serious. First, it means that virtually the whole of the fiscal business before Parliament in one year is artificially sandwiched into the period between early April, when the Budget is delivered, and early August, when the Finance Bill must be passed.
  It follows from that that all sorts of measures which have no need to be forced through at breakneck speed are subject to the tyranny of the Provisional Collection of Taxes Act. Parts of the Bill must be passed by early August, and Ministers can therefore argue that they must rush the whole thing through. But there are many parts of the Bill which could and should have been considered in a much more leisurely way, and would have been better in consequence. That would have been possible if parts of it had been separated.
  A division of Finance Bills roughly along the lines I have suggested would also obviate a small but not insignificant difficulty, and that is the increasingly absurd attempt to divide consideration of the Committee stage of the Finance Bill between the Floor of the House and Committee upstairs. With separate Bills, we would naturally deal with the general taxation Bill fully on the Floor of the House, and we would deal with the other Bills in the ordinary way in Committee upstairs. That would be far more sensible for everybody involved.
  With such a proposal, I would couple the need, clearly illustrated in this Bill, especially by the benefits-in-kind clauses, for Governments to undertake a self-denying ordinance that they will not introduce changes of this kind without

  1317
  first going through a full consultative process. This has happened on a number of occasions in recent years, with value added tax and capital transfer tax, and it helped, even though it did not make the process perfect. It should be a firm rule for Governments that major taxation changes should be prefaced by a Green Paper, preferably with draft clauses, so that people may examine the possible details, and that there should be an examination by a Select Committee before an actual Bill proceeds to the normal form of discussion by the House. That would do more to improve our procedures and the service we do to people outside than almost anything else.
  I hope that the Select Committee on Procedure will study these issues, but I emphasise that nothing that I have suggested need await the Select Committee. It simply requires that the Government should think clearly about the various purposes they are trying to pursue in tax matters, and should accept the public benefit which will flow from ensuring proper consideration in advance when they propose major changes.
  I turn from those procedural issues to the Bill itself. We spent about 100 hours or more considering it in Committee, and we have spent at least 30 hours on the Floor of the House. We stayed up many nights until two, three or even four o'clock in the morning working on the Bill. For those of us who served on the Standing Committee, it has dominated our parliamentary lives—it has virtually consumed them—for about three months.
  Our constituents, and taxpayers generally, are entitled to ask what they have as a result of all this burning of midnight oil. That question has to some extent been answered by my hon. Friend the Member for St. Ives (Mr. Nott), who compared the Bill as it started with the Bill as it is now. Whether or not our constituents and the general body of taxpayers have value for money, we have certainly saved them a good deal of money by the changes which we have made in Committee.
  Perhaps one of the most important gains is that we have preserved some possibility of a rethink on the child benefit scheme, and credit should go to both sides of the House for that. We have saved airline employees from a huge
  1318
  increase in their burden of taxation. We have saved railway employees who have fringe benefits on travel-to-work from a significant increase in their burden of taxation. We have saved season ticket holders who buy season tickets with loans from their firms from an increase in their taxation. We have saved some people from bankruptcy by changing the provisions of the Bill relating to loans for the purchase of shares.
  We have significantly eased what would otherwise have been the tax burden on many people putting substantial sums of money into life assurance. We have made progress towards safeguarding Britain's national heritage in the great homes and great works of art which were discussed at length in Committee.
  We have given important help to war widows by exempting half their incomes from tax. I have reservations about whether that problem was tackled in the right way, but I am delighted that something has been done for this group of people who were suffering from the squeeze of our taxation system. On child income limits, we have ensured that children and university students can earn more before their parents are subject to the ridiculous clawback from personal allowances.
  On the question of the new tax on cherished car number plates, we have made sure that Parliament will have a proper opportunity to scrutinise the tax before it is introduced. On the so-called "snoopers' clause" and Schedule 6, we have managed to drag out of the Government some important safeguards which will have eased the minds of a number of people, even if we have not entirely solved the problem.
  All in all, what our constituents have for their money is a Bill which is undoubtedly the most improved Bill which will be passed by Parliament in the present Session, and hundreds of thousands of people will be better off—or at least less hard-hit—as a result.
  Nevertheless, it remains a deeply unsatisfactory Bill partly for what is in it, hut perhaps even more for what is not in it. Let me touch briefly on three points concerning what is in it which seem to me to be wrong.
  First, there is the extra tax—and that is what it is—on newly married couples where the wife continues to earn after

  1319
  marriage. This amounts to £60 million in the present year, and it is iniquitous in the form in which it has been introduced. I have made clear that I do not necessarily quarrel with the principle, but this tax measure has deprived 300,000 or 400,000 young couples of up to £250 for which many of them had already planned and had already counted on in arranging their marriages this year. In effect it has taken from them the lounge suite which they planned to buy or part of the deposit on a house. One of the Ministers is giggling, just as Ministers giggled in Committee upstairs. In dismissing this charge, they appear to have relied on the assumption that many young couples will not have realised what has happened to them. That is true, because not all young couples are as sophisticated as those who have done their calculations.
  That does not change the fact, however, that additional taxation amounting to £60 million has been levied this year on couples marrying this year, and many of them had planned on the assumption that the tax system would remain unchanged. In view of its effects, this proposal should at least have been delayed in its implementation, and I greatly regret that it remains in the Bill.
  Secondly, the Bill goes nowhere near far enough to deal with the problems relating to transactions which attract capital transfer tax and capital gains tax at the same time. We shall have to return to that matter.
  Above all, I regret the Bill because of the dog's breakfast which it contains with regard to fringe benefits. Instead of tidying up the question of fringe benefits and establishing a clear pattern of principle and practice, we have a complete mess, namely, the proposals as they were originally introduced minus those proposals about which enough pressure was exerted by pressure groups outside.
  There is in the provisions no clear basis of principle. There can be no basis of principle in allowing miners to have free coal, or even a tax-free cash exchange for free coal, when other people are to be taxed on comparable benefits from their employers. There can be no principle in allowing airline employees to enjoy concessionary fares but not allowing bank employees to enjoy cheap
  1320
  loans from their employers. There is no principle there. Concessions have simply been made in accordance with the extent to which pressure was exerted on the Government from outside the House.
  The anomalies in the provisions in respect of cars need no emphasis. Those proposals were introduced primarily to suit the convenience of the Inland Revenue. That is not an unworthy purpose, but is not in itself enough to override all considerations of fairness as between individual taxpayers. We now have a set of proposals that bears no real relation to a fair deal as between one taxpayer and another in terms of fringe benefits.
  Finally, I should like to list four points on which I am unhappy because they are not in the Bill—
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. The hon. Gentleman will have to save those four points for another Finance Bill. He must confine himself to talking about what is in the Bill rather than what is not in it.
  Mr. Newton: I accept your guidance, Mr. Deputy Speaker. I shall relate what I was going to say to proposals which are in the Bill but which, I believe, do not go far enough. That would be a more accurate way of putting what I was saying.
  First, we must do more about tax thresholds. The proopsals in the Bill will go some way to help, but nobody in the House will regard it as satisfactory that payments to provide a basic income, such as the family income supplement, war widows' pension, widows' pension and other forms of benefit—are themselves reduced by tax payments, even in the hands of people with little or no other income. We have a whole army of Inland Revenue officials collecting tax and insurance contributions, paying it over to the social security departments whose officials in turn pay out those sums in basic incomes. That same army of the Inland Revenue collects some of that same money back again. This is a crazy situation and we must do something about it.
  I see two ways in which the Government can act in this respect. First, the principle of relating incomes policy specifically to taxation reliefs is certainly a fruitful one, and I hope that this course

  1321
  will be pursued next year whichever Government are in power. If we are to have an incomes policy, a policy which takes explicit account of tax rates and allowances, and enables us to raise the tax threshold, must undoubtedly be the most sensible basis for it.
  Secondly, the Minister will have to think of shifting more of the burden of taxation from direct to indirect taxation, if we are to have any chance at all of dealing with the problem of thresholds in the circumstances that will face us in the next few years.
  There is another area in which the Bill does not go far enough and in which I should like to see more action taken. I am extremely pleased that something has been done for the war widows, but the problems of the other widows and of single women between the ages of 60 and 65 now stand out even more starkly in our tax system. I shall not repeat all the arguments I advanced in Committee on this point, but I must record my view that something will now have to be done for these two groups if the tax system is to be remotely seen as fair.
  I turn finally to a matter which is not only related to the tax burden on many in the middle income group and many young married couples, but which also raises wider issues of social and planning policy. I refer to the subject of tax reliefs for travel to work expenses. The rise in fares and in motoring costs has caused real hardship, and a corresponding resentment at the way in which our tax system takes no account of these problems. This resentment is not going to disappear.
  I do not think we can lighly advocate complete tax relief on all travel-to-work expenses, without a wider study being put in hand on the implications. But I believe that we could look at an allowance of some kind for such expenses, including private car travel. After all, if it is right to tax benefits in kind, how can it be argued that it is not right to provide some relief on the other side of the coin—namely, expenses in kind.
  I hope that Ministers and some of my Opposition Front Bench colleagues will be prepared to consider the analogy with the proposals advanced on the taxation of cars, with a fairly simple scale for assessing benefits to be taxed.
  It would not be beyond the bounds of possibility to devise, a comparable scale
  1322
  for the travel expenses incurred in earning one's employment income, with tax allowances related to that scale. This would help to tidy up the treatment of expenses and to bring about more fairness in the tax system between expenses and benefits.
  These are some of the thoughts that have gone through my mind as I have sat through the proceedings on the Finance Bill. I hope in particular that Ministers will be prepared to look at our procedures for discussing and legislating on these issues. Unless these are improved, there will be continued public dissatisfaction with Parliament's handling of taxation questions and we shall also damage the interests of many people outside the House.
  5.18 p.m.
  Mr. J. Grimond: I apologise for the fact that because of another engagement I missed the Chief Secretary's speech.
  I wish to make a few remarks on the various themes which have arisen from our discussions on the Finance Bill. I wish first to pick up a theme that was touched upon by the hon. Member for Braintree (Mr. Newton)—namely, the growth of perks and how they should he treated.
  One of the worst features of our economy is the fact that it is becoming perk-led. It matters more to people what they can obtain free of tax or provided by the State or by their company than what their salary may be. This leads to waste, certainly to a denial of freedom of choice, and is connected with questions of tax avoidance.
  Tax avoidance is a phrase of infinite meaning, and no doubt the Treasury officials think they know what it means. Ordinary people believe that it embraces those people who, in evading taxation, put themselves in a privileged position. It is not considered particularly wicked, nor is it confined to the rich. On the contrary, the amount of moonlighting that goes on throughout the country is enormous. It has the obvious purpose of avoiding tax. When ordinary people are told that Ministers do not pay tax on Government cars provided for their use, those people regard that as a form of tax avoidance. Again, when an ex-Prime

  1323
  Minister is provided with a car worth £10,600 tax free, that again is a form of tax avoidance. There are a great many people who look askance at these matters, and that certainly applies to many of my constituents. We should look at the morality of what in the Treasury is known as tax avoidance. I hope that we shall work towards an economy in which people are paid more and are less prone to look for perks of all sorts as a way of making up for the indecently high taxation from which the country suffers.
  We talk about Government expenditure, using it as a portmanteau phrase. It covers many different types of expenditure. What needs to be cut is unproductive Government expenditure. No one can say that this has not been proliferating. We know that it has. The hon. Member for St. Ives (Mr. Nott) gave the example of the dual carriageway which goes nowhere. I have given examples of public authority buildings in my constituency, to be put up at a cost of £1 million. We all know that the grant system positively encourages wasteful public expenditure.
  We do not have to leave this building to see a waste of £300,000. We can go to New Palace Yard and look at the rather ugly garden that has been constructed there. The Department of the Environment has only to look at its own building to know that it is a totally inhuman operation. We have only to go to housing estates to see enormous waste in public authority housing. It is this type of waste which has to be cut. It cannot be objected that this will do any harm to anyone. It will be positively beneficial. We are not talking about the essential social services or productive investment. We are talking about the steady proliferation of useless and non-productive public expenditure on all sorts of ugly things. That is what has to be cut out.
  Much as I dislike them, it is time that we had some committee or commission which looked at the methods of assessing what people should receive in the public sector. I agree with those who think that inflation will be stopped only by better control of the money supply. This has to be coupled with some sensible salaries and incomes policy in the public sector, especially as the private sector grows smaller.
  1324
  It is not only middle management that complains about the erosion of differentials. The trade unions complain. Engine drivers, for instance, complain that their differentials have been elided. We have only to compare what pilots are paid with what drivers of express trains are paid to see that things are out of proportion. At some point we have to take a much calmer look at this subject than we have so far done. I got into severe trouble about two years ago for suggesting that the top range of salaries in this country was too high. I agree that after taxation they are not nearly so high as they look. Nevertheless, at the top end, there is a danger that if we suddenly reduced tax we would leave people with an after-tax salary which may be too high.
  We have only to look at recent events when considering this problem. If £60,000 a year with very little tax paid upon that sum is considered the right salary for the President of the Commission—and I do not say that it is not, and the British Government subscribe to this—it shows up some of our internal arrangements in an odd light. I put it no higher than that. This is nothing to do with Liberalism, Socialism or Conservatism. It is about running a decent, free society. If we are to stop the trend I agree with the hon. Member for Motherwell and Wishaw (Dr. Bray) that probably we have to put on a freeze at the top end, at least temporarily.
  Such a freeze must start in the only place the Government can start, the public sector. We would have to reward in some way those who take less—not those to whom perks are granted, those who get near-free education for their children if they are working abroad, who do not pay capital gains tax if they are abroad and so on. A good deal can be done in the public sector. We can reward the public spirited by giving them honours and in all sorts of other ways. We must take a long, hard look at the principle of remuneration after tax in the public sector and therefore at what sort of gross remuneration we can afford to pay.
  I want rather more information about how far the current situation has driven people abroad. I am told that it is not that companies are finding it difficult to recruit middle management but that if, by chance, middle managers go abroad,

  1325
  they stay abroad. They find the attractions of life there to be considerable. Clearly in the long run that must be harmful to our economy.
  One of the difficulties about our Finance Bill procedures arise from this passion for stuffing in every conceivable form of change to deal with some loophole or because someone in the Treasury or the Revenue has decided that something should be put in. This procedure makes life intolerable and lends to large-scale evasion. Taxation today is largely concerned with taking out of demand a sufficient sum to allow for Government expenditure without cataclysmic inflation. It is not a matter of finding the cash to pay for what the Government want to do, although that is no doubt important. It is a question of ensuring that there is room in the economy for public expenditure. Therefore a certain amount of demand is taken out of private expenditure.
  In this respect, a lot of taxation is totally irrelevant. For instance, a tax on the very rich—a wealth or capital gains tax—has an infinitesimal effect. We take out most demand with the poor. They are the people who find demand cut more and more by taxes, owing to inflation. In a cruel way this is the purpose of taxation —it reduces demand. But we are not prepared to see widows and the poorer section of society being constantly more heavily taxed to fulfil the purposes of the Government. That is the dilemma.
  We have to move away from the idea that taxation is the basic way of managing the economy. I am glad to say that I think we have gone some way from fine tuning. But there is still a feeling abroad that somehow taxation is the main instrument in the Government's hands for running the economy. If that is so, to take up the point made by the hon. Member for Braintree about taking credit for the number of people taken out of taxation, we have probably added to inflation. Control of money supply and of nonproductive Government expenditure are the main priorities.
  Next year I would like to see a much shorter Finance Bill, making far fewer changes. I would be content to see no loopholes stopped UP. I hope that the Bill will be accompanied by some evidence about how best to assess salaries in the public sector. There must be an
  1326
  effort to change from the perks system. And I would like to see all this coupled to an economic policy which relied more on control of the money supply and of unproductive Government expenditure.
  5.28 p.m.
  Mr. Geoffrey Dodsworth: It is already clear from the course of this debate that a number of hon. Members are concerned about the content of this Finance Bill and its method of production. We are all greatly obliged to my hon. Friend the Member for Braintree (Mr. Newton) for his clear analysis and exposition of the Bill's contents. It appears that via Clause 52 and Schedule 6 we are bringing about a constitutional change which cannot be allowed to pass without mention.
  I hesitate to contribute in too detailed a manner to this debate in the presence of so many experts—what I believe were referred to as the "PBI" of the Finance Bill Committee. Having read their contributions on this subject I notice that my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) my right hon. Friend the Member for Crosby (Mr. Page) and my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) all alluded to the fact that they were concerned that there should be a separate debate and a separate Bill on matters of this nature. In Schedule 6 there are sections to be substituted for Section 20 of the old Taxes Management Act.
  In my view the procedure resolution is probably inadequate for that purpose. It makes no reference to the Taxes Managment Act 1970, referring only to Sections 19 and 20 of the Incomes and Corporation Taxes Act 1970. We have the problem of ensuring that the measures that come before us are authorised in the proper and right way and that we as individuals are aware of their consequences.
  In this instance we have to differentiate between the Bill and its precedents. I am thinking of the provisions which were made in the 1972 Act for value added tax investigation by those responsible in the Customs and Excise. We were then concerned with the rights that registered tax collectors would have on behalf of the Government, but in the Bill we are dealing with individuals. We are provid-

  1327
  ing that there will be right of access to the households of individuals for the purpose of obtaining private papers.
  Let us compare the Bill's provisions with the criminal law. The police have to apply for a warrant, and although there is a judicial safguard as a result of the magnificant efforts that were made in Committee, that does not alter the fact that the tax inspectors will have right of access even if they hardly suspect a crime. I am obliged for the reports that have emanated from another place about the likely effect on proceedings in that place. I find this morning that that view is made clear:
  "Schedule 6, which allows Inland Revenue investigators after an application to a court to enter private premises and take away private papers is clearly a constitutional change in the law of trespass and individual freedom, a section of law-making which the House of Lords law lords and constitutional experts are manifestly suited to help formulate".
  It was for that reason that I sought to raise with Mr. Speaker the whole question whether the Bill should be certified as a Money Bill. If it is so certified, the opportunity to examine any amendment or detailed clause falls away. We are concerned about the effect on the individual and the liberty of the subject. We are also concerned to maintain our constitutional position. At page 80 of "Erskine May" there is an apposite quotation that reads:
  "'The annexing any clause or clauses to a bill of aid or supply, the matter of which is foreign to and different from the matter of the said bill of aid or supply, is unparliamentary, and tends to the destruction of constitutional government.'"
  That is the position that the House is facing. We have a situation in which Treasury Ministers have a duty to prepare a separate Bill if they are to bring forward rights and opportunities of this nature and to enforce the law as they see it. The Bill bundles everything together. That is entirely unsatisfactory. It reflects the rather authoritarian and arbitrary nature of the way in which the proceedings of Government are now being conducted. Steamroller tactics are being employed. They are being used on the individual taxpayer.
  We are in error if we allow such matters to go unmentioned and unnoticed. The proceedings of the 1972 Act went unnoticed as regards the rights of VAT snoopers. That was a certified Money
  1328
  Bill. In that instance there was no opportunity of reflecting upon the rights of the indivdival or individual tax collector on behalf of the Revenue. That is evidence that we need to be on guard. I notice that nine out of the past 12 Finance Acts have not been certified as Money Bills. That indicates that it is the one that goes through that must be the source of grave concern.
  There is a need for the House to record its view that the rights of the inidividual are being reduced. They are being reduced by changing a section of the existing Act through the use of a Finance Bill. That is a very unsatisfactory mechanism. It is the obligation of us all to press the Government to take the opportunity of withdrawing Schedule 6. Let them return with a separate Bill so that the matter can be fully and properly considered. That would be the right way in which to proceed.
  My hon. Friend the Member for Braintree made this point lucidly and clearly. Surely it is not right that a matter of this significance should be considered through the hours of the night and in the early morning, along with many other matters involving technical detail, when we are concerned with the right of the individual subject. I hope that even at this late hour the Government will take the opportunity to reflect. I hope that they will remove this offending and offensive clause from the Bill and reintroduce it at a later stage when there will be oupportunity for a proper form of debate and discussion. This is what a matter of constitutional significance deserves.
  5.35 p.m.
  Mr. Douglas Crawford: I do not wish to take up the remarks of the hon. Member for Hertfordshire, South-West (Mr. Dodsworth), save to say that I agree with a great deal of his remarks.
  In Scottish Grand Committee last week I was accused by Labour and Conservative Members of making what they called a short speech of some 50 minutes' duration. I was criticised in the harsh way that is typical of that Committee. I see no reason for long speeches having to be equated with parliamentary virility. I have no intention of making needlessly lengthy speeches, a tactic that some Members all too often use to camouflage lack of content. However, I exempt members

  1329
  of the Committee that considered the Finance Bill from those strictures. I add my tribute to the Chief Secretary and the Financial Secretary for the humour, helpfulness and courtesy with which they treated the Committee.
  There is much that is unsatisfactory in the Bill from a general point of view. As the hon. Member for St. Ives (Mr. Nott) has said, we were dealing on Report with virtually a new Bill. We had little time to consider it, little time to table new clauses and little time to study the amendments that had been tabled along with amendments to the new clauses. It was even more difficult for members of minority parties than for members of the Conservative Party in that we have less research hack-up to help us.
  A satisfactory feature was the decision of the House to give a 50 per cent. tax exemption for war widows. My party would have liked a 100 per cent. exemption, but I congratulate the hon. Members for Ormskirk (Mr. Kilroy-Silk) and Birmingham, Perry Barr (Mr. Rooker) on tabling a new clause and succeeding in persuading sufficient of their hon. Friends to vote for it. It was rather churlish of one or two of their hon. Friends subsequently to vote against the clause when they had previously added their names to it.
  As I have said, there is much that is unsatisfactory from the general point of view. In particular, there is a great deal that is unsatisfactory from the Scottish point of view. That which is primarily unsatisfactory is the increase in whisky duty. I raised this matter in Committee and I shall briefly comment on the figures. The increased duty in previous years has caused a reduction in total production. In 1974, 183 million proof gallons were produced whereas in 1975 production amounted to 151 million proof gallons. That is a drop of about 30 million proof gallons, a fall of 17 per cent. or 18 per cent. Home consumption fell from 70 million proof gallons in 1974 to 60 million proof gallons in 1975. The latest figures are even worse. They show that in January and February of this year only 1,245 million proof gallons were released from bond compared with 1,410 million proof gallons in January and February 1975.
  The strange thing about Scotch whisky is that once it is sealed it improves. I
  1330
  shall quote what was said by my hon. Friend the Member for Moray and Nairn (Mrs. Ewing) in the European Parliament debate on whisky a week or two ago. She said:
  "There is a certain public house in Tobermory, on the Island of Mull, where there are two bottles of whisky over 100 years old which the owner says he does not intend to open until the Spanish galleon which was sunk in the Spanish Armada is recovered from Tobermory Bay. The expectation is when he finally opens these bottles they will be even better than they were 100 years ago."
  I return to a more serious point. There has been a drop of some 200 million proof gallons taken out of bond in the first two months of this year compared with the first two months of last year. That is a very serious matter.
  It is also important for the Government to know that the Governments of other countries tend to put up their duties on whisky commensurate to our duties. The largest export market for whisky is the United States, which imported 132 million gallons in 1974 but only 126 million gallons in 1975, and that is without taking inflation into account.
  By now, the Scottish economic case is well known to the House—my hon. Friends have seen to that. I remind the Government and the House that the Department of Employment's regional survey quarterly cost of living report shows that, in the latest quarter for which figures are available, Scotland's cost of living was 9·4 per cent. higher than other areas of the United Kingdom, while the Family Expenditure Survey showed that the income per capita in Scotland was 9·4 per cent. lower than in England. This alone means, in our contention, that Scotland should be immune from the forthcoming public expenditure cuts, which are economically unfair and economically unjustifiable.
  It is time that we had at least two Finance Bills in this House, if not three, one for Scotland, one for England and, doubtless, one for Wales as well. Scotland's economy is now different in its psychology, balance and potential. In Edinburgh or Aberdeen one is met with a feeling of bustling enthusiasm for commerce and industry, while in the City of London one tends to be met with gloom. There is a difference between the two economies which is larger than it has been for many years.

  1331
  The Scottish economy, via this Bill and the public expenditure cuts, is being strangled by the serpent of England's economic constriction. That must stop, and the sooner it does the better for industry, trade unionists, management, bankers and the rest of the people of Scotland.
  5.42 p.m.
  Mr. Nigel Lawson: I do not wish to follow what was said by the hon. Member for Perth and East Perthshire (Mr. Crawford), except to say that he really is deluding himself if he thinks that there is a Scottish economy wholly separate from the English economy. The two economies are intimately interlinked, and until he understands that he will not understand the problems of the economy of the United Kingdom as a whole.
  Dr. Bray: The hon. Member for Perth and East Perthshire (Mr. Crawford) is also mistaken in thinking that the Scottish economy is fully inter-linked. Glasgow's is different from that of Edinburgh.
  Mr. Lawson: That takes the Scottish situation as far as we want to go now.
  I want to devote my remarks to those made by the Financial Secretary in opening the debate. Certainly it seems to be true that the most novel feature of this year's Finance Bill has been the insertion on Report of amendments to introduce a number of income tax reliefs—which, incidentally, do not even compensate for the increases in the real tax burden as a result of inflation—as an explicit quid pro quo for trade union acquiesence in stage two of the Government's incomes policy. Yet, already how remote and unreal it all seems. No wonder.
  A century ago, Walter Bagehot advanced the cause of political analysis by drawing a distinction between the dignified parts of the constitution, such as the monarchy, and the efficient parts, such as the Cabinet. Today, we see much the same distinction in economic affairs, where the efficient elements of national economic management are monetary policy, tax policy and, above all at the present time, public expenditure policy, while the incomes policy,
  1332
  with all its solemn processions of trade union barons in and out of Downing Street and Chequers, represents the dignified element.
  Thus, even today, as we discuss all this flummery in the Chamber of the House of Commons, we know, as we speak, that the real decisions—the absolute vital decisions—on cuts in Government spending are being argued out between Ministers behind closed doors, with resignation threats flying thick and fast for the benefit of a rather credulous Press.
  Of course, as Bagehot explained, the dignified parts of the constitution had a dual rôle—to draw attention away from the efficient parts and to make the decisions taken by the efficient parts more acceptable to the people as a whole. The trouble with the incomes policy on this analysis, quite apart from the doubtful wisdom of elevating Mr. Jack Jones to the status of constitutional monarch—a doubt shared, it seems, by some of his own trade union colleagues—is that while it admirably fulfils the diversionary aspect of the rôle, it does not, in the long term, do anything to enhance the acceptability of the real measures needed for our national economic recovery.
  Indeed, if anything, the reverse is the case, as is to be seen all too starkly at present, when the Chief Secretary to the Treasury is being told by the TUC that the cuts he is proposing in public expenditure are contrary to and a breach of the so-called social contract on which the incomes policy is allegedly based.
  Nor, of course, is the incomes policy harmless in other ways, too. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) set out the indictment of incomes policies—an indictment based not on some abstract theory but on the most bitter practical experience over a long period of years—at painstaking length in his important speech to the Bow Group Economic Affairs Standing Committee at the Carlton Club on 12th May.
  But of all the disadvantages and dangers—I interpolate that reference to my right hon. and learned Friend's speech in order to spare the House hearing me reiterate those points—the greatest of all

  1333
  is the invariable tendency of all Governments when the going gets rough and tough to assume that the dignified can actually be a substitute for the efficient. I am afraid that we are likely to see the present Government repeat that error in the fairly near future.
  Meanwhile, it is essential, if we are ever to think clearly about this whole subject, and to arrive, as I shall seek to arrive, at a positive and constructive conclusion, that we should tear away the biggest myth of all within which the incomes policy debate is currently enshrouded. This was very well set out in the most odious, complacent and illiterate article it has recently been my misfortune to read. It appeared in The Times of 16th June and was written by the General Secretary of the National Union of General and Municipal Workers, Mr. David Basnett, so I do not think we can blame the editorial staff of The Times. Mr. Basnett concluded wth these words:
  "I end by drawing the contrasts between the sober and disciplined self-sacrifice of the trade union movement in this economic crisis with the behaviour of those in industry and the financial sector who control the deployment of funds…"
  and who
  "…do not appear to have the same concern for the national interest. The contrast with the TUC's position is stark."
  That is complete and utter nonsense. No doubt, if it were only Mr. Basnett who spoke like that, we could ignore it. But it is not. The entire Cabinet, from the Prime Minister downwards, is apt to echo much the same sentiment at the drop of a hat.
  So what is this great sacrifice that we are all called upon to admire? It is a reduction in real personal disposable income, imposed not by the incomes policy but by harsh economic realities. The idea that it is something we can either accept or reject as we please is the most arrant nonsense. It is something imposed upon us, alas, by the facts of our national economic predicament. All that is in question is how the burden of that sacrifice is shared out, and this is where the incomes policy comes into play.
  I have taken the trouble to read the latest White Paper on incomes policy very carefully. I have also read with equal care the Remuneration, Charges and Grants Act and the various other
  1334
  pronunciamentos of various Ministers on this policy. Nowhere can I find any authority whatever for the proposition that only members of trade unions need adhere to the pay guidelines. Indeed, it is abundantly clear that the 55 per cent. of the nation's work force who do not belong to a trade union are intended to be as fully regimented by the statute backed non-statutory policy as are the 45 per cent. who do belong to a trade union. Thus, there is no sense whatever in which the trade union movement has made a sacrifice which those outside have not made.
  That is not to say that the Government's incomes policy proposals are in any sense neutral—far from it. As Mr. John Lyons, the General Secretary of the Electrical Power Engineers Association, pointed out at the TUC special conference on 16th June—the same day as Mr. Basnett's nauseatingly self-congratulatory article appeared—this is not so. He said:
  "The TUC-Government deal that we are being asked to endorse specifically discrimininates against the members which my Association represents. Engineers, scientists and managers, working men like everyone else, are specifically discriminated against in the policy."
  The plain truth of the matter is that the incomes policy was deliberately framed by the leaders of the big general unions, such as Mr. Jones and Mr. Basnett, in such a way as to ensure that their members made the smallest possible sacrifice and the hulk of the burden was shifted on to everyone else—higher-paid workers and middle management in particular.
  It may be good Socialism for Mr. Basnett to see to it that his snout is well and truly in the trough, but for him to seek plaudits for his abstinence is nothing but the most arrant humbug and hypocrisy. And for Ministers to praise trade unionists and their leaders for a sacrifice which they have never made and which they are taking great care they will never make is not merely an insult to the majority of people who are not members of trade unions but a profound political error.
  In the first place, it makes it appear that the temporary, if painful, decline in the nation's living standards is something proposed by the Government which the unions are free either to accept or reject,

  1335
  instead of being something imposed by objective reality from which there is no contracting out. Secondly, it makes it appear that the unions as such are entitled to ask for a quid pro quo in return for acceptance of this sacrifice. Hence we have the notorious deal in which all the benefits from moderation in wages claims are outweighed by the wholly unnecessary price that is paid in order to achieve them.
  Moderation in wage claims is not, as I tried to make clear at the start of my speech, directly part of the efficient component, either of economic management in general or of the fight against inflation in particular. It is, none the less, for obvious reasons greatly to be desired. But it must be presented, not as a sacrifice for which a heavy price has to be paid but as a positive advantage from which great rewards can be gained, above all, the reward of lower unemployment. One of the most encouraging aspects of the past 12 months has been the increasing awareness of more and more trade unionists that wage moderation is the only route to full employment and that inordinate pay rises simply mean fewer jobs.
  The one area in which this realisation has not occurred is the public sector which has been able to export the unemployment caused by its own pay rises into the private sector. In June unemployment in the public sector, according to the latest Written Reply which I have received from the Minister, was a mere 2·4 per cent., compared with 6·8 per cent. in the beleaguered private sector.
  It is for this reason some of my hon. Friends believe that a formal incomes policy is necessary. They believe that this is the only means of ensuring wage restraint in the public sector where economic forces do not apply in the normal sense, and therefore the only means of adequately controlling public expenditure, the importance of which we are all concerned about. I believe they are mistaken. A much more useful weapon lies to hand in the application of cash limits to public sector payrolls, which brings home the connection between pay levels and employment in the clearest possible way. Indeed, this is precisely why the Civil Service unions are so opposed to
  1336
  the Chancellor's decision to introduce cash limit control.
  This was revealingly set out in written evidence submitted to the General Sub-Committee of the Expenditure Committee jointly by the Society of Civil Servants and the Civil and Public Services Association. I quote from paragraph 37 of that evidence:
  "Continuation of the cash limit system in the public sector inevitably means a covert system of statutory control of wages and the implications for collective bargaining are such that they virtually remove any freedom to negotiate. If cash limits are set prior to an annual wage/pay settlement, this means moving into a negotiating situation where the overall amount of money available for pay increases has already been set. If wage negotiations take place prior to cash limits being set then the benefits of a substantive pay settlement may be reduced or offset by pressures to reduce resources for expenditure in other areas such as manpower, accommodation, training, etc. Therefore the effects of cash limits will be to put a permanent squeeze on both pay and manpower levels."
  Exactly so. That is just what the doctor ordered. And no overt incomes policy, with all its rigidities and other nonsenses, is needed.
  We shall, no doubt, have the opportunity to debate public expenditure, as such, in the not-too-distant future so I will not go further into that this afternoon. On the less central, but curiously obsessive, subject of pay restraint, what we need is clear. We need cash limits to deal with the special problem of pay in the public sector. Beyond that we need wage moderation that is accepted generally, not as part of some inevitably disastrous deal, as the present Government have chosen to introduce it, but as a commonsense good in itself from which manifest advantages flow and, more starkly, from the absence of which the evil of increased unemployment will inescapably ensue.
  But although there must be no explicit deal between the Government and the self-confessed politically motivated trade union bosses, the way ahead for the next Conservative Government—and we shall not have to wait long for that—will require an understanding of a different sort. We shall need an implicit social contract—to borrow a phrase—between the Government and the people as a whole, including the rank and file trade

  1337
  union membership, according to which the Government gains the popular support for its economic policies that any Government in a free society requires by pursuing social policies such as lower taxation and increased home ownership which genuinely meet the aspirations of the people instead of the prejudices of the Basnetts and the Joneses.
  The big bosses of today are the trade union tycoons, and thus the Labour Party has inevitably and inescapably become the bosses' party. By contrast, it is the Conservative Party which is today the people's party. Therein lies its opportunity and its destiny.
  6.0 p.m.
  Mr. Ralph Howell: I shall confine myself to one criticism of the Bill—is its failure to deal with the poverty trap. The Govenment have done something to raise tax thresholds, but they have done nothing to alter the percentage at which tax payment begins. That means that people who are earning only 48 per cent. of the national average wage will still be taxed, and the Bill will serve only to deepen the poverty trap.
  Perhaps I may explain what is happening and highlight the absurdity of the situation. A man with a wife and two children would receive £35·85 in supplementary benefit if he contracted out of work for one reason or another. Yet if he earned £35 a week he would pay tax of £1·78 and a national insurance contribution of £2·01. What a totally absurd situation that people whose earnings are below the official poverty line, as fixed by social security benefits, should be taxed.
  I am told that this cannot be dealt with at this stage because it would cost £1,230 million in lost taxation. That is the amount currently being taken from people whose earnings are below the supplementary benefit level. I am also told that it would be inflationary to raise tax thresholds to supplementary benefit levels. That means that we are operating a thoroughly rotten society. It is time that the Government recognised that they must change the system quickly if the country is ever to get out of the mess it is in.
  It simply does not pay several million people to work, and it is only because
  1338
  they are conscientious that they do so, even though they know that they are worse off in the process. The Government are taking £1,200 million from them in taxation and at least that much again in national insurance. That means that about £2,500 million is being deducted from the pay packets of the poorest members of the community. It would be unfair to blame the present Government for that, but someone at some time must remedy the situation.
  Someone must find the courage to raise tax thresholds not merely to supplementary benefit levels but even higher, to family income supplement levels. It makes no sense to pay FIS to families when the money has been taken away from them in taxation in the first place.
  It is a waste of time talking to this dying Government; I therefore address my remarks to my own Front Bench. Our party must change the situation. In the past, we, too, have been guilty of allowing tax thresholds to fall to an absurd level. As soon as we get into office one of our first and most important tasks must be to raise the thresholds in the manner that I have described, so that people are encouraged to work. If we implemented my suggestion we would create a situation in which, in every case, people would be better off if they worked. Until that is done there will be no health in the country's economy.
  6.5 p.m.
  Mr. Peter Rees: My hon. Friend the Member for Norfolk, North (Mr. Howell) has established an enviable reputation in the matters to which he was addressing himself. I do not presume, therefore, to deal also with those matters.
  It would be wrong to part with the Bill without reflecting a little on some of its consequences, particularly on the way in which it may be passed into law. The Financial Secretary seemed to project it as some kind of educational tract for the trade unions. I think that the bulk of the country will rather resent the price that has had to be paid for educating the unions. Nor will the country find much enjoyment in the saccharine and reverential tones with which Ministers refer to them. They are an important pressure group, but no more than that.

  1339
  My hon. Friend the Member for Braintree (Mr. Newton) gave us a lucid and comprehensive summary of the Bill and was disposed to describe it as the most improved Bill that may be passed by the House in this Session. I may add that that is only because it started from such a low base line.
  Like many of the Government's Bills, it has been conceived in spite, and I find spite no basis for solid legislative achievement. I can only tell the Prime Minister that if he aspires to be the Baldwin of our era he must apply his talents of conciliation not just to his hon. Friends below the Gangway and to the trade union movement, but to the rest of the country as well.
  One aspect of the Bill has hardly been explored. I hope that the Minister who is to make the winding-up speech will deal with it. I refer to the cost of the Bill in terms of administrative manpower. The Conservative Government, to a remarkable degree, held steady the level of manpower in the public sector. When my right hon. Friend the Member for Sidcup (Mr. Heath) gave up the reins of office on 1st March 1974 there were 697,000 civil servants. By 1st April 1976 that number had increased to 747,000. Consequent upon that, the White Paper that we debated in March forecast staff cuts of £140 million in the public sector. That means a cut of 35,000 in the number of civil servants. The Ministry of Defence has cut its staff by 1,500, the National Savings Movement by 97 and the Foreign and Commonwealth Office by 56. The explanation of those cuts can only be that the Government no longer feel that we need armed forces to defend our interests, that no one will be foolish enough to take advantage of the national savings movement, and that our foreign policies are such that it is not worth employing people to present them elsewhere in the world.
  The Inland Revenue now numbers 80,000—give or take a few hundred. That is 10,000 more than two years ago. On present estimates, it is easy to forecast that it will need another 10,000 by 1977. The Financial Secretary should tell the House frankly what exactly are the implications, in manpower terms, of the measures that he is asking us to pass into
  1340
  law. He should also say frankly where these £140 million of cuts in the public sector are to be found. I believe that there is considerable scope for cuts in the costs of revenue collection.
  It is noticeable that the White Paper projections were that by the end of this decade the cost of collecting the revenue is likely to rise to £480 million. That is one aspect of the Bill that troubles me.
  Another point of concern about the Bill is the way in which it has been treated in this House. It has certainly led me, as it has others of my hon. Friends, to reflect on the way in which we treat our Finance Bills. I do not complain that it was a long and complex Bill; this House has frequently had inflicted on it long and complex pieces of financial legislation. I do not say that our debates in Committee were unduly curtailed. It is fair to say, however, that there was insufficient advance exposure of the Bill.
  On the evidence of the way the Government behaved in Committee, they had not thought through sufficiently the implications of the measures that they were putting before the House. Beyond that, there was totally inadequate time in which to consider the fundamental amendments and new clauses, which the Government introduced during and after the Committee stage, before we got to the Report stage.
  I dare say that my hon. Friends, with considerable expenditure of energy and with their normal mental acuteness, were able to table a range of amendments on Report, but that is not the complete answer. After all, interested bodies outside the House are entitled to have reasonable time in which to consider these measures and to make representations to those right hon. or hon. Members whom they feel may be able to champion their cause in the House.
  I believe that it was totally impossible for outside interests to consider the Government's own amendments and new clauses, leave aside anything else, between the Thursday when the Bill was first published, as amended in Committee, and the day when the Report stage started. It was quite impossible for deep and considered examination of the Bill to be given. As a result, the Bill will be the poorer for it.

  1341
  The Leader of the House, when pressed on this point, was disposed to refer to a very doubtful precedent in 1972. Having searched the record as far as I can, I do not believe that the then Administration of my right hon. Friend the Member for Sidcup introduced during, and, indeed, after, the Commission stage new measures that were absolutely fundamental to an understanding of VAT. The only precedent that I can call to mind is that of the Finance Bill in 1975, when capital transfer tax was introduced.
  For the benefit of those hon. Gentlemen who were not privileged to be present at that time—unlike myself, my hon. Friend the Member for Blaby (Mr. Lawson) and others of my hon. Friends who are gracing the Opposition Benches this afternoon—I recall that in the middle of our debates in Committee the Government introduced a fundamental structural alteration. They differentiated between dispositions at death and dispositions during lifetime. To add insult to injury, no new clause was introduced in Committee. A printed circular was put out, and a rather lame explanation was given, as I recall, by the present Financial Secretary.
  I believe that that was a totally improper way in which to ask a Standing Committee on a Finance Bill to debate an important measure—but that provides the precedent on which, presumably, the Government hang their case.
  Further than that, the Government flinched from tabling a Ways and Means Resolution in the second Finance Bill last year that would have enabled the House to debate fully and to re-explore the darker recesses of capital transfer tax. As a result, 48 clauses and five schedules are included in this Finance Bill. We have been asked, in a very limited space of time, to do the Government's work for them and to consider the various lacunae, errors and misunderstandings that were the hallmark of capital transfer tax when introduced last year.
  I now pass to the present Finance Bill. In Committee—it is right that the country should be reminded of this—several crucial and fundamental changes were offered and accented. Beyond that, when we debated the whole question of benefits in kind we were blandly told by the Financial Secretary that he would
  1342
  listen courteously and graciously to what we had to say but that consultations were going on not with the Opposition and with hon. Gentlemen inside the House but with interested parties outside.
  I do not complain of that, but how a Standing Committee can do its work when it knows that parallel consultations are going on outside the House on the precise form of the Bill that it is being asked to debate, I do not know. If the Financial Secretary was so uncertain of the accuracy, fairness and equity of the measures he was putting before the Standing Committee, he was in honour bound to withdraw those clauses and reintroduce them in a later Finance Bill.
  Beyond that—it is right to remind interested parties outside the House of this—not in Committee but as late as the Report stage last week, the Chief Secretary said, under pressure from the Opposition Benches, that he would be prepared to receive representations on the scope of Schedule 6.
  It is true that under intense pressure from the Opposition in Committee, those provisions were humanised, to a degree, and that a range of fundamental amendments was introduced. But for the Minister, at the eleventh hour, when it was impossible, in legislative terms, for this House at any rate to amend those provisions, to say that he would be prepared to receive representations from interested parties outside, is an insult to the House and likely to bring the whole legislative process into disrepute.
  It would be quite wrong for me to add my voice to the very powerful speech made by my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth) and, indeed, to the representations he made to the Chair at an earlier stage, on whether the Bill should be certified as a Money Bill, but I think it right to say that I believe that the only way now for any kind of prober legislative amendment to be made to Schedule 6—and it is implicit in what the Chief Secretary has said that he is prepared to contemplate further amendment to these provisions—would he to allow the House of Lords to re-examine these provisions. But it is nothing short of scandalous that this House has been deprived of a proper opportunity of debating fully and considering in depth both the benefits in kind provisions and Schedule 6.

  1343
  The behaviour of the Government in this instance has led me, as it has led others of my hon. Friends, to reflect on whether we provide the right kind of scrutiny process for Finance Bills. It may be that others of my right hon. and hon. Friends, who have experience of the Government's behaviour in other fields, feel that the strictures and criticisms ventured from the Opposition Benches may also be applied to other legislative measures. It may well be that we shall have occasion to return to this problem tomorrow, in the three consecutive debates inflicted on the House.
  My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) suggested that the Select Committee procedure could be applied. I certainly believe that where any major reform of the fiscal system is in contemplation, it is right and proper that the House, through the Select Committee system, should consider the framework of it.
  There is no mystery about Finance Bills. There is no real reason why they should be clothed in such secrecy. One appreciates that questions of rates of tax should be disclosed only during the Budget speech, but where the whole framework of a tax is in contemplation, I believe that leisured scrutiny by a Select Committee, with plenty of opportunity for outside interests to make representations, is the only proper way in which to proceed.
  It may well be that there are other complex amendments which do not amount to a fundamental reconstruction of part of the tax system. Indeed, there are many such complex provisions in this Bill—the benefits in kind provisions, the stock relief provisions, and so on—and I have no doubt that in due course we shall be considering the implementation of the Sandilands Report.
  In such cases, I suggest that the proper approach would be for the Government to allow a much longer period between the publication of the Bill and the Second Reading, and certainly the Committee stage, so that outside interests can scrutinise the Bill with considerable care, go through it in detail and make representations to the Treasury and to Somerset House. One knows that Somerset House, even now, does a little advance consultation, but it is on a very guarded, partial and limited basis.
  1344
  There is no reason at all, even when methods of tax avoidance are concerned, why a Bill should not be published in detail in advance. There is a very praiseworthy precedent for this. My right hon. Friend the Member for Chipping Barnet (Mr. Maudling) in 1963 or 1964 published in a White Paper the measures which he was proposing to introduce in order to put us all on a current year basis for taxation. Alas, the fortune of war took him out of office and prevented him from implementing that measure. It may be that the Financial Secretary would say that this would give a chance to the tax avoiders and those who would abuse the system. I can say, I believe without immodesty, that no one has expressed more concern than I have about retrospective legislation—indeed, I may have become a little reptitious on the subject—but I would not object to a Bill published in March or earlier, and not enacted till August, being made retrospective to the point of publication—after all, there are many precedents for that—if it were felt that by giving advance notice people would be able to take undue advantage of it.
  There are no practical objections that come to mind. There may be many pressures on Treasury Ministers. They may relish their months in purdah between November and March. It may be that it gives them the chance to discharge their various administrative responsibilities. But they must consider the convenience of the taxpayer. It is quite wrong for them to inflict on taxpayers a mass of detailed, unthoughtout legislation with little time to consider it in detail.
  Beyond that, it is nothing short of scandalous when a Government, having announced that they were preparing to change the basis of their Finance Bill, deprive us of a proper opportunity, on Report to consider what they have in mind. It demonstrates clearly the Government's approach to this House.
  It is not for me to observe that the Leader of the House has projected himself over the years a great parliamentary figure—a Tiberius Gracchus, the Tribune of Pleba, John Wilkes, the libertarian; it may be that he has other prototypes in mind. But he has done more to damage the standing and processes of Parliament than any person

  1345
  whom I can recall in post war years. He has demonstrated that his Government regard Parliament as a kind of legislative sausage machine to turn out at command any number of neatly packaged radical measures. He has shown that he has no regard for the Opposition parties whose interests by tradition and practice he is supposed to represent when considering the legislative programme.
  I can only say to the Leader of the House and to the Government that there are those who say that power and respect will soon pass from this House, not only, possibly, to devolved legislative assemblies but also to the European Parliament in Strasbourg, or, it may be, in Brussels. I believe that the people of this country, contemplating the way in which we handle complex legislative measures, especially on finance, may feel that it would be no bad thing if we were divested of some of our responsibilities. I say this with profound regret, because I have a great regard for the history, traditions and, I hope, the future of this House. But, if that comes about, the blame will lie fairly and squarely on this Government, and on no member of it more than the Leader of the House.
  6.23 p.m.
  Mr. John MacGregor: I must apologise for the fact that, owing to my being on one of the Public Expenditure Committees today, I was unable to hear all the earlier speeches, although fortunately I was able to hear the admirable speech and the powerful criticisms of this Finance Bill by my hon. Friend the Member for St. Ives (Mr. Nott). Since I want to make only two points, and since they follow the contributions of my hon. Friend the Member for Norfolk, North (Mr. Howell) and of my hon. and learned Friend the Member for Dover and Deal (Mr. Rees), I hope that I shall be forgiven for that.
  I want first to say how much I support what my hon. Friend the Member for Norfolk, North said. He is to be greatly complimented on the way in which for many years he has drawn our attention to this problem with admirable persistence. For me, it has been very much due to his probing into the facts and statistics that I have become converted to his line of argument. I knew that there was strong pressure in the country along these lines, but within the past
  1346
  18 months my hon. Friend has convinced me that there is a serious problem here.
  I draw one further illustration to show the difficulty. Since the Department of Health and Social Security refused to answer some of my hon. Friend's Questions, I got the Library to work out certain figures for me taking into account the tax changes in the present Bill and the changes announced recently in social security unemployment benefits.
  I take solely the situation in the forty-first week of the financial year where an employed man became unemployed. I take that period because it illustrates graphically the worst situation, although I recognise that at the beginning of the financial year the figures which I am about to give will not be as bad. Nevertheless, many more people are becoming aware of this type of situation, are beginning to take advantage of it, and are not worried too much when they fail to find jobs; indeed, in some cases they refuse to take jobs towards the end of the year.
  I take the situation of the married man with two children and that of the married man with four children. The position of a married man with two children earning £60 a week when employed is that he will have a net income of a little more than £38, taking into account certain expenses of travelling to work, and so on, where a reasonable figure has been included, and average figures for rent and rates and any rebates that he might obtain. His net income on becoming unemployed goes up by £9, so that it becomes £47. Taking the position of the married man with four children who earns £60 a week, his net income when employed is £45. When he is unemployed, his net income goes up by £12, to £57.
  Whatever we say about the desirability of giving reasonable social security and unemployment benefits and whatever may be the administrative difficulties involved in sorting out the position between the tax and the social security systems, the plain fact is that that type of position cannot be defended. It is nonsense that two groups both with exactly the same requirements for their expenditure should find that when employed they have net incomes of £9 and £12 less than when they are unemployed.
  Looking at the possibilities of making short-term unemployment benefits taxed,

  1347
  we discover that the net income when unemployed does not go dramatically below the net income when employed. In one case, it is £4 less and, in the other, it is £3 less. If we cannot sort out the relationship between tax and social security benefits immediately, one answer that must be looked at seriously is to tax short-term unemployment benefits, and the administrative difficulties in doing it must be overcome.
  The real answer, however, is to raise the tax thresholds for the net income when employed. I make no more of that today, because I am aware that I and many other hon. Members have constantly put forward that argument. But that must be the answer to dealing with the problem. We recognise how expensive it is, and we recognise, therefore, that the efforts of the Chief Secretary to cut public expenditure are highly desirable. But they will have to go further if the objective of raising substantially the opening tax threshold is to be achieved.
  I wish to add my voice to what has been said by one or two hon. Members who have been participants in Standing Committees on Finance Bills for some time about the procedures in which we have engaged. The Financial Secretary and the Chief Secretary have said at various times in the Standing Committee that they do not defend the present system, but they have gone on to say "This it not the time to discuss such a matter." At the conclusion of one Finance Bill, it may be that this is the time.
  I agree with all that was said by my hon. and learned Friend the Member for Dover and Deal. He has great experience not only of our Finance Bill Committee but also of the workings of the tax system. There can be no doubt that the way in which we deal with Finance Bills at present is most unsatisfactory. I do not complain about staying up all night. I find our discussions in the early hours of the morning constructive, helpful and agreeable because of the way in which the Chief Secretary and the Financial Secretary respond. Looking at the Official Report afterwards, I am amazed to find that even debates at 5 o'clock in the morning are quite coherent.
  I accept that in one sense the fact that we have so many changes to the last two
  1348
  Finance Bills demonstrates not only that great credit should be reflected on the Opposition for their arguments, without any voting power to get those changes, but that the parliamentary process works and that changes can be made. However, I believe that no one outside this House finds our rushed processes in the small hours of the morning at all sensible. It seems crazy to them and it means also that they cannot participate in the debates or follow our discussions unless they have the same lunatic perseverence, dedication and energy that we on the Committee have to have.
  But there are much more serious objections. The first is the one which my hon. and learned Friend the Member for Dover and Deal made, which is, in so many cases, the lack of time for Opposition Members to receive outside representations. It is often difficult enough to have sufficient time for the amendments that we wish to table, let alone to consult outside bodies and to decide which arguments and amendments we wish to press. We complain about the lack of time for many others, apart from the dedicated and important outside bodies of observers who follow our proceedings, like scores of accountancy firms and others throughout the country who are crucially affected even to look at what is proposed by the Government in their amendments.
  The other serious aspect of the way in which we have to deal with so many Finance Bills in an ill-organised manner is that we end up with an excess of ill-digested fiscal legislation, which needs amendment in succeeding Finance Bills. The CTT is an example.
  In addition, we have a severe effect on the efficiency of industry, accountants and others who constantly have to cope with the changes we make. We should be greatly concerned that many informed outside observers have this criticism of our present procedures.
  Many hon. Members feel that one of the best ways of proceeding in the future would be by way of the Green Paper technique, effectively deployed by my hon. Friend the Member for St. Ives when in Government, and/or the Select Committee procedure, though this will not cut the amount of parliamentary time. It will put the same pressure on us, but it will remove the rush and give

  1349
  outside bodies time to put their case effectively and give us a better chance to get it right the first time round.
  I should very much like to see the Inland Revenue given the opportunity for greater openness before it goes to Ministers with proposals. In the general sub-committee of the Expenditure Committee we have been investigating the extent to which the Revenue and the Treasury consult outside bodies or even other Departments about the industrial and economic effects of any proposed measures.
  It has been clear to those of us on that Committee, as it is clear from the fringe benefit clauses in the Bill, that there is very little outside consultation. It would greatly assist our procedures and help industry and outside bodies if the Revenue were allowed this greater openness. I understand the reasons for Budget secrecy, but they are outweighed by the desirability of a better process for considering Finance Bills.
  We need less fiscal legislation. I recognise the difficulties. I accept that many of the amendments of my hon. Friends and hon. Members opposite would add to the legislative process and result in longer, more complex Finance Bills, but we must be firm in our resolve to have less legislation.
  We need at least an ordnance of self-restraint on major changes to the system. We need such changes least of all at present.
  We should also separate those matters in Bills involving major structural changes from those involving fiscal changes in rates for economic or other reasons.
  I do not mind our exchanges upstairs—I find them agreeable and constructive—but they are not the most sensible way to conduct the nation's fiscal affairs, and are increasingly being recognised as not being so by all the outside interests affected.
  6.33 p.m.
  Mr. Cecil Parkinson: Some of my hon. Friends have pleaded for less fiscal legislation. There is a general feeling that Finance Bills are brought forward too frequently and are both too long and too complicated.
  They tend to become a self-generating exercise. For instance, 37 clauses were
  1350
  devoted to the capital transfer tax last year and there are 48 clauses dealing with the tax this year.
  In the current Bill, several of the measures will be discussed and amended for years to come. We are constantly putting right the mistakes of previous years while, at the same time, creating more mistakes. We can see that a number of mistakes and injustices of previous years are being tackled in this Bill.
  Last year, we argued time and again that a 25 per cent. rate of VAT on cottage industries like boats, caravans and other small business industries would be criminal and would destroy them. The Government ignored our arguments. This year they have returned to the subject and reduced the rate to l2½ per cent.
  We have had three changes in three years because the Revenue cannot admit that we should never have abandoned a single rate VAT. First, we had the single rate, then the dual rate, which resulted in so much damage, then the return to a situation which approached a single rate, while not actually going back to it.
  We argued on CTT last year that the tax was ill-conceived and badly thought out and that it should be deferred and considered in more detail by a Select Committee. The Government used their majority to ride roughshod over our arguments and this year they had to include 48 new clauses on the tax to try to put right some of the mistakes which need never have been incorporated in the legislation if they had listened to our arguments and given a little thought to their own ideas.
  We must welcome some of the reliefs in the Bill and I am glad that the Government have admitted that it was a mistake to get rid of the industrial hereditaments relief built into estate duty. That was our argument last year and the Government have brought forward a variation of that relief, but there is a gap between the time the CTT legislation was introduced and now. When we point out that some people will not qualify for the relief, the Government say that that is too bad.
  We say that if there was a need for this relief in the old estate duty and there is a relief now, because jobs may be threatened, what is wrong with admitting that the Revenue made a mistake and

  1351
  giving Parliament the opportunity to put it right? However, that has not been done and no doubt changes will have to be made to CTT for years to come and the tax will result in a flourishing industry to deal with it.
  The Government have further amended stock appreciation relief. This is becoming a legislative nightmare. Even if one devoted a lifetime to try to understand it, one would find it virtually impossible.
  Why was it introduced? The Chancellor of the Exchequer made speeches about obscene company profits and increasing the taxation on the corporate sector, but when he tried it, he found himself threatened with an industrial collapse. Instead of admitting that he was wrong and reversing his proposals, he introduced this relief. Huge sections of the Finance Bill are now devoted to this over-complex, totally unnecessary piece of legislation which was introduced because the Chancellor could not bring himself to admit that he had made a mistake. So much for the mistakes and injustices of earlier Bills.
  This Bill will provide considerable work for Parliament in the years ahead. The benefits in kind provisions have been badly thought out. Chapter II was virtually withdrawn by the Government and has been reintroduced in bits. We now have Mr. Joe Gormley boasting about the extra-statutory concessions he has obtained for the miners. Their perks will not be taxed. The Government dare not tangle with them, he implies.
  Extra-statutory concessions will be made for the miners, whether the case is just or unjust. There has been no argument about the justice or injustice of giving the railway and airlines workers their reliefs. The only argument has been that they have the power to do the Government tremendous damage and they will use it unless they get their way.
  The salesman who uses his car for private purposes will be more heavily taxed, although the Government have halved the amount of taxable benefit, following pressure from us and the motor industry but only for those driving over 25,000 miles on business. The salesman will still not receive anything like the reduction of taxation of benefits that the more powerful groups will receive. I had a conver-
  1352
  sation at lunch-time today with the chairman of a very large company. He said "I have no complaints about the legislation. My chauffeur-driven Rolls will cost me far less than it has in the past. I am grateful to the Government. But my salesmen, espcially the promising salesmen who are too busy selling to be driving round the country clocking up 25,000 miles a year, will be hit by the Bill and will have to pay more tax. Their wages have already been frozen and we have been unable to do much for them. They are being penalised. However, I am getting the benefit because my chauffeur-driven Rolls will cost me less in future."
  The Chief Secretary has said "This is a well-thought out piece of legislation." He introduced it two months ago. He has already withdrawn it twice and in the years ahead Parliament will need to make major changes if this legislation is to be fair and just and to produce the results that the Government want.
  Major injustices have been perpetrated in two other areas this year—the snoopers' clauses and the capital gains tax on compensation stock. The Government, in a vindictive way, have introduced Schedule 6. The clause on compensation stock is unfair and the Government know it, but they have been trying to pretend that they are doing a favour to the owners of shares in industries which are to be nationalised. They are, in fact, doing an injustice and they will damage British industry.
  Many of us are increasingly alarmed about the power of the Trades Union Congress and the deferential attitude adopted by the Government to that body—an attitude which day after day they seem to expect Parliament to adopt.
  Whose view predominated on pay? The TUC's. The TUC was consulted. Parliament was not allowed to discuss the deal until the TUC General Conference had been held to approve it. Who had the first and major word on tax reliefs for individuals? It was not Parliament, but the TUC. Only if a deal could be done with the TUC were the rest of us to get our reliefs.
  With whom are the Chancellor and the Prime Minister having major discussions about public expenditure? Is that discussion taking place here? No. It is taking place with the TUC. The Cabinet will be allowed to discuss it after

  1353
  the Prime Minister and the Chancellor have found out what the TUC will finally wear. It may be a way of producing a kind of peace to say "We shall not do anything that the TUC will not bless and we shall let it have the last word on any proposals that we put before Parliament", but many of my constituents are not members of the TUC. Only about 40 per cent. of the work force are members of the TUC. Many people resent the fact that the TUC's view on what is best for its members is to predominate. The Government are scared of the TUC. They dare not stand up to it and they have the majority to railroad this legislation through Parliament.
  One point that worries many of us is that the CBI seems to be prepared to give its blessing to agreements and to act as if it had been consulted. We know that if the CBI is called in, it is called in not to be asked, but to be told. However, Lord Watkinson seems to be developing a strong taste for the corporate State. Many of us would urge that he should cast his mind back to the Chequers talks when he left thinking that he had reached an agreement with the Government to which the TUC was also a party, but found out only a short time afterwards that what he thought had been agreed had not been agreed. I warn Lord Watkinson to be careful about giving the CBI's blessing and giving the appearance of the CBI having been consulted when he knows that it has been consulted only about the very fringes and that the real decisions are being taken by the Government and the TUC.
  Another aspect of the Bill that perturbs me—I mentioned this matter on Thursday—is the growing militancy of the Inland Revenue. Many of us see the hands of an ever more vindictive and militant Revenue in pieces of this legislation. When we read speeches in which the Inland Revenue Staff Federation announce that war will be declared on the taxpayer and we see some of the legislation that is coming through, we feel that the Government have lost their grip and are allowing the Inland Revenue Staff Federation and the TUC to have too much sway.
  This is a better Bill than it was, but I hope that the Chief Secretary will not make the mistake of thinking that is a compliment to the Bill. I hope that he will accept from me that a growing num-
  1354
  ber of people hope that in drawing up future Finance Bills the Government will start to consider what is best for the nation, not what the Inland Revenue Staff Federation and the TUC will accept.
  6.46 p.m.
  Mr. David Howell: There is one sense in which this Bill is not typical of Socialist financial legislation. It is that hitherto, in the last two and a half years, we have never succeeded in completing the Committee and Report stages of any Financial Bill without the whole thing being overwhelmed by yet another Government U-turn on economic policy, another statement in the House of Commons by the Chancellor and, in one instance, the beginnings of yet another Bill. Admittedly, this time it is a damned close run thing. Within a few days, or hours even, we shall see the next U-turn. That we have arrived at Third Reading without, for once, the whole thing being overturned by a complete reversal of policy is, I suppose, a small mercy, for which we should be grateful.
  This constant overlapping over the last few years, as the Labour Government scramble to undo the effects of proposals of one Budget and one Bill in the next Bill, has placed a colossal load on those concerned with financial legislation. It has meant that Opposition Members on the Finance Bill Committee—they make a formidable debating cadre—have been in almost continuous session. Indeed, they have had to adopt the motto of the old Windmill Theatre "We never closed". That is the only way in which the Bill has been different. For the rest, it has been familiar to those of us who have participated in Finance Bill Committee proceedings.
  This Bill has had the two main features of other Finance Bills from this present stable. The first is the feature of backtracking on every front, a few weeks out from the Budget, on some of the most rumbustiously proposed plans and suggestions in the Bill. The second is the gross overload of the whole Bill, so that it creaks and groans its way through Committee, unable to bear the enormous legislative weight placed upon it. I want to deal with those two features which are so familiar to those of us who have served with this Government on Finance Bill Committees.

  1355
  First, there is the overload on the whole legislative machine. When we have raised this matter—my hon. Friends have rightly raised it again this afternoon—the Chief Secretary and other Ministers have been apt to take upon themselves the lofty tone "It is a valid point, but nothing to do with the Bill. We shall need to look at the whole procedure.", and so on.
  I am not sure that I accept that. There may well be broader arguments for changing the procedures by which we handle Finance Bills. But there is a narrower, more precise and immediate argument for changing the way in which this Finance Bill has created so many difficulties for the Committee and the House. That argument can be dealt with here and now.
  My hon. Friend the Member for Blaby (Mr. Lawson) pointed out the way in which the Government have begun to use what he called the built-in guillotine in the Finance Bill—the fact that it has to be got through by 5th August because of the Provisional Collection of Taxes Act—as an opportunity for throwing into the Bill as it rolls by any difficult propositions and plans for legislation which happen to be to hand. For example, Schedule 6 should never have been in a Finance Bill at all. It should not have been loaded on and thereby given the benefit of being rushed through, with Treasury Ministers confident that it would never have detailed scrutiny, that everything would be all right, and it would be hurried through without any problems.
  Much the same sort of argument applies to Chapter II, to which most of my hon. Friends have referred again today. Without doubt, if the Government want to set about the business of taxing fringe benefits and perks, as, perhaps they do, the best way to go about it is through sensible and full debate, with, ideally perhaps, a Green Paper beforehand, so that we could look at some of the snags. Instead of that, they have shovelled the whole thing into the Finance Bill, hoping that it can be pushed through by 5th August, with all the pressures on both this and the other House, and hoping also, no doubt, that nothing awful will be noticed.
  1356
  If that is the spirit of the present Government's approach, I can only say that it is extremely damaging. If things go on as they are, we shall be driven to the point where the Government will start popping nationalisation measures into the Finance Bill, too. In fact, they have come precious near to it in Clause 49, anyway. I do not know why they bother with all the agony and angst of guillotine motions when they could put the nationalisation of the shipbuilding and aircraft industries into the Finance Bill and have it rushed through by 5th August. That may be thought a parody of events, but it is a likely development if we continue to have this abuse of the Finance Bill and the insertion of measures which have nothing to do with it.
  There was another description of this practice in The Guardian, which warned against the dangers of using the Finance Bill as a Christmas tree on which to hang any little "goodie"—or "baddie" is probably a better description—which the Government wish to push through. This is a thoroughly unhealthy development, and I am glad to see that their Lordships have been looking at it very much askance. There is no doubt that it is an abuse of the Finance Bill procedure as we have known it over the years.
  Naively, as it turned out, we on this side hoped that Ministers had learned something from the capital transfer tax legislation—a classic example of trying to cram enormous tax changes into a rushed procedure which had to be completed in a given number of months. But they did not learn. They pushed it through. The result was that 31 clauses then, I think, became 43 clauses in the present Bill, and, on that rate of growth, no doubt, there will be 50, 60 and 70 clauses in the years to come.
  All this creates a vast amount of work and vast complications, with grotesque difficulties for business and everyone else, and all because the Government persist in using the Finance Bill procedure, with the Provisional Collection of Taxes Act guillotine built into it, to cram in major reforms which should never be put into a Finance Bill.
  There is a serious case now for the present Government not only to review, with the co-operation of the Opposition,

  1357
  the whole process by which we handle financial legislation but also, in the shorter term, to get back to the habit of using the Finance Bill for tax regulation, tax adjustment and other such matters, and using a different Bill for major changes in the administration of taxes and other constitutional issues only dimly related to tax matters.
  That would be no new procedure. It would do no more than go back to the old procedure which was familiar in the House at one time. Let me remind the Chief Secretary of what used to happen. Before the First World War, there was the practice of having both Finance Bills and Revenue Bills. In 1913 and 1914 this was introduced, and its introduction at that time was merely going back to a practice which had been familiar many years before. On 22nd April 1913, Mr. Lloyd George said in the Budget debate:
  "We have therefore decided this year to recur to a practice, which was only abandoned in view of the controversy between the two Houses, of having two Bills. One will be a Bill dealing with the taxes which we propose, and the other will be a Bill dealing with all the amendments to the law which the Government propose, or which any Members of the House propose."—[Official Report, 22nd April 1913; Vol. 52, c. 279.]
  He then went on to review the divisions between the two types of legislation.
  What was in Lloyd George's mind was that one type of Bill would be treated very narrowly as a Money Bill, a Bill far narrower than the sort of Bills which we now see, certainly from this Government, which would be governed by the Provisional Collection of Taxes Act timetable. The other would deal with fundamental matters affecting people's rights, the administration of the tax system and other financial matters, which could be dealt with in a less rushed and more civilised fashion.
  I believe that to be the right approach, and the Government should have adopted it. We do not need elaborate Select Committees and more reports from the Procedure Committee to take us back to that practice. All we need is a bit of common sense on the part of the Government in handling their legislation and a readiness not to abuse the Finance Bill procedure any further. If that is done, at least we shall have a slightly less neurotic procedure for dealing with these
  1358
  colossal blocks of legislation, and slightly less chance of seeing whole Chapters of the Finance Bill wheeled in, with great clarion calls to the Left about the wonderful benefits there will be through squeezing the rich, only to be wheeled out again a few weeks later.
  The great wheeling in and wheeling out has been done with Chapter II of the present Bill. Why has there been this great back-tracking? Several of my hon. Friends have suggested reasons, and I think that they all have some validity. I do not believe that it was just the complexity which the Government found when they began to hear from my hon. Friends in Committee and from others outside about the appalling consequences of what they were doing. It was more than that. I believe that it was the discovery of the huge numbers of people who would be caught by their proposed legislation, and I do not mean just those in trade unions who, of course, were quick enough to express their views, as my hon. Friend the Member for St. Ives (Mr. Nott) reminded us.
  I believe that the principal reason was the realisation that the old £5,000 limit, which sounded like a figure relating to the world of senior management, in fact affected an enormous proportion of the working population. Today, probably about 26 per cent. of the working population have a gross income plus benefits of various kinds which put them in the £5,000 range. This means that we are dealing with the weekly or monthly pay packets of the entire skilled work force the semi-skilled, the junior executives, middle-rank professionals and, of course, senior management and directors—although, of course, that applies to by no means all directors—in the United Kingdom. We are dealing with vast numbers, not with a tiny group who could be hunted down but with an enormous number of people who would be directly affected.
  As my hon. Friend the Member for St. Ives said, one turning point came when the hon. Member for Ealing, Southall (Mr. Bidwell) came in to announce that the shop stewards at Heathrow agreed with the idea in principle but did not like the way it affected them. Another equally telling moment came on Report when the hon. Member for Birmingham, Selly Oak (Mr. Litterick) intervened during the

  1359
  speech of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) to express amazement and bewilderment—this is reported in column 707 of Hansard—at the idea that skilled workers were earning anything like £100 a week. He found it almost impossible to accept that that was the truth.
  The hon. Gentleman's incredulity was, I think, understandable because minds get stuck with certain figures and in certain ruts; the mental adjustment simply had not been made either by Ministers or by enthusiastic supporters of the attack on fringe benefits, and they had not appreciated the change in differentials, in income distribution and the arithmetic of money values which had taken place over the past two years or so.
  The basic reason for the back-tracking was that the Government found that they were legislating not for a minority but for something approaching a majority in the skilled and semi-skilled areas, and a majority who, quite properly, intend to hang on to their fringe benefits. If anyone is in doubt about that, he should read the words of Joe Gormley, for whom I have a high respect, who has had no reluctance in stating strongly that he believes in the fringe benefit approach and intends there to be more fringe benefits for his members.
  According to the Sun newspaper on 6th July, he is reported as saying that miners are well on the way to
  "a standard of living never before dreamed of…this would come from improved productivity bonuses and the increasing value of fringe benefits like concessionary coal, subsidies, subsidised transport, and other things."
  He went on to say that
  "Huge rises in basic wages only fuelled inflation and were self-defeating."
  and elsewhere he pointed out with equal accuracy that the virtue of fringe benefits was that as the value of money went down the value of benefits went up, and they were not taxable.
  There is the voice of realism, and it is a pity that that voice did not penetrate to the Government earlier in the year. Had it done so, it would have saved us a great deal of trouble. We should have been saved a lot of sweat and bother,
  1360
  and the Chief Secretary would have had more time with his expenditure cuts and less time to salvage the wreckage of the Finance Bill, and particularly Chapter II. That was the back-tracking feature of the Bill and most of us realised the moment the Chancellor stood up full of vigour and confidence that it was inevitable that he would back away, or ask his Ministers to do the dirty work for him, before a few weeks were out.
  Now we come to the point where we normally expect the next U-turn in Government policy, usually at the end of July and the ending of the Finance Bill. The next U-turn will be on public expenditure. As my hon. Friend the Member for St. Ives said, the very matters about which we have been castigated and the proposals that have been denounced as unthinkable will become thinkable and the Chancellor will be arguing that this is his essential next move. Not everyone may like the Chancellor all that much. He may not be the best Chancellor that we have had, as some argue, but if there is a man in this Administration who is suitable to shout simultaneously "Hard Astern" and "Forward" he is the man to do it, and no doubt he will perform in his usual way when he comes to utter the simultaneous calls to go forward and back. That is the U-turn of the present time.
  The next U-turn will be to do with management and realising that management matters. It is a U-turn that many hon. Members have not found it easy to make, but it will come next, and then we shall have the necessary changes brought in by this Government, if they are still there, to restore differentials and incentives in the economy.
  As for public expenditure, the best thing that one can say is that "public expenditure cannot continue to grow at its present pace without imposing high levels of borrowing and unacceptably large increases in taxation". The Chief Secretary will recognise those words, because they are his. He uttered them in a speech on Friday, and he was kind enough to send me a copy. I read the speech with great interest. It contained many sound points, and I hope that the right hon. Gentleman will send copies of his speech to his hon. Friends, because it says some things that have needed to be said—and, indeed, have been said by

  1361
  my hon. Friends for a long time—by Labour Ministers.
  My only criticism of the right hon. Gentleman's speech on Friday is that it was a shade defensive. I do not think that he need be so defensive about cutting public spending. The argument of his hon. Friends below the Gangway is that it is a negative thing, but it is not. It is a positive thing, because the cutting of public spending can make a major contribution to increasing social justice, welfare and prosperity in this country. I think that the right hon. Gentleman would probably do even better—he is doing very well so far—if he put the point that profits are the engine of social progress with some vigour and enthusiasm to his hon. Friends below the Gangway.
  There is something deeply negative about the present pattern of expenditure and the present levels of taxation. The Chief Secretary gave examples, and these are examples of something that is deeply negative in the present pattern of expenditure. It must be going backwards rather than forwards when we learn that the Civil Service grew by 48,000 between June 1974 and March 1976. It must be going backwards when we learn that local authority manpower increased by more than 110,000 in the same period. This is not carrying social progress forward, but taking it backwards. It must be going backwards and not forwards when we learn—the Chief Secretary did not say this, but it is a fact—that both in the Inland Revenue and in the Customs and Excise there has been an increase of 5,000 in the last 18 months.
  That is not bringing greater benefits to the working people of this country. And it cannot be right—again I am going with the Chief Secretary—that 57 per cent. of housing costs come from public expenditure and the public budget. Reducing that would greatly advance housing conditions in this country, and heaven knows, as my hon. Friend the Member for St. Ives said, what the Secretary of State for the Environment thinks he is fighting about when he tries to resist cuts in the overall environment expenditure, which includes the housing budget. If we are looking for better housing, better conditions, better schools and a better environment generally, the fact is—and the Chief Secretary should have no hesitation about saying this to
  1362
  his hon. Friends—that that will be found by cutting spending and reordering the priorities with better spending, more efficient spending and higher profits in the private sector. It will come from a stronger private sector with a livelier and better rewarded management cadre to invest, innovate and create the prosperity from which those things should be financed.
  The Chief Secretary has plenty to apologise for about this Finance Bill, and so has his master the Chancellor of the Exchequer, but on the matter of public expenditure he should carry on with the kind of speech that he made, and not apologise, because he is making a case for a better deal for working people in this country rather than for the ever-growing burdens of taxation and lower standard social and public services that they face now.
  The apology for this Finance Bill should go mainly to the higher-paid and middle management levels, because they are the people whom this Bill forgot, just as they were forgotten in the White Paper "The Attack on Inflation". The White Paper is full of assertions that productive enterprise must expand and that resources must be channelled from here to there, but there is no mention of its being done by human hand atnd brain. There is no understanding that it is management, the technicians and the skilled and semi-skilled who will act to create the greater wealth in this country. There is no recognition of that in this Finance Bill, except to give them a few more kicks in the teeth in Chapter II and elsewhere.
  This is the Finance Bill that forgot the people. It forgot the management, and it forgot the workers. It is another inglorious chapter in Socialist legislation. I have no doubt that Ministers would like to forget it, but the country will not forget it, and we will not let it forget.
  7.8 p.m.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): Almost everything has been said in this debate, and I shall not take too long.
  The hon. Member for St. Ives (Mr. Mott) began by paying a compliment to my hon. Friend the Finance Secretary and myself by saying that we were both genial, but perhaps incompetent. I accept the former, but repudiate the latter. Having

  1363
  listened to the hon. Member for Guildford (Mr. Howell), I would say that nobody could ever accuse him of geniality, at least not when he is delivering a speech in the House. I shall not accuse him of that, nor would I be so rude as to accuse him of incompetence—
  Mr. Nott: He is not a Minister.
  Mr. Barnett: He can be incompetent even if he is not a Minister.
  As the hon. Member for St. Ives went on to say, we have had long and arduous debates and I am obliged to the Opposition for their help and co-operation in putting the Bill on the statute book. I do not know why they should apologise because they heiped to improve the Bill. After all, I thought that that was the function of the House of Commons. I am grateful to them for their help, even when it has been inadvertent.
  My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) and a number of other hon. Members raised the important question of the method by which we handle our Finance Bill legislation and indeed all our legislation. My hon. Friend made the perfectly valid point that it is an appalling misuse of Government Back Benchers to insist that they should never speak in Committee because that simply takes up more time.
  It is not only under this Government that that happens. I remember debates on the Finance Bills during the period 1970–74, which included the 1972 Finance Bill, on which there was some tacking similar to Schedule 6 in this Bill and which was different from normal Finance Bill legislation. [An HON. MEMBER: "It was not a Finance Bill."' It does not matter what one calls it. The House of Lords could not amend it. My point is that hon. Members have waxed eloquent about all kinds of measures in debates on this Bill but were not such frequent speakers on the Finance Bills between 1970 and 1974.
  Mr. Peter Rees: They were better Bills.
  Mr. Barnett: Better Bills? On the 1970 Finance Bill, my hon. Friend the Financial Secretary and I put down a thousand amendments. Yet Tory Members were very quiet. I do not blame them.
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  There is a serious point here about how we handle our legislation. My hon. Friend the Member for Motherwell and Wishaw is absolutely right. Although this is not the time to discuss how we might better handle our legislation, certainly no one could pretend that this is the best way. I hope that the Select Committee on Procedure will be able to consider this matter.
  Whatever view one takes of the search and entry powers in Schedule 6, most democratic countries will find it astonishing that the Opposition have been so eloquent in trying to deny this provision entry to the statute book. Many democratic countries and most people outside the House will find astonishing the two different voices with which the Opposition have spoken about offences against social security and offences against taxation, particularly when we are talking generally in Schedule 6 about suspicion of criminal offences namely, tax evasion—which mainly concern much larger sums of money than any offences normally committed under social security legislation.
  I therefore find such speeches remarkable to say the least, particularly as we have provided many more safeguards in the search and entry powers in this legislation than apply to virtually any other search and entry legislation on our statute book. We therefore have no need to apologise for those powers.
  We have had long and arduous debates on the Bill. I understand the problem of the hon. Member for St. Ives today. This was made crystal clear for us by the hon. Member for Blaby (Mr. Lawson) in an unusually laboured and prepared speech when he spelled out for his Front Bench how they must avoid at all costs pinning themselves to any incomes policy. Because the hon. Member for St. Ives could not do that, he had to have a bit of fun and complain about the conditional tax reliefs and the rest. We understand that.
  I recognise that the hon. Member and the Opposition Front Bench have some problems on incomes policy. That is why he could not spell out for us the policies that the Opposition have. On the one hand he has the hon. Member for Blaby and the right hon. Member for Leeds, North-East (Sir K. Joseph) and he and

  1365
  his other Front Bench colleagues still vaguely have to pay a little regard to the right hon. Member for Sidcup (Mr. Heath). We understand those little local difficulties. That is why they cannot make any constructive comments on this Bill or any other.
  Meanwhile, however, the Budget and this Bill which forms the legislative part of the Budget, as well as previous Finance Bills and Budgets and others to come during this Parliament, will help to transform the economic and industrial fortunes of this country. It is in that hope that I commend it to the House.
  Question put and agreed to.
  Bill accordingly read the Third time and passed.

  EUROPEAN COMMUNITY (DRAFT BUDGET)
  [Commission documents: Revised triennial financial estimates, 1976–77–78 (R/373/76), Community's budgetary problems, Commission communication (R/672/76), Proposed transfer of appropriations, EAGGF Guarantee section, 1975 (R/794/76), Rate of increase in non-compulsory expenditure, 1977 (R/1117/76), Audit Board Report, 1973 (R/1370/75), Audit Board Report, 1974 (R/118/76), Discharge to Commission in respect of 1973 budgets, draft Council Decision (R/1290/76), Discharge to Commission in respect of 1974 budgets, draft Council Decision (R /1291/76).]
  7.15 p.m.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move,
  That this House takes note of Commission Document No. R/1483/76 relating to the EEC 1977 Preliminary Draft Budget.
  I should like to begin by apologising to the House. I hope that it will not be thought any discourtesy if I am not here for the closing speeches of the debate, but I have one or two other important meetings to attend.
  The EEC documents before us today form the usual massive pile. As usual, I should like to express the thanks which I am sure is felt by all Members of the House for the work which the Scrutiny Committee has done in examing these documents and drawing them to the House's attention. In particular, I should like to congratulate it on the speed with which it has examined and reported on the main document before us—the seven-volume 1977 preliminary draft budget, to which Volume 7 provides a useful introduction and summary.
  In my opening remarks, I should like to concentrate on the preliminary draft budget itself, which was the subject of the Committee's 27th Report.
  Before turning to the substance of the budget, I should like to spend a few moments on the question of the timetable. Today is the first time that the House has been able to discuss the preliminary draft budget before its discussion at the first Budget Council, at which the draft budget incorporating the Council's decisions is established. The Budget Council meeting this year is on 22nd July.
  In previous years, the Commission, under the timetable laid down in the Treaty of Rome, has had to submit the

  1367
  preliminary draft budget by 1st September. This year presentation has been brought forward, by informal agreement, to 15th June. The treaty timetable meant that the Scrutiny Committee was unable to examine the preliminary draft budget except during the recess and that the House was unable to debate it before the first Budget Council at the end of September. The position this year is an improvement in that respect, and is in part at least due to a United Kingdom initiative.
  However, the new timetable is not solely designed to benefit us here—it should also have advantages for the Community as a whole in allowing slightly more time for examination of the draft budget by the Council and Assembly in the later stages of the budget procedure. The change in the timetable is on an experimental basis this year. The Community will have to consider at the end of the year whether the advantages outweigh the disadvantages.
  Disadvantages there certainly are. Most obviously, the Commission, and other institutions, now have to draw up their estimates of expenditure much further in advance of the year to which they relate. This is a dilemma to which there is no obvious solution. This year, we should observe how things go and judge whether they are better or worse than before.
  As the Scrutiny Committee recognises, the estimating problems arise particularly on expenditure on agricultural support, which accounts for a large proportion of the budget. The problem is made more acute by the fact that so much agricultural expenditure flows—regrettably—from the excess production of certain commodities, leading to surpluses which have to be bought up and disposed of at EEC expense. Whether, and if so what, surpluses will arise depends on the difference between total EEC production and total consumption for each of the commodities concerned. Quite small changes, due to the weather, for example, can lead to significant deviations from estimates.
  It is also very difficult to forecast the world prices at which surplus production will be able to be exported to other countries. This difficulty exists at whatever time the Budget is drawn up, but the earlier this is done the more uncertain the figures must inevitably be. Under the old
  1368
  budgetary timetable, the size of the grain harvest, for example, for the current year, which to a considerable extent determines expenditure in the coming calendar year, was known when the preliminary draft was drawn up, but this will not be the case under the new timetable.
  Nevertheless, the Commission has improved on last year. Then, it at first took refuge in merely repeating the provision for agricultural expenditure contained in the 1975 budget and did not produce genuine 1976 estimates until immediately before the first meeting of the Budget Council in September. This year, it has provided genuine forecasts of expenditure in 1977 from the outset. The assumptions on which these forecasts have been drawn up are being critically examined in Brussels.
  But, however well the Commission has done its work, it will almost certainly wish to revise the forecast by means of a rectifying letter in September, when production prospects and the other variables will be somewhat clearer. This does not mean that it is any the less important to scrutinse the preliminary estimates now available. Careful examination now will pay dividends when we come to look at the final figures later.
  Indeed, in my view, constant revision and scrutiny of the estimates of agricultural expenditure both before and during the year concerned must play an essential part in the EEC's agricultural policy decisions. As the Scrutniy Committee's report point out, this is particularly important at the time of the annual price review, when the main agricultural policy decisions are taken. I am sure that my right hon. Friend the Minister of Agriculture will be seeking to improve on the present position in this respect.
  I come now to the size of the preliminary draft Budget. As the House is aware, the preliminary draft is essentially the work of the Commission, which puts forward its own estimates of the cost of Community policies, together with estimates from the other institutions.
  This year, its proposals total 9,260 million units of account—£3,858 million—compared with agreed budget provision of 7,637 million units of account in 1976—£3,182 million. This is an increase of about 22 per cent. But it is not really comparing like with like, since

  1369
  the present 1976 total does not take account of the substantial supplementary Budget for 1976 which the Commission has just put forward. The latter amounts to some 632 million units of account, needed mainly to provide for the budgetary consequences of the agricultural prices review in March this year but also for expenditure on food aid and aid to Portugal, offset by gains on exchange. The supplementary has not yet, of course, been approved. It will be deposited in the House as soon as it is available in English. Meanwhile, it is likely to be discussed at the Budget Council on 22nd July. But comparisons with the 1976 position are still not easy, even when the supplementaries are taken into account.
  A major complication, with which I shall deal later, is that the Commission has split the provision in many areas of the budget this year into commitment appropriations which are included in the tions. In the first year the effect of doing this is to reduce the level of payment appropriations which are included in the expenditure total. The budget total will also change in the course of its discussion by both Council and Assembly during the budgetary procedures.
  Mr. Peter Hardy: My right hon. Friend said that the new distinction will make a difference in the first year. Does he agree that that will be an optical illusion in the first year and in the succeeding years, because the commitments of earlier years will be disbursed in the succeeding years and there will be relaively little differnce beween the two figures?
  Mr. Barnett: I know that my hon. Friend understands my point. Previously we had nothing like as large a commitment appropriaion provision. Assuming that the Council and the Assembly agree there is a special commitment appropriation and payment appropriation, that is just one more complicating factor in making a comparison.
  The Commission treats the preliminary draft budget as a forecasting document, and includes all items on which there may be a need for expenditure, even where these are for policies which have not been adopted by the Council. The Scrutiny Committee has expressed con-
  1370
  cern on this score. I would like to reassure the Committee.
  In examining the provision for individual items, a process which comes to a head at the Budget Council, member States take the view, which I hold myself that all items on which there is not Council policy agreement should be deleted, or if agreement is close, that provision should be made in Chapter 100—formerly Chapter 98. The figures now before the House are, therefore, liable to change as a result of Council decisions in establishing the draft budget and thereafter by the Assembly in exercise of its powers to modify and amend the draft budget within the so-called maximum rate provisions.
  It may help the House if I indicate the main topics which I think will be discussed at the Budget Council, and give the House some indication of the Government's attitude to the whole exercise and to the main elements within it. I shall not be able to give the House a final view until I have seen the report from the Committee of Permanent Representatives which has been discussing the preliminary draft budget in the last day or so.
  First, I should like to deal with the provisions in the budget, and then the presentational issues. Inevitably, our general approach, in line with our approach to domestic public expenditure, will be to seek to restrict increases in expenditure as far as possible and to ensure that provision in the budget represents a realistic assessment of the cost of carrying out agreed Community policies. Indeed, with two exceptions, that is the main rôle of the Budget Council, in the exceptional areas—the Social Fund and food aid—although the policies are framed by other specialist Ministers, the volume of provision is determined by the Budget Council.
  As usual, a large proportion of the budget is accounted for by estimated expenditure on agricultural support, that is to say, under the guarantee section of the EAGGF. The reason for this preponderance of agricultural expenditure is well known. It is the one area in which the EEC has taken over virtually the whole of expenditure which would otherwise be borne by the member States. Only in the case of those few commodities not covered by the common agricultural policy do

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  member States spend anything on agricultural support.
  What I have said explains the present position. It does not imply that we are happy either with the total sum devoted to expenditure on agricultural guarantees, or with the balance between agricultural and other expenditure within the budget. But neither of these issues can be pursued to any great extent by the Budget Council. Its task will be to ensure that the budgetary provisions properly reflect the cost of carrying out existing agricultural policy, so far as this can be forecast.
  In addition to this, we shall, however, want to question the presentational innovations of including the appropriations needed because of the "double exchange rate effect" in a chapter outside the FEOGA titles and thus hiding part of the cost of agricultural expenditure.
  We shall also want to challenge the assumptions which the Commission have made in forecasting monetary compensation amounts—a devaluation of the represenative or "green" rate. In practice, these must remain a matter for member States' decisions.
  Finally, we object, as do most member States, to the inclusion in Chapter 100 of appropriations for the 1977 CAP price fixing. We, and other member States, have previously emphasised that the provision of such a "contingency reserve" is unacceptable.
  The other main expenditure items are less complicated. On staff, our aim will be to limit the increase in staff numbers to those which are strictly necessary.
  In the case of the Regional Development Fund, the main question will be whether the Commission's proposed payment appropriations—500 mua—are realistic, given the slow speed at which claims are coming in so far.
  On the Social Fund, in the current economic situation I believe that the Commission's proposal of 619 mua for commitment appropriations is probably of the right order of magnitude.
  I also expect to press at the Budget Council for the inclusion of provision for aid to non-associates as a means of impressing on other member States the
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  urgency with which we believe a decision in this area is needed.
  I turn now to presentational issues. A major issue in this year's budget discussions will be the wider use of separate commitment and payment appropriations. The system is already used for the Regional Development Fund and for research and investment, where it was introduced for expenditure under programmes covering several years.
  The Commission has proposed that this system should in future be used in all parts of the budget where expenditure occurs under programmes extending over more than one year.
  Annex C of the explanatory memorandum on the preliminary draft budget, which all hon. Members, I know will have read, sets out the difference between commitment and payment appropriations in detail. At present, the position is that the Commission may enter into an obligation to spend money—a commitment in Community jargon—only within the amount of substantive provision in the budget. Once committed, the money may not be spent for any other purpose and must be kept available until the bill is presented for payment.
  The disadvantage of this system is that it involves substantial carry-forwards as money which has been committed is carried-forward until payments fall due. These carry-forwards and the need to provide more money in the budget than will be used in the financial year create difficulties for accounting and financial control. It also means that the budget does not give a clear indication of actual expenditure during the year.
  The effect of the change proposed would be that the payment appropriations would make provision only for expenditure expected to occur in the financial year. This would then be more similar to the provision made in Votes in this country.
  The commitment appropriation would provide the ceiling within which the Commission would be able to commit money for planned future expenditure, a funtion broadly comparable with the United Kingdom expenditure programme. As yet no agreement has been reached by the Council on this issue.
  The proposal clearly has advantages, but it is an area in which the precise

  1373
  rules are very important. I shall want to ensure that the system is applied only in those areas—multi-annual programmes—where it is appropriate, and that it is applied in a way that will ensure that the maxima set by commitment appropriations cannot build up into excessive expenditure totals when the time comes to make payment.
  It may also be worth mentioning that the introduction of commitments and payments creates problems in calculating the Assembly's margin under the maximum rate provisions. The rate established for 1977 in accordance with the treaty provisions is set out in another of the documents which we are debating tonight—R/1117/76. There is no argument about this percentage which is calculated on the basis of macro-economic statistics. The base—non-obligatory expenditure in the previous year—to which it should be applied is less clear.
  There is a continuing problem over the classification of the Regional Development Fund, and this year there is the additional problem stemming from the introduction of commitment and payment appropriations. It is not yet clear how this will finally be resolved.
  However, on the basis of comparison adopted in the preliminary draft budget, and assuming the Regional Development Fund to be obligatory, the Assembly's margin will be at least 100 million units of account.
  Finally, may I say that I have intentionally concentrated on the preliminary draft budget on which I am grateful for the Scrutiny Committee's Report and on which I would welcome the views of other Members. I shall certainly take account of these in deciding on the United Kingdom line at the Budget Council.
  There are, of course, other documents before us tonight on finance and Budget matters. If there are any questions on these, my hon. Friend the Financial Secretary will be happy to deal with them later in the debate.
  7.34 p.m.
  Mr. Michael Shaw: We must all be grateful to the Chief Secretary. After having had a very long and, from the appearance of it, a rather gruelling day, to be plunged into the debate on the Common Market is going it a bit. We
  1374
  welcome the very important, full statement on the Government's attitude and their approach to the preliminary draft budget. The Chief Secretary has hit on the main points that will concern most of us in considering the documents.
  The first point that we must appreciate is the change in the timetable for the production of the preliminary draft budget because this year we are working under a completely new timetable. We ought to be very grateful to the Commission and particularly to Mr. Cheysson for the tremendous amount of work that has gone into producing that document at this early stage. The timetable now enables us to consider the preliminary draft before the Summer Recess. This means that both the Council and the European Parliament can consider it more thoroughly. My hope is that they will both consider it without the last-minute frenzy that was such a feature of our autumn procedures in the past. The benefit of this extra time extends to the House, to the other place and to the Committees that have already taken advantage of its early production.
  The advantage is in having a first discussion of this sort. While I do not believe that we shall get very far by considering the details of the document, at least we shall be able, through discussion, to discover what our approach to the budget is to be in a particular year. That is how we should best look at the document.
  We in the European Parliament have had our preliminary discussion, and our respresentatives, of whom I am happy to be one, under the leadership of our President. Mr. Spenale, will be meeting the Council on Thursday to give our initial reactions. I believe that such a meeting will be of considerable value because the problems and policies connected with the budget can then be freely discussed between the two sides before the Council settles down to its own detailed consideration of the preliminary draft budget.
  A growing practice of consultation between the Council and the Parliament is essential to the healthy growth of the Parliament. This budget has already been described elsewhere as a standstill budget—indeed, one might call it almost a steady-as-you-go budget, if that phrase does not ring too embarrassingly in the Prime Minister's ears. However, obviously it is right that there should be an ele-

  1375
  ment of standstill at present, in view of the background to the national economic situation throughout Europe. In spite of that, this budget should not be compared with a national budget. At 9,260 million units of account it will be under 2 per cent. of the aggregate for the individual national budget. It is far too small a sum to affect the economy of the Community, whether we raise it or whether we reduce it. Our considerations, therefore, of the budget must lie with the policies represented by the items of expenditure set out in the budget, with the presentation and with the layout of the budget, which has changed considerably in this year, as the Chief Secretary has said.
  Finally, we should not neglect the question of control over the budget expenditure and the relationship of that control to the budget. Referring briefly to the policies, the expenditure that appears in the budget does not necessarily represent additional expense to the Community. It would be wrong to look at the items contained in the budget and to ask "Why has this gone up? That will mean that we have to find more money.", and so on.
  In projects such as those connected with the aircraft industry, various forms of research and agriculture, expenditure on a Community basis may wholly or in part take the place of national expenditure. Therefore, one will get a true picture only by considering national and Community expenses as a whole. I hope, and indeed expect, to see such a pattern grow, showing, as it will, the benefits to be derived from working together in Europe.
  I also welcome the Community proposal to step up its action in connection with the problems of young people. It is a great pity that some national Governments appear to be so slow in taking up the sums committed. It is a weakness in the operation of the Social Fund that the implementation of the schemes, with demands for money as they are implemented, seems to take so much time.
  As the Chief Secretary said, by far the largest sector of expenditure continues to be agriculture. This expenditure can rarely be forecast accurately. The right hon. Gentleman mentioned the question of the supplementary budget. It is not
  1376
  true to say that most of that budget is for agriculture. In fact, 717 mua appear in the supplementary budget but they are offset by other savings, reducing the supplementary to 632 mua. Therefore, coming forward seven months after the original budget, there is little use in trying to consider accurately the comparison between the previous year and this year—and who can tell at this juncture whether there will be a need for supplementary budgets to the 1977 budget?
  It is important, particularly at the start of our annual budgetary process, to spell out our attitude to expenditure in the agricultural sector. We must ensure, not only that the policies and expenditure are necessary and effective but that we in the European Parliament have a greater control over the expenditure. I am glad that the hon. Member for West Lothian (Mr. Dalyell) is present because he and I serve on the new Sub-Committee of Control. We must be on our guard to ensure that the agricultural policy does not become a policy to preserve a pattern of life and a pattern of production against the pressures for change and modernisation which bear on the rest of our society. Equally, both in the interests of the public in general and of those engaged in agriculture, in particular, we must ensure a proper reward for the efficient producer and a proper incentive for the producer who is prepared to become, and is capable of becoming, efficient.
  We have the new Sub-Committee on Control which we hope will eventually, with much striving, turn into a form of Public Accounts Committee. We urgently need, if we are to pursue that task, the rapid establishment of the Court of Auditors. I congratulate the Government on the speed with which they have acted in ratifying the treaty change. I merely ask them to use their best offices to try to persuade other Governments to speed up their processes, because from what I have heard it seems that the Court of Auditors will not be set up before about the middle of next year, and that is far too late.
  I wish to say a few words about the proposed new financial regulation. The House many not realise it, but this budget is framed largely on the assumption that the change in the financial regulations—which is another massive document—

  1377
  will be approved in time for the passing of the budget. It would be nice if the Council could adopt the new financial regulation before the end of the year. However, I am aware of the problems which that would entail. Therefore, should that prove impossible, I hope that the Council will be able to accept straightaway the changes in part, leaving the rest to be adopted thereafter as soon as possible. In particular, it would be helpful if the concept of "commitment" and "payment" appropriations could be adopted. There may be difficulties, but this concept will make the presentation of the budget much clearer and resolve the totally unsatisfactory system of automatic carry-forwards which has existed up to now and which leads to so much expenditure being outside the control of Parliament.
  I have expressed my thanks to the Commission for the early production of the preliminary draft budget. It is no mean achievement and the way in which, in particular, Volume 7 has been drawn up, with the clear explanatory statements made therein, is a model not only for us in Europe but for other national Governments in presenting their budgets.
  While each year has seen an advance in the presentation of the budget, in the consultation between Council and Parliament, and now in the new financial regulations, I am bound to end on this note. The next big advance in our dealing with and authority over the budget for us in the European Parliament must await the holding of the direct elections and an "own resources" budget. Subject to that, this early look at the preliminary budget to enable the attitude of this Parliament and of the European Parliament to be expressed is a step in the right direction.
  7.48 p.m.
  Mr. John Roper: Like the hon. Member for Scarborough (Mr. Shaw), I welcome the fact that the budget has been brought forward this year, and I hope that my right hon. Friends, when they attend the appropriate Council meetings, will ensure that the experimental procedure adopted this year will be formalised by the passage of the appropriate regulation so that we shall have, as of right, this opportunity every year.
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  This budget is considerably clearer than some that we have had from the Commission, and we should pay tribute to the efforts of Commissioner Cheysson, who has been a great success in the post. I hope—it may be a vain hope—that this will not be the last full budget which he presents for the Commission. I hope that when the new Commission is drawn up the proposal included in the British Government's White Paper of December 1975—that there should be a financial commissioner—will be examined again, because, in addition to the Court of Auditors and the Sub-Committee of the Budget Committee of the European Parliament, this is a part of the control mechanism which is necessary if there is to be adequate financial control over the activities of the Community.
  I shall also mention one additional control which on occasion has been of value to the Scrutiny Committee in our work over the past year. More frequently than in the past the Commission's proposals have been attached to a memorandum setting out the financial implications. The term of art in this respect is fiche financière. It is important that this House when receiving copies of Community proposals should obtain a document setting out the financial implications so that in considering proposals in that year as well as at the time of the Budget we are aware of those implications in relation to the various matters handled in the Community.
  There was discussion with my right hon. Friend the Chief Secretary last year, and indeed again this year, as to what exactly the budget is and what is the function of the Budget Council. I still maintain that the budget is more than a simple compilation of decisions taken by other Ministers during the year. I do not wish to belabour the points made in last year's debate, but the budget represents more than a mere totting up and putting together of a number of decisions. I shall try to explain why I think this is the case.
  First, although the Council which makes these decisions is described as a Council of Budget Ministers and is attended by Ministers from member States, such as my right hon. Friend the Chief Secretary, and other Ministers with comparable responsibility in other countries, the Council of Ministers is indivisible. There is no difference between

  1379
  the Council of Budget Ministers, the Council of Foreign Ministers and the Council of Agriculture Ministers. The Council meets as a Council of Ministers, although on occasion Ministers attend who have special expertise. Therefore, it is a simplification to suggest that the Council of Ministers exists merely to tot up sums at the end of the day.
  Secondly, Budget Ministers can and do change Commission proposals. If they did not have that power, they would not be a Budget Council but would merely be a set of officials sitting around a table totting up sums. Indeed, my right hon. Friend the Chief Secretary said that he intended to try to change some of the proposals put forward in the budget, and in particular he said that he intended to ensure that aid to non-associates is implemented and perhaps increased.
  Thirdly, there are some specific items explicitly controlled by the Budget Council. When the Chief Secretary came before the Scrutiny Committee on 5th July this year, he agreed that the Budget Council controlled the size of the Social Fund. That is an important aspect of the Community's work. If the Budget Council can control areas of the Social Fund, why is it not appropriate for it to consider other parts of the Community's expenditure in the same way?
  According to Press reports at the time of the Budget Council's meeting last September, the Chairman of the Council of Ministers was prepared to block the budget if the agricultural figures were not lower, thereby implying that the Budget Council can restrict overspending by Agriculture Ministers.
  It seems to me that the Budget Council has a responsibility and a role to help to direct policy. The Chief Secretary said that in the past the European Commission's budget was not a policy-making document. In one sense that could be said to be technically true, but in some ways this document is not altogether very far different from the British Government's White Paper on public expenditure. One could say that that was not a policy-making document because it merely summed up decisions taken elsewhere. None the less, when a public expenditure White Paper is published, or when such a document is revised, it is the result of some fairly difficult discussions within the Cabinet. In the same way the
  1380
  Budget Council acts in a similar fashion because it determines allocations to different parts of the Community's development which in turn influence the policy and direction of the Community.
  Therefore, we want more of an overview by the Budget Council, taking its role as the Treasury of the Community in allocating resources as effectively and efficiently as possible. That is the place at which some of the policy choices should be made apparent. If at the end of the day Budget Ministers say "This matter is too difficult for us", they should make the matter explicit and refer it to a meeting of the Council of Ministers. But somewhere priorities should be arrived at and, if not carried out in the Budget Council, they should be determined somewhere else.
  One of the unsatisfactory aspects of the way in which the Community deals with agriculture is that it appears to leave it to the Agriculture Ministers to discuss among themselves the amount that should be spent on agriculture. I believe that within the Community, if not within this country, agriculture is too important to be left to Ministers of Agriculture, but to the outsider that appears to be the way in which the matter is dealt with in the Community. I see that the Financial Secretary to the Treasury is looking a little quizzical at that remark. I am sure that he will deal with this topic when he replies.
  Within the United Kingdom the Minister of Agriculture puts his point of view in the Cabinet, in which of course there are other Ministers representing other interests. Unlike this situation, the Community Agriculture Ministers get together and argue what is best for agriculture within the Community without the presence of other departmental Ministers. It appears that the only place in which priorities can be worked out is within the Budget Council in attempting to deal with priorities across the board within the whole of the Community activities. In the same way as within the United Kingdom the Treasury or the Chief Secretary tell the various Departments that expenditure cannot be allocated, similarly within the Community's Budget Council attempts are made to ensure proper priorities.
  I turn to the question of the Assembly's margin and proportion of increase. The

  1381
  Chief Secretary chose his words with great care when he said that the Assembly would have a margin of at least 100 mua. On one interpretation that would amount to about 8·65 per cent. of this year's budget.
  There is an alternative interpretation, which I understand from the Chairman of the Budget Committee of the European Assembly is his view, namely that the Budget Committee will take the view that it is entitled to an increase of 200 mua—that is the full increase of 17·3 per cent.—since the Commission has merely recommended an increase of 6·3 per cent. which is less than half of the maximum amount laid down. I realise that this is an extremely technical point but I would be grateful if my hon. Friend could tell us whether it is the Government's view that the Parliament's margin of manoeuvre is 100 mua or whether, as is thought by some, it is 200 mua.
  Next I would like to say a word about the distinction being made over a wider range of the activities of the Community this year between appropriations and commitments. The appropriations are adopted in the draft budget at the request or suggestion of the European Parliament. This may make the document more transparent, more explicit. We may have a better understanding of what is going on. As the hon. Member for Scarborough said, this may prevent us from having to deal with the difficulty of the carryovers which are extremely unsatisfactory and to which the Scrutiny Committee has drawn attention.
  As I tried to suggest in an intervention earlier there will be a certain optical illusion. In the coming year, when we first introduce the system, we shall appear to be approving for payment a much lower figure. I suspect that in subsequent years, when we have got the carry overs in their new form, they will become matters to be approved for payment and the budget will go up again to its old level. We may have a situation this year, in which, while it appears to go down, this will be a once-and-for-all effect, and we should not be surprised if next year there is a jump upwards. When people complain next year because of the jump they will have to go back and look at what has been said this year to see that this is merely an optical illusion resulting from the new budgetary technique.
  1382
  There is a possible problem which should be avoided at all costs. Let us suppose that on the basis of past experience of the rate at which requests are made for expenditure from one of the funds, say the Regional Fund, the approval for payment is only half or three-quarters of the commitment for the year. Is there not a danger that the officials working in the Commission may feel that this is the true ceiling and if applications come in which take the total expenditure towards the amount which has been approved for payment in 1977—although they will still be some way from the amount which has been committed for 1977—they will say "No, we cannot take any more applications"? Although in one sense this is a more realistic system, we must be careful that it does not inhibit Community expenditure, particularly if it gets close to these limits, as will be the case. We must make it clear that these payment appropriations are figures which can be amended by supplementary budgets during the year if it appears that applications from the fund go up towards the limits which have been set.
  As well as dealing with expenditure there is within the budget a section dealing with Community sources of revenue. I hope that in preparation for next year—when the United Kingdom representative will be the President of the Council of Ministers for the first six months and when the initial work on the budget is undertaken—my right hon. and hon. Friends are beginning to think about the various problems attached to the Community's future revenue. This is one of the areas which needs to be re-examined. The concept of own resources has not proved totally satisfactory and there may be a case for the Community as a whole to re-examine whether the 1 per cent. levy of VAT is the appropriate mechanism by which to add to its resources. Obviously the fund derived from the customs duties and import levies is an appropriate item for the own-resources heading. In addition, in the past it has been suggested that the 1 per cent. of VAT should go to the Community. That is something which should and could be re-examined, and I hope that my right hon. Friends will devote some attention to that between now and next year.

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  This method of proceeding is a useful way of considering the budget although, having attempted to look at all of the papers with which we were provided in preparation for this debate, I feel that the amount of time allocated to it is not adequate. In future we shall have to devise some form of consideration which combines a detailed Committee stage with a debate on the Floor of the House.
  8.6 p.m.
  Mr. John Davies: It had not been my intention to seek to intervene in this debate, but I am glad to have the opportunity of doing so if for no other reason than to say with what pleasure it was that I listened to my hon. Friend the Member for Scarborough (Mr. Shaw) opening the case for the Opposition. It gave me the opportunity of recalling the many happy hours we spent working on the great task that he is now performing on these European budgetary matters, for which I commend him.
  I have some positive and professional points to make. I do not think that there is much of a case for a deep and detailed debate on the terms of this budget, because many of the procedural considerations have already been discussed. I take the opportunity of commending the Chief Secretary and the Financial Secretary for what they have done in bringing about some of the changes that many of us thought were highly desirable in this budgetary procedure. I am thinking particularly of the question of timing, to which reference has been made, and which is a great facility to us in this House and to others.
  For my part, there is the whole question of the division of the commitment and payment of appropriations, which is an improvement in the budgetary system and one which will show much more clearly to us what are the realities of the budgetary process in the Community. There is one incidental question that I hope will receive some consideration. I can foresee some difficulties arising in relation to the appropriations where the payment date is seriously deferred in relation to the date of appropriation, if rates of inflation are maintained at high levels. There will be problems arising where the original sums voted in the appropriation become manifestly
  1384
  inadequate to achieve the original purpose by the time the moment of payment arrives. This will need some consideration by our own Ministers and also within the framework of the Community, to see how these inflationary tendencies are to be handled.
  The hon. Member for Farnworth (Mr. Roper) correctly referred to the fiche financière question as it affects the budgetary process of the Community. Were a fiche financière system universally applied, the budget would become a mere assembly of the values involved in individual decisions. At this stage that is not the case, and I very much hope that it will be the purpose of the Financial Secretary and his right hon. Friends to ensure that as far as is humanly possible the Community will see that financial values are placed on decisions taken. It is still all too easy for policy decisions of a major kind to be taken in the Community without those concerned having a clear understanding of what is involved financially. I strongly hope that the use of the fiches financière system will be made totally effective.
  I regret that it did not prove possible for the Government to submit as a relevant document the supplementary 1976 budget No. 2. In fact, through the courtesy of the Chief Secretary, the Scrutiny Committee has had access to what is contained in the budget. Last week the Scrutiny Committee reported on the matter as requiring consideration by the House, in the hope that it would appeal to the Government as a document to be submitted for today's debate. However, it appears to be too substantial an item for this debate, although the Chief Secretary, with your agreement, Mr. Speaker, referred to it. It completely vitiates the comparisons put forward in the explanatory memorandum and in the document itself.
  The figure of 22 per cent., representing the overall increase in the 1977 provisional budget figure compared with the 1976 figure, is already substantially reduced to about 12 per cent. in the light of the supplementary second budget. That throws into highlight the importance of the supplementary budget. It is a pity that it has not been included in this debate, especially as it will stick out like

  1385
  a sore thumb in the recommendations made by the Scrutiny Committee. It seems to be inappropriate to discuss it in isolation. It may well be, the Government having taken the trouble that they have, that the Scrutiny Committee will be required to reconsider the position.
  The second document that is of substantial importance and is not available for this debate, although the information contained in it is now known to the Government, relates to the breakdown of the individual support measures involved in the agricultural chapter. At present it consists of the single figure in respect of each main product heading. This is rough and ready stuff compared with the realities of the problem. Even at today's rate, the element of support involved in the dairy product is still unknown, because of the continuing discussion in relation to that section. It is a pity that the knowledge that is already held by the Government, namely, the more detailed figures of breakdown of the agricultural elements, was not available to the House this evening. Perhaps it will be possible for the House to have access to this information, in view of the undertaking given by the Chief Secretary that the information will be made available in due course.
  Those are the small points that I wished to make. On the whole, I believe that the budgetary process is improving. The big issues now lie between the European Parliament and the Council. That is where the improvements in the whole scrutiny and consideration of the Budget should now take place in the light of the decision taken on direct elections. It is my hope that the Parliament will progressively prove to be a much more effective and determined monitor, as I believe it wishes to be itself.
  8.15 p.m.
  Mr. Tam Dalyell: The right hon. Member for Knutsford (Mr. Davies) is absolutely right in lamenting the cost of too frequent lack of control. Very often it is not what it should be throughout the Community institutions. There should be price tags on every proposal that comes forward.
  One of the troubles of the European Parliament or Assembly is that any body that is not responsible for raising its own revenue becomes slightly gay about
  1386
  spending. It puts forward all sorts of resolution without putting a price tag on them. Without the obligation of having to find the money, perhaps one becomes rather light-hearted about such matters. That applies not only to the European Parliament but to the proposed Scottish Assembly. But tempt me not down the path of discussion.
  Whereas the right hon. Member for Knutsford and the hon. Member for Scarborough (Mr. Shaw) both praised Mr. Cheysson, rightly, the next time round in the Commission we must not have a Commissioner who is responsible for Lomé, the ACP set-up, developing countries, plus the rôle of Chancellor, that of Chief Secretary, that of Comptroller and Auditor General and other matters. We must have a Commissioner who is responsible for budgetary strategy and, in addition, a Commissioner to undertake what might be called the public accounts function. I do not think it is necessary to increase the size of the Commission. Heaven knows what some of the Commissioners actually do. But it is essential to have someone who is responsible for the developing countries, someone roughly in the position of a Chancellor of the Exchequer, and certainly a third Commissioner in the position of a Comptroller and Auditor General, a Chief Secretary, or a hybrid of the two.
  I hope that I can leave the idea with the Financial Secretary that perhaps the British Treasury and the British Government will press whoever is the next President of the Commission, be it the Secretary of State for the Home Department or anyone else, to recognise that there must be a separate Commissioner responsible for the function of monitoring.
  On behalf of a man whom I regard as an excellent colleague, a man who won the confidence of his colleagues both in the Socialist group and in the Budget Committee—namely Lord Bruce of Donington, the rapporteur for the 1977 Budget, with whom it is a pleasure to work as a member of the Budget Committee—and of myself, perhaps it would not be out of place for me to say to the Financial Secretary that we appreciate the help that has been given very often by Treasury officials, whom we have found co-operative. My hon. Friend might pass on to Treasury officials in Brussels our appreciation of the co-opera-

  1387
  tion that they have given to the British Members in a purely objective and proper way. Nevertheless, their co-operation has been considerable. I should like the thanks of Lord Bruce and myself to be recorded.
  As the hon. Member for Scarborough said, he and I are both vice-chairmen of the Sub-committee of Control, the embryo Public Accounts Committee. I ask the Financial Secretary what I consider to be a crucial question—namely, to what extent is that embryo committee and the Budget Committee to be given access to the civil servants in the various nation States? If we are denied access to questioning civil servants of the independent nation States, I wonder very much how effective we shall be. Indeed, I believe that we shall become very ineffective.
  Mr. Douglas Crawford: The hon. Gentleman is talking about nation States, and I believe that Greece will shortly be joining the Community. Is he thinking of Scotland and Wales among the member nation States?
  Mr. Dalyell: That is an overwhelming temptation, but having studied the business, Mr. Deputy Speaker, I must somehow bring myself to resist being led astray into making a 35-minute speech on a second subject.
  I ask the Financial Secretary what pressure is being exercised by the British Government regarding a Court of Auditors, to which the hon. Member for Scarborough referred? Until it is set up, some of us will have worries about control. I shall give a specific example to demonstrate precisely what I mean. I refer to the malt problem, with which my hon. Friend the Minister of State for Agriculture, Fisheries and Food is well aware. It is quite clear that it is the Commission that decides what information shall be in the hands of its own auditors and what will be denied them. I find it strange for any organisation solemnly to decide itself what information on a delicate issue of great relevance to the auditors shall be given them and what information shall be denied them. Therefore, I think that it is of overwhelming importance that the whole set-up of the Court of Auditors be pressed ahead with as quickly as possible.
  1388
  The Sub-Committee on Control should not try to do the auditors' job. It should use an "expedited" procedure to deal with alleged fraud and scandals.
  I gather that there are some technical difficulties in Holland, but I do not worry about those. I gather that there is likely to be delay in the Federal Republic of Germany and that it cannot be ratified until mid-1977. But that has to do with the German elections, and I do not worry about that. What I do worry about—and it has to be said—is that there is very little indication indeed that efforts are being made, first, in Ireland and, secondly, in Italy to do anything about the auditing position. We should bluntly ask, as a member of the Community, what we are doing as a Government to ask the Irish and Italians to be serious about going ahead with the setting-up of a court of auditors.
  Mr. Frank Hooley: They have no intention of doing so.
  Mr. Dalyell: I would not be indelicate enough to put it in such strong terms as my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) has done, but there is a widespread feeling among people of all nationalities that there is very little intention to do so on the part of the Italians and the Irish. So I ask the direct question—what are we going to do about it? What are we going to do with the Irish and Italian Governments in this matter?
  Finally, Mr. Deputy Speaker, I raise a separate issue on which you will rule me out of order.
  Mr. Deputy Speaker (Sir Myer Galpern): I can do that in advance.
  Mr. Dalyell: I have known you for 14 years, Mr. Deputy Speaker, and you have watched me like a hawk, so that would be nothing new. It is the question of the expenses of the European Parliament itself. These should be scrutinised very carefully. It is not that there is corruption. Nor do I think that there is great inefficiency about the place. I think that the officials of the Parliament are very efficient and hard-working people. It is the whole set-up by which we wander like nomads between Luxembourg and Strasbourg and Brussels. We have committee meetings in Amsterdam and Newcastle and Rome, and now, with

  1389
  the entry of Greece and Portugal, no doubt we shall become even more peripatetic. Not only does all this throw doubt on the seriousness of the Parliament, but it is extremely expensive in terms of cash—and that the Treasury might look at. There is something more serious—it is expensive in terms of the energy not only of Members of the Parliament, though I put that secondarily, but of a large number of officials of the Commission and of the Council of Ministers and others.
  There is the idea that one has to meet in a certain place simply because the prestige of the Government of France is at stake. But Strasbourg is not a very sensible place to do proper business. I remind the House of what Churchill said about it. He was not favourably disposed towards the idea of a Council of Europe at the time, and possibly still less so to the idea of a European Parliament. He said that Strasbourg was "an excellent place where Icelanders and Turks could discuss their common problems". That is very much the situation. I think we have to consider both on a financial basis and on an efficiency basis the peripatetic nature of the European Assembly.
  I hope that if my speech has done nothing else, perhaps it will cause the British Treasury to reflect on the answer that my right hon. Friend the Prime Minister gave last Tuesday. I asked him a quick question about the nomadic nature of the Parliament, and with great relief he said that, thank heaven, it was not a problem for him as a member of the Council of Ministers. I have friendly news for him. I fear, after discussion, that it is his problem and that of his colleagues, because it is a matter not for the Parliament or for the Commission but for the member Governments. I do not make any great play of my right hon. Friend having given an off-the-cuff answer that may not have been strictly accurate. That is of no consequence and it was done in good faith. I simply say that the Government should realise that, along with the other Governments, they have the responsibility of coping with this problem.
  Mr. Neil Marten: The hon. Gentleman has made great play of this matter, and I respect him for it, because this is the sort of waste I do not like to
  1390
  see either. Did he notice that, in The Economist of the week before last, the cost of this dual Parliament was estimated at £3 million a year and that each time some 60 tons of baggage and paper has to travel back and forth either from Brussels or Luxembourg to Strasbourg or whatever? From his knowledge of the thing, does the hon. Gentleman agree that these estimates were roughly about right?
  Mr. Dalyell: One of my many failings is that I am not a reader of the Economist. But it is true that the cost is about £3 million. I would not commit myself to tonnages or kilograms or anything else, but a vast amount of paper is moved in truckloads along that axis.
  It is not only a question of cost. There is also the whole idea of having to think which papers the hon. Member for Banbury (Mr. Marten), or the right hon. Member for Knutsford or I or others will ask for, and the sheer amount of mental energy of the highly-paid people in the Commission being sidetracked into the sheer physical, logistical labour of deciding what we shall want and when, where and how. It does not lead to a very efficient Europe.
  8.27 p.m.
  Mr. Alexander Fletcher: I would not be indelicate enough to follow many of the arguments which the hon. Member for West Lothian (Mr. Dalyell) has put. Like him, I am a member of the Budget Committee. He will recollect that, on an idea put forward by the hon. Member for Fife. Central (Mr. Hamilton), we looked at the cost of the Parliament moving around and produced some estimate of savings that could be made along the lines the hon. Gentleman mentioned.
  It is interesting that tonight of all nights there has been some acclaim on both sides of the House for the improved timetable of the Community budget and the fact that a great deal more time is now being given to the national Parliaments as well as to the European Parliament to discuss in detail the construction of the budget. That is interesting, because in this Chamber tonight we are on the eve of the day of the guillotine at Westminster. Here we are, debating the fact that Europe is giving more time

  1391
  to check legislation, while at Westminster the power is being cut off yet again—or at least, that is what is expected for tomorrow. The effect of that is that as Westminster weakens its scrutiny of legislation and of the Executive, we have before us evidence that Europe is moving rapidly in the opposite direction and giving more time to legislative appraisal and scrutiny of the Executive itself.
  One bright spot, as far as Westminster is concerned, is the 45th Report of the House of Lords Select Committee on the EEC, which deals expertly with the vast volumes of the EEC budget and produces a summary that I commend to all hon. Members.
  This debate is taking place against the background of an unscheduled Cabinet meeting to discuss yet again the proposals to cut public expenditure in the United Kingdom. [Interruption.] I do not see why Opposition Members do not think there is a connection between public expenditure in the United Kingdom and in Europe. The connection is fairly obvious. There is a certain irony in the fact that the Cabinet meeting is taking place tonight, when one recalls the agonising assessments that took place over the cost of British entry into the EEC and the burden it was said to place on Britain taxpayers and consumers. The mood then was that the United Kingdom would be a great catch for the Community and that the Europeans were very lucky to have Britain as a member. I am not disputing that Europe is lucky to have Britain, but so far it has not been a case of financial luck. That is evidenced by this budget and the previous ones. How differently it has all turned out. One has only to remember the financial cost of Britain in Europe, with the devalued pound making it necessary for the EEC to subsidise food prices in this country, to realise that.
  Although the United Kingdom's share of the 1977 draft budget is estimated at something less than 20 per cent., our gross contribution will be offset significantly by receipts from the Community. In 1975 we actually received more than we contributed. None of this should give any satisfaction to hon. Members of this House. The truth is that the United Kingdom, along with Ireland and Italy, forms
  1392
  the second division within the Community.
  In his first annual report on the Regional Fund, Commissioner Thomson pointed out the widening gap in per capita income between the second division and those on top of the first division, such as Denmark and Germany. The comparison between the regions was even more striking, according to Commissioner Thomson. In 1970 the gross domestic product of Hamburg and Paris was five and four times higher, respectively, than that of the West of Ireland and Southern Italy. By 1975, Hamburg's GDP was six times higher, and Paris's five times higher. That is the sort of discrepancy that the Regional Fund is finding out about. Finding out the problem is easier than solving it, but at least an effort is being made on a European basis, through the European budget.
  These figures point out the importance of the Regional Development Fund to Britain. All parts of the United Kingdom benefit from it, not least Scotland, which so far has received just on one-quarter of the total contributions made from the fund to the United Kingdom.
  In his opening remarks the Minister complained, or appeared to complain, about the slow speed of claims from the fund. I suggest that the main reason for this is the fact that these applications have to be digested by the national Governments, and it would speed things up considerably if the local authorities concerned in the United Kingdom and elsewhere in the Community could make claims direct to the Regional Commissioner and his Department and could get their benefit direct from the fund. That might help to remove the problem of additionality, and it would enable the regions to have direct access to Brussels about particular requirements and particular developments. This would make the Community's purpose much more meaningful throughout the member States.
  Mrs. Winifred Ewing: At the last meeting of the Regional Committee, Commissioner Thomson did consider this view, which is shared by many members of the Committee. His answer was that while he thought it was not a bad idea, the difficulty was that he had only

  1393
  his staff. When I asked him for his personal view he said that he thought it would be very difficult, in the foreseeable future, for his small staff to make the assessment speedily.
  Mr. Fletcher: That is one case in which a restricted staff budget might not be justified in the interests of the Community as a whole. But that is something for further debate in Brussels and in the European and all the national Parliaments.
  The contribution that Britain makes to its own recovery and to the growing strength of Europe depends upon the effectiveness of the meeting in Downing Street tonight, and on other such meetings. Britain's weaknesses have clearly been self-inflicted, and our Community partners and the Community budget can help us only in a limited way. It is for that reason that the credibility of British Ministers in Europe—and that includes particularly British Finance Ministers—must be somewhat limited. That situation gives no comfort to anyone here or in Europe. But if in considering the Chancellor's Budget we encountered as few problems as we do with the Community Budget, Britain's problems would be absolutely minimal.
  8.37 p.m.
  Mr. Frank Hooley: I wish to comment on Document R/672/76, first, in relation to the policy for co-operation with developing countries. The document says that the Commission is not proposing any new action in 1977 and intends simply to continue the measures already approved by the Council and being carried on at present. However, the triennial forecast of expenditure in Document R/373/76 shows a jump from the 1976 figure of 236 mua to the 1977 figure of 567 mua, an increase of 147 per cent.
  I shall be interested to know what that means in terms of new activity. If it means increased activity by the Community in respect of developing countries, I very much welcome it, but it seems slightly odd that it should be suggested that nothing new is to be done in 1977. I entirely support any increased expenditure to aid developing countries, whether in the form of the Stabex scheme or through food aid.
  1394
  Document R/672/76 refers on page 18 to the JET project on fusion research. There has been considerable argument about the location of the project. I am not clear whether that argument has delayed the project's budget. It is not entirely clear from the document whether the failure of the Council to approve the location has led to a failure to appropriate money. This is an extremly important piece of fundamental research, particularly for this country which has played a leading part in developing its study. We should be told whether funds will be provided for it in 1977 or not.
  Pursuing the question of energy, there is a section devoted to this in the paper numbered 672, and I note from that that
  "The Commission is proposing to keep up and expand its efforts concerning research into new energy resources: backing for technological development projects in the hydrocarbons sector and for deep-sea hydrocarbons exploration, and uranium prospecting in the Community."
  It goes on:
  "The Commission considers that the total financial effort entailed by the two types of intervention in the hydrocarbons sector should be about 70 million u.a."
  I suppose that that is about £30 million or so.
  I should be interested to know on what authority or under what powers the Community will start meddling in deep-sea engineering or exploration for oil and presumably gas within the 200-mile limit or whatever other limit may result from the Law of the Sea Conference. Hitherto, I was not aware that the Commission or the, Community had any powers or responsibilities in relation to the Continental Shelf; I thought that these were matters for the coastal States.
  I should be interested to know on what authority and under what section of the treaty the Commission has the right to start interesting itself in deep-sea hydrocarbon exploration, where it proposes to do it, what its effort will be, how it will be financed, and how it will affect British interests in this matter, which I believe are the most extensive of any member of the Community. There are considerable underwater gas resources off the Dutch and German coasts, but in terms of oil I believe that of all members of the Community the United Kingdom has the largest interest in seabed engineering. I

  1395
  am intrigued to know what exactly this 70 mua is to be used for and how it will impinge upon United Kingdom activity in this area.
  On page 21 of the same document, we read that the Commission
  "urges that the Community clearly show its resolve to launch measures in the near future for the aircraft industry and transport infrastructure, and aid for investments in the energy sector."
  Again, how exactly will the Commission start meddling in this important area of technology where, so far, co-operation has been confined to bilateral projects or sometimes trilateral projects between Britain and France, Britain, France and Germany, Germany and Holland, and so on, and has developed on that basis? What is the Commission thinking of in this connection? Are we to have more harmonisation of aircraft design, or of aero-egines? Will the Commission decide who shall produce what, the design of aircraft, and so on? What lies behind this proposal? Since it would hardly have been in the budget unless there were serious intentions in this connection, we are entitled to some information on these matters before the Council of Ministers consider the detailed budget.
  To prove that I do not intend to hold up the debate by intervention or excessive speechmaking, I refer briefly to the section on financial control and support strongly what my hon. Friend the Member for West Lothian (Mr. Dalyell said about the great importance of having effective financial control over expenditure from the budget. Alas, we seem to be increasingly getting reports in the Press either of gross maladministration or of deliberate fraud. Within the past few days, reports in The Guardian have talked about the supply of contaminated meat to this country, and some system under which beef could be shuttled across frontiers with different claims being made under different Community rules, resulting not only in handsome profits being made by the traders concerned but also, apparently, in some hazard to the health of the British people if this meat should slip through the control and get into the hands of manufacturing companies in the United Kingdom.
  Document No. 672 says that
  "The implementation of the Budget depends for the most part on the operations under-
  1396
  taken and the expenditure incurred by Member States themselves, and on the behaviour of commercial operators on the agricultural product markets. Effective auditing must of necessity be made where the expenditure is actually incurred."
  It is, alas, true that there are commercial operators in the Community who are only too willing and anxious to take advantage of various regulations and currency fluctuations to make handsome profits.
  I am disturbed by the renewed reports from different sectors—sometimes grain, sometimes meat, sometimes other sectors—of gross fraud being carried out, due, presumably at least in part, to inadequate control by member States or the Commission of the disbursement of payments of various kinds for agricultural products.
  My hon. Friend the Member for West Lothian referred to the Court of Auditors and asked why the United Kingdom was not bringing pressure to bear on other members of the Community to ratify the convention setting up the court. Document No. 672 says that
  "The Heads of Government have agreed to do their utmost to reach a speedy conclusion with regard to the ratification procedures…in order to enable the Court to start operating in 1976."
  Yet the very next paragraph reads:
  "At the present time, only the United Kingdom and Denmark have completed the ratification procedures."
  The House is entitled to inquire why other countries are dragging their feet, since this matter has been approved by Heads of Government. We are entitled to ask the other States to honour the commitment they have made and to get on with establishing an effective and powerful audit system to ensure that fraud and misuse of the system are limited to the minimum.
  Mr. Dalyell: My hon. Friend is making an extremely important point. In order to clarify what I said earlier, I add that it is not a question of the budget control committee doing the job of the Court of Auditors. The budget control committee, or this House, should be using an expedited procedure so that the Court of Auditors can get on to a fraud while it is topical and reveal either that it was blown up by Press reports or that something was wrong, and explain how it went wrong and what is proposed to be done about it.
  Mr. Hooley: I am grateful for my hon. Friend's intervention. Obviously we

  1397
  need a body to put its finger on the apparent misuse of funds, but, in addition, we need highly competent people to track down the details and find out what has gone adrift and where funds have been misused, through techniques such as those of the Comptroller and Auditor General and the Public Accounts Committee, which have long been established in this House.
  I hope that I shall receive answers on these matters in due course.
  8.45 p.m.
  Mr. Emlyn Hooson: This debate illustrates the unsatisfactory relationship between the Common Market and its member States.
  The hon. Member for Farnworth (Mr. Roper) suggested that we had insufficient time to discuss the budget, but I doubt whether we shall be able to struggle on until 10 o'clock with this debate. We have enough time to discuss the matters of which we have cognisance.
  We should realise that the effect of our debates is virtually nil. We have here a public budget with no public accountability. This is a stage in the development of the Common Market which must be brought to an end as soon as possible.
  Mr. Roper: The point that I was trying to make was that in a debate of this sort we have time to make speeches on generalities but no time to discuss the details of the budget.
  Mr. Hooson: I should have thought that there was a good deal to be said for discussing the so-called budget—it is not a budget in our sense of the term—in, say, a Select Committee, where everyone may put questions. This is an inappropriate forum for that kind of discussion.
  We have not got the machinery—it has not yet been developed—for dealing with the important budget proposals of the Common Market. Not being a member of the Scrutiny Committee or of the European Parliament, I found it horrendously difficult to investigate the papers that are the subject of this debate. If we are to have progress in Europe, we require an alert political commitment to Europe among ordinary citizens. They must be aware, as they are of our Budget, of the kind of public expenditure and the
  1398
  taxes involved which affect them. It is hideously difficult for any reasonably intelligent citizen to discover what is involved in the so-called budget.
  I have been assured about this matter by right hon and hon. Members who have considered it before. For example, the right hon. Member for Knutsford (Mr. Davies) said that the budgetary proposals were improving. If so, I should say that they still have a great way to go.
  The hon. Member for Edinburgh, North (Mr. Fletcher) unfavourably compared the procedures of this House and the way that they have been developed with the procedures in Europe for scrutinising the budget. I thought that was a most unfair comparison.
  Whatever our deficiencies in this House, there is no accountability within the Common Market. The logical conclusion is that we must insist on far greater democratic control of the budget in the Common Market. That will no doubt take place after direct elections.
  It appears that reference back to national Parliaments of all these proposals is farcical. What influence do we have in this debate? I venture to think that we have very little. Whom can we influence? We cannot influence the people who propose the expenditure, as they are not concerned with the budget, as such. The budget is a quantification of the cost of their proposals, and those proposals are not the subject of discussion here today. Yet the Budgetary Council of the Common Market has no control over the policy. Therefore, whom are we influencing by means of this debate today?
  Were it not for the Forty-fifth Report from the Select Committee of the House of Lords on the European Communities, I should have found it virtually impossible to follow the various documents before us. Therefore, the whole system is grossly unsatisfactory.
  I am on record as sharing many of the doubts of the hon. Member for Banbury (Mr. Marten) regarding the Common Market, but I took the view that when we were in we should make it work and have proper accountability. The present situation illustrates that we have not moved forward since we joined the Common Market. Therefore, the whole position needs urgent review.

  1399
  I suppose that agriculture takes up a great deal of the Common Market's budget expenditure, because it is virtually the only sphere in which there was early agreement by the member countries. It is natural that it should take up a good deal of the budget. However, the change in the timetable, which is no doubt beneficial to those who have to discuss these matters in Parliament, and so on, has its disadvantages. For example, anyone knows that trying to estimate agricultural yields at this time of the year is difficult, whereas it is far easier later in the year. Therefore, the change in the timetable, although, as I say, it gives certain benefits, is unsatisfactory in other ways.
  My concern at this point—I hope that it is not out of order—is about the failure to police policies. The hon. Member for Sheffield, Heeley (Mr. Hooley) was entirely right to draw attention to the lack of effective machinery for policing certain Common Market policies. Some time ago I pointed out to the Minister of Agriculture that it is well known in agricultural circles that there has been a great racket in the moving of beef about Europe. Indeed, one hon. Member once told me that cattle that he had sold in Scotland had eventually gone into intervention in Denmark, having in the meantime certainly been into Italy. There is an absolute racket going on.
  What steps have been taken by the Government and by the Commission to ensure that there is proper policing? If the common agricultural policy is to take two-thirds of the budgetary allocation of the Common Market, it is essential to ensure that there are proper policing methods, yet it seems to me that our national policing system is unable to deal with these matters. There are no enforcement officers here—or, if there be some such system, it is grossly inadequate, and a great deal remains to be done in respect of this one matter on which there has been a general European policy for some years.
  The hon. Member for Scarborough (Mr. Shaw) spoke of the unsatisfactory nature of the carry-over provisions of the budget. Bearing in mind, of course, that this is not a budget in our sense but is a series of estimates, I do not take the same view. I have always thought it a highly unsatisfactory element in our
  1400
  budgetary procedure that we do not allow for carry-overs. Everyone knows that towards the end of the financial year there is a good deal of wasteful expenditure, because Departments are anxious to spend their allocation for the year, and the effect of a carry-over in our country is to deprive a Department of the funding that it might otherwise have in the following year.
  I am not at all sure that the implication of what the hon. Gentleman said is right—that we should come nearer to the kind of system that we have here, which does not allow carry-over, perhaps because we are so addicted to annual Budgets, annual Estimates, and so on. There is a good deal to be said for having greater flexibility in Europe. I do not know the detail of the carry-over provisions to which the hon. Gentleman referred. I do not have his knowledge. I imagine that he was making a general rather than a specific statement on the matter, but I think that it would be wise to look at the deficiencies in this country before we impose the same kind of straitjacket on the Common Market.
  Mr. Michael Shaw: The danger under the old system lies in the automatic carryover. I have previously given the House what might almost be called a lecture on this, and I shall not weary hon. Members with it again, but the problem is that Parliament had no control and has no control over these automatic carry-forwards. Large sums may often be involved. Under the system that we are now proposing in the altered financial regulation, we can make commitment and payment appropriations. The commitment appropriation ends in the particular year, and has to be re-entered the next year, so that one may look at the whole thing without its lapsing.
  Mr. Hooson: I am grateful to the hon. Gentleman for expanding on that matter. It deserves further consideration.
  I have come to the conclusion that the sooner we have a directly-elected European Parliament and it establishes good, tough budgetary controls, the better. Its present system, whereby budget proposals of this kind are referred back to national Parliaments which have no influence on the progression of events in Europe, is highly unsatisfactory, and the sooner it is brought to an end the better.
  9.0 p.m.
  Mr. William Hamilton: I want to take up in a few moments the latter part of what was said by the hon. and learned Member for Montgomery (Mr. Hooson).
  Having listened to nearly all the debate, one is almost driven to the conclusion that we in this House exercise supreme control over public expenditure and that there is nothing at all like it in Europe. In fact, I think that the reverse is nearer the truth. We pretend that we control public expenditure, and certainly we in this House have a lot of sophisticated machinery for doing it, but the most powerful Committee for doing that is investigating how the milk got spilled. The Public Accounts Committee has done just that, and for the past 100 years it has exposed the kind of fraud, or the kind of theft, whatever one likes to call it, that is taking place in the Common Market now.
  Every summer we get a big fat volume through the post indicating the way in which the Treasury or some other Government Department has made gross errors, or the way in which there has been a misappropriation of public funds of one kind or another. Therefore, the situation is not peculiar to the Common Market, and I wish that the anti-Europeans—and there are still many in the House—would seek not to make this point as though the problem were peculiar to Europe and were absent from national States, because it is not.
  Congratulations have been given to the other place on its document on this budget. Far be it from me to withhold congratulations from the other place, but it has done little more than repeat almost verbatim a whole lot of facts and figures given in the Treasury Explanatory Memorandum on this matter. The hon. and learned Member for Montgomery referred to the impossibility of understanding this budget were it not for the House of Lords document, but he need only have read the Treasury's Explanatory Memorandum and he would have been aware of virtually all that we are talking about today.
  We are debating today not a budget in the sense that we understand it but simply what is intended to be spent in Europe during the next financial year. It is almost the equivalent of an annual public
  1402
  expenditure intention, and I think that the Treasury's Expenditure Memorandum and the House of Lords' report put it into perspective. Lest we get worked up about the sums involved, let us consider what is provided. It is true that a sum of £3,800 million is not to be sniffed at, but if one remembers that that is less than 2 per cent. of the total budget of the nine member States, that put it into perspective.
  Paragraph 32 of the House of Lords Report says that the United Kingdom
  "…net contribution has been far less than the estimated outturn so that in 1975 the United Kingdom actually received more from the budget than it had contributed."
  There are special reasons for that which we need not go into now. It is idle, foolish and dishonest for anyone to say that we have made enormous sacrifices and losses as a direct consequence of our entering and remaining in the EEC.
  Most hon. Members have raised the question of public accountability. My hon. Friend the Member for West Lothian (Mr. Dalyell) is right. One of the ablest men in Europe is Commissioner Cheysson. Everybody who has watched that gentleman in operation will appreciate that. He described these estimates as "distressingly banal and mediocre". He was simply reflecting the effects of the world-wide recession out of which the European Community could not contract any more than could the United Kingdom.
  It is an interesting comparison that this debate is the equivalent of the debate on our own Public Expenditure White Paper. When we introduced the novelty of the rolling five-year programme, it was envisaged that we would have an annual two-day debate which would be a real occasion, top hats and everything, equivalent to what Budgets used to be when I first came here, with the House packed and everybody on edge.
  The White Paper debates turned out quite the contrary. As much interest was shown in them as has been shown in this debate, and I suspect for precisely the same reason: hon. Members have more than a hunch that whatever they say or do can have little or no effect on the figures before them or the policies behind those figures because this House is not equipped to challenge the policies,

  1403
  still less the figures which are the result of those policies.
  Some more intimate machinery is needed to question and cross-examine Ministers and civil servants in depth. Whatever the House is equipped to do, it is not equipped to do that. Ministers can and do get away with murder in this House. Therefore, the machinery must be elsewhere.
  Often the most skilled and highly polished performers on the Front Bench are the very people who are the most eloquent opponents of Select Committees which can cross-examine in depth. One of the best examples is the present Leader of the House. He is a wonderful actor and a great performer but, like all other grea performers, he does not give a damn about the props or about who prepared the script. He can deliver it, but he cannot allow himself—he does not like to allow himself—to be subjected to cross-examination.
  Similarly, the right hon. Member for Down, South (Mr. Powell), when he gave evidence to the Select Committee on Procedure on the establishment of the suggested Select Committees, is on record as saying that he believed that the best Back Bencher in the House was he who was the most ignorant. The less aware he was of the facts of the matter, the more open-minded he could be in looking at a particular problem and, therefore, the more likely he was to come to the right conclusion. We have two classical examples of right hon. Members who are star performers in this theatre, but that is not what the House of Commons is for.
  If we want to control public expenditure either in the United Kingdom or in the EEC it will not be on the Floor of an Assembly or Parliament, whether it be in Westminster, Edinburgh or Brussels. It will be in an all-powerful committee equipped, serviced and staffed by an organisation similar to that of our Comptroller and Auditor General.
  I pay tribute to the hon. Member for Scarborough (Mr. Shaw) for what he has done in seeking to get that kind of machinery going in Europe. The subcommittee of the Budget Committee that is in operation is a completely inadequate substitute for our Public Accounts Com-
  1404
  mittee and nothing less than that will satisfy him or me. Anything less might retard progress toward the ultimate end.
  Whilst I am in this mood, I pay tribute to Lord Bruce of Donington. He went to the European Assembly a committed anti-European. Now he is inclined to be much more pro-European because he recognises that we are in Europe and there is no prospect of our coming out of it, and he is, therefore, determined to see it work. When we have more time at our disposal and are able to give the budget debates greater consideration both in the House and in the European Assembly, there will be much more effective debate and we shall wrest from the Commission and the Council much more control of the Budget.
  I agree with my hon. Friend the Member for West Lothian that we need price tags on all the proposals that come before us. The first comments I made in the European Assembly were directed to the need for a Public Accounts Committee. Meanwhile, the sub-committee to which the hon. Member for Scarborough referred must have the right of direct access to papers and witnesses throughout the Community if it is to do its job properly. It must also be properly staffed. That function cannot be performed by a sub-committee of the Budget Committee. It must be a main committee in its own right.
  The lack of public accountability in the European Community is partly caused by the nine Governments being incapable of coming to a unanimous agreement on the siting of the European Parliament in one place. My right hon. Friend the Prime Minister said recently that it was nothing to do with him. My hon. Friend the Member for West Lothian said that it had everything to do with him. The Prime Minister is one of the nine Heads of State who will have to take the decision, because Parliament cannot get powers of control over expenditure unless and until it is directly elected and sits in one place.
  I shall blow my own trumpet here and say that I took an initiative a few months ago to try to compel the Governments to take a decision on this matter. I put forward a resolution proposing that the first meeting of a session should be in Strasbourg. I did not say where the other

  1405
  sittings should be. My resolution was that, of the 11 plenary sessions, the statutory one shall be in Strasbourg, nine shall be in Luxembourg, and, as evidence of our future intent, one shall be in Brussels. The resolution is now in front of, I think, the Political Committee, and two of the other Committees in Europe have pronounced more than favourably on it.
  If we can get an almost semi-permanent site in Luxembourg while declaring our desire as European Parliamentarians, for the time being anyhow, that the siting of the democratically-elected Parliament should be in Brussels as a permanent feature of European institutions, it will be a big step in achieving what everybody in this debate wants to achieve—the sort of public accountability that we have become accustomed to in this House. However imperfect it may be, if it is as effective as public accountability anywhere else in the world. I remember Lord Diamond making that statement in this House when the Public Expenditure Committee was set up.
  I welcome this debate. I am only sorry that more Members have not shown an interest in it. I should have thought that the anti-Marketeers, in particular, would take this golden opportunity to express their reservations about the EEC. If it is an indication that they are giving up the fight, that is to be welcomed.
  9.18 p.m.
  Mr. Neil Marten: Perhaps it is appropriate that I should be called now, if only to deny what the hon. Gentleman has just said.
  The hon. Gentleman referred to us as "anti-Europeans". I am sure that that was shorthand. I am pro-European. I am "anti" the Treaty of Rome, and that set-up. I am quite serious when I say that. I am not anti-European. I do not think that any of the so-called anti-Marketeers are anti-European; they are "anti" the structure of the Treaty of Rome. We want to see European unity in another way. What is happening in the Community now will, in the long term, destroy the unity of the European people.
  The hon. Gentleman also quoted my right hon. Friend the Member for Down, South (Mr. Powell) when he said that the
  1406
  best Back-Bencher was an ignorant one. That goes for not only for Back-Benchers but Ministers. When I was invited by Mr. Macmillan to be a junior Minister at the Ministry of Aviation I said to him "Well, Mr. Prime Minister, I must be honest with you. I will do anything for my country, but I know nothing about aviation whatsoever—except jumping out of aeroplanes during the war." He looked at me with his rather charming, drooping eyebrows, slapped me on the knee, and said "Just the chap." I said "Is that not rather an odd remark?" He said "No. You will enter as a Minister with an empty mind." I commented "Yes, certainly", and he said "Your mind will be filled by the industry on the one hand, and by civil servants on the other, and you must make your own political judgment." I have never forgotten that episode. If we become too expert, perhaps we cease to be politicians, but I am still ignorant about most things.
  About 70 per cent. of the budget is for agriculture—the guarantee and guidance sections. The figures in it are provisional. I am sorry that no representative of our agricultural committees is on the Opposition Front Bench, because 70 per cent. of the budget is for agriculture. A representative should be present to hear what is said and to intervene on behalf of agriculture. The amount for the guarantee section has increased by about 25 per cent., whereas the amount for the guidance section, which I have always understood to be the more important section, has fallen by nearly 50 per cent. That is disturbing, and we should hear the views of the agriculturists, certainly those in the Opposition, on it.
  It has been said that it is a good thing that we have had more time to debate the budget. I agree. But as we are dealing with 70 per cent. of the budget, and as it is recognised that the figures are only provisional, I am disturbed about what will happen after the question of the harvest has been considered and the letter that we have been promised has been written. The firm estimates will arise in September. They go to the European Assembly from 10th September to 28th October. Then they go back to the Council of Ministers from 29th October to 20th November.

  1407
  Therefore, for almost three weeks the Council will consider the alterations made by the Assembly.
  The hon. and learned Member for Montgomery (Mr. Hooson) asked whether we had any control over the budget. Different people have different views about that. However, when it is back with the Council of Ministers, the House should try to exercise its influence or control on our Minister when he goes to the Council budgetary meeting. After the budget proposals have been firmed up, have been sent to the Assembly and have returned to the Council, we in this Parliament) should have, another opportunity to have a go at the budget. I have given notice to the Government Front Bench—I hope that the Minister has received it—that in my view the House of Commons should have another bite at it when we know to a much greater extent what we are talking about. I see no objection to that. Then, if we are dissatisfied with the agricultural budget we should vote against that section of it, because the way in which the money is going into the guarantee section and is not being used for restructuring the guidance section, where the effort should be made, is very unsatisfactory.
  In 1972, some of us doubted the wisdom of the common agricultural policy but we were continually told "Do not worry. Once we are in we shall reshape it." We have now been in the Common Market for more than three and a half years and so far as I can see there has been little reshaping of the common agricultural policy by us, or any effort by us to seek to influence the situation. The situation goes on and on and money is being wasted.
  I should like to see this House voting against that part of the budget which relates to agriculture, when and if it comes back to this House, just to show that until the CAP is restructured more sensibly we shall oppose these matters in the House. This would give some hope to those hon. Members who go over to the Assembly and who seek to improve the situation. This has been the longest-running farce in Western Europe and there seems to be no sign of any change.
  It appears that the budget is up by 22 per cent. on last year's figure. We are
  1408
  told that Her Majesty's Government are about to bring in cuts of up to £1,000 million, on which great rows will take place in the Labour Party. I see that the hon. Member for Fife, Central (Mr. Hamilton) disagrees with that comment. I do not know whether he has been here frequently enough in recent weeks to get the feeling of some of his hon. Friends on these matters. While these cuts are to take place in the United Kingdom Budget, expenditure in the Common Market is to increase by 22 per cent. Obviously, the Common Market has become a sacred cow. Few people will criticise or vote against anything to do with the Common Market. I believe that we must re-examine the position.
  As the situation continues we are building up an increase in bureaucracy in this country, although apparently it is official Conservative policy to reduce bureaucracy. In our speeches we often point out that we must take the bureaucracy off the backs of the people. They are fine words, but in legislating on water supplies or evisceration, involving an increase in the bureaucracy, people talk with two voices or adopt double standards when the matter involves the Common Market.
  I am also critical of the proposed expenditure on the European Assembly. In a short intervention I mentioned the cost of shuffling backwards and forwards from Luxembourg to Strasbourg—a cost estimated at £3 million a year. The transporting of documents involves a figure of 60 tons of material, taken from Luxembourg to Strasbourg and back. Clearly that is another long-running farce, and practically everybody recognises it. Why, then, do we sit here and do nothing about the situation? Why do we not take the view "Until these matters are sorted out we should not have direct elections"? Why do we not veto the question of direct elections until those responsible are brought to heel? Many hon. Members sit here afraid to criticise the Common Market, but that does not apply to me.
  I have also been critical of the Select Committee that has been dealing with the subject of direct elections to the European Parliament. Indeed, I dealt with this matter in a brief speech in the House last week. The Select Committee recommended an increase in the number of members at the European Parliament from 198 to 410, apparently without any

  1409
  study of the cost involved. I regard that as an irresponsible attitude. That is an odd way for a Select Committee to behave.
  There is the capital cost for, presumably, a new Parliament to accommodate the extra 212 Members. When Greece and Turkey join, it will presumably have to be expanded. That will be a sizeable capital cost, particularly when we take into account current expenditure for the salaries of the vast numbers of researchers who will obviously proliferate, the secretaries, the offices and the equipment. A visit to the present Parliament at Luxembourg shows the fairly luxurious way in which delegates to the Assembly are serviced in one way or another. None of that, it seems, was costed by the Select Committee when it recommended the increase in numbers.
  It must be remembered that we have to pay our "whack" for all that. This must be carefully examined. We must ask where all this expenditure goes. Somehow in this debate these matters are blithely forgotten by the Front Benches —so far, anyhow. I hope that in the reply some attention will be paid to them.
  I wish to refer to the state of crisis into which the Community seems to have got itself. I quote from the speech of the President of the Council of the European Communities, Mr. Max van der Stool. I am not cheating by reading an extract, and it will save a lot of time if I read the relevant criticisms that he makes of the Community. He says that the Community is going through a serious crisis. He says that whereas once the motto was "completion, enlargement and strengthening" it has now been replaced by the motto "stagnation, decline and illusion."
  "The Community apparatus…seems to he sterile and ineffectual…stagnation and ineffectualness have also affected other bodies of the Community."
  He refers to:
  "decline, disintegration and impairment of the Community's patrimony. These signs of disintegration are produced day by day."
  I ask the House to bear in mind that that is not the hon. Member for Banbury speaking; it is the man who has had vast experience of the Community and who is now the President of the Council of Ministers. He goes on:
  "the realities which at one time were to have formed the basis for our European solidarity
  1410
  now seem to be the cause of differences, of our growing apart and the parting of our ways…The result is that in their attempt to find solutions, the Government seek their salvation outside the Communities"
  —presumably in such places as the Puerto Rica meeting—
  "or through channels which only have a tenuous link with the Community structure."
  That is harsh criticism. He goes on to say that
  "the Comunity structure has reached an advanced stage of erosion and one may well wonder how long it will be before the European Treaties and everything that has been achieved on the basis of them will simply be valuable historical curiosity…For many years the Community has been suffering from structural difficulties which are caused by its somewhat hybrid nature, namely that of being neither an intergovernmental organisation nor an independent unit which can operate entirely from its own strength…I would point rather to the dangers of disintegration, decay from within which—I repeat—are serious and acute…The Community is suffering from a political anaemia."
  I think I have quoted enough for me to say that I can agree with what the President of the Council has said about the Community. His solution is that all will be well once we have direct elections. Surely there is no evidence to show that direct elections, given the same powers that they have today, will make one iota of difference, except that there will be the extra cost involved in going from 198 seats to 410.
  The reality of the Common Market, and where it goes wrong, is that each State is a nation State and each State is always looking over its shoulder at its own electorate. The nine countries of the Community always seem to be having General Elections, one after another. When they approach a meeting of the Council of Ministers and they have to make a decision, if it happens that the German elections are coming up the Germans will be looking over their shoulder. If it happens to be the Italian elections that are approaching, the Italians will be looking over their shoulder. I hope that quite soon the decisions that the British Government will have to take will mean that they will be looking over their shoulder and that elections will take place very shortly in this country.
  That is why the thing will never work. It is foolish to say that direct elections

  1411
  to the European Parliament will make any difference, except to increase the cost.
  The House of Commons, including the two Front Benches, should take these matters far more seriously. For once in a while I should like the Opposition Front Bench, when it feels like it, to join in the votes that we have, from time to time, late at night, against Common Market propositions. We should then have much more confidence.
  As I have said previously, a Select Committee should be set up—I do not care what the Leader of the House thinks about Select Committees—to monitor the Common Market. It should be in almost permanent session. It should monitor matters outside the scope of the Scrutiny Committee, such as the Tindemans report, and developments from day to day and week to week. In that way we should be able to have a much better view of the matters that we have been discussing this evening.
  9.38 p.m.
  Mr. Nigel Spearing: The speech of my hon. Friend the Member for Fife, Central (Mr. Hamilton) was enlivened as usual by his direct and often to-the-point comments. I agree with him about the need for some mechanism in this House for dealing with the budget other than this sort of debate.
  I refer my hon. Friend to the debate on EEC procedure on 3rd November 1975, when the former Select Committee on Procedure recommended that a committee be established to consider and debate indigestable lumps of documents such as those now before us and to question Ministers upon them. Had my hon. Friend been a member of that Committee I am sure that he would have been as good at questioning witnesses and making committee points as he is at speaking on the Floor of the House. There are hon. Members who can do both.
  In passing, I do not believe that my right hon. Friend the Lord President has his scripts written by somebody else. His scripts in this House are invariably of a high standard, even if the contents are not always agreeable to some hon. Members.
  The first point that we can make about this debate is the number of documents involved. I believe that there is only one in the motion and that the others
  1412
  are in italics. That is a procedural innovation. I am not sure whether the documents that are in italics will be considered as having been debated by the Scrutiny Committee.
  I think I am right in saying—the chairman of the Scrutiny Committee will correct me if I am wrong—that there was an occasion in the not-to-distant past when a document was submitted for debate that received cursory examination—I think it was on our domestic Budget—and the Scrutiny Committee did not reckon that it had been debated.
  A whole list of these documents is connected with the motion, but as they are not part of it I think that they will not be in the Official Report. I will therefore read the list into the Official Report. We read on the Order Paper:
  The following documents are relevant:— R/373/76, Revised triennial financial estimates, 1976–77–78; R/672/76, Community's budgetary problems, Commission communication; R/794/76, Proposed transfer of appropriations, EAGGF Guarantee section, 1975; R/1117/76, Rate of increase in non-compulsory expenditure, 1977; R/1370/75, Audit Board Report, 1973; R/118/76, Audit Board Report, 1974; R/1290/76, Discharge to Commission in respect of 1973 budgets, draft Council Decision; R/1291/76, Discharge to Commission in respect of 1974 budgets, draft Council Decision.
  I regret having had to read those titles out to the House, but had I not done so I do not think that they would have appeared in the Official Report, and we know what an invaluable source of information Hansard is.
  Had I been able to be on the committee which my hon. Friend mentioned, I, and no doubt others, would have wished to question Ministers on particular parts of the document before the House. But such a committee does not exist, and so the only thing I can do is to draw attention to one or two points in this document. They are technical points and I shall make no complaint if the Minister cannot answer them tonight. I hope that he will write to me and let me have the answers.
  There is, however, one point on which I think he will be able to comment. There has been some comment on the matter in the debate, but I do not think that it has been adequate. It is in relation to the Audit Board Report, Document R /118/76. On page 69 of that document, we have a report on the guarantee section

  1413
  of the Agricultural Fund, which is 68 per cent. of the budget of the whole Community. It says:
  "…only very limited examination by the Audit Board of the operations of the Guarantee Section of EAGGF has been possible. As in previous years, the Board has not been in a position to form its own judgment of the manner in which the operations have been conducted or to give an opinion on the reliability of the financial management of this sector of expenditure. Such a circumstance is irreconcilable with the specific task which Article 90 of the Financial Regulation requires of the external audit body and should receive attention from the Council and the European Parliament."
  I hope that my hon. Friend will give an undertaking that the Council of Ministers will look at this matter. If such a qualification were attached to any firm in this country, the Department of Trade would be down on it at once, there would be Questions in the House, and so on. It is a massive qualification on the way in which the guarantee fund is administered, and we all know what loopholes there can be in matters of storage, grant, and so on.
  My hon. Friend the Member for Fife, Central is very active in the European Assembly in pressing for the setting up of the equivalent of our Public Accounts Committee. But it seems that in this matter even the European Assembly has not been able to get very far. I hope that the attention of the House and the country is drawn to what I regard as a prima facie scandalous statement of the first political order.
  I turn from a matter of major concern to one which is perhaps not spectacular but which causes anxiety to some of us —the expenditure of the Community on information services. Page 69 of the document 1483/76 shows considerable expenditure in this regard—some 7·5 mua, of which 5.9 mua have been related to expenditure on information, popularisation and participation in public events. In this country we have a very clear practice of knowing on what public money can be properly spent. In the EEC this practice does not apply in the same way.
  On page 184 of the budget this sum has been broken down to some extent There is a considerable sum involved here—5·6 mua, considerably more than the 4·8 mua for 1976—on information directed at specific categories of people, such as farmers, consumers, middle and
  1414
  senior management, trade unionists, universities, young people, and educational circles. I do not think that there is any cause for concern in the fact that the EEC is letting these people know about the regulations, but many people are concerned about whether this is information, or perhaps a little more than information—the giving of points of view, bordering on what might be called propaganda.
  Mr. Teddy Taylor: Perhaps the hon. Member could tell me whether the 7·5 mua include the cost of all those trips which my constituents are being offered to go to Europe and hear all about it. My constituents are getting a little annoyed that these trips should be offered to Europe when the local authority cannot even provide them with home helps. They think that this is a very strange situation.
  Mr. Spearing: The hon. Member has raised a point that I was about to come to. In the back of many people's mind, there is the question whether this information for these categories includes free trips. Probably it does. Probably the attitude is that one cannot get the full flavour of the European Assembly unless one actually attends it. Visits of all sorts have been arranged. The funds for these may come direct from the EEC or from some European movement. The trips are aimed particularly at people who are in a position to use their influence.
  I am not against these people being sent free literature on factual matters, although, as everyone knows, in this country the question whether such information should be supplied out of public funds is one which is hotly debated. If we are to apply these standards to our own Government we should also make sure that standards are applied elsewhere. I am not saying that they should be the same standards, but we should know what standards, rules and practices do apply. Perhaps the Audit Board could look at this. It may find something interesting here.
  Mr. Hooley: Would my hon. Friend agree that a little more money could be spent on telling us what goes on in the Council of Ministers? That would be money well spent.
  Mr. Spearing: My hon. Friend is very much to the point. Some time ago I put

  1415
  down Questions about the nature of the Council of Ministers and its report to the public. There seems to be some difficulty here. I am not saying that the Council of Ministers should publicise its minutes, or have a verbatim record as we do in this House. I would not go as far as that, although I know that some of my hon. Friends would. However, I believe that after it has met the Council should give us a clear and adequate account of the decisions it has made.
  When the Prime Minister came back from the last Summit meeting and gave us his report last Wednesday he said that copies of the communiqué would be placed in the Library. I went to the Library hoping to get some information and found three or four sheets of paper with three or four lines on each. That is the extent to which the Community lets us know what decisions are taken at the Summit.
  I am not suggesting that we should get complete detail, but quite clearly if each Minister returned to his Government with his own version of what had been agreed at the Council that could lead to genuine misunderstanding. I would have thought that money spent on information about what had been decided would be money well spent.
  Mr. Alexander Fletcher: I am surprised at the hon. Member's timidity on this point. At the last meeting of the Parliament in Luxembourg I put a question to the President of the Council of Ministers asking him to publish the full minutes of Council meetings where the Council was acting in a legislative capacity. I was unsuccessful, but I shall continue to press the point. The Council has dual functions—the executive function and the legislative function—and there is no reason why when it meets in its legislative capacity it should not publish the full minutes of the discussions.
  Mr. Spearing: I agree with the hon. Member. I am glad that he thinks that I am perhaps a little timid on this issue because I have been accused of continual and persistent exaggeration. The equivalent of what is required is in this House the Journal of the House. It is the acta of what is legislated here. If
  1416
  the House passes various regulations it is only through the Journal that we can tell what has been agreed, and if we could not do that there would clearly be something wrong with our procedure.
  Those who have been calling for greater democratic surveillance of what goes in the EEC should bear in mind the procedures of this House. If we do not get a proper response to our requests we must make plain our dissatisfaction. We are, after all, dealing with money contributed by taxpayers to the EEC. Much of it goes directly to Brussels and we have a right not only to a proper audit board but to proper accountability by the legislative bodies there.
  I am concerned about the amount of money spent on subsidising tobacco. We all have experience of relatives and friends or from the hospitals in our constituencies of the ravages which overindulgence in that product can provoke. Few people, however, know that the EEC supports tobacco-growing as part of the agricultural guarantee fund. I do not say that people should not be free to consume tobacco. It is a matter for them. It is also a matter for the EEC to decide where it purchases its tobacco, or whether it grows it itself at a higher cost. Page 349 of the draft budget states that the aim is to secure
  "An adequate income for growers with well-managed undertakings."
  On the back of that document is a very strange group of figures. I cannot determine whether the sum expended on supporting tobacco growing is 8 mua a year or 80 mua a year. I suspect that it is the latter. Perhaps my hon. Friend will write to me on this point, if he cannot reply tonight, and say whether the Government support such expenditure. We spend about £1 million a year on education in preventive medicine in this country, and it is but a mere fraction of what we are prepared to see allotted to the support of this crop inside the EEC. It is a matter of principle on which both the Government and the public should now ask a few questions.
  My last question about this hypothetical Select Committee which we have not got but which apparently everyone wants relates to the comptence of the EEC in spending on matters connected with education. Those of us who remember the referendum will recall how

  1417
  people went on television and radio to assure the British public that education was nothing to do with the EEC. But on 10th June we had a debate in this House, as they did in the other place, on a document entitled "A Programme of Action". On 18th June, I asked my right hon. Friend the Secretary of State for Education and Science what status the meeting of education Ministers "within the Council"—which is the way that it is put—had under the Treaty of Rome. My right hon. Friend replied:
  "Meetings of Ministers within the Council have no status under the Treaty of Rome."—[Official Report, 18th June 1976; Vol. 913, c. 281.]
  Yet that Council authorised the expenditure of about 500,000 ua for this action programme. It is true that 290,000 ua was for the education of migrant children, under the social programme, no doubt, and that applies to the mainland of the EEC, although it does not apply to us. But there were other sums in this programme of action, and quite a considerable expenditure is now involved.
  In a further Answer on the same day, my right hon. Friend the Secretary of State was extremely vague about the article of the Treaty of Rome under which this action was taken. He said that no particular article was cited in the document concerned, which was R/26376, but he prayed in aid Article 2 of the Treaty of Rome, which is, of course, a very general treaty.
  We shall shortly be debating in this House and no doubt in the country whether there shall be direct elections to the European Assembly. Those hon. Members who favour this step will be either those who support a federal European State—and that is their concern—or those who say that we should have greater accountability of our Ministers and of European institutions to the people. I have suggested a number of different ways in which we can do that now, through the institutions of this House, through Select Committees and through the acceptance of Procedure Committee which was rejected by the Government on a payroll vote on 3rd November. I have also suggested—and I am supported by a number of Opposition Members—how this can be done better within the Council itself by the publication of more relevant and up to date information.
  1418
  When we debate this issue, I suggest that there are ample ways in which the Community can be made answerable to national Parliaments and to the Members who represent the public who provide the cash. The British people are becoming very cynical about the authorities—and not only about local councils but about the Government, of whatever colour, and this House. Unless we tighten up on the historic chain of accountability between those who provide the money and those who spend it, not only faith in our own domestic legislature but also faith in and good will towards the EEC will be found wanting.
  These budget debates are perhaps less important than some of us would wish. We know that the historic power of this House was founded on its power over what was taxed and what was spent. The way in which the budget of the EEC is presented to us and the way in which we deal with it in this House have been consistently unsatisfactory. We can tighten it. We do not need to await direct elections. We can do it now, if this House thinks fit, by a resolution of the House.
  10 p.m.
  Mr. Douglas Hurd: Many references have been made to the improvements in procedures for handling the budget of the Community. I do not think that this House can claim much credit for those improvements; they are obviously due partly to the Commission, partly to the European Parliament and, from what I have heard, not least to the work of my hon. Friend the Member for Scarborough (Mr. Shaw) and his colleagues on our delegation. It is right that those of us who are not members of that delegation should have the opportunity to thank and congratulate hon. Members in the Parliament.
  The Chief Secretary had some doubt about the advantages of bringing forward the publication of what he correctly called a forecasting document. He said that the earlier figures were prepared the more uncertain they were likely to be, and that we could not take into account the figures for the harvest which became available later.
  I can see the force of that argument, but it would be to the advantage of both the European Parliament and this House

  1419
  to have an early opportunity to discuss the outline of Community spending. This could be valuable if we used it as an opportunity to range over the spending and, therefore, the policies of the Community in an attempt to influence the decisions on that spending before they were made.
  I hope that the Financial Secretary will give us a reasonably wide-ranging reply to the various points raised in the debate. It is not good enough to hide behind the limited powers of the Budget Council. The hon. Gentleman is not speaking tonight for the Treasury alone; he is speaking for the Government and for the spending as well as the saving Ministers.
  This debate ought to be about a wider portrait of the Government's attitude to Community spending and policies. That is my answer to the questions posed by the hon. and learned Member for Montgomery (Mr. Hooson), who was sceptical about the purpose of the debate. He said that we could not examine the Community budget in detail. That will be the responsibility—perhaps the most important responsibility—of the European Parliament, particularly when it is directly elected.
  We can and should—though I do not pretend that we do—influence the Ministers who go to Brussels on our behalf to spend and to approve spending. That should be the purpose of this debate. It should be our purpose to influence not just the Financial Secretary but all Ministers who go to Brussels or Luxembourg on our behalf to approve spending within or without the terms of the budget. I agree with my hon. Friend the Member for Banbury (Mr. Marten) that we should have reached the stage of debating the policies of the Community on their merits—praise where praise is due and blame where blame is due.
  On the Opposition side of the House, we have been reasonably good at that. Where there have been policies that we have thought wrong—for instance, on skimmed milk and in respect of the tax on margarine—we have said so. But that policy has not been at work among those hon. Members who opposed our entry. I have yet to hear a passage in the voluminous speeches of the hon. Member for Newham, South (Mr. Spearing) praising
  1420
  a policy or principle of the Community. When that day dawns, when we hear that from the hon. Gentleman—I think we shall one day—and perhaps from my hon. Friend the Member for Banbury (Mr. Marten), I am sure that we shall begin to have better debates on Europe.
  Mr. Hooley: One of the difficulties was that when this House took a decision on, for example, skimmed milk we were told that it did not make the slightest bit of difference.
  Mr. Hurd: The hon. Gentleman has made a serious point. It is true that this House has not yet learned how to exercise its own influence in time and effectively on British Ministers. We tend to do it too late. We do not set about it in the right way. We have not yet learned our own European dimension. That is the beam in our own eye and we should concentrate on that, with the help of the Scrutiny Committee, before we worry too much about the mote in other people's eyes.
  My hon. Friend the Member for Scarborough pointed out that the Community budget is less than 2 per cent. of the total of the budgets of the member States. Therefore, it does not loom very large in terms of public expenditure as a whole. Nevertheless, one cannot consistently press for spending restraints at home and for spending adventures in Europe.
  I agree with my hon. Friend the Member for Banbury that we should be as watchful for waste and bureaucracy in the Community, to which we now belong, as for waste and bureaucracy in this country. That is an essential part of the case for direct elections to the European Parliament, because that is where the watchfulness is easiest.
  No one could be happy about the balance of spending now in the Community budget. We understand how it comes about that nearly 70 per cent. of Community spending is on agriculture. We understand that, as my right hon. Friend the Member for Knutsford (Mr. Davies) pointed out, we must take account of the total spending on agriculture and of the fact that, if as a Community we spend more, national budgets are relieved and that the principle for

  1421
  agriculture is different from the principle for industry.
  I do not believe that if this country had joined the European Community in 1963, or earlier, we would now be considering a Community budget in which more than two-thirds of the spending went on agriculture. It is a balance which is not satisfactory for this country or for Europe in the long run.
  On the other side of the balance—the one-third—we have as two of the main items the Regional Development Fund and the Social Fund. I should like to ask the Financial Secretary some questions on both those items. How do the Government sec the future of the fund? This is the kind of question which should be posed and to which the Government ought to give an answer. How do they see the future of the fund after the present agreement, which has one more year to run, runs out? Will they press for it to be renewed? If so, on what kind of basis?
  My hon. Friend the Member for Edinburgh, North (Mr. Fletcher) stressed the importance of this matter. It goes far beyond Scotland in its importance.
  What about the principle of additionality? I do not want to go into the principle whether it is right for the Community to insist that funds made available through that institution should be used for policies additional to national policies, but that is the basis of the scheme for the Regional Fund. If that basis had not existed, it is doubtful whether the Regional Fund would have been accepted by, say, the Germans, even in the limited form which we now have. When we consider renewing it, they are likely to be even more insistent because they suspect, with justice, that the British Government have not abided by the principle.
  Last year when we debated this matter the Minister gave a hazy undertaking that the Government were looking at it. What is the position now? Do the Government accept the principle of additionality as regards the Regional Fund?
  On the Social Fund, we concede that already large figures are involved. An answer in the other place showed that last year the United Kingdom was allocated nearly £46 million from the Social Fund. An answer recently given to me
  1422
  showed that, of the £93 million which the Government were spending last year on industrial retraining through the Training Opportunities Scheme, just on £22 million was allocated from the European Social Fund. That is a substantial slice of help from Europe for the alleviation of unemployment and the equipping of our work force with new skills which we all think are extremely important. What is the Government's views about that? How do they see the Social Fund developing?
  I do not wish to weary the House with a long speech, but I must interpose here and say that I have much sympathy —I imagine that good many of us do—with the point made by the hon. Member for West Lothian (Mr. Dalyell) about the nomadic nature of the European Parliament. It is not just a question of wasting money, although what he said on that score must be true; there is also a wasting of authority. I cannot believe that a directly elected European Parliament, once established, will feel that it can possibly function successfully or exercise the sort of authority that people in Europe will look for if it wanders about in the present untidy and undignified way. Inevitably—it should be encouraged to do so by this House and by the Government—it must find a place, perhaps settled in advance—I do not want to prejudge the timetable or the place, since we all have different ideas about that—where it can settle down and exercise its legitimate authority.
  I come now to the question of the common agricultural policy. As my right hon. Friend the Member for Knuts-ford reminded us, it is difficult to compare like with like in this matter, since no one set of figures is truly comparable with another—perhaps that is the trap into which my hon. Friend the Member for Banbury fell when he quoted figures —but, having looked at the figures as carefully as I can, I find it hard to accept that these large sums are being applied at present in such a way as to make European agriculture more effective and efficient.
  The balance between guidance and guarantee is disturbing. We have not had for some time—indeed, not since the referendum, as far as I can recall—a clear statement from the Government

  1423
  about how they see the balance, about how the stocktaking exercise is going from their point of view, and about what they want to do. My hon. Friend the Member for Scarborough raised an interesting question when he wondered why there should be this reticence. In the mythology of these matters, we are accustomed to thinking that it is the French and perhaps the German farmers who are obstructing and holding up the reshaping into a more sensible form of common agricultural policy, but that is certainly not the whole truth. In fact—the document now before us makes this clear-12 per cent. of the present budget goes, or will go, on monetary compensatory amounts, and 20 per cent. of the agricultural budget goes in that way.
  How much of that money is now coming to Britain to relieve the British housewife of the consequences that would otherwise flow from the fall in the value of the pound? There was an authoritative Press article at the beginning of June suggesting that we were now benefiting from these European food subsidies by £15 million a month, and I saw an article last week suggesting that the figure had risen to £20 million a month. This is a matter of public interest on which are entitled to an answer.
  What is the Government's view of the figure of inflow of help from the Community to assist in keeping down the price of food, which would otherwise rise as a result of the fall in the value of the pound? M. Cheysson has described this as an intolerable burden on the Community—not just from the British angle, since other countries are involved —and I want to know whether the Financial Secretary agrees with that comment.
  Mr. Dalyell: Does the hon. Gentleman realise that there are Germans in the European Parliament who think that it is now running at £300 million a year?
  Mr. Hurd: I am not sure whether the hon. Gentleman is thinking of Britain alone or of the total—
  Mr. Dalyell: Britain alone.
  Mr. Hurd: —but at any rate his intervention underlines the need for some straight speaking from the Treasury Bench about the rate at which the figure is running.
  I introduce these matters simply to show that almost every country, when it comes to think about Community policies, has a skeleton rattling in its cupboard, or, more accurately, some special interest—some large hungry creature that it hopes to feed from the Community board without others noticing too closely how large the animal's appetite is. That is fine, up to a point. The Community consists of democratic politicians who understand each other's needs and are prepared to be flexible about them, but that cannot be all that the Community is about if the Community is to be worth anything. It is a little like a board of one of those companies that we do not particularly admire, which spends a lot of time discussing what perks and fringe benefits each member of the board is entitled to receive. The discussion of the Community budget in the European Parliament, in the Council of Ministers and in this House should—and I emphasise should—provide an opportunity for a wider look than that at the direction in which the Community should move.
  I hope that the Financial Secretary will answer some of the questions asked by my right hon. and hon. Friends and which I have put to him. I hope that we can hear, in particular, how he sees the present balance of expenditure within the Community between agriculture and the rest, and, within agriculture, between guidance and guarantee. Unless we can have debates in this House and express our views on, and influence the conduct of Ministers on, a strategic approach of that kind to the future of the Community, neither Britain nor the Community to which we belong can expect to flourish.
  10.16 p.m.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): The hon. Member for Mid-Oxon (Mr. Hurd) asked for a wider portrait of the problems facing the Community. I am sorry, but I shall not be able to provide that, for reasons which I think he can well understand. What we are concerned with

  1425
  is the Community budget, and that is a more limited aim. I take the point made by my hon. Friend the Member for Farnworth (Mr. Roper), and I shall deal with it in due course, but I am unable to present the whole picture in the way in which the hon. Gentleman wants. I can, however, answer one or two of his questions and ask him to take up the other matters with those with more immediate and direct ministerial responsibility for them.
  The hon. Member for Mid-Oxon asked about the amount of money coming to the United Kingdom. He will understand that I cannot give him the amounts arising from the fall in the value of the pound. That will be understood, because this is a recent event and our figures do not cover this period.
  Mr. Hurd: Is the hon. Gentleman saying that the fall in the value of the pound is a recent phenomenon? It has been continuing at different rates for a long time.
  Mr. Sheldon: I thought that the hon. Gentleman had in mind the events of the past few months during which the pound fell. One would need to specify the periods that one had in mind before being able to make such calculations. In any event, the calculations would be extremely complex because they would take into account changing contributions and receipts. Because of recent changes, even those computations would not be possible, even if they were simpler to make than they are, but the hon. Gentleman will know that in 1975 there was a net contribution inwards to this country of £56 million. That is the last complete figure that we have. That is the last figure that I can give with precision in answer to his question.
  The hon. Gentleman mentioned the nomadic nature of the Parliament, and this has been referred to by a number of hon. Members. We can see the problems, and I take note of them.
  Mr. Dalyell: No doubt my hon. Friend is sympathetic, but what we have to pinpoint is where the responsibility lies. Will he at some convenient moment, perhaps in a letter, outline precisely where the responsibility lies? There is a good deal of buck-passing in this matter.
  Mr. Sheldon: I note my hon. Friend's point but I have no immediate responsibility for the location of the European Assembly, although like any member of this Government I am obviously concerned about the aspect on which he strikes a chord—that of expenditure. I note that expense and it is something that we shall have to consider.
  Mr. Michael Shaw: I am sorry to interrupt again so soon, but this is an important matter. If the hon. Gentleman has no responsibility and if the Prime Minister has none, one might ask who has. Is it not the case that the Government have one-ninth of the collective responsibility and therefore should be playing their part in finding a single seat for the European Parliament?
  Mr. Sheldon: I understand that point, but what we are considering here is the Community budget. That is the aspect which concerns us and the task of assessing the budget is to ensure that those proposals which are undertaken and accepted by the Community are paid for through the Community budget and are anticipated and that the appropriations are duly made as a result of those policies being implemented. That is what we are debating and that is what I have to deal with.
  Mr. Spearing: This bears very much on the point of the hon. Member for Mid-Oxon (Mr. Hurd) about our doubts. Someone has to pay not only for the rents of the halls but for the furniture vans and so on to take all this material back and forth. If that is so, surely there must either be a Vote or it is down on a particular account, and on that matter either the majority of the Council agrees or there is some disagreement. If there was some disagreement, did Her Majesty's Government vote in favour of a single centre, or, if there is agreement, on what Vote does the matter arise and what control do the Finance Ministers have over it?
  Mr. Sheldon: The task of the Community budget is to implement those decisions and when a decision is taken to have more than one centre or to reduce the number in any way the amounts of money will be specified and it will be up to my right hon. Friend the Chief Secretary to scrutinise that expenditure and to ensure along with his colleagues examining these matters that that expenditure

  1427
  accords with the provision that has been made by those responsible for the policy. It is up to the Council of Ministers itself to make the decisions on policy in the way we all well know.
  Mr. Alexander Fletcher: With respect, the hon. Gentleman is presenting a very narrow book-keeping attitude. He is suggesting that the cost of the policies is different from the policies themselves. Surely, if we are discussing any matter of cost, whether in the United Kingdom or in Europe, we must speak together of the policy and its cost. That is the point to which we are addressing ourselves.
  Mr. Sheldon: I understand that the hon. Gentleman wants to get at the policy which underlies the expenditure and I have great sympathy with him. But that is not what we are debating in the Community budget. What we are debating and what we debated last year—precisely the same points were made then as are being made today—is ensuring that those policies which are carried out have the amounts of money accorded to them that were originally envisaged. Hon. Members may, rightly, complain that that is not what they would like to be discussing. There are many occasions in this House when we debate things which we should not like debated and many more occasions when we should like to debate things which it is not possible to debate under our rules of procedure. We are debating a much narrower matter over which my right hon. Friend the Chief Secretary exercises control on behalf of the Government.
  My hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) asked whether provision for the Joint European Torus was included in the budget for 1977. I confirm that it is, but before the money can be spent there has to be a Council decision on the siting of the project. My hon. Friend also asked me about the development of policies on aerospace, hydrocarbons, transport and other matters, but I cannot deal with questions of policy. These proposals do not come to the Budget Council for approval unless there is agreement that they represent Community policy. My hon. Friend needs to look at Community policy to satisfy himself whether these projects will go forward in the way he wishes.
  The hon. Member for Banbury (Mr. Marten) asked for another debate on the
  1428
  budget in the autumn. I understand his desire for lengthy and frequent debates on matters of such great interest to him. Far be it from me to deny him the opportunity of speaking on these matters, but he will know that the timing of debates is for my right hon. Friend the Leader of the House. No doubt the hon. Gentleman will question him at business question time, as he does from time to time.
  Mr. Marten: I am not asking the Leader of the House. The Financial Secretary is representing his Department, and I am asking him whether he thinks it right that when the details have been firmed the budget should come back to the House of Commons for further debate in the same way as the European draft regulation concerning New Zealand was debated in blank and came back for a second debate after it was filled in. I am asking the Financial Secretary.
  Mr. Sheldon: I am always happy to appear in the House on any occasion when I can be of assistance, but it would be wrong for me to pre-empt the decision of my right hon. Friend the Leader of the House on which business should be taken at which time of the year. That is a matter for him to decide. I can only confirm that I shall be at the service of the House in whatever way I can best help it.
  The hon. Member for Banbury also asked me about the guidance section which had fallen in percentage terms. The right hon. Member for Knutsford (Mr. Davies) referred to the division of the commitments and payments appropriations. This is an example of payments appropriations which are expected to be less in 1977.
  My hon. Friend the Member for Newham, South (Mr. Spearing) wished that there was a standing Select Committee on these matters—
  Mr. Spearing: If I may put it correctly, I want a committee, as recommended by the Select Committee on Procedure, to look at these documents in greater detail over a greater period of time.
  Mr. Sheldon: I understand the point made by my hon. Friend. I note the ingenuity with which my hon. Friend raises these matters. He and the hon. Member for Banbury by themselves almost constitute a standing Select Committee. Certainly they bring these matters to our

  1429
  attention and perform a service, perhaps of a slightly different kind from the service which they think they perform but nevertheless useful and valuable to the House.
  My hon. Friend the Member for Newham, South referred to support for tobacco-growing. That is agricultural support, and I shall look into the points he raised. Meanwhile, I can inform him from a reading of the documents that there has been a decline in the support given to tobacco growing over the past two years.
  My hon. Friend the Member for Fife, Central (Mr. Hamilton) mentioned that the House is not equipped to deal with expenditure, citing the problems of controlling public expenditure here, let alone the expenditure in the Community. I take the point but quarrel with one part at any rate of what he said. The Expenditure Committee does not deal with expenditure not because it is unable to, but, for some reason, because it has not seen fit to do so. The organisation exists for it to take control. We have potentially half a dozen Select Committees, but they have not exercised their muscles, although those muscles are there waiting to be used. But that is all I should say on these matters because they do not lie strictly within the debate.
  My hon. Friend the Member for West Lothian (Mr. Dalyell) talked about the discipline imposed upon an Assembly which not only spends but has to raise money. No one can dispute the dangers of an Assembly with the power to spend but without the discipline of raising the money, because that process is a little one-sided. One must look at these institutions with some care, therefore, and we note my hon. Friend's reservations. I noted—indeed, awaited—his comparison between the European Assembly in this respect and the set-up advocated by hon. Members from the Scottish National Party for Scotland.
  I thank my hon. Friend for his comments about Treasury officials in the Community and the way in which they have been able to assist in general terms. I shall be happy to pass on his comments to them in due course.
  Mr. Dalyell: I also said that it was a bit crucial that the sub-committee on Control of the European Parliament should have access to the civil servants of
  1430
  our nation States. Is my hon. Friend in a position to comment on that?
  Mr. Sheldon: I noted that point and was interested in it, but I am unable to comment on it at present. I should like to think it over and consider what implications are involved in it.
  My hon. Friend the Member for West Lothian, the hon. Member for Scarborough (Mr. Shaw) and my hon. Friend the Member for Heeley raised important points concerning the need for a Court of Audit, and there was discussion of the problem of ensuring a satisfactory audit. We in the United Kingdom can claim credit for pressing for the Audit Board, a part-time body, to be replaced by an audit court full-time and able to carry out the kind of scrutiny we have come to regard as normal. I noted the point made by the hon. Member for Scarborough about the European Assembly setting up a sub-committee and comparing it with the role of our Public Accounts Committee. Our delegation has played a prominent part in that process and our whole attitude to this matter has been useful and helpful to achieving the kind of detailed scrutiny which we take for granted and which eventually the Community will have to acquire.
  My hon. Friend the Member for Farnworth and the right hon. Member for Knutsford wanted the fiche financeère to be made more effective, and I take the point. I think there has been some progress in that direction. I understand that most policy proposals coming to the Council have the fiche financière attached to them. Although the comprehensiveness varies, advances are being made, although perhaps more slowly than we would wish. But I understand the problem, and the United Kingdom will continue to press this matter, which is very important.
  The hon. Member for Scarborough spoke of the advantages in commitment and payment appropriations being divided in this way. He gave a useful piece of instruction to the hon. and learned Member for Montgomery (Mr. Hooson) about the problems of carry-forwards and retaining adequate control. This is one of the crucial reasons why we need these commitment and payment appropriations.
  My hon. Friend the Member for Farnworth sought to find a comparison

  1431
  between the budget document and the White Paper on public expenditure. Without committing myself whether this is the precise way in which we should proceed, I can say that I understand the point that he was making. We know the way in which developments occurred in this country, over a long period and with great difficulty, until we reached the stage of having a White Paper. No one can say, even at this stage, that we have reached the ultimate solution. We can therefore, understand some of the problems in applying these lessons in a European context. There are certain things which we have learned in our own Parliament which we must press to be applied in the European Assembly, when analogies can usefully be made.
  Mr. John Davies: In the course of his response to the debate the Financial Secretary has concentrated almost entirely on the technical and monitoring aspects of the budget. In doing so he has failed entirely to respond to the invitation of my hon. Friend the Member for Mid-Oxon (Mr. Hurd) to give a broader conspectus of the Community, looking at it from a financial and budgetary point of view. It would be a pity if the hon. Gentleman's response were to set a pattern for this debate. The whole purpose of it, knowing the great differences there are between this budget and the national budget, is to look at the Community as a whole in financial terms. I would feel sorry if the hon. Gentleman's response were taken as an indication of the Government's view that we were dealing with the matter purely as a technical or monitoring proposition.
  Mr. Sheldon: I understand the point and I can see that there are many who would like to see this turned into something approaching a Budget debate. That does not misrepresent their views. But the debate is not of that type. I must correct the hon. Member for Mid-Oxon. This is a much narrower debate than that. When my right hon. Friend goes to Brussels he does not discuss the whole of the financial arrangements—how much can be spent, where the money can be spent, and so on. If that were so, it would have a much more powerful and much more fundamental role than it is. I must query this interpretation. We are following the pattern of last year's de-
  1432
  bate. What we are concerned with is this kind of budgetary control. It may be that hon. Members who do not like things done this way will be successful in introducing certain changes. Perhaps they can make representations which could be further considered. Such matters cannot fall for consideration during this debate, which is much narrower than some hon. Members would wish.
  Mr. Hurd: Surely it is narrow because the hon. Gentleman has made it narrow. The House is discussing not just the responsibilities of the Chief Secretary but a large quantity of documents. In the documents is contained an analysis of a large number of Community policies. It is not unreasonable for the House to ask the Minister to comment on those policies and to provide answers to the points that have been raised. There is no reason for us to accept the narrow definition of the debate.
  Mr. Sheldon: I well understand the point that the hon. Gentleman is making, but when my right hon. Friend the Chief Secretary attends these meetings he is concerned, unfortunately for the hon. Gentleman, with the much narrower issues whether the policies have been agreed and whether the appropriations are in line with the policies that are agreed by other Ministers.
  Mr. Roper: I appreciate that that has been the tradition of the Budget Ministers' Council, but will my hon. Friend take back to his right hon. and hon. Friends the hope that next year, when the presidency of the Council of Ministers will be in British hands and when British Ministers will be in the chair of various Councils, they will try to develop a new role for the various Councils so that we can manage once again to re-integrate the Council of Ministers?
  Mr. Sheldon: I can be much more favourably inclined to the point put forward by my hon. Friend. He has accepted, as I think the whole House will have to accept, that these are traditional rôles in the Community budget. This is what it is about, But my hon. Friend now asks that those rôles should change. I am prepared to consider that and to ask my right hon. Friends who have responsibility for these matters to understand and to take note of the point that is made by my hon. Friend, and, if

  1433
  they can, to bring about such changes both in the Community and among their Community colleagues. When we come to the next debate on these matters we may have something to report if those representations are accepted.
  Question put and agreed to.
  Resolved,
  That this House takes note of Commission Document No. R/1483/76 relating to the EEC 1977 Preliminary Draft Budget.

  KEARNEY AND TRECKER MARWIN LIMITED (FINANCIAL ASSISTANCE)
  10.43 p.m.
  The Minister of State, Department of Industry (Mr. Alan Williams): I beg to move,
  That this House authorises the Secretary of State to pay, or undertake to pay, sums not exceeding £1,900,000 by way of financial assistance, as to million in respect of a loan to Kearney & Trecker Marwin Limited and as to £900,000 in respect of the acquisition of share capital in that Company, under section 8 of the Industry Act 1972, as amended by section 22 of, and Part I of Schedule 4 to, the Industry Act 1975.
  I think it will be common ground to all who may consider taking part in the debate that we are dealing with an important machine-tool manufacturer. Most of us will hope that this will be the last in a series of moves to return the company to profitability.
  It is our intention, after consultations with everyone involved, that the company should be reconstructed financially by means of a Scheme of Arrangement under Section 206 of the Companies Act 1948. The scheme was approved at a series of shareholders' meetings held on 29th June by the overwhelming majority of each class of shareholder, and it is to come for approval before the court next week.
  As hon. Members will know, an investor has taken legal action to prevent the scheme going ahead, as he has a perfect right to do. It is utterly appropriate that it should be the court which decides whether the scheme goes ahead and whether it is in the interests of the shareholders. The important thing, which I am sure the House understands, is that there is nothing in the motion—it authorises payment but does not say that it shall take place—which would in any way prejudge the court's decision or prejudice the objector's position. Indeed, I personally investigated the matter thoroughly because, if I had thought that the objector's position had been prejudiced, I would not have felt able to bring the resolution before the House. Because the motion is in a sense the rubber stamp to the Government's commitment to the scheme, technically this motion is necessary before the court can consider the scheme. That consideration is due to begin on 26th July.
  1436
  I fully appreciate the concern of that one investor, but, since the objector's case is before the court, the House will fully appreciate that I am inhibited in discussing the merits of his case. Therefore, I must treat his case as sub judice, and merely say that the Government will abide by any decision taken by the court in this matter.
  The Government thought it right that we should debate this matter before the recess. Hon. Members who have been concerned with the affairs of my Department for far longer than I have will recollect that the crisis arose for this firm during last year's Summer Recess. The Government then had to act without the House having had the opportunity to debate the matter. It seemed to me important, from the point of view of avoiding uncertainty for the company's suppliers and customers, to clear the matter in this House before we go into the next Summer Recess. For that reason I brought the matter forward for debate today, and I look forward to the comments made on this matter in this debate.
  The company in its present form results from a merger in 1973 of Kearney and Trecker Limited of Brighton and Marwin Machine Tools Limited of Leicester, both of which had in the past been assisted by the Industrial Reorganisation Corporation. It is no secret that this is a sector of industry that is particularly prone to massive fluctuations in fortunes. The merger was approved by the then Conservative Administration, who provided £1,450,000 in assistance under section 8 of the Industry Act.
  It is worth pointing out that by the time the Conservative Government left office they had paid only £6–3 million in assistance under that Act, a point to which the hon. Member for Bridgwater (Mr. King) alluded in a recent debate. Therefore, I am sure that we shall have the Opposition's solid support for these proposals.
  The House will recollect that this was a somewhat unfortunate time for such companies. I shall not go into the political background of the economic disruption that subsequently burst on the country and on the industry. Suffice it to say that the cost of inflation took its toll. Contracts had been entered into on a fixed price basis. Although at that

  1437
  time fixed-price contracts were standard practice, cost inflation and the disruption of the three-day week quickly overtook the company, and it was necessary yet again to examine the company's future.
  In the early months of 1974 the Industrial Development Advisory Board advised the Government that, since there was a management deficiency in the firm, we should seek the management resources of a powerful industrial group. The idea was that the group should be invited to join in re-establishing the company with a new financial structure. An additional £3·5 million was provided under Section 8 of the Industry Act, to meet current commitments and to enable working capital to be made available through a new holding company of KTM Machine Tools (Holdings) Limited, in which the Department would hold 50 per cent. of the equity. The industrial partner was Vickers Limited—and all credit to it for the work it put in—and an undertaking was accepted by the then Secretary of State that Vickers, in taking this on without any real major financial return, would be given an option, exercisable at the end of April this year, to acquire a controlling interest in the holding company. Had this option been exercised, the Government's share of the equity would have been down to 24 per cent.—even below the blocking percentage.
  After Vickers took control it quickly applied a new financial discipline and asked questions which should have been asked previously, or should have been asked with more persistence. It became clear on the data that Vickers derived from its studies that the position of the company was far worse than originally envisaged. The deteriorating cash position necessitated in September 1975 a guarantee under Section 8 of £250,000 to the company's bankers made by the Government, and a similar guarantee of its financial commitment at this stage was made by Vickers.
  At this stage, total assistance under the Industry Act was £5·2 million, and as the House was in recess at the time, we were unable to debate the matter, which would have been helpful. The Government had to lay a statement, as provided for in the Industry Act, and this was laid on 13th October last year.
  1438
  As I intimated earlier, better information planning systems, which were needed in the firm, were established by Vickers. The evaluation of the company's future has now been completed. The story of the firm is far from happy. In the document circulated to shareholders there is a reference by the chairman to a loss of £5 million over the period from 1970. The losses are considerable, and a measure of risk is still involved for anyone who takes on the operations of the firm. There was a loss of £2·1 million for the year ended 30th September 1973, a loss of £1·6 million for the 15 months ended 29th December 1974, and the company showed a small loss of £100,000 in 1975. It has been in a loss position for some years. That has now been stabilised, or is near to breaking even, and the company expects to hold that position this year. However, one wants better results than that. One wants to see viability and a situation in which the company makes a profit and is successful.
  It is indicative that Vickers did not exercise its option in April to acquire control, because it thought that much of the existing shareholders' funds represented, in effect, a liability in that much of the assets had been lost in the affairs of the business over the last few years. But because it was a peculiar practice of the firm that in difficulty more funds were raised in the market, those funds were then added on to the queue for a call on profits. By the time the scheme came to be considered the accumulated call on any return the company made amounted to £1·25 million per year before any new capital could hope to receive a significant return.
  In the light of the previous losses it can be understood why we and Vickers felt that new capital was not likely to come forward. Therefore, we had to recognise that either the company should gradually run down into receivership or that we should try to wipe the slate clean and put it on a sound operational basis. We therefore discussed this with Vickers, and it indicated that it was prepared to invest in KTM to the extent of a controlling interest, subject to a reconstruction of the capital. The Kearney and Trecker Corporation of Milwaukee, one of the most advanced firms in this sector, has intimated that it would invest in KTM on

  1439
  that basis. That is an important link in giving a chance of survival and viability to the firm in the future.
  Therefore, subject to the approval of the House, the motion proposes that a further £1·9 million of assistance should be made available under the Act from the Government in the reconstruction to meet the situation from which we think viability may be attained. The Government will subscribe £900,000 in new nonvoting preference shares and make available an unsecured loan facility of £1 million. This will be matched by Vickers, which will provide an unsecured loan of £500,000 and guarantee £250,000 of the Government's loan. Vickers and Kearney and Trecker between them will contribute £900,000 in new voting preference shares in the company—in the proportion of £773,000 from Vickers and £127,000 from Kearney and Trecker. Under the new provision each party—the Government and the private sector—will be risking £1·65 million of new money. We must deduct from our £1·95 million the £250,000 guarantee of our funds which Vickers is providing. The £250,000 guarantee given last year will now no longer be required and will be withdrawn. We can therefore ignore it as an element in our consideration of the matter.
  The Government have concluded that we would be right to support reconstruction. We recognise that the industry inevitably has an area of risk and is subject to wide fluctuations in the placing of orders. There can be no guarantee of the future, but we believe, for reasons I hope to demonstrate, that perhaps now the company is in a better position to prosper than in the past, and that a solid foundation now exists for viability.
  In our industrial strategy generally the Government have emphasised the role of manufacturing industry, and hon. Members on both sides of the House will recognise the importance of the machine-tool industry in the health and development of our manufacturing industry generally. This industry is characterised not just by wild fluctuations in demand but by a considerable erosion of its capacity in recent years, and hon. Members are very familiar with debates in previous years on other companies.
  1440
  It so happens that Kearney and Trecker Marwin occupies an important place in the industry. The company manufactures numerical control machine tools, transfer machines and a range of standard machine tools. In the important area of numerical control, a number of its products are leaders in their particular field.
  It is the leading British-owned designer and manufacturer of numerical control machining centres and the largest manufacturer in this country of profiling machines.
  In particular, it is our only manufacturer of some of the larger profiling machines used in the aerospace industry, for which it has an internationally noted capability which has an important part to play in the European aircraft industry.
  It is one of our few remaining manufacturers of in-line transfer machines for the automotive and other large-volume industries. Nearly half its output, which at present amounts to some £13 million a year, is exported, and a large part of the remainder, because of its unique quality, can be regarded as direct import saving. The adverse effects of failure would not just have a balance of payments effect, but would mean a loss of domestic capacity at the very time when industrial demand for the products of the firm looks likely to revive.
  We would lose an indigenous design capacity which is important, and put at risk access to an advanced source of American design and manufacturing technology, through the link with Kearney and Trecker of Milwaukee.
  There would also be the loss of 800 jobs. I know that hon. Members on both sides would not willingly see this happen in the present context, particularly as this industry has often found in the past, to its cost, that skilled men lost to it in a downturn are rarely regained when the industry picks up.
  The loss of the unique and valuable combination provided by KTM would seriously weaken our industry in one of the main areas in which it will need to concentrate in order that we can move away up-market from the simple and more conventional types of machine that are increasingly being built in the less-industrialised countries.

  1441
  We are satisfied that the injection of new capital under the scheme of arrangement, coupled with the proven experience of Vickers' management, gives a good prospect for the future.
  We recognise that much of the Government's past investment has been lost, along with that of other past shareholders. It is investment for the future that we are considering, and we are trying to judge whether it is a worthwhile proposition or not.
  Mr. Ian Gow: Could the Minister tell the House what the terms of repayment are, and what rate of interest on this loan of £1 million is to be made?
  Mr. Williams: The rate of interest is at 1½ per cent. above base rate. The first repayment is in 1984 and the second in 1986. I cannot say off-hand whether it is loan first or capital first but I seem to recollect that somewhere in the forthcoming paragraphs of inspiration which are awaiting the House there may be that information. Indeed, I am relieved to tell the lion. Gentleman that my memory of what is in the speech is slightly better than my memory of the detail that it contains. The redemption of the shareholding is by 1986 and the repayment of the loan is by 1984. The timing of both these is at the discretion of Vickers, and it can, if it wishes, repay earlier.
  We regard the role of the Government here as a temporary one. It is for that reason that we have not taken an equity stake in the company, and, because there is no equity stake and no participation, it has not been appropriate to vest the shareholding in the National Enterprise Board. All shareholdings which have been vested there are in companies which have voting participation.
  I reiterate that this is an important company in an important sector of industry. We think that we have an opportunity of attaining profitability in the future. We believe that the scheme provides the three essentials necessary for viability: high quality management, which has not been available in the past; additional finance at the appropriate time; and continuing access via KTC of Milwaukee to technological innovation and the latest technological design.
  11.7 p.m.
  Mr. Tom King: First, I want to thank the Minister for the painstaking way in which he presented a very complicated motion to the House. His efforts in this respect are in stark contrast to those of one or two of his colleagues in the Department, who seem to think that a three-line opening will get through some of the more contentious business.
  However, the Minister will understand when I say in a friendly way that his performance tonight was not quite his most impressive one at the Dispatch Box. Although a lot of facts were presented, it was a muddled presentation. I thought that it consisted of few sweeps round pious hopes for the machine-tool industry and the odd delve into rather arcane financial arrangements, and that he did not explain the situation as clearly as we should have liked. Unfortunately, some of his facts were wrong as well, which is always confusing in a complicated situation of this kind.
  The Minister referred to the reconstruction as being last year, whereas it was two years ago, although that may have been merely a slip on his part. He referred to the Conservative Government putting in £1·45 million and that strange non sequitur that it represented one-fifth of our industrial strategy, which seemed a totally meaningless comment. But he omitted to mention that that coincided with the repayment by the company of £1·25 million, which was the loan that it received from the IRC, so that that perhaps reduces the one-fifth to about one-fiftieth of our industrial strategy.
  The Minister said quite fairly that this was a matter which had come before the House on previous occasions. If I were looking for a title for my brief contribution it would be "The last chance for Kearney and Trecker Marwin", and, as a sub-title, perhaps "The first real chance for it". It is a fact that these very complicated proposals for the reorganisation of the capital structure are the end of a long series of interventions ever since the IRC first got involved in both Kearney & Trecker and Marwin.
  Now we have a situation in which this reorganisation proposes the cancellation of eight old classes of shares and subordinated loans and their replacement with five new categories of shares. I am

  1443
  no expert in these matters, but certainly it is the most complicated situation that I have ever seen. It was our hope that it would have been possible to go forward on a more logical and streamlined basis than we seem to be embarking upon at the moment.
  Approval of the motion is only one of the hurdles that the re-organisation has to surmount.
  What is the position of the objector? In the informal notice of forthcoming business, we were advised that this motion was to be taken two weeks ago and when the Leader of the House did not announce it in the House, I asked why it was not coming forward. The right hon. Gentleman's Department sent me a courteous note explaining that there was an objector and it was considering the propriety of introducing the motion while there was an objection outstanding.
  I understand the Minister's point that it may not be possible to object to a scheme unless it is able to proceed, but I should not wish our deliberations to prejudice the right of anyone before the courts. I was pleased to hear what the Minister said about the rights of the individual and other shareholders in this matter. Of course, it will be for the courts to decide, and the individual concerned has the opportunity to make his representations.
  Mr. Alan Williams: This issue was dealt with before I joined the Department, so I came new to it. I found it as complex as does the hon. Member. The first matter on which I sought an assurance before giving the go-ahead was that we should not prejudice the position of the petitioner. I repeat the assurance in my speech that if I had thought that we were prejudicing his position I should not have brought forward this debate.
  Mr. King: The Minister made that point in his speech, but it is of sufficient importance that I understand his wish to reinforce it. We take no different view.
  Our duty is to decide whether Parliament should approve the provision of new Government funds and the writing off of substantial sums of Government money in previous investment.
  The Minister went quickly through the basic details. The motion clears £6·8 mil-
  1444
  lion of accumulated losses from the balance sheet, provides for a new injection of £2 million, reduces the interest burden of £800,000—a staggering figure for a company of this size—provides for the Government to put in £900,000 for which they will receive redeemable preference shares and includes a £1 million unsecured loan. Vickers will have 86 per cent. of the voting shares, with the other 14 per cent. held by KTC.
  That is the bare bones of the situation, but what has really happened? The Government had effective control of this company and they are surrendering that control, writing off £5 million of Government money and injecting another £2 million on condition that Vickers run it in future.
  I notice that the Minister moved pretty smartly over these details. What has happened to the NEB—that great spearhead of the regeneration of British industry? It is not to be seen. This project is not thought suitable for the Board. We welcome the recognition that this is an area in which the NEB, in terms of managerial expertise, does not have a role to play.
  There is also no suggestion that the State should have a share in the equity. There used to be a thesis that when public money was involved the Government should have a share of the action. On this side, we took a slightly different view. We felt that it was in the best interests of the country that all companies should be well run, profitable and successful and that this was the best way of achieving the national interest. We felt that decisions should be taken free of dogma, out-dated party manifestos and programmes, clause IV or any other such provision.
  Therefore, we welcome the recognition that Government funds can be involved in a rescue or regeneration situation without the terrible old baggage of the Government continually having to hold stakes in companies and the feeling that the NEB has to spread itself in every possible direction. We welcome that the Government are prepared on this occasion to put that aside.
  It is interesting how the Government have gone to some lengths to avoid too many of their supporters finding out what is going on. I thought that they had

  1445
  succeeded in managing to shuffle the hon. Member for Bolsover (Mr. Skinner) out of the Chamber, but, for some reason, he has returned. It may be that he has a nasty suspicion about what is going on.
  A number of Questions have been put down to the Minister and his colleagues, and a considerable smokescreen has been laid over them. My hon. Friend the Member for Surrey, North-East (Mr. Grylls) asked what amount of public money had been committed to Kearney and Trecker Marwin Ltd. The Answer that he got was that it was
  "in the form of a preference shareholding of £235,000 and a guarantee of £250,000 to the company's bankers. The government hold none of the equity in the company".—[Official Report, 24th June 1976; Vol. 913, c. 628.]
  That was a clever Answer. My hon. Friend made one mistake. He forgot the word "holdings". Therefore, the Minister was able to conceal the fact that the Government held 50 per cent. of the equity in the holding company, which wholly owned the subsidiary, and that concealed the fact that it was the equity control they were giving away.
  Mr. Alan Williams: My only mistake in giving that Answer was in assuming that the hon. Gentleman knew what Question he intended to ask.
  Mr. King: The House will draw its own conclusions. I think that more than one Member on the Government side was more than pleased to be able to hide behind a technical smokescreen and avoid the real point of the Question that was asked by my hon. Friend.
  The hon. Member for Stoke-on-Trent, Central (Mr. Cant) got a bit worried about the matter and put down a Question to the Government asking why this was done
  "without reference to the National Enterprise Board."
  Back came an Answer from the Under-Secretary of State which avoided the question about the Government having voting control and an equity stake in the previous company. The reply was:
  "The Department will … accordingly keep a close watch on the company's progress." —[Official Report, 15th June 1976; Vol. 913, c. 119.]
  That was meant to reassure the hon. Gentleman that nothing was being lost.
  I was interested to see the form of the motion and how well phrased it was
  1446
  in case one or two of the Minister's hon. Friends read the Order Paper. It refers to
  "£900,000 in respect of the acquisition of share capital".
  This was meant to imply that the commanding heights of the economy, the taking of a full share and control of companies, were still being pursued. It did not say that, so far from taking voting shares, those were redeemable preference shares which, if the company has any money, will get repaid in 1986 and give the Government no votes whatsoever in the control of the company.
  The Government have gone to considerable lengths to try to conceal that matter. We think that is a much more sensible approach for the Government to take than continually feeling the need to get involved in equity holdings in situations where it is quite inappropriate.
  I said at the beginning of my speech that we could define this as the last or the first real chance for Kearney and Trecker Marwin Ltd. I should like to enlarge on that.
  An article in the Financial Times asked:
  "why should this particular company be preserved when several other machine tool concerns have gone to the wall in recent years, one of which—Herbert-Ingersoll—was, like KTM, at the 'high technology' end of the business. And if KTM is to be helped through its present crisis, will the Government have to come up with regular cash subsidies should future traumas occur?"
  That is an interesting article, but it was written two years ago, in August 1974. The prophetic question
  "will the Government have to come up with regular cash subsidies should further traumas occur?"
  is one that it is fair to ask.
  We look at the situation and ask "Why should this company be preserved?" The article from which I quoted refers to Herbert-Ingersoll, which did not continue. The Minister of State emphasised the importance of KTM in the sector of high technology in numerical control machine tools, where we are not strong, and where undoubtedly the company occupies a significant position. It has a substantial export record, and it is fair to say that its home sales could be translated into import savings, in the snse that if they were not available here it is possible that a considerable proportion of machine

  1447
  tools would have to be imported. There can be an argument that it is important for balance of payments reasons, for employment reasons—which the Minister of State mentioned—and for maintaining a presence in this field of technology that we should stay here.
  I have referred also to whether this is the first real chance for TKM. Both Governments come in for some criticism here. It starts with the IRC. Was it ever set up on a basis on which it could operate? Did it initially have the management that could perform? When it got the management, did it have the right capital structure, or was it so burdened with debt and interest payments that it was not able to perform? The Minister referred to the heavy load of debt that it incurred.
  There is a case for saying that this is the first real chance for this regrouped company within the higher technology end of machine tools to perform under a better capital structure and with the sort of management and backing that a big group of the size of Vickers can give. Also, one cannot ignore the substance of the comment in the Financial Times article from which I quoted. This business has come back for funds on a number of occasions. It has made a number of applications and received assistance from the Government. There must come a time when, whatever view one holds of the machine-tool industry, one says "Yes, it would be nice to be in here and it is desirable, if possible, but there is a limit" and one wonders whether this is both the first real chance and possibly also the last.
  If one says that this is the last real chance, one has to ask whether this is the best scheme. I think that one is bound to say that on this basis it seems that Vickers—and one does not criticise the company for this; it is being punished enough by this Government in other directions—has got quite a good deal out of this. Referring to the reorganisation in 1974 the Financial Times said: said:
  "The view at Vickers is that this presents a fairly inexpensive way of taking a close look at an area of industry in which it is not so far involved but which is allied to some of the things it is already doing. … If Vickers likes what it sees it can take up the option."
  1448
  Vickers has had a two-year look at this company, and it has decided that it is prepared to invest and take 86 per cent. of the share capital but will want further financial assistance from the Government. Although we respect the achievements of Vickers in many fields, one is entitled to say that it is our duty to protect public expenditure and to ask whether it was necessary for the Government to make a further injection of funds. They are accepting a write-off of £5 million of our funds in this respect. Was it necessary to make a further injection, including a £1 million unsecured loan, in this matter?
  The question is whether there was any other way in which it might have been done, whether there were any other companies with which it might have been possible for this company to have allied itself. Anyone considering a reconstruction has to consider these questions. As one of the partners previously involved, the Government must make the best arrangements they can. We should like to hear what alternatives were considered before this expensive—for the Government, certainly not for Vickers—reconstruction scheme was put forward.
  This is a complicated matter. This company as yet has failed to perform. There are encouraging signs of a return of profitability and market prospects. Our view is that the motion should not be impeded. It still has the hurdle of the courts to get over in any case, and we shall watch that with great interest. It may be the first real chance, but we believe that it must also be the last chance, for this company.
  11.25 p.m.
  Mr. W. E. Garrett: The hon. Member for Bridgwater (Mr. King) said that the Minister's speech was not up his usual high standard. I listened to the hon. Member for many months in Committee on the Aircraft and Shipbuilding Industries Bill, when he mastered his brief exceptionally well, but tonight he was singularly unimpressive and not very knowledgeable about the machine-tool industry. I hope that he will take that as favourable criticism in some ways.
  We are talking about a technical industry and a firm with a high degree of technology. One of the first inquiries into machine tools took place in 1916

  1449
  when Lloyd George was Prime Minister. Ever since, the political issue has been the one which divides the House tonight—whether the industry should be completely nationalised, with vast resources pushed into it, or whether it should continue expanding with its rather small capacity.
  Not many months ago, some of us took part in a debate about Alfred Herbert. That was a similar situation, except that the deal was much simpler. I wonder how the senior management and shop stewards of this company will understand this complicated deal. I find it difficult to do so; we shall have to look at the matter more closely, I suppose.
  We must face certain facts. If the British economy is to have a good industrial base, it must have a wide and efficient machine-tool industry. The figures show that its manpower is declining. Some highly skilled technical people are leaving to go to other industries, and their replacement will present enormous problems. World-wide competition in this field of industrial activity is intense. If we are to enter much more vigorously, as we should do as a nation, into competition with West Germany and America in particular, any Government must get down to the basic reorganisation of the industry.
  Last week I was one of a parliamentary group which visited Czechoslovakia, and we saw a machine-tool plant just outside Prague. It is a totalitarian country and we may not like its politics, but we can still learn some things about its industry. We sometimes chuckle about five-year plans in such countries when they go astray, but the five-year plan for the machine-tool industry, starting this year, advocates an 80 per cent. increase in production and a small increase in manpower, with export potential increasing by 10 per cent. to 70 per cent. of output. That indicates how one country is prepared to attack world markets.
  It is essential to keep Kearney and Trecker Marwin afloat for the reasons stated by the Minister and the hon. Member for Bridgwater. It is also essential for the Government to examine the machine-tool industry throughout the United Kingdom. The industry, if reorganised, could create job opportunities instead of employing a declining labour force. Young people coming
  1450
  through technical colleges would be excited at the thought of participating in the production of basic machine tools. There are markets for basic machine tools in the developing countries if we are prepared to go out and get the orders.
  Kearney and Trecker Marwin has a future. If it is impressed upon senior management and shop stewards that with a concentration on producing and selling a good product the chances of success are good, there is a chance that the British taxpayer will get a return on this money and recoup losses from previous investments. As the world economy gradually improves, there will be an increasing market for this type of machine tool.
  I wish the company well. I hope that the people employed in it in the Brighton area are given this opportunity. The Government had little room for manoeuvre, and they and Vickers have done well to get the scheme off the ground. As the hon. Member for Bridgwater said, this is probably the company's last chance, and I am confident it will succeed.
  11.32 p.m.
  Mr. Richard Wainwright: The Minister was correct in saying that the House will want to consider this matter in great depth. It raises some extraordinary issues, and I am sure that the Minister is the last man to wish to shelter from questions behind his comparatively recent membership of the Department. He has all the resources of his Department visible at his command, and I know he will want to answer the questions which must be asked before we can approve the deal.
  My information is that about 1,000 jobs are at stake. I was a little disturbed when the Minister, with all his sources of information, mentioned 800. Has he foreknowledge of some immediate redundancies, as in the case of the shipbuilding industry which is celebrating nationalisation by the sacking of many employees? We must have an explanation of the discrepancy between the figure in the recent published accounts of Kearney and Trecker Marwin of 1,089 employees and the figure of 800 which the Minister mentioned.
  Mr. Robert Taylor: The Public Accounts Committee was told recently that the number of

  1451
  employees has already been reduced to the figure mentioned by the Minister.
  Mr. Wainwright: I am grateful for that intervention.
  There is the intriguing question how this offer by Vickers to come forward at this stage came about. It has profound repercussions on the whole of the Government's National Enterprise Board policy of taking a big share in the technogical re-equipment and modernisation of British industry.
  The history of the deal shows that, in spite of the money poured into the company, the Government were incapable of securing management and, therefore, for better or worse, called in Vickers. They then found, not surprisingly, that after a few years Vickers said it wanted the lot. The scheme has been contrived with Vickers holding a pistol at everyone's head.
  I quote from the report of the distinguished firm of chartered accountants, Thomson McLintock, which, as is the wont of the profession, protects itself by saying:
  "We have been informed that there are no alternative commercial sources of finance other than a large company such as Vickers and that Vickers' participation is conditional on this scheme going ahead, at least in principle."
  The scheme is accepted by Thomson McLintock as a compromise which is not to be questioned. At no stage in any of the papers concerning this deal is there any indication that any firm except Vickers was sought to rescue the company.
  What happens is that the Government are incapable of finding management for their semi-nationalised concerns, and, therefore, they have to go to private enterprise, which eventually says "We have done this trick for you. We are in command. We know all about the company. We have all the secrets. We have figures on the people, who are mostly Vickers' employees and people in management. Therefore you must submit to our terms." There is no doubt that the taxpayer is being bullied in this matter. It is up to the Government to say whether they regard this as a highly special case, for some reasons which are not clear to me, or whether they admit, as I believe some Members below the Gangway on
  1452
  the Government side suspect—or, at any rate, the one Member there at the moment —that this is the fate of all the Government's plans to have a share in the equity of companies working at the frontiers of technology.
  It must also be recognised—I mention this not as a recrimination but as a warning for the future—that this is likely not to be the last time that the House will be asked to bail the company out. Nobody can believe that when the whole history of the attempt to exploit the frontiers of technology in the national interest has been a series of small-minded disasters. Obviously, an enterprise on this scale, intended to reproduce machine tools of hitherto unknown specification, was bound to require enormous capital resources to get off the ground.
  What have the Government and their fellow conspirators done over the years to exploit comparatively small companies in the machine-tool industry, except to put in relatively small sums of money on a patchwork basis, so that every year or two—in fact, between 1973 and 1974 there was not 12 months between the two crises—a pathetic tranche of money has to be sought, with an elaborate reconstruction of the company? This must make us the laughing stock of other advanced industrialised countries, who see the pathetic way in which we are trying to exploit the frontiers of technology.
  The worst disaster, which has cast a cloud over the whole enterprise and the future of 1,000 people, was the disastrous way in which, with the explicit support of the Department of Industry, the ICFC persuaded Kearney and Trecker to take over Marwin which could not even keep its books. As a result of merging Kearney and Trecker with Marwin, the auditors had to report that in their opinion
  "proper books of account have not been kept in respect of the business acquired from Marwin Machine Tools Limited".
  They said that goodwill of over £3 million in respect of Marwin could not be vouched for and that
  "due to the inadequacy of the records, the Company has had to make the best estimates possible in the circumstances to arrive at amounts included in the accounts for sales."
  In view of this unhappy chapter, it must be for the Government to explain in much greater detail than they have done

  1453
  so far why the deal that is being recommended is so much better.
  I conclude by asking three questions in view of the very privileged position that Vickers has achieved in this matter, being able to dictate terms, to buy the thing back for an old song, to get a Government loan, on participation, considerably in excess of Vickers' own stake at the moment, and so on.
  First, I am sure that I am not the only hon. Member who wants to know what steps were taken to see whether other large concerns were interested as well as Vickers so that, in the proper tradition of British public finance, there could be open tendering and the prize would go to the best bid. There is no indication that the Government have lived up to our best tradition in that matter.
  Secondly, if there has been any interest at all by other concerns, either in this country or in the European Economic Community, which concerns have shown such interest and what is their position at the moment?
  Thirdly, what steps have the Government taken to stimulate interest? Is the Minister saying that the Government have tamely given way to the very powerful position in which Vickers has managed to install itself?
  This is a dangerous and rather unhappy venture with certain clouds about it which have not yet been dispelled. I am certain that the Government's proposition will not solve the problems of this very expensive and high technology industry and that before long we shall be debating another motion for Government assistance to KTM.
  11.41 p.m.
  Mr. Andrew Bowden: I do not think that anyone would disagree that the last year has been one of the worst in the history of the machine-tool industry. The Minister was not being entirely fair to KTM when he pointed out that it made a loss of £100,000. In 1975 it made a trading profit of £40,000. The only reason why that profit was converted into a loss of £100,000 was the drop in the value of the pound which had to service the dollar loan that the company owed to the Americans. But for that fact there was a £40,000 trading profit. That puts the matter into perspective.
  1454
  However one looks at it, the last year has seen a remarkable recovery for KTM. In the previous 15 months it was making a loss at the rate of £1,600,000. The difficulties of the last year have been recognised by the company. The chairman, in his annual report for 1975, said:
  "The current recession in the machine tool industry world wide has increased the severity of competition in all spheres of your company's operation and only marginal improvements in trading profits can be expected until the economy recovers."
  That is a realistic and honest appraisal of the situation.
  I was delighted that my hon. Friend the Member for Bridgwater (Mr. King) said that this proposition gives the company a new opportunity and perhaps its first real chance. It could be its last, but the fact that this new opportunity was needed was again emphasised by the chairman when he said in his 1975 annual report:
  "The Capital Restructuring which is outlined in the enclosed circular has been approved by the Company's management and legal and finance advisers as the most appropriate means of obtaining the necessary finance for the Company's development plans to introduce new products and to improve further our position as the major British producer of advanced machine tools."
  KTM is a high-technology specialist machine-tool company, and there can be no doubt that without the new capital and without restructuring it is very unlikely that it would survive.
  But there are possible alternatives. We had expected that they might be suggested by hon. Members' opposite, but they have not been so far. It was the deputy chairman of KTM, Mr. Ken Lane, who pointed out that KTM was the sort of company that needed a "big brother" He said that KTM, in the engineering sense, needed a "big brother" which would understand the problems involved. Mr. Lane thought that the National Enterprise Board did not provide the right kind of "big brother" for KTM since it was largely a merchant bank.
  Naturally, I have a local interest in the company. I want briefly to touch on the national role. The company is second only to one American company in the production of numerical control machine tools. It is this country's biggest supplier of special machines. The impact of this company on the motor industry is considerable. About 40 per

  1455
  cent. of the machines used for the production of crankshafts, cylinder block and cylinder heads for the motor industry are produced by KTM. It has played a major rôle in the production of Concorde. Indeed, it would be difficult to replace this firm.
  The company has a vital role to play in the future of British Leyland. A great deal of money has been pumped into that company, and as British Leyland starts to use that money the role of KTM will be vital. We have already touched on its exports. If only every British company was exporting nearly 50 per cent. of its turnover a lot of our industrial and overseas problems would disappear.
  Mr. Nicholas Winterton: At a profit?
  Mr. Bowden: At a time of recession it is accepted that the machine-tool industry suffers more than almost any other industry. It has the lowest troughs. Now that it is on an upward turn we have to use that fact and invest, using money effectively. That is why I am supporting the motion.
  Mr. Nicholas Winterton: Would my hon. Friend be prepared to comment on the two projects which he has named; namely British Leyland and Concorde? Both of these have cost the taxpayer vast sums of money. It looks as if neither will ever make a return on that investment. My hon. Friend is making a great case for his own company. Perhaps he is forgetting the comments made by the hon. Member for Colne Valley (Mr. Wainwright), that it looks as if this company will never make a return on the investment of taxpayers' money.
  Mr. Bowden: I was about to come to the comments of the hon. Member for Colne Valley (Mr. Wainwright). My hon. Friend is taking a narrow view. What would have happened if British Leyland had collapsed? He knows that the effect on this country's economy would have been catastrophic. He knows that British Leyland had to survive. My hon. Friend knows that KTM has played, and will play, an increasingly important part in British Leyland's revival. British Leyland will succeed, not just because public money
  1456
  has been pumped into it but because it has sorted itself out and has got its management right. It is in the process of increasing its production and exports. All the signs are that, as long as we can avoid stupid strikes, the firm has a great future.
  As for my hon. Friend's comments about Concorde, I am amazed that he should criticise it. It was my parliamentary colleague, the right hon. Member for Brighton, Pavilion (Mr. Amery), who started it all. [Interruption.] My hon. Friend cannot take this on the narrow basis of a financial return on a specific project. There are all the scientific and technological by-products. When this is thought through we shall see the effect it has on British industry. Concorde still has a great future. I am not one of the faint-hearts. Concorde will make the breakthrough.
  I turn to the local role of KTM. I have spoken this very day to a director of KTM, and the number of jobs we are talking about is not 800 but 1,000. If those jobs were to go, their loss would have a serious effect upon Brighton, which suffers from high unemployment in some age groups. Indeed, in some sectors it is above national average. Linked with that is the fact that Brighton has now started to develop a considerable number of light industries. To get the balance right, it is important that that development should continue. There are many retired people in the town, and a significant group that commutes to London and other areas for work. Therefore, we need a thriving local industry. If KTM were not to survive, its demise would have grave effects upon Brighton and the surrounding areas. It is for national and local reasons that I strongly support this measure.
  The hon. Member for Colne Valley talked about the future pessimistically. He forecast that it might not be long before the House is again considering financial aid for KTM. If he is right—and the good years are ahead for KTM in the context of a world and national recovery—and if the company is unable to face the lean years, that will surely be because the Government have milked it as they have milked British industry generally by their taxation policy. They

  1457
  have taken far too high a percentage of the profits during the good years and not allowed companies to build up reserves for the lean years.
  Mr. Richard Wainwright: Surely the hon. Gentleman is aware that the company has already established £5 million of tax losses, which will have to he extinguished by profits.
  Mr. Bowden: The hon. Gentleman is talking about very lean years. At the time of recession the machine-tool industry went down proportionately further than most other industries, but if the Government are sensible and allow companies to keep a higher percentage of profits to build up for the difficult years they can survive in future.
  I believe that KTM and its staff will respond to this opportunity. There is a determination among all the employees to make this chance work. Everyone in the company knows that if he does not adopt that approach there will be little future for KTM. In the national interest and in the local interest I urge the House to accept the motion.
  11.53 p.m.
  Mr. Robert Taylor: As virtually every hon. Member who has taken part in this debate has conceded, this company has had an extremely chequered history since its first injection of taxpayers' money as long ago as 1970, which was before the merger.
  As a layman without any technical knowledge of numerical control machine tools, and in the absence of any evidence to the contrary, I am bound to accept the statements of the Minister and my hon. Friends that the company has a significant part to play in the industry and that it is pre-eminent in this country. But if I accept those statements, in no way do I accept that the taxpayer's money that has already been invested in the company over such a long period has been wisely invested, or that the investments have been wisely arranged in terms of the company's share capital.
  I do not regard these proposals as a fair deal for the taxpayer. It has already been said that since the merger the management has been deplorable. It was appallingly weak until the arrival of the management team from Vickers. Before that time there was no sign of any
  1458
  sensible accounting in any way whatever. In my view the Department of Industry stands condemned for not having taken steps much earlier to see that proper management was put in as soon as public money was invested.
  Mr. Alan Williams: I am grateful to the hon. Gentleman for bringing out that point clearly and effectively. When the company was in trouble we brought in Vickers. It was the Conservative Government who did nothing to change the management.
  Mr. Taylor: I am not seeking to make any party political point, but am looking at the record of the Department of Industry since public money was first invested in this concern. If taxpayers' money was first invested in the company in 1970, surely the matter was under consideration before the Labour Government left office at that time. The fact that this company—a company with a turnover in 1975 of £13 million and before that some £10 million—had seven different categories of preference shares should have suggested to the Department of Industry that all was not well with the financial management of the company.
  If these proposals are not approved, Vickers, as the company's affairs stand at present, could resurrect the option that expired in April to acquire, on very favourable terms indeed, 51 per cent. of the shares. It chose in April not to exercise that option, at the same time it has declared its faith in the future of the company. Those seem to me to be contradictory attitudes to take. It is astonishing that if the proposals this evening go through, Vickers, instead of acquiring 51 per cent. of the capital, will end up with 86 per cent. of the important voting shares. In addition, it will have £½ million loan stock for the same figure. On the other hand, the poor taxpayer has already invested £4,950,000 in ordinary shares and £235,000 in preference shares, and has given a £250,000 guarantee to the company's bankers.
  In return for all that taxpayers' money which has gone into the company, the taxpayer, if these proposals go through, will receive back the sum of £47,000 for the preference shares and be released from the guarantee. But in its place he will invest a further £900,000 for Class B and

  1459
  D shares and offer a £1 million loan. Therefore, in plain terms the taxpayer is being told tonight by the Government that he must write off a sum of £5,138,000. In addition to that, he must subscribe £1·9 million, and will end up with none of the all-valuable voting A shares.
  In my view, that is a very poor deal indeed. The taxpayer is putting up a loan of £1 million and Vickers a loan of £1½ million. Which of those two loans will be called upon first? Will they be called on pro rata for every £2 produced by the Government and £1 by Vickers? It would be interesting to know the order of priority.
  This scheme is not good enough for many reasons, but there is a particular reason why it is not a satisfactory deal for the taxpayer. In the documents sent out with these proposals, the chairman referred to the significant improvement in the company's affairs for the year ended 31st December 1975.
  We have heard from my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) that the loss of the previous 15 months of £1·6 million was turned into a profit of £40,000, subject to payment of interest to the American company. But the chairman of the company in this document makes no significant comment on the first six months' trading in the current year. What is the turnover for the first six months of this year? Do the unaudited accounts suggest that he has produced a profit? These figures are known to that board and that board represents Vickers. When Vickers considers these proposals it is privy to information to which this House is not privy. We in this House represent the taxpayers, and we should be privy equally to information which is made available to the board of Vickers.
  I believe that Vickers has achieved a very substantial bargain in the terms of this arrangement. I do not blame the company, in fact, I admire it for what it has achieved. It may be a quid pro quo for not opposing nationalisation of some of the company's other assets, but Vickers appears to have found that the Government are a soft touch.
  In the support of industry generally there seems to be an unlimited supply of money. The biggest companies are able
  1460
  to put their hands on this money. I put down a Question about cash limits under Section 8 of the Industry Act, and I was told that, other than existing known commitments under Section 8, there were no cash limits. Any additional calls on Section 8 are out of contingency reserves. In other words, there is no cash limit under Section 8 of the Industry Act. If there were, the proposals before the House tonight would be very different, and much more sensible, on the side of the taxpayer.
  12.3 a.m.
  Mr. Michael Marshall: In the limited time available I wish to make two or three points very briefly.
  Once again we are seeing this familiar pattern of the Government bringing forward money matters relating to industry very late in our proceedings. A week ago we had an additional £4,000 million borrowing by the British Steel Corporation, which was made meaningless today by the Secretary of State's announcement. Tonight we have another £1·9 million at stake, with only very limited time available to debate the matter.
  I am not entirely happy about a number of aspects of this proposal. The headline in the Sunday Times on 11th July last
  "Why a Can of Worms is Worth So Much"
  summed it up pretty well. However, I differ from my hon. Friends in that I do not believe we should sell short the role of Vickers in this matter, as may have been implied in some of the comments tonight.
  If the Government spend money in joining up with private industry, this is a modest step forward in moving away from the doctrinaire approach. In that sense I welcome the role which Vickers has played in the affair so far. We must remember the background of a loss of £5 million—"a measure of the risk involved" was what the Minister called it. The high quality of the Vickers management is the hope for the future. In that sense I think that Vickers is a good bet and worth the sort of money we are talking about. I accept that we cannot be finite about it, but I urge the House to consider the role of Vickers.
  On the other hand, if the Government are so convinced about the quality of

  1461
  the Vickers' management in this area, why are they seeking to strip it of its aerospace and shipbuilding interests? In that respect the Government have their priorities totally wrong. However, because I have some faith in what Vickers can do I am willing to go along with the motion. The house, however, should sound a strong note of disapproval of the Government's attitude to private industry generally. I hope that this modest step forward will lead to a more realistic view by the Government of these matters and that we may see some progress.
  12.7 a.m.
  Mr. Alan Williams: I regret that time has prevented the hon. Member for Eastbourne (Mr. Gow) from making a speech, especially since he has sat through the debate. I must try now, however, to deal with some of the questions put to me.
  I am grateful to my hon. Friend the Member for Wallsend (Mr. Garrett) for his support, and I appreciate the significance of the point he made about having the time to consider the future of the industry. Certainly in our period of office in the 1960s the industry was a source of concern to the Government. The same was true for the Conservatives when they were in power. In the case of this company, however, the prospects are now improving.
  The hon. Member for Arundel (Mr. Marshall) made a rather dubious point when he referred to the limited time for debate. It was his Government who in their Act specified that the one-and-a-half hour procedure should be used on such occasions. No doubt the hon. Gentleman will take that matter up with his own Front Bench.
  The hon. Member for Bridgwater (Mr. King) made great play of saying that I was concealing information from my hon. Friends by giving evasive answers. But he, too, was less than completely frank with the House when he failed to point out that the day after one of his hon. Friends asked about KTM, the hon. Gentleman also asked about KTM Holdings, and I believe that an Answer was given indicating the Government's 50 per cent. stake. That is the information I have been given, and if I am wrong I apologise to the hon. Gentleman.
  1462
  The employment figures are still below 1,000, but they are scheduled to rise to just over that level by the end of the year, so that in one sense it is jobs in prospect which are imperilled. That, however, is not the central issue that we are discussing.
  The hon. Member for Bridgwater said that my speech was somewhat confusing. All I can say it that he should have seen my brief— and by that I intend no criticism of my officials. I saw one of my officials this morning to ask him to unravel the issue for me. He said that when he came to the Department—I think a year ago—he found 14 files waiting for him. Of course, he has made his own contribution to the stock of knowledge in the period since. To try, therefore, to encapsulate all the problems of the company within one short speech is a little difficult.
  Was there any other company interested? Originally there was not. What happened in 1974 was that the Department looked around for companies, public and private, that might conceivably have been able to give the assistance required. Informal approaches were then made by the Department to various companies that might possibly have been willing to take the project on.
  Of course, I am sure hon. Members will appreciate, from their knowledge of management, that Vickers having had its management immersed in the company for so long, by the time this next arrangement came to be discussed it would have been an extremely difficult managerial process to extricate its management and superimpose new management without causing a major disruption.
  Someone said it would be a hiccup. I think it would have been rather a disastrous one at the stage at which this particular company was in.
  There have been intimations that other companies might be interested. One Swiss company said it might, but I would not call it a firm interest. It indicated that it would be about six months before it could give any clear indication. I am sure hon. Members will appreciate that in terms of the position of the directors, and the Companies Act, the directors need to know about their financial position well before that if they are to be able to take

  1463
  on large orders and place the necessary orders required to take advantage of the up-turn.
  So there appeared to have been no meaningful alternative. Some interest was also shown by a French firm, but even that has been very vague, in the sense that there has been no indication that it would come forward with firm offers. Therefore we have to go ahead

  Division No. 257.]

  AYES

  [12.15 a.m.

  Bates, Alf

  Hamilton, James (Bothwell)

  Stoddart, David

  Bishop, E. S.

  Harper, Joseph

  Stott Roger

  Bowden, A. (Brighton, Kemptown)

  Harrison, Walter (Wakefield)

  Taylor, Mrs Ann (Bolton W)

  Callaghan, Jim (Middleton & P)

  Jackson, Miss Margaret (Lincoln)

  Thomas, Ron (Bristol NW)

  Cocks, Michael (Bristol S)

  Lambie, David

  Tierney, Sydney

  Cook, Robin F. (Edin C)

  Loyden, Eddie

  Tinn, James

  Dalyell, Tam

  McCartney, Hugh

  Wainwright, Edwin (Dearne V)

  Dempsey, James

  MacKenzie, Gregor

  Walker, Harold (Doncaster)

  Dormand, J. D.

  Noble, Mike

  Watt, Hamish

  Ellis, John (Brigg & Scun)

  Roderick, Caerwyn

  White, Frank R. (Bury)

  Evans, John (Newton)

  Rodgers, George (Chorley)

  Williams, Alan (Swansea W)

  Flannery, Martin

  Snape, Peter

  Garrett, W. E. (Wallsend)

  Spearing, Nigel

  TELLERS FOR THE AYES:

  George, Bruce

  Stallard, A. W.

  Mr. Ted Graham and

  Golding, John

  Stewart, Rt Hon M. (Fulham)

  Mr. Donald Coleman.

  NOES

  Hooson, Emlyn

  Skinner, Dennis

  Wainwright, Richard (Colne V)

  Winterton, Nicholas

  TELLERS FOR THE NOES:

  Mr. Ian Gow and

  Mr. Robert Taylor.

  Question accordingly agreed to.
  Resolved,
  That this House authorises the Secretary of State to pay, or undertake to pay, sums not exceeding £1,900,000 by way of financial assistance, as to £1 million in respect of a loan to Kearney & Trecker Marwin Limited and as to £900,000 in respect of the acquisition of share capital in that Company under section 8 of the Industry Act 1972, as amended by section 22 of, and Part I of Schedule 4 to, the Industry Act 1975.

  HILL LIVESTOCK (COMPENSA- TORY ALLOWANCES)
  12.22 a.m.
  The Minister of State for Agriculture, Fisheries and Food (Mr. E. S. Bishop): I beg to move,
  That the Hill Livestock (Compensatory Allowances) (Amendment) Regulations 1976, a draft of which was laid before this House on 29th June, be approved.
  I must not stray like a sheep too far from the narrow area of this limited instrument. Hon. Members will recall that
  with this scheme in the absence of anything more positive.
  A further question to bear in mind is whether one would want control of what is a rather strategic sector—
  It being one and a half hours after the commencement of proceedings on the motion, Mr. Deputy Speaker put the Question, pursuant to Standing Order No. 3 (Exempted business).
  The House divided: Ayes 41, Noes 4.
  the Hill Livestock (Compensatory Allowances) Regulations that we discussed at some length last December implement the livestock subsidy provisions of the EEC directive on the less favoured areas and provide for compensatory allowances to be paid to farmers in hill areas on breeding cows and breeding ewes.
  Shortly after 1st January, when these regulations came into force, the Council of Ministers increased the maximum rates payable under the less favoured areas directive from 50 to 52·5 units of account for each livestock unit. The overall financial limit which is imposed on the total allowances payable in respect of each hectare of eligible land is set at the same level and was, therefore, similarly increased.
  Following the Annual Review of Agriculture, my right hon. Friend announced that it had been decided that the United Kingdom rates of compensatory allowances should be increased by £4·50 to £29 and the overall financial limitation to 52·5 units of account—about £29·90.
  Both these changes occurred too late to affect the initial 1976 payments to hill farmers, but these amendments to the principal regulations will, with the approval of Parliament, enable any supplementary payment due to farmers to be made at an early date.
  In addition to these increased rates, which I am sure will be very acceptable to the farmers concerned, this amending order also makes two minor technical changes to the regulations. The first of these relates to Regulation 3(4) of the principal order and substitutes the word "in" for
  "throughout the greater part of".
  The reason for this change is to remove any doubt as to payment of grant on changes of occupancy when, for example, a new occupier—perhaps a son—takes over with the eligible land the previous occupier's herd or flock in the latter part of the year preceding the qualifying day.
  The second change relates to Regulation 6 and widens the powers to apportion eligible land which is available to more than one claimant for the purposes of determining payment. The need for this arises primarily from the difficulties of apportioning common land. Some claimants for compensatory allowances who have grazing rights on a common do not always take advantage of these rights. The regulation on apportionment—Regulation 6—as originally worded refers only to land being grazed, whereas under the regulation governing the financial limitation—Regulation 3(4) —it is possible, when assessing a claimant's maximum entitlement, to take into account land which he has the right to use whether or not he does so in practice. The amendment is designed to bring the two regulations into line and enable common land to be apportioned to claimants to whom such land is available as a result of their legal grazing rights whether or not they exercise those rights in any particular year.
  Both these alterations stem from the experience gained in operating the new rule which imposes a limit on the payment per hectare. This has shown the need to be able to apply the rule with more flexibility.
  I hope that the House will see fit to approve these amending regulations so that any supplementary payments may be made as quckly as possble.
  12.26 a.m.
  Mr. Michael Jopling: We are grateful to the Minister of State for coming to the House at this late hour to explain the effect of these regulations.
  The Minister said that we had a debate on these regulations on 17th December last when there was a good deal of discussion about them. Indeed, it will be recalled that on that occasion the Liberal Party and the Scottish National Party decided to divide the House. I have no doubt that more of their supporters will arrive during the course of the evening. I cannot believe that, having voted in considerable strength on that occasion, they do not intend to do the same tonight.
  The official Opposition welcome these regulations in so far as they go. But there are a number of matters that we shall want to raise, to which I hope the Minister will respond.
  We believe in the need for encouraging the prosperity of hill land in this country. Indeed, hill land is the breeding ground for a vast proportion of the meat supplies that housewives need. It goes without saying—it is known to the House—that I have a close constituency interest in this matter. I suppose that my constituency contains almost as much hill land, or land of the less-favoured-area type, as any other constituency.
  Increasing the amount of grant which is available to farmers in hill areas will have an important effect which should be noted at the beginning of the debate. Whilst these new rates of grant will help farmers within hill areas, there is no question but that they will further increase the gap between the prosperity of the less-favoured-areas—broadly, the old hill areas—and what I should describe as the upper dales areas—those pieces of land which come up to the hill areas but are just slightly too good to qualify for these grants.
  I have always said—the Minister of State may have heard me say this before in the House, and I believe that at one time he agreed with this view—that, whereas hill areas are given a good deal of care and consideration by the Government, we ought to think more carefully about the effect on land which is just slightly too good to qualify. Does

  1467
  the Minister think that it might be sensible to have a review of the hill land areas as a whole? I think I am right in saying that the last time there was a full review was in the early 1960s, and a good deal has happened since then. It would be helpful if the Minister would consider looking at the position of less-favoured-area land and what I describe as the upper dales land which falls just below it.
  I should like the review to consider the situation with regard to land that qualifies for less-favoured-area grant in England compared with land in Scotland. I say that because there is a popular feeling in my constituency and throughout the North of England that it is considerably easier to get land to qualify for this grant in Scotland than it is in England. I do not know whether that is true, but it is something that is widely believed in the North of England.
  Mr. Emlyn Hooson: Sheer English nationalism.
  Mr. Jopling: The hon. and learned Gentleman says that, but he will recall my saying that I was not sure whether there was any truth in it. However, in view of the broad expression of view about this land, it would do no harm if the Minister were to consider looking at this matter again.
  One effect of the original regulations which these regulations amend has been to create a conflict in the way in which these subsidies operate compared with the old hill area and beef cow subsidies. I have had a classic example in my constituency. I received a letter from a family called Cleasby, at Brough. I took the case up with the Minister, and he was kind enough to reply on 7th July. He accepts that there is an unsatisfactory situation in the way in which these new subsidies have affected certain farmers in the hill areas. Is it the Government's view that the situation is satisfactory in the Cleasby case which I know? There are probably many similar cases all over the country. I acknowledge the help that has been given by the Minister and by his officials in Cumbria, but it is a fact that the Cleasbys have had to reduce their beef herd from 22 to 16 cows as a result of these regulations, and I should
  1468
  be alarmed if I thought that that applied on a wide scale.
  Mr. Cleasby wrote:
  "We feel we were getting the best out of our holding, but won't be able to under the new regulations".
  That sums up a position which occurs and which the Minister acknowledges will occur. Will he look at this anomaly again to see whether something more can be done to deal with it?
  The Minister referred in his opening remarks to the provisions on the back of the regulations, particularly those in paragraph 3(2), and in part in paragraph 3(1)(c)(ii) which deal with some of the anomalies that have occurred, quite apart from the one to which I referred. One deals with changes of occupation in the course of a year and the other with the apportionment of grant on common land. How many such cases have occurred? How widespread are the anomalies which have caused the Government to make this amendment? That information would help us to put into perspective how important is the amendment.
  I want now to deal with the cash considerations in Regulation 3, the most important of these regulations. This raises from £24·50 to £29 the amount which can be paid in respect of cattle and the maximum amount from 50 to 52·50 units of account per hectare. I understand that these increases, certainly the latter, were announced in Brussels many months ago. I am afraid that I do not have the exact date. It has taken the House many months to get around to amending the original regulations to take advantage of that announcement.
  I have had a letter on this point from the National Farmers' Union, which is very concerned about the delay in amendments of this kind. It has suggested that such amendments here should be automatic when announcements are made in Brussels. I am not sure that I agree. I would not be in favour of amendments being made automatically without our being able to debate them.
  Mr. Hamish Watt: Why should we be different from our partners in the Community? Why should not such grants be made automatically?
  Mr. Jopling: My impression is that all the other countries in the Community

  1469
  have a similar arrangement to ours, and that we are not out of step. I believe that changes announced in Brussels do not automatically become law in the other Community countries, but perhaps the Minister of State could clarify that point.
  The NFU is unhappy about the time lag. Could not a way be found through the usual channels of speeding up such regulations so that changes announced in Brussels become law here without this kind of delay? That is a mistake, and I hope that it will be looked at.
  This increase, particularly the overall increase to 52·50 units of account per hectare, is a sign of the Government's failure to negotiate on behalf of the hill farmers what they themselves feel is necessary. I was interested to remind myself of what the Minister said previously about the top limit:
  "We have tried to persuade other member States to agree to a limit of 60 UAs but we were unable to do so on the last occasion. There will be further opportunities to press this case and I note the views that have been expressed."—[Official Report, 17th December 1975; Vol. 902, c. 1591.]
  That was the Government's intention in December, yet here we are eight months later and the Government have been able to negotiate an increase from 50 ua to 52½ ua instead of to the 60 ua they felt was the right figure last autumn when the negotiations originally took place. The Government have failed to negotiate the figure they think is right for the industry.
  There is an alteration in the amounts that can be claimed for some ewes, but for the majority of hill sheep there is no change. There is a major problem in the definition of livestock units. Sheep are being dealt with unfairly in comparison with cattle.
  In broad terms a breeding cow is equal to one breeding unit. Accordingly to Regulation 3(2) of the regulations we are amending a cow will be entitled by the amendments to a maximum of £29 or 52½ ua. According to Regulation 3(4) the maximum payable is 52½ ua per hectare. A. breeding cow on hill land is entitled to an allowance which the Community has laid down in the less-favoured-area directive. But that does not apply to sheep.
  1470
  According to Regulation 3(3)(a) of the original regulations a ewe of an approved breed can qualify only for 7½ ua or £3·60, whichever is the less. Only six ewes per hectare are eligible for these subsidies. Sheep can qualify only for 45 ua as a maximum, or £21·60 per hectare as a maximum. There is a considerable shortfall in the maximum amount that can be claimed for sheep compared with cattle.
  The National Farmers' Union is concerned about that, and feels that the provision for a maximum stocking rate of six ewes per hectare should be deleted from the regulations which apply in this country. The NFU considers that the overstocking provisions in the regulations are sufficient to safeguard good husbandry practises. I hope that the Minister will comment on that matter.
  The position is that sheep lose a minimum of 7½ ua per hectare, or £7·40, compared with cows. How much would it cost the Government in cash terms to allow sheep farmers to get the maximum amount of subsidy permitted under the regulations laid down from Brussels? If we were to give the sheep industry the maximum that Brussels allows in the less-favoured-area directive, how much of that money would be paid from Brussels—I understand that it is 25 per cent of the total—and how much would it cost the British Government? Will the Government consider doing what the NFU has asked—to increase the six ewes per hectare limit to bring the scheme into line with what the Community has laid down?
  Another problem raised with me by the NFU is that of shearling ewes. There is some doubt whether shearling ewes can qualify for the scheme. The NFU says:
  "The Union has indicated to Ministry Departments that they will wish to have further detailed discussions with them on the possibility of including Shearling ewes as a category of stock eligible for Compensatory Allowances. It is somewhat uncertain at the moment whether the L.F.A.D. would allow this category of stock to be included. However, it has been represented to NFU Headquarters that as Shearling ewes are in fact part of the basic flock, they should be eligible."
  This is an important matter on which the Minister should comment, and I hope that he will give an undertaking to negotiate with the NFU on these lines to

  1471
  see whether this category of sheep could be included.
  We approach these increases and adjustments with a welcome, but at the same time there is a background of Government failure. The Minister would do well to comment on the latest figures of the Ministry for breeding cattle and breeding sheep. These are the March 1976 figures Perhaps he will compare them with those for breeding cattle in the previous year. They exclude lowland and non-hill cattle, but, as I have said, the hill livestock breeding industry is the basis of our livestock population of cattle and sheep.
  In March 1976, compared with the previous year, cows and heifers in milk for rearing as beef were down 9 per cent. and heifers in calf for their first calf for rearing were also down 9 per cent. That is the poor background of the Government's record. With sheep, the position is not quite so bad. The latest figures I have available, for December 1975, show that, compared with the previous December, the ewes for breeding were down 2 per cent., shearling ewes were down 3 per cent., and ewe lambs for breeding were down 3 per cent.
  There is here a background of Government failure to maintain our breeding herds for cattle and sheep. I do not have the figures for the hill areas, and it would be interesting to hear them from the Minister. I suspect that they will be nearly as bad, if not worse than, the overall figures for the herds and flocks.
  I do not know what will happen at the end of the debate. I began by recalling what happened at the end of the debate we had in December. I see the hon. Member for Banff (Mr. Watt) is present. I hope that his hon. Friends and members of the Liberal Party will be entering the Chamber soon because it is strange to see only one Member of the Liberal and Scottish National Parties present after they made such a great show of voting against these regulations in December. I assume that they will be voting against them tonight. Again, the Official Opposition will not obstruct these regulations. We give them a welcome but we have reservations. I hope that the Minister can answer our questions.
  12.52 a.m.
  Mr. Emlyn Hooson: The hon. Member for Westmorland (Mr. Jopling) took 25 minutes to say what could have been compressed into five minutes. He rightly recalled that the Liberals and Members of the Scottish National Party divided the House on the last occasion when these regulations were brought before us. That was because about 1,200 farmers are excluded from their provisions since they do not have the qualifying acreage. Although it is a relatively small number, we thought it important to draw attention to this point, because they are in the main farm workers. It is true that they are part-time farmers but they are a force upon whom the hill farmers are largely dependent.
  The Liberals and the Scottish nationalists thought it important that the Government should be aware of our feelings. It was our hope that the Government would be able to do something to help these people. If the official Opposition had lent its weight, the position tonight might have been different.
  Am I not right in thinking that the Brussels directive allows for a higher rate of subsidy than is provided for by these regulations? It would be useful to have comparable figures. Perhaps the Minister of State can tell us what the maximum figures for hill cows and hill sheep could be under the directive.
  I assume that the winter keep supplement is not affected by the Brussels directive. There is a good deal of uncertainty about this in some farmers' minds. Am I right in thinking that it is possible to implement that if it became necessary?
  Mr. Watt: Would not the hon. and learned Gentleman agree that the best way in which the hill farmers could be helped would be if we got the green pound nearer to parity with its European counterpart?
  Mr. Hooson: I entirely agree. The answer that the Minister may give me about the maximum figure laid down by the directive must be dependent upon the value of the green pound. The maximum figure that the Minister is able to give in his reply will still not be the maximum if the green pound were to be re-adjusted.

  1473
  Despite the sedentary intervention of the hon. Member for Westmorland, am I not right in thinking that the directive does not prevent the Government, if it became necessary, from having a winter keep supplement? Am I wrong in my assumption?
  Finally, I refer to shearling ewes. My understanding is that they qualify and that payments have been made on them. It was a matter of surprise to me that the hon. Member for Westmorland should have raised the matter.
  Mr. Jopling: I can do no better than quote again what the National Farmers' Union headquarters said—namely:
  "It is somewhat uncertain at the moment whether the L.F.A.D. would allow this category of stock to be included."
  It was on that basis that I raised the matter.
  Mr. Hooson: I appreciated that the matter had been raised with the hon. Gentleman by the NFU, but it has not been raised in my area. That is because it has been the practice to put shearling ewes under the directive. After all, they came within the sheep subsidy this year.
  My next query concerns a matter that would have been raised by my hon. Friend the Member for Cardigan (Mr. Howells) had he attended the debate. In fact, he has gone to the Royal Welsh Show. In my hon. Friend's area there have been many complaints of delay in payment. I realise that there was expeditious payment of the subsidy last year because of the difficult conditions in agriculture, but as a result of the change in the forms this year it has been necessary to have much more checking. I understand that a number of the forms had to be returned to those who had completed them because they had not been completed correctly.
  Will the Minister tell us how many farmers have not been paid? Is there a variation from area to area? What action does the hon. Gentleman intend to take?
  12.58 p.m.
  Mr. Marcus Kimball: I shall deal briefly with four matters arising from the regulations. First, I declare an interest. I have been paid for all my shearling ewes under the scheme this year.
  1474
  In dealing with these matters I suggest that we might clear our minds if we use the designations in the agricultural return form. In completing the less-favoured-area grant scheme form it is necessary to state the ages of one's flock in the regular ages. There is a column for the shearling ewes not put to the ram, for example. In many areas and on a great many hill farms the gimmers are not put to the ram. In my area we have definitely been paid for that category of sheep this year.
  The expensive animal on a hill sheep farm is the ewe lamb that has been sent away to winter because it will not grow if it is left at home. That involves expensive winter food. Is it possible to extend the scheme so that the capitation payment is made on ewe lambs sent away to winter and not on the farm at 12th December prior to the payment of the subsidy in the New Year? These are expensive beasts on any hill farm. It is the exclusion from the previous hill sheep subsidy and now from the less-favoured-area scheme that causes great hardship. We want payment on the hogs that are away at wintering.
  Reference has been made to the cash flow problem of the hill farmer. The way in which the subsidy was not paid out this year was scandalous. I think that I received mine on 9th June. In the normal way we used to receive the hill cattle subsidy in November and the hill sheep subsidy in February. They provided useful cash flow in the most difficult and expensive months. This year the hill cattle subsidy and hill sheep subsidy were lumped together under the new scheme and were paid to most farmers by the end of May and to the balance during the first two weeks in June. I think that in Scotland there was trouble with the computer.
  We should like an assurance from the Minister tonight that at least the new payment will be pushed through for all farms by the middle of March next year. Hill farmers are normally at their lowest ebb when the sheep come back from wintering. I have not even received my brucellosis payments for this year. Perhaps the Minister will be able to say when we may expect to receive the brucellosis supplement.
  1.00 a.m.
  Mr. Hector Munro: I wish to ask the Minister of State one or two questions about these regulations. I think that he should try to put the record straight on the subject of payments. In the debate on 17th December 1975, the Minister announced, no doubt in the Christmas spirit, that we should be paid
  "… by mid-January, and certainly as early as possible in the new year."—[Official Report, 17th December 1975; Vol. 902, c. 1593.]
  I, too, like my hon. Friend the Member for Gainsborough (Mr. Kimball) wish to declare an interest. I must point out to the Minister that we were receiving payments in May and June, which seems a long time to wait bearing in mind the Minister's promise at Christmas.
  In terms of cash flow, this will be a severe blow to the farmer who will have to carry those payments on paper for so many months when they would be far better reposing in one's bank balance. I hope that the Minister will give an assurance on behalf of the Scottish Office—and I am disappointed to see no Scottish Minister present—that this will not happen again. I appreciate that there were 7,000 applications to process and £8 million to be paid out, I also appreciate that the computer breaks down with great regularity. However, despite a visit by the Scottish NFU to the subsidies branch of the Department of Agriculture in Scotland, farmers in the Scottish hill areas did not receive payments in accordance with the Minister's December promise. I should like to know why those payments have not been made.
  I wish to ask whether the Minister has resolved the problems of the farmer who wishes to retire, say, in the May term. If such a person has given up his lease, he then has the problem that he will receive the new compensatory allowance only if he is prepared to go on farming three or four hectares for a number of years. This produces an unreasonable degree of difficulty. I hope that the Department has now resolved this matter so that farmers can retire in the normal course of their lease without facing difficulties over compensatory payments.
  Furthermore, has the Minister made any firm arrangements on compensatory allowances and restocking after brucellosis slaughterings? This is a major problem, and I appreciate that the Department has
  1476
  looked at it sympathetically. There is no doubt that if a farmer has his herd slaughtered on account of brucellosis at a certain time of the year and cannot restock for six months, or sometimes longer, the difficulty arises whether he is eligible for compensatory payment, although the herd is lost compulsorily, so to speak. Is the Minister making progress in resolving this difficulty?
  I congratulate my hon. Friend the Member for Gainsborough on his suggestion about the wintering of ewe lambs or hoggs each year and whether they could be included. I was under the impression that we could include gimmers for these payments. If this arrangement can be extended, it will be a help in the wintering of ewe lambs. This has become a very expensive item in the annual budget of the hill farmer and any extensions to include this class of stock would be extremely beneficial.
  One must look at this amending provision in relation to what it is trying to do—that is, strengthen the economy of the hill areas. Unless we can make hill farming profitable, the whole operation becomes pointless.
  Whether the calf subsidy will be continued is a matter which is complementary to this Order. I hope that the Minister will tell us what will happen next year and the year after. What will happen to the beef cow subsidy, because this covers the stock halfway down the hill and is complementary to the hill cow subsidy? Will this subsidy continue in 1977 and 1978?
  There are a number of answers we want from the Minister tonight so that we can go back to our hill farming areas and give our farmers confidence about the future. There are many question marks and difficulties in their way. For example, the new dipping regulations should have been the subject of much greater consultation before being introduced this year.
  Without a long-term, profitable industry in the hills, the rural economy of the uplands areas will not survive. I hope that the Minister will give helpful and encouraging answers.
  1.8 a.m.
  Mr. Bishop: The hon. Member for Westmorland (Mr. Jopling) raised the Cleasby case. The situation is that a

  1477
  farmer with beef cows in the hills is not eligible for more than the permitted payments. The House may recall that under the old scheme, the hill cow subsidy was paid on the maximum number carried and the beef cow subsidy paid on the excess. Under the new regulations the farmer gets a compensatory allowance up to the maximum allowed in the directive, but nothing on the excess. This farmer, with six cows affected, may not be much worse off. This increase will help to alleviate the problem as a higher stocking rate is paid, and more is paid per cow.
  The figure of six ewes per hectare would mean an extra £8 million gross if all sheep were paid at the maximum rate permitted under the directive. This is an Annual Review matter. The present rate was announced by my right hon. Friend on 8th March in his statement to the House.
  I was asked why our payments are not up to the level of the directive. The levels are the maximum the member States are permitted to pay. Within those limits the allowances to be paid to United Kingdom producers in less-favoured areas remain to be considered following the Annual Review. After the Annual Review earlier this year, the fat sheep guarantee was raised by 18 per cent. to 42p per lb. and the wool guarantee by 23 per cent. to 83·7p per kilogramme. It was also decided that the cattle rate should be raised this year since it had remained the same since 1972. We are moving to the maximum limit which determines the overall financial payment permitted per hectare.
  I was asked about hill farmers receiving less subsidy under the directive than they would have received before it was implemented. The increase in the overall financial limit will reduce the problem, but the extent to which the limit will bite will depend on the stocking policies of farmers who graze both cattle and sheep on the same land. At a rough estimate, there may be 1,550 farmers—600 in Wales—who will be affected, although in many cases the sum involved will be small. The Government would like to see the overall limit raised further, and we shall watch for a suitable opportunity to reopen the issue with our European colleagues.
  A number of hon. Members asked about the delay in payment of the
  1478
  amounts. The delay this year under the new regulations has been partly due to the farmer's unfamiliarity with the new scheme. That led to about 40 per cent. of claims in many areas having to be returned to farmers for correction.
  Mr. Monro: If 40 per cent of farmers completed the form incorrectly surely the Minister should be considering what to do about the form. It is far too complicated. Can he not ensure that it is simplified next year?
  Mr. Bishop: I can assure the hon. Member that we are looking into that matter. On 17th December I mentioned that we were replacing about 12 Orders or regulations. In addition, 1976 is the first year in which hill cattle and sheep have been dealt with together, and that has created an unusually heavy load for the staff concerned. We expect that experience gained this year by both farmers and staff will in general enable payments to be made earlier next year when there will be one claim form covering both sheep and cattle.
  Over 50,000 claims to a value of about £47·5 million have been paid so far in the United Kingdom, and I understand that fewer than 500 are outstanding in England and Wales. I stated in December that we hoped to commence payments in January.
  The hon. Member for Westmorland asked about the cost to the Exchequer. It is estimated that the increases will mean an additional cost of £4·3 million, increasing total United Kingdom expenditure on compensatory allowances to about £55 million. There is, of course, the 25 per cent, contribution from FEOGA towards eligible expenditure. Expenditure which does not attract the contribution is that paid to pensioners, which is expected to be of the order of 10 per cent.
  Several hon. Members mentioned the criteria for determining eligible land for the purposes of paying hill livestock compensatory allowances. I recognise the concern about this matter, expressed last time as well as today. The House may ask what are the criteria for determining eligible land. They remain as in the former hill subsidy schemes.
  There are two tests relating to location and quality. The land has to be in an

  1479
  area of mountains, hills or heath and be suitable for use for the breeding, rearing and maintenance of sheep and cattle, but not, to any material extent, of fat sheep or fat cattle, or the production of crops in quantity materially greater than that necessary to feed the number of sheep or cattle capable of being maintained on that land. Such land also has to be in an area adopted by the Council of Ministers as less favoured under the terms of the EEC directive on less-favoured areas. At present there are no plans to extend the less-favoured areas outside the hills in the United Kingdom, but clearly this is a matter that will have to be looked at in conjunction with our Community partners.
  The hon. and learned Member for Montgomery (Mr. Hooson) asked about winter feed. This is no longer paid, as it is covered by the compensatory allowance. Payment at the old rate was £18·75 for a hill cow plus £5·75 for winter keep, giving a total of £24·50. The same amount will be paid as a compensatory allowance and is now increased by £4·50. Similarly, winter keep rates for sheep are also consolidated into the compensatory allowance
  The hon. and learned Member also raised the subject of how many farmers in Wales were outside the eligible hill areas but have been able to claim concessionary payments in respect of the hill cow subsidy. Some 70 farmers in Wales occupying land outside the hill areas but receiving hill cow subsidy under the special concessionary arrangements made at the time of the 1963 hill land review are ineligible for the compensatory allowances. Arrangements were made to make payments to the farmers concerned for 1976 and 1977 comparable with those they received under the former hill cow subsidy scheme.
  The hon. Member for Gainsborough (Mr. Kimball) commented on cash flow. I hope that my comments about that explain the situation, even though they have not satisfied him.
  The hon. Member for Westmorland said that there was a feeling in his constituency that it was easier to obtain compensatory allowances in Scotland than in England. I remind him that this scheme applies to all areas equally and the rules
  1480
  for eligibility are common throughout the United Kingdom. I have no reason to believe that the way in which they are operated in Scotland varies from how they are operated in this country.
  The hon. Member pointed out that the National Farmers' Union wanted changes in the directive to be implemented automatically. There are two points here. The implementation of the EEC directive and any amendments to it requires regulations to be made in the United Kingdom. It is for the United Kingdom to decide whether we should raise the limits. The directive simply sets the maximum and minimum rates, and we are free to fix rates within the limits according to our assessment of the situation of our own industry. This is again a matter for the Annual Review, and I have commented already on the increase which was announced in the review statement this year.
  Mr. Hooson: The hon. Gentleman has not answered my question about the maximum rate permitted by the directive for hill cows and hill sheep.
  Mr. Bishop: I was about to come to that. The maximum for cattle is £29·90 and that for sheep about £4·50.
  The hon. Member for Westmorland referred to the case of Cleasby of Brough and asked how many other cases there were. I understand that only two cases are known, but there may be others, of course. They seem to be very few in number. But I take the hon. Gentleman's point, and he has had a communication from my right hon. Friend on this matter.
  The hon. Member for Gainsborough asked why brucellosis incentive payments were not paid along with the compensatory allowances. I understand that in general the brucellosis payments were made along with the allowances. If the hon. Gentleman can give me any further particulars, I shall be very pleased to look into them.
  The hon. Member for Dumfries (Mr. Monro) asked about the payments being made in mid-January. What I said on 17th December last was that I hoped that we should begin payments in mid-January. He also asked about the position affecting pensioners. A farmer in receipt of a State retirement pension is not required to sign the five-year undertaking to remain in farming. A farmer

  1481
  who has signed the undertaking will be released from it when he starts to receive his State pension, and the allowance will continue to be paid to State pensioners.
  Mr. Jopling: I hope that the Minister will be good enough to answer the question which I raised with him during the debate and, indeed, privately before the debate began. It follows on from the question asked by the hon. and learned Member for Montgomery (Mr. Hooson) about the maximum which could be paid out on sheep. I wanted to know how much more in cash it would cost if we paid out the full subsidy that Brussels permits on sheep and how much that would cost from British sources and how much from Community sources. It would be interesting to know the extent to which the sheep industry misses out on what is permitted in terms of payments by the Community in Brussels.
  Mr. Bishop: I have said already that, at a rough estimate, it would cost another £8 million gross if all sheep were paid for at the maximum rate permitted by the directive. This is an Annual Review matter where the Government have freedom within the maximum and minimum limits to decide their own policy. I also said that 25 per cent. of the payments would come from FEOGA grant, so the hon. Gentleman can work it out for himself.
  I think that I have answered most of the questions put to me. With those comments, I hope that the House will approve the regulations.
  Question put and agreed to.
  Resolved,
  That the Hill Livestock (Compensatory Allowances) (Amendment) Regulations 1976, a draft of which was laid before this House on 29th June, be approved.

  KESSOCK ROAD BRIDGE
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Graham.]
  1.24 a.m.
  Mr. Hamish Gray: I am very glad to have the opportunity of raising, even at this late hour, on the Adjournment, a subject which is causing both anxiety and annoyance to many of my constituents, and, indeed, to thousands
  1482
  of people throughout the Highlands of Scotland—namely the delays over the construction of the proposed bridge at Kessock which will link the A9 between Inverness and Ross and Cromarty. There has been unwarranted delay on the part of the Government, but before I itemise my criticisms of the way in which the matter has been handled, perhaps I should briefly recall the events which have led to the present situation.
  The intention of the 1966 Labour Government was to effect improvements to the A9 North of Inverness via Beauly, Conon and Dingwall to Invergordon. This envisaged considerable widening over what was in reality a horseshoe route, and in the late 1960s a campaign was initiated for the bridging of the Beauly Firth between Longman on the Inverness, or southern, side, and Craigton Point on the Ross and Cromarty, or northern, side. The new road was then to cut across the Black Isle to Tore, where a link for westbound traffic was to be provided, while the north traffic would continue to cross the Cromarty Firth by a barrage or bridge near Evanton. The saving in road mileage was to be considerable. Between Inverness and Tain 15 miles would be saved over the original Beauly route; between Inverness and Invergordon 14 miles; and between Inverness and Muir of Ord, five miles.
  Indeed, the proposers of this plan went further and suggested the crossing of the Dornoch Firth, thus bringing much benefit to Sutherland. An article by Reay Clark, a past president of the Easter Ross NFU, and John Smith, at that time a lecturer at Aberdeen University, appeared in The Scotsman of 10th May 1969, which outlined the proposal. This was followed some time later by a booklet entitled "The Crossing of the Three Firths" produced by those already mentioned with the assistance of Pat Hunter Gordon, then the managing director of a well-known Highland engineering company.
  So compelling were the arguments presented that after the 1970 General Election the then Secretary of State, Mr. Gordon Campbell, now Lord Campbell of Croy, commissioned a feasibility study to consider the proposals, and on 7th April 1971, in answer to an oral Question from me, he announced his decision to adopt the Black Isle route, including

  1483
  the bridging of the crossings of the Beauly and Cromarty Firths. Consultations with the local authorities followed and the acquisition of the necessary land proceeded. This has, I understand, now been completed for some time and the approach roads to the sites of both bridges are in an advanced state of construction.
  To date, however, the tale of the bridges is less than satisfactory, for while the planning for the roadworks has proceeded, the forward thinking about the Kessock Bridge has been, to say the least, painfully slow. From the outset, it must have been obvious to the roads department of the Scottish Development Department that the Kessock Bridge would not only be the most expensive single project in the whole development, but that it would be the most demanding in engineering design skill.
  I wrote to the Secretary of State late in 1971, suggesting that the bridge be the subject of a design competition, but I was advised that the aesthetic values would be fully considered by the design team. Over the years I have kept in touch with various Ministers concerned, both by letter and in discussion, in an effort to ensure that progress on the bridge was accelerated. But, despite my efforts and the considerable support which I received from others who had the same object in view, it was not until the spring of 1975 that offers were obtained from contractors.
  At this point disaster struck, and the originally estimated figure of £6 million to £8 million became £30 million. The Government decided to look again, but, regrettably, at a snail's pace. Meanwhile, the development of Easter Ross, potentially the most attractive area for development and job creation in Scotland, continues to be deprived of this important fast link with Inverness and the south. The crossings of the Cromarty and Beauly Firths are essential to such development, while the crossing of the third Firth at Dornoch is highly desirable if depopulation of Sutherland and Caithness is to be arrested.
  The amount of correspondence that I have had with Ministers is very great. I do not intend to delay the House at this time of night by going over each
  1484
  letter, but two are significant. On 19th September 1975 the Minister of State, Scottish Office, Lord Kirkhill, wrote in reply to my letter of 2nd September, in which I had raised a number of queries about the Kessock Bridge, saying:
  "Nevertheless, matters of much technical complexity are involved, the weighing and determination of which must take some time … The Secretary of State has, however, undertaken to make a further statement in Parliament as soon as it is practicable to do so."
  My comment on that letter is that, while I agree that
  "matters of much technical complexity are involved",
  this letter is dated 19th September 1975 and the decision to bridge the Beauly Firth was taken in April 1971. Therefore, the complexity and the technical difficulties are no greater now than they were when that decision was taken. The Scottish Office has had those years to consider how best it can deal with the matter. As for the final sentence in that letter of 19th September 1975, in which the Secretary of State undertook to make a statement in Parliament, to my knowledge that statement has not yet been made.
  On 19th December 1975 I received another letter from Lord Kirkhill. That was in reply to yet another letter of mine dated 9th December in which I raised the whole question of progress. In his letter the Minister of State said:
  "As I said in my letter of 19th September, the technical and economic factors involved are complex; detailed studies and assessments of them are being undertaken, including the consideration of alternatives of various kinds".
  That is all very well, but I submit that, while those are important matters, they are not new and there has been a period of years over which they could have been considered and ironed out.
  The estimated cost of a redesigned Kessock Bridge is now £20 million, and it is to be hoped that contract prices will be within this figure. If the bridge does not commence until 1978, it is unlikely that it will be completed before mid-1979 at the earliest and, even with the most optimistic estimate of inflation, the final cost by that time could be close to £30 million. Would it not, therefore, be much more realistic to cut the corners and Scottish Office red tape and go all

  1485
  out for a commencement in the spring of 1977?
  The professional advice which I have received considers that this should be perfectly possible. Contractors or consortia wishing to be considered had to submit their names and experience by 5th July. A selection could be made, I would assume, within six weeks, and a further two months should be sufficient to produce initial design and cost estimates, allowing a further two months for the Department to access the proposals and, always, of course assuming the willingness of the Scottish Development Department to co-operate and not to frustrate progress, there is little reason why the project should not be under way next spring.
  I put it to the Government that they have had not months but years to consider the problems of design and construction, and I suggest that they are using these as excuses for not proceeding with the work, whereas the real reason is that they have committed so much of the nation's budget to unnecessary and unwanted nationalisation projects, for which they have had to borrow millions of pounds, that vital infrastructure such as the Kessock Bridge is being held back. Let me suggest to the Government that they get their priorities right. Cut-backs in Government spending are necessary—nobody would disagree with that except Government Members below the Gangway and the Tribune Group—but it was the Prime Minister himself who only last week at a miners' gala said that the importance of oil and steel were paramount.
  I suggest that the Kessock Bridge comes into this category, where priority must be given to the future development of an oil-related area, and the ability to provide a massive contribution to the regeneration of British industry should not be overlooked. I understand that local consortia are hoping to be allowed to compete, and I trust that they will be given an opportunity to tender. I know that at least one platform yard is capable of making a contribution to the building of this structure, and this has the added advantage of supplying jobs locally.
  Tourism, which still plays a major part in the life of the area, is very important indeed and it, too, would benefit from the advantages of the new bridge. The
  1486
  amount of industrial development in Easter Ross is considerable, and potential developers and executives of companies already located in Easter Ross have an unnecessarily long and delayed journey to reach the nearest airport of Dalcross. That is another argument in favour of the project.
  I hope that tonight the Minister will be able to give the House an assurance that there will be a special effort by the Scottish Office to use every device to short-circuit procedures and get on with this job, for I maintain that the whole future development of the Highland area could hinge upon the action taken by the Government in this regard.
  This is not a party matter. Indeed, in the Highlands all parties are concerned about the future of this area. It has tremendous potential. The Kessock Bridge is a vital link, and I cannot impress on the Minister too strongly the view of the area. I hope that he will be able to satisfy me with his reply.
  I am grateful to the Minister of State for coming here at this late hour to answer the debate. I hope that his reply will be acceptable both to me and to my constituents.
  1.40 a.m.
  The Minister of State, Scottish Office (Mr. Gregor MacKenzie): We should all be grateful to the hon. Member for Ross and Cromarty (Mr. Gray) for the way in which he has introduced this subject. I am also grateful to him because this debate gives me the opportunity to discuss this matter in more detail than is possible in the normal exchange of questions and answers across the House. I should also like to deal with some of the misconceptions which have got around.
  People who are anxious to see this bridge started are grasping at any idea which can be used to suggest that the timetable my noble Friend Lord Kirkhill proposed last February to the Highland Regional Council is unduly long and imply that the Government are dragging their feet. It is quite true that my noble Friend properly drew attention to the effect which the economic climate might have on his target for the starting date but there is no question of uncertainty holding up the preliminary work.
  The hon. Member suggested that we were procrastinating and that one of our

  1487
  mistakes was to overestimate the time needed before a contract could start. I should like to deal with the second point first. If one were willing to accept risks, which seem to me to be quite unacceptable when one is responsible for public money, it might be possible to start in about six months. It would require the acceptance of a design which had already been prepared and the selection of a single contractor without any element of competition—in other words a monopoly situation and a design which would still require modification and which would still have to be checked. All large bridges are unique to their locality and even if a design of a bridge of the right span were available it would still require adaptation to the site conditions and, if foreign in derivation, would have to be checked to see whether it were suitable to our loading conditions.
  The contractual arrangements which we are following involve the selection, after careful consideration, of a limited number of contractors from the list of those who have tabled their interest. The selected contractors will then be invited to submit outline designs and budget estimates in sufficient detail to enable the suitability of the designs to be evaluated and a fair comparison made of their cost estimates. The successful contractor will then be chosen and invited to complete the design, negotiate a contract and, if this is carried out satisfactorily, to start work. The independent design check, which took a year for the design which went to tender last year, must be fitted in.
  If we speed up the tender processes, we shall be unable to complete the design in detail and to carry out the independent structural check before we are firmly committed. The structural check is a condition imposed on the building of highway bridges by Government as a result of the major bridge disasters, such as Yarra and Milford Haven. The Kessock Bridge is a major bridge requiring great experience in its designers and it would be folly to undertake it in too short a time.
  Amongst the peculiar problems of this bridge is the need to design for earthquake shocks because of the Highland fault and the need to apply wind
  1488
  tunnel tests to the deck section. Long-span cable-stayed bridges can suffer from the type of flutter which destroyed the Tacoma Narrows bridge in America, and the wind tunnel check is most important where a bridge crosses open waters where high winds are quite common. Another problem peculiar to this site is the exceptional depth before one reaches rock and the difficulty of designing acceptable foundations at a reasonable depth and cost. Again, the penalties for mistakes are very high and the foundations are the first bit of work to be undertaken.
  On the financial side the risk which we would run if we tried to accelerate the design/tender period too much would be a loosened control of the costs. If an outline design is too rough when it is accepted at a budget price, further detailed design could well bring about changes which could be used to "justify" large increases in price. Finally, we have appointed eminent consulting engineers to assist in the evaluation of the designs, and it is a fact that in the preliminary discussion of the proposals of the firms who have asked to be considered, not one of the engineers concerned considered that the time allowed by our timetable was excessive.
  I hope that that deals with the view that there is some way in which the design and contracting period can be drastically shortened. It cannot. The hon. Member implied, however, that this was merely a part of a general atmosphere of procrastination. This I deny absolutely. It is true that during the last Tory Administration his ministerial friends hazarded some rather optimistic estimates of the time it would take to complete the reconstruction of the route from Perth to Ardullie on the Cromarty Firth, but this was before any detailed technical examination of the problems involved had taken place before all the procedural difficulties in establishing a new line for A9 had come to light and before the economic climate became as difficult as it is now. Nevertheless, we might examine the progress with the Kessock bridge.
  Mr. Gray: I accept what the Minister says to a certain extent, but when my hon. and right hon. Friends were in office they were presumably advised about the statements which they made on the

  1489
  time scale by the people who are now advising the Minister. How can he stand at the Dispatch Box tonight and suggest that the advice they gave to my hon. and right hon. Friends was inaccurate at that time and the advice they give him now is correct?
  Mr. MacKenzie: I did not say that the statements made by the noble Lord the former Secretary of State were inaccurate. I said that in my view, for what it is worth, they were optimistic. It is true that the people who advised him advise me, but it is up to Ministers to make a judgment. It is not for civil servants to justify themselves nor for Ministers to justify civil servants. Whatever has to be done has to be done by Ministers, and the judgment is that of myself and my noble Friend the Minister of State.
  The trunk road orders were made in September 1972. This could be said to be the formal starting date, although a good deal of preliminary thought had been given to the ways of crossing the Beauly Firth. It is interesting to note in passing that the tender documents for the bridge were ready and were issued in January 1975 nearly two-and-a-half years later. This compares with the talk now about six months being sufficient.
  It was, however, hoped that the work could be expedited by dividing the work and placing first a contract for the piers and foundations, so that they could be built while the superstructure design was being completed. The tenders for the piers and foundations were received in October 1973, but the hon. Member's noble Friend, Lord Campbell of Croy, who was then Secretary of State, rejected them because they were too high. He thought that the right course would be to include this work with the superstructure in a single tender for the whole bridge. I do not blame the noble Lord for this because I think that he was right, and no question of blame arises. But the decision delayed work on the piers, although it was hoped that time lost would be recovered later. If, however, the hon. Member thinks that this decision was part of a process of procrastination, he should not lay the blame on me but on his noble Friend Lord Campbell of Croy.
  1490
  As I say, the tenders for the bridge were issued in January 1975 and what happened then is recent history. As was fully explained in a statement to the hon. Member by the Secretary of State on 24th July 1975, the lowest of four tenders received for building Kessock Bridge as a steel structure was for more than £30 million and was also subject to very considerable qualifications. A preference for building in steel had emerged from the preliminary design study done by the consulting engineers in the early 1970s and reflected their assessment of the needs of this particular bridge.
  It must be remembered that the bridge will cross 1,060 metres of open water where conditions can be rough, that sufficient clearance in height and width must be provided for shipping, and that a considerably longer span—240 metres—is therefore required to give a clear channel of the desired width. The conversion of these requirements into engineering reality, particularly in an inflationary period, created major difficulties. As the statement of 24th July last said:
  "While, as the design was developed and as economic conditions changed, it became clear that the cost would be much higher, a figure as high as £30 million was never contemplated. Nor was it foreseen, in April 1971, that the bridge would have to be built in competition for skilled labour with the oil production platform yards at Nigg and Ardersier".
  In these circumstances, it was decided that that expenditure could not be justified, particularly at a time of severe restraint on public expenditure, that the tender for this amount should not be accepted, and that the possibilities both of using an alternative form of contract for appropriate parts of the work and of adopting a more economical design as well as an alternative form of construction should be investigated. So far as I know, there has not been any serious criticism of the wisdom of this decision.
  The search for a more economical design and a contractual method has entailed a great deal of work. There were also discussions with Inverness Harbour Trust about the possibility of reducing the navigation span as a means of widening the design field with the aim of allowing a cheaper design of bridge to be adopted. The trust, however, was

  1491
  unwilling to prejudice the future development of the harbour, and three alternative design possibilities which had been put forward, all including a reduced navigation span, could not be pursued.
  Here I may interpolate that during these discussions there was no real argument with the trust and that my Department accepts without reserve that a 240-metre span is necessary. Nevertheless, a good deal of time was spent earlier this year dealing with the belief which got around that the key to a quick start on the bridge lay in the reduction in length of the main span. The opposite was indeed the truth, since, if the span were reduced, the main piers would have to be recited and consequential changes designed into all the approach spans, and this would all have taken more time. Also, there was no guarantee that the effect of all this change on the total cost of the crossing from shore to shore would be of any significance.
  By the spring of this year, these exploratory activities had achieved encouraging results in that it had become clear that alternative—and cheaper—solutions were possible at Kessock, although a wide and complex range of problems, technical and financial, remained to be solved before a feasible solution could be worked out in detail. Early in June, therefore, contractors who wished to tender for the design and construction of the bridge—in steel or concrete—were invited to submit their
  1492
  names to the Scottish Development Department by 5th July. This they have done, and I am glad to say that it will be possible to arrange for the receipt of competitive designs in both steel and concrete. The process of selecting the firms which should be invited is now in progress.
  Obviously, the timetable for the construction of the bridge has slipped beyond the optimistic hopes of 1973, but the cause has been the pressure of events and not deliberate delay of any kind. For the current position, I would come back to the statement which my noble Friend Lord Kirkhill made at his meeting with the Highland Regional Council last February. This was that we would be pursuing the possibility of an alternative design for the Kessock bridge which might cost about £20 million and which, given a favourable economic climate, might start to be constructed early in 1978. After all the to-ings and fro-ings of the last few months, that remains the position.
  Mr. Gray: Before the Minister sits down—
  The Question having been proposed after Ten o'clock on Monday evening, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at six minutes to Two o'clock.

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Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Worcester.

HYDROCARBON EXPLORATION LICENCES
The Earl of LAUDERDALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when they propose to offer further licences for exploration for hydrocarbons in the British sector of the Continental Shelf.
The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of INDUSTRY (Lord Melchett): My Lords, arrangements proposed by the Government for the Fifth Round were set out in a Consultative Document published on 27th May. As a result of the ensuing consultation with interested parties, my right honourable friend the Secretary of State for Energy plans to invite applications soon, and to begin granting licences at around the end of the year.
The Earl of LAUDERDALE: My Lords, in thanking the noble Lord for that reply, may I ask him whether the Government have been able to modify the blackmailing position set out in the Document to which he referred, and whether they have come any nearer to the views of the industry with regard to public sector participation?
Lord MELCHETT: My Lords, as the noble Earl knows, we believe that the proposals represent a fair reward to oil companies and a fair return to the State, and I do not believe that the consultations, useful as they have been, will make us alter that view.
The Earl of LAUDERDALE: My Lords, could the noble Lord say whether
506
all the Offshore Operators' Association members have accepted the principles set out in the Document?
Lord MELCHETT: My Lords, my right honourable friend will soon no doubt be announcing the results of consultation; but, as the consultations are at the moment continuing, I do not think the noble Earl would expect me to make a statement about them.
The Earl of LAUDERDALE: My Lords, would the noble Lord bear in mind that the Third Round, which required public participation as a ground for preference in dealing with licensing applications, was indeed the greatest flop?
Lord MELCHETT: My Lords, I am sure that the experience of that Round has been borne in mind in the arrangements for this Round, which I do not believe will be a flop.
Lord PAGET of NORTHAMPTON: My Lords, is the noble Lord aware that the Government are much to be congratulated on having recovered from the oil companies most of the swag which was presented to them by the Conservative Party?
Lord MELCHETT: My Lords, I am grateful for the noble Lord's usual kind and considerate view of the Government's policy.
Lord CAMPBELL of CROY: My Lords, is it the intention of the Government, as appears to be indicated in the Consultative Document, that companies who agree to a 51 per cent. participation will get priority over other companies?
Lord MELCHETT: My Lords, the full participation agreements will, of course, take some time to work out, as the noble Lord will appreciate; but it would be difficult for the Government to award licences to any company with an interest in an existing oilfield which was not in serious discussion with the Government about participation. However, I think it is true to say that almost all, if not all, of the companies are in serious discussion with the Government about participation.
The Earl of LAUDERDALE: My Lords, could the noble Lord help us in this further way? Would he agree that one of the difficulties confronting the Government at the present time is a slump in investment confidence in the offshore, and that that in turn is due to the Government's behaviour in going back on the ground rules affecting previous licences and their penal taxation exactions?
Lord MELCHETT: No, my Lords; I would not agree with what the noble Earl says, and I suggest that it might be wise to wait until we see how the oil companies respond to this Fifth Round of licences before we make such sweeping generalisations about the position.
Lord SLATER: My Lords, is the noble Lord aware that it would be very wise for this House and the other place to take particular note of what my noble friend has said in the course of his replies to the five questions asked about this matter by the noble Earl, Lord Lauderdale? In the course of the noble Earl's questions to my noble friend, I hope my noble friend took particular note of one word the noble Earl used; that is, when he talked about "blackmail". In the course of consultations, surely to goodness we do not enter such an avenue when we seek to discuss and arrive at an agreement with these people.
Lord MELCHETT: My Lords, as my noble friend knows, there are occasions when the noble Earl uses language which I think it is wise to take with a pinch of salt.

HONG KONG: CHILD LABOUR
2.42 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action is being taken by the Hong Kong Labour Department to combat the increase in child labour, and whether an investigation is being made into the allegation of Triad Society involvement in the recruitment of such labour.
The MINISTER of STATE (FOREIGN and COMMONWEALTH OFFICE] Lord Goronwy-Roberts): My Lords, the Hong Kong Labour Department is carrying out a progressively increasing number of inspections of factories in order to detect whether there is illegal employment of child labour and to bring offending employers before the courts. Over 120,000 such visits were carried out in 1975, as compared with about 76,000 in 1973. The Royal Hong Kong Police have not received any complaints that organised Triad societies are involved in recruiting child labour.
Lord BROCKWAY: My Lords, I thank the Minister for that reply. Is it not the case that this year there has been a great shortage of labour in Hong Kong and, as a result of that, increasing illegal employment of child labour? Is he aware that the Director of Education states that 68,000 children between 10 and 14 years of age are not at school because their parents cannot afford the school costs? Has he seen the report of the students of the Hong Kong Baptist College, which includes the fact that in the industrial area of Shamshaipo 8 out of 10 factories are now employing child labour? Is he satisfied that 70 inspectors are sufficient to deal with this problem?
Lord GORONWY-ROBERTS: My Lords, as to the shortage of labour, as Hong Kong is virtually extricating itself from a very marked economic recession no doubt there is a new call for labour. I would not for a minute say that at this stage it is creating a new problem of child employment. As to the figure of 68,000 children between the ages of 10 and 14 who are not at school, I should like to tell the House that the Hong Kong Government has plans to provide, by September 1978, schooling for all up to the age of 14. It has been demonstrated to me that these plans are realistic and will be pressed forward with all due expediency. The report to which my noble friend refers, if it is the one to which my attention has been drawn, was based on a survey conducted in 10 factories out of a total of 35,500 factories in the Colony. I suggest that a survey based on such a minuscule area is not totally dependable.
Lord BROCKWAY: My Lords, referring to the second point that the Minister

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made in his reply, regarding the activity of the Triad organisations, may I ask whether he is aware that children are recruited in Hong Kong by these middlemen and taken to the factories, led by what is known as a "Pied Piper"? Is he aware that for supplying the children these middlemen organisations take commissions from the children's wages? Will he get in touch with the headmaster of the Baptist College in order to secure further facts about this problem?
Lord GORONWY-ROBERTS: My Lords, certainly. I based my reply on the information available to me from the Royal Hong Kong Police, who say they have not received any complaints that organised Triad societies are involved in recruiting child labour. Of course I shall look at any evidence to the contrary which my noble friend can put before me, including what he has received from this Baptist College.
Lord GEORGE-BROWN: My Lords, just to put forward the other side of the story, would the Minister agree that the Hong Kong Government now reports to a Governor of tremendous sensitivity and great belief in the improvements that should be made, and who has in fact made enormous improvements? Instead of shooting at him should we not pay to him and those who report to him a certain respect and regard for what he has been able to do in a short period of years?
Lord GORONWY-ROBERTS: My Lords, I warmly agree, especially as this comes from a quarter of authority and experience such as that of the noble Lord. I am sure that Sir Murray MacLehose's record of dedicated service in this very difficult area needs to be commended, and to be commended frequently, especially when it is so easy to condemn the situation in Hong Kong which nevertheless shows tremendous advances in the last three or four years on what was there previously.
Baroness VICKERS: My Lords, in view of the fact, which I accept, that for several years it is not possible to undertake education, may I ask the noble Lord whether it is not better for these young people to be employed in some form rather than being on the streets?
Lord GORONWY-ROBERTS: My Lords, while one does not for a moment take a complacent view of child employment in this or any other country, there is something in what the noble Baroness says. The Chinese family organisation which coincides so often with industrial and productive activity, very often lends itself to a benevolent form of juvenile employment that we, in a country like this, would not find tolerable. I hope that I am not putting this too high, and that what I have said will not be misunderstood. At the same time, the Hong Kong Government, as the noble Lord, Lord George-Brown, reminded us, has ensured that in a number of specified industries there is a ban on the employment of young people below the age of 14, and the figures I have given, and indeed other figures I have provided in Written Answers to my noble friend, show that they are earnestly following up those regulations.
Lord BROCKWAY: My Lords, is my noble friend aware that many of these children are paid scandalously low wages, which are skimmed off by the middlemen recruiters, and that they are compelled to work more than 12 hours a day for those wretched wages?
Lord GORONWY- ROBERTS: My Lords, if they are compelled to work 12 hours a day, then those concerned are in default of very clear regulations and are subject to the inspections which, as I have tried to show, are being very rigorously pursued. As to the level of wages, Hong Kong is not the best or the worst when compared with cognate countries in that area. It is our firm intention, and certainly that of the Governor to whom reference has been made, that the substantial progress that has already been attained shall be pressed forward with redoubled energy in the next few years.

BERMUDA AIR AGREEMENT
2.51 p.m.
Earl AMHERST: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have any information to

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give the House on the negotiation of a new Air Agreement to replace the present Bermunda Air Agreement which is to be abrogated early in 1977.
Lord ORAM: My Lords, the Government reached the conclusion that the time had come to replace the Bermuda Agreement with a new agreement more appropriate to the conditions prevailing in the 1970s. Under the Bermuda Agreement, the United States has been deriving far greater benefits than we have. In addition, a number of improvements to make it function more efficiently were manifestly required. We shall work constructively with the United States authorities in order to secure the establishment of a more equitable and rational agreement to succeed the present one after 21st June 1977.
Earl AMHERST: My Lords, while thanking the noble Lord for that Answer, may I ask whether he can now tell us who will be leading our negotiating team? Can he assure us that that team will also comprise representatives of the British airlines as technical advisers?
Lord ORAM: My Lords, it is too early to give that information to the noble Earl, but I can tell him that a team has been in Washington this last week making preliminary arrangements and that there has been a very satisfactory meeting there. A series of meetings is scheduled for September to study the issues involved.
The Earl of LAUDERDALE: My Lords, may I ask the noble Lord to say whether the Government expect any serious progress in these negotiations to be made before the new President is inaugurated next year?
Lord ORAM: I would certainly hope so, my Lords. I understand that last week the atmosphere was such that the Americans are as anxious as we are to press ahead to an early conclusion.
Lord BALFOUR of INCHRYE: My Lords, in view of the very great importance to our nation of any new agreement, may I ask the noble Lord whether the Government would consider laying a White
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Paper of the proposals for any new agreement before finality and signature comes about?
Lord ORAM: My Lords, I will put that point to my right honourable friend the Minister.

GOVERNMENT STATEMENT
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m., my noble friend Lord Melchett will repeat a Statement on capital investment for the steel industry in Wales.
RIVER MEDWAY (FLOOD RELIEF) BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.
BRITISH TRANSPORT DOCKS BILL
Read 3a, and passed.

BUSINESS OF THE HOUSE
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, on behalf of my noble friend the Leader of the House, I beg to move the Motion standing in his name on the Order Paper.
Moved, That Standing Order No. 37 (Arrangement of the Order Paper) be suspended until the Summer Recess so far as is necessary to give the Government power to arrange the order of business; and that Standing Order No. 43 (No two stages of a Bill to be taken on one day) be suspended for the same period.—(Baroness Llewelyn-Davies of Hastoe.)
On Question, Motion agreed to.

PRACTICE AND PROCEDURE
2.54 p.m.
The CHAIRMAN of COMMITTEES (The Earl of Listowel): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That, as proposed in the Fifth Report from the Committee of Selection, the Lords following be named of the Select Committee to consider the Practice and Procedure of the House and to make recommendations for the more effective performance of its functions:

D. Atholl,

V. Hood,

L. Alport,

B. Burton of Coventry,

L. Champion,

L. Crowther-Hunt,

L. Fulton,

L. Hawke,

L. Home of the Hirsel,

L. Hoy,

L. Hughes (Chairman),

L. Kilbrandon,

L. O'Hagan,

L. Shackleton,

L. Wade,

L. Windlesham;

That the Committee have leave to adjourn from place to place and to report from time to time;
That the Minutes of Evidence taken before the Committee from time to time he printed and, if the Committee think fit, delivered out;
That the Committee have power to appoint Sub-Committees and to refer to such Sub-Committees any of the matters referred to the Committee;
That the Committee, or any Sub-Committee appointed by them, have leave to confer and to meet concurrently with any Committee of the Commons on Procedure or any Sub-Committee of that Committee together with any such persons as that Committee or any Sub-Committee of that Committee may select to attend for the purpose of deliberating and of examining witnesses, and have leave to agree with the Commons in the appointment of a Chairman for any such meeting;
That the Committee have power to appoint Specialist Advisers.
That the Committee do meet at half-past Four o'clock on Wednesday next.—(The Earl of Listowel.)
Lord SHINWELL: My Lords, before this proposition is accepted by the House I have a few questions to ask for the purpose of clarification. First, would the Chairman of Committees accept a proposition to insert the word "composition" in line 3 before the word "Practice"? That insertion, if acceptable, would he even more important than seeking to reform the procedure and practice of the House. Is my noble friend the Leader of the House aware that the composition of the House being what it is—I speak for myself but I should not be at all surprised if I speak for other noble Lords—the practice and procedure of the House is quite satisfactory? At any rate, we manage to survive with it and I see no reason for interfering with it and certainly not for emasculating it.
Secondly, would it not be desirable to refer to this very important Committee the fact that there are almost 1,000 Members of your Lordships' House and that probably 50 per cent. or 60 per cent. never attend any of our deliberations and have no intention of doing so, and that the activities of the House are probably confined to 200 to 300 Members, and even of that number only a minority are intensely interested in our deliberations?
Is he aware that some Members hardly ever appear and that there are some Members who are known to their colleagues to appear simply for the purpose of making speeches on subjects in which they happen to be interested, at the end of which they vanish and never interfere any more in our proceedings? Would it not be desirable in those circumstances to refer the subject of composition as well as the subject of procedure and practice to this Committee for consideration? Thirdly, is my noble friend aware that while I have no clear ideas on the subject of composition—about the hereditary position or the Life Member position—I think that the question of selecting Members for your Lordships' House is a matter of fundamental importance and one which surely should be considered by this Committee?
Fourthly, I notice that one of the functions of this Committee is to "adjourn from place to place". I am not quite sure what that means. If they are going to change their geographical position, there must be some reason for

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that. If there is to be a change from the precincts of your Lordships' House to some place with amenities which are much more suitable than those available to Members of this House, so be it. If there is one thing lacking here it is suitable amenities; ours are nothing like those enjoyed by the common people at the other end of the corridor. I hope that that remark does not raise a question of privilege in regard to those common people; they will probably get other language later on, should that be necessary. It seems to me that we should know what the phrase "adjourn from place to place" means. Does it mean, for example, that in order to ascertain the views of the Members of the United States Senate, or of Congressmen or perhaps of Deputies in Paris or the Bundestag in Bonn, these Members of your Lordships' House will repair to those places to ascertain their views, as if their views are really necessary? And what will all this cost? There is the rub.
In these days when we are always talking about the need for financial stringency—for example, cutting expenditure, something which is almost the motto of the Opposition; they are always saying, "cut expenditure"—I hope to get support for my proposition from noble Lords opposite that we should inquire into the purposes of this Committee. We want to know how far they will travel and how they will travel. For example, will they use Concorde? These are important questions. We ought to know before we decide to accept the proposition. A great deal depends on the answer that I receive whether proceed further, but, for the moment, I am content to ask the questions.
Viscount DAVENTRY: My Lords, can the Minister consider whether some Members of this House talk too much?
Lord SHINWELL: My Lords, that is certainly an important question and we may also ask why some Members never talk at all.
The LORD PRIVY SEAL (Lord Shepherd): My Lords, I suspect that I should rise, if only to intervene between my noble friend and noble Lords opposite, some of whom speak occasionally and
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some often. My noble friend Lord Shinwell asked whether there was anything sinister about the provision that the Committee could meet from place to place. If my noble friend will read the entire Motion, he will see that the Committee or any Sub-Committee, "… have leave to confer and to meet concurrently with any Committee of the Commons on Procedure or any Sub-Committee of that Committee …"
Those words were required in order that the Committee or any Sub-Committee could meet with another place in another place.
In regard to composition, my noble friend asked me that question some days ago and I replied to him that the question of composition and the relationship of this House with another place in a constitutional form had deliberately been omitted from the Motion that is before another place. I explained to your Lordships that we should therefore be equally restrained and should merely look at the question of practice and procedure to see ways and means by which the two Houses together can act to improve the quality of the examination of legislation, whether it be for central Government or, for that matter, for the European Economic Community, which we shall be discussing today. That is the purpose of the Committee and I hope that my noble friend will allow the Motion to be agreed to without dissent.
Lord LEATHERLAND: My Lords, my question is less complicated than that of my noble friend. It is similar to a question which I put two or three years ago when the composition of another Committee was announced. I see that the Committee is to have 16 members. Fifteen are men and one is a woman. Surely, fifteen to one is out of all proportion to what we ought to expect. There are noble Baronesses in this House who are very able and who take an active part in its proceedings. I suggest that some slight modification might be carried out in connection with the composition of the Committee.
Lord SHEPHERD: My Lords, I should not like matters of this sort to be decided on the basis of sex or age. If my noble friend has any criticism, it should be directed to the appropriate Committee of your Lordships' House, the Committee

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of Selection. It is for that Committee to decide who should be members, not for the Chairman of Committees, nor for me as Leader of the House.
On Question, Motion agreed to.

"DEVELOPMENTS IN THE EUROPEAN COMMUNITIES, NOVEMBER 1975 TO APRIL 1976"
3.4 p.m.
Lord SHEPHERD Lord SHEPHERD rose to move, That this House takes note of the White Paper Developments in the European Communities, November 1975 to April 1976 (Cmnd. 6497). The noble Lord said: My Lords, I beg to move the Motion which stands in my name on the Order Paper and, with the permission of the House, I shall address some remarks to the Motion that has been put down in the name of the noble Baroness, Lady Tweedsmuir. Anyone who has been in Government will know that July is always a bad month, and although I fully appreciate that my first duty is to your Lordships' House, I ask your Lordships' forgiveness if I leave at 4 o'clock to attend a series of meetings. I shall return as quickly as possible.
These two Motions require us, like Janus, to face both backwards and forwards. Backwards, as we review the developments described in the six-monthly report on the European Communities, and forwards as we look at the prospectus for Europe presented by the Belgian Prime Minister, Mr. Tindemans. We need not, I hope, confine outselves too strictly to the material in these reports, but use them rather as the main texts for a more general stocktaking. If I may be allowed a general personal comment, I believe that, hitherto, we have perhaps thought of ourselves and even at times behaved—and been thought of by others—as new boys in the Community. We can do so no longer. Our membership is now 3½ years olds and within six months the United Kingdom will for the first time have the Presidency of the Council of Ministers. We may have an opportunity of seeing the work of the Council of Ministers at close hand because, by and large, its meetings will take place in London. We shall find ourselves very much at the controls: and it is right that Parliament and the
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Government should now consider the direction in which they think the Community should move. We very much look forward to hearing your Lordships' views this afternoon.
The House will not, I believe, wish me to dwell at any length on the six-monthly report. The developments it describes are many and varied and, to some extent, have already been overtaken by recent events. Noble Lords will probably share my sense of relief that this is so, for it would be misleading to pretend that the period was very successful. Indeed, there were many problems. These were often those of the world at large, especially, of course, those on inflation, monetary instability and economic uncertainty. But when surveying this period we can take advantage of our double perspective. Pessimism would be out of place, since the picture is improving. Some of the failures and half-measures of that time are the successes of the present.
The European Council last week agreed on a formula for direct elections which met the requirements of Member States without creating an outsize Parliament. For our part, the formula satisfies our twin aims of providing reasonable representation for the constituent parts of the United Kingdom and ensuring that the constituencies are not too large. This decision represents a major step forward and illustrates the Community's ability to find acceptable solutions when there is the will to do so.
The Community has weathered the world economic crisis; and Member States are showing their determination to tackle the related and vital questions of restoring full employment and maintaining economic stability, both individually and in concert with each other. The second Tripartite Conference of Governments, the social partners and the Community's institutions, held on 24th June, expressed the Community's joint efforts in this respect, and its conclusions, which were approved by the European Council, will be carried forward over the months ahead.
It is appropriate at this moment to turn to the Tindemans Report, whose presentation during the period covered by the White Paper was a major event and one which focused sharply on the future. I should like again to congratulate the

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noble Baroness the Chairman of the Scrutiny Committee of this House and her Committee on their most helpful report on the Tindemans Report. It was a model of its type. We consider that M. Tindemans has provided a very valuable reference point for our own thinking about the future of the Community and our objectives in it. This is a large subject and not one which can be covered in a single debate. The Community itself is devoting many months to a study of the Tindemans Report, and the Government do not intend to take a final view on it until we have had the views of both Houses and have discussed the report within the Community a good deal more than we have been able to do in the past. But I would assure the House that we shall take a constructive position in these discussions.
My Lords, I shall touch only briefly on a few aspects central to the Community and to our membership of it. There is the matter of the promotion of economic convergence between Member States. M. Tindemans perceived this very clearly, and we shall wish to build upon existing Community mechanisms—such as the Regional Development Fund and the Social Fund—which are intended to assist this process by transferring resources from the richer parts of the Community to the poorer. Of course we cannot, and should not, expect an endless flow of resources. There is a great deal for us to do at home, but I am encouraged by the political will demonstrated by Finance Ministers to concert national economic policies and to co-operate closely within the Community to bring about closer convergence of its constituent parts. This is very much in our interests.
We hear a great deal these days about interrelationship. There is a clear and close connection between the economic performance of the Community and its social policies. Unemployment, which the Community is tackling in various ways, is an obvious and crucial example of this. More generally, M. Tindemans rightly emphasises the importance of making progress towards a modern society and a form of economic growth which respects human values and social needs. The Government certainly endorse this, and we consider it essential increasingly to involve the social partners
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in Community-level discussion of policies or issues which directly affect their interests.
The Tripartite Conference is one forum in which such discussions take place, and its value was recognised by the European Council last week. The Standing Committee on Employment, which M. Tindemans singles out in his Report, has been charged with certain tasks arising from that Conference. The Regional Development Fund, in the period covered by the White Paper, made commitments to the United Kingdom totalling more than £56 million—or approximately 28 per cent. of the total budget—to assist the development of projects in disadvantaged areas of the United Kingdom. The successful development of the Community will depend on the continuation of policies of this kind, and we share M. Tindemans' view of the need to improve the Community's institutions.
The House will be aware of the initiative at the European Council last week, as a result of which the new President of the Commission, Mr. Roy Jenkins, will be charged with the task of reviewing the structure of the Commission. This is, of course, only one element of the Community's institutional structure. I am sure that my noble friend Lord Goronwy-Roberts will have more to say about this and other aspects of the Tindemans Report when he replies to the debate.
So far I have singled out internal policies in my survey of the Community. On the external side, one of the more visible successes of the Community during this period has been the development of common policies and the adoption of common positions on a number of foreign policy issues. We regard this as among our foremost objectives, and we will pursue our original aim of seeking to ensure that the Community is outward-looking and that its external relations give full weight to United Kingdom interests. In this context the revision of the Common Fisheries Policy is of prime importance to us, as a policy whose implications will have direct and immediate bearing on the Community's and our own positions at the Law of the Sea Conference, and in meeting the needs of our own fishermen.
The Community must quickly come to terms with a world in which 200-mile fishing limits are general; and the House will know that my right honourable friend the Prime Minister made clear to the European Council our desire for a declaration of intent on the extension of Community fishing limits to 200 miles. We shall follow up this matter vigorously, and the House will have an opportunity to debate it in full on 28th July. In addition, in the period covered by the Report we have worked successfully towards forging common positions in the Conference on International Economic co-operation, or the North/South Dialogue as it is sometimes called, and in the Euro/Arab Dialogue.
Community agreements have been concluded with a large number of countries such as the Maghreb agreement and agreements with the countries of the Indian sub-continent. Others with Canada, Iran, the Mashraq countries, Spain and the Comecon countries are under consideration or negotiation. The Community has developed common positions on a number of foreign policy issues. On the Cyprus problem, the Nine have been working as one for a settlement; it is a long way away, but we are still working on it. They have made progress with common positions towards the problems of Southern Africa.
The Lomé Convention between the European Economic Community and the 46 developing countries from Africa, the Caribbean and the Pacific was signed on 20th February 1975 and came fully into effect on 1st April 1976 following ratification by all Community Member States and more than two-thirds of the developing countries concerned. The Convention runs until 1st March 1980. It provides generous concessions in the fields of trade and aid to the developing signatories. The trade provisions which entered into force last August under interim arrangements give the ACP preferential tariff—and quota-free access to the Community for all their industrial products and practically all agricultural produce. The only obligation placed upon the ACP is that they must treat the Community at least as generously as any other developed country and must not discriminate among the nine Community Member States in trade matters.
In the aid field, the Convention establishes the fourth European Development Fund, under which over 3,000 million units of account (some £1,700 million) will be reserved for the ACP countries over the remaining four years of the Convention. The European Commission has sent programming missions to most of the ACP States. Reports have been produced on some 30 missions and indicative programmes have been drawn up. There is additionally a sound working consultation relationship with the United States. Looked at in a historical perspective, the Nine have moved a long way towards common positions in world affairs since our accession.
None of this justifies the view that is sometimes expressed that the Community is in a state of collapse. It is here to stay, and with every day its reality becomes more established. Equally established is the fact of United Kingdom membership of that Community. Perhaps it was inevitable, as the anniversary of the Referendum came and went, that there would be people who would try to resurrect the argument over whether or not it is to the advantage of the United Kingdom to be a member of the Community. I do not think the country as a whole will give them any encouragement for doing so. The people gave the clearest verdict last year. What is now needed is to give the fullest attention to making the most of the opportunities Community membership offers both to further United Kingdom interests and to influence the Community's future development. So far as this House is concerned, we can fairly claim to be setting an example of the advice I have just given.
Before closing, I will once again pay tribute to the work carried out by the noble Baroness, Lady Tweedsmuir, and the other Members of the Select Committee on the European Communities. Not only have they scrutinised with their customary speed and efficiency a large volume of day-to-day legislative and other proposals: they have also produced well-informed reports, and reports of very great clarity, on some of the more important topics being considered in the Community, on which we had a total of eleven debates during the period reviewed by the White Paper.
These debates, and the reports on which they were based, have covered many of

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the issues to which the six-monthly White Paper refers: such diverse subjects as EEC company law proposals, the budgetary powers of the European Parliament, problems of nuclear safety and the EEC farm prices proposals. The Committee have continued to perform a most valuable service, and have played a major role in enabling this House to pay full attention to events in the Community, which these events require. These reports may have been of great value to your Lordships' House, but may I put on record that they have been of extreme value also to Her Majesty's Government.
My Lords, in considering the documents before us it is apparent that our future and that of the Community are bound up closely together. Our own problems are the Community's problems, and we can and should take full advantage of the Community's resources and policies in our efforts to resolve them. It is equally true that the Community's problems are our problems; and it is our task to make whatever contribution we can to their resolution and to the achievement of progress in Europe, which is inseparable from progress in the United Kingdom.
The White Paper and the Tindemans Report chronicle some of the steps to be taken and suggest others which may be considered. It is for Parliament to consider those proposals; it is for the Government to consider the advice given and then to negotiate, not only in the interests of the United Kingdom but in the interests of the European Community as a whole. My Lords, I beg to move.
Moved, That this House takes note of the White Paper Developments in the European Communities, November 1975 to April 1976 (Cmnd. 6497).—(Lord Shepherd.)
3.22 p.m.
The PRINCIPAL DEPUTY CHAIRMAN of COMMITTEES (Baroness Tweedsmuir of Belhelvie.): My Lords, I am very glad indeed that we are able to debate these two documents together; and on behalf of my Select Committee I should very much like to thank the noble Lord the Leader of the House for the generous tribute he has paid to the many Peers—I think we are nearly 80 in
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number now—who give of their time and experience to what is without doubt fascinating work. We feel that we owe a debt to those who gave us our terms of reference, because they are wide enough for us to look at the larger questions which confront Europe and not only the rather smaller legislative matters which come before us from time to time.
I should like, first, to congratulate the Government on having reached what I believe to be a fundamentally important decision for this country; that is, that we should have direct elections to the European Parliament. I think myself that an increase from 67 seats for Britain, which is what was originally thought of to 81 can but benefit the United Kingdom as a whole; and it will also offer the chance to ensure larger representation of, the component parts of the United Kingdom. I would hope, for example, that Scotland will have at least ten seats when this comes to be decided. But I noticed that the Secretary of State for Foreign and Commonwealth Affairs did not commit himself to this country definitely taking part in direct elections on our own system, first past the post, in the time approved by the other Governments, with one reservation by Denmark; that is, in May or June 1978. I would only say that surely the sheer horror of appointing 81 Members of both Houses would urge the Government to speed the preparation, above all because nominated Members would not have the same authority as elected Members.
It is my privilege to present on behalf of the Select Committee our report on the Belgian Prime Minister's Report on European Union. He is rather sad in his introduction. He sometimes seems to reflect the way in which many people look at the European Community today. He says:
"Why has the European concept lost a lot of its force and initial impetus?
He goes on:
"The European idea is partly a victim of its own successes: the reconciliation between formerly hostile countries, the economic prosperity due to the enlarged market"—
this may sound odd today but, taken from the start of the Common Market, this is true—
"the détente which has taken the place of the cold war, thanks particularly to our cohesion, all this seems to have been achieved and consequently not to require any more effort."

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He goes on to say:
"Our peoples are concerned with new problems and values scarcely mentioned by the Treaties. … We must listen to our people. What do the Europeans want? What do they expect from a united Europe?"
The Tindemans Report on European Union considers there are two main urgent matters which we must achieve if we are to promote unity among the Nine. First, direct elections to invigorate the Community's institutions; and, secondly, a common effort to fight inflation and recession. The Select Committee are particularly glad to have had a chance to consider this report, which is of undoubted political importance. The House may be aware that we, as a Scrutinity Committee, have long been almost buried under the draft legislative matters which we are asked to look at in detail. They seem to deluge us from time to time. Therefore, the work involved in study and in taking evidence inevitably means that we see only a part of the work of the Community; and the Select Committee have thought it important to examine the direction being taken by our partners and ourselves in Europe so that we can, maybe, get ideas on how this country can share in the shaping of Europe.
The Tindemans Report is especially interesting in that the Belgian Prime Minister is himself a federalist, although he has sought to say how we can cooperate by pragmatic means, and suggests certain practical ways in which we can achieve greater unity. Yet his report reflects the fear that the European Community has lost its force, and the object of his report is to suggest how the cohesion and power of the Community, as conceived in the original Treaty, can be enhanced. At first sight the Tindemans Report seems to suggest a two-tier community, comprising those States who have the power and the will to forge ahead and those who will need aid and help to catch up.
This conception of a two-tier Community has, however, been denied both in public and in private. Mr. John Davies (who, as the House will know, is chairman of the Select Committee on the European Communities in another place) and myself had the privilege of meeting Mr. Tindemans about his report, and we asked him why he thought it had been coolly received in the capitals of the Nine. He said that he had had to try to find a middle way
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between federalists and those who believe in the evolution of common policies. But, my Lords, even evolution must be stirred by energy and by beliefs. Had the United Kingdom been a member in the earlier years many of the problems which now seem so hard would not have existed. We should have built Europe together.
My Lords, as the House will appreciate, the Select Committee Report is a work of many minds. We have studied and commented upon the various sectors of the Tindemans Report and the order in which he fashioned them. There are a few omissions. One of them is rather extraordinary. Very little is said about the Common Agricultural Policy which takes up three-quarters of the budget. But the kernel of the Report so far as foreign affairs are concerned is this sentence:
"European union implies that we must present a united front to the outside world."
I should have thought that it was on this, from whatever quarter we came, that we would all agree. But when one examines the implications of security, of economic relations, of development aid, it does not always work out without some traumas.
There is a closer relationship developing now between the larger States of the Nine except where Italy's lack of effective political leadership has at present caused a vacuum. But this has caused some resentment among the smaller States. A recent example was the acceptance by the so-called Big Four of President Ford's invitation to the Puerto Rico Summit; without direct representation for the smaller nations or even of the Community as a whole. Of course, we must work with the Americans in every way, but Europe as a whole is our prime concern. So if the unity of Europe is vital to all our interests, it surely is important to study the institutions which govern all that we do. The Tindemans Report contains an important chapter on the action that can be taken within the Treaties and those which, in his opinion, should precede an Act amending or extending the original Treaties. We are much indebted to the noble and learned Lord, Lord Diplock, and his sub-committee for his careful analysis of this section of the Report. But it seems to many of us that much could be done by strengthening and improving the performance of the existing functions of the Community.

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To be frank, the order and priority of some of the documents that come before your Lordships' Select Committee seem to lack both rhyme and reason. We have discovered that there is no central body which decides on priorities or defines the scope of possible action and its policy consequences. There is, in fact, no central policy review body; there is no European "think tank". I, for one, am absolutely delighted that the right honourable gentleman the Home Secretary is to become the next European Commissioner. I should like to wish him every success and also happiness in an absorbing task; but I should like to ask the Government whether the Tindemans Report recommendation that the President should choose his own commissioners has been accepted. It seems to make sound sense.
I understand that Mr. Jenkins has been asked to examine the work of both the Commission and the Council of Ministers. It would obviously give him greater support in his work if he had a freer hand to choose his 13 commissioners. They are due to retire at the end of the year. Many are active politicians; and, while they swear fealty to the European ideal, they are, of course, nominated by their national Governments and therefore, being human, they are bound to ponder on their future as to what happens to them at the end of their four-year term.
As the House knows, there are now 20 directorates-general. One cannot help feeling that these should be greatly reduced. Mr. Michael Shanks, who formerly served the Commission, has suggested that there are really only six major areas of policy which could be grouped under six directorates-general. In the present structure, as the House knows, five of the 13 commissioners are named as vice-presidents and, therefore, one could have a kind of inner political cabinet so to speak. This could be composed of the vice-presidents and the president with the commissioners remaining heading a re-grouped number of directorates-general. These are ideas which are aimed at securing some method of decision on priorities and the avoidance of harmonisation in small matters which cause irritation in the public and can hardly help towards the unity of Europe.
In any case, I am sure there should be an organisation to serve the Commission
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in research and on long-term forecasts and priorities. The Commission itself asked for a study to be made two years ago, called Europe plus Thirty. The distinguished chairman was the noble Lord, Lord Kennet, who I am glad to see is to speak later. Many able people took part in that study; but I understand that the Commission will not decide whether to accept the ideas of this project team until the autumn.
In the meantime, two weeks ago, I had the honour to represent the noble and learned Lord the Lord Chancellor and your Lordships' House at a conference of Presidents of Western European Assemblies. I was accompanied by the Clerk of the Parliaments who gave me invaluable assistance. From the other place came Mr. Speaker himself—and Mr. John Davies because there were many subjects on which it was unsuitable for Mr. Speaker to take part. Among other things it was proposed to recommend that there should be an "institute for research" which seemed to me—and I dared to say so—to overlap work already commissioned by the Commission on which they had not yet made a decision. But the more interesting proposition, perhaps, came from the President of the Bundesrat who proposed a "Chamber of States" with members nominated by the national Governments of the Nine to act as check and balance to an elected European Parliament.
There is no doubt that elected Members will at once ask for increased powers. As this can only come about by the unanimous decision of the Council of Ministers, the relations between the Council and the Parliament will be of paramount importance. As we have no European Government, the implications for national Parliaments will, I am sure, be long debated and we shall have many other opportunities to debate them. But European union, as such, can come about in the end only if the 250 million people now represented in the Community understand it and want it to succeed. It seems to me that the two problems which fill their minds above all else just now are inflation and unemployment. If we could tackle these with success, then, in the words of our report:
"The EEC will have the added strength of public support based on the broad social and moral objectives of the Community."

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If Europe so far has no world political reality, let us remember the forces, both seen and unseen, that threaten us on every hand. As President Giscard d'Estaing said to this Parliament a short time ago:
"For once the wind is not blowing across the Channel—it blows from other quarters, and so brings us closer together."
So, my Lords, whatever the shape of European union that we cannot yet clearly discern, I believe that we shall have to achieve it in the end. We need only to stay together and to stay the course.

THE STEEL INDUSTRY IN WALES
3.40 p.m.
Lord MELCHETT: My Lords, with permission, I will now repeat a Statement which is being made in another place by my right honourable friend the Secretary of State for Industry. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a statement about capital investment on steel in Wales.
"The Government have been faced with a very difficult and complex decision over the British Steel Corportation's proposals for major developments at Port Talbot and for the closure of steelmaking at Shotton. The Corporation's plans and several alternative schemes have been most carefully examined in the light of the many representations made to us from the areas concerned. It is the Government's view that the assumptions about capital costs and market prospects which lay behind the Corporation's proposals require a thorough re-examination in the light of inflation and of market prospects as the steel industry recovers from the severe recession of last year.
"I have therefore asked the Corportation to carry out a further review both of their own proposals and of alternative schemes involving continued steelmaking at Shotton, in the light of the latest available information. They have agreed to do so.
"This review will inevitably take some time to conduct in the necessary depth
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and detail. We have therefore proposed to the Corporation that they should undertake without awaiting the review those elements of their proposed investment at Port Talbot which would not prejudge in any way the decision on the future of steelmaking at Shotton.
"The Corporation have informed me that they are willing to proceed on this basis with the second phase of the coke oven replacement scheme, of which a first phase was authorised in February 1975. This will reduce pollution in the vicinity of the works and will contribute to operating efficiency. They are also prepared to consider the economic and operational feasibility of introducing some continuous casting to feed the existing mill at Port Talbot, giving some improvement in product quality. The new coke ovens and the continuous casting machine together with necessary modifications to the steelmaking, scrap and slab handling facilities, would represent an investment of some £100 million in total.
"The Government informed the Corporation of our readiness immediately to authorise expenditure of a further £250 million for the proposed new hot strip mill at Port Talbot. The Corporation have agreed to consider this proposal within the re-examination that they have undertaken to carry out."
My Lords, that concludes the Statement.
Lord CARR of HADLEY: My Lords, I am sure that the House is grateful for the repetition of that Statement on such an important matter. May I ask the noble Lord whether he realises that it can be with nothing but dismay that the House hears that, after all this time—now a number of years—there is still no decision about this vital matter. All we can have is the promise of a further review, and goodness knows how many reviews there have been already. The noble Lord admits that this review will take some time.
Coming to more specific matters, does the noble Lord agree that the urgent need of the British Steel Corporation is for a definitive decision about the new investment in basic iron and steel production, and that within this overall need the

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BSC need to know in particular whether the capacity of Port Talbot in the future is to stay at the present level, which I believe is about 3 million tons a year, or whether it is to be greatly increased to 6 million tons a year. Thirdly, may I ask the noble Lord whether he accepts that this investment of £250 million which was announced on the new hot strip at Port Talbot will not increase the total output of steel in this country? It fails to do so at a time when the big tin plate users and the big users of other forms of steel sheet are probably being driven more and more to import in order to meet their requirements. Is this not in itself a condemnation of the Government's lack of decision over the really urgent matters?
3.44 p.m.
Baroness SEEAR: My Lords, we from these Benches should also like to thank the Government and the noble Lord, Lord Melchett, for repeating the Statement which has been made in another place. I fear that I can only echo the comment made by the noble Lord, Lord Carr of Hadley, in deploring still further the delay in deciding what is going to be done about Shotton. I am sure that your Lordships' House will agree that in a matter such as this there comes a point when almost nothing can be worse than further uncertainty as to what is to be done; nothing can be worse either to the health of the industry or indeed the people employed in that industry, or contemplating going into that industry in this area, who cannot know, and have not known now for years, where they stand or where they can expect to stand in the near, let alone middle, future.
I should like to ask the Government from where this £250 million is coming. Is it a loan to be repaid by the BSC at some time? Is there any reason why it should not be raised on the market with a Government guarantee? If the future of the steel industry is good, why should this not be done? If indeed it is simply a further grant to the steel industry, we must point out that £250 million is a quarter of a billion, the billion which has nearly split the Government in deciding how they are going to save monies of this order.
3.26 p.m.
Lord MELCHETT: My Lords, taking the noble Baroness's point first, we will shortly have a Bill before your Lordships' House dealing with the capital investment programme of the British Steel Corporation. It may be best to leave the detailed discussion of that until that time. I take it that the noble Baroness is not suggesting that this much-needed investment should not be proceeded with, and my understanding is that the sums mentioned in the Statement come within the existing provisions of the British Steel Corporation's investment programme. The British Steel Corporation are empowered to raise money on the market if they wish. A Government guarantee amounts in public expenditure terms to exactly the same thing as the Government providing the money. I do not think that of itself is necessarily very helpful.
I appreciate what the noble Baroness and the noble Lord have said about the uncertainties which a further delay will cause and the length of time it is taking to reach a decision on this matter. But both the noble Lord and the noble Baroness will accept that this is an extremely difficult decision that has to be made. It is a question of weighing up the very grave social consequences of any reduction in the steel making capacity at Shotton in an area of high unemployment where up to 6,000 or more jobs would be at jeopardy. The noble Lord said that this had been under consideration for a matter of years. Of course, until the Government had the British Steel Corporation's formal plans for Port Talbot we could not begin to reach any final decision on the case for closing Shotton. The plans were received in January 1975 at a time when the recession was beginning and capital costs were rising. That changing situation has affected both British Steel Corporation's own proposals and the alternative scheme that was put forward by the workforce at Shotton.
It is for those reasons that we think it is better to ask the British Steel Corporation to look at the matter again than for the Government to reach a decision on figures which almost certainly do not any longer reflect the true position. The noble Lord, Lord Carr of Hadley, mentioned the new hot strip rolling mill at Port Talbot.

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It is true it will not lead to any overall increase in the amount of steel produced at Port Talbot; but it will dramatically improve the quality and my understanding is that is something which is urgently wished for both by the British Steel Corporation and their customers. The Statement says we would have been ready to authorise the new mill at this stage because it has always been part of the British Steel Corporation's plans for Port Talbot and it had no implications for Shotton's future. The British Steel Corporation felt that such a large investment should be considered together with the location and size of related steel-making investment, and they will be re-examining the economics of the Port Talbot hot strip mill along with the related matters and alternatives for Shotton.
However, I do not think that the British Steel Corporation, or anyone else, would say that this investment, or the lack of it, would have affected any shortages in the immediate upturn because, on the best estimate, investment at Port Talbot would not have been in production before 1980. I know that as a result of the industrial strategy exercise the British Steel Corporation are in very close touch with their customers and will be keeping a close eye on the position in the immediate upturn of the supplies of steel.
Lord SELWYN-LLOYD: My Lords, is the noble Lord aware that, as one who has had considerable concern over Shotton for a very long time, I am very pleased indeed that its future is at least to be further considered? A reprieve is better than the execution of a death sentence for 6,000 jobs. I hope that when the British Steel Corporation or the Government make a future decision it will be a wiser one than the last one.
Baroness WHITE: My Lords, is my noble friend aware that I am extremely grateful to the noble Lord who has just spoken, who was a neighbour at Shotton across the Dee and the Wirral, whereas I was the actual representative of Shotton for 20 years in another place? While we can very fully appreciate the feelings of noble Lords who consider that any further delay is undesirable, nevertheless until one can find a solution for the intense social problems of North-East Wales it really is not reasonable to demur at
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further investigation in the current situation. As the noble Lord has explained, the consideration so far has been based on information which is now somewhat out of date. I, for one, am delighted that in spite of the difficulties of delay there is to be further investigation.
Lord MELCHETT: My Lords, I am very grateful for what the noble Lord and my noble friend have said. Of course, any Government faced with this decision would like to be able to find an option which preserved the jobs at Shotton, and allowed the investment, modernisation and expansion at Port Talbot to go ahead. It seems it simply is not possible to find an easy way out and, as my noble friend and the noble Lord pointed out, the social considerations at Shotton are such that we feel the ultimate decision should be taken on the right information.
Lord LEE of NEWTON: My Lords, may I associate myself with the relief that has been expressed about the proposal for Shotton being re-examined. I should also like to point out to my noble friend that those who criticise the changes in the capital programme have not a very clean record themselves. Indeed, this Government have a long way to go to equal the procrastination and deferments from which the steel industry suffered during the time of the 1970–73 Government. Might I ask my noble friend whether the question of Shotton is not bound up with the total capacity required by the British Steel Corporation? He may remember that the 1970–73 Government cut down the global amount which the BSC were going to produce by a very large amount indeed. May we take it that that figure is now to be increased to something like the 35,000/40,000 million tons which those of us who were responsible for nationalising steel had in mind at the time when we did it?
Lord MELCHETT: My Lords, having had in a sense some indirect experience of the British Steel Corporation's problems during the 1970–73 Government, I do not think I would disagree with what my noble friend has said. As to the point of total capacity, that is extremely important and it will be one of the things which I am sure the British Steel Corporation will be considering in this study.

DEVELOPMENTS IN THE EUROPEAN COMMUNITIES, NOVEMBER 1975 TO APRIL 1976
3.56 p.m.
Debate resumed.
Baroness ELLES: My Lords, the noble Lord the Leader of the House and my noble friend Lady Tweedsmuir of Belhelvie have between them covered a vast area of policy-making and decisions on policy both in retrospect and for the future of our country. I think we must be particularly grateful to my noble friend not only for her remarkable and profound analysis of the development of the institutions, as she sees them, for the Community relative to the Tindemans Report, but I know that my noble friends would also like to join me in warmly thanking her and the members of her sub-committees—ever extending and ever growing in number—for the vast amount of work they do. Not only do they do a great deal of work, but they do it extremely well; and those of us who have to read such a great deal of material, particularly European material, are deeply thankful for their brevity as well as their precision and clarity.
But, really, how is it possible, from all the subjects before us this afternoon, to select those few which are more important than the others and, at the same time, try to remain within what might be called the tolerance limits—ever tolerant, nevertheless—of your Lordships' House? First, while appreciating that in this House we do succeed slightly better than is done in another place in the allocation of time given to European affairs, I would ask the noble Lord the Leader of the House whether he could request the Select Committee on Procedure to study the question of how best to allow proper time which is both adequate and relative to the situation concerning European affairs.
It is clearly inappropriate to debate the White Paper from the point of view of the quantity of matters contained in it, whether they go from direct elections to mutton and lamb or from potatoes to the European Investment Bank, when each item affects domestic matters. Surely it becomes more and more clear that European affairs are no longer part of our foreign affairs but part of our internal
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domestic interests. Therefore, in so far as it is possible, the European aspects should be considered when discussing matters which are relevant both to the Community and to our own national interests.
We already have the opportunity in this House, thanks to the excellent report of my noble friend Lady Tweedsmuir and her Committee members, to be able to debate draft proposals from the Commission; but it is matters of policy that your Lordships are generally not able to debate until after decisions have been taken by the Government. We appreciate that room for negotiation has to he allowed, but I wonder whether there could not be some arrangement whereby the monthly Statement on the future business of the European Council could not be more fully debated. For instance, it may be practicable to publish a Statement in the Official Report instead of one being read out and having what must obviously he formal replies, and then having some time allotted on the following day for a debate on items of importance or those which may be considered of importance by your Lordships' House. This may be possible already, but perhaps we could have some guidance on that issue. It is a matter which I think could rightly be considered by the Select Committee on Procedure.
Turning to the substance of the White Paper, the noble Lord the Leader of the House will understand if I do not follow him on every point or if I cover one or two aspects he has not dealt with. Section III on External Relations—Trade and Aid contains an impressive list of initiatives taken by the Community over the last six months, despite the fact that some people seem to think it has been a rather dreary and dark period in our Community relationship. Nevertheless, I consider that the formidable list of achievements in those six months are an indication of the growing importance of the Community, not only as the world's largest trading bloc but as a coherent political and commercial force with which it is in the interests of other countries to have links and agreements. I am thinking particularly of the agreement with Canada, which is of political as well as commercial significance, bringing once more a close relationship between Commonwealth countries and the EEC. This was one of the aspects with which we were all

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very concerned before we came into the Communities, and I think this is a prime example of how much Canada can do for Europe and how much we in the United Kingdom can do for both our Commonwealth friends and for the European Community.
The ratification of the Lomé Convention which took place in April is another very significant movement: and I should also like to mention the approach by COME-CON for a trading agreement. We would hope, however, that the Community will ensure that the West derives positive and compensatory benefits from any such agreement which is reached and that we are not engaging in another assistance programme for what we might call a stagnant economy in order that the Soviet Union may eventually defeat our whole Western way of life.
The application of Greece to join the Community is welcomed by this side of the House. It has frequently been said that Europe without the founding country of Western democracy would be unthinkable. We agree with this sentiment. Admittedly, some concern has been voiced—and I know that some of my noble friends have also voiced this concern—about relations between Greece and Turkey, particularly on the question of Cyprus. It is a matter for EEC initiative to help Cyprus find its own solution, and this should not become a matter for discussion in any negotiations on the entry of Greece. Of course, the association agreement with Turkey was not on the same terms as the agreement concluded with Greece, which envisages total removal of the Customs barrier by 1984.
It is said that the Greek economy would not withstand successfully the initial impact of the effect of joining the Community, but perhaps we should recall that the per capita income is just about the same as that of Ireland, a country which has received enormous economic benefit from its recent membership. But it is not the economic so much as the political aspect which is of overriding importance. Perhaps it does no harm to reflect from time to time on comparatively recent events—especially those of us who were involved in events at that time—and recall that at one period in our history Greece was our only ally. Al
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though we may consider that our role has changed, many of our friends still look to Britain for a lead and for support, and I think that that should not be forgotten. To deny entry to a country which has made such a successful recovery from dictatorship would, I think, be absurd.
There are two other matters raised in the Report on which I wish to comment The first is the matter of direct elections, and I join the congratulations which my noble friend has extended to the Government. We think that this agreement has shown a will to reach a settlement and, despite all the many proposals by many governments and individuals, I believe we are all fully satisfied with the successful result achieved last week. The decision of the European Council, that elections should take place in 1978 with a membership of 410, allows us 81 seats, as my noble friend reminded us. But I must say, here and now, that I am not quite so happy about her proposal for Scotland. In view of the heated debates over the ratio of population to seats, she might remember the problems arising over Luxembourg, and the fact that already the Scottish Members of Parliament in another place are far in excess of their true proportion of the population in relation to the United Kingdom. I understand that the division of the 81 is entirely a decision for the United Kingdom Government, and that no outside pressures can be brought to bear as to how it is to be made among the peoples of the United Kingdom.
Lord BOOTHBY: My Lords, may I ask the noble Baroness one question? Does she not realise that the Scots are worth twice the English?
Baroness ELLES: No, my Lords, I did not realise that. But I am grateful to the noble Lord for having drawn my attention to the point. The procedures necessary in order to have elections in the United Kingdom by the agreed date require the active co-operation of the Boundaries Commission. Is it possible to step up the procedure, so that their task may be completed in good time? Also, has any initiative yet been taken? I should be grateful if the Minister could reply at the end of the debate. We might also remember that Portugal, after 45 years of dictatorship, was able to hold two

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elections, draft and adopt a Constitution and install a President all within the space of 26 months.
Although I have already stated our great pleasure and our warm welcome for the decisions at the European Council, we feel that we must always he asking the Government why we must be made to appear incompetent, inept and unwilling to co-operate in something new, which is of interest and even excitement for the young of our country. If the eight other Member States can manage to arrange their affairs so that they hold their elections by 1978, why cannot we? If our procedures are so cumbersome, can we not have a look at them and see whether they can be modified or, dare one suggest it, even improved?
I speak on this point as an individual and not on behalf of my Party, because I represent only about half of my Party in this matter, though my view is, of course, shared by the most important member of it, but I should like to make a plea to all political Parties to see what they can do to get as many women candidates as possible for the direct elections. Women, as well as men, can make a positive contribution to the growth and development of the Community. In this regard, I would ask the Government what they are doing about coming to a decision on a fixed site for the European Parliament. It is hard enough to have to travel 100 days in a year, especially if one is married with family commitments, to three places within Western Europe. Undoubtedly, a fixed site would make an enormous difference to the possibilities of both men and women being able to undertake this new and very exciting commitment for our country. So we would ask the Government what line they intend to take on this matter, and whether they hope to be able to come to some decision with the other Member States at an early date.
Before turning to Tindemans, I should like to say that not only arc very major and important matters decided in the Community, such as the decisions taken within the six months covered by the White Paper, and to mention a small initiative to show what can be done in the Community by individuals. When I was a member of the European Parliament, I was
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asked to initiate a proposal to form a European Community youth orchestra. I left the European Parliament before that was possible but, thanks to the very valuable and helpful co-operation of the noble Baroness, Lady Fisher of Rednal, who then joined the European Parliament and became a rapporteur on the matter, the Commission have adopted the proposal and a new European Community youth orchestra will be playing in 1977, with most senior and important European conductors of world fame.
I say that only to show what can be done through the European institutions to help the youth of Europe understand better the meaning of European cooperation, and to use a media such as music, which requires no interpretation and has universal understanding. These young people will be playing throughout the nine capitals of the Community, starting next year. I hope your Lordships will forgive me for raising something which is not in the White Paper, but which shows the human side of the Community and the willingness of the Commission to co-operate on matters which are not of earth-shattering significance, but which are of significance to youth and to individuals within the Community.
Turning now to the Tindemans Report and the Scrutiny Committee's comments on it, although Tindemans is not a formal Community document it provides a blueprint for the future development of European policy and decision making processes. Some of the proposals in the Report have been overtaken by events, which seems to be the motto for this afternoon's debate. The co-operation of the European Community's Member States at the United Nations Seventh Special Assembly, and the eventual agreement in UNCTAD IV, show that it is possible to agree to speak with one voice on major international matters. Of course, it does not always happen—for example, there has been the question of Angola—but it happens from time to time, and I sometimes think it would be more beneficial for us to turn to those times when things work, than always to be carping when they do not.
Our relations with the lesser developed countries must surely be one of our priorities, both for our own and for their economic and social progress. There is

541
no area of policy-making which shows more clearly the economic and political interdependence in the world of today. The approach is pragmatic in Tindemans, but we must slowly shift from co-ordination of external policies to a co-ordinated common external policy. That, I think, is the distinction which Tindemans makes between the position in the past and the position, as he sees it, for the future; not to co-ordinate individually on a whole lot of matters, but to create together one common policy as a guide and a direction in which the nine Member States must go. There is urgent need to look at our joint economic, industrial and social policies on a common basis. Unemployment is affected by all three of these areas of policy, and finance from Community funds should be applied in accordance with interdependent and interconnected policies. For instance, do the Government agree that a mixed economy is the best way for Europe to progress in order to improve the standard of living of its peoples? These are the kind of questions we shall want to have answered by the Government. We want to know the direction in which they envisage Europe should go. It is these practical issues which will decide whether we come to a satisfactory solution to the many problems that are facing the Community today.
On youth unemployment, what is the policy, in European terms, of the Government? We hear about job creation schemes in isolated parts of the country, but has any thought been given to an overall five-year plan for industry and investment in the context of Europe, to the kind of jobs which will be created, the kind of training which will be needed and the kind of education which children should be getting to fit them for the demands of a modern European society, with developments in science and technology rapidly overtaking current industrial programmes?
It is true that the Tindemans Report is based on the terms of the Treaty of Rome, but in dealing with the employment problem and economic convergence there is no mention that the Treaty provides for the mobility of labour to solve unemployment and regional imbalance. There has been very little mobility as between EEC nationals. The emphasis has been on third country migrants. What is the Government's view on this?
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Are they intending to go back to the terms of the Treaty and encourage mobility of labour under Article 48, or do they see a new vision of Europe, built upon the basis of industrial contributions from third countries?
The report touches on aspects of policy which are not within the legal powers of the Commission and which come within the competence of the Ministers as Foreign Ministers of national Governments. Articles 100 and 235 of the Treaty have been used very considerably in social and employment policies. Again, we should be glad of the view of the Government as to how they view this aspect of the development of the Community. The use of these particular Articles has assisted in what might be termed blurring the edges between the function of a Foreign Minister of a national Government and his function as a member of the Council of Ministers.
One has to think only of the problem of the rights of aliens—whether "migrant workers" means migrant workers who are nationals of the EEC or whether this term also includes third country migrants. This has a very important and deep significance for the economic and social policies of the Community budget. Surely this should be a matter for our national Parliaments to discuss if it is outside the power provided for by the Treaties, because it will also have very serious effects on our Constitution: whether migrant workers should be given the right to vote in local elections, whether they should be given the right to vote in General Elections, whether EEC national residents abroad should have the right to vote in direct elections.
There are whole areas of policy upon which we need guidance and some evidence of the thinking of the Government. Unless we are fully aware of what is happening there is danger of power being in the hands of our Foreign Ministers, uncontrolled either by the European Parliament or by our national Parliament, because they fall between two stools and can make decisions without being controlled by either. Then, indeed, the sovereignty which we sought to defend, and which so many of us talked about before joining the Community, will be eroded—not by the European institutions but by members of our own Government. This may be exaggerating the issue, but

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attention should be drawn to this difficulty when we are considering the development of the institutions.
I must distinguish clearly between matters which affect the citizens of Europe and our relations with countries outside. It becomes clearer every day that there is an urgent necessity to co-ordinate and formulate a joint foreign policy in order to speak with one voice on matters of European concern. This is beginning to happen and we welcome the evident co-operation—for instance, in the United Nations Security Council last week.
Mr. Tindemans has made a valuable contribution to the advancement of international co-operation at the European level. We have been gradually losing our political and effective sovereignty as individual nations in the context of world affairs, but we support the pragmatic and cautious approach of Mr. Tindemans in the development of the role of the European Council, the insistence upon the co-ordination of policies affecting external relations and the increasing opportunities for the citizens of Europe to take part, through the development of its institutions, in the decision-making processes. Just as was 1st January 1973, 1st January 1977 will be an auspicious day for Britain. On that date we shall have a great opportunity to play an effective and positive role in this development, with both a British President of the Commission—and I take this opportunity to congratulate Mr. Jenkins on his appointment and to wish him well in his new task—and also a British President of the Council. We should like to hear some of the New Year resolutions of the Government concerning their plans and policies and, above all, to see a sign of their determination, together with that of all your Lordships, that now that we are truly a part of the European Communities we shall all cooperate with our eight Member States in continuing the task of constructing a free and democratic Europe.
4.16 p.m.
Lord GLADWYN: My Lords, if I may say so without causing any offence, the White Paper now under discussion is one of the blandest documents I have ever read. You might think that in the EEC all is proceeding according to plan. True,
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there is an expression of mild disappointment in paragraph 24 concerning aid to non-associates and an acknowledgement of disagreement—though only, it seems, a temporary disagreement—on nuclear research and on energy. But on everything else, including political co-operation, and even agriculture, the impression is created that there are few real difficulties and that a far-sighted Council of Ministers, wisely guided by its civil servants, is proceeding imperturbably on its predicted path.
I know that, as stated, the paper is merely designed to describe major decisions and to refer to major work in progress. But, even so, many people feel, as has been stated this afternoon, that the Community has been stagnating rather than progressing during the period under review, and the least one can say is that any anxiety on this score is hardly reflected in the White Paper—nor is it, apparently, very present in the mind of the Government. Still, as I think the noble Baroness, Lady Elles, said, the White Paper is useful—and I would even say very useful—in drawing our attention to the enormous field of activity now covered by the Community.
To imagine that we could somehow withdraw from this great entanglement —although the idea still appeals to a number of our citizens and, indeed, to a number of the members of the two great Parties in this country—is becoming increasingly unrealistic. But if, on the other hand, this activity is to continue fruitfully and not to end up in shrill recriminations and in a reversion to economic nationalism, there must surely be some generally agreed concept of how it should best be organised. Each Government concerned, including our own, should have its own ideas on this rather essential point. So it is here that we come to the second and obviously the more important document under examination this afternoon; namely, the Select Committee's Report on Tindemans.
As was only to be expected, given its membership and its chairman, this report constitutes an admirable, as I think, and certainly a legally impeccable approach to the admittedly difficult problem of European Union. As I think the late General de Gaulle said—and he had a habit of making these rather sardonic remarks—"You cannot get European

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union by simply shouting 'Long Live Europe' and jumping up and down"; nor, indeed, as I myself think, though not everybody here today, including the noble Lord, Lord Northfield, may agree, by devising some ideal federal constitution which, apart from everything else, would not stand the slightest chance, as things are, of being approved by any of the nine national Parliaments which would he required, of course, to ratify it. Apart from anything else, our ancient nation States are not to be equivalent to the thirteen British colonies in North America in 1776, and if European Union is to come, then surely it must be something different from such historical precedents, and there are many of them. I may be wrong, but I have always held that it can only come about by a gradual reinforcement and development of the existing Community institutions which have, after all, been agreed by all the countries concerned.
In holding this view, however, I do not regard myself as a pragmatist if, by this term, is meant someone who wants to go ahead with increasing co-operation in all fields, without apparently having the faintest idea of what sort of European union will eventually emerge, if indeed it ever does emerge. Judging by what they have said, Mr. Hattersley and the Prime Minister come into this last category, and I think they are misguided for if they persist they are likely to be pushed by events rather than pushing them—the role incidentally, assumed by our beloved country ever since the Suez disaster.
Perhaps I may explain, therefore, what kind of union might, with luck, emerge, if we do try to construct it on the basis of existing institutions. Here, I think that Tindemans is right. The effective "Government" of the Community for the foreseeable future can only be the Council of Ministers—or the European Council acting in its stead—and it is impossible to imagine that such a Government can ever function effectively unless it has increasing recourse to the practice laid down in the Treaty which we have signed, of taking decisions if and where necessary—and I repeat "if and where necessary"—by a qualified majority vote. I remember that before the referendum, in an effort to explain to audiences
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how the Community could or should work, I defined this system—and here I quote myself—as
"one in which major decisions will be taken by what might be called a process of assisted consensus rather than by the imposition of the will of one, while minor decisions can be arrived at by qualified majority vote, minorities being confident that even if they lose on a short-term swing, they will certainly gain on a long-term roundabout".
I see the noble Lord, Lord Northfield, is nodding his head; I am glad that I have convinced him on this point at any rate.
It should be pointed out in the first place that under the existing practice—the existing rule—it would be most unlikely that this country would ever be virtually isolated on any important issue: in other words, that it would not have the support of at any rate one large Power or two or three smaller ones. In the second place, even if this country were so isolated, it would clearly pay to yield to the majority on all save the most vital issue, in the knowledge that by so doing she would be likely to get a majority decision on some other issue in which our interests—perhaps our vital interests—were concerned. Even on the highest or most contentious issue it would seem advisable, as I think, for the Government, in the very unlikely event of their being virtually isolated, to say that they agreed to the proposal ad referendum to the West-minister Parliament, and then to explain to that Parliament the likely consequences of standing out before, if necessary, deciding definitely to apply its veto. If the Government could find it possible to say that this was, very broadly speaking, the way in which they proposed to apply the decision-making procedure in the Council in the future, I have no doubt that their example would be likely to be followed by their colleagues and that a great step forward towards a new kind of union would have been made.
Naturally, as the Select Committee very properly points out, such a procedure could be applied only in spheres coming outside the Treaty—as I think the noble and learned Lord, Lord Diplock, will agree—if it were authorised by legislation approved by all nine national Parliaments. But if the procedure is applied in the sphere of the Treaty and is seen, over the years, to be successful, as I think it would

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be, is there any reason to suppose that it would not be possible for such approval to be given? I do not think so.
Take, for instance, monetary union—or, shall we say, to begin with, a common monetary policy. This cannot, as I believe the Committee truly observes, be forced on us for such time as we are in a weak economic position and the Germans hold all the cards. Of course not. But as we get stronger, as oil contributes to our balance of payments, so some advance in the direction of monetary union may well seem to be both desirable and necessary. And if the decisions are then taken by the means suggested, what is to prevent the system from being recognised as being applicable even as regards the difficult matter of defence? Here, may I say how glad I was to read in paragraph 9 that:
"Much could be done to obtain a greater degree of unanimity in the field of defence supply"
and research, thus apparently subscribing to Mr. Tindemans' recommendations on the subject, which, as noble Lords will probably recall, was effectively the same proposal made in the Resolution which I drafted and got through the European Parliament by a majority last December.
These prospects in any case should not alarm us. The Committee seems to fear that they may. It says that the Tindemans Report is,
"ahead of public opinion in the United Kingdom"
and that the whole question of qualified majority voting is,
"a sensitive field which can only he approached with caution".
I suggest, with respect, that they are too apprehensive. My own feeling is that a definite lead by the Government in the broad direction that I have indicated would be welcomed by the same sort of majority as approved our entry into the Community, more especially—and perhaps only—if it could be assured that there could be no question of our losing our national identity, still less of becoming a mere province of some great federation centred in Brussels, but simply of our agreeing to take part in a new international European system designed to reach common decisions for the benefit of all concerned. It all depends on how the question is put.
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If we can gradually build up the European "Government" in this way, what about the European Parliament and the Commission? I think we all recognise that the recent decision to go ahead with direct elections was of paramount importance, if only for the implicit recognition by the Ministers that there are decisions on matters coming within the Treaties, and notably the Community budget, which are almost exclusively within the purview of the Ministers and cannot, therefore, be changed by any action on the part of any national Parliament. If the Community is to be a democratic institution, there must consequently be a directly elected body which will give some popular sanction to the actions of Ministers, at least in this sphere. And once it is directly elected, it will naturally claim to accept or to reject not only a small proportion of the Community budget but the whole of it. It will also press for powers of what is called "co-decision" in other spheres; in other words, the right by a given majority to approve or disapprove of all major political decisions of the Council of Ministers. That will come. Certainly the new Parliament will not be able to exercise such powers unless there is agreement by all nine national Parliaments that it should possess them; but I shall be much surprised if by the end of the first directly elected European Parliament in, say, 1983, some such system is not in force.
This does not mean that we shall be progressing towards a Federation in the conventional sense. The European Parliament, even in possession of wide powers of "co-decision", will not be the equivalent of a national Parliament. I do not know whether noble Lords will agree, but as I conceive it, it will rather be a sort of combination of long stop and safety valve—if your Lordships can imagine such a thing. I agree with the Select Committee, for instance, that it is very doubtful whether it should have powers of initiative except of course indirectly, as I think the Committee suggests, through the Commission with which it should obviously, as now, work in the closest harmony. But it will not be a kind of constituent assembly—or rather, if it tries to be anything of the kind it will, like its predecessor, the Frankfurt Paulskirche Parliament of 1848, be in some danger of collapse.
What will happen eventually no one can say, but the old idea that the Parliament,

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directly elected, should concentrate on a scheme for a federal union, involving a Senate, or Chamber of States, a House of Representatives on which the Executive will directly depend, or from which it may even be drawn, together, no doubt, with a directly elected President of the entire "shooting match", seems to me to be now inconceivable in practice, and not even very desirable in theory. I believe indeed that a Chamber of States which was apparently recommended by the President of the Bundestag the other day, is, if realisable, very undesirable. If it were set up in the near future, it would simply be a rival to the Council of Ministers, and a dangerous institution indeed. I hope that that idea will be firmly suppressed.
My Lords, there remains the Commission. I believe the danger is that the Ministers, even if they tend more and more to act like a Government, as I hope they will, may come to regard the Commission as a mere collection of high-powered civil servants, useful for carrying out collective decisions, but not to be taken very seriously from the political point of view. This would be a great mistake. The Commission is a unique institution. It not only administers the Community, it also represents it, and as collective decisions are increasingly taken, it will tend to represent it more and more. Tindemans has quite rightly pointed to the necessity of putting an end to the inherently absurd distinction between treaty and non-treaty activity. I know the Committee sees some legal difficulties in this, but I have no doubt that they will be overcome eventually, and I think quite soon.
The so-called Davignon apparatus must clearly at some stage be merged with the Commission whose major function it will still be, in conjunction with the COREPER, to submit all kinds of plans and proposals in all spheres to the Minister for approval. But if it is to perform this role effectively during the next few years, it will have to function much more as a really collegiate body under strong and independent leadership. Here I agree very much with what the noble Baroness, Lady Tweedsmuir of Belhelvie, said. Mr. Roy Jenkins—we can all congratulate him on his appointment—has a great opportunity. We can only hope that not only will he rise to the occasion, but that the Ministers will give him his head.
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My Lords, provided the basic Convention is approved, as I have no doubt it will be, in this Parliament of Westminster, we shall from October or November onwards be concentrating chiefly on the ways and means of directly electing the 81 British Members of the European Parliament. I assume that in any case, by the spring of the year after next we shall have reached agreement on how to do this, if only for the fact that the nomination of no less than 81 Members of this and the other House would be as silly as it would be impracticable. It may be said that there are legislative difficulties in the way, but presumably a Government who are prepared to push legislation through by a ruthless use of the guillotine would be prepared, if necessary, to use the same methods in respect of direct elections to the European Parliament. Where there is a will there is a way; the only doubt is whether there will be sufficient will, not only on the part of the Govermment, but also on the part of a considerable section of their supporters, to say nothing of the Tory Opposition.
As for the electoral procedure, I can only repeat what the Liberal Party has been saying since the issue first arose. It is not the alleged precedent for adopting proportional representation in this country which should tell against the adoption of some variant of that system in respect of the European elections. The two major Parties can always stick out for the "winner takes all" system in the United Kingdom if they so desire, monstrous though we Liberals think it would be. It is rather the inherent absurdity, indeed the self-defeating imbecility, of applying our British system to the totally different sphere of European elections that should influence anyone who considers the question with any impartiality at all. No one in their senses, indeed, can logically dispute the conclusions arrived at in the section devoted to European elections in the recent splendid report on electoral reform by the noble Lord, Lord Blake, who, to the best of my knowledge and belief, is a Conservative. Unless our Party politicians can rise above mistaken considerations of purely Party interest, I am afraid that the directly elected European Parliament, on which so many hopes are placed, will not get off to a very good start; and that is the least one can say.

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My Lords, as your Lordships are no doubt aware, I am making way in October for my colleague Russell Johnston who, now relieved of his previous responsibilities in respect of devolution is, I am happy to say in a position to resume his seat. Nearly four years in the European Parliament, even as at present constituted, has convinced me of the constructive part which it is now likely to play in the creation of that European entity in which so many of us fervently believe. Of course, it will have to shift eventually to Brussels, and from being in the nature of things a friendly collection of well disposed and perhaps not very important politicians, nearly all agreed on European issues, it will have to become a serious battleground for conflicting political groups and notable political figures. Above all, it will have, for many years at any rate, to maintain the closest links with the national Parliaments, a liaison which, as I see it, can only be effected by the various political groups and parties themselves, and not by trying to set up some cumbersome liaison machinery, or so-called Conferences of Presidents. It may, indeed, be something new and strange; no one can say exactly how it will work out. What is certain is that unless it does work in the sense of providing the incentive, the essential popular spark for European unity, that unity will not come about, and that would be a real tragedy. In spite of the understandable caution of the Committee, I hope therefore that, as a nation, we shall greet Tindemans with a cheer.
4.38 p.m.
Lord KENNET: My Lords, may I start by apologising to the House for the fact that I shall have to make off in a cloud of dust, almost before I have finished speaking, because I have to go elsewhere and say the same things that I am saying now, but at much greater length. I apologise with particular grief because this is the first time I have ever had to use that particular discourtesy to the House.
My Lords, the Tindemans Report, let us not forget, was called for for two reasons. The first was to enable and encourage the British people to forget all about union, whether political, monetary or economic, during the referendum. In this aim, it was entirely successful, for
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the word was hardly breathed at all during our referendum debates. The second reason the Tindemans Report was called for was because many of the members of the Council of Ministers at that time, and especially our present Prime Minister, I think, maintained that they had not a clue what was meant by European union and it would be intrinsically desirable for someone to try to define it. Much constructive work is often done under the carpet when something has been swept there.
In achieving this second purpose, we must give the report a little less than full marks—not much less, but a little less. I was struck by the comment made by Mr. Hattersley in giving evidence to the Committee of the noble Baroness, Lady Tweedsmuir of Belhelvie, that it was the first time the Community had been able to look into its own future with any logicality beyond the end of this decade. That is true. It was a better and more logical look at institutions than we had ever had before. It was a great advance on the earlier series of magnificent and idealistic documents which punctuate the history of the Community—I will not enumerate them—which were all drawings, photographs if you like, of a desired state of affairs, saying "Here is where we ought to be," with no arguments about how we get there, and no comparison of the position which is recommended with alternative positions.
I think Mr. Tindemans did as well as he possibly could without the services of what the noble Baroness, Lady Tweedsmuir, has called a think-tank; in other words, some body of people who are capable of setting out alternative aims which might rationally be adopted by the body concerned, namely, the European Community; alternative routes to each of those aims, and the costs and benefits, first, of each of those aims, and, secondly, of each of the alternative routes to each aim.
This all sounds very grand, but it is simply called long-term planning or long-term forecasting, and there is nobody in the world who does not do it except the European Community. It is done by every Member State of the Community, and in the more developed Member States, like our own and France, it is done by every single Ministry for its

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own purposes. It is done by every developed State outside the Community, it is done in Eastern Europe and in the Soviet Union; it is done in the United States—in a completely different way, but it is done—it is done by Mexico; it is done by Iran and by Egypt. It is, of course, done by every major company in the world. No company above a certain size would dream of trying to invent its own future without some cost/benefit analysis, without some cross impact matrix studies and all the rest of the jargon, which is really a very simple way of thinking about the future set out in figures.
Only the Community does not do it, and this, to my mind, is one of the reasons why the European Community, on the world scene, has shown some of the characteristics of a car on a dark night on a busy road without headlights. When a politician sees a political and economic entity bumping other political and economic entities in the dark, and hitting the very street furniture itself in a series of, so far thank God! minor collisions and falling to pieces at the seams, his instinct is to say: "Here, let me take the wheel; I can steer a better course".
Early in 1974 the Council of the day had a better idea. They said, "Let us try headlights. These have been found useful elsewhere". So, as Lady Tweedsmuir mentioned—I was not going to mention it otherwise, because I have an interest, but she has done so, so I will follow her—the Council set up the study called "Europe plus Thirty". They were so excited about it, and thought it so urgent to get this long-term forecasting and planning capacity, that they voted no less than 500,000 units of account, which in present money values is nearly £500,000. They said "Report within a year, and here is the money to enable you to report within a year." We did. I am glad to say we underspent; we spent only 360,000 units. We got the report in.
The question we were asked was: "Should the European Communities" —because, as we know, the three of them are still legally separate—"endow themselves with a capacity for long-term forecasting in respect of all matters likely to affect the future of Europe?" So it is not limited to economics; it includes social factors, political factors, the state of
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education, agriculture, even the climate—we could not leave that out. "If so, what should this capacity look like?" In the Report we turned in we answered that question: "Yes, indeed, it should, and here is a 400 page description of what it should look like."
That Report is now in the public domain. That is to say, if you can afford the fare to Brussels, if you can find the right room in the basement and blow the dust off the report and persuade the official to give it to you, he cannot prevent you taking a copy away. But it will be published in the ordinary sense of the word this autumn. After that, I hope there may be some discussion in the national Parliaments and in the European Parliament about whether what we say should be done.
What we recommend is this. We avoid the word "institutions", because the Community already has three great institutions with a big "I", and we did not want it to be supposed that we were recommending the addition of a fourth institution. We recommend the addition of a small new instrument, consisting of about 30 or 50 people, which would be equally at the service of the Commission and of the European Parliament, and should work half its time for each of those, and perhaps in some spare time for the Member States and Member Parliaments, if they wanted it. I think Lady Tweedsmuir is perfectly right in saying that there is a possible collision or overlap here with the proposal made by the present President of the European Parliament at the meeting she attended a week or two ago in Bonn.
It seems to me still that the main reason why the Community needs such a capacity—besides the intrinsic one that any large body of people trying to do the same thing must try to plan a little—is that everybody else is doing it. The Community is at the mercy of its Member-States because it knows less, it has fewer statistics, it does less projecting of statistics. It indulges less in the application of political judgment to trend projection, which is the essence of forecasting—indeed, it hardly indulges in it at all. It knows less than the great multi-national corporations, both those which are based on its own territory and operate outside, and those which are

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based outside, typically in America and Japan, and operate into the Community.
Above all, it knows less than the OECD. At first sight one might not think this is a very terrible thing. Why should not it know less than the OECD? The OECD has been in existence longer. The general level of its staff is, I think by common consent, higher; it has abler people in its secretariat. It has got richer countries in it, and therefore there is more money to spend to carry out the studies. The OECD is now starting up a fairly major long-term forecasting operation, concentrating specifically on relations between the developed world and the developing world. It is possible to view this with alloyed delight. Most of what comes out of the OECD work will, of course, be of the highest interest and utility to all the Members of the Community and to the Community itself. But only most of it. It is not always automatically so that West European interests, particularly vis-à-vis the Third World, should coincide with American and Japanese interests. It is for that reason that some of us believe that it is important for the European Community to look at its own future through its own spectacles, and not rely on spectacles with American and Japanese tints.
May I conclude by saying what everybody else has said, and that is how much I rejoice in the appointment of Mr. Jenkins to the chairmanship of the Commission and how much I wish him well. It is perhaps a little more of an Augean stable than is commonly spoken of in respectable quarters. He will have a great task in reforming it, and the task will be, as I think Lord Gladwyn was saying—I am not sure I followed him, because he was going so fast at that moment—very largely to reintroduce the collegiate principle among the Commissioners, to prevent them being a body of national politicians, gathered together for four years, sitting back to back and facing their own national capitals at home, hoping to be judged good boys, all of which tends to make each sector of Community policy a fief of a given Member of the Community and tends to cause that sector to be run in the interests of that Member, which is a disastrous arrangement.
The degree of internal lack of communication within the Commission is some
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thing very hard for an outsider to understand. If you imagine the most entrenched positions of the most backward-looking of our Whitehall Ministries at the worst moments of their histories, you still have a long way to go before you can find anything like the way the Directors-General do not talk to each other inside the Commission building. Communication is vertical. The Director-General will talk to his Commissioner and tell him what he thinks ought to be done; he will get the orders he wants, go back to his office and deliver those orders down the line, and that will be done. Very often a crisis will then result in the social and economic fabric of the 250 million people for whom all this is supposed to exist. The crisis will then hit the Ministers in their national Parliaments, who will then go to Brussels or Luxembourg and have a meeting, and call upon the Commission to make a proposal; because, of course, they are not allowed to act by themselves, only on a proposal by the Commission.
To break the vicious circle it is obvious that a reform of the Commission, though not sufficient, is necessary. It is my own hope that something like the long-term forecasting and long-term planning instrument that I have been outlining may be a help in shining a uniform light all over the recesses of the Commission and connecting up the different vertical circuits which, at the moment, are so very much out of phase.
4.51 p.m.
Lord DIPLOCK: My Lords, there are occasionally parts of a report of the Select Committee for which, as chairman of the Law Sub-Committee, I bear a certain responsibility. I am conscious that they always appear to be critical in that they are designed to point out legal difficulties which particular proposals may involve. But that is the function of the Scrutiny Committee. It is the function of the Law Sub-Committee to look at the possible legal snags and to suggest solutions; not to act as a brake upon the progress, the development, of the Communities. Our task is to find the best way to make the legal system and the institutional machinery work to make the Communities a success.
Mr. Tindemans, by European union, wants two things: he wants, first, an

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expansion of the field within the competence of the Community institutions beyond that field which is already covered by the Treaty of Rome—in particular foreign affairs beyond the merely commercial type of convention, and security. The second thing he wants is to accelerate the progress towards economic and monetary union, which is a field well within the Treaty as it stands. As the noble Lord, Lord Gladwyn, pointed out, an amendment of the Treaty requires an elaborate procedure, and ratification by all the nine countries. Such an amendment requires, before it is made, unanimous agreement as to the limitations upon the further national sovereignty transferred to the Communities, and unanimous agreement upon the division of power between the institutions; the Council, the Commission, and the European Parliament. It is a natural temptation to a politician, particularly a pragmatic British politician, to say, "If we can find a field in which the heads of Government can agree upon a common policy, let us proceed as if the Treaty were amended to cover it, leaving the formal amendment until experience has taught us what its advantages are and what its limitations should be".
The distinction between what is within and what is outside the Community field under the Treaty cannot safely be blurred. There is a basic difference between the Community structure and the Treaty and any other commitment entered into by the United Kingdom Government with other States. The Treaty of Rome and the European Communities Act together constitute a unique constitutional document for this country; the Treaty is a unique constitutional document for all the Member States. Together for us they have created a new legal order: a direct source of legal rights and legal obligations to individuals; a transfer of legislative, executive, and judicial powers within the United Kingdom to Community institutions, and any further transfer requires the legal basis of legislation by Parliament.
A commitment entered into by Heads of Government, whether by treaty or whether by resolution of the European Council, can have no direct effect, can confer no legal rights, impose no legal obligations, upon the citizens of this country, whatever it may be able to do in other countries—and I think Belgium is one of them where
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it can. If the agreement, commitment, of Heads of Government related to a field outside the Treaty, to give it the form of legislation by regulation or Directive would give it no legal authority in this country. The United Kingdom courts would have to treat it as a nullity, and it would not fall within the interpretive jurisdiction of the European courts. The courts in this country would have no jurisdiction to refer it to the European Court.
May I make one final comment. A commitment to majority decision outside the field covered by the Treaty—may I say I agree with the noble Lord, Lord Gladwyn, that within the field covered by the Treaty (I speak as a lawyer) the sooner we get back to majority decision the better—is quite impractical and contrary to all constitutional theory in this country. A Government of today cannot commit a Government of tomorrow to a policy with which they do not and will not agree. If I have spoken perhaps bluntly on this issue it is because I believe that we should do a real disservice to the European Community if we were to attempt, for reasons of expediency, to blur a distinction which it is vital to retain.
I mentioned that monetary and economic union fall within the field of the Treaty, and within that field Mr. Tindemans desires to improve the machinery for reaching decisions more speedily and more effectively than we do today. That is wholly unobjectionable from the legal point of view, provided that so far as possible one retains consistency with the constitutional structure of the Community laid down in the Treaty.
There are only two comments which I desire to make on the Tindemans proposals in this regard. First, he recommends more delegation by the Council of decision-power to COREPER and to the Commission. To COREPER, I can see no constitutional objection to delegation. To the Commission, one must bear in mind that the Commission represent, as the Council do not and as the Assembly does not, the bureaucracy, the oligarchy. That they would do their job admirably in many respects I do not doubt, but there is no constitutional check under the Treaty on the exercise of that delegated power; no duty to report to Parliament and no duty to consult the Council. If it is proposed that there should be a wider delegation to

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the Council—and let us not forget that the European Court would give a much wider interpretation than the English courts to a delegated power—I would suggest for serious consideration that there should be an obligation, which could be done by agreement and as a term of the delegation, that the Council's proposals, their legislation, should be submitted to the Assembly for consideration before coming into force.
Lord NORTHFIELD: My Lords, the noble and learned Lord referred to delegation to the Council. Did he mean to the Commission?
Lord DIPLOCK: I am sorry, my Lords; I meant to the Commission.
Lord O'HAGAN: My Lords, may I ask the noble and learned Lord to explain how the Commission are not accountable to the European Assembly or the Parliament, in his line of argument, when the Parliament can dismiss the Commission by majority vote? May I also ask him to explain how in his view—I may have followed him imperfectly—the Commission could not carry out certain delegated functions when they already have certain functions in the field of competition policy which could be taken as an example, at least, of functioning in a way which could act as a precedent for the things he is criticising?
Lord DIPLOCK: My Lords, theoretically of course the Commission is accountable to the Parliament or to the Assembly because they have a power to dismiss it, though no power to prevent its being reappointed again. By lack of responsibility I meant lack of responsibility for the particular terms of the legislation concerned; not generally a power to turn them out but a power to look at what they are proposing for legislation, to comment on it, to criticise it and perhaps have the opportunity of getting it checked.
The one other matter on which I wish to comment is the proposal in the Tindemans Report that the Assembly should be able to discuss all matters and send resolutions for the consideration of the Council. Of course that is appropriate, but if the resolutions which it sends are
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proposals for legislation, then it would be more consistent with the constitutional structure that those should go to the Commission first before they go to the Council because if they go to the Council first then, under the Treaty, the Council must send them back to the Commission. I suggest that a much more profitable development would be to continue and extend that co-operation between the Assembly and the Commission by which the Assembly makes suggestions to the Commission for matters on which they might propose legislation from the Council.
May I make a final observation, for I have taken up too much of your Lordships' time. A new supranational political entity—that is what the Community is—is not, I think, necessarily stagnating because it is not continuing to expand its activities into new fields and is not producing a continually increasing volume of legislation. The time may come to consolidate, to digest, what has already happened and to correct errors and make improvements; I have in mind particularly the Common Agricultural Policy. It is to be expected in an institution of this kind that the speed of legislative activity should change. In the early years it had the comparatively easy and well-worn task of removing internal barriers to trade. Freedom of establishment followed and that threw up rather more intractable problems; monetary and economic union at present, at this stage of recession, present even more. But the progress of the Community is not to be measured by the quantity but by the quality of its legislation and the administrative work of the institutions. It takes time to get legislation right, particularly when there are nine nations, not only one, to be considered, and it is in that respect that the Select Committee is endeavouring to play its part in helping to make the machinery work better.
This morning I looked at the row of Statutes in my library and I found that 80 years ago it took about 10 years to produce the 2,500 pages of legislation which this House passed last year. I asked myself: is this country 10 times greater, 10 times happier and 10 times better governed than it was in the 1880s and 1890s? Lest I should be suspected of expressing a political opinion, wild horses will not drag from me the answer I gave myself.
5.9 p.m.
Lord CASTLE: My Lords, the nobls Baroness, Lady Tweedsmuir of Belhelvie when introducing her admirable report made a passing reference to the "deluge of paper"—reports, recommendations legislation and so on—which descends on that Committee. I assure her on behalf of my colleagues, momentary refugees from Europe, that this House is like arriving on Ararat after the Deluge to which we are subjected day by day, week by week. Very sincerely, my colleagues and I congratulate the noble Baroness and the chairmen of her Sub-Committees on the extraordinary amount of time, and the thoroughness, with which they examine the proposals and legislation that come from Brussels. We are deeply grateful to them. In the nature of things, this debate is of a diffuse nature, but perhaps none the less valuable in that we are giving rein to our personal prejudices in what we choose to talk about.
I must tell the House that my own impression of the Tindemans Report may possibly coincide with no one else's. I remember that the report arrived almost as a New Year gift to those of us who had been in Parliament only five months and who were doing our conscientious best to become good Europeans and to fulfil the hopes of the British people when they decided for Europe. We looked for a Sign: this, the Tindemans Report, was to be it. My noble friend the Leader of the House has called the report a major event and a reference point. Perhaps it is.
Mr. Tindemans had been going round Europe talking to the Prime Ministers and Foreign Ministers of the Nine and we understood that his report was the distillation of their ideas as to how the Community should develop. And develop it must, because we were told that the Community and its institutions had "to develop or die". Ever since we Labour Members had joined the Parliament—and not because we had joined—we had heard and read how the European set-up was in decline. Mr. Gaston Thorn, President of the Council of Ministers, had said that, "the only achievement of the Community in 1975 was that it did not fall apart"—a rather more gloomy picture than some which have been painted this afternoon. Everybody knew that something had to be done.
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So, when we got our privileged preview typescript of the Tindemans Report before it had been seen even by the printers, we read it eagerly—and long. Most of us—I am speaking not only for my colleagues in the Labour delegation but for most of us in the Political Committee of the Parliament—read it with growing disappointment. So, I must say, did the world outside. Mr. Tindemans had fulfilled his brief. For a day or two, the report merited mention and discussion in the serious newspapers. But there was hardly a line in the popular Press and barely a mention on the television or the radio. Though it has been with us for seven months, not one person in a hundred in this country outside this building would be able to say what the Tindemans Report was about. I tried that out this weekend on a company of young people. One thought—and I assure your Lordships that I am not fibbing—that it was the only "U" film on show in the West End of London; another thought it was a report on corruption in the Girl Guides; and another thought that it was a guide to the pools.
This is much as I should have expected, but though the ignorance is not tragic, it is revealing. Worthy as were the intentions which led to the conception of the report, the truth is that it was not what a jaded and dejected Europe needed. Though it was good of its kind, its delivery for public debate was badly timed. Europe was not its old, buoyant self. Far from it. The realities of its day-to-day life were that 5 million of its people were unemployed and that inflation was biting hard. The confidence that Europe had developed during the 1960s was undermined. The Tindemans Report appeared not to heed those facts. The Common Market had had its moments, but this was certainly not one of them. The Treaty of Rome, the Big Idea, the Grand Design were, so far as the people outside, and indeed, many inside, the legislative bodies of the Community were concerned, being translated into a mere profit and loss account—mostly loss. We had heard recently about wine growers rioting against dumping of cheap wine by their brother Europeans; we had heard of subsidies for silk worms; we had heard of butter and dried milk mountains. The vision which good, practical politicians had seen had seemed

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to fade into a humdrum, bureaucratic harmonisation of this, that and the chicken on the table.
In such a situation—or so it seemed to me and some of my colleagues—in such a political climate, the Tindemans Report had no immediate importance. I retain that original point of view. Let us by all means continue the discussion among outselves here and in other assemblies like this about whether Summit meetings shall be called Summit meetings or Meetings of the Council, whether majority votes—which have been referred to so often today—shall be the rule or the exception, whether or not the Commission should have a voice in the Council and how and whether the Treaty of Rome shall be amended. I shall look forward, as I am sure will your Lordships, to detailed discussion on every one of those points. However, at this moment so little regard has been paid to this report that, so far as I know, not a single Assembly has committed itself to a full, deep discussion nor made a decision. Let us be realistic and face the fact that, with the limited amount of time that all of us can give to the discussion and debate of European matters, this is not a priority for the next two years.
The debate will radiate not from Tindemans but largely and quite rightly from the preparations for the decisions on a directly-elected Parliament or Assembly of Europe. This, not Tindemans, is the historic challenge. A mass of urgent work has now to be done in that field, for it is there that the changes in the power and function of the European institutions will be decided. Four hundred directly elected MPs, properly conscious of the legitimacy of the power which they will exercise, will not be fobbed off with spending 150 days a year beating a drum which neither Council nor Commission listens to. Mr. Tindemans knows that and he has made some tentative suggestions.
I believe that the new vitality which the Community needs, will, as in all democracies, spring from those elected Members of Parliament. They will be the vehicles of change in the institutions. They, and no 1975 constitutional planner, no matter how well-equipped, or how full of good will, will decide their powers. It will be
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they who, by vigorous assertion and imagination, can be expected to shape the new Europe; and that knowledge makes me hopeful, provided that we begin preparations for that great event forthwith. The kind of candidates we select to change Europe is of the utmost importance. This should be the concern of us all. It should be the over-riding duty of every European from today onwards through the next two years. I wish that a new subject—Europe—could be included in the curriculum of every secondary school and of every "further educational establishment"—which is what I believe night-schools are now called. I wish that the media would follow this up with European news and current affairs programmes, so that a properly informed electorate goes to the polls in 1978—or later, if that is what is desired.
Lord BOOTHBY: My Lords, I should like to interrupt the noble Lord in his very interesting speech to ask him just one question. What type of relationship does he envisage there to be between a directly-elected European Parliament and the national Parliaments of the countries concerned?
Lord CASTLE: My Lords, the noble Lord has started what I am sure will be a most fascinating debate as the days go on. Many of us have put forward ideas. Many of us would like to see the Members of the European Parliament ipso facto Members of this House pro tem, occupying a similar position—though not in the sight of God—to the Bishops. If I may continue this point about the necessity for propagating the idea of Europe, I should put somebody like Angela Rippon on to read the news and opinions on Europe every night, and her auditory addicts—count me among them—could be cured of insularity for ever.
Tindemans will not have reported in vain, even if he has only set the agenda for long-term discussion. Whatever happens to this report, our present priority is to start looking forward and finding men and women of high public standing and potential as candidates for Parliament. Through their quality, integrity, wisdom and devotion our British Members of Parliament in Europe can take a lead—perhaps a decisive one—in seeing the kind of Europe which

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emerges. We shall hear many sniggers, they will hear many sniggers from erstwhile friends, about opting out from the real political struggle—
Lord GEORGE-BROWN: I am sorry, my Lords, that I came in late, and if the noble Lord wishes to say to me that I should not ask him a question, then that would be reasonable. But the question I want to ask is this. Is he in favour of those of us who are not nominated by his Government being able to stand for election at the first elections in 1978? The noble Lord may have answered this point before I came in, in which case I apologise deeply, but I should like to know what is his view about this.
Lord CASTLE: My Lords, I do not think that I am under any real obligation to answer that point, but I should have no objection to seeing the noble Lord stand for the European elections and I should have great joy in seeing him defeated.
Lord GEORGE-BROWN: That is silly.
Lord CASTLE: But of course the noble Lord knows, as well as I do, that our opinions differ on many social and industrial matters, and I should wish that my Party wins those elections with the kind of candidates which I—
Lord GEORGE-BROWN: My Lords, if the noble Lord will forgive me for interrupting again, I must say that the remark he made at the end was silly since we have been friends for so long. I was actually asking whether he was arguing that I could stand as a candidate in 1978 for a selected part of the country. I was not discussing whether I would ask him to come and speak for me—or whether I would ask his noble friend, the noble Lord, Lord Ardwick. I was merely asking him whether he would be in favour of my being allowed to stand.
Lord CASTLE: My Lords, I would be in favour of any Peer being allowed to stand if he could find sufficient sponsors to get him to the poll. If that is the noble Lord's intention, it will be a very interesting development to watch.
In conclusion, speaking as a Socialist I should like to borrow a phrase which
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belongs to another Party and say that just now I think that what matters is men, not measures, so far as Europe goes. That is why I was so heartened to find that a man of the eminence of Mr. Roy Jenkins had been appointed to the most powerful position in Europe, and I was delighted, too, that that pleasure was reflected on all sides of the House this afternoon. I have no doubt whatever in my mind that with his experience, his stature as a statesman, his understanding and his charm, Mr. Roy Jenkins will make bigger changes in Europe than the Tindemans Report.
5.27 p.m.
Lord O'HAGAN: My Lords, I shall try to follow the noble Lord, Lord Castle, in one respect only, which is the change of mood between the first part of his speech, when he was rather gloomy about the future—or at least the immediate past—and the second half of his speech, when he was much more cheerful about what lies ahead. Recently—for the first time, I am ashamed to say—I read a line in a poem by Wilfred Owen which goes:
"Happy are those who lose imagination";
and for any enthusiast for the European Community it was possible to be happy about the way things were developing only if one had lost all imagination about what could and should be happening; and the comment of President Thorn, which the noble Lord, Lord Castle, quoted was, I am afraid, all too true.
Several things have happened that make the outlook more cheerful. The choice of Mr. Jenkins to go to the Commission as its new chief is one of these, and another is the decision by the Council of Ministers to press ahead with direct elections. But another reason for hope, as I think, is that Her Majesty's Government—without Mr. Jenkins, but with a determination to benefit from the massive commendation of the people in the referendum for our continued membership of the Community—have the chance, at the beginning of next year, to use all the disappointment that has been built up in the past, so as to make the future something quite different. There will be a new Government in Germany; there will be some more stable Government is Italy, we hope; and all the omens look good.

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My Lords, I should like to follow what my noble friend Lady Elles said in her comments about the role of the British Parliament, and your Lordships' House in particular, in the discussion of Community matters. Of course, the White Paper that we are talking about today is a valuable retrospective account of what has happened, but it is virtually useless as the basis for a serious debate about what should be going on in the Community. We should talk about what is going to happen, not about what is already in the history books; and I should like to endorse my noble friend's suggestion that the Select Committee on Procedure look at the possibility of using the monthly statement of what is coming up in the Council of Ministers as the basis for a debate in this House on what the Community will be doing in the future—and it may be that some of the reports of the Scrutiny Committee could be used as the bases for some of these debates. The noble Lord, Lord Northfield, looks as if he is going to sleep. I am sorry, but I think it is very important that this House uses its collective wisdom to look ahead, and not to dance a ritual dance about what is already dead inside the EEC.
We have also to look at the way the Community is going. There is some hope that the Commission will be reformed. If I may add a slightly less enthusiastic note, I hope that Mr. Jenkins will be able to be ruthless as well as elegant within the Commission. I hope that he will carry out his mandate to eliminate certain areas which need a lot of attention, and to introduce people who can perhaps apply a slightly less European and idealistic turn of mind but a greater expertise, particularly in the scientific and environmental fields, to the preparation of Directives.
If we are looking ahead to the beginning of next year and to the role which Her Majesty's Government can play in the re-invigoration of the European Community, there are certain obvious items which need attention and which we should be starting to think about now. One of them is agriculture. I would hope that Her Majesty's Government will issue their ideas in the form of Green Papers, so that they can be discussed by your Lordships' House and another place as well as in the European institutions. I would ask the Government: How many subjects have been sent to the Central Policy Review
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Staff in preparation for our chairmanship of the Counicl of Ministers at the beginning of next year? Who is doing the long-term thinking for our presidency? Will it be done primarily in the Cabinet Office or in the Foreign and Commonwealth Office; and will the results of some of these thoughts be published, so that we can all discuss them and add our comments to them before decisions are taken in the Council of Ministers?
It would be possible for Her Majesty's Government to issue, and it might even help them, if they were seeking to make some major reforms in the agricultural field, if they were to issue, a Green Paper of the sort I have been mentioning which listed some of the alternative methods for dealing with the fundamental structural problems of the Community. We cannot trust the Commission to do so yet, not until Mr. Jenkins has had a go. If anybody seriously contemplated making a fatuous suggestion about reforming the CAP, Monty Python could not do better than the proposal to tax margarine to make it as expensive as butter. It really does fall into the category of the line of poetry that I was quoting from Wilfred Owen:
"Happy are these who lose imagination".
If you make that sort of proposal, your faculty of imagination must wholly have left you.
Before the new, reformed Commission is able to grapple with these fundamental structural problems to get away from the price mechanism as the sole way to deal with structural surpluses and to start thinking about paying people not to produce, bribing people out of production, having variable levies, in all of which we in this country are very experienced indeed, would it not be a good idea for Her Majesty's Government to show their European spirit and to make a contribution to the solving of these problems (which the Germans, I am sure, would be very keen to have solved as well, so that they may stop paying for the consequences) by issuing a Green Paper? This would demonstrate, as I have said, our European spirit, as well as the sort of thing that we would be prepared to push through when we are President of the Council.
Lord GEORGE-BROWN: My Lords, is the noble Lord willing to give way?

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His argument in favour of the margarine manufacturers is in fact an argument in favour of great monopolists. I ask the question: Does he quite understand that he is arguing for Unilevers and various other multi-national monopolists against the farmers who actually produce butter?
Lord O'HAGAN: My Lords, I will say two things. I am arguing in favour of a serious reform of the Common Agricultural Policy to make sure that farmers get a fair return at the same time as making sure that consumers get a fair deal. The only other comment I will make is that if the noble Lord will come and speak for me when I stand for election to the European Parliament I will seriously consider coming and speaking for him.
Lord GEORGE-BROWN: My Lords, I disregard that. I do not want to.
Lord O'HAGAN: Then I am sorry. My Lords, I will not take up the time of the House by illustrating other areas in which Her Majesty's Government could involve the public and Parliament in the way in which they are preparing for their presidency, but I hope they will do better than has been done in the past. For example, in his opening comments today the noble Lord the Lord Privy Seal referred to the Tripartite Conference, which is a body whose name is so deafeningly boring that no newspaper ever comments on what it does. But, my Lords, it provides a forum for management, the trade unions, the Finance Ministers and the Governments of the Member States to come together and look at the social implications of the economic situation of the Community. This is the sort of thing to which public attention could be drawn, and I hope that Her Majesty's Government will seek to do it, not by issuing propaganda but by outlining some of the proposals which they have and which they hope to implement from the beginning of next year.
My Lords, it is always easy for a European enthusiast, in talking about the future of the Community, to sound like Jimmy Carter on an off day, because there is a certain religious undertone which comes into one's voice which makes one sound rather intolerant and extremely difficult to listen to. I am therefore not
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going to do that; but it is heartening for those of us who feel like that to know that it may be possible to communicate our enthusiasm to others through the mechanism of the preparations for direct elections. We have seen that, contrary to all the pundits, a large number of British people voted—and voted "for"—during the Referendum. I think that the same could easily happen again, in spite of what the pundits say, in the direct elections campaign.
I should like to add my voice to those of other noble Lords who ask the Government not to be deterred by the endless ruminations of the Boundaries Commission. I am not suggesting that the Boundaries Commission should be bypassed; all I am suggesting is that their deliberations should be hastened as much as possible so that there is plenty of time for constituencies who have a real regional or local feeling about them to be well before the public mind before the people in those areas are called upon to vote for members of the new directly-elected Parliament. I should therefore back up the other Members of your Lordships' House who spoke hoping that we can get on with this so far as possible and as fast as possible.
We are not talking of the future of the universe or of the future of the world: but we are talking about—or I hope we are—the future of our Continent, which has an enormous impact on the future of the world. One has only to think about the ramifications of Lome and many other external activities of the Community to realise that it would not be too much to say that what the Community already does has world-wide implications. The importance of the Community has not yet entered into the daily processes of mind of everybody in the United Kingdom: but I hope that the prospect and actual arrival of direct elections will do so; and, as a candidate, I will do my best to make sure that it does.
5.42 p.m.
Lord ARDWICK: My Lords, I should like to congratulate the noble Baroness on the Report of her Sub-Committee. I am sorry that her name does not appear on it. I should also have liked to see the names of all those wise and moderate people who apparently accepted this

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Report. I take it that is not the custom and that this is the only reason why the names are not there.
One of its useful purposes is that it focuses attention on Mr. Tindemans's very well calculated vaguenesses. At the very beginning of the European affair we used to divide ourselves into federalists—to which category Mr. Tindemans belongs—and functionalists, the category to which I belong and to which I believe the majority of British people belong, no matter what their politics. Now we are all in Europe together; and Mr. Tindemans has had to produce a Report which would not bring the federalists into despair and yet would not make the functionalists fighting mad. That is why he uses the splendidly ambiguous word "union", which means all things to all men. It can mean simply getting closer together, without any formal bond, or it can mean, ultimately, the closest federal union. Yet we all ought to be able to agree now on moves towards union, at least in the weaker sense of the word. We should be able to believe that—if we have the faintest belief in Europe at all. We ought always to be looking for ways of doing things together; when doing things together will bring general benefit.
There is another useful word employed by Mr. Tindemans which has also a strong meaning and a weak meaning. He believes, as the Committee believe, and as I believe, in the need to co-ordinate external policies. The word "co-ordinate" can mean simply bringing things into a more logical relationship; or it can mean to take part in common action. Mr. Tindemans believes, as I believe, that there should be a gradual movement towards common policies. He has had a rather grim task to encourage the Community to think of ways of moving forward while it was still actually moving backward—like somebody trying to plan D-day while the troops were still coming back from Dunkerque.
I do not think that those of us who were latecomers to the Community can appreciate the shock that the veterans of Europe had when, four years ago, the Community stopped going forward and seemed to go backwards a little way, from union towards disunion. Just before this all seemed to be well. The years of frustration occasioned
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by de Gaulle were over and the Common Market seemed to have found the elixir of economic life: perpetual growth, increasing welfare and full employment, from which in time even Italy would benefit. Then came the recession, the oil crisis, the inability to find a common energy policy and the drift towards national solutions. One of the great virtues of the Community is that we have not drifted further back in this recession as we might have done; we have not tried the harsh national solutions that we might have tried, if the Community had not existed.
My Lords, in the 12 months that I have been a Member of the European Parliament, I have felt sometimes as if I were between a set of Jeremiahs, people always sceptical about the Community, and Job's comforters, ardent Europeans filled with woe. I would describe myself as neither an ardent European nor a sceptic. I am an earnest European and, because I am a newcomer to the European Parliamentary scene—although a veteran of the European movement—I am still full of hope. What fills me with hope is the richness of the current European dialogue. Perhaps it takes somebody from outer space, an innocent and insular eye to perceive what I might call the European process as it looks today.
First, there is Parliament itself. Some people, by the way, are so in love with the principle of direct elections that they tend to write off the present Parliament as ineffectual and illegitimate: that is, to the Continental mind, it does not possess the somewhat mysterious quality known to historians as legitimacy. All I can say is that it contains many able and distinguished politicians, assiduous in their duties, with a deep knowledge of the labyrinths of the Community and a strong feeling for Europe. I believe in direct elections; but I hope that the first elected Parliament will contain enough men and women of this calibre and with an equal appetite for work.
Most of the real work of the Parliament is hidden from the public gaze. It takes place in committees where the Commission's proposals are not only discussed but discussed in the presence of the responsible Commissioners or their officials, subjected to rigorous inquiry and often to challenge. When the committees have done their work there is

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further debate in the political groups both in the hard, immediate subjects which are coming up in Parliament and on long-term policies. In the Parliament itself the debates are conducted in the presence of the Commissioners and Members of the Council, too.
But this is not all. The dialogue does not end there. On the aircraft to Brussels, in the hotels and restaurants one is continually coming across Ministers, Junior Ministers, officials, trade union leaders and industrialists—all taking part in some form of committee meeting about the complex affairs of the Community. Added to these are the representatives of the special interests groups. The farming unions of Europe are there today; and there is even talk of their leader, Sir Henry Plumb, becoming a Commissioner. And when we come home we find a Select Committee of your Lordships' House is engaging in the dialogue. We put our heads round the door and they are up to their necks in the European affairs that we have just left behind.
So, my Lords, do not let us despair. To use Churchill's homely phrase, we are becoming more mixed up together. The mix will inevitably lead to union and, perhaps long after our time, to some form of federal or confederal system. At the moment there is new hope in Europe. First, the economic upturn seems real—it is better than people dared to hope—and the economic convergence, on which hopes of increased unity of eventual union must be based, seems to be developing. Alas! there is still an inflationary problem. It looks as though we shall see a new economic phenomenon—that is conspicuous growth without conspicuous decrease of unemployment.
The second cause for hope is the decision to go ahead with direct elections. I agree in principle, but some people, even including my noble friend Lord Castle, have rather exaggerated hopes of what a directly elected Parliament can be. I do not think it will have behind it any popular pressure in favour of the nations of Europe giving up some national sovereignty in the interests of European union. Those who think otherwise are mistaking the opinion of pro-European pressure groups for public opinion, or are basing themselves on public opinion polls which get positive answers to propositions
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whose implications the public have not yet grasped. I cannot think, for example, if there were elected Members of the European Parliament at this moment when there is a dispute about fisheries that the elected British members would be pursuing a strongly European policy in favour of the Commission's proposals, and that they would not be putting the British national interest first. I think people are human; and particularly when they have to face the electors it would be very difficult for them to take a consistent pro-European supranational line and not take a national line. Nevertheless, the decisions to hold direct elections have caused some buoyancy.
The next cause for cheerfulness is that the President-elect is Mr. Jenkins. Some of us see his impending appointment with mixed feelings. We have gained a European President and we have lost a most distinguished national leader. It is however important that Europe is going to be led virtually for the first time—since Mr. Mansholt's reign was so brief—by a Social Democrat. The voice of European progress will be an English voice of great persuasive power. I think it will have a special effect in Britain and I hope in Denmark and Scandinavia generally, too. It is very important that the voice of Europe is now going to be the voice of a politician and the voice of a Social Democrat. I am sure people who belong to other Parties will see the importance of this in the general European interest at this moment. Above all, the Commission will be in the hands of a man who has proved his efficiency in two great Departments in Britain. It will be in his hands at a time when there is urgent need for administrative reform, political vision and a more effective relationship between the Commission and the Council. For most of the things, it is of course the Commission which proposes and the Council which still disposes.
But which Council? That is always a problem. There is always a problem of names when we discuss this matter. I have raised this question of nomenclature in the European Parliament, so far without effect. I hope I can get through to my noble friend on the Front Bench or even to the new President-designate of the Commission. The names of the European institutions are in a confusing mess. They are confusing even to Parliament

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arians. They are a nightmare to people running information services, particularly newspaper clippings libraries. They are incomprehensible to the public, yet it is the public who are going to be asked to vote for a European Parliament.
To come back to my question, "Which Council?", there is a Council of Ministers; there is the European Council—the confusing name given only recently to the Heads of Government or State who used to be known as the Summit. Then apart from this there is the Council of Europe which has nothing to do with the Community. The Economic Community's Parliament is, strictly speaking, the European Assembly. That is its official name in the Treaty. The Council of Europe has an Assembly, too. To make the confusion worse confounded, the two assemblies use exactly the same building in Strasbourg. A further confusion is that one of the Community institutions is the Economic and Social Committee and this has nothing at all to do with the Economic Committee or the Social Committee of the Parliament. The mix up is so great that I have had at least one dinner at an embassy which thought that because I was on the Economic Committee of the Parliament I was a member of the Economic Community's other Institution. So I plead with my noble friend or Mr. Jenkins to look at this problem. Surely it is a fundamental of democracy that different institutions should have different names which give some indication to citizens of their basic purpose.
5.55 p.m.
Baroness SEEAR: My Lords, I should first like to apologise to your Lordships and particularly to the noble Lord, Lord Goronwy-Roberts, because, unfortunately, I shall not be able to be here for the winding up of this debate. I have to chair a committee which was fixed long before I knew the date of this debate. I am speaking primarily as a Member of the Social and Economic Sub-Committee of the Select Committee. As noble Lords will be aware, the noble Lord, Lord Fulton, is chairman of that Sub-Committee. He had greatly hoped to be able to speak today and I know he gave a great deal of care to the preparation of what he planned to say, which is based on a section of the Select Committee's report to which
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he contributed greatly. Unfortunately, for urgent domestic reasons he is not able to be here. His wife is sick, not I believe and hope seriously sick, but sick enough to detain him in Yorkshire. It is with very great regret on his part that he is unable to be here today. I do not claim—I would not dare—that I am in any sense speaking for him, but we have discussed from the point of view of membership of the Social and Economic Sub-Committee the kind of points we should like to present to your Lordships, and although the noble Lord, Lord Fulton, takes no responsibility whatsoever for what I am saying, I hope in some limited degree I am reflecting the points he would have liked to make.
The Tindemans Report strikes a note of muted optimism. The speeches today have also struck a note of muted optimism. But Tindemans is a politician and the Members of your Lordships' House are politicians speaking to politicians. It would be unwise in the extreme if we were to fail to look at the less agreeable facts starkly in the face. Until recently there has been in many minds a real fear that the Community, for which some of us have worked and fought for nearly 20 years, might be moving into a state of disarray leading even to total disorganisation. The position is that if we are to avoid becoming merely a customs union and then from being merely a customs union to face the inevitable consequence of breaking up once again into national entities each out for their own end, we have to go forward. We cannot stay where we are. We have to take a leap into the future however much we may guard the path as we go so that we do not run into unnecessary difficulties. It is clear—this has come out in the speeches today—that we cannot stay in the position we are in.
As my noble friend Lord Gladwyn said, we do not know the precise structure of the political organisation which will ultimately emerge. It is almost certainly like no other political entity that we have had in human history. We have spoken of federalism, and many of us still talk of federalism, as being the nearest known institutional political form to the kind of organisation to which we wish to move. But, for my part, I think it is perhaps misleading to talk too much of the term "federalism" because that conjures up in the minds of so many people pictures of the American situation.

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They have been misled by believing that what we hope to achieve is the mirror image of the United States. That, I believe to be far from the truth. It is part of the excitement to those of us who were interested in political ideas and it is part of the excitement of the development of Europe that we are forging a new type of political organisation for which the name is as yet unknown.
So ahead we must go. But how are we to take these moves forward unless there is behind the Governments a real groundswell of popular support and indeed of popular enthusiasm, if we can get it, for the way ahead? If we can all too easily agree at the level of Ministers, and if we can all too easily agree inside both Houses of Parliament the steps that are needed, we can also find that the leaders have moved on but that those they represent are not coming along behind them and there is no solid popular support for the direction in which we are going and for the changes that have to be made. Therefore, the question is: How are we to get that popular support which we are going to have to have if the essential moves ahead are to be real and enduring?
This can happen only if ordinary people everywhere—and let us confine ourselves to this country, because this is our first responsibility—see that in Europe, and preferably in Europe alone, and I believe "in Europe alone" to be true, there are answers to the problems which are the real and urgent problems for them. People of our generation were seized by the European idea, because the problem that fired us was the problem of seeing that there would be no future military conflicts in Europe. It is perhaps a measure of the success of Europe that that is not an objective which fires the young of today because they take it for granted, despite the history of a thousand years, that France and Germany will not fight each other again. The military security, the prospect of peace in Europe which was the inspiration of the early Europeans, simply is not, in my view, the inspiration of the younger voters, the younger men and women of this country, whose support we must have if we are to go forward with the European idea.
What, then, are the issues which will rally them? First, as other speakers have said, they want the security of a reasonably
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safe economic future and they want reasonable economic prospects for themselves. That might sound very materialistic but, to my mind, it is entirely right and reasonable. If they can be led to believe that there is a safer and sounder economic prospect for young Europeans in the new and better co-ordinated Europe that some of us would wish to see, then they will begin to rally again, as people of our generation rallied in the years after 1945.
Again, because they care not only for themselves, there is the great problem of poverty—poverty in sections of their own countries—and perhaps, above all else in the eyes of the young, the problem of the distribution of wealth between rich countries (which are mainly European countries) and those of the developing world. Can they be made to see that it is only through European co-operation that we can hope effectively to do what must be done, and what they urgently feel on ethical grounds needs to be done, in the relationship between the developed and the developing countries? In areas of this kind and in the work that has to be done in the future, I believe there is an opportunity for rallying the support of the generations which need to become enthused about the European idea and which, quite frankly, are not enthused about it at the present itme but whose support is absolutely essential if that muted optimism of Tindemans and of your Lordships' House today is not to be a false optimism.
When we on the Social and Economic Committee look at the kind of issues coming before us, they are very much what the noble Lord, Lord Fulton, has referred to on several occasions as "second order issues". Certainly they are important matters concerning training, the professions and conditions of work and matters dealing with secondary concerns of health and social security; but there is very little coming from Europe that can fire the imagination of people who are not close to the workings of Europe and to demonstrate to them that here is the instrument through which, and only through which, they can find an answer to the questions they are asking, or indeed to the questions which all too many of them are becoming too afraid even to ask.

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Can we not do something here to show far more plainly to men and women up and down the country what Europe really can mean in terms of the problems which are problems to them? I believe we can do this only if we can get to grips on a European level, as, if you like, a demonstration exercise, with tackling some of the really tough problems. If we find one or two issues to which people in this country will respond as the real issues of our time, and if we struggle with them—and one great example here would surely be unemployment—and show that a European initiative may be the best, and indeed the only, way of dealing with the question of unemployment which hangs like a pall over the young generation—if we could show that Europe could do this, then I believe we should begin to get the battalions of ordinary people coming behind us in support for Europe in a way that we most emphatically have not got them coming behind us at the present time.
The noble Lord, Lord Fulton, pointed out to me, as he was preparing to talk to your Lordships' House today, that he had been looking at the experience of the bitter way in which America had worked through to unity. As I said earlier, I am not suggesting that the pattern of unity America found is the pattern of unity that Europe will find. But to refer to the work of the historian, Morison, who wrote of the results of the American Civil War, he said this:
"Others learned their lesson from the powerlessness of the Confederation even to protect its own property, much less to help a state in distress. Out of all this came an emotional surge—without which nothing great can ever be accomplished in America—towards a new federal constitution ".
In this country today there has been no emotional surge towards Europe, except in a very few and very rarefied areas. The support in the Referendum was genuine support but in many ways, if the truth be told, although I was myself active and enthusiastic in that campaign, it was in a sense a negative rejection of "going it alone", rather than a positive enthusiasm for the European idea. We need that emotional surge, but it will come only following the experience of a real tackling of real problems which appeal to the imagination of ordinary men and women.
There is one thing more I should like to say, and I know that the noble Lord,
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Lord Fulton, would have said it far better had he been here today. If we are to move to a new Europe we have to prepare now in educational terms to be ready, and we have to prepare the younger generation in educational terms to be ready to be Europeans. We in this House are Europeans by conversion. Most of us are very poor Europeans in many of the most important ways. I can speak only for myself but I have halting French and a menu German, and that is no basis on which to be an effective European. The knowledge that any of us had of the roots of European civilisation and of the ideas that move and sway other sections of Europe is very slight and inadequate. Can we not begin now to find ways, on a far larger and more effective scale than anything that has yet been done, to bring together in our educational system opportunities for a much greater movement of the young between the schools and universities of the countries that make up Europe, so that they are growing together in thought and activity at that stage of life when mixing together is all important?
6.11 p.m.
Baroness WHITE: My Lords, I should like to add my congratulations to those already expressed to Roy Jenkins. I am sure your Lordships will understand if I do so with the peculiar partiality of a compatriot. I trust also that it will not have escaped the notice of your Lordships that in this annus mirabilis not only did we beat everybody at Rugby football—that we take in our stride—but we have attained a triple Parliamentary crown. We have the Lord Chancellor, the Speaker of the House of Commons and the Prime Minister all hailing from the Principality, to which we are now to add the chief designate of the Commission in Brussels.
I feel that it is a most important conjunction that Roy Jenkins should be going to Brussels at a time when, from the beginning of next year, we shall be in a position of peculiar influence in the Council of Ministers. It therefore behoves us in this House and in the other place very much to concentrate our minds in the next few months on how best to take advantage of this opportunity which, in the natural course of events, will not present itself very frequently. I hope that we shall be able so to influence the

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processes of the Community that it may emerge from the period of disappointment and recession to which many speakers in this debate have already referred.
Of course, I entirely agree with the noble Baroness, Lady Seear, that we do not have in this country at the moment the kind of emotional concern for the affairs of Europe which would certainly he a prerequisite of any kind of political union on a federalist or any other pattern. It seems to me that that can be focused only when we have already created the political institution namely, the directly elected Parliament. I do not think we can expect it to happen earlier. I myself have serious apprehensions as to how this new political experiment will work, partly for a reason which I have already mentioned in your Lordships' House. To expect those of us who come from Wales—possibly for those who come from Scotland it may prove easier—to digest virtually simultaneously two major political changes in the Parliamentary sphere is asking a very great deal. We are in an uncomfortable state following our local government reorganisation, which has not brought satisfaction. Many of us feel that that, in itself, was so ill-advised that even after such a short period it should be changed once again—
Baroness ELLES: My Lords, will the noble Baroness allow me to intervene? Is she proposing that devolution should be postponed in that case?
Baroness WHITE: My Lords, the noble Baroness cannot possibly put that construction on what I am saying. I am simply suggesting that it is a peculiarly difficult situation for the ordinary man and woman, who, after all, are expected to provide the electoral basis for all these institutions, where one has very recently changed local government, and is then proceeding—and I am of the opinion that we shall proceed—to a form of devolution for Scotland and Wales, which will be a very great change in both countries, while at the same time being expected to take in the European dimension. It would be difficult enough on the English scene, and I am just suggesting that there is additional difficulty in Wales and Scotland, both on the mundane plane of political organisation, which is not entirely to be disregarded, and even more in the reaction of the people concerned.
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It will be difficult for those who will present themselves as European candidates—I do not know where the noble Lord, Lord O'Hagan, proposes to present himself; he has Welsh connections and might do quite well in the Principality—to make intelligible the kind of issues to which the noble Baroness, Lady Seear, referred. It will be still more difficult to make intelligible the matters of second order business with which our Select Committee occupies itself, and sometimes third, fourth and fifth order business. It is difficult enough for most of us to follow the intricacies of the documentation which emerges from Brussels. I make those few remarks in no unhelpful sense, but simply to indicate that it will need a great effort of imagination and will, as well as hard work on the details of programmes and so on, from everyone who hopes that Europe will proceed to a state of political development which we can accept with any satisfaction
I doubt whether the Tindemans Report is helpful in this situation. I must confess that I am not a federalist; I am a functionalist by nature and upbringing. I am not excited at all by the notion of federation. I think it would be a state of affairs which we should not find very comfortable. Much of what Mr. Tindemans said I found not particularly convincing and, in some respects, even rather boring. That, no doubt, was due to some deficiency of my own. But I was interested that those who have been much more closely concerned, as members of the European Parliament, also did not seem to be quite so enthusiastic for Mr. Tindemans' point of view as we might have expected. I entirely agree with the noble Lord, Lord Castle, and others that far more important is the issue of direct elections and what may emerge from them. That is in no way derogating from the task which Mr. Tindemans has most faithfully carried out; it is just a political truth.
On the other hand, we in the Select Committee of which I have the honour to be a member, under the admirable guidance of our chairman the noble Baroness, Lady Tweedsmuir, have been concerned with the more particular interests touched upon in the Tindemans Report, and at that level I think he said a number of things which are distinctly helpful. If I may refer—I hope very briefly—to the

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briefest section of the Select Committee's Report, Part 6, on the environment on page 10, we there drew attention to the two matters upon which Tindemans touched. One was the matter of organisation in the Commission which we do not find very satisfactory. Again I hope I say this in no carping spirit because those who are concerned with these environmental matters are I am sure doing their utmost. At present they do not have adequate resources to do the kind of job which I am sure they wish to do as much as we would have them do it.
The other matter is a much more important philosophical and constitutional matter. Mr. Tindemans pointed out quite rightly that when the Treaty of Rome was promulgated it was almost entirely based—although it had many political overtones—on economic terms and functions. The dominant Article 2 is couched accordingly in terms of economic harmonisation and economic growth.
Mr. Tindemans very properly pointed out that in the years which have passed since the Treaty was drafted and adopted public opinion in Europe and in other parts of the world—most notably, possibly, in the United States but really it is a world wide phenomenon—has become, suddenly and sharply, most acutely aware of the fact that we live in a physical environment which is of the greatest importance for the future of the human race. It is an environment that we share not only with Europeans but with all other human and living creatures in one common biosphere. It is only very recently that we have woken up to the fact that by misuse, or profligate use, of the resources of our environment we may be betraying not only ourselves but future generations. Therefore, the notion that we can happily go on expanding and expanding our economic growth is not tenable. One must look far more critically than we have ever done before at the effect which our activities have on our environment and at what policies we should adopt with such considerations in mind.
It was only in 1973 that the Community gave public recognition to this principle in its declaration on the environment. It has still not been incorporated in the Treaty. Some of us have suggested that
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Article 2 should be amended, but having listened to the noble and learned Lord, Lord Diplock, I am daunted by what would be required to be done to alter the Treaty of Rome. Therefore it is at least comforting that whatever other weaknesses or deficiencies there may be in Brussels, they seem to be prepared to proceed with a very substantial environment programme, which I commend to the study of your Lordships, whether or not any mention of the environment is made in the Treaty. That I regard as a very substantial bonus mark for an institution of which I am otherwise rather critical.
So we are grateful indeed that Mr. Tindemans himself should so clearly have drawn attention to this development. In our very brief comment on his report we quote him as saying:
"Our peoples are concerned with new problems and values scarcely mentioned in the Treaties. They are calling for a new type of economic growth displaying more respect for the quality of life and for the physical and human environment."
This is one of the causes which appeal most strongly to the young generation in all countries of the world. It is one which, if the European institutions can be successful, may provide one of the emotional urges for which the noble Baroness, Lady Seear, was calling.
Finally, may I refer to the efforts which the non-Governmental organisations in Europe who are concerned with environmental affairs are themselves making? They have established in Europe the European Environmental Bureau, and I have here their comments on the Tindemans Report. If I may just underline one particular request they make, it is that those in the Commission who are charged with responsibility for environmental affairs should not be so restricted and inward looking as they are in the Brussels context—as was so vividly described by the noble Lord, Lord O'Hagan, and other noble Lords who have spoken—where each directorate regards itself as completely self-contained and is hardly able to speak to those who work for other interests. But the voluntary organisations are anxious that concern for the effect of policies upon our physical inheritance—they may be land use policies, or industrial policies, or energy policies—should permeate all sections of the Community organisation and not be confined simply to the one which has the direct official responsibility.

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In its commentary on Tindemans the European Environmental Bureau say in terms:
"Meanwhile, the Environment and Consumer Protection Service of the Commission should see its task not merely as pursuing a programme of its own independently of other directorates of the Commission but as promoters of the idea of environmental quality within the other directorates".
Those of us who had occasion recently to meet some of our own officials who represent us at official gatherings in Brussels were much disappointed to find that this idea does not seem to have permeated some, at least, of our official representatives. We hope very much that they will raise their eyes from the details of these innumerable Directives which are issued from Brussels and recognise that here one has a most challenging situation. One should be able to relate these environmental issues to matters of much wider policy than the relatively narrow Directives, important as they are, dealing with pollution of water, with problems of noise, and so on and so forth. I hope very much that whatever happens in the political developments of the next two years or so, some of these ideas will permeate both the institutions in Brussels and also ultimately our own European electorate in this country.
Lord O'HAGAN: My Lords, before the noble Baroness sits down, she has commented on the attitudes of some of the officials who represent us at meetings in the Community and complained that they do not take an over-view. Would not the noble Baroness agree that it is impossible for the officials to look beyond the brief setting out what they are meant to do and that the only way for them to take a wider view of all the environmental considerations would be for their political masters to ask them to put forward a Green Paper on the environmental issues in preparation for our Presidency next year?
Baroness WHITE: My Lords, I appreciate what the noble Lord has said but I have always believed that it is the officials who are really the masters. They advise the Ministers.
6.28 p.m.
Lord DUNLEATH: My Lords, I have listened with great admiration and no small
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amount of awe to the erudition of the contributions made to the debate so far by both noble Lords and noble Baronesses. It leads me to the conclusion that I must be the most objective and unbiased speaker in the debate this afternoon, because I am completely free from and untainted with any knowledge of the EEC situation—so much so, indeed, that as I was coming over this morning in the aeroplane I was practising my pronounciation of "Monsieur Tindemans", slightly to the disquiet of the air hostesses and my fellow passengers. But having heard what I have heard this afternoon about "Mr. Tindemans", I will not venture on to such dangerous ground again and, indeed, will make no further reference to the gentleman, thus shortening considerably my speech. I hope, however, that your Lordships will forgive my rather simplistic approach to the debate, and may I say with respect that I shall welcome very favourably any interventions which your Lordships may make if I should happen to stray into error.
I have read the documents associated with this debate with great interest and I welcome the seemingly solid progress that is being made in the development of the European Parliament, and certainly the progress that is envisaged for the near future. The Party which I represent, which is the Alliance Party of—dreaded words !—Northern Ireland, and I welcome greatly the fact that the proposal is to have direct elections and direct representation because we feel this means that there will be a very much better chance of any available funds being deployed to the best advantage in disadvantaged areas, such as Northern Ireland, where, as your Lordships know, unemployment is at the highest rate in the United Kingdom and the economic outlook is far from happy at the moment. We feel that direct representation in areas such as that will help in ensuring that any available funds are deployed to the best advantage. We also feel that it will be very helpful if it is not only the case, but is seen to be the case, that assistance from the Community is not substitutional for but additional to any that comes from the United Kingdom Government funds.
This means that there will be a heavy responsibility on the Members of Parliament elected to the European Parliament and therefore a heavy responsibility on the

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electors throughout the United Kingdom, and perhaps even more, a heavy responsibility on the Party selectors who choose the candidates for that Parliament. For instance, your good, old fashioned "no Pope here" candidate will not cut much ice in the European Parliament, particularly in view of the fact that the Treaty of Rome has so frequently been misrepresented as the Treaty with Rome. We must have people who will genuinely represent all parts of the United Kingdom in the European Community and who will know what they are talking about.
My belief is that proportional representation would be the best method of election to the European Parliament. I think my Party is in agreement with the Liberal Party that this is the best form of election, and referring also to elections to the House of Commons at Westminster. I can only say that surprisingly enough it has worked well since 1973 in Northern Ireland. It has meant that the automatic vote has gradually decreased and that the voter tends to make more of a conscious decision before casting his vote. Multi-Member constituencies mean a certain amount of duplication of effort, but at the same time they keep the elected representatives more on their toes, as I know from my own experience, and also enable a fairer pattern of representation to be achieved.
I do not imagine that the time is yet ripe to have proportional representation for the House of Commons at West-minister. I wish it were. If it is not—and I hope I am wrong—the argument may be adduced that to have direct elections to the House of Commons but proportional representation elections to the European Parliament would cause confusion. I submit that that would not be so very serious a snag. There are a lot of sick jokes in currency at the moment about the stupid Irish. We have not had all that much confusion between proportional representation for the Northern Ireland Assembly or Convention and direct elections for Westminster, so surely the superior intellects of the voters on this side of the water would not experience difficulty! In passing, while speaking about Westminster, I would say that I agree with those who suggest that in the absence of devolved Parliament in Northern Ireland a higher number of
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MPs would be justifiable for Northern Ireland, but that is not the subject of this debate.
Turning to the problems of small regions and looking at the proposed allocation of seats in the European Parliament, on the face of it, it would seem that the smaller countries are being treated over-generously, with places like Luxembourg and the Republic of Ireland getting a disproprotionate number of seats compared with their population. But when one thinks about it, this is reasonably fair. The point I want to make is this: if small countries are given over-generous treatment because their problems are not necessarily fewer in number or lesser in magnitude than those of countries with a larger population, should this criterion not be applied to smaller regions?
To the best of my knowledge the proposals are that of the 81 seats allocated to the United Kingdom, apart from the bulk of them, which quite rightly will go to England, there will be 10 allocated to Scotland, five to Wales and three to Northern Ireland. is it really consistent that Northern Ireland with a population of 1½ million should have three seats when the Republic of Ireland, with a population of 3½ million—just over double; not three times—should have 15 seats? All right, it could be said that the three members from Northern Ireland have the backing of all the other members from the rest of Great Britain. But I would submit to your Lordships that perhaps there is a case for considering that small regions with peculiar problems—and particularly in the case of Northern Ireland with the remoteness problem, the unemployment problem, the economic difficulties—should have larger representation, possibly to the tune of four or five.
So far as the direct elections are concerned, I feel that Northern Ireland should be treated as one constituency, and I would hope that four or five members could be elected from Northern Ireland as a whole. I put it to your Lordships that, if the number were increased from three to four or five, this would make more likely the chance of a reasonably good spread across the sectarian and community divide, which is what my Party is all about. But, above all, I think what is essential—and I have been

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delighted to hear so many speakers refer to it this afternoon—is to cultivate in the next 22 months public awareness of the European Parliament.
I was involved in a canvass at the time of the Referendum last year. In trying to advocate to people that they should vote in favour of Britain staying within the EEC, I found that, first, they were not interested, and secondly, they knew nothing about it. I think it is the view of so many people that it is rather like the solar system: if you take an unfavourable view of sunspots, there is nothing much you can do about it, so therefore, you do not acquaint yourself with it, you take no steps about it, and you do not make any effort over it.
In the next 22 months we must get over to people that there is something they can do about the European Parliament and the Community as a whole, that they have to think carefully about the policies involved, and that they have to think carefully before selecting or electing members; otherwise, as other noble Lords and Ladies have said, the public is not going to be behind the European Parliament and it is not going to achieve what I think nearly all of us here are hoping for.
6.41 p.m.
Baroness ELLIOT of HARWOOD: My Lords, I should like to follow the noble Lord, Lord Dunleath, in the last words of his speech. I think it is of vital importance that we should get the British public to understand what the European Parliament is all about, and what the question of direct elections will mean. This is extremely important, and what the noble Lord has just said is also very important indeed. I could not agree more with the noble Baroness, Lady White, on the problems of small countries deeply involved in local government reorganisation, which is not as successful as we would have hoped; devolution, not knowing what we are going to do or what is the right thing to do, and about which there has been a good deal of controversy; and then being offered, and accepting I am sure, the responsibility of elections to the European Parliament. These are very difficult things to deal with, and to try to get the British public interested will take a lot of hard work, care, help from the media, and so on. But I certainly agree that the British public should, and must, be
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interested because we are all committed to the European idea, and so far as I am concerned, committed with great enthusiasm. I have always been a supporter of it.
We cannot exaggerate or underestimate the amount of good that has been done by the noble Baroness, Lady Tweedsmuir of Belhelvie, in organising these committees. It seems that everybody present in the House at the moment is a member of one committee or another. I must say that I have learnt more in the two years that I have been on Committee D, the Committee which considers agriculture, than I could possibly have learnt in any other way. These committees are functional and highly successful. I have been listening to everybody talking about the particular committee upon which they sit, and in this way a great contribution is made to the wav in which all of us can play a part in understanding and the spreading of propaganda, if you like, or however we may like to put it, to the British public on the importance of understanding and being an enthusiastic supporter of the EEC.
In reading the papers, particularly those on the Tindemans Report, it is a little disappointing—and I am speaking now as a very enthusiastic member of Committee D dealing with agriculture—that there is only a very short reference to agriculture. When I was reading these, the other Command Paper, and also the Tindemans Report, I wondered why it was that such small reference was made to this subject in the report by Mr. Tindemans because this subject has so absorbed the Six ever since the Treaty of Rome was signed—and now it is the Nine. I have come to the conclusion that it is because this is such an exceedingly difficult subject.
Agriculture is so varied and so difficult to organise on the basis of unity that I am not at all sure that it really is a possibility in the sense in which one can organise things like the environment, or energy, or what-have-you. It is a very difficult thing to do. It is dependent on forces over which we have no control, such as the weather, climate, type of soil, and so on. We cannot grow in this country what is grown in Italy; we cannot grow in this country what is grown in other parts of the EEC, and vice versa. So it is not an easy matter

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at all to work out an agricultural policy which will suit everyone. Furthermore, much of the EEC agriculture is part-time. The farm units are so small they are not farms in our sense of the word at all. In Scotland, we would call them crofts. It is the crofting idea that a lot of the small farmers in the EEC are really engaged in, and even then they are not engaged full-time; they are doing something else, and going to work on their small patch of land during the course of the day, the evening, or however it is organised.
It is not easy to relate that to our type of agriculture which is about the most efficient, certainly in Europe, and I would be prepared to say in the world today. On the whole, the units are a great deal larger than in Europe. The efficiency which we have achieved, the desire for low cost for high quality, and for sales promotion are some of our principles—principles which we discussed last year when discussing agriculture with Mr. Lardinois, when I thought that in many ways the ideas they had were not the same as our own.
The idea that agriculture is a subsistence industry and that sales organisations are not really developed in Europe is quite different from the situation here. We base our whole agricultural policy on being as efficient as we possibly can be, and by having as good a sales organisation as we possibly can. I have no doubt that these problems have weighed very heavily with M. Lardinois, which may well be the reason why he feels he cannot go on at present. But I think a good deal of the policy has been very successful. I think the grant aid allocated for disadvantaged areas has been very helpful and successful. Many of the economic policies are beginning to be successful, and are beginning to co-ordinate agricultural interests. But, of course, it is a slow progress. The differences in conditions are very great indeed.
I am just wondering whether it is possible to have the same rules for food production in all countries when all the conditions are so very different. Section IV of Cmnd. Paper 6497, which we are also discussing today, refers to agriculture and fisheries in more detail than does the Tindemans Report. This
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section shows there has been considerable progress among the Nine. But it still seems to me necessary to think about sales of produce as well as of production. There is little about sales in any of this. Therefore, one comes across the huge surpluses, whether they be of milk or any other product, which in my opinion might well be avoided to some extent if there was a real sales drive. Taking milk alone, the amount of milk consumed in France, Holland or Belgium is far, far less than that consumed in this country per head of the population, because we have a splendid organisation in the Milk Marketing Board. I am glad the Common Agricultural Policy has agreed to let our Milk Marketing Board continue because it has done highly successful work, and has the backing of the whole of cur dairy industry.
I only wish we could persuade the agricultural interests in Europe to consider doing something on the same lines as with some of their other products. I think the idea of selling food should not be separated from the production of food, otherwise the balance gets completely wrong and you have what I think someone referred to as these meat mountains, milk mountains and so on and so forth.
Paragraph 39 of the Cmnd. 6497 refers to preliminary discussion on the agricultural structure. I would like to suggest that whoever takes over from M. Lardinois should work very seriously on this problem. We have learned with great pleasure of the appointment of Mr. Roy Jenkins to the Commission of the EEC, and no one could have had a more enthusiastic reception from all sides of this House and the other place. I am extremely delighted that he is going to be our leader there. I agreed with Lord Castle when he said very distinctly that what was wanted in Europe and the European Parliament were men and women of stature; it is vitally important that when our representatives are elected to the Parliament they should be people of great stature.
I was delighted to see recently in an agricultural paper, and I think it was also in the newspapers, that there was a possibility that the Agricultural Commissioner might be chosen from the

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United Kingdom, and the name of Sir Henry Plumb was mentioned. I hope that this may be a happy prognostication which might be fulfilled, as I believe that, if we had a really outstanding agriculturist like Sir Henry Plumb, it would be a great help to the agricultural policy.
If noble Lords would turn to the Tindemans Report, it lists a number of people interviewed by M. Tindemans on the different subjects he covers in the report. I was a little startled to see under "Agricultural Organisations" a list of trade unionists—Len Murray, David Basnett, Norman Willis, A. Hargreaves and Jack Jones—admirable gentlemen, but none, I think, could be called agriculturists. Then I see above, at number V, a list of Trade Unions, and these are R. Butler, President of the National Farmer's Union, George Cattell, Director General-of the National Farmer's Union, Asher Winegarten, Deputy Director-General, National Farmer's Union. This has either been an error of printing, in which case I hope somebody will correct it, or something very odd has happened, because nobody could say that to discuss the important subject of agriculture you would go to the agricultural interests described as Trade Unions here and the trade unions described as agricultural organisations here. Perhaps that may be mentioned and put right.
I have spoken about agriculture in the EEC because I am an active member of the sub-committee, but I would support those who have spoken about direct elections. I feel encouraged that some of those who have spoken as members of the European Parliament at the moment feel that things have started to go better and that people are more interested. Lord Ardwick has encouraged me with his account of work being done by the appointed members of the European Parliament and the amount of cooperation which exists today. I am heartened by this. I hope it will continue. I hope that in about a year's time, when we are discussing these matters again, we will be able to point to a very successful reorganisation of the European Parliament, and that we can send to Europe first-class people from this country, who I think would have a tremendous influence in Europe today.
6.54 p.m.
Lord BRUCE of DONINGTON: My Lords, I should like to join with my colleagues in the European Parliament in expressing my own congratulations to the Committee headed by the noble Baroness, Lady Tweedsmuir, and indeed to her personally, for the clarity of the reports that are produced by her Committee. Many of us by this time have become used to placing rather more reliance on the observations made by the noble Baroness's Committee than we do on some of the allegedly more authoritative comments contained in the papers themselves. We are, indeed, grateful to her.
I am a little worried by the course that this debate has taken. It seems to me that in so many of the contributions that have been made, admirable and well-documented as these may undoubtedly have been, we have to some extent confused hope with reality. If one went through the White Paper we are considering today, one would not gather the impression that there was anything seriously wrong with Europe today, but, of course, the reality is that things are not going at all well in Europe today. Until we recognise this, there will be but little chance of affairs in Europe improving. There are at the moment 5 million people out of work in Europe, and there is inflation, however improving. But there is no sign from any of the Member States, including my own, that they have arrived at any European solution for this problem. Of course, that may not be—and I am not suggesting it is—the fault of the European Community institutions themselves. Neither am I blaming it on the Treaty of Rome. But what I am saying is that from the observations of the nine Ministers they are no nearer a solution to the problems of Europe than is implicit in their insistence on the old solution of cutting public expenditure as a means of curing unemployment, a doctrine which I thought was as dead as the dodo following 1931. There is no evidence at all that the Council of Ministers have made any serious and structural analysis of the European economy itself.
Baroness ELLES: My Lords, would the noble Lord allow me to intervene? Would he not agree that by not cutting public expenditure we still have enormous unemployment in this country, and it is increasing?
Lord BRUCE of DONINGTON: I was not saying that at all, my Lords. What I was saying was that there was no evidence that the nine Ministers have made any structural examination of the real nature of the European economy as a whole, or if they have, they have kept it very secret from us. About a year ago, the Commission itself published a document, a very important document called The Problems of Inflation. It in fact went to some length to discuss the role played by private corporate power in Europe, the whole problem of the impact of the conduct of the very large multinational companies—which I am not seeking to decry in any way—not only on price levels themselves, on the problems of inflation, but also by transfer pricing and also by the movement of vast sums of money across the exchanges permissible under the Treaty of Rome. This was causing imbalance between the various balance of payments situations in several countries of the Nine. There is no evidence that such an examination has been carried out or, if it has, that any attention has been paid to it.
The first report of the Regional Fund just produced by Commissioner Thomson draws attention to the fact that far from during the last five years the regional imbalances having improved, in fact the situation is getting worse year by year. I am not going to speculate as to what extent this has been caused by, or follows from, the freedom to move both capital and labour all over Europe, I merely record the fact that according to Mr. Thomson's first report, if one took the the position of Paris and Hamburg as against Southern Italy and Western Ireland in 1972 the difference was four and five times as much GNP per head in Paris and Hamburg, and the position is now five and six times rather than four and five. There is no evidence at all that the Member States or, for that matter, the Commission are making any endeavour at all to correct this imbalance.
One would have thought on reading the Treaty of Rome that the Member States could have invoked Article 92 of the Treaty in order to have made special arrangements in order to increase the amounts available to the Social Fund. There is no point in making extra arrangements for the Regional Fund because the Regional Fund is geared to the contributions of the
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Member States. Only 20 per cent. or 30 per cent. according to the nature of the project is supplied by the Community, the remainder has to come from the resources of the Member States, and so there is this imbalance.
It is one thing to trace the causes of the imbalance backwards, but it is another thing to take steps to remedy it. There is no point in going back into history to reveal, something which is undoubtedly true so far as this country is concerned, that we had a favourable balance of payments with the Community prior to 1970, and it is today running at over £2,000 million. It is one thing to say, as is undoubtedly so, that when the first assessment was made of the Common Agricultural Policy on this country, way back at the time of the White Papers of 1970 and 1971, an additional burden on the balance of payments of the order of £50 million by the end of the transitional period was contemplated, as against the approximately £800 million additional burden on the balance of payments last year owing to the operation of the Common Agricultural Policy.
There is no point in going back to the recrimination about that. What is important is to ascertain what steps are being taken to remedy it, because this country cannot play its full part in the Community, and cannot do its duty by its citizens, unless it makes quite clear to the world and to the Community what it proposes to do about it. One thing that it can do is to contribute to changing quite radically, as the noble Lord, Lord O'Hagan, indicated, the whole agricultural policy. I beg my noble friend not to regard the Common Agricultural Policy as being the tablets of wisdom handed down from Mount Sinai. I really hope that he will not, because I can assure him, if he may feel disposed to defend the operation of the existing Common Agricultural Policy, that he will find that he will be out of step with other European countries, and I suspect too with the Opposition in this House and in another place.
If there is one thing that is universally agreed throughout the Community by all the Member States, it is that the Common Agricultural Policy should be changed. What there is not agreement about is how it should be changed. It is my sincere hope that my own Government,

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the British Government, will be able to bring their mind to bear on this subject and make their own original contribution. The existing system of price intervention, at a price higher than prevailing in the world market, has not only cost our country this extra burden running into hundreds of millions of pounds on our balance of payments, it has also entered into the price structure of the prices that people pay in the shops, and acts, to the extent that it is excessive above world prices, as a poll tax on the entire population and has a profound bearing on the attitude that they take towards the whole concept of the European Community and its impact on them.
Unless the demands that are now being made, and the pressures that are mounting in the Community, for the rapid phasing out of the monetary compensation amounts, for the rapid adjustment of the Green Pound to the exchange value of the pound, are resisted and a new policy is put forward—I hope at the instance of the British Government—there will be a rise in food prices in January 1978 that will blow the bottom out of any social contract policy and any incomes policy. Let there be no illusion about that.
Baroness ELLES: My Lords, I am sorry to intervene again, but would the noble Lord therefore admit that the support from the Community to British food prices has been enormous, thanks to the MCAs?
Lord BRUCE of DONINGTON: My Lords, undoubtedly it has been, but unfortunately it has not been as much as the extra burden on our balance of payments, because it is cumulative. If the balance of payments deteriorates by some £800 million due to this particular cause, this itself has a depressing effect on the rate of exchange which then causes the payment of more monetary compensation amounts, and so on, and it becomes self-propellent. I therefore hope that we are going to have a more constructive attempt to reform the Common Agricultural Policy. At the moment the position is that 68 per cent. of the Community's budget is in fact being spent on 10 per cent. of its working population. If you take that in conjunction with the figures that I have put forward, which are authenticated, in relation to the Regional Fund,
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this is something that will strike at the very roots of the whole of the Community institutions unless Governments correct this.
I have been critical concerning the working of certain parts of the Community's policy. This does not mean that I think that the institutions, even operating within the Treaty, cannot be made to work. What it does mean is that we have to make an effort to make them work, and that we have to stop kidding ourselves that it is going to work all right if only we leave it alone. One result of my being able to participate, as representing this House, in the Community is that I have been able to learn a little better how the other countries think. I hope that by now they have begun to know a little better the motives which animate us. Whatever the shortcomings of Britain may be—and we are sometimes accused of dragging our feet—it is undeniable that in the European Parliament the attendance record of the British delegation, from whichever Party, outstrips that of any other nationality. There we have not dragged our feet.
For ten years of my youth I lived in apprehension of the war that as a young man I knew was coming. When it came it wasted six years of my life, as it did for many others who were engaged in war efforts of various kinds. One of the greatest advantages—one which perhaps we do not yet realise, but one which we may sometimes think about—is that because of the existence of the Community, that is now impossible. We in Europe do not have to live in fear of war among the Member States. That is worth fighting to preserve and I hope that we will fight to preserve that feeling of security in the European sense. We will fight for it not by pretending that problems do not exist, not by pretending that things are better than they really are but by getting down to the nitty gritty work of making it work in conformity with our own beliefs.
7.12 p.m.
Lord RHODES: My Lords, it is always refreshing to listen to the noble Lord, Lord Bruce of Donington. He spoke of the few years which he lost out of his life because of the war. The war took 13½ years out of my life. I do not

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intend to speak for long but I must first ask Lord Bruce, in view of his remarks about public expenditure, whether he is satisfied that it is being expended efficiently. In my view there has never been a time when public money has been handed out more profligately, but the question whether there is any virtue in not cutting public expenditure now, in the face of the inefficiency which goes with it, is a subject for argument on another occasion.
I came to this subject on the side, as it were; I evinced an interest in the Committee which was set up under the guidance and chairmanship of the noble Baroness, Lady Tweedsmuir of Belhelvie, which has been very successful, and I think that I was one of the first to point out the difficulties facing everybody when it came to understanding some of the problems which came to us from Europe via Brussels. Indeed, the first document in this connection that was handed to me was about the shipping industry. It recommended the rationalisation of the industry and one recommendation was that the industry in Jarrow, which at that time was quite busy, should be closed down. I recognised at once that here was a case of somebody writing papers for a Commissioner who knew nothing about the political implications for this country of such a step. I thought it was political dynamite, and I said so. Eventually it was withdrawn and ther began an investigation into some of the sources of the proposals coming from Brussels, something about which I shall have more to say later.
In the last few years democracy has had many trials and tribulations. Democratic institutions throughout the world have come out of those trials and difficulties pretty well and one which has stood up, maybe on rickety legs, is the EEC. I agree with much that was said by Lord Bruce and others about the need to have fire in the belly to grapple with the tremendous problems in the EEC. One of these, mentioned by Lord Bruce, is unemployment. The only countries in the world which do not have unemployment are the Communist ones and that is because they have a tight grip on labour. An example of this is in the East. There is no unemployment there. The authorities dish out little baskets to the workers on a building site
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and send them off running from one place to another carrying small quantities of earth, and at the end of the day they are given a bowl of rice for their labour. Perhaps they have the ultimate answer; they regulate how much technology can be admitted in relation to unemployment.
At the other side of the world we have the Russian example, with a tight control over labour. There the workers cannot strike and the amount of money they earn is dictated by the Establishment. At present unemployment is being mopped up by the manufacture of armaments and anybody who has travelled throughout the world as I have recently will have seen what is going on and cannot fail but to have been impressed by the fact that Russian hardware is mounting everywhere. Soon there will be hardware in every ocean of the world. With them, military geophysics has given place to geopolitics, which can mean confrontation all over the world. That is why Tindeman is right: the EEC must speak with one voice.
I do not believe that we in this country can solve our unemployment problems working on our own. We must be in an organisation like the EEC with its 250 million people, but, as Lord Bruce said, we will have to approach the matter in a different manner and the priorities in the EEC will have to be right before we can do it.
Mention has been made of direct elections. These could be the saving grace for the EEC. If you have direct elections, you must go to the country with a programme and, if you go to the country with a programme, you must say what will be the period of that programme. Up till now, there has been no mention in any shape or form in any document that I have seen about a programme of work. It has been ad hoc. Quite haphazard. The ideas coming out of the Commisson have been agreed about, I presume, in all the EEC countries. Whether all the countries have taken the work as seriously as we in our Committee have, I doubt very much.
If we can have direct elections we must make it quite clear to the country what is involved, and they will respond. A programme will have to have something on the lines of a Queen's Speech. I thought that the noble Baroness, Lady Tweedsmuir,

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hit the nail on the head when she said that there was no control of who decides priorities. How can an organisation function without such direction? But the initiative that has been taken by the Heads of State during the past few weeks, and has given me great hope that at long last this lack has been realised and that shortly we shall be working to a programme in the EEC.
I should like briefly to follow up the remarks of the noble Lord, Lord Castle. He was talking about schools, and information and making the EEC common knowledge. He felt that it was necessary for us to be in it and part of it. We should be explaining to the people of this country some of the elementary problems that confront the EEC. For instance, who can tell what a mountain of skimmed milk is? What on earth are we talking about when we speak of mountains of skimmed milk, mountains of wine, mountains of butter? Why is it that out wives have to accept high prices so that something in the EEC can be adjusted? Will somebody explain, please, why cannot the media—the BBC and ITV—showing pictures of great lorries tipping up apples that ought to be available on the market stalls of towns and villages in our countryside, explain why it comes about.
For goodness sake! let us stop this pedantic-talk about the EEC and get down to some of the simple basic facts of the kind that the noble Lord, Lord Bruce, was talking about. If we could simplify and give everybody a feeling that by being members of an organisation such as the EEC we were improving the possibilities of solving some of the problems of the day, there is no question we could restore some of the lost enthusiasm.
7.24 p.m.
The Earl of BESSBOROUGH: My Lords, I am very glad that we are having another Grand Tour of Europe this afternoon, though we had a mini-tour which was given us by the noble Lord, Lord Northfield, the other evening. Usually, grand tours take a few weeks rather than hours and I must admit that telescoping all the work of the Community covering virtually every department of government is quite a task, and I do not wonder that we are running a little late. However, I also look forward to the next debate on the Budget.
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At the outset, I should like to thank two noble Baronesses of this side of the House. Noble Baronesses have made a tremendous contribution to this debate. Firstly, I need hardly say that I wish to thank my noble friend Lady Tweedsmuir for her Committee's extremely useful report, for, as the noble Lord, Lord Bruce, has said we often find these reports produced by our Select Committees easier to cope with than the reports which we receive in Brussels. I congratulate her and I also congratulate my noble friend Lady Elles on her contribution
I should like to deal first with the question of strengthening the institutions. This relates to Chapter V of Tindemans, to get back to Tindemans. I refer especially to the institution which must be uppermost in our minds at present—that is, the European Parliament and its composition after direct elections. I believe that we should be very glad that the Council of Ministers was able last Monday night to reach agreement about this. I feel that the Heads of Government, including our own Head of Government, should be congratulated on having achieved the numerical compromise, even if the noble Lord, Lord Dunleath, is not quite happy about Northern Ireland. We have not had much to crow about in the Community and this decision of 12th July was certainly historic. Indeed, it is the view of most of us in the European Parliament that it was the most exciting decision since the Treaty was signed 18 years ago. We shall, in 1978, have a truly political human core to the Community. I feel that this is an amplification of the thoughts of the noble Lord, Lord Rhodes.
I agree, too, with my noble friend Lady Elliot, who also made a very interesting contribution, that political leaders in this country should now come forward and declare their willingness to stand for election to the Parliament. Certainly, if the new and enlarged European Conservative Constituency Associations were already in being, I should offer myself as a candidate and I hope that other noble Lords—including, of course, noble Baronesses and, certainly, those younger than myself (and, in this connection I am very glad to hear that the noble Lord, Lord O'Hagan, is determined to present himself) but even some who may be older on all sides of the House—will

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likewise declare in principle their willingness to stand. As far as we are concerned, this will, to my mind, make us politically legitimate even if, hereditarily, we may already be so.
It is easier for us in this House to state our intention in this matter than for members of another place; rightly, they have their future in their present national constituencies to consider. Clearly, it is more difficult for them to commit themselves or even to state their intentions. No doubt, in their case the dual mandate will continue at the outset and, certainly, I can see no reason why, in your Lordships' House, we should not continue to exercise a double duty. "Mandate" is not quite the right word for your Lordships since we have no popular electoral right to sit in this Chamber, even if we certainly have a duty to do so by the writs which we have received.
I have quite a long list of noble Lords of all three Parties and on the Cross-Benches—though I shall not read it to your Lordships—who, since it appears virtually certain that we shall be eligible to stand, would, I believe, make very appropriate members. I am certain also that they will be appropriately rewarded for their work, which they can hardly be considered to be so far. In other States, the most distinguished political leaders of varying ages and political hues have either been, are now or have stated their wish to be members of the European Parliament after direct elections. To mention a few, in France, I think of M. Alain Poher, the President of the Senate who was interim President of the Republic in the interval between M. Pompidou and M. Giscard d'Estaing. I think of M. Mitterand, the leader of the French Socialists. He has come forward.
In Germany Herr Willy Brandt and Herr Apel, the present Minister of Finance, have let their names go forward. In Italy Signor Andreotti, who is at present forming a Government there, has been for many years, and indeed still is, a member of the present European Parliament, and Signor Agnielli, the most distinguished of all Italian industrialists, has also volunteered. In Belgium, Mr. Tindemans himself—the author of this report—has stated that he, too, will stand for election. This means that they really do believe in
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European union. Of course there are the names of two or three commissioners as well who are either standing or are proposing to stand. My Lords, who has come forward in this country? I believe that some, like the noble Lord, Lord O'Hagan, have indicated their intentions, but I know of no well known or truly famous names.
When we come to Mr. Tindemans' first proposals concerning Parliament, I must confess they are rather disappointing. He proposes that the Council:
"should immediately allow the Parliament to take initiatives by undertaking to consider the resolutions which Parliament addresses to it."
He goes on to propose that during the development of European union:
"this practice should be given legal value through a Treaty amendment …"
Finally, concerning Parliament's powers Mr. Tindemans proposes that Parliament:
"should be able from now on, to consider all questions within the competence of the Union, whether or not they are covered by the Treaties."
Here, to be frank, I do not think that Mr. Tindemans has carried out quite as much research as he has in other sectors in what is undoubtedly a most interesting and valuable report. In practice, Parliament can already "take initiatives" by addressing resolutions to the Council, and the Council never refuses to consider them, whether they take the form of an opinion on a Commission proposal, or the form of an initiative report and resolution. There is no need therefore for this practice to be given any legal status by a Treaty amendment, as Mr. Tindemans proposes.
So far as the third suggestion is concerned—that Parliament should be able to consider any question whether or not this is covered by the Treaties—Parliament, as the noble Lord, Lord Gladwyn, knows, already reports on and debates resolutions on important questions of interest to it which lie outside the Treaties, and this on its own initiative, so long as the plenary session or the Bureau of Parliament authorises the interested committee or committees to draft the report and resolution. On the initiative of the noble Lord, Lord Gladwyn, Parliament has debated and adopted resolutions on defence co-operation and the Conference, on Security and Co-operation in Europe, on the initiative of a Belgian Member,

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M. Radoux, who is now preparing a report on the intensely military subject of the mutual balanced force reductions negotiations in Vienna.
Traditionally, and to the extent that Parliament needs a specific justification for these reports, Parliament has claimed that a paragraph in the Bonn Declaration of July 1961 is sufficient. But despite the rather disappointing nature of Mr. Tindemans' proposals, he does use and repeat this word "initiative". The European Parliament's Political Committee, of which my honourable friend Sir Peter Kirk is rapporteur, is indeed preparing proposals concerning the extension of Parliament's powers. This could involve a greater right of initiative by Parliament in the legislative process. It would, I think, go some way to meeting, from Parliament's side, the statement made by the Heads of Government in 1974 that:
"The competence of the European Assembly will be extended, in particular by granting it certain powers in the Communities' legislative process".
I do not want to anticipate what Sir Peter Kirk may himself propose within the coming weeks. But one thing is clear to me—and with this I agree very much with the noble Lord, Lord Castle—and that is that once they elect their own Members of the European Parliament, these Members will not wish to be denied a degree of legislative initiative and control comparable, I would say, within those areas covered by the Treaties, to those enjoyed by national Parliaments. Indeed, the logic of direct elections is that directly elected Members cannot be political eunuchs, even if at the outset there may not be immediately any increase in those powers.
In the section of the Report on the role and strengthening of the Commission certain proposals are made by Mr. Tindemans concerning the appointment of the President and Members of the Commission. As we all know, Mr. Tindemans' first proposal that the President of the Commission should be appointed by the European Council, has already come into operation, and I am sure that all of us in this House have indeed wished Mr. Jenkins well in fulfilling the major task that lies ahead of him. We have great hopes.
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Mr. Tindemans suggests that the newly appointed President should appear before Parliament to make a statement and to have his appointment confirmed by vote, and that he would then appoint his fellow commissioners in consultation with the Council. Again, speaking personally, I cannot but regret that Mr. Tindemans and the Governments wish to retain the tradition that the appointment of the President of the Commission, a body whose political responsibility is to Parliament—and it is important to remember this—rather than to Member States, should be nominated solely by agreement between those Member States.
In view of direct elections, and in view of the need, recognised by Heads of Government themselves, to increase Parliament's role in the coming years, it would seem more logical, and I think institutionally sounder, that the nomination of the new President should be by agreement, or as has been mentioned earlier this evening, by co-decision between Governments and the Parliament. While it is only normal that the President of the Commission should consult Governments concerning the appointment of these colleagues, the European Parliament should in my view also have a decisive voice in their appointment. We cannot, as Mr. Tindemans has said, develop a meaningful European union unless the Nine speak and act as a single entity in dealing with the outside world.
To achieve a genuine European foreign policy, Mr. Tindemans argues that it is necessary to go beyond the present system of political co-operation and to achieve a real European foreign policy. In order to develop such a policy, Mr. Tindemans holds that the pre-condition is that there must be an obligation to reach a common point of view and that the European Council should be obliged to arrive at common decisions on specific issues of foreign policy. I very much hope that the Government will take up this extremely important suggestion and that the Foreign Office will make constructive proposals, within the Davignon Committee, concerning foreign policy areas which could be most realistically chosen. As Mr. Tindemans says, come what may we should present a united front at multilateral negotiations relating to a new world economic order. This means that

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we should in every case place the primary interest of joint action above our divergent opinions and interests.
I much admire the way in which Mr. Tindemans has the courage to stick his neck out on the issue of European defence. I fully realise that it is probably premature for the Community to relaunch the idea of a European defence community, but security is an essential element of foreign policy and cannot be divorced from it. There is, of course, a question mark concerning Ireland's role, as a neutral, but it should not be too difficult to find procedural devices to cover this point. The vital issue would be that France must agree to take part in these discussions, but since she does participate in the work of the recently-created European Programme Group it is to be hoped that there would be no objection on her side to this. Finally, I consider that Mr. Tindemans' proposals regarding co-operation in the manufacture of armaments are well worthy of consideration by the Government. The time is too short for me to go ino this now, but I hope that the Government are considering this particular suggestion by Mr. Tindemans.
There are many other points in the report on which I would have touched if time had permitted, but I have tried to concentrate on those issues of Europe's role in the world, and the strengthening of the role of Parliament in the light of direct elections, which are to me of the greatest significance. I thought that the noble Baroness, Lady Seear, made one of the bull points in our debate when she said that an emotional surge was needed. I would say that there must be an emotional challenge, and I fear, my Lords, that that challenge may have to come from outside the Community.
7.42 p.m.
Lord NORTHFIELD: My Lords, I was glad that the noble Earl came back from his blatant advance electioneering to the Tindemans Report. I wish him and his noble friend good fortune in getting ten constituencies, as we now know them, to agree to have them as candidates at the forthcoming elections.
The Earl of BESSBOROUGH: And the noble Lord opposite, my Lords.
Lord NORTHFIELD: My Lords, it will be a very amusing time. If elections involving the eminent people who he says are lining up for the purpose really take place, it will be a most intriguing election when the time comes, and I wish him all good fortune in it.
My Lords, I am a strong critic of the Tindemans Report, and I want very briefly to say why that is so. I regard it as mainly all tactics and no strategy; and I want to say what I think is wrong with having a report of that kind at this stage in Europe's history. After all, the exercise on which Mr. Tindemans embarked started in 1972 when, at the Summit Meeting then, the Heads of Government set 1980 as the target date for European union. They reasserted this in 1974, and asked Mr. Tindemans to draw up the agenda for European union. So this is a sort of once-a-decade exercise and it has got to be good, I am sure, to be approved and applauded. I regard it as a tragically missed opportunity in European history; one of those chances to make a landmark in the development of Europe which were not taken.
However, before I come to my criticisms, may I make two points? Of course, I approach this not as a federalist at all. I am not complaining that Mr. Tindemans is not a federalist. He is, of course, although his report is not all that noticeably so. I am not a naive federalist who wants instant Europe tomorrow or the next day; I see it as something evolving past the end of this century. So I am not, so to speak, criticising his report because it is not going fast enough for me. I do not go quite as far as the present Prime Minister, who said in February 1975 to the House of Commons that he did not believe—and I quote:
"we are in sight of moving to a Federal Europe by 1980, or indeed by any later date".
I would not go quite as far as that, but I see the point that he is making; it is a long process.
Secondly, I am not critical of the details where Tindemans is positive. I thought his Chapter 2 on Foreign policy and his Chapter 4 on a Citizens' Europe, and Passports, and all those things, were all very helpful—patching up the Europe we have got. It is not European union. This was a sort of mini report on a few odd

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ideas, and I do not mean to be disrespectful to him, for, so to speak, giving Europe a slight push forward. This exercise is however a once-a-decade sort of thing and and I suggest it should have been used for something bigger—to analyse what is going on in Europe and how we are evolving, and what the next two decades are all about—as well as giving the minutiae that he descends to as part of the work in the report.
Let me come then to precise criticisms and I will try to be more explicit. First of all, there is no doubt about the ringing tones of the instructions given to Mr. Tindemans. He was not asked to chart a couple of years ahead. He was asked by the Summit Conference of 1974, and they say,
"In this connection we consider that the time has come for the Nine to agree as soon as possible on an overall concept of European union".
"An overall concept of European union"—and this is all elaborated in a long paragraph about consulting everybody, European Parliament, opinion in the countries and so on. This was to be a grand exercise and a fundamental analysis—at least so many of us thought.
Indeed, this is what is needed. After all, the Community started in 1958. We have had it now for nearly 20 years and nobody has done any stocktaking of any note. Nobody has said: "How much has this Community evolved compared with what was in the Treaty? What have we added, what have we subtracted, what have we changed? How have the institutions begun to work out? How do they look, how are they shaping up for the next couple of decades?" None of that is in Mr. Tindemans Report.
To recall what really happened in 1958 we have to take our minds back to the historical situation at that time. The idea of a political Community had foundered in 1954 at the time of the demise of the European Defence Community. This idea of the Treaty of Rome was put up to fill the gap at the time, and it built on the experience primarily of the Coal and Steel Community. The thinking was that you could have a High Authority like the Coal and Steel Community has. In this case it was the Commission, which would run more and more of Europe as we surrendered more and more to the centre. The idea in the Treaty of Rome—
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there is no doubt about it: these are historical facts—was that the Commission was regarded as an embryonic Government, a Government "in waiting" as more and more supranational decisions were taken in areas like energy policy or the Common Agricultural policy. They would be added to the duties of the Commission, the Commission already having by the Treaty certain duties over Customs duties and rules of competition. Thus more and more as the years were going by it was envisaged that the High Authority, the Commission, would gradually take over more and more. This was the hope—that gradually Europe would federate because, as they said at the time, there would be a spillover into political affairs from the growing economic union. As the economic union developed it would spill over and inevitably involve political union, and all on the High Authority blueprint.
Of course, my Lords, nothing of this has really happened and what Tindemans should have done after 20 years is to analyse what really has been happening in Europe and say therefore: where do we go next as a result of that? What has actually happened is that the Commission, far from having this role as an embryonic Government, has gradually been downgraded. What has happened in addition is that its place has been taken by the Council of Ministers. Let us look at this.
First, we know that the historical context has changed. We no longer think of High Authorities and slick solutions of this kind. The tide of federal union has disappeared. There are not the historical imperatives. We are not afraid of Germany or of rearmed Russia; we have détente. We have a real growth of national bureaucracies, and the nation-State, since 1958, has been rehabilitated—to the sorrow, perhaps, of many Europeans; but this is a fact. The European tide in that simple sense has begun to retreat.
Secondly, in the inter-governmental and supranational parts of the Treaty there has not been the progress that the maximalists expected. There is not for example a real energy policy. There is not, in large parts of the Treaty, that agreement between Governments to make a policy and to give it to the Commission to execute it and to be the masters of on

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the High Authority blueprint. A great deal of Europe has got stuck hard into an inter-governmental situation instead of becoming para-federal. There is no spill-over from the economic affairs to the political union because economic and monetary union—which Tindemans hardly begins to analyse—has become impossible for the time being. This is because of the divergence of our economies. You cannot federate or have economic and monetary union with the economies diverging in the desperate way they are doing at the moment. This he does not analyse. His chapter on economic union is pathetic. It does not face the facts of the difficulties.
More, importantly, look at what has happened to the Commission. All sorts of non-Treaty matters have been brought into the Community system. Foreign policy is now right in the European system. It is not mentioned in the Treaty; but it is now part of the work of the Council of Ministers.
Parliament is now allowed to ask questions on it. We have broadened the activity of the Community beyond the Treaty into all sorts of inter-governmental areas of which foreign policy is the most notable, while environment is another. This is useful, but it is vastly different from what the Treaty originally envisaged. There is even talk of going into defence. Nobody expects that if we bring defence into the Community, we can give it to a high authority to run in the next few years or decades. The Treaty is outmoded in this sense.
Lastly, instead of the Commission-Parliament dialogue being important, that is no longer important. What is important in Europe now was not even mentioned in the Treaty of Rome; that is, the dialogue between the Council and Parliament. It was not even mentioned in the Treaty that there should be relations between them. They have built them up from the point of answering questions to colloquies, to having major debates; and there is an emerging sense of a Government facing Parliament—contrary to what the Treaty of Rome envisaged. Indeed, we can say that it has gone so far (in a way that the Treaty did not foresee) that there is now actually formal conciliation between the Parliament and the Council over the Budget. The Commission is only,
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as it were, sitting in the middle as an arbitrator. This is not the emergence of another Community on the style of the Coal and Steel Community with a High Authority, this is the emergence of something that we understand better in politics, a real Government of real politicians facing a Parliament.
In those circumstances and with all that evolving in this way, there will be an elected Parliament in 1978, who are going to say, "We must face the people with real power and make them behave in a collegiate manner, answerable to us as a governing Council of Ministers." What the Tindemans Report should have been doing is to examine that Europe which has now come about despite what was in the Treaty.
In that circumstance, the really important body is the Council of Ministers. They suffer from the simple defect that they are fragmented. They have no integrated approach. My noble friend Lord Rhodes and others talked about the work programme of Europe being "haphazard"—that was his word. The noble Baroness who introduced the debate made similar remarks about the need to bring order into the work of the Community. This does not happen because the Council is not a conscious collegial body, but a body of Ministers who have meetings, or of Foreign Ministers who dash backwards and forwards on aeroplanes and have no secretariat with the job of providing an integrated view of the development of Europe. Yet these are the people now who are the emerging Government of Europe: and nothing is happening to put order of a critical kind into their work. The Council of Ministers, I suggest, is the body which needs to be fashioned into a conscious instrument of European progress, giving Europe momentum—in addition to the extra momentum that the Commission, with its attenuated power, can give by working hand in hand.
These changes that I have been setting out were not analysed by Tindemans. He gives the game away in a specific paragraph where, when he is talking about the freedom of action of the Commission, he says:
"That freedom of action was best expressed by the powers conferred on the High Authority of the Coal and Steel Community. We must follow this example."

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We know what is wrong with Tindemans. He is an old fashioned federalist who still believes that; he could not bring his mind to grasp that what is needed in Europe is an analysis of what has really happened compared with the outdated hopes of 1958.
What ought he to have recommended? He should have recommended, say, something that the Wyndham Place Trust has recommended or the ideas that a number of us have put up for the refashioning of the Council. If this is to be the political head of Europe, it must become a responsible collegial Executive. The Wyndham Place Trust suggested in their report that one way of doing it would be to appoint the President of the Council of Ministers for one year. Tindemans also says that. They go further to make a crucial distinction: that he should be a Minister of a national Government who is sent to Brussels for a year to do nothing else other than to run the Community, to push the Council of Ministers together, to give it dynamic leadership and to get the bandwagon rolling in an orderly way that has not happened so far.
My own proposals go further. I have suggested that we ought to be sending resident Ministers to Brussels who could gradually form a collegial Executive. They would have the advice and, indeed, the presence of colleagues from their own Governments from time to time as needed when specialist matters were under discussion.
In some way, my Lords, we must begin to face up to the fact that it is the Council of Ministers that has now evolved as the supreme body and not the Commission. We must begin to think consciously how to adapt its role and push us forward into the future. He might have gone so far, in fact, as to spell out the progress of Europe up to now and then to indicate how we use the Council of Ministers in this new form, accepting the lessons of history, and to draw together the threads of the new kind of Community and possibly move towards a new Treaty of Union. This, in his Institutional chapter, would have made sense. As it is, I am afraid that his Institutional chapter is lame and unconvincing and only largely harks back to the past.
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Finally, I see that Mr. Tindemans has been elected to head the new European Party, the European Peoples' Party (EPP). I see in The Times on 9th July that he spoke in Luxembourg. Mr. Tindemans attacked the growing tendency among members to transform the Community into a mere free trade area. How right he is! He said:
"If these currents of opinion develop, we shall soon find ourselves in a Community we never wanted."
If we find ourselves in that sort of intergovernmental community Mr. Tindemans would be one of the people to blame. He has wasted 10 years in effect. He has failed to grasp the need to analyse the Europe that we have rather than the Europe we set out with. He has failed to draw together the lessons about how constitutionally we now begin to advance towards the end of the century. I did not want to ask any more of him than that. do not want the blueprint. I do not believe that Europe can emerge tomorrow or the day after; but I expect from leaders of great nations surrounded by great advisers, that they would analyse what we have been doing for 20 years in a realistic way and then set us on the road to something more worthwhile at the turn of the century. I remain gravely disappointed that he muffed that chance and lost his opportunity.
Lord ARDWICK: My Lords, before the noble Lord sits down and concludes his extremely interesting speech, could he tell me what he visualises regarding the future of the Commission? We have the Commission which is a collegial body; he is now making the Council into a collegial body. Is the Commission to fade away and to transfer its expert staff to the Council?
Lord NORTHFIELD: My Lords, this is a point which the noble Lord, Lord Gladwyn, I and others, have discussed on many occasions. The answer is simple. As I indicated, for the time being the Commission has its duties under the Treaty. It will run in harness with the developing Council for the time being, adding its momentum, its initiatives to the development of Europe. But ultimately, as the Council gets more powerful, there is no doubt that the Council at that time, if it

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has become really collegial and is beginning to be divorced from Member Governments—as will occur in 20, 30 or 40 years time—the Commission will begin to fade away and become largely a bureaucracy entrusted with various jobs by the Council of Ministers. All this has been argued about and is known to many of us who spend our time in Europe on these matters. I am not trying to belittle the question; I am simply saying that there is not any real magic or even mystery about all these things. If we would all sit down and say what is happening as opposed to harking back to original blueprints, we would all get on much faster.
8.2 p.m.
Lord BANKS: My Lords, of the two documents with which we are directly concerned in this debate, the White Paper on Developments in the European Communities and the Select Committee's appraisal of the Tindemans Report, like other noble Lords I found the second of these much the more valuable. The six-monthly reports on developments in the Community are little more than in each case a catalogue of events and activity about which we have already read in the Press or elsewhere and no opinions are expressed. We are told, for example, that Mr. Tindemans presented his report on European union, but nothing of the reaction of our Government or any other Government. As my noble friend Lord Gladwyn said earlier, we get from that record an indication of the immense breadth of the activity going on under the auspices of the Community, and from that point of view it has value.
The Select Committee, on the other hand, makes a number of judgments on different aspects of the Tindemans Report. For example, we read:
"The Committee consider it desirable that the Community should ultimately be able to speak with one voice in its external affairs."
The noble Baroness, Lady Elles, said earlier that when we are thinking about the need to speak with one voice we should not continually pick on the failures—and there are plenty of these—but should highlight the successes. I agree with her on that. The success of the joint decision at the Helsinki conference immediately comes to mind. On the other hand, we cannot ignore the occasions
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when it seems to us that the Governments are running absolutely contrary to that principle of having a united front so far as the rest of the world is concerned, as for example in the case of the Puerto Rico conference. That seems to be completely contrary to the whole concept of the Tindemans Report of having one delegation, one person, a country, to speak for the community, and one is bound to criticise when that happens.
We read that the Select Committee endorsed the generally accepted view that monetary union should remain the ultimate objective of the Community, but recognised the many obstacles to its attainment. At the opening of this debate the noble Lord, Lord Shepherd, spoke of the need for the convergence—it is not happening at the moment—of the economies of the nine countries. I am not sure whether the Government still regard economic and monetary union as the ultimate objective. There are these enormous obstacles, to which the Committee refer. I still believe that we should have that as the ultimate objective and I should like reassurance that that remains the view of the Government.
While the Select Committee accept those two propositions, they are more critical of other proposals such as that for majority voting in the Council of Ministers, about which my noble friend Lord Gladwyn spoke very persuasively earlier today. I should like to speak about that in a moment. The Select Committee made clear that they have not sought to reach conclusions on the merits of European union as an ideal. It is clear from a perusal of the evidence given to the Select Committee by the right honourable gentleman the Minister of State, Mr. Roy Hattersley, that the Government are in the same position. This is a tenable position for a Select Committee which represents all the different points of view within a legislative chamber. I do not think it really is a tenable position for a government to hold. Mr. Hattersley says that he cannot support the ideal of "political union" until he knows what it is. But when people start to sketch out all that the political union might involve some overall picture of future development—he deplores their abandonment of what he calls the "traditional techniques of English empiricism".

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Over the week-end I heard those techniques described by a student of British foreign policy as, "Waiting for something to hit you before you got out of the way". Those techniques leave us without a sense of direction and unable, as a consequence, to give a lead. All Mr. Hattersley is prepared to commit himself to is the inevitability of closer political co-operation, which is a very vague phrase among the Nine. But to me the vital question is whether the Community is to develop as an alliance of virtually independent nations on the famous Gaullist principles, or whether it is to develop, however slowly, on a supranational basis. I am not talking about anything so bold or frightening as a federal constitution.
It is clear that the founding fathers intended the Community to develop on a supranational basis, since they provided for a directly elected European Parliament. They provided for an executive arm in the shape of a collegiate body—the Commission—whose members were pledged to think and act in the interests of the Community as a whole and not of any individual country, and since they provided, except on certain specified issues, for majority voting in the Council of Ministers, the Community's legislative body. The Member nations have delayed our direct elections; they have reduced the significance of the Commission, as the noble Lord, Lord Northfield, was saying, and they have abandoned majority voting on almost all issues. They have, however, allowed the Parliament to acquire some new powers in respect of the budget.
Faced with that situation, Mr. Tindemans has called for direct elections as soon as possible and an increase in the powers of Parliament. The noble Earl, Lord Bessborough, has cast some doubt on the precise proposals that Mr. Tindemans puts forward, his right to initiative, but he is urging an increase in the powers and the enhanced role for the Commission through greater use of Article 155. He is arguing, too, for an increase in the authority of the Commission through the confirmation of the appointment of the President of the Commission by the Parliament. He argues for majority voting in the Council and says this should become normal practice. We are hoping—and this hope has been expressed many times this
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afternoon—for direct elections to the European Parliament by 1978.
May I underline the point which was made by my noble friend Lord Gladwyn, that we on these Benches hope most sincerely that these elections will enable political Parties in this country to be represented in porportion to their strength. The noble Lord, Lord Dunleath, was talking about Northern Ireland and the possibility of having more than three seats. If there are three seats it would be possible to represent the minority, but only if it is done on a proportional basis; otherwise the majority will collect them all. That is a point that needs thinking about very carefully.
We are hoping for direct elections by 1978 and I agree with the noble Baroness, Lady Elles, that there would seem to be no reason why we should not achieve that. But what about the powers for the Parliament? Do the Government feel that increased powers for the Parliament is one of the objectives for which they will strive in the Council of Ministers? What about the role of the Commission? Is the review of structure of the Commission which I understand has the full support of and may even have been proposed by the British Government, being undertaken because the Government would like to see an enhanced role for the Commission?
I should like to say how very much I support what the noble Lord, Lord Northfield, was saying about the need ultimately to come to the position where we have a resident Minister in charge of the Council of Ministers, or resident Ministers comprising that Council. I cannot think that we shall ever run Europe satisfactorily so long as it is being run by leading statesmen of Europe, but in their spare time. Therefore, underlying all the questions I am asking is this one: Do the Government want to build on the supranational principle or do they wish to restrict or modify it?
In a previous debate the noble Lord, Lord Goronwy-Roberts, said that there were eight other Governments in the Community and that we should not always be picking on the British Government and blaming them when things do not go right. Of course, I would completely agree with that; and in the course of what I have been saying this evening there has been some implied criticism of the

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Governments of the Community as a whole. But of course it is only through the British Government that in this House we can get at the government of the Community. If I were convinced that the British Government were pressing on reluctant colleagues in the Council of Ministers the reforms to which I have been referring, then certainly I would be silent so far as any criticism on the British Government is concerned.
The noble Lord has tended to say—and one can well understand it, "We are going as fast as we can. Don't press us". But it is not only a question of pace: it is also a question of the direction in which we are going. For example, the Dutch Foreign Minister was reported in The Times on 8th July as saying that the Community structure had reached an advanced stage of erosion and we might well wonder how long it would be before the European teachings and everything achieved on the basis of them would simply be a valuable historical curiosity. He also went on to express his conviction that the work of the Council of Ministers could not proceed efficiently and fruitfully if they continued with the requirement that all decisions of the Council should be taken unanimously. The next day in the Guardian Mr. Tindemans was reported as detecting a growing tendency to transform the Community into a mere free trade area. There was no longer, he said, any real European democratic legitimacy for decisions taken at Community level. No doubt there is some exaggeration in those statements which was born out of frustration which they may have been suffering; but what the Foreign Minister of Holland and the Prime Minister of Belgium are saying is that the supranational principle has been and is being eroded. The Tindemans Report contains limited but definite proposals to reverse that trend, and the question to which I seek an answer is simply this: Do the British Government wish to reverse that trend or do they, perhaps, welcome it?
8.15 p.m.
Lord GORONWY-ROBERTS: My Lords, as was to be expected, this has been a wide-ranging debate, and an equally wide-ranging debate presses upon us as the next business on the Order Paper.
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Out of fellow feeling for my fellow Minister I will endeavour to be as brief as possible, but in a debate like this, with 18 speeches each containing a separate clutch of 18 questions, the inherent difficulty will be appreciated, I hope, on both sides of the House.
I will attempt to answer some of the questions raised by your Lordships at the very beginning, before moving on to outline the Government's view at this moment of the Tindemans Report, upon which the Scrutiny Committee has offered us a thoughtful and professional report, under the admirable leadership, once more, of the noble Baroness, Lady Tweedsmuir, and for which the House, and certainly I and the Government are deeply grateful.
The main points which occurred to me as I listened to the debate fall under a number of rough headings. There was a group of constitutional points which, quite naturally, the noble Baroness herself put forward. For instance, she proffered a suggestion which was echoed by at least one other speaker in the debate; that is, that the President of the Commission should himself appoint the European Commissioners. Her Majesty's Government are not in a position to accept this suggestion, but the Tindemans Report proposed an interim measure. The new President of the Commission has just been appointed. He is the present Home Secretary of this country, and I should like to join in the general congratulations extended to him and also in the general expectation that Mr. Jenkins will indeed render to Europe, and thereby to the cause of democracy throughout the world, outstanding services as President of the European Commission.
Mr. Tindemans suggested that the President of the Commission should help Member Governments to prepare for the meeting which would appoint the other Commissioners. That seems to me perfectly acceptable, and it should be given a try. I am more doubtful about the proposal that in later years appointments should rest entirely with the President and with the Assembly. The Government feel that the initiative will almost certainly have to rest with Governments.
I should like to continue for a moment with this group of constitutional or procudural points, if your Lordships will bear with me. The noble Baroness, Lady Elles,

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asked whether the work of the Boundaries Commission in drawing up particular constituency boundaries could be speeded up. I think she said that no other Member State has found any difficulty about doing that. Certainly Denmark, to name but one, has come out clearly and publicly with the expression of its own reservations. No doubt there are other reservations which have not been as publicly announced as those announced by this country and by Denmark.
The answer to the noble Baroness, Lady Elles, is this. There are no powers in the present legislation to enable instructions to be given to the Commissioners on the drawing up of European Assembly constituencies. This is a matter for national decision, and the Government will wish to consider the views of the Select Committee on Direct Elections which is now examining it. It will be for Parliament to decide in the legislation what role the Boundaries Commission should play, in view of timing and other considerations.
In answer to the noble Lord, Lord Gladwyn, and others, I repeat what my right honourable friends the Prime Minister and the Foreign Secretary have said more than once. We genuinely aim to be in a position to hold direct elections in the United Kingdom in 1978. We have consistently said, also, that if there are real difficulties we shall explain them and we shall expect our partners to understand them. We have made no secret of the fact that there are serious difficulties which must be overcome, and we are hopeful of overcoming them. This point could not have been put better than it was put this evening by my noble friend Lady White, who indicated to the House, before going on to very substantial matters relating to the environment, the real difficulties in putting together a procedure for direct elections by that due date, the efforts we are making and the fact that only real difficulties will prevent us from achieving that goal.
In the same group, there was the point made by the noble Lord, Lord Gladwyn, about majority voting. It will continue to be our policy that the Council should seek to achieve a consensus. The norm will be agreement by consensus. But we do not wish to be dogmatic and will not exclude a vote when no important national interest is at stake. It may well
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be that from that practical, sensible basis there will be a development towards majority voting at a faster pace than I can anticipate at this moment. The fact is that we are taking into account not only our own beliefs and feelings about how fast one can inject majority voting into matters which are of important national purport, but the known views and feelings of our partners. We are not the only member of the Nine who takes a very anxious view of this revolutionary transfer of authority from a nation to an international body.
I have said more than once from this Box that we have been engaged in Europe, and are now engaged in Europe, in a massive operation, something which we cannot expect to promote at a faster pace than the facts and feelings of Europe will warrant. This is really the answer to the noble Lord, Lord Banks. It is so easy to ask: What do the Government think about the supranational principle? It takes many debates, many books, a great many speeches and hard thinking to evolve an answer to that question. It is not enough to say, "We are for it". There are plenty in Europe who will say that without meaning it, and without expecting it to come about. We are not going to say anything of the kind. By dint of careful scrutiny—and how well we are served, especially in this House—by hard thinking, by producing the kind of publication which my noble friend Lord Northfield has produced, and realising that we are engaged in a major historical enterprise, we shall try to answer that question, not in a single debate or at a single point in time, but over a fairly long period.
The noble Lord, Lord Gladwyn, also used a phrase which I greatly welcomed. He spoke of a gradual development of existing institutions. This seems to me to link with the argument which my noble friend Lord Northfield was deploying. I wish he had spoken for a longer time on the theme that he chose for himself. It seems to me that we are coming very close to the point in that phrase, and in a number of other things said in this debate about the need to look at the position as it is, as it has emerged, and not to be too tied to blueprints, statements and even agreements; although, of course, agreements must be honoured until they are replaced by the proper

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procedure. But I took my noble friend's point to be that we should take from the situation as it has evolved the main facts of our thinking today, and try to build upon it.
Hopefully, we may emerge more quickly than most people anticipate along the road to a proper internationalism. It is certain that we are not today in Europe, or indeed in the world, facing the challenges of 1958 as much as the challenges of 1938. I entirely agree about that. The main fact of today is the recrudescence of nationalism. We have seen it coming. In 1958, nationalism was on the retreat before federalism. Today, it has come back fighting in this country, in Europe and, indeed, in every part of the world, and it is against that fact that we have to approach the massive task of creating, first in Europe, an international system and hopefully, on that basis, a much wider international organisation.
I pass quickly to the points made by the noble and learned Lord, Lord Diplock, who expressed doubts about delegation to the Commission as recommended by M. Tindemans. I think the noble and learned Lord's speech will greatly repay study when it emerges in cold print tomorrow. I found it a fascinating as well as an authoritative analysis of the position, with which I was in considerable agreement. There are points of disagreement which are, perhaps, a little recondite, and I shall wait until I have the benefit of the presence of the noble and learned Lord before I go into those.
Related to the group of constitutional points were procedural points raised by, among others, the noble Lord, Lord O'Hagan, who, as an example of what he had in mind, referred to the Common Agricultural Policy. That is an issue worth debating on its own, as well as an example of what he sought very effectively to argue on the question of procedure. I was greatly taken by the speech of the noble Baroness, Lady Elliot, who referred with familial expertise to agricultural policy, and by the speech delivered by my noble friend Lord Bruce who, among other things, adjured me not to regard the CAP as the Sinai tablets of wisdom. May I assure my noble friend that in no way do I regard the Common Agricultural Policy as being enshrined in the Sinai
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tablets of wisdom. I hope that that is a sufficient assurance to my noble friend whose speech was, of course, based upon great knowledge and considerable service so far in the European Parliament.
Much of what my noble friend said I think that this House and, indeed, Europe should take to heart. It links with what other Members of this noble House had to say about the way in which, for instance, the Common Agricultural Policy (although I am not picking on that in particular) has evolved into a kind of Heath Robinson contraption which it is fatally possible to criticise and, in so doing, to denigrate the very idea of a united Europe. This is the danger: of being so admirably enthusiastic about the conception of a united Europe as to close one's eyes to the glaring deficiencies of many of the things that are happening under the aegis of the Treaty of Rome. The true friends of Europe must be prepared to grasp these nettles and to do what I took the noble Lord, Lord O'Hagan, and others, including my noble friend, to be doing; namely, to see whether we can make more possible the great objective of political unity by solving more quickly the great impediment of economic deficiency.
This takes me from agriculture, not without a certain sense of relief, to another group of suggestions with which I entirely agree—they were made by the noble Baroness, Lady Seear, my noble friend Lord Rhodes and others—in support of the idea that we must carry the people with us, in particular young people. We may draw up, as yet Tindemans and the rest of us may draw up, all kinds of blueprints and reports, but if there is not an answering spark—or, as the noble Baroness, Lady Seear, called it, "an emotional surge"—we shall not get very far. Coming down to brass tacks, the noble Baroness and others said that it is necessary to show that Europe, working together, united in practical work, means something in terms of the real problems that confront people, in particular young people. This is pragmatism, even if it is not empiricism—a word which has been denigrated this evening in a very graceful way. Let us call it "this pragmatic idealism".
Unemployment and inflation, the two related evils, were quoted in very powerful speeches and the Government entirely agree. We believe that the co-ordination of policies between Member States has an

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extremely important part to play in mastering inflation and reducing unemployment, particularly among the young. It is the helplessness created by unemployment that lies at the heart of the appeal of certain philosophies, if that is what we can call them. Those of us who grew up in the 1930s remember that Fascism and Nazism fed on the unemployment of youth, the hopelessness of youth. It is a vital political as well as economic purpose of Europe and, indeed, of the whole world to master these twin evils.
The tripartite conference, to which I was delighted that the noble Lord referred, between Governments of Member States, the Commission and the social partners—that is, representatives of employers and trade unions—has already proved to be a major democratic instrument not only of thought but, it seems, of action. The conference on 24th June focused on the theme of the restoration of full employment and stability in the Community. I shall not delay the House by referring to the declaration that followed which instanced concrete measures which would ensue. The Government welcome this. We shall be pressing for action and taking part in the Community action that we hope will follow.
The noble Earl, Lord Bessborough, referred also to direct elections and to the powers of the Assembly. On the question of powers, as I have said, it is the Government's intention that the first direct elections shall take place in 1978 but on the basis of the Assembly's existing powers. We have said this for some considerable time.
The Earl of BESSBOROUGH: My Lords, to begin with.
Lord GORONWY-ROBERTS: Yes, my Lords, to begin with. I freely grant that hopeful subordinate clause "to begin with". It will be for decision by this Parliament and the eight other Parliaments, acting unanimously. I do not think that they will adopt a majority vote, whatever we say, on whether in due course to pass over further powers to the European Assembly. We ought to get rid of the idea that we are afraid of the transfer of power. I certainly am not and join my noble friend Lady White. It is not a question of opposition
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to the transfer of power. It is the need for two things—for periods of digestion between constitutional innovations which are, of themselves, somewhat revolutionary and for coherence.
My noble friend Lord Ardwick made an extremely important point when he called our attention to what we have all realised without putting it, as he did, with such great clarity: the way in which the various European international bodies use practically the same names—the Council of Europe, the European Council, the Council of Ministers, and so on. It is by no means simplistic to suggest that we might usefully get down to the question of nomenclature and clarify our minds by using the right labels. But that would not be the end of it, any more than my noble friend suggested that it would. There is a need for hard and clear thinking to achieve a coherence of relationship.
This evening we have had some extremely useful suggestions. I shall not be tempted to discuss even those which have particularly appealed to me, but central to them all is the search for a pattern, a kind of hierarchy of decision. Within our own country—and once again I refer to a speech we have heard—we are used over a long period to a kind of graduation of power from the parish to the nation, indeed to the united nations, of the United Kingdom. We are looking at devolution in the same way, to fit into this clarity of power. Now Europe has not developed in this way. I make no complaint: it is a massive achievement that it should have got so far.
As my noble friend Lord Bruce of Donington reminded us, those who grew up in the 'thirties and then went through the six years, as he and many others did, suffered from the fact that this process of power stopped at the nation-State. The conception of Europe in 1946–47 and thereafter was to try to carry on from the nation-State, knowing that the nation-State and nationalism had in fact nearly wrecked the world—and may yet do so. If revived nationalism in every part of the world, including Europe, is not caged and tamed by an international organisation, we are all prepared to start in Europe with it, with a view to Europe saving itself by its own vision and possibly the world by its example—if I may vary a famous phrase.

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I pass quickly, with apologies for having taken some time over these specific points, to the Tindemans' Report. I have a statement here—what I would call a necessarily interim statement—of the Government's attitude. I will try to compress it without referring to this excellent note, but if anybody wants to borrow these notes, he may do so.
The Earl of BESSBOROUGH: My Lords, will the noble Lord put them in the Library?
Lord GORONWY-ROBERTS: My Lords, they are not in a fit state for publication at the moment because like all my notes they are subject to constitutional amendments from time to time, and certainly to semantic interference. May I sum it up in this way: we regard Mr. Tindemans Report as a very useful, comprehensive report which avoids dogma. He himself, as we all know, is a Federalist; a literal Federalist. But he has deliberately eschewed even his own dogma in this report. It provides a basis—the best basis so far—for a discussion of the way in which Europe can move in the next few years towards a more meaningful union. He makes four or five major points; for instance, on political cooperation, or putting it more simply, a joint foreign policy. I would say that I am a European for that. I want to see the other come, but my motivation always has been political rather than economic. I still have my reservations; who has not? As my noble friend Lord Bruce of Donington said, there are reservations up and down the Community about the economics of it, but surely there can be no reservations about political co-operation.
This again will not come overnight. I can assure the noble Lord, Lord Banks, that the United Kingdom is very much in the van in pressing for a consensus approach in international organisations, and indeed in other directions, on foreign policy. He will have noted with satisfaction the way in which Europe almost got into a common position in regard to the vast problems of Southern Africa, and it was not the fault of the United Kingdom. She was not the one out of the Nine which made that in fact less effective than it might have been. We
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are constantly pressing—and indeed frequently succeeding—in getting joint approaches in capitals—in New York and in other locales: and it is growing.
On that first point, Mr. Tindemans makes some sensible proposals and to a very large extent we agree with him, and indeed we have shown that especially in the last six to 12 months we have agreed in practice. I wish I had time to look at the question of economic, monetary and social matters, which is the second point he raised. I must say this much: we share many of the doubts expressed by the Scrutiny Committee on what Mr. Tindemans has to say on this matter and we shall have to go into that in more detail later. We agree with the noble Baroness, Lady Tweedsmuir, in presenting the report, and with the noble Lord, Lord Bruce, among others, that the emphasis placed by Mr. Tindemans on the need for transfers of resources from the more prosperous to the less prosperous regions of the Community is essential for the survival of the Community. It is not a Community if it is two-tiered or many-regioned in economic progress. It is a Community if it is clear that its essential purpose is to develop all parts, all countries, all regions, all peoples of the Community.
The point was also made about a citizens' Europe and indeed suggestions were made about getting popular support and popular participation. A good deal is going on now. We must constantly look at practical ways of bringing together individuals—especially young people—across Europe. Finally, there was the point about institutions, but I think the debate answers itself on institutions. I hope that this kind of debate, which after all is printed verbatim, will serve as a quarry for future thinking. What has been said has not always formed a consensus: every man or woman is his or her own constitutionalist, especially on Europe. Nevertheless, it has been a useful and valuable debate, although not a conclusive one. We are on the way. My noble friend Lord George-Brown is not here, otherwise I would have added "brother". We are on the way, and I give way to my noble friend Lord Jacques who has to tackle even more erudite subjects in a moment or two. This is a massive operation. Enterprise or enthusiasm and idealism must not lead

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us to a position that we get into panic or pique if it does not develop as quickly or in the directions we want. After all, it got going a bare 20 years ago. The marvel is not that it has done so little but that it has got so far, always remembering the difficulty of reconciling clamant competitive nationalisms in a world which so far from getting rid of them seems increasingly to have to fight them.
On Question, Motion agreed to.

THE TINDEMANS REPORT
Baroness TWEEDSMUIR of BELHELVIE: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That this House takes note of the Report of the European Communities Committee on the Tindemans Report.—(Baroness Tweedsmnuir of Belhelvie.)
On Question, Motion agreed to.

EEC: PRELIMINARY DRAFT BUDGET FOR 1977
8.50 p.m.
Lord MAIS Lord MAIS rose to move, That this House takes note of the Report of the European Communities Committee on the Preliminary Draft EEC Budget for 1977. The noble Lord said: My Lords, it is my privilege to introduce to your Lordships' House the Report of the European Communities Committee on the Preliminary Draft EEC Budget for 1977. Your Lordships will have received a copy of the report, but I regret that your Lordships have not had it for a longer period, and have therefore not had a greater opportunity of studying it. Your Committee has been working considerably against time in order to produce the report in time for today's debate. Nevertheless, I trust that your Lordships have had an opportunity to study at least some of the salient points. May I draw the attention of your Lordships to those points which your Committee consider to be particularly important?
Your Lordships will recollect that last November your Committee expressed some concern at the delay in the production of the draft budget proposals for 1976,
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and perhaps your Lordships will take some comfort from the fact that this year the draft budgets have been produced earlier than on previous occasions. May I also remind your Lordships that in our report last year, to some extent we concentrated on the need for more effective scrutiny and control of Community expenditure, and on the procedural and institutional means necessary in order to effect this improvement.
This year, for the first time, the Preliminary Draft Budget, having been produced earlier than previously, has allowed your Committee and the House to consider and to debate the consequences and effects of that Preliminary Draft Budget before, in fact, the initial Budget Council of Ministers meets on 22nd July. Therefore, for the first time it provides us with an opportunity to bring influence to bear on the Government, and to examine how much progress has been made in the last year in the improvement of financial control within the Community. Your Lordships may perhaps think that as today is the 19th July, and the 22nd July is the date when it is considered by the Council of Ministers, this does not leave us very much time to make our feelings felt, but at least it is a considerable improvement on last year. I will not at this stage comment further on the improvements in control. I propose to leave this in far more capable hands, those of the noble Lord, Lord Cobbold, who will be speaking later in the debate. The report also gives a factual summary of the 1977 budget proposals, together with suggestions for the improvement of control.
Turning to the detailed budget proposals for 1977, your Lordships will note that it is anticipated that the total expenditure for that period will amount to 9,260 million units of account. Working on the basis of 2·4 units of account to the pound sterling, that amounts to £3,800 million sterling, an increase of 684,000 units of account over the figures given for 1976. The principal increases are in connection with research and investment, which show an increase of 48 million units of account; miscellaneous aids and subventions are increased by 84 million units of account; the Regional Development Fund, an increase from 300 million units of account to 500 million units of account. Your Lordships will probably remember that last year, the 1976 Budget included

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500 million units of account under that heading, but it was subsequently reduced to 300 million units of account.
My Lords, the biggest increase of all is in connection with the Agricultural Fund. That shows a very substantial increase indeed, amounting to 1,230 million units of account—that is as far as the guarantee section is concerned. There is a slight reduction so far as the guidance section is concerned. With regard to food and other aid, here again there is an increase from 237 million units of account to 283 million units of account, and lastly, but by no means least, there is a big increase in the provisional appropriations from 21 million units of account to 239 million units of account. I will have something more to say about appropriations later on.
On the other side of the scale, the Social Fund has been reduced from 441 million units of account to 172 million units of account. I must direct the attention of your Lordships to the fact that although the increase for 1977 over 1976 is substantial, the 1977 figures are still provisional, whereas the 1976 expenditure is almost certain to be larger than the Budget figures suggest. This is principally due to the fact that supplementary budgets were expected, in particular one to cover agricultural monetary expenditure. Since the report was printed and published, we received information as late as last Friday that a supplementary budget for 1976 has been presented by the Commission in Brussels, and may well be considered by them on 22nd July, at the same time as they consider the Budget before your Lordships today. As yet we do not have the English text of that document, but we understand the proposals of the Commission are in the region of 632 million units of account, reflecting decisions taken in the 1977 Agricultural Price Review, and developments in the agro-monetary field. This has been partially offset by gains on the differences in the rate of exchange. If the amount I have just mentioned is added to the 1976 budget, your Lordships will find that it compares almost exactly with the budget for 1977.
It is difficult to make a strict comparison between the 1977 figures and those for 1976, due to the fact that several items of expenditure, such as the Social Fund, this year have been affected by the extension of the
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commitment to the appropriation system whereby only payment appropriations are entered in the budget. Nevertheless, the increase in the 1977 figures over those of 1976 is significantly lower percentage-wise than the increase of the 1976 figures over those for 1975, and also the 1974 figures compared with 1973.
My Lords, under Article 203 of the EEC Treaty, the Commission is required to place the Preliminary Draft Budget for the succeeding year before the Council of Ministers not later than 1st September. Last year, your Committee did not in fact receive the Budget papers translated into English until mid-September, when your Lordships' House was in Recess. Although they proceeded at once to consider the report, it was not possible for this to be debated in your Lordships' House until 7th November, long after the Budget Council of Ministers had established the Draft Budget. Therefore, there was no opportunity for Finance Ministers to take into account the views expressed by either House before their meetings of 22nd and 29th September.
Furthermore, because of the timetable, there was very little time for either the Council of Europe or the European Parliament to consider the views of other institutions, for the procedure had to be completed by December. Under the new timetable, which is experimental for this year, the Commission has produced for the first time a Preliminary Draft Budget by 15th June. The Council at once referred this to the Budget Committee consisting of officials of Member States and representatives of the Commission. Unresolved issues are thus to be discussed within the Committee of Permanent Representatives and then at a meeting of the Budget Council, which will be held on 22nd July, the date to which I have already referred, they will, acting on qualified majority, establish the draft budget and forward it to the European Parliament.
That institution will consider the draft budget between 10th September and 28th October and will propose modifications to the obligatory categories of expenditure and amendments to the non-obligatory categories. Then it returns to the Council, who will have until 20th November to accept or reject the modifications and to modify the amendments. Thereafter the Parliament will

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have a further 23 days to act on any changes made by the Council, and finally the Presidents of the Parliament will declare the budget adopted on 19th December.
I would draw your Lordships' attention to the fact that this is an experiment only for this year. In the light of experience the Council will decide whether or not to follow the new timetable in future. It may be of some satisfaction to your Lordships and to those in another place that this advanced budget timetable has been adopted as a result of pressure from national Parliaments. I am sure your Lordships will appreciate that, although it is obviously a step in the right direction to produce the budget at an earlier date, it does bring with it certain disadvantages in that the new budget is presented before the final outcome of the previous year's budget is known or can be forecast. It can also be said that the earlier you produce a draft budget the less reliable it is likely to be. On the other hand, I think all our experience in the past has been that the more frequently you produce a budget, the more information you have from the previous years, the more accurate the budget will be.
We are in the early days of a vast undertaking, and for that reason if we want the early production of budgets to continue we must accept the fact that the final outcome may not be as accurate as we should like. But, on the other hand, I think your Lordships will agree that the advantage of having a budget earlier far outweighs any disadvantage. I will not go into detail, but I would direct your Lordships' attention to the present policy and the problems which arise from including in the budget commitment appropriations.
Under the financial regulations of April 1973 the Commission may enter into commitments to spend money only within the amount of substantive provision in the current year's budget. The problem which arises from this general rule is that where expenditure extends beyond the financial year in question the money to be spent in future years can only be committed if the whole of the necessary expenditure has already been provided for in the budget. Consequently appropriations are entered in the budget for specific actions which cannot or may not be completed and
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paid for, or for that matter even committed in the course of the budgetary year in which the amounts are included. For instance, where a commitment is validly entered into but not paid an automatic carry-forward is allowed. Even when no commitment has been made, there is still the possibility of a nonautomatic carry-forward taking place. The amounts involved in this are very considerable when compared with the total amount of the budget.
In addition, this undoubtedly adds to the difficulties of an adequate financial control. For instance, payments carried forward from the preceding year represented 28·9 per cent. of the 1975 Budget. That is over a quarter, getting on for a third, of the total amount of that budget. I am afraid I do not have the figures yet for 1976.
In the budget we are considering today only the payment appropriations will be entered into the appropriation column of the budget, and the commitment appropriations will form part of the remarks column under the appropriate item. Any appropriation for commitment not used by the end of the financial year will be cancelled, thus limiting budget entries to sums actually paid out, and will substantially decrease the appropriations carried forward. This is a sensible move. But it does have one disadvantage, and that is that in certain aspects the 1977 Budget figures are not strictly comparable with previous years. Working on this basis in the preparation of the 1977 Budget there has been a certain amount of anticipation; namely, that there will be acceptance by the Council of a proposal for a regulation amending the financial regulation of 25th April 1973, which empowers the budgetary authority—that is, the Commission and the Council—to apply the distinction to any multi-annual project it wishes.
My Lords, when we debated the 1976 budget last November your attention was drawn to the question of control, and it was control, or lack of it, which caused your Committee more concern than virtually anything else. Attention was then drawn to the fact that national Parliaments could exercise control, should they desire to restrict budget expenditure, only indirectly through the influence of

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their own Government Ministers in the Council of Ministers. Nevertheless, your Committee is pleased to note that an effort has been made to achieve greater transparency in the presentation of the budget. In particular it is essential that there should be a clearly defined distinction between firm authority to spend during a particular year and tentative figures relating to subsequent years or for a project as yet lacking firm policy approval.
Nevertheless, although your Committee is glad to note the intention to present commitments and payment appropriations under separate headings, it is essential that this should be done in such a way as to avoid the slightest risk of the commitment figures being regarded as having, or providing, the authority of an actual budgetary provision for expenditure in the financial year to which the budget relates. For this reason your Committee strongly recommend that consideration should be given to showing all commitment figures separately from the payment commitments, in much the same way as this information is presented annually in the United Kingdom Annual Public Expenditure White Papers, which, as your Lordships know only too well, are separate from the annual Estimates and imply no authority whatsoever to spend. Your Committee last November made a number of criticisms and suggestions with regard to financial control in general. I believe that the noble Lord, Lord Cobbold, will deal with these particular points in detail later on in this debate—and who better qualified so to do? He will, I know, explain what progress or lack of progress your Committee have noted during the past year.
One point which I am sure will be welcome is that the Committee have noted that, although the United Kingdom share of the 1977 Budget will be 19·24 per cent. of the total, or 1,781 million units of account—and, coming a little closer home, £742 million sterling—it is nevertheless likely that a substantial part of this will be offset by receipts from the budget. This assumption is made because in past years our receipts from the Social and Regional Funds have been high, and also we have benefited considerably from the monetary factors—that is, the monetary compensatory amounts paid by the EEC to the United Kingdom in respect of the
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shortfall between the unit of account and the Green Pound. This is dealt with in detail in the report, and I will not burden your Lordships further.
My Lords, there is much more in this report to which I should have liked to refer but I am conscious of the fact that there are a number of other noble Lords who wish to take part in this debate and I would not wish to delay them further. In conclusion, if I may crave your indulgence, I should on this occasion like to pay tribute to Mr. Paul Wooley, who was the technical adviser to Sub-Committee A and did tremendous work for us, and who has now departed to a senior post in the International Monetary Fund in Washington. I would also again pay tribute, as I did once before, to the Parliamentary secretariat, and on this occasion in particular to those young ladies down below who worked terribly long hours in order to produce the typed version of this draft report and without whose efforts undoubtedly we might not have been debating it today. I should also like to thank the members of my Sub-Committee A for the tremendous contribution they have given both in time and from their great experience. My Lords, I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on the Preliminary Draft EEC Budget for 1977.—(Lord Mais.)
9.11 p.m.
Baroness ELLES: My Lords, my noble friends will certainly wish me to thank the noble Lord, Lord Mais, for his very clear and lucid exposition of the main points of interest and importance contained in the draft Budget before your Lordships this evening. Like he did I shall certainly try to apply a self-denying ordinance and not touch on many matters, all of which in the draft Budget could be discussed at great length and are of great importance. We, on this side of the House, certainly appreciate the importance of this draft Budget. We are also grateful of course to the noble Lord and his Sub-Committee for all the work they have done in preparing the 45th Report which we have before us this evening in order to help us understand better the problems raised in the presentation and procedures connected with the draft Budget.

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Before passing on to the substance, we should also like on this side of the House to congratulate most warmly the noble Lord, Lord Bruce of Donington. I do not know whether it should be congratulations or commiserations we should be offering, but I should like to congratulate him on his appointment as rapporteur for the Budget in the European Parliament. It is certainly the most arduous of all the rapporteurships, and on this side of the House we certainly wish him very well in his very arduous and exacting task during the coming months.
I should like first to mention the question of the timetable for discussion and consultation on the Budget. This seems to be a great improvement on last year's arrangements. We on this side of the House pressed heavily that there should be an alteration; that there should be time to discuss this more fully, and particularly more time to discuss the draft Budget, look into the implications, and be able to have some influence on decisions which will he taken over the coming months.
In this connection, we wish to express our thanks to all those who have undertaken and been involved in changing the timetable. It has obviously meant a great deal of work not only for the Commission but for the Treasury and all the Government Departments connected with this change. From this side of the House we wish to say that we very much appreciate this. Lord Mais was perhaps a little diffident and put a few reasons to show why it was not perhaps such a good idea, but we feel that for the present, for this year, we should appreciate the trial of this new timetable and we do not consider that there is any reason for being quite so diffident as the noble Lord was.
In regard to the formalities of the presentation of the Budget, we welcome the separation of commitment appropriation from payment appropriation as a more practical and clearer method of proceeding and we realise that this achieves a certain transparency in the way in which the Budget is presented and this must bring only benefit to all those who have to deal with this document. I am not sure that I took correctly the point which Lord Mais raised about showing all the commitment figures separately. In my humble understanding
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of the draft Budget, these commitment figures are, in fact, shown separately, I think in another column; I do not quite see why the noble Lord considers that they should he show n completely separately from the Budget. I should have thought that it would have been helpful in this sort of document to know the kind of commitment that will come forward in the following years. I think they are shown sufficiently separately to give an indication of onward expenditure in the coming years and I welcome the separation in the way it is now being shown.
The political implications reflecting the draft Budget proposals are in accordance with the need for all Member States to control their public expenditure and we appreciate that the percentage increase over last year's Budget may be even less than that which is calculated at the moment in view of a possible quite large supplementary budget which will be coming forward soon, so that although it is in the present document shown as 22 per cent., I imagine that that percentage will be reduced considerably, or certainly to some extent, by the time the supplementary budget has been produced before 22nd July.
Despite inflation and the Budget being an estimate of expenditure, it should at least try to represent as nearly as possible in a concrete forecast the commitments and payments for 1977. We appreciate that this is almost impossible, considering the enormous element of the Budget which is connected with agricultural matters and with the uncertainties in this field which are ever present. The drought must seriously have affected the agricultural policy, particularly in relation to dairy produce and all the guarantees that are given to farmers in this area.
I imagine, therefore, that the present figures shown for the agricultural sector will need to be revised considerably, and presumably there will also need to be supplementary budgets in this field. I do not think the fact that they have to be changed really matters all that much. What we really need is an idea of the kind of expenditure that will be involved over the coming year. I do not think that any Government have ever been in a position to give a correct account of what will be spent in the coming Near, and this is merely another example of

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the impossibility of forecasting expenditure, especially in an area where even the weather plays a considerable role in affecting expenditure.
I must say a few words about the agricultural expenditure because concern is sometimes, if not frequently, expressed about the proportion of expenditure dedicated to agriculture; it is somewhere in the region of 67 per cent. this year. Whatever has been said about CAP, it has achieved three things. First, food prices were kept down in the European Communities during a time when world food prices were rising.
Secondly—this is a point which is always overlooked by those of us who live in an area of plenty—we have had plenty of food and have not suffered from a shortage in the way that practically every other part of the world has suffered and, whether one talks of mountains or lakes, I am certain that the 249,999 million other citizens of the Community share the same feelings when it comes to being able to buy food in the shops. Thirdly, it has supported farmers' income and, by the assurance of support for their incomes, has encouraged them to continue in their productive activities. If none of those points had been considered and had not been achieved by CAP, we should have had reason for complaint. Nobody denies that the whole thing must be looked at again—revised and considered in the light of new developments—but perhaps people are too ready to criticise CAP without looking at its benefits. Indeed, in this country, as was announced the other day, we received £338 million towards agricultural expenditure and this has undoubtedly influenced the fact that we have been able to keep food prices down to a comparative degree. I should just like briefly to comment on the imbalance between the guidance and the guarantee sectors, as we consider it. We would rather see more spent on restructuring of farms and rather less on the guarantee in relation to the amount which is available for expenditure.
Secondly, I should like to speak about the fact that so much of this money is given to support farmers' income. It is this support of farmers' income which is related to national policies. Would they
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need support from the European Community if they paid less tax and if succession duties did not seek to make them give up their livelihood? Domestic issues and, above all, national fiscal policy, cannot be divorced from considering the European Community Budget expenditure. I shall not enlarge on this but, clearly, a good deal could be said on the way national policies deal with individual incomes, whereas, in the Community, the farmers' income is separated from anybody else's income. I believe that this was realistic when about 50 per cent. of the population were engaged in farming activities. However, we have gone through a changeover from farming to industrial life in the Community and I wonder whether it is not now time to consider that the number of farmers in the Community in relation to other professions and careers should be considered in the context of income support through national policies or even through a European social and employment policy, rather than taking it as an agricultural item.
My third point relates to the failure so far to develop and co-ordinate policies on any other than agricultural matters which fall within the Treaty, such as the common transport policy. That combined action may be taken at diplomatic level vis à vis third countries is one matter, but is it not time for a more comprehensive and constructive transport scheme in the Community? The fact that there is no other main policy within the Community is what leads to the emphasis on agriculture. It is not because agriculture is put above every other policy. It is the fact that no other common policy has been developed which calls upon Community funds. Surely, too, expenditure on employment policy, which does not take up a very large percentage of the Community Budget, would be an area at which we should be looking. Of course, I am not suggesting that we should increase the expenditure in the Budget, but merely that there might be a shift of resources from one area of the Budget to another. Certainly, employment policy is very much overdue for consideration by the Community.
I want just to say a word about the regional policy. Of course, the Regional Fund has benefited the United Kingdom considerably. We are getting about 28 per cent. of the total amount of £540 million

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over the three years and, in talking about the effects of the Community on the United Kingdom and the knowledge of the citizen of what Europe does for him, I believe that there can be no better way of telling him than by letting him know how much we benefit financially from the Community. I happen to be one of those, like many others in your Lordships' House, who do not believe that the economic side of the Community is what is most appealing; there are many other very important reasons why we consider that the European Community should be developed. Nevertheless, I believe that there is no better touchstone of the effects of the Community than to know how much of the enormous Budget which we are discussing is coming straight back to the citizens of this country.
One point which I noticed in one of the documents that I was looking at was the suggestion that when we have loans from the European Investment Bank or from the ECSC, they should be shown in some way—that mention should be made in hoardings that the money is a loan from the EIB, just as one sees "Ministry of Works—or whatever the present Department may be—Development by such and such a local authority". Information should be put on hoardings in order to show that Europe is actually taking part at a local level and is taking an interest in an area or is connected with some new infrastructure in some other part of the country. This is particularly important for the regional fund, because I understand that about 40 per cent. is going to Scotland, and an enormous amount to Northern Ireland and to those areas of the United Kingdom which have greater need than perhaps the South-East or other of the more prosperous areas.
I should like to mention the question of additionality. I wish to refer to what was stated in paragraph 15 of the Forty-fourth Report from the Scrutiny Committee relating to the Tindemans Report. Admittedly, the sentence related to economic integration, and I quite understand that the thinking of the Committee was related to economic integration through a larger Community budget. But it went on to say:
"expansion should only be approved if it can be demonstrated that Community expenditure is acting as a substitute for, rather than as an
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addition to, national or local government expenditure."
I took that as being a Freudian slip and possibly a reflection of the practice of the Government.
I should like some confirmation or denial from the Minister as to this problem of additionality. We on this side of the House should like to know how much is paid from Community funds which goes into the Treasury and which is not passed on necessarily to local authorities or to Government programmes. Are these funds, which are coming into the United Kingdom, used entirely for initiating new programmes? Are the Government themselves paying 50 per cent. of the programmes for which Community money is meant to be used? The regulation says, in relation to the regional fund, that the Fund's assistance should not lead Member States to reduce their own regional development efforts but should complement these efforts. I should be grateful if the Minister is able—in what I am sure will be the very short time available to him—to comment on this. If he has not time tonight, will he kindly write to me on this matter of additionality and state what the exact position is in regard to Community funds? This is an important aspect of the effects of the draft budget on national expenditure.
We read with interest the evidence given to the Scrutiny Committee, particularly a passage relating to a change in the unit of account used for the budget and the difference between the actual market rate and the juridical rate. I understand from the minutes of evidence produced that the Treasury has agreed that there should be arrangements to introduce a concept of a new unit of account more realistically related to the "basket". Apparently this is not considered to be a severe difference in cash terms. Can the Government give some indication as to the terms of this agreement, and say what will be the time scale? Is it to happen fairly soon? Might we also have some estimate of the cost and effect on agricultural prices as a result of the change in the use of another unit of account? Again, if he cannot give an answer tonight, perhaps the Minister would be good enough to write to me on this matter later.

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I also want to comment on the proposals discussed in paragraph 22 of the Forty-fifth Report on the Preliminary Draft EEC Budget from the Scrutiny Committee with regard to one of the Commissioners acting as a Finance Minister. We have not got a view on this at the moment, and we should like some kind of indication as to the appointment of this Commissioner. He would presumably be one of the 13 Commissioners who would be given the sole task of looking after the finance of the Community. We should like to know if this matter is being discussed and considered by the Government, and what kind of view they are likely to take when they take over the presidency of the Council. Is it something for which they are going to press, and what is their general policy on the appointment of a Finance Minister?
In conclusion, my Lords, and very briefly, we on this side of the House very warmly welcome the increased measures for the control of expenditure and, particularly, the establishment of a subcommittee of the Budget Committee, on which I believe the noble Lord, Lord Bruce of Donington, serves. I am sorry, my Lords, I understand he does not, but certainly Mr. Shaw, from our side, serves of this sub-committee. I understand that this sub-committee has been found to be a practical way, at least for the time being, to implement some form of control prior to the setting up of a court of auditors, although I understand that they will both in fact continue in function. We of course welcome the ratification of the amendment of the Treaty setting up the court of auditors; and, again, here we would ask the Government to press their colleagues in the other eight Member States to see that they also ratify. I understand that Denmark has now in fact ratified—the noble Lord, Lord Bruce, will be able to confirm this, or my noble friend Lord Bessborough—but certainly we should like to see the others ratifying as soon as possible. Of course, if one had a suspicious mind one might wonder why they were not ratifying, but certainly we in this country consider that a court of auditors to control public expenditure on such a vast scale is an essential in order to create the confidence of the citizen in the processes of the Community, and we very much welcome the setting up of this court of auditors.
Finally, my Lords, in the mechanism of budget presentation and in the prospects
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for tighter budgetary control we consider that there is progress, and we appreciate the efforts of our colleagues in the European Parliament, on all sides of the House, in getting as far as they have. Also, of course, we recognise the cooperation of the Treasury in this regard. To conclude, again we would wish the noble Lord, Lord Bruce of Donington, well in his arduous task; and we thank the noble Lord, Lord Mais, for the presentation of this report.
9.32 p.m.
Lord BANKS: My Lords, I should like to join in thanking the noble Lord, Lord Mais, for the very clear way in which he introduced this preliminary draft Budget to us this evening. I should also like to express very genuine appreciation of the Report from the Select Committee, which is extremely comprehensive and very clear. Last year, when we had the counterpart of this debate, I remember trying to emphasise how small the budget really is, and I am struck by that fact again this year. The Select Committee point out that it is ·62 per cent. of the Community GNP as against ·59 per cent. last year; so that is an increase of ·03 per cent., which I think the Community will not find it difficult to bear. It is, the Select Committee tell us, 1·9 per cent. of the total national budget of Member States. The Select Committee point out, however, that an increase in the Budget is to be expected in future years, and this must be so particularly if, as we hope, the Regional Fund and the Social Fund get under way.
In this context, I should like to take up the point referred to by the noble Baroness, Lady Elles, when she was talking about additionality. It seems to me that in present circumstances, when the amount from the Regional Fund is somewhere about 8 to 10 per cent. of what we ourselves spend on the regions, this amount should not be used as a substitute for what we normally spend; but if there is a very considerable transfer of resources through the Regional Fund and through the Social Fund on a scale quite beyond that at the present time, then I anticipate that that ought to be a transfer of expenditure from national to Community level. I think that is a point which the Select Committee were making in their comments on the Tindemans Report.

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If, in fact, we see in the future this increase in the budget, then it will certainly be important to see that the proper checks on expenditure, both when it is proposed and after it has taken place, are established now. I endorse all that the Select Committee had to say about this and the important role to he played by the European Parliament. I also regret that only the United Kingdom and Denmark have so far ratified the proposal for the establishment of the audit court. If we may expect new expenditure in the future, there is little of it this year. New operations take up about 1·4 per cent. of the budget and the largest amount among them is the 100 million units of account set aside for the establishment of the capital for the European Export Bank.The Regional Fund takes more this year, going from 300 million to 500 million units of account. This is the last instalment of the agreed programme. We must hope that a new programme will succeed it with increasing expenditure. Whether this happens will depend, I imagine, to a large extent on the German Government; and their attitude may well depend on the general response throughout the Community to the matters which we have just been debating. The decrease in the percentage taken by agricultural expenditure, once separated from agricultural monetary expenditure, is welcome and perhaps is the first step on the road to a more balanced budget in which agriculture will not take something like 70 per cent. or so of the whole.
Agricultural monetary expenditure, I understand, takes about 12 per cent. and the Select Committee tell us the Commission are, not unnaturally, unhappy about this position and propose to reform the provisions relating to monetary compensatory amounts and to change from the present unit of account to a unit of account based on a basket of Community currencies.
These moves may well affect the United Kingdom adversely, but would, nevertheless, appear to be overdue; and, in any event, as the noble Lord, Lord Mais, explained, our costs are not what we imagined they might be at the time of entry, or have not so far proved to be. The Select Committee say that the use of the present unit of account is not wholly indefensible since it provides help for a
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country when its currency depreciates; but it is help which must be abruptly terminated when the adjustment comes eventually and which does appear unfair to other countries in the meantime. It would seem preferable to have a more graduated adjustment such as the new unit of account would provide and specific separate approved assistance for any country which might require it at any time.
The percentage increase in the budget is less than for a number of years, as has already been said, and the Select Committee, as we have also heard, say that it will be 22 per cent. I understand that this is taking the preliminary budget against the preliminary budget last year after allowing for the new distinction between payment credits and budgetary commitments. I understand that if we take into account the rectification budget presented by the Commission a few days ago, this will mean that the increase in the proposed budget over the 1976 budget will be 9.33 per cent. for payment credits and 13.2 per cent. for budgetary commitments. But I suppose there may be a similar supplementary budget in 1977 and everything depends on how accurate is the forecast. The budget is, after all, a forecast of the financial effects of policy decisions already taken; nevertheless, it offers us an opportunity to assess the significance of the different policies being pursued.
Finally, I am left with three outstanding impressions. First, that the budget is still dominated by agriculture; secondly, that we spend a very small sum on the Social Fund and on the Regional Fund, welcome though it is; thirdly, what a small amount altogether we are spending on what is potentially so ambitious a project as the creation of a European union, whatever interpretation your Lordships may individually place on that term following on the debate which we had earlier this evening.
9.40 p.m.
Lord BRUCE of DONINGTON: My Lords, I should like to take this opportunity of thanking the noble Baroness, Lady Elles, for the kind remarks she addressed to me concerning the responsibilities that the European Parliament have entrusted to me. I should like to think

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that in due course that may reflect some credit upon this House. I read carefully the document that has been prepared by the Committee of the noble Lord, Lord Mais. I congratulate him and his Committee most sincerely on the extreme clarity of this report which has been produced in under one month from the issue of the preliminary draft budget. If one could have seen the actual volumes of the budget—seven in all—with their vast bulk and thousands of pages, one would have appreciated that it must have needed a considerable amount of work to assimilate them, or assimilate the most essential parts of them. As one who has had the opportunity of studying the documents, this is one of the best summaries I have ever seen of any kind of European document.
This is the last occasion that we shall have before the European Parliament representatives—of which I am one, together with the noble Earl, Lord Bessborough, Mr. Michael Shaw and others—meet the Council next Thursday, 22nd July. We shall make our views known then on the kind of action we think the Council ought to take and what attitudes of mind the Council ought to take regarding Parliament's views on the preliminary draft budget. We hope that on that occasion the Council and Ministers will not have made up their minds as to what they propose to do. After all, they do not have to submit their draft budget to Parliament until 10th September. We therefore hope that what we may be able to say on 22nd July may have some influence upon them and what we say here today has some influence on our own Ministers representing us on the Budget Council.
It is possible to take two views of the type of budget which has been presented to us. It is a very small budget in relation to the total resources of the Community's total income and expenditure and, at about £3,801 million—which is projected expenditure—it is at about the level of a medium-sized multinational company. It is under 2 per cent. of the total national budgets of the Nine: it is an insignificant fraction of the gross national product of the Nine. As I said, there are two attitudes one can take. There is the attitude, "After all, this is another expense on the budgets of the national
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Parliament". Of course, much cheap political capital can be made by individual politicians wishing to look, in the eyes of their Parliaments, the most zealous in cutting down every bit of expenditure possible regardless of its purpose.
The way in which I hope your Lordships will look at it, and in due course the European Parliament will look at it, is this: Does it meet the real demands of the Community in accordance with the provisions of its Treaty? In other words, does this really amount to the correct type of expenditure and the correct priority of expenditure in order to achieve the best results within the economic climate available and bearing in mind the powers of the Member States? Is this the best way of going about it? This latter way of looking at the budget is the one that I would hope the European Parliament would take and the one which will be taken by your Lordships. Even if we take the broader view, as I hope we shall, it is of course necessary to ask: Is this a satisfactory reflection or instrument of Community policy?
This does not mean that we should not exercise the utmost care in scrutinising items of expenditure in order to see that there is no waste. This must be so, and particular attention will obviously be paid to Titles 1 and 2 of the budget, which incorporate the expenditure of the Commission itself in terms of staff salaries, establishment expenses and so on. The noble Baroness may rest assured that we shall pay great attention to the words which have fallen from her lips on this peripatetic Parliament moving between one, two or three places, as the case may be.
We shall also, of course, examine staff under Title No. 1. In this connection, if I may, I should like to remind your Lordships of some very sensible observations that fell from the lips of the noble Lord, Lord Carrington, in the debate on the 14th July. He was talking about the way we seemed to be losing our confidence in this country, and he said:
"… it is not helped by the continual carping and criticism of our institutions by the media. Of course, I do not mean there should be any cover-up of our failures or that there should not be exposure of wrongdoing. But the sneering and the cavilling at our institutions goes much too far."

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The noble Lord went on to give examples; then he continued:
"Those responsible for this and those who allow it should ask themselves very seriously whether they are doing much of a service. It may be smart and it may be slick; but it is dangerous and it is contagious."—[Official Report, 14/7/76; col. 324.]
There is already similar evidence within the media of a deliberate campaign of denigration being mounted against the civil servants in Brussels. I think that ought to stop and that those who own and edit newspapers might undertake a similar degree of responsibility as was advocated by the noble Lord, Lord Carrington, the other day. Indeed, some of us may think that if the final truth were known the social value of some of these statesmen, both at home and abroad, is at a proportionately higher level than the salaries and expenses paid to some owners and editors of our national newspapers, whose affairs are never under public scrutiny.
Having said that, my Lords, it is necessary—and we shall endeavour to do it—to give serious scrutiny to every item of expenditure to see whether it is cost-effective so far as our limitations go. It is our intention that the whole organisation, irrespective of whatever Mr. Jenkins may do, shall be brought under Parliamentary scrutiny and under scrutiny from the Community Budget Committee on this occasion.
I shall not go further into matters connected with the budget proper, except to point out that the expenditure on agriculture represents 68 per cent. of the total. This is largely an open-ended commitment. It is important that this should be borne in mind. It is called, "compulsory expenditure". Parliament exercises no control at all over it and the Council do not evidence any particular desire to control it either. It is, in fact, open-ended expenditure and, therefore, open to some of the criticisms that have emanated not only from ourselves but also from the noble Baroness herself.
Also, if I may presume to answer another point raised by the noble Baroness, the Regional Fund is subject to specific regulations which are laid down in Volume 18 of the Official Journal of 21st March 1973. It is important to realise that every time a payment appropriation is made out of the Regional Fund
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of the European Community there is a like percentage commitment on the part of the Member State affected. If 30 million units of account are paid to a certain country from the Regional Fund, that country is expected to provide 70 million units. That means that if a Member State considers itself to he subject to the necessities of austerity and wants to reduce its own Government's expenditure, or if we in this country decided to cut our expenditure on regional development, the amount which was received from the Regional Development Fund would automatically be cut.
So, even though Parliament has power to increase the total availability within the Regional Fund, because it is regarded by the Commission as non-compulsory expenditure the amount that any country draws out of the Regional Fund ultimately depends not upon the will of Parliament, but upon the will of the Member State concerned. I certainly hope that that will be borne in mind, in the light of the strictures which the House was good enough to permit me to make earlier on the gross disparity which has developed between the richer parts of the Community and the poorer ones. This shows that very considerable responsibility rests upon Member States, if they all bow to the current clamour to cut public expenditure, because if cutting that expenditure impinges on regional development they will be making the position worse than it ever was before. I hope that Her Majesty's Government and my noble friend will bear that point in mind.
In theory, the European Parliament has the right to increase the expenditure in the Budget by 122 million units of account, which is approximately £51 million. It may well be on this occasion that, far from advocating that the Budget should be cut, the European Parliament, supported by delegations from this House and from the other place, may suggest increases if an extra amount is required for research and development, data processing and all the other Community projects. I therefore hope that my noble friend, who is to reply to this debate, will convey to his right honourable friend the fact that we shall expect new account to be taken of the general attitude within the Community as a whole, and in the European Parliament, which will be no less intense than it was last year; and that we want a responsible

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Budget and not one that merely echoes a parrot cry, unsupported by any economic analysis or by any social recognition, and which simply says, "Austerity for austerity's sake".
Finally, on the assumption that the Council will decide to amend the preliminary draft Budget produced by the Commission, we hope that the provisions of Article 13 of the Financial Regulations, which require the Council to state its reasons, where necessary, for departing from the preliminary draft, will be borne in mind. I say this with feeling because the draft Budget came back from the Council last year with some what comic amendments to the effect: "For reasons of austerity we have decided to do this". This will not do; it is not in accordance with Article 13 of the financial regulations.
I share entirely the concept which was touched upon by the noble Baroness, Lady Elles, concerning the budgetisation of loans. Although the European Investment Bank is established under Articles 139 and 140 of the Treaty, the loans made and repaid are not stated in the Budget. With the noble Baroness, I much prefer the adoption of the procedure that we tried to adopt in this country of above and below the line expenditure so that we may see what are the capital outlays and returns. I hope that this will be done. I hope also that in due course the Financial Commissioner will be able to give us an explanation of why the net interest charges in the current Budget have not been stated in respect of loans made and effected during the last financial year. Doubtless there will be a memorandum upon the matter.
Also, we and, I think, the House would prefer that the sums which are being made available under the Lomé Convention—the sums which will be disbursed for stabilising prices to the developing countries concerned—should also be budgetised. At the moment all payments and receipts in regard to the Lomé Convention are outside the budget. We think that they should be inside it. Therefore we want transparency and we hope sincerely that the remarks which have been made tonight by your Lordships in all parts of the House to my noble friend will have some bearing on the response that we get on 22nd July.
9.57 p.m.
Lord COBBOLD: My Lords, the noble Lord, Lord Mais, in introducing the Motion, has covered the general sense of our Report, but it may be of interest to the House if T refer in rather more detail to one of the particular aspects to which the Committee has given special attention. First, I should like to echo on behalf of the Sub-Committee and, perhaps, on behalf of the Select Committee, the congratulations to the noble Lord, Lord Bruce of Donington, on the very important and somewhat difficult task which he has undertaken and I should like to thank him very much for the extremely valuable evidence which he and two of his colleagues from the other place gave to us in the course of our inquiry about the Budget.
It should first be emphasised that the EEC Budget is not exactly a Budget as we understand the term. It is more akin, as has been suggested in the Report, to an estimate of the likely financial consequences of Community proposals. If I may quote from last year's Report:
"The Committee concentrated on the need for more effective scrutiny and control of Community expenditure."
This year the Committee have felt that their principal duty was to consider to what extent the criticisms and suggestions made in last year's report have been dealt with. The Committee have felt bound to conclude that although there are some welcome improvements, there remains a great deal to be done before control procedures can be regarded as satisfactory.
In saying this, I should not wish to underestimate the difficulties. Many of your Lordships know from practical experience the problems and frustrations involved in securing effective control of expenditure in local and national Administrations, even when they have decades and even centuries of experience. In a Community administration, still in a formative stage, the problems are far greater, both because of their complexity and also because of the need to dovetail the experience and methods of the various participating countries. Nevertheless, it is a matter which must be tackled and must be tackled more urgently and more vigorously than it has been up to date. The position has nowhere been set out more clearly and more forcefully than in

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the Government White Paper of December last, to which the Committee hope the House will give the strongest support.
The problem falls broadly into two parts. First there is pre-budget control; that is to say, an effective machinery for costing and controlling the financial consequences of policies and proposals as they come forward. Secondly, there is ex post facto control to ensure that monies have been properly spent and that accountability lies on the officers, departments and institutions responsible for recommending or authorising expenditure.
On the first point, some progress has been made since the Committee's last report, particularly in the development of so-called fiches financieres which are in effect costing documents which accompany each proposal. The Committee feel, however, that this particular development needs to go a lot further before it covers the ground. In the context of the fiches financieres procedure the Committee strongly recommend to Her Majesty's Government that when draft Directives are put forward to the Scrutiny Committees in this House and in another place the departmental memorandum should always he accompanied by the clearest possible forecast of any financial consequences.
The Committee attach even greater importance to the proposal that there should be a financial commissioner concerned with financial and control duties only and not burdened as at present with other responsibilities. His position would thus be more like that of a Treasury Minister or senior official in a national Administration. But even if this proposal is adopted it must be recognised that real control of expenditure lies with the Council of Ministers, where the difficulties of overall financial supervision, such as is normally exercised by a Finance Minister in a national administration, are obvious enough. These difficulties have been stressed to us in evidence, as has the importance of ensuring that effective financial analysis comes forward to the Council with each proposal.
Your Committee have noted the material increase of 1976 estimates over 1975 for administrative costs. Attention has also been drawn to the present system whereby the Council of Ministers exercises no control over the expenditure of the
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European Parliament, where costs are inflated by several factors, including the use of six languages and, as has already been mentioned, the peripatetic nature of the Parliament.
It is however gratifying from our national point of view to note that in the table of contributions to the EEC Budget the actual out-turn for 1975 shows a net benefit to the United Kingdom. This result is in part due to receipts from Social and Regional Funds, but in part to the depreciation of sterling. As has already been mentioned, the proposed application to the budget in 1978 of a European unit of account reflecting current exchange rates would of course have profound consequences for the United Kingdom contribution.
I turn now to the second point, that of ex post facto control, involving adequate arrangements for audit and for accountability of officers, departments and institutions responsible for expenditure. On this, the Committee feel bound to record their view that, while there are pointers in the right direction and while a great deal of hard work is being done to achieve proper mechanisms, the progress made since the last report is very disappointing. Until the proposed arrangements for an Audit Court are ratified, with machinery somewhat similar to the Public Accounts Committee with which we are familiar, your Committee do not feel it possible to have confidence in the audit system. They have been disturbed to hear in evidence that the bodies at present responsible for audit do not have completely free access to information and also that various frauds which have given rise to criticism in the past have by no means been eliminated.
Your Committee hope that this House will give the strongest support to the efforts which are being made by Her Majesty's Government and also in the European Parliament and its Budget Committee by Members of this House and another place to accelerate the progress which is urgently needed in these fields. I should not like it to be thought that your Committee have approached the problems of the budget and of financial control in too carping a spirit. The United Kingdom has joined the Community at a stage when the ideals of its founders have to be translated into the nuts and bolts of

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arrangements covering such mundane matters as money and food. The Community institutions are busy translating their ideals into reality. Your Committee fully appreciate both the difficulties involved and the efforts being made to overcome them even when we deplore the slow
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ness with which progress can be made. One might add, my Lords, that it is perhaps not for the United Kingdom to appear in too white a sheet in these matters, or as perfectionists in the art of financial forecasting or of controlling escalating costs, whether they be due to inflation or to other causes.
10.6 p.m.
The Earl of BESSBOROUGH: My Lords, like all the other speakers, at the outset I should like to thank the noble Lord, Lord Mais, for conducting us again, if I may use the pun which 1 used last November, through this complicated maze, or labyrinth as another noble Lord has described it. He has certainly rendered us good service in producing this report. I feel that we should also congratulate the noble Lord, Lord Cobbold, who has clearly been his principal adjutant and who has presided over the Committee in the absence of the noble Lord, Lord Mais. I was very sorry not to be free to attend, together with the noble Lord, Lord Bruce of Donington, and my honourable friends in another place, to give evidence before the Committee.
I should also like to say that we all welcome the appointment of the noble Lord, Lord Bruce, as rapporteur for the 1977 budget. I have fortunately been in a position to hear him agreeing very often with my honourable friend Mr. Michael Shaw, who leads our budget delegation. It really leaves me little to say, because I agree with everything he said, and also with everything the noble Lords, Lord Mais and Lord Cobbold, said. However, there are just one or two minor points which I might have put to the noble Lord, Lord Mais; indeed, which I wanted to get to him before the report was printed, but I am not going to deliver myself of these little points, rather similar to ones I produced last year, in view of the lateness of time.
But there is one important point I should like to make which I think was probably indicated by the noble Lord, Lord Bruce of Donington, although perhaps he did not say so specifically. There is no reference in the report to the margin of manoeuvre which the Parliament has in this respect over non-compulsory expenditure—for example, aid to the associated developing countries. A similar comment could also be made in a later paragraph, paragraph 40, where the entries that Parliament can make under this margin were not in fact referred to.
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My Lords, as your Lordships know, I was very much involved in this procedure last year, and it is extremely important to the European Parliament, which has the final say in this expenditure. I should also point out that I feel the budgetary authority—and this again is a slip in the document—is Council and Parliament, and not of the Commission; that is in paragraph 13. 1 feel that this paragraph might perhaps have paid a little more attention to this point, and its last sentence is perhaps too generous towards the restricted attitude of the Council towards the budget entries.
Overall, I have the impression that the sub-committee's report could perhaps have been better directed towards considering the shape of the Community budget that your Lordships would like to see, rather than to dwell overmuch on questions of control which are, I think, better dealt with by the European Parliament, including the noble Lord, Lord Bruce of Donington, and my noble friends, and on which the United Kingdom Parliament is perhaps not quite so well qualified to comment.
I should have liked to say something about this notion of commitment appropriations. I will do so briefly, because I think that they are not perhaps fully understood. The notion is in line with the Commission's belief that the budget of the Community should be a budget of forecasts, and should enable the Commission to enter into commitments without obliging it actually to effect the payments in the one financial year. I should also, in that connection, have liked to speak of the revision of the financial regulation. What is going to be proposed is not going to solve all the problems, but it is an important matter which the noble Lord, Lord Bruce, and I are at present considering.
I would make one comment on the energy sector, in which I am specially concerned. The Commission have proposed major increases, and ft is as well they have, for exploration for hydrocarbons and uranium within the Community, plus financial interventions in the cold storage sector. This is a total increase of 55 million units of account, or 83 per cent., in commitment appro

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priations, with a much smaller increase, of course, only about 13 per cent. for payment appropriations. In the general research activities of the Community a steady increase is proposed, in line with the decisions on the multi-annual programmes that have intervened since the beginning of 1975. So for the whole of Chapter 33 (on research) of the preliminary draft budget an increase in payments appropriations amounts to some 48 million units of account. However, since the major commitments for the four-year or five-year programmes were entered into in 1976, there is an actual fall in commitment appropriations for 1977.
I was asked to say something on one particular supplementary budget, which seemed to some of us in the European Parliament to be essential, although in principle we are very much opposed to supplementary budgets. This was the one which was adopted recently concerning the del Fruili earthquake in Northern Italy. Your Lordships will remember the disaster which took place there. I was sent by the European Parliament to represent it in the disaster area to see what steps were being taken by the Community authorities, and whether the aid from the Community of some 60 million units of account was opportune.
I need hardly say that this was one of the most moving and agonising experiences of my life. I was present when the 923rd body was drawn out of the rubble. But these disasters certainly do increase Community solidarity, and perhaps some good thing comes out of terrible disasters of this kind. In this case Parliament used an accelerated procedure to approve the supplementary budget, because it was our opinion that it was urgently needed, and that it would be inopportune for any of the European institutions to seem to be delaying the project, even in the name of defending their budgetary rights. On the control aspects, the actual special programmes proposed for that part of Northern Italy are in the form of the assimilation of that region into existing Community policies. Therefore, the general financial provisions of, for example, the Council Directive on hill
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farming and the basic agricultural regulations will apply.
On the third aspect of the proposals—the regulation on special assistance for repairing infrastructural damage caused by the earthquake (Document (76) 279), inasmuch as it was proposed to expedite procedures, without necessarily consulting the Regional Policy Fund committees, difficulties in financial control could be raised, but it was envisaged that general Community supervision would be sufficient. I hope it will be. In any case, we shall be watching this very carefully, and I am sure that the Budget Committee's sub-committee on financial control will be keeping an eye on any problems that might arise from this point, and I shall certainly be doing so personally by another visit to the area.
In conclusion, I believe that it is a positive factor that your Lordships have been able to examine the preliminary draft Budget at this stage of the procedure; namely, before the Council draws up the draft Budget on 22nd July. This is an improvement on last year. The new calendar, brought in largely as a result of pressure from the European Parliament, and I think from noble Lords here, will enable both national Parliaments and the European Parliament to exercise more effective scrutiny. Commissioner Cheysson has already characterised this Budget as banal. More charitably it could be described as a budget of consolidation. It should certainly not invite the axe from the Council when it draws up its position on Thursday. If that axe were wielded, then certainly the Budget would, in my view, be a step backward and would indicate a lack of will to persevere with European integration. I trust that it will not do that, and I trust that the noble Lord the Minister will be able to assure me that it will not happen.
On the points of presentation of the draft Budget, the Commission should be congratulated for providing a very detailed and extensive explanation, in Volume 7, of the draft Budget. It is by far and away the most comprehensive political document accompanying a Budget so far. Whatever other criticisms we may have heard this evening, it is certainly

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the most comprehensive document which has so far been produced by the Commission. It should serve as a model for future years, and I should like to pay this tribute to the Finance Commissioner, M. Cheysson, and his staff for the work which they have accomplished in a very much shorter time than in previous years.
10.20 p.m.
Lord PRITCHARD: My Lords, at this hour will not detain the House for long. The brief theme of what I wish to say is to stress, both as an industrialist and a banker, that there should be an improvement in the costing of the EEC figures and that there should be greater opportunity for your Select Committee and its subcommittee to comment on and criticise, constructively of course, the extent of the financial burden which is laid on EEC Members in the light of future inflation.
We are all used to making our own budgets, be it personal or in industry, and we are used to a discipline being imposed on us so that we include not just the things that we can do with but the things that we cannot do without. I feel that in the EEC, in many instances, because it is somebody else's money and they are not responsible for raising it, they do not have the same discipline. The noble Lord, Lord Bruce of Donington, spoke more eloquently than I could about this whole financial area and I support him in what he said. Equally, the noble Baroness, Lady Elles, touched on the financial benefits that this country is receiving, and I very much support her when she says that it is important that this is made clear by Her Majesty's Government to the public who are not aware of this fact. I wish also to emphasise what the noble Lord, Lord Cobbold, said about the need for stricter control over spending and a stronger audit control. These are in my opinion two points where there is considerable weakness in the Commission that would not be tolerated either by Members of the other House or indeed by any commercial company in the Community.
The Select Committee was told in evidence by the Treasury of an improvement in the fiches financiéres, to which Lord Cobbold referred, which is the financial explanatory memorandum which accompanies each Commission document. We welcome this and we believe that it is
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highly important that this improvement should be sustained. Ministers and officials in the Council and in its Working Parties should test and scrutinise with the greatest possible care the Commission's estimates and costs. The House will have seen at the end of each report that we have made the suggestion that the Governments' explanatory memoranda should, as a matter of course in all cases, give an indication of the costs of their proposals in as much detail as possible. In doing so, they would only be following the practices of most of their Parliaments, and certainly our own, whereby Bills are furnished with an explanation of the financial implications when they are introduced.
Further, your Select Committee and its sub-committee A dealing with finance, economics and regional policy—both of which I have the honour to be a member—will then make it their practice to seek information from Government Departments as to the cost of the proposals and will report on the information they receive in a particular paragraph dealing with the financial implications, in the way that has been done up to now in regard to the legal implications of EEC draft legislation. This is standard practice and it is a great credit to my chairman of sub-committee A, the noble Lord, Lord Mais, that he has done what he has done in such a very short time after receiving the document. I strongly support the congratulations of Lord Bruce and others on the amount of work that he and his colleagues have done in such a short time in presenting such a concise and yet full report.
In the First Report of the Expenditure Committee in another place, dated December last year, it was stated:
"We feel bound to conclude that, even allowing for unannounced policy changes, the Treasury's present methods of controlling public expenditure are inadequate in the sense that money can be spent on a scale which was not contemplated when the relevant policies were decided upon."
This criticism was of course levelled at our own national control, but I believe that the same criticism can be levelled at the EEC, perhaps to an even greater extent.
I should like to end by asking the Minister whether it is possible to answer two questions in his reply although, as he has not had much notice of this, perhaps this may not be convenient, in which case

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I should be grateful if he could let me know the answers in due course. The first question is in connection with the effect of inflation. We all know that actual expenditure must often exceed planned and approved expenditure simply to purchase the same amount of goods and services. What will be the position in the Community? If the cost of a policy increases because of inflation in the Member States, will money expenditure be held constant and the programme therefore reduced, or will the full programme be pursued and therefore the cost increased? Secondly, that question has implicitly assumed that the rate of inflation is the same for all Community countries, whereas we all know that to be inconceivable. What, therefore, are the implications of the differential rates of inflation in this context?
10.27 p.m.
Lord RAGLAN: My Lords, I thought that, as chairman of Sub-Committee D on Agriculture and Consumer Affairs, it was incumbent upon me to say something about the agricultural budget, so long as I could make my speech not too long and boring. I should like first to refer to the subject of our previous debate this afternoon. Mr. Tindemans refers only briefly to agriculture: in fact, he gives it only eight lines. In the Select Committee's comments on his report, we said that we considered this surprising in view of the fact that agriculture, as has been mentioned this afternoon/ represents over two-thirds of the Community's budget. I suppose that Mr. Tindemans might reply that the Common Agricultural Policy was already a fact and that he was thinking more about the future than about the present. On the other hand, my noble friend Lord Northfield might have something to say about that as well.
Nevertheless, in those eight lines, Mr. Tindemans manages to make what to my mind is a highly controversial statement. He says, having said that agriculture is our most highly developed and integrated form of common action:
"Agricultural policy reflects one of the aspects of European union in that it guarantees farmers incomes and living standards comparable with those of other groups in society. This objective is one of solidarity and justice."
The inference of that statement, so far as I understand it, is that the CAP exists,
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in Mr. Tindemans' view, to ensure parity of income for farmers vis-à-vis industrial workers. Although your Lordships will discuss these social matters in greater depth when we come to the debate on the Select Committee's Report on Farm Structure, I feel I should point out that Mr. Tindemans, in saying what he did, has given ammunition to critics of the CAP—and there are still many in this country—who are continually saying that the CAP is entirely producer orientated and thinks of the consumer not at all. If that really were the case, and Mr. Tindemans was right in his assumption, I think we should have all have a justifiable cause for complaint. The Select Committee says as much in Part IV of its report on Tindemans. But it seems to me that the CAP is in fact much more well-meaning and beneficial than that in practice, even if it is frequently to be criticised in the practicality of its schemes.
We start with the broad idea behind the CAP that it is wise and it is prudent to be as self-sufficient as possible. The formulaters of the policy think that there is no virtue in importing foreign food. Why import it if we can produce it ourselves? Next, one runs into the problem that if one goes for self-sufficiency one is bound to have surpluses from time to time, and that it is surpluses—and this may seem paradoxical—and not shortages which usually beggar producers. If one has something to sell in time of shortage, one can make a lot of money out of it, but if one has an enormous surplus one cannot sell any of it very often. So just as we in this country thought up deficiency payments to help farmers in time of surplus, so the Common Agricultural Policy makers invented intervention; that is, a floor price for the commodity below which the Community intervenes and buys the surplus.
We must not forget that we in this country also have traditionally bought surpluses of those commodities in which we have chosen to be self-sufficient, such as milk and potatoes. But in our case this has been done not through an intervention board but through statutory marketing boards. There is much evidence to support the view that for certain commodities marketing boards are much more sensitive instruments for control and fine-tuning than the Intervention Board of the CAP. But the purpose

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behind both these instruments is broadly the same, which is that if you have self-sufficiency you have surpluses; surpluses harm producers; and that jeopardises production the following year—in other words the result of a free market is chaos, and the necessary alternative, which is a managed market, costs money. The continual argument within the CAP is how that market, which is as near as possible a free trade area, is best managed.
One of the points of disagreement is, and will continue to be—and this is where I began my remarks—what proportion of the agricultural budget will be directed towards market management itself, and how much, and in what way, it should be directed towards supporting farming as a way of life in those areas of the Community (and we must not forget that we have also many areas in Britain) where it is not possible to maintain a decent income out of farming, due to small farm size, or unfertile locality or substandard methods of farming.
Looking at the budget forecast, one sees that the Commission reckons that to support the CAP it will be necessary to find about £2,587 million; that is about £10 per head of the EEC population. This £10 compares with about £6 per head which United Kingdom agricultural policy was costing in the last year (that is, 1972–73) in which separate account was kept of expenditure. Allowing something for inflation and something else for the fact that our agricultural support budget was applied only in respect of half the food that we ate, the Community forecast budget does not really, it seems to me, compare too badly in cost with what our own used to be. Certainly the allegation that money spent on the CAP is money spent on a ramshackle extravaganza appears to me to be very wide of the mark indeed. We do not get too bad a value for our money. But, my Lords, we must continually look for ways in which we can get better value, and we must surely be mindful of what my noble friend Lord Bruce of Donington said about the commitment being open ended. Incidentally, it represents only about 1½ per cent. of the total budget of the nations in the Community. Nevertheless, there may come a time when a limit will have to be set.
My Lords, in considering the draft budget, one must first of all remember
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that, since agricultural expenditure is about 70 per cent. of the Community's budget, any large alteration in the agricultural bill is likely to have a big effect on the total budget. Earlier draft budgets have been presented in September the previous year, and advancing this one to June will have the effect of making the forecasts more unreliable and tentative than usual. For instance, many important agricultural commodities had not started their 1976–77 marketing years in May, when the Commission were trying to get out their figures. Nevertheless, one cannot have one's cake and eat it, and if we want to consider the budget earlier we must be mindful of the drawbacks. The Commission, as has been mentioned this evening, will submit a Letter of Amendment in September which will correct the initial agricultural estimates on the basis of later information.
My Lords, certain assumptions have been made in the construction of the budget, any one of which can make a big difference if they are not confirmed. First, they assume that the Council of Ministers will agree to adopt the Commission's co-responsibility measures for milk producers. This is not the time to debate those measures, but some people think that the Commissioners are being clever without being practical enough. Secondly, the Commission assume that the Council will agree to the halving of the existing levels of monetary compensatory amounts before the start of the 1977–78 marketing years; and, finally, the Commission assume that the Council will agree to limit the price rises which it will undoubtedly award to Community farmers next spring, so that the extra charge on the budget is only 200 million units of account—that is, £83 million. The assumption that all monetary compensatory amounts should be halved has important implications for Britain. As my noble friend Lord Mais said, we have done very well out of these payments in the past, especially in terms of shielding consumers from the full effects of the falling pound; and the Government's desire to shield people from the true cost of food will be balanced by the reluctance of our partners to continue to subsidise us.
Lastly, I would remind your Lordships that the agricultural budget is in two parts: the guarantee fund, which is applied to produce, and the guidance

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fund, which is applied to improving the means of production. The forecast holds a surprise for all those who thought, perhaps like the noble Baroness, Lady Elles, that the greater part of the CAP's problems was derived from the need for structural reform—that is, the amalgamation of holdings and the need to increase efficiency—for the Commission propose holding expenditure on improving long-term structure to a rigid limit of 325 units of account, and not even all this is expected to be spent in 1977; about half of it, in fact. The Select Committee's Report refers to this as "disturbing". My own opinion is that I think it may really reflect what in my view is welcome realism in the Commission, in that it is one thing to talk about structural reform and to offer bribes to bring it about; it is quite another to cajole small farmers to accept these incentives and to change their way of life accordingly.
The answer to the problem of structural reform appears to be not to accord with Mr. Tindemans' sentiments and assumptions, but to pitch the price of agricultural produce at such a level that the very inefficient are not kept in business and are not given parity of income as of right, and to let time and the lure of more profitable jobs elsewhere be seen as necessary allies to a policy of subsidised resettlement. In other words, I think that changes are already going about as fast as they can reasonably be expected to go. Your Lordships will know that ways of thinking can take long enough to change, and ways of life take much longer to change. I think it is very important to remember that when considering the CAP and its budget and its development in the future.
10.40 p.m.
Lord JACQUES: My Lords, if I am a little cryptic I think that the House will understand. I should first like to congratulate the Committee on their report which is both full and comprehensive and which has been prepared in such a short period of time. I would also congratulate my noble friend Lord Bruce of Donington on his appointment a rapporteur in relation to the budget. I think that we all know him and expect him to do useful work for the Assembly and to be a credit to the United Kingdom.
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The time-table we have this year is experimental. It was partly at the instigation of the United Kingdom; and, in the course of the debate, the advantages and disadvantages of that time-table have been quite clearly stated. I need not repeat them. I must say that since the time-table is experimental we must keep an open mind, but the Government will bear very much in mind what the Committee has said and what has come out in the debate. There is in addition a three-year forecast which is not yet available.
The change that has been made to the form of the budget on commitment appropriations and payment appropriations has been quite fully explained to the House. The Government welcome this change; it simplifies. But we expected that the commitments would be restricted to projects which were going to be spread over more than one budget year: Provided that is done, we certainly welcome this simplicity.
We notice that the Scrutiny Committee have suggested that the commitment appropriations should be kept quite separate—something similar to our Public Expenditure Statements. We have grave doubts about that. Our Public Expenditure Statements are concerned with the planning of expenditure. These commitments are more than the planning of expenditure: they are usually the amounts up to which the Commission is authorised to commit. Therefore, we have very grave doubts as to whether or not they should be in a separate document.
The Commission, of course, sees the preliminary draft Budget as a forecasting document. It includes all items for which there may be a need for expenditure. The Budget Council usually deletes items for which there has not been policy agreement. In consequence, there are almost certain to be supplementary budgets; but supplementary budgets go through exactly the same procedure as preliminary draft budget. We are convinced that this is a better way of controlling the finance.
The preliminary draft Budget of 9,260 units of account is an increase of 22 per cent. on the agreed budget for 1976—and I mean the agreed budget before the supplementaries. But that increase is understated. We must bear in mind that when changes are made such as the changes that

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have been made from commitments appropriations to purely payment appropriations, then, in the first year in which the change is made, there is a reduced level of expenditure. Your carry forwards are obviously going to be greatly reduced. The only carry forwards you have are those from previous years. It follows, therefore, that this 22 per cent. increase is an understatement and the real increase is something substantially more than that. Consequently, that has to be borne in mind.
So far as the attitude of the United Kingdom is concerned, let me say to my noble friend Lord Bruce of Donington that this Government have never, do not, and will not advocate austerity for the sake of austerity. We advocate austerity only when we think it is absolutely necessary to protect our currency or reduce our rate of inflation. That is our policy. It has been clearly stated and I restate it.
Consequently, since we do not seek austerity for the sake of austerity at home, we are unlikely to do that in the Community. But because of our position at home—and we have to bear something like 20 per cent. of the cost—we will seek to restrain increases in ways which are sensible. We shall try to get sensible priorities. Already, although the preliminary draft was published only on 15th June, there have been changes which will affect the budget. For example, on 29th June there was a measure of agreement on new methods of controlling the number of staff and controlling the pay increases which they will receive. This agreement will give rise to some recalculations in the budget.
The noble Lord, Lord Bruce of Donington, put two questions to me in writing which I can answer briefly. He asked, first, if inflation continued, whether the control in the Community's budget would be on a cash level, or whether provision would be made for the increase in cost. The budget itself provides for anticipated increases in cost, but if this is not sufficient because of inflation, then it is a matter for the Commission as to whether or not it seeks a supplementary budget. It is a matter for the Budget Council and the Assembly as to whether or not they accept those supplementary budgets.
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The second question was: what is the effect of differential depreciation? That must depend upon the sector of the budget concerned and the place where the money is spent. For example, if the sector of the budget concerned is original fund, and the money is spent in a country where inflation is at the most rapid rate, then the consequence would be that while the same amount of money might be spent, it would buy less in the country concerned.
Last year 64 per cent. of the preliminary draft budget was on agricultural guarantee. This year, on the face of it, the figure is 63 per cent., but one has to take into account that there have been changes in the budget, particularly in regard to monetary compensation. Monetary adjustments which were formerly charged as part of the agricultural budget are now charged separately. If one allows for that, then agricultural guarantees account for 69 per cent. of the 1977 preliminary draft as compared with only 64 per cent. in 1976. So the cost of the agricultural guarantees has increased more than the increase in the total budget.
We all know the reason for such a big percentage of the budget being agricultural guarantees. This is the only area where the Community meets almost the whole cost that would in other circumstances have been borne by the national States. In all other sectors, the Community simply makes a contribution. The major part of the cost is borne by the national exchequers of the Member States. Of course there is very little that the Budget Council can do about this position. The Budget Council is not concerned with making policy; it is concerned with seeing that what is provided is the amount that will be needed to finance the policies which are made elsewhere.
What can be done are two or three things. First, we can examine the budget, whether for agriculture or anything else, to make sure there is no fat hidden in it. Secondly we can question the changes that have been made to make the agricultural budget look somewhat smaller than it would have been. Thirdly, we can examine those areas where the estimates are highly speculative. Fourthly, we can seek to eliminate any elements of contingency reserve; and of course we shall do so in so far as we are part of the Budgetary Council.

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I should like to say a few words on the United Kingdom's contribution. In 1976 the contribution was 16·3 per cent. This year it will be 19·24 per cent., but I must point out that at current exchange rates it will be only 13 per cent. Our gross national product is 16 per cent. of the gross national product for the Community. Therefore, we could hardly expect that we should be able to claim some compensation from the correction mechanism which applies when the contribution made by a State is excessive in relation to its gross national product — because, taking the current rates of exchange, our percentage is much less than our percentage of the gross national product.
However, we must bear in mind that there are going to be changes. It has already been provisionally agreed that as from 1st January 1978—and remember, my Lords, that means the next budget we shall consider—instead of the present units of account for budget purposes being related to gold, there will be a unit of account which is Market-related. This, of course, will make a substantial difference to our contribution; but in our case we have a proviso that we would accept the Market-related unit of account, provided there is satisfactory agreement for the two remaining transitional years of 1978 and 1979, and that there is a reasonable interpretation of, I think, Paragraph 131 of the Treaty of Accession; so that we have some protection. But we also have to bear in mind that from 1980 onwards the budget will be on a full "own resources" basis. I think it is within those years—that is, the years 1978, 1979, 1980 and onwards—when we may very well have to look at the correcting mechanism which was agreed in the renegotiation for the collection of our contribution. I believe that in those years we may well be pleased with the foresight shown by the former Prime Minister who renegotiated the correcting mechanism.
Finally, I should like to say a few words on financial control. Last December, the then Prime Minister took the initiative. Germany proposed that there should be a Finance Commissioner. We strongly supported that. A new Commission has to be appointed in 1977, and in 1977 this matter will certainly come to a head. So
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far as the Court of Auditors is concerned, I think I need only say that apart from ourselves and Denmark, who have ratified, several other countries are in the course of their procedural processes in ratifying. We understand that at least three of those countries are very near to ratification.
So far as the documents are concerned, I think there is some exaggeration here. The trouble in regard to documents and auditing arose over two matters. First, there was the question of the minutes of the European Development Fund. The question was whether the Audit Board should automatically have all the minutes, or only some of them. The Commission referred this matter to the Committee of Ministers, which took the view that the Board should not automatically get all the minutes—they were sensitive minutes, in many cases—but should get those which were needed for the purposes of audit. I believe that the other case was in connection with aid to developing countries, and the matter in dispute was whether the Audit Board should get the documents at once, or after a project had been completed and closed. The view taken by the Commission was that they should get them after a project was completed and closed. So that while there was some point to be made, we should be careful not to exaggerate.
Lord BRUCE of DONINGTON: My Lords, will my noble friend forgive me for interrupting? Is he aware that the circumstances that gave rise to the misgiving about documentation did not arise from the two examples he gave? What caused the misgiving was the payment to maltsters in connection with malt subsidies. That is the case that was considered by the controlling sub-committee, and that is where there was some difficulty about the provision of documents to the Audit Board.
Lord JACQUES: My Lords, I can only say that that is somewhat different from the advice that I have received, and the point raised by my noble friend has not been raised with me. But I can say that, under the treaty which is now in course of ratification, the Audit Board will have much wider powers and this problem will be completely overcome, whether it applies to maltsters or to anybody else.
Lord HOY: My Lords, I do not want to interrupt at this late stage, but the suggestion was made that a committee like the Public Accounts Committee might play a very satisfactory part in connection with this type of accountancy. As one who served on the Public Accounts Committee for more years than I care to remember, I hope that my noble friend might consider that a committee like the Public Accounts Committee could undertake this job to the satisfaction of all concerned.
Lord JACQUES: My Lords, we are pleased to have noted that the Assembly has appointed an Audit Committee which will be somewhat similar to the Public Accounts Committee, and we welcome the proposal. So far as the financiers are concerned, we believe that they have been much improved but the quality varies somewhat, which is to be expected since we all ourselves vary a good deal. We believe that financial control does not wholly depend upon institutional changes; it depends upon improving procedures. We know that our colleagues in the Community will be plugging away all the time to improve the procedures—and this also applies at home.
10.59 p.m.
Lord MAIS: My Lords, the hour grows late and T will not detain your Lordships longer than I can possibly help. I should like to thank noble Lords and the noble Baroness, Lady Elles, for taking part in this debate and I hope that they have not been delayed overlong. I should like to add my congratulations to those already offered to my noble friend Lord Bruce of Donington on his new appointment, and I am sure that our affairs are in good hands. May I thank your Lordships for the kind remarks that you have made about the Report, which are greatly appreciated? I know that they will also be appreciated by the Committee and the staff, to whom the credit belongs. I thank your Lordships very much for taking part in this debate. I hope that it has served a useful purpose.
On Question, Motion agreed to.

CHRONICALLY SICK AND DISABLED PERSONS (AMENDMENT) (No. 2) BILL
Brought from the Commons; read 1a, and to be printed.
DOMESTIC VIOLENCE AND MATRIMONIAL PROCEEDINGS BILL
Brought from the Commons; read 1a, and to be printed.
INDUSTRIAL COMMON OWNERSHIP BILL
Brought from the Commons; read 1a, and to be printed.
MOTOR-CYCLE CRASH-HELMETS (RELIGIOUS EXEMPTION) BILL
Brought from the Commons; read 1a, and to be printed.
PROTECTION OF BIRDS (AMENDMENT) BILL
Brought from the Commons; read 1a, and to be printed.
STOCK EXCHANGE (COMPLETION OF BARGAINS) BILL
Brought from the Commons; read 1a, and to be printed.
FINANCE BILL
Brought from the Commons; read 1a, and to be printed.
FOOD AND DRUGS (CONTROL OF FOOD PREMISES) BILL
Returned from the Commons with the Amendment agreed to.
DIVORCE (SCOTLAND) (No. 2) BILL
Returned from the Commons, with the Amendments agreed to.
COUNTY OF SOUTH GLAMORGAN BILL [H.L.]
Supplemental Report from Her Majesty's Attorney General received and ordered to lie on the Table.
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