Sitting of 30 November 1976

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

  ANGLIAN WATER AUTHORITY BILL
  [Lords]
  Order for Second Reading read.
  To be read a Second time upon Thursday.

ORAL ANSWERS TO QUESTIONS
  SOCIAL SERVICES

    European Community (Reciprocal Medical Treatment)
    Mr. Hurdasked the Secretary of State for Social Services what progress has been made towards including within EEC arrangements for reciprocal medical treatment self-employed persons and their families travelling in other Community countries.
    The Minister of State, Department of Health and Social Security (Mr. Roland Moyle): I understand that the EEC working party set up to consider this question has formulated proposals which are now to be considered by the Administrative Commission on Social Security for Migrant Workers.
    Mr. Hurd: I thank the Minister for that reply. Does he accept that it is still an irritant that whereas medical treatment is available to employed people and their families travelling inside the Community, self-employed people and their families are denied such treatment? What kind of timetable does the Minister now foresee for the working party? If the working party does not make progress soon, should not the hon. Gentleman consider making bilateral agreements of the kind
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    that we already have with Germany and Denmark?
    Mr. Moyle: I appreciate that it is an irritant for self-employed people, when they go abroad, not to be able to obtain the same facilities as others. That is why the Government made representations to that effect in the Council of Ministers for Social Affairs on 10th June 1974. I regret that I cannot give an indication of the timetable. Any amendments proposed by the working party for the consideration of the Council of Ministers will have to be dealt with first by the EEC Commission, the European Parliament, and the Economic and Social Committee. I suggest that we should await the outcome of these discussions before we consider further bilateral arrangements.
    Dr. Vaughan: Will the Minister be a little more explicit about his discussions on the introduction of international medical expense forms—international credit cards?
    Mr. Moyle: I have had no discussions on this subject. I have noted the contributions made on the subject by the right hon. Member for Bournemouth, East (Mr. Cordle) in the European Parliament, and no doubt these have been taken on board by the working party.

    Pensions and Benefits
    Mr. Newtonasked the Secretary of State for Social Services what representations he has received from national insurance retirement pensioners and widows following the recent increases in pensions and benefits.
    The Minister of Social Security (Mr. Stanley Orme): I have received about 300 letters on the subject of retirement and widows' pensions since 15th November, when the increases were introduced. Of these about half were concerned with the level of pensions. This is a typical postbag for this time of year.
    Mr. Newton: Is the Minister aware that £105 million of the increase in benefit is coming straight back in the form of extra tax on pensioners' and widows' pensions, and that this has added to the resentment felt over the comparison with untaxed short-term benefits? Will the right hon. Gentleman try at least to make sure that pensioners are not treated in the same shabby way in respect of their

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    tax allowances next year and ensure that something will be done to meet the growing sense of injustice felt by working widows?
    Mr. Orme: From what the hon. Gentleman said one would think that the practice has changed. It has not changed. The tax position is exactly the same as before. I remind the hon. Gentleman that pensions have been increased by 97 per cent. since 1973. Over the same period prices have arisen by 69 per cent. That is to October 1976. Therefore, the true value of the pension has increased by one-sixth since the last uprating brought in by the previous Conservative Government.
    Mr. George Rodgers: While warmly welcoming the recent increase in social benefits, may I ask whether my right hon. Friend would agree that it has brought the elderly person who is exclusively dependent on the State pension up to the threshold of tax payments? Will my right hon. Friend draw this fact sharply to the attention of his right hon. Friend the Chancellor?
    Mr. Orme: I thank my hon. Friend for his supplementary question. We are concerned about the tax threshold but it is a matter for the Chancellor who has to take into account the whole issue of the poverty trap and all the other factors about which my hon. Friend is concerned. I shall certainly draw my right hon. Friend's attention to the matter.
    Mr. Boscawen: Is the Minister not more than merely concerned, now that the gap between the single person's tax allowance and the basic widow's pension is narrowing month by month? Will not the Government take steps to take the pensioners out of the tax system altogether?
    Mr. Orme: We could take pensioners out of the tax system, or we could increase the pension. What we have done at present is to increase the pension. I am aware of the concern expressed on the matter. It is, of course, a matter for my right hon. Friend the Chancellor.
    Mrs. Bain: Will the right hon. Gentleman accept that to say that the system has not changed is no excuse for continuing it? Will he particularly bear in mind that working widows have to meet all the responsibilities of being heads of
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    households? Is it not time that this Government showed a humanitarian attitude towards widows?
    Mr. Orme: The Government have shown concern. The important fact is the size of the increase, which, as the hon. Lady knows, was 15 per cent. this month. We are concerned, but the pension has been considerably increased. I take note of the other points that the hon. Lady mentioned.

    Benefits
    Mr. Patrick Jenkinasked the Secretary of State for Social Services what plans his Department is making to reform the system of social benefits.
    The Secretary of State for Social Services (Mr. David Ennals): The right hon. Gentleman will already be aware that our new pensions scheme will commence in April 1978, non-contributory invalidity pension will be extended to married women incapable of housework in November 1977, and the child benefit scheme will be phased in over the years 1977 to 1979. In addition, I have put in hand a major study to reform the supplementary benefits scheme.
    Mr. Jenkin: Does the right hon. Gentleman accept that the system has got out of kilter when so many people find themselves with more spending money when they arc out of work than when in work? Whose statement are we to accept as to the Government's policy on taxing the short-term benefits? Is it his own—that the short-term benefits should, in equity, be taxed—or the Chancellor of the Exchequer's statement that he has no intention of doing this?
    Mr. Ennals: The question whether short-term benefits should be taxed was dealt with by my right hon. Friend the Prime Minister. He said, as I had said, that this had been decided upon when the scheme was introduced in 1948 and was found to be impossible to administer. Successive Governments—the right hon. Gentleman's as well as ours—have tried to see whether there was a workable administrative system. We have not succeded in finding one. There is no difference now, unless the right hon. Gentleman is now proposing some legislation or alteration which would discriminate particularly against the unemployed.

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    However, on the question whether there are certain people who can get more when they are unemployed than when they are working, I must point out that it is a very small minority indeed, to whom earnings-related supplements, tax rebates, rent and rate rebates, and so on, are paid. It is these payments rather than the increase in the basic benefit rates which are the significant factors. It is, I assure the hon. Gentleman, a very small percentage indeed.
    Mr. Nicholas Winterton: A reform of social security system would be advantageous and long overdue, but does the Secretary of State agree that his proposals to reduce unemployment benefit for people who are forced, for one reason or another, to retire at 60 is wrong when those people are determined and will try extremely hard to obtain employment? Is this justice? Is it social justice?
    Mr. Ennals: There is a further Question on that point—Question No. 7—but one has to ask whether it is right that in these times, when we look closely at public expenditure, a man should be able to receive unlimited unemployment benefit when he has already retired from a job which gives him a pension. We are dealing with a very small percentage—in fact, much less than 1 per cent. of the total number of occupational pensioners.
    Mr. Pardoe: Is the Secretary of State aware that in 1948 it was decided, on purely administrative grounds, not to proceed with taxing short-term benefits, and that very few people were then in receipt of short-term benefits and in the tax net? The situation is now very different. Does not the Secretary of State think that the balance of advantage may have changed?
    Will the Secretary of State comment on the fact that the reason why his right hon. and hon. Friends turned down the Conservative Party's proposals for a tax credit scheme was precisely that it would have involved taxing the short-term benefits?
    Mr. Ennals: The Conservative Party never said how it would finance the tax credit scheme. It will be most interesting to know whether it now has plans for financing such a scheme. The hon. Gentleman must recognise, as I said, that it was because of straight administrative reasons, and that the cost in terms of
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    staffing, particularly, would be many thousands of pounds. We estimate that about 13,000 civil servants would be required to undertake this task. It is a matter worth looking at, but the chances of our finding a way through are very small.
    Mrs. Castle: Will my right hon. Friend tell us what would be the current cost of the Conservative's tax credit scheme?
    Mr. Ennals: I am not quite certain what the Conservatives' proposal is at the moment. If they would explain it, we might be able to cost it.

    Thames Regional Health Authorities (Expenditure)
    Mr. Peter Bottomleyasked the Secretary of State for Social Services if he will make a statement on the proposed cuts by hospital authorities in the four Thames regional health authorities.
    9. Mr. John Huntasked the Secretary of State for Social Services if he will make a statement on the proposed cuts by hospital authorities in the four Thames regional health authorities.
    Mr. Ennals: Proposals for closure in the current year arise mainly from the duty of authorities to keep expenditure within notified cash limits. I shall shortly decide what allocation will be made for next year in the light of consultation on the report of the Resources Allocation Working Party. I remain firmly convinced that redistribution of resources in favour of deprived areas is right and necessary. But it must essentially be a long-term process depending partly on the total resources available to the NHS, but also on the over-riding need to proceed at a pace which allows adequate time for careful planning and full consultation on rationalisation proposals. Press reports of wholesale butchery among leading, teaching hospitals in London are totally unfounded.
    Mr. Bottomley: We can gather from that answer that we are on a touchy subject. Would the right hon. Gentleman agree that area health authorities should provide cost justification proposals to close hospitals like the Eltham and Mottingham General Hospital? Will he build the conurbation factor into the

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    plans for denuding many parts of London of their NHS hospitals?
    Mr. Ennals: In relation to the problems of Greenwich and Bexley AHA, there are proposals for the closure of four small hospitals, including the Eltham and Mottingham hospital. These closures are designed to rationalise the over-provision of hospital facilities in the area as a result of there now being two large new hospitals in the area—Greenwich Hospital and Queen Mary's Hospital, in Sid cup. It is a natural consequence. People will always resist the closure of any hospital, but if we are to go ahead and build new hospitals with better facilities, inevitably the planning must include the closure of some small uneconomic hospitals.
    Mr. Lipton: Does my right hon. Friend really think that this country is going to be saved from economic disaster by closing the children's ward at Bart's over the weekend and sending the children either back home or into adult wards, where they run the risk of cross-infection? Will he also have a look at what is happening at the Maudsley Hospital in Denmark Hill.
    Mr. Ennals: At Bart's, to keep expenditure within the cash limits in the current year there are proposals—and they are only proposals as yet—to close temporarily two general wards and, at the weekend only, one children's ward. No decision has been taken, but if areas are to live within their cash limits and within their budgets, they have to have some programme of rationalisation. That is inevitable. The only other consequence would be for the Secretary of State of the day to bail out regions which are over-expended or to take the money from funds in other parts of the country.
    Sir George Young: Will the Secretary of State now give the House a categorical assurance that in no circumstances will he authorise the closure of the newly-constructed Charing Cross Hospital in Hammersmith, or the Hammersmith General and North-West London Hospital in West London?
    Mr. Ennals: Yes, I give that assurance. The reports of proposals to close one or more of any of the teaching and specialist hospitals in the North-West Thames region—and that includes Charing Cross and Northwick Park—are
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    absolutely without foundation. They lack reality. I can give that denial. The heavy concentration of teaching hospitals in the inner London area of the region poses some problems for the regional health authority. I have not yet received the plans of the region for the future, but I repeat that the pace at which change can be introduced needs to be carefully considered, to avoid putting at risk important services and teaching commitments.
    Mr. Michael Stewart: Is my right hon. Friend aware that what he has said about the Charing Cross and Hammersmith hospitals is encouraging? Nevertheless, does he agree that if the imbalance between the London regions and the rest of the country is to be corrected, it has to be done on a time-scale that will allow the other regions to make use of any new money that may be available to them?
    Mr. Ennals: The problem is not whether other regions which have been deprived over many years can use their resources, although, of course, there is great concern about the situation in London. The real problem is that we are suffering from a failure to plan the use of our health resources over many years. I believe that it is the responsibility of the Government to seek to adjust that balance. I fully agree with my right hon. Friend that it can be done only at a speed which does not damage centres of excellence, and which does not damage the teaching hospitals and the main structure of our NHS hospitals, on which our Health Service is based.
    Mr. Patrick Jenkin: Is the Secretary of State aware that the Opposition entirely accept in principle the general proposal for reallocation over a period? Will he equally accept that in a period when the real resources going to the National Health Service are at best static, and perhaps in real terms declining, he must proceed along this path with the most extreme caution if he is not to do unacceptable damage to health centres in the declining areas?
    Mr. Ennals: The implication of extreme caution might be that I should not proceed at all. However, I can assure the right hon. Gentleman that I shall proceed with very great care. Since so many rumours are floating around, I

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    should add that it must be recognised that health authorities have been required to submit to my Department, by early next year, plans for the rationalisation and development of services over the next 10 years. In doing that, there are inevitably some proposals for closures, but it must not be assumed that because a plan has been put forward for consultation that will happen, let alone that it will happen next year.

    Disabled Persons
    Mr. Hall-Davisasked the Secretary of State for Social Services what steps his Department is taking with regard to the adaptation of buildings for disabled people to enable them to live at home.
    The Under-Secretary of State for Health and Social Security (Mr. Alfred Morris): Local and health authorities are very conscious of the need to provide help and support for disabled people in their own homes to the fullest extent possible within the resources available. I shall continue to give them guidance and help whenever appropriate.
    The hon. Member may also wish to know of the recent issue of a consultative document on adaptations to disabled people's homes. The document was issued jointly by the Department of the Environment, the Welsh Office and my Department. Moreover, my right hon. Friend the Minister for Housing and Construction has taken the very important step of promoting an increase both in "wheelchair" and "mobility" housing.
    Mr. Hall-Davis: Will the Minister impress on the authorities which disburse grants that the cost of providing residential care for the disabled is now so high that what may appear to be substantial public expenditure is, in fact, fully justified, in the short as well as the long term, if it enables a disabled person to live or be looked after at home?
    Mr. Morris: The hon. Gentleman makes an important point. We are deeply aware of the cost of needlessly institutionalising disabled people who want to live in their own homes, among their families, friends and neighbours. There has been a substantial increase in the number of housing adaptations under Section 2(1)(e) of the Chronically Sick and Disabled Persons Act. Improvement
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    grants for homes occupied by disabled persons are a matter for my right hon. Friend the Minister for Housing and Construction, but I shall be closely in touch with him on that matter.
    Mr. Park: Can the Minister give any statistics to the House on the extension of the housing adaption schemes for the disabled under the Chronically Sick and Disabled Persons Act?
    Mr. Morris: I have said that there has been a substantial increase in the number of housing adaptations. In 197273, there were just under 29,000 adaptations, while the corresponding provisional figures for 1975–76—the latest year for which figures are becoming available—was 49,000. This represents a rise of nearly 70 per cent., which is indicative of the importance placed by the authorities on this service.

    Occupational Pensioners (Benefits)
    Mr. Gristasked the Secretary of State for Social Services if he will make a statement on the eligibility for benefits of occupational pensioners between 60 and 65 years of age.
    Mr. Ennals: Occupational pensioners, like the rest of the population, are entitled to all the national insurance benefits to which their contributions give rise, including where appropriate sickness and invalidity benefits, and to benefits such as attendance and mobility allowance. Our proposals in the Bill, which will be before the House on Second Reading on Thursday, relate solely to the unemployment benefit entitlement, lasting for one year at a stretch, of occupational pensioners with pensions of over £25 a week; but even they would not have their unemployment benefit, including maximum earnings-related supplement, totally withdrawn unless the occupational pension exceeded £58·10 in the case of a married man.
    Mr. Grist: If the Minister is intent on breaking the national insurance principle, does he realise that £25 is a ludicrously low cut-off point? If there are abuses, does this mean that he thinks that the "availability for work" rule is not being operated properly, and will he consider some adjustment to the non-employed person's stamp for those over 60?
    Mr. Ennals: The hon. Gentleman says that the level is ludicrously low. I have already said that a man with a dependent wife receiving earnings-related supplement would not have his unemployment benefit pay ended totally below a figure of £58·10. If we take the example of a single person, the figure is just over £50. Therefore, we are talking about people who will receive a quite substantial income and in any case will have retired.
    The question of availability for work is difficult, and was considered by successive Governments. The only way to check whether a man is available for work is to be able to offer him a job and find out whether he accepts it. It is extremely difficult to offer a job to many of the people in question, particularly those living in rural areas or in areas to which they have retired and where unemployment is high. The chance of having this point properly tested is, therefore, difficult. The hon. Member will know that the insurance principle was originally set by the National Insurance Advisory Committee, which recognised that this was an area of, if not abuse at least misuse, of social security benefits.
    Mr. George Cunningham: Will the Minister bear in mind that the majority of the House of Commons has pulled down this flag when Governments of both parties have run it up in the past? Will he recognise that it is not acceptable to say that we shall deny a legitimate entitlement to people who deserve it under the proper criteria because there are some people who abuse it? Will the Minister try in the next 48 hours to avoid nailing the Government's colours to the mast, since it will result in the destruction of the flag when it is pulled down by the rest of us?
    Mr. Ennals: I recognise the deep concern of my hon. Friend. If we look at the history of this issue, we note with interest that successive Oppositions have opposed successive Governments, believing that this was an area in which there was misuse. If we are concerned with limitation of public expenditure, the Government and, I think, the Opposition, will agree that this is a much more important area in which to make an examination, rather than producing hardship or discrimina-
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    tion against the unemployed by other means, such as Conservative Members have suggested.
    The fact that successive Oppositions have opposed successive Governments does not mean that at this time of economic crisis this is not the right area in which to look for savings.
    Mrs. Chalker: Surely the Secretary of State would be better employed with his right hon. Friend, in correcting abuse by tightening up the rules on availability to work. Why does he not start on this far more productive way of dealing with the problem?
    Mr. Ennals: I welcome the hon. Lady's appearance on the Opposition Front Bench. Perhaps she ought to have listened to the answer that I gave to her hon. Friend on this question. If she is in doubt whether there is a satisfactory availability for work, I repeat what the hon. Member for Somerset, North (Mr. Dean) said when dealing with the matter. If she has a proposal, we would welcome it when the Bill reaches Standing Committee.

    Community Health Councils (Trade Unionists)
    Mr. Banksasked the Secretary of State for Social Services if he will make a statement on the right of trade unionists to be appointed to community health councils.
    Mr. Madelasked the Secretary of State for Social Services if he will make a statement on the right of trade unionists to be appointed to community health councils.
    Mr. Moyle: Regional health authorities have been asked to include a nominee of the appropriate trades council among the members they appoint to each community health council. Apart from this, trade unionists have the same right as anyone else to be appointed to a community health council.
    Mr. Banks: Will the Minister undertake not to impose on community health councils a statutory right for trade unionists to be represented on those bodies? Does he understand that trade employer organisations feel strongly that they, too, should have an equal right to sit on those councils, if trade unionists are allowed to sit on them?
    Mr. Moyle: My right hon. Friend has given advice to regional health authorities that trades councils should be represented on community health councils because they, of all voluntary organisations, have affiliated to them organisations representing larger numbers of the community than any other voluntary organisations one can think of. That would apply to employers' organisations, too.
    Dr. Edmund Marshall: Is my right hon. Friend aware of the confusion during recent months over future hospital developments at Goole, in my constituency? In such circumstances, would it not be better for hospital staff to have trade union representation on the local community health council?
    Mr. Moyle: I shall certainly bear that point in mind. My right hon. Friend has drawn to my attention the particular problem with which he is exercised at the moment, and I shall look into it.
    Mr. Boscawen: Are not community health councils there to represent all the people in the area, not just the most privileged groups? Should they not be appointed on merit, and merit alone?
    Mr. Moyle: Community health councils represent all sections of the population. One-third of their members are drawn from voluntary organisations with an interest in the health service and one-half from local authorities. I scarcely think that trades councils are privileged members of the community.

    Ambulance Services (Essex)
    Mr. Biggs-Davisonasked the Secretary of State for Social Services whether he will make a statement about the breakdown of ambulance services in the Essex area.
    The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): Following a dispute over the payment of meal allowances, about half of the ambulance men in Essex are taking mainly unofficial industrial action; the remainder are working normally. Emergency services are being maintained, together with more than half the routine ambulance services. Talks have continued between management and unions and the assistance of the conciliation officers of ACAS has been sought by the
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    unions with the full agreement of the authority. I hope that this will secure an early return to full, normal working.
    Mr. Biggs-Davison: Echoing that, may I ask the Minister whether we can expect an overhaul of the unsatisfactory Whitley procedure? May I also ask him whether he will consider the injustice, which I have discussed with the union, of the denial of weighting allowance to a handful of ambulance men in Waltham Abbey?
    Mr. Deakins: It would not be appropriate for me to comment on the original cause of the dispute when conciliation is going on. In reply to the first part of the hon. Gentleman's question, we must now await the report. which will be out very shortly, of Lord McCarthy on the whole Whitley machinery.
    Mr. Newens: Will my hon. Friend investigate why what amounts to a lockout notice was served on ambulance men who have an unparalleled record of good labour relations and public service in this area, thus converting what was a small dispute into one which is far more widespread? Would it not cost more, in terms of the supplementary benefit which will have to be paid to the families of men who have stopped, than it would cost to solve this dispute, even if the men's demands were met in full?
    Mr. Deakins: In an industrial dispute such as this, it does not help to make judgments, particularly in the House, about the actions of either party. We must all hope that the action by ACAS will help to resolve the dispute and lead to an early return to full normal working. I think that is what we all want.
    Mr. McCrindle: In the event of a major emergency in the Essex area, have any arrangements been made to import ambulance services from surrounding areas?
    Mr. Deakins: Yes, indeed. If a major emergency arises, as distinct from a normal emergency—if I may use that expression—there are appropriate liaison arrangements with neighbouring authorities.
    Mr. Moonman: How many ambulances are out of service? Will the Minister also say what lessons he can

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    draw from this dispute and what rôle he sees himself performing? I ask this because there has been some delay. When there is an obdurate health authority, I should have thought that the Minister had some function to perform.
    Mr. Deakins: I cannot give the exact number of ambulances out of service. About half the men—about 240—are still engaged in this unofficial action. On the second part of my hon. Friend's question, this is a local dispute and I do not think that it is one in which I can usefully intervene. There is regional and national negotiating machinery. My officials and I have kept in very close touch with the situation, day by day and hour by hour, over the past eight or nine days. I can assure my hon. Friend and hon. Members from those parts of Essex which are affected that I hope that the measures which have now been taken by agreement between the unions and management will lead to an early resumption of normal working.

    Pay Beds (Alternative Facilities)
    Mr. Hal Millerasked the Secretary of State for Social Services what further consultations he has held since July with the medical profession about the availability and accessibility of alternative private facilities before pay beds are phased out of the National Health Service.
    Mr. Ennals: In August I invited health authorities to consult interested parties locally and submit any additional nor new evidence relating to the reduction of pay beds as contained in Schedule 2 of the Health Services Act. On the basis of these consultations certain amendments were made to the schedule.
    Mr. Miller: Why did the Secretary of State not give that reply on Third Reading?
    Mr. Ennals: I gave a great deal of information during Third Reading, but at that stage the Health Services Act had not become law.
    Dr. Vaughan: Will the Secretary of State now try to explain to the House how he can carry on meaningful discussions when his own Minister of State admitted the other day that he does not know how many NHS beds have been
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    closed in the past six months, how many beds are planned to be turned over to administrators, or what the effect will be on nurse employment?
    Mr. Ennals: None of those situations exists. Of course, my hon. Friend can give no exact figure of the effect on nursing employment, because we have to decide exactly at what speed within the next six months those 1,000 beds shall go. Now that the Bill is passed, it is my responsibility to start speeding up the closure of those beds. The rate at which they go in the course of the next six months is a matter on which I cannot make a statement at the moment. But I can tell the hon. Gentleman that I shall be writing to health authorities almost immediately about the arrangements for effecting the separation of the first 1,000 beds.

    Television Sets
    Mrs. Castleasked the Secretary of State for Social Services whether any regulation has been issued by his Department instructing the social security offices as to what type of television sets shall be provided to people on social security and specifying that they shall be coloured ones with sliding doors.
    Mr. Orme: The Supplementary Benefits Commission does not in any circumstances make provision for television sets—black and white or colour, with or without legs, with or without doors. I am grateful to my right hon. Friend for the opportunity to make this clear once again.
    Mrs. Castle: Is my right hon. Friend aware that my Question is based, word for word, on a statement made by the hon. Member for Rochdale (Mr. Smith) in an interview with the Health and Social Services Journal of 5th November, in which he claimed that he gathered that there was such a regulation in force? Is my right hon. Friend further aware that the hon. Member, in the same article, said that he had tabled a Question to verify this allegation, but that he has tabled no such Question, nor has he made any attempt to find out the facts? Does not my right hon. Friend think that it is outrageous that the Liberal Party should join in this irresponsible scrounger-scaremongering on unsubstantiated allegations? In view of what has

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    appeared in this article, can we ever trust the word of a Liberal again?
    Mr. Orme: I can confirm the facts given by my right hon. Friend to be absolutely accurate. The hon. Member for Rochdale (Mr. Smith) has submitted no Questions. He has written no letters to the Department. He has reiterated this statement, I understand, in a local paper. I will say to my right hon. Friend that, while it arouses a certain amount of amusement, it does a great deal of damage to people who genuinely need help. In fact, the average amount paid to a person in 1975, as exceptional needs payment, was £18·18.
    Mr. Nicholas Winterton: On a point of order, Mr. Speaker. May I ask your advice whether the right hon.—
    Mr. Speaker: Order. Perhaps the hon. Gentleman would follow up this matter at the end of Question Time.
    Mr. Pardoe: Is the right hon. Gentleman aware that the party of William Beveridge and Lord Keynes can hardly be accused of joining in any campaign against scrounging? Is he further aware that, whatever may be the case—about colour television sets I know not what happens in Rochdale, nor am I responsible for it—there is, unfortunately, a general view that television sets, provided that they can be classified as furniture, are eligible for payment by the Supplementary Benefits Commission? Will he—because it would be helpful to those of us who have to fight this kind of scaremongering—like to nail that lie here and now?
    Mr. Orme: That is what I am attempting to do. The average amount paid in an exceptional needs payment was, as I said, about £18, and one cannot buy many television sets, black and white or colour, for that sum—[Interruption.] That is one payment. The Department watches this kind of thing extremely carefully. Many other aspects of this matter are referred to in the article written by the hon. Gentleman's hon. Friend. The Liberal Party has certainly slipped since the days of Beveridge and Keynes.
    Later
    Mr. Nicholas Winterton: On a point of Order, Mr. Speaker. Will you advise
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    the House whether it is a tradition and custom of the House that it an hon. or right hon. Member is to mention another Member by name, the proper course is to notify that Member in advance? I believe that it would have been helpful to the House if we had known this earlier during Question Time.
    Mr. Speaker: I understand that that is the normal convention which hon. Members follow. I do not know whether it was followed in today's circumstances.

    Chiropodists
    Mr. Martenasked the Secretary of State for Social Services whether he has any proposals for dealing with the shortage of chiropodists.
    Mr. Deakins: I have in mind to draw health authorities' attention to methods of improving services within present resource constraints.
    Mr. Marten: When are there likely to be enough chiropodists for the National Health Service, and what are the Government's proposals in the meantime for relieving the shortage? Many elderly people are becoming almost immobilised, and some are in great pain, because of a shortage of chiropodists and the resultant inability to have their feet treated.
    Mr. Deakins: I appreciate the hon. Gentleman's concern. Services are still inadequate in some areas, even for priority groups. However, a substantial pay increase—38 per cent.—was given to chiropodists last year as a result of the Halsbury Report, so I do not think that pay is a disincentive to NHS employment. The number of students in training increases each year, and last year a new training school was started for State registration.
    Mrs. Knight: Will the Minister bear in mind that his information that services in some areas are inadequate does not square with the facts, because in some areas services are totally non-existent? Does he accept that it is part of the job of the National Health Service to look after people who are crippled in this way, and will he do a little more about this matter?
    Mr. Deakins: The proposed circular which will, I hope, be going out soon to health authorities will cover the point

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    about which the hon. Lady is concerned. For example, we shall be asking health authorities to use salaried staff rather than private practitioners on a fee basis, by clinic provision rather than by provision of domiciliary services, and by using foot hygienists to perform simple foot care and hygiene under direction from a qualified NHS chiropodist.

    North-East Thames Regional Health Authority
    Mr. Neubertasked the Secretary of State for Social Services what representations he has received about the draft reorganisation proposals of the North-East Thames Regional Health Authority.
    Mr. Ennals: I have received representations from the hon. Member for Upminster (Mr. Loveridge) on behalf of some of his constituents.
    Mr. Neubert: Is the Secretary of State aware of the great public concern in my constituency and throughout Essex over proposals to close the ultra-modern neurosurgical unit at Oldchurch Hospital? Will he ensure that such a drastic decision receives full public debate and is not taken in the rarefied ether of medical politics?
    Mr. Ennals: If, eventually, it is proposed that the hospital should be closed, and if the proposal is opposed by the community health council, I assure the hon. Gentleman that the final decision will be taken by the Secretary of State. I am not informed about the specific hospital mentioned by the hon. Gentleman. It may be that a proposal is out for consultation, but I can assure him that no decision has yet been taken.
    Mr. Spearing: Does my right hon. Friend agree that his principle of reallocation of resources nationally should also apply inside any regional health authority? Is he aware that, whatever may happen in Woolwich on the other side of the river, in Newham the North East Regional Health Authority closes hospitals not only before new ones are built but before permission for new ones—particularly maternity hospitals—has been given? In respect of closures at St. Bartholomew's Hospital, which are the result of his recent action, will he investigate the effects that this is having on
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    the emergency bed service in East London?
    Mr. Ennals: Certainly. I shall make inquiries on the last point raised by my hon. Friend. I agree that part of the problem of redistribution is not merely between regions but also within regions. If we consider the situation in the North East Thames region, it has a problem where some areas have been over-provided and some under-provided, and therefore they have been conducting their own study to see how they can ensure that resources available for the North East Thames region are distributed more equitably. But, as I said earlier, we must watch carefully that we do not proceed with reallocation so quickly as to do severe damage to hospitals in the area.
    Mr. Newton: Will the Secretary of State accept that I am very happy with what he has just said about distribution within areas, because it is often assumed that the Thames regions are entirely confined to Metropolitan London? Will he assure me that something will now be done for the Chelmsford and Colchester district where the population has been expanding very fast and where practically nothing has been spent on their hospitals since the war?
    Mr. Ennals: It is true that part of the long-term planning of the North East Thames region is to see that some of the under-provision in Essex is met. Chelmsford and Colchester are two examples, and this, of course, is the case with others of the Thames regions. There is a similar problem in the South-East Thames region, where there is also a problem of redistribution within the region.

    PRIME MINISTER (ENGAGEMENTS)
    Mr. Christopher Priceasked the Prime Minister if he will list his engagements for 30th November.
    Mr. Rifkindasked the Prime Minister whether he will list his engagements for 30th November 1976.
    The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): In the absence of my

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    right hon. Friend, I have been asked to reply.
    My right hon. Friend is attending a meeting of the European Council in The Hague.
    Mr. Price: Is my right hon. Friend aware that it is a pity that the Prime Minister is not here today? Had he been here, he would have been able to attend the debate on the Address and to be made fully aware of the complete inability of, at any rate, the official Opposition to put forward policies capable in any way of maintaining the social contract with working people. Is he further aware that, in respect of the speech today by the Chancellor of the Exchequer, there are many very moderate Members on the Government Benches who will oppose tooth and nail any further deflation either through tax increases or through further public expenditure cuts?
    Mr. Foot: My hon. Friend uses the word "moderate". I am not sure whether it ought not to be outlawed from the language altogether, because it has been misapplied in so many instances. I certainly take note of what my hon. Friend said. As for discovering the economic policies of the Opposition, I am doubtful whether my right hon. Friend would have been able to discover them even had he attended the debate.
    Mr. Rifkind: Has the right hon. Gentleman actually read the 166 pages of the devolution Bill published in his name today? If he has, does he accept that it is manifestly unfair and absurd that complex and conflicting proposals for Scottish and Welsh Assemblies should be included in a single Bill? Will he undertake to reconsider this, so that Parliament can consider each set of proposals on their merits rather than as a single party political package Bill?
    Mr. Foot: I certainly could not claim truthfully that I had read every word of every clause of the Bill presented to Parliament, and in that I think I am no different from many other Ministers who have presented substantial Bills to the House. The Government considered very carefully whether the proposals for Wales and the proposals for Scotland should be presented in separate Bills. Since they both deal with the same subject and the same undertakings that the Government
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    have given to the people of Wales, Scotland and, indeed, to the people of the United Kingdom as a whole, we thought that it was better to have one Bill and to pass the proposals for Wales and Scotland through the House at the same time.
    Mr. Sillars: At his Press conference on devolution, did my right hon. Friend explain why there is such a vast difference between the Bill presented—the Scotland and Wales Bill—and the Labour Party policy statement "Bringing Power Back to the People" which was published in the autumn of 1974 in order to get Scottish workers' votes?
    Mr. Foot: I think that when my hon. Friend studies the Bill further he may be able to see that his remarks are not really borne out by the facts, in terms of what we have included in the Bill. The Bill gives considerable economic powers to the Scottish Assembly. It gives great powers to fix priorities in expenditure, and I believe that when the people of Scotland have the Assembly in operation they will feel that we have fulfilled the pledges that we made at the last General Election.
    Mr. Grimond: Is the Leader of the House aware that it is rumoured that he attended a Press conference this morning at which he explained this Bill, which we now hear that he has not fully read? When he has considered the Bill further, as we hope he will, will he examine not only the point made about separate Bills for Wales and Scotland but the extraordinary position of the Secretary of State for Scotland, who is going to continue as a sort of floating kidney in the body politic? Will he also bear in mind that Scotland will be hopelessly over-governed unless the regions are abolished?
    Mr. Foot: I certainly said, in response to the hon. Gentleman's question—in order to be truthful to the House, as I always am—that I have not read every word of the Bill, but it appears that the right hon. Gentleman has hardly read a clause or any provision of the Bill. If he did so, he would discover that the powers of the Secretary of State as proposed in the Bill are very different from his description of them. When he has had an opportunity to study the Bill, I trust that we shall have his support, as well.

  NATIONAL ECONOMIC DEVELOPMENT COUNCIL
  Mr. Gryllsasked the Prime Minister when he next intends taking the chair at the NEDC.
  Mr. Foot: I have been asked to reply.
  My right hon. Friend hopes to take the chair from time to time, as he did at the last meeting on 3rd November. But he has no specific date in mind at present.
  Mr. Grylls: Will the Leader of the House ensure that the Prime Minister takes the chair at the NEDC very soon in order to explain the current negotiations with the IMF? Will he tell the House and the country whether the Prime Minister agrees with the Secretary of State for the Environment that cuts in public expenditure are a gross act of folly, or with the rest of the Cabinet, which believes that cuts should take place?
  Mr. Foot: When the discussions with the IMF are completed, the proper place for the Prime Minister to make his report is to this House. Certainly he should report to this House rather than to the NEDC, although, of course, the consequences of any agreement would be discussed at the NEDC at some time. As for the speech of my right hon. Friend the Secretary of State for the Environment, it was, as usual, very wise and intelligent. I am sure that if the hon. Gentleman studied it in detail he would not only discover that, but would see that it was wrenched out of its context by many newspapers.
  Mr. Kinnock: Will my right hon. Friend or other members of the Government, at the NEDC or any other place where our economic problems are discussed, take care to explain to the people of Britain why it is that, for the next 12 months, with the economy in its present dire condition, we are to preoccupy ourselves with constitutional tinkering instead of giving attention to the real issues at stake?
  Mr. Foot: It is right that the House should give its attention to the major Bill that we are proposing in this Session and that we have promised to the people of this country, but that does not mean that the time of the House is to be mono-
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  polised for that purpose. Of course there will be time for full and proper discussion of the major economic questions that must govern our deliberations over the next 12 months.
  Mr. Hordern: If the remarks of the Secretary of State for the Environment were taken out of context, will the Leader of the House say whether he thinks that public expenditure should be reduced?
  Mr. Foot: The hon. Gentleman refers to the speech of my right hon. Friend the Secretary of State for the Environment. When he has studied it, we shall see whether he agrees that it was a very wise speech. My right hon. Friend was putting the cuts that have already been made in public expenditure in the context of the general situation. I think it is much wiser to discuss the matter in that way than to hold the simplistic view presented by the hon. Gentleman.
  Mr. Skinner: Will my right hon. Friend suggest to the NEDC that it should prepare a quick paper on the relative retirement ages of miners in the various Common Market and other industrialised countries? Will he say whether he—as the representative of thousands of miners —agrees with some of us on the Government Benches who are fully in support of the miners' claim for early retirement, in 1977, at the age of 60?
  Mr. Foot: I am grateful to my hon. Friend. I represent as many miners as he represents, and I agree that miners have a strong case for a reduction in their retirement age. The Government are sympathetic to that view. But we have to proceed towards it in a way that does not destroy the social contract and the agreements that have been made under it, and in a way that does not do great injury to the economic position of the country. I am sure that the miners will take that into account, just as the rest of the country has to.

  PRIME MINISTER (GUILDHALL SPEECH)
  Mr. Wyn Robertsasked the Prime Minister if he will place in the Library a copy of his public speech on Government policy at the Guildhall, London, on 15th November.
  Mr. Aitkenasked the Prime Minister if he will place in the Library a copy of his public speech on economic policy at the Lord Mayor's Banquet on 15th November.
  Mr. Foot: I have been asked to reply.
  My right hon. Friend did so on 16th November.
  Mr. Roberts: The Prime Minister referred in that speech to the intractable problem of unemployment Why did it take the Prime Minister until last week to admit that unemployment was bound to rise, when it was patent to the House and to the country that it would do so? Was the Prime Minister not guilty of misleading the country?
  Mr. Foot: I do not think that anything the hon. Gentleman has said suggests that the Prime Minister has misled the country in this respect. My hon. Friend merely underlined what everyone knows, that the situation is extremely serious. In all his pronouncements since he became Prime Minister, he has never misled the country in that respect.
  Mr. Aitken: Is it not clear that when the Prime Minister spoke in that speech about public expenditure cuts he had not, like the Lord President, studied all the Government's devolution proposals in detail? If he had studied them closely, would not he be aware that it would be incompatible to say that public expenditure was under control while simultaneously putting forward proposals for an expensive new tier of Government, with new bureaucrats and a new level of politicians, all of whom would be destined to see that public expenditure rose in Scotland and Wales?
  Mr. Foot: The devolution proposals do not propose a new tier of Government. When right hon. and hon. Members have had the chance of studying the proposals they, too, will appreciate that. Indeed, it may well be, as has already been indicated by the Secretaries of State for Scotland and for Wales, that the establishment of the Assemblies may enable us to escape some of the heavy expenditure that was involved in the establishment of local government reform —so-called—by the Conservative Administration. Indeed, if the Welsh Assembly had been in being, I am certain
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  that we should not have had local government reform in the form that we had it in Wales. That would have saved the country a great deal of money. I assure the hon. Gentleman that so far from there being the slightest slender margin of difference between the Prime Minister and myself on this subject, we are absolutely united.
  Mr. Wrigglesworth: Will my right hon. Friend be so good as to ask the Prime Minister, on a future visit to Guildhall, to investigate the curious announcement made last Friday, that the Bank of England is to look into the clothing industry in this country? Will he explain to the House how we shall avoid massive confusion if everybody in the City, the NEDC, the Department of Industry and various other bodies try to run our industrial strategy?
  Mr. Foot: I have not seen that announcement on behalf of the Bank of England. Although I may be responsible for some strange people today, I am not responsible for the Bank of England. I should have thought that the Bank of England had enough problems of its own without inquiring into the clothing industry.
  Mr. Prior: Did not the right hon. Gentleman once say that he would fight unemployment with every breath in his body? In view of what has happened, why is he still here?
  Mr. Foot: Because I am still trying to fight unemployment with every breath in my body. I remember very well that when we introduced the temporary employment subsidy, which has saved the jobs of some tens of thousands of people —to put the claim very moderately—we did not have support from the right hon. Gentleman. He tried to pour scorn on many of our other proposals that have saved jobs. Of course we agree that the situation is still extremely serious, but I am sure that the way to bring the figures down is for this Government to stay in office and to fight it through.
  Mr. Heffer: Has my right hon. Friend read the speech made by the hon. Member for Guildford (Mr. Howell), the Opposition spokesman for economic matters, in which he told the staff of the NEDO that the Opposition would go forward on the basis of a cut in public

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  expenditure of a further £4,000 million or £5,000 million?
  Would not that increase unemployment, and is it not a good reason for the Labour Government to remain in office to avoid such slashing of public expenditure by the Tories?
  Mr. Foot: I entirely agree with my hon. Friend. If any such madcap proposals as that were carried out, they would result in making the unemployment situation much more serious than it is. I am sure that that fact is appreciated by all my hon. Friends.
  Sir David Renton: How does the right hon. Gentleman delude himself that there will be no new tier of Government under the devolution proposals when the Secretaries of State for Scotland and for Wales will continue to have their central Government offices and there will still be several tiers of local government, as well as a new Government, responsible to the new Assembly, interposed between them? Is not that a new tier of government?
  Mr. Foot: The right hon. and learned Gentleman has misunderstood the situation. We shall have considerable time in which to debate the matter later in the Session but in immediate reply, I point out that many of the functions that will be exercised by the Scottish Assembly will be transferred from the Secretary of State for Scotland. In that sense, the Secretary of State will not be dealing with the same functions. We are not establishing a new tier of government.
  Moreover, as I have said before—I know that the Conservative Party does not like to be reminded of it, but it is a fact—in Wales and Scotland, and, indeed, in England, the Conservatives made such an unholy botch of local government reform by piling huge bureaucratic burdens on the people that, naturally, one of the tasks of the new Assemblies to be established in Scotland and Wales will be to try to diminish those heavy bureaucratic burdens.

ORDERS OF THE DAY

  DEBATE ON THE ADDRESS
  [FIFTH DAY]
  Order read for resuming adjourned debate on Question [24th November]:
  That an humble Address be presented to Her Majesty, as follows:
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.—[Mr. Mallalieu.]
  Question again proposed.

  ECONOMIC AFFAIRS
  Mr. Speaker: Before I propose the Question, I want to tell the House that so many right hon. and hon. Members have indicated to me that they wish to participate in today's debate on the Gracious Speech that it will be impossible for all of them to catch my eye. As far as the length of speeches permits me, I shall endeavour to ensure that there is a fair balance in the debate, and that those who have been trying for days to be called will have their chance.
  I can only do my best, and, much as the House knows that I am not averse to visitors to the Chair, I have to say on this occasion that I fall back on my predecessors' strategy on similar occasions. I remind hon. Members that it will be counter-productive for any hon. Member to come to the Chair to advance his claim.
  I have selected the official Opposition amendment.
  Mr. Eric Ogden: Further to the point of order, Mr. Speaker. For those who have, in hope, submitted their names, of whom I am one, is there no way in which some indication can be given that we shall have a chance to speak, or is it so impossible to get on the list that we could be better employed elsewhere?
  Mr. Speaker: I often think that it would be for the good of the House if

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  we went back to the custom that prevailed when I came here. Hon. Members then did not know whether they would be called and we had a good attendance in the Chamber. I am sorry that I cannot tell the hon. Gentleman any more.
  3.35 p.m.
  Sir Geoffrey Howe: I beg to move, at the end of the Question, to add:
  "But humbly regret that the Gracious Speech provides no grounds for confidence in the economic policies of Her Majesty's Government."
  I begin by seeking to secure quite shortly the agreement of the Chancellor about the economic prospect that immediately faces us. It was described quite shortly by the Prime Minister last Wednesday when he said that the prospect for unemployment was a further increase. We have seen surveys suggesting that it could rise from its present 1¼ million to 1½ million and, in one survey, beyond 2 million. I should like to hear the Chancellor's comments on that.
  The Prime Minister told us that there was likely to be no improvement in the rate of inflation for some time ahead. Again, the figures we have seen seem to suggest that it could be running above 13 per cent. and in some cases at 17 per cent. next year. The Prime Minister said that the prospect for growth in the economy was "slight". Other forecasters talk in terms of 2 per cent., 1 per cent. and even a negative growth in the economy. Beyond that, looking to 1978, one cannot foresee any substantial increase in growth. The forecasters also suggest an increase rather than a decrease in unemployment and little change in the outlook for price inflation.
  I want the Chancellor to give us his own assessment, so far as he can, of these matters. I want him also to agree that the outlook described by the Prime Minister last week is in total and complete conflict with the forecast given by the Chancellor to the House a few months—indeed, even a few weeks—ago. As recently as the end of September he was talking about the likelihood of growth in the economy of 4½ per cent. per annum, about the prospect of a 10 per cent. inflation rate next year, and about the outlook of falling employment;
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  and in the debate in the House on 11th October he expressed the view that everything suggested that the economy was still on course.
  The reality is in contrast with that of other economies, with the prospect of high and still rising unemployment, of low and still sagging growth—the consequences of the attempt in which the Chancellor has persisted on a diet of false expectations to avoid the consequences of the 5 per cent. cut in real living standards for the people of this country that followed from the oil crisis of three years ago. It is no wonder that the Prime Minister has wrenched from the Chancellor the rôle of economic forecaster and no wonder that the Prime Minister himself added in his speech at the Guildhall the other day that we should no longer believe that forecasts were facts.
  According to the Press of the last few days, the Chancellor appears before us today rather in the guise of a boy standing on a burning deck from which almost all but he has fled.
  Mr. Dennis Skinner: The right hon. and learned Gentleman is getting worse.
  Sir G. Howe: The Chancellor may well laugh at his hon. Friend's comment, but this House is entitled to know just how far, if at all, he will have the support of his colleagues in the Cabinet and of the Prime Minister. If indeed he is, as he should be, standing for the interests of this country, he is entitled to expect and will receive our sympathy and support, but only if he is prepared today to accept responsibility, as surely by now he should, for the extent to which over the past two and a half years he has led the people of this country gravely astray in his management of the economy.
  We have too often heard from the right hon. Gentleman various suggestions that the fault lies in his stars rather than in himself. We look to the Chancellor for some sign of repentance. We may be looking in vain, but he should recognise that he will not begin to restore the credibility of his office unless, in some respects at least, he is prepared to acknowledge his mistakes.
  I am glad, and I am sure the whole House will be, to see the right hon.

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  Gentleman's announcement yesterday that he has decided to abandon plans for the introduction of a wealth tax. We congratulate him on that accession of wisdom. We now look for more. If he does not accept the need for making a fresh start, he will remain a lame duck Chancellor who carries very little conviction.
  Mr. Neil Kinnock: Does not the right hon. Gentleman recall the unfortunate experience of the Conservative Government of whom he was a member? When major tax concessions were made, practically none of the additional finance made available to industry found its way back in the form of investment. Does he consider that to be a fitting strategy for our present difficulties?
  Sir G. Howe: We shall consider the fitting strategy in due course. I hope that I carry the hon. Member for Bolsover (Mr. Skinner) with me in my condemnation of the failure of the strategy of the Government whom he supports.
  Where does the Chancellor go from here? He told the Labour Party conference that he intended to apply to the International Monetary Fund on the basis of his existing policies. It is important for the House to know whether that remains his position, or whether he agrees, as he surely must, that now is the time to make a substantial change in direction if the economy is get back anywhere near on course. We are looking to the Chancellor and the Government for an approach very different from that which they have followed so far.
  I ask the Chancellor to give these essential assurances. Is he going to make an entirely fresh start after the debacle of his first two years' policies? Can he count, as he must if he is to carry conviction, on the firm and unequivocal support of the Prime Minister? Can he assure the House that he will not be distracted by colleagues in the Cabinet, or elsewhere, who appear prepared to take very grave risks with the economic future of this country? Above all, will he give an assurance that he will not seek just to preserve the fragile unity of the Labour Party but will try to serve the interests of the British people? We look to him for that.
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  The people are ready to support the Chancellor if he is brave in the measures which he brings before us. They will never forgive him if, on this last occasion, he fails them yet again.
  Mr. Eric S. Heffer: Why does the right hon. and learned Gentleman not get a new script writer?
  Sir G. Howe: Let me invite the hon. Gentleman to follow me in a script, which should be dear to him, based on a number of observations by the Prime Minister. I commend to the Chancellor as a basis of his approach the speech made by the Prime Minister at the Guildhall only two weeks ago.
  Mr. Skinner: Where?
  Sir G. Howe: Guildhall, at the Lord Mayor's banquet.
  Mr. Skinner: What did they have for dinner?
  Sir G. Howe: The hon. Gentleman must absorb what the Prime Minister said to that audience, because it is the basis for the policy of the Government he supports, and I shall be glad to know how far he agrees with it.
  The first point made by the Prime Minister was this:
  "We must resume the mastery of our own affairs and especially the control of our currency."
  He was echoing what he said to the Labour Party conference—that for too long the country has trodden the primrose path and borrowed money from abroad. It still goes on.
  Does the Chancellor intend to carry through that first proposition of the Prime Minister? The signs are by no means encouraging. All we hear of the plans being made by the Government are of their hunt for small loans, for large loans, for new loans, for fresh loans, for long loans.
  One of the most interesting options in this areas is their apparent intention to fund the sterling balances. Funding sterling balances has a comforting robust ring about it until one examines what it means. It means asking other countries to underwrite the debts incurred by this Government on behalf of this country—funding the sterling debts. The Chancellor was glad enough to enjoy those

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  balances while they were flowing into this country. Other countries that have substantial savings—the Germans, Swiss, Americans and Japanese—are not rushing round the world seeking other nations to fund those balances. I hope that the Chancellor will not believe that this ploy will do anything to fortify the basic strength of the economy.
  What disturbs us is that there is one feature in common in any policy to which the Government have been committed or appear likely to follow. The policy is dependent in one way or another—and apparently is intended to remain so—on continued access to the borrowing of huge sums of money wherever they can be found. On this side of the House we have no enthusiasm for that approach.
  The policy of the Government bears all the signs of having been over-influenced throughout the years by the advice of the Chancellor of the Duchy of Lancaster—and I am glad to see him sitting on the Front Bench. He may have been able to make a fortune on borrowed money, but he should know by now, having had long experience of his colleagues, that they are not likely to achieve anything like the same success.
  Let me give the Chancellor some advice. If he is seeking to shape the necessary policy, let him quit looking as he has done in the past year or two to an automatic growth of world trade to float us off the rocks. If this country is to succeed—whatever the future of world trade may be—we must equip ourselves as a nation to fight for a growing share of world trade and to succeed in winning that share on our own merits. Let him and the Prime Minister quit expecting either Governor Carter or Chancellor Schmidt to come to the rescue and float the policy off the rocks.
  The Chancellor has abused the confidence of the world financial community for too long for the good of the Government and the country. Chancellor Schmidt and Governor Carter were elected to govern in the interests of the German and the American people. This Government were elected to govern in the interests of the British people. The House and the country are looking to them to get on and accept that responsibility. If they will not accept it, whatever pattern of distintegration may lead them to fail
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  to do so, and will not get on with the job, the time has come for them to get out and make way for somebody else who will.
  Mr. Frank Hooley: Is the right hon. and learned Gentleman seriously arguing that countries like West Germany, with its reserves of 35 billion dollars, and the United States, with its massive reserves, have no responsibility for the present international monetary arrangements of the world?
  Sir G. Howe: Of course there are responsibilities to be shared across frontiers for the world monetary order. I complain that this Government, who have recklessly disregarded the policies that have been so successful in Germany and the United States, seem to have no policy other than to look to other countries to get them off the rocks.
  The country is sick and tired of an endless cliffhanger as the Government struggle to reconcile the national executive committee of the Labour Party on the one hand and the International Monetary Fund on the other. We are asking just how much longer these visitors from other countries are to remain in this country apparently seeking to secure the agreement of the Government to what ought to be done to put our economy right. The opinion was seriously expressed to me last night that if they stayed here much longer, the Government hospitality fund might be consuming too large a share of the loan that is still in prospect.
  We want to know when the Chancellor or the Prime Minister will be in a position to disclose to the House the content of the Letter of Intent. I hope that they will not repeat last year's example of publishing it on the eve of the dissolution of Parliament on 17th December. When is the Chancellor to announce whatever package may emerge from these over-prolonged deliberations? Are the package and the terms of the Letter of Intent to be disclosed to the House at the same time so that we may judge them together? May we have an assurance that the House will have—as it certainly ought to have—an opportunity of debating that package and the terms of the Letter of Intent before the Government are committed to them?
  As the hon. Member for Berwick and East Lothian (Mr. Mackintosh) said

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  yesterday, our anxiety is that this is the last chance—not just for the Government but for the country—to put together a sensible economic policy for the years ahead. The people of this country rightly will not forgive the Government if they produce yet another package that is inadequate, does not work and condemns us to three months more misery waiting for the next round.
  We seek from the Chancellor an assurance, without qualification, that he understands that, that the Prime Minister understands it, and that they will between them require their colleagues to understand it. No one outside this country will believe the Government unless this time their actions speak louder than their words—and soon. We have had enough waiting and enough half measures. This is the time for the action that will begin to put the country right.
  I come to the second proposition from the Prime Minister's speech that I commend to the Chancellor and, indeed, to Government supporters below the Gangway. We must make a success of the mixed economy. We must give absolute priority to industrial needs. We must ensure that industry is profitable. That is the second key ingredient in the prescription that we commend.
  For that to happen—if we are to make a success of the mixed economy—the Government cannot look for help in that respect to the public sector; nor can their supporters below the Gangway. There is no prospect in the public sector of the creation or establishment of jobs that will survive. There is no prospect in the public sector of any creation of wealth. It is to the private sector that we have to look for the restoration of health. The real threat to the health of the private sector comes from the very size of the public sector. That is where the importance of the size of the public sector borrowing requirement lies.
  We have heard so many speculations about that that we cannot possibly, from the Conservative side of the House, predict with any accuracy what that figure is likely to be. I ask the Chancellor today to let us into the secret that he has been sharing with his Cabinet colleagues and with the representatives of the International Monetary Fund. The House is entitled to know today what is the Chancellor's estimate of the likely size of the
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  borrowing requirement for the current year and for the following year.
  What is clear—and we are glad to see it recorded in the Gracious Speech—is that the conquest of inflation is of fundamental importance to the restoration of any prospect of employment. If that is clear, we are agreed also that the proper management of the money supply, which means a steady reduction in its rate of growth, is equally essential to the management of the economy. What concerns us is that, exactly as we predicted earlier this year, we have now been landed in the past six weeks with the most savage squeeze in the recollection of anyone in this country as a result of the incompetence of the Chancellor in the management of his monetary policy. He has demonstrated all the skill of a reluctant and unconvinced convert to that argument. What I want to ask him is where he goes next.
  Does the Chancellor still stick to his target for the money supply of 12 per cent.? If so, does he anticipate that inflation will be running in the same year at 14 per cent. or 15 per cent., and if so, does it not follow as we can see as we go up and down the country—that the public sector is exerting and will exert tremendous pressure upon the private sector, thereby destroying present and future jobs in the private sector? That was the point made yesterday by the hon. Member for Berwick and East Lothian.
  We can see—and I hope that this is common ground throughout the House—that the wealth-creating private sector of the economy is now being throttled by the high interest rates now imposed which are a direct result of the Government's mismanagement of their monetary policy. We can also see that the private wealth-creating sector is also facing further destruction as a result of the payroll tax which we are to debate next week.
  There was only one ray of hope in the Prime Minister's speech last week. He pointed with some cheerfulness to the fact that the minimum lending rate had fallen by ¼ per cent., from 15 per cent. to 14¾ per cent. At the same rate of progress, by the end of the next 12 months we shall have come down to the 13 per cent. which the Chancellor introduced as a crisis rate only six weeks ago.

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  That is in no sense good enough for us. The Government must make such changes in their management of the public sector and of public sector debt as will bring down those crippling rates of interest as soon as possible. They ought to be making changes so as to avoid the necessity of imposing a tax of £1,000 million on British industry and destroying still more jobs.
  We are not, as the Chancellor so often seeks to misrepresent us, calling for savage and immediate deflation, whatever that may be. We are asking for evidence of firm, determined progress to restore the essential balance of the economy.
  We seek three assurances from the Chancellor. First, we ask that he will do what is necessary to reduce the borrowing requirement, however hard that task may be.
  Mr. Skinner: By how much?
  Sir G. Howe: Secondly, we ask that he will not seek to achieve that reduction by the imposition of still higher taxes. Surely it must now be well understood throughout the House that higher taxes are as sure a method of destroying jobs as any reductions in public expenditure. Where is the sense in destroying jobs in the private sector by the introduction of higher taxes?
  The Chancellor should know all about this. He destroyed many jobs by putting value added tax up to 25 per cent. in his first Budget. Labour Members should know all about it, too. The hon. Member for Ormskirk (Mr. Kilroy-Silk) knows what has happened to a factory in his constituency as a result of higher value added tax. Where is the sense in imposing taxes that will put tens of thousands of engineers, process workers and people in the private productive sector out of work for the sake of keeping tens of thousands of clerks, civil servants and bureaucrats still at their desks? That is the second assurance that we want from the Chancellor.
  Mr. Skinner: How much?
  Sir G. Howe: The third assurance is this. I take this, too, from the Prime Minister's speech. There must be proper
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  rewards for skill and for responsibility. [Interruption.] I add to that proper rewards for hard work and enterprise. Last night my hon. Friend the Member for Manchester, Withington (Mr. Silvester) quite rightly spoke of a widespread feeling of depression—[Interruption.]—throughout the country about the outlook in the economy.
  Mr. Speaker: Order. I must say that continued interruptions from a sedentary position are unfair to any hon. Member seeking to address the House.
  Mr. Heffer: We have to liven it up a bit.
  Sir G. Howe: The hon. Member for Liverpool, Walton (Mr. Heffer) must know this very well. I was on Merseyside only last weekend. [Interruption.] I should be surprised if the hon. Member did not agree that there is a widespread feeling of depression and, indeed, of demoralisation among the working people of this country. There is an erosion of the will to work.
  I want to carry Labour Members with me on this. I am not now talking so much about scrounging. Only a minority are involved in that, as they always have been, although they give rise to widespread irritation. I am talking about the number of people who quite frankly ask when confronted with the challenge of harder work by moving to a new job opportunity "What's the point? Where's the incentive?" The argument takes many forms.
  Again at the weekend I met a young engineer on Merseyside who was contemplating the prospect of moving to a different part of the country for a better paid job opportunity. He volunteered that observation to me. "What additional reward shall I get?" he asked. "By the time I have paid the tax on the extra pay I shall receive for going to that job what is the point?" I hope that the hon. Member will agree with me.
  Mr. Heffer: The right hon. and learned Gentleman is right. I agree that the people on Merseyside are beginning to feel absolutely fed up with the whole unemployment situation. However, the hon. Gentleman must know that one of the factors which have led to unemployment on Merseyside, particularly among construction workers—many of whom

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  have been out of work for nine months, a year, or, in some cases, 18 months—is the public expenditure cuts. Of those unemployed on Merseyside 30 per cent. are construction workers. If the Conservative Party has its way, it will cut back further on public expenditure.
  The figure given by the hon. Member for Guildford (Mr. Howell), which I mentioned earlier, is about £4,000 million to £5,000 million. That would lead to further massive unemployment, particularly among construction workers. What is the right hon. and learned Gentleman's answer to that? What would the Conservatives do in relation to public expenditure?
  Sir G. Howe: The hon. Member should not believe what he reads in Labour Weekly. As so often happens in that publication, the report is a complete fabrication.
  Let me deal with the merits of the hon. Member's argument. What has been happening to employment on Merseyside? Unemployment has doubled and more than doubled on Merseyside under this Government. What prospects are there of any further growth in employment on Merseyside under their policies? [HON. MEMBERS: "Answer the question."] I shall answer the question gladly, but this Government offer no prospect of further growth in job opportunities on Merseyside through public expenditure. There is nothing left to spend. The Government can only raise money to spend on job creation on Merseyside by taxing out of existence the jobs in factories at Skelmersdale and Ormskirk.
  The only way of restoring prosperity to Merseyside—the hon. Member had some insight into this matter yesterday—is to do what is necessary in many other parts of the country, namely, to begin sweeping away the cobwebs of controls and bureaucracy which have delayed private sector recovery in Merseyside, Glasgow and Tower Hamlets for years, and to get back proper control of the management of the economy so as to bring down interest rates.
  How can anyone be expected to invest in new factories, new small companies and new jobs on Merseyside, until interest rates have been brought down? One of the consequences of making reduce-
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  tions in public spending will be to bring down interest rates, to restore confidence in the private house-building market, to restore confidence in the industrial market and to begin to get the private sector to create the jobs on Merseyside which the public sector has no capacity of creating. Those are the answers to the hon. Member's question.
  I am glad that the hon. Member shares my feeling in this respect. The people of this country are oppressed by the feeling "What is the point?" A case was reported to me the other day of members of the Inland Revenue staff moonlighting—as is not uncommon—in order to seek other means of escaping from the restraints on incentives. That is a measure of how serious the situation is. Cases have been reported to me—other hon. Members may have had the same—of factories in development areas, now recruiting to expand their programmes, finding that the willingness of people to take up the jobs offered now is much less than it was three or four years ago. What is the reason for that, other than the general feeling of malaise and demoralisation which results from the general economic policies of this Government?
  It is more than anecdotal. The motor industry is now producing in the third quarter of this year less than two-thirds of its total output in the peak year of 1972. Yet it has short supply. There is a shortage of motor cars to meet export markets, a shortage of motor cars to meet any retail customer in this country who wants to buy a car. Why is it that the motor industry is producing currently 20,000 cars a week against 37,000 cars in 1972? Its capacity is being underused.
  I come back to Merseyside. Why is it that Halewood, where there are 3,000 more men employed than there were four years ago, is now producing 47 vehicles an hour against 60 vehicles an hour four years ago? Is that not all evidence of a demoralisation because of the lack of incentive which is the consequence of this Government policies? The same is true of steel.
  The reasons—which the Chancellor knows very well—for this state of affairs are the following. First, there is a substantial and growing differential in rewards and salaries for those employed

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  in the public sector by comparison with those employed in the private sector. It has become more and more attractive to take employment in the public sector and less and less attractive to work in trade and industry.
  Secondly, as the Chancellor pointed out the other day, a significantly heavier sacrifice is being imposed on those in work than on those out of work. I hope that the Chancellor will tell us more about his thinking on that aspect. It is certainly having a serious effect if those in work are being asked to make larger and larger sacrifices than those out of work.
  Thirdly, of course, there is the compression of differentials. That is an inescapable feature of the present incomes policy. The relaxation of differentials must be a feature of the relaxation of present policy at the end of its term. That will be possible only if it is clearly understood that there is no other room for real improvement in take-home pay and that it is essential to begin restoring differentials in that way.
  The final cause of this malaise is, of course, the huge and growing load of direct taxation on the pay packet and the salary at all levels in our society. The present balance between direct and indirect taxation has been growing progressively worse and more and more discouraging to the achievement of wealth and growth in the private sector.
  The Prime Minister and the Chancellor of the Exchequer have often paid lip service to this need. The Prime Minister did so in his speech at the Guildhall and the Chancellor does so frequently. The time has passed for mere lip service. It is essential to ensure that substance is given to the Prime Minister's statement that we must give proper rewards for skill and enterprise, for hard work and initiative.
  The House needs no reminding of a quotation from the Third Report of the Select Committee on Science and Technology which reported a few weeks ago, and I ask the Chancellor to take this seriously:
  "If the Government is serious in its desire to rebuild British productive industry it must create an environment in which there are adequate incentives to attract the ablest young people into industry and away from nonproductive public and private services …
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  It is essential for the future industrial health of Britain that they move beyond the stage of sympathetic platitudes."
  That is the fourth and most important point in the prescription that I commend to the House, and I hope that the right hon. Gentleman will respond to each of them.
  Is the Chancellor determined that the Government, on behalf of the people, shall regain mastery of our own affairs? Now is the last chance for them to do so. Is he determined to promote, as he must, the success of the mixed economy? In particular, is he determined to see that skill and enterprise receive their due reward? We seek from the Chancellor of the Exchequer an assurance that he will stand by those principles. We seek also an assurance that the Prime Minister will stand by these same principles that he has enunciated.
  Last night the Secretary of State for Industry had the gall to speak of a yawning gap. No gap yawns more widely than the gap between the Prime Minister and the Chancellor and the views expressed by some members of the Cabinet, not least the Secretary of State for Energy. We wish the Chancellor well in seeking to bridge that gap, because it is important for the sake of the nation that he should. We hope that he can count on the Prime Minister's support in seeking to bridge that gap, because that is important. But, because we have no confidence in the Government as a whole and in the capacity of the Chancellor surrounded by those colleagues to reconcile Socialist doctrine with the needs of the nation, I invite the House to support the amendment.
  4.8 p.m.
  The Chancellor of the Exchequer (Mr. Denis Healey): When we last debated the economy on 11th October, I drew the attention of the House to the deterioration in the world economy since the summer. In the seven weeks since then, a growing harvest of economic statistics shows that the dimension of that deterioration is even greater than we believed at that time.
  Not all the figures for the third quarter are yet available, so there is some room for a difference of view. But it already seems clear that, whereas in the previous 12 months industrial production in the

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  OECD area as a whole had been rising at an annual rate of about 10 per cent., in the third quarter of this year it rose at less than half that rate, and there has been growing concern among Governments and informed commentators all over the world about this pause in recovery.
  The prospects for employment and activity all over the world now look a good deal weaker than they were then, and there is a common concern lest they be weakened still further by an increase in the price of oil.
  If we focus our attention on Western Europe, the picture is seen even more clearly. As Eurovision points out in its current number, investment was barely getting under way when the stock markets fell through the floor while interest rates all around Europe went through the ceiling. The balance of payments over most of Europe has now fallen into deficit, and the latest figures for unemployment published by the European Commission last week show unemployment rising in Belgium, Denmark, Germany and France. In Britain, although unemployment seems recently to have levelled off, the prospect, as the Prime Minister told the House last week, is for some further increase in the coming year. Many other countries all over the world face a similar prospect.
  There must still be deep uncertainty about the prospects for world growth in the next 12 months, although the general view is that recovery will resume, though at a lower pace than expected last summer. But there is universal agreement that significant growth will not take place in the rest of the world unless the three strongest economies—the United States, Germany and Japan—take the lead. Fortunately, this responsibility is recognised in the three countries concerned. They do not share the view expressed by the right hon. and learned Member for Surrey, East (Sir G. Howe) that it is possible to pursue national interest with no regard for the welfare of the world in which one's nation has to live.
  I stress the international context within which Britain's economy must operate, because it must set the framework within which our own performance must be judged and fix the limits within which it can be improved. It is now possible to
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  see more clearly the shape of the summer pause in our recovery. We looked to exports for the main increase in demand, but the volume of our exports fell 3 per cent. in the third quarter as a whole, although there has been some recovery in the past two months. Imports remained about constant. Industrial production fell by about ½ per cent.
  Our gross domestic product was sustained in the third quarter by some rise in consumption following the payment of the income tax rebates and a levelling out of the decline in stock-building. Nevertheless, in both the second and third quarters of this year, our gross domestic product appears to have been rising at a rate of under 2 per cent. a year.
  Some special factors played their part. The summer weather and changes in holiday patterns affected production in some industries, and the installation of North Sea equipment during the summer kept up import volumes. Nevertheless, it is difficult, even given the slowdown in world recovery, to explain what happened to our exports since they have never been more competitive and profitable for British manufacturers. This is recognised by the CBI and every manufacturing firm in the country.
  Mr. Nicholas Ridley: The Chancellor will recall that in the last public expenditure White Paper he based his plans for spending on a 3·5 per cent. average growth rate. Now that he has admitted that it is 2 per cent. or slightly under, has he similarly cut his plans for public spending?
  Mr. Healey: I think that the hon. Gentleman was awake once or twice during our debates in the past year, and he will know that last July we revised our plans for public spending.
  It may be that official statistics exaggerate this failure, since they are not easily reconciled with evidence collected by the CBI from its members, but it would be unwise to bank on that Unfortunately it is difficult to estimate the nature of our export performance in the coming year while we are still uncertain about the nature and causes of our poor performance during the summer. This is one of the many uncertainties which, as I have told the House before,

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  make economic forecasting as unreliable as long-range weather forecasting.
  On the other hand, on top of the increase in employment in manufacturing industry which began in the summer—it went up over 60,000 between the second and third quarters of this year—the latest figures suggest that capital spending by manufacturing industry has also begun to improve. Investment by manufacturing industry rose about 2 per cent. between the second and third quarters of this year and spending is now almost 3 per cent. above the low point during the first quarter.
  The prospect for the future is brighter still. In its most recent economic report, on the basis of information collected after the sharp rise in interest rates, the CBI—a body which hon. Members opposite regularly smear—forecast a rise of 15 per cent. next year.
  In other respects, however, the outlook for 1977 remains exceptionally uncertain, as is demonstrated by the wide range of projections in some of the published unofficial forecasts. The right hon. and learned Gentleman referred to some of them. Only one thing is fairly certain—lower growth than was expected last July.
  The depreciation of sterling since the summer will keep inflation at something like its present level well into the coming year and this, in itself, will tend to depress home demand. Moreover, although we can expect the lagged effect of depreciation to produce a substantial improvement in exports and import substitution next year, if world trade fails to grow at the rate forecast earlier in the year, external demand is also likely to be lower than expected. Together, these factors make it likely that, unless world trade improves, the growth in our GDP next year may be only half as high as we expected in July.
  But it is difficult to estimate the precise effects of lower growth on other elements in the economy. The right hon. and learned Gentleman asked me to give some views on this. For example, the National Institute in its latest Economic Review, while assuming lower growth next year than most other forecasts, believes that unemployment is unlikely to rise in consequence because there will
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  be much more work sharing and thus that productivity will not rise at its trend rate—if it rises at all. This is one reason why its forecast of the PSBR next year is a good deal lower than others would assume on the same assumptions—although the National Institute admits that not much attention should be paid to its PSBR forecast.
  At the same time, the National Institute assumes a much greater improvement in the terms of trade than is easily explained. So it forecasts a substantial and growing surplus on the balance of payments, and argues against any resort to temporary import restrictions to hasten the return to current balance.
  I have referred to the new forecast by the National Institute to illustrate the exceptional uncertainty of the outlook for the coming year and the fragility of the assumptions which forecasters are obliged to make. But, as I have said, there can be little doubt that demand at home and abroad will be substantially lower next year than anyone could have expected a few months ago and that output will therefore be lower, too.
  Against this background, there has been a welcome change in the tone of some at least of the Government's critics. A few newspapers are still asking for a massive further deflation of the economy through cuts in public expenditure of at least £5 billion in the coming year, but I notice a significant caution in the right hon. and learned Gentleman's speech on that point this afternoon, compared with some of the speeches to which he treated us earlier this year. As I pointed out in my speech at the Mansion House last month, a massive and immediate deflation of this nature would bring a fall in living standards of some 10 per cent. or more, generated largely by an increase in retail prices, and would reduce our national output by some 5 per cent. compared with what it would otherwise have been. It would mean a massive increase in unemployment. I ask the House what I asked my City audience on that occasion. How many hon. Members, apart from the right hon. Member for Leeds, North-East (Sir K. Joseph), really believe that this could happen without widespread industrial disruption, a wage explosion and a collapse in confidence throughout the economy?

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  I am glad to see that some of the Government's critics at any rate have now become more moderate in their demands, and in this they are echoed by both sides of industry. Indeed the new Director-General of the CBI has made it clear that his organisation does not support the calls for further deflation. It wants measures which would have a broadly neutral effect on demand. The CBI put this point strongly to me when we met in the Treasury last Friday.
  What is needed at the present critical moment in Britain is a programme which will bring the economy into balance at a pace which will not overstrain the national consensus on which all hope of industrial progress and recovery must depend. We must think in terms of a stabilisation programme covering at least two years, perhaps three. If this is the meaning of the Liberal Party's amendment, then I welcome it.
  The immediate problem, however, is to regain control of the pound sterling. As I pointed out in the last debate, there has been in recent months a continuous and malignant interaction between expectations about the growth in the money supply and movements in the exchange rate. It is no use regarding such financial or monetary factors as somehow irrelevant to the real economy. That was the tragic error made by the last Government, as I think most of their survivors would now agree.
  The painful measures which the Government took last month to tighten credit already have had a marked effect on the growth of money supply, although excessive bank lending in October robbed us of the full effect we could otherwise have expected from the massive sales of gilts which followed. That is why we decided a fortnight ago to reintroduce the Supplementary Special Deposits Scheme and to end the provisions under which banks in Britain are able to lend money for financing trade between third countries. Besides making more credit available for British industry within the strict limits now set on bank advances, the latter measure is expected to bring a gain of some £500 million to our capital account in the coming year.
  But the foundation of any programme for stabilising our economy must be the re-establishment of confidence in sterling. We have seen a useful improvement here
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  over the last few weeks, and I doubt whether this is due to the delivery, bound and gagged, of the hon. Member for Blaby (Mr. Lawson) to the Opposition Whips' office).
  I believe that the successful conclusion of our application for further facilities from the International Monetary Fund will consolidate that improvement, particularly if it is accompanied, or followed closely, by an international agreement to deal with the problems created by our sterling balances.
  Mr. Tim Renton: Does the Chancellor agree that the effect of the application is likely to be a corset which will be so tight that there will be only a 1·2 per cent. growth in the banks' eligible liabilities over the next five months? Therefore, private industry may find itself very short of capital borowings from the banks in the next year or so. Secondly, has he made any estimate of the loss of invisible earnings as a result of the measures designed not to use sterling for trade with third countries?
  Mr. Healey: On the first question, I agree that it will be restrictive, but the ending of the facility for financing trade with third countries means that that amount more will be available for industrial lending. Very strict instructions have been issued to the private banks to give priority to industrial lending. A small increase in manufacturing industry this year has been shown already in the figures I have given. It is not possible to make an assessment of the loss of invisible earnings next year, but it is possible to estimate the gain to our balance of payments. This is expected to be £500 million, which is very worthwhile in the present situation.
  The House will not expect me to comment this afternoon on the discussions which are taking place with the Fund staff. But it may be useful if I describe the spirit in which the discussions are taking place and the framework of policy established for the decisions which the Government will take.
  First let me give the lie to some of the feverish imaginings which have filled the recent pages of some newspapers, which have no objective but to bring the Labour Government down by fair means or foul.
  There is no question of the International Monetary Fund seeking to

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  impose on Britain a massive dose of deflation such as some of our own newspapers—and, I suspect, the Conservative Party, are demanding. Nor is there any question of the Fund seeking to force a fundamental change in the direction of the present Government's policy. On the contrary, we have been assured again and again that the basic thrust of our policy is right—to base our recovery on exports and investment, not on an artificial boost to domestic consumption like that brought about by the last Government in 1972 and 1973. Moreover, the Fund agrees with the Government that, providing our industry takes advantage of the competitivity given it at home and abroad by the recent depreciation of the pound, our balance of payments should be in surplus on current account in 1978. The purpose of the Fund drawing for which we have applied is to help in financing our external deficit until that time comes. It is, if one likes, a bridging loan.
  Moreover, the Fund gives much more credit to the efforts of the British Government and people than unpatriotic hon. Members opposite. I was asked by one of my European colleagues the other day how I could explain the behaviour and attitude of the Opposition at a time when the British Government are negotiating with the Fund. I found that quite easy to explain.
  Mr. Michael Grylls: Is the Chancellor telling the House that the IMF has told him that the Government's economic policies are right? Is he saying that there will not be any more cuts in public expenditure?
  Mr. Healey: No, I am not saying that. I am coming to that in a moment.
  Moreover, the Fund gives the same importance as the Government to the two pillars on which our economic policy is based—the social contract with the trade union movement which has given us one of the lowest increases in wage costs in the world and has brought about a dramatic transformation in industrial relations; and the industrial strategy through which the Government, the trade unions and the employers are seeking to
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  improve the performance of our manufacturing industry.
  I have heard no echo in any of my discussions with the Fund of the view so loudly trumpeted by the Conservative Party that the social contract is a fool's bargain. Quite the reverse, they regard it as the keystone to our recovery and have already recommended other countries to follow our example. Indeed, the social contract and the industrial strategy together are the only bases on which Britain can hope to receive those structural improvements in her economy to which Congressman Reuss, Chairman of the House Committee on Finance, referred so rightly in his radio interview last night.
  Again the Fund recognise the immense progress which has been made by the Treasury in the last 12 months in establishing effective control of public expenditure and our determination to make the limits stick. Their concern, like that of the Government, is that the problems of financing our external and internal deficits should not again disturb our steady progress towards our goal as it has done in the last six months; but they do not believe, as some of the domestic critics of the Government appear to do, that the achievement of financial balance is possible at once. They recognise that we need a two or even a three-year stabilisation programme—although they would not be so ambitious as to pretend that forecasting over a three-year period is accurate enough to permit the programme for the last year to be drawn except in the broadest order of magnitude.
  Finally, and here again we are at one with the Fund staff, they are as anxious as we are to ensure that any adjustments on, which we now decide should be sufficient to do the job, that we should not have to take another bite at the cherry. On all these issues there is no division between the Government and the International Monetary Fund.
  Mr. Nicholas Fairbairn: If, as the Chancellor of the Exchequer says, the Fund takes the view that his economic policies are correct, how is it that the majority of the Cabinet apparently are against him and the Fund? Is it that it does not think that the policies are correct and that

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  the Fund is wrong? What is the position? If the Fund thinks he is a genius, why do not the rest of the Cabinet share that view?
  Mr. Healey: The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) never ceases to astonish me or, I suspect, his right hon. and hon. Friends. I would have thought that an hon. and learned Member of his vast experience and acute intelligence would know better than to believe stories which he reads in Conservative newspapers.
  Mr. Skinner: My right hon. Friend has carefully explained the way in which the negotiations have taken place about the massive cuts in public expenditure. Why did he say that there would be no need for another bite at the cherry? When he talks about loans as distinct from another cut in public expenditure per se has he forcefully explained to the IMF that another 100,000 on the dole would,at current prices, represent an extra £400 million on the public sector borrowing requirement? That is an enormous sum.
  Mr. Healey: My hon. Friend made an interesting intervention which he will no doubt expand if he catches Mr. Speaker's eye later in the debate. His last point was relevant—the effect of unemployment on the PSBR. The Fund recognises that it will have a powerful effect. Its broad estimate is that under-capacity working and unemployment in the current year is responsible for between one-third and one-quarter of our whole public sector borrowing requirement. Moreover, any increase in the PSBR next year over what we expected in July—if it takes place—will be three-quarters due to the increase in unemployment which might follow the lower growth rates.
  But, as I have said, it is very difficult indeed to predict how growth will affect unemployment at a time when unemployment is already high. As my hon. Friend knows, the National Institute has estimated that although growth will fall further next year than I believe itwill, there will be no increase in unemployment at all. That is the reason why the National Institute estimate shows such a low PSBR.
  I now come to the issue about which hon. Members are so anxious. The ques-
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  tion which remains is not one for the IMF. It is for the British Government alone to decide the size, nature and phasing of the adjustments required to bring our economy into balance in time. When we have taken our decision, the IMF will have to decide whether we have decided wisely. But the decision is so important, and the problems and uncertainties we face in taking it are so great, that I make no apology for taking the time required to get it right.
  Other countries are finding exactly the same difficulties in deciding what adjustments should be made to meet the unprecedented uncertainties of the coming year. That is particularly true of the countries which I mentioned earlier to which the rest of the world must look if we are to ensure that the world recovery does not spend its force even before it is properly under way. I speak of the United States, Germany and Japan. We have, however, some special problems and I would like to mention some of them. [Interruption.] The wit on the Benches opposite almost baffles the imagination.
  First, we inherited a massive balance of payments deficit in 1974which was thereafter swollen by the stupendous increase in oil prices. We have made substantial progress already in dealing with this problem. Between 1973 and 1975 Britain transferred 3 per cent. of its GDP into the balance of payments. But over the same period the deterioration in our terms of trade caused by the increase in oil prices and of other import prices was equivalent to a shift of 2½ percent in the other direction. So the net gain to our balance of payments over that period was equal to only about ½per cent. of our gross domestic product.
  In spite of the depreciation of sterling, our terms of trade have been fairly stable so far this year. While this continues we shall get the full benefit of the resources we managed to shift into the balance of payments. But we hope to see a substantial increase in the volume of our exports over the coming year—this is what we need to get unemployment down—and this is likely to require some reduction in their relative prices which could well be afforded out of current profit margins.

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  Moreover, there are already signs that the level of import prices is at last beginning to reflect the recent depreciation of the pound. We shall probably see some deterioration in the coming year and have to shift rather more resources into the balance of payments next year than indicated by the size of our current deficit.
  The second problem I should mention is the balance between public expenditure and taxation. It is now accepted by our friends abroad that as a percentage of GDP our public expenditure is well in line with that of other countries. The new definitions of public expenditure which I have recently announced and which the Select Committee has accepted as reasonable not only make financial control a good deal easier but also bring our definition more closely in line with that used by other countries.
  The new treatment of nationalised industry expenditure and of debt interest, as the House knows, gives our public expenditure this year as 51·5 per cent. of GDP. But, many other countries appear to exclude from their Budget figures that part of social security benefits which is financed by contributions. If we did the same, our current total of public expenditure would be further reduced to around 45 per cent., at factor cost, and if, like Germany, we expressed our GDP at market prices, then the current percentage of GDP taken by public expenditure would be close to only 40 per cent.
  So the picture of a profligate public expenditure as ignorantly presented by Professor Milton Friedman and fatuously echoed by the Conservative Party bears no relation to the facts. Indeed, in 1975, the last years for which we have figures, the United States spent 8·3 per cent. of its GNP at market prices on social security, compared with 8 per cent. for the United Kingdom.
  Mr. John Nott: If public expenditure is as prudent as the Chancellor of the Exchequer makes out by these new definitions, why do interest rates have to be at 15 per cent. to finance it?
  Mr. Healey: I am delighted to see that the hon. Member for St. Ives (Mr. Nott) is following the argument because
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  that is the next point to which I am about to address myself. It is a pleasure to know that he is not sleeping during my speech in the way in which the right hon. Member for Sidcup (Mr. Heath) was sleeping during the speech of his right hon. Friend.
  This is only half the story. The sensible changes that we have made in presenting the figures for public expenditure do not in themselves affect the actual size of the public sector borrowing requirement or the taxation requirement for which provision has to be made in the Budget, since the Budget arithmetic already takes account of the self-financing of the nationalised industries and of the receipts which can be offset against total debt interest payments. Therefore, the new definition of public expenditure does not affect the public sector borrowing requirement or the taxation requirement.
  Unless we act to reduce the size of our PSBR we are likely to find that we can finance it only by keeping interest rates at levels which, if they persist for any length of time, will gravely damage our industrial strategy. Also, I must warn the House that it is impossible to establish a simple and direct relationship between interest rates and the PSBR and industrial investment, since so much depends on the general state of confidence at any time. On the other hand, it is immensely difficult to forecast the likely size of the PSBR since, as the National Institute points out, it is the residual between very large flows of money indeed.
  However, in the midst of all this uncertainty, I believe that there is one thing that we have all learned by the experience of recent years. As the Prime Minister said at Blackpool,
  "We used to think that you can just spend your way out of the recession and increase employment by cutting taxes and boosting Government spending".
  That was the route taken by our predecessors in 1973. I believe that the Prime Minister was right to add that
  "That option no longer exists and that in so far as it ever did exist it worked by injecting inflation into the economy and each time that happened the average level of unemployment has risen."
  We must, therefore, aim at a steady and continuous reduction in the size of

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  our PSBR. But there is at least one field in which that reduction cannot be sought—an increase in direct taxation. I believe that the level of income tax is already dangerously high and is already doing real damage to our economic performance, particularly through its effect on those at each end of the earnings ladder. There is a very strong case for tackling the problem of the overlap between wages and benefits. The right hon. and learned Gentleman asked me to express a few thoughts on this matter, so I shall.
  As I have pointed out on many occasions, the whole burden of economic sacrifice is at present being carried by those in work. They have limited their wage increases to a level only half as high as inflation during the previous year, and they are taxed on those increases at 35 per cent. Those on benefit have been protected against inflation by the automatic indexing of their benefits—and short-term benefits are not taxed. The result of this is that to get £5 more in work than out of work a married man needs to earn more than £65 a week if he has two children, and more than £70 a week if he has four. There are many parts of the country, including that which I have the honour to represent, where these levels of earnings are above the average.
  I fear that the current overlap between benefits and earned income, besides its disincentive effect on those in work, is fuelling a backlash among the low-paid against the whole concept of the welfare State and creating the wholly unwarranted impression that people on benefit are in some sense scroungers. It gives me no pleasure to record that some Conservative Members have felt it right to exploit this feeling without shame or scruple. I think that the whole House should be disgusted with them.
  On the other hand, I believe that the social and political implications of this backlash should be a real cause for concern on both sides of the House. It is one of the many reasons for seeking to reduce the burden of direct taxation. This is another of the major problems which the Government must consider before they take their final decision on what adjustments are required to meet our current economic situation.
  Mr. Sydney Bidwell: If the International Monetary Fund is
  718
  not worried about the current level of public expenditure in Britain, especially in so far as it affects social security benefits and National Insurance benefits, why are we mucking about with the Social Security (Miscellaneous Provisions) Bill on Thursday, which will lead to depriving pensioners at the age of 60 of the right to unemployment pay, which for a year involves, in all, probably about £8 million net? Why are we mucking about with matters of that kind?
  Mr. Healey: The Government are deeply concerned about the size of the PSBR. I made clear in July the necessity for the decisions that the Government then announced, some of which have still to be made operational through legislation. I put it to my hon. Friend —no doubt I shall find out later how far he agrees with me—that to refuse unemployment benefit to these particular categories of people who get super-annuation benefit early is socially by far a less damaging way of seeking to bridge a little part of this gap.
  Decisions on direct taxation, of course, will be possible only in the spring Budget. Moreover, it will be impossible to take such decisions until the shape of the third pay round is known. The Government believe—the Prime Minister said so the other day—andso does the TUC, which stated so in a composite resolution passed at its Congress, that it will be essential to continue the attack on inflation after the second pay round ends next summer in ways which will permit greater flexibility in wage bargaining than has been possible in the first two rounds. I hope it will be possible to reach decisions on this matter in time for them to be reflected in the income tax provisions of the next Budget. Moreover, if in the meantime the figures show that we have over-estimated the size of the adjustment needed to bring down the PSBR to the right level next year, the necessary demand can be fed back into the economy by income tax reliefs next spring.
  I have tried to give the House some idea of the way in which the Government are approaching the problem they now face in adjusting their economic policy to meet the changes in the situation which we now perceive. I do not pretend that these adjustments will be painless. On the contrary. But I hope that I have said

  719
  enough to indicate that some of the horror stories in the newspapers recently bear little relation to the truth.
  In our approach to these difficult questions, we shall be guided as always by the paramount need to give priority to our manufacturing industry and to maintain the relationship with our trade unions which is the foundation of so much that we have achieved since we took office.
  Mr. Brian Sedgemore: I have been listening to what my right hon. Friend has been saying about income tax, but I am not sure whether I have been following him. Is he telling the House that there will be a shift in our taxation system from direct to indirect taxation? Given that the progressive nature of the direct taxation system is largely offset by the regressive nature of the indirect taxation system, what, apart from a psychological boost, is the merit in that?
  Mr. Healey: First. I am not suggesting anything of the nature of what my hon. Friend has put to me. However, in commenting on his intervention, I would make this very important point, which I hope that the House will recognise. It certainly was true 30 years ago that, broadly, indirect txation was regressive and income tax was progressive, in the social sense. That is no longer true when income tax is paid at levels of earnings below those which qualify for supplementary benefit. It cannot really be regarded as a progressive tax. On the other hand, the structure of the value added tax, which zero rates half—the most important half—of family expenditure, can be shown to be in many respects progressive rather than regressive. If my hon. Friend cares to send me a letter, I shall be glad to explain this point to him in greater detail.
  I suppose that I should now turn to the right hon. and learned Member for Surrey, East, who opened the debate. He seemed to regard me as the Demon King. I should rather be the Demon King than either Buttons or the Widow Twankey. I think that the right hon. and learned Gentleman deserves at least a friendly cuff for all the work he obviously put in on his speech, though I confess that I
  720
  find it a little less attractive each time I hear it.
  I fear that neither the House nor the country will be able to take seriously any views that the Conservative Party express from time to time on economic policy until we have a little more clarity on what precisely the Opposition would do to meet our nation's problems and a little honesty about the implications of their policies for ordinary men and women.
  Let us take incomes policy, the key to any attack on inflation. The confusion that they have created over their attitude to incomes policy has never been so complete. According to the Financial Times, the right hon. Lady the Leader of the Opposition gave a pledge in Prestatyn on Friday that a future Tory Government would never introduce a statutory incomes policy. The right hon. Member for Worcester (Mr. Walker) told "The World At One" yesterday that he could only assume that the quotations made from the right hon. Lady's speech cannot be correct, or if they were, they were said off the cuff and will not be repeated.
  On Friday last week, two members of the Shadow Cabinet were quoted in the Financial Times as rebuking their leader. Well, what did the right hon. Lady say? I cannot say that she threw much light on the subject by her intervention in answer to my right hon. Friend the Secretary of State for Industry last night. She then refused to confirm or deny the report of what she had said at Prestatyn.
  Mrs. Margaret Thatcher: I told the right hon. Gentleman to check it.
  Mr. Healey: The right hon. Lady refused to confirm or deny the report. Perhaps the right hon. Lady will now confirm or deny the report in the Financial Times.
  Mrs. Thatcher: I am interested that no member of the Government checks what he says before he says it. The word "never" was not used.
  Mr. Healey: It seems that the right hon. Lady did not say that at Prestatyn. She confirms that. This is what my right hon. Friend asked her to confirm or deny last night. It seems that she did not say

  721
  that a statutory policy would never be introduced by a Government whom she leads. I am glad to hear the right hon. Lady say that will never say never again" again, or never said "never" last time.
  Last night the right hon. Lady said:
  "I said during the passage of the Bill … last year that I do not believe in a statutory incomes policy."—[Official Report. 29th November 1976; Vol. 921, c. 610.]
  She did not say last night that she would never introduce one. She went on to say that she did believe in a voluntary incomes policy. What a great triumph it was to get that confession out of the right hon. Lady after the days and nights of debate during which we tried to find out the Opposition's view.
  I wonder whether the right hon. Member for Leeds, North-East shares the right hon. Lady's view. Does he believe in a voluntary incomes policy? If the right hon. Lady believes in it, why was the phrase never used in the document entitled "The Right Approach", which was circulated at the last conference of the Conservative Party? I shall not weary the House by reading out the lucubrations by which the Conservative Party sought to avoid any commitment on incomes policy for or against.
  Mr. Peter Rost:: The Chancellor promised earlier that he would explain why he has put up the rate of interest to 15 per cent., why it is now damaging industry and what he is going to do to get it down.
  Mr. Healey: I can see that the hon. Gentleman wants to change the subject, but he must know that I dealt precisely with that problem. I shall stick where I am
  Mr. Skinner: You do that.
  Mr. Healey: I shall take the advice, as always, of my hon. Friend. Perhaps not "as always" but one time out of four or five.
  The one thing that is absolutely clear about the right hon. Lady is that she believes in dodging issues that are liable to cause her trouble in keeping together the two wings of her party. What is more serious than this type of equivocation is her refusal to be honest with the country about the consequences of
  722
  the massive cuts in public expenditure to which she has committed herself. When she was asked by Mr. Julian de Havilland on 4th October whether she would accept a large increase in unemployment as a result of her massive cuts in the public services, she replied:
  "No. A very, very small increase would be incurred."
  She went further the same night in telling Mr. David Holmes:
  "We've been through cuts before. Don't you remember the last Labour Chancellor that put on cuts, Roy Jenkins? They didn't hurt that much."
  Let me tell the right hon. Lady to take the advice of the right hon. Member for Sidcup, who pointed out to her at Brighton that cuts do hurt, that civil servants have wives and families, too. To pretend in public on television that the sort of cuts—[Interruption.] I have always said that cuts are painful. I have never denied it. To pretend that cuts on a vastly greater scale, such as the right hon. Lady insists upon continually, will not hurt is a dishonesty that disgraces her present role as Leader of the Conservative Party.
  The plain fact is that the transient impression that the right hon. Lady has a policy, which was so sedulously cultivated by the professional image-makers at Brighton a few weeks ago, is already fading into thin air, like the equally transient impression of her reconciliation with the right hon. Member for Sidcup. I ask the House to reject the right hon. Lady's amendment with the contempt it deserves.
  5.57 p.m.
  Mr. David Steel: The Chancellor of the Exchequer said some important things about the requirement of the IMF for a national stabilisation programme over the next two or three years. I shall respond to what he had to say on that subject, but before I turn to today's debate on the economy I point out that it is the tradition that the winding-up speech in this debate is made by the Leader of the House, who deals with the programme for the year ahead. I wish to address two side remarks—none the less they are important—to the right hon. Gentleman so that he may deal with them in his reply. I hope that he will not choose to stand aside from these remarks by saying that

  723
  they are matters for the Patronage Secretary.
  First, I shall say a word or two about the way in which we conduct our affairs in the House, or how they were conducted during the previous Session. I refer especially to pairing arrangements. I address these remarks to both Front Benches. It is time that the House came to accept that there are nearly 40 Members who do not take the Government or Opposition Whip. It is a pretty scandalous state of affairs that Members, be they Ministers who have to attend important international meetings, members of Select Committees, or members of international delegations, are constantly interrupted in the duties that they have to perform on behalf of the House because of the lack of comprehensive and sensible pairing arrangements. It does us no good to have sick Members being dragged in here from time to time. Both the Government and Opposition Benches must accept some of the blame.
  The fact is that the Government and the Opposition will not extend pairing facilities to Members who do not take their Whips. Last week, for example, my hon. Friend the Member for Inverness (Mr. Johnston) and the hon. Member for Moray and Nairn (Mrs. Ewing) had to leave their places in the European Assembly to come back here to vote. [HON. MEMBERS>: "Shame".] I think it is a shame. I think it is disgraceful. Such Members are appointed and sent to the European Assembly to carry out their functions. There are some Labour Members who may disapprove of the European Assembly, but they have as much right as Members of any other party to reasonable consideration in the carrying out of their duties. I hope, therefore, that the Leader of the House will make sure that the arrangements for this Session will be more sensible, will enable Ministers to carry out their duties and will' reflect greatly to the credit instead of the discredit of the House, as occurred during the past Session.
  Mr. Norman Buchan: I am surprised that the hon. Gentleman should refer to the hon. Members for Inverness (Mr. Johnston) and Moray and Nairn (Mrs. Ewing). Surely it was a disgraceful episode that they
  724
  should come over specially to vote against the Scottish workpeople in the shipyards.
  Mr. Steel: The hon. Member for Renfrewshire, West (Mr. Buchan) should be above that sort of comment. I am making a general point. We shall have our political differences in the House. The pairing arrangements are intended to ensure that the arithmetic at the end of the day is exactly the same whether hon. Members are elsewhere conducting their business on behalf of the House or present in the Lobbies. All I ask is for some rethinking about the way in which we conduct our affairs.
  It is certain that the bulk of the coming Session will be taken up with the devolution Bill. My party has a distinguished record on devolution, but when I was arguing inside my party recently that we should at least support the Government on the principle of the Bill on Second Reading, one of my hon. Friends, perfectly fairly, said "What principle is there in the devolution Bill published by the Government?"
  The Bill proceeds from expediency and not from principle, and it is defective in many respects. The Leader of the House must not count on support from the Liberal Bench for the passage of the devolution Bill through Committee and on Third Reading unless the Government think again about the absence of devolution proposals for England, about the fact that they are creating representation without taxation—which is a recipe for conflict—about the fact that they have ignored the unanimous recommendation by the Kilbrandon Commission for a representative electoral system in Scotland, and about the fact that they have compounded their folly by creating multimember constituencies without changing the electoral system. They have given inadequate powers over industry and the economy.
  The hon. Member for South Ayrshire (Mr. Sillars) is right to reflect on the Labour manifesto. The Government propose to continue the over-representation of Scotland in the House of Commons. I sympathise with hon. Members representing English constituencies who strongly resent that.
  An opinion survey, published in the Daily Record—not by my standards a

  725
  scientific poll—eliminated the federal proposal. It presented readers with a straight choice between the Government package and total independence. Presented with that straight choice, 44 per cent. were driven to declare for independence. The Government should take that result very seriously. Unless they get the package right and create a rational and logical basis for devolution, they will create more trouble instead of finding a solution.
  Mr. W. R. Rees-Davies: Does the hon. Gentleman also adopt the view expressed by his former leader that two separate Bills, one for Scotland and one for Wales, should be published? Many of us think that that would be the proper course.
  Mr. Steel: Yes, I wholly support that view. We have pressed for it all along. The Bill published this morning is a dog's breakfast. Two nations are dealt with in two different ways within the one Bill. That in itself is a recipe for conflict.
  I turn to the amendment before us. It is instructive to see from the Order Paper the fundamental difference between the Conservative Opposition amendment and the Liberal amendment to the Address which has not been called. The Conservative amendment is identical to ours except that it leaves out everything positive. It stops at the end of the first sentence. I shall argue our solution in a moment. It may not be the right solution, but at least we put forward positive suggestions, whereas the Opposition ask us to accept a blank cheque —that there is no confidence in the economic policies of the Government without putting anything in their place.
  We in the Liberal Party—I suspect that we reflect the mood of the country—have no confidence in the official Opposition, who have put forward no alternative policies. Time and again we are told what the Conservative Party is against. As we have just been reminded by the Chancellor of the Exchequer, we were told within the last day or two that the Conservatives were against a statutory incomes policy, although after the exchanges this afternoon it seems that that firmness is not quite so resolute as it was reported to be.
  726
  If the Leader of the Opposition goes on record as being against a statutory incomes policy, she will be following the distinguished record of Leaders of the Opposition who have been against a statutory incomes policy. Both the right hon. Members for Sidcup (Mr. Heath) and Huyton (Sir H. Wilson) in their time as Leaders of the Opposition expressed themselves as being against a statutory incomes policy and lived to repent of it.
  If the Leader of the Opposition is arguing, as she did last night, in favour of a voluntary incomes policy, does that mean that she supports the social contract? That, I understand, is a voluntary incomes policy. If she does not support it, does she expect the House and the country to believe that she would get a better social contract than have the Government out of the trade union movement?
  I, too, believe in a voluntary incomes policy. It would be nice to have it, but we can have it only by building the political stick of a possible statutory incomes policy when we negotiate for a voluntary incomes policy. A voluntary incomes policy can work only if it has the wholehearted support of Parliament as a whole and not just of the governing party.
  The Opposition say that they are against the National Enterprise Board and its associated agencies. Although I may not necessarily agree with the way in which the Government operate the agency, the record, under both Conservative and Labour Governments, of the lack of industrial investment in essential places is so obvious—it has been spoken about by Conservative and Labour Ministers time and again—that it is clear that some agency is required as an instrument of Government to steer industrial investment. By saying that they would scrap the NEB and its associated agencies the Opposition are adding to the impression that we operate politics as a seesaw and that whatever one Government do will be undone by the next incoming Government. That is against the national interest.
  The Opposition tell us that they are against public expenditure at its present level, but they are never specific as to where and by how much they would cut it. Am I to go to my local authorities, complaining as they are about the present

  727
  requirements for cutting local authority expenditure, and tell them that if the Conservatives were in office the cuts would be even more Draconian? If that is not what I am to tell them, what is the alternative method by which the Conservatives would cut public expenditure?
  If the Government do not act in the national interest, the right course is to have a General Election, but we should be under no illusion: a third General Election in three years can hardly be described as in the national interest: nor would it give the impression that we are capable of organising our affairs.
  Our amendment refers specifically to the Government's record during the past Session of Parliament. The figures given in the amendment are based on what was the position when we were debating the Queen's Speech a year ago. Since then, we have had a 20 per cent. devaluation of the pound, an increase in unemployment from 1,168,000 to 1,377,000, an increase in the annual rate of inflation from 14·8per cent. to 19·7 per cent., and an increase in overseas borrowing from £4,000 million to over £7,000 million.
  We go on to call on political leaders to produce a programme of national recovery for the remaining three years' life of the present Parliament. In saying that, I echo what was said yesterday by the hon. Member for Berwick and East Lothian (Mr. Mackintosh). He said that he hoped that the Cabinet was not thinking what some people were thinking:
  "that is, What package can we get through the Labour Party?
  That is not the correct question. Ministers should ask, 'What will meet the problems of this country?' If a package is produced to meet the needs of the situation there will be a majority for it in this House."—[Official Report, 29th November 1976; Vol. 921, c. 557.]
  I very much agree with what he said. It echoes one of the understated arguments in favour of the reform of the electoral system. I am not talking about fairness to minorities. It is difficult for any Government who at the last election commanded the support of only 28 per cent. of the electorate to address themselves to the national need and to the other 72 per cent. who did not support them at the polls.
  The Chancellor of the Exchequer said that representatives of the IMF are visit-
  728
  ing London. It is true that they are inspecting the books and that they have a closer view of the books than anyone in the House, outside the Treasury and the Cabinet, but the books do not tell everything, and the IMF representatives will not discover everything from looking at the books. They are entitled to ask about how we manage our affairs as well as about management matters and to ask what the management of this country is like at present. I am afraid that they may conclude—and they would be right —that in recent years that which has been economically necessary in this country has been fundamentally almost politically impossible. We have had, during the past year, four Budgets or the equivalent of Budgets, if we include the massive increases in interest rates, and we are about to have a fifth, presumably, within the next few weeks.
  I should have thought that it was common ground in every part of the House that a far greater proportion of our national resources should be allocated to industrial investment. But that requires far greater industrial confidence than we now have in the future of our economy and its handling. It is for that reason, to boost confidence both at home and overseas, that my colleagues and I believe it necessary to produce a programme of national recovery.
  I do not think that the Government yet fully understand just how precarious their position appears overseas. They are seen as dependent upon the vote in this House of one Irish Republican publican. When the Labour Party conference passes resolutions about public ownership of banks and insurance and when the Labour Party executive decides to back demonstrations against Government policy, these things are not studied in great detail overseas. This Government are simply seen as having their backs to the wall and as weak.
  I was in the United States of America at the time of the Labour Party conference. Time and time again I had to give broadcast and newspaper interviews to explain that the Labour Party conference was not the Labour Party. Why should I have had to do the Government's work? It was necessary and it was an uphill task.

  729
  The Government must accept that they are in a very weak position. In my short experience as Liberal Party Leader I have found in both Europe and America general astonishment that the party leaders in this country meet in only two circumstances: publicly to exchange insults across the Dispatch Box, and socially to exchange pleasantries over drinks. There is astonishment that while party leaders may get together to discuss the grave situation in Northern Ireland and issues of national security, the economy is never on the agenda and even the National Economic Development Council is closed to the views of opposition parties. This information is greeted with astonishment overseas.
  Investment decisions taken by industry must be made against a hopeful background of a five-year or 10-year projection. It is difficult to take such decisions against a background of political uncertainty which is often destructive to the national economy. If we were to attempt to form a programme of national recovery, it should contain six elements.
  First, it is necessary to establish agreement on the proper boundaries between the public and private sectors in the economy and the rôle of the National Enterprise Board. I accept that there may be from time to time pragmatic arguments in favour of public ownership, as indeed the Tory Government found in the case of Rolls-Royce. But there is no case for continuing the dreary battle that has bedevilledus since the end of the war about the doctrinaire boundaries of public ownership, for the Government to be pushing through irrelevant nationalisation policies, or for the Opposition always on regaining office to be introducing Bills to denationalise parts of the public sector.
  Secondly, there will have to be agreement about the limitations on pay after next August. It is deeply damaging for us overseas that the Government should go round the world saying that we have a social contract and a policy which is half working but that it expires in nine months' time and that they do not know what we shall do after that. We cannot proceed with restoring long-term confidence at home and abroad unless we have a consensus about policy after next August.
  730
  Thirdly, it is very important that we should stop creating illusions for our own public about the real effect of inflation. The Chancellor—with his famous 8·4 per cent. figure at the last election—must accept part of the blame for this. This continued last night at the summit meeting in the Hague when an argument took place between our Prime Minister and the Prime Minister of France about the possible devaluation of the green pound. For the EEC it does not make economic sense that such a massive amount A Community taxpayers' money should be used in supporting cheap food imports into this country. [HON. MEMBERS: "Cheap?"] All right, less expensive food imports.
  It does not even make sense nationally. At a time when, as the Chancellor of the Exchequer admitted a few moments ago, a boom is not taking place, we should be looking for ways of making savings on imports. Concealing the reality of food costs and encouraging cheap imports instead of going for a greater expansion of home agriculture is not at all sensible. Food subsidies should be abandoned faster than the Government propose.
  The same is true of our nationalised industries. It was interesting last night that the Secretary of State for Industry criticised the previous Government because, he said,
  "Their deliberate policy of controlling the pricing policy of the nationalised industries resulted in subsidies to those industries having to be handed over and paid for by this Government when we took office, subsidies of £1,250 million."—[Official Report, 29th November 1976; Vol. 921, c. 611.]
  Of course, he is right, but what disturbs me about what I call the "sucks, yah boo" school of politics is that if he is right now he should have been right at the time when the subsidies were voted by the House.
  I looked up the Division list for 21st November 1973 when there was before the House the Second Reading of the Statutory Corporations(Financial Provisions) Bill, which provided for compensation for the gas and electricity industries and for the Post Office because of the policy of price restraint. I found that the names of neither the present Secretary of State for Industry nor of any of the Labour Opposition of the time appeared as voting against. They were

  731
  happy to accept it for good political reasons when it was presented by a Conservative Government. It does not do for them now to complain. It is the policy of illusion and of concealing the reality of inflation from the public that must he stopped.
  Fourthly, there must be a concerted effort to reduce wasteful public expenditure. We cannot let the Tory Opposition get away with the fact that it was under their Government that the National Health Service was so reorganised that it now has more administrators than doctors. It was under a Tory Government that the number of local government units was reduced from 1,400 to 400, but the number of local government employees went up by nearly 250,000.
  It was under a Tory Government that the insane Motor Vehicle and Driving Licence Centre at Swansea was created. In 1973–74—I looked up the figures—before centralisation took place the service employed 4,700 people and cost £19 million per annum. In the first year of the new operation, admittedly with the transfer still going on, it employs 6,700 people and it has cost us £30 million, leaving out of account the capital cost of the project. It is this sort of wasteful expenditure that the Government should be looking at severely.
  Is it really necessary in an age when we support 334,000 Service men for them to have a back-up of 240,000 civil servants to sustain them? I agree with the Chancellor of the Exchequer that one cannot have painless cuts in public expenditure. The civil servants in these positions are the victims of policies which have been pursued over the years. They cannot be thrown on the scrap heap. But public efficiency audits and a real scrutiny of the scale of public expenditure and where it is going is essential.
  Over the last 20 years manufacturing employment increased in France by 11 per cent., in Germany by 31 per cent., and in Japan by 155 per cent. In Britain the number of people in manufacturing employment in the same period was down by 13 per cent. Mr. Harold Macmillan was right in his recent television programme when he said that what is wrong with Britain is that our manufacturing and industrial base has become too weak for the massive administration which we
  732
  are now required to support. What is required is a major shift in social and economic policy, which will be unpopular, and that is why there must be a greater consensus in this place if we are to carry it out.
  Fifthly, there must be a major review of the tax structure. When the Chancellor read the section of his speech today which referred to the effect of income tax on the lower income groups, he read it as though it had come as a recent blinding revelation to him. But I recall that the Liberal Party devoted its one miserable day a year to this subject last March. He should have taken action on the matter in April.
  I remember speaking in that debate about a family with two children and on an income so low that they qualified for family income supplement, yet what the FIS people gave the tax man took away, and the net benefit of all that administration to this one family was 8p per week. The situation is ludicrous. It has obtained throughout all the Chancellor's period in office, and his solution or suggestions for what he will do about it next April seem pretty vague.
  The Chancellor ought to do more than raise the income tax threshold. He must reduce income taxes right across the board in order to restore incentives. He should recognise that, in relation to our Community partners, we are the country with the heaviest proportion of taxes on incomes and the lowest proportion of taxes on things through such systems as VAT, in which, in my view, there is room for a fairly considerable increase.
  For my sixth element, I take up what has been said already in the debate on the Gracious Speech about industrial partnership. I refer, first, to what the Prime Minister has said. It is reported that he had a blinding flash on the road to Chancellor Schmidt one day and that he is deeply impressed by the German experience. I hope that he will look at it accurately. There is nothing in the German experience which extends trade union patronage. It is a genuinely democratic experience in West Germany, where everyone within any place of work of over 50 people has a right to help to elect members of the statutory works council.

  733
  Moreover, it has operated against a background of one union, one industry—the system for which we helped to legislate the immediate post-war period. It has been one of the failures of our industrial society since 1945 that no one has been able to tackle the problem that our trade unions still remain vested in the old craft basis and we still have problems of demarcation and overmanning as a serious inhibiting factor in the working of our economy.
  When one speaks about a programme of national recovery, it is interesting to see the reactions of those who lead and who have led this country. The Prime Minister says that the trouble with any form of national recovery programme is that it would represent the lowest common denominator of all the parties I do not regard such matters as those of which I have been speaking as weak or flabby or as representing any lowest common denominator. I dare say that people could contribute other things, and I do not say that it is the perfect solution but I believe that we could achieve a wider measure of agreement across the Floor for the necessary programme.
  In a recent radio interview, the right hon. Member for Huyt on said that he was against coalition and things would have to be very serious before he contemplated it. What sort of condition does he think we are in now? We have rising inflation, record unemployment, a pound which has slumped and stagnant production, and we are in record debt. Is that not a very serious condition? Has not the time come to think of alternative political solutions?
  If we are to have what the Chancellor referred to as a national stabilisation programme, there must at the same time be a political stabilisation programme over the next two or three years. In a noteworthy speech to the Conservative Party conference, the right hon. Member for Sid cup said that the crunch had now come. My problem is that I am not sure that he was right. I think that the danger is that in our present condition the crunch never comes. It is simply a slide slowly down and down, and there is no magic point. Because we do not have fixed exchange rates now, there is not even the shock of a sudden devaluation such as we used to have.
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  I believe that a programme of national recovery is far more important than the people who might be involved in it, although the newspapers love to speculate about who would be involved in the process. It seems to me that, if we are to have a programme of national recovery, the Government have three options. First, they could amend their programme and put before the House a programme which had been discussed with the Opposition parties and which could therefore attract their support for the rest of the lifetime of this Parliament. That is one option, and it is one which I should certainly consider.
  The second option is to have a formal grand coalition between the two major parties, as existed in West Germany, for example, from 1966 onwards. I regard that as the least probable scenario, but at least it is one which should not be excluded.
  The third option—perhaps in political terms in the public mind the most popular—is the possibility of the Government being reconstructed to provide a Government of national recovery, probably losing their own Left wing and probably excluding the Right wing of the Cinservative Party. But it could, I reckon, command the support of at least 400 of the 635 Members of Parliament.
  That is what the public want, and I believe that politicians should occasionally respond to public demand. The way of handling the economy so far has been that the Government of the day have constantly under-estimated the readiness of the public to follow a lead and accept sacrifice. In saying that, I recall how struck I was by the reaction of public opinion in December 1973 when Lord Barber was Chancellor of the Exchequer. I believe that we failed then to take the necessary measures which the public would have accepted if the Government had been willing to be tough enough.
  The Prime Minister's favourite nautical metaphor in his advice to the House is "Steady as she goes." It will not do now when she is sinking. I believe that if he were to say "All hands on deck, everyone man the pumps", he would have the personality and experience to evoke a national response. The question is whether he has the will.
  5.26 p.m.
  Mrs. Reneée Short: The hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel), the Leader of the Liberal Party, has once again floated his idea about a National Government, but I do not believe that it evokes much response on either side of the House or, indeed, in the country. What the country wants is that the Government who have been elected should carry out the policies on which they were elected. As for what we heard from the right hon. and learned Member for Surrey, East (Sir G. Howe), with his talk about sweeping away cobwebs, moonlighting and the rest, that does not take us very far, either.
  Although I have been critical and remain critical of the direction in which my Government have been going, especially in connection with cuts in public expenditure—largely because they are cuts in public expenditure and not in private expenditure—I do not accept that we have heard anything from the Opposition Benches to persuade us to join them in the Lobby tonight.
  One of my greatest concerns is that we are raising money in order to spend it in an utterly unproductive way. The present level of unemployment, now at nearly 1½ million, is costing us £3,000 million a year. That is unproductive expenditure in terms of manufactured goods and of tax return to the Chancellor, and it is an enormous burden for us to carry. The 20,000 unemployed teachers represent a public investment of £150 million in their training. This also is an appalling waste of public resources. It is high time that we examined the ways in which we use the money which we raise at such great cost to the public purse.
  There are many local education authorities still with over-size classes. In 1972, some time ago now, the right hon. Lady the present Leader of the Opposition produced a White Paper on education expenditure. That was when she was Secretary of State for Education and Science, and I supported her wholeheartedly in her proposals, especially the proposal for the expansion and development of nursery education. But the right hon. Lady left a fatal flaw in that part of her White Paper because she did not also
  736
  introduce a requirement that nursery education should be part of the State system. She made an allocation of resources which she said would be available for local education authorities to call upon, but there was no compulsion on those education authorities which acquired the allocation actually to spend it on nursery education or to carryout a scheme.
  That failure has bedevilled nursery education as a whole since 1972. In this current year, 17 local education authorities which asked for an allocation when it was offered by the present Secretary of State refused to take it up, and they have accordingly provided no nursery classes this year at all. Twenty more local education authorities have refused part of the allocation, again an allocation for which the originally asked the present Secretary of State, and they have done that, they say, because they cannot afford the revenue costs of carrying out the capital expenditure.
  That is a very sad state of affairs. It means that there are today fewer children receiving nursery education than there were at the turn of the century. That is something which the Government will have to take on board. I had hoped that the Queen's Speech would mention that nursery education should be part of the State system for those parents who want it—at least until we get to the position of making it part of the State system for all children from the ages of three to five.
  I wonder whether the Government could be persuaded to look at some more imaginative and perhaps unorthodox way of using the unemployed teachers to whom we are now paying a large amount of unemployment pay. Perhaps we could allow education authorities to employ unemployed teachers, and if the Government were still to pay that part of their salary in unemployment pay, and let the education authorities make up the rest, we would then have more teachers employed. It would be the same cost to the State but the State would get something back in taxation. It would be a reduced cost to the local education authorities. We could then see nursery education carried out. In other sectors of education the sizes of classes could be reduced, which would bring great benefit

  737
  to the whole area of education from the earliest stage right through.
  If hon. Members opposite are concerned about improving standards in education, they must accept that to get the foundation right at the age of three or four is the best way The next best way is by reducing the size of classes throughout primary and secondary education.
  I offer this suggestion to my right hon. Friend free of charge. It may be unorthodox but it has already been tried by some members of the NUT. It has been accepted by the Labour group on the Hertfordshire County Council who raised it at the education committee of that council—which is Conservative controlled—and it was accepted by them. There is some feeling that this might not be a bad idea.
  Cuts in Government expenditure which have been carried out or are about to be operated are having disastrous effects in the National Health Service. The NHS is facing a similar crisis to education. The South-East is facing a cut of possibly 5,000 hospital beds. A cut in that number of hospital beds means that roughly the same number of jobs will be lost. Area health authorities all over the country have carefully combed through their expenditure and are facing a similar situation. They arc told that certain amounts have to be cut from their expenditure. Undoubtedly the service to patients will be affected.
  The teaching hospitals are also being affected. In the London area Guy's, St. Thomas's, King's College, the Middlesex, the Post-Graduate Medical School at Hammersmith, Charing Cross and University College Hospital are all facing cutbacks in expenditure. This inevitably means that centres of excellence, which the teaching hospitals represent, and which are essential to medical research, are likely to be closed.
  Some of the important departments are concerned with women's medical care. I am thinking particularly of breast cancer screening. It is so much under-utilised at present that nowhere near the amount of screening necessary in the age group most at risk is being done either in London or outside London.
  I had a letter from a professor working in this field at University College Hospital a few days ago in which he
  738
  indicated that his work in breast cancer screening is likely to be cut and that he will have to leave that field. He will work in other areas of the hospital but this important work will be lost. That means that the leading teachers and research workers will withdraw from this area of research. Other people will be affected. I beg the Government to look at this again.
  What is particularly annoying to me and to many of my hon. Friends is that alongside the sad situation which affects NHS hospitals and teaching hospitals we find that private hospitals are growing up like mushrooms. According to the Independent Hospital Group, 100 new private hospitals are in the planning or development stage, most of them in London and the South-East. Within the Greater London area seven private hospitals are on the drawing board and several others are being expanded. Other private hospitals in Coventry, Wolverhampton—there is one going up in Wolverhampton—Leamington, Derby, Sutton Coldfield and Bromley are on the way and many others are being planned for.
  All these schemes have been funded. It is interesting that in a comparatively short period, the money has been raised to build these private hospitals. They will attract doctors and other staff from the NHS hospitals which are already being depleted. This is a situation which cannot be allowed to continue.
  One that is threatened with closure is the Elizabeth Garrett Anderson Hospital which deals entirely with women's health problems. We cannot allow any NHS hospitals to be closed, or partly closed, while allowing private hospitals to be built. Clearly, there is a lot of money about. The Chancellor of the Exchequer should take note of this. There is a lot of money to build private hospitals. There is a lot of money to buy houses at £600,000 a time. There is a lot of money to spend on an enormous amount of imported foods and luxury manufactured goods from the Common Market which are pouring into the country every day.
  I would suggest that the wealth tax, which has been excluded from the Gracious Speech, ought to be put back.
  Sir John Hall: I am grateful to the hon. Lady for giving way.

  739
  Would she agree that the development of private hospitals has been stimulated largely by the withdrawal of pay beds from the NHS hospitals? Would it not have been better had those pay beds remained in the NHS hospitals for the benefit of both income and staff?
  Mrs.Short: We have argued about this in the House for a long time. The Expenditure Committee took a great deal of evidence, largely from professional people, about the effect of private practice within the NHS hospitals. It uncovered a large number of inequalities and abuses in the NHS system which needed to be put right.
  The answer is to have no private practice at all and to have all consultants and doctors working full time for the NHS and using their medical skills, and organising and political skills, to improve the NHS. I would have thought that that was a much more preferable situation.
  I ask why we have not got the wealth tax and when we shall get it. We see the sad position of penny pinching in children's education, especially at the most important stage. We have seen it in respect of women's health and in respect of the NHS. We see it in the arts, which also faces a difficult situation. We have refused to provide a small amount of money to give some recompense to writers. It is a dismal situation.
  The Opposition are always whining about more public expenditure cuts. Yet from time to time, when Ministers are answering Questions, they are asking for more public expenditure. They are very schizophrenic about this. It is time they sorted out their own difficulties and decided exactly what it is they are planning for.
  The Opposition do not care about education. They care only about maintaining privilege in education. They do not care about the closure of NHS hospitals or teaching hospitals. They care only about the privilege of part-time consultants and those who can afford to pay for private medical treatment. They do not really care about more unemployment. They think that everyone is well off on the dole or on social security.
  It is time that the Government stopped playing the Tories' game. The Chancellor
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  can find many sources of additional taxation revenue and save much of the fabric of our society to which all of us on this side of the House are committed to improving and safeguarding. I hope that my right hon. Friend will carry that message back.
  5.40 p.m.
  Mr. Reginald Maudling: I am grateful for the chance of catching your eye, Mr. Deputy Speaker, and for the opportunity, after a very long time, of making a speech in the House about economic problems. I greatly welcome this opportunity.
  I cannot say that I equally welcome the circumstances in which it arises. That, after all, is another matter. In the meantime, I gather that I have become one of the neo-Keynesians who appear to be rather despised by some individuals. I do not mind being associated with John Maynard Keynes. After all, he, together with Freud, was one of the great innovative intelligences in this century, just as Hegel was in the last century. If his theories of economics do not wholly apply at present, it is simply because there are new political circumstances which he could not have foreseen. He would have adapted his principles to those circumstances—not deserted them, as they have been deserted by some of those who are so frightened by or so disapproving of modern society that they seek to take refuge in the last century.
  I want to put forward three themes. I know that we are discussing an amendment to the effect that there is no confidence in the Chancellor of the Exchequer or his policies. I do not think that I need add to the conclusive case made by the Chancellor himself on that issue. I wish to put forward three themes which may be unfashionable but which I believe have some substance.
  First, too much emphasis is now put on monetary economics at the expense of real resources. It is resources which matter and money, important as it is, draws its importance solely from the fact that money moves resources around.
  Secondly, all economic problems are really political problems in the widest sense. What should concern us in the House is not the intricate mechanics of an economic model but what goes on in

  741
  the minds and hearts of people in this country—their desires, ambitions, frustrations, jealousies and fears. These are the things upon which, and upon which alone, the House of Commons can erect an effective and lasting economic policy.
  Thirdly, in contrast with the normally held view of Britain, I believe that our economic prospects are better than they have been for many a long year if we have the wit and the will together to grasp them. We have a substantial amount of spare capacity available. We have a highly competitive currency. We have the signs of a development of international trade. We have the growing substance of North Sea oil.
  Taking all these things together, what a mark we could make on the world if we could unite to develop and use them. Despite this, all we seem to talk about in public is how much we should cut and how soon.
  We are getting things back to front. We should not say all the time that we are spending more than we are earning. We should say that we are earning less than we are spending and we should concentrate on this. It is not that we are spending too much. How can anyone, looking at the face of Britain today, argue that we are spending too much? We are no doubt spending unwisely—too much on some things, and too little on others. But, looking at the face of Britain and of our society, can anyone really argue that we are spending too much as a whole? Of course not.
  Our problem is, not over-spending, but under-earning. These are fundamentally different things, though they may seem to be the same. It was Aristotle—the right hon. Member for Down, South (Mr. Powell) will correct me if I am wrong—who described the difference between the road from Athens to Thebes and the road from Thebes to Athens by saying "They may look the same, but it matters a heck of a lot which one you end up on at the end of the day".
  It is rather the case with our economic situation. We are under-earning rather than over-spending. That is why I do not see an economic case at present for a new and drastic deflation of demand. Let us cut public spending by all means,
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  but the purpose should be to lay the foundations of expansion. How can it make sense in a country where falling demand is piling up unused resources to reduce demand further and to increase waste further? This is the demand of the monetary economists.
  How does this misconception arise? I think that it arises from a confusion between cost-push inflation and demand-pull inflation and the desire to use remedies appropriate to the one for the curing of the other. A good deal of the blame for this must rest on the shoulders of the monetary economists. I strongly suspect that in the past two years a great deal of intellectual bosh has been spoken about money supply by the more trendy academic economists and their more bemused followers. For when their arguments are analysed as a guide foraction—that is what we want—their recipe for beating inflation in practice amounts to no more than the old-fashioned credit squeeze which I remember from many years ago at the Treasury.
  The high priest of these mysteries is Professor Milton Friedman who, as I see in the newspapers, has just been dancing on the grave of Britain with all the uninhibited freedom of the truly ignorant. He argues that there is a two-year time lag between movements in the money supply and the effect on the economy. A two-year time lag is not a very good guide. It is rather like the man who, having lost his way in Liverpool, asked how to get to the East Lancashire road and was told that he should not have started from there in the first place.
  In my opinion, the only way in which a credit squeeze can restrain prices is by reducing profits, on the one hand—but everyone, including the Prime Minister, agrees that profits should not be reduced —or, on the other hand, by reducing incomes which is the only element in the cost of production which is amenable to a credit squeeze.
  Deflation is a barbarous method of doing this. If reliance were to be placed on deflation to contain the growth of costs and prices, first, it probably would not work and, secondly, if it did work, we should need deflation and stagnation for ever to maintain it.
  The same is true of the balance of payments. Deflation is the solution of

  743
  despair. Nor in our present situation is it needed by our present economic balance of payments prospects. I think that there is a great deal of misunderstanding about international borrowing. What matters is our total net overseas indebtedness and, subject to the obvious qualification about the quality of investment, this cannot rise by more than our current deficit. Every time the Bank of England supports the pound sterling by buying pounds in the market it is paying off a debt. To borrow from the Fund, for example, at 8 per cent., to pay off Arab holders of sterling at 15 per cent. seems to me to be, on the whole, quite good business.
  The case for cuts in public expenditure is a strong one on its own and should not be based upon the frail and sometimes facile arguments of demand management. The case is simply this. The proportion of the gross national product taken by the public sector is too high. The best remedy for this is to increase the total national product. But this is itself inhibited by the level of the public sector requirement at present.
  Nationalisation is a costly nonsense. I do not know what the man in the Clapham omnibus might say, but I know what the man in the Chipping Barnet pub would say—that we need more nationalisation at present like we need a hole in the head. Public expenditure is clearly wasteful. I have been shocked recently—I know other Members have been shocked as well—by figures showing how few of those employed in the National Health Service or in education are actually teaching, doctoring or nursing. These are deplorable figures and a strong argument for action.
  A large public expenditure must lead to a high scale of taxation. Whatever the arguments about taxation one way or another, it surely can not be a coincidence that we in this country have the highest marginal rate of taxation in Europe and the lowest economic record of performance. That is a correlation which cannot be explained away purely on grounds of coincidence.
  Mr. Sedgemore: So explain it.
  Mr. Manning: It does not need to be explained away: it is absolutely clear.
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  With taxation at these rates, one gets production at these rates.
  Mr. Sedgemore: If this correlation is so obvious, why is it that distinguished economists for 100 years have sought to prove it but have found no evidence to substantiate it?
  Mr. Maudling: I sometimes find that distinguished economists have a little difficulty in recognising the obvious.
  The fourth argument is that resources need to be transferred from services to manufacturing—broadly speaking, from public sector to the private manufacturing sector. That is a good argument, so long as we are clear about the consequences. It is no good at all destroying jobs in the service sector if there is no creation of jobs in the manufacturing sector. After all, at present there is no great extra demand in the manufacturing sector.
  I think that the lesson of the last 20 years has been clear—that whatever incentives we might give to manufacturers, whatever tax reductions or concessions we may make, we will not get people to invest in additional capacity so long as their present capacity is under-utilised. It is as simple as that. If we want to achieve this switch from services to manufacture, we must stimulate the demand for manufactures.
  That brings me to the problems of incomes policy. The whole essence of the problem of expansion without inflation, which we have been talking, about in this House for a generation now, rests in incomes policy. I make no apology for restating the views on this subject which I have held consistently, in and out of government, since the 1950s. My belief is simply this—that in modern conditions any Government must have an incomes policy as a major element in their economic policy.
  This has been confirmed by experience. Succeeding parties when in office have found it necessary, and with the growth of the pressure of income inflation it has become even more important than it was. Whatever form it takes, voluntary or statutory—clearly, voluntary is far more desirable—any Government must have a policy for dealing with the growth of incomes if they are to deal with inflation, for the growth of incomes is the

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  major factor in the growth of costs and prices.
  This cannot be left to the free market mechanism, for the simple reason that there is nowadays no such mechanism. The new consciousness of their power among the trade unions makes the operation of a free market mechanism quite impossible. Just as Goverments in the past have had to act against potential monopolies of capital, so Governments in the foreseeable future will have to have policies designed to deal with the monopoly exercise of power by the suppliers of labour. The techniques may be different. but the need is the same.
  Her Majesty's Government have two great problems now in this field. The first is the present claim by the miners. My right hon. Friend the Member for Sid cup (Mr. Heath) might ruefully reflect upon the words of Winston Churchill—that there is a melancholy justice in the long swing of events. This is a new situation for the Government but it is an old problem—how to find a way in which the claims of the underground workers, which are so exceptional, can be met without allowing them to act as a battering ram in the Government's whole incomes policy. We did not get much help in 1974. We on this side will help the Government now if they are doing the right thing, but it is the same problem; it is a very difficult and crucial problem indeed.
  The second problem of incomes policy is that always it has appeared too negative, always it has appeared solely destined to restrict and restrain, which is not the purpose of incomes policy. The purpose of a rational incomes policy is to encourage and facilitate maximum growth of incomes consistent with avoiding inflation. The reason that it has gone wrong is that successive Governments have come too late to adopt incomes policies and have adopted them at times when the crisis was such that it was impossible to give any proper concern for differentials and impossible to have the flexibility to encourage productivity.
  In planning the future of incomes policy, it seems to me enormously important to have regard to this essential matter. As I was saying earlier, it is greater output, greater productivity, greater production, at which we must aim. All our
  746
  policies—on incomes, on taxation, on anything else—must be geared to that necessity.
  I am afraid that I have wearied the House. I come to my final theme. Our answers now in this country lie not in restriction but in expansion. There is no one problem that we face that we cannot solve from the resources of this nation. There is no reason why British industry—managers and workers alike—should be any less productive than the industry of Germany or Japan. We have the skills, we have the brains, we have the traditions.
  We have the most civilised society in the world in which to work and for which to work. We have the oil of the North Sea. The problems are not economic but political. They lie not in men's pockets but in their hearts. We shall solve them not with the small change of party dispute but with the major currency of human endeavour—united British endeavour. Can the House of Commons give a lead?
  5.57 p.m.
  Mr. Eric Ogden: The right hon. Member for Chipping Barnet (Mr. Maudling) has made a bold and lively return to the Back Benches. My father used to say, "Eric, as you move along, up or down, you will meet people in all walks of life. Always greet those you see as you go up the ladder because they will be there to greet you as you come down." Perhaps "Cross-Benches" is a more suitable term than the words "up" or "down". From where I sit, the alternative Government below the Opposition Gangway look much more impressive than the alternative Government on the Opposition Front Bench. Interruption.] There are other alternative Governments in the Chamber; on this side of the House my hon. Friends on the Government Front Bench should not be afraid of that.
  Before the right hon. Gentleman's speech, this debate was a depressing experience for me. This is the first time in 12 years that I have even attempted to intervene in an economic debate on the Queen's Speech. I have taken some interest in regional economic affairs, but I left the high points of economics to others of my hon. Friends. That may be one reason why the economic state of

  747
  this country now is rather worse than it was 12 years ago when I first came here —but this is not entirely my responsibility.
  I would say to the right hon. and learned Member for Surrey, East(Sir G. Howe), who took 30 minutes to reaffirm some of the things he has told us in the past, that I do not recognise his description of depression and malaise on Merseyside. There is anxiety, worry and concern there, there is a degree of what I might call "bloody-mindedness", but my impression of Merseyside does not include depression and deep gloom, and I hope that the right hon. and learned Gentleman does not, either.
  The Chancellor had many things to say, not only to hon. Members but to people outside. I only wish that, in a speech lasting almost an hour, he had found five minutes to talk to people like mine on Merseyside—people who have worked 50 weeks this year, who want to work the same next year and who do not ask too much of life—people who are now facing the third economic crisis this year.
  We were told last March that there was an economic crisis and that measures were needed to deal with it. We were then told in June that those measures were not working and that there was an economic crisis for which measures were needed. We arc now being warned of a pre-Christmas package because of the difficulties with which we now have to deal.
  In all this, my concern for Merseyside relates to jobs. In my area the main industrial unit is a factory controlled by the General Electric Company. The concern in that company is that its workers are in some danger of losing orders at home and abroad, not because of lack of technology, or because those goods are not required abroad, or because they have not the right quotas or delivery times, but because they cannot put a price to their contracts. There is a real danger that we may not win major contracts, and that means that we on Merseyside are not able to earn the money to provide for our services.
  The over-riding priority for workers and management is that we should seek to establish the value of the pound at a level which will give our manufacturers
  748
  the ability to say "We can produce and deliver goods at the right time and at a certain price." Therefore, the first priority in regard to jobs on Merseyside is for the Government to lift the value of the pound. If it is a question of jobs or social services, the answer must be jobs. If the argument is between jobs or council rents—and I represent many thousands of council tenants—jobs must take first place. Again, if the calculation lies between jobs or education, we must see that jobs come first. If there has to be pruning, it must be pruning not just to enable growth and leaves to appear on the trree but to provide some fruit.
  In the last days and weeks we have had many and various reports of different opinions in the Cabinet. Therefore, throughout this debate I have become more than a little worried over the question of who is in charge of the Government's economic strategy. Is it my right hon. Friend the Chancellor of the Exchequer, or my right hon. Friend the Chancellor of the Duchy of Lancaster—or, if neither of my right hon. Friends, who is in charge of the strategy?
  My constituents on Merseyside are not particularly worried about who is in charge, provided that whoever is in charge brings forward a package and makes it work. My constituents are not particularly concerned whether my ideas are put into operation, or whether they should be the ideas of my hon. Friend the Member for Liverpool, Walton (Mr. Heller), or indeed the ideas advanced by the Opposition. My constituents require a guarantee that they are able to work. If the package that is brought forward in response to pressures internally and outside has less effect than that of guaranteeing work, we are in real danger of losing the confidence of our people in any part of the country.
  The message that must go to my right hon. Friend the Chancellor of the Exchequer is that he must bring forward his own package supported by the Cabinet. No doubt if it works other people will take credit for it, but if it does not work then my right hon. Friend will certainly get the blame. I sincerely hope that the next package will not be just one of a long series. We cannot go through this whole procedure time and again. We must surely seek to avoid that

  749
  situation. It is no use coming back to the House time and again doing too little too late. If the Chancellor will trust his own judgment and his own courage, he will deserve and receive the support of the House. If he does less than that, he will not deserve the support of the House or the country. Given that courage and determination, then everything is possible.
  6.4 p.m.
  Mr. Richard Page: I rise to speak in this debate conscious of the fact that not only is it the first time that I have addressed the House as parliamentary representative for Workington, but that I do so following the elevation to another place of Workington's former Member. My predecessor served that constituency for31 loyal and hard years, and I wish to place on record my appreciation of the work he did for the constituency. He was well liked and was regarded with affection in the constituency and also by his colleagues with whom he came in daily contact.
  I shall consider myself fortunate if in time in Workington I can be regarded with the same affection and trust which is so typically Cumbrian. Whereas our policies and aims may be different, I hope that I shall use the right approach to bring about their solution.
  Some Members are privileged to represent constituencies and areas of contrasting interests—constituencies made of an amalgam of industry and farm, country and city, representing a changing and challenging pattern of interest. I count myself fortunate to represent a constituency that is among that number.
  Workington is a name that suggests very much what it stands for. That name in the past was evocative of mills and mines and hard-earned coal and steel, wrenched from the ground on the backs, and even the lives, of the West Cumbrian. The name embraces the coastal town of Maryport, the central market town of Cockermouth, and the tourist area of Keswick. Workington covers an area of over 500 square miles which, besides comprising areas of outstanding natural beauty with its lakes and mountains, also covers some of the finest farming land of its sort in the country.
  750
  The coal mines as such have gone and have been replaced by the far noisier opencast process and the town of Workington contains the steelworks at Moss Bay and the Distington Engineering Company at Chapel Bank. These complexes not only are the largest employers of labour in the area, contributing £13 million to f14 million of salaries per year in the town, but are also highly profitable sections of British Steel.
  Next year will see the celebration of 100 years of rail rolling at the steelworks in Workington, and they can be justifiably proud of that achievement as they are the producers of the finest railway lines in Europe, if not in the world. Although the area is greatly dependent on steel, other industries have moved in over the years. It would be wrong, and perhaps inappropriate, for me to mention them one by one, but they include the manufacturers of buses, shoes, plastics, paper and even of Cumberland pencils. Cumbria has been cut off in the past, but in a few months' time, in an effort to speed communications with the rest of the country, the completion of improvements on the A66 will give important links with the motorway network.
  Workington is, as it says, a working town. Nearly half its working population are engaged in manufacture compared with the national average of 33 per cent. Furthermore, over 3 per cent. of the working population are engaged in farming as opposed to the national average of just under 2 per cent. Therefore, I very much welcome the following statement in the Gracious Speech:
  "My Ministers are convinced that the key to a better economic future for the British people lies in improved levels of industrial output and productivity, a higher level of industrial investment, and being more competitive thus securing a greater share of world markets."
  That part of the Speech is absolutely right, because it is the only way in which we shall bring our economy under control. However, I noted with some concern the next passage:
  "They will pursue these objectives through continued development of the industrial strategy in co-operation with both sides of industry."
  Nobody will argue on the subject of cooperation with both sides of industry because that is a vital factor and will play its part in righting our economy, but we

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  all know that in pursuance of the present development of that strategy industrial productivity has slumped and we have a high level of imports of finished manufactured goods. In certain areas I am sure that selective dumping or adverse reciprocal trading occurs, such as in motor cars, shoes and textiles.
  I welcome some of the ideas that are pursued on this subject in other countries. If anybody brings goods into those countries and sells them more cheaply than they are being sold in the home country, those goods are either refused admission or an appropriate tax is imposed upon them. I believe that we owe it to our industry and to our manufacturing units to consider such an idea.
  The present strategy forces high national insurance premiums upon employers, increasing the cost of labour. There is the prospect in April of these contributions becoming even greater. No doubt this will have exactly the effect that we fear and will put up unemployment.
  This present industrial strategy gave an average return last year of 3·9 per cent. on capital invested, and there is the prospect that this year the figure will be even less. It is a derisory amount for an industrial nation which depends on its wealth from its manufacturing in order to survive and we must compare this figure with that of 132 per cent. achieved in 1960.
  Our companies, our manufacturing industries, our wealth producers, are then faced with a company corporation tax at the end of their financial year of over 50 per cent., which leaves them precious little for investment for capital growth and for any regeneration.
  In addition, we have a Price Code which ensures that companies cannot earn too much money. It makes sure that they do not produce any seed corn to invest in order to bring about this so necessary capital investment and regeneration and makes management spend most of its time filling in the forms and making the applications to the appropriate body.
  This present strategy gives us an inflation rate which means that every devalued penny's profit is absolutely vital to ensure not that we grow, not that we get bigger, but that we have exactly the
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  same stock or raw material on the shelves as we had at the beginning of the year.
  I noted grimly that at one point of the year the money supply had been inflated at a greater rate than the increase in inflation.
  Then we have a personal tax rate—it has already been mentioned that it is one of the highest in any industrial nation—which is guaranteed to reduce the will to work in the hearts and minds of the people of Great Britain. We are losing the psychological battle in people's minds, and it is a battle we must win if we are to regenerate this country's economy.
  We now have a bank rate at an unprecedented level, some three times that in the United States. This in turn simply forces up costs, puts people out of work and further decreases the hopes of any industrial regeneration.
  These are just a few of the inhibiting factors which hit our industries and demoralise the people who work in them. I am sure that if these and other crippling burdens could be removed or reduced, our industries would then revive, and not only drive out the competition which is hurting us so much on the home market but achieve a greater share in the world market. This in turn would produce the wealth to reverse this country away from economic disaster and so that we should be able to support the social programme in the public sector, which must in the short term bear a reduction in order to have eventual long-term benefits.
  I ask this not only for the sake of Workington, with its high industrial commitment and its high unemployment, but also because I believe that it is the only way to a true, genuine and lasting national recovery.
  6.13 p.m.
  Mr. James Sillars: It is my extremely pleasant duty to congratulate the hon. Member for Workington (Mr. Page) on his maiden speech. I came in at a by-election, and I know how difficult an experience it is to come to a House of Commons which has already had its character formed and to insert one's own personality and point of view.
  Without wishing to appear at all patronising to the hon. Gentleman, may

  753
  I say that he can relax completely, because everyone who has listened to him found him most eloquent and pleasant to listen to. We were particularly impressed with the kind tribute that he paid to the former Member, Fred Peart.
  There was one stage during the hon. Gentleman's speech, when he dealt with import controls, at which I thought that, unlike his predecessor, he was a potential member of the Tribune Group. But he can relax, because the rest of his speech showed that he is sitting exactly where he should be.
  I turn from that rather pleasant duty to the less pleasant duty of referring to the speech of the Chancellor of the Exchequer earlier this afternoon. Like my hon. Friend the Member for Liverpool, West Derby (Mr. Ogden), I found the whole affair—until the right hon. Member for Chipping Barnet (Mr. Maudling), a former Chancellor of the Exchequer, spoke—extremely depressing, particularly when the Chancellor of the Exchequer made reference to the fact that he is deliberately thinking, or thinking deliberately, of cutting social benefits to persons who are unemployed at present. I am perfectly well aware of the fact that there is a great deal of public concern, anxiety and frustration over the payment of benefits to people who are out of work, but that is a tragedy for which those people, who are the victims of current economic policies, are in no way whatsoever responsible.
  We have a Socialist Chancellor of the Exchequer lending legitimacy this afternoon to the argument that one of the ways to cure the economic problem of this country is to have an attack upon unemployment and social security benefits. It is a disgrace, coming from a Socialist, a member of the British Labour Party, or of any other Labour Party inside the United Kingdom.
  We shall never solve the problems of the working people by turning one worker upon the other—the old Tory device of divide and rule. It is a great tragedy for the British Labour Party that in the week in which its own Chancellor of the Exchequer drops the election pledge of a wealth tax he also talks about cutting benefits.
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  No matter how fancy the language the Chancellor of the Exchequer employs, if he attacks supplementary or unemployment benefits, it is simply cutting the benefit at the end of the day. There is no more harrowing experience for working people, men or women, than to be faced with having to take up a position in the dole queue in company with 11 million other people. They do not expect a Labour Chancellor of the Exchequer to start talking about cutting their benefits. If that Bill ever comes forward, it will be with considerable pleasure that I shall vote against it.
  I say to my hon. Friend the Financial Secretary to the Treasury that he should look at what was produced by the Labour Party in 1975 to celebrate its 75 years of existence. He will find that in that production there is a cartoon from the 1930s. It shows four people standing upon a ladder. The unemployed man at the bottom has his head just above water, and the man at the top is saying "Let us all take a step downward for the sake of the country." In essence, that is what the Labour Chancellor of the Exchequer is saying to the unemployed at the present time.
  This Government, like their predecessor, have a Chancellor of the Exchequer who is guilty of flawed judgment on major economic policies. There have been about six major economic statements from him since February 1974. He has a history of allowing optimistic words to mask reality. If I may say so to my hon. Friends, I am one of the most pessimistic Members of the House of Commons. I did not come to the House like that six and a half years ago. I have been turned into a pessimist at the hands of optimists such as the Chancellor of the Exchequer, and I have had to live with the consequences of their optimistic action for six and a half years.
  The Chancellor of the Exchequer is quite wrongly optimistic on the Achilles heel of the Government's economic strategy in relation to investment. There is no member of a Socialist movement who will deny that the rôle of investment in economic policy is fundamental and critical. The Chancellor of the Exchequer, earlier this afternoon, was extremely optimistic about investment intentions. He was talking about a 2 per

  755
  cent. increase, and the CBI is talking about a 15 per cent. increase. He did not tell us that it is 2 per cent. on far more depressed investment levels than we have had in this country for a considerable period of time and comes nowhere near the level of investment which will be required if the proper regeneration of the manufacturing sector is to take place in British industry.
  The difference between Britain's need for investment and its investment performance can be no better illustrated than by quoting the speech made by the current Secretary of State for Energy, then the Secretary of State for Industry, during the Second Reading of the Industry Bill. This was at a time when my hon. Friend the Member for Liverpool, Walton (Mr. Heifer) was Minister of State in that Department. My right hon. Friend the Secretary of State said:
  "Since 1970 British manufacturing industry has been investing a mere 4p in every pound of our gross national income in new plant and equipment. The United States, Japan and France invest twice as much per worker as we do."
  After an intervention from the hon. Member for Bridgwater (Mr. King), the Secretary of State went on to say:
  "over the last 30 years, under Governments of both parties, the country has failed to obtain the level of industrial investment it needs to be effective."
  Then more ominously, after dealing with Scotland and Wales, my right hon. Friend said:
  "Nor do I see how we can prevent the Midlands, with its vital but often ill-equipped engineering industry, from entering on a downward slide towards development area status, unless we … act directly on the investment gap and find some alternative to the industrial disputes that have troubled that industry."—[Official Report, 17th February 1975; Vol. 886, c. 940–3.]
  I refer my hon. Friend the Financial Secretary to the phrase "act directly". That is precisely what has not happened since February1975. One reason is that my right hon. Friend was removed from that Department and my hon. Friend the Member for Walton unfortunately removed himself. Instead of acting directly on investment and regenerating the economy, we have slid into a condition of wage cuts, unemployment, loss of jobs and loss of morale such as this country has not seen for 40 years.
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  If the Government are to pursue an economic strategy, they will require to accept the logic of their previous analysis of the problems of British capitalism. They are there in the 80,000 words in "Labour's Programme for Britain 1973" —the best Socialist document since 1945 —upon which was founded the election manifestos of both February and October 1974.
  There will have to be prohibition on capital outflow, designation of priority areas in certain sectors of the economy, compulsion in planning agreements, direction of capital and full control over the investment institutions if the Government are to act directly to fill the investment gap.
  Mr. Alan Clark: What about the direction of labour?
  Mr. Sillars: I did not catch what the hon. Gentleman said.
  Mr. Alan Clark: I as trying to jog the hon. Gentleman's memory. What about the direction of labour?
  Mr. Sillars: I come from a country where labour has been directed for generation upon generation, because we have been unable to give our people jobs in our areas. I do not need any lecture about the direction of labour. We already have the direction of labour in a private enterprise society.
  My argument is that we require the direction of capital. If we get the direction of capital, we shall not need deliberately to direct labour. It is time to abandon the idea that we can gently persuade the investment institutions to do their patriotic duty. We cannot cajole, bribe and exhort them to do what they have not done in the post-war period. I should have thought that lesson had been learned by this Labour Government from the previous Administration.
  The lecture delivered by the former Prime Minister, my right hon. Friend the Member for Huyton (Sir H. Wilson), to investors at the Institute of Directors has been quoted time and again. My right hon. Friend said: "You used to say that you had not the confidence to invest because there was a Labour Government. You then had a Tory Government, and you said that you needed economic growth. I have gone

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  for 5 per cent. growth. Then you said that needed to go into the Common Market. I have taken you in and still you will not invest." Those are not his exact words, but they are an accurate paraphrase of his lecture.
  As yet, there is no sign on the Treasury Bench of acceptance of the logic argued by the Labour Party in opposition and during the elections of February and October 1974. Sometimes one gets the impression that some Members of the Parliamentary Labour Party would prefer the Liberal idea of coalition to a Socialist Government.
  Mr. Heffer: Quite right, too.
  Mr. Sillars: My hon. Friend said "Quite right, too". That would be the revolution of the year. We do not have a great deal of confidence in the Government's ability to overcome the economic problems and to restore full employment. I say that seriously and with a considerable amount of sadness.
  I shall finish, as did the Leader of the Liberal Party, on a Scottish note. I have come to believe from my experience at Westminster that, if we are to have a successful economic strategy, and certainly if we are to deliver to Scottish working people, who have for many years sent a Labour Party majority here, the full employment to which they are entitled, we shall require a substantial amount of economic control vested in a Scottish Parliament in Edinburgh. That control will have to be of sufficient magnitude to warrant the establishment of a Ministry of economic affairs in Scotland able to act directly upon the age-old Scottish problem of heavy unemployment.
  Mr. Ian Lloyd: The hon. Gentleman emphasised the direction of capital. As a considerable proportion of the new employment in Scotland has depended to a large extent on American capital voluntarily sent to this country, what does he propose to do about that?
  Mr. Sillars: I am more concerned at the end of the day with the amount of capital which will flow once the oil hits the Scottish mainland and travels through pipelines, together with the added development probably taking place in Rotterdam and elsewhere. We are pre-
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  pared to borrow American capital at going rates of interest as long as we get a share of the dividend for the Scottish economy. There is nothing new about that in the Socialist movement. People much further to the Left than me in countries such a Romania and the Soviet Union have that kind of relationship with capitalism now.
  I believe that we need a Scottish Parliament in Edinburgh with real status, power, economic control, and a share of the oil revenues. It is a considerable disappointment that the devolution Bill gives us virtually none of those things. While on this occasion I shall find it impossible to vote with the Opposition parties, at the same time I shall find it impossible to vote with the Government this evening.
  6.26 p.m.
  Mr.J. Enoch Powell: In this debate, there have been two maiden speeches. One was made by the hon. Member for Workington (Mr. Page). Some Members come into this House as the inheritors of the lush patrimony of a large majority which will secure to them the prospect of remaining here for almost as many years as they desire. That will not be the experience of the hon. Member for Workington. His experience will be to hold his seat precariously, but it will be a challenging life which he will live, and we can assure him that he will derive no less from it and will contribute no less here because of the seat upon which he is so precariously balanced.
  The other maiden speech, if I may use that expression, was by my right hon. Friend the Member for Chipping Barnet (Mr. Maudling). I found it both moving and humbling. I found it moving because I recalled that he and I entered politics in almost the same month over 30 years ago and that we made our real maiden speeches in the same month in 1950. I found it humbling because, as I listened to his speech, I realised that it was an anthology, well selected and convincingly expressed, of almost all the propositions which I have been led to combat over the last 20 years. As I listened and said to myself "My right hon. Friend seems not to have changed under the impact of events and experience", the humbling thought came to me

  759
  that perhaps I might be as mistaken as he appeared to me to be.
  Last night, in the closing stages of the debate, I addressed a question to the right hon. Member for Lowestoft (Mr. Prior). It was a simple, plain question which I thought only admitted of the answer "Yes" or "No". I asked him whether the Opposition were in favour at this point of accepting the IMF loan. I was mistaken. I got neither "Yes" nor "No" for an answer. I am not sure whether it was both "Yes" and "No" or neither "Yes" nor "No". But his reply was:
  "We must accept the loan. We have no alternative but to accept it. But we must also decide for ourselves the terms on which the loan is possible".—[Official Report, 29th November 1976; Vol. 921, c. 604.]
  What a delightful world it would be not the world we inhabit—in which the borrower decided the terms on which he was to borrow. One has a whimsical picture of the right hon. Member for Lowestoft in the office of his bank manager informing him that it is absolutely essential that he should have an overdraft and proceeding to tell the bank manager the terms on which he is willing, graciously, to accept that overdraft.
  But I will not ask others a question without answering it myself. My answer to the question whether we should accept the loan from the IMF is "No". We should courteously open the door to the representatives of the IMF and bid them good day. We should neither ask for nor receive the loan which, I suspect, they are proffering. It can do us no good. Indeed, it will do us harm. Its acceptance would only delay those events which, sooner or later, I have faith, we shall experience and through which both sides of the House can have their hearts' desire.
  Our difficulties are of our own making, and therefore they must be of our own removing. When I say that they are of our own making, I am not associating myself with the Chicago professors or the American television commentators who enjoy attributing our difficulties to the failure of the fibre of the British working man, to deep-seated faults in our society and the degeneracy of our population. Neither do I attribute our difficulties to any failings, real or imaginary or
  760
  statistical, in our productivity. Our productivity might be higher or lower than it is without our suffering from any of the embarrassments, difficulties and dangers which have led us to this position.
  Nor is our celebrated deficit on the balance of payments—even if one corrects the expression and calls it our deficit on current account—the cause, the fons et origo, of our difficulties; for the deficit on current account is but the counterpart of our external borrowings, of our net surplus on capital account. There, indeed, we see perhaps the reason why the IMF team is here, why we have these visitors, why there is no element of reluctance on the part of other nations directly or indirectly to lend us money. We see the reason why those who pour scorn on "the sick man of Europe", as they delight to call us. gather round our bedside with proffered cordials and assistance. They are only too anxious that our capital surplus should be maintained as the counterpart to our current deficit, as otherwise the two sides of the account might be brought into balance by something which they do not desire for their own reasons, but which is necessary to us—that is, an exchange rate which recognises the real value of our currency and of our goods in the outside world.
  The true cause, the true root, of our difficulties is more generally recognised on both sides of the House at present than at any time in the past 20 or 30 years. It was candidly acknowledged by the Chancellor of the Exchequer this afternoon, as anyone who listened carefully to his speech would have realised. It is the fact that the spending projections of the public sector so greatly exceedthe revenue-receiving projections of the public sector, resulting in our celebrated PSBR or public service borrowing requirement. The only way to deal with this—the Chancellor made no secret of it—is to reduce that gap to such a size as can, on a reasonable expectation, be filled by genuine savings voluntarily proffered to the Government, preferably from inside this country rather than from overseas.
  That is only one way in which that can be done. It cannot be done by the method sometimes advocated by Labour Members—the imposition of import controls. There may or may not be a case,

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  on other grounds, for import controls; but there is no case for them as a means of dealing with the consequences of the exorbitant public sector borrowing requirement. By all means let those who advocate import controls surround this country by a wall of brass. By all means let them forbid the penetration of that wail by a single pound's worth of imports. The projections of public expenditure and of public revenue would be no better than they are today. I might even be prepared to argue that they would be less favourable. At all events, there is no remedy for the divergent projections of the public sector to be sought by cutting ourselves off from the rest of the world.
  Nor is there any hope, and here I differ from my right hon. Friend the Member for Chipping Barnet—this has been tried before and has failed—in the dash for growth. I do not see any hope in our saying "Let us go on heaping up the money supply generated by our failure to meet this gap on the off chance that it might summon up so much production that it will counterbalance and eat up the surplus money supply". That is a totally unrealistic prescription. Even if there were excuses in the past for offering this solution, the repeated experience of the past 10 or 15 years has made it mere mischief to do so.
  The only method is that of which the Chancellor was talking with great can dour this afternoon. It is a combination of an increase in projections of revenue with a reduction in projections of expenditure. Only by achieving that, and achieving it on a sufficient scale to put us out of risk of losing control of the money supply, may our difficulties be overcome and may we be able to look the rest of the world in the face.
  I have had some experience—and from inside the Treasury—of this business of handling the estimates of future expenditure. Among other things, this experience makes me very cautious of what I read in the newspapers, which purport to tell us what is going on day by day in the Treasury and at meetings of the Cabinet. I remember how in the early days of January 1958, when Lord Thorneycroft was locked in mortal battle with his Cabinet colleagues over the Estimates, for 1958–59, the newspapers
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  informed the public day after day that the Government were unable to decide on the proper measures to be taken in the island of Cyprus. I think that we should therefore suspend judgment.
  We should do so all the more because, whatever we may say, and whatever hon. Members have said in this debate about making a quick job of it and getting it done and over with once and for all, that is quite unrealistic. If the Chancellor is to succeed in what is his national duty in the next six months he cannot do it all at once. A Chancellor of the Exchequer gets stronger and stronger as the months which lead up to the Budget go by. What is happening at the moment, if I mistake not, is that the Chancellor of the Exchequer is collecting a few hundred millions, maybe the odd thousand million, here or there. There will be another phase in a month or two's time when he will collect the next instalment. But he will be at his maximum strength and take his final instalment immediately before the Budget in the spring of next year.
  But this much can be said already, and ought to be said; and perhaps I am personally entitled to say it against the background of the experience to which I have referred. Never, in my judgment, since the war has the control of public expenditure been exercised with the courage, the determination and the consistency which has been shown in recent months by this Administration and this Treasury team. [Interruption.] I am trying to cause no discord between the Government and their supporters, I simply speak as I observe.
  What the Government have been prepared to do in their control, for instance, of local government expenditure—I mean no moral condemnation, but local authorities have been the most prodigal force in the expansion of public expenditure over these many years—and what they are envisaging doing in future to control it is something that no previous Administration, not even the previous Labour Administration in 1968–69, would have been prepared to face.
  Mr. Ian Gow: Despite the praise which the right hon. Gentleman is heaping on the Government Front Bench for their welcome cuts in the rate support grant, does he agree that to continue to borrow, as the Government are

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  doing, at the rate of £30 million a day shows that public expenditure is totally out of control?
  Mr. Powell: I do not know whether the hon. Gentleman happened to enter the Chamber—I do not complain if he did not—during the earlier part of my remarks; but the whole burden of my argument is that we have to free ourselves, and that the Chancellor of the Exchequer and the Government have to free us, from this necessity which is upon us to attempt to borrow, because of the still exorbitant divergence of those two lines of projected expenditure and projected revenue.
  That is a task in which the right hon. Gentleman deserves, in the first place, the support of all sections of the Labour Party. This is not a debate about Socialism. This is not a debate about whether public expenditure is a good thing, or whether more public expenditure is a good thing. There are other arenas in which to debate with Government Members or, indeed, hon. Members on this side of the House, whether expansion of particular public expenditures is desirable, or whether public expenditure itself is the key to unlock the treasury of social results which they wish to achieve.
  I say that the debate is not about that, because I challenge any hon. Member on the Government Benches, when he pronounces his blessing upon public expenditure, when he says that public expenditure is a good thing and has his support in principle because it is the way to the Socialism to which he looks forward, to say that he means public expenditure financed by international bankers. Surely not. There would be no hon. Gentleman opposite who would not be ashamed to say that that was the public expenditure that he meant.
  Nor does he mean that it is public expenditure that will be financed by money created out of nothing in order to secure a transfer of resources from the rest of the community on the most unjust and unreasonable system possible, that of inflation. There is no hon. Gentleman opposite who would—[An HON. MEMBER: "There is."] We shall see. I am issuing a challenge. I say that there is no hon. Gentleman opposite who would come forward and say "My ambition as a Socialist is to achieve the expansion
  764
  of public expenditure by means of inflation". Of course not. Whatever may be our differences about what should be the proper scope of public expenditure, or of the public sector, we ought to be, and we can be, united in the determination that, however large or small it is, it is going to be financed honestly, and it is going to be financed by this country without dependence upon the rest of the world.
  So I say that the Chancellor of the Exchequer deserves support—no doubt he will get it—from the empty Benches behind him above the Gangway; but he deserves support from all parts of that side of the House.
  He also deserves support, and receives it, from my hon. Friends and myself on this Bench. We were mandated when we came here to support the Government in restoring the balance of the Budget and the balance of the economy, and the Chancellor of the Exchequer and his hon. Friends who occupy offices in Northern Ireland will agree that we have remained faithful to the undertaking which we gave at the beginning of this Parliament, and to the mandate which we brought here.
  The Government are also entitled to support from the Conservative Party. However, there is an amendment on the Order Paper, humbly regretting that the Gracious Speech
  "provides no grounds for confidence in the economic policies of Her Maejsty's Government."
  A fair comment, and a comment which must have risen to the lips of many who read that, is "Who is talking?". Long before the present crunch was reached in the control of expenditure, long before the falling rate of inflation had produced 1·3 million unemployed, an Administration of the party which now forms the official Opposition would have disappeared over the horizon out of sight altogether in a flurry and dust cloud of manufactured money. We know that from the form. We know that, because that was how that Administration behaved in a crunch far less alarming or severe than that wherein we stand at the present time.
  Yesterday my hon. Friend—I use the expression rather in the personal than in the parliamentary sense—the Member for Oswestry (Mr. Biffen) was received with

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  cheers from the Benches behind him when he quoted the Prime Minister's condemnation of the option of spending our way out of a recession and increasing employment by cutting taxes and boosting Government spending, where the Prime Minister went on to say that so far as that option
  "ever did exist it worked by injecting inflation into the economy."
  Some of the cheers came from hon. Members who did not live through the years of 1970 to 1974, in particular who did not live through the volte-face of 1972–73. My hon. Friend the Member for Oswestry is perhaps the only occupant of that Bench who without a blush or a sense of shame dare quote, and quote with approval, those words of the Prime Minister.
  There seems to be some notion among Her Majesty's Opposition that now that they have got the hon. Member for Oswestry as a kind of totem on the Front Bench, everything will be all right, that everyone will look at the hon. Member for Oswestry and listen to what he is saying and forget everything else that happened in the past. I assure them they are mistaken. I assure them that the sponge will not be passed over the memory and the record of the conflict with economic common sense, the conflict with sound financial management, the conflict with the supreme national duty in the years 1970–74, until most of those who were co-operators, connivers or consenters to those events have passed elsewhere.
  Meanwhile, it is an impertinence for the present occupants of the Opposition Front Bench to declare that they "have no confidence in the economic policies" of a Government who have analysed and defined—as they did not—the cause of the malady and who deserve their support in the crucial steps that will have to be taken in the coming months to apply the only remedy to it. That is why, in their partially deserted Lobby tonight, will not be found my hon. Friends and myself.
  6.52 p.m
  Mr. Eric S. Heffer: I am almost afraid to say anything that would make the right hon. Member for Down, South (Mr. Powell)
  766
  desert his recent declaration. After that quite brilliant speech, it is very difficult to come out against it. However, I am afraid that although I listened very carefully to what he said, particularly about the present Labour Government and why he thought that he and his hon. Friends should support them, or at least not vote against them tonight—which I welcome—I should be absolutely horrified if I thought that my Front Bench was actually accepting the right hon. Gentleman's basic economic views. If it were, I could not support the Government either, and Government would find themselves in great difficulties.
  The right hon. Gentleman clearly dissociated himself from Milton Friedman. He said in passing that he was not in any way associated with a certain professor from the Chicago school. Nevertheless, much of the argument that he put forward today was not very different from the type of argument that has been advanced by Milton Friedman. I find myself in total opposition to the arguments put forward by that gentleman.
  I want to make a few references to Milton Friedman because undoubtedly the Opposition Front Bench seems to have accepted him as its guru. A great deal of talk is coming from the Opposition about the Chicago school, how private enterprise is equated with freedom, why it is necessary to have the free market economy, and so on. I do not know why anyone should want to listen with any seriousness to anything that Milton Friedman says, despite the fact that he has received the Swedish Nobel Prize.
  Milton Friedman was also the individual who advised the Chilean Government. After the junta came into power, inflation increased in Chile, as did unemployment. That was based upon the concepts of the free market economy put forward by Milton Friedman, so why should we want to listen to his arguments with any seriousness? Why should we believe that he has the answer to Britain's problems?
  I wish that I could meet the gentleman face to face, because I should like to say quite bluntly to him that to say that the British working man is lazy is to lie. British working men are no more lazy —in this sense, no more industrious, either—than working men in any other part of the world. In many respects they

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  are probably a damned sight more hardworking than workers in other parts of the world. I refuse to accept that all our economic ills stem from the position outlined by Friedman—that our people are lazy and workers will not work hard.
  My hon. Friend the Member for South Ayrshire (Mr. Sillars) made the point that investment per worker in Britain was lower than such investment in many other countries. That is absolutely true. Investment per worker means machinery. Investment in itself, in any case, does not necessarily mean an increase in the number of people working. In my constituency at present I am faced with the case of Lillicups, which is about to introduce into its factory at a cost of £1 million, assisted by the Department of Industry, 16 new machines. In one fell swoop this will reduce the staff of workers by almost 50 per cent. With 16 machines, as against 35, and with half of the work force, the final production will be about the same. Therefore, productivity per worker in that factory will rise. That is investment.
  Investment does not necessarily mean that our people will get more jobs. Therefore, we have to create not merely investment in existing companies but investment in new industries. We must expand in that direction, otherwise we shall not create the work for our people and we shall have a permanent unemployment figure of up to 2 million and possibly more. That is one of the factors with which we must grapple.
  Mr. Fairbairn: This is one of the fundamental problems of Western industrial society—namely, if one increases productivity and efficiency, one decreases the number of people required to do the job. This is a matter to which I have addressed myself a lot over the years. Is the hon. Gentleman in favour of such investment which increases productivity and output and necessarily requires a smaller work force?
  Mr. Heffer: It is very interesting. We are obviously all Marxists now. Karl Marx explained in "Das Kapital" a long time ago that the very nature of the capitalist system meant that as one increased investment, one was bound to have what he called a reserve army. Of course, that is absolutely right. That is what happens
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  within our type of economic system.
  The answer to the hon. Gentleman is that we need planned investment, the extension of new industries, and a reduction in worker's hours. That must all be done on a planned basis. A great shudder goes through Opposition Members when we talk about planning. They believe that if there is planning, there can be no genuine political or industrial democracy.
  Of course I am in favour of investment, but not purely on its own without taking it a stage further. The analyses made by the right hon. Member for Down, South, the hon. Member for Oswestry (Mr. Biffen), myself and others are not very different, but the conclusions we draw and the answers we get are different. The right hon. Member for Down, South is dedicated to the acceptance of the present economic system—a perfectly understandable position for him to hold. On the other hand, I think that the present economic system is out-dated. It has outlived its usefulness. To ensure full employment we require planned investment, industrial development and democratic planning of the type put forward by myself and my party.
  Mr. Geoffrey Johnson Smith: Why does the hon. Gentleman think that what he calls democratic planning but what many of us suspect means State planning—dictatorial planning at that—is more likely to guarantee job satisfaction and increased prosperity for the nation when other more prosperous countries with a mixed economy have rejected his form of democratic planning?
  Mr. Heffer: The hon. Gentleman says that other countries which are more prosperous than we are have rejected democratic planning.
  Mr. Johnson Smith: State planning.
  Mr. Heffer: There are about 8½ million unemployed in the United States of America, one million unemployed in France, over one million unemployed in West Germany and unemployment on a huge scale in Italy. All the Western European countries have a high level of unemployment. In some of those countries there are planning measures. France in particular has a record of planning

  769
  of a kind we have never envisaged. When planning is suggested by the Labour Party through the development of the National Enterprise Board, Opposition Members on the other side of the fence almost have a fit at the very idea of our attempting to intervene in private industry, although such intervention has been accepted in France for a long time.
  I do not want to spend all my time talking about the advantages of democratic planning over our present non-planning or partial planning. I trust that none of my hon. Friends in the Labour Party accepts the arguments put forward by Milton Friedman.
  Mr. Alan Clark: I am anxious that the hon. Gentleman might not mention wages. Within the parameters of democratic planning, as he calls it, is he or is he not personally committed to the principle of totally free collective bargaining?
  Mr. Heffer: I shall have to ask the hon. Gentleman to read my book on the subject, in which I make clear that I am not in favour, and never have been, of a statutory incomes policy. I have always been in favour—just like the Leader of the Opposition—of trying to get a voluntary incomes policy.
  I have never believed that we should have a totally free-for-all. That can lead to great imbalances. I have always believed in the necessity for a voluntarily negotiated agreement between the trade union movement and the Government of the day. That is nothing new. I have always argued that. Where I differed from my Government in the past was in arguing against a statutory incomes policy. That was when I joined some of my hon. Friends who were opposed to any type of incomes policy, voluntary or otherwise. I am moving slightly away from what. I want to say—
  Mr. Deputy Speaker (Sir Myer Galpern): Order. The hon. Member has omitted to state the price of his book.
  Mr. Heffer: It is very expensive—£3·95, I think.
  I wish to comment briefly on the IMF loan. I agree with the right hon. Member for Down, South that our objective must be to stand on our own feet. I appreciated the remarks he made in a recent speech. At a time when others were suggesting
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  that I and my hon. Friends were agents of foreign Powers, he pointed out that although he did not agree with our economic strategy, the arguments we put forward were basically patriotic arguments for solving our economic and political problems in our own way, in our own country. That has to be said over and again, because it is what we have always argued.
  The Government should have listened to us 18 months ago when we originally put forward our strategy. Unfortunately, they did not do so. It is no good saying after 18 months that they have to accept our strategy, lock, stock and barrel, but my right hon. Friends on the Front Bench must come at least partially in our direction.
  If some of the proposals that we put forward are accepted by the Government, during the next 18 months or two years we shall be able to advance and take full advantage of the upturn in the economy that is likely to come, the oil that is likely to flow, and the better balance of payments position that in any case will occur. I put that seriously to my right hon. Friends. We do not want any further massive public expenditure cuts as a result of pressure from the IMF.
  Yesterday, my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) said:
  "I am always puzzled by my hon. Friends who, like the National Executive of the Labour Party, are prepared to run demonstrations because of cuts in public expenditure. I sympathise. I do not want to see teachers. the keepers of public parks and school cleaners laid off."—[Official Report, 29th November 1976; Vol. 921, c. 555.]
  Does not my hon. Friend understand that public expenditure cuts do not affect only teachers, school cleaners and those who work in public parks? It is the construction workers who suffer more than any other sector in industry from public expenditure cuts.
  About 50 per cent. of the construction workers in my area are out of work. The biggest clients for both private and public construction work, if one includes direct labour, are local authorities and Government agencies. Further cuts in public expenditure must mean extra unemployed workers in the construction industry and, finally. almost the demise of that industry. If there is an upturn there will be no

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  trained workers in the construction industry because no apprentices are now entering the industry. This is a factor that my right hon. Friends on the Treasury Bench should take into consideration when discusing the IMF loan.
  I want to conclude by making one last point. I am glad that the hon. Member for Guildford (Mr. Howell) is here, because I want to raise the subject of his statement which was—so I was told—that one should not always believe what one reads in Labour Weekly. I accept that. I do not believe everything I read in any newspaper, whether Labour Weekly, The Times, the Telegraph, the Morning Star, or any other. I should like the hon. Member for Guildford to tell us that he was not arguing for a further £4 million or £5 million cut in public expenditure and, if not, what the figure is that he and his right hon. Friends on the Tory Front Bench put on further cuts in public expenditure.
  It is about time that the Tories explained to the people of this country what they are talking about. Are they suggesting that further cuts in public expenditure will mean cutting back on unemployment benefits, old-age pensions and social benefits, which have been gained as a result of efforts made over the years by successive Governments? I think that if the hon. Member for Guildford speaks later he should let us know precisely what the position is and whether the Labour Weekly report was correct. If he does not, we can only assume that the report was 100 per cent. correct.
  Mr. David Howell: I dislike responding to the kind of hectoring demands that the hon. Member for Liverpool, Walton (Mr. Heffer) is wont to make. He was muttering about me earlier this afternoon—I cannot always hear what he says these days because he speaks so softly—but it is incredible to me that he should be so naïve as to believe what he reads in Labour Weekly and that he should take his advice on economic matters from that organ.
  It is only slightly less unbelievable than the analysis he has put before us. He does not understand that it is the imbalance in the balance of payments and abnormally high interest rates which are damaging jobs, throwing people out of work, and
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  undermining the job security of, among others, his own constituents, and which will continue to do so in future. That is the basic cause of unemployment. If he does not believe that, his naïvety in believing the Labour Weekly report—which was, incidentally, a complete fabrication—is almost matched by his naïvety in failing to understand why unemployment is high and why it will rise until we get outstanding debts under control.
  Mr. Heffer: If the Labour Weekly story is a complete fabrication, will the Opposition Front Bench reveal by how much it is prepared to cut public expenditure? It is no good arguing about further public expenditure cuts unless the Opposition are prepared to say precisely what that means, the fields in which cuts will be made, and their levels. Otherwise the British people cannot take the hon. Member for Guildford seriously.
  To that extent the right hon. Member for Down, South is absolutely right. If the Opposition were really concerned about these matters, they would show some support for the efforts which my own Government have taken in this direction, although I believe that in many respects the Government were not right. Therefore the arguments the hon. Member for Guildford has put forward are totally phoney. Tories have shown once again this afternoon, as on so many other occasions, that they are not prepared to say exactly where they stand on this question of public expenditure.
  I should have liked to deal with many other issues in this debate and to have taken up the other arguments put forward by the hon. Member for Guildford in his brief intervention, but I trust that my right hon. Friends on the Treasury Bench have listened carefully to the points I have made and I hope that they will respond.
  7.16 p.m.
  Mr. Douglas Crawford: I should like to join in the congratulations which have been offered to the hon. Member for Workington (Mr. Page) on his maiden speech. I have spent many happy holidays in Keswick, and he alluded to that very pleasant town in the Lake District.
  It is a privilege for me to be speaking from the Scottish National Party Bench

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  on St. Andrew's Day since it is today that the devolution Bill has been published. We see the Bill as a step along the road to full independence and sovereignty for Scotland.
  I was depressed and astounded to see that the most recent comments by the media and others on devolution suggesting that, given the United Kingdom's current economic difficulties, to introduce this Bill now is folly and that to do so is to fiddle while London burns. Perhaps the Observer was in our eyes the biggest culprit. On Sunday under the heading "Fiddling as we burn", the Observer said:
  "The Parliamentary session which has just begun could be a psychological disaster of the first magnitude. At a time when the concern of ordinary people is about how to get or keep a job and how to mitigate the fall in their living standards, the main item on the agenda at Westminster will be devolution for Scotland and Wales. Many will find it hard to conjure up a more appropriate example of 'fiddling while Rome burns'; or a more certain way to increase public cynicism about Politics."
  It was sad that this came from such a liberal and renowned newspaper, because I believe devolution is vitally relevant, more relevant than hon. Members and the country know, to the economic plight, of the countries of the British Isles.
  Self-government for Scotland is the only way in which the countries of the British Isles can individually regain their prosperity. I do not say this facetiously or ironically, but in all humility. If I am about to preach a short Church of Scotland sermon, I make no apology because I think that England needs one and that it could help in a number of ways. I take as my text the words in Deuteronomy:
  "Thou shalt lend unto many nations but thou shalt not borrow; and thou shalt reign over many nations but they shall not reign over thee".
  As far as the United Kingdom is concerned, this philosophy is past and will remain so. It will be difficult for the House to grasp, but if this political philosophy is not appreciated and translated into action, disaster stares the economy of these islands in the face.
  The hon. Member for Berwick and East Lothian (Mr. Mackintosh), in his trenchant speech yesterday, said that this was a last chance, and I agree with him.
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  It is essential to get back to the economics of stability as propounded by Adam Smith. A nation cannot go on living on tick for ever. Yet this is precisely the result of what the United Kingdom sought to do as it searched its way out of the economic morass of 1929, 1930 and 1931. In adopting the deficit financing policies of John Maynard Keynes, the seeds of today's crisis were sown.
  It may have been safe for the United Kingdom to run a deficit on its current account when it was the beneficiary of cheap food and raw materials and the guaranteed markets which the British Empire provided. But a deficit on current account, as every accountant knows, can change into a deficit on capital account straight away when the sources of cheap materials disappear. That is precisely what is happening to the United Kingdom now.
  Towards the end of the last century, Rudyard Kipling penned the words:
  "Lo, all our pomp of yesterday
  Is one with Nineveh and Tyre!"
  It is happening again. India, East Africa, West Africa and Southern Africa, together with our other erstwhile colonies, are looking elsewhere for their manufactured goods, if they are not making them themselves. We all know what has happened to the prices of raw materials and food which England—I say "England" advisedly—has to import. As the House knows, Scotland is self-sufficient in food.
  Mr. Alexander Fletcher: Not true.
  Mr. Crawford: Presumably, the hon. Gentleman is omitting from the equation the valuable commodity, fish. Scotland is self-supporting in beef, lamb, eggs, milk—
  Mr. Fletcher: Oranges?
  Mr. Crawford: The hon. Member tells me that we are not self-sufficient in oranges. We export enough food to other countries to pay for the oranges and other foods which we import. In any case, a nation does not live on oranges alone.
  I am pointing out that what has happened has changed a deficit on current account to a deficit on capital account. If ever this was spelled out

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  clearly, it was spelled out in the latest Barclays summary of the state of United Kingdom financial markets:
  "Even on the basis of relatively optimistic forecasts of capital movements in the second half of this year, it seems likely that the bulk of the IMF loan (assuming it to be granted in full) will be utilised in making good the loss to the reserves incurred in financing the deficit this year. The loan therefore represents at most a short breathing-space which must be used to reverse the flow of capital funds it sterling is not to continue depreciating rapidly in 1977."
  We all know what that would mean—continuing high inflation, continuing high interest rates and continuing high import costs, all of which erode any competitive edge which the devaluation of sterling gives to our exports.
  I think it important that the House should be well aware of what the SNP policy is and what it proposes for a self-governing Scotland. We propose, for example, the creation of a national bank to carry out in Scotland those functions presently carried out in the United Kingdom by the Bank of England. Next, we propose the right to control our own currency and the power to manage it in such a way that it does not float upwards too quickly, and the right to fix our own interest rates. The Chancellor said that interest rates in Europe were going through the ceiling. I presume that he has not read of what is happening to interest rates in Norway, Sweden, Switzerland, Belgium, Holland and Austria.
  When the SNP published its paper on proposals for monetary policies in a self-governing Scotland, it naturally attracted attacks from both the Tory Party and the Labour Party. The Labour Party said that a £ Scot floating upwards could lead to unemployment. Could anything be more ironic than that, coming from the party which at the last General Election campaigned on the slogan "Back to work with Labour" and which is now presiding over unemployment levels almost twice what they were when the party came to power?
  Further, the Labour Party in Scotland stated:
  "The fact that other European countries, like Germany, which have strong currencies also have low unemployment rates is irrelevant to Scotland."
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  What an amazing statement. We remember the scare stories we heard from the Labour Party about bank notes being smuggled up and down the A74 between Carlisle and Scotland. Let me remind the Labour Party that any simple economist knows that that does not happen if there are no violent fluctuations between one country's currency and another. There are no latter-day Bluebeards smuggling avalanches of Norwegian, Swedish or Danish currency across the Skagerrak, and there will be none between Scotland and England.
  As for the Conservatives, they had their own stories, and the hon. Member for Edinburgh, North (Mr. Fletcher) was in the van. He said that he and others had been approached by companies which said that, if Scotland gained self-government and put its monetary policies into effect, they would leave Scotland. We challenge the hon. Gentleman to say which those companies were. I give him another chance now to name the companies which said it. If he does not take that chance, I suggest that for ever he holds his peace.
  Mr. Alexander Fletcher: I hope to speak later in the debate, if I catch the eye of the Chair.
  Mr. Crawford: I hope that the hon. Gentleman will, and that he will tell his hon. Friends and, inter alia, the marvellously named "Scotland is British" campaign that they should get some more confidence in their own country.
  The Scottish National Party's monetary policy enunciates the basis of a sovereign Scotland's financial structure, based on the economics of rectitude, and from that basis, if it has ears to hear, England itself can profit. Scotland is not the least interested in an economically poor England: quite the contrary. For reasons of friendship and sentiment as well as self-interest, we need and we wish to see a healthy and prosperous England south of the border.
  It is our contention that the English body politic and body economic, once the envy of many parts of the world, is sick and ailing. The right hon. and learned Member for Surrey, East (Sir G. Howe) talked about prescriptions. I have to tell him that medicine can no longer help. Even the Dr. Faustuses of the

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  IMF can administer no more than a short-term cure, and, as the right hon. Member for Down, South (Mr. Powell) said, the IMF will not play "Sugar-Daddy" for ever.
  What is needed is surgery or—to get away from metaphors and speak in plain language—the English body politic and economic needs a change, a constitutional shock, if it is to shake itself out of its presently near fatal lethargy. We believe that self-government for Scotland will administer precisely that kind of shock which will enable England to come to her senses.
  We have seen the usual banal movements to and fro between the two Front Benches which we always see when we debate the economy. They are totally irrelevant to what is happening in the country, and that is precisely why today's devolution Bill is so important in the context of the present economic crisis. I agree with the hon. Member for South Ayrshire (Mr. Sillars) that it is not enough. It is not nearly enough, but at least it is a start. It will be the forerunner of a sovereign Scotland.
  Here, let me reassure all hon. Members and the country, as well as the media —especially "Weekend World" and the political correspondent of The Times— that the SNP parliamentary group is wholly united with the party at home in wishing an early General Election, which will pave the way towards a sovereign Scotland. Press stories to the contrary are so much rubbish, and one is entitled to wonder whether one can put any trust in the Press. If the Press can so garble the affairs of a parliamentary group of 11, I hate to think of the idiocies which it can perpetrate when discussing Cabinet meetings, Shadow Cabinet meetings and the like.
  I realise that English politicians and economists will in the by-going have to cast out many preconceived economic ideas and doctrines. I realise that the reappraisal will be agonising. But I am convinced that a sovereign England will benefit from the precepts of the policies of economic stability which we intend a self-governing Scotland to put into practice. If we in the self-governing Scotland of the future can help that to come to pass, we shall have done England some service, and done it gladly.
  Mr. Deputy Speaker: On behalf of the 16 hon. Members still wishing to take part in the debate before the winding-up speeches commence at nine o'clock, I appeal for brevity. If hon. Members observe my appeal, a substantial number might have their opportunity.
  7.27 p.m.
  Mr. Roy Hughes: I think that it was Lord Salisbury who, at the turn of the century, said that politics are islands. It now seems that politics is devolution. That is certainly the impression one would gain from listening to the hon. Member for Perth and East Perthshire (Mr. Crawford).
  Some of my hon. Friends claim that the Scottish National Party is based on principles which are now out of date. I have had some doubt about that, but, after listening to the hon. Gentleman, I think that my hon. Friends may well be right, especially after his references to Adam Smith and Rudyard Kipling. One would hardly think that the ideas of those two men were relevant to the highly complex industrial society in which we now live in Britain.
  On its front page of last Friday's issue, the New Statesman suggested that the Queen's Speech might well have been written by Prince Philip. We know that the bulk of parliamentary time this Session will be taken up with devolution. I welcome the Government's proposals. They have taken the only honourable course which they could take, after the promises and pledges made and freely entered into. Nevertheless, it must be reassuring to them, if the New Statesman is to be believed, that they have at least Prince Philip on their side.
  In considering the Gracious Speech, we should bear in mind not only what is in it but what has been omitted. In my view, we should have had a short sharp Bill to clear away the remaining delaying powers of the House of Lords. This is relevant even to the Government's economic policy and strategy, since at any time that body can throw a spanner in the works, as we saw over the Aircraft and Shipbuilding Industries Bill.
  A Bill about the House of Lords should have been given the highest possible priority by the Government. The behaviour of the House of Lords has been deplorable. It is noticeable that the

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  Lords behave like this only when a Labour Government are in power and particularly when the country is facing severe economic difficulties, as it is at present, or when we are approaching a General Election situation. It goes without saying that the hereditary system— "the first of the litter" as my illustrious fellow Welshman, David Lloyd George, once called it—is now very much out of date. Likewise, the patronage system is equally disreputable made up, as it is, by friends and publishers of ex-Prime Ministers.
  I believe that the present obstructionist tactics of the House of Lords is really part of a Tory plot. The Conservatives want a reformed second Chamber, perhaps partly elected, but on a basis suitable to them. That would be a means of putting the damper on future progressive legislation to be implemented by a Labour Government.
  We should have Lords reform. This body should be swept away. We could start by ending their delaying powers, which at least would be the penultimate nail in their coffin. However, the Government seem to have decided against such a measure, at least for the time being.
  Far from being Marxist-dominated I would say that the Government are actually too conservative. What we really need in the Government at present is a David Lloyd George. I am sorry to say that my right hon. Friend the Member for Ebbw Vale (Mr. Foot) seems to be a poor substitute. The conservative nature of the Government is reflected in their economic policies. We now have almost 1½ million unemployed. We must bear in mind that unemployment is what led to the creation of the Labour Party and is what it is all about. Keir Hardie was known as the Member for the unemployed.
  Mr. Peter Hordern: Perhaps the hon. Gentleman would remind the House of what David Lloyd George, who was a great reforming Chancellor, instituted in the way of income taxes and what rate of income tax he introduced at that time.
  Mr. Hughes: I appreciate that David Lloyd George was responsible for an awful lot of progressive legislation. The point that I am trying to make is that
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  the Government could learn a lot from him despite the fact that he was at his zenith even before the First World War.
  Despite the astonishing figure of almost 1½ million unemployed, the Government have repeatedly turned their face against import controls. The Government's failure to act in this direction is keeping many thousands of extra people on the dole. We know that the country has been persistently troubled by a balance of payments crisis. Many of our traditional industries are being undermined —electronics, textiles, motor cars and so on.
  During the debate we have listened to extracts from Marx, from Keynes and from the Chicago school. To me it makes sound economic sense that we should only import what we can afford to pay for by our exports. Home demand could and should be controlled by adjustments in taxation and the level of public expenditure. In this way we could expand effective demand without a recurring balance of payments crisis. Production, employment and investment would grow rapidly.
  The Cambridge economists who have put forward this particular theory are absolutely right in their analysis. For the Chancellor to suggest that there is no alternative to the Government's present strategy is misleading to say the least. If the Government were to introduce the sort of import controls that I am suggesting, there would no doubt be many snags and anomalies in implementing such a policy. There would certainly be squeals of anguish from the Common Market and from our trading partners in GATT. But these organisations must be flexible enough to enable this country to get back on its feet.
  An impoverished United Kingdom can only be of limited value as an ally. Likewise, a major trading nation like the United Kingdom, persistently in economic difficulties, undermines the trading stability of the world.
  7.37 p.m.
  Mr. Alexander Fletcher: It cannot be a matter of national pride that the financial world, in the form of the IMF, is once again taking stock of Britain's creditworthiness and considering the viability of our forward budgetary plans. Apart from the IMF

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  examination of our books, our financial plight is being considered by Presidents and Prime Ministers all over the Western world.
  The reason is simply that since March 1974, when Labour took office, it has persistently refused to face the facts of economic life and economic reality. Labour fell into the trap of believing its February 1974 propaganda by then claiming that there was no serious economic problem to worry about. It clung to power in October 1974 with promises that not even the Chancellor, with his renowned brass neck, would dare to defend today. The IMF doctors may prescribe medicine, but they will not force it down our throats. They do not have to lend us money. That is something which Labour Members should bear in mind when they make their criticisms.
  The question now is whether the Government have the sense and strength to take the medicine which should have been prescribed in the first of the Chancellor's many Budget Statements since March 1974. It is, perhaps, our last opportunity to take the necessary, if painful, steps towards Britain's economic recovery following the horrific rates of inflation that have been inflicted on the country since Labour came into office.
  I endorse the hopes, so eloquently expressed by the hon. Member for Berwick and East Lothian (Mr. Mackintosh), that we will have from the Government an effective and final package of economic measures. Judging from the Chancellor's remarks this afternoon it looks as if the watering-down process is very much in hand in the Cabinet and will, no doubt, be seen in the Parliamentary Labour Party.
  There are two matters of particular concern that I would like to raise. The first is the inevitable bewilderment and disappointment that public expenditure cuts will bring to people in those areas of the country where public investment is so chronically needed. I am referring to areas of urban deprivation, mainly in the inner cities. There are parts of our cities, for example Glasgow, where, in the space of just a few streets, one crosses a social border between one kind of society or civilisation and another, but one is not crossing into a different
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  political regime; it cannot be compared with crossing politically from the West into East Berlin; but physically the environmental sight is much worse than that encounterd when crossing from the West into East Berlin.
  I therefore hope that, in whatever package the Government try to produce in the course of the next few days, they will appreciate that, in addition to cuts which, in public expenditure, most people are agreed are necessary, there must also be a disciplined reallocation of public resources to meet the desperate needs of areas that have been neglected for many years. The future for the people in those areas can only be bleaker still if in the present economic crisis there is not an attempt to reallocate public sector spending in favour of people who for far too long have suffered from a depressing environment.
  Local government could help by encouraging private enterprise projects in those areas. It would also help if EEC grants and loans from the Regional Fund and the Social Fund were allocated entirely to those areas of particular deprivation throughout the country.
  I want to obey your request, Mr. Deputy Speaker, that speeches should be brief.
  My next point concerns the impediment to investment, from which we all suffer because of the economic situation, not just in Britain but in Scotland, as stated by the hon. Member for Perth and East Perthshire (Mr. Crawford).
  I believe that this impediment arises from the devolution proposals, the demands for a separate Scottish economy within a devolved context, and the demands for a separate Scotland—a completely independent Scotland going far beyond any proposals tabled today by the Lord President of the Council and Leader of the House of Commons.
  It does not take too great an imagination to understand that people in business and elsewhere who make investment decisions must pay close attention to political pronouncements, and not least the political pronouncements of the Government of the United Kingdom regarding their plans for devolution in Scotland and, to a certain extent, to the political pronouncements of people such as the

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  hon. Member for Perth and East Perthshire who has recited again something of the economic philosophy which he hopes to introduce in Scotland. Some people, quite rightly, pay attention to this.
  When I travel abroad, I find that there is a constant need, as a Scottish Member, to try to explain to people what is happening in Britain and to stress that Britain is not on the point of breaking up its unity, that there will not be a separate Scottish economy within the United Kingdom with a separate method of operating its money supply and its general economic affairs. If this is likely to happen—I hope that the hon. Member for Perth and East Perthshire will agree with this—people will make different investment decisions in this context than if the decisions were taken within a unified economic structure of the United Kingdom.
  In Scotland itself Scottish and British companies are hesitating about investment in Scotland, and their hesitations arise for precisely the same reasons. I have had a number of letters from British companies as well as regular conversations with Scottish companies which have asked my opinion about what is likely to happen in Scotland. I do not doubt that the hon. Gentleman has had similar conservations. Our stories will be different, but essentially we are trying to answer the same questions. It is up to the recipients of our answers to decide precisely what they think is likely to happen.
  Mr. Crawford: Will the hon. Gentleman name the companies?
  Mr. Fletcher: The hon. Gentleman has asked me to name companies. He knows that that is impossible. One speaks in confidence, and I hope he respects the confidence of the companies that speak to him about their investment plans, as I would respect their confidence.
  It does not need much imagination to lead one to look at the sort of business which exists in Scotland today and to ask ourselves the questions that the managers must ask themselves. Let us consider the example of the management of a mutual life assurance company which is responsible only to its policy holders and which has operated successfully in Scotland for many years, although perhaps 80 per cent. of its policy holders
  784
  are in England. Anything that will upset the balance between Scotland and England is of great importance to that company's management and must cause it to hesitate before taking investment decisions.
  Mr. Crawford: The hon. Gentleman will be aware that the associated Scottish life offices have established a sub-committee which will produce a paper in the near future in the financial and monetary proposals of the Scottish National Party.
  Mr. Fletcher: That information might make us look forward to getting a statement from the industry of the kind that I and my hon. Friends have received privately. It is entirely up to the industry when it decides to make a public statement. It is not up to people like myself.
  Hon. Members will have seen from a television newsreel that thousands of employees of Babcock and Wilcox in Renfrew are desperately concerned about their future employment, as there is a shortage of orders for power stations. These men wish to be assured of future employment. An order for a power station is more likely to come from England than from Scotland. This illustrates in a simple way the dependence of so much of Scottish industry on the United Kingdom economy as a whole. That situation will not change overnight or, indeed, in a generation.
  To make my final point I shall again refer to the hon. Member for Perth and East Perthshire. I hope that he will appreciate that I do this out of no disrespect to him: indeed, I believe that he is a constituent of mine. According to reports, he wrote to the Managing Director of the International Monetary Fund a few weeks ago saying "Do not lend any money to the United Kingdom. Do nothing to help Britain on the security of North Sea oil, because it is not Britain's oil."
  The Managing Director of the IMF is in a position to judge the importance of that letter without any assistance from me or any other hon. Member, but if to the managing director of an international organisation, that sort of letter goes out attempting to damage Britain's financial and economic reputation, think what might go out privately to less well-informed individuals regarding what

  785
  happens in Britain generally and Scotland in particular.
  To return to my main theme, Britain now await its fate at the hands, not of the IMF, but of the Government Front Bench. I believe that the picture could be so different if we had a Government who were less conceited about their own powers and who had more confidence in what the people of this country could do for themselves if we set free their energy and resources. Surely that is the only road to economic salvation for all the people of the United Kingdom. It is an economic freedom leading to economic prosperity on which the unity of the United Kingdom must depend. Nationalism and separatism feed on inflation, unemployment and on a devalued currency.
  I think that most hon. Members will remember the history of Europe in the 1930s. It is sufficiently close to remind us of the evils in store for British people if the Government fail to face the economic and political facts of life and fail in their duty to the nation.
  7.49 p.m.
  Mr. Bryan Gould: This debate takes place at the same time at other perhaps more important debates in the Cabinet and between the Government and the IMF on Britain's economic situation. It is worth while pausing for the moment to remark on the reason for our present negotiations with the IMF and for the fact that they take that particular form at this time.
  We have to negotiate a loan from the IMF at this time principally because the standby credit that we obtained in July runs out in a week or so. If we are asked what we did with the money that we then borrowed, the answer is not that we in any sense financed our public sector borrowing requirement or even our overseas trade deficit. What we did with the thousands of millions of pounds that we borrowed, and spent, was prop up the pound in a futile attempt to maintain it at an unrealistic level.
  We did so because the Treasury utterly failed to recognise how far our loss of competitiveness made the fall of the pound inevitable. That monumental error by the Treasury has attracted virtually no attention. That is principally
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  because the Opposition, and the Press who support them, are so ideologically blinkered that they must have it that our need to borrow from the IMF is related in some way to our levels of public expenditure.
  So keen are they on this idea, so ready to wield the axe, that they ignore any factor which offers a simpler and more direct and rational explanation. The danger is that our own Labour Government might be infected by such nonsense and that, having run out of money with which to support the pound, they will turn to other measures, such as very high interest rates, to achieve the same objective, that they might even be tempted to seek "confidence"—a much overworked word—by deflationary cuts and squeezes on the familiar model. If that were to be done, it would be totally misguided, both as to means and as to ends.
  It would be misguided as to means because confidence in the pound is not won or lost on the basis of measures reflecting the mish-mash of monetarist the orising. It depends rather on the hard facts of our economic and trading performance, facts which are available to every foreign holder of sterling, facts showing our comparative increase in unit labour costs and export prices for manufactures and the rate at which exports are increasing in volume by comparison with imports.
  It would be misleading as to ends because every cent by which the pound is maintained at a value higher than its true value simply penalises our exports, subsidises our imports and acts as a major disincentive to any manufacturer who might be tempted at any point to think of investing in new export capacity. In other words, it would be quite ludicrous for us even to contemplate paying the price of a further and irrelevant deflation, all for the privilege of maintaining an uncompetitive exchange rate.
  Our only escape from our economic straitjacket is, as the Prime Minister himself keeps saying, export-led growth. By export-led growth I mean—and I presume the Prime Minister means—such a growth in net exports as to make a significant difference to investment, employment and the balance of trade. I do not mean by export-led growth what the Treasury apparently mean. They forecast in April, and have not yet revised

  787
  the forecast, that in the first half of 1977 as compared with the first half of 1976, there will be a 9 per cent. increase in exports—they might even revise that estimate downwards now—with a corresponding increase in imports of 9 per cent. and therefore a growth in net exports of nil.
  That is not the stuff of which export-led growth is made. If we are to get the export-led growth we need, we must have a substantial growth in net exports. Whatever else we may get right, that will not be achieved unless we get the exchange rate right. If we are to have the right exchange rate, it must do two things. First, it must enable us to sell abroad at a price which is competitive. Secondly, that competitive price must be a price which makes it more profitable for manufacturers to sell abroad than to sell on the home market. Unless we combine those two conditions, we shall not get export-led growth.
  If we do not make our prices competitive, we shall not get the demand which will lead to a volume increase in exports; unless we make exports profitable, the manufacturer will do as he has done every time in similar situations since the end of the war: he will turn back to the more profitable and easier home market as home demand is allowed to rise.
  All the facts suggest that we have not yet succeeded, even with the current fall in the value of sterling, in combining those two conditions. In fact, our export prices for manufactures this year have not fallen at all. We have become less competitive. We have become more competitive by comparison with the Americans, it is true, but the Germans have actually become slightly more competitive and the Japanese, French, and Italians substantially more so, by 5 per cent., 9 per cent. and 18 per cent. respectively.
  It is not surprising in the light of those figures, although the Chancellor seemed to be surprised, that our export performance has been rather bad so far this year. There is little evidence of any substantially increased demand for our exports, in direct contrast to the German and Japanese exports during this year.
  The continued competitiveness of imports is shown by the fact that the volume
  788
  of our imports has gone up very fast— faster than that of exports—over recent months and the only sign that the fall in the value of sterling may at last be beginning to have an effect is that import prices went up very fast in October.
  As for profitability, there is some evidence that manufacturers have taken advantage of the devaluation in profit margins rather than by increasing the volume of their sales abroad. Export prices have gone up 17 per cent.—the pound has been devalued by 16 per cent.—but home prices have risen only 10 per cent., which suggests that exports have become comparatively more profitable. But even that increased element of profit margin must owe something to cost pressure and those increases must also be considered in the light of the relative un profitability of exports over recent years.
  So there is nothing in the present exchange rate to suggest that we have yet adhieved the conditions necessary for export-led growth. If we are to be serious about such an objective, we must do some hard thinking about what a realistic exchange rate is. Unfortunately, when we come to do that, we find substantial obstacles to clear thinking.
  First of all, when we consider our present competitiveness, we have to consider it against an historical backdrop of continued and consistent un competitiveness ever since the end of the war. We have an economy in which our own home prices for manufactures have risen faster than import prices, in which our export prices for manufactures have risen much faster than those of our competitors. That is the profile of an economy which has consistently had an over-valued currency.
  One cannot be surprised that the argument that we are marginally more compentitive than we were, let us say, in 1970, does not cut much ice. For a start, we simply were not competitive in 1970. We have to make a major improvement on the performance of 1970 before we start to get export-led growth. In addition, since 1970 we have lost our tariff protection against Common Market imports. Our balance of trade in manufactures with the Germans alone is running at a deficit of £928 million this year. We have also lost the tariff advantages

  789
  that we used to enjoy in the Commonwealth and in EFTA.
  The second obstacle to clear thinking is that we have been so mesmerised by the speed and extent of the fall in the pound's value this year that we have simply taken it as a matter of faith that it must be under-valued. But what we fail to take into account is the fact that, while we were inflating rapidly—unit labour costs in this country went up by 60 per cent. in the two years 1974 and 1975—£4,000 million-worth of Arab oil money flowed in and artificially propped up the value of the pound. So, far from the sterling balances having dragged down the pound, in fact they propped it up throughout that period. Incidentally, if we were only to achieve a realistic exchange rate, many of the problems about the so-called funding of the sterling balances would disappear.
  Thirdly, it is rightly argued that there is a price to be paid for devaluation, that it puts up the cost of imports and therefore the cost of living. That would be a powerful argument if it were possible to avoid such a price in other ways. But there is no way in which we can avoid the price for our past mistakes and failures. It will work its way through the economy in one form or another. We have the choice of the form—devaluation—which will at least give us the chance of export-led growth or of the form—a further deflation—which itself has an impact on the cost of living. Hon Members have only to look at the level of mortgage interest rates,—which has none of the corresponding advantages which export-led growth would present to us.
  In any event, the impact of devaluation on inflation should not be overstated. No less than 58 per cent. of our import bill now comprises imported manufactures. Certainly we do not want to make them artificially cheaper. On the contrary, we want to price them out of the market. As long as we maintain the present value of the green pound, we are equally protected against any sizeable impact on our food bill.
  Then there is the sophisticated argument, in a sense, that our lack of competitiveness is not a matter of price alone but reflects our failings in terms of quality, design, delivery, and so on. Again, no doubt that is true. But what
  790
  should we do about those difficulties tomorrow? We can hardly argue that an uncompetitive exchange rate makes them easier of solution. What are we to do? Shall we make more ministerial speeches exhorting people to invest more or to work harder? Are we to say to our foreign customers "We realise that we have long-term problems, but you must wait while we resolve our problems" and, therefore, make our goods saleable at the current exchange rate? Of couse not. If we cannot sell because of superior quality, we must sell in terms of price. We must make exports both profitable and competitive now.
  The Government now face a major choice. They can follow the almost age-old so-called remedy of solving our balance of payments problems and propping up the pound with further deflation. Any fool can solve those problems in the short term by screwing down everything so tightly that nothing moves. But such a solution would do nothing to resolve our long-term problems. In fact, it would make them much more difficult.
  I believe that we must resist that sort of strategy to the death. There is no point in waiting for North Sea oil to come to help us, because it will do nothing to encourage investment or employment in manufacturing industry. If we use the oil revenues to prop up the pound, to reduce our public sector deficit and to balance our trade, we shall simply live on North Sea oil revenues and end up with no manufacturing industry at all.
  The alternative is to go for growth, to recognise that the falling pound is a symptom rather than the disease. If we repress the symptom, we make the disease worse. The disease is the familiar British one of low growth, low investment, low productivity, low wages and, now, low employment. We ought to do the little bit extra that we have not yet managed to do. We have done 90 per cent. of what is necessary. We have a stable wage rate and a very successful voluntary incomes policy. We have the lowest level of industrial disputes for 23 years. We have a major programme of tax incentives so that any manufacturing company which wishes to invest can do so without paying any tax. We have a Government who are restraining public expenditure and the money supply. We

  791
  have a Government who make it clear that their first priority is manufacturing industry. If we do the remaining 10 per cent., by which I mean low interest rates and a competitive exchange rate, we can go for growth without the usual obstacles and inhibitions. If the exchange rate is right, we can expand without running into balance of payments problems.
  I believe that that is the strategy which the Government should adopt. If we run into short-term problems with capacity, the answer is some form of import restriction. I would favour an import deposit scheme.
  That is the choice facing the Government. Unless they make the right decision, we shall not solve our economic problems and, incidentally, this Government will not win the next election.
  8.5 p.m.
  Mr. John MacGregor: I hope that the hon. Member for Southampton, Test (Mr. Gould) will forgive me if I do not pursue any of the matters that he raised in his interesting speech, since there is no time to do so, as you have indicated, Mr. Deputy Speaker. However, it seems to me that his prescription may well not work. Over the past months we have had a rapid decline in the exchange rate, and it has not produced the rejuvenation of industrial confidence or the switch to the manufacturing sector that the hon. Gentleman seeks.
  I wish to concentrate my early remarks on one or two comments on the speech earlier today by the Chancellor of the Exchequer. First, it seemed to me that his speech again showed all the spasms of self-delusion and complacency to which we have become so accustomed.
  I give two examples. On capital investment the right hon. Gentleman said that the prospects for the future were brighter still. From my talks with representatives of industry I do not get the feeling that that is the case at the moment. The right hon. Gentleman also indicated that in the talks with the IMF it was recognised that the twin bases on which the Government's strategy were based at the moment were regarded as the right ones. If they are so good, why is our projected rate of inflation over
  792
  the next 12 months still so very much worse than most of our competitors? I understand the right hon. Gentleman's desire for some bright light in the present situation, but he is fooling himself if he thinks that he has the strategy right.
  Secondly, the right hon. Gentleman expressed surprise that exports were not rising sufficiently. I do not wish to repeat the detailed analysis of the export situation made by the hon. Member for Test, but I make one small comment. Exporting for Britain's managers and salesmen is a pretty hard business. It is not fun. At present, there is little incentive for them to go out and spend months abroad away from their families, as they have to do if they are to get big export orders.
  It is not just Britain's tax rates which are at fault, though they are bad enough. The evidence coming to me recently suggests that those who spend a fair amount of time abroad on export business find themselves increasingly inhibited by Inland Revenue rulings on some of these overseas earnings which go beyond what most of us who took part in the passage of the 1974 Finance Bill thought would happen. So part of the remedy lies in the Chancellor's court—giving real incentives to the people who are doing the hard export work which will enable them to do it.
  That brings me to my third comment on the right hon. Gentleman's speech, which concerns his interesting passage on direct taxation and social security benefits. He was incorrect in ascribing to the Opposition the view that we were mainly concerned at present with scrounging in social security. It goes on, and it is a minor problem which must be put right. But the main point to which we have all addressed ourselves is that in the present situation, because social security benefits are free of tax and have been more than indexed and because tax thresholds have been nothing like indexed to take account of inflation, there is now for large numbers of groups with below average incomes a positive incentive not to work rather than to seek work.
  The Chancellor today gave the key illustrations himself. I think that he is

  793
  beginning to recognise that the real anger, frustration and concern about this comes from the lower income groups, as I know directly week after week from my own constituency, and not from those in higher income groups. Therefore, at last he has got the message that we have been trying to put across to him over the past few months.
  But whose fault is it? It is the Chancellor who has deliberately created this situation. In 1974, he said that he would set out to do so, and he has done it. Therefore, all that he is now doing is starting to put right a situation which he himself created.
  The right hon. Gentleman's comments on direct and indirect taxation were fascinating. If he means what he says, what he is about to embark upon is a welcome and long overdue shift in the burden of tax from direct to indirect taxation. But I fear that he will pay only lip service to this, as always. I suspect that the carrot of direct tax cuts which has been hung out will not come before next April but that we shall see increases in indirect taxation much sooner. Moreover, all that the right hon. Gentleman has been saying about taxation demonstrates the need for further public expenditure cuts.
  I now move on from the right hon. Gentleman's speech to make one comment about the employee participation Bill. I think that it is relevant to this debate, although more so to yesterday's debate, because this Bill could be very important for an efficient economy. My one plea to the Secretary of State is that the Government postpone the Bill this Session. It is of major importance to get the Bill right—positively, because a good employee participation Bill with the right flexibility and concentrating on those areas where employees wish to participate could make a major improvement, as it has to many companies, to the performance of the British economy; negatively, because, if we get a single structure or the wrong structure, it could do immense harm.
  We should not reject the Bullock proposals as coming down on a tablet of stone. I doubt very much, from some of the noises coming out of the Committee, whether they will be right. This demonstrates a strong need to consult wide sections of British industry before
  794
  the Government frame their own proposals, and that will take time. Therefore, in this Session there will be neither time for the Government to consult properly nor time for them to bring forward a Bill which will enable this House to deal with it properly. Although I accept fully that an employee participation Bill is desirable, I urge the Government not to introduce it this Session.
  The main point of my speech relates to the present Cabinet dispute. Clearly, there must be a dispute, because it is not just a question of newspaper leaks, as the Chancellor suggested. We have had the Secretary of State for the Environment saying that it would be an act of gross folly to engage in big public expenditure cuts at present. He said that publicly in a broadcast. If that line is followed, it will be an indication that once again the Government will be making all the mistakes that they have made in the past two years. I wish to strengthen and support the line which I hope Treasury Ministers are taking.
  We are all agreed on the importance of industrial rejuvenation and the switch of resources to get the industrial and commercial sectors going again. But, for all the talk from the Government, I have the impression that they would like that rejuvenation to work magically without too much effort from them, so that they will be able to spend freely of the extra wealth created, and that they are not prepared to make the major shifts of policy which are necessary to make it happen.
  Over these last two years, public expenditure has begun to gobble up such an undue proportion of resources—of labour because of the increases in employment which have taken place in the public sector, while the massive unemployment has taken place only in private manufacturing and the commercial sector, and of finance. The burdens of industry have increased through corporation tax, although the Chancellor finally recognised his mistake and introduced the stock relief provisions, through the £1,000 million extra in insurance contributions and through the many extra burdens put on industry through legislation. It has often struck me observing the Government side in the past two years that it is all too easy to imposee new burdens on industry without worrying about the effects, and

  795
  to spend freely without worrying where the money is coming from. Because of the Government's failure to keep the rise in public expenditure within bounds, we have had latterly an undue reliance on fiscal policy through VAT and on monetary policy, which has produced the very high interest rates. All of these factors have put additional burdens on the private sector.
  I agree with my right hon. Friend the Member for Chipping Barnet (Mr. Maudling) about the need to be expansive. That is my natural temperament. But I do not think that we are in a situation where, in the short term, that expansion can be achieved quickly or easily. My fear is that the economic recession in manufacturing industry and commerce will continue and will need much endeavour to shift it.
  The recent CBI survey was before certain events. Talking to companies about their plans for the next 12 months, one finds that they are extremely anxious. They are taking into account moves that the Government may make in the next few weeks. There is a lack of confidence in their markets. They are worried about the combination of high interest rates and their continued poor returns on capital. They need to be sure of expansion, which they cannot be, because of the high cost of employing extra labour through the events of the last two years.
  On top of all that there is uncertainty about the future growth of world trade and the possible impact of OPEC oil price rises to which the Chancellor referred. So the present environment for manufacturing and commerce, which have to take up the slack of unemployment, is very uncertain. And we should remember that so far the Chancellor has always been over-optimistic about growth calculations when framing his public sector expenditure programmes. If the Government do not get their package right, they will really keep the lid on the manufacturing and commercial sectors.
  The Prime Minister has accepted that there will have to be some further increase in employment. The question is where it should fall—in the productive or in the unproductive sector. The present unemployment measures are only a temporary palliative. The real need is
  796
  to get lasting jobs in the productive sector.
  The core of the problem of the public sector borrowing requirement will be about the level of debt which the Government will have of finance. If it is still too high it will mean that high interest rates will remain, and that in turn will inhibit the private sector. If the Chancellor chooses to do it through indirect taxation, mainly through value added tax, again the brunt will be borne by the industrial sector. Something of that sort is only possible if it is accompanied immediately by cuts in direct taxation.
  I agree with the hon. Member for Liverpool, Walton (Mr. Heffer) about the effect of concentrating all the expenditure cuts on the capital side. If that happens once more, the private sector will again suffer the brunt, and again that will be a lasting and long-term disadvantage. I do not object to a growth of public expenditure as such—ideally, I am in favour of it. But there has been this massive shift over the last two years and there is a need now for a permanent and massive switch back from the unproductive to the productive sector.
  That is why we can justify our argument for cutting public expenditure and creating the jobs which will last. The Government have not done that yet, but I hope that those Ministers urging that such steps should start now will be supported in the Cabinet.
  8.15 p.m.
  Mr. Joseph Dean: I welcome the declaration of intent by the Government in the Gracious Speech to place priority resources in inner city and other stress areas. However, I find it hard to understand how that can be achieved when there is a massive cut in the house-building programme. I wish that the stress areas had had the cosseted treatment which has been given in the past to the new towns. If they had received such treatment, we might not be discussing them as distressed areas, because they would have been dealt with adequately.
  The hon. Member for Cornwall, North (Mr. Pardoe) yesterday, as the Liberals usually do, produced instant remedies, knowing that there was no possibility of his being called upon to put them into action. He said that he could cure the

  797
  unemployment by asking the Minister involved with the road building programme to take action on the fact that we now have massive road-building machines of foreign origin which are now building mile after mile of motorway and major roads. I am with the hon. Gentleman on the argument that perhaps there is a case for import restrictions if he is talking about providing employment in the engineering industry, because I believe that we have companies here which could produce that type of machine. But the hon. Gentleman was saying that we should train all these youngsters and surplus labourers and turn the clock back, as it were, to the labour gangs of the late 1920s and early 1930s, thereby again building roads by manual labour.
  It would be difficult to find a more bizarre and ridiculous notion. The hon. Gentleman might have taken the trouble to check his facts. I asked the city engineer of a major local authority what the cost comparison would be. He told me that we would end up with a minute stretch of roadway at the cost of what would otherwise have been a major road scheme. The hon. Gentleman's suggestion is a non-starter and as ridiculous as his remark on television when he stated that senior Treasury officials had been in Washington trying to sell the country down the river, a charge which, as usual, he never substantiated.
  If I were to pick out one part of the Gracious Speech which I do not welcome, it is the proposals for devolution. I think I was the first Back Bencher to speak in the devolution debate against devolution, but I have been prepared to sit back and listen to the arguments developed on merit. I was perhaps prepared to accept Assemblies for Scotland and Wales on the basis that it would mean no extra cost to my constituents. In my speech on devolution, I spelled out the preferential financial arrangements per capita that Scotland was enjoying as against my constituency, and no one refuted me.
  Taking development grants as a whole, and calculating on a per capita basis, one finds that Scotland gets 5½ times the amount that English regions get while the Welsh get 6½ times. In domestic rate support grant, Scotland gets 27p and Wales 36p in the pound. It therefore
  798
  comes a little hard to hear an hon. Member representing the Scottish racialist party—I mean the Scottish National Party—saying that Scotland is so badly done to. I find it hard to accept that they have been hard done to by their counterparts from Westminster. In some respects some of us, or certainly our predecessors, in the English constituencies have been rather placid and have let develop a situation which should have been arrested some time ago.
  The Scotland and Wales Bill published today makes clear that the financing of the Scottish Assembly will take place via block grant—but which block grant? If we divide the financial cake distributed by the Government in three, among England, Scotland and Wales, and since the amounts are already rigidly fixed, if any increased financial assistance is to be expected from that total Government allocation to finance the Scottish and Welsh Assemblies, it can happen only at the expense of money that should be made available in the English regions.
  I had assumed that this was the accepted pattern, and I have been assured in private conversation with junior Ministers that it was never intended that money should go from the English regions to finance a Scottish Assembly. However, a report in the Guardian yesterday stated that prominent people in certain political parties—some in my own party—north of the border believe that the financial arrangements in the Bill are inadequate—and they took that view before the Bill was published. Where do they think the money will come from?
  I have strong reasons for believing that the setting up of such Assemblies will create yet another army of civil servants north of the border. We were told that no such thing would happen—that those officials are already there. I have reason to believe that there is an option to send a thousand civil servants north of the border to see that the Assembly is well-serviced and run. When we are in our present serious financial situation and are being investigated by IMF officials—and indeed we probably now face the most serious financial crisis since the 1930s—why should we waste 30 days of parliamentary time and considerable finance on such an exercise?

  799
  In the final analysis I do not believe that such a move will provide anything extra for the Scottish and Welsh peoples. I shall be interested to be told on Second Reading why the Bill should be supported by such people as myself. Perhaps my mind is still slightly open on the subject, but I shall need some convincing that this measure will not be to the detriment of my constituents—and in the last resort my loyalty lies with them.
  We hear perpetual incantations from the SNP Benches about so-called Scottish oil. We get the impression that if that oil is obtained, it will afford independence and will be the foundation-stone on which to build a new Scotland. However, the most optimistic predictions lead one to believe that by the turn of the century those resources will be very much expired. The major energy resources of the United Kingdom are not in the North Sea. They happen to be under the newfound coalfields in Yorkshire, Nottingham, Derbyshire and Leicestershire.
  The Leader of the Liberal Party has asked for a certain percentage of oil revenues to finance the Scottish Assembly. In that case why should not hon. Members from Yorkshire, Lancashire, Derbyshire, and Staffordshire take the view "The miners in our area are now producing coal at a very economic cost compared with their counterparts north of the border"? If that is a good argument on that ground, it is also a good argument in another context. Why should not our areas have special benefits, too?
  The wrong assumption is being made by the Labour Front Bench, and certainly by SNP Members, that this Bill is nicely parcelled and tied up with pink ribbon. But unless assurances are given on some of the points I have mentioned tonight, I cannot see the devolution measure becoming an Act, and 30 valuable parliamentary days will be wasted.
  One of the minor items in the Gracious Speech relates to the intention to legislate to allow direct labour organisations to tender for work for other bodies. I welcome that move where such organisations are successful. Where direct direct labour organisations are in a position to tender for work for other authorities or public bodies, they should do so. I believe that this will bring a discipline
  800
  to the pricing of tenders. That is one part of the Queen's Speech I truly welcome, and I hope that the measure will have a successful passage through Parliament.
  8.25 p.m.
  Mr. Ian Lloyd: The hon. Members for Leeds, West (Mr. Dean) and Southampton, Test (Mr Gould) have injected into the debate two refreshing streams of reality. Although I do not go all the way in agreeing with the hon. Member for Test, I go a long way in agreeing with the hon. Member for Leeds, West on the subject of devolution. Doubtless we shall hear much more on that topic as the Session progresses.
  I want to take issue with the hon. Member for Liverpool, Walton (Mr. Helfer), who criticised the contribution made by Professor Friedman to Chile's difficulties. I thought that the hon. Gentleman's remarks were singularly unfair. What made the Chilean situation so disastrous was the effect of two years of rule under Allende and the whole story of political confusion following the civil war. Whatever economist was let loose in that part of the world or whatever advice was given there would have been rampant and raging inflation in Chile for a considerable time after Allende fell from power. Therefore, it was wholly unfair and unrealistic of the hon. Gentleman to lay blame on Professor Friedman.
  When listening to the right hon. Gentleman the Chancellor of the Exchequer this afternoon involving himself in the great public expenditure debate, I could not help recalling the analogy between the effects of public expenditure on the body politic and of alcohol on the body private. In excess both create an illusion of well-being, both tend to cause loss of control, and both result in a severe diminution of judgment. Furthermore, both tend to inculcate the belief that cure will be hastened by more poison. In the case of the body politic, as in the case of the body individual, bankruptcy is usually at the end of the road. Moreover, in both cases there are many who will hasten the individual and the State on their way to perdition with bad advice. There are other similarities. The habit is hard to break, and for some economies an excess of public expenditure becomes a form of poison.

  801
  There are, of course, contrary arguments. Who is not familiar with the languid and skilled propagandist, John Kenneth Galbraith, to whom so much of the views about the inherent goodness of public expenditure must be attributed? He would probably be the last to admit to being an advocate of some form of national economic alcoholism. But there is no doubt that if the United Kingdom body politic is now staggering down the international pavement of the IMF and its soul is being fought over by the Colonel Friedmans of the IMF Salvation Army, advocating their brutal economic teetotalism, and, on the other hand, by the progressive reformers—such as the American banker who in The Times this morning was suggesting that he is much more concerned with the effect of withdrawal symptoms than he is with the progress of the disease—this is a situation which is hardly surprising.
  I want to examine briefly the criteria being used to make our judgments in this situation and those which I suggest, in all humility, should be used, and also to test some of the prescriptions of the Gracious Speech against both. The criteria being used are basically four.
  First, will the particular policy prescription be supported by the Trades Union Congress? Secondly, will it exacerbate unemployment or otherwise? Thirdly, will it damage that interesting phenomenon which we now describe as the social contract and by implication unleash more inflation, which is commonly thought to be an undesirable result? Finally, will it reinforce such little cohesion as remains within the Parliamentary Labour Party? These questions, no Member can deny, are dominating the discussion.
  The objectives are not nearly so controversial. They seldom are. We all want economic salvation and growth and a healthy balance of payments. But what criteria should be used? I suggest that they should be much more precise and, if it is not a contradiction in terms, more broadly based. The ranking is important but not vital.
  The first criterion—this is the acid test that I would apply to any policy prescription—is whether it will restore people's self-confidence in this country. Secondly, will the policies convince the non-Socialist world, to whom in general
  802
  we are turning for support, that the self-indulgence of Socialism in the United Kingdom will be put second? I do not think that any of our possible lenders expect a Socialist Government to abandon Socialism, but the least they expect the Government to do is to finance only as much Socialism as they can afford. The objective judgment of our lenders at the moment is that that is very little indeed, and they would expect a Socialist or Labour Government to conform to that restriction. Thirdly, will the policies operate both effectively and expeditiously on the crucial economic indicators? What are these indicators?
  This brings me to the point made by my right hon. Friend the Member for Chipping Barnet (Mr. Maudling). Will the claims on resources increase more or less rapidly than the availability of resources? He suggested that we should earn more. This is always the cry of Micawbers throughout the ages. Every Micawber who is sixpence short has earned sixpence too little, but the problem was created by the excess on expenditure in the first place rather than by the lack of earnings.
  I accept what my right hon. Friend said: of course the national productive capacity of this country, given certain stimuli and certain important conditions, can be rapidly and drastically increased, but that is another matter. In the context in which we find ourselves at this moment in time, we are in the Micawber situation, spending sixpence too much, and the national result is misery.
  Will the net improvement show quickly across the exchanges? Quite clearly, any policy which achieves both these results is better than one which merely achieves a domestic increase in resources.
  Will gross national product per employee rise? Will the areas of high productivity and industrial performance expand more rapidly than the areas of low productivity and industrial performance? We have both, and we know which they are.
  Will the investment in new technology-based firms be stimulated? There is a very great deal of evidence—much of which has been given to the Select Committee on Science and Technology, to which my right hon. Friend referred this afternoon—that one of the main causes

  803
  of the poor economic performance of the United Kingdom in recent years has been the comparatively poor availability, accessibility and application of high technology. Will there be an increase in national imagination, endeavour or performance, or will it be inhibited by the policies proposed?
  Policies which satisfy the above will, in my view, have the right effect on the rate of interest, on the value of the pound, on the balance of payments, on real wages, on profits, and on all these other matters. Of that there is no question. Measures which do not satisfy these criteria will not have the right effect on these indices.
  The social contract is shown a degree of deference which has not been exceeded since Caligula made his horse a consul, but with this difference: Caligula did not attribute to his horse the collective wisdom of the Roman Senate, and sometimes, when I follow the Government's attitude towards the social contract, it seems to be regarded as something so sacrosanct and so much the embodiment of wisdom that I am absolutely astonished. The attitude is similar to that of someone going to his banker and saying "Do not foreclose or you will damage my social prestige," and it is about as relevant.
  The social contract may or may not have trimmed the wage-income explosion, but in my view a more important contract is involved—the contract of the British people with their own destiny. The proposals which satisfy my criteria should satisfy the TUC, because it has nothing to lose from economic recovery.
  But what of that grossly neglected, much maligned, gravely under-represented body which I define as the NUC—the non-union community? About 20 million people in this island belong to the non-union community. No measures will be be successful, whatever the TUC does or does not do, supports or does not support, unless they have the support of the NUC as well. That point must be made by Members in this House, because many of us represent at least in half in our constituencies the NUC as well as the TUC.
  I come now to an analysis which suggests one answer to the Chancellor's
  804
  dilemma. This afternoon the right hon. Gentleman seemed uncertain whether to pat the nation's head or kick it on the shins. It seems to me that he might end up by doing both.
  If policies are geared solely to the first limited criteria which I have described—unemployment and the social contract—they will suggest that the Chancellor has been governed by effects rather than by causes, and there is a danger that he will kick the nation on the head and pat it on the shins.
  I come now to the stark inconsistencies in the Government's policy which are revealed in the Gracious Speech. The Speech argues for
  "improved levels of industrial output and productivity, a higher level of industrial investment".
  Those are quite unexceptionable sentiments. But how is that to be done?
  Looking at the Gracious Speech, we see four essential measures: the nationalisation of the shipbuilding and aircraft industries; the introduction of industrial democracy; the development of industrial training; and an increase in indirect labour. Only one of these measures stands up to any close and critical examination. Only the improvement of industrial training can be said to have a direct, if not an immediate, effect on industrial productivity.
  What about nationalisation? I am sure that most hon. Members—unfortunately, there is not time to read it—have seen the study of United Kingdom nationalised industries, published by a Government Department, under the chairmanship of Sir Ronald McIntosh. This is an official Government publication published by Her Majesty's Stationery Office.
  The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot)indicated dissent.
  Mr. Lloyd: The right hon. Gentleman shakes his head. Perhaps he disagrees with the conclusions. But that it is a NEDC Report published by the Government is not in doubt.
  The conclusions on nationalisation in this report are remarkable. That any Government, having recently had the benefit of the advice which this report has made available, should make the nationalisation of further major sectors

  805
  of the economy a major plank in their platform is astonishing.
  I turn now to the question of incentives and stimuli, which I believe to have a profound importance. The figures published in The Times this morning and produced by my hon. and learned Friend the Member for Solihull (Mr. Grieve) show how serious these can be. If the Government will use their imagination, measures can be taken, even in the present restrictive context, to achieve a higher response, which is what we want.
  I suggest three possible measures. The first is that all income in excess of 1975–76 levels earned by commission on export sales should be free of income tax. That would have a dramatic effect on our export performance.
  Secondly, I suggest that all dividends of firms with exports more than 25 per cent. up on their 1975–76 levels should be free of tax above those levels. That would be a bonus to the firms concerned to go out and change export patterns.
  Finally, what would happen if 50 per cent. of all income or fees earned abroad above 1975–76 levels and remitted to the United Kingdom were free of tax or were taxed at 10 per cent.? I suggest that would have a dramatic effect on the tens of thousands of people on whom the Government depend for an improvement of their economic performance.
  Unfortunately time permits no further comment, but if the Government are serious about making an effort for some degree of realism, there is no question whatever but that they will not achieve this unless they look more seriously and more continually at the basic industrial structure of this country, and what makes it tick.
  8.41 p.m.
  Dr. Oonagh McDonald: The Prime Minister made it clear at the beginning of the debate on the Queen's Speech that what matters in this Session of Parliament is the management of the economy, and in particular the management of industry. Yet, when we look at the proposals in the Queen's Speech we see the same system of grants, loans and tax concessions to encourage manufacturing industry. Successive Governments have used grants, loans and tax concessions as incentives. Yet they have
  806
  failed to increase manufacturing investment in this country, and they have certainly failed to increase it to the level of our competitors. In other words, they have failed to revive manufacturing industry.
  Vast sums are spent on aid to private industry. The total was almost £l½ billion last year, and almost the same level is expected to be reached this year. Plenty of carrots are offered to private industrialists to invest, but there are not enough takers. It is time that we learned, and it is time that the Government realised, by looking at industrial problems and rising unemployment, that offering tax incentives is not enough. It is not enough to dangle a carrot in front of an industrialist's nose. We must make sure that the industrialist bites the carrot and invests in the right way in the right place.
  We need much more stringent policies to encourage investment. We could look at other countries. We could look at Sweden, for example, and impose swingeing tax penalties on companies which fail to invest out of retained profits.
  We must ensure greater accountability in the use of public money. It is public money which is being used by private companies. Government aid to private companies is often massive. The Government are continuing to give massive aid, and, as in the case of Courtaulds, the Government find that they are taken by surprise by closures and the consequent loss of thousands of jobs, while industrialists offer feeble excuses for closing their factories. In order to ensure accountability we need the use of planning agreements—not just in a voluntary way but compulsorily, to ensure that companies give us the information we need about their future planning, as far as manpower and pricing policies are concerned. We need to know what they propose. We need planning agreements to ensure that the right kind of investment takes place in the right part of the country.
  It looks as though the Government propose to continue using regional aids in the same way. Yet our regional policy, which has developed since 1940, now needs to be changed, to be refined in order to take account of changing patterns in industrial development and

  807
  employment. It needs to take account of the increasing concentration in British industry and the increasing ownership of British industry by foreign and British-based multinationals. It needs to take account of the changing pattern of employment. For example, areas which have been designated development areas are in many cases not now high unemployment areas, while others which were not designated development areas are now areas of high unemployment.
  I cite my constituency of Thurrock as an example. It has a current unemployment level of 8·2 per cent. That level of unemployment is the result of a decline not in demand, but in part at least of primary industries and the permanent loss of jobs. For example, two cement works in my area have been closed, with the permanent loss of about 700 jobs. Those jobs will not be replaced no matter what kind of upturn there is in world or national demand for cement. Regional policy should be used carefully with a view to taking account of changing patterns of employment and ownership of industry, and once again that is best done by using planning agreements with major companies so that we can rapidly discern changing patterns and changing levels of employment.
  In considering regional policy we need to think of moving not just manufacturing industry but service industries and office development from London to areas of high unemployment, to areas that are not designated as development areas, such as Thurrock. We must make careful use of regional policy and not just continue with policies that have been developed over many years, as though nothing had changed about employment in industry.
  The Queen's Speech makes it clear that the Government have rightly turned their attention to the inner cities as well as to the development areas. They have turned their attention to the inner cities because many of them have become areas of high unemployment, but in looking at downtown London I want the Government to be sure that they turn their attention to other parts of the South-East, such as Thurrock, where unemployment is unacceptably high.
  In doing so the Government should remember that we cannot have the proper
  808
  development of industry in the regions unless there is thriving industry in the South-East, which is our industrial seedbed. Industrial development moves out from the South-East, not in the reverse direction. Therefore, when the Government hand out incentives, grants and loans they should look closely at where industry is located and at what kind of development can take place in the South-East—which is where I want to see it happening—to replace declining industries. I hope that the Government will look also at further developments that could flow from reviving industry in this area.
  It is not enough to continue with the same old system. It is not enough to dangle carrots. At a time when people want to restrain public expenditure the Government would do well to look closely at the kind of aid that is given to private industry. They should do that to make sure that the aid is directed and controlled through planning agreements so that the right kind of industrial development takes place and we do not give money to companies which then say "We are sorry, but we did not notice that women had stopped buying tights because the miniskirt went out and so we have to close that plant".
  There must be the right kind of development and proper control, otherwise public money will be wasted. There must be planning, and not just through planning agreements. There must be centralised planning and protection for our basic industries, for without centralised planning we shall waste time, money and effort, and in the meantime jobs will be lost. As I say, there must be not only planning, but protection, for without protection for some of our basic industries by means of wide-ranging import controls we shall in a few months' time find that we have lost those industries, and the money that has been poured out will have been wasted. Let the Government take note that it is not enough to continue with the old system of support for industry. The support must be planned, channelled and controlled.
  8.50 p.m.
  Mr. Peter Hordern: I thought that the speech of the Chancellor of the Exchequer this

  809
  afternoon was the worst that I have heard him make in that capacity. He is, of course, in a very restricted position. He is boxed in, and in every sense he is a residuary legatee of the Labour Party's policy of the social contract. I do not know whether he sought this—although I believe so—but when he became Chancellor his policy should be so dependent upon the social contract itself.
  I was particularly struck by the speech of my right hon. Friend the Member for Chipping Barnet (Mr. Maudling) and his notable contribution. I am sorry that he is not in the Chamber at present. He has been very consistent over the years. He has taken no notice of any development in economic thinking, particularly on the monetary side. I notice, because I read his speeches when he was Chancellor of the Exchequer, that he never even mentioned monetary policy when he was Chancellor. I do not think that he was alone in that respect, but even now he pays scant attention to monetary policy and he still depends overwhelmingly upon incomes policy as the only way in which to control inflation.
  I shall not ask my right hon. Friend to read the works of Milton Friedman. I am sure that he would prefer to read and follow Monty Python instead. Nor is it necessary for him to read the works of Milton Friedman because he has only to follow the experience in controlling inflation of those countries that have been most successful in doing so—namely, Western Germany and the United States. Neither of those countries has any form of incomes policy whatever.
  However, if my right hon. Friend needs further proof, he has only to turn to the economic record of the last 12 years, at any rate since I have been in the House, of over-dependence on incomes policy as a means of controlling inflation. I believe that the experience of the last 12 years has been that inflation has not been controlled and that the principal weapon that has been used to try to control it has been the incomes policy. This is a policy which has emanated most of all from the Treasury. Happily, my right hon. Friend need not concern himself with this prospect any more because the management of our affairs will be taken out of our hands and out of the Treasury's hands.
  810
  It will be put into the hands of the International Monetary Fund, which will, whether we like it or not, adopt a very strict monetary stance.
  I turn briefly to the comments of the right hon. Member for Down, South (Mr. Powell). I understand that he is advising his hon. Friends to vote with the Government side tonight because, he says, the Government have adopted a stricter monetary posture than that which my right hon. and hon. Friends have adopted or would be likely to adopt. If the right hon. Gentleman does not mind my referring to him in this way, perhaps I may say that he will know that he was not alone in opposing his then Government and my then Government in their economic policy at the time. If he really wants an indication of what the present Government have done, he has only to look at their record in the first months of 1974. It was not the previous Conservative Government that increased public expenditure, reduced value added tax from 10 per cent. to 8 per cent. and increased the borrowing requirement. It was the Labour Party that produced those things.
  I do not have much time. I shall address myself to only a few points on public expenditure because I believe them to be of some importance. Public expenditure lies at the root of our economic problems. The simple fact is that public expenditure, as I see it as a member of the Public Accounts Committee, and as some other hon. Members see it, is out of control. We estimate that it is out of control in the strict sense by £1,000 million in this last year.
  Secondly, the Public Expenditure White Paper, which has a five-year target, is itself way out of date. As the House will know, it is based on an assumption of growth in the gross national product and what proportion of that product public expenditure should take. The fact is that in the present round of public expenditure, between 1974 and 1979, the economy is estimated to have an average growth rate of 2·4 per cent. each year within that period. We are now two-and-a-half years through, and we have had no growth so that, even on the last estimate, we must have an increase in growth of 4 per cent. per annum for the remainder of the period up to 1979.

  811
  The Financial Secretary well knows that the prospects for next year of any growth are virtually nil—and probably for the year after. What kind of economic miracle does he expect for 1979? The proportion of the GDP taken up by public expenditure is certain to rise. I say that not only because it is true but because many of the calculations of the Public Expenditure White Paper are plainly incorrect. I take as an example the cost of unemployment benefit which for this year was based on an unemployment level of 700,000. That level, it was assumed, would come down next year to 500,000. That, for a start, will be way out. There are inherent difficulties in controlling public expenditure of which the Financial Secretary will be only too well aware.
  In any case, the level of public expenditure as a proportion of GDP is bound to rise. I always find the Chancellor of the Exchequer's remarks on statistics extremely interesting though not always complete. He said today that the new Treasury calculation of public expenditure as a proportion of GDP is down from 60 per cent. to 52 per cent. What interests me is how fast that proportion has grown in the past two years. On exactly the same analysis, two years ago the level of public expenditure as a proportion of GDP was 45½1 per cent., so it has grown by six points during the last two years alone.
  If I am right in saying—as I am sure I am—that public expenditure will grow again, from where will the growth of the economy come? So far as can be established, there are to be no funds for the private sector to borrow during the whole of 1977 because the Government will need to borrow every penny. If the borrowing requirement next year and into 1978 is as high as £11 billion, it is certain that there will be no funds for the private sector in the following year either. That is the price we have to pay—a very high level of interest rates—and it will go on until public expenditure is reduced. That is why it is so important to reduce public expenditure and so reduce the level of interest rates. That is the key to our problems.
  I want to mention one or two small matters which are interesting and indicative
  812
  of what is going on. There are various matters in our public accounts which baffle people. Does the House know, for example, that last year we contributed £382 million to the Shah of Iran? We are even giving £41 million to Saudi Arabia—which I would not have thought to be the most poverty-striken country in the world. There are many items such as that all through the public expenditure accounts which should be cut out.
  So serious is the position today in the private sector because of its inability to expand that I do not believe that we shall get the increased manufacturing investment that is necessary. Glaxo, which I suppose has been the most successful company in the past 10 years, had a rights issue and raised £30 million from its shareholders last year. The company has put ever penny of that £30 million into short-dated Government securities because by lending the money to the Government it will get a better return than it would get from manufacturing investment. The same is true of other companies. That is an indication of what is happening. Companies and firms throughout the country are lending their money to the Government because by doing so they get a higher return. What sort of prospect is that for any advance in the economy in future?
  This Government have no notion of how to get us out of our difficulties. The Government are wedded entirely to the social contract and as long as they are wedded to that, they will also be wedded to too high a level of public expenditure, and as long as the Government are wedded to that, this country cannot make progress.
  9.0 p.m.
  Mr. Francis Pym: I shall try to sum up the whole of this debate, begun last Wednesday with such an engaging speech from the hon. Member for Huddersfield, East (Mr. Mallalieu). I want to deal with the Opposition amendment on the subject of the economy and to say something briefly about devolution.
  We have certainly had some good and interesting speeches in this five-day debate. One is very sympathetic to all those hon. Members who hoped to catch the eye of the Chair but who were unlucky.

  813
  Two of the very best speeches were those made by my hon. Friend, the Member for Walsall, North (Mr. Hodgson) yesterday and by my hon. Friend the Member for Workington (Mr. Page) today. My, hon. Friend the Member for Workington paid fulsome tribute to his predecessor, Lord Peart, who was himself a lavish tribute giver, and he then went on to make a trenchant criticism of the Government's industrial strategy, the lack of profit in the private sector, and the burdens imposed upon that sector. I think that his speech was well received in the House, and we hope that he will secure his return to the House on subsequent occasions and that we shall hear more from him, despite what the right hon. Member for Down, South (Mr. Powell) said.
  We heard a persuasive speech from my right hon. Friend the Member for Chipping Barnet (Mr. Maudling) and, characteristically, he showed his great consistency. His analysis and prescription contained a message of hope for our country if only we can overcome political problems. What he had to say was well received on the Labour Benches, particularly below the Gangway. But he was then shot down by the right hon. Member for Down, South, who, nevertheless, gave his advice to Labour Members.
  The hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) touched on the parliamentary situation. He gave us his usual dose of a bit of praise for and a bit of criticism of both Government and official Opposition. He teased them, as he likes to do, for playing party games, giving the impression that he is above all that sort of thing. But the whole point is that that is the very ploy which he delights to play seemingly at the expense of the two main parties, while actually scoring points for himself.
  Until today the debate had an air of unreality and irrelevance. Even the Chancellor of the Exchequer had nothing positive to say today. He has a fantastic capacity for passing the blame. He is the biggest blame passer we have in the House of Commons, and he has an amazing capacity to justify himself, however wrong he may have been.
  My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) thought that it was the worst speech the
  814
  Chancellor has ever made. I thought that it was the most confusing. The Chanceller said that public expenditure was a good thing. He went on to say that our level of public expenditure was in line with that of other countries, which seemed to imply that there was nothing wrong. But he then said that it was too high and must be cut. No one really knows what one should make of all that.
  Mr. Michael English: The right hon. Gentleman has mentioned an air of unreality. He will recollect that his right hon. Friend the Member for Finchley (Mrs. Thatcher), when replying to the Chancellor of the Exchequer, said that one should check the text of her speech at Prestatyn. I tried to. I checked with the general news service of the BBC, which got its report from the Press Association. I found out that the word "never" was used in the Press Association's outgoing report. I do not suggest that it was necessarily the right hon. Lady's fault, but I have also found out that there was no text. How, then, can one check, as the right hon. Lady asked? She may have had a text or a tape recording but where is it?
  Mr. Pym: The hon. Gentleman has made his intervention, and we can no doubt return to the matter on a future occasion.
  The unreality to which I referred derives from the contradiction that exists between, on the one hand, the Government's declared adherence to their economic strategy, seemingly oblivious of the fact that it has failed, leading to high unemployment, rising prices, roaring inflation and all the rest, and, on the other hand, the expectation of a new strategy about to be announced if and when the Government can lay their hands on someone else's money to borrow.
  What my hon. Friend the Member for Oswestry (Mr. Biffen) described so graphically yesterday as open disagreement openly arrived at has been going on for too long. Even now no one knows which Cabinet leak to believe, whether the leaking itself is a ploy, or who is being fooled by whom. For some months, negotiations have been going on for a new loan, with the attendant arguments, and this following a period when the Chancellor was full

  815
  of assurances that no loan at all would be necessary.
  In such a shaky and hopelessly uncertain economic climate, not to mention the absence of public political support for this Government, it is hardly surprising that the debate on the Gracious Speech has a hollow ring about it. There has been an atmosphere of charade until today, for peoples' livelihoods are at stake.
  In my view, the present parliamentary and political situation calls for a Sessional programme reflecting the maximum degree of general support and agreement. Our present self-inflicted predicament requires the maximum degree of unity. This is not the time for fuelling the flames of political controversy. The economic blizzard is too severe for that. People are too worried and fearful about their jobs, about taxes, about rates, or whatever it may be, and we ought to be concentrating on areas where we can agree very broadly.
  I pick out of the Gracious Speech the reference to elections to the European Parliament, which we support. I single out the references to the fishing industry. I think that the whole House is agreed about the serious position of that industry today' and about what needs to be done. I think that the House is agreed about the need to expand home food production. The only mystery here is how the Government intend to achieve it. They have expressed these good intentions for nearly two years now, and we still do not know how on earth they intend to achieve success.
  Of course everyone hopes for a negotiated settlement in Rhodesia which will he acceptable. Of course everyone wants progress in Northern Ireland. The Government, so the Gracious Speech tells us,
  "will continue to strive for a just solution to the problems of Northern Ireland".
  The Government's policy towards Northern Ireland is rather obscure, and I should like to know from the Leader of the, House whether they are just hoping for the best, which is the impression' they are giving at present. What positive action are they taking now? What political reconstruction is in hand? It
  816
  is time the Government said something more about Northern Ireland, and I think that they will be forced so to do by the debate on devolution which will shortly come.
  Devolution is a subject upon which we shall spend many days and weeks, and, by the time the Green Paper on the English regions is added, I imagine that several days will be added even to that time. The devolution Bill will attract most public attention and parliamentary time, and I wish now to say a brief word about it.
  For my part, I entirely understand the dissatisfaction of those who live in Scotland with government as it affects Scotland. If I lived in Scotland, I should want to find better forms of government. I should want to be more involved in decisions affecting Scotland if a satisfactory method could be found.
  My right hon. and hon. Friends identified the need long ago. There is nothing sacrosanct about the existing arrangements—and there are not many people in Scotland who want things left as they are. We made our constructive and positive proposals. But the Government came into this business in a serious way only a couple of years ago, apparently out of political panic. We have seen the letter in the Daily Telegraph today from our erstwhile colleague in the House, Mr. George Lawson, explaining what happened. He says:
  "… when in August 1974 the 'Scottish Socialists' were brought finally into line, the about-turn was made against the judgment and advice of the party's Scottish Council."
  We have seen the right hon. Member for Kilmarnock (Mr. Ross) and some of his hon. Friends somersaulting with pretty extraordinary political inelegance. We had built up hopes of legislation last Session with the promise that a Bill would be published in draft, as it were, last spring. That did not happen. Indeed, the Government took the plunge with this enormous Bill published today.
  Whatever view one takes about the extent and form of devolution, many hon. Members will question whether it is the right way to do it. Already today the Bill has been subject to a great deal of criticism. The hon. Member for Roxburgh, Selkirk and Peebles gave it a knock and so did the hon. Member for Leeds, West (Mr. Dean).
  Mr. Crawford: I understand that the right hon. Gentleman recently spent some time in Edinburgh. Is he now saying that he is committing the Conservative Party to voting against the devolution Bill?
  Mr. Pym: If the hon. Gentleman will await what I shall say in due course, he will know what we shall do. But the Bill will not be considered until a fortnight's time. That is true. I could devote the whole of my speech to describing our policy, but I shall not do so. But it is only fair to the House, since a number of hon. Members have mentioned the subject, that I make some comments about it. [Interruption.] The Bill has been criticised from a number of quarters, either because it goes too far or because it does not go far enough.
  Mr. Sedgemore: Is the right hon. Gentleman for or against the Bill?
  Mr. Speaker: Order. It is quite wrong for the hon. Member for Luton, West (Mr. Sedgemore) to think that he may shout from a sedentary position. It almost amounts to barracking.
  Mr. Pym rose—
  Mr. Sedgemore: For or against?
  Mr. Speaker: Order. If the hon. Member for Luton, West does that once more, I shall have to ask him to withdraw.
  Mr. Pym: If it were possible for the House to come much closer to a common approach in reforming the method of government as it affects Scotland, it would make far more sense to tackle such a major problem that way than by introducing a botched-up scheme invented by the Labour Party. There ought to be progress with the maximum amount of agreement and not the imposition of measures. How do we know who wants this particular scheme in any case, either in Scotland or in Wales? Will Parliament accept this scheme? If so, which parts of it? No one knows.
  In any case, it is wrong to have one Bill for Scotland and Wales. There is no mention of Northern Ireland in the Bill. If Northern Ireland is to be treated separately, why should not Scotland and Wales? As the Bill progresses, what will the people of Northern Ireland say about it? I think that they will have a
  818
  lot to say. I do not think they will be content to see this House debate a Bill for Scotland and Wales day after day when they are apparently to be left out of the discussion altogether.
  One wonders whether the Government have considered these proposals in relation to the European Parliament or other tiers of local government. I would quote what the Prime Minister said in opening the debate on the Gracious Speech. He stated:
  "The devolution Bill … is a necessary means of bringing government closer to the people."—[0fficial Report, 24th November 1976; Vol. 921, c. 33.]
  It should bring government closer to the people, but does this scheme do it? It may sound as though it does bring government closer to the people, but that does not necessarily follow. We shall have to see how we get on. I am certain that among other things Parliament will want to consider the method of election to the Assemblies, the number of Members of Parliament in this House, and their rôle. The Bill will have to be thought about in the context of Scotland, Wales, Northern Ireland and England. There is a great deal of dissatisfaction with existing arrangements and there is an amendment on the Order Paper tonight in relation to this matter.
  Mr. Michael Stewart: The right hon. Gentleman is urging the Government to concentrate on measures on which we can agree. Surely it is difficult for the Government to do that if the Conservatives will not tell us whether they agree with this measure.
  Mr. Pym: The Government have proceeded with considerable speed, very much pursuing their own ends. They have been panicked into taking this action by the results of certain elections. I do not think that was a sound fundamental approach to what is a constitutional matter.
  The House will want time to consider matters such as a referendum. I understand that the right hon. Member for Ebbw Vale (Mr. Foot) mentioned that this morning. Although I have not had an opportunity to discuss it with my right hon. Friends, my personal view is that a referendum in Scotland or Wales at some stage could well be a valuable guide to this House as to what is required.

  819
  Our objectives are, first, to preserve and strengthen the United Kingdom, which I believe most people in Scotland want, anyway, and, secondly, within the United Kingdom to find improved methods of government as it affects Scotland, methods which will work and methods which will not bring conflict, which is what I am afraid the Bill will produce to a considerable degree.
  Contemplation of democracy in the United Kingdom leads to a consideration of industrial democracy and participation. I agree wholeheartedly with my hon. Friend the Member for Norfolk, South (Mr. MacGregor). At least there is no commitment to legislate this Session, which I think would be ridiculous as the Bullock report has not yet come out. However, the "necessary consultations" referred to in the Gracious Speech will certainly have to be thoroughly carried out. It is not so much the legislation that matters as obtaining the public consent and understanding, but that is what this Government are particularly bad at.
  Most people, certainly we on these Benches, as the House well knows, are sympathetic to the objective of involving people more in their work, but it is another area of potential agreement and it would be a tragedy to throw that away and to foist unwanted or resented measures on industry. Many firms already are excellent practitioners of industrial democracy, and I think that we should build on that. I therefore hope that the Government will take their time.
  One of the principal reasons for the exceptional degree of unpopularity which this Government now enjoy is that their misleading statements and forecasts are now finding them out. The fashion is now for the Chancellor to say that he does not like forecasts, unless they happen to be bright ones, in which case he is only happy to use them. His earlier statements have proved to be wrong, inaccurate or misleading, and that is one reason why the public do not have confidence in the Government. The Government are being rumbled in the ballot box.
  So far from giving warnings of what was to happen, the Government have constantly painted too rosy a picture. They have raised expectations too high. They
  820
  have encouraged others to share their own wishful thoughts. Even the right hon. Member for Huyton (Sir H. Wilson) did not help very much; he did not know that a crisis was coming. If we are to believe him, if he had known that a crisis was coming, he would still be sitting on the Treasury Bench.
  Any helpful suggestions made by my right hon. Friend the Leader of the Opposition, by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), or by anyone else have been brushed aside by the Government in the hope that everyone else would forget. It is too late for any repentance now.
  We know the story, from 8·4 per cent. onwards. Even last April the Chancellor said that we should have inflation at a rate of
  "under 10 per cent. next winter".
  In June the Chancellor said that the rate of inflation would be
  "12 per cent. by the end of this year and about 7 per cent. by the end of next year".
  All that has now been abandoned, along with growth rates of 6 per cent. or even 4½ per cent. of which the Chancellor spoke earlier this year. No wonder there are confusion and distress.
  We had hopes of the new Prime Minister. When he was first elected, in his first broadcast he said:
  "We are only keeping up our standards by borrowing and this cannot go on indefinitely. There is no soft option".
  He said in Blackpool:
  "If industry cannot generate sufficient funds to buy its new plant and machinery then you will not get the investment and we shall continue to go downhill. These are elementary facts of life, well-known to every trade unionist".
  These remarks and others indicated the hope of action to make a mixed economy work. The private sector is taking all the knocks at present. It is the private sector that is receiving all the blows. Yet it is the private sector that is the wealth-creating sector that we now have to encourage.
  The Prime Minister seemed to recognise the reality of the unfavourable climate in which business and commerce, are trying to operate. We are still wondering whether he meant it. He held out the hope of altering things, and I

  821
  still hope that he will, but there is scepticism, because his words have not yet been followed by action.
  In the debate last Wednesday the Prime Minister said:
  "We must ask the country to adhere to existing policies, hard though that may appear to families who see the necessities of life costing more each month."—[Official Report, 24th November 1976; Vol. 921, c. 38.]
  No wonder he had to add that phrase, because the existing policy is the very one which has brought the country to its present pass. Those words in no way seem to coincide with what the Prime Minister said at Blackpool, so they are misleading. We still do not know what the right hon. Gentleman means. That is one reason why this Government are so extremly unpopular and unsuccessful.
  Then we come to the long paragraph in the middle of the Queen's Speech on the subject of the economy. That does not throw much light on how the Government will tackle the problem. How is the "better economic future" that they talk about to be achieved? The reference is only to boards and agencies. But it is not the National Enterprise Board or the development agencies or any other nuts and bolts of administrative machinery which will get this economy moving again.
  The economy will get moving again only when the climate becomes favourable and that will happen only when people feel that their services are wanted and appreciated, that the fruits of their efforts and their work are not confiscated. It is what people believe in this situation that matters. It is what people believe that governs confidence. Today, people believe that this Government are agin them.
  We shall not get that favourable climate until profit ceases to be a dirty word in the minds of the party opposite. How is it supposed that industrial investment can be at a high level without adequate returns? What is the point of investing if one cannot see that a profit will be earned? That point was well put in the context of small businesses by my hon. Friend the Member for Walsall, North yesterday. He referred to interest rates which cost nearly 20 per cent. when the profitability of industry is 4 per cent.
  822
  Interest rates at that level, coupled with the payroll tax foreshadowed in the Gracious Speech, is no way to change the climate for British industry, which is the section of our economy which is in real trouble today. The trouble is that the Government have convinced many people that they are dead against them. People are not allowed to keep enough of their earnings or to pass on their businesses to their heirs. What is required is a change in the Government's attitude. Perhaps we shall hear that announced in the next week or so, but I doubt it.
  After all that has happened, how can we be optimistic? What confidence has the House that the national interest and the needs of our society will motivate and determine the Cabinet's decisions? On the evidence, it cannot have that confidence. Hence our amendment for today.
  No doubt the Leader of the House will rest everything, as the Government seem to do, on the social contract. That is beginning to look not so marvellous. Not only are the Government in a mess over the economy, but many trade unionists are worried about it too, as is almost the whole nation. There used to be talk about whether the next Conservative Government could work with the unions. That is not the question now. The question is, how soon can the Labour Government go so that a Conservative Government, together with the unions and with all sections of our community, can begin to clear up the mess? After all that has happened in two years, after the Government having clearly shown that they were totally unprepared for the economic blizzard which is now affecting us, when they are now in a terrible tangle themselves, publicly split across the Gangway, how can confidence return to the British people?
  There are two other measures which should not be in the Gracious Speech. The first is the proposed Bill to remove restrictions on direct labour departments. That is an unwanted and divisive measure. It is a dirty little Bill, put in no doubt as a political sop to certain Labour councils, and it should not be there.
  The other is the water charges Bill, put in, according to the Prime Minister, for the benefit of the people of Wales.

  823
  The people of Wales are a large group and certainly should be heard—and have been heard, quite rightly.
  But what about the small groups to which the Prime Minister also referred, as previously had my right hon. Friend the Leader of the Opposition? What about my constituents? What about Cambridge? What about the Cambridge Water Company? I can tell the right hon. Gentleman that they will be very angry and, although I do not presume to suppose that this subject will be uppermost in their minds on Thursday, I have no doubt that some people will take the view that that is an action taken by this Government without the kind of consultation, let alone the consent, to which the Prime Minister himself referred in his opening Prime Ministerial broadcast.
  It is not necessary for the attainment of the Government's objectives to have this Bill. There is also lying in those words a threat to nationalise the private water companies, which again is an absurd measure to contemplate and one which is totally unnecessary.
  I understand that the Leader of the House is to reply to this debate. That may be bad luck for me. Certainly it does not fill me with any great optimism. But I am not thinking about that in any personal sense, because I think that he is seen by us all to have cast aside his championship of Parliament, especially of the rights of Back Benchers. He seems to have changed his colours as he now masterminds the ministerial control and direction which appears to inform his leadership of the House.
  If the evidence of the last Session is not enough to prove my point, the motion on the Order Paper today which is to be taken tomorrow in relation to the Aircraft and Shipbuilding Industries Bill provides all the evidence that we need. It is an attempt to stifle the grievance which I have no doubt would have been and may still be raised by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) before it had even had an airing. I do not think that that is a very sensible way to proceed.
  If the Government were so keen that the nationalisation of the aircraft and shipbuilding industries should go through, they could have had it for the asking provided they were prepared to sacrifice
  824
  ship repairing. They could have had three-quarters of the Bill without the need for any further parliamentary process in this Session. I am bound to say that it was their greed, their spite or their pique that caused them to take this line. Certainly it is not the way in which the Leader of the House would have been prepared to see it done had he not been occupying his present post.
  We want the Government to change their attitude to industry by deeds and not just by words. We want them to base their actions and take their decisions upon the basis of the needs and the genuine interests of our whole country and our whole community. We want the Government to govern for all the people, which is what the Prime Minister tried to imply in his first broadcast. The trouble is that he is not doing it.
  Unless the Government change their minds about that—if they cannot or will not do it—the sooner that they make way for a truly British Government who can govern for the whole community, the better it will be.
  9.28 p.m.
  The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): If the right hon. Member for Cambridgeshire (Mr. Pym) will permit me, I shall not deal at the moment either with the Aircraft and Shipbuilding Industries Bill which we shall be discussing tomorrow or with the apoplectic water companies of Cambridgeshire which he described a few minutes earlier.
  I hope that he will not mind if I turn instead to his opening remarks and the congratulations which he offered and which I am glad to support to the two of his hon. Friends who made their maiden speeches, the hon. Members for Walsall, North (Mr. Hodgson) and Workington (Mr. Page). In common with my right hon. and hon. Friends, I cannot say that I welcome their presence in this House. We understand that they will not be here representing those constituencies after the next election. But I am sure that all those who heard their speeches will wish to congratulate them. Perhaps I might say to the hon. Member for Workington that we appreciated especially what he said about his predecessor and that we thank him for the congratulations which he offered to my noble friend. We

  825
  also repeat what we have said on previous occasions—that of course we shall wish to hear both hon. Gentlemen speak in this Parliament on many future occasions.
  I turn now to the remarks of the right hon. Gentleman and others referring to the position in Northern Ireland, as well as to speeches made by hon. Members from Northern Ireland. There is an amendment on the Order Paper standing in the name of the hon. Member for Antrim, South (Mr. Molyneaux), supported by his hon. Friends. In the context of our proposals for devolution to Scotland and Wales, it regrets the lack of any proposal to increase Northern Ireland's parliamentary representations or any fresh measure of devolved government in Northern Ireland.
  I do not think that I can do better than to repeat the words which my right hon. Friend the Secretary of State for Northern Ireland used in a speech he made last Friday. He said that he believed that the time was ripe for devolution, and added:
  "It would be a pity if Northern Ireland should now lag behind Scotland and Wales. There is, moreover, the present under-representation of Northern Ireland at Westminster; a constitutional settlement would open the way for change here.
  "If the basis of agreement is present there need be no problems about implementation. Let all the parties show their commitment to devolution by demonstrating their desire to participate with others in a new system of devolved government. The Government will not be slow to respond. I ask the political parties—or better still ask them to ask themselves—whether they are ready to confess to their own people that once again they have failed to secure for them what others in the United Kingdom are getting. Scotland and Wales are moving on: is Northern Ireland to he left behind?"
  The Government also believe that progress should be made on devolution to Northern Ireland and, indeed, on the question of Northern Ireland's representation in this House. We look forward greatly to the success of discussions be-between the Northern Ireland political parties and all others concerned to see how best progress can be made in that direction.
  The hon. Member for Antrim, South has also tabled an amendment about the point in the Gracious Speech at which Her Majesty refers to Northern Ireland.
  826
  It criticises that part of the Speech in which the reference is made. I have looked up previous Kings' and Queen's Speeches, and I understand that it is usual for such references to be made at such points. I am sure that this is not a matter which we need discuss at length and that it would be more proper to note that the Gracious Speech reflects on the heartrending situation in Northern Ireland and reiterates the determination of the Government to bring peace there. I emphasise that no disrespect was meant by the manner and place of that reference in the Gracious Speech.
  I turn now to the speech by the Leader of the Liberal Party. All who heard it will agree that it was a notable contribution to the debate.
  Mr. Norman Tebbit: Is the right hon. Gentleman saying that, in the event that there is a devolved Parliament again in Ulster, the representation of Ulster in this Parliament will be on the same basis as for English constituencies?
  Mr. Foot: I was not saying that. I do not think that any hon. Member who heard what I said would interpret it as that. I was saying that, clearly, the matter of representation in this House from Northern Ireland is one to be discussed, and that we would be prepared to discuss it. We are not making a commitment about it. We are making a commitment to discuss it in the form stated by my right hon. Friend the Secretary of State for Northern Ireland in his speech last weekend. I have quoted his speech and I think that the point is well understood in the House.
  The Leader of the Liberal Party, before turning to economic matters, asked me two questions. He first asked about pairing arrangements between the different parties. I do not think that it would be a satisfactory arrangement to have regular pairing between the Labour and Liberal Parties. On some occasions the Liberals vote with the Government and on other occasions they vote against them —and occasionally in the course of the debate they change their minds, and that may alter the situation. I do not think that that would be the best way to deal with the situation. There has been some discussion between the usual channels, and we believe that some progress should

  827
  be made in dealing with the serious problems that occurred a few months ago when dealing with sick Members. We hope that progress will be made in a dialogue on this matter and that the results will benefit the House as a whole.
  Secondly, the Leader of the Liberal Party asked about the Scotland and Wales Bill and warned the Government that we could not rely on permanent Liberal support for the Bill. I fully understand that the Liberal Party has its own view on the matter, and no doubt we shall hear it during the many debates on that topic. No doubt they will then be able to make up their minds how they will vote on individual matters.
  The hon. Gentleman said that our proposals were based on expediency whereas his proposals were based on principle, but I must remind him that our proposals on one major matter accord more closely with the recommendations of the Kilbrandone Report than do the Liberal proposals. Kilbrandon rejected the principal distinctive proposal of the Liberal Party that there should be a federal solution to the problem. We do not believe in a federal solution, for much the same reasons as were adumbrated by Kilbrandon. We believe that the disproportion between England, Scotland, Wales and Northern Ireland is so great that a federal solution would mean that much greater power would be attached to one part of that federation. We do not believe that it would be a sensible way to proceed. In most of the successful federations cited as examples to follow such a situation does not prevail. For that reason alone we believe that it would not be a satisfactory solution.
  Therefore, we have set out to try to discover a solution which will unite the United Kingdom but will still ensure that we have proper democratic devolution to Scotland and Wales. We believe that our solution meets those principles. It is a matter not of expediency but of seeking a proper workable solution to the problem. We shall present it to the House, and we shall listen to hon. Member's views.
  I was gratified to hear the clear thinking and bluff downright statement made by the right hon. Member for Cambridgeshire on these matters. No more will the country need to be in doubt about Con-
  828
  servative policy on the subject of devolution. I commend to every hon. Member the right hon. Gentleman's speech, which will merit close reading. However, if anybody who heard the right hon. Gentleman was not sure what his conclusion might be, I am sure that the right hon. Gentleman will fulfil his promise within a fortnight to tell us what he meant by his remarks. I shall greatly look forward to that occasion.
  Mr. Crawford: Leaving aside any question of Government expediency, does not the right hon. Gentleman agree that the government of Scotland is not a matter for Kilbrandon or for this Government but for the people of Scotland?
  Mr. Foot: It is a matter for the people of the United Kingdom as a whole. [HON. MEMBERS: "No."] We are putting forward proposals which we believe will be of benefit to all the people of the United Kingdom. We advance them not only in the interests of people in Scotland and Wales but in the interests of people in England as well.
  We shall have plenty of time in which to discuss these matters and to reach our conclusions. I believe that the more the House examines our proposals and sees the care and detail with which they have been prepared, the more it will find that they are sensible proposals which will, I believe, command the general support of the House.
  That does not mean to say that we shall be dogmatic about each particular suggestion or proposal. As to any proposals that may be made about some form of referendum, as long as that referendum did not hold up the provisions of the Bill, and the Bill getting on the statute book, we should be prepared to consider such proposals. But we are certainly not prepared to go back on the general undertakings that we gave as a party to the people of Scotland, to the people of Wales and, indeed, to the people of Britain as a whole. We are not prepared to go back on those general proposals, and we are presenting to the House in the Bill a faithful execution of the pledges we gave then.
  Mr. Sillars: Does my right hon. Friend link the statement on the referendum with his previous remark that the question of Scottish government is a

  829
  matter for the whole of the United Kingdom? Does that mean that if there is a referendum conceded by the Government, it will not be one taken only in Scotland? If that is the case, what makes Scotland so different from Northern Ireland when its constitutional position was determined?
  Mr. Foot: So that there is no mistake about it, what I say is that the decision about the future of the United Kingdom and the maintenance of the unity of the United Kingdom—which is provided for in the Bill from its very first clause onwards—is a matter for the United Kingdom as a whole, and we are carrying out our undertakings to the United Kingdom as a whole.
  If, however, this House agreed to a devolved system of government for Scotland and for Wales and if, having agreed to the proposition, it was then considered that there should be a referendum—the Government have not made up their mind about it but we are prepared to listen to what the House says—I am not suggesting that that referendum should be in the whole country. It should be in Scotland and Wales. That is a sensible proposal and would be understood by the rest of the House.
  On this matter—I agree that it was a matter of detection rather than a simple statement—it appeared to me that I had the support of the right hon. Gentleman. Whether I should be encouraged by that I am not quite sure, but at any rate that appeared to be the case.
  Mr. George Cunningham: Does my right hon. Friend not think that if the people of Scotland want to be completely independent, that is an issue which the people of Scotland and they alone are entitled to decide? But if what they are looking towards is devolution, a half-way stage, which affects the rights of England and the rest of the United Kingdom as well, that is a decision which ought to be taken by the people of the United Kingdom as a whole.
  Mr. Foot: I do not agree with my hon. Friend in the formulation he has made of these matters, but these are questions which will have to be debated by the House as the Bill goes through.
  830
  What I am indicating is that, of course, the Government, when they come to that matter, will be quite free to have a debate in the House, to hear what is said, to make their proposals and to consider the matter in that way. All the considerations put forward by my hon. Friend will be relevant at such a time. I believe that the House of Commons itself will shape the Bill and, I believe, improve the proposals that the Government have made, although the Government have worked out very carefully what is proposed.
  Turning to the speeches of hon. Members who have participated in the debate—
  Mr. Tim Renton: I am grateful to the right hon. Gentleman for giving way. Will he tell the House whether it is in his mind to propose in due course a devolved system of government for the English regions as well? If so, will not this inevitably bring us towards a federal system of government?
  Mr. Foot: The hon. Gentleman has no doubt followed these questions very closely and will know that the Government have agreed and will be publishing, before Second Reading debate on the devolution Bill, a White Paper on the subject of what is proposed for England and for the rest of the country, and what may be considered. That is a consultative White Paper. It will be more a matter for discussion of what might be the possibilities here than setting out any cut and dried final solution.
  I do not wish to raise any expectations that we have solved all these problems. Certainly the solution to the problems would not be the one suggested by the hon. Gentleman. When he reads the White Paper or the document that we produce on the subject, he will see clearly enough the reasons why we have reached that conclusion.
  I want now to come to what was said—
  Sir Derek Walker-Smith rose—
  Mr. Foot: I want to get on to the speeches made by hon. Members on other subjects. We shall have plenty of time to discuss this matter later in the Session.

  831
  I turn now to what was said by the Leader of the Liberal Party on another question which has figured prominently in the debate—the whole matter of a statutory wages or incomes policy. The hon. Gentleman said that he preferred a voluntary incomes policy. In that he differentiated himself from his hon. Friend the Member for Cornwall, North (Mr. Pardoe) who has always been a strong advocate of a statutory policy.
  This matter cropped up especially in remarks made by the Leader of the Opposition, who has been eager to underline that she now takes a somewhat different view of these matters from that when she was a member of the previous Government. Last night, the right hon. Lady said to my right hon. Friend the Secretary of State for Industry:
  "The right hon. Gentleman clearly did not check what I said… Unlike the right hon. Gentleman, I check my facts and I check transcripts."—[Official Report, 29th November 1976: Vol. 921, c. 610]
  At the beginning of the debate today, the right hon. Lady advised my right hon. Friend the Chancellor of the Exchequer to do the same.
  I have done my best to check what the right hon. Lady said. It is important that everyone should know what she said. First, this is the report which appeared in The Times. I say right away that, because a report appears in The Times, it is no guarantee of its accuracy. I am sure that the right hon. Lady will be grateful to me for clearing up this matter, because some people might have been deceived by what appeared in The Times. The report reads:
  "Mrs. Thatcher said last night that a Conservative Government would never introduce a statutory incomes policy again."
  The right hon. Lady has objected to that construction on her speech. Thanks to the assistance of my hon. Friend the Member for Nottingham, West (Mr. English), I have had the report of what was said by the reporter who was there. I agree that the right hon. Lady is entitled to say that the report in The Times was in one sense incorrect because, although the sense is not tremendously different, there is a marginal difference. Under the title "Liverpool Daily Post", which had a reporter there, there is the headline
  "Our first priority—by Maggie."
  832
  Further down, it states:
  "I do not intend to have a statutory policy again."
  The right hon. Lady did not say "never again". I am very sorry. I had pictured her singing the famous old song,
  "I'll never say 'never again' again."
  I have always had a soft spot for the right hon. Lady, if I may confess it to her. I thought that she had been making this vow. At any rate, I think that we have cleared up the fact that she never intends to have a statutory policy again—not never again, but never again. The right hon. Lady never intends to have a statutory policy again.
  Will the right hon. Lady tell us at some suitable time—I do not suggest at this moment—or circulate in the Official Report, or we might make provision for this in the Library, all those items in the previous Government's policies which she is never going to have again or not going to have again?
  At any rate, a statutory incomes policy is out. Some of us on this side of the House, but not all, were guilty of being in favour of a statutory incomes policy. I was never in favour of such a policy. I am strongly in favour of the right hon. Lady's view. I am sure that the right hon. Member for Down, South (Mr. Powell) is in this alliance, too. The right hon. Gentleman may not have made his normal approaches to the Front Bench today—I am sorry that I missed his overtures, because I am told that they were of a most touching character—but in any case, having missed them, I am very gratified that we three at least—the right hon. Lady, the right hon. Member for Down, South and myself—are all anti-statutory incomes policyites, and we are not prepared to have such a policy at any future time. Right, we have established that. We do not know how many we have on our side.
  What about some other items on her list apart from the statutory incomes policy—and we all know who was responsible for that; it was the ghost of Banquo who has not turned up, for he cannot face it. However, the right hon. Member for Chipping Barnet (Mr. Maudling) made a very good speech if I may say so without losing the support of the right hon. Member for Down, South.

  833
  The right hon. Lady said that the only matter over which her Government—which she frequently now disowns—quarrelled with the trade unions was statutory incomes policy. But if I remember rightly there was a little trouble over the Industrial Relations Act 1971. [Interruption.] I seem to remember a few dock strikes and other disruptions. In fact, we had three years of the worst industrial relations in this country since recorded time. That must have escaped her recollection.
  Mr. Peter Bottomley Mr. Peter Bottomley (Woolwich, West)rose—
  Mr. Foot: No, I will not give way.—ah! Speak of the devil—the right hon. Member for Sidcup (Mr. Heath) has come in. I was just explaining how I hoped that the Leader of the Opposition would put in the Library a list of the measures which she supported in the right hon. Member's Administration, but which she now opposes. I am sure that the right hon. Member would be in favour of that little list, although it may well he a longer list.
  We got to item No. 2. What about the Industry Act? After all, if the Opposition are to be as ruthless as the hon. Member for Oswestry (Mr. Biffen) suggested in the application of monetary policies—the Leader of the Opposition seems to have been converted to them—and if the Opposition intend to carry them out to the letter, they cannot draw a distinction between Rolls-Royce and British Leyland. They cannot assist one and not the other. So the right hon. Lady must have on her list the fact that she would never again have an Industry Act. Not only would that mean abolishing the National Enterprise Board and planning agreements; it would mean wipping away the entire Industry Act introduced, in a minor capacity by the hon. Member for Henley (Mr. Heseltine). He was sacked in the last reshuffle. We understand why. It was because he was one of the authors of the Industry Act.
  There are quite a number of other measures and the Leader of the Opposition owes it to the House and the country to give a full list of all the measures which she previously supported but which she will never again support.
  Mr. Rost: Tell us about the IMF.
  Mr. Foot: I thought that we were discussing the Opposition amendment but they do not seem to want to talk about that now.
  Many hon. Members came into this debate rather late and did not hear the many interesting speeches. They did not hear the speech of the right hon. Members for Chipping Barnet. I recommend hon. Members to read it. I wonder how often he delivered it in the Shadow Cabinet. The right hon. Gentleman shakes his head. I am not surprised. Had he delivered it once, he would have been out on his ear a long time ago.
  What can one think of the selection of the right hon. Lady who sacks the right hon. Member for Chipping Barnet in such an unceremonious manner but keeps in the Shadow Cabinet—if he is still there; he could have been sacked for all I know—the hon. Member for Guildford (Mr. Howell) as spokesman on Treasury matters, still with the authentic stamp of the new regime upon him? I am not sure what rôle he played in the regime of the right hon. Member for Sidcup, but I think that before the right hon. Lady makes further approaches to the trade unions she had better sack the hon. Member for Guildford too, because he made a speech—I have checked this—and he confirmed to me that the report is broadly correct, like the speech of the right hon. Lady at Prestatyn.
  The hon. Gentleman said:
  "A future Tory Government would have nothing to do with the 'self-interested mafia who now prowl the upper reaches of trade union bureaucracy'… Those well-heeled princes of trade union officialdom' had concern only for their own political power and appointments and none at all for their workers."
  Mr. Tebbit rose—
  Mr. Foot: We are not surprised at the hon. Member for Chingford (Mr. Tebbit). We know that he agrees with that statement. The hon. Gentleman has the reputation of being the most studiously offensive Member of the House. He does not even have to rise to his feet to sustain his reputation. We know how well he would work with trade union leaders.
  Does the right hon. Lady approve of the language of her hon. Friend the unsacked Member for Guildford? She had an opportunity just after that speech was

  835
  delivered to put the hon. Gentleman out on his ear, too. Maybe she will get that Bench so crowded that she will have great open spaces—
  Mr. Tebbit rose—
  Mr. Foot: I shall not give way. I have expressed my view about the hon. Gentleman, and nothing on earth that he could say would make me alter it. He should take his seat and try to catch your eye, Mr. Speaker—
  Mr. Tebbit Mr. Tebbit rose—
  Mr. Speaker: Order. One at a time in the last two minutes.
  Mr. Foot: All I am saying to the right hon. Lady is that the next time she is trying to reorganise her Shadow Cabinet I should be happy to offer my
  assistance to her. Apart from the hon. Member for Chingford, there is a likely lot sitting on that Bench below the Gangway. So mistaken did I think the right hon. Lady in her choice that I thought she was going to select the hon. Member for Chingford, and he would have been sitting on the Front Bench. I hope my few remarks will make it certain that such an appalling thing will never happen to this House.
  To return to the right hon. Lady's amendment, I hope it is understood that no case has been made for it. I hope, therefore, that the House will throw it out and give full support to the Government's motion.
  Question put, That the amendment be made:—
  The House divided: Ayes 266, Noes 276.

  Division No. 3.]

  AYES

  [10.00 p.m.

  Aitken, Jonathan

  Dodsworth, Geoffrey

  Havers, Sir Michael

  Alison, Michael

  Douglas-Hamilton, Lord James

  Hayhoe, Barney

  Amery, Rt Hon Julian

  Drayson, Burnaby

  Heath, Rt Hon Edward

  Arnold, Tom

  du Cann, Rt Hon Edward

  Henderson, Douglas

  Atkins, Rt Hon H. (Spelthorne)

  Eden, Rt Hon Sir John

  Heseltine, Michael

  Awdry, Daniel

  Edwards, Nicholas (Pembroke)

  Hicks, Robert

  Bain, Mrs Margaret

  Elliott, Sir William

  Higgins, Terence L.

  Baker, Kenneth

  Emery, Peter

  Hodgson, Robin

  Banks, Robert

  Ewing, Mrs Winifred (Moray)

  Holland, Philip

  Beith, A. J.

  Eyre, Reginald

  Hooson, Emlyn

  Bell, Ronald

  Fairbairn, Nicholas

  Hordern, Peter

  Bennett, Dr Reginald (Fareham)

  Falrgrieve, Russell

  Howe, Rt Hon Sir Geoffrey

  Benyon, W.

  Fell, Anthony

  Howell, David (Guildford)

  Berry, Hon Anthony

  Finsberg, Geoffrey

  Howell, Ralph (North Norfolk)

  Biffen, John

  Fisher, Sir Nigel

  Howells, Geraint (Cardigan)

  Biggs-Davison, John

  Fletcher, Alex (Edinburgh N)

  Hunt, David (Wirral)

  Blaker, Peter

  Fletcher-Cooke, Charles

  Hurd, Douglas

  Body, Richard

  Fookes, Miss Janet

  Hutchison, Michael Clark

  Boscawen, Hon Robert

  Forman, Nigel

  Irving, Charles (Cheltenham)

  Bottomley, Peter

  Fowler, Norman (Sutton C'f'd)

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

  Bowden, A. (Brighton, Kemptown)

  Fox, Marcus

  Johnson Smith, G. (E Grinstead)

  Boysor, Dr Rhodes (Brent)

  Fraser, Rt Hon H. (Stafford & St)

  Johnston, Russell (Inverness)

  Braine, Sir Bernard

  Freud, Clement

  Jones, Arthur (Daventry)

  Brittan, Leon

  Fry, Peter

  Jopling, Michael

  Brocklebank-Fowler, C.

  Galbraith, Hon. T. G. D.

  Joseph, Rt Hon Sir Keith

  Brotherton, Michael Gardiner,

  George (Reigate)

  Kaberry, Sir Donald

  Brown, Sir Edward (Bath)

  Gardner, Edward (S Fylde)

  Kershaw, Anthony

  Bryan, Sir Paul

  Gilmour, Rt Hon Ian (Chesham)

  Kilfedder, James

  Buchanan-Smith, Alick

  Gilmour, Sir John (East Fife)

  Kimball, Marcus

  Budgen Nick

  Glyn, Dr Alan

  King, Evelyn (South Dorset)

  Bulmer, Esmond

  Godber, Rt Hon Joseph

  King, Tom (Bridgwater)

  Burden, F. A.

  Goodhart, Philip

  Kirk, Sir Peter

  Carlisle, Mark

  Goodhew, Victor

  Kitson, Sir Timothy

  Chalker, Mrs Lynda

  Goodlad, Alastair

  Knight, Mrs Jill

  Churchill, W. S.

  Gorst, John

  Knox, David

  Clark, Alan (Plymouth, Sutton)

  Gow, Ian (Eastbourne)

  Lamont, Norman

  Clark, William (Croydon S)

  Gower, Sir Raymond (Barry)

  Langford-Holt, Sir John

  Clegg, Walter

  Grant, Anthony (Harrow C)

  Latham, Michael (Melton)

  Cockcroft, John

  Gray, Hamish

  Lawrence, Ivan

  Cooke, Robert (Bristol W)

  Griffiths, Eldon

  Lawson, Nigel

  Cope, John

  Grimond, Rt Hon J.

  Lewis, Kenneth (Rutland)

  Cormack, Patrick

  Grist, Ian

  Lloyd, Ian

  Corrie, John

  Gros, Michael

  Loveridge, John

  Costain, A. P.

  Hall, Sir John

  McAdden, Sir Stephen

  Craig, Rt Hon W. (Belfast E)

  Hall-Davis, A. G. F.

  MacCormick, Iain

  Crawford, Douglas

  Hamilton, Michael (Salisbury)

  McCrindle, Robert

  Crouch, David

  Hampson, Dr Keith

  Macfarlane, Neil

  Crowder, F. P.

  Hannam, John

  MacGregor, John

  Davies, Rt Hon J. (Knutsford)

  Harvie Anderson. Rt Hon Miss

  Macmillan, Rt Hon M. (Farnham)

  Dean, Paul (N Somerset)

  Hastings, Stephen

  McNair-Wilson, M. (Newbury)

  McNair-Wilson, P. (New Forest)

  Price, David (Eastleigh)

  Steen, Anthony (Wavertree)

  Madel, David

  Pym, Rt Hon Francis

  Stewart, Donald (Western Isles)

  Marshall, Michael (Arundel)

  Ralson, Timothy

  Stewart, Ian (Hitchin)

  Marten, Nell

  Rathborte, Tim

  Stokes, John

  Mates, Michael

  Rawlinson, Rt Hon Sir Peter

  Stradling Thomas, J.

  Maude, Angus

  Rees, Peter (Dover & Deal)

  Tapsell, Peter

  Maudling, Rt Hon Reginald

  Rees-Davies, W. R.

  Taylor, R. (Croydon NW)

  Mawby, Ray

  Reld, George

  Taylor, Teddy (Cathcart)

  Maxwell-Hyslop, Robin

  Renton, Rt Hon Sir D. (Hunts)

  Tebbit, Norman

  Mayhew, Patrick

  Renton, Tim (Mid_Sussex)

  Thatcher, Rt Hon Margaret

  Meyer, Sir Anthony

  Rhys Williams, Sir Brandon

  Thomas, Rt Hon P. (Hendon S)

  Miller, Hal (Bromsgrove)

  Ridley, Hon Nicholas

  Thompson, George

  Mills, Peter

  Ridsdale, Julian

  Thorpe, Rt Hon Jeremy (N Devon)

  Mitchell, David (Basingstoke)

  Rifkind, Malcolm

  Townsend, Cyril D.

  Moate, Roger

  Rippon, Rt Hon Geoffrey

  Trotter, Neville

  Monro, Hector

  Roberts, Michael (Cardiff NW)

  van Straubenzee, W. R.

  Montgomery, Fergus

  Roberts, Wyn (Conway)

  Vaughan, Dr Gerald

  Moore, John (Croydon C)

  Ross, Stephen (Isle of Wight)

  Viggers, Peter

  More, Jasper (Ludlow)

  Rossi, Hugh (Hornsey)

  Wainwright, Richard (Come V)

  Morgan, Geraint

  Rost, Peter (SE Derbyshire)

  Wakeham, John

  Morgan-Giles, Rear-Admiral

  Royle, Sir Anthony

  Walder, David (Clitheroe)

  Morris, Michael (Northampton S)

  Sainsbury, Tim

  Walker, Rt Hon P. (Worcester)

  Morrison, Hon Peter (Chester)

  St. John-Stevas, Norman

  Walker-Smith, Rt Hon Sir Derek

  Mudd, David

  Shaw, Giles (Pudsey)

  Wall, Patrick

  Neave, Airey

  Shaw, Michael (Scarborough)

  Walters, Dennis

  Nelson, Anthony

  Shelton, William (Streatham)

  Watt, Hamish

  Neubert, Michael

  Shepherd, Colin

  Weatherill, Bernard

  Newton, Tony

  Shersby, Michael

  Wells, John

  Nott, John

  Silvester, Fred

  Welsh, Andrew

  Onslow, Cranley

  Sims, Roger

  Whitelaw, Rt Hon William

  Oppenheim, Mrs Sally

  Skeet, T. H. H.

  Wiggin, Jerry

  Page, Rt Hon R. Graham (Crosby)

  Smith, Dudley (Warwick)

  Wilson, Gordon (Dundee E)

  Page, Richard (Workington)

  Speed, Keith

  Winterton, Nicholas

  Pardoe, John

  Spence, John

  Wood, Rt Hon Richard

  Parkinson, Cecil

  Spicer, Michael (S Worcester)

  Young, Sir G. (Ealing, Acton)

  Pattie, Geoffrey

  Sproat, Iain

  Younger, Hon George

  Penhaligon, David

  Stainton, Keith

  Percival, Ian

  Stanbrook, Ivor

  TELLERS FOR THE AYES:

  Peyton, Rt Hon John

  Stanley, John

  Mr. Spencer Le Marchant and

  pink, R. Bonnet

  Steel, David (Roxburgh)

  Mr. Carol Mather.

  NOES

  Abse, Leo

  Conlan, Bernard

  Fletcher, Ted (Darlington)

  Allaun, Frank

  Cook, Robin F. (Edin C)

  Foot, Rt Hon Michael

  Anderson, Donald

  Corbett, Robin

  Ford, Ben

  Archer, Peter

  Cowans, Harry

  Forrester, John

  Armstrong, Ernest

  Cox, Thomas (Tooting)

  Fowler, Gerald (The Wrekin)

  Ashley, Jack

  Crawshaw, Richard

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

  Atkins, Ronald (Preston N)

  Cronin, John

  Freeson, Reginald

  Atkinson, Norman

  Crosland, Rt Hon Anthony

  Garrett, John (Norwich S)

  Barnett Guy (Greenwich)

  Crowther, Stan (Rotherham)

  Garrett, W. E. (Wallsend)

  Barnett, Rt Hon Joel (Heywood)

  Cryer, Bob

  George, Bruce

  Bates, Alt

  Cunningham, G. (Islington S)

  Gilbert, Dr John

  Bean, R. E.

  Cunningham, Dr J. (Whiteh)

  Ginsburg, David

  Benn, Rt Hon Anthony Wedgwood

  Davidson. Arthur

  Golding, John

  Bennett, Andrew (Stockport N)

  Davies, Bryan (Enfield N)

  Gould, Bryan

  Bidwell, Sydney

  Davies, Denzil (Llanelli)

  Gourley, Harry

  Bishop, E. S.

  Davies, Ifor (Gower)

  Graham, Ted

  Blenkinsop, Arthur

  Davis, Clinton (Hackney C)

  Grant, George (Morpeth)

  Boardman, H.

  Deakins, Eric

  Grant, John (Islington C)

  Booth, Rt Hon Albert

  Dean, Joseph (Leeds West)

  Grocott, Bruce

  Bottomley, Rt Hon Arthur

  Dell, Rt Hon Edmund

  Hamilton, James (Bothwell)

  Boyden, James (Bish Auck)

  Dempsey, James

  Harper, Joseph

  Bradley, Tom

  Doig, Peter

  Harrison, Walter (Wakefield)

  Bray, Dr Jeremy

  Dormand, J. D.

  Hart, Rt Hon Judith

  Brown, Hugh D. (Proven)

  Douglas-Mann, Bruce

  Hattersley, Rt Hon Roy

  Brown, Robert C. (Newcastle W)

  Duffy, A. E. P.

  Hatton, Frank

  Buchan, Norman

  Dunn, James A.

  Hayman, Mrs Helene

  Buchanan, Richard

  Dunnett, Jack

  Healey, Rt Hon Denis

  Butler, Mrs Joyce (Wood Green)

  Dunwoody, Mrs Gwyneth

  Heffer, Eric S.

  Callaghan, Rt Hon J. (Cardiff SE)

  Eadie, Alex

  Hooley, Frank

  Callaghan, Jim (Middleton & P)

  Edge, Geoff

  Horam, John

  Campbell, Ian

  Edwards, Robert (Wolv SE)

  Howell, Rt Hon Denis (B'ham, Sm H)

  Canavan, Dennis

  Ellis, John (Brigg & Scun)

  Hoyle, Doug (Nelson)

  Cant. R. B.

  English, Michael

  Huckfield, Les

  Carmichael, Neil

  Ennals, David

  Hughes, Rt Hon C. (Anglesey)

  Carter, Ray

  Evans, Fred (Caerphilly)

  Hughes, Mark (Durham)

  Cartwright, John

  Evans, loan (Aberdare)

  Hughes, Robert (Aberdeen N)

  Castle, Rt Hon Barbara

  Evans, John (Newton)

  Hughes, Roy (Newport)

  Clemitson, Ivor

  Ewing, Harry (Stirling)

  Irvine, Rt Hon Sir A. (Edge Hill)

  Cocks, Rt Hon Michael (Bristol S)

  Fernyhough, Rt Hon E.

  Irving, Rt Hon S. (Dartford)

  Cohen, Stanley

  Fitch, Alan (Wigan)

  Jackson, Colin (Brighouse)

  Coleman, Donald

  Flannery, Martin

  Jackson, Miss Margaret (Lincoln)

  Colquhoun, Ms Maureen

  Fletcher, L. R. (Ilkeston)

  Janner, Greville

  838

  839

  Jay, Rt Hon Douglas

  Miller, Dr M. S. (E Kilbride)

  Small, William

  Jenkins, Hugh (Putney)

  Miller, Mrs Millie (Ilford N)

  Smith, John (N Lanarkshire)

  John, Brynmor

  Moonman, Eric

  Snape, Peter

  Johnson, James (Hull West)

  Morris, Alfred (Wythenshawe)

  Spearing, Nigel

  Johnson, Walter(Derby S)

  Morris, Charles R. (Openshaw)

  Spriggs, Leslie

  Jones, Alec (Rhondda)

  Morris, Rt Hon J. (Aberavon)

  Stallard, A. W.

  Jones, Barry (East Flint)

  Moyle, Roland

  Stewart, Rt Hon M. (Fulham)

  Jones, Dan (Burnley)

  Mulley, Rt Hon Frederick

  Stoddart, David

  Judd, Frank

  Newens, Stanley

  Stott, Roger

  Kaufman, Gerald

  Noble, Mike

  Strang, Gavin

  Kelley, Richard

  Oakes, Gordon

  Strauss, Rt. Hon G. R.

  Kerr, Russell

  Ogden, Eric

  Summerskill, Hon Dr Shirley

  Kilroy-Silk, Robert

  O'Halloran, Michael

  Swain, Thomas

  Kinnock, Neil

  Orme, Rt Hon Stanley

  Thomas, Jeffrey (Abertillery)

  Lambie, David

  Ovenden, John

  Thomas, Mike (Newcastle E)

  Lamborn, Harry

  Padley, Walter

  Thomas, Ron (Bristol NW)

  Lamond, James

  Palmer, Arthur

  Thorne, Stan (Preston South)

  Latham, Arthur (Paddington)

  Park, George

  Tierney, Sydney

  Leadbitter, Ted

  Parker, John

  Tomlinson, John

  Lee, John

  Parry, Robert

  Tomney, Frank

  Lestor, Miss Joan (Eton & Slough)

  Pendry, Tom

  Torney, Tom

  Lever, Rt Hon Harold

  Perry, Ernest

  Tuck, Raphael

  Lipton, Marcus

  Prentice, Rt Hon Reg

  Varley, Rt Hon Eric G.

  Litterick, Tom

  Prescott, John

  Wainwright, Edwin (Dearne V)

  Loyden, Eddie

  Price, C. (Lewisham W)

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

  Luard, Evan

  Price, William (Rugby)

  Walker, Harold (Doncaster)

  Lyon, Alexander (York)

  Radice, Giles

  Walker, Terry (Kingswood)

  Lyons, Edward (Bradford W)

  Rees, Rt Hon Merlyn (Leeds S)

  Ward, Michael

  Mabon, Dr J. Dickson

  Richardson, Miss Jo

  Watkins, David

  McCartney, Hugh

  Roberts, Albert (Normanton)

  Weetch, Ken

  McDonald, Dr Oonagh

  Roberts, Gwilym (Cannock)

  Weitzman, David

  McElhone, Frank

  Robinson, Geoffrey

  Wellbeloved, James

  MacFarquhar, Roderick

  Roderick, Caerwyn

  White, Frank R. (Bury)

  McGuire, Michael (Ince)

  Rodgers, George (Charley)

  White, James (Pollock)

  MacKenzie, Gregor

  Rodgers, Rt Hon William (Stockton)

  Whitlock, William

  Mackintosh, John P.

  Rooker, J. W.

  Willey, Rt Hon Frederick

  Maclennan, Robert

  Rose, Paul B.

  Williams, Alan (Swansea W)

  McMillan, Tom (Glasgow C)

  Ross, Rt Hon W. (Kilmarnock)

  Williams, Alan Lee (Hornch'ch)

  Madden, Max

  Rowlands, Ted

  Williams, Sir Thomas (Warrington)

  Magee, Bryan

  Ryman, John

  Wilson(Alexander (Hamilton)

  Mahon, Simon

  Sandelson, Neville

  Wilson, Rt Hon Sir Harold (Huyton)

  Mellalieu, J. P. W.

  Sedgemore, Brian

  Wilson, William (Coventry SE)

  Marks, Kenneth

  Selby, Harry

  Wise, Mrs Audrey

  Marguand, David

  Shaw, Arnold (Word South)

  Woodall, Alec

  Marshall, Dr Edmund (Goole)

  Sheldon, Robert (Ashton-u-Lyne)

  Woof, Robert

  Marshall, Jim (Leicester S)

  Shore, Rt Hon Peter

  Wriggiesworth, Ian.

  Mason, Rt Hon Roy

  Short, Mrs Renée (Wolv NE)

  Young, David (Bolton E)

  Maynard, Miss Joan

  Silkin, Rt Hon John (Deptford)

  Meacher, Michael

  Silkin, Rt Hon S. C. (Dulwich)

  TELLERS FOR THE NOES:

  Mellish, Rt Hon Robert

  Silverman, Julius

  Mr. Joseph Ashton and

  Mikardo, Ian

  Skinner, Dennis

  Mr. James Tinn.

  Millan, Rt Hon Robert

  Question accordingly negatived.
  Main Question put and agreed to.
  Resolved,
  That an humble Address be presented to Her Majesty as follows:
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United King-
  840
  dom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.
  To be presented by Privy Councillors or Members of Her Majesty's Household.

  BUSINESS OF THE HOUSE
  Ordered,
  That the Motion relating to Ways and Means may be proceeded with at this day's Sitting, though opposed, until any hour.—[Mr. Walter Harrison.]

  NATIONAL INSURANCE SURCHARGE
  10.16 p.m.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): I beg to move,
  That a surcharge, payable into the Consolidated Fund, be imposed on secondary Class 1 contributions under the Social Security Act 1975 and the Social Security (Northern Ireland) Act 1975, being a surcharge—

  (a) payable together with the contribution by every person who pays or is liable to pay such a contribution; and

  (b) equal in every case to 2 per cent. of the amount of the earnings in respect of which the contribution is paid or payable.

  The House will recall that the Chancellor's statement on 22nd July dealt with a number of reductions in public expenditure and the introduction—[Interruption.]
  Mr. Speaker: Order. It is unfair to ask the Minister to continue until there is something approaching silence in the Chamber.
  Mr. Sheldon: In introducing this Ways and Means Resolution. I ask the House to recall that on 22nd July the Chancellor of the Exchequer announced certain reductions in public expenditure as well as the introduction of the new tax which this resolution paves the way for a subsequent Bill to implement. That Bill, the National Insurance Surcharge Bill, is due to be published on Thursday this week, and the surcharge will start to take effect as from 6th April next year. The resolution provides for a new tax which levies a surcharge of 2 per cent. on the earnings covered by the national insurance contribution within the range normally applied at present, that is £13 to £95 a week, and it will be payable by all employers who pay secondary Class 1 contribution in respect of employees.
  842
  The reasons for the introduction of the new tax were fourfold. First, there was the need to reduce the public sector borrowing requirement, on which action was required in the summer. The yield from the tax in a full year would be about £1 billion, or £930 million in the year 1977–78; giving a PSBR reduction of about £700 million in 1977–78. This reduction in the public sector borrowing requirement was one of the prime reasons for the introduction of the tax.
  The second reason was that it was possible nine months in advance of its implementation to plan for and announce it without the risk of forestalling. This is one of the few types of measure available without the fortstalling difficulties which normally apply in such cases.
  The third reason was the move to more indirect forms of taxation, and it has the further effect that, by comparison with other indirect taxes, it has less effect on the retail price index and offers that effect after a longer time lag. I give the House an example. The 2 per cent. national insurance surcharge will feed through into the retail price index only to the amount of 1 per cent., and that by early 1978, or approximately nine months after the introduction of the tax.
  The fourth advantage of this form of taxation was its easy introduction and ease of administration.
  I mention those as the main advantages which we saw from the tax, but there will be those who say that it will be a tax on employment and, in particular, on the employee's contribution. I remind hon. Members that most other countries have a form of national insurance contribution which bears much more heavily on employers than will anything which we suggest in the Bill.
  To show how out of line we have been with most of our industrial competitors, I give some examples. Taking employers' social security payments as a percentage of their wage and salary bill, we find that it is 14½per cent. in Belgium and Germany, 18 per cent. in Italy, 13 per cent. in the Netherlands and 22 per cent. in France. In the United Kingdom in 1973 the latest date for which we have figures —it was 4·8 per cent. against an average

  843
  ranging between 14½ per cent. and 22·8 per cent. in the other Community countries. We are well below the average of these other countries with whom we are in immediate and direct competition.
  Mr. Cyril Smith: Has the Minister any indication of when the countries to which he referred introduced this sort of percentage level? What was the level of unemployment at the time? Did they have the same level of unemployment as we have? In other words, I am asking whether this is the most opportune time to introduce this proposal.
  Mr. Sheldon: The hon. Gentleman may well argue that, but I would remind him that in an effort to reduce the public sector borrowing requirement alternative forms of action would have reduced it in ways which had an even greater effect on the unemployment level. Hon. Gentlemen who have been arguing for a reduction in the public sector borrowing requirement should ask themselves how it will affect the levels of unemployment however we attempted to reduce the levels of public expenditure and the public sector borrowing requirement.
  I have made the comparisons internationally but I would also mention the proportion of the total tax revenue. When we look at the total tax revenue we see that receipts from employers' national insurance contributions in those other countries are again very much higher. They form quite a large part of the total tax revenue.
  National insurance contributions in most of the countries of our industrial competitors form a much higher proportion than they do in Britain. I would just give a few examples. In Italy it is 33 per cent., France 32 per cent., West Germany 21 per cent., Belgium 20 per cent. and Sweden 16 per cent. In the United Kingdom it is 9½ per cent. That is the percentage of receipts from employers' national insurance contributions as a percentage of total tax revenue That means that those other countries are much more dependent upon taxation obtained in that way than we are.
  What is happening under the Bill which will shortly be introduced is that we are moving only slightly in that direction.
  Mr. J. W. Rooker: Is it not true that while employers in other countries pay larger taxes there are also better benefits? No improvements in social security, unemployment benefit or maternity grants will come from this £1,000 million.
  Mr. Sheldon: We must also bear in mind the higher prosperity in many of the countries that I have mentioned—[HON. MEMBERS:"Oh!"] Of course. We all know that. That has been part of the economic facts of life for some years now.
  We have seen our standards in welfare benefits decline and those of us who tried to improve them received very little assistance from hon. Gentlemen opposite. One of our major problems is how we can retain the level of benefit which we consider acceptable and necessary at a time when our levels of output and growth in the economy are not as high as those of our industrial competitors. Here we are talking about a much more limited objective—the raising of substantial sums of money in a way that will cause the least damage.
  We shall have the Bill on Thursday. What I am doing tonight is introducing the Ways and Means Resolution to bring forward the new tax. New taxes are not cause for celebration, whether it is a national insurance surcharge or VAT which was introduced with such approbation by hon. Gentlemen opposite.
  Mr. James Sillars: Is my hon. Friend aware that I have had it put to me that with this imposition, on top of very substantial rate increases to come in heavily depressed sections of the West of Scotland economy, a number of people are bound to pitch some employees out of employment? It is noticeable that up to now my hon. Friend has made no reference to the employment effect of the measure he is introducing, Will he now refer to that?
  Mr. Sheldon: This has been computed. My hon. Friend will know that I have not got the figures as they apply to his area, but we shall have an opportunity to discuss the Bill on Second Reading and in Committee and he will be able to make his further comments on the detail then and the Minister will do his best to answer.

  845
  Given the need to make these changes in the public sector borrowing requirement, given the advantages that it has with its lagged effect on price increases, as well as the ease of introduction and administration, I believe that the Bill will play a useful part in meeting the objectives for which it was designed and I hope that it will receive the approval of the House.
  10.26 p.m.
  Mr. John Moore: When I entered the Chamber tonight I had not intended to speak, but I do not think I have ever heard such an appalling attempt at a justification for imposing an increased tax burden on the country as that we just heard from the Financial Secretary.
  The essence of the case seems to lie in the ease of introduction. That is too fine a rationale for introducing a tax. We are expected to believe that it has as its basis a reduction in the public sector borrowing requirement. This is the most tortuous piece of illogic that I have ever heard, for here what is being talked about is raising additional taxes rather than reducing public expenditure. We are talking about raising additional taxes but, as was so ably pointed out by the hon. Member for Birmingham, Perry Barr (Mr. Rooker), these additional taxes produce no additional welfare benefits of any kind but merely increase employers' tax payments. They obviously reduce the prospects of employment.
  We listened to a rather specious Treasury argument containing no moral or intelligent justification for the introduction of this tax. It was an appalling example of how not to argue a case and I hope that the House will not sustain such an argument.
  10.27 p.m.
  Mr. James Sillars: I too, had no intention of speaking, but I am forced to do so now, because my hon. Friend the Financial Secretary failed to reply to my question about the employment consequences. I will make the point again.
  People in my constituency and in the adjoining town that serves my constituency have telephoned me to say that, because of the rate imposition which is to come following the reduction in the
  846
  rate support grant, they will have to lay off five people here and 10 people there. This comes on top of the Prime Minister's statement at the beginning of the debate on the Loyal Address in reply to the Gracious Speech in which he forecast continuing rising unemployment.
  I should like to know what I am to reply if, when I am walking down Ayr High Street in a month's time, a constiuent of mine or someone from a Labour movement in Ayrshire asks me this question: "Why have the Labour Government decided that it is an inappropriate time to introduce a wealth tax when we all know that there has not been a bankruptcy in any of the expensive London restaurants? Why have the Labour Government decided that this is an inappropriate time to raise a wealth tax but an, appropriate time to impose a burden on my employers to such an extent that they will have to lay me off, with the consequence that I shall have to go on the dole—and this is after the Labour Chancellor has said in effect that he will probably be taxing my benefits and indeed cutting them at the same time?
  The package deal which was superficially proposed by my hon. Friend the Financial Secretary tonight is unacceptable to me and I shall certainly not support it.
  10.30 p.m.
  Mr. Giles Shaw: Last night we debated two European resolutions, and the Financial Secretary then sought to defend the position that he had reached in relation to VAT. Some of us expressed considerable concern about the way in which that tax was being manipulated. Now we have the second example of the way in which the Government seek to manipulate the tax system for ends which at worst can be described as dubious and at best as deeply damaging to those who seek to employ people and to keep them in employment.
  The fact that, two nights running, the Financial Secretary should come here to wash the Government's dirty linen in public may qualify him for being an expert washer woman, but here what he is seeking to do, which is to ask the House to give leave for the introduction of a tax, should be questioned.
  There can be little doubt that what the Government are seeking to do is tax jobs.

  847
  That is the object of the exercise. They are seeking to do that in preference to reducing other forms of public expenditure. When the Financial Secretary suggests that this is a convenient way of doing it and that there are not many other convenient ways, we must ask what the Secretary of State for Prices and Consumer Protection is doing about the phasing out of food subsidies, and how many jobs that would save, if job saving is the criterion which this Government apply.
  This manoeuvre is designed to tax jobs at a time when the Government are seeking to regenerate British industry and trying at the same time to stimulate the national economy. What stimulus can be given to the national economy if we give leave for the introduction of this tax? It is nothing more than sleight of hand, and we have had that from this Government on practically every motion to have come before this House.
  This is a typical example of the way in which the Government seek to tax industry while they are trying to get away with saying "We are not doing anything deeply damaging; it is convenient, we like it, and we want to do it." They have no mandate for this kind of tax, and this House should say so.
  10.33 p.m.
  Mr. J. W. Rooker: The Treasury Bench will become aware in the next few weeks that the 22nd July package will not be as easy to get through this House as they first expected. They know that it requires four Bills and six Statutory Instruments to cover the statement by the Chancellor of the Exchequer.
  Notwithstanding the arguments which will take place on Thursday's legislation, which the Chief Secretary to the Treasury has now convinced me that I should oppose, I am ready not to give my support to this legislation unless we get some firm answers to straight questions which we have not had so far from my hon. Friend the Financial Secretary.
  The effect of this proposal on local authorities, which is the only part that I wish to discuss, will be £145 million on their costs. That figure was given in answer to my hon. Friend the Member for Coventry, South-West (Mrs. Wise) in
  848
  late July. Bearing in mind that the Government will chip in 60 per cent. of that —say £90 million—the net cost to local authorities, on top of all their other costs, will be about £50 million plus.
  If we are prepared to put that additional burden on local authorities—and I am not in favour of it—I cannot see why we could not have put the burden on local authorities of the £40 million necessary to implement Section 2(4) of the Health and Safety at Work Act and fulfilled our commitment to get trade union safety representatives organised throughout the country. The same cost would have been there. The Government say that they cannot go ahead because of the cost that it will impose on local authorities. But here we are imposing almost the same cost.
  As for the employment effects, which are most crucial on this, the Chancellor of the Exchequer admitted on 22nd July in answer to a question from an Opposion Front Bench spokesman that 10,000 jobs would be lost directly attributable to this proposal. My right hon. Friend put it more convolutedly than that. He said that the fall in employment would be 10,000 fewer than it would otherwise have been. But he cannot get away from the fact that there will be 10,000 additional people out of work as a result of this Bill.
  I am all for taxation. I am not screaming like the Opposition. I want taxation. I want a wealth tax, for a start. But if we took the trouble to collect the income tax and surtax which is due and the capital gains tax which the Treasury has written off in the past few months, we should have more than enough money to meet what is required to be raised for this purpose.
  I do not subscribe to the view that we should come here, following the July package, and be told that this is part of the July measures. That is what I was told about the Social Security Bill yesterday. We are told that we have to accept it. But we have never discussed these measures. They are not discussed by the various groups in the Labour Party until there is a crisis such as this week over Thursday's legislation. We have not had a chance to discuss this. Therefore, I do not think that the Bill should be introduced this early in the Session. It can

  849
  easily be got through before April, when the tax has to be collected.
  There should be far more discussion on the employment effects and on the alternative ways of raising the same finance. The alternative ways are there. There are Government supporters who have alternatives to suggest. We are prepared to put them forward if the time for argument is provided.
  It is wrong to roller coast the Bill through in this way. When I came to the House yesterday morning, I told the Whips—and this is the first time I have done so—that the Government could not count on my vote on Monday week. I had not read the Order Paper correctly, because at 5 p.m. today I realised that this resolution was to be brought before the House.
  I shall be prepared to give the Bill a Second Reading when that occasion arises. It is clear that we shall not have a proper debate tonight on these matters because my hon. Friend the Financial Secretary has not the answers to questions which have been put to him. He will have to come up with those answers—otherwise the Bill may not be given a Second Reading next week.
  10.35 p.m.
  Mr. David Hunt: I am deeply concerned about the effect of these provisions on employment. It has been estimated in this debate that as many as 10,000 jobs may be jeopardised, but I believe that the impact may be even more serious.
  On Merseyside, and particularly on the Wirral, there are a large number of small businesses which are now almost facing the wall. They are finding it difficult to make a profit, they are overtaxed, overdrawn and over-governed. Anybody who seeks the opinion of those who run those concerns is told "How much longer can we go on suffering the present taxation level?"
  We are not now discussing just a comparatively trivial measure but a calculation involving a figure of £1 billion. That is the extra burden that is to be placed on employers—not just on local authorities, but on ordinary individual small businesses.
  What will happen when those business men are deciding whether to increase the
  850
  number of people in their employ? I strongly believe that these measures will increase the level of unemployment among school leavers because it will increase the cost of employment, which is bound to hit young people trying to obtain their first job. If employers decide not to take on any more people, those young persons may find themselves among the other unemployed school leavers. The fact that these provisions will cause more unemployment and will make it impossible for small businesses to continue is a good reason for rejecting them.
  10.37 p.m.
  Mr. Ian Stewart: My hon. Friend the Member for Wirral (Mr. Hunt) and the hon. Member for South Ayrshire (Mr. Sillars) may well be baffled by the Government's reasons for introducing a tax of this kind. Although the Financial Secretary listed four rather specious reasons why it was a good thing to impose such a tax, does anybody believe any of those reasons?
  Those who are puzzled about the present situation would do well to recall the advice on which the Government acted in introducing this provision in the July package. Mr. Michael Posner, who was then one of the Government's economic advisers, explained one of the advantages. In addition to the four points listed by the Financial Secretary, Mr. Posner said that these provisions would make it easier for company finances by reducing the public sector borrowing requirement—which, in turn, would reduce interest rates and make company finances that much easier to handle. He implied that it would mean more rather than fewer jobs. If that were such a good thing, why did not the Government put on a 4 per cent., 6 per cent., or 8 per cent. payroll tax? Perhaps interest rates in that case would have been as high as 25 per cent. or 30 per cent. But with the benefit of such advice, is it surprising that the Government have now introduced this daft and dotty measure which will have a perverse effect, as every sensible person knew was bound to be the case.
  10.39 p.m.
  Mrs. Audrey Wise: I do not agree with the hypocritical objections on unemployment grounds voiced by the Opposition. Their

  851
  objection is hypocritical because in the next breath they call for more public expenditure cuts. Do they not appreciate the effects on employment if that were to happen? But they are not interested in the effect on employment. They are looking for a way to bash the Government.
  My hon. Friend the Financial Secretary must accept that many of us are deeply unhappy about these provisions. We are not unhappy because we wish to protect employers—far from it—but it is clear that many employers will take advantage of the opportunities given by these measures to increase prices. We are looking at the matter in terms of cost-of-living increases.
  When we consider the need to combat inflation, these provisions are somewhat illogical. Furthermore, this is a disguised cut in real public spending because local authorities will have to divert some of their financial resources from spending on services to making refunds to the Government. Whatever we do this evening, there is serious concern on the Labour Benches. This measure as part of a strategy is not good enough. The Government cannot continue to act in this way.
  10.41 p.m.
  Mr. Norman Tebbit: When the debate started the Secretary of State for Employment was here, but, after hearing a couple of speeches, he quietly folded his tent and snook away— I presume until it is time for him to come and vote for a measure which, it is generally agreed on both sides of the House, will increase unemployment. I do not blame the right hon. Gentleman. Why should he sit here and take the stick for that when his colleagues on the Treasury Bench are willing to do so?
  My objection to this new tax is that clearly the revenue will not be used to improve our social services. It will not be used as part of the funds which are normally accepted as being for the purposes of national insurance. It is a straightforward payroll tax which will disappear straight into the funds of taxation. It will be lost for ever. It will not get back to where it should go if it is a national insurance surcharge—namely for the purposes of national insurance.
  852
  Why have the Government chosen to impose this extra £1,000 million of tax in this way? It would have been just as simple not to expend £1,000 million in various forms of subsidy to industry. Why not leave the £1,000 million in the hands of industry's managers?
  All that we are doing by going through this process of redistribution is taking money away and withholding it for a period and then giving it back not on any commercial grounds but on the criteria of various civil servants at the Department of Industry who do not have the greatest track record of success in picking winners.
  In the meantime, as the hon. Member for Coventry, South-West (Mrs. Wise) pointed out, industry's increased costs will inevitably be passed on to the consumer in increased prices. We shall get the worst of all possible worlds; no benefit to the insured workers; one Department taking money in and handing it to another Department which will hand it back on the basis of criteria which are, to say the least, mysterious, if not totally inexplicable; a loss of liquidity during that period on the part of companies, more of which will be forced into standing off or not taking on new employees; and pressure again on companies to raise their prices. What good this will do employers, employees and consumers it is possibly beyond the wit even of the Treasury Bench to explain.
  Mr. Dennis Skinner: Has not the hon. Gentleman forgotten one piece of this scenario, namely, that most of this £1,000 million might be set off against corporation tax before we get to the grants which have been mentioned?
  Mr. Tebbit: The hon. Gentleman could be right, which makes the whole scenario even more farcical than that which I have outlined. We have the complete picture of a muddled decision, carried out by muddled Ministers on a muddled brief, probably on the advice of an adviser who, as my hon. Friend the Member for Hitchin (Mr. Stewart) said, has already been fired. All that we have to do is to fire those who took the advice.
  10.45 p.m.
  Mr. Cyril Smith: I, like other hon. Members, did not intend to

  853
  take part in this debate, but I have been brought to my feet by the statement of the hon. Member for Coventry, South-West (Mrs. Wise) that the object of hon. Members on these Benches is to bash the Government. I think I can say in all modesty that the hon. Lady cannot accuse me of taking that attitude, certainly with regard to the Government's economic policy. I abstained in an earlier vote this evening, and therefore I do not believe that the hon. Lady can lay that charge at my door. The hon. Lady says from a sedentary position that I bashed the Government on the question of social security. I advise her to read what I said. I reported what I had been told and said that I was going to inquire into it. I am prepared to send the hon Lady the article.
  I support the opposition to the Bill, not because I want to bash the Government but because I am deeply concerned about the present level of employment and because I believe that this measure will make no contribution towards solving the problem but will, in fact, make it worse.
  The Bill will levy on industry, which includes local government, a tax of about £1,000 million. If industry is to provide that money it will have to come from one of three sources. First, it could come from profits. I have no objection to industry paying the money from profits if it is making profits, but not all industries are in that situation. I urge Labour Members to realise that the profits that were declared last year will not be available to companies this year. Companies that made substantial profits last year will not be declaring a similar level of profits this year.
  There is not the buoyancy in orders in industry this year that was evident last year. I speak as one who has a small factory, and I assure hon. Gentlemen opposite that many employers who last year had no problem in keeping employees in full employment will not be able to do that so easily this year and will not have the same percentage turnover in trade. It would be wrong to take the level of profits last year as the level of profits that will be declared in the next 12 months, because I do not believe that that would give a true picture of the situation. If, however, some
  854
  industries increase their orders and their profits, I have no objection to their paying more by way of tax.
  However, what about companies that are not making profits? They will have to carry this burden in exactly the same way. It is not even to be imposed on a regional basis. It will not be applied only in regions where there is less unemployement, where I would support a payroll tax. If we are to have such a tax, let us have it imposed on a regional basis and let it not be a blanket tax of this character.
  If it were merely that the National Insurance Fund was short of money, the Minister has powers to balance the fund. He has power to increase it by about 2·5 per cent. without coming to the House.
  This is a direct tax on employment. It has nothing to do with benefits or the National Insurance Fund. This is a way of raising another £1,000 million of taxation in contributions from employers. It is nothing else.
  I understand that some Labour Members have expressed reservations about supporting the Bill next week. Perhaps I may give them some advice. It is always as well to cut off the Ways and Means Resolution, because the Bill cannot then be introduced.
  I do not look upon political opponents as enemies but as friends with differences of opinion. All that I say to Labour Members is that they should think very carefully whether they should allow the Bill to come forward next week. We can stop it tonight by voting against the Resolution. If the Government can convince us later that they have good reason for introducing the Bill, so be it. The only reason that I heard the Minister advance was that the percentage of certain levies here was less than those in other countries. What he did not tell us was the level of taxation otherwise in those countries, or whether our taxation is higher than theirs. What should concern us is the whole level at which it is set, and not what is being paid out for one particular item.
  Mr. Nicholas Winterton: While on that subject, will the hon. Gentleman turn his attention to the minimum lending rate, because here smaller businesses in particular are having to find

  855
  very large sums of money which, combined with this payroll tax, will result in higher unemployment among them.
  Mr. Smith: That is absolutely true. Indeed, there are Labour Members who know of that in the case of Courtaulds' closures of two places in my constituency. I was told by the Chairman of Courtaulds that it was purely the interest rate which had closed a small factory in Rochdale. I do not believe that that is the argument in relation to the whole of Courtaulds, but it was that which determined whether that factory was to remain open or to close.
  I urge the Government to think again about this matter. To be fair, the present Government are making efforts to stimulate employment. I do not believe that they create unemployment for the joy of doing it. I believe that they want to reduce unemployment. I have said so in economic debates. I do not attribute to the Government the use of unemployment as an economic weapon. Of course they want to reduce unemployment. But it is no good getting down the figures on one hand and increasing them on the other.
  Apart from giving the Treasury another £1,000 million to do away with, or allowing the Treasury to borrow £1,000 million less—that is all that it does; it does not mean that the Treasury has to stop borrowing—the only other effect that this proposal will have is to increase unemployment. I believe that that is a very good reason for refusing the Bill.
  10.55 p.m.
  Mr. Leslie Spriggs: I wish to raise a point about a question that has already been raised but has not been answered by the Minister. It appears that the Minister will not be making any effort to answer it. My hon. Friends the Members for Birmingham, Perry Barr (Mr. Rooker) and Coventry, South-West (Mrs. Wise) have both raised the question of the unemployment and the increased cost of living which this further levy of £1,000 million on industry will create. It certainly will have to be paid for by the people. The consumer will have to pay for it.
  Where employers cannot afford to meet this surcharge, it will affect employment.
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  The smaller the business, the fewer the number employed but the sooner will the employer have to shed the load. This is simple economics, the law of the jungle all over again.
  Unless the Financial Secretary goes to the Dispatch Box and starts to give intelligent answers, Labour hon. Members from Merseyside and other parts of the country will not put up with it. We shall not march through the Division Lobbies to vote in favour of Bills which will affect employment, depressing it still further in places such as Merseyside.
  The hon. Member for Wirral (Mr. Hunt) referred to small businesses in my part of the United Kingdom, the type of business which is bound to be affected by this 2 per cent. surcharge on employment. Before we go to the Division Lobby tonight we have to have far more assurance from my hon. Friend. There will be a repeat of last night if he is not careful.
  10.57 p.m.
  Mr. Nicholas Fairbairn: This has been a fascinating evening, listening through the economic debate and into this one, for this reason: we have heard from Labour Members that they regard what they call public expenditure as being so sacred that it must not be diminished but that any attempt to finance it cannot be countenanced.
  This is merely an attempt to finance what they demand as public expenditure. I agree that it is a rotten bad way of attempting to finance it but that is what it is. I should like hon. Members opposite to understand that, as the hon. Member for St. Helens (Mr. Spriggs) has just said, there is no such thing as public expenditure. It is private expenditure. It is hon. Member's constituents, their jobs, their income, their families, which pay for this fantasy of public expenditure.
  One other way in which this sacred cow of public expenditure, which is always supposed to be paid for by Mr. Nobody, has to be paid for is by taking another £1,000 million out of the industry which pays for public expenditure in the first place.
  I represent one-thousandth of the people of this country and therefore this measure is a surcharge on my constituents

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  of £1 million. Let us remember that each of us represents between a 700th and a thousandth of the people so that this is a surcharge on each of our constituencies of between £700,000 and £1 million. Apparently the hon. Member for Bolsover (Mr. Skinner) thinks that is funny.
  Mr. Skinner: We think the hon. Member is funny.
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. It is a pity that the Chair is not able to benefit from some of these exchanges.
  Mr. Fairbairn: I always thought that one-thousandth of £1,000 million was £1 million, but perhaps the hon. Member for Bolsover thinks differently.
  The Government say that they are interested in investment in manufacturing industry—it does not matter for the moment whether it is private or public. That is what creates wealth. Yet we are taking out of industry another £1,000 million to fund public expenditure, which is non-productive wealth. That is not public expenditure; it is private expenditure. Each of our constituents has to pay. Nothing is more fundamentally false and wrong than that the Government should say "Let us add to the bill". As the hon. Member for Wolverhampton, North-East (Mrs. Short) said, there are still little puddles of wealth from which to suck up the money to fund this wretched totalitarian régime.
  Mrs. Renée Short: Has the hon. and learned Member read in tonight's Evening Standard that one of his friends—about whom Conservative Members try to wring our hearts—has to find £2 million for racing and gambling debts? There are many other areas available to the Chancellor for raising money.
  Mr. Fairbairn: I do not understand the hon. Lady's intervention. I do not think that £2 million is an area to which the Chancellor could look for funds.
  Mrs. Renée Short: His name is Sir Hugh Fraser.
  Mr. Fairbairn: He is not one of my hon. Friends.
  Mrs. Renée Short: He is one of your business men.
  Mr. Deputy Speaker: Order. The House is doing itself no credit by these sedentary exchanges.
  Mr. Fairbairn: I am not responsible for those on the Scottish national Benches who are not present, but if Sir Hugh Fraser wishes to fund the Scottish National Party on the basis of gambling debts, it is up to him, and if the Labour Party wishes to keep itself in office in Scotland on the gambling debt of devolution, it is up to the party. It was the English Labour Party which pushed devolution down the unwilling throat of the Scottish Labour Party, whatever may be the position now. Let us have no more rubbish about the Evening Standard and Sir Hugh Fraser.
  Mrs. Renée Short: What has that to do with devolution? How about the £2 million gambling debt?
  Mr. Deputy Speaker: Order. I have appealed to the House on three occasions for order and fewer sedentary observations.
  Mr. Fairbairn: I know it is late and that hon. Members want to go home, but the Government are being dishonest when they say that they are interested in the survival of industry and investment in productive industry but casually put down £1,000 million of tax to fund something which is non-productive. They are being even more dishonest if they allow those below the Gangway who demand that expenditure to say that they will not allow it to be funded in a manner that might upset unproductive areas such as local authorities which have to provide part of the cost. If they only knew what it did to productive industry, they might be more understanding.
  11.4 p.m.
  Mr. John MacGregor: It seems to me that the Financial Secretary did not come clean with the House. His arguments were less than honest, except for the one argument that the measure was necessary to reduce the already over-swollen public sector borrowing requirement. When he moved into the sphere of European comparisons he left the House and the country behind. For him to produce false reasons for what he is doing does not help the country to understand its plight. He knows as well

  859
  as anyone that this is a straight payroll tax on industry as well as on local authorities.
  As one of my Friends said, this tax has nothing to do with national insurance contributions, or anything of that sort, in the sense of financing benefits. The Chancellor must know that if he is to make European comparisons, he should make them over the totality of the case. It is no good picking out one difference and comparing that with what we do in this country. Our systems are in many cases totally different.
  I wish that the Government would take more notice of comparisons with direct taxation where we are out of line with other European countries. We are also out of line on indirect taxation. We in this country should switch more taxation back from direct to indirect.
  It is no good justifying a new measure brought forward by the Government on the basis of false European comparisons. This is another example of the Government failing to tell the truth to the country. We all know—and I follow the case made by the hon. Member for Birmingham, Perry Barr (Mr. Rooker)—that this tax is an extra imposition on local authorities. For my county council in Norfolk this will add £1 million to the cost of labour, without any additional benefits being given to the people of Norfolk. If that burden is to be imposed, the Government should come clean and say that cuts will have to be made.
  At the same time the Government are reducing, in real terms, the rate support grant. I make no complaint because that grant has to bear its share of the cuts, but at the same time the Secretary of State for the Environment has said that this should mean no redundancies for local authority staffs because this will be taken care of by natural wastage.
  In other words, the Government impose the extra burden of payroll tax, cut back the rate support grant, and then say that if local authorities have to lay off staff it will not be the Government's fault because, they say, the cuts can be accomplished by natural wastage and therefore any cuts must be the fault of the local authorities.. In fact, local authorities must look at the specific departments and services that they wish to cut back.
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  That may well mean redundancies, because natural wastage will not take care of the problem.
  The Financial Secretary missed an opportunity tonight of being straightforward and honest about why this measure is necessary. This shows that the consequences of overspending and encouraging the Labour Party and the country to believe that over spending could be financed are now coming home. The chickens are coming home to roost. Politically, from the debate tonight we have seen the difficulties that the Government will face with their own Left wing because of the measures that the Government will have to undertake to clear up the mess they have got us into over the last two years. Economically, we shall have measures that will impose burdens on industry and the private sector because the Government have got the balance between the public and private sectors out of kilter during the last two years. Do the Government believe that this measure will not have serious consequences?
  The whole House will recall the circumstances in which the tax was announced. The Government had produced an industrial strategy with CBI agreement and then suddenly imposed this extra burden on industry to the astonishment of the CBI.
  Many industries, particularly small firms, retailers, and so on, will find that this extra imposition will prevent them from taking on extra staff and may make them increase the unemployment problem by not replacing natural wastage. This will be a particularly severe problem for small business men.
  I believe, therefore, that there will be serious consequences for the productive sector of the country from this type of approach to dealing with the public sector borrowing requirement. I hope that the lesson will be learned. I hope that it will be made clear that we in the Opposition and, I believe, many people in the country, as well as industry as a whole, do not want to see this type of approach in any measures which the Government are contemplating to deal with the PSBR in the next few weeks, and will strongly oppose any further imposition on industry, through this measure or through increases in VAT, instead of a direct attack on overspending in the public sector.
  11.10 p.m.
  Mr. Michael Shersby: I strongly oppose this measure because of the effect it will have on small businesses. I am glad to see the Under-Secretary of State for Industry in his place. After his visit to my constituency a few days ago, he will perhaps be aware of some of the small firms which will have to face the effects of this measure.
  I shall quote a couple of paragraphs from a short letter from a small but excellent firm of precision engineers in Uxbridge:
  "It appears that the Socialists in Westminster are still intent on a policy of extracting every last penny out of private enterprise. The planned increase of 2 per cent. on employers' contributions to the social security fund is effectively a payroll tax. It will further cripple small businesses already over-burdened by taxation, legislation and general State interference.
  The man in the street is led to believe that this is a mere 2 per cent. increase, and will probably disregard it as insignificant. It is, in fact, an increase representing over 22 per cent. on the contribution currently payable. In our own small business this will load our overheads by a further £2,500 next year."
  That letter shows the sort of effect that the measure will have on a small firm of precision engineers in my constituency—the kind of firm which is the seed corn of British industry, upon which the country depends for expansion, for innovation and for all the other attributes which we expect from the best in British industry. For that reason, I strongly oppose the measure, and I shall vote against it.
  11.12 p.m.
  Mr. John Nott: I doubt that I can match the gravitas with which the Financial Secretary introduced this Ways and Means Resolution, but I do not think that my hon. Friends have had much difficulty in demolishing his arguments.
  First, the Financial Secretary said that the measure was necessary to reduce the public sector borrowing requirement. We can go along with that, but, of course, its effect on the PSBR will be relatively slow-acting as the contributions come in over a period from April next.
  Next, the hon. Gentleman said that the tax could be introduced in such a way that there would be no forestalling. That conjures up a picture of the housewives of Britain rushing out to buy washing machines and other consumer goods as
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  soon as the Government introduces their next indirect tax. I cannot believe that the idea of forestalling in indirect taxes quite meets the current economic situation or, indeed, the trend of consumer expenditure which the Chancellor described in his speech today.
  Third, the Financial Secretary said that it was a move to indirect taxation but it would have less effect—these were his words—on the price index than would other indirect taxes. I had always understood that throughout the arguments on this measure the Chancellor and other Ministers had repeatedly stressed that it would find its way through into prices over a period of time and would have a relatively small effect on jobs and on investment. This was one of the main reasons for its introduction—that it was effectively not much different over a period of time from an increase on VAT.
  I take the hon. Gentleman's comment on indirect taxation in the context of what the Chancellor himself said today, when he was answering a point made by his hon. Friend the Member for Luton, West (Mr. Sedgemore) about the regressive nature of indirect taxation. The Chancellor said "No, these indirect taxes such as VAT are not really regressive any more, because of the zero rate, so we want to switch to indirect taxation and to take advantage of zero rating". But here the Government have introduced an indirect tax for which there is no zero rating whatever. It covers all products. It will find its way through into the price of food, housing, fuel, rents, transport—all those items which the Chancellor himself, in his speech this afternoon, said would not be affected by a switch to indirect taxation.
  The Minister of State finally said that it was an easy tax to introduce and that it would be easy to administer. I only wish that we could find the Government taxes which were difficult to introduce and difficult to administer. Then we would have fewer of them.
  The House will have the opportunity to debate the new Bill next Monday. I think the Second Reading is down for next Monday. Therefore, I shall comment only briefly tonight. The Bill is entitled the National Insurance Surcharge Bill. In a way, that is appropriate because it has absolutely nothing to do with national insurance. It is not, as

  863
  the hon. Member for St. Helens (Mr. Spriggs) said, a 2 per cent. surcharge on the employers' national insurance contributions. It is really a 23 per cent. increase in the tax on jobs.
  To talk about a 2 per cent. surcharge on national insurance does not emphasise the fact that it is an increase of about one-quarter—nearly 25 per cent.—on the only tax that we now have on jobs and particularly on the productive, wealth-creating part of the private sector.
  Like all taxes—it has nothing to do with national insurance or other benefits —it will no doubt find its way out of peoples' pockets into the Consolidated Fund where the Government will use it to employ more people in the public sector, to finance further extravagant projects and to ensure that the parasitic public sector continues to suck the lifeblood out of the wealth and job-creating private sector of the community.
  The Financial Secretary's comparison with overseas countries is completely irrelevant. What is the relevance of stating that employers' contributions in Germany or France are 14 per cent., 18 per cent., or 20 per cent.? The fact is that those employers' contributions are used to finance considerably higher social benefits in those countries than we have here.
  The Government's proposed increase will not finance higher benefits. It will go straight into the Consolidated Fund where it will be used as part of the general pool of taxation and it will destroy jobs in the process. With that nice sense of timing, which the present Chancellor deploys so well, this measure will start to have its impact on the profits, investment and jobs in businesses just at the time when unemployment is again beginning to rise.
  Almost all of the arguments used by the Chancellor in his speech on 2nd August, following his July measures, have been proved completely faulty. He then said that the national insurance surcharge, as he called it, would not have any adverse impact on jobs. He said that the economy was growing at 4 per cent., that we were looking forward to a rise in exports and that investment was beginning to pick up.
  864
  This afternoon we had the Chancellor telling us—only a few months later—that the growth rate was now going down from 4 per cent. to a projected 2 per cent. The whole basis upon which the measure was constructed has proved erroneous.
  I have tried to find out how many jobs the Government estimate will be lost by this national insurance surcharge. It has been difficult to follow because the Secretary of State for Employment told the Tribune Group in July that it would lose about 110,000 jobs. However, Treasury Officials who appeared before the Expenditure Committee's sub-committee on 28th July, with a very convoluted argument, seemed to suggest that the figure was even higher. Indeed, Mr. Posner, the former Deputy Chief Economic Adviser to the Treasury, about whom we now read in The Times, rather implied, as I am sure the Financial Secretary will agree, as he was present, that the July measures would involve a loss of about 120,000 to 150,000 jobs. The Chancellor himself gave the figure of 60,000 jobs for the measures as a whole and 10,000 for this surcharge. I therefore think that the Financial Secretary should make clear just how many jobs the Chancellor intends to destroy with this measure.
  The Chancellor has already destroyed 1 million jobs since he took over the Chancellorship in March 1974. It would be interesting to know how many additional jobs on top of the 1 million he has already destroyed since he became Chancellor he intends to destroy with this measure.
  One of the proudest edifices in the Chancellor's policy is the Job Creation Schemes. These have cost the Exchequer about £500 million so far. It is hard for the country to understand, and indeed perhaps for some hon. Members opposite to understand—I am sure that the hon. Member for St. Helens thinks this way how £500 million can be spent on job creation schemes, on the one hand, and a £1,000 million tax imposed on jobs, on the other. It is an increase of 23 per cent. on the only tax we have on jobs. The two things are utterly contradictory and make no sense.
  It is absolutely certain that what this measure will do is in absolutely direct contradiction of the Chief Secretary's speech last week when he made—in my

  865
  view rightly, though no doubt wrongly in the view of hon. Members below the Gangway opposite—the very reasonable point that it is very much overdue for us to get jobs out of the public sector back into the profitable wealth-creating private sector. I know that some hon. Members do not agree with that, but that is clearly the policy of the Treasury Bench. That is the policy that the Chancellor and the Chief Secretary advocate.
  Local government was referred to by my hon. Friend the Member for Norfolk, South (Mr. MacGregor). It is very difficult to understand a policy that imposes a tax on local government at a time when, as I understand it, the rate support grant is to be reduced for next year. As I understand it, jobs will have to be shaken out of local government as a result of this measure—something which I accept as desirable.
  It is hard to understand how the Chancellor could have said in his statement about this measure on 2nd August 1976 that it would not affect the non-trading public sector. It clearly will affect the non-trading public sector. If the rate support grant is to be pegged by the Government—I am not complaining about that—and local authorities are to have to bear the extra tax upon those they employ, it will do precisely what the Chancellor claimed it would not do —it will shake jobs out of the non-trading sector.
  Generally speaking, however, its impact will be upon the private sector. That is in absolute contradiction to the Government's policy, because they say that they want people to move back into the private sector.
  So once again we have not the remotest idea what the Government's strategy is or what they intend to do about jobs. Even after having heard the Chancellor's speech today, we do not know. If the Financial Secretary is to say anything more tonight—he should answer a number of these points—may I ask him a specific question? What is to happen to retailers? The measure was announced in July. We were told that there was no worry about jobs because it would find its way through into prices. We were told that the Price Code had been changed so that there was nothing to prevent employers from pushing this amount into prices. That is
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  different from what the Financial Secretary said tonight, but that is what was said when the measure was introduced. The Financial Secretary said that this increase would have less effect on the price index than other indirect taxes. I took that to mean that it would on the whole affect jobs and investment and not wholly prices.
  I should like the Financial Secretary to answer this point. Retailers do not operate under allowable costs. It is now November. The measure was introduced in July and still the whole of the retail industry does not have the slightest idea whether employers will be able to push the increase through into prices. Four months have passed and one major section of the economy has not the slightest idea how it will be affected.
  I conclude by telling the Government that this is a tax involving smaller profits for industry, less investment, higher prices and fewer jobs. Most hon. Members will not contradict me. When on Monday we debate the Second Reading of the Bill, I hope that the Government will have a better explanation that we have heard tonight. The hon. Member for St. Helens, whose views I respect and who made a modest contribution to the debate, said that the smaller the business, the more quickly would the employer discharge employees, and of course that is right.
  Because this is a 23 per cent tax increase on jobs and because we consider this measure to be utterly inappropriate in the present economic conditions, in due course I shall ask my hon. and right hon. Friends to vote against this Ways and Means Resolution.
  11.26 p.m.
  Mr. Robert Sheldon: The hon. Member for St. Ives (Mr. Nott) said that this tax was a burden on jobs and that to make comparisons with other countries was no answer to his question, which was whether an increase in unemployment would be the result. What I sought to establish was that, given that any tax of this nature is a tax on employers, there were other countries with very much larger burdens. In the countries with which we compete, whatever the reason for the tax, the burden is of precisely the same character but much larger.
  Those who advocate moving towards indirect taxation have had a difficult time

  867
  in this debate, because they have been deploring this change on account of its effect on employment while refusing to understand that it was the indirect effect of working through into prices much less quickly and with much less certainty than other forms of indirect taxation available to the Chancellor of the Exchequer. That is a major difference.
  My hon. Friend the Member for Coventry, South-West (Mrs. Wise) mentioned the hypocrisy of many Opposition Members. They are calling for £5 billion cuts in public expenditure—how official that figure is we are not very clear at any time—with all the consequences for employment of such cuts compared with the effects of this measure, which has so little effect with long time lag on prices and which has a public sector borrowing requirement effect not so delayed as the hon. Member for St. Ives asserted but right from 6th April. It is a measure of its value that it will produce £1 billion in a way that will cause much less damage than many of the solutions advocated by the Opposition.
  My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) wants the Health and Safety at Work Act implemented. He mentioned the problems of the collection of outstanding taxes. These are all matters with which we can deal, but I am sure that my hon. Friend understands that they do not have a great deal to do with this measure. I understand my hon. Friend's grievance, and I share his anxiety. But we have to bear in mind that there is this need to obtain the £1,000 million in order to carry out the plans of my right hon. Friend the Chancellor of the Exchequer, and if any hon. Member can suggest better, more effective and less harmful ways of doing that. I shall be very pleased to listen to him.
  Mrs. Renée Short: My hon. Friend has been told. The answer is a wealth tax.
  Mr. Sheldon: A wealth tax could not be put into operation in 1977–78, and it would not produce the necessary income. I am all in favour of the introduction of a wealth tax at the earliest possible moment, but I am sure that my hon. Friend will understand the reasons for its deferment at the moment, even if she does not agree with them.
  868
  My hon. Friend the Member for South Ayrshire (Mr. Sillars) and many others are concerned about the employment effects of any tax. All I say about the employment effects is that calculations are not easy to conclude with any degree of certainty. I cannot bring myself to restate some of the estimates that I have seen, including the 10,000 jobs figure which has been quoted tonight—[HON. MEMBERS: "Why not?"] Because I have little confidence in the ability of people to make assessments of this kind. Such assessments need, for example, to take account of the relationship between industries and their attitudes to the tax. Frankly, we have no immediate direct experience of these matters and, therefore, I cannot offer my support to any of the estimates which have been provided. However, work is continuing on this, and it may be that by Second Reading I shall have an estimate to offer my hon. Friend.
  Mr. Tony Newton: What the hon. Gentleman says amounts to saying that he is going ahead with the imposition of hundreds of millions of pounds of taxation on industry without having worked out the consequences. Does he not recall that that is exactly what he told us 18 months ago about his 25 per cent. rate of VAT? Does not he remember the damage that that did?
  Mr. Sheldon: The hon. Member for Braintree (Mr. Newton) talks about other taxes and their consequences. On the introduction of a new tax, I find myself having to show a certain amount of modesty about the forecasts that one quotes with certain assumptions. It is necessary to understand that the consequences that one foresees cannot be determined with complete accuracy.
  My hon. Friend the Member for Birmingham, Perry Barr pointed out the consequences for employment in local authorities. However, he will realise that the national insurance surchage counts for rate support grant, and in so far as there is an obvious adjustment this clearly has to be taken into account, too.
  The hon. Member for Rochdale (Mr. Smith) made a number of points about the levels of profit and the effects upon certain industries. This money is being made available to the Government. It will go into the Consolidated Fund and

  869
  will be paid by the employers concerned. However, the hon. Member for Rochdale makes a wholly unwarranted assumption about the burden of the tax when he assumes that there will be big changes in his constituency and elsewhere. I believe that it is a useful tax.
  Mr. TebbitThe Minister says that there is a range of estimates in existence in none of which he believes. He mentioned the figure of 10,000 as being the lowest of the estimates in which he does not believe. What is the highest of the estimates in which he does not believe?
  Mr. SheldonThe figure I have seen is 10,000 for the fourth quarter after
  introduction of the tax. I do not hold myself to that figure because there is a degree of uncertainty.
  I believe that the tax will produce a saving in the public sector borrowing requirement and will produce revenue more easily than the equivalent amount of revenue to be obtained if we were to follow Opposition suggestions. It is a measure that accords with the July decisions that were taken by the House. Since this measure is a consequence of those decisions, I commend it to the House.
  Question put:—
  The House divided: Ayes 232, Noes 195.

  Division No. 4]

  AYES

  [11.37 p.m.

  Archer, Peter

  Dunn, James A.

  Jones, Barry (East Flint)

  Armstrong, Ernest

  Dunnett, Jack

  Jones, Dan (Burnley)

  Ashton, Joe

  Dunwoody, Mrs Gwyneth

  Judd, Frank

  Atkins, Ronald (Preston N)

  Eadle, Alex

  Kaufman, Gerald

  Atkinson, Norman

  Edge, Geoff

  Kelley, Richard

  Barnett, Guy (Greenwich)

  Ellis, John (Brigg & Scun)

  Kerr, Russell

  Barnett, Rt Hon Joel (Heywood)

  English, Michael

  Kilroy-Silk, Robert

  Bates, Alf

  Ennals, David

  Kinnock, Nell

  Benn, Rt Hon Anthony Wedgwood

  Evans, loan (Aberdare)

  Lamble, David

  Bennett, Andrew (Stockport N)

  Evans, John (Newton)

  Lamborn, Harry

  Bidwell, Sydney

  Ewing, Harry (Stirling)

  Lamond, James

  Bishop, E. S.

  Fernyhough, Rt Hon E.

  Latham, Arthur (Paddington)

  Blenkinsop, Arthur

  Flannery, Marlin

  Leadbitter, Ted

  Boardman, H.

  Fletcher, L. R. (Ilkeston)

  Lee, John

  Booth, Rt Hon Albert

  Fletcher, Ted (Darlington)

  Lestor, Miss Joan (Eton & Slough)

  Bottomley, Rt Hon Arthur

  Foot, Rt Hon Michael

  Litterick, Tom

  Bray, Dr Jeremy

  Ford, Ben

  Loyden, Eddie

  Brown, Hugh D. (Proven)

  Forrester, John

  Luard, Evan

  Buchan, Norman

  Fowler, Gerald (The Wrekin)

  Lyon, Alexander (York)

  Buchanan, Richard

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

  Lyons, Edward (Bradford W)

  Callaghan, Jim (Middleton & P)

  Freeson, Reginald

  Mabon, Dr J. Dickson

  Campbell, Ian

  Garrett, John (Norwich S)

  McCartney, Hugh

  Canavan, Dennis

  George, Bruce

  McDonald, Dr Oonagh

  Cant R. B.

  Gilbert, Dr John

  McElhone, Frank

  Carmichael Neil

  Golding, John

  MacFarquhar, Roderick

  Carter, Ray

  Gould, Bryan

  MacKenzie, Gregor

  Cartwright, John

  Gourley, Harry

  Maclennan, Robert

  Clemitson, Ivor

  Graham, Ted

  McMillan, Tom (Glasgow C)

  Cocks, Rt Hon Michael (Bristol S)

  Grant, George (Morpeth)

  Madden, Max

  Cohen, Stanley

  Grant, John (Islington C)

  Magee, Bryan

  Coleman, Donald

  Grocott, Bruce

  Mahon, Simon

  Colquhoun, Ms Maureen

  Harper, Joseph

  Mallalieu, J. P. W.

  Conlan, Bernard

  Harrison, Walter (Wakefield)

  Marks, Kenneth

  Cook, Robin F. (Edin C)

  Hart, Rt Hon Judith

  Marquand, David

  Corbett, Robin

  Hattersley, Rt Hon Roy

  Marshall, Dr Edmund (Goole)

  Cowans, Harry

  Hatton, Frank

  Marshall, Jim (Leicester S)

  Cox, Thomas (Tooting)

  Heffer, Eric S.

  Maynard, Miss Joan

  Crawshaw, Richard

  Hooley, Frank

  Meacher, Michael

  Crosland, Rt Hon Anthony

  Horam, John

  Millan, Rt Hon Bruce

  Crowther, Stan (Rotherham)

  Howell, Rt Hon Denis (B'ham, Sm H)

  Miller, Dr M. S. (E Kilbride)

  Cryer, Bob

  Hoyle, Doug (Nelson)

  Moonman, Eric

  Cunningham, G. (Islington S)

  Hughes, Rt Hon C. (Anglesey)

  Morris, Alfred (Wythenshawe)

  Cunningham, Dr J. (Whiteh)

  Hughes, Mark (Durham)

  Morris, Charles R. (Openshaw)

  Davidson, Arthur

  Hughes, Robert (Aberdeen N)

  Moyle, Roland

  Davies, Bryan (Enfield N)

  Hughes, Roy (Newport)

  Oakes, Gordon

  Davies, Denzil (Llanelli)

  Irvine, Rt Hon Sir A. (Edge Hill)

  Orme, Rt Hon Stanley

  Davies, Ifor (Gower)

  Irving, Rt Hon S. (Dartford)

  Ovenden, John

  Davis, Clinton (Hackney C)

  Jackson, Colin (Brighouse)

  Padley, Walter

  Deakins, Eric

  Jackson, Miss Margaret (Lincoln)

  Palmer, Arthur

  Dean, Joseph (Leeds Welt)

  Janner, Greville

  Parry, Robert

  Dell, Rt Hon Edmund

  Jay, Rt Hon Douglas

  Pendry, Tom

  Dempsey, James

  Jenkins, Hugh (Putney)

  Prescott, John

  Doig, Peter

  John, Brynmor

  Price, C. (Lewisham W)

  Dormand, J. D.

  Johnson, James (Hull West)

  Price, William (Rugby)

  Douglas-Mann, Bruce

  Johnson, Walter (Derby S)

  Radice, Giles

  Duffy, A. E. P.

  Jones, Alec (Rhondda)

  Rees, Rt Hon Merlyn (Leeds S)

  Roberts, Albert (Normanton)

  Snape, Peter

  Watkins, David

  Roberts, Gwilym (Cannock)

  Spearing, Nigel

  Weetch, Ken

  Robinson, Geoffrey

  Spriggs, Leslie

  Weitzman, David

  Roderick, Caerwyn

  Stallard, A. W.

  Wellbeloved, James

  Rodgers, George (Chorley)

  Stewart, Rt Hon M. (Fulham)

  White, James (Pollock)

  Rodgers, Rt Hon William (Stockton)

  Stoddart, David

  Whitlock, William

  Rooker, J. W.

  Stott, Roger

  Williams, Alan (Swansea W)

  Rose, Paul B.

  Strang, Gavin

  Williams, Alan Lee (Hornch'ch)

  Ross, Rt Hon W. (Kilmarnock)

  Summerskill, Hon Dr Shirley

  Williams, Rt Hon Shirley (Hertford)

  Rowlands, Ted

  Swain, Thomas

  Williams, Sir Thomas (Warrington)

  Ryman, John

  Thomas, Jeffrey (Abertillery)

  Wilson(Alexander (Hamilton)

  Sandetson, Neville

  Thomas, Mike (Newcastle E)

  Wilson, Rt Hon Sir Harold (Huyton)

  Sedgemore, Brian

  Thomas, Ron (Bristol NW)

  Wilson, William (Coventry SE)

  Selby, Harry

  Tinn, James

  Wise, Mrs Audrey

  Shaw, Arnold (Ilford South)

  Tomlinson, John

  Woodall, Alec

  Sheldon, Robert (Ashton-u-Lyne)

  Tomney, Frank

  Woof, Robert

  Shore, Rt Hon Peter

  Torney, Tom

  Wrigglesworth, Ian

  Short, Mrs Renée (Wolv NE)

  Varley, Rt Hon Eric G.

  Young, David (Bolton E)

  Silkin, Rt Hon John (Deptford)

  Wainwright, Edwin (Dearne V)

  Silkin, Rt Hon S. C. (Dulwich)

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

  TELLERS FOR THE AYES:

  Silverman, Julius

  Walker, Harold (Doncaster)

  Mr. James Hamilton and

  Skinner, Dennis

  Walker, Terry (Kingswood)

  Mr. Frank R. White.

  Small, William

  Ward, Michael

  NOES

  Alison, Michael

  Gow, Ian (Eastbourne)

  Meyer, Sir Anthony

  Amery, Rt Hon Julian

  Gower, Sir Raymond (Barry)

  Miller, Hal (Bromsgrove)

  Arnold, Tom

  Grant, Anthony (Harrow C)

  Mills, Peter

  Atkins, Rt Hon H. (Spelthorne)

  Gray, Hamish

  Mitchell, David (Basingstoke)

  Baker, Kerneth

  Grist, Ian

  Moate, Roger

  Banks, Robert

  Hall, Sir John

  Monro, Hector

  Beith A. J.

  Hall-Davis, A. G. F.

  Montgomery, Fergus

  Bennett, Dr Reginald (Fareham)

  Hamilton, Michael (Salisbury)

  Moore, John (Croydon C)

  Berry, Hon Anthony

  Hampson, Dr Keith

  Morris, Michael (Northampton S)

  Biggs-Davison, John

  Hannam, John

  Morrison, Hon Peter (Chester)

  Blaker, Peter

  Harvie Anderson, Rt Hon Miss

  Neave, Airey

  Body, Richard

  Hastings, Stephen

  Neubert, Michael

  Boscawen, Hon Robert

  Havers, Sir Michael

  Newton, Tony

  Bottomley, Peter

  Hayhoe, Barney

  Nott, John

  Boyson, Dr Rhodes (Brent)

  Heath, Rt Hon Edward

  Onslow, Cranley

  Braine, Sir Bernard

  Hicks, Robert

  Oppenheim, Mrs Sally

  Buchanan-Smith, Alick

  Higgins, Terence L.

  Page, Rt Hon R. Graham (Crosby)

  Budgen, Nick

  Hodgson, Robin

  Pardoe, John

  Bulmer, Esmond

  Holland, Philip

  Parkinson, Cecil

  Burden, F. A.

  Hooson, Emlyn

  Pattie, Geoffrey

  Carlisle, Mark

  Hordern, Peter

  Penhaligon, David

  Chalker, Mrs Lynda

  Howe, Rt Hon Sir Geoffrey

  Percival, Ian

  Clark, Alan (Plymouth, Sutton)

  Howell, David (Guildford)

  Peyton, Rt Hon John

  Clark, William (Croydon S)

  Howells, Geraint (Cardigan)

  Price, David (Eastleigh)

  Clegg, Walter

  Hunt, David (Wirral)

  Raison, Timothy

  Cooke, Robert (Bristol W)

  Hurd, Douglas

  Rathbone, Tim

  Cope, John

  Hutchison, Michael Clark

  Rawlinson, Rt Hon Sir Peter

  Craig, Rt Hon W. (Belfast E)

  James, David

  Rees, Peter (Dover & Deal)

  Crouch, David

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

  Renton, Rt Hon Sir D. (Hunts)

  Crowder, F. P.

  Johnson Smith. G. (E Grinstead)

  Renton, Tim (Mid_Sussex)

  Davies, Rt Hon J. (Knutsford)

  Jopling, Michael

  Rhys Williams, Sir Brandon

  Dean, Paul (N Somerset)

  Kaberry, Sir Donald

  Ridsdale, Julian

  Dodsworth, Geoffrey

  Kilfedder, James

  Rifkind, Malcolm

  Douglas-Hamilton, Lord James

  Kimball, Marcus

  Rippon, Rt Hon Geoffrey

  Drayson, Burnaby

  King, Tom (Bridgwater)

  Roberts, Michael (Cardiff NW)

  du Cann, Rt Hon Edward

  Kirk, Sir Peter

  Roberts, Wyn (Conway)

  Eden, Rt Hon Sir John

  Kitson, Sir Timothy

  Robertson, John (Paisley)

  Edwards, Nicholas (Pembroke)

  Knight, Mrs Jill

  Ross, Stephen (Isle of Wight)

  Eyre, Reginald

  Knox, David

  Rossi, Hugh (Hornsey)

  Fairbairn, Nicholas

  Langford-Holt, Sir John

  Rost, Peter (SE Derbyshire)

  Fairgrieve, Russell

  Latham, Michael (Melton)

  Royle, Sir Anthony

  Finsberg, Geoffrey

  Lawrence, Ivan

  Sainsbury, Tim

  Fletcher, Alex (Edinburgh N)

  Lawson, Nigel Le

  St. John-Stevas, Norman

  Fletcher-Cooke, Charles

  Merchant, Spencer

  Shaw, Giles (Pudsey)

  Fookes, Miss Janet

  Lloyd, Ian

  Shaw, Michael (Scarborough)

  Forman, Nigel

  Loveridge, John

  Shelton, William (Streatham)

  Fowler, Norman (Sutton C'f'd)

  MacCormick, Iain

  Shepherd, Colin

  Fox, Marcus

  McCrindle, Robert

  Shersby, Michael

  Freud, Clement

  Macfarlane, Neil

  Sillars, James

  Galbraith, Hon. T. G. D.

  MacGregor, John

  Silvester, Fred

  Gardiner, George (Reigate)

  McNair-Wilson, M. (Newbury)

  Sims, Roger

  Gardner, Edward (S Fylde)

  McNair-Wilson. P. (New Forest)

  Skeet, T. H. H.

  Gilmour, Sir John (East Fife)

  Madel, David

  Smith, Cyril (Rochdale)

  Glyn, Dr Alan

  Marshall, Michael (Arundel)

  Sproat, Iain

  Godber, Rt Hon Joseph

  Marten, Neil

  Stanbrook, Ivor

  Goodhart, Philip

  Mather, Carol

  Stanley, John

  Goodlad, Alastair

  Maxwell-Hyslop, Robin

  Steel, David (Roxburgh)

  Gorst, John

  Mayhew, Patrick

  Steen, Anthony (Wavertree)

  872

  873

  Stewart, Ian (Hitchin)

  Vaughan, Dr Gerald

  Wiggin, Jerry

  Stradling Thomas, J.

  Viggers, Peter

  Wilson, Gordon (Dundee E)

  Taylor, Teddy (Cathcart)

  Welder, David (Clitheroe)

  Winterton, Nicholas

  Tebbit, Norman

  Walker-Smith, Rt Hon Sir Derek

  Younger, Hon George

  Thatcher, Rt Hon Margaret

  Wall, Patrick

  Thomas, Rt Hon P. (Hendon S)

  Watt, Hamish

  TELLERS FOR THE NOES:

  Townsend, Cyril D.

  Weatherill, Bernard

  Mr. John Corrie and

  Trotter, Neville

  Whitelaw, Rt Hon William

  Sir George Young.

  van Straubenzee, W. R

  Question accordingly agreed to.
  Resolved,
  That a surcharge, payable into the Consolidated Fund, be imposed on secondary Class 1 contributions under the Social Security Act 1975 and the Social Security (Northern Ireland) Act 1975, being a surcharge—

  (a) payable together with the contribution by every person who pays or is liable to pay such a contribution; and

  (b) equal in every case to 2 per cent. of the amount of the earnings in respect of which the contribution is paid or payable.

  Bill ordered to be brought in upon the said Resolution by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Stanley Orme, Mr. Joel Barnett, Mr. Robert Sheldon and Mr. Denzil Davies.

  NATIONAL INSURANCE SURCHARGE BILL
  Mr. Robert Sheldon accordingly presented a Bill to impose a surcharge, payable into the Consolidated Fund, on secondary Class I contributions under the Social Security Act 1975 and the Social Security (Northern Ireland) Act 1975: And the same was read the First time; and order to be read a Second time tomorrow and to be printed. [Bill 11].

  AIRCRAFT AND SHIPBUILDING INDUSTRIES BILL
  Ordered,
  That, in respect of the Aircraft and Shipbuilding Industries Bill, notices of Amendments, new Clauses or new Schedules to be moved in Committee and suggested Amendments pursuant to the Parliament Acts 1911 and 1949 to be moved in the House, may be accepted by the Clerks at the Table before the Bill has been read a second time.—[Mr. Walter Harrison.]

  SOUND BROADCASTING (JOINT COMMITTEE)
  Motion made,
  That the Lords Message of 25th November relating to the Joint Committee of both Houses to consider the implementation of the Resolutions of both Houses in favour of the establish-
  874
  ment of a permanent system of sound broadcasting of their proceedings, be now considered.—[Mr. Walter Harrison.]
  Hon. Members: Object.
  To be considered tomorrow.

  HOUSING (SUBSIDENCE)
  Motion made, and Question proposed That this House do now adjourn.—[Mr. Ashton.]
  11.52 p.m.
  Mr. Stephen Ross: I am extremely grateful for this opportunity to raise a matter which is a cause of real anguish to a limited number of owner-occupiers throughout the country and certainly of considerable concern to a larger number of householders generally. I refer to the problems arising from structural subsidence, which can occur for a variety of reasons but which has been particularly prevalent since last August, when the side effects of the exceptionally dry summer began to show themselves, more especially in properties erected, frankly, with insufficient foundations on a clay subsoil which, with the dry weather, contracted and cracked.
  My wish to secure the debate stems originally from a visit that I received from a young couple and their family of three about two months ago. In 1971 they purchased, with the aid of a mortgage, a semi-detached four-bedroomed, late Victorian villa in my constituency. They spent the next five years modernising it, installing bathrooms and all facilities, decorating it, getting it up to modern standards and creating a very pleasant home.
  Suddenly their whole security and plans for the future were ruined by the appearance of large cracks in the main walls of the adjoining house, which slowly but surely extended to their own. The house next door is now a complete write-off, and theirs is also considered by the structural engineers and the insurance company to be beyond repair, though not

  875
  quite so badly affected and still capable of occupation.
  On checking their insurance position with the building society they find that they are covered for only £5,500, which, with a 10 per cent. additional allowance towards the cost of alternative accommodation, possibly brings the total compensation to them to some £6,050. As to purchase a house of similar size on the open market at present would certainly cost at least £10,000 and as they have an existing mortgage on their property of over £3,000 to pay off, one can understand their feelings.
  Of course, it can be rightly said that they should have checked their insurance and made sure that it was adequate. We all know that the diktat caveat emptor still applies—buyers beware. Many building societies and insurance companies are now reminding their clients of the necessity to ensure that their insurance cover is adequate.
  When we speak of adequate coverage, it means full replacement value, which many of us neglect and ignore at our peril. I have been caught on this myself. Insurance companies are drawing clients' attention to it and some are making an automatic increase of up to 50 per cent. at no extra charge and withdrawing it after six months if the client then cancels the increase and does not wish to have the extra protection. This action is justified but it does not help those whose property has already been adversely affected by subsidence.
  Subsidence cover has been automatic since 1971 at no extra premium, but, with the substantial increase in claims, that inevitably is under review. However, most policies carry an excess clause which requires the policy holder to pay the first part of any claim, either 3 per cent. or 5 per cent. of the overall sum insured, according to which company arranges the insurance, subject to a minimum which varies between £150 and £500. That additional 3 per cent. or 5 per cent. can be the cause of further difficulty since underpinning of property affected by subsidence can be a very expensive business. Estimates from the British Insurance Association range from £2,500 to as much as £35,000, depending on the circumstances, so that even those who have
  876
  insured adequately can find, as other constituents of mine have found—other pensioners—that they are required to provide as much as £500 or more towards the remedial work.
  For retired couples living on fixed incomes in particular, with ever-increasing costs to meet, that can come as a great shock, to say the least. In my constituency 22 per cent. to 25 per cent. of the residents are retired people many of whom have purchased bungalows with their savings. It is a terrible shock when they have to face finding money of this order, which they had not bargained for.
  What do I want the Government to do about this? It would be wrong to ask them to set up a fund to compensate people in this case when there are so many other cases which should receive help.
  I should like to know whether the Department of the Environment has any idea of the extent of the problem. How widespread is it? The British Insurance Association suspects that claims this year may amount to as much as £60 million, but that is only an approximation. Most claims are still being negotiated and have yet to be settled. The building societies are working flat out and people do not know where they stand.
  Although I am certain that all reputable building societies and insurance companies are trying to make sure that people cover themselves adequately, should such cover not be obligatory on all building societies and local authorities which lend money?
  Should not greater efforts be made to bring home to people through television advertising, posters and circulars the need for full cover, not just for cover of the amount of the mortgage? The cost of new building today can be as much as £16 a square foot. If people are advised how to measure the floor area of the house and to multiply the figure they will know what amount of cover they should provide for. It is the complete reinstatement figure which is required.
  Secondly, local authorities should be encouraged to step in where houses are a complete write-off and where, perhaps, more than one owner is concerned, so that sites can be parcelled together, purchased at existing use value, and then resold.

  877
  Applications from local authorities for financing this sort of work should, therefore, receive favourable consideration from the Department of the Environment and funds should be made available, to be repaid when the land is sold off.
  If something like that is not done, there will be long delays, and some properties will be left empty and others will be left in a dangerous condition. If this initiative is not taken, some unscrupulous person will come along and doll up the property and pass it on to someone five years hence when all this is forgotten.
  Thirdly, some method should be devised to help people on fixed incomes whose houses can be repaired but who are unable, because of under-insurance or inability to find the 3 per cent. to 5 per cent., to pay for the repair, even if they are properly covered.
  As we have no national disaster fund, which I regret, will the Minister consider allowing local authorities—providing them with the necessary cash—to advance low-interest loans, secured on the freehold of the property where it is adequate, to be repaid on sale or death? I have in mind the sort of scheme which can be offered to elderly people faced with substantial road charges. In this way they can retain their houses and do not become a charge on the State, which they might otherwise be forced to become through no wish or fault of their own.
  I emphasise that most properties can be repaired. Only a limited number are a complete write-off. Even in those cases, where there is real hardship, we surely could afford to meet the cost of removal and legal fees out of national resources. I ask that dispensation be given to local authorities to deal with these cases. If the matter is not dealt with in that way people will become a charge on the State because they will have to be rehoused, presumably in local authority housing.
  Finally, we should look again at the planning procedures that allow houses to be built on known trouble-spots. In some areas in my constituency houses are known to be slightly suspect because of the nature of the subsoil. We should insist upon the standards laid down by building regulations being strictly enforced. There has been far too much
  878
  bad building in the United Kingdom over the past 10 years.
  I could go further and comment on the rôle of the National House-Building Council in the matter of subsidence claims, which is not entirely satisfactory, but time does not allow. I would, however, express the view that this, too, is an area that needs to be clarified for purchasers of new property. The present procedures should be improved upon.
  I should like to give way to the hon. Member for Harrow, Central (Mr. Grant).
  12.2 a.m.
  Mr. Anthony Grant: I am very grateful to the hon. Member for the Isle of Wight (Mr. Ross) and the Minister for allowing me to make a brief intervention.
  The Minister will know, because I have been in correspondence with him, that a startling number of people in my constituency have suffered from subsidence because of the recent drought. The extent of the problem is perhaps not sufficiently widely appreciated.
  To support the plea made by the hon. Member for the Isle of Wight, I will illustrate some of my constituents' problems by quoting from a letter from one constituent, which reads as follows:
  "Apparently I am not covered on my insurance … for subsidence (although I am for earthquakes) and I will have to pay for all the repairs myself which have been estimated at approximately £1,500. I have been a resident in Harrow for almost 50 years, and as I am in my eighties and recently widowed, I should very much appreciate any assistance and advice."
  I quote that letter as an example of the hardship that is being experienced. I entirely understand the need to contain public expenditure; indeed, I support it.
  In answer to my letter to him, the Minister told me:
  "I am afraid I could not encourage local authorities to make an exception to the normal rules where repairs are required as a result of subsidence."
  In hard cases, will the Minister please look sympathetically at the proposals made by the hon. Member for the Isle of Wight, perhaps with a view to local authorities advancing money for the work to be done and taking a chance. In the case of my constituent the only way the local authority could recover would be

  879
  on death by having a charge on the property. I ask the Minister to make a full investigation of the extent of the problem. If he can find a way to help the hardest cases along these lines, many people will be very grateful.
  12.4 a.m.
  The Under-Secretary of State for the Environment (Mr. Ernest Armstrong): I am grateful to the hon. Member for the Isle of Wight (Mr. Ross) for raising this important matter, and also for the contribution made by the hon. Member for Harrow, Central (Mr. Grant).
  There is no doubt that great hardship has been caused in some cases, and I am sorry that I cannot give an estimate of the claims which have been made this year. All I can say, on behalf of my Department and the Building Research Establishment, is that there has been an increase in the number of claims, probably because of the drought this summer. We are well aware of the hardship that has been caused in individual cases. Both hon. Gentlemen who spoke raised specific cases, and that is an indication that, although I speak in general terms, the problem means a great deal to the persons affected.
  As the hon. Member for the Isle of Wight said, total insurance payments will be about £60 million this year, and that figure may well increase because some people will not claim until 1977. Therefore, this is just a rough estimate. I am aware of the concern of people up and down the country. The problem has, of course, arisen predominantly in areas, mainly in the South of England, where houses have been built on clay subsoil which has dried out excessively and shrunk because of the long drought, although every year there are claims because of subsidence. The result has been movement of house foundations and cracking of walls. I know that many approaches have been made to the Building Research Establishment as well as to my Department, and I should like to draw on the advice which the Building Research Establishment has issued, since generally it would not be wise for owners to rush into expensive repairs. In almost all cases that the BRE has dealt with, the answer has been to do nothing until the spring because the soil will largely
  880
  recover its original form in the winter rains, partially closing the cracks. Only in very exceptional circumstances is the damage sufficiently severe to affect significantly the structural strength of the house as a whole.
  But all householders who have suffered damage from subsidence should immediately notify their insurance companies of the damage, and warn them that they may be submitting a claim when the full scale of the necessary repair work has been assessed.
  The Building Research Advisory Service has been giving advice on this problem for many years. It has produced a technical information leaflet TIL43, "Damage to Buildings on Shrinkable Clay Sites", which can be obtained free of charge from the Building Research Station at Garston. Anyone who is concerned with the problem would, I think, find it very useful to have that leaflet as a starting point. I have given the general advice provided by the BRE in the light of its expertise and long experience, but I should say that it cannot be taken as an individual prescription for each property. It is vital that the owner should base his decision on what to do by a particular judgment on his own property.
  I was very interested in some of the suggestions put forward by the hon. Member for the Isle of Wight. It has been suggested that, in view of the extent of subsidence and the cost of remedying the damage caused, the Government should provide some special financial assistance, by way of a grant, an interest-free loan or a loan. I assure hon. Members that I will read very carefully what has been said in this debate because I know how concerned they are. I do not want to appear unsympathetic to those who are worried and worse off as a result of what has happened but I find the suggestion a difficult one to accept as a matter of principle. The ownership of almost any asset carries with it the risk that it will at some stage need repair or replacement. As a general rule, it seems a doubtful proposition that the Government should stand the cost of that work rather than the individual owner himself.
  The argument here, I realise, is that the scale of what has happened makes it a national problem outside the normal responsibility of the individual owner.

  881
  That seems to be a fairly slippery path to follow. It is, of course generally accepted that the owner of any costly asset, whether it be a house, or anything else, will be responsible for its upkeep and that the prudent person will safeguard himself against exceptional cost by insuring against the risk. Nevertheless, I take on board what has been said about insurance policies and the need for people to be very cautious and to read what is involved. I will consider very carefully what the hon. Member for the Isle of Wight suggested drawing people's attention to this.
  In principle, I suggest that the individual owner must be responsible for the maintenance of his property and should take steps to see that he is insured for potential major costs if he feels unable to meet them from his own resources. That is certainly what I would expect to be the view of most owners. Indeed, since 1971 comprehensive policies taken out by house owners have, I believe, generally included cover for subsidence, and those whose policies date from before then have since had the option to extend them either at no extra cost or for a small additional premium. The owner normally has to meet a limited percentage of the total insured sum. I know that even that small percentage can make a nasty hole in one's pocket in relation to a substantial capital asset, but it is, I think, one of the hazards an owner faces. However sympathetic I feel when I hear and read of the distress that has been caused by this problem, I find it hard to think that the general principle of individual responsibility is wrong.
  An interest-free loan would, of course, constitute a subsidy in another form and is, therefore, ruled out for the reasons I have given. Nor, since a Government loan would constitute public expenditure, can I agree that we should at this time increase the public sector borrowing requirement in the way suggested.
  It has been suggested also in letters I have received, as well as tonight, that there should be a national disaster fund. A disaster fund established by the Government would be contrary to the principles on which Parliament votes money to set sums aside to meet unspecified needs for expenditure. Nor, I think, is the idea of a general fund primed from time to
  882
  time by voluntary contribution very realistic. Either would, of course, be some sort of generalised insurance. It would certainly be difficult to defend the application of public money to provide for the repair of damage which is or could reasonably be, covered at least for the major cost by insurance.
  I have already said that for many people much of the cost of large repairs will be covered by their household insurance, subject to the terms and conditions which apply in each particular case. There are also other forms of help which may be available. If a house is less than 10 years old, it will probably be covered by the National House-Building Council's protection scheme. While the NHBC scheme specifically excludes the council from liability for the cost of remedying structural defects caused by subsidence in so far as such costs are already separately covered by insurance, the council will consider claims not covered by insurance —for example, the excess which, as I have already explained, owners are required to meet under most policies.
  Further, I understand that where an owner has a building society mortgage his society will consider making an additional advance to cover the uninsured part of the cost of remedies if his circumstances are such as to necessitate a further loan. If an individual does not have an existing mortgage, he would probably be advised to take professional advice if he requires a loan to help him meet costs. The house itself should normally provide sufficient security.
  It may also be possible to secure some assistance to reduce the burden of the loan. A borrower could, for example, borrow the money through an option mortgage and, subject to the conditions of that scheme, the interest charges would be reduced by means of a Government subsidy. Alternatively, it might be possible for the borrower to get tax relief on the interest of any such loan. The availability of relief will depend upon what is the precise nature of the work to be done. As each case rests on its own facts, individuals should get in touch with their inspector of taxes about their own particular circumstances.
  There are some for whom the decision not to make special assistance available

  883
  will be a disappointment, and I am particularly sorry for those for whom the payment for repairs will mean hardship. I acknowledge that there are such cases. But I cannot regard a very dry summer as such an exceptional circumstance as to throw overboard the principle that successive Governments have followed in relation to the prime responsibility for an individual's property to rest with that individual, and I hope that many who are advised and able to wait and see the effect of the return of normal soil conditions
  884
  will find that their early worries are substantially dispelled.
  As I say, I recognise that this is a very serious matter for the people concerned. My post-bag has convinced me of this. There are a number of people who have been wondering whether any extra help could be given. I shall study carefully what both hon. Members have put to me, but I can make no commitment.
  Question put and agreed to.
  Adjourned accordingly at fifteen minutes past Twelve 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 sheffield.
The Lord Kindersley—Sat first in Parliament after the death of his father.

"NOTIONAL SALARIES": INCREASES
Lord ORR-EWING: 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 categories of public servants are permitted to have increases in their "notional salaries" in excess of limitations imposed by the Government incomes policy so as to increase further their fully indexed pensions; and what categories in the private sector are allowed these same concessions.
Lord ORAM: My Lords, in the public and private sectors alike, pensions may be based, consistent with the pay guidelines, on salaries to which employers were committed prior to July 1975 even though payment of such salaries has been prevented by the pay policy. Few groups are in this position in the public sector or, so far as is known, in the private sector. I should add that this use of "notional salary" for pension purposes can produce a less favourable result than the alternative arrangement, which I understand is adopted in the private sector. This consists of basing pensionable pay on salary in any one of the last five years uplifted by the cost of living from the end of the year in question to the date of retirement.
Lord ORR-EWING: My Lords, while thanking the noble Lord for what he has said, may I say that I am not sure that I would accept the last part of his reply? From my experience of industry, it does not appear to be accurate. Is it not a
124
fact that the Civil Service Pay Research Unit has to try to equate the facilities and assess the comparability of rewards and pensions in the public and private sectors? Therefore, would it not be more evident that they are being objective and just if, included in the manning of that Pay Research Unit, were not only civil servants but some representatives from industry, so that it was seen on all sides that it was being extremely objective and very accurate in its assessments as between public and private sector rewards and remunerations?
Lord ORAM: My Lords, I agree with the noble Lord about the duty of the body to which he referred to keep comparability; but I assure him that, with regard to comparing the public and private sectors in relation to indexed pensions, the provision applies equally to all employees. There is no differentiation between the public and private sectors. I take note of his point about representation on the body.
Lord ROCHESTER: My Lords, would the noble Lord agree that the expectation of prospective public servants of index-linked pensions, along with higher salaries, longer holidays and more secure employment, is one of the main reasons why in the last few years so many of our best university graduates have not proved willing to enter private manufacturing industry, on which the production of our national wealth finally depends?
Lord ORAM: That, my Lords, seems to be a much wider question. I accept that it is a factor that has to be weighed, but I think it is only one of quite a number. I hope the noble Lord is not suggesting that conditions for the public service should be greatly worsened in order to encourage recruitment into industry.
Lord SLATER: My Lords, is my noble friend aware that I made a statement in the House on one occasion that I thought the time had arrived when the Whitley machinery, for which the Government are responsible, should be re-examined and a new form of conciliation machinery established? May I suggest that that would cover the point on comparability raised by the noble Lord, Lord Orr-Ewing.
Lord ORAM: My Lords, I was not aware of my noble friend's specific suggestion in this connection, but clearly these points need to be kept under review.
Lord ORR-EWING: My Lords, would the noble Lord bear in mind that we raised this matter during a considerable debate about 18 months ago? At that time the Government said that, because the rate of inflation was clearly going down to single figures by November 1976, it might not be necessary to make adjustments to the indexing of pensions? As that has not happened, and as at that time people on all sides suggested that there should be an independent element introduced into the Pay Unit, as is now proposed for the police service, would this not be a good moment to re-examine the whole matter to consider whether we can continue to afford some of the expensive concessions which are available in the public service but which are not available in the private sector?
Lord ORAM: My Lords, with regard to the rate of inflation, external factors have been involved here which are beyond the Government's control, and the forecast has, understandably, not been followed through. Whether or not that raises a procedural or constitutional question, I rather doubt; but, as I indicated in response to the earlier suggestion, I will pass on this suggestion.
Lord HAWKE: My Lords, would it not be possible to make a fair comparison between a sector in which it is almost impossible to get the sack and one in which it is only too easy to get it?

POLICE STATUS
2.41 p.m.
Lord SHINWELL: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will consider the appointment of a committee of inquiry or a Royal Commission to inquire into improving the status of the police force including pay and conditions of service.
Lord WELLS-PESTELL: My Lords, my right honourable friend does not consider that a committee of inquiry or a Royal Commission would serve a useful purpose at the present time; but he has accepted that there should be a review of the police negotiating machinery.
Lord SHINWELL: My Lords, would my noble friend not agree that, as we rely on the police force to maintain law and order, the public must have the utmost confidence in their importance and integrity? Is it not therefore important that their status should be improved, in addition to their pay and emoluments?
Lord WELLS-PESTELL: My Lords, there was a Royal Commission on this and other matters which reported in 1962—some years ago, I accept—and many of its recommendations were implemented. But my right honourable friend has given very careful consideration to this matter. He has met the Police Federation on three occasions—the former Home Secretary on 29th July; the present Home Secretary on 8th October and 13th November—and has come to the conclusion that the situation would be met if there were a review on the police negotiating machinery.
Lord SHINWELL: My Lords, will my noble friend inform your Lordships' House who is to conduct this review? Is it to be a review conducted by some bureaucrats, or by some independent body which can take an objective view of the whole situation? Furthermore, when is the review to take place and when will its findings be published?
Lord WELLS-PESTELL: My Lords, bearing in mind that the last discussion which my right honourable friend had with the Police Federation was on 13th November, when he came to a conclusion about the need for a review, it is not possible at this stage to say who will comprise the review body. But it will not be a bureacratic body; it will be a body of people nominated by the Home Secretary, who will consider every aspect and receive oral and written evidence from the various bodies concerned.
Lord DERWENT: My Lords, does the noble Lord realise that virtually the whole country, except Government circles and,

127
probably, certain criminal circles, think that the police ought at this present moment to be treated as a special case?
Lord WELLS-PESTELL: My Lords, a number of people may well think that; but last year the police received an increase of 30 per cent. when everybody else had £6 a week, so that less than a year ago they were, perhaps, considered a special case. But in the present situation, and in the current pay pause, there cannot be any special case whatsoever.
Lord DERWENT: My Lords, I am merely saying what most people in the country think ought to happen.
Lord HALE: My Lords, does the noble Lord agree that the Report of the Commission of 1960 to 1962, of which I was a member, is now entirely out of date? There has been no real consideration of the conditions under which the police now operate of increased danger, increased risk and increased violence in the country; and it is necessary that the police should be able to maintain the high standard which, with a few unhappy exceptions, they have maintained. Also, can the noble Lord say whether recruitment is still satisfactory, and how many forces are below their recognised authorised standard?
Lord WELLS-PESTELL: My Lords, we are aware of the view of the Police Federation, but it is primarily a financial matter. As I said, a very serious attempt was made last year to deal with that; but this year they are asking for the £6 a week which applied to all persons last year, and are not willing to accept the present pay pause which gives a maximum of £4 and a minimum of £2·50 per week. In reply to my noble friend's second question, recruitment continues well. In the first 10 months of this year, 7,982 men and women joined the Police Service, as against 8,239 last year. The figures for wastage this year are a little higher than last year, but that is almost wholly due to increased retirement on pension. Over the country as a whole, we are approximately 9,000 policemen short.
Lord MACKIE of BENSHIE: My Lords, would the Minister like to tell the House what this enormous increase last
128
year made the average wage of a constable in this country? What is the average wage today?
Lord WELLS-PESTELL: My Lords, I cannot do so. That question, and several earlier ones, are far outside the original Question which I was asked to answer. I do not want to incur the further displeasure of my noble friend, who complained some months ago about the length of my replies.
Baroness WARD of NORTH TYNESIDE: My Lords, in supporting my noble friend Lord Shinwell, may I ask the noble Lord if he has yet had a reply from the Police Federation about whether they are satisfied with the action taken by the Government?
Lord WELLS-PESTELL: My Lords, if the noble Baroness's question applies to the Government's action in refusing them £6 a week, as against the present figure of £4 a week, the answer is that they are not satisfied.
Baroness WARD of NORTH TYNESIDE: No, my Lords. What I am asking is how the Police Federation react to the decision which has just been taken?
Lord WELLS-PESTELL: My Lords, I have no evidence at all that they are dissatisfied with my right honourable friend's decision to have a review body.
Baroness WOOTTON of ABINGER: My Lords, would my noble friend care to correct his previous answer, when he said that the £6 applies to all persons? It does not apply to all persons. It does not apply to persons who get their incomes from investments, and it applies only to persons in employment.
Lord WELLS-PESTELL: My Lords, that is perfectly true. It applies to all persons who are earning less than £8,500 a year.
Lord SHINWELL: My Lords, is my noble friend aware that I am concerned not so much about pay and emoluments—although they are important—as about status and making this, in reality, an honourable profession?
Lord WELLS-PESTELL: My Lords, I cannot go beyond the answers that I have already given to your Lordships.
Lord LEATHERLAND: Finally, my Lords, may I ask my noble friend whether he is aware that our police are wonderful? Is he also aware of the fact that if a special case is made of the police, it will be followed by applications by the firemen and then by the ambulance men to be made a special case, and then the whole of the Social Contract will be torpedoed?

ARDDLEEN BRIDGE AND CANAL NAVIGATION
2.50 p.m.
Lord TREFGARNE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will ensure that the bridge to be built over the Shropshire Union Canal at Arddleen near Welsh-pool is so constructed as to permit the navigation of vessels along the canal.
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, this is the objective which the Welsh Office and the British Waterways Board are together seeking to achieve.
Lord TREFGARNE: My Lords, I am greatly obliged to the noble and learned Lord for that reply. Is he aware that a great stretch of the canal has recently been cleaned and opened at the expense of many private individuals in order to make it navigable and that if this bridge is constructed so that barges cannot pass underneath all that work will be set at naught? Is the noble and learned Lord further aware that much of the money for this work has been collected under the auspices of no less a person than His Royal Highness the Prince of Wales?
The LORD CHANCELLOR: My Lords, I am aware of the matters to which the noble Lord has referred. In 1973 the Welsh Office agreed to a suggestion by the British Waterways Board to incorporate in the bridge design a box culvert capable of accommodating a dropped lock. I am sure that noble Lords will understand
130
fully what that mechanism means and what is involved. Since then I understand that, although the Welsh Office agreed to pay for the box culvert and to contribute towards the cost of the dropped lock, certain difficulties have arisen. There was a conference on 20th October between all concerned, including a representative of the Secretary of State for Wales. A number of alternative suggestions were put forward and the Secretary of State is awaiting the receipt of conclusions upon those expert discussions.
Lord ELTON: My Lords, is the noble and learned Lord saying that the canal will or will not be navigable when the bridge is completed?
The LORD CHANCELLOR: My Lords, I am sorry that my answer did not make that elementary fact clearer. Obviously the answer is, Yes.
The Earl of CRANBROOK: My Lords, will the noble and learned Lord bear in mind that too much navigation could ruin what is at present a most attractive canal? It is an admirable nature reserve, and that aspect may be ruined if too many motor-boats use the canal.
The LORD CHANCELLOR: My Lords, that is yet another illustration of the many sidedness of Truth.

TURKISH EARTHQUAKE: RELIEF
2.53 p.m.
Lord ELTON: 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 contributions they are making, through NATO and by other means, to the relief of the victims of the recent national disaster in Turkey.
Lord ORAM: My Lords, the Disaster Unit in the Ministry of Overseas Development has been working closely with the United Nations Disaster Relief Office in Geneva in the implementation of its co-ordinated international relief operation. The Unit has organised Her Majesty's

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Government's response to priority needs as requested by UNDRO on behalf of the Turkish authorities. Two special flights by RAF Hercules aircraft—one last Saturday and one yesterday—have been made direct to that part of Turkey affected by the disaster. The cost of material relief provided so far is £75,000. Within the last few hours UNDRO has appealed for further heavy duty tents and a flight is leaving Lyneham this afternoon with a consignment of such tents. We plan to despatch another similar flight tomorrow. This is a good example of the quick and close co-operation between the Government and the United Nations co-ordinating body. The Government's Disaster Unit continues to work on a round-the-clock basis and we stand ready to respond to any further specific requests.
Lord ELTON: My Lords, while thanking the noble Lord for that detailed and specific reply and welcoming the motives which have inspired the efforts to which he has referred, may I ask him whether any action was taken specifically under the NATO aegis? May I ask the noble Lord to recall the favourable reply to this concept which was given by his noble friend on 17th May when I asked a supplementary question in a similar vein? Would not the noble Lord accept that if there was a formed and existing body of men and material it would have been possible to get off a flight before Saturday after a disaster which struck on Wednesday? Does the noble Lord accept that that flight arrived on the Sunday and that there were three blizzards between the earthquake and the arrival of our aid? Can we not do a little better in terms of time?
Lord ORAM: My Lords, NATO has been involved but only in terms of helping with the communications. A NATO communications system has been operative, but we and other major donors look, as I have said, to the United Nations Disaster Relief Office to co-ordinate all international aid. This United Nations body has been suitably strengthened to carry out these tasks as well as the all-important assessment of relief needs. I doubt whether the noble Lord's suggestion about NATO would have made any effective difference in terms of time, but, as the
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noble Lord possibly knows, the possibility of NATO having a stand-by force is being discussed although I should say that Government members of NATO do not regard it with very great favour. Apart from the logistics, in certain circumstances, although not this particular one, there would obviously be political difficulties involved in a NATO operation.
Lord HARVEY of PRESTBURY: My Lords, is the noble Lord aware that as this earthquake took place nearly a week ago the Minister's Statement certainly gives a better impression than the week-end Press? However, may I ask the noble Lord why we are having to go through all this bureaucracy in Geneva? When the Turkish Government are appealing directly to the world for tents and other equipment can the Government not show some real initiative and help these desperate people who are living under appalling conditions?
Lord ORAM: My Lords, I think that we should bear in mind that the Turkish Red Crescent organisation is very effective and experienced and is able to operate in a quick and effective way in the first instance. As regards international relief, contrary to what the noble Lord suggests I believe that, unlike earlier occasions, we are beginning this time to get it right. Rather than rushing off huge loads of unrequested material which does not get through to the essential objective, this time we are getting the right communications and the right requests and we are seeking to get these specific requirements to the right place. Indeed, these flights to which I have referred—and I acknowledge what the noble Lord has said, that it was a much better view of things than perhaps had been conveyed in the week-end Press—have gone to an airport near the disaster area, whereas if they had been rushed off earlier they might have gone to Ankara and been far less effective.
Lord ORR-EWING: My Lords, is the noble Lord aware that the figure of two aircraft carrying 9 tons each works out that each of the 40,000 refugees from the earthquake, even if the aid was distributed very quickly, would get one and a half ounces of aid? This is not a very big contribution to their wellbeing, their security, their feeding and their health. Would not it be better to make use of a NATO organisation which is geared to

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quick reaction time in matters of hours, not weeks? It would be a very good exercise as to how our military forces can be brought to bear on the peripheries of NATO in the minimum time possible?
Lord ORAM: My Lords, I have already indicated my view about a NATO operation which is worthy of discussion but there are difficulties which perhaps the noble Lord underestimates. As regards the quantity, I believe that this kind of arithmetic can be very misleading. As I suggested in response to an earlier supplementary question, what is needed is an assessment of the basic requirements and the carriage of those materials to the right area. If the noble Lord is thinking in terms of quantity, he should bear in mind that other donors also are involved and that it does nobody any good at all to belittle what has been a very effective operation.
Lord BROCKWAY: My Lords, while appreciating what this Government and other Governments have done and the co-ordinating contribution from the United Nations at Geneva, may I ask the Minister whether it would not be much better, as many of us have urged over the years, that the United Nations itself should have a stand-by emergency organisation with medicines and blankets and so on, so that it can act immediately in such crises?
Lord ORAM: My Lords, that suggestion, like the NATO suggestion, indeed bears examination but my own view is that the present arrangement is the better one; namely, for individual nations like ourselves to set up an emergency unit. This has been done over the last two years and the operations of these units can then be co-ordinated within the United Nations relief organisation.
Baroness HYLTON-FOSTER: My Lords, will the noble Lord confirm that the Turkish Government requested the Turkish Red Crescent immediately to release from the warehouse in Turkey, which is part of the United Nations disaster relief programme, 7,500 tents, 7,000 blankets, 12 tons of food, ambulances and a complete medical unit, which were on the spot before anybody else could get there? Is the noble Lord also aware that the British Red Cross is very grateful to the Government for the help
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that they have given it, and in particular for the aircraft standing by to take the priority needs, which are the Arctic sleeping bags and greatcoats and the heavy duty tents? They have all been requested today, and the Turkish Government have requested that those goods should be sent, and no more blankets.
Lord ORAM: My Lords, I am grateful to the noble Baroness for her questions, which put this matter into perspective, and I am glad that she has called attention to an additional piece of help that Her Majesty's Government are giving in this connection, in conjunction with the voluntary organisations of which the Red Cross is one. We have indeed made the offer of meeting the costs of a charter aeroplane to send supplies which the voluntary agencies will gather together.
The LORD PRIVY SEAL (Lord Peart]: My Lords, I hope noble Lords will consider that we have devoted sufficient time to this Question, particularly as we have a large number of speakers wishing to take part in the debate.

EEC COUNCIL OF MINISTERS: DECEMBER BUSINESS
Lord STRABOLGI: My Lords, a Statement was made yesterday in another place about business to be taken during December in the EEC Council of Ministers. With the leave of the House, I will, as usual, arrange for the statement to be made available in the Official Report.
Following is the Statement referred to:
"With your permission, Mr. Speaker, I will make a Statement about business to be taken in the Council of Ministers of the European Community during December. At present seven meetings of the Council of Ministers are proposed for December.
"At the Social Affairs Council on the 9th December Ministers will consider Commission proposals on vocational preparation for young people and revised proposals on the education of migrant workers' children. They are also likely to consider to increase safety at work, a Commission communication on the humanisation of working conditions, the draft Directive on acquired rights, a common system for payment of family benefits and the fourth report on the activities of the new European Social Fund.
"Ministers at the Environment Council on the 9th will consider the Second Environment Action Programme. They may also discuss Directives on biological standards and screening the population

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for lead and pollution from the titanium dioxide and paper pulp industries, draft decisions on Community participation in the Rhine and Barcelona Conventions and a draft directive on the quality of drinking water.
"At the Foreign Affairs Council on the 13th and 14th Ministers will discuss the follow up to the European Council on the 29th and 30th November. They are also likely to consider relations with Iran and Portugal, and preparations for accession negotiations with Greece; the Community's relations with Turkey and Passport Union. Both the Foreign Affairs Council on the 13th and 14th December and the joint meeting with Agriculture Ministers on the 14th December are likely to discuss the External and Internal aspects of the Common Fisheries Policy.
"Agriculture Ministers on the 14th and 20th and 21st will consider the Commission's proposals for revised green rate and MCA arrangements, proposed hops and interim sheepmeat régimes, beef import arrangements and measures for improving agricultural structures and marketing. They will also resume consideration of proposals for achieving a better balance between supply and demand in the milk sector.
"At the Fiscal Council Ministers on the 16th will discuss the draft Sixth Directive on the harmonisation of value added tax.
"Ministers at the Transport Council on the 16th may consider roadworthiness tests and a progress report on the draft Third Social Regulation. The Commission may introduce new proposals on lorry weights and dimensions.
"Finance Ministers on the 20th will consider a report from the Monetary Committee on Dr. Duisenberg's proposals for co-ordination and co-operation by Member States in their exchange rate policies.
"They are also expected to discuss export credit policy. The fourth medium-term economic policy programme will also be on their agenda.
"At the meeting of the Standing Employment Committee on the 13th, Ministers will consider the problems of youth unemployment."

COMMODITY PRICES: SELECT COMMITTEE
The CHAIRMAN of COMMITTEES (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That a Select Committee of nine Lords be appointed to investigate the problem of instability in prices of primary essential commodities; to scrutinise proposals designed to rectify wide price movements in these commodities; and to report on the likely effectiveness of these proposals in reducing the substantial price fluctuations which have occurred in recent years:
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That, as proposed in the First Report by the Committee of Selection, the Lords following be named of the Select Committee on Commodity Prices:

E. Lauderdale,

V. Amory,

V. Simon,

L. Campbell of Eskan,

L. Cobbold,

L. Davies of Leek,

L. Lee of Newton,

L. Roberthall (Chairman),

L. Thomas;

That the Committee have power to appoint specialist advisers;
That the Committee have power to adjourn from place to place;
That the Minutes of Evidence taken before the Committee from time to time be printed and, if the Committee think fit, delivered out;
That the Proceedings of the Select Committee on Commodity Prices in the last Session of Parliament be referred to the Committee:
That the Committee do meet To-morrow at half-past Ten o'clock. — (Lord Aberdare.)
On Question, Motion agreed to.

CRIMINAL LAW BILL [H.L.]
Lord WELLS-PESTELL: My Lords, I beg leave to introduce a Bill to amend the law of England and Wales with respect to criminal conspiracy; to make new provision in that law, in place of the provisions of the common law and the Statutes of Forcible Entry, for restricting the use or threat of violence for securing entry into any premises and for penalising unauthorised entry or remaining on premises in certain circumstances; to amend the law relating to the proceedings and powers of criminal courts, including the law as to the penalties which they can impose and as to appeals in criminal cases; to provide for the alteration of certain pecuniary and other limits; to make further provision with respect to the methods of dealing with offenders, the transfer or removal of prisoners and other detained persons and the administration of the probation and after-care service; to amend the Legal Aid Act 1974, the Rabies Act 1974 and the Diseases of

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Animals (Northern Ireland) Order 1975 and the law about juries and coroners' inquests; to abolish certain offences; and for connected purposes.
I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a.—(Lord Wells-Pestell.)
On Question, Bill read 1a, and to be printed.

ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
3.5 p.m.
Debate resumed on the Motion moved on Wednesday last by Lord Wallace of Coslany—namely, That an humble Address be presented to Her Majesty as follows:
"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."
The LORD CHANCELLOR: My Lords, last Thursday the debate on the humble Address concentrated on economic affairs. Today home affairs are our main theme, although clearly the two subjects are not really separable. I propose to deal first with some of the problems that have caused me most concern as Lord Chancellor in the administration of justice in our country. This is a crucially important aspect of Government, for any breakdown there would threaten the social order. My noble friend Lord Harris of Greenwich dealt with one important aspect of this in the debate on Thursday; namely, the problems created by the general crime situation. It is no comfort to know that in most other countries, and particularly in the United States, as in our own, the crime rate has risen in recent years.
Between 1965 and 1975 there was a 69 per cent. increase (from 1¼ million to 2,100,000 cases) in the number of indictable offences known to the police; and the percentage increase in the number of
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indictable cases coming before the courts has been even greater. In magistrates' courts it has been 87 per cent. and in higher courts 135 per cent. The increases in the past year alone (that is, 1975 over 1974) have been 7 per cent., 8 per cent. and 12 per cent. respectively. The only comfort to be derived from these figures is that the rate at which cases have been brought before the courts has more than kept up with the rate of increase in crime, and with no significant alteration in the conviction rates. For this the police are to be congratulated.
However, the administration of justice is not just a matter of crime statistics, judges and courts. It is best seen as part of the broader picture of our home environment. If an atmosphere of decay and hopelessness in a community persists, particularly in our inner cities, then the consequential damage that is done to disadvantaged families and their children, who have no option but to live there, is bound to have effects in terms of crime, and especially adolescent crime. This is the experience of those of us who practise or adjudicate in the courts in our least privileged cities, where family ties and the old disciplines of the family and the community are vanishing in the face of squalor and disruption. There are significant relationships between crime and social deprivation; the House may be particularly pleased, therefore, to see in the Queen's Speech that special attention is to be paid to the needs of inner city areas.
The growth of the case load on the courts that I have referred to has had serious consequences, in particular for the Crown Courts where the more serious cases are tried. There we are suffering from continuing, increasing and cumulative delays. For each of the last three years the number of cases disposed of by the Crown Courts has been fewer than the number of cases committed to them for trial. The inevitable result has been that the number of cases awaiting trial has risen from about 8,000 early in 1974 to 12,000 in September of this year.
The situation in the London Crown Courts is the most worrying. There is a backlog of nearly six months' work for them to handle. The pressure in the rest of the country is somewhat less intense, but it is still a matter for serious concern.

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On the South-Eastern Circuit, other than London, there is a backlog of nearly four months' work; on the Northern Circuit between two and three months, and even on my old Circuit, the Wales and Chester Circuit, there is a backlog of over two months. The result is that anyone who is committed for trial in London today is likely, on current estimates, to have to wait fifteen weeks before his trial if he is in custody and 25 weeks if he is on bail.
These are average figures. It follows that there will be many cases in which the waiting time will be longer than this. To this waiting period must be added the time taken between arrest and committal for trial, often substantial. The backlog of work and the increasing delays are simply a reflection of the unremitting growth in the number of cases coming forward, which, between 1972 and 1975, amounted to nearly a third. Very recent figures offer some indication that the rate of growth may be slowing down, but it is too early to know whether these figures represent a trend.
My Lords, faced with these sombre facts, your Lordships will wish to know what has been done to grapple with the problem. Thanks to the foresight of my predecessor, my noble and learned friend Lord Gardiner, and to the determination of my predecessor, the noble and learned Lord, Lord Hailsham of Saint Marylebone, the major reconstruction and re-organisation of our court structure which was effected by the Courts Act 1971 provided us with the administrative and judicial structure which is needed. In particular, it has enabled us to deploy judge power as flexibly as possible, and to cut out a lot of waste of judicial time. We have also helped further by increasing the size of the second-tier Bench. Now there are no fewer than 280 circuit judges and 368 recorders. Meanwhile, steps have been taken to increase court accommodation which remains one of our leading constraints. In the meantime, if we are to reduce the size of the mountain of work in London, then it seems to me that we shall have to redistribute some of this business outwards to other courts which are less hard-pressed. That will cause some inconvenience but has got to be faced.
My Lords, we must also be prepared to take a fresh look at the way Crown
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Court proceedings are conducted. That we are doing. There appears to have been avoidable wastage of time, particularly in the hearing of complicated criminal cases and cases involving a large number of defendants. I notice the noble Lord, Lord Wigoder, confirms that conclusion. I have accordingly given my support to certain experiments by way of pre-trial conferences which have been directed towards identifying the real issues which are likely to require to be aired in a trial. These are like the Summons for Directions which precedes the trial of civil actions in the High Court. The first formal experiment along these lines took place at the Old Bailey in October 1974. The results of that experiment were sufficiently encouraging for a number of schemes to be introduced in an increasing number of Crown Court centres. It is a promising development which could well help to shorten the trials of long and complex cases.
My Lords, the position on the civil side of court business is, on the face of it, less worrying in that the growth of the work there is only about 1 or 2 per cent. a year. But as we have only one pool of judges, both at High Court and at Crown Court level, to deal with all civil and criminal business, and as we are already giving high priority to the despatch of criminal business, the situation becomes difficult.
I decided some months ago to set up a small Working Party of experts under Mr. Justice Cantley to cast a critical eye over the current procedure in personal injuries cases. They will be advising me as to what reforms should be made for their quicker and more economical disposal. In particular I have asked them to have regard to the desirability of simplifying procedure and giving the judges more control over the actual conduct of the proceedings.
I have already informed your Lordships on another occasion of my proposals for extending to all undefended divorce cases the special procedure which avoids the necessity of a court hearing at all in such cases. Those proposals will help save judge power.
My Lords, justice delayed is justice denied. Delay harms the parties, causing them increasing uncertainty and anxiety, and undermining their respect for our

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judicial system. We must all be concerned about the cases, and there are too many of them, of accused persons who remain in custody for month after month, often in overcrowded prisons, only to be acquitted or dealt with without imprisonment when their trial eventually takes place. Delay also makes it difficult for the courts to do adequate justice. The memories of witnesses become clouded. Some become less certain as to the facts. Others become dangerously more certain about what initially was only an impression. This is particularly true of civil cases which come on to be tried years after the events which gave rise to the initial dispute. Mark Twain said:
"When I was young my memory was so good, I could even remember things that never happened".
This is not confined to the young.
Quite apart from those actually involved in judicial proceedings, the public at large, and particularly the victims of crime, feel a legitimate impatience if criminals responsible for serious crime are not brought to book within a reasonable time. This must, in the long run, create a danger of resort to self-help both in taking personal vengence for criminal acts and even in the resolution of civil disputes. Happily, we have not reached or even nearly reached that stage. But I believe the vital need to retain public confidence in our legal system compels us to consider difficult and even unpopular measures.
A few minutes ago, your Lordships' House gave a First Reading to the Criminal Law Bill, the complexity of the Long Title of which I hope did not depress the House unduly. These provisions are closely related to the matters which I have been discussing. One of the leading purposes of this Bill is to give effect to the recommendations of the Interdepartmental Committee on the distribution of criminal business between the Crown Court and the magistrates' courts, a Committee chaired by the late and much lamented Lord Justice James.
Among other things, the Committee recommended, and the Government have incorporated this in the Bill, that where a person is charged with theft or a related offence and the value of the property involved does not exceed £20, the offence shall be triable only summarily and without a jury. We have also incorporated in the
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Bill the recommendation that all offences of criminal damage, except arson, where the amount of damage done does not exceed £100, should be subject to the summary procedure.
I will not conceal from the House that these proposals have caused me some anxiety. A diminution of the right to trial by jury is not lightly to be undertaken. I am now, however, convinced that what we are proposing is right and inescapable. As the James Report says:
"In the last analysis, society has to choose between two conflicting aims. On the one hand is the existing right of the citizen to be tried by a judge and the jury on any charge of theft or criminal damage, however small the amount involved. On the other hand is the right, especially important to anyone defending a serious charge, to be tried as soon as possible. …At present, defendants on serious charges are suffering the injustice of long-delayed trial, while the time of the Crown Court is partly occupied with minor cases of low monetary value. We consider that a change in this balance, by the means that we have suggested, will ensure that the available resources are used so as to achieve better justice over the whole range of criminal charges and that the balance cannot possibly be redressed in favour of quicker trial of serious charges without some loss of the existing choice for defendants against lesser ones".
The overall effect of what we are proposing in the Criminal Law Bill is to transfer some 8,000 cases a year from the Crown Court to the magistrates' courts. My own view is that the present delays in the dispatch of Crown Court business are rapidly becoming intolerable, and that the injustice to which they give rise is so notable as to call for these steps which we now propose.
My Lords, I should now like to turn to the Government's devolution proposals. As your Lordships know, the Scotland and Wales Bill, which establishes directly elected Assemblies for Scotland and Wales, was read a first time in another place yesterday, and was published earlier today. Obviously, therefore, your Lordships will not have had time to read, certainly not to digest, the contents of the Bill by now, even if your Lordships had the facility attributed to a former Master of the Rolls, Sir George Jessel, who, it was said, could read so fast that he could read both sides of the page at the same time. It was he also who said: "I may be wrong, but I am never in doubt". Perhaps he was never in doubt because he did try to read both sides of the page at the same time.

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My Lords, the Government, at any rate, are in no doubt that devolution is needed and is needed now. Over the last few years there has been, I believe, a radical change in the attitude of people towards the way in which they are governed. No longer is there an attitude of, "Let them get on with it, we are not interested". People of all types, of all sections of society, now want an opportunity to take more part in the way things are run. They want government to be, and to be seen to be, more responsive to their needs. They want public bodies which are currently run by people who are not elected—in the language of the devolution proposals, "nominated bodies"—to be more readily accountable to the electorate This, I believe, is a healthy development of our democratic system.
The transfer of increased democratic responsibility for their own affairs to the people of Scotland and Wales lies at the heart of the devolution proposals. In Scotland and Wales these changes in attitude towards the organisation of government have coincided with an upsurge in national pride and awareness. There is a genuine desire for more and more Scottish and Welsh affairs to be administered by Scottish and Welsh democratic institutions. But it is also, I believe, abundantly clear that the vast majority of people, not only in England but also in Scotland and Wales, want these changes to be made within the secure framework of the continuing unity of the United Kingdom. Clause 1 of the Bill spells this out quite clearly in stating that the provisions in the Bill,
"do not affect the unity of the United Kingdom or the supreme authority of Parliament to make laws for the United Kingdom or any part of it".
Only a minority want separation. I believe that the great majority of the Scottish and Welsh people appreciate the advantages of remaining within the United Kingdom, and feel a deep and abiding attachment to it. We have taken a great deal of trouble to find out what they really want. We set up a Royal Commission in 1969, which produced valuable advice as a result of four years work on a thorough examination of the machinery of government at all levels in the United Kingdom. In June 1974 the Government issued a discussion document on devolution, and followed it up later in the year with a
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White Paper. This time last year we set out detailed proposals in a further White Paper, and took special measures to encourage discussion of them.
During these last two years we have carried out extensive consultations with a wide range of organisations, and we have welcomed and received many useful comments on our proposals from both Houses of Parliament and from individual citizens. I find it hard to think of any legislative scheme which has undergone such thorough public scrutiny, deliberately fostered by the Government. Moreover, we have not done this simply on the basis of acceptance or rejection of a cut-and-dried package. We have encouraged people to comment on the details of the scheme, and we have taken these comments into account as we have gradually developed our proposals; and our Supplementary Statement in August this year set out numerous ways in which we were improving the plans in the light of comment and advice. The result is that this Bill rests, I believe, on an increasingly broad base of consultation and understanding. We believe that the balance we have achieved is broadly right.
In the course of the debate, I have little doubt the question will be asked: Should we be proposing devolution at this time? Should we not wait a few years, for example, until the economic climate is more favourable? My Lords, there is never a good time for proposals which entail additional expenditure, modest though it may be in this case in the context of our total expenditure. But we have been at great pains to get these proposals right; we have taken time to do so, and we see no reason for further delay. I believe it would not be right or acceptable to tell the people of Scotland and Wales that measures worked out over a long period to improve the running of their affairs and to increase their participation in government had to be held over for some further set of reasons. The improvement of democratic institutions and the machinery of government should be a continuous process and not something to be picked up and then dropped casually when the going is hard.
My Lords, I am very conscious that the devolution legislation will take up a considerable proportion of the time available for legislation in this Session. Since these are major constitutional proposals

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which will make important changes to our system of government, this is inevitable. I admit that the Bill is a substantial Bill. Noble Lords will, however, find that they can at least get a fair idea of the proposals as a whole from the very helpful Explanatory and Financial Memo-random and Index.
I know that many noble Lords have strong views on all or part of what is proposed, and it is important that there should be adequate opportunity for these views to be expressed. The Government for their part—and I give this assurance—will be very ready to listen carefully and to make adjustments if there are good reasons for them. We look forward to a full and constructive debate, which will, I hope, be marked by a genuine desire to improve the institutions through which we govern ourselves. We intend that the Bill should be law by the end of this Session. The majority of the people of Scotland and Wales expect this of us, and we do not intend to disappoint them.
My Lords, I have spoken of Wales, and as, apparently, the Minister for Welsh Affairs in your Lordships' House, I should like to say a little more about it. There was in a recent publication of Y Cymro—"The Welshman" for the uninformed—a reference to a report of 40 years ago when one of the Welsh Members of another place, Colonel Goronwy Owen, complained that although the gracious Speech included substantial reference to Scotland, Wales and Welsh interests did not figure at all. This is certainly not a complaint that could be made this year. The Bill to establish the Scottish and Welsh Assemblies represents a massive constitutional advance for Wales. In addition, the Bill to provide for greater equality in average charges for unmeasured water supply will lessen a grievance which has been keenly felt in Wales, as indeed in some parts of England which have experienced particularly high charges under the present system. The inequality has resulted in the conclusion, "Water is Dynamite in Wales", and we are hoping to avoid an explosive situation developing.
In each of the last two years, moreover, we have also had important items of separate Welsh legislation, in particular the Welsh Development Agency Act and the Development of Rural Wales Act,
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which it was a satisfaction to see introduced for the first time in this House. Since the introduction of the Welsh Development Agency there has been promising advance in approaches from private industry as to how the Agency can assist them, and the pessimistic fears which were expressed on the Opposition side of the House that private industry would oppose the operations and existence of the Agency have, happily, not materialised.
Now Wales looks forward to the completion of major new sections of the M4, on which, as I saw on Saturday, work is currently in progress, and that will greatly improve communication between industrial South Wales and the main economic centres of the country. Good communications are clearly important for the growth of industry in Wales, and I believe there is a growing appreciation in this field, as elsewhere, of the fact that the strengthening of our industrial base is the first priority for every activity in our country now. For me, therefore, it was very pleasing on Friday to hear from Dr. Bevan, the Principal of University College, Cardiff, that no longer do universities and industry work too far apart. The formation of industrial liaison units in about three-quarters of British universities has led to the establishment of self-supporting centres and limited companies in which the technological expertise available in universities has been applied to the development of industrial processes and manufacture.
These units have generated a two-way flow between universities and industry, of advice and assistance, of teaching and research, consultancies, exchanges of staff and the provision of advisory services. In many cases large sums of money have been made through patents and other earnings; this money is put to work to generate further activity of this kind. I was pleased on a recent visit to the chemical laboratories at Aberystwyth University College to see that this is happening there as well—as no doubt is the case in many other universities. It is an excellent trend.
Another proposal relating to the industrial field is the Patents Bill which is mentioned in the Queen's Speech. This will provide a comprehensive reform of

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our patent law. Information about new technology will be made available at an early date to avoid duplication by others and to act as a support in the competition for new products and processes. A new Patent Court will be established as part of the High Court to give greater certainty to judgments on important issues. The law on ownership of inventions by employees will be codified and provision will be made for rewards to employed inventors in certain circumstances. The Bill will also contain provisions enabling ratification of international treaties. This will give much advantage to British industry in terms of cost and convenience.
Ratification of the European Patent Convention will make it easier for industry to obtain patent coverage throughout most of Europe. The Community Patents Convention will provide for a single patent for the Community area. This is an important Bill which will make the patent system better suited to the needs of modern industry and will, I believe, be generally welcomed by industry, inventors and the patent profession.
My Lords, I conclude by affirming the Government's determination to set our country on the road to recovery on the lines indicated in the gracious Speech. While this is no time for complacency, still less is it a time to entomb ourselves in despair. As one of the sages expressed it:
"Even though the birds of sorrow fly over your head, it is not necessary to invite them to nest in your hair"
To the doom-watchers both here and abroad who are prophesying our national demise, we proclaim that we do have the resilience and the reserves, human, material, moral and political, to get out of our difficulties both as a people and as a country; and that we shall do so.
3.35 p.m.
Lord CAMPBELL of CROY: My Lords, we are grateful to the noble and learned Lord the Lord Chancellor for having told us about some of the measures proposed in the gracious Speech. I propose to address myself principally to the subject of devolution, following the noble and learned Lord; a subject which is due to take up a great deal of our time here and a great deal of time in another
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place. First, I should like to touch on two other matters which arise in the gracious Speech, with which I have been concerned myself. On the first I fear I must be critical of the Government, but on the second I shall be giving them a gentle pat on the back.
The first subject, they will probably have already guessed, is the Aircraft and Shipbuilding Bill, because the Government have decided to lose in the last Session most of what they could have got in the Bill rather than drop the ship repairing companies from it. Now documents of the Commons of yesterday and today show that the clerks in the Public Bill Office there have decided that there is doubt on the question of hybridity where ship repairing companies are concerned and that the Bill should go to Examiners. I was the first to raise that matter in your Lordships' House.
Further, the Government have put down a Motion to suspend Standing Orders in another place, and I would make just two comments. The first is that the Government have only themselves to blame for this situation. If they had accepted our Amendments the rest of the Bill would have gone through and would now be enacted without the hybridity question arising, because it arises on the ship repairing firms which would have been dropped. Secondly, the effect of suspending Standing Orders, if the Government succeed in that, is to deny individuals and firms access to the procedures available to protect their interests in such circumstances, including presenting evidence to a Select Committee. The Government must be in a poor state when they are reduced to depriving citizens of the rights which Parliament has provided for such situations.
The second subject, on which I move from criticism to qualified approval, is the proposed extension to 200 miles of the British fishing limits. The Government, as the noble Lord, Lord Goronwy-Roberts, and other noble Lords opposite will know, are doing what I have been proposing from this Bench for more than a year. Together with other countries, I have been suggesting that we should extend our limits. The other countries, being the principal maritime countries in the world, include the United States, Canada, and Norway, who are proposing

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to extend their limits early in 1977. I would make these comments because the matter is urgent. First, the negotiation within the EEC for an exclusive belt is a very important and urgent matter for British fishermen, and I hope that the Government are concentrating on that now. Secondly, the methods of control and policing within the United Kingdom 200-mile zone do seem inadequate. We hope we shall be discussing these matters soon when the Bill comes before us before Christmas.
Now I turn to devolution. As the noble and learned Lord the Lord Chancellor has said, the Bill was published only about four hours ago, and clearly detailed comment on it must come in due course. It will no doubt be a very long time in another place. When it reaches us it may be somewhat different from what it is now. I shall confine myself to considering why we apparently have to spend so much Parliamentary time now, as the noble and learned Lord said, when we have so many economic problems, on simply changing the machinery of Government. That in itself will not achieve anything to improve the conditions of the country or the people. Nothing will be positively achieved until any new machinery carries out some constructive action which would not have been done, or which would not have been done as well, under the present system.
I would consider this with three concepts in mind. First, decentralisation; secondly, devolution; and thirdly, independence, or separation as it is sometimes called. In most parts of Britain I have found, as I think other observers have too, that there is a desire for decentralisation. For example, in the North-East of England and Merseyside on visits which I have made I have found that there is a demand for decentralisation. That means less decision-making in London and less dependence upon central authorities. But there is little, if any, wish for a form of Assembly in those regions in England. That is my impression. Indeed, to delineate precise dividing lines between such regions would be difficult.
We understand that the Government are to produce a document next week on the possibility of regional Assemblies in England. Then there is also, so far as England is concerned, anxiety about
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money; that is, that if Scotland and Wales are to have separate Assemblies, they may be getting much more of the United Kingdom taxpayers' money than regions of England which have just as difficult problems and appear to be just as deserving. That is a valid matter of concern and should be taken fully into account.
We come to devolution, because I have been talking about the general feeling for decentralisation, which does not necessarily mean changes in the system, and, so far as England is concerned, presumably the changes, if there are any, will not be as extensive for Scotland and Wales. Devolution applies particularly to Scotland and Wales. It is a word new to many people, but not new to me. As someone whose home is in Scotland and who is a Scot, the word "devolution" has been ringing in my ears for at least 15 years, meaning that powers and functions be delegated to Scotland from London, much of which has already been carried out administratively; for Scotland for at least 40 years and for Wales within the last 10 years.
Where Scotland is concerned, because there is a separate system of law—a separate judicial system—and a separate system for education and other matters, there have been separate Acts of Parliament, and that Scottish legislation has been passed at Westminster and not in Scotland. In our two-day debate at the end of January many Scots spoke in your Lordships' House but hardly a Welsh voice was raised. Indeed, the speakers' list read like the casualty roll after Flodden. I hope, therefore, that the House will understand if, in speaking of devolution, I address my remarks mainly to Scotland.
Then there is the third concept, independence. This is the aim of the Scottish and Welsh National Parties. This must be clearly understood and there must be no mistake about it. They are intent on the break-up of Britain. That is the antithesis of devolution, although in some people's minds they are still mixed up. Devolution means remaining a single country with the delegation of powers and functions within it. The SNP appear to support devolution, but they do not support it as a settled state; they support it simply as a stepping stone towards the complete separation which they are seeking, which is clearly in their manifestos and which is not disguised. Moreover, they

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would not wish any system of devolution which is set up to work properly. They would be concerned to use it to agitate for more and more powers until they reach the state of Scotland being a separate independent country.
SNP spokesmen have said this. At their 1974 Party Conference it was said:
"I do not believe in devolution. I believe in independence."
That is not devolution. They do not believe in devolution, but it would mean the demolition of Britain if it were to happen. That is why it is important in any scheme of devolution—and we shall be examining the Government's proposals carefully in the light of this—that the system be stable and designed to minimise clashes between. Westminster and Edinburgh. There is a paradox because most of the people in Scotland who have been supporting the SNP with their votes do not want to break up Britain and have an independent Scotland; they do not want Britain to be Balkanised. However, they support the existence of a Scottish pressure group which appears, by its very existence, to have had some success in waking up people in London, causing alarm in the Government and getting results by way of better and quicker action for Scotland. At least that is the impression that is given, whether or not it is correct.
The ground is more fertile in Scotland now for support for the Nationalist cause because there is no longer the Empire, Britain's economy is in a shaky situation and there is what is known as the "English disease", much quoted in Scotland. If we had an economy which was as strong and successful as Germany's, I am sure the ground would be much less fertile for the support which is going to the Nationalists in Scotland now.
I come to some publicity which was given to some results published by the Daily Record, a Scottish newspaper, yesterday. It was not a sample poll, but it said that 44 per cent. of those who wrote in would prefer independence. That goes against all the polls there have been recently, including the ORC poll in Scotland a month ago where 69 per cent. of the population wished Scotland to remain in Britain and only 23 per cent. were against that and in favour of inde-
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pendence. The point about the Daily Record figures is that they were limited to readers of the paper and those who bothered to send in the coupon. Anybody who knows how the SNP operate will know that the word was sent out immediately to all branches to get every possible person to cut out the coupon in the newspaper and send it in saying they were in favour of independence, and getting their friends to do so as well. There could well be plural voting, too.
Thus, with respect to the Daily Record, they have not appreciated the way in which the Nationalist movement operates in Scotland; it will take any opportunity of that kind to produce distorted figures to give the impression that there is more support for breaking up Britain than there actually is. Although the sampling polls show that about 20 per cent. of those sampled in Scotland say they would be in favour of Scotland becoming a separate country, it must be made clear that at least 60 per cent. of those who are polled want some change and indicate that they want more say in Scotland on Scottish affairs.
I have mentioned that the present system involves a great deal of administrative devolution in Scotland. When, from 1970 to 1974, I was Secretary of State for Scotland, I found myself responsible for, broadly, all domestic functions except industry and finance, and there were five Departments in Edinburgh, which was a mini-Whitehall, administering, with the Ministers at the Scottish Office, the various functions. This meant that in the Scottish Press every day or when I was listening to Scottish news on the radio while shaving in the morning North of the Border, I was continually hearing in almost every other item that the Secretary of State for Scotland was doing something to or for Scotland, whether it was roads, housing, education, health, local authorites, whatever the subject was. That would not be the case South of the Border; it would be a different Minister in each case. Of course, on some of those subjects the matter had not even come before me because it had been dealt with by another Minister or Department.
That is one of the troubles. There is a great deal of administrative devolution, and the Ministers and civil servants in Edinburgh, the Executive, could be a

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tyrannical bureaucracy if they wanted to be. In fact, they are not. However, there appears to be no visible check on what they are doing, and that is why the increase in administrative devolution has not necessarily assisted the situation. If anything, it has highlighted the absence of a visible check on that Executive by elected representatives. But there is such a system, and that is the Scottish Committee system.
The Scottish Grand Committee has existed since 1906 and consists of all the 71 Scottish Members of Parliament. However, it has become submerged in all the other Committees in another place. It is invisible. It has a public gallery, but practically nobody is ever there. The people most concerned are more than 300 miles away. Indeed, they would have the greatest difficulty in finding the Committee room, if they knew what time to come. That ingenious system, which evolved many years ago, before the aeroplane was in daily use, and enabled the same elected representatives to consider Scottish matters in the morning and Empire and United Kingdom subjects in the afternoon and evening, has now gone into what I would call disuse. Its reputation has disappeared. One never hears it mentioned on the radio programme, "Yesterday in Parliament", whereas 20 years ago one did. The Press hardly take any notice of it and it is hardly reported because it is one of many committees and it is no longer the Scottish debating Chamber that it was years ago. That is the background, I believe, to much of the present feeling that there ought to be some Parliamentary devolution to match the immense administrative devolution that there has been in Scotland.
The question of a referendum comes up whenever a devolution plan is put forward. I feel that the kind of referendum that might be held—and I understand that the Government have not closed their mind to this—is the simple inquiry into whether or not people in Scotland want to be independent. At present, I believe that 80 per cent. of the population would say, No, and that would at least be an absolutely clear indication that they did not want to be a separate country. I believe that it would be much more difficult to put a simple question about devolution. First, at least three-quarters of the men in the street in Scotland do not know
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what the word, "devolution" means. Secondly, it would be extremely difficult to make clear in a simple question what form of devolution was being proposed. I therefore think that, though a referendum could be a useful indication of public opinion in Scotland on a precise question, it might be difficult to hold a referendum on a particular form of devolution. As anybody who has had a quick look at the Bill and all its complications will realise it will be very difficult to reduce that to a single, simple question.
Then there are other matters such as the many Scots who live not in Scotland but in the rest of Great Britain and who may feel that they are concerned in this and know more about it than many others. I believe that it would be difficult to bring them in and that the selection would probably have to be done on the electoral rolls North of the Border. Then there is the question why the English and the Welsh should not also have their say in a referendum what they think about the proposals. That is another problem. So I believe that a referendum would not be very easy to hold, though it would be possible on the simple question of independence; that is, of the break-up of the United Kingdom.
Lord DAVIES of LEEK: My Lords, as was said by Mr. Foot today, the Government have not closed their mind to a referendum. Would a referendum on this matter be more difficult than one on the Common Market? I do not think so and that is why I support it enthusiastically.
Lord CAMPBELL of CROY: My Lords, as I said, I think that a simple referendum of the type that I have mentioned as to whether Scotland should be a separate, independent country, causing the break-up of the United Kingdom is the one question that could be put simply. I feel that it would be much more difficult to put variations on devolution into a referendum and for the question to be understood by 90 per cent. of those taking part.
Another matter arises. If there is to be an Assembly in Scotland or Wales, should the election be carried out by proportional representation? Where Scotland is concerned, my personal view is that it certainly should be, because otherwise there could be a situation in which

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the majority of SNP members elected on a minority vote felt that they could take the constitutional question of the separation of Scotland from the rest of the United Kingdom as a mandate, even though considerably less than half of the population had supported that. I know that there are considerable doubts about proportional representation at Westminster, though not in the Liberal Party. Proportional representation has, however, been adopted for Northern Ireland without prejudice to the situation a Westminster. I believe that this could be done for Scotland, again without prejudice to the situation at Westminster.
There is a good reason why this should be so. If proportional representation were to be adopted at some time in the future for Westminster, a whole lot of other matters would have to be considered as well and probably first. For example, what would happen about forming a Coalition Government? Are the people ready for a three-week or even, as in the case of the Dutch, a three-month pause before a Government are formed? The whole attitude towards manifestoes and pledges would have to be altered. Manifestoes could be torn up; they would have to be drafted in a quite different way. The first thing after an election would be for the leaders of the Parties to get together to throw out of the window some of the points in their manifestoes so as to reach compromises.
The British public, as well as we ourselves, must be prepared for that kind of thing to happen before we adopt proportional representation at Westminster. It might lead to a Coalition Government being formed as a result of proportional representation which represented about 85 per cent of what the people of the country wanted. That might be a good thing or not. The main points of the manifestoes would have been thrown out of window in order to obtain a compromise. That sort of situation will have to be foreseen and prepared for before one could adopt proportional representation at Westminster but, personally, I am one of those who are prepared to face up to that and work it out. However, that does not apply where the Scottish Assembly is concerned because a Government would not be being formed and because the
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method proposed for forming an Executive would not give rise to that sort of problem.
Another comment is that an Assembly will mean too much government in Scotland. I know that some of my noble friends are concerned about this. I would say straightaway that, if an Assembly is established in Scotland, I believe that there must be accompanying changes. I believe that local government would need to be changed and, certainly, considerably reduced in Scotland. Otherwise there will be over-government in Scotland.
I would just make these comments on the Bill itself: first, I think, as I have said before, that it is a great pity that Scotland and Wales should be being dealt with in one Bill. It would have been much better to have separate Bills for Wales and Scotland because the situation in Wales is very different from that in Scotland and in any case Scotland has its own legislation. Secondly, there is still the proposal in the Bill that there should be two Executives in Scotland. These are the Secretary of State for Scotland who is to continue as an Executive and the new Executive that is to be formed after an Assembly has been elected. To have two Executives will promote a situation of friction, conflict and probably collision. I believe that that needs to receive considerable thought and working out while the Bill is going through Parliament. I believe that it raises the whole question of the division of powers and functions between the two Executives. That is a question about which people are still arguing. It will need to be examined.
A further point is how the Scottish Members of Parliament at Westminster are to vote, if at all, on matters affecting England and Wales. They will not be legislating on education, health and other matters for Scotland because that will be done by the legislative Assembly in Edinburgh. My view is that they should not vote on legislation affecting England and Wales and that, in the same way as the Speaker now certifies that a Bill is a wholly Scottish Bill, it should be possible for him to certify that a Bill is wholly English or Welsh. I believe that if that were done it would certainly reassure a great many of the critics of devolution schemes.

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I should like to return for a moment to the question of a separate, independent Scotland. Of course it is nonsense from the point of view of promoting the well-being of the people in Scotland but a further dimension—oil—has been added and the SNP have pretended that Scotland could become a sheikdom and have hoards of wealth from this newly found resource. I would point out that most of the oil that has been discovered in the North Sea is within the belt of Shetland and that the Shetland Islands have made it clear that, if Scotland became independent, they would want to stay with England or else go their own way. The Continental Shelf where most of the oil has so far been discovered would go with Shetland, so that the argument about oil is a very risky one where the Nationalists are concerned.
Then we come to passports and defence. When many people in Scotland realise that they will be deprived of their British passport—the SNP has indicated that they will have to have Scottish passports—they will find themselves deprived of privileges and rights in the world which they will not very happily relinquish. The defence proposals are ridiculous; Scotland is going to spend all its money on defence, or it is going to have no defence, or else it is going to be entirely dependent upon the good will of its neighbours.
There are also proposals for separate taxation and a Scottish pound. For 270 years there has been economic union, and the kind of proposals that the SNP put forward for erecting economic barriers at the Border would mean that firms which now have myriads of interwoven strands across the Border would have the most burdensome task of having to sort out whether their income, for income tax purposes, arose from something North of the Border or South of the Border. The amount of incredible bureaucracy which would be caused by that is unthinkable, and of course major industries which are now based on Scotland are dependent entirely on being part of Britain, having a home market of 55 million instead of 5 million. Engineering firms, the motorcar industry, manufacturers of aero engines are not possible in a country of 5 million. If one looks around the world one sees that such things do not happen in countries of under 6 million or 7 million, and at the moment much of
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the employment in Scotland is based on these industries. It cannot be taken for granted that they would remain if Scotland were to go its separate way under the SNP.
Most people in Scotland would recoil from the edge of the precipice of independence, but they do expect some change in Parliamentary devolution to match the administrative devolution which has already taken place. I believe that the Government's devolution proposals must be judged by the criterion of whether they will work and whether they will last; otherwise we shall be tampering with the cornerstone of the edifice of Britain, and if it is not being strengthened and repaired in our work upon it the dislodgement could cause the whole building to split. That is the risk. I believe that where Scotland is concerned there is a greater danger in doing nothing, so I am one who agrees that something must be done but I recognise that it is a very delicate and difficult matter to erect something which will be stable and permanent without causing the whole edifice to shake and possibly crumble.
It is not, my Lords, a question of appeasing the SNP; some say that it is appeasing the Nationalists to put forward any proposals for devolution. The hard core and hierarchy of that Party do not want devolution. They will settle for nothing less than Scotland becoming a separate country. The majority of people in Scotland, while not supporting that objective, have an instinctive leaning towards more say in Scotland on Scottish affairs. This means a visible, representative body in Scotland which would openly debate issues and to which the Executive would have to account publicly for its stewardship. To ignore that feeling, now widespread in Scotland, would I believe be unwise. It might well push more people into the camp of the extremists who want to split Britain into separate countries. To split the United Kingdom would be a lamentable course, damaging to all parts of the country. I would wholly oppose that course with every effort I could summon and with every sinew.
4.3 p.m.
Lord MACKIE of BENSHIE: My Lords, our eyes having followed the two previous speakers with immense interest,

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it is particularly gratifying to find that the Tory Party and the noble Lord, Lord Campbell of Croy, have accepted practically holus-bolus Liberal policy for the past 20 years both on the method of election, at least in Scotland, and on a Parliament in Scotland. The noble and learned Lord the Lord Chancellor must have pleased your Lordships greatly, as my noble friend Lord Simon has just pointed out, when he said—with a great difference from the last Session—that on this Bill your suggestions will be welcome instead of being continually sent back to you. So I look forward with great interest to see how many of our suggestions are really welcomed.
Before proceeding to devolution I believe, with the noble Lord, Lord Campbell of Croy, that it is necessary to look at the economic situation. There is no doubt at all that the gracious Speech is particularly welcome for what has been left out of it as much as for some of the Bills proposed in it. In our present situation—and I do not think that we can really laugh off Professor Milton Friedman and what is said in other programmes in America; we appreciate as much as he does that we are in a desperate situation—it is a good thing to see that the Government at least are not being provocative. I think that this is a great step forward. I believe that the ragbag of Bills in the last Session did much damage to this country. They were the result of rather shoddy bargains, and we should have been far better without many of them. We welcome their conversion, and I hope they will go much farther.
One thing that is certain is that the people of this country want the centre and control, and nothing showed it more clearly than the Referendum on Europe, and the coalition that took place then might well bring this country out of the mess much quicker than any other single measure. I hope that the Government will continue along the way and that they will be encouraged greatly by the attitude of many Conservatives to think about a programme for national recovery—at least a programme, if not a coalition or a Government of same. I say this with all seriousness and without any thought of Party advantage to ourselves.
Without doubt Great Britain is a country of the centre. The Government
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must realise that only the people can get us out of the economic mess we are in. It is impossible for the Government so to organise production that we immediately become as rich as some of our neighbours in Europe. The lesson should be learnt from the vast majority of nationalised production that we cannot do it in that way, and that without incentive and without the people wishing to stay and work in this country we shall not get out of our economic morass. I hope that the Finance Bills, which are not in the gracious Speech, will recognise this.
I should like to take up one point in the gracious Speech where the Government talk about the need to increase agricultural production. Certainly agriculture is the most essential of our industries, the largest single industry, and the industry which can save us most money in our imports from overseas. I should like the Government to realise that past Acts are not always applicable to the present situation. The noble Lord, Lord Peart, referred to Tom Williams—normally known in the Labour Party as "St. Tom Williams"—and the 1947 Act. But I should like to remind him that the 1947 Act kept down prices to farmers. It regulated every price that they received and kept the prices down. It is an entirely different thing in the present day. I should also like to say that the structure of farming needs looking at and the two Acts of the last Session are no help at all, giving a false security to both the tenants of agricultural cottages and the sons of tenants of farms in England. Both of these are very bad for the farming ladder. Farming is the same as any other industry; it is the people who produce the food, not the system. If you do not have a ladder, if you do not have a change, then you will get nothing but Mackie's farming and even that would be a bad thing.
I also believe that the references to agriculture in Europe need following up with much more success than the noble Lord had in the past, because a guaranteed price system is no use unless it follows the market. The noble Lord made some slighting references to Adam Smith. If many more of Adam Smith's policies were used in this country at present we might not be so poor. The noble Lord is perhaps trying to laugh it off, but guaranteed prices are no good unless they follow the market trend. What is wrong

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with the CAP at present is that we are not reducing the price of milk in Europe in line with the over-production. Of course the noble Lord is right when he says that in this country we are more efficient producers of milk, but unless we adopt a pattern which follows the market trend guaranteed prices will not help. What they do, really, is to alleviate the worst effects of the 5 per cent. surplus drop in the price, and so on.
My Lords, we must also welcome the proposals in the gracious Speech for direct elections to the European Parliament. If it is to be effective, then it must be seen to be directly representative of the people of this country, and this is a welcome step. At the same time as we welcome our involvement in Europe, I do not think it is inconsistent to welcome the devolvement of power to Scotland. I have believed in this for a long time. The Liberal Party has supported it for many years, and we welcome the fact that the Government have at last produced a Bill. We should have liked them to produce it with a little more eagerness, with a little more basic belief in it, and perhaps with a little less looking over their shoulder at the danger of the Scottish Nationalists. Nevertheless it is here, and we welcome it. But we do not welcome the single Bill, which is really nonsense. Noble Lords may not have seen it, but, again, it is a great book containing what should be two Bills. If you are devolving power to two separate Parliaments, surely it is only logical to have two Bills. To put the two together is, I think, a grave mistake, and it is one which will to a great degree stultify discussion of the essential points when they arise.
I am very glad to hear that the Government are going to look at the question of devolution of some sort in England. I do not think that the Scottish case rests at all on devolution in England, but if we are not to have that complete over-government about which the noble Lord, Lord Campbell of Croy, talked, then we have really got to look at it. Obviously, federalism must eventually be the answer; because it is nonsense, when you have powers over a wide range of affairs in Scotland being exercised by a Scottish Parliament, then to have 71 (or however many you may have) Scottish Members of Parliament coming down here to Westminster and taking part in discussions
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which do not affect their constituents in any single way. I think it logically leads to some form of federalism; but all the thought that goes into it should be along the lines of reducing the amount of government, and where it is handled by one tier, for goodness' sake do not let us double up with another tier!
I was very glad to hear the noble Lord, Lord Campbell of Croy, say this, because he has been a Secretary of State for Scotland and Secretaries of State for Scotland are apt to feel they are God because when they are shaving in the morning they hear of all their doings and their multiplicity of offices. I was very glad that he at least recognised the great need for the functions to be separate and not repeated in two or three tiers of government. There is nothing more unpopular at the moment than the amount of local government and the expense of local government, as well as the expense of all government in this country, and it is probably as serious an administrative problem as we face today. Of course it is up to England how they proceed, but the case for Scotland has been strongly made.
My Lords, I think the Daily Record, which is not a paper which I read much, is significant as regards proportional representation. I think it is significant, not for Scotland as a whole, or indeed for the Conservative Party or the Liberal Party, but very significant for the Labour Party, because two-thirds of the readers say they vote Labour—or did vote Labour, which is a slightly different thing—and I hope that self-interest will make the governing Party opposite consider PR. I am delighted to hear of the conversion of the Conservative Party, and I hope that one of the points and suggestions which we shall certainly make will be considered and accepted by the Government, because if it is not accepted by the Government they are going to be in grave trouble. In case they do not know, let me give them some more facts. Out of the 71 seats in Scotland, 56 were won on a minority vote; and it is quite possible, in the case of seats in the Assembly, for example, that where three Members are standing then, if the Scottish Nationalist Party get a slight edge, if you care to put it that way, they will win all three seats in six constituencies in Scotland, which will make a considerable difference to the

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balance. It is grossly unfair and I appeal to the Government to reconsider. Nine Members of Parliament of the SNP, who are not noted for their lack of self-interest, have come out strongly in favour of PR, when I think it is probably to their short-term advantage not to do so. I would appeal to the Government to reconsider on this absolutely vital point, which is also vital in the case of the whole of the United Kingdom.
The other point which I think keen Scottish Parliament supporters must bring up is that in Scotland we must have some source of revenue other than the £2,000 million handed out by the central Government. The disposal of £2,000 million sounds like a tremendous amount of power for an Assembly to have, but anybody with any experience in Government, or knowledge of it, knows perfectly well that it is enormously difficult to shift the sheer inertia of spending, and that if you have £2,000 million which is given to you it is very difficult to move it by more than 1 or 2 per cent. within a country. I see no reason at all why a proportion of the oil revenues should not be allocated to the Assembly, to give them some room for movement within Scotland.
There are one or two other points which I regard as of great importance. The experience of Northern Ireland—and I am not talking about the religious troubles or any such thing; I am talking about their technical ability and their technical record of government and of production—shows that agriculture and the attraction of industry should be in the hands of the Assembly. I cannot understand why the Secretary of State or the central Government want to hang on to it. They were two of the most successful Departments in Northern Ireland; and again I would hope that the Government will consider the genuine experience of another devolved Parliament and will place these important matters in the hands of the Assembly. I know that some agricultural matters are in the hands of the Assembly, but the really important ones—for example, prices—are not. Certainly, in the case of industry, the example of Northern Ireland during times of peace has been an example to all of us.
My Lords, I regard these matters of PR, of separate Bills, of agriculture
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and of industry as of great importance, and I think these points really show a certain lack of eagerness on the part of the Government for the measure. I think it looks as though they are giving a sop to the SNP. I think that the people of Scotland will cotton on to this. The Government, I think, should reconsider. The Lord Chancellor's words should be listened to and they should, in the immortal words of somebody, "lie back and enjoy it", instead of grudgingly giving way. I think that it is necessary to make a job of all this, and for all the political Parties to give proper support. I am glad that the Tory Party is supporting it and is not trying to make capital out of a certain amount of support that it is getting in Scotland just now in the hope that an anti-Assembly feeling is growing in Scotland. There is not. The feeling that we need devolution of power, that we need a centre of power and a Parliament in Scotland is very strong and will, I think, grow stronger.
My Lords, I am a Scot and I am also British and I certainly want to remain in Britain. The only way I can see of doing it is by having a really effective Parliament in Scotland, by calling Scottish Ministers by their proper names and not things like "Chief Executive" and derogatory terms like that. At the moment, as a Scot, I am best known in Europe as a football hooligan who beats up Barcelona. As a Briton, I am known as a chap who owes money and is constantly trying to borrow more. If the Government go the right way about it they might be able to put these things right in about two or three years.
4.21 p.m.
Lord PONSONBY of SHULBREDE: My Lords, I understand that it is the custom of this House that those making a maiden speech should speak on a matter within their own experience and should be as uncontroversial as possible. I have been involved in local government in London for over twenty years, a period which has seen a vast change in the organisation and structure of local government in the capital. Now that proposals have been put forward by the Government to devolve additional powers to elected Assemblies in Scotland and Wales, one must ask whether similar

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powers should also be devolved to the English regions, about which we are to hear shortly. Certainly the principle of devolution is one that must be welcomed as it would help to satisfy the articulated demands which have been made for people to have a greater control of their own affairs.
What is the case for similar powers and responsibilities to be devolved to other areas of the United Kingdom? Most important of all is the question of size. The population of Scotland, about which we have heard a great deal this afternoon, is some 5¼ million; the population of Wales is some 2¾ million; whereas the population of London is over 7 million. During my years in London government have witnessed successive Governments of both political persuasions slowly removing from the control of local representatives powers to carry out and implement certain functions on behalf of the people who elect them. The most recent examples are the control of the ambulance service and water which are both now managed by nominated bodies and not by local government. Over the years one has had a feeling that central Government feel that they know what is best for local government and know what is best when it comes to deciding whether particular plans should be implemented in the fields of education, housing or planning; and overall control, particularly in the financial field, by central Government has grown stronger and stronger.
If the devolution proposals are to be taken as an earnest desire by central Government for greater local say by elected representatives in their own affairs, then they are much to be welcomed. However, my fear is that the proposals are primarily a result of pressures which have been exerted by our Celtic neighbours and that they do not really herald any greater desire by central Government to hand over additional powers to locally-elected bodies. Indeed, I believe that in general terms they should be seen as a political sop to particularly persuasive pressure groups.
In London, I believe that the Greater London Council should at least be the regional authority for water and the health services and have supervisory functions in respect of gas, electricity and transport undertakings. It should also
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have the general competence to act for the welfare and good government of the people of London. If the Council's powers in these fields were strengthened appropriately and sonic of the anomalies in the housing field sorted out, surely the Council, of which I have the honour to be the chairman, could act as a prototype for regional assemblies in England.
My Lords, another aspect of the devolution proposals which perturbs me very much, and again seems to me to be an aspect of the proposals which show a succumbing to the outspoken demands of Wales and Scotland, is the proposed accompanying reorganisation of the British Tourist Authority where the non-Celtic membership of the Authority is to be reduced from six to two members with an independent chairman. This will inevitably mean that the voice of England, and, therefore, of London, will be lessened to such an extent that when decisions have to be made in deciding how available resources are to be spent, a greater proportion of monies will be channelled through to the regions—particularly Scotland and Wales—with the result that the position of London, which is the primary tourist earner in the multi-million pound tourist business, will be undermined.
I know that there is a strongly held belief in Government circles that Scotland and Wales do not get a fair crack of the whip of the British Tourist Authority's present programmes. We must therefore conclude that, under the new system, Wales and Scotland will get a bigger share of the cake. If this is so, then England's share will be reduced unless the size of the cake is increased—which seems highly unlikely in present economic circumstances. The facts are that in the present financial year the English Tourist Board will have received 8·9p per head of population, the Scottish Tourist Board 28·4p per head and the Welsh Tourist Board 38·5p per head. Thus, in terms of equity, Scotland is already getting three times more than its fair share and Wales four times more. The position in London is proportionately worse.
My Lords, I fear that London is thought to be so powerful, so economically strong and so large, that there is a tendency by other areas of the country to gang up against London with the effect that London is in danger of not receiving fair

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treatment—and, indeed, this has been our experience in a number of areas in the past, particularly in relation to industrial employment certificates. I hope that the needs of this great metropolis can be adequately catered for in the future.
My Lords, another custom of this House, I am told, is that a maiden speaker should try to stay to the end of the debate in which he makes his speech. I very much hope that I shall be able to conform to this custom, but unfortunately I have two official functions this evening which inevitably means that I shall have to be absent for some period of the debate.
4.29 p.m.
Lord VERNON: My Lords, it is my duty and great pleasure to congratulate the noble Lord, Lord Ponsonby of Shulbrede, on his maiden speech. What he had to tell us, based as it was on his personal knowledge of London and local government, has given us a great deal to think about and we will all hope that he will address us frequently in future. It is perhaps also worth noting in passing that it is satisfactory, from the point of view of the working of this House, that hereditary Peers do not always take their seats on this side of the Chamber.
My Lords, the gracious Speech gives great prominence to the subject of devolution, and so far that has been the major topic of this debate. I am not going to speak about devolution, but about the omission from the gracious Speech of another aspect of constitutional reform; reform of Parliament here at Westminster. Not long ago the report of the Hudson Institute argued that, among other things wrong with the United Kingdom, the House of Lords was outdated, and they recommended that it should be reformed. I remember well the hostility to this suggestion from all sides of the House when the report was debated. It was said that we should concentrate on things that really mattered and the report, so far as that recommendation was concerned, was dismissed as being irrelevant. How wrong they were! This House, as part of Parliament, is close to the top of the tree which governs us; and if the top of the tree is unhealthy, then the whole of the body politic will suffer because people believe that the system is unfair and they therefore
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lose confidence; and confidence is at the root of so many of our troubles today.
But of course it is not just the qualification for membership of this House which is unfair; more important is the fact that representation in the House of Commons is a mockery of the wishes of the electorate. So I believe that there must be reform in both spheres, and that it is much more urgent than most people seem to think. So far as your Lordships' House is concerned, there now seems to be almost universal agreement that the present hereditary basis for its composition is indefensible. The system of Life Peerages is also open to criticism, partly because of the patronage which it confers, and partly because of the age structure which it creates. I am sure that whatever else could be said about the hereditary system, it at least produces an element of youth which is appreciated on all sides of the House.
If there is to be a second Chamber—and I believe that our type of democracy requires it—the only way in which it can command support in the country at large is that it should be elected, or at least that the major part of it should be elected. Just how it should be elected is a matter for debate; but that it should be elected I have no doubt whatever. Moreover, such an elected House should not be the impotent body desired by some Members of the Labour Party. It should have powers almost as great as and possibly greater than it has today, although its powers of delay should in my view depend on the method of election to the House of Commons. If the present first-past-the-post system of election to the other place is retained, then the powers of the reformed second Chamber should be at least equal to the powers conferred by the 1911 Act.
The Earl of LONGFORD: My Lords, may I interrupt? When the noble Lord says "the 1911 Act" does he mean he wants to go backwards beyond the post-War Act?
Lord VERNON: I mean that there should be adequate powers of delay; and the 1911 Act provided for greater powers of delay than we have at the present time. My Lords, I believe—and I think most people in the country believe—that the first-past-the-post system

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is grossly inequitable and should be replaced by proportional representation. That is not only the view of the Liberal Party; it is also the view of a distinguished committee set up by the Hansard Society under the chairmanship of Lord Blake which reported earlier this year.
At present we have a Government with an overall majority in the House of Commons, after having won only 38 per cent. of the votes in the Election, and with the support of only 29 per cent. of the electorate who were entitled to vote. On the strength of such percentages, policies are introduced under the doctrine of the so-called mandate. How can we possibly lift up our heads and claim to be a democratic country when such a travesty of elementary justice prevails? It does not just prevail when a Labour Government is in office; it can and does happen under a Conservative Government. I have only ever heard one argument in favour of the first-past-the-post system; that it gives us strong government. I was brought up on this myth, and I swallowed it for many years; but no longer. When the two main Parties are as divided in principle and policy as the Conservative and Labour Parties are today, the system gives rise to a prolonged tug-of-war in which there is no winner and the country is the loser. It was graphically described not very long ago by my noble friend Lord Coleraine when he said that if what we have had in the past few years is strong government, then, for heaven's sake, let us have weak government.
We have heard a lot lately about the extent of the people's disillusionment with Parliament. No wonder they are disillusioned when the system is so outdated and so basically unrepresentative. Let us begin by reforming our Legislature, which should set the tone for the whole of our public life; we shall then have a much better chance of bringing about the much needed economic rejuvenation which we all desire. The Labour Party do not want reform. The present system which enables them to carry out the social, economic and perhaps, who knows, constitutional changes which do not command the support of the country at large, suits them very well, just as, for the rest of us, it opens up serious dangers to which our attention has lately been drawn by Lord Hailsham of Saint Marylebone. This means that only the Conservative Party
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can initiate the reforms which are required, reforms which I believe would be supported massively by the electorate if they were consulted. It was the Conservatives who brought in the reform of the franchise in 1867. Let it be the Conservatives who initiate proportional representation in 1977. The opportunity is there: let them seize it with both hands.
4.40 p.m.
The Earl of PERTH: My Lords, I count myself fortunate in being the second speaker to congratulate the noble Lord, Lord Ponsonby of Shulbrede, on his maiden speech. If I may say so, it was wise and full of good things. It also—something which is not always so in your Lordships' House—had the great value of being short and to the point. I am not surprised, because at one time or another I have had occasion to work with the noble Lord on matters of planning and matters concerned with the GLC. The noble Lord will know particularly to what I am referring. I have always been struck by his common sense and his readiness to listen. I know that I speak for all your Lordships when I say that we look forward to further contributions from him.
The Queen's Speech contains these momentous words:
"A Bill will be introduced for the establishment of Assemblies to give the Scottish and Welsh people direct and wide-ranging responsibilities for their domestic affairs …".
We have heard today that the Bill has now been published. I rejoice, because for many years I have again and again urged in your Lordships' House that we should have such an Assembly for Scotland. I am competent only to talk about Scotland, and I am sure the Welsh well understand it.
I have two main reasons for arguing in favour of an Assembly: first, my conviction that Scotland should run its own show as regards its home affairs. Then, if things go wrong, we know who to blame; ours is the blame. For those who are Scots, it is quite easy to go to Edinburgh and bully, if that is the right word, our chosen representatives and we can be sure they will listen to us. Whitehall is a long way away; and Whitehall has grown too powerful. Centralised Government has to be stopped and the process reversed.

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Whitehall does not know best. If we had had a Scottish Assembly can your Lordships imagine that we should have had the latest reform of local government that was thrust upon us two years ago? They would never have accepted such an arrangement, with its monstrous—for that is really the only word I can use—Strathclyde covering over half of Scotland. I know many of your Lordships tried hard to get this changed, but to no avail.
It is my hope that the Assembly's first task will be the reform of local government. That should be the first item on its agenda. It would be a cause which is right and which would be popular. It is the kind of thing that would be good for the Assembly to cut its teeth on. I also rejoice over the Bill for devolution because I am convinced that if the Assembly had been longer delayed we should have faced real trouble in the United Kingdom. There would have been a new Irish question: the earlier one haunted our forebears and its scars still remain.
I beg those who oppose devolution—perhaps there are not many people in this House but there are some in another place—to remember and to pay heed to the lessons of history. I feel confident that the Assembly will not lead to independence if it is rightly set up but, rather, will avoid that danger. Independence is something which I am sure the great majority of the people in Scotland today do not want.
I congratulate the Government on bringing forward this Bill, despite the difficulties of the present time. The noble and learned Lord the Lord Chancellor said there was no right time, and I think that this is so. But the great thing is to go forward when the chance offers. Again, I believe that the noble and learned Lord is correct when he says that the Bill is broadly right—I believe those were his words—as regards the powers and functioning of the Assembly. It is certainly a very much better proposal than that toothless debating society which was proposed at the Conservative conference in Perth last year. I hope and believe there has been progress in the Conservative Party since that time.
Having said that I broadly go along with the powers and functions, there is to my mind one fundamental change and two lesser but none the less vital ones
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which must appear in the final Bill. The fundamental one is how the Assembly is to be elected. As almost all the speakers today have pointed out, the present Westminster model of election, which is being proposed, is wrong. We must have some form of proportional representation. I say "some form" because I do not very much care what form it takes as long as it ensures a balance of representation in Scotland of town and country. I also believe that its decisions and actions must represent the wishes of the majority of the Scottish people. If we get those two things, the exact form seems to me not to matter. I hope very much that this change will take place in another place. If not, then there is a job for your Lordships' House to do, and I am sure we shall do it. I know that certainly many Scottish Peers believe that this is a vital matter for the Assembly. I have noted recently, and your Lordships will also have seen, that a Committee has been set up to deal with this very question. It is a good thing that the noble Lord, Lord Ritchie-Calder, has been appointed its Chairman: I am myself a humble member.
I said there should be two other changes in the Bill. The first is that the Assembly must have some revenue-raising powers. It really is an absurdity that the two local government bodies which are subservient to the Assembly have such powers, while the Assembly has none. Whatever else is done, something like this cannot last. It makes no sense. My second change, which is also important, if not fundamental, is that the Assembly must have more economic functions. It must be able to say something on economic affairs, over and above having control of the Scottish Development Agency. Some of your Lordships will remember the Toothill Report, and the new and novel point that was made there that one should encourage new growth points, and not necessarily ailing industries. That was not acceptable to the powers that be at that time, but if the Assembly wants to encourage growth points, and schemes such as Oceanspan, then it should be allowed to do so. Therefore, I hope that there will be a change which will give it these powers.
If the Assembly is rightly elected, and the two other changes which I have mentioned are made, then I feel very

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confident that Scotland can, and will, help the United Kingdom towards its recovery. To those in Scotland who are fearful of what it portends—and I am sorry to read that the Scottish Confederation of British Industries and even some noble Lords in this House are antagonistic ("oppose" is not the right word) to the Assembly which we are proposing—I say have courage, and have confidence in the people of Scotland. Help guide them, but do not oppose what is proposed. These are momentous times. It is my hope and belief that devolution, and the setting up of the Assembly in its right form in Scotland, is an act of the Parliament at Westminster that will never be regretted.
4.52 p.m.
Lord GORDON-WALKER: My Lords, my noble friend Lord Ponsonby of Shulbrede has gone, so I shall not be able to congratulate him on his maiden speech as I meant to do. I should like to say one word on devolution. I agree very strongly with one remark of the noble Earl, Lord Perth—though not with only one—which I want to emphasise. He said that the Assembly should have revenue-raising powers. It seems to me that one could put this more strongly and say that it should have power to raise the greater part of its revenue. It is a very great error in the present proposals that the Assembly is to be so dependent on a grant from central Government. The noble Earl said that after devolution Scotland would have only itself to blame. I am afraid that that is not true. Scotland will always be blaming central Government for not having made the grant a little bigger, and will blame them for everything it cannot do. It will say "We could build another 100,000 houses, if only they gave us more money". So I believe that that is a very great error.
I should like to talk about one or two economic matters which have not yet been raised in the debate. Before we consider the detailed ways and means of righting our economy, we must first fix the major strategic objectives which we should set ourselves. In my view, the most important of these is to encourage and secure industrial investment before economic expansion begins, not, as normally happens, after it has begun. If we leave this too late, we will draw in too many imports when expansion comes and get into balance of payments problems, as we have done so
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often in the past. The only way to get an export-led expansion is to make room for it ahead of time, before the economic expansion is upon us. This is not easy to achieve, because it is against the nature of management. Its instinct, which is perfectly intelligible, is to invest only when it can see certain returns. But that, as I have argued, would be too late.
There seem to me to be two corollaries which follow from the points I have made. First, we have to shift manpower from non-productive to productive industry—both private and public industry—and this must be begun betimes, because we shall not have a great deal of time and it takes a long while to carry through that kind of process. The next corollary is quicker of achievement. We must allow industry—again, both private and public—to make sufficient profits. These industries must be allowed to charge realistic prices, and to keep a larger part of the proceeds of their work. It also follows, of course, that it would be right in those circumstances to take measures to secure that profits are, to a proper extent, really invested.
In this connection, I should like to say a word about taxation policy and here, if it interests anyone, I must admit that I have changed my mind. I was brought up to think that direct taxes were very much preferable to indirect taxes, because indirect taxes are flat taxes and, therefore, fall mainly upon the poorer sections of society, whereas direct taxes can be graded and adapted to the capacity to pay. This is, of course, still true. It was once a good guide to fiscal policy when relatively few people paid direct taxes. But today an enormous proportion of the public pay direct taxes, and it is clear that they dislike doing so—the workers no less than anyone else. No one likes to see deductions from his pay packet, and no one likes to write a cheque in favour of the Inland Revenue. Of the two evils, I am quite sure that the majority of our people today would prefer to have their money taken from them—because that must happen in one way or the other—in ways which they notice less; that is, by indirect taxes on cigarettes and drink, and even by VAT. So my advice to the Chancellor would be to consider increasing indirect taxes, making a corresponding decrease in direct taxes.

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My final point concerns the present fashionable fad of monetarists' theories. Of course, as with all modish economic theories, they contain some truth, and this one does. It is that there is too much money in the economy and it needs to be reduced. But it would be very dangerous and damaging to carry this theory too far, and I hope that the IMF does not attempt to do so, or, if it does attempt, does not succeed. There are at least two main aspects of the monetarists' theory which limit its applicability to the real world. First, it rests upon very uncertain statistical bases. It is impossible to measure the money supply accurately. Assumptions must be made about the definition of M3, in particular, and these assumptions arbitrarily determine what shall be included in, or excluded from, M3; and different assumptions, all of which can equally be made, lead to very different results.
Secondly, the monetarists' theory, like all economic theories, rests upon the concept of economic man—that is why all economic theories have to be limited in their applicability—and therefore leaves out a great deal of human, psychological and social life. We must remember this when we consider the calls that are now being made, in the name of the monetarists' theory, for slashing cuts in Government expenditure. Cuts on the scale demanded could be made only if social services, welfare, et cetera, were decimated and this would undermine our best hope of mastering inflation. We can master it only if people, not Governments—I agree with what the noble Lord, Lord Mackie, said—fear inflation more than other economic evils, including unemployment. If they fear other things worse you get inflation; if they fear inflation worse you begin to get a cure to inflation. Indeed, that is beginning to come about through the great achievement of our voluntary incomes policy. If great cuts were made, this would create a popular reaction which would destroy the very basis of the voluntary incomes policy. Thus the aim and object of monetarist theories, which is to control and reduce inflation, would be self-defeating and contradictory.
If follows, therefore, that we must be very cautious about how we carry out, how far we carry out and on what scale we carry out these monetarist theories.
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I suggest that we should apply only a moderate version of the theory. It seems to me that it is a golden rule, based on our past experience in these matters, that all the fashionable theories of the economists should be tempered with a very good dose of lay common sense.
5.1 p.m.
The Earl of SELKIRK: My Lords, the House has listened with very real interest to the speech which the noble Lord, Lord Gordon-Walker, has made, dealing as he has with the utmost realism with some of the problems which face us today. I will add only to one point that the noble Lord made regarding taxation. It is not always realised in this country that the standard of honesty, in taxation terms, is probably very much higher here than in any other country in Europe. Perhaps I say that too widely, but my personal experience of some countries is that the standard of honesty there is much lower than it is here.
I hope that the noble Lord will excuse me if I do not follow him, but there are many speakers and I shall speak shortly on one point regarding devolution. I am going to take it that the Government intend to put through this Bill with all the strength, machinery and mechanism that they can. There are two unchangeable aspects. One is the number of Parliamentary representatives from Scotland at Westminster. The other is that financial control will be in London. Apart from those two exceptions I take it that most of the Bill is probably negotiable.
I believe that it is of the utmost importance that we should make a success of the Bill. The week before last, I think it was Mr. Wolf of the Scottish Nationalist Party who said that he was going to start an army, a navy and an air force in Scotland. One does not need to have even a passing acquaintance with what happens in Service Departments to know either that those remarks were made in complete ignorance of what modern armaments are, or alternatively that this gentleman is living in a complete fairyland and is of the utmost danger to his fellow countrymen. The other point I would make—and here I agree with the noble Lord, Lord Mackie of Benshie, who is not here—is that we must do something about local government. Frankly, I feel that it is very unwise that we should not have

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dealt with this problem before moving on to an Assembly for Scotland. We have to ensure that local government is a success, otherwise we shall certainly move much nearer towards asking for independence. Not having read the Bill, but having glanced at it, may I ask the noble Lord one question. Does the noble Lord wish to speak?
Lord KIRKHILL: My Lords, I apologise for intervening and interrupting the noble Earl. Perhaps I did not hear him aright, but could I say from this side that it is quite clear that the question of local government will stand devolved to the Assembly. However, I may have misunderstood the noble Earl.
The Earl of SELKIRK: My Lords, I meant to say that I believe it will be very difficult for the Assembly to alter local government, but they will have to do so. If I may ask the noble Lord one question, apparently £3 million are being put aside to build the Parliament Chamber. What shape is that Chamber going to take? Who has been consulted as to its shape? We in this country have been accustomed to our own form of Parliament, with two sides to it. Other countries prefer a circular Assembly. I do not wish to enlarge upon the relative benefits of these alternative methods, but they make a difference to the way in which Parliamentary discussion is carried on. I should like to know whether anybody has been consulted and also whether a decision regarding the shape of the Parliament Chamber has been made.
I am frightened of the Bill. This is what the Law Society of Scotland said at an earlier date about the general plan:
"Good will, consultation, flexibility and co-operation will be required".
I think that that statement is true, but it means in fact that this suggestion is not good enough. If there are two entirely separately elected Assemblies, one cannot count purely upon co-operation to make them work; there must be something more definite and clear cut than that. Two Assemblies of a totally different nature will never wholly agree. The essence of this is responsibility, and that is where I find the Bill defective as it stands at present. Where does responsibility lie and who is going to be responsible?
There is to be a Privy Council. No doubt the Privy Council will be able to
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define where responsibility lies, but the ordinary man wants to know who will be able to answer his questions and who will have the administrative responsibility, whether this he for housing or for any other aspect of his life. The ordinary man must know where he stands. He is not going to go to the Privy Council to find out the answer.
I must admit that I am absolutely horrified by the Bill. There are something like 50 pages in the Schedule describing, so far as I can see, what are the devolved subjects. Who on earth is going to understand that except a high grade, constitutional lawyer? Can we not get away from defining devolution by Acts of Parliament and on to subjects, and simply say, bluntly, that these are the subjects which will be the responsibility of the Assembly? If we do not do that we are in great danger of so confusing the public that, whether or not this is a good Bill, it will be thought to be too complicated for people to understand. May I ask the Government to look extremely carefully at this Bill to see whether it is necessary? If I may say so, this means no more than going round the Departments at Westminister and saying, "What do you want to hive off?" That is not the way to do it. It is the worst form of devolution and I ask the Government to think very hard about whether or not they have got hold of the wrong end of the stick.
To turn to another subject, namely, law, this is not a subject that I am very good at, but who is to be responsible for law? I have heard Earl Jowitt say, "I am concerned about the Statute Book". I believe that the noble and learned Lord, Lord Gardiner, has made the same point and the noble and learned Lord, Lord Hailsham of Saint Marylebone, has written in very much the same vein. Law is not just a collection of rules tied together with a piece of string. It is a corporate, organic organisation which must hold together, an organisation which in most cases has evolved in Scotland from practice and principles over many years. Who is going to look after law and, if I may say so, who is properly looking after it now?
So far as I know, a certain amount of law lies with the Secretary of State, while some of it lies with the Lord Advocate.

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Other parts of it lie with the Department of Consumer Protection and yet others with the Departments of Trade and Industry. And so it goes around. It is not satisfactory now and I am bound to say that it will be wholly unsatisfactory if the laws of Scotland are to be decided by two entirely separate Assemblies. For good government and for the satisfaction of the people of Scotland it is very important indeed that at some point somebody who is well qualified should be responsible for the quality of the laws. I am not speaking about policy. Policy is a matter that Departments must take care of. However, the laws should hang together as one organic whole and I ask the Government to look again at this point.
I know that the theory is there. Commercial law will probably be for the United Kingdom, while private law will be for the Assembly. But private and commercial law run very closely together. Bankruptcy may well be a matter of commercial law but property law will probably be a matter for the Secretary of State. And when one comes to diligence or enforcement, that will be for the Lord Advocate. One has to watch very carefully that these aspects do not get so entangled with each other that the position is wholly complicated and will not be understood by the people of Scotland.
I will come to one other point on this of the more general question of responsibility which was raised by the noble Lord, Lord Gordon-Walker. If there is one lesson in constitutional evolution which is fairly consistent, it is that calling together a representative Assembly which is not responsible has always failed. This Assembly will have all its money provided for it. It will have no responsibility for finding any of the sinews of war which will enable it to do what it wants to do. Its members can build hospitals, roads and schools and then say, "Oh, those blessed people in London will not give us the money". This is the height of irresponsibility and in my view it is very dangerous indeed. To my mind responsibility is the essence of democracy and unless you get responsibility you cannot get democracy working properly.
This is even more dangerous because there are many organisations today which
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have power without responsibility. There are too many of them: for instance, there are all the media, including the newspapers and television. They have immense power with no responsibility. Demonstrations take place from time to time, and they have power with no responsibility. To some extent, trade unions have power without always the responsibility which flows from it. I ask the Government to think hard of the dangers which arise, and of the dangers to Parliament which has responsibility but, very often, not power. Undoubtedly, to build up any organisation with power but without responsibilities constitutes a very real danger.
I have drawn attention to these matters because they go fundamentally to the way in which this Bill must be produced. I have not enlarged on them because we have not had time to consider it properly; but I hope that the Government will consider these points extremely carefully.
5.12 p.m.
Lord SOPER: My Lords, I venture to try to attract the attention of your Lordships' House to another part of the governmental forest and to an entire change of scenery. I want to talk about the homeless, and about nothing else. I think it is unnecessary for me in a debate on home affairs to justify the inclusion of speculation and thought about those who have not a home and who, in my judgment, ought to have one.
Some 18 months ago as chairman of Shelter and on behalf of a number of other organisations connected with the problem of homelessness, I ventured to ask a Question in your Lordships' House as to what progress had been made in the light of a Consultative Document on homelessness which had just appeared. Also, on two particular issues and one general issue, there were the questions as to what was the programme of the Government in toto towards the homeless and what was the intention of the Government with regard to the confusion between the responsibilities in local government of the Social Services and the housing authorities. The Answer which was given to me by my noble friend Lady Birk was that the Government were seized of the importance of the issue and convinced of the necessity for legislation.

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Some six months afterwards in another place, Mr. Crosland, who was then the Minister responsible in this area, said that the legislation was not only desirable but would be effected and that legislation would crystallise the situation as between local government, Social Security Departments and the housing authorities. As if to corroborate that a junior Minister in the same Department in February of this year—and being a Methodist I attached a great deal of credibility to what he said—announced his conviction that in the early part of a new Session such legislation would be put into effect. Therefore I think it is not an extraordinary thing that many of us have been shocked and bewildered at the total absence of any reference in the gracious Speech to the fulfilment of these promises and undertakings so frequently and assertively made.
As if to add insult to injury, provision was found in the gracious Speech for the criminal prosecution of those who squatted under such circumstances that they were liable to prosecution. This seems to me to be adding insult to injury, putting the punitive cart before the administrative horse. It rather strengthened the feeling that many of us still have; that is, that this is a situation which cannot be tolerated and about which it is necessary to make some kind of démarche, which I am trying now to do.
The problem of homelessness is not only acute but is growing. If your Lordships are not already aware of the facts, I will endeavour to acquaint you of the way in which this problem of homelessness has become more intense in the last two years. When I asked the Question the available government figure for those making applications to local authorities for somewhere to live, temporarily or permanently, was 33,000. The latest figure furnished by the Government today is 50,000, which is a 50 per cent. increase. Although we cannot measure human suffering in terms of quantity, because of course it is essentially qualitative, it is a growing menace which has been exacerbated by the process by which, admittedly in the conditions of financial stringency which exist, a number of local authorities have now been reducing their expenditure on the growing problem of homelessness rather than increasing it to meet that growing need.
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In October of last year the Dorset County Council reduced the amount of time in which it believed it was required to provide temporary accommodation in bed and breakfast—a most squalid and in many cases a most expensive and unsatisfactory form of temporary accommodation—and further limited the availability of those requiring home funding to certain groups of people, and particularly those who had more than one child in the family. This resulted in the application by a Poole family so expelled from temporary accommodation to Shelter: Shelter advised them to seek redress in the courts and offered to support their case in the High Court. The High Court's decision was that there is no necessary requirement on local authorities to provide more than temporary accommodation and it is their right to select those who have priority rights to the benefits of such efforts. This was supported by their interpretation of the 1948 Public Assistance Act in which they said such temporary amelioration of the lot of the homeless was all that was required by that legislation. I regard that as sufficient evidence to suggest that there was a grave dereliction not only of promise but of duty on the part of the present Government to omit from their proposed legislation the kind of redress of what is now once more a growing evil.
Perhaps your Lordships will permit me to give two more up-to-date illustrations of the way in which that evil has grown. The Slough Council, in conjunction with the Berkshire County Council, came to a very sensible arrangement by which they shared the responsibility for the homeless, the county council providing the particular funds and the local council carrying out the particular work; until the local council decided that they would implement some of the provisions that were already in process in Dorset and elsewhere, limiting those amenities and thereby actually finding that the county council was in a position of being able to throw out on to the streets some of those for whom they had been caring. It is also true of the Three Rivers local council, and for all I know it may be already part of the programme—under stringency, I quite agree—of many another local authority.
I have some knowledge of these matters, as have many of your Lordships, and I

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would not dispute that, but I would claim that this is an intolerable situation, not only a breach of what was assumed to be an undertaking but also a failure to recognise the sense of priorities in one of the most difficult and dangerous situations in which we find ourselves in our community today. He is not in the Chamber at the moment but I remember that in his speech on the humble Address my noble friend Lord Pitt of Hampstead made a most impressive reference to the way in which the Government, in matters of housing in Inner London, had repented of their sins. He indicated there was not enough joy in heaven at such repentance, but quite an amount of joy, perhaps, in this House at such repentance.
I have taken care to see what the Government have been saying since the White Paper was publicised. It seems to me that the Minister of Housing in another place has given some evidence of an approximation to the penitence form. I want to be fair to him in eliciting from a rather dusty speech what he had to say about the present situation. He said:
"Gone, temporarily, but not forgotten"—
That was his verdict on this particular piece of legislation.
"In due time"—
a dangerous phrase—
"it would no doubt come to pass. They were working on it"—
not an elucidating phrase—
"and were doing their best."
I take it from that that they have been somewhat impressed by the chorus of disapproval to which they have been subjected in their failure hitherto. This, I believe, is a matter upon which great thought has to be given, and I would presume in a moment or so to say something very near to my own convictions on the matter. He also suggested that the process would not be unduly prolonged. We do not want a process to be unduly prolonged, or a process for which no time schedule has been arrived at. We have heard all this before. The numbers increase weekly; the problem increases daily. It is a question of priority, and there is no priority more imperative than that of providing some kind of home for those who have no homes.
The Minister also said, in addition to his promise to help and advise—once again sincerely meant but hardly very
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satisfactory as a proposition for those who have no homes to go to—that provision would be made for discrimination between various groups of people, some of whom would be more amenable or more suitable for the programme of home-finding than others. Will your Lordships allow me to say a word or two about the philosophy which lies behind that, which I detest and believe to be unacceptable. Food, clothing and shelter have been regarded as the trinity of necessaries. It is a fact that shelter is very largely the poor relation of that trinity. If I were to translate into terms of food what is the proposition of Her Majesty's Government in terms of shelter. I believe it would be seen to be totally unacceptable. We are prepared to say about homes and a place to live that this can be a matter for those who deserve it, or who can be so accommodated, temporarily or otherwise, but it is not of immediate and peremptory importance. It cannot be regarded as statutory; it cannot be regarded as something which has to be done.
Supposing we were to find someone who was without food. Would we say to them, "You have not been very long without food, and therefore we cannot provide you with the necessary food until you have proved your consistency in starvation for a sufficient length of time"? Supposing someone came to us and said, "We have not had any food for a long time", should we say to them, "When you had food, you were such bad cooks, so we don't provide you with the necessary food which you may contaminate by your inefficient cooking"? We would not say to people, "If you have behaved badly you will not be fed". But at Three Rivers and in Slough, and also in Dorset, the provision includes such measures as would exclude those who for reasons which can be regarded as pejorative or unsatisfactory, have failed to live in the accommodation provided because arrears of rent or various other delinquencies have been taken into account.
This is a civilised conviction which belongs to a society which would claim that this is civilised practice, that these three are peremptory. I would isolate in the argument food and shelter. Whatever the cost, whatever the restrictions elsewhere, whatever the size of the support grants, and whatever the claims of

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competitive issues in local administration, if we are to claim civilisation as part of the community in which we live, we cannot afford to temporise with the problem, of which I know a good deal as I visit day by day 150 or 200 homeless young people and others, of whom the number increases and about whom Crisis for Christmas has already provided, almost providentially only yesterday, increasing evidence as to the sheer misery and the sheer terror which belong to this homelessness. That applies particularly to those 700,500, of whom one in five are girls of adolescent age.
My Lords, in his book, Barnaby Rudge, Dickens said:
"To be homeless is akin to nothing more than despair".
There may be some of us who at this time of year will remember as poignant and relevant the Christmas story of a homeless baby. But I believe there would be none of us who could not feel that, were we to sit beside those who have no home and endeavour to comfort them, nothing would be more imperative than to recognise the over-arching and overwhelming responsibility, whatever it costs; as we feed those who are hungry, we must see, however inadequate it may be in many respects, that we clothe people who are naked, and that in fact we give to people who have no home the opportunity of a hearth fire. This is my plea. The Government may well feel that the stringency of the present economic situation is a deterrent to any practical action of a comprehensive nature.
I would append one or two very simple comments. Let the Government appeal to voluntary associations. Let them give voluntary bodies a greater opportunity of co-operating. They will find it cheap and effective. Let them make emergency measures to prevent the kind of corruption of what is assumed to be the attitude of the Government towards homelessness; and let the Government proceed as quickly as possible with the promised legislation. I believe that will be not only a feather in the Government's cap, but one of the most sure and certain ways to the reclamation of the society in which we live.
5.27 p.m.
Lord O'NEILL of the MAINE: My Lords, I must apologise for inflicting upon you my detached remarks (I will not call it a speech) on devolution—a subject
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about which I know a little, if your Lordships will bear with me after having heard several speeches already on this subject. I expect your Lordships will hear several more during the course of the debate. How wonderful it would be if home rule could be conferred on Scotland and Wales without endless hours of argument. Some English people fail to understand the strong feelings which exist on the periphery of the United Kingdom, areas which have sometimes been known as the Celtic fringes. This lack of understanding is particularly strong among those who feel that anything North of Oxford is Indian territory on the far side of the new frontier. But one would have thought that, with the example of Ireland in front of them, they would realise that it is a very important, and has become a very urgent, subject. If your Lordships are not interested in the example of Ireland, you might then quickly say, "Ah, but look at Ulster! That is an example which no one should follow". But in fact, this is not correct.
Stormont had some very, very useful things about it. The Ministry of Agriculture was very highly regarded by people throughout the country who know about these things. If I might give your Lordships one recent example, brucellosis among cattle was eradicated in Northern Ireland before it was eradicated anywhere else in these islands. The Ministry of Commerce succeeded in persuading that famous international firm, Duponts, to come and set up a factory in Northern Ireland. This was their first European investment. May I add that they came to Derry, where they employed 85 per cent. Catholics. That is another Ministry which had a wonderful record behind it. We had motorways in Northern Ireland before they existed in Scotland; and when the Treasury tried to stop our motorway programme I appealed to Lord Home, who was then Prime Minister—in fact I came over and saw him in the Cabinet Room—and, despite the fact that he had by then become a Scottish Member of Parliament and knew that Scotland had no motorways, he allowed us to continue with our programme. So do not be misled by what has happened in Northern Ireland. Northern Ireland has been ruined not by its administrative set-up but, I fear, by bigotry.
As a purely personal view—and my good friend Lord Davies of Leek may not agree with me on this—I feel, in a very

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short reference to Wales, that they should be given the same powers as Scotland. I am sure that the Welsh Assembly will ask for these powers at an early date. Why not give them now, rather than let a grievance arise in Wales that they have not been given the same powers as Scotland.
With regard to local government reorganisation, I feel—other noble Lords have mentioned this—that it is a tragedy that this great local government reorganisation took place, especially in Scotland. I do not believe it would have happened had it been realised than an Assembly was to be set up in Edinburgh. It would have been far better, in my view, for the Assembly to reorganise local government, rather than that we should have had the reorganisation of local government first and then the Assembly. As I think the noble Earl, Lord Perth said, this is something which I am sure they will deal with very early on in their lives.
My Lords, might I appeal to distinguished Scottish and Welsh MPs to stand for their new Assemblies. It would be a wonderful thing if the Westminster tradition could be carried on in the new Assemblies, by people who, for several years, had themselves been Members of Parliament at Westminster. So I hope that Members of Parliament will not feel it beneath them in any way to stand for these new Assemblies, because it seems to me essential that people with the Westminster tradition in their blood should be prominent members of these new Assemblies. On a Party point, if I remember rightly, before 1970 Mr. Heath wisely asked Lord Home to chair a committee to inquire into some sort of devolution for Scotland. Modest proposals emerged. A start would have been made if only they had been proceeded with in 1970 or 1971.
Lord CAMPBELL of CROY: My Lords, if the noble Lord would allow me to intervene, of course the trouble about that was that the Royal Commission on the Constitution had been set up to look into all these matters. It was impossible to start making moves until that Royal Commission reported. In fact my information was that they would probably all have resigned if any action had been taken.
Lord O'NEILL of the MAINE: My Lords, naturally, I fully accept that amendment to my remarks, because the noble Lord was the Secretary of State and he knows all about these matters. But I still feel it is a great pity that that committee was set up and made recommendations, and that it was impossible to carry them out. I think the Tories would have gained considerably in Scotland had they been able to carry out even those modest proposals. But—now I am coming to the real point of my remarks—it is too late now to revert to them. I feel that anything like the pre-1970 proposals would be regarded as too little and too late. Therefore, I hope that will be carefully considered; I am sure it will be, and that Scottish aspirations will be taken into account.
People have become so used to Great Britain being ruled from London that they have failed to understand that a federal system operates in Canada with 20 million people, in Australia with some 12 million people, in America, and, I suppose really a much better example, a European example, in Germany. Is it really supposed that we run our affairs far better than those great countries? I doubt whether they would agree with that. Earlier I said that Wales should be given the same powers as Scotland. But in my view Scotland should have the same powers as Northern Ireland was given in 1920, or as a Canadian Province enjoys today—for instance, Nova Scotia—but not the titles which Northern Ireland once enjoyed.
Perhaps I could digress for a moment of history and recall to your Lordships how it came about that Northern Ireland found itself with a Parliament, a Prime Minister, a Minister of Finance and all these grand sounding titles. It was at the time of all those Irish problems in 1919 and 1920 that the Irish declared, or many of them declared, that they wanted dominion status. Lloyd George said that they could not have dominion status, because if they had it it would lead to the break-up of the British Empire. But being a man of great Welsh ingenuity, he decided that if he could not confer dominion status on Ireland he would confer dominion titles on them, and so Parliaments were set up, with Prime Ministers and Members of Parliament. If you go to Canada, you will find that in

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the Legislative Assemblies they have a Premier, not a Prime Minister, that they have a Provincial Treasurer and not a Minister of Finance, and that they have Members of the Legislative Assembly and not MPs. Therefore, it was most ironic that these dominion titles, conferred by Lloyd George on the South of Ireland—which never operated because the Government of Ireland Act never came into operation in Southern Ireland—should have been left with Northern Ireland, who had never asked for them. This is often the way of life.
So I am not suggesting for a moment that we should have a Prime Minister of Scotland, or a Parliament; but I am suggesting that Scotland should have the same powers as Northern Ireland had conferred on it in 1920, or rather, to use a modern up-to-date example, as a Canadian Province has today. Is it really to be supposed that Scotland could not be entrusted with the same powers as Nova Scotia has in Canada? I feel that this should be very seriously considered and not brushed aside, because I have no doubt whatsoever, knowing the Scottish people as I do, that they will soon demand and receive those powers.
I understand from the ticker-tape that Mr. Foot announced today that if another place decided they wanted a referendum with regard to devolution he would consider it favourably. In my personal view, if a referendum takes place it should be confined to Scotland and Wales and not to the United Kingdom as a whole. After all, it is Scotland that wants devolution, and it is for the people of the United Kingdom as a whole, I fully admit, to confer devolution on Scotland; but at the same time it seems to me at the very least rather curious that the people of Cornwall should have the right to decide whether or not Scotland should have devolution. It seems to me that if you are going to have a referendum you should find out what the people of Scotland and Wales themselves want. The result of such a referendum might be a very unpleasant shock for the Scots. Nats. and Plaid Cymru, but it seems to me that it should not take place in the whole of the United Kingdom.
Finally, a word about proportional representation. None of us really knows, despite various polls, what is the strength of the Scots. Nats. in Scotland today.
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But one thing we know is that, in certain circumstances, on 30 per cent. of the vote the Scots. Nats. could get more seats at Westminster than any other Party in Scotland. Having got more seats than any other Party on the first past the post system under which we operate at the present moment, they could then go to Downing Street and say, "We have played our part in these affairs in a constitutional manner, and, Mr. Prime Minister, we now want independence." Whereupon the Prime Minister of the United Kingdom would quite naturally tell them they could not have it.
Once again with the Irish analogy before us, is it not likely that some small element in the Scot. Nats., having won on a constitutional basis and having, as they see it, been denied the fruits of their constitutional victory, might then take to violence? This is something that should be seriously considered. This is one of the reasons why I was so honoured to serve on Lord Blake's Committee, and this is why I am a strong supporter of proportional representation, if only to make it impossible for the Scots. Nats. to win more seats than any other Party in Scotland under the present electoral system.
I have said far too much already, my Lords. I know you probably have more speeches on devolution to come. I thought that the noble Lord, Lord Pitt, put it so well on Wednesday when he said that devolution had its difficulties, had its dangers, but that it was something we had to face up to. I heartily agree with what he said, and I hope that the majority of your Lordships in this House will support at least this Bill and, if possible, a stronger one when the time comes.
5.43 p.m.
The Earl of LONGFORD: My Lords, in any discussion on Northern Ireland the noble Lord, Lord O'Neill, has a unique place in our esteem if only because of the sacrifice for principle he made when he was Prime Minister. He and I have had many discussions on these matters. He regards me as a congenital optimist and I regard him as possibly being on the pessimistic side. It may be thought that up until now he has had the better of that argument, but who can say? Personally I am optimistic in a new sense because of the emergence of this force of

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the peace women, who I believe hold out new hope altogether for that afflicted Province. However, I shall not pursue that topic.
I must fail to say more than "ditto" to all that was said by the noble Lord, Lord Soper. I labour in the same field as the one to which he referred, and I should like to lend any support I possess with the utmost fervour to the strong line that he took. But it is as well for a Back Bencher to confine himself to one topic, and mine today will be one that has not been overworked in this House. I think it has been dealt with only once before, and that was by the noble Baroness, Lady White: it is the question of battered wives. I am asking the Government to act in this matter, but before we reach that point perhaps we could look at the question in some perspectives.
It may be asked, "Are more wives being battered than used to be battered"? No statistics are readily available, but I think there is little doubt that a great many more wives are now being battered. This springs, as one might expect, from the breakdown of various aspects of family life and the weakening of what is sometimes called "The extended family". In former times the extended family—the grandparents, the uncles, the aunts, and all the other relatives—provided a refuge, a kind of long-stop, and also a kind of model where such a model was lacking in the home. Nowadays this is not the case. Nowadays the children in a home where battering is going on are left with the example, and they are left to the tender mercies of just one violent man.
Of course our present society, in which our children are influenced through television, books and films, et cetera, condones violence in a way that reaches the home in an altogether new fashion. Boys who rampage on the soccer fields are affected by these influences, and very often they come from violent families. The point is that they in their turn will become violent husbands. We are today in a kind of mid-way situation. We have just got started in dealing with this problem. A few volunteer bodies are offering refuge, chiefly to the women and children involved. One of these homes has started a separate place for men, but on the whole the refuges are for women and children.
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Society, speaking for the Government and the local authorities, gives these homes an absolute minimum of help, and apparently we do not yet accept the fact that we have an interest as well as an obligation to look after these people. The obligation should be obvious to anyone of compassion or ethical feeling, but the national interest is that the battered children become the batterers of the future. This is becoming clearer and clearer. Up until now people might think that those who have been battered in youth would be, so to speak, put off battering for life. But not at all, it does not work that way. On the whole if they have been battered when young they themselves will turn into batterers. Children brought up in violence become violent.
A percentage of women—I do not say all, by any means—who have been battered have been brought up in what is sometimes called a violent game, and somehow or other we have to bring them out of it again. Otherwise they go back, even if they break away from their violent husbands, to other violent men, producing more violent children. At present it tends to be a vicious circle. Surely the Government ought to do far more than they do to encourage the attempts that are beginning to be made to cope with this problem. The attempts are really twofold. One, to provide the battered women and their children with a place of refuge, and secondly, to build up a therapeutic community, by living in which the battered women and their children will escape from the whole violence syndrome.
At the present time, as noble Lords may be aware, the very meagre help—and it is very meagre indeed—is given in principle by local authorities. The Government are making a small grant at the present time to the National Federation of the Battered for headquarters expenses. They have been giving £2,000 a month for two years to Chiswick Women's Aid, which is run by a remarkable lady, Mrs. Erin Pizzey, who has been the pioneer of the whole movement. Now, unless the Government can be persuaded not to do so, they are stopping their aid to Mrs. Pizzey and Chiswick Women's Aid on the ground that it is no longer necessary. That seems a piece of enormous and incredible shortsightedness. One could hardly believe it if it were not actually happening.

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The authorities claim that Chiswick Women's Aid is no longer necessary because, they say, there are sufficient refuges across the country. Of course that is totally untrue, although I am sure the Government believe what they say; we must always assume that. There are 70 refuges in this country and most of them are very small, housing only a few families each. Chiswick Women's Aid is constantly being taken to court for overcrowding, which means that they find themselves in an impossible position. On the one hand they are being starved of funds because, it is said, there is no longer a need for their services, and on the other they are being prosecuted for overcrowding. The Germans sent a senior official to study the centre at Chiswick Women's Aid and spent a week there. As a result, the Germans are to adopt a similar kind of refuge scheme. At a time when there are refuges in Australia, New Zealand, America, Canada, Holland and France modelled on the work done in this country, all started by Mrs. Pizzey, is it not a tragedy that the British Government, instead of taking the credit, as they might if they were reasonably self-interested, are trying to close down the organisation which is the worldwide prototype?
I will not today go further into the details of this matter. This is not the place to press the cause of one particular institution, even though I have a tremendous admiration for what is being done there. Although I am not directly connected with this centre, I went on one deputation and I understand that the Minister will be seeing representatives of the organisation in the near future. I can only hope that wiser counsels will prevail. I hope that the principle will be accepted that the Government should give help on a much larger scale than ever before. In other social problems the family can be dealt with within borough boundaries, but here, when dealing with this trouble of battering, in many cases women have to be moved across borough boundaries because if they stay within them they will be battered again. The only answer to this problem, therefore, is to treat it as a national one. I repeat that, because it is the gist of my remarks; that this should, for the first time, be treated as a national problem.
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The Press and the public have more or less accepted that here is a new category of victim who needs and deserves social help. What the Press and the public and the authorities have not yet understood is that there is also growing up a great opportunity to treat the children of these families, bearing in mind that these children will otherwise themselves become violent people when they grow up and this vicious cycle will continue. The treatment is not very expensive, even in these days when we know that every penny has to be watched. It is simply a question of helping people to live in a non-violent way. In other words, the very exciting discovery is being made that people can be cured of violence. The question is really whether we, the people, and the Government in particular, are ready to back these efforts. I hope and believe that we will and that the Government will.
5.55 p.m.
Viscount BARRINGTON: My Lords, it is always a great privilege and challenge to speak following the noble Earl, Lord Longford. I have only a few remarks to make and they will only incidentally touch on the question of battering and violence. However, before making those comments I wish to take this opportunity to congratulate, if one can do so in his temporary absence, the noble Lord, Lord Ponsonby of Shulbrede, on his excellent maiden speech. It is not conventional to criticise a maiden speaker, but perhaps I may be permitted to criticise him for one thing. Having sat next to his father on these Benches, I very much hope that as a prodigal son he will regret having left for a place where possibly there may be more room because we would value both his knowledge and enthusiasm on these Benches, two qualities to which the noble Earl, Lord Perth, referred.
I have been struck by Lord Ponsonby, but that was only by a tennis ball when I was umpiring in a children's tennis tournament, and that was not in malice but out of enthusiasm. I mention that simply to get myself on to the subject about which I wish to speak; that is, the difference of age. Noble Lords will be pleased to hear that there is only one paragraph in the gracious Speech to which I wish to refer, and to only one part of that. It is the

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paragraph which concludes:
"There will be an annual increase in pensions and other social security benefits in order to protect the living standards of the most vulnerable members of the community".
I have nothing to say about pensions, except that I have two interests in them. One is that I am of pensionable age and the other, which is relevant to what I intend to say, is that the first time I ventured to intervene in your Lordships' House, apart from making a maiden speech which had every fault which that of Lord Ponsonby did not have, was on the subject of pensions for people who were so old that they were legally not entitled to them.
I made the bad mistake of introducing that subject on a night after what was in those days a marathon debate on the subject of the Burmah Oil Company and war damages. The then Lord Chancellor, the noble and learned Lord, Lord Gardiner, made the brilliant defence of pointing out that we need not pay those damages because the letter of the law said so, and thus there was a strong case in equity for not doing to. My question was answered in rather a different way, and courteously, by a noble Lord opposite, who said that although there might be a case in equity for such people over 90 receiving pensions, there was no case for doing so according to the letter of the law and that, anyway, the matter would be discussed the next day. It was not. However, the noble Viscount, Lord Colville of Culross, who will be winding up this debate, raised the question again about two years later, when it was overruled on the same ground; that is, that one must not tamper with the letter of the law. It was four years later, very much to their credit, that the then Conservative Government brought in a measure allowing pensions to be given to those very elderly people, who in the intervening six years had greatly decreased in number.
I now come to the other extreme and suggest, as I have before—I will probably be the only person to suggest this tonight—that there is another age group which is also vulnerable in the same sense; they are not only vulnerable, as we all are, to violence and the difficulties of living, but get virtually no protection from the law, and for a rather similar reason. Just as those elderly people did not get protection because they were too old, these younger persons—I will call them persons—get
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virtually no protection because they are too young. I do not want to go into this question in detail but I should like to take this opportunity of raising a question which I raised a number of years ago. On that occasion, the noble Lord, Lord Donaldson, was winding up the debate and he said, very properly, "This is not the time to discuss the status of the foetus". The noble Lord, Lord Kirkhill, will be absolutely justified in saying the same thing today, but I believe that the time is coming when this matter should be discussed at greater length than has been the case in any of the debates that we have had. The question is one of vulnerability. After all, the words in the gracious Speech are:
"… an annual increase in pensions and other social security benefits in order to protect the living standards of the most vulnerable members of the community."
That raises the question of who are the most vulnerable members of the community.
Of course, we are all vulnerable in every sort of way. There was a character in one of Shakespeare's plays, a Lord by the name of Jaques. He is not to be confused with the noble Lord on the Front Bench opposite who has behaved so admirably and who could not be accused of being melancholy. It was a theory of this character that all the world's a stage and that each one in his time plays many parts.
He might possibly have said, "Each Peer plays many Pearts". Shakespeare classified man's roles as seven. The one that we all remember is the last one which ends the strange eventful history of man with second childhood and mere oblivion,
"Sans teeth, sans eyes, sans taste, sans everything".
That might be thought to be a description of Members of your Lordships' House or even of the House itself, but I do not believe that it is because we have been told by the other place that we are to have our teeth drawn. So that puts elderly Peers into the sixth stage of man; that of the "lean and slippered pantaloon".
Going very rapidly through the other five stages, the noble and learned Lord the Lord Chancellor covered the ground in the most admirable way as regards the fifth stage: that of what Shakespeare calls the "justice"—the magistrate—and what I call the "Establishment".

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They are much more vulnerable now than I imagine they were in Shakespeare's time. They can be abused by all sorts of people. That also applies to the fourth stage, that of the soldier or what we should call the militant, including the military police, the police in Northern Ireland, the soldier himself,
"Full of strange oaths and bearded like the pard".
That would include a number of militants to whom I have listened.
All these are vulnerable in their ways but there is some sort of law to protect them. However I believe that the noble Earl, Lord Longford, had he been here, would have agreed with me that the third stage, which Shakespeare called that of the "lover" and which we should call that of the adolescent, is also highly vulnerable to showers of pornographic material. The same applies to the second phase of life; that of the "whining schoolboy". He is less vulnerable than he was in my day to the violence of the headmaster but he is still vulnerable in other ways. That brings me to the infant,
"mewling and puking in his nurse's arms",
who is clearly as vulnerable as it is possible for a visible person to be. What I want to suggest is that there is an earlier stage than that in life on this earth. It is when one has not yet been "extradited"—if that is the right word—from the womb. Nobody would deny that an unborn child is highly vulnerable, but they would deny that he is a member of the community.
I should like to ask the noble Lord, Lord Kirkhill, to consider three reasons why I believe that an unborn child is a member of the community. I do not want to vie with the late Lord Jessel who said, "I may be wrong, but I have no doubt …". On this, I have no doubt. I believe that a child before he is born is a member of the community in the sense that he is a person. I am not a lawyer and I know that it is a difficult matter to decide who is a person, but I believe that a rough and ready definition is the "living body of a human being". If it were not living it could not be assaulted or killed. If it were not a body the same would be true and if the body were not that of a human being it would be outside what we are talking about.
That is one definition of a person. There is also for those who believe in
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the Christian religion a more complicated definition which would include the three persons of the Trinity, only one of whom would come under the law. That is the second Person of the Trinity who, before being quite legally, though some would say wrongly, executed, was born and was a foetus. So I believe that another definition of the foetus would be somebody for whom Christ died. I am open to correction, but it seems to me difficult to believe that, if Christ died for the whole human race, he did not die for it at all ages including those of the lean and slippered pantaloon and the foetus. Those of your Lordships who do not accept entirely the legal definition and feel that it is getting into fairyland to talk about theological questions such as whether God was incarnate in human form would, I believe, accept something that has been mentioned very recently by a prominent member of the Cabinet. Whether or not one believes in a duty towards God, most of your Lordships believe in a duty towards one's neighbour. I should like to know what is the argument that an unborn child is not a neighbour of his mother or that she is not his, her or, in the case of twins, their neighbour. Certainly, in terms of nearness, he is.
Like the infant when it is born, the foetus is of course a hell of a nuisance. Our neighbours are a great nuisance in all walks of life—and, though a foetus cannot of course walk, it can kick rather strongly long before its legs are long enough to be felt. The fact that it cannot walk does not matter. I believe that, if the foetus had a vote—and I am not suggesting that it should have one—as to whether it should or should not be aborted under the present law, it would kick out very strongly, voting with its feet to say "no".
I shall not go into the rights and wrongs of the present Act but shall only say that I believe that this subject is becoming more and more important and that more and more people are becoming interested in it. I was delighted to see the number of people who demonstrated on the Irish peace march, but larger demonstrations than that have been held—though they have not always been so greatly publicised—by a society of which I have the great and undeserved privilege of being the chairman and a founder member. These have been going on ever since the Act.

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If it is suggested that this is not a matter that any Government, of any colour, will not have to look at closely in the near future, then I believe that that would be a mistaken attitude. My Lords, I apologise for speaking for so long. I did not intend to speak for as long as this and I have exceeded my limit by at least one minute, and I hope you will forgive me.
6.10 p.m.
Lord DAVIES of LEEK: My Lords, I have listened with interest to the noble Viscount, Lord Barrington, who has taken us into the realms of moral philosophy and into the idea of creative evolution and religion. I do not want to get involved in that, but as a Celt who is fully aware of the mystery of existence and who is interested in research work in biochemistry, and who knows that the progress in biochemistry today is even greater than that in space research, I never scoff at the unsolved mysteries of creation. I do not want to get involved in the very difficult problem of abortion, which the noble Viscount was trying to put across to the House. All I am saying is that I wish to God that there was the neighbourliness in the world which the noble Viscount felt existed, but when I see brother shoot brother, or brother shoot pregnant woman, I sometimes wonder what has happened to the progress of man. The aggressiveness of the average materialistic motorist suggests very little good today for neighbourliness. Nevertheless, we should not give up, and I admire the work—I know of it—that the noble Viscount has done.
Before I turn to the main part of my speech, I should like to refer to the fact that the noble Lord, Lord Ponsonby of Shulbrede, was good enough to let the House know that it was not through lack of attentiveness or pomposity that he had to go to carry out his particular special duties. I hope that we will have the opportunity of listening to constructive speeches such as that which the noble Lord, Lord Ponsonby of Shulbrede, gave the House the pleasure of listening to. I ended there with a preposition—but I hope that we shall hear similar speeches again.
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In the short time available to me, I should like to say that we have gone through a period of fantasy, marvellous fantasy, for 2½ months. From September I have been sitting here night and day. We have had arid rows of Opposition, uttering remedies about the destiny of Britain; the machinations of the Labour Party had brought Britain to its knees. It was fantasy—actor rubbish—but they scored heavily with the Press and the mass media as a result of this bumptious rubbish. I heard a great farmer talk about us having done very little for agriculture. Had I not listened carefully, I should have ended up like some lumpen member of the proletariat—that he thinks we in the Labour Party are—thinking that the farmers of today were worse off than ever because of the Labour Government. I wonder whether the noble Lord who spoke for the farmers thought that he did pretty well out of the price of potatoes lately? I want to point out—I knew that I would get him to his feet.
Lord MACKIE of BENSHIE: My Lords, the noble Lord is never concerned about himself. I can always look after myself. The able in the community can always do this, and I am well placed to do it. What I was thinking about was the food for the people of this country and the total production. I can always look after myself, but I thank the noble Lord for his concern.
Lord DAVIES of LEEK: I know that; and I have watched his nephew playing rugby at Cardiff Arms Park, when he has played wonderfully for Scotland. Nevertheless, I must not let the noble Lord get away with this fantasy about the contributions of the Labour Government to British agriculture, because from the 1870s until the beginning of World War II British agriculture was in the doldrums. Enough about that.
What I want to bring out here is that what I find disconcerting in this fantasy world are the panaceas that are supposed to solve our problems. There are, for instance, the speeches of the Liberals. I remember the elusive glamour of the Liberal Conference of 1963, when the graph of Liberal support was rising, and they were doing very well indeed. The Liberal Party, in its largest assembly to date since the days of Lloyd George,

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had a huge banner—millions of us saw it on television—with the words, "Go Jo, go!" That was written in huge letters about six feet tall, and there was dear Jo Grimmond leading the Party. How did he go? His speech was militaristic. There was none of that demure, social everyday attitude any longer in the Liberal Party. Listen to Jo's thrilling speech, in which he was dragging his troops behind him. Here are his exact words:
"I intend"—
but they were spoken with a beautiful Scots, plus a cultured Oxford, accent—
"to march my troops towards the sound of gunfire".
Absolute fantasy, but the Liberal Conference rose to its clamour, clapped, and the roof and rafters "did a swirl" as a result of that. The blood of the conference was surging and they were ready to rush out into the streets stark naked to win Liberal votes. That was it.
Two years' later Jo is still leading. What does he do? On 25th September there was another conference. I watch these conferences on the television. What does he tell us? He has now reached the culinary department. He is the great gourmet. Here is his great speech:
"Our teeth are in the real meat, and our muscles exerted in the real power struggle of politics".
My God! It must have been tough meat if his muscles were bulging with the effort of digesting it. Absolutely marvel-lous! Then he gives the great panacea at the end of the conference, with the roof and rafters again doing a swirl. What is his remedy to solve the problems? Proportional representation. Absolutely marvellous. Absolute rubbish.
What constructive suggestions have come out to answer these difficult problems? There are no answers to some of them. We know this. So what do we find—the pompous and patronising advice which we have had these past three months, while the Opposition (both sides) are out of power. It is kindly given some times. There is a little absurdity now and again. It is insubstantial; they are pillars of cloud. Any noble Lord who cares to read Sammy Brittan's book The Treasury Under the Tories, between 1951 and 1964 will see mentioned there about 13 different crises. Stop-go, go-stop, all the time. This is a feature of modern affluent society, the answers to which the advisor to the
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Treasury admitted at Manila on 25th October this year when he was before the International Monetary Fund.
So let us get off this stupid cut and thrust about problems to which the world wish it knew the answers, but is not sure about. So I approach them with a little humility. I do not want to eat the red meat or anything else. Chapter 5 of Brittan's book shows the slow growth of our economy. Let me quote a little of it:
"In the 10 years from 1953 to 1963 British prices rose faster than those of every other major European country except France;"—
the Tories were in power, mark you, not Labour—
"and our gold and foreign exchange reserves were at less than £1,000 million, hardly any higher at the end of the period than at the beginning".
Then, after showing the increase in reserves of the Common Market countries, Brittan says in the book:
"Britain now has to maintain the Sterling Area on a reserve less than half of Germany's and a good deal smaller than that of France. Yet neither country maintains an international currency and France has a much smaller foreign trade than Britain.
"Britain has thus done just as badly in the `sound finance' league of conservative bankers as in the production league of modern minded economists. We have too often sacrificed rapid growth for the sake of a strong pound and as a result ended up with neither".
That is the analysis on page 136 of Samuel Brittan's book, The Treasury Under the Tories.
Members on both sides of the House had the pleasure of listening to a wise speech the other day, and I quoted it in my last speech, or little talk, to your Lordships—my goodness! I have been speaking for ten minutes; I did not realise that. Sir Eric Faulkner, in a factual speech in a House of Lords Committee Room on 11th May of this year, spoke of the current position of sterling. Sterling balances, he told us, fluctuated between £400 million and £500 million in the 'thirties; and the war meant that enormous payments had to be made to the theatres of war, especially India and Egypt. Last week I heard an Opposition Member who sits below the Gangway talk about these sterling balances as though we had lost them and squandered them. They did not belong to us; they were money owed to other people, but because they had confidence they left

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the money here. The balances rose to about £3,600 million, one-third of which belonged to the sterling area, Sir Eric pointed out, and the rest to others abroad.
By 1974 those balances were £7,500 million, and they were split like this: £5,100 million belonged to Governments, and £2,400 million to traders. Obviously, the nature of our sterling balances was changing. In the 30 years between 1945 and 1975 foreign Governments' holdings of dollars grew faster than the holdings of pounds. I cannot go into it in this little talk, but the Euro-dollar was the thing which was the bête noire of international finance. The noble Lord, Lord Kaldor, who recently made the sort of speech which one would expect from him, would know full well what I am trying to get at about the Euro-dollar situation. I will not go into expenditure on Defence, aid and the war in Korea, but these were matters which had nothing to do with Party politics; they had to do with the state of the world.
So, my Lords, I come to one little contribution (I will try to finish in 15 minutes; that is, three more from now), which is this. While I should like to extend this, I am going to touch on only one aspect of our trade, and it is one which is forgotten. I have a slight interest to declare, but I want to pay a tribute—and it was not mentioned in the Queen's Speech—to the people who are our invisible men; that is, those who are responsible for the invisible income that is earned by Britain. The report of the Committee on Invisible Exports took a year to produce under the guidance of Sir Thomas Bland, of Barclays Bank, and Mr. William Clarke, who had been financial editor of The Times. They worked for a long time—and what does that famous report show? It shows that invisible earnings helped Britain to keep its head above water during 200 years of booms and slumps, and that in only seven years out of 175 did Britain ever balance its trade. By that I mean physically balance its trade, selling goods for goods. If it had not been for the invisible men dealing in insurance and shipping—buying, on spot and futures, platinum, lead, cocoa, oil and all these things—we should have been in dire circumstances.
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How many of those invisible men have ever had a Queen's Award for Exports?
My Lords, what action did the Government take? These people earn through banking, insurance, shipping and tourism. Even waiters in little Welsh and Scots hotels in the hills or cottages are part of our invisible earnings in tourism. More attention should be paid to these people. More attention should be paid because one-third of our earnings overseas come through these people. I believe a Labour Government and Chancellor should encourage these people, and that legitimate allowances should be made to these merchant adventurers, rather than fringe benefits. Let us cut out the vast income tax but give legitimate allowances to these people. These are men who work with pen, paper, phone and telex—and, by the way, they are not lazy. Some are working at 6 o'clock in the morning because Stock Exchanges and such places are open earlier than ever in Hong Kong, in New York and in places like that. Yet in no Queen's Speech and in no full debate have we ever given attention in depth to the place of these invisible earnings—shipping, insurance, tourism, waiters in hotels, et cetera. That is a vast area where the know-how of the British is second to none in the world. For heaven's sake let us stop these threnodies!
My Lords, I must finish because my fifteen minutes are up. I suggest noble Lords should go to the Printed Paper Office and get the Blue Book on our income and expenditure. We hear talk about our being in the red and about Britain being crippled. If we have assets like this, what is this moaning about going to the IMF? What are our assets? From last month's Blue Book on expenditure and income we see that in 1975 Britain's gross national product—that is, the total income of all residents—was £94,000 million. But, better than that—and I quote from the Blue Book again—the estimated net capital stock of reproducible fixed assets, in which assets are valued at current replacement costs and after the deduction of capital consumption, was about—listen to this figure!—£332,100 million at the end of 1975. Any nation with those assets is not a bankrupt nation. For goodness' sake let us stop moaning about it and letting the world think we are bankrupt.
6.27 p.m.
Lord INGLEWOOD: My Lords, even in a general debate I like to try to begin my speech by finking my theme to that of the noble Lord who has just sat down, but the noble Lord, Lord Davies of Leek, has really given me an impossible task. The two previous speakers followed a devious course from Chiswick to Calvary, and I really feel that that would be too difficult to follow too, so in the circumstances I think I ought to stick to the notes which I prepared earlier today.
Even though devolution has played the biggest part in our discussions this afternoon, if we take the debate as a whole it is the economic situation of the nation which has really commanded our attention most. What has pleased me is to notice how the experts are much nearer agreement than I have heard them on many occasions. But even if all the experts agreed on what was the right policy for this country, there would still he little hope of success unless the people had the will to make the policy effective, and that would mean some change from the present too-escapist attitude and the feeling that borrowing solves all our problems if done on a big enough scale and often enough. What we will need, my Lords, is more effort and more discipline, and by that I have in mind self-discipline.
I heard another noble Lord say that we are all too ready today to accept increasing violence and lawlessness. I would add that we are less ready, I am sorry to say, to offer voluntary service to the State and to our fellow men. My Lords, until not so long ago one great feature of our much-admired administration and public life was the scale of voluntary service given in this country, and in many fields amateurs and part-timers worked closely and happily with professionals and full-timers. There is less scope for that service today than there was 25 years ago, largely because of the contraction of the Territorial Army and the end of Civil Defence. But opportunities remain, and one very important field of service which we still have is the Special Constabulary; a back-up to our regular forces—not a substitute.
To many people in this country the special constabulary is an almost unknown service. Special constables have never
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been given their due by the people in this country; nor by successive Governments— and one Government, I submit, is just as bad as another—and nor by the regular police force. I want to avoid detail this evening, but for those who are interested in the present strength of the special constabulary I can quote these figures. In 1946, at the end of the war, although well below the so-called establishment, we had 56,000; currently we have 23,000— less than half—and the need was never greater. The total numbers have dropped every year since 1951 and Governments have done little or nothing to arrest the decline.
My Lords, special constables should be of more than a little interest to this House because their terms of service are so similar. They, like us, serve for no pay. They, like us, can draw certain allowances but they rarely meet the outgoings they are intended to cover. They, like us, arc given little or no encouragement from their more professional colleagues and if some Members of the other place say that we should be abolished, the Police Federation of Scotland in 1972 seriously proposed that the special constabulary should be disbanded. If successive Ministers and St. Andrew's House have done little to help, they at least refused this. But special constables have one advantage over us. They now have hopes of an improvement in one of their allowances—a better boot allowance!
My Lords, returning to a more serious note; recently two important committees have been sitting on the future of this service, one for Scotland and one for England. To me, it appears costly in time and money duplicating this work considering that the general problems are the same for both countries in spite of certain differences in the law. The Scottish Committee have now reported. There was only one member of the special constabulary among the 17 members of the committee while there were ten regulars and no independents. The report is as much an apologia for past shortcomings as any clear recommendation for future developments. But some things came out, and I quote this. At one time there was an agreement in Scotland with the regular police that the specials should not do duty more than once a month. This was hardly the best way to use

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volunteers or to encourage keenness. The limit has now been increased to once a week, which is as much time as most can give and approximately the same as the average in England but I still feel that that restriction should be removed.
We all await to hear the results of the English Committee, but I would suggest that there are three clear needs. Whatever the Committee recommend, the Government must state their own view on the role of special constables clearly. Secondly; then, and only then, can they lay down national minimum standards of training and devise schemes for helping those who have the interest and time to train on and to be available to take more responsibility. At present, the training is all too haphazard and differs between one force and another. I am proud to claim that my own county of Cumbria has taken this question of training more seriously than most parts of the country, including London.
As long as training remains superficial and disorganised, or unorganised, and as long as the allocation of duties to the specials remains so erratic, who can blame the regulars for saying that the specials are unreliable? Often that may be true, but not, one is happy to say, always. My third point is that the regular police must change their carping attitude and come out openly in support of their part-time, unpaid colleagues who are not rivals for status or pay but are performing a valuable service. The special constables are men and women, who help not just with less exacting police duties but can also help to improve the image of the police as a whole. Recently there have been too many lapses in the Metropolitan Police for any member to be truly happy or self-satisfied.
From an Answer to a Parliamentary Question last week, we were told that we had 2,500 members of the regular police on duty in Westminster during the oversize demonstration and procession. Many must have been pulled in from other divisions, which can only have left large areas depleted of their normal quota of policemen. Yet the same Answer informed us that no special constables had been asked to do duty in those divisions on that afternoon and evening. Even though it coincided with normal working hours, I feel sure that some would have
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been available. Yet we hear it stated over and over again how great a pity it is that more men in uniform are not to be seen on their feet on the streets.
My Lords, my last point is this. If the Special Constabulary could be brought nearer to establishment and offered better training, there would be much less reason for the growth of security forces and private armies which are an unwelcome feature of today's life all over Western Europe. The regular police service, however large, cannot be everywhere all the time, but with a better voluntary element—not just a bigger voluntary element—much more could be done and if some of the lines that I have indicated could be followed up am sure that the whole country would gain.
6.36 p.m.
Lord RHODES: My Lords, after listening to so many speeches on devolution I feel that it is incumbent on me to declare an interest. I am a Yorkshireman and an Englishman and, I trust, without that celebrated English disease. I follow another Englishman who was talking about the disciplines of yesteryear. I think that the Bill introduced today is indicative of the tremendous changes that have come over things; because when the Act of Union was brought in, I understand that the whole of the agreement was on two pages of foolscap and in this Bill I understand the Schedules run into reams, as the noble Earl, Lord Selkirk, pointed out.
I wish to revert to a bit of business. I have been round the world this year and have been to Venezuela and have had the opportunity to see things for myself. Three things in the Queen's Speech struck me very forcefully: the falling pound, our smaller share in world trade, and the infiltration of imports into our markets making our share of our own market smaller. Since the war we have had an unprecedented boom in exports. Exports have exceeded the national product in practically every industrial country of the world. We have come to a point now which in my opinion has never been seen before. I think the phenomenon that faces the world of the industrial countries is one that will tax the resource, the dedication and sacrifice of every single person in this country, and if we fail we cannot pull through.

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We have become so insular, so wrapped up in our own devices, all wanting to take part, it is said. But we have to be more extrovert and I am trying to show one or two reasons why in what I have to say. The devaluation of 1967 was the last time that the fixed exchange rate system applied. After that there were many adjustments resulting eventually, in 1972–73, with the floating of the pound. In five years the pound lost 45 per cent. of its value. At every devaluation the manufacturers (and I speak as one) gave our stock in the factory and in the pipeline away, and when we had to replenish at higher prices the same routine happened Again we were non-competitive. The short-lived competitive edge which these devaluations gave us were whittled away in five years. Further falls were needed. It is interesting to note that in 1975 prices increased to the extent of 25 per cent. in this country compared with 14 per cent. in the EEC and 11 per cent. in the OECD; that is including the EFTA countries.
I want the Government to take notice of this. So long as our inflation rate is higher than that of our competitors, the pound will go on falling until we have to wheel pound notes round in barrows to pay small bills. This rot must stop. Talking about devolution for 12 months will not help one iota. There has to be less public expenditure, and it is time the Government made up their mind and stopped dithering and decided what they are going to do. The country is waiting for it and it will take it. We cannot evade the issue. I want to tell the Government to get to grips with this, when they meet tomorrow and the day after. Be courageous. It will pay off. Another factor about productivity which is mentioned in the Queen's Speech is that when output is low—and this is another basic principle that you have hammered into you as a manufacturer—the funds from which investment is made are also low. When the Government pours money into industries which cannot use it effectively by a better productivity, failure is inevitable.
I now want to go on to something else I discovered in my journeys. The necessity for industry, the Government and workers on the shop floor to come to terms with the new demand from oil-rich countries for vast projects like the 400 miles of railway in Venezuela. These
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are practical things about which I want to make some suggestions. There was a consortium for the railway, which was very sensible. It was made up of the National Enterprise Board, GKN, British Rail, John Laing, and GEC Signalling—a mature group by our standard. When we get into a country like Venezuela we are up against the vitality and expertise of the Germans, Japanese and Americans. There, our consortium was not so experienced.
On account of onerous terms our consortium withdrew. Right enough, the terms were onerous. But they came out too soon. If they had waited a month, they would have had the support of the Japanese who also found them onerous. This strengthens my view—and I put it to the Department of Trade, and I have given a notice of this question—that we should go in for international consortia for projects of this size and, in any case, our consortium should be ready to go in again if the terms are recast. I ask the Government if they will comment on that and see to it that that idea is put forward.
It needs to be clearly understood by Government and everybody else—including workers on the shop floor too—how difficult it is for a contractor in a weak currency country with a high inflation rate to make any money out of the contract rate in a hard currency country. The big difficulty when you go in for jumbo projects abroad is the labour costs in this country when you have an unpredictable inflation rate. How can anyone do their stuff and give an accurate forecast of costs when we do not know what our inflation rate is going to be in three months' time? These are facts which have to be faced. It is imperative that inflation should be conquered. It will take a lot of sacrifices to do it. Compromise with it and we shall lose. This was the reason why Davy Ashmore lost their contract for a rod mill to the Germans. In Venezuela if you want to insure against cost escalation it is so prohibitive that you finish up with no profit at all. That was the principal reason for Avrail withdrawing. Our livelihood depends on exports. Never mind about 12 months' talk on devolution. Let us talk all the time on how to make Britain strong again.
Our common complaint is that our visiting teams are too late on the scheme. Countries like Germany and Japan are

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often in at the specification stage, hence the criticisms that our teams do not go out early enough. There is some justification for it. There ought to be a catalyst to pool all the knowledge gained from consultants and travellers about mooted new projects in foreign countries like Venezuela to get in at the specification stage. The competition for these jumbo projects should make us realise how fortunate we are with some of our loyal friends all round the world. When we hear the criticism levelled at places like Hong Kong, we ought to remember the regular orders that come through from places like Hong Kong. I can bear witness to millions of pounds worth of orders a year for electric generating firms in this country. We ought to be very thankful that they are loyal to us in the face of intense competition and persuasion from the Japanese. Every year they quote prices 30 per cent. lower than ours to get the business. One day they may get it and then we shall rue.
I do not want to make a speech about textiles, but it has to do with the third part of what I want to say. We are losing out in our own home market because of imports. I am hoping that we shall have a special debate on this subject before too long. There is one aspect of it that I must mention because this debate is so timely. A British team is at the moment engaged in preliminary discussions with our EEC partners about the renewal of the multi-fibre agreement. I urge the Government—and I really mean it—to do all they can to influence other European Governments to accept the British line. The multi-fibre agreement is a good instrument for the textile trade. We want it renewed, but it must be improved to meet up-to-date requirements and we want it for a minimum of six years. As it now stands, a bilateral agreement for more than 12 months carries with it a growth rate of 6 per cent. per annum. Think of that on an exponential basis. A 6 per cent. growth rate bears heavily on countries like ours with high import penetration—in some cases up to 60 per cent. This is insufferable because in 10 years the amount allowed is doubled. It certainly cannot be tolerated in a recession, particularly in those areas of the trade which have suffered the most distortion. So the safeguard clauses in
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the multi-fibre agreement must be strengthened at once and their application speeded up.
Let me explain why I say that their application is too slow. The safeguard clauses became operative on 1st January 1974. It took 12 months to bring one case into operation, and most of the others were brought in during 1976; 18 months after they need have been, despite the fact that a case had been made out and agreed prior to 1st January 1974. It would have obviated a great deal of agitation for import control if we had only used intelligently the means we had at our disposal.
I also think that the next improvement we should work for is that the so-called developing countries should be made to respect the conditions of work laid down by the International Labour Office. If we do not do that, the work put in by Governments, employers and unions over the years to bring our own conditions to acceptable standards will have been wasted because we shall have no industry left. Many of the new producer countries would welcome such a move, which would make their competitors come into line, too. I would say to the Government, "Use the instruments you have on hand, and more quickly". That applies equally to the Minister and the civil servants.
Turning to my last point, dealing with home affairs, I believe it was the noble Earl, Lord Perth, who described the local government changes of 1974 in Scotland as "monstrous". I wrote down his words, Let me say that the local government changes at home were monstrous. As a Yorkshireman, I was carved out of Yorkshire and put into Greater Manchester—think about that to go to bed with! But I have been watching how it operates during the last two years and it does not. They have 12 functions on the Greater Manchester Authority and Joel Barnett can tell you a lot about that, the Minister at the Treasury. There are three important ones which could be done by joint committees of the Metropolitan boroughs. Everything else is unimportant. I could go through the list, but there is not time.
What I am pleading for is that if you want to save money without pain and without upsetting or disorganising anything, get rid of the Greater Metropolitan Manchester Council. I would back that

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with a proposal: I will take on anybody from the Civil Service in Manchester or any councillor of Greater Manchester in debate—I am issuing that challenge now—in a great hall such as the Free Trade Hall or perhaps the Opera House. I would take the decision given by such a meeting and I hope the Government would also. It would be more economical than having a referendum, as has been suggested in other cases, and in the long run as well as in the short run we should be able to have in our area a far better-run organisation than we have at the moment.
Lord BOOTHBY: My Lords, may I ask the noble Lord one question: does he realise that what he is saying applies equally to Scotland?
Lord RHODES: Yes, my Lords, and that is why I admire the Scots for showing the flag and showing that they are proud of their heritage. In a world which is losing its way, we all need a hit of pride. I have said before that when I have seen on television the Welsh three-quarters tearing down that field in Cardiff, I have been proud for them. I am proud for the Scots, too. Perhaps I might mention another thing which is a saving grace today. Yorkshire makes more tartan cloth than any other part of the United Kingdom—so what is good for Scotland in devolution? It is going to keep our mills very busy and, I hope, your own, too. I have raised all these points, and I hope they will be taken notice of, especially the serious ones concerning exports and the difficulties which the textile companies are facing at the moment. As I said at the beginning, I believe it will need dedication to get us through these difficulties. It will need a Government that will make up their minds and get on with the job without dithering. If they will only challenge the country to respond, the country will do it.
6.57 p.m.
The Duke of DEVONSHIRE: My Lords, the conventions of the House prevent my describing the noble Lord who has just sat down as "my friend", but he has described himself as an Englishman and a Yorkshireman. He is more than that; he is in every sense of the word, a nobleman, and no matter what the conventions of the House may be, I am
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proud to call him my friend. I am quite certain that I speak for every Member on this side of the House when I say that we agree wholeheartedly with what he had to say about trade in this country. Whether his remarks will be so palatable to the Government Front Bench is another matter. However, as I have an academic connection with the great City of Manchester and I wish to make no enemies in the Manchester area, I shall not pursue the remarks made by the noble Lord about the Greater Manchester City Council.
After the trenchant speech made by the noble Lord, I fear that my own remarks may appear to be somewhat fatuous. I should like to touch very briefly on one of the main strands of the debate, devolution, and then to join my noble friend Lord Vernon in mentioning something which has been omitted from the Queen's Speech. Rather more than two years ago, I made an overlong speech on the subject of devolution during the debate on the humble Address. In the extremely unlikely event of anyone wishing to know what I feel about devolution, he may look up Hansard for 4th November 1974, where it may be read in full.
This evening, therefore, I shall make only two very brief points. First, as I said two years ago, surely this endless debate we are going to have about devolution for Scotland and Wales will be largely a waste of time unless a referendum is held first. Without a referendum and a clear indication of what the people of Scotland and Wales feel, no final decision on what power should be devolved and what should remain at Westminister can be reached; and the spectre of nationalism, particularly in Scotland, and to a lesser degree in Wales, will haunt the debates that are going to go on in this House and in another place hour after hour and week after week in the 12 months that lie ahead.
The great question we must ask, the answer to which we can find out by a referendum, is: do the Scots and the Welsh wish to be their own masters? Once that is settled, if the answer be, "yea", we may regret it, but it is their right. From what my noble friend Lord Campbell of Croy said, I was interested to note that he seemed so strongly critical of the Scottish Nationalists. I see nothing ignoble in wishing to see Scotland an

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individual country. I visit that country all too rarely, but when I return from it I come back full of admiration for its peoples and its customs. So if it be their wish to pursue their own role in life, it is their decision and it is not for us to criticise.
I do not wish to see the break-up of the United Kingdom, but it takes three to be partners in this case, and it is better to have separatism than an alliance held together by out-of-date conventions and Parliaments. So let there be a referendum and, if the answer be "Yea, we wish to go our own way", let us with regret wish them well. But if, as seems more likely—and there are those, including the noble Lord, Lord Campbell of Croy, who think that this will happen—the vote is likely to go the other way, then the great question of independence will be out of the way, and this House and another place can get down to working out the details of how more power, within the existing framework of the United Kingdom can be devolved upon those two countries. But it will be a waste of time, until we get the one vital question wound up once and for all.
My second point is: for Heaven's sake let us keep the question of devolution, or independence for Scotland and Wales, quite apart from any devolution to regions in England! I am sorry that Her Majesty's Government are to publish, so soon after the Bill published today on devolution, arrangements for decentralisation within England, because they are two totally different things. To talk about regional Assemblies for England is no more than further tinkering with local government in this country. No one can get wildly excited about whether Suffolk, or East Anglia in general, should have more rights. That is no great cause for which the banners will be unfurled. The subject of devolution for Scotland and Wales has emotive appeal, but one tier more of local government, which is all local Assemblies will be, is totally different and, what is more, plays wholly into the hands of the Scottish and Welsh Nationalists, because they can say with truth to their fellow Scots and Welsh "One day we have devolution for Scotland and Wales, and the very next week they produce a consultative paper about how they are going to devolve power to England. All they are doing is treating us as one more region of England."
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As I have said before, the Parliament of the United Kingdom sits in London, and therefore in England. It is all too easy, for those who wish to move away from the United Kingdom, to equate it with England and with London, and with that removed much of the fire will be taken from the appeal of the Scottish and Welsh Nationalists. So I say: let us keep the issues quite separate. They are totally different things. An added tier, or a reorganisation of local government in England, is one thing, but it is totally different from the great emotive cry for a separate Wales or a separate Scotland.
I turn to my second point, which has already been touched on by at least one other speaker, and that is the question of the future of our own House, the House of Lords. In recent days and weeks, as most of us know full well, we have been very much in the public eye with all-night Sittings and so on. It has been rather enjoyable to find the House of Lords making the headlines, and many of us have had the added gratification of being asked to air our views on television and say what we think about our future. So it has all been rather good for our morale. But it has done much more than that. It has shown just how impossible for ourselves our present constitutional situation is. What are we expected to do? If we come here, as we are constitutionally entitled to do, and vote in ways which we think are in the best interests of the country, we are told that because we have been created Life Peers, or are here by what is sometimes rather curiously called "accidents of birth", we are totally undemocratic. If, on the other hand, we stay at home and do not exercise our constitutional rights, then those of us who are Hereditary Peers are called "backwoodsmen", and those very distinguished men who have been ennobled as Life Peers, because of great service to their country, are insulted by being called "placemen". So I suggest that it is time we did something about it ourselves because, to coin a phrase, I do not think we can go on meeting like this.
I must apologise for the fact—and I am, indeed, ashamed to admit it—that I am not sufficiently aware of the procedures of this House. But I should like to know whether it would be possible for a Select Committee, representing all aspects and

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factions of this Chamber, to be formed to thresh out the matter and see whether we can among ourselves find a consensus on the future role and composition of the second Chamber. There is a very wide consensus that the hereditary principle is no longer right. Others also object to what they call patronage. So let us, if no one else will do it, get together and produce proposals for some reform of this Chamber. My noble friend Lord Gage, prior to this afternoon's debate, asked me what I was going to speak about, and I told him that I would speak about some ideas on possibly reforming the House, at which he groaned and said, "I have been a Member of this House for 52 years. People have always been talking about reforming it, but nothing has ever happened and nothing ever will". As I hope to show shortly, someone had better do something soon or we shall be in for very serious trouble.
It has been said that our relatively minor powers of delay should be used only in a grave constitutional crisis, and that on other occasions we should always fall in with the vote taken in another place. That, to my mind, is an extremely dangerous line of thought and, if nothing else, the heat engendered over the fate of the Bill on the nationalisation of the shipbuilding and aircraft industries is an indication of what might happen if we used our constitutional right and stood in the way of another place, preventing some major constitutional development in this country. Your Lordships can imagine the outcry that there would be against this House. What happened in these recent weeks is a mere token of the feeling that would have been stirred up, and the cry of "Lords versus the people" would have been raised with justification. If they have done nothing else, the events surrounding the Aircraft and Shipbuilding Industries Bill have brought our role back into the limelight, so let us take the opportunity and let it not go back into limbo.
I know that in politics the temptation to let sleeping dogs lie is almost overwhelming, but it can also he fatal. The dog of Ulster lay sleeping from the 1920s to the 1960s, and we have paid in the last seven or eight years the bitter price of letting that dog lie sleeping. The dog of Rhodesia also lay sleeping from 1923 until the 'sixties, and the whole world is
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today paying the price for letting the dog of Rhodesia lie sleeping. You can sweep the dust under the carpet for just so long, but in the end it erupts. It may be easier to say "We have devolution on our hands now. We have a grave economic crisis on our hands now. All right, to hell with the House of Lords! It has always been there and does not do much harm. Let it go on." But one day we shall have a major constitutional crisis and this House will have a vital role to play. So we must take time now, in relative calm, to sec that this House is put in order, and demand that we who sit in it are given a new constitution and new rights.
I am aware of the difficulties. Anyone can say, "Do away with the House of Lords. It is impossible." But what you put in its place, and what powers are given to it, is more difficult. We have a relative lull in the history of the House of Lords, so let us consider the problem calmly and realise that it cannot go on as it has gone on for so many years. At ten past seven on a winter's evening, this Chamber does not look much like the tip of a volcano which may one day erupt. But unless we do something, it will erupt with disastrous results not only for those of us who sit in it, but for the peace and constitution of this country. So let us be warned by what has happened and take steps to put our house in order and, if no one else will do it, take steps to demand that we be reorganised on a proper basis so that we can exercise our constitutional functions without being ashamed of ourselves.
7.10 p.m.
Lord HUNT: My Lords, the noble Duke will, I know, forgive me if I do not follow him in this very wide-ranging debate on either of the two main topics about which he has spoken to us, beyond saying how very fully I agree with him on the need for a referendum in respect of devolution and as regards his proposal that we should make our own suggestions for the reform of this House. Also I fully agree with the noble Duke on his general proposition relating to the folly of letting sleeping dogs lie. On that point I shall have something to say in what little I have to say to your Lordships this evening.
Rather than follow the noble Duke, and being quite unable to emulate the

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pungent oratory of the noble Lord, Lord Rhodes, may I go back to the speech of the noble and learned Lord the Lord Chancellor when he retailed to us the worrying figures about crime in this country at present, and refer specifically to one aspect of the problem which I believe merits serious attention; that is, the growing incidence of crime and delinquency among young people and the fact that crime is going down and down the age range to reach young people who are barely in their 'teens.
As your Lordships will agree, almost daily the media bring to us further news of acts of hooliganism, of violence against the person, of vandalism against property. Chief officers of police tell us that all this is on the increase. The numbers of young people who are being sent to detention centres and to borstals and upon whom care orders are being made for execution by the local authority Social Services and Probation Services are growing. All this indicates, by its sheer scale, a disturbing trend. Whether it takes the form of racialist attacks, or the mugging of individual people, or gang warfare in the streets, or fighting on the football terraces, whether the immediate cause, or, if you like, the stimulant, is the growing and worrying propensity among young people to take strong drink or to continue with drugs, or whatever the immediate explanation may be, it is symptomatic of something which is quite seriously amiss. Whether it is the entertainment that we offer on our television screens or whether it is something lacking in the upbringing of the young or our provision for them in one way or another, or whether it is our lack of expectation of them, the answer is to be found in one, or more, or all of these things.
In the debate so far—and no doubt reference will be made to it again in the speeches which are yet to come—noble Lords have referred to schooling and housing. We heard the noble Lord, Lord Soper, speak of homelessness. I am not going to refer to these matters, which are mentioned in the Queen's Speech, but this evening I should like to say a few words to your Lordships about the question of our expectations of young people. Given the conditions and circumstances in which a great many young people are growing up, living and
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working, it is quite surprising that so many of them keep their noses clean and get into so little trouble, or into no trouble at all. Everybody will acknowledge that these kinds of delinquency and misbehaviour are still quite untypical of the great majority of our youth. I could wish that our national Press and the other media would sometimes, or more frequently, bring to us more of the good news which abounds about some of the enterprising and responsible activities in which a great many young people are engaged.
Delinquency is nothing new. It has always been with us and will always be with us, nor is it peculiar to this country. However, at the rate at which delinquency has been growing in this country in recent years no society can afford to deny or minimise its significance; nor can there be any hope or expectation that punitive measures, such as raising the fine for fighting on the terraces to £1,000—I do not say that these measures are not necessary—are alone going to cure it. The trouble does not have its roots in inherent criminality among the young. By a paradox it has its roots in something which is intrinsically good.
To put the problem in perspective, I believe it to be true that one thing has remained constant over many years: that only about one-third of teenagers are attracted of their own accord to any organised leisure provision which is provided for them. This was first pointed out in a survey conducted by the King George Jubilee Trust in 1956 and confirmed by the Albemarle Report in the early 1960s, and it is true today. It is mainly from among the majority of those who "miss out" or who quite positively shun the opportunities that are provided for them that a minority, a hardcore of youngsters pass through an anti-social phase during which they are personally at risk to themselves and during which they constitute a danger to the other unoffending members of the community. These are facts which no initiatives by local authorities, no initiatives, many as they have been, by the voluntary youth organisations have succeeded in altering over the years.
Of one thing I am quite sure, and here I come to the point made by the noble Duke about letting sleeping dogs lie: that is, as things are going now, the

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problem will have to be tackled in a much more comprehensive, imaginative and radical way. I realise that the Government have already made an effort to do something about school leavers, so many of whom are at present leaving school without a job. I applaud the work experience scheme which is operated by the Manpower Services Commission and I have great admiration of the scheme developed by the National Association of Youth Clubs, of which I was privileged to be President for 19 years, for young people to do community jobs, with minimum financial reward, in various parts of the country. However, a very much higher priority will simply have to be given as soon as is economically possible to youth and community services.
Over the years the youth and community services have been referred to as the Cinderalla. They have been regarded as an optional extra. Over all the years it has been the old story of too little and too late. It has been said many times—but I take the opportunity of stating the obvious again in your Lordships' House—that irresponsible behaviour, and worse, among most young people is due to boredom and sheer frustration which can be transformed into responsible behaviour by making demands on young people, by activities demanding and requiring effort and challenge. Quite simply, young people need to be kept busy and made to feel necessary in the adult world which they join outside school hours and of which they become members when they leave school.
It is very often pointed out, and it has been pointed out to me only very recently by one of the Members of your Lordships' House, that work in the community is done well only because it is done voluntarily and that it is no good expecting young people to do it without that voluntary impulse. However, it is also demonstrably true that delinquent youth who would not have dreamed of doing such work of their own accord, and who have committed offences for which they would otherwise have been sent to prison, have been transformed in their outlook by being required to serve community service orders as an alternative to going inside.
By and large community service orders are proving a great success story, but this happens after serious damage has been
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done, either to people or to property, or to both, and I believe the time has come to give serious consideration to ways and means of inducing and encouraging far more young people to gain this revealing experience without their first having to commit a serious offence, in order to pre-empt delinquency and crime among the young. I do not believe it would be such a mammoth task as might at first sight appear to be the case. It certainly would require the wholehearted co-operation of employers. It might be made a condition of employment; it might indeed be made a condition of drawing unemployment benefit by those who at first do not manage to get a job. It would certainly require the active co-operation of the voluntary services as they give active co-operation to community service orders at present. It would be reckoned as in the case of CSOs, in terms of a minimum number of hours spread over the year following their leaving school. It would have to be a very limited commitment because of the numbers involved.
I think the appropriate agency for undertaking this job—and it would do them a power of good—would be the local authority social services, reinforced by part-time—or perhaps full-time—supervisors and liaison officers as in the case of the probation and after-care service. The needs in the community, whether it is the community at large or the local community; the personal needs of people; the needs to benefit everyone are legion, and I see this whenever I go round the country looking at the work of the probation and after-care service, and even taking into account all the excellent voluntary work that is being done at present.
This time of economic stringency may not be the time to provide the means, but what we want is the will to do this. It is certainly overdue that the possibility should be given serious thought and study, and possibly a few experimental pilot schemes should be carried out. If we really want to face up to the problem which young people are having to face up to and to present to the community—this evil phenomenon of juvenile delinquency and crime—I believe that one essential step, which is a radical step, indeed it might even be called a revolutionary step, is to involve them all, including the potentially delinquent, by every possible means

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(short of compulsion) in the problems of their own neighbourhood and in the wider community. This is something which should be expected of them.
To conclude, service in the community on leaving school should—and I believe could—become as much of the normal order of things, as much a part of our national way of life as are the years of full-time schooling which precede leaving school. In the final passage of the gracious Speech it is stated that,
"In all their policies for social reform, it will remain My Government's aim to promote justice and equality for all the people …".
I should like to put a question to the Government and in your Lordships' House: Should it not equally be the aim of the Government—of any Government—to promote a greater sense of responsibility among all the people, starting at grass roots with the young citizens, which would match and justify and be a condition of the rights and opportunities which the Government quite properly aim to spread more equitably?
7.25 p.m.
Baroness ELLIOT of HARWOOD: My Lords, it is enormously interesting to listen to your Lordships' debate on the gracious Speech because I think we must hear more varied speeches on more different subjects than at any other time and certainly than in any other House of Parliament. We have today heard some extremely interesting speeches. I should have liked to follow the noble Lord, Lord Hunt, in what he said about young people as I think I have spent more of my life in organising youth clubs than in almost anything else, but today for my own comments I have chosen two other subjects so I will not follow the noble Lord on this occasion but will merely say that I agree with every single word he said.
The two subjects I wish to mention are agriculture and devolution. I picked out the paragraph in the gracious Speech which speaks of the encouragement and the expansion of home food production and so on—the agricultural paragraph—and I should like to stress this policy and this wish of the Government very strongly indeed. The present situation is that on the whole I think we have an exceedingly efficient agricultural industry; we have enterprising people who are prepared to
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enlarge and to put money into and to develop agriculture in every possible way. I believe that is extremely important and I think the Government encourage it.
Of course, we always say that the Government might do more, but the fact is that they do encourage it and I agreed with the noble Lord, Lord Peart, in his opening speech, when he claimed, as he had every right to do, that the Labour Party have on occasions had very remark able Ministers of Agriculture, of whom Tom Williams of course was the most remarkable. I may say that I speak with a history of agriculture behind me because I think my own husband did more to revolutionise agriculture between 1932 or 1933 and 1937 than anybody else. We are still working with the organisations that he set up, of which the Milk Marketing Board is perhaps the one which has lasted longest and is perhaps the most important.
We are all deeply engaged in studying the common agricultural policy of which we are now members in the EEC and I have spent many hours, and indeed many days, on a Committee of your Lordships' House studying the Common Agricultural Policy and its relationship to our own agriculture. On one occasion three or four Members of your Lordships' House went over to Brussels and had conversations with M. Lardinois and discussed the development particularly of the many surpluses which appear in Europe and which make life very difficult for farmers over there. I came away with the very strong impression that certainly in the dairying industry in Europe where there is a great surplus of milk, the other European countries have no idea of how to sell their products, as we have here. They have not got a Milk Marketing Board; they do not know how to sell milk; they have no method of guaranteeing (as we have) that the production will go into the right channels for consumption, and on the whole there is a muddled situation over there.
I hope very much that our representatives on the Agricultural Policy Committee working over there will try to convince the other Europeans that we have something to contribute to their agricultural views; that we are doing things which they could well copy and things which would help them quite enormously, because in many ways we

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are way ahead of some of the methods used on the Continent today. I think we owe a debt to the European Community for the way in which they are helping us in agriculture. We get considerable grant aid from them, and I do not wish to indicate that I am opposed to the agricultural policy, because I am not, but I think we have a great contribution to make and I hope that the Government in their negotiations and discussion with the various branches of EEC policy will stress very strongly the agricultural policy of this country. In many ways it is greatly in advance of anything that is going on in the rest of Europe.
My Lords, in the gracious Speech the question of increasing production is stressed, and I would hope very much that the Government will do everything they can to see that our food production is increased, for no other reason than that it saves imports. If we want to save imports—and we all know that food is one of our biggest imports—then we should produce more and not have to import so much. So I trust that everything the Government can do in this way, they will do.
There is no mention in the gracious Speech of the new agriculture, as I call it, because it is in fact agriculture—the industry known as fish farming. We have had many debates in this House about fish farming, and a considerable number of your Lordships are quite expert in this sphere. I had hoped very much that something might have been said about fish farming in the gracious Speech. There is a paragraph about fishing—and we all know the awful complications of fishing today, with the cod war, and the difficulties which appear to threaten almost the whole industry. One of the ways in which we could help—because I do not want this country to be without fish any more than anyone else—would be to encourage the development of fish farming. I am sorry that this does not actually appear in the gracious Speech.
The other subject I should like to speak about is the question of devolution. I was extremely interested in the analysis of the situation by the noble Duke, because he has a very clear view of what is likely to happen and what we should be looking for. I suppose I know as much about Scotland and about local government in Scotland as almost anyone. I
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would say this to the noble Lord, Lord Kirkhill, who himself is a great local government person and knows certainly quite as much as I know, if not more, about these problems. If ever something went wrong with the reorganisation of local government, it was carrying out reorganisation before the question of devolution had been raised. The cart before the horse was never more clearly in evidence, certainly in Scotland. Who supported this I do not know. I think that we on this side of the House can take some of the blame. On their side of the House, the Government must take some of the blame, too.
Before we think of having an Assembly we should realise—and I do not know whether your Lordships do realise—that in a country which has only 5½ million people, there are already four tiers of Government, and possibly a fifth if we bring in the elections for the European Community. We have district elections for the district councils; we have regional elections for regional councils; we are proposing to have an Assembly where there will be more elections. We have 72 Members of Parliament in another place, and now we are going to have European elections. I think this is absolute lunacy. I think we should do away with at least one tier, if not two, of local government if we arc to have an Assembly. We should scrap the whole of regional government. I agree completely with the noble Lord, Lord Rhodes, over the question of Greater Manchester, or Metropolitan Manchester, or whatever it is called.
Although some of your Lordships may not have actually been present, you will remember that when the debate took place we had a long discussion on the subject of reorganisation of local government in Scotland, more particularly on the establishment of the vast Region of Strathclyde. I was opposed always to the vast Region of Strathclyde. The noble Lord, Lord Hughes, who was leading for the Labour Party on local government in those days, shared the same view. We had a joint meeting in Glasgow to try to prevent the Government—who I am sorry to say was our Government—from taking through this enormous regional development and having one region instead of four.
If one is thinking about the reorganisation of the House of Lords, it was an

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occasion when Members on this side of the House, who were then in the Government, and Members on the other side of the House, who were then in Opposition, joined together and voted, and carried the vote against the Government of the day. I was backing the Government of the day except on this particular subject. So when noble Lords are inclined to say that they never get Resolutions or Motions through the House from the Labour side if the Tories are so overwhelming in numbers, all I can say is that on this occasion the Tories defeated their own Government with the help of the Labour Party. I put that in as an aside, because it happens to be a demonstration of something which does not often happen, but which has happened once or twice.
My Lords, going back to the subject of devolution, before—and I say "before"; I have the Bill here, but I have not had time to read it because I collected it about only mid-day today—this comes into effect I should like to see the Government reorganising, or going back to some of the reorganisation of local government which happened before the Regions were instituted. It will be very difficult for an Assembly to do away with the regional tier of government, for the simple reason that it will be very unpopular. No Assembly will want to do something unpopular in the first few months of its existence. I should like to see the reorganisation done before we embark on the Assembly. I should like to see either the present Government, or, if we win the next Election, our Government, doing away with one of those tiers of government. I think it is a disaster. It is frightfully expensive. One has so many more local government officials than one had before.
We read in the papers every day of the vital importance of cutting down on the expenditure of local government and on civil servants, whether in local government or elsewhere. But we are creating every day more and more jobs which require to be done by civil servants, whether they are in national Government or local government. We shall not reduce expenditure until we stop doing that, until we go back to doing something much more simple, until we do away with some of these complicated pieces of organisation which, quite frankly, I do not think
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are any more democratic than before, judging by my own experience at home, where it takes me six or seven months to get an answer from a regional council. When I was in local government, I was furious if every letter was not answered within a week, and it now takes months to get an answer at all. I do not suppose we are any worse than anywhere else; it is the same everywhere. There is no democracy, only, it seems to me, this piling tier upon tier of officials, of layers of government, all to no purpose.
My Lords, I have not read the Bill yet, but I hope very much that we will not leave it to the Assembly to do something which will be very unpopular, because many people will lose their jobs; a lot of salaries will go out, and many people will not be able to draw £10,000 or £15,000 a year for a local government position. That is not going to be at all popular if you are going to have to do it in an elected Assembly. So I suggest to the noble Lord, Lord Kirkhill, that if they are going to continue with this proposition of an Assembly, they should begin by putting the house in order before they begin to think about another tier of government, another assembly.
I am in two minds about devolution. I agree with the noble Duke in that before we embark on something extremely complicated and difficult, there should be a referendum. There should be a test in Scotland of whether or not people really want to have an Assembly. If they do, then by all means let us see the best way to do it. But to spend all the money, to establish the Parliament House, to do all these things, and then to find that there is a very strong opposition, would really again be putting the cart before the horse. It is very hard to say how strong the Scottish Nationalist vote is. I am inclined to think that it is not as strong as it was, and not as strong as some people think it is. I may be wrong. I live in an area where it is not at all strong. I do not think it is very strong, for instance, in the great industrial area of Glasgow and Dunbartonshire and Lanarkshire. Curiously enough, I think it is strongest in the North-East and in the areas which are more or less agricultural areas. Nevertheless, I should like to see a test of opinion before we make the great decision.
Lord PITT of HAMPSTEAD: My Lords, if I may intervene, I believe I am being a bit wicked. May I remind the noble Baroness that Margo McDonald won the Gorbals.
Baroness ELLIOT of HARWOOD: Yes, my Lords; I do not say that there are not strong areas of nationalism. I may be wrong; I am not saying that my opinion is any better than anybody else's; but I do not think it is growing as fast as it did in, say, the last five years. But we shall not know that unless we try to test public opinion. I personally think there is everything to be said for having a referendum.
I do not like the fact that we have Wales and Scotland in this one Bill. I think the situations are quite different. I do not know Wales anything like as well as I know Scotland, but I think it would be much better if there were two Bills and not one. I think what might suit Wales, a much smaller country with a smaller population, is different from what would suit Scotland. I therefore do not think that it is a very good idea to have one Bill for both countries.
I have not read the whole Bill yet; I really cannot express any very definite opinion until I have had the time to do so. We shall, no doubt, have tremendous discussions going on in another place, and we shall all be very interested to see what happens. I am not a great enthusiast for devolution. It may be that it is something which is inevitable and we ought to do it. I certainly think that the analogy with Northern Ireland and Ireland is one to which we should pay very great attention. So from that point of view I should be very willing to have a completely open mind about it. I am utterly opposed to breaking up the United Kingdom; I think that would be absolutely disastrous. There is nothing I should dislike more than that. I would not at any point vote for that. But if we were to reorganise, scrap one whole tier of local government, and then have an Assembly—which the Scottish Nationalists do not like, but which I would find quite satisfying—which dealt only with Scottish affairs, that would be the wisest solution. By Scottish affairs I mean everything that could be managed from Scotland; not foreign affairs or defence or any of those things which one noble Lord said Mr. Wolfe had been speaking about; all that is completely and
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absolutely wrong. If we had an Assembly purely for domestic and internal working, I should think that that would be probably the wisest way to do it. But I would not want to do it unless I knew that that was the will of the Scottish people after a referendum.
7.45 p.m.
Lord CROWTHER-HUNT: My Lords, at this late stage in the debate I propose to limit what I say to four or five main points about the Government's proposals for devolution to Scotland and Wales. I am delighted to have this opportunity of doing so today on the very day when the Government have published the Bill to set up directly elected Assemblies in Scotland and Wales. It seems to me a very long time ago since the Commission on the Constitution was set up and started its work, charting out what some people see as the slippery slope to the break-up of the United Kingdom, but what those of us on the Commission saw as a much more efficient and democratic way of handling our affairs.
Indeed, it was a long time ago. We started work in 1969, but it is very gratifying indeed that just about three years after the publication of our report, in October 1973, the Government have now brought forward their Bill, all 166 pages of it, to give effect to the main recommendations of that Commission. This is very rapid action indeed when you consider that the Bill published today involves a massive and far-reaching constitutional change. Here it is nice to note that the Government have dealt very fairly indeed with the noble and learned Lord, Lord Kilbrandon, who was chair man of the Commission when we reported, and with myself, because the Government scheme for devolution to Scotland is in all essentials the scheme for legislative devolution which the noble and learned Lord, Lord Kilbrandon, and the majority of the Commission proposed and worked out; and the Government's scheme for executive devolution to Wales is in all essentials the scheme of executive devolution which Professor Alan Peacock and I proposed and worked out in our Minority Report.
It is not often that members of a Royal Commission see any Government taking any notice whatsoever of what they say. For a Government, therefore,

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actually to implement both the recommendations of the majority and the minority of one Royal Commission in one Bill within three years of their reporting, must indeed be without political and constitutional precedent. If that is not quite without political and constitutional precedent, then I add to my list that for a Government to carry out the recommendations of the Majority and Minority Reports in one Bill within three years of reporting, and in a matter of such enormous constitutional importance, must surely indeed be without precedent.
Lord MACKIE of BENSHIE: My Lords, will the noble Lord permit me to remind him that the Government carried out the recommendations of the Wheatley Committee, with disastrous results in Scotland?
Lord CROWTHER-HUNT: But, my Lords, I am sure the noble Lord does not believe that the present proposals are going to have disastrous results, since in this particular case I am sure and confident that the noble Lord's views on these matters are not dissimilar from those of all members of the Commission or the Constitution.
In commenting on the Government's proposals, it seems to me that we need to be clear about the case for devolution, because it is against the case for devolution that these proposals must be judged. The case for devolution, it seems to me, has nothing at all to do with the Government giving in to the Scottish Nationalists or the Welsh Nationalists. This just does not come into the argument at all. The case for devolution is quite simply, first, that the central machine of Government is now intolerably overloaded. The central decision-making processes, whether in the Executive of our United Kingdom government or in Parliament, are enormously overloaded. This makes sensible central Government decision-making on major matters of policy enormously difficult. Indeed, I suspect that one of the reasons why we have staggered from economic crisis to economic crisis since 1945 is the fact that central Government are so burdened that Ministers have never had an opportunity to stand back and look at major policy making unburdened by all the trivia they have to deal with while in office. I think the same goes for
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Parliament. Central Government have become enormously over-burdened and overloaded.
One needs to illustrate this in only one way. In 1900 the United Kingdom central Government consisted of about 60 Ministers and 50,000 civil servants. Today central Government consists of about 120 Ministers and 750,000 civil servants: all in one way or another making decisions, nominally on behalf of Ministers, and decisions that affect our lives. So the centre has become enormously over-loaded and over-burdened, and joining the Common Market has made the situation even worse.
I am not arguing that we should not have joined the Common Market, but joining the Common Market has placed a still further burden on the central Government's decision-making processes, because so much of major policy now has to be done in a Common Market context in consultation with Brussels and in detailed consultation with other Common Market Ministries and Governments. Quite simply the burdens on central Government have enormously increased, and unless we have devolution we shall have a situation which is becoming like London traffic: the whole centre will seize up. Therefore, the case for devolution is to unload the centre in the interests of effective decision-making at the centre on major matters of policy, so that we can build the House of Commons back into the major policy making process; and without devolution we shall not be able to achieve that end.
Therefore, I greatly welcome the Government's proposals for devolution to Scot-land and Wales. They are a beginning of unloading the centre and shoving things out from the centre, and therefore making possible better central decision-making, making it possible to build Parliament back into that decision-making and formulation of major policies in a way in which it used to operate and in a way in which it operates no longer. Also in doing this we shall give greater democratic control to the people of Scotland and Wales in the running of their own affairs, because there will, as a result of directly elected Assemblies and Governments in Scotland and Wales, be much greater real participation by the people of Scotland and the people of Wales in the running of their own affairs.

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It is against that background that we need to assess the Government's proposals for devolution. Broadly speaking, I am delighted with them because how could one be otherwise when they carry out the recommendations of the Majority and Minority Reports of the Commission on the Constitution. But they do not carry them out quite in their entirety. I should like to draw the Government's attention to what seem to me to he a number of important deficiencies. For example, one of the points on which both the majority of the Commission on the Constitution and the minority were absolutely at one and united was that elections to a Scottish Assembly and a Welsh Assembly should take place on the basis of proportional representation. We were even united in the form of proportional representation which we recommended, which was the single transferable vote system of proportional representation. I hope that the Government will give that most serious consideration. I am delighted at the welcome this idea seems to have had from Conservative and Liberal Benches, too. There is obviously a strong move there in the direction of proportional representation.
There is an additional case now for proportional representation which was not present when we produced our Majority and Minority Reports, and this is the quite simple fact which has to be faced, that without proportional representation it would be possible for the Scottish National Party in Scotland to win an absolute majority of seats in the Scottish Assembly on a minority of votes. Since the SNP do not regard the Government's proposals for devolution as a firm resting place but as a half-way house to independence, it would be the greatest of all tragedies if, in the first elections to a Scottish Assembly, the Party that is committed to go a lot further still rather than working the Government's proposals should be the Party which emerged with a majority and formed a Scottish Government. A Party with a majority on a minority vote might form a Scottish Government, and that majority might be committed to total independence rather than working the Government's constitutional proposals. So I urge the Government to think again on this particular front. The importance of proportional representation in Wales, of course, relates
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quite simply to the fact that in the system of government proposed for Wales it is crucial that minorities should be adequately represented, and fairly represented, in the Welsh Assembly. The only way we can achieve that is by a form of proportional representation. That is my first point.
The second point I want to mention is that it is also important that there should be proper and full judicial review in the Government's proposals. It is in that context that I very much welcomed what the Government proposed in their White Paper of August. I thought that was a move very much in the right direction, as a result of which it is clear that an Act of the Scottish Assembly will be able to be challenged in the courts on grounds of ultra vires. But the one thing that still slightly disturbs me about the Government's proposals in this respect is the veto power of the Secretary of State for Scotland and the United Kingdom Government over Acts of the Scottish Assembly, because that veto power, as I read it, is to remain—and here I quote from the August White Paper:
"if an Assembly Bill is considered by the Government to have unacceptable repercussions on matters for which they remain responsible".
In those circumstances the United Kingdom Government will have a veto power.
Since one of the things that one hopes for in this set-up is that the possibilities of friction between a Scottish Government and a United Kingdom Government should be reduced to the absolute minimum, I hope that the United Kingdom, if it thinks a Scottish Bill will have unacceptable repercussions on matters for which it remains responsible, will not seek to act as judge and jury in its own cause and that there will be some impartial, judicial way of considering whether the United Kingdom Government are right in believing that something proposed by a Scottish Government and Assembly has unacceptable repercussions on matters for which the United Kingdom Government remain responsible. Because the United Kingdom Government will have every temptation to regard anything they do not like in Scotland as having unacceptable repercussions on their policies for the United Kingdom as a whole. Therefore, I hope that we shall ensure that there will be what I call full and

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proper judicial review in the Bill when we discuss it in detail.
The third point I want to make is the question of a Bill of Rights, at least so far as Scotland and Wales are concerned. The Government have put great emphasis, rightly in my view, on maintaining the economic and political unity of the United Kingdom. This seems to me to be crucial. But one of the hallmarks of political unity and economic unity is equality of civil rights. Equality of civil rights is one of the matters that are the very essence of political unity of a country. I hope that we shall find it possible in the end to have in the Bill at least a guarantee that the people of Scotland and Wales will enjoy the same civil rights as the people of England. If there are possibilities of restriction of civil rights in Scotland and in Wales, then this would be something we ought to seek to avoid. Therefore, we have to consider the question of Bills of Rights in this context.
The fourth point I should like to make is on the question of power to tax. I agree with the Government's proposal that the main income of the Scottish and Welsh Governments must obviously come from a block grant. But in this context I have never accepted, even when I was a member of the Government, that it is impossible to devise a means of enabling the Scottish Assembly and the Welsh Assembly to levy some sort of tax of their own. It is an extraordinary state of affairs if we are saying that a Scottish Assembly shall have no power to tax, a Welsh Assembly shall have no power to tax, but every local authority in the country has a power to tax. Here we are setting up very much more important bodies than local authorities, but denying them this right to levy some form of taxation.
The Earl of SELKIRK: My Lords, would the noble Lord allow the Scottish Assembly the power to reduce taxes?
Lord CROWTHER-HUNT: My Lords, I think that that is inherent in any power to tax. It would be possible to reduce taxation within its own area provided that a Scottish Assembly and Government are prepared to have the cutback in services in Scotland that such a reduction would envisage. But I do regard this as a two-way activity. It is in this context that the point has been made that perhaps
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some of the oil revenues might go to Scotland. It has always seemed to me that one possibility in this area is that the oil revenue should go into a special oil fund and that that fund, or part of it, should be earmarked specifically for use in those parts of the United Kingdom which are in greatest need. That would include Scotland, Wales and some of the regions of England. I hope that that suggestion will be considered by the Government.
With modifications along those lines, it seems to me that the Government's proposals for Scotland and Wales will be absolutely first class. But devolution will not have fulfilled its main purpose if it is limited to Scotland and Wales. The main purpose, as I argued earlier, is to reduce the burdens on the centre in the interests of better decision-making at the centre and in building the House of Commons and Parliament back into the shaping of major policies. But with devolution only to Scotland and Wales, that will not have reduced the burdens on the centre. The paradox is that it will have increased the burdens on the centre because the centre will, after devolution to Scotland and Wales only, be running Scotland, as it were, in one way, Wales in a different way and the rest of the country in a third different way. This will have complicated central Government rather than made it easier and therefore the initial paradox of devolution just to Scotland and Wales will increase the burdens on central Government, when the only way to reduce them is to have a form of devolution to the English regions as well.
It is in this context that I welcome the fact that the Government are to produce within the next few days a Green Paper or some form of discussion document on English regions. I hope—I would welcome reassurance on this—that that document will set out for discussion all the options on English regionalism which were recommended in the majority and minority reports. Just as the discussion document of June 1974, which was the basis of discussions in Scotland and Wales and which led to the devolution Bill which is now before us, set out all the options for Scotland and Wales that had been recommended in the majority and minority reports, I hope that England will be treated equally in this respect and that all the

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options in those reports which were recommended for the English regions will also be set out as a basis for those discussions.
We can then set about carrying out the major reform of our very antiquated system of Government, a major reform which will involve a new role for the House of Commons, for the House of Lords and for Parliament as a whole in shaping the major policies of the United Kingdom. It will, of course, also involve this much-needed extension of democratic decision-making to the people not only of Scotland and Wales but to the people of the English regions as well.
8.3 p.m.
Lord AUCKLAND: My Lords, inevitably in the gracious Speech—and I, like many other noble Lords, have sat through gracious Speeches ranging over some years—a large number of topics are discussed, and it is not surprising that devolution should have topped the list today. I would say, as something of an exiled Scot, having lived in Perthshire for much of my life but now living in the South, that Parliament faces a formidable task with the devolution Bill, which has 136 clauses and 16 Schedules.
One of the main problems the Government will face over devolution, particularly for Scotland, is that of distance. If the Assembly is set up in Edinburgh, as I imagine it will be, the fact has to be faced that in terms of transportation it takes about as long to get from Edinburgh to Wick as it does from London to Edinburgh, and the same is not far off in terms of distance. And as a great deal of development has been taking place in recent years North of Inverness, it is questionable whether those who live in that region of Scotland will be entirely happy about an Assembly in Edinburgh. This point has been put to me by several friends and acquaintances who are by no means wedded to the Scottish Nationalist cause but who have these and other concerns about this legislation. Apart from agreeing wholeheartedly with those who have criticised the fact that Scotland and Wales are being dealt with in the same Bill, I question the Title of the Bill, which seems to be woefully ambiguous. However, when the measure eventually reaches this House these questions can be discussed.
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The main part of my speech tonight concerns the section of the gracious Speech which reads:
"It will remain My Government's aim to promote good working relationships within the National Health Service and to make the best use of the resources available to the Service for the benefit of patients and with due concern to the aspirations of those who work in it".
Those are fine words, words with which there can be little disagreement, and I do not wish to rekindle the ashes of the last Session when we spent long hours on the pay-beds Bill or indeed on the reorganisation of the Health Service carried out when noble Lords on these Benches were in office. However, I am bound to say that I and many of those who are concerned directly and indirectly with the NHS have little enthusiasm for either of those measures, and I am bound further to say that we have even less enthusiasm for the reorganisation of the Health Service.
I mention this because there have been some disturbing reports about what will happen to some of our leading teaching hospitals. These reports have appeared in the Press and elsewhere, though of course one must regard with some degree of scepticism what is said chapter and verse through the media. However, there is bound to be a great deal of concern on this score and although we will have an opportunity, I hope soon, to discuss this in detail—in fact, I am contemplating putting down a no-day-named Motion on the Health Service—there must in evitably be a number of anxieties. It may be the aim of the Government to move more hospitals and hospital staffs into areas where the population exists, particularly as new towns and new units of accommodation are being built up. But there is still a need for a fairly substantial number of hospitals in London and particularly for hospitals for specialised requirements. One of the reports suggests that at St. Bartholomew's Hospital the leukaemia and cancer unit may well be closed during the weekend. That, for children and others suffering from those dread diseases who receive splendid treatment at this hospital, could well have dire effects if they have to be sent home where they may pick up infections.
Some of your Lordships may have seen on Panorama last night a most disturbing report that a number of young British doctors and nurses are leaving this country

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to work in the EEC countries, notably Holland and Germany. It has of course been quite an acceptable fact that there is an interchange of doctors, students and others between various countries. Such interchange is healthy because it enables people to get ideas from other countries and to observe the workings of their health services and so on, but the fact is that the reason why these doctors and nurses are leaving this country is that they feel that the remuneration they receive and the conditions under which they work are frustrating. This was made particularly clear by two senior doctors from, I believe, the Newcastle Royal Infirmary. I do not make this point in any Party political spirit. I have taken part in a number of debates in this House on the National Health Service and have always, as one who has served on hospital committees, tried to keep Party politics out of the discussion. However, even on an occasion such as the gracious Speech when one tends to generalise on certain topics, I feel that this is something which is so new —it has, at any rate, only just been brought to public notice—that I hope that the Government will make some fairly searching inquiries into what is going on. I am bound to say in what is perhaps a rather partisan spirit, though with no offence to any noble Lord on the Government Front Bench, that some of the legislation that was passed during the last Session of Parliament and one Bill that was not passed will cost as much money as it would have cost to obtain better equipment and better remuneration for the hospitals which face a reduction of their staff and, in some cases, possible closure.
Baroness WARD of NORTH TYNE-SIDE: My Lords, as regards my noble friend's reference to Panorama, it was made very clear on the programme, that though remuneration in Europe was a factor, the greatest criticism was of the lack of modern, up-to-date equipment. Would not my noble friend agree with that?
Lord AUCKLAND: My Lords, I would certainly agree with my noble friend whose knowledge of her own part of the country is unrivalled. That is one point that must be stressed, but I shall leave it at that at this stage because I hope that there will be opportunities to
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discuss the matter further at various times during the coming Session. It is, however, a very important matter because we train some of the finest doctors in the world and it will be an excruciating shame if we lose them for the reasons that I have mentioned and upon which my noble friend has elaborated.
There is one other matter that has not yet been touched upon. That is the question of the construction industry. I have an interest to declare here as a non-executive director of a very small construction company. There will clearly be a great deal of discussion on the proposals to extend the direct labour scheme. I do not want to go into this in depth but for very obvious reasons I am bound to say that, reading the speech of the right honourable gentleman the Minister for the Environment last week, I found it complacent in the extreme. It may well he that at the present time direct labour accounts for only 2 per cent. of house building and something like 5 per cent. of industrial construction work, but there is considerable fear in the building industry about a proposal by an authority which uses direct labour to be permitted to use it nor merely, say, within the Greater London Council but outside that area. Clearly, having raised this matter without notice, I do not expect to he given a detailed reply this evening, hut, when the Bill reaches this House, it will certainly he gone into in considerable depth.
Time is getting on, my Lords. I am bound to say that the measures foreshadowed in the gracious Speech will do very little to stimulate what is at the present time a stagnant economy. It is perhaps one encouragement that the insurance industry, with which I have been concerned since 1948, contributed to the total of our invisible exports in 1975 the sum of £452 million, of which £294 million came from Lloyds' of London. T hope that the right honourable gentleman the Member for Huyton and his colleagues will, when they come to examine the City of London, bear in mind not merely the shortcomings of the City but also achievements of this kind which arc all too frequently overlooked.
Lord BROWN: My Lords, can the noble Lord say whether the figure for Lloyds' insurance earnings that he quoted was gross or net?
Lord AUCKLAND: My Lords, I cannot tell the noble Lord without notice, but I think that the figure was net.
8.20 p.m.
Lord BROWN: My Lords, the gracious Speech from the Throne refers to:
"Legislative proposals for the extension of industrial democracy …".
What I have to say this evening really concerns that section of the gracious Speech, although the connection with industrial democracy will not be obvious until I am some way through what I have to say. It hardly needs saying that Britain's economic salvation largely depends on the existence of a growing manufacturing industry employing a higher proportion of labour, of skill and brains, and producing sophisticated products in a competitive manner. I am sure that nobody would question that, and I think that we would all be agreed that we have in this country many excellent companies which can be included in that category. Unfortunately, we also have many which do not meet such critieria, and it is my opinion, admittedly on an intuitive basis, that about a third of all British chief executives are of too low a calibre to hold their jobs.
I base that view on having, over the last 10 years, met and discussed industrial affairs with more than a thousand chief executives and visited hundreds of companies. I have heard management consultants, auditors, senior civil servants, merchant bankers, and many senior managers express similar opinions. I was in the board-room of one of our major merchant banks two weeks ago having lunch and I expressed the view about a third of British executives being of low calibre, and the response was, "That is a gross understatement." So I am certainly not alone in these opinions, and I think that a general airing of this problem, which has a severe effect on our economy, is overdue.
The response from some quarters to my comment will be that I am joining that band of irresponsible commentators who continually make unfair attacks on British management. Let me try to dispose of that criticism before I go further. I believe that about a third of our companies are extremely competently managed. They would stand comparison with the best in any other country. Another third get by.
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But the rest drag down our economy and their performance gives the whole of our industry a false and damaging image overseas. If noble Lords want confirmation of that, opinion should be asked of our better industrial export marketing men or of commercial counsellors in our Embassies overseas. They all tell you how much damage bad companies do to our whole image. So I am criticising the tail of industrial management—and can anybody deny that that tail is too long and includes too many companies of potential importance? I am not aiming at small companies now. I am aiming at a spectrum from small to large, which have inadequate chief executives.
It is difficult to speak publicly about this very serious ingredient of economic failure without being categorised as one who seeks to make management the scapegoat for all our troubles. I am not one of those. Some may assume that the inadequacy of a chief executive can be compensated for by higher calibre subordinates. Well, perish the thought! Companies which have inadequate chief executives employ inadequate subordinates and companies with inadequate chief executives who have adequate chief subordinates find that they lose them to other companies.
I seriously doubt that I have said anything very controversial so far: I hope not, anyhow. I am simply trying to make the problem which faces us explicit, so that we can take steps to deal with it. Section 107 of Table A of the First Schedule of the 1948 Companies Act places authority for the appointment of the managing director on the board of directors. If the managing director is not sufficiently competent, then the board is failing in what I regard as its prime responsibility to conduct a continuous assessment of the performance of that managing director. Section 101 of the same Part of the Act says that the board must elect its chairman. But the wording of the section clearly implies a non-executive part-time chairman. I quote from it:
"… if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the directors present may choose one of their number to be chairman of the meeting".
That does not sound like a full-time executive. But it now seems to have become the ambition of most managing

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directors also to be chairman. When this happens there is no person with the responsibility of leading the other directors in the task of assessing the performance of the managing director. Think how difficult and embarrassing it can be for a director who is not chairman to pick up this role, and rally his other directors, and say, "Look here, old Bob is not good enough". Your Lordships know what they would say:" We can't deal with that. He has been 20 years with the company. It is all too embarrassing. It is the chairman's job". So my first specific proposal for dealing with the problem of inadequate chief executives is to alter the 1948 Act in such a way as to ensure that these two roles are always occupied by different directors, and to ensure that the role of chairman is a non-executive one. It may occur to some noble Lords that executive directors are often in a better position to know how the managing director is performing than are other directors. But in their work roles they are subordinates of the managing director. It is quite impossible to ask them to take part in an assessment of their own boss, and so they cannot be counted upon.
How are directors appointed? Many of them, even in our best companies, appear on board after board. It is not uncommon to find people with 20 or 30 directorships. Many clearly have no real industrial management experience at all. I am not suggesting that competent accountants, lawyers, financial experts, and so on should be excluded from boards. But the election of retired soldiers, civil servants, bankers, university professors, Peers, politicians, or even retired trade union officials, and the like, simply on the assumed grounds that they would add lustre to a company, dilutes the overall competence of the board to perform its proper function; and this is going on on a very wide scale indeed.
The whole procedure for manning the boards of many of our major companies has for years been based on far too narrow a circle of candidates. Would it not be an excellent idea if we obtained more cross-fertilisation of ideas between companies by getting large companies to agree that it would be wonderful training for some of their experienced and rising managers to serve as directors of other companies?
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Half a day a month would suffice. It would benefit the company on which they sat, it would exchange ideas across non-competitive companies, and it would, I believe, do a great deal of good. From time to time pressure from various sources has been put upon banks, merchant banks, pension funds and insurance companies, to use their voting or financial power to correct this situation of the composition of boards, but virtually nothing at all happens and the indications are that nothing will happen in the future, either.
Something really must be done about this, because our problem largely is the performance of industry, and if a high proportion are led by people who are not capable of doing the job properly there is one of the foci of our real trouble today. I have made specific proposals in the past when I was at the Board of Trade, with which I will not bore your Lordships now because events are about to overtake us. The Bullock Report is upon us. I do not expect legislation in this Session; I am quite sure that it is not coming. There is too much debate about this for that to happen. So we have a year to discuss what might happen later. I am not in favour of two-tier boards, but if we do nothing more than resist the ideas that the Bullock Committee is probably to put in front of us, we shall, I think soon have them anyhow.
To those who might rise in angry denunciation of the Bill which might produce two-tier boards—and I think it probably will in due course—I would be prepared to say:" If the obvious problems of board composition and managing directors had in the past received proper attention from investors, then they might well have escaped this particular fate". If, then, we are to have two-tier boards, or, more hopefully, reformed single-tier boards, let us attempt the best possible shaping of such a probable reform.
The stated objective of board restructuring, according to the terms of reference given to the Bullock Committee, is to achieve a greater degree of industrial democracy. In my opinion it will not do so unless at the same time works councils are established on every geographical site of every large company. These must include the chief manager on the site and representatives elected by every rank of employee. That is the main negotiating

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institution through which real employee participation can take place. I have views on works councils, my Lords. I do not mean any old works council; I mean works councils of a very specific kind, but I am not going to go into that matter this evening because I want to deal with boards of directors. I am merely saying that to restructure boards and not to create internal institutions inside companies will not do. Unless those are created, we shall not get the participation which is the main object, apparently, of restructuring boards.
My Lords, if employees are elected to boards they will find that they cannot both represent those who elected them and also perform effectively as directors. The two roles are quite incompatible, and I fear that the policies which employees will support as directors will be parochial, short-term and against risk-taking. Employee representatives will have no experience of other companies, or of management, on the basis of which they can make comparative judgments of the performance of the company which employs them, or of the actions required to meet the future of that company. I therefore propose single-tier boards composed as follows: one-third elected by the share holders; one-third of trade union officials appointed by relevant unions, with their nominations being acceptable to employee representatives; and one-third of executive directors appointed by the other two-thirds of directors. Some union officials are currently very hostile indeed to management. Some shareholder directors are currently very hostile to trade union officials. The coming together on reconstructed boards might commence a long-overdue learning process on the part of both groups. Such boards might well begin to bridge the gap in thinking which has separated capital and labour for far too long, and is one of the causes of our poor economic performance today. When previously-hostile bodies sit regularly together to solve common problems, attitudes always change.
Trade unions are now so powerful, and are indirectly playing so large a part in the shaping of industry and of every individual company, that it is essential that they gain a much better appreciation of the real problems with which managements have to cope. There is a great deal of unrealism around in trade unions
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still. Trade union official directors would be able to feed back into their respective unions this knowledge, and shared knowledge is the basis of responsible action. But, of equal importance, if each union director sat on a number of boards, then each would have a comparative frame of reference within which he could take part, with other directors, in the board's prime task of assessing the performance of the chief executive. I bet the trade union officials would not be quite so tentative in discussing really incompetent chief executives as some of our boards are today, because we have all seen examples of dreadful leadership and the boards have for years done nothing about it. I would go further in proposing a committee of each board in major companies, composed of the chairman, one share holder director and one union director, with special responsibility for assessing performance and reporting to the board. I am sure that union directors would be less diffident in criticising than boards are at the moment.
My Lords, every rational citizen wants to see our country emerge from economic tribulation, but radical changes rather than petty alterations are required. I have attempted an analysis of one area which requires such change—namely, means of making it more likely that incompetent chief executives would not remain in post—but the real trouble is that most people wish the ends without being able to agree the means. We have a year to think about shaping a reform of the boardroom which, I think, is inevitable in some form or other. I hope that that thinking, which might perhaps be a little stimulated by what I have said, will be able to shape this inevitable reform so that it becomes much more useful than it might otherwise be.
Lord KINGS NORTON: My Lords, before the noble Lord sits down would he say whether, in his reconstructed board, the one-third membership by trade unions would include any from the company in question?
Lord BROWN: No, my Lords, because I have put the emphasis on trade union officials. Admittedly, initially I think they would be very ignorant of company affairs, and they might have feelings which are hostile, but if they got involved in regular board meetings I think that would change very rapidly indeed.
8.37 p.m.
Lord GRANVILLE of EYE: My Lords, at this late hour I will not follow the noble Lord in his arguments with regard to industrial democracy, but, like him, I should like to refer to that part of the Queen's Speech which places emphasis on the necessity for increased productivity and export-led growth and sacrifice. I think one of our problems is going to be that we have to catch up the three lost years, and that is not going to be easy. Some of us pleaded for this three years ago; but I think that the 1974 and 1975 Budgets, which were referred to, I believe, as "producing howls of anguish" or as "making the pips squeak", had the effect of discouraging middle management. Many of them, I believe, and certainly new recruits, were so discouraged that they looked to the safer public sector. Mr. Joel Barnett, in a weekend speech in the country, said that we now have to reverse the process from the public sector to the private sector, and it is not going to be easy.
My Lords, if as a result of the announcement of the Government measures, whenever it comes this week, there are to be extensive cuts, I fear that an extension of unemployment is inevitable. We have to ask ourselves, in carrying out this new policy: Can the private sector of industry absorb those who would be put out of employment if the cuts were effected on an extensive scale? Many of the factories today are in fact overmanned for various reasons, and with the advent of re-equipment, fresh investment and better machines the tendency is to employ fewer men. So how are we to take them on? How are we to fill the gap in a background when the national overheads of this country are recognised by almost every economist to be far too big for industry to carry and when we are in serious danger (and have been for three years in this respect) of taking in each other's washing. I believe that it is stated that we are in fact producing less in industry than during the three-day week. Our adverse balance sheet in the Common Market is a shocking statement.
Now we have to begin a new policy and it is three years too late. Exports, with all the advantages of devaluation to which my noble friend Lord Rhodes referred (provided they are not lost in cost-inflation in this country) should be a piece of cake for exporters; but that is not what it
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proves to be. We must ask ourselves why this is so. Is it that taxation and cost inflation have become far too high and we have lost incentive? With reference to what my noble friend said, are we giving senior executives enough incentives compared with what they can get in the Common Market? Or is it that with a Government supported by only 28 per cent. of the electorate did we make the biggest mistake of all time in pushing through the Manifesto programme in a climate of economic crisis?
With the Civil Service already over burdened, some of them saying," For goodness sake do not give us any more to do," and, at the same time, a programme which was divisive and could not appeal to widespread national support, I think that whatever we are going to embark on as a result of this new policy the Labour Government must ask themselves how they can govern. We have always had what is called a Left since the days of Jimmy Maxton and the Clydeside Group; but the tail cannot wag the dog. They cannot remain in office as a minority Government. I think this is what the Government must realise.
This is an international trading country. Whatever else we depend on, we depend on confidence—this vital word—in our currency, on confidence at home and abroad. We import our food and raw materials and there is no other way. Confidence is a very strange animal; it has to be seen and felt here and abroad. I think that confidence in the House of Commons is important and it certainly does not help when one can read that the Lord President is referred to as the "Leader of the Scruffies" and as pandering to mob rule and is referred to in the same Press as" fifty years out of date". They have sold the pound and the Government is on the rack again.
I think there should be a referendum on the reform of the House of Commons. I think there should be a referendum to consider whether wider powers should be given to the House of Lords in a somewhat changed Assembly. There certainly should be, as many noble Lords have suggested today, a referendum on devolution and, as has been suggested, one on electoral reform. I think that "first past the post" in the new English Parliament after devolution will be completely outmoded in what Mr. Foot has called a genuine democracy.

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I think that if we have a referendum or an Election, the women are going to have a big say on domestic policies, perhaps as never before. I think they will object to the" Scruffies" trying to do away with a bit of colour and spectacle in a drab world. They are not going to vote for the drabness of the Iron Curtain and those who advocate it will be in my view consigned to the lost limbo.
There have been criticisms in the media of the House of Lords. I think that this House would be unwise to be rattled by a bit of" media mongering" and institution bashing. Some who try to blame the House of Lords as an alibi for wrong decisions or failures of any kind have another ambition; destroy the Lords and you destroy the Monarchy. These things run in cycles. Maybe there are other causes on the horizon or on the way; for example, that collectivism has reached its high water mark in various parts of the world, that individual freedom and a simple idea of patriotism is reviving—which in these days of the "Scruffies" and "Rent-a-mob" would be a relief. We have a hard road ahead but it is time we made a real start now.
8.46 p.m.
Viscount COLVILLE of CULROSS: My Lords, even the noble Lord, Lord Kirkhill, in his most skilful debating vein is going to have some difficulty in making a felicitous comment on all the topics that have been raised in this debate, ranging as they do from inefficient boards of directors to abortions, from battered wives to special constables—and I imply no connection between any of those things.
My big disappointment, truthfully, has been the noble Lord, Lord Davies of Leek. I had little doubt that we would hear at last the true voice of Wales speaking up on devolution. We heard no voice from Wales at all upon that subject. This is the second occasion running when Wales has been singularly coy in saying what it thinks about the proposals for devolution. Of course, we enjoyed what the noble Lord did say; but perhaps another time he would give us the advantage of his enormous experience on this subject, so that we may know the true value of what is being put forward. Perhaps noble Lords do not expect the noble Lord, Lord to answer him since I am sad to see that many have gone home although
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there are honourable exceptions. I say that only because one of the honourable exceptions is the noble Lord, Lord Soper, who told me that he thought he had a temperature and I had no doubt that your Lordships would forgive him if he were not in his place at the end of the debate.
My Lords, I agree with the noble Lord, Lord Mackie, that, thank Heavens! this time the Queen's Speech has been one which dwells to a large extent upon the principles that the Government propose to govern upon, such as justice and equality for the British people. I hope that we interpret it in the same way on this side as noble Lords in other parts of the House. We are not promised another flood of legislation and in the admirable speech with which he moved the Address that we are now debating the noble Lord, Lord Wallace of Coslany, commented on this. I should like to join in congratulating him and the noble Lord, Lord Pitt, on the admirable way in which they fulfilled the task set them last week.
I am particularly glad to hear from the noble Lord, Lord Brown, that he does not think that we are going to have industrial democracy in this Session. Indeed, so little do I think that we are going to have it that one must pay another congratulation to the authors of Her Majesty's gracious Speech in being able to fill up enough time for Her Majesty to come and make a suitably lengthy speech from the Throne at all.
This is not an occasion, I must confess, when I wish to suggest anything should be put in that has been omitted. I would rather wait, even for the most pressing measures, for another occasion when perhaps it will be a different Administration that will be handling them. I am glad that the Government have been modest in the tasks they have set for Parliament this time. I should like to comment on one or two things and I am glad to find that there is a precedent in the debate for all of them.
First of all, the Criminal Law Reform Bill that was introduced this afternoon by the noble Lord, Lord Wells-Pestell. I recognise even in the Long Title, and certainly from the noble and learned Lord the Lord Chancellor's speech, a good deal of the Law Commission's Report No. 76. The topic of conspiracy has been the subject of a good deal of concern in this House—I remember

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particularly the noble and learned Lord, Lord Gardiner. It is not entirely co-incidental that that part of the Law Commission's Report on conspiracy to corrupt public morals, which has been one of the most controversial areas, together with obscenity, is, I would judge, not going to be found in the Bill. It may be that the Government have thought that this was not the occasion to deal with this matter since there are, after all, a large number of other topics which will be included in the Bill.
However, I think it is important that Parliament should now take on the problem of the law of conspiracy. Where people act in a way that is criminal, and particularly if they do so from political motives—because it is here that the "crunch" has recently come—it does nothing but harm if their political supporters are able to attack the very law under which they have been convicted. This diminishes the rule of law itself and brings undeserved notoriety and even sympathy for people who certainly do not deserve it. The Law Commission carefully studied this whole area to see what actions which are now potentially or actually criminal should not any longer be so, and they have also studied the scene to see what gaps there may be in the law, such as, for instance, what is to be done about bomb hoaxes, which are inadequately covered at the moment. They have also tackled—and I am delighted to see that the Government are proposing to do so—the formidable problem of squatters. Whereas there has long been a civil law right to deal with this, the trouble is that it takes a good deal of time. That is very little comfort to somebody whose home has been taken from him unlawfully and who has nowhere to go. Nor, of course, can the police assist, at least in very few cases.
The squatters themselves use the forcible entry Acts which are of incomparable antiquity on the Statute Book. They use them to protect themselves against the rightful owner who wishes to re-obtain his own property. I have seen the notice on the front window of a house occupied by squatters where the law is most learnedly set out and all those ancient Acts quoted. It seems to me that it is high time that this problem was tackled, and I congratulate the Government for doing so.
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I hope that they are also going to deal with the case that this House, in a judicial capacity, in the case of Kamara, has attempted to clarify, but that is another area of the law of conspiracy where a statutory restatement is overdue and would be most welcome. That case dealt with the occupation of foreign embassies and has a bearing upon the whole of the law of squatters. I join with the Law Commission in this area in preferring the clear-cut, criminal offence to the tortuous force of the use of the civil law as the final sanction, not least because if you have to involve the law of contempt of court, having gone through all the civil procedures to deal with squatters and eventually to evict them, you are using a penalty which has no time-scale and no maximum which can be imposed. There fore, they face unlimited imprisonment. I do not think that is satisfactory either; nor has their case usually been heard before any court at all.
I rapidly looked up the James Committee Report when the noble and learned Lord explained that that too was comprehended in the measure that he is proposing. It seems as though the recommendations of that Committee are being faithfully adhered to. The matter which may interest some of your Lordships—because I remember it from a few years ago—is the rather more complicated situation relating to motoring offences. I wonder whether the Government have grasped the nettle of that, as I believe they might find that the most controversial part of the whole subject.
When we come to other law reform it comforts me greatly that from these Benches when we are dealing with patent law there is a possibility that my noble friend Lord Cawley may be here. Of course the noble and learned Lord will be able to expound every detail of this complicated subject to the perfect comprehension of the House; I fear if it is left to me I shall be struggling in very deep waters. I am glad that my noble friend Lord Auckland mentioned the problem of direct labour because of all the matters in the gracious Speech (which I thought was singularly uncontroversial) this is the one which appears to us to be the most provocative. I fear that the Government may not find the passage of their legislation particularly easy in this House, as indeed has been threatened in another place.

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My lack of comprehension of this situation derives from this fact: there is currently an inter-Departmental Working Party looking into the whole of this subject, and we have been told by Ministers in another place that it will take some time to complete its task. We are also told that the Government are not going to await the completion of their task before they choose to legislate. This is a strange matter. We have been given, furthermore, a public assurance that the tendering practices of direct labour organisations will be brought more closely into line with the private practice; and then the Government go on to say that the Minister concerned has already asked the Working Party to consider arrangements for charging, accounting and tendering, which are the crucial matters, in the light of the principles that it is proposed to introduce in the legislation.
Why not let the Working Party look at it first and then introduce legislation afterwards? It is not altogether surprising that some of these matters require to be looked at because, as I understand it, within the past year the district auditors have reported on no less than 13 cases where improvements, to say the least, have been needed in procedures. Perhaps the most notable one I heard was the case in the Sedgefield District Council which was referred to the other day in another place. It is a story of inefficiency there and I suspect that it is the same elsewhere.
I wonder whether the Government are hastening to legislate on this in order to forestall their possible demise and the inability to get anything on the Statute Book at all. I would warn them of this: there is among ratepayers in this country at the moment an upsurge of feeling that they are not prepared to go on without any further ado taking increases in rates. They are beginning to use some of their legal rights to look at the accountability of the local authorities under whom they have to suffer. They are beginning to take part in the district audits, and they are beginning to use their rights to inspect documents which the local authority have to produce to them. The trouble about inefficiency in direct labour organisations is that they do not come out until ages afterwards. They may never come out at all if for one reason or another the public are not allowed access to the documents.
It is a great mistake for the Government
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to legislate on this matter at this moment in advance of at the very least a complete scrutiny of the whole of the financial controls for these departments. I strongly suspect that they should not legislate at all. They surely do not wish to put on the Statute Book another case where one can say that inefficiency and waste are the clear and obvious hallmarks of Socialist legislation. This they can forestall.
I now turn to devolution. It is a strange thing that, although I have not had a word with him about the details, my noble friend Lord Campbell of Croy and I seem to be thinking on very much the same lines. I am not averse to tile idea that there should be a Scottish Assembly; indeed, I welcome it. I expect I welcome the idea of a Welsh Assembly, but nobody will tell me anything about it. One of the things that has certainly gone wrong—and this is at the most basic level —is that Scottish legislation is not upon the Statute Book simply for lack of Parliamentary time. The needs have been there and the pattern South of the Border has been there; yet it takes ages to find time for the Bill in the Parliamentary timetable.
A very good example is the Town and Country Planning Bill which has just been introduced in another place and contains a number of things which have been law in England and Wales since 1968. That is the sort of thing that happens and it is something which needs to be dealt with. It was here that the noble Lord, Lord Pitt of Hampstead, came to the fore with his speech seconding the humble Address. A number of noble Lords have spoken on this and I should think that they have said things which the Government would find useful to them.
Upon one thing we in this House (since the noble Lord, Lord Belhaven and Stenton, who is the only Scottish National Party member among us, is not here) are all absolutely at one: the requirement that we should have a stable system and avoid what the noble Lord, Lord Crowther-Hunt, again referred to as the "slippery slopes". I am sure that when these Assemblies come into being, in whatever form they finally arrive, they must live up to the expectations of the peoples of those two countries. That was the point made by my noble friend Lord Selkirk.
The noble Lord, Lord Crowther-Hunt, looked at it from the other way: that we

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also need to clear the decks at the Westminster end in order more properly to consider the things that fall upon us. I do not think, with respect to him, that that is the way it will be seen in Edinburgh and Cardiff. I believe the heady wine will be in their hands and they will not think very much about how helpful they are being to the overworked legislators down in London. But they have got expectations and demands for participation, as the noble and learned Lord the Lord Chancellor said, and we shall be in trouble if our proposals do not satisfy them.
There are a number of ways in which these proposals may not satisfy them, it seems to me. Perhaps we shall have judged wrong as to the sufficiency of the powers given to them; and then they will ask for more. Here in particular I consider most important the point mentioned by the noble Lord, Lord Crowther-Hunt, and others, concerning the powers to raise money. I have looked at the Bill as nearly as possible from end to end and it seems to me the Government have gone back on their proposals in the August White Paper. I can find no powers in Scotland for extra revenue to be raised, let alone reduced, by any means at all. I think they will be wholly dependent upon the Treasury in London to provide a block grant. That may be very dangerous because, first of all, for unpopular cuts or for an inability to carry out popular schemes, it will never be the Assembly which is to blame: it will always be the Treasury in London, And they will never have to face the odium of actually raising taxation in order to satisfy the demands of their voters and electors.
That may be a fundamental flaw in the whole of the organisation and, indeed, in the very foundations of this Assembly. I wonder very much why the Government have reneged upon the paragraph in the August White Paper. Perhaps they will complain because of the arrangements we have for veto. This was touched on by the noble Lord, Lord Crowther-Hunt, and I think he ought to look at Clauses 45 and 107 of the Bill. He will not find there any of those grandiose words in Clause 45. For instance, something can be vetoed because it is thought "not to be in the public interest". That can mean anything: it is a phrase as long as a piece of
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string and it applies, I may say, to all political complexions of the Government in London. That could be a very formidable ground for complaint.
Perhaps there will be complaints because the majority in Edinburgh—and, of course, to a lesser extent in Cardiff—is of a different complexion from the majority in London. There may not necessarily be vetoes but, for all I know, there may well be economic sanctions. After all, London will have complete control of the block grant. Perhaps the Parties in power in the Assemblies will follow too closely the political persuasions of the Parties in London and the people in Scotland and Wales will find they have too little differentiation and too little self-identity. They may be disappointed in that way, and it could lead to another type of conflict. Last of all—and this has been touched on by many of your Lordships—we could have a situation where the Party in power, at least in Scotland, will simply be aimed at wrecking the whole thing. We must be very careful to ensure that this does not happen, otherwise the exercise will be completely in vain.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): My Lords, if the noble Viscount is about to leave the matter of devolution, may I just—
Viscount COLVILLE of CULROSS: I am not.
Lord McCLUSKEY: Then before he leaves the matter of taxation, may I ask him this. If he is prepared to criticise the Government for not including in the Bill revenue-raising powers, is he prepared to be constructive and inform us what revenue-raising powers he would like to see in the Bill?
Viscount COLVILLE of CULROSS: My Lords, I think that is perhaps a little hard on me. I consider it fairly clever of me to have discovered that there are not any revenue-raising powers. In paragraph 16 of the August White Paper we were told that there were going to be such powers and we were told what form they would take. In other words, they were going to be based on rates, because nobody at that stage could think of a satisfactory alternative. Given a little time, I will see what I can do to help the noble Lord, Lord McCluskey, but I should have

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thought the Government had probably gone through that exercise before they abandoned it. Perhaps therefore I may be forgiven for not having any very original ideas this evening.
I take the point made by my noble friend Lord Campbell of Croy. There are, after all, difficulties at the moment for anybody who is governed from Westminster. It may not be everybody's cup of tea, for example, that when the Government wish to cut expenditure they pass it on to the town hall or county hall so that that authority can decide whether to cut standards, sack their local government officials or raise the rates and get the Government out of a mess in that way. At least, I gather that is at least partly the method Mr. Healey is adopting. At the moment other things are going wrong for those who are dependent for their livelihood and for their economic existence upon Whitehall, and I very much hope that those who consider the setting up of Assemblies will not take too much account of that sort of thing.
One day, we hope, things will be very much better and we do not wish to set up a system now which reflects the discontent afar off in Scotland or in Wales, which will not adequately allow those parts of the country to share in the prosperity that we very much hope will return to us before too long. It would, I think, be a tragedy if they were to judge the system upon what they wished to avoid by way of central Government today. Indeed, I believe that any of those points intended to be an emollient to those voters—I suppose, those voters who are very nearly going to vote Scottish Nationalist or Welsh Nationalist —may, unless we are very careful, turn out to be an irritant not only for Scotland and Wales, but also for England as well, because I come lastly to the situation in England.
We have the proposition put forward by the extremists that, for instance, they would like to have the oil in Scottish waters, subject, as my noble friend said, to what Shetland has to say about that. They do not think at this stage of the time when the oil runs out, because it is, after all, a fact that of the enormous reserves of coal in this country, which will last for decades if not centuries after the oil and the gas have all gone, the great proportion is in England, with perhaps some in Wales. England and Wales are an inherent part of
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this, as much for ourselves and for the United Kingdom, as for Scotland and Wales, and let us just think for a moment about the English side of this.
We have been told about the possibility of referenda, and my noble friend Lord O'Neill of the Maine suggested that the English should not take part. I do not agree with him. I believe that the English are inherently bound up in the whole of this process, and certainly we should be very careful before we exclude them from the process of decision. I am not particularly impressed, to be honest, with the prospect for England as it arises inferentially under this Bill. It is really the same point as that made by my noble friend Lord Campbell, but perhaps I may give some examples.
Let us take what we now find to be a devolved power of legislation for Scotland—education. Let us suppose that the Scottish Assembly decided to deal with secondary education, with which we have just been dealing, in a way quite different from what has so far been introduced for the United Kingdom. They would be able to do that, and Westminster would in no way he able to interfere with them, but that does not apply to England. Suppose that the Parliament legislating only for England, the United Kingdom Parliament, was to put forward proposals which, for the sake of argument at the moment, were not congenial to the Labour Party. With the English and the Scottish MPs, they could impose their will upon England, but those English and Scottish MPs would already have been able, either directly or indirectly, to deal with affairs in Scotland, and perhaps to some extent in Wales, in a different way. Why should England be bound?
The same thing happens, if we are taking Party political issues—and I appreciate that it would work equally well in reverse—about the Community Land Act. It is a devolved executive power for both Assemblies. For instance, it will be perfectly legitimate for the executive in England, and in Wales in this case, to bring all factory development into the machinery which requires that it goes through local government bureaucracy before a brick appears on the ground. A Statutory Instrument would be required for that to happen in England. We cannot interfere in the English Parliament in what that

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process requires in Scotland or Wales, but all the MPs from those two countries can come and force it through for England and there is nothing that we can do. I do not think that this has ever previously been brought out in the consultation and I think it should be considered.
But I do not believe necessarily that the answer is regional government for England. There are some particular difficulties about that, if I may finally deal with it, and it is a matter upon which the noble Lord, Lord Ponsonby of Shulbrede, made his most helpful maiden speech. I am only sorry that he should have to read my congratulations to him in the Official Report, whenever he sees it. Nevertheless, I very much enjoyed his speech. I would ask, when we come to the next stage of the debate about English regional government, for people to consider some of these points: the artificiality of the boundaries; the fissile nature of policies which allow regions, perhaps, to carry out entirely divergent political, executive activities; the movement of population and industries seeking more attractive forms of government, or executive decisions which suit them best; and, I suppose, a matter dear to my heart, the overwhelming legal chaos that would result from trying to advise anybody about the law in any part of the British Isles.
I have looked with interest at these provisions in the Bill, so far as I have been able to take them in while listening to the debate. I am sure that they are a start but equally I am sure that they are by no means the finish of the argument. When we have done with that we must still think, and perhaps we must think in the process, of the effect of it upon those of us, expatriates from Scotland and Wales or not, who live South of the Border. Certainly I envisage on this, and on a number of other topics on home affairs and devolution which have been raised in Her Majesty's gracious Speech, a fascinating Session of this Parliament
9.14 p.m.
The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill): My Lords, as we reach the conclusion of the second day of debate on the Address, which has concentrated on the topic of economic and home affairs, I hope that noble Lords will agree with me when I say that the
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customary standard of high excellence in debate has been maintained in your Lordships' House and that it certainly behoves those of us on this side—indeed, all of us—to study carefully all that has been said.
Economic and home affairs is a wide-ranging title and your Lordships' contributions to our deliberations have quite properly covered many issues of a varied nature and character. Today, however, and very naturally on the day of publication of the Bill, devolution, and some of its implications, has occupied the attention of many noble Lords. May I speak about devolution for some minutes before I make reference to other points which have been raised in the debate by noble Lords who felt that they might mention matters not pertaining to devolution.
This afternoon my noble and learned friend the Lord Chancellor referred to the Government's proposals for Scotland and Wales and the noble Viscount, Lord Colville of Culross, has just made a number of pertinent comments which will be read carefully by me tomorrow. During the debate many other noble Lords have made considerable reference to devolution. In view of the place which the Scotland and Wales Bill will occupy this Session in your Lordships' deliberations, it seems appropriate for me to devote that period of time to the subject.
The noble Lord, Lord Campbell of Croy, and the noble Lord, Lord Mackie of Benshie, argued strongly that there should be separate Bills for Scotland and Wales. The Government acknowledge that the devolution schemes for Scotland and Wales differ considerably in detail. That reflects differences in local circumstances and history, but the Government are equally pledged to both countries to introduce devolution. In the Government's view, there is a very significant framework of common principles underlying both schemes. There is great merit in Parliament considering together the schemes for the two areas where a clear demand for devolution now exists, and putting both schemes into one Bill will certainly be far more economical in the use of Parliamentary time. The Government considered very carefully after the debates in January of this year whether there was a case for two Bills. The Government are clear that the balance of advantage lies in having one Bill.

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My noble and learned friend the Lord Chancellor referred your Lordships to the first 50 clauses or so as containing the main structure of the devolution schemes. No doubt your Lordships will also want to study carefully Clauses 58 to 76, as these arc the financial clauses. In more general terms, it may help your Lordships if I confirm that the Bill reflects faithfully the proposals in the two White Papers of November 1975 and August 1976 respectively.
If I may take up one point which the noble Viscount, Lord Colville of Culross, made on the question of the 1976 White Paper and the Government's position anent their tax proposals, could I direct him to page 3, paragraph 16 of the White Paper. We said there that further reexamination of the rates levy, et cetera, had confirmed that no better method of devolving some revenue-raising power is available within the current framework of national and local taxation but that in the light of the comments received the Government had decided not to pursue the proposal. Therefore we think that we are consistent on that point.
The noble Earl, Lord Selkirk, asked me who is responsible for the law and suggested that somebody who is well qualified should be responsible for the quality of the law. At least, the noble Earl used words to that effect. As I am sure the noble Earl will understand, a substantial part of our debate could be taken up on this very subject. Indeed, that may well be the case when the Bill is considered. In the time available I can only reassure the noble Earl by saying that responsibility for the law, especially the interconnection of private and commercial law which he mentioned, was given the most exhaustive consideration by the Government. As to arrangements for husbanding the quality of the law after devolution, devolved law will be the responsibility of the Scottish Administration. The noble Earl may be interested in Clause 21(4) of the Bill which provides that a member of the Scottish Executive responsible for functions equivalent to those of a Law Officer need not be an elected member of the Assembly, for reserve law responsibility will continue as at present.
The noble Earl, Lord Selkirk, further posed this question to me: who has been consulted about the shape of the devolved
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Assembly chamber? It is difficult to consult effectively when those with title to be be consulted do not yet exist as a body, but in July last provisional plans were widely published in the Press in Scotland and were displayed to Scottish Members of Parliament, who had been shown round the building. There have been no representations since to suggest that the plans were on the wrong lines, although of course the noble Earl gave every indication that he thought they were.
The noble Baroness, Lady Elliot of Harwood, posed this question to me. She said that local government in Scotland should be reorganised before devolution, and I am sure that from her own vast experience of the local government scene she will recognise that local government reorganisation is far from simple and that we cannot simply go back to an old form of organisation. To organise local government first would delay devolution very seriously; it would create another upheaval in local government, which as we all know has just been reformed in Scotland, and certainly could not improve it in the short-term; and having got so far with devolution it would seem strange to pre-empt at this stage a possible major decision of the new Scottish Administration.
My noble friend Lord Crowther-Hunt, as indeed the noble Lord, Lord Ponsonby of Shulbrede, in his most eloquent maiden speech, both suggested that all options for England set out in the Kilbrandon Report must be in the English Consultative Paper. That Paper will aim to deal comprehensively with the possibilities of change in England. My noble friend Lord Crowther-Hunt posed questions about taxation powers, about the equality of civil rights as between different parts of Great Britain, about the desirability of having a judicial review of reserve powers and policy, but I consider that these are matters of considerable detail which will certainly be discussed at considerable length as your Lordships debate the Bill on a future occasion. There have been statements or implications—at least outside this House—that the Bill should and could have been deferred so that the energies could be concentrated on the economic situation and on other matters considered vital.
I am glad to note the measure of agreement, as the noble Lord, Lord Campbell of Croy, has said that there is a

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greater danger in doing nothing. We can therefore concentrate on what to do rather than whether or not to do anything. It is a major argument of those who oppose devolution that it will lead to over-government of Scotland. The noble Lord, Lord Campbell of Croy, mentioned this danger and seemed to have some fear of it. I will not follow him on the point of local government reform which, as I mentioned earlier, after devolution will be a matter for the Scottish Assembly. We are not adding to government; we are re-distributing it. The Government's proposals are not directed to matters being considered in two places where they are now considered in only one. We are seeking to improve the quality of government both by relieving Parliament of responsibilities which can be borne elsewhere, and by creating circumstances in which the discharge of these responsibilities can get more care and attention than Parliament is at present in a position to give it. The need for relief is not only in Parliament; it applies at least equally to Ministers, and certainly to this Minister.
The noble Lords, Lord Mackie of Benshie and Lord Campbell of Croy, referred to the manifold functions of the Secretary of State for Scotland, and of course the noble Lord, Lord Campbell of Croy, has a personal knowledge of those difficulties. I can assure the House that both the present holder of the office of Secretary of State for Scotland and his predecessor are satisfied that administrative decentralisation in Scotland has been carried as far as it usefully can, if not further. I must say to the noble Lord, therefore, that any devolution scheme must take account of this fact.
In this connection, I cannot help but feel that there is a contradiction in the arguments of those who are opposed to devolution and who also say that we should be concentrating on the economic situation, or whatever. How will it help the Government and Parliament to deal more effectively with the economic situation if they are obliged to spend much of their time dealing with matters of significance to one part of the Kingdom only, and which could perfectly well be decided in that part of the Kingdom? In any case, I am a little sceptical about scare stories of prospective over-government. It is true that from time to time some people complain in very general terms of over-
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government, but the overwhelming number of complaints about government received by Ministers are about the failure of Government to do something, or about the quality of what they have done. Devolution is directed towards these complaints.
Possibly the most fashionable argument against devolution is the now almost legendary slippery slope to which passing reference was made by my noble friend Lord Crowther-Hunt and by the noble Viscount, Lord Colville of Culross. The contention that once we have granted devolution independence is bound to come, apparently regardless of whether or not the Scots want it, is one that has helped to justify the total refusal of devolution in any form or, at the most, some sort of Scottish talking shop without any powers. The Government wholly share the conviction, widely expressed in this House, that independence for Scotland would be bad for both Scotland and Britain, and that the majority of Scots do not want it. Given the evidence that we have of the demand for transfer of real political responsibility to Scotland, I think the dangers of a slide towards independence are greater if we take no action, or inadequate action, than if we do what we propose.
My Lords, the noble Lord, Lord Campbell of Croy, spent some time on the question of referenda as, indeed, did the noble Duke, the Duke of Devonshire, and the noble Lords, Lord Hunt and Lord Granville of Eye. The noble Lord, Lord Campbell of Croy, spent some time pointing out the difficulties of constructing satisfactory questions to ask, and of deciding of whom to ask them. I can only say that the Government have no proposals for referenda. They do not think such proposals necessary. They are satisfied that the need and wish for devolution are already sufficiently demonstrated to justify Parliament doing its normal duty and taking its normal responsibilities. But the Government will listen to and carefully consider any proposals made during consideration of the Bill in another place and in your Lordships' House.
My Lords, the noble Lord, Lord Campbell of Croy, to the accompaniment of great enthusiasm from the noble Lord, Lord Mackie of Benshie, and understandable enthusiasm from my noble friend Lord Crowther-Hunt, suggested

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that proportional representation would be highly suitable for the Scottish Assembly. Without the accompanient of quite so much enthusiasm from the noble Lord, Lord Mackie of Benshie, the noble Lord, Lord Campbell of Croy, thought proportional representation much less suitable for the British Parliament. It seemed to me that he was rather undesirably concerned on the effect of proportional representation on the fortunes of a political Party.
Lord CAMPBELL of CROY: My Lords, I am grateful to the noble Lord, Lord Kirkhill, for giving way. I am sorry to interrupt him, but I would not wish there to be any misunderstanding. I was pointing out—and we had a debate on this about a year ago so I will not go over it all again—that those who oppose proportional representation at Westminster have to consider a whole lot of other things; that is to say, it is likely to produce coalition government and compromises of Manifestos; and until all that is sorted out, it is difficult to consider that for Westminster. So I was not doing what the noble Lord said I was doing, but I was pointing out a different situation. I was pointing out that those difficulties would not arise, as they did not in Northern Ireland, if proportional representation were to be adopted for a Scottish Assembly.
Lord KIRKHILL: My Lords, I followed the point made earlier by the noble Lord, Lord Campbell of Croy. At this stage I was attempting to put in a minor, although snide, political boot, but really the only one I have so far attempted to use. I can only say that the Government consider that the present electoral system is simple to operate, easily understood and provides for clear and direct accountability of the Member to his constituents. Any change would have to be looked at hard, and the implications not only for the Assemblies but also for Parliament and local government elections would need to be fully assessed. The circumstances of Northern Ireland, particularly the presence two separate communities, are entirely different from those elsewhere in the United Kingdom.
Lord MACKIE of BENSHIE: My Lords, before the noble Lord leaves that point, perhaps he would explain why we have three Members for one constituency.
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Surely this raises the same sort of difficulty which he reckons to avoid?
Lord KIRKHILL: My Lords, that is a very fair point to put to me. I think the frank reply to that is that for the first election this would seem to be the quickest and most effective way to proceed. These are early days and the Bill has only just been published. If the noble Lord will consider the matter in some depth, I think he will see that this may not necessarily be the case as we proceed. It seems to the Government to he an important way of dealing quickly and effectively with elections very soon after the Bill has passed through these Houses of Parliament.
Finally, my Lords, I should acknowledge the position of those who accept that significant change is desirable, agree that action should be taken now to that end, but consider that the action should take quite a different form; namely, that of creating a federal constitution, a point touched on by the noble Lord, Lord Mackie of Benshie. I would remind those who take this view that the Majority Report of the Kilbrandon Commission, after a careful study of federalism, ended with a firm recommendation against it as a solution to British requirements. I would also remind your Lordships that an essential object of devolution is to respect the different attitudes and aspirations of different parts of the United Kingdom. Those favouring federalism have increasingly sought to argue that it is capable of more flexible application than has yet been demonstrated in any existing federal State.
Even so, it is not easy to see how satisfactory arrangements could be made whereby Parliament had complete sovereignty over parts of the United Kingdom but only partial sovereignty over the remainder. Alternatively, it is not easy to see how a British federal State could operate if one of its provinces, England, accounted for 85 per cent. of its population and for a very significant percentage of its overall wealth. This might be corrected by breaking up England into a number of regions, but there is as yet no evidence of a wish in England either for a federal State or for that type of sub-division. Federalism elsewhere has been either a natural process of growth from the bottom upwards or has had historical factors working in its

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favour. In the Government's view, neither of these influences applies in Britain.
The Government will, of course, as I repeat, be ready to listen with the greatest care to all the arguments put forward on the provisions of the Scotland and Wales Bill. I do strongly commend to your Lordships the Government's initiative in bringing the Bill forward, and I strongly suggest that the only constructive approach is that of considering the Bill within the broad principles of devolution as laid down by the Government and not of seeking some totally different solution. In the meantime, the Government will take note of the contributions made in your Lordships' House today, aware that there will be future occasions for debate in greater depth.
I now wish to make observations on a number of disparate points made by other noble Lords. I would, of course, thank the noble Lord, Lord Campbell of Croy, for his kind words on the Government's proposal to extend fishery limits to 200 miles next year. This is a first and essential step in safeguarding our fisheries interest. The next vital stages are those for settlement in negotiation with our EEC partners. It is our intention that this Chamber should have the opportunity of debating the fishery limits Bill before the Christmas Recess.
My noble friend Lord Soper—who, unfortunately, has had to leave because he has been feeling somewhat unwell these last few hours—properly directed your Lordships' attention to the plight of the homeless, pointing to the urgent need for legislation. I can say, as my right honourable friend said last week in another place that the Government remain committed to introducing the promised legislation on homelessness and will bring it forward at the earliest opportunity. The statistics for 1975 which are now available show how much authorities are doing, but the Government fully accept the point made by the noble Lord that a clear statutory framework is needed. The Government have made it clear that they intend to deal with this and the Government will introduce a Bill as soon as this proves to be practicable.
The noble Earl, Lord Longford, has expressed a proper concern for the plight of battered women. However, I can tell your Lordships' House that, in
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welcoming the Select Committee's Report on Violence in Marriage, the Government undertook to report back to Parliament. The Government's observations on all 28 recommendations contained in the report will be presented to Parliament before Christmas. I give the noble Earl that undertaking. I confirm to the noble Viscount, Lord Barrington, that tonight is not the time to discuss the status of the foetus, but I can say that the first Report of last Session's Select Committee on Abortion makes a number of recommendations to the House of Commons, many of which would require legislation to implement, and recommends that the Government should introduce such legislation. My right honourable friend the Secretary of State for Social Services has said that the House of Commons as a whole would wish to consider carefully the report and its recommendations. It has not yet done so. The other place would require initially at least to consider the individual recommendations.
I am disappointed to learn that the noble Lord, Lord Inglewood, considers the average run of St. Andrew's House Ministers to be somewhat supine, but I can confirm to the noble Lord that the Working Party set up by the Police Advisory Board for Scotland reported in June 1975, a point I have made before, as a result of which chief constables and police authorities have been encouraged to improve their special constabulary both in quantity and in quality. In England and Wales a similar Working Party will report in the near future to the Police Advisory Board.
The noble Lord, Lord Auckland, and the noble Viscount, Lord Colville of Culross, have expressed scepticism about the Government's proposed plans for direct labour organisations. If I could be helpful yet partisan, the Government's proposals, on which the industry has been consulted, are broadly that direct labour organisations will be enabled to do new construction work within the county for another local authority in the county, for new town development corporations, and for registered housing associations. A district direct labour organisation will be able to do new construction work for a contiguous district of an adjoining county, and direct labour organisations will be able to do improvement and maintenance work for owners of private houses in housing action areas and general

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improvement areas within the county. Proper charging—and the noble Viscount mentioned this—accounting and tendering arrangements will be introduced. A financial objective will be established, and all proper costs, including overheads, will have to be taken into account. Separate accounts in relation to direct labour organisation activities will be required to be kept. The main principles will be included in the legislation, and the detailed arrangements will be set out in regulations. The proposals on these aspects are, in essence, in line with the recommendations in the Report on Direct Works Undertakings Accounting published last year by the Chartered Institute of Public Finance and Accountancy.
The noble Lord, Lord Rhodes, asked me a specific question. He asked about the nature of the Government's policy towards MFA renegotiation. The Government are aware of the shortcomings of the present MFA, which expires at the end of next year, and we have been in close touch with industry in recent months over possible improvements.
I have made observations on a number of specific points raised by noble Lords today. However, as I indicated at the outset of my remarks, the debate in these two days has ranged widely over the economy and home affairs, a point emphasised by my noble friend Lord Gordon-Walker. In the circumstances, I consider it would be appropriate if I were to conclude by making a general comment on the Government's view of the economy. The aim of the Government's strategy is sustainable full employment in an economy that can provide rising standards of private consumption and public provision, although where the link lies between these two thoughts and ray noble friend Lord Davies of Leek's invisible man with his invisible earnings I confess I have not yet quite considered; but I undertake further to think and reflect on what my noble friend said.
Since the autumn of last year, the main stimulus to our growth has been exports. Our target of full employment means that we must ensure that this growth is sustained, and this necessitates a continuing shift of output into investment and into the balance of payments. The necessary conditions for a sustained movement towards our overall objectives are, first, a rate of inflation at least no worse than
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that of our main competitors overseas; secondly, sustained growth in exports so that we may pay our way in world trade; thirdly, improvement in the efficiency of our industry through higher investment and better use of both labour and capital; and, fourthly, an expansion of our manufacturing sector. If we are to achieve our objectives and have a tolerable future, we must fulfil these conditions.
The main instruments for uniting the nation behind these purposes are the Social Contract and the industrial strategy. It is part of our strategy to increase the nation's industrial capability and particularly to provide for an expansion of the manufacturing sector. This strategy requires a very careful balance between the need for resources, physical and financial, of the public and private sectors. While the aim must be for an increase in the resources available for manufacturing industry, it takes time before an increase in available finance can be used to bid for more resources and more time to allow an increased flow of resources to begin to correct the imbalance with which we are faced. The lag between introducing an economic policy and seeing its beneficial results is certainly frustrating. The Government's view is that it is not the overall strategy that worries the electors but the time it takes to make progress, and this is very natural.
The policy of this Government is one of co-operation, confrontation. The Social Contract encompassing the pay agreement has been and continues to be the most important plank of the counter-inflation policy. It is important that all concerned realize that the whole British public, including the trades union movement, has accepted that there must be some fall in living standards for all, except the least well-off, if we are to restore our economic self-respect. It is that goal of economic self-respect that Government policy must be directed.
Lord STRABOLGI: My Lords, on behalf of my noble friend Lord Goronwy-Roberts, I beg to move that this debate be adjourned until tomorrow.
Moved, That the debate be adjourned until tomorrow.—(Lord Strabolgi.)
On Question, Motion agreed to, and debate adjourned accordingly.
House adjourned at seventeen minutes before ten o'clock.