Sitting of 27 April 1977

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

    Local Authorities (Mortgage Schemes)
    Mr. Dempseyasked the Secretary of State for Scotland what funds will be made available during 1977–78 and 1978–79 to local authorities for mortgage schemes; and if he will make a statement.
    The Under-Secretary of State for Scotland (Mr. Hugh D. Brown): Scottish local authorities have been allocated £13·8 million for lending to individuals for house purchase and improvement in 1977–78. The amount for 1978–79 has not been fixed but is likely to be about the same in real terms.
    Mr. Dempsey: Is the Minister aware that there is a site in Airdrie that is fully serviced with roads and has been classified by the Chairman of the National Coal Board and an eminent structural engineer as "buildable", but that the building societies have refused to lend money to potential home owners for the erection of houses on this site? Can my hon. Friend do anything about that?
    Mr. Brown: Perhaps my hon. Friend will send me details. If I understood him rightly he said that this was a site that was available. If there are no houses on it, naturally some questions arise before we can talk about the way in which money should be available for home loans. If my hon. Friend will write to me, I shall investigate the matter.
    Mr. Grimond: Is the Minister aware that the lending or granting of money to individuals to obtain their own housing
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    is one of the most satisfactory ways of getting housing and that it is often much more rewarding than the local authorities building homes? Can the hon. Gentleman say how the figures that he has given compare with the amounts made available in 1976–77? Will he look at the figure for 1978–79 with a view to increasing it to take account of the inevitable inflation?
    Mr. Brown: I do not know whether the Liberal Party is now saying that we should not build council houses. Additional sources are available through the special scheme with the building societies, and we attach great priority to having a regular supply of funds available for anyone who wants to purchase.
    Mr. Teddy Taylor: As this is the only Question about housing, has the Minister in mind making any statement on the alarming disclosure this morning of Glasgow housing letting irregularities and whether his office is considering any form of independent inquiry into what has been happening?
    Mr. Brown: I am well aware of the great ability of the hon. Member for Glasgow, Cathcart (Mr. Taylor) to be in the gutter when there is anything that he can rake up.
    Mr. Teddy Taylor: Answer the question.
    Mr. Brown: I shall certainly answer the question. I must make it clear that the housing management department of the district authority lets about 12,000 houses a year and has a staff of between 600 and 700. To pillory one official, a man who might be sick and ill, for 60 cases of proven irregularities is in keeping with the normal level of the hon. Member for Cathcart.
    Mr. Teddy Taylor: There is no question of pillorying. Does the Minister realise that it is precisely to protect the reputation of the vast majority who have carried out their duties efficiently and well and because of public anxiety about the matter that there is a need for some form of public inquiry?
    Mr. Brown: I have the utmost faith and personal knowledge of the integrity and ability of both Bailie Lally and Mr. Malcolm Smith, the housing manager. If

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    Glasgow makes any approach to us to seek help, advice or information, it will be given willingly.
    Mr. Small: Can the Minister assist the House about the magnitude of the problem of transferability and allocation of mortgage schemes in Glasgow? I understand that that was the purport of the Question.
    Mr. Brown: Glasgow provides loans for about 1,000 borrowers in the city and has magnificent accomplishments, particularly at the bottom end of the market, where building societies, albeit that we have good relationships with them, are rather more reluctant to lend money.

    School Milk
    Mr. Galbraithasked the Secretary of State for Scotland what was the total cost of supplying free milk to schools over the last year and what was the cost to State schools only.
    The Under-Secretary of State for Scotland (Mr. Frank McElhone): The cost to education authorities of supplying free milk in the year ending 31st March 1976 was approximately £1·9 million. Some 98 per cent. of the pupils supplied were in education authority schools.
    Mr. Galbraith: Is the Minister aware of the strong sense of grievance felt by parents who are denied free milk for their children simply because they are paying for their children's education at the same time as contributing to the general cost of education? Does the Minister think that such discrimination is fair, particularly when so little money is involved—this arises out of his answer to my Question—and when most of that money is provided out of general taxation, not through the rates, to which these people have contributed? Is this not a gross and monstrous injustice, and when will the Government do something about it?
    Mr. McElhone rose—
    Mr. Galbraith: Bloody scandalous.
    Mr. McElhone: The Conservative Party fought an election in 1974 as the freedom fighters and on giving freedom to local authorities. The hon. Gentleman cannot have it both ways. This is a matter entirely for the regional council and it is
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    for that council to determine its own priorities. I can tell the hon. Gentleman, however, that the council will continue to supply milk to special schools not under its management.
    Mr. Selby: Is my hon. Friend aware that the cut-back in the milk supply to schools originated from the Opposition when they were in office and that people who are in a good financial position and who desire to separate themselves from the rest of the community are denying their own children free milk?
    Mr. McElhone: I can only agree with my hon. Friend.
    Mr. Speaker: Before I call the next Question, although probably I misheard something that occurred on the earlier Question, I ask right hon. and hon. Members to remember where they are.

    Royal High School, Edinburgh
    Mr. Tim Rentonasked the Secretary of State for Scotland whether he is making arrangements for alternative uses for the Royal High School, Edinburgh, whilst the debate on devolution continues.
    The Secretary of State for Scotland (Mr. Bruce Millan): No, Sir.
    Mr. Renton: Despite that disappointing reply, will the Secretary of State be open-minded enough to consider a suggestion from a Scot living in Sussex to call a conference at the Royal High School, to be held in public, on the whole question of decentralisation of government in the United Kingdom? Would not that give the Scots an opportunity to air their views on two-tier local government and three-tier national government and thus on the prospect of their future administration looking like a five-decker sandwich?
    Mr. Millan: The Scots have expressed their views on these matters on various occasions, as have the Government. Since the Assembly is going ahead, I do not need to consider alternative uses for the High School.
    Mr. Donald Stewart: Will the right hon. Gentleman accept that the hold-up in the work on the school arising from the failure of the Bill is due entirely to English Members reneging on their election promises?
    Mr. Millan: There was a fair bit of that, I agree.
    Mr. William Ross: Would my right hon. Friend consider it worth while, until the school is properly used for the Scottish Assembly, making space available, since it was a picture gallery before, for pictures of all those Scots who voted against devolution, together with copies of their election addresses highlighting their supposed support for it?
    Mr. Millan: The Royal High School would be a very suitable rogues' gallery.
    Mr. Alexander Fletcher: The Secretary of State will remember that he reacted angrily when we last dealt with Scottish Questions to the suggestion that work should be suspended until a decision had been reached on devolution. What has happened since to make him change his mind?
    Mr. Millan: It is an abuse of words to say that work has been suspended when we shall be spending £2 million to bring the Assembly building into readiness.
    Mr. Dalyell: What is the position of those evicted from the High School, such as the canoe club?
    Mr. Millan: As far as I am aware, its members have paddled away somewhere else.
    Mr. Fairbairn: Since all the buildings on Carlton Hill have always been follies, tombs or ruins, does not the Secretary of State feel that he is conforming to tradition by abandoning progress on the High School?
    Mr. Millan: Let me make it clear again that we have not abandoned progress on the building. The work has not been suspended. Considerable work is going on at the moment. If hon. Members care to visit the site, they will see it.
    Mr. Gowasked the Secretary of State for Scotland whether he will make a statement about the progress which is being made on the preparation of the former High School in Edinburgh for the proposed Scottish Assembly; and when the building will be ready for use.
    Mr. Millan: Satisfactory progress is being made. It is expected that work
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    to bring the former High School to the stage indicated in my statement of 7th April will be completed early in 1978.
    Mr. Gow: What will be the total cost of preparing the High School as an Assembly? Does the right hon. Gentleman think that it is prudent for the Government to continue without specific authority from the House in the preparation of this building for an Assembly which many of us believe will never sit?
    Mr. Millan: I have already dealt with that matter on an earlier Question. The present total expenditure committed on the work that we intend to complete, in terms of my earlier answer, is about £2 million.
    Mr. Rifkind: As the Government originally resisted calls to reduce the size of the proposed Assembly on the grounds that it would interfere with the timetable for elections to the Assembly that the Government were hoping to apply, and now that the timetable has been put back indefinitely, will the Secretary of State give new and serious consideration to reducing the size of the Scottish Assembly to that which will not create an unnecessary burden for the Scottish people?
    Mr. Millan: There have been arguments other than that of the time factor on the view that we take about the numbers in the Assembly. When we are able to make further progress with our proposals, no doubt that matter can be raised again, if hon. Members so wish.
    Mrs. Winifred Ewing: Does not the Secretary of State think that it ill becomes English Members to enter into this discussion and suggest that this building is too good for a Scottish Assembly, which was the pledge of all parties? Should they not see the position against the background that it costs £5 million a year to run the Palace of Westminster?
    Mr. Millan: I do not resent anyone's asking me questions about the High School. It is proper that hon. Members should do so. I am pleased to be able to make the position clear this afternoon.

    Roxburgh
    Mr. Dykesasked the Secretary of State for Scotland when he next intends to visit Roxburgh.
    Mr. Adleyasked the Secretary of State for Scotland when he next intends to visit Roxburgh.
    Mr. Millan: I have, at present, no plans to do so.
    Mr. Dykes: Will the Secretary of State forgive my incursion into Scottish geography? Will he explain that his decision not to go to Roxburgh must be an integral part of the Lib-Lab compact and, presumably, that he has promised not to go? But should he not seize this opportunity to enhance his political career on both sides of the border by doing what the Leader of the House failed to do yesterday, which is to explain what parts of the Socialist programme have been given up in order to keep the pact going?
    Mr. Millan: That is rather a separate question. If I ever visit Roxburgh, I may take up one or two of these matters with the sitting Member.
    Mr. Adley: As the Liberals are keeping the present Government in office, and as the Labour Party has not a hope of winning Roxburgh, Selkirk and Peebles, would not the Secretary of State be wise either to suggest to his colleagues in Scotland that they withdraw the Labour candidate from Roxburgh, Selkirk and Peebles at the next General Election or, now that the vote of confidence has finished, come clean with the British people and explain that the Lib-Lab alliance was a cheap trick to deprive the British electorate of the chance of choosing a new Government?
    Mr. Millan: We have no intention of withdrawing Labour candidates from any constituency in Scotland.
    Mr. David Steel: Does the Secretary of State accept that a visit to Roxburgh, Selkirk or Peebles would be a great deal more profitable for him than a visit to Harrow, East or to Christchurch or Lymington and that if he came there he would be warmly welcomed, especially if he were able to outline to us what specific measures the Government will take to compensate for the loss of the regional employment premium?
    Mr. Millan: On my visits to Roxburgh in the past I have always found them enjoyable occasions, even when I have not met the right hon. Gentleman.
    Mr. Canavan: Is not Roxburgh in a constituency where the chairman of the local Scottish National Party is that millionaire absentee landlord, the hon. Colin Tennant, who, when he is not flirting with the SNP, seems to spend much of his time flirting around his Caribbean island with Princess Margaret?
    Mr. Monro: If the right hon Gentleman comes to the Borders, presumably he will have to come by road. If he does, will he look carefully at the condition of the A7 between Hawick and the M6 at Carlisle and realise that it is quite inadequate for the traffic that it carries? Will he see that more improvements are carried out than are on the programme at present?
    Mr. Millan: I have travelled that road on occasions in the past, but I shall look into what the hon. Gentleman said.

    Devolution
    Mr. Biffenasked the Secretary of State for Scotland what representations he has received from public authorities in Scotland suggesting that an Assembly should have revenue-raising powers and representation on EEC institutions.
    Mr. Millan: Since the publication of the White Paper in November 1975 five Scottish local authorities and the Convention of Scottish Local Authorities have expressed views in support of revenue-raising powers for the Scottish Assembly. No public authority has argued that Scotland should have separate representation on EEC institutions.
    Mr. Biffen: Is the Secretary of State aware that last month the right hon. Member for Orkney and Shetland (Mr. Grimond) made a speech advocating that the Assembly should have powers which incorporated the major amount of taxation and that Scotland should be directly represented in Europe? Is he aware, further, that the Prime Minister told the House last week that the Government's credibility on the issue of devolution had been enhanced as a result of the arrangement with the Liberal Party? May we therefore conclude that the Assembly now proposed will have more power than that envisaged in the Scotland and Wales Bill?
    Mr. Millan: As for representation on the EEC institutions, the position has

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    been made clear on many occasions. Only if Scotland went completely separate and independent would any question of formal representation at the Community institutions arise. There is no doubt about that. What informal arrangements might be made in the post-Assembly situation to take account of the views of the Assembly Executive on matters which were of concern to it would be arranged in that situation. Again, there has been no change from that point of view. On the specific question of the Liberals' views on this matter, I do not recollect that the recent document submitted to us dealt directly with the question of representation at Brussels.
    Mr. Buchan: Is my right hon. Friend aware that many of us are pleased that he has made it so clear that the argument for separate Scottish representation in the EEC is a dishonest and back-door method of arguing the case for separatism? Will my right hon. Friend keep in mind that it is not only local authorities or even the right hon. Member for Orkney and Shetland (Mr. Grimond) who have argued the case for revenue-raising powers? An Assembly without such powers would not be a totally responsible Assembly.
    Mr. Millan: This argument is still open. The Government have never said in principle that they are against independent revenue raising. They have simply said that the practicalities of working out an acceptable system are very difficult and that we have not so far found a satisfactory solution. But these are matters which are relevant to the current situation in which the Government are discussing the future of the Scotland and Wales Bill with the Liberal Party and with other parties in the House.
    Mr. Gordon Wilson: Is the Secretary of State aware that the Government published yesterday a Brown Book on oil resources showing that over the next seven years about £5½ billion will go into the London Treasury as a result of oil revenues gleaned from the Scottish sector of the North Sea? Does he accept that these revenues would be useful for the financing of the Scottish Assembly? What proportion of those revenues will go to Scotland?
    Mr. Millan: I have made clear on numerous occasions that revenue from North
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    Sea oil is a United Kingdom resource. As is only right, Scotland already gains disproportionately from North Sea oil development, for example, in terms of jobs, most of which would be put at risk if we were ever foolish enough to accept the SNP policy.
    Dr. Bray: Does the Secretary of State accept that revenue-raising powers are, in part, a question for the Assembly when it is set up? Although the House might well consider that such powers are impracticable, should not the Assembly be left to judge whether it chooses to exercise such powers?
    Mr. Millan: Such a proposition would be difficult to get through the House. It would not be right to give revenue powers in the Bill and to allow the Assembly to determine whether it wants to use those powers. These are matters that must be settled in the House in the context of the Bill.
    Mr. Alexander Fletcher: Is the Secretary of State saying that a Scottish Assembly will impose an additional level of taxation on the Scottish people over and above United Kingdom taxes?
    Mr. Millan: I did not say that. I do not see how anybody could take what I said as meaning that.
    Mr. Fairgrieve: Leaving aside any relationship between the Scottish Assembly and the EEC, would it not be in the interests of Scotland if such non-political bodies as the Scottish Council (Development and Industry) kept some relation ship in Brussels, in Standing Committees, for instance, and with people over there?
    Mr. Millan: All types of bodies maintain relationships in Brussels. When I was in Luxembourg yesterday taking part in discussions on fishing, a fishery representative from Scotland was present. How ever, that is different from formal Government representation on EEC institutions. That is a matter which rests with the United Kingdom Government.

    Area Health Boards (Expenditure)
    Mr. Alexander Fletcherasked the Secretary of State for Scotland if he has given any guidance to area health boards on the priority they would adopt in their expenditure policies in the light of the latest White Paper on Public Expenditure.
    Mr. Millan: General priorities remain as stated in "The Health Service in Scotland: The Way Ahead", published last April, but my hon. Friend the Under-Secretary met health board chairmen on 14th April for discussion of expenditure guidelines and the use of resources.
    Mr. Fletcher: I am surprised that the Secretary of State has not issued any guidelines on the administrative costs of the National Health Service. Is the Secretary of State aware that a reduction of 10 per cent. in the administration of the Service would not only save money but greatly improve the efficiency of the Service and give a great boost to the morale of doctors, nurses and others working in the medical professions?
    Mr. Millan: Some of the additional administrative expenses in the National Health Service are caused by the attempt to reduce the administrative burdens on members of the medical profession. It is not true that the Government have done nothing about administrative costs, because in January 1976 we put a freeze on administrative staffing.
    Mr. Thompson: In view of the increased burden of taxation which is to fall upon the motorist and which inevitably will hit worst the rural areas where there is often not enough public transport, will the Secretary of State give priority to the retention of good, established cottage hospitals in the smaller towns of Scotland?
    Mr. Millan: Each case must be considered on its merits.
    Mr. Adam Hunter: Will the Secretary of State take a converse view to that suggested by the hon. Member for Edinburgh, North (Mr. Fletcher) and allow an area health board to implement its own first priority by giving it the finance to get the new hospital in Dunfermline started?
    Mr. Millan: In the next day or two I hope that we shall be able to announce the results of the review of the capital programme of the health boards, which has been going on for some time and which has now been completed.
    Miss Harvie Anderson: Is the Secretary of State satisfied that at the meeting to which he referred adequate consideration was given to the problem of providing more facilities for training the
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    adult mentally handicapped? Is he satisfied that the present administrative arrangements are adequate, or does he think that hospital boards should be more closely involved?
    Mr. Millan: Some of these matters are for the local authorities through the social work departments rather than the health boards. One of the priorities in the document "The Way Ahead", to which I have already referred, is the needs of the mentally ill and the physically and mentally handicapped.

    Economic Situation
    Mr. Teddy Taylorasked the Secretary of State for Scotland if he will issue a White Paper on the Scottish economy.
    Mr. Hendersonasked the Secretary of State for Scotland if he will make a statement on the prospects for the Scottish economy for the remainder of 1977.
    Mr. Millan: I expect the broad pattern of recovery indicated by the United Kingdom forecasts that accompanied the Budget Statement to be reflected in Scotland. The return of confidence in sterling and the reduction in interest rates in the early part of 1977 are encouraging evidence of progress in the Government's economic strategy. I have no plans to issue a White Paper.
    Mr. Taylor: Will the Secretary of State at least carry out a survey to try to establish the effect of Budget measures, such as the increases in petrol and transport costs, on the Scottish economy? Is he aware of the dangerous effects of these increases on Scottish development particularly in rural areas?
    Mr. Millan: The effect of the Budget as a whole on employment in Scotland, as elsewhere, will be to improve the position. I dare say that the House has been heartened by the fact that the unemployment figures have now dropped by 13,000 since the January 1977 peak.
    Mr. Henderson: I welcome the fact that the unemployment figures have dropped. But is the Secretary of State aware that in Scotland there are still 170,000 unemployed, as was disclosed yesterday? Does he recall that in eight weeks a substantial number of youngsters will he leaving schools in Scotland? Will

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    he tell us what he thinks about their prospects of obtaining employment?
    Mr. Millan: I certainly hope, as I am sure the House hopes, that we shall have a better record of employing school leavers this year than last year. The House also knows that it is not the practice for Ministers to make detailed forecasts of unemployment figures.
    Taking the seasonally adjusted figures, to which we should pay most attention, this morning's figures show for the first time for a very long time that there has been a reduction. I shall not bank too much on that. However, I hope that this is the start of a process that will reduce figures that I have always said are far too high.
    Mr. Robert Hughes: I welcome the assistance given to areas in dire straits which my right hon. Friend recently announced. However, is he aware that there is grave disquiet in the city of Aberdeen about the reduction to intermediate area status? Will he assure us that every effort will be made by the Scottish Office, or any Departments dealing with industry and employment, to ensure that new jobs are encouraged in Aberdeen? If the employment situation in Aberdeen continues to deteriorate over the next 12 months, will my right hon. Friend undertake to look again at the withdrawal of development area status from April next year?
    Mr. Millan: Aberdeen's unemployment figures are below the United Kingdom average. We have to take that factor into account in terms of priorities and getting Government assistance to industry working most effectively. There are many forms of assistance still available to the Aberdeen area, because it is an intermediate area. It has not lost development or assisted area status completely. For example, selective assistance will still be available under the Industry Act 1972. We shall look sympathetically at any prospects for additional jobs in Aberdeen in terms of selective assistance where appropriate. There is no question of abandoning Aberdeen. This is an attempt to produce a better distribution of Government assistance in Scotland. I think that, generally speaking, although there is understandable disappointment in Aber-
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    deen, that has been accepted throughout Scotland.
    Mr. Buchanan-Smith: Is the Secretary of State aware that, although the unemployment figures for Aberdeen are low, there is great concern in some of the communities around Aberdeen which fall into the administrative area and which are affected by the change in development area status? Will he look at the problems of the smaller communities where there is still a need to attract industry? Does he also recognise the need to diversify industry in Aberdeen in order that it does not become too narrowly based on oil if we are to plan properly for future jobs in the Aberdeen area?
    Mr. Millan: It would be foolish to abandon traditional industries in the Aberdeen area. The Government have no intention of doing that. We looked at the area as a whole. The hon. Gentleman will know that these schedulings are based on employment exchange areas. That is why this particular pattern has been adopted for Aberdeen. But it means that Peterhead, for example, which is also a thriving area, still remains a full development area although a number of other places near Aberdeen have been included in the reduction to intermediate area status.

    European Price Review
    Mr. Monroasked the Secretary of State for Scotland what discussions he has had this month with the National Farmers Union of Scotland concerning the European Price Review; and if he will make a statement.
    Mr. Millan: I discussed this matter with the President and General Secretary of the National Farmers Union of Scotland on Thursday 21st April. I also met representatives of the National Farmers Union on 25th and 31st March.
    Mr. Monro: Is the Secretary of State aware of the anger of farmers over the problems facing the pig industry? Does he understand that, unless action is taken immediately, the housewife will be short of supplies in the not too distant future? Why has the recently concluded price review in no way helped the pig industry, about which there is so much concern? I hope that the right hon. Gentleman will not hide behind the statement to be made

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    later today in order to escape from his responsibility to pig producers in Scotland.
    Mr. Millan: I do not know why the hon. Gentleman should have made that last statement. I discussed this matter with office-bearers of the Scottish NFU at the meeting last Thursday. They understand the difficulties under which we are operating. We introduced a special subsidy for pigmeat. The Commission claims that it is illegal and is threatening to take us to court. Negotiations are going on regarding the method of calculating the MCAs, a method which we believe at present to be unjust. We hope to make progress on that matter. I think that the industry, although naturally apprehensive about the present situation, understands that the Government are making every effort to improve it.
    Mr. Grimond: As the Secretary of State said, there is anxiety in the industry about the fall in production. Can he add to what has been said about the review regarding the likely effect on agriculture in the North of Scotland? Does he think that production will rise?
    Mr. Millan: I do not think that I should anticipate the statement that is to be made later this afternoon. Scottish farming as a whole did not have a bad year last year. There were difficulties, but the difficulties in Scotland were a good deal less severe, due to the weather and other reasons, than the difficulties south of the border.
    Mr. Welsh: Is the Secretary of State aware that the price review will bring no consolation to Scottish pig producers and processors, who are wondering whether the Government really wish a viable industry to continue? Does he accept that there is a need to change the basis of calculating the MCAs? If so, what does he wish to put in its place?
    Mr. Millan: I have already said that the present method of calculating the MCAs is unfair, and we have been attempting to change it. We have made certain changes, but not enough to satisfy our position. We are still negotiating on that matter.
    I think that the Scottish NFU accepts that it would have been foolish not to reach a conclusion on the overall price review on Monday because of the diffi-
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    culties we had over pigmeat. The NFU wanted us more than anything else to reach a conclusion. At least from that point of view it has welcomed what we have done. It is an extremely good solution—in fact, the best settlement we have ever had—from the point of view of consumers in Scotland, as elsewhere.
    Mr. Robert Hughes: It may be that farmers in Scotland understand the difficulties, but they certainly do not accept them. What they do not understand and seek to end is the constant uncertainty from year to year, which allows no stability on which to plan for the future. When contemplating capital investment—for example, in dairy herds and beef cattle—farmers need long-term security to plan properly.
    Mr. Millan: I am not disagreeing, but I am not sure what my hon. Friend's moral is.
    Mr. Michael Clark Hutchison: Will the Secretary of State tell me of any advantages that we have had from joining the EEC?
    Mr. Younger: Will the Secretary of State assure the House that he will in no sense forget the dire plight into which the Scottish pigmeat industry will be put unless it has some definite help in the near future? Will he take special steps to explain to consumers that, if the Scottish pigmeat industry should fall into that dire catastrophic situation, they will suffer from higher prices and shortages?
    Mr. Millan: I recognise the difficulties in the pigmeat section of the industry, but that is not the whole of farming in Scotland. Certain sections had a particularly good year last year. That was acknowledged freely and openly when I addressed the annual general meeting of the Scottish NFU the other day.

    Cowal
    Mr. MacCormickasked the Secretary of State for Scotland if he will pay an official visit to Cowal.
    The Minister of State, Scottish Office (Mr. Gregor MacKenzie): My right hon. Friend has at present no plans to do so.
    Mr. MacCormick: Does the Minister appreciate that many people in Scotland regard the digging of the biggest and emptiest hole in Europe at Portavadie in

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    Cowal at great public expense as characteristic of all the efforts of the Labour Government these days? Will he tell us what the Government intend to do to try to bring some kind of employment to the Cowal Peninsula in view of the lack of activity at Portavadie and the inevitable winding down of operations at Ardyne Point?
    Mr. MacKenzie: If my memory serves me right, the hon. Gentleman and his hon. Friends were those most concerned that we should do what has been done. We are concerned about the unemployment situation in the area.

    Teacher Training
    Mr. Canavanasked the Secretary of State for Scotland whether he will now make a statement about the conclusions reached as a result of submissions made on the document "The Future of Teacher Training from 1977 Onwards".
    Mr. Millan: I am considering all the views on my consultative paper that have been put to me by interested bodies and by hon. Members. As I indicated in the debate on 5th April, I shall give my conclusions as soon as possible.
    Mr. Canavan: As it is now clear that the college closures and mergers have been rejected by the lecturers' union, the ancillary workers' unions, the students' union, the college principals, the teachers' unions, the STUC, the Scottish Council of the Labour Party, the Churches, the Scottish Grand Committee and the House of Commons, can anyone seriously maintain that "they're a' oot o' step except oor Bruce"?
    Mr. Millan: I might seriously maintain that. As I have said before, all the points put to me will be taken into account before I announce my conclusion, which I hope to give quite soon.
    Mr. Russell Johnston: Is the right hon. Gentleman aware that we welcome the possibility of the points we have made being taken into account? In view of the very many questions that were put to the Government, both in the Chamber and in the Scottish Grand Committee, none of which has been answered, will the Secretary of State consider the publication of a paper in which the ques
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    tions are answered, or at least writing to the hon. Members who have put the questions?
    Mr. Millan: My recollection is that quite a number of letters have been written to hon. Members and others. [HON. MEMBERS: "No."] It will probably be quite a lengthy statement.
    Mr. Dalyell: In forming his conclusion should not my right hon. Friend take into account one incontrovertible fact, namely, that if he goes ahead with his proposal he faces the virtual certainty of a double-figure defeat in the House of Commons?
    Mr. Millan: I take all sorts of things into consideration before reaching a final decision.
    Mrs. Bain: When the right hon. Gentleman issues his final statement, can we expect with it a financial costing of the Government's proposals at this stage? Would the right hon. Gentleman, or his hon. Friend the Under-Secretary of State with responsibility for education, care to visit any school in my constituency and show me where pupil-teacher ratios such as they have outlined are operating each hour of the school day?
    Mr. Millan: As I have said on numerous occasions, we have the best pupil-teacher ratios that we have ever had. Incidentally, they are much more favourable than those in England and Wales.
    Mr. Alexander Fletcher: Is it not a fact that the right hon. Gentleman is deferring his decision on this matter until after next week's elections in Scotland?
    Mr. Millan: No. I might even make a decision and publish it before the elections if I am able to do that, but I am making no promises about that either.

    Scone
    Mr. Crawfordasked the Secretary of State for Scotland if he will visit Scone.
    Mr. Gregor MacKenzie: My right hon. Friend has, at present, no plans to do so.
    Mr. Crawford: Does the hon. Gentleman agree that it would be a happy and symbolic gesture in this Jubilee Year if the Stone of Scone were restored to Scotland, where it rightly belongs?
    Mr. MacKenzie: I am not sure who is responsible for that in this Government, but it is certainly not me.
    Mr. Buchan: My hon. Friend will know that there is some divide as to whether the proper stone was ever returned—
    "For if ever he comes on a stone wi' a ring
    He can sit himsel' doon and appoint himsel' King,
    For there's none would be able to challenge his claim
    That he'd crooned himsel' King on the Destiny Stone."
    Mr. MacKenzie: I appreciate the point that my hon. Friend makes. If my right hon. Friend, or any of my ministerial colleagues, has an opportunity of venturing into this part of Perthshire, I suspect that the people in the area will be much more concerned about other issues.

    Dundee (Industrial Infrastructure)
    Mr. Gordon Wilsonasked the Secretary of State for Scotland what representations he has recently received from Dundee regarding the need to develop the city's industrial infrastructure.
    Mr. Gregor MacKenzie: I am in regular contact with the regional and district councils, and other local bodies, about issues of concern to Dundee, including its industrial infrastructure. The Government's decision to make Dundee a special development area demonstrates our understanding of its problems.
    Mr. Wilson: Is the hon. Gentleman aware that organisations, including the Dundee District Council, have made joint representations to his Department about the need to spend money on building up the harbour and airstrip to prepare the way for further employment as and when the economy turns round, and that the oil revenue should be employed to that end? In view of the reports made to the hon. Gentleman from those in the Labour Party, will he now give the positive and affirmative answer that their request will be sympathetically received?
    Mr. MacKenzie: I thought for a moment that the hon. Gentleman was about to say that he approved of the Government's recent action in increasing Dundee's status to development area status. I think that the hon. Gentleman knows that the airstrip and the harbour are presently the subjects of discussion among the local authorities, the Scottish Office and the Department of Trade. As
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    soon as I have announcements to make. I shall certainly make them.
    Mr. Doig: May I assure my hon. Friend that all sections of those in Dundee welcome the Government's recent action in elevating Dundee to special development area status? That will do far more to help employment in the city than any debatable projects, such as the airstrip, which, as far as I and a great many local people can see, are unlikely to provide any jobs.
    Mr. MacKenzie: I am grateful for my hon. Friend's comments. I know that he has been active in seeking to persuade my right hon. Friend and myself of the importance of employment in Dundee.
    Mr. Teddy Taylor: Does the hon. Gentleman agree that many of the matters of infrastructure that have been raised come within the jurisdiction of the district council and that the Scottish National Party in Dundee has apparently failed to present any candidates for the forthcoming election? Is this not an appalling example of political cowardice?
    Mr. MacKenzie: There is no doubt that it is in the minds of most of us that there has been some shyness on the part of the Scottish National Party in presenting candidates in Dundee and in other parts of the North-East. That is something that we have all noticed. Perhaps it is because the nationalists cannot agree on policy between Glasgow, Dundee and Aberdeen that they find themselves in this difficulty, apart from finding sufficient people to present them selves as candidates—or perhaps there are other difficulties of that sort.

    Fishing Industry
    Mr. Sproatasked the Secretary of State for Scotland if he will make a statement on the latest situation in the fishing industry.
    Mr. Millan: The economic situation of the fishing industry continues to improve. The overall value of Scottish landings to 15th March was 52 per cent. above the same period in 1976, despite an overall reduction in fishing effort.
    Discussions continue within the European Community on a number of issues relating to the common fisheries policy. The EEC Commission is expected to be

    1221
    bringing forward proposals on the internal régime shortly and we shall be continuing to press for satisfactory resolution of the critical issues outstanding.
    Mr. Sproat: Will the right hon. Gentleman confirm that the proposals he mentioned are likely to give only a 12-mile exclusive limit plus quotas and historic rights within those 12 miles? Will he confirm that the Government would find such proposals totally unacceptable? Will he tell the House when he intends to make the ungutted haddock order?
    Mr. Millan: The order will probably be available to the House today. It is to be signed by my right hon. Friend as well as myself, and my signature is already on it.
    We have repeatedly made it clear in discussions with other Ministers in the Community that any acceptable internal régime of a common fisheries policy must contain a considerable preference for coastal States.
    Mr. Watt: Will the right hon. Gentleman inform us why he is answering this Question and not leaving it to the Minister whose responsibility it normally is? Is he prepared to lift the order that bans drift netting for salmon around the Scottish coast? Does he not agree that a totally unjust situation prevails when Scottish fishermen are the only fishermen in the EEC who are banned from such a practice?
    Mr. Millan: I answered the Question myself because I have just returned this morning from Luxembourg, having yesterday engaged in fishery discussions. I thought that it might help the House, but I could have been wrong about that. I shall look into the other matter.
    Mr. Buchanan-Smith: Is the right hon. Gentleman aware that those who are interested in the future of the Scottish fishing industry are very much behind the stand that he is reported to have taken in Luxembourg yesterday? In the absence of getting arrangements satisfactory to the Scottish fishing industry, will he confirm yesterday's report that the United Kingdom Government will consider taking unilateral action if necessary?
    Mr. Millan: We were dealing yesterday with herring fishing, particularly the
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    North Sea herring ban, which lasts until the end of the month and which was extended yesterday for only one more month. I believe that this is basically unsatisfactory.
    We have made some progress in that there will be a meeting on 16th May to deal with herring fishing as a whole as well as herring fishing off the West Coast of Scotland. We are anxious that this subject should be discussed and the industry wants it taken into account, because it fears a diversion of fishing from the North Sea to the West Coast.
    We made a little progress yesterday, but I made clear that I considered that other nations in the Community were not treating the matter urgently enough. In the absence of satisfactory progress at our next meeting, we must reserve the right to look at this matter nationally.
    Mr. Younger: Is the right hon. Gentleman aware that he will have the fullest support of this side of the House in taking a strong stand on this matter? Is he aware that the operation of the quota system is becoming daily less satisfactory as a means of control? Will he therefore stand firm on a basic minimum requirement of a 50-mile exclusive zone for Scottish fishermen?
    Mr. Millan: I am grateful for what the hon. Gentleman said about support. I cannot add to what I have already said about zones. The Commission will be bringing forward revised proposals for an internal régime sometime next month, and we shall be putting our own proposals at that time. If the Commission's proposals are not substantially different from those of last December, the Government have no intention of accepting them.

  LAW COURTS, GLASGOW
  Mr. Teddy Taylorasked the Lord Advocate if he will pay an official visit to the law courts in Glasgow.
  The Lord Advocate (Mr. Ronald King Murray): I have no immediate plans to visit the law courts in Glasgow.
  Mr. Taylor: Is it not about time that the right hon. and learned Gentleman did visit the Glasgow courts? Is he aware of the increasing concern in Glasgow about whether the courts are able to cope with a frightening increase in their work

  1223
  load, particularly in crimes of violence? Would the right hon. and learned Gentleman be willing to call a meeting of fiscals, police, solicitors and court staff to consider whether the courts are able to cope with their increasing work load, or whether additional provision needs to be made?
  The Lord Advocate: I am regularly in touch with procurators-fiscal in Glasgow. Their staffs are working under great pressure. There is difficulty in obtaining court time for a number of cases. Diets have been allocated for indictment cases up to 30th May 1977, and there are many cases awaiting allocation. This means that the delays cannot be reduced as much as would otherwise have been possible. Within the limits of public expenditure cuts, I am endeavouring to do the best that I can and I shall take note of the hon. Gentleman's suggestion, because a meeting of the sort that he suggests might prove useful.
  Mr. Fairbairn: If the right hon. and learned Gentleman does visit the courts in Glasgow, perhaps as a prosecutor for a change, is he aware that he will notice that a large number of crimes in cases of indictment arise from the fact that people carry offensive weapons? Since the Government appear to have nothing much else to do, could we have a Critimal Justice Act for Scotland to implement the recommendations of the Thompson Committee and the Scottish Council on Crime on this matter, which are rapidly gathering dust?
  The Lord Advocate: The recommendations of the Thompson Committee are under urgent consideration. This is only one of a number of suggestions which may have a material bearing on the reduction of the crime rate in Scotland. The carrying of offensive weapons is dealt with under a United Kingdom statute and deliberations beyond Scotland would be necessary before any change were made.

  HONORARY SHERIFFS
  Mr. Canavanasked the Lord Advocate whether he interviews honorary sheriffs-substitute before their appointment.
  The Lord Advocate: No, Sir. The appointment of honorary sheriffs rests entirely with sheriffs-principal.
  Mr. Canavan: Does my right hon. and learned Friend agree that the appointment of honorary sheriffs should not be confined to one narrow section of the community? Would it not be a good idea to ascertain their political affiliation, if any, before they are appointed? I get the impression that so many of them are reactionary Right-wing Tories that they are in danger of bringing the law into disrepute.
  Mr. Fairbairn: On a point of order, Mr. Speaker. Is it in order for an hon. Member to impugn the motives of the judiciary?
  Mr. Speaker: No. It is not in order to impugn the motives of the judiciary. The hon. Member for West Stirlingshire (Mr. Canavan) will have heard what I have said.
  Mr. Canavan: Further to that point of order, Mr. Speaker. I was merely impugning the method of appointment of honorary sheriffs.
  The Lord Advocate: I should have thought that it was in the interests of justice that the Bench, whether honorary or otherwise, should be non-political and balanced in all respects and that it should truly reflect the community. The appointment of honorary sheriffs is not my responsibility. It has been devolved by Parliament to sheriffs-principal because it is believed that they are the best people to recruit suitable persons from the locality to assist the court, on a voluntary basis, with the business in hand. I have no reason to believe that sheriffs-principal exercise their discretion in other than a satisfactory way, having regard to the need for a balanced representation.
  I noticed that my honorary Friend—I apologise: that was an indiscretion. I noticed that my honourable Friend asked in his original Question about honorary sheriffs-substitute. He will be aware that uder the Sheriff Courts (Scotland) Act 1971 their correct title is now honorary sheriffs.
  Mr. Dalyell: Is my right hon. and learned Friend aware that arising out of a certain case on which my hon. Friend the Member for Stirling, Falkirk and

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  Grangemouth (Mr. Ewing) has been extremely helpful and which is well known to the Scottish Office, which has also been helpful, some of us have grace doubts about whether trials of police officers in matters that affect their careers should take place other than before experienced and senior sheriffs? I do not ask for an answer today, but will my right hon. and learned Friend look at the grave issues involved in this case?
  The Lord Advocate: The case to which my hon. Friend refers is sub judice and I can make no comment on it. My hon. Friend is referring to a case that was tried by a temporary sheriff and that raises considerations that are altogether different from those raised in the original Question about honorary sheriffs.
  Mrs. Winifred Ewing: Is the right hon. and learned Gentleman prepared to consider the appointment of full-time sheriffs-substitute? Is he satisfied with the proportion of appointments from the solicitor branch of the profession? Has there been a substantial increase in such appointments in the past few years?
  The Lord Advocate: There has been a substantial increase in such appointments in the past three years. The hon. Lady will accept that it is desirable to have a proper balance and in order to achieve this the correct course, which I have always sought to pursue, is to take various representatives of the legal profession into one's confidence, through consultations, to find out what they think is the appropriate proportion.
  Mr. Gourlay: In the interests of justice manifestly being seen to be done, will my right hon. and learned Friend advise sheriffs-principal that they should consult a wider range of people before making recommendations about appointments? Is he aware that, as my hon. Friend the Member for West Stirlingshire (Mr. Canavan) said, there is a feeling in a number of areas of Scotland that honorary sheriffs are biased towards a certain class of person in the community?
  The Lord Advocate: It would not be appropriate for me to advise sheriffs-principal on appointments that are left to their discretion by Parliament, but no
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  doubt they will note the comments made in the House.
  Mr. Fairbairn: Lest the question raised by the right hon. and learned Gentleman's honorary Friend-substitute, the hon. Member for West Stirlingshire (Mr. Canavan), should cast any aspersion on the Bench, will the right hon. and learned Gentleman confirm that the tradition of political impartiality of the Bench in Scotland in all its aspects is as strong now as it was when the late Lord Braxfield sentenced to death his best friend, with whom he played chess, with the words:
  "Well that's checkmate noo, Willy."?
  The Lord Advocate: I do not know whether it was checkmate, but I certainly agree in general with the hon. and learned Gentleman's sentiments.

  CROWN OFFICE
  Mr. Gordon Wilsonasked the Lord Advocate what transfer of personnel at the Crown Office to Dundee has been made recently; and for what purpose.
  The Lord Advocate: There has been no transfer of Crown Office personnel to Dundee recently. The Deputy Crown Agent, who is investigating allegations of corruption in Dundee, is spending a considerable part of his time in that city, where he is directing the police in this connection, receiving their reports, assessing the information and deciding what further investigation is required.
  Mr. Wilson: Will the right hon. and learned Gentleman accept that the transfer of the Deputy Crown Agent to Dundee, even temporarily, indicates his intention to make progress in the matters that he has been discussing? However, does he not agree that two years, which I think is the time that the inquiry has been running, is a very long time, and that one accused has now been on petition for the extraordinary period of 15 months?
  The Lord Advocate: The hon. Gentleman should be aware that the inquiries in this case have been extremely exhaustive and have covered a very considerable period. I can give some indication of the depth of the inquiries by stating that more than 200 witnesses, in the United Kingdom and abroad have been

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  interviewed, and that the transactions concerned are transactions with connections and interconnections in fields far beyond the obvious limits of local government. For these reasons they are inquiries which, on any view, could not be carried out quickly.
  Mr. Alexander Fletcher: If any staff are transferred to Dundee, will the right hon. and learned Gentleman warn them that they will not have the opportunity to vote for the Scottish National Party in the district elections, as that party is not sufficiently interested in the affairs of Dundee to put forward a candidate?
  The Lord Advocate: It would not be appropriate for me, as Lord Advocate, to give them any such warning or direction.

BRITISH NATIONALITY LAW
The Secretary of State for the Home Department (Mr. Merlyn Rees): With, permission, Mr. Speaker, I wish to make a statement.
A discussion document on possible changes in our nationality law, which I have presented to Parliament, is published today.
Our present law on nationality has for long been outmoded and difficult to follow. Accordingly, when the present Government took office my predecessor set up a working party under my hon. Friend the Member for York (Mr. Lyon), who was then Minister of State, to examine the whole question as we had promised in the Labour Party manifesto of February 1974. The discussion document is based to a large extent on its work.
I emphasise that the document is a set of ideas for discussion. It is not a set of proposals for legislation. The Government do not intend to introduce early legislation. Nationality law affects all of us and thousands of people living overseas, so before we embark on change there must be a full opportunity for people and representative organisations to express their views.
The main suggestion canvassed in the document is that we should have two citizenships—a British citizenship for those with close ties in this country, and a British overseas citizenship for the remainder of those people who are now
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citizens of the United Kingdom and Colonies. British citizens would have an unqualified right of free entry to the United Kingdom, while the right of entry to a dependency would be reserved to those who are British overseas citizens by virtue of a connection with it. The question of who should obtain which of the citizenships on the coming into force of the new law is discussed in some detail.
In addition, the document contains, for example, some discussion about the distinction in the treatment of men and women, both in the transmission of citizenship and in the acquisition of it through marriage. It also mentions possible changes in the requirements for the grant of naturalisation, which have remained largely unchanged for many years.
An important point to keep in mind is that the changes discussed in the document would not affect anyone's existing right of entry to the United Kingdom. In particular, the obligation which successive Governments have assumed towards holders of United Kingdom passports from East Africa would be maintained, and the special voucher system would continue.
As I have said, the Government do not intend to introduce a Bill in the near future. The purpose of this document is to invite views from hon. Members, private individuals and representative bodies. We shall want to study very carefully what is put to us, and in that spirit, therefore, I commend the discussion document to the attention of the House.
Mr. Whitelaw: Is the right hon. Gentleman aware that we welcome this Green Paper as a recognition of our changed overseas relationships and as an opportunity to provide a more rational basis for our immigration policies based on citizenship? Does he appreciate that the present obscurity of our nationality laws gives rise to widespread fears of unending millions who might claim entry into this country and that this anxiety must be removed, and removed urgently? Will he, therefore, accept that the Green Paper must be used as a basis for action and not as an excuse for prevarication?
Hon. Members: Hear, hear.
Mr. Rees: On the last point, when the right hon. Gentleman and those who

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cheered have read the document, I would defy anyone to get the confusion that is in our laws made clear to the legislative draftsmen. We need about a year or 18 months, even if one were working with great urgency. There are great problems in this matter. What happened in 1971 was that when the then Conservative Government came in with the patriality law they made it even more obscure than it was previously. Therefore, I would advise people not to jump into this matter until they are clear as to what it is all about.
However, having said that, I am very grateful to the right hon. Gentleman.
Mr. Bidwell: As my right hon. Friend has had much more time than Back-Bench Members to study the Green Paper, may I have an assurance from him that the principle of equality of the sexes shines right throughout the document? On that basis, and on the basis of page 5, which deals with the acquisition of British citizenship by virtue of marriage, if that principle is adopted, bearing in mind my right hon. Friend's most recent pronouncements on the subject of marriages of convenience—although I have never known what a marriage of inconvenience is—does he not agree that he could not operate what he has recently announced if the principle of the Green Paper came through in ultimate legislation?
Mr. Rees: No; the principle is there. My hon. Friend was referring to page 5 of the document, which is a summary. If he looks at page 18 and section 50, he will see four possible options which are put there freely for hon. Members and others to discuss. We have had a look at what has gone on in other countries. Whatever system we have, if there are bogus marriages it would be wrong for any law that we have to aid those who are marrying simply to come in rather than marrying for the normal purposes.
Mr. Powell: Does the right hon. Gentleman contemplate dispensing with the status of "British subject", which since 1948 has been largely devoid of content, and attaching to the status of "British citizen" any substantive rights, such as those of the franchise in this country?
Mr. Rees: I remember the days when the right hon. Gentleman and I served on the Committee which deliberated on the
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patriality Bill, as it was then, and exchanged ideas that we had. We are at one in this respect. There is no doubt that the sort of nationality that we had in 1948 was based on a concept that was even then outmoded. What we want is citizenship, and, indeed, citizenship in the same way as it is in most other countries in the world where there are rights. However, civic privileges are a separate matter. Of course they are related, and I have put in a section on that matter, because, even at present, if one wanted to alter civic privileges one could do that without waiting for a change in the law on citizenship.
Mr. Alexander W. Lyon: While welcoming the decision to issue the Green Paper but regretting the omission of some of the argumentation in the working party document, which makes the recommendations more understandable, I understand why some of the issues have been more muted than others, but the issue about the right of British citizens to have free movement in Europe seems to me to be the most muted of all. Will my right hon. Friend recognise that, although this is subject to negotiation with our Community partners, the Government ought to recognise and to desire at any rate that British citizens should have free movement throughout the Community, so that there are not two kinds of British citizen in future?
Mr. Rees: My hon. Friend is right. I take this opportunity of saying that the detailed investigations and report of the working party which he chaired have been extremely valuable and that we are grateful to him and his colleagues for their work. The situation in relation to the EEC is one aspect of the matter. The fact that citizenship of the United Kingdom and Colonies as a nationality concept has not been accepted in Europe is basically because it is not citizenship in the sense of the term accepted elsewhere. It is most important that we get it right, because the final concept should mean that a British citizen, once given that classification, should have the right to free movement in Europe because we have defined it by statute. Until we get the whole thing correct, there will be problems.
Mr. Hooson: As the Green Paper is being published well in advance of the

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Commonwealth Conference, and as most Commonwealth countries in recent years have brought their own law of nationality up to date, will the right hon. Gentleman have consultations with Commonwealth leaders, if they seek them when they come here, or at least invite their observations on the Green Paper? Is it not correct to say that our nationality law, based on an Imperial concept applying in 1948, is so outmoded that all the efforts to deal with, for example, immigration problems through concepts such as patriality and the right of abode have further complicated the law because we have delayed in dealing with nationality?
Mr. Rees: The hon. and learned Gentleman is right on the last point. That is the basic reason for the publication of the Green Paper. Whatever differing views right hon. and hon. Members may hold, I think that we are at one in agreeing that the whole concept is out of date. The hon. and learned Gentleman asked about consultations with the Commonwealth. Our High Commissioners have already been instructed to consult Commonwealth Governments, and Her Majesty's Government will be ready to take into account any views they may wish to put forward. Indeed, in the preparation of the Green Paper I myself have studied what Commonwealth countries are doing.
Several Hon. Members rose—
Mr. Speaker: Order. May I seek the help of the House? With the agreement of the House, I shall call only those right hon. and hon. Members who have stood so far, because there is a very long statement to follow this one and also a Second Reading debate. We obviously want to get on.
Mr. Scott: Is the right hon. Gentleman satisfied that, in publishing the Green Paper and envisaging a prolonged delay before legislation, there is not a danger that some groups of people around the world who presently have the right of abode in the United Kingdom will be frightened into trying to exercise their right before legislation is produced? May I urge upon him the point that many people will feel that civic rights are an integral part of the concept of citizen ship and that there will be some disappointment that this point was not dealt with more fully in the document?
Mr. Rees: Civic rights are not part of nationality law. It must be made absolutely clear that that is the case. As I said to the right hon. Member for Down, South (Mr. Powell), it is not the case that nationality by itself, basically important as it is, is connected with civic rights. The State has the right to give civic rights to whom it likes. We have taken such a line over the years.
The hon. Gentleman referred to there being a danger that some groups of people might be frightened into trying to exercise their rights before legislation is produced. This document has been published as a Green Paper. I have made clear the time scale involved. I see little danger that people will jump to conclusions. If there were proposals which were to be effective next week, the situation would be different, but when the hon. Gentleman reads the Green Paper and studies the immigration aspects he will see that the effect on immigration in the short run, even when the Bill is published, will be very small. In the long run, however, it will be quite different, because there is a conceptual argument involved in a change of nationality law, and in the long run there will be a difference of tone as well as an effect on what was once the Empire.
Mr. George Cunningham: Is it not a reflection of an appalling mess that the Green Paper deals with no less than one-quarter of the world's population and that the majority of the population of no fewer than 35 countries are, in British law, British subjects and entitled as such, if they happen to be resident in this country on a magic date in October each year, to vote in our elections? Will my right hon. Friend reconsider the connection between civic rights and citizenship on the ground that we historically gave civic rights to British subjects and it was only because we botched the job in 1948 and did not notice that time had passed that we have had to give civic rights to people of other independent countries, a practice which is not operated in most of the rest of the world, where they see things more clearly?
Mr. Rees: Of course there is a mess. I think that most right hon. and hon. Members agree that the law is a mess in this matter. My hon. Friend's view of the question of civic rights is different from that in most other countries. If

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there were a desire for a change in that concept—and there is none on the part of the Government—the question of civic rights would be dealt with separately.
Mr. Sims: Will the right hon. Gentleman accept that the time taken to produce the Green Paper and some of the phrases used in it suggest a somewhat leisurely approach to a problem that is closely enmeshed with the immigration question? Will he reconsider the timetable with a view to having a fairly early debate in the House on the Green Paper, with legislation in the next Session?
Mr. Rees: I have been much concerned about this matter since I was a junior Minister at the Home Office. When I took office as Home Secretary, I immediately asked what was going on about it. I must advise the hon. Gentleman—I am sure that he will agree when he reads the Green Paper—that we cannot move quickly. This is an extremely complicated matter. I advise him also to recall the days of 1971, when the Conservative Government, wanting to move quickly, got it wrong.
Mrs. Jeger: Will my right hon. Friend give some thought to the problem of women citizens of the United Kingdom who are working abroad or who are abroad because their husbands work overseas and whose children happen to be born abroad? Will he ensure that it will be possible for British women to have British babies wherever they happen to be born?
Mr. Rees: The aspect raised by my hon. Friend emphasises the point that we should be careful not to move quickly, because we might get it wrong again. There is a passage in the Green Paper which deals with the problem to which my hon. Friend has referred. It is extremely complicated, but I do want to deal with that aspect because there is different treatment for men and women in this respect. Other countries have put their minds to the problem in recent years, and in preparing the Green Paper I have taken account of what they have done.
Mr. Brotherton: Is the right hon. Gentleman aware that there are really only two types of British citizen—those who are British and those who are not? Regardless of what is in the Green Paper,
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can he assure the people of England, Ireland, Scotland and Wales that those who are born here as native-born citizens of the United Kingdom will not be placed as second-class citizens because of what is in the Green Paper?
Mr. Rees: I do not think that the hon. Gentleman would have asked that question had he read the Green Paper first. On his first point regarding types of British citizen, I am tempted to ask him "Are you one?"

EUROPEAN COMMUNITY (AGRICULTURE MINISTERS' MEETING)
The Minister of Agriculture, Fisheries and Food (Mr. John Silkin): With permission, Mr. Speaker, I should like to report on the outcome of the meeting of the Council of Ministers (Agriculture) on 25th-26th April. My hon. Friend the Parliamentary Secretary represented the United Kingdom for the discussions on agriculture, and my right hon. Friend the Secretary of State for Scotland for the discussions on fisheries.
Agreement was reached on Community farm prices for 1977–78. The common support prices will rise by 3·5 per cent. for most commodities, the lowest figure since United Kingdom accession. There will be a butter subsidy for the United Kingdom, which was not included in the Commission's original proposals, at a rate of 8½p per lb., until 1st April 1978. This should lead to an immediate fall in shop prices of about 5p per lb., although I now learn that this may actually be an understatement. Prices thereafter will begin to rise again, but increases and decreases throughout the year are expected roughly to cancel out. The subsidy on Community butter will be financed by the farm fund. It will continue until 1st January 1979, though the rate after 1st April 1978 has yet to be decided.
For beef, our premium system, with intervention only as a fallback, will be continued not merely until July, as the Commission originally proposed, but for the whole of 1977–78. I am confident that agreement will be reached in the course of the year that the premium system be retained permanently. I shall announce this week the scale of United Kingdom target prices for 1977–78, but

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the average will be £30·28 per live cwt, and the level will rise to over £32 next March.
The levy on isoglucose will be fixed at, the maximum of half the level proposed by the Commission.
The action programme for milk has been improved. There will be no tax on vegetable oils and fats—that is, no margarine tax. There will be no regulation on the "exclusive use" of milk products or their labelling, although this will be further examined. There will be no ban on national aids for investment on farms. The action programme now comprises incentives to farmers, financed wholly by the Community, to cease to market milk or to convert to beef or sheep production; a "co-responsibility levy" of 1·5 per cent. from 16th September; Community aid for school milk programmes; and Community aid for accelerated programmes for eradicating brucellosis, tuberculosis and bovine leucosis.
I now think that it right to make a small move in the green pound. It will be devalued by 2·9 per cent. rather than the 6 per cent. proposed by the Commission, to take effect from the beginning of each marketing year, with two exceptions. It will apply to pigmeat from the beginning of May, thus reducing the monetary compensatory amount immediately by about 8½ per cent., and without at the same time reducing mcas on cereals. This will provide some relief to our pigmeat industry. We shall continue to press for a more fundamental change in the calculation of these amounts. The change will also be deferred for milk products, and will apply in two equal steps, one on 16th September 1977, and the other on 1st April 1978.
The change in the green pound will be reflected in higher common support prices for United Kingdom farmers in sterling terms. After allowing for the deferment of the change for milk products, however, the effect on retail prices will be very small. Its effect on all food prices between now and April 1978 will be more than offset by the butter subsidy which we have negotiated.
I consider that this package achieves a fair balance between producers and consumers. The effect on food prices in the shops has been cut to the minimum
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and the green pound devaluation more than offset by the butter subsidy. The effect on average food prices of this settlement during the period to next April is estimated at one-third of 1 per cent., so that with the transitional steps, the overall effect will be 1·25 per cent., When all the effects excluding the transitional steps are fully passed through, the increase in the RPI would be less than one-third of 1 per cent. Also agricultural support prices in the Community as a whole will fall in real terms, but United Kingdom farmers will get a big boost to their support prices from the combination of the transitional steps, the common price increases, and the small devaluation of the green pound.
I believe that the outcome of these negotiations represents a very good deal for both British housewives and farmers. The final package is a considerable improvement on what was originally proposed by the Commission. For us, the key objective was to keep consumer price increases to an absolute minimum while at the same time obtaining a fair deal for the farmer. I recommend the package to the House.
The Council also agreed to certain changes in the basic regulation on hops which will strengthen producer marketing. I believe that these will be welcomed by the Hops Marketing Board and the farmers' union.
The Council agreed on a mandate for the negotiations with the ACP countries on sugar prices for 1977–78. These will start on 28th April.
The Council decided to extend the present ban on fishing for herring in the North Sea for a further month and to consider the herring situation as a whole—including waters to the west of Britain as well as the North Sea—at the next Council.
I should take this opportunity to tell the House that Commissioner Gundelach has notified me that he is studying how the functions of the Milk Marketing Boards can be maintained, with particular regard to the means by which the Boards help to maintain the level of liquid milk consumption thereby reducing intervention on dairy products, with a view to making appropriate proposals.
Mr. Peyton: My first question to the Minister must be, why did he hold out

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in March? What does he think he has gained that was not available in March to justify the delay, all the bitterness and the loss of good will that has resulted? It would appear from what he has said that the subsidy on butter is something less than 1p per lb. Also, will the Minister clarify the anticipated total effect on food prices because that does not emerge all that clearly from the statement?
Does the Minister understand the consequences for the pig producers and processors? If so, why were these consequences not discussed in Brussels? Has he understood, in particular, the terrible effect on specialist producers who have very heavy investment and whose losses have been running for months at the intolerable level of £4 per pig after the subsidy? The breeding herd has gone down by 10 per cent. as a result of slaughtering caused by the destruction of confidence over the past six months. The producers feel that the Minister has given the Danes and others an easy ride in our market.
We all accept that farming costs went up by 20 per cent. last year. It would appear from what has been decided in Brussels that just over half of that will be recouped by producers. What does the Minister have to say about the future generally, and the future existence of the document "Food From Our Own Resources", which now begins to look shop-soiled and tarnished in the extreme? When can we expect a statement from the Minister on prices to farmers in this country for milk and potatoes—an announcement that has been very long delayed?
We understand that the way in which these negotiations were handled caused immense resentment in Europe, so much so that the Minister has lost a lot of good will, and this evidently made him unable even to raise the all-important question of structural surpluses, let alone make progress on it. Finally—[HON. MEMBERS: "Too long."] The Minister made a very long statement. Will the Minister take note of the fact that the Opposition will require a debate in Government time in order to give him an opportunity to make a speech explaining Government policy, if that is possible?
Mr. Silkin: Government policy has been made very clear. It is the Opposition's policy that worries me. Let me try to answer all those long questions. First of all, the right hon. Gentleman asked me why I held out in March. I held out for the simple reason that the difference between the two sides was too large to be bridged at that time. I said then that I was willing to sit day and night until we settled the matter. Most, though not all, of my colleagues in Europe thought it was better to come back after Easter on 25th and 26th April. But the actual difference in terms was significant. [HON. MEMBERS: "No"] That happens to be correct. Hon. Gentlemen were not there, and I was. The offer that lay between us was an offer tapering down to 6½p per lb. What we have got is one that is 8½ flat.
I remind the House that it is not stopping as a butter subsidy in April next year but will go on to the end of the year, at a rate to be decided. This was, therefore, a very considerable advance. I wish that the Opposition would get out of their historical liking for appeasement. If there are two conflicting sides, why do they always assume that this country is wrong?
The right hon. Gentleman's second point is covered in the statement. I thought I had made it clear, but let me make the point again. The effect on food prices until April next year—by then we shall have had, we hope, the price fixing of 1978—is one third of a penny in the £ if we exclude the transitional steps, for which I claim no responsibility. Opposition Members have a responsibility for that. It is 1·25p in the £ if we include the transitional steps.
I understand, of course, the crisis in pigmeat. That is why I introduced the subsidy and why I incurred the wrath That was where the wrath of my colleagues came, when I put in the pig subsidy. I find that complaints come from various sections of this House that I have not raised it, despite the fact that I have gone to court. Nevertheless, there is quite a substantial change going on. I believe that the effect of the changes I have announced will amount to about £22 a tonne. That is something on the way. That is taken together with the £23 a tonne that I got from the Commission last October. I intend to press the matter

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vigorously again at the next Council three weeks from now.
I understand the right hon. Gentleman's point that farmers are being recouped only half their costs, but this arises simply because we have not yet got the detailed prices out. We hope to get them out today or tomorrow, and I think they will command study. Then we can all have a good and, I hope, unequivocal look at them.
I shall endeavour to announce the milk and potato guarantees as speedily as possible.
The right hon. Gentleman's last question surprises me—perhaps it should not—when he asks whether I am going to deal with the structural surplus. That lies at the root of the CAP. That is what has got to be changed. I have said it all along. What on earth does he think was the point of dealing with butter specifically? It was, of course, to deal with the fact that butter was being sent outside the Community—to the Urals, as somebody said the other day—and being subsidised in being sent there when we believe it ought to be available to people inside the Community who are willing to take it. We know, of course, that the largest amount of butter is consumed by the poorer sections of the Community, the old-age pensioners and those earning under £30 a week. That was another reason for dealing with butter specifically.
The effect of dealing with this matter is to cut at the butter surplus and to see the beginnings of what I hope will be that major reform of the CAP which at any rate all my hon. Friends believe to be right.
Mr. Donald Stewart: In the forthcoming talks at the next Council meeting on a possible ban on herring fishing on the West Coast of Scotland, will the Minister be prepared to make representations on small vessels, on which I have written to one of his hon. Friends at the Scottish Office? There are only two in the fleet in my constituency—there may be some elsewhere—which are engaged in herring fishing only by drift nets and which are too small and lack the equipment to go in for other kinds of fishing. I am informed that there would be no objection from the other fishermen concerned.
Mr. Silkin: If the right hon. Gentleman has communicated with the Scottish Office I shall certainly take it up with my right hon. Friend the Secretary of State and look into the point as urgently as possible.
Mr. Jay: Is my right hon. Friend aware that he might have got an even better deal if he had not been publicly attacked by Opposition spokesmen in Brussels during the negotiations?
Is he further aware that because—despite the most strenuous efforts that he made in these negotiations—we still face a further series of increases in the price of food, including the transitional steps, more and more people will conclude that it is time we withdrew from the common agricultural policy?
Mr. Silkin: My right hon. Friend has put a view that I know many people in this country share with him. My task was to deal as best I could with a particular prices package. To have brought back the lowest increase in prices since the United Kingdom joined the Common Market, and to have got a butter subsidy for the reasons I have given, was the best I could do at this stage.
Mr. Geraint Howells: I am grateful to the Minister for finalising the price review negotiations this week. Will he not agree with me that this year's price review is a holding operation for farmers until we shall be able to persuade our counterparts in Europe to reform and change the common agricultural policy for the benefit of producers and consumers alike? The butter subsidy and devaluation of the green pound are a step in the right direction.
Will not the Minister further agree that the pig industry is in dire financial trouble? What further plans does he have to provide help for the industry?
Finally, is it not true that the biggest worry confronting the British farmer today is the precarious future of the marketing boards? Is the Minister in a position to comment on the future of these boards?
Mr. Silkin: With regard to the Milk Marketing Boards, I have referred to what I believe is a very significant shift on the part of Brussels. I was about to say Luxembourg but it is really Brussels. The

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Commissioner's notification to me represents, I think, a very hopeful change, and we shall build upon it.
I agree very much with the hon. Gentleman about the pigmeat situation. That is the reason, as I said a few moments ago, for my introducing national aid. I was grateful for the hon. Gentleman's support, although that support was not so widespread in other parts of the Opposition Benches.
Mr. Gould: Will my right hon. Friend agree that his major achievement is not so much the temporary subsidy on butter, welcome though that is, as his staunch resistance to the very much higher price increases urged on him by his Common Market colleagues and by the Conservative Opposition?
Will he not also agree that if even he cannot protect us against unnecessary price increases, the time has come for us to say quite bluntly that the common agricultural policy is beyond reform and that we can no longer afford it?
Mr. Silkin: As to my hon. Friend's point about the common agricultural policy being beyond reform, it depends on what comes out at the end of it. But he is quite right. We were advised by right hon. and hon. Gentlemen on the Opposition Benches to accept the Commission's original proposals willy-nilly. We all remember that. We were told to do so. Had we done so, there would have been no butter subsidy. Had we done so, the variable beef premium would have ended in July. Had we done so, the isoglucose levy would have been at its full rate. Had we done so, there would have been a margarine tax of 2½ per cent., and the exclusive use proposals would still have been in force. Had we done so, there would have been a ban on investment in dairy farms. Had we done so, the devaluation of the green pound would not have been under 3 per cent. but would have been 6 per cent.
Mr. Peyton: The right hon. Gentleman's sublime disregard for the truth—[Interruption.]—is almost without parallel even on the Government Benches. But will he now answer the question which he dodged before? What will he do about structural surpluses? Is he saying
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that the butter subsidy is a way of dealing with that problem?
Mr. Silkin: Of course it is. Anyone who knows about them knows that structural surpluses are simply mountains of food or drink which have accumulated because people cannot afford to pay the prices.
Mr. Benyon: I should like to return to the question of pigmeat processors. Even after the adjustments made to the green pound, every pound of imported canned ham from Holland carries a subsidy of 27p per lb. vis-à-vis its English competitors. The 1,800 process workers in my constituency face a grave situation. Can the Minister give us any hope that in the discussions in the next three weeks something can be done about that?
Mr. Silkin: I certainly intend to see that the discussions are forcefully proceeded with. We have already made the difference one of £45 a tonne, and that should not be forgotten. I would remind the House that this is not a question of what the Commission can give but a question of unanimity in the Council. The plain, hard fact is that, important as it is economically to us, it is, if anything, even more important to the Danes, for example. When we talk about pig-meat we are talking about 30 per cent. of the Danes' export industry. It is tough going, but I shall endeavour to do it.
Mr. Ron Thomas: While I recognise my right hon. Friend's efforts, may I ask whether he is aware that the recent Cambridge Economic Policy Review made clear in a detailed analysis that the CAP was costing Britain at least £650 million a year, far from there being any kind of subsidy? Can my right hon. Friend tell us how much the additional cost will be? Does he not think that it is now time for the British Government to issue an ultimatum saying that unless this indefensible CAP is scrapped within 12 months we shall come out of it?
Mr. Silkin: I have read the report to which my hon. Friend refers. I think that after two very long nights now and five very long nights in March I have made my position clear to my partners in Europe.
Mr. Scott-Hopkins: Does the Minister agree that by over-emphasising the butter

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situation he has thrown away an awful lot of things that should have been gained at this price review in Europe? He has lost them with the rise in the price of milk, which will start on 1st May and which was not proposed by the Commission. He has given way on milk and on isoglucose. He said that he would not give way on isoglucose when I said that he should not do so. The increase accepted by the Minister is 3·5 per cent., and that is 0·5 per cent. more than the original price rise proposed by the Commission. The emphasis has been entirely wrong. What the Minister has gained is far outweighed by what he has lost. Not only the consumer but also the farmer will regret the day that he was made Minister of Agriculture, Fisheries and Food.
Mr. Silkin: I remind the hon. Gentleman that he suggested that we should take all the Commission's proposals as they stood, although he said that there were individual matters in them which he did not like. If he cares to examine the butter subsidy, which is designed only to start to get rid of structural surpluses and to help the consumer, he will find that it outweighs the green pound devolution.
Secondly, concerning isoglucose, which I think is important, I was willing to accept the rise because the final document says that it is a maximum of one half of the levy originally proposed by the Commission—as the hon. Gentleman will see if he studies the documents. It therefore gives us all the right in the world to continue and I think that this time we shall have certain allies to argue what the rate should be. I hope that it will be downwards.
Mr. Buchan: Is it not rather pathetic that those who surrendered British interests in 1971 are now carping about my right hon. Friend's trying to protect British interests? The Tories are the guilty party. It is even more ironic that the main burden of their argument is that we have not so far dealt with surpluses, when this was precisely the position they chose to accept? Is it not a fact that the difference between us is that we recognise that the surpluses cannot and should not be dealt with through an end price policy but that we have to go back to the more traditional British form of farming sup-
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port to fulfil the aims of the White Paper "Food From Our Own Resources"? If the Common Market cannot achieve that, it is time we left the CAP.
Mr. Silkin: I was interested to find, when reading the list of those items that we would have had to accept if we had followed the instructions—if that is the right word—of the Tory Front Bench, that no right hon. or hon. Member in the Opposition dared to mention the question of the variable beef premium. That is one of the most vital things in British industry, and yet we managed to keep it for the whole year, when it was proposed that it should end in July. The expectation is that it should now become permanent.
Colonel Sir Harwood Harrison: Is the Minister aware of the great anger and frustration of all pig producers? Suffolk, which I have the honour to represent, is one of the biggest counties producing pigmeat. Some of the producers came here earlier this week to show their indignation and many hon. Members from both sides met them. The producers were worried—and it worries me, too—that if they continue to lose money, which they can do only to a certain extent, they will have to sell or kill off all their breeding sows and we shall be in a desperate state. This is illustrated by what I hope the Minister may have seen—[Interruption] Do you want to interrupt me?
Mr. Skinner: No.
Colonel Sir Harwood Harrison: Well keep quiet then. I was saying to the Minister—
Mr. Skinner rose—
Mr. Speaker: Order. Everyone knows that remarks are to be addressed to me, in theory at any rate. I kept quiet for rather a long time, but I should now be grateful if the hon. and gallant Gentleman would put his question to the Minister.
Mr. Skinner: Gallant, is he?
Colonel Sir Harwood Harrison: If we slaughter our breeding stock, we shall have a situation such as that described in the Press last Sunday, when imported cabbages were being sold for more than £1 each. We shall be held to ransom.

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This is what I am frightened about, and I want immediate action.
Mr. Silkin: I am grateful to the hon. and gallant Gentleman for that point. It is exactly the point I was making and it is why I introduced national aid. I hope that the measures which I oined today in my statement will be of some assistance—although I admit only small assistance. I shall fight for a change in the calculation of the mcas. That, I hope, is where we all agree.
Mr. Spearing: Does my right hon. Friend not agree that the questions from the Opposition show that the Tory Party represents producers, whereas my right hon. Friend's efforts and the 1947 Agricultural Act show that this party represents both consumers and producers? Will my right hon. Friend comment on an apparent discrepancy in the price increase? The right hon. Member for Yeovil (Mr. Peyton) mentioned a price increase to farmers of 10 per cent. and my right hon. Friend mentioned a 1·25 per cent. increase.
Mr. Silkin: I think that the right hon. Gentleman was talking about producers' prices. I was talking about food prices.
Mr. Michael Hamilton: Has the Minister had time to study the British Press this morning, and has he noticed the contrast between his own satisfaction with the settlement and what is in the Press?
Mr. Heffer: Surprise, surprise.
Mr. Hamilton: Secondly, the right hon. Gentleman is aware of my personal interest in the Hop Marketing Board—the first marketing board to be set up. Will he explain the significance of the latest development mentioned in his statement?
Mr. Silkin: The significance of the hon. Gentleman's second point is that the Hop Marketing Board will be recognised as a producer group for the purpose of aid until, I think, 31st December 1980. This is an important point and it gives us all the transition necessary. From time to time I read the British Press. I sometimes believe what it says and sometimes do not, and sometimes my beliefs are mixed.
Mr. Fernyhough: What is the difference between the original terms that the Common Market wanted to impose upon my right hon. Friend and those that he
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negotiated to finality yesterday? Can my right hon. Friend express it in pounds, shillings and pence?
Mr. Silkin: I reckon it to be, until early next year, about 1p in the £.
Mr. Shepherd: Does the right hon. Gentleman agree that the emphasis he placed on securing the extra ½p on the subsidy for butter seriously jeopardised his bargaining position for the pigmeat sector? If he waits a further three weeks before taking further steps in this direction, there may well be irreparable damage to the pig industry. In the meantime, will he go to the slaughter as a sheep rather than a lamb and take immediate steps by jacking up his own subsidy to, say, £1·50 or £2, just to sort the matter out?
Mr. Silkin: When Conservative Members, having said that I was wrong to defy what they believed—
Mr. Shepherd: No.
Mr. Silkin: I know that the hon. Gentleman himself did not, but others on the Conservative Benches did. Having said that I was wrong to defy what they thought was the Brussels rule—[HON. MEMBERS: "Who said that?"] I well recall that the right hon. Member for Yeovil (Mr. Peyton) told me that I was taking it lightly and frivolously, and that this was a very important matter. To ask me now to take it even more lightly and frivolously and to increase it is very difficult. If the hon. Gentleman reads in Hansard what I said, he will see that the difference between the last proposals in March and those finally accepted by all nine countries after some trial and tribulation at 2 o'clock in the morning represents a good deal more than just ½p in the lb. on butter.
Mr. Madden: Does my right hon. Friend agree that so long as Britain remains subject to the common agricultural policy our people are trapped on an escalator taking them towards higher and higher food prices? Does he agree that the long-term interests of both British producers and consumers can be protected only by Britain's withdrawing from the CAP? Will the Government rescue the people by withdrawing Britain from the CAP?
Mr. Heffer: From the Common Market.
Mr. Silkin: My hon. Friend speaks of high prices. I absolutely agree with my hon. Friend that we have been on an escalator going up. The one thing I can claim on this occasion is that the escalator has slowed down pretty considerably this year. This is the lowest increase since the United Kingdom joined the Common Market.
Mr. Jasper More: Does the right hon. Gentleman recognise that whilst his principal interest seems to be in the RPI, the effect of his statement on imporant sections of the farming industry will be RIP? Why has he not made his long-promised statement on potatoes? Will he undertake that we shall have a debate on his statement and in Government time?
Mr. Silkin: The hon. Gentleman for a long and distinguished period once graced the same office as I held, as a Whip. He knows that the question of a debate is not in my hands.
Mr. Kinnock: Has my right hon. Friend noted the comments of the French Minister for farming to the effect that a reduction in prices is against the principles of the common agricultural policy? Does my right hon. Friend recognise, as I do, that structural surpluses are as fundamental and natural a part of the common agricultural policy as rigor mortis is of death? Does my right hon. Friend consider in those circumstances that the CAP is capable of reform, even under the persuasive influence of some one such as himself? Does he not recognise that, no matter how valiantly he or subsequent Labour Ministers attempt to extricate us from the worst effects of the CAP, and however dedicated their attempts, the British Press will always say that they were inadequate? Is it not time that we withdrew, on all those grounds?
Mr. Silkin: I had noticed that my French colleague, who was not alone in this, appeared to regard it as a principle that prices should not come down. I believe that he said so. I am afraid that nevertheless the price of butter will come down in this country. I make my apologies for it! But it will.
With regard to the general question that my hon. Friend raised, I think it important that there should be a sufficient change in the workings of the CAP to
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deal with the question of prices, because if it is not dealt with we shall always have structural surpluses. I believe the latter to be the absolutely wrong way of dealing with the food production and supply problems of Europe.
Several Hon. Members rose—
Mr. Speaker: Order. As hon. Members know, I have strong feelings about the House having the right to question what happens in Europe. In order to be fair, I shall call those hon. Members who have been standing.
Mrs. Millie Miller: Does not my right hon. Friend agree that one of the most obnoxious aspects of the common agricultural policy has been the sale of cheap commodities to Eastern European countries? Would he care to comment on the suggestion that the ban on those sales is to be relaxed?
Mr. Silkin: I certainly think that the sales to which my hon. Friend refers are not only an obnoxious feature but a symptom of what happens when one accumulates a structural surplus and it apparently becomes more economic to sell it, highly subsidised, outside the Community than to those in the Community who really want it. I shall do my best now and in the future to see that this policy is changed.
Mr. Welsh: How exactly will these small changes rescue the pig industry from its present crisis, especially as it needs a rapid infusion of cash? Will the right hon. Gentleman clarify exactly what he means by "fundamental changes to mcas"? Will he consider introducing an operating subsidy for pig meat processors, such as I believe has now been introduced into Ireland?
Mr. Silkin: I did not say "fundamental changes". I said "the recalculation of mcas". I have always believed—and I think that on the whole I take most hon. Members with me—that the best method is to relate the mca payment to the actual cereal content and not to the general basis. That is what I shall work for. But I accept what the hon. Gentleman says about the pig industry. We must do our best for it.
Mr. Peter Mills: What is distressing is that the Minister seems to have been

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mesmerised by butter, important though that is. What is really important is the long-term changes that are needed. Will the right hon. Gentleman bear in mind that his attitude over that matter has done two things—first, it has put back the structural changes so desperately needed in the CAP, and, second, it has produced the confidence of the home producer. That is what the right hon. Gentleman must answer for.
Mr. Silkin: I do not accept either the first or the second point. The interesting point is that the attack—for that is what it is—is on the high price which caused the accumulation of a structural surplus in a commodity in the dairy products sector. As the hon. Gentleman knows, butter is the worst culprit of the lot, and it had to be dealt with first. There was no doubt among my colleagues in the Council that that was what they felt, too, although their attitude to it was slightly different. The whole of the milk action programme, as now changed by us, goes exactly towards the same effect.
Mr. Monro: Will the right hon. Gentleman understand that his astonishing complacency has done nothing for the confidence of the farming industry and nothing for the long-term interests of the housewife? Can the right hon. Gentleman say clearly how he equates the 50 per cent. under-recoupment of costs with his White Paper, and why he expects pig farmers to have to wait more than a month for action?
Mr. Silkin: The hon. Gentleman obviously did not listen to my reply to his right hon. Friend the Member for Yeovil. I said that we should wait until we had the detailed figures, because I think that there is a misapprehension. There is no complacency over the question of pig production. Anyone who has, as I have, introduced a national aid and has been subject to considerable pressure because of it knows exactly what I mean.
Mr. Mawby: Will the right hon. Gentleman disregard most of what has been said by his hon. Friends and remember that the interests of the producer and the consumer are intermingled, and that any damage done to one will in the long term end in disaster for the other? Will he bear this in mind in any future
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negotiations, to try to make certain that the interests of the consumer are properly looked after by ensuring that the producer can continue to enjoy a reasonable standard of life?
Mr. Silkin: Yes, and that is the view of my hon. Friends and myself. It works another way. It means that all one has to do is look at the last quarter's food survey and see what has happened. When the price goes too high there is a drop in consumer consumption, and then the producer himself is worse off.
Mr. Buchanan-Smith: Would it not be more realistic to acknowledge that, if progress has been made from the Commission's original proposals to the final settlement, any difference between March and now is very little indeed? Is there not some danger that, because of the acrimony generated as the result of the Minister's attitude, his own credibility and influence to change and reform the common agricultural policy—which is far more important in the longer term than any annual review—may have been for feited?
Mr. Silkin: I take it that the hon. Gentleman thinks that a change of 2p in the £ is insignificant. Many old-age pensioners and people on low wages would not agree. As for his second point, I would have thought that quiet firmness was better than appeasement any day of the week.
Mr. Shersby: What will be the effect of the changes in isoglucose on its production in the United Kingdom, and how will it affect sugar production in the United Kingdom and the Community generally.
Mr. Silkin: I believe that even half the rate that was originally proposed by the Commission would be far too high, but I am encouraged by the fact that that is the maximum amount. Other countries have begun to wake up to this point. We shall do as much as we can to see that this level is reduced.
Mr. Maxwell-Hyslop: If it is not incompatible with Common Market policy to have a quota on Italian wine coming into France, why should it be incompatible with Common Market policy to put a quota on pigmeat from Denmark or elsewhere coming into

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Britain? Does not the Minister think that at the end of the day the only way in which we can achieve a common agricultural policy that will stand the test of time and give fair returns to the producer without getting over-production is by coming to a national quota system?
Mr. Silkin: The hon. Gentleman raises a very important and very difficult question, because I am being told about the amount of goodwill that I am sacrificing with our colleagues in Europe by not agreeing with what they say on every occasion, but now the hon. Member for Tiverton (Mr. Maxwell-Hyslop) is boldly advocating that I take additional national steps. I think that the truth of the matter is that provided that one can fully justify the steps that one takes—as I believe I could on the pig-meat subsidy—one should be allowed to take them.
Mr. Michael Morris: I declare an interest in the British biscuit industry, and in that context, and in relation to the Minister's statement, what decisions were made about the addition of mca's to British cake and biscuit exports? Is the Minister confident that he will be able to get rid of the nonsense of denying British industry the traditional labelling and naming of British biscuits?
Mr. Silkin: On labelling, the point we were making all the way along the line was that it was ridiculous to put this matter in the milk action programme. There is a point about labelling, but I think that the hon. Member for Northampton, South (Mr. Morris) and most hon. Members would agree that it has to be kept in proportion. There were some extraordinarily lunatic ideas about what was meant in the English language by "cream" or "custard", mainly by people who do not practise the English language. On the first point, I shall give the hon. Gentleman details, but I do not have them with me.
Mr. Brotherton: In the document "Food From Our Own Resources" the right hon. Gentleman's White Paper talked about doing good for the British agricultural industry, but devaluation of the green pound by 2·9 per cent. is a very small devaluation. Will the Minister explain to the people of this country that they have no God-given right to cheap
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food and that very soon we shall have to have a green pound which is on parity with the pound sterling, and therefore the price of food has to rise, otherwise the British agricultural industry will go broke?
Mr. Silkin: What I have always liked about the hon. Member for Louth (Mr Brotherton), ever since we had our first election fight in Deptford, is his invariable total honesty. I wish that he shared it sometimes with some of his hon. Friends, who try to do two things at the same time. They try to say that we should support the farmer, but that that means that food will be cheaper.
An Hon. Member: That is what you said.
Mr. Silkin: On the contrary, I say that I keep a balance, and that is very different. The hon. Gentleman has put his finger on the point. If one moves away from a price for food that the con summer—that is, the housewife—can afford, there is a drop in consumption, and that puts the producer out of business. The right way is to get the right balance between the right price for the producer and the right price for the consumer.
Mr. Fairbairn: The Minister's last reply reminds me of the accused man who was also accused of lying and replied that if he had wanted to lie he would have got a lawyer. We have a lawyer as Minister of Agriculture. What figure was taken into account in these negotiations for the increase in the price of diesel fuel, if any? Why does the Minister consider it satisfactory to have a de valuation of the green pound of only 3½ per cent., which means that farmers have to pay in a ridiculous currency? What will happen to the other marketing boards that the right hon. Gentleman has not mentioned, since they come to an end under the agreement at the end of this year? Will the Minister say whether he cannot immediately give a £2 subsidy on pigs and ask for other offences to be taken into account by the court if it finds against him?
Lastly, does the Minister not realise that his argument about butter is farcical because he is saying that one can remove a mountain—which amounts to only one small packet of butter per per-

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son in this country—by increasing production, but he will not save old-age pensioners money if he expects them to eat more? The Minister has sacrificed the interests of farmers for the temporary interests of consumers, and that will fall back on his head.
Mr. Silkin: The hon. and learned Member put so many questions that I feel it would be more appropriate if I were to write to him. If his argument was as erroneous as his facts—he got the figure for the devaluation of the green pound wrong—it is not worth replying to.

ORDERS OF THE DAY

  PRICE COMMISSION BILL
  Order for Second Reading read.
  4.37 p.m.
  The Secretary of State for Prices and Consumer Protection (Mr. Roy Hattersley): I beg to move, That the Bill be now read a Second time.
  Mr. Speaker: I have selected the amendment which stands in the names of the Leader of the Opposition and her right hon. and hon. Friends.
  Mr. Hattersley: The Bill provides powers for the statutory control of prices. The propriety and utility of such powers are beyond question and have long been accepted by some of our most successful competitors. But it is equally certain that inflation in this country can be over come only by the creation of an economy in which the sterling rate is stabilised, domestic credit expansion is contained and progress towards increasing exports and expanding production is accelerated.
  Nothing this House decides can determine the world price of oil or tea or coffee. Inflation cannot be abolished by Act of Parliament. It can be overcome, and I have no doubt that it will be overcome if we remain resolute in the pursuit of our present policies. But we shall not remedy any of our difficulties if we pretend that there is an alternative quick and easy way by which the present intolerable inflation rate can be held back.
  The steady improvement in the inflation rate which we expect to begin in the summer depends on the successful completion of the policy we began last December. Within these policies and strategy statutory price control has an essential part to play. It cannot cut the overall inflation rate in half. But it can hold back unjustified price increases and have a significant effect on individual items in the Retail Price Index.
  Mr. Dennis Skinner: It has not done so yet.
  Mr. Hattersley: At a time of high inflation, when working people are accepting wage restraint, it is the Government's duty to ensure that a small section of

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  the industrial and commercial community does not make unacceptably high profits at the expense of the majority of consumers who accept restraint in the interests of national recovery. It is to combat such abuse that we propose taking powers to investigate price increases, and powers to freeze prices—powers that are flexible, effective and sharp enough to cut through specific abuses when they occur.
  This, the most important part of the Bil—the power to investigate specific price increase proposals and to freeze individual prices for up to a year—is permanent. It is a new power, potentially stronger and more effective than the price controls we now operate. I anticipate that the new Price Commission will choose to make about 40 detailed investigations each year. Usually they will concern prices which guide and govern the costs of other goods and services.
  Each investigation will certainly influence more prices than those that are actually within its terms of reference. Many companies will hold back possible increases in order to avoid investigation. Others will be affected by price limitations placed on their competitors. Ceilings on the prices of manufacturers' end products will restrain other prices, the prices of other manufacturers and the prices of wholesalers. The overall effect on the price level will certainly be greater than our present Price Code. The effect of each investigation and possible freeze will be significant and visible.
  All that the Opposition are choosing to vote against. I trust they do not do so in the belief that by putting down the so-called reasoned amendment they are absolved from the charge of opposing any form of price restraint. Perhaps the hon. Member for Gloucester (Mrs. Oppenheim), applying the levels of political sophistication we have come to expect of her, believes that she can argue convincingly that the Conservative Party is not against control in general, but is just against these price controls. If that is the case, I hope that she will abandon her normal rule and actually tell the House something positive and constructive, actually let us into the secret of what she and her party would do.
  I suspect that we shall be disappointed, for the amendment makes it absolutely
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  clear that the Opposition prefer a political knock-about to an examination of alternative policies. That is the hon. Lady's choice. My task is to describe the Bill's contents and to offer my judgment of its value.
  The advantage of the scheme I now propose over the cost control procedures that the Bill abandons are obvious. A general price code applied by cost control is unavoidably inflexible. It lays down rigid rules. The rules are inevitably arbitrary and indiscriminate. They attempt to relate a firm's pricing policy to its past performance: a straitjacket from which improving and expanding firms rightly wish to escape.
  Within the rules every price increase is permissible. Outside them no increase is possible. So a scheme of general application has to be applied either so loosely that few firms feel the effect or so tightly that the expansion of many firms is postponed or prevented.
  Attempts to graft exceptions into general rules rarely succeed. The Trade Union Research Unit's criticism of the 50 per cent. investment relief we introduced last August was broadly correct. It could not be limited to firms which planned additional investment. In consequence, it became simply a loosening of overall control.
  At a time when we hoped to encourage more industrial expansion it was right to loosen the general code in that way. We estimated that it would produce 1 per cent. increase in the Retail Price Index, and we believed that that increase was a penalty we had to pay to avoid inhibiting new investment. As a result, in many cases market forces have held prices below Price Code ceilings.
  The new attachment to the old prices policy which I have found in the backwaters of industry has a direct relationship to the fact that in some areas it is difficult to distinguish between the effects of the present code and the effects of no code at all. I am not interested in the appearance of statutory control. I want a prices policy which neither deters investment nor allows unnecessary price increases. The Bill provides it.
  Under its provisions the Price Commission will receive 28 days' warning of price increases in all the manufacturing and service firms which notified price

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  increases under the previous Act. These firms account for 70 per cent. of manufacturing output. The Commission will examine these proposals against the criteria in Clause 2. Price increases needed by efficient and competitive firms to finance investment, preserve quality or meet unavoidable costs will be allowed. Price increases which merely produce swollen profits not productively used, or, are the simple result of management's preference for passing on costs rather than attempting to improve efficiency, will not.
  The flexibility of these powers makes them wholly consistent with the industrial strategy. It also makes them more effective. We do not apply general powers rigorously for fear of damaging companies which should be exempted from their effect. Specific powers can be applied firmly because they are applied with discrimination.
  The principal power within the Bill provides support for both competition policy and the industrial strategy, neither of which is a short-term device. The criteria in the Bill are not designed simply to cope with a period of unacceptably high inflation.
  Improving our competitive efficiency and influencing industrial performance in less than perfectly competitive markets is not a task confined to the next few years. Active promotion of competition is essential to create an expanding economy. But competition does not do the whole job. Unregulated it is callous and wasteful. Competition has a part to play in the mixed economy, but it does not solve all our problems, and sometimes it only exists because the Government directly intervene to ensure that market forces really operate.
  My Department attempts to encourage competition through the Monopolies and Mergers Commission, the Restrictive Practices Court and the Office of Fair Trading. Most of the powers these agencies now possess are effective, but only after months—sometimes years—of investigation and inquiry. We need a new power that operates more swiftly. This Bill provides it. In the long term, these powers—though perhaps operated by one of the existing anti-monopoly agencies—will be used as part of our permanent competition policy.
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  That, however, is for the future. The immediate object of the Bill—the ability to freeze the price of particular goods and services and the right after a sectoral examination to regulate prices for an entire industry—plays a direct and significant part in the Government's counter-inflation strategy.
  The success of this policy in holding back unacceptable price increases depends in part on the sort of Commission we appoint. I intend to appoint a Commission in which industry can have confidence, which represents all sections of the economy and which includes men and women of proven industrial success. Another essential qualification will be a positive commitment to the belief of selective Government intervention within the economy. This policy will succeed because it will be run by a Commission which wants it to succeed.
  Mr. Frank Hooley: If the Commission is to be as powerful and as well composed as my right hon. Friend has said, what is the point of a veto, which he wishes to have on its investigation at any stage?
  Mr. Hattersley: There are circumstances in which the Commission might want to make an investigation when other events were taking place in the industry that it was proposed to investigate. It might be that a merger was being proposed and that this might be part of the industrial strategy. We might be on the verge of a planning agreement and in those wholly exceptional circumstances—[HON MEMBERS: "A unique occasion"] It would be an occasion that I should want to become increasingly less unique. When that happens I should want to ensure that two conflicting powers were not working against each other. I shall explain this point in a moment.
  I have stressed that the powers are selective and flexible and that when they are used, therefore, they can be used effectively. But they will also be comprehensive—and in this I refer to the overall margin controls that we are proposing to maintain under Clauses 14 and 15.
  Through the margin controls we shall be able to ensure that profits are not increased by unacceptable amounts. At a time of wage restraint it is no more than simple justice to limit profit margins and to welcome the element of price control

  1259
  that that provides, but it would clearly be impossible to have effective general price control without some form of wages policy. For that reason the power to enforce a general code based on net and gross margin expires in three years and even during that time needs renewal annually by order.
  The power to operate margin control was first introduced in 1973 by a Conservative Government. I know that much history is being re-written on the other side of the House, but I hope that even the Tory Ministers who voted for it then will recall their pasts.
  I am not surprised that the reaction to the Bill of the hon. Lady has been both trivial and intemperate. Let me confirm some of her prejudices. There are many ways in which the Bill is inimical to all that she stands for. The Bill does imply that Government intervention within the economy is right and necessary. It does seek to protect the consumer against the normally stronger forces of industry and commerce. It does require private industry to be publicly accountable for its actions. The Bill is not based on the principle that what is right for big business is right for Britain. I do not expect the honourable Lady to share or even understand those views.
  I turn again to the Bill's contents and the central rôle that the Commission will play in its operation. It will be to the Commission that price increases in manufacturing and service industries will be pre-notified and the profit margins of distributors reported. It will be the Commission that will decide which of them will be investigated. Nationalised industries will be included in exactly the same way as companies within the private sector. From time to time the Secretary of State of the day may ask under Clause 10 that the Commission examines prices or charges in a whole sector of the economy. When this request is made, the Secretary of State will be able to regulate prices within that sector if the resulting report so recommends. He will have power to freeze prices at their existing levels, or to require an actual reduction.
  The sectoral references made by the Secretary of State will take up only a small part of the Commission's time. Most of the Commission's work will be done under its own initiative and in accord-
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  ance with its own judgment. However, it will be required to use its initiative and exercise its judgment against the background of principles laid down in Clause 2. That clause requires the Commission to make its judgment after considering all matters which appear to it relevant to the business of restraining prices and charges. Price restraint is the prime objective and principal purpose of the Commission's work, but that work must be carried out after reference to those parts of Clause 2 which require the Commission's judgment on any firm to be consistent with the efficient company's need to earn adequate profit. Clause 2 contains a set of criteria to which the Commission must pay proper regard.
  The first and primary consideration is the restraint of prices but there are a number of other matters important to the protection of efficient industry that need to be taken into account. We have met a number of suggestions from industry about the contents of this clause.
  The concept of criteria approved by Parliament as a guide to the behaviour of statutory authorities is not new. The Monopolies and Mergers Commission is guided by a similar device set out in Section 84 of the Fair Trading Act. All such criteria are subject to the criticism that they are too vague and that rules written flexibly can be interpreted capriciously. When the Government intervene in the economy, in proposed mergers or intended price increases, we have to make a choice about the nature of those rules on which they operate. They can be general and absolute, applying without exception irrespective of the damage they do, or their irrelevance to a specific situation, or they can be statements of principle interpreted according to individual circumstances.
  I have no doubt that the second alternative is right. As with monopolies and mergers legislation, there will be criticisms of individual judgments. This is unavoidable, but the overwhelming advantage of such flexibility is that it enables the Commission to examine a price proposal and recommend prohibition when it is appropriate and yet allow other and unexceptionable increases to go ahead unhindered.
  Since the Bill was published I have said continually, and I repeat today,

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  that the efficient, socially responsive company has nothing to fear. Clause 2 will indicate to the Commission that it should take into account the effect of a price freeze for one company on the viability of its competitors.
  We have also built into the Bill a series of formal safeguards. Investigations not completed within three months will automatically lapse. A recommended freeze or restriction will be extended for a full year only if the recommendation of the Commission is endorsed by me. I shall have power to increase the maximum price allowed by the Commission, but I shall not have powers to reduce it. All my decisions—and that means every decision to prolong a price freeze—will be subject to the negative resolution procedure. Clause 9 requires me to construct a system of safeguards to protect the viability of companies during the temporary freeze which accompanies a Commission investigation and during the life of any order that results.
  A further safeguard is my ability to veto a Commission decision to investigate a specific price increase. I know that that power has caused concern to some of my hon. Friends. I believe that that power will be used rarely if at all. It is simply intended to ensure that if a company is in negotiation with the Government—considering a merger which might be directly relevant to our industrial strategy, or contemplating a planning agreement—it should not be required at the same time to accept a Price Commission investigation. Were I, however, to use such a veto it would be a public act for which I should be accountable to Parliament, and I should have to explain my reasons for preventing the Price Commission's initiative going ahead. The law would require me, like the Price Com mission, to act in accordance with the criteria in Clause 2.
  Mrs. Audrey Wise: Will my right hon. Friend explain why he thinks that the negotiation of a planning agreement should excuse a company from being subjected to a Price Commission investigation? Would not the possible Price Commission investigation actually strengthen the hand of the Government in such negotiation?
  Mr. Hattersley: It might well. I have not said—and nothing in the Bill contains this—that where a Price Commission investigation is contemplated it should not be carried out if there is the prospect of a planning agreement, or vice versa. All I have said is that we need a power in some circumstances conceivably not to run the two things side by side. I can imagine a situation in which it would reveal the need for a planning agreement. I can also hypothesise the situation in which such an investigation would prejudice a company coming to agreement with the Government. I want flexibility and to use it in a way most effective to pursue the aims that my hon. Friend and I share.
  The Bill contains one major power which is dependent on the initiative of the Secretary of State rather than that of the Commission. Clause 10 enables me to direct the Commission to examine any question related to prices and charges within a whole industrial sector. The Bill also provides the power to act upon the Commission's recommendation and to regulate prices throughout that sector or actually to reduce them. I anticipate making up to about 10 references of this sort every year. They will result initially in the Commission investigating sectors in a way broadly similar to that adopted under the existing programme of Ministerial references. That investigatory power has existed for four years, but throughout that time the Government have been denied the specific power to act on or implement any recommendation that the investigation produced. We have had to rely primarily on the good will and common sense of the investigated firms in voluntarily accepting either the spirit or the letter of the Commission's recommendation.
  I hope that when sectoral examinations are made the industries examined will co-operate with the Government in the same way. But if an examination revealed excesses or abuses that the industry was not prepared voluntarily to remedy, it would clearly be in the public interest to ensure that the Government could act against the offending companies. Clause 12 provides that power.
  I want to describe only one other specific clause in some detail. That is Clause 17, which extends beyond 31st July, when it would otherwise lapse, the

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  provisions of the Remuneration, Charges and Grants Act 1975. That Act has four distinct parts. The first is support of voluntary pay policy. The second continues the power of the Price Commission to enforce a Price Code. The third continues the power to modify other Acts relating to prices or charges. The fourth continues the ability to control dividends.
  Clause 17(1) refers to Section 1(1) of the 1975 Act, which exempts employers from liability for breach of contract entered into before 1st August 1975 to the extent necessary to comply with pay limits set out in the White Paper referred to in the Act. Clause 17(1) extends this relief to agreements made at any time in respect of increases payable after 31st July 1977.
  This clause appears in the Bill after discussion with the TUC. It does not introduce new elements to pay policy, but merely continues the status quo. The TUC knows that it forms part of the Bill, and it has chosen not to include this clause among those to which it suggested changes. This afternoon the General Secretary of the TUC made it clear in a public statement that the TUC would not agree with any Member who—in my view, misguidedly—voted against the clause.
  Mr. Ron Thomas: Will my right hon. Friend give way?
  Mr. Hattersley: When I have concluded my remarks on this clause, I shall gladly give way to my hon. Friend.
  This clause contains powers essentially in support of a voluntary pay policy. The powers in the Remuneration, Charges and Grants Act, which this clause extends, do not enable pay limits to be imposed on anyone. They merely enable an employer to comply with a voluntary pay policy when a previous contract would otherwise require him to breach it. The pay policy concerned would have to be voluntary, because no powers exist to impose a pay policy statutorily.
  We abolished the whole apparatus of statutory pay control in 1974. But if there is a voluntary policy, the powers are essential, not to limit the wages of the vast majority of employees whose unions will have voted for a further agreement on pay, but to ensure that
  1264
  employers are not inadvertently forced to breach the policy by previous contracts of employment. Of course, if there is, as I hope, a third wage round, the White Paper to which the parent Act refers will be debated in the House.
  Mr. Ron Thomas: I think that my right hon. Friend will be aware that many of us are anxious about Clause 17(3), which would give power to the Government to extend the policy to 31st July 1980—beyond the next General Election. That means that we could have a fourth or fifth round of the pay policy. That is the part about which many of us are concerned.
  Mr. Hattersley: There is no such assumption on my part. It appears in this form because all the time-limited parts of the Bill have a similar life. Were the move towards an orderly return to collective bargaining to take two years rather than one year—my hon. Friend's judgment on that is as good as mine—it is conceivable that we might want to apply the powers again. However, I assure my hon. Friend that it is not intended to extend the pay policy unacceptably and unnecessarily. If there is to be a third round, which seems possible, or even a fourth round—that is something about which I do not speculate—the same rules would apply. I am sure that my hon. Friend's fears are wholly groundless.
  I come to my last words on the Bill. I repeat what I said at the outset—that the propriety and utility of the Bill are beyond question. I hope that Opposition Members who are aware of the need to stimulate competition and the relationship between competition and prices will make their position equally clear. Perhaps one is about to do that.
  Mr. John Gorst: On the contrary, I was hoping that before the right hon. Gentleman abandoned the Bill to the House for discussion he would give us an insight into his thinking on Clause 12, which is potentially inflationary. What is the thinking behind the desire to abolish double pricing?
  Mr. Hattersley: My hon. Friend the Minister of State, who pays particular attention to these matters in the Department, will deal with that point later tonight. In view of what has been a

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  somewhat long speech, because of interruptions, I think that the House would prefer me to leave that topic to my hon. Friend.
  I want to make only two points in conclusion. The first is the perhaps vain hope that we might hear tonight the voices of some of those hon. Members who voted for prices policy four years ago raised again in its support today. I hope that they will say a word not only in favour of a prices policy in general—the principle of the Bill—but in favour of the details in the Bill that I offer to the House. I offer them two reasons why they should—both quotations:
  "There is little doubt that in countries such as France, Belgium and Sweden, price controls have contributed to diminishing the impact of inflation.";
  and:
  "We must aim as soon as conditions permit for a much more selective and discriminating system of price surveillance."
  Those are the views of the Shadow Chancellor, the right hon. and learned Member for Surrey, East (Sir G. Howe), speaking in London in January 1974. If there is any doubt about his wholehearted support for what I go on to propose, let me quote the right hon. and learned Gentleman on the same occasion on permanent powers:
  "Sir Alec Cairncross probably struck the correct balance when he said 'at all times the Government needs some machinery for investigating complaints of excessive prices'."
  I suspect that measured judgment is very different from what we are about to hear. I have no doubt that we are about to be told that prices are rising too quickly and that, bad as the rate of inflation is, figures will be carefully selected to make it seem worse. I hope that we shall also have a couple of words about how things could be made better, particularly in the absence of any form of statutory restraint, for that would be the result if the Opposition amendment were carried tonight.
  The powers in the Bill will provide a way of holding back unjustifiable price increases. But, I repeat, its major provisions are not a temporary measure. I offer the Bill as a development of the rules that ought to govern the mixed economy. I believe in that sort of economy and—as the Bill makes clear—the mixed economy must be profitable.
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  But its profits must result from efficient and competitive enterprise, not from restrictive practices and exploitation of the consumer. That is the result that the Bill will promote. I commend it to the House.
  5.9 p.m.
  Mrs. Sally Oppenheim: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
  this House declines to give a Second Reading to a Bill which establishes a system of price control that will discourage investment and destroy jobs without any genuine benefit to the consumer and does nothing to mitigate the Government's disastrous record on prices which are rising at 19·9 per cent. compared with 8·4 per cent. in October 1974.
  Despite the Secretary of State's extravagant claims for this measure, it represents no more nor less than the latest episode in the continuing saga of this Government's so-called attack on inflation—an attack that has become a rout as one disaster has followed upon another.
  I noticed that not once during his remarks did the right hon. Gentleman refer to real people. The amount of hardship and suffering that has had to be endured by the people of this country as a result of the Government's continued failure to defeat inflation cannot be over emphasised.
  Nor can the fact that it is likely to intensify in the coming months as prices leap ahead again and the cumulative effect of three-and-a-half years of double figures inflation takes its toll. No wonder hon. Members on both sides are deeply concerned or that consumers are at their wits' end. If only the Bill were the painless panacea that it is represented to be, we could all rejoice and welcome it. Alas, there can scarcely have been anything more ill-fated than the succession of attempts by this Government to manipulate prices. That is why we were singularly unimpressed to learn on 22nd February that the Secretary of State had another prices policy.
  In the beginning we had the Prices Act 1974, which introduced food subsidies, which we were told were the answer to inflation. Few will forget the earnestness of the then Secretary of State when she said:
  "Our major object is to seek to protect from inflation those least able to face it."—[Official

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  Report, 9th April 1974; Vol 872 c. 259.]
  Those least able to face inflation have told this Government what they think about that protection in Walsall, Stechford and Workington. They will tell them again tomorrow in Grimsby.
  When food subsidies were first introduced, food prices were rising at an annual rate of about 17 per cent. Now that they are rising at an annual rate of about 20 per cent., food subsidies are being phased out, because the Government are running out of money and credit and can no longer afford them, as we predicted from the beginning. As a result there will be a sharper increase in food prices this year than ever before.
  I warned that this would be the out come of food subsidies way back in 1974. During the Third Reading debate I said:
  "We are also very concerned … at the whiplash of price increases that consumers will have to face … when these subsidies are withdrawn."—[Official Report, 12th June 1974; Vol. 874, c. 1782.]
  When food subsidies were first introduced, food prices were rising at a rate that was far less than it is now. By the time subsidies have been phased out, they will have cost nearly £2,000 million. Apart from their indiscriminate application, the measurable help that food subsidies have brought to the poorer families and pensioners is less than those affected have had to pay in extra indirect taxation to finance them. So much for helping those who are less able to fight inflation! So much for the extravagance and futility of the Government's policy!
  After food subsidies we had Shirley's Shopping Basket Mark 1. That was followed by the now notorious price scheme. That was another abysmal failure. It cost £1 million to publicise and it was followed by a rise in the cost of processed food of about 19 per cent.
  Mr. Ron Thomas: Will the hon. Lady also include in her list the effects of the indefensible common agricultural policy on food prices in Britain?
  Mrs. Oppenheim: We have already had a long session following the statement today by the Minister of Agriculture, Fisheries and Food. Labour Members and the Government in particular knew precisely what those effects would be when they told the country that they had satisfactorily renegotiated the CAP.
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  As a number of hon. Members wish to take part in the debate, I shall continue with what I intended to say. Perhaps the hon. Member for Bristol, North-West (Mr. Thomas) would like to address those remarks to the Secretary of State, who was a supporter of the CAP long before I was.
  As a background to these gimmicks over the past three years we have had the most stringent price and profit control. Yet none of those gimmicks and none of the price and profit controls has prevented inflation from rising by over 72 per cent. in this period—an all-time record. At the same time, investment has been virtually paralysed and unemployment has soared. The Government have the most abysmal record on prices of any Government in the history of this country.
  It is no good trotting out moth-eaten alibis, as the Secretary of State and the Chancellor do so often. This Government are responsible, and no one else. It is no good their bleating on about commodity prices and drought. The same drought and commodity prices have had to be faced by most of our main competitors, who have managed to keep their rates of inflation down to half ours.
  This Government "got it wrong"—to quote the Chancellor—right from the beginning and they have not got it right since. It was their level of public expenditure, their silent acquiesence to wage explosion in 1974, their belated and inadequate attack on inflation in 1975 and their appalling record that led to the fall in the value of the pound last year. It is their fault that the average family now need over £30 a week merely to live. It is their fault that many thousands of people are seeing their savings wiped out by inflation and that living standards are plummeting and have fallen by 3 per cent. in the last three months of last year alone. It is their fault that families and pensioners are now doing without everyday things that they have taken for granted all their lives. It is their fault that the internal purchasing power of the pound fell from 100p in 1974 to 50p today.
  These are the realities that lie behind the Government's record on price inflation. On top of everything else, this Government have continually tried to delude consumers with short-sighted, short-term cosmetics and artificial manipulation, all

  1269
  of which, one by one, have left consumers worse, not better off. Yet once again we are asked to accept that yet another set of convoluted price manipulations will be of value to consumers when all the records show that the most that they can produce is more short-term distortion of prices—a disguise rather than a cure for inflation. At the same time they will undermine investment confidence and possibly cause even higher unemployment.
  All this is being done in the name of the social contract. Draconian measures are being introduced, not because they will help the Government's so-called industrial strategy, not because they will contribute to economic recovery or in the long-term help consumers. It is being done because, having got all the inflation forecasts wrong for the umpteenth time, this Government are confronted by a restless TUC. The Government's case is that the preservation of the social contract is crucial at any price and that wage restraint is vital to economic recovery. But so far this Government have not got a phase 3 pay policy. Under the Bill business and industry are being asked to settle for the cart without even seeing the horse.
  Some Labour hon. Members no doubt will refer to the sacrifices that TUC members have already made in order to remain within the social contract. Although that is undeniably true, and I agree with it, one is entitled to ask about all those people who have been keeping a social contract all their lives, who know of no other way of life and who have never had any of the pay-offs that have been given to those with more power who have merely kept a social contract for the past two years.
  Those are the people who are suffering most today and who have suffered most in the past three years from the worst price inflation that we have ever known. Those people have been let down again and again and will be let down once more by the falsely optimistic forecasts and the consistent failures of the Government. This Government have turned their backs on those people and they will be let down again if they believe any of the guff that the Secretary of State meted out this afternoon. They will not be helped by this measure. It is cruel to suggest that they will.
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  We are not alone in our scepticism of the Bill. When the measure was first announced, there was hardly a word of praise for it, and what little there was was qualified. The Guardian took the view, rather benevolently I thought, that the Government's proposals were designed to get the best of both worlds and looked like getting the worst. The Financial Times, more realistically, described the proposals as
  "The worst of both worlds."
  Another newspaper said of the Bill:
  "The Government Bill announced yesterday can frighten no one except possibly the hapless shopper."
  I heard an hon. Member ask "Which newspaper?" It was the Morning Star. The TUC was equally unimpressed, the CBI was appalled, while consumers were, understandably, plain cynical: they had heard it all before.
  We heard from the right hon. Gentleman this week that the electors of Grimsby supported this Bill. We shall see tomorrow whom they support. It will not be this Bill. It will be the Conservative candidate. Most of them have never even heard of this Bill. Those who have distrust it in the same way that they distrust anything that this Government do. What the right hon. Gentleman has done is to make the fundamental mistake of misunderstanding and miscalculating the common sense of the people.
  Having dealt with the record up to date, I turn to that part of the Bill which deals with the continuation of profit margin controls. In continuing the Price Commission and the Price Code, albeit in a relaxed form, the Secretary of State has opted to perpetuate the vast and costly control of the Price Commission and a great deal of existing bureaucracy for an indefinite period, and he also intends to discriminate differently in his treatment of manufacturers compared with his treatment of distributors.
  On the surface, the abolition of allowable costs will provide considerable relief for manufacturers, though not complete relief, but distributors will be as badly off as ever under the Bill, because they will still be subject to gross profit margin control. On top of this, they will have to absorb the national insurance contributions increases ad infinitum which they were told they would have to absorb only

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  until July. This inevitably will mean labour shedding in a sector of industry which employs a high proportion of school leavers, while administrative burdens in the case of these industries will not have been lightened at all. On top of this, distributors are having to absorb high cost increases in rents, rates and public sector prices.
  So convoluted are some of the information requirements under the present code that one whole distributive industry for which the rules will not be changed has been waiting for six months for the Price Commission to tell it what information is required of it. So far the Price Commission has been unable to provide the information. It does not know, either. There is no evidence that there will be any simplification of these requirements. In any event, percentage profit margins. Whatever they may be, do not render any meaningful measurement of economic viability in any company as long as the return on capital investment throughout British industry is as low on average as below 4 per cent. It is ludicrously low, and there can be no return of confidence while such a situation exists.
  The continuation of the Price Code for an indefinite period indicates a fundamental lack of understanding on the part of the Secretary of State of the extent to which profitability in this country has been eroded over the past three years and of the urgent need to allow a recovery of profit if there is to be a sustained upturn in investment and job creation.
  Companies cannot be made to invest when the right hon. Gentleman or anyone else cracks his whip so long as it does not pay them to do so, and, naturally, there is a direct relationship between lack of investment and jobs. In an article in The Sunday Times on 13th March Malcolm Crawford equated a 1 per cent. increase in profitability with a 2 per cent. fall in unemployment. So the reverse is obviously true.
  Mr. Eric S. Heffer: The hon. Lady talked about the profitability of companies and said that they could not be made to invest unless it was profitable to do so. What precise conclusion does she draw from that? Does she draw the conclusion that we draw—that it is clear that private enterprise has
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  failed and that we need investment policies based upon the NEB, and so on, or is she now saying—I suspect that she is—that there should be totally uninhibited free enterprise, that we should leave it entirely to the market economy and just hope for the best?
  Mrs. Oppenheim: I am saying that there should be flourishing free enterprise and fair competition. That is the only thing that will protect consumers in the long term. Over and over again it has been proved that it is market forces—fair competition, so long as it is fair competition—and not controls that regulate prices most of all.
  The right hon. Gentleman is somewhat ambivalent on this subject. He claims in one breath that this is not the case and in another that it is the purpose of this policy to heighten competition, when in fact it is the purpose of this measure to distort competition heavily. That is what will happen as a result of this Bill. The right hon. Gentleman said that when one sector of industry or when one company had its prices frozen, others would have to keep down prices or they would not be able to compete. That is distorting fair competition.
  I turn now to the second string of the prices policy embodied in the Bill—the Price Commission's new, permanent, sweeping, arbitrary investigatory powers and its equally arbitrary powers to recommend a freeze in prices. Quite apart from one's objections to the dictatorial principles involved, I understand that there was even greater objection to the grand inquisitor in the person of the Secretary of State himself, so much so that he had to give an undertaking during his consultation period that it would be not he but the Price Commission who instigated investigations in the first place.
  That was not surprising, because there was hardly a newspaper reviewing the policy when it was first introduced that did not express some reservation about such powers in the right hon. Gentleman's hands, since he had shown himself to be meddlesome and unprincipled. No doubt under his regime we should have by-election freezes, General Election standstills and levels of profitability deter mined by value judgments. Above all, since his bread prices debacle, Mr.8½p,

  1273
  as he has become known, is no longer trusted.
  In the unlikely event that any hon. Member thinks that these criticisms of the Secretary of State originate with me, let me hasten to assure the House that it was not I who first suggested that one ought not to buy second-hand Yorkshire pudding from the right hon. Gentleman or who suggested that he was unprincipled or untrustworthy. I have before me a whole dossier of newspaper comments to this effect of which I propose to read only three. Colin Welch, in the Daily Telegraph of 14th March, wrote of the right hon. Gentleman:
  "He is also said to be a man without any principles whatever"
  William Phillips, in the Investors Chronicle on 25th February, wrote:
  "Mr. Hattersley's brief record bodes worse for business than his philosophical taste for a mixed economy."
  In the Commons sketch in the Daily Telegraph of 15th March, Frank John son wrote:
  "We can repose in this man our complete distrust, knowing that he will not let us down."
  It is very good that the right hon. Gentleman will not be instigating investigations. But he will be instigating examinations and he will be freezing prices, so that, quite apart from any reservations we might have or which might have been engendered by his past record, we are entitled to ask what are his qualifications for the massive intervention in business and industry that he is proposing.
  Apart from the fact that the right hon. Gentleman has an economics degree, which some people would rate as an automatic disqualification, he has no personal experience of business or industry. No doubt to cover his lack of expertise and knowledge and in the total absence of any relevant criteria in the Bill, he has dredged up a whole lot of trendy, ambiguous phraseology.
  We hear that profits are to be socially accountable, whatever that means. Like the social contract, "social accountability" is not even an original phrase. It was used first by Lyndon Johnson several years ago, and it did not refer to profits. But, apparently, social accepta-
  1274
  bility is to be the yardstick by which the arbitrary sweeping investigators of the Price Commission are to judge profits, and, according to the right hon. Gentleman at his Press conference on 22nd February, socially accountable profits are those which are used for investment and job creation only and if they are not used for this purpose they will become what he describes as "socially unacceptable".
  The result is that companies are no longer to be allowed to make investment decisions that only their directors have the authority to make under the Companies Act. Many important factors in investment decisions are to be ignored. For example, many companies need to reserve resources from profitability for future research and development—not when the Price Commission thinks so, but as and when they think so. There is no provision for such eventualities in the blancmange-like criteria that we find in Clause 2.
  The new elite are to be companies that invest in the way that the right hon. Gentleman wants them to invest. That form of investment does not need to be in the interests of shareholders. It does not necessarily need to be in the interests of the work force or the interests of consumers. Worst of all, the sole arbiters of this new so-called social accountability are to be none other than the Secretary of State and the Price Commission.
  There was no doubt what was in the right hon. Gentleman's mind when he spoke to an interviewer from the News of the World on 27th February with engaging frankness and some relish. He said:
  "I can encourage profits when they are being used for the right purposes. And I can hold prices down when profits are not being used properly."
  No doubt the right hon. Gentleman sees himself as the new Judge Jefferies of prices and profits. The mind boggles at the thought of any member of this Government making investment decisions as any such decisions they have made have usually ended up in disaster. The likely scenario that springs to mind immediately is one in which the whole of British industry becomes one great disaster area.
  One of the Bill's features that has alarmed business and industry most of all, and to which the right hon. Gentleman

  1275
  has paid little attention, is the total lack of any rational or specific criteria in the Bill in respect of the instigation of investigations, or in respect of price freezes themselves. Such criteria as there are in the Bill are so hopelessly ambiguous that they provide no guidelines. As a result, there will be uncertainty, business confidence will be undermined, and for some companies forward planning will be impossible.
  To make matters worse, there is to be no explanation and no justification of the Price Commission's reasoning for initiating an investigation in the first place. It seems that the investigations will automatically assume all the characteristics of the Star Chamber. Nor are the investigations to be anything in the way of occasional—
  Mr. John Mendelson: It seems from the hon. Lady's references that she had a bad history tutor.
  Mrs. Oppenheim: Judge Jefferies presided over the Bloody Assize and not the Star Chamber. If the hon. Gentleman prefers the reference to be to the Bloody Assize, I shall use that term.
  The investigations are not to be occasional. The right hon. Gentleman has confirmed that there are to be about 50 investigations a year. That is nearly one investigation a week. The outcome is not to be subject to any appeals procedure. Decisions to recommend a freeze of prices can be made by a minority of the Price Commission itself.
  The only criteria in the Bill to which the Commission has to refer are that which seem relevant to the Commission. In practice, the Commission does not need to refer to any criteria. The length of the freeze, which is up to a year, could bankrupt some companies in the not-too-distant future if not immediately. Worst of all will be the sense of frustration and unfairness that will pervade business and industry, because everything has to be done in secret. A number of technical questions are still unanswered. What is to happen—
  Mr. Hattersley: I told my hon. Friend the Minister of State that when the hon. Lady made her tenth error of fact, I would correct her. She has made that error. Investigations will not be held in secrecy. The Bill provides that if com-
  1276
  panies so require it, publicity will be available to them. I shall not correct any more of the hon. Lady's errors.
  Mrs. Oppenheim: The right hon. Gentleman should listen before he seeks to correct me. I did not say "held in secrecy". I said that the Commission is not required to justify or explain why it instigated an investigation. That is much more important and a matter that has bothered industry and business a great deal.
  In Clause 4 provision is made for the Price Commission to award interim increases during an investigation and for the Secretary of State to discontinue an investigation, presumably if profit mar gins have fallen below safeguard levels. But if that happens, or if margins fall anywhere near safeguard levels, what on earth is the Commission's purpose in investigating them in the first place? How much is an investigation going to cost a company by the time it is finished? There are those questions and many more on the subject of safeguards that are likely to remain unanswered until the regulations are made, and by then it will be much too late for many companies.
  Profit levels have been so depressed over the past three years that the only outcome of the sort of pricing freeze envisaged in the Bill is that the goods will disappear from the shelves to be replaced by more expensive imports or, in the case of multi-product companies, the price freeze in the instance of one item will be off-loaded on to another item, or at the end of the freeze there will be a fresh surge of even higher prices, as happened at the end of the price check scheme. Once again we see that the only outcome of the type of freeze envisaged in the Bill will be a temporary distortion of the price of some items for which a realistic price will have to be paid in the end.
  Not today but in previous statements the right hon. Gentleman has strongly implied that the Price Commission's investigations in the past have not been sufficient and that the Price Code itself has not prevented unjustified profits. He feels that such profits will be prevented under the new policy. Perhaps he will tell us this afternoon in how many of the investigations undertaken by the Commission in the past excessive profits have been

  1277
  reported and how many and which cases would he have liked further intervention on his part. If he cannot answer those questions, he has no raison d'être for his policy.
  Mr. Hattersley: Television rentals, for example.
  Mrs. Oppenheim: What would the right hon. Gentleman have liked to do by way of further intervention? There was an independent voluntary agreement in respect of television rentals. He did not need the Bill for that purpose. It is insulting to the House for him to continue a sotto voce conversation with the right hon. Gentleman when he is seated.
  Mrs. Wise: Is the hon. Lady in favour of any price control? If so, what kind and when?
  Mrs. Oppenheim: As I am dealing with the Bill, I tell the hon. Lady that I am not in favour of the price controls in the Bill. She can have that clearly and unequivocally.
  I move on to a matter that may interest those on the Labour Benches particularly. Labour Members can always vote for the Opposition amendment if they are not satisfied with the Bill. That would seem to be the case from the amendment that has been tabled by some Labour Members.
  There is one new point in the Bill that is of particular interest and that I draw to the attention of the House. I congratulate the right hon. Gentleman, because for the first time the cost-effective use of resources and efficiency will be considered in relation to profits and prices. The consumer interest could be very well served if that criterion is the subject of searching investigations in the nationalised industries. The Price Commission could happily engage in nothing else for some considerable time to come, but we know that that will not be the case as it is clear that the Government already do not mind breaking the Price Code, as they have in the case of the nationalised industries with the acquiescence of the Secretary of State for Prices and Consumer Affairs. Gas prices have been increased. We know that the Government have one prices policy for the public sector and another policy for the private sector.
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  The irony of it is that it is not the private sector but the public sector that has been the main source of price inflation over the past three years. The right hon. Gentleman could well busy himself with the public sector, but no doubt he will be charging round the country with the Price Commission to meddle in the affairs of the private sector. He will be telling companies how to run their own businesses. Already the whole climate of business and industrial opinion has been soured by the crippling amount of anti-business legislation that we have had from this Government. This is another anti-business measure that completely fails to understand the rôle of profits not only in companies but in the context of the whole economy.
  It is profits that help a company to become more efficient and to charge lower prices. It is the profits of the private sector that pay for health, education and welfare. It is profits not losses that are socially acceptable.
  But, because this Government, having failed hopelessly to overcome inflation themselves—[Laughter.] The right hon. Gentleman laughs, but that is why the people of Grimsby will not vote for the Labour candidate tomorrow. The Government, having failed hopelessly to overcome inflation themselves, are now trying to make a scapegoat of business and industry, and in doing so they will destroy the seed corn of future prosperity It is no longer a question of killing the goose that lays the golden egg—that gosling could never even get hatched in the economic climate of today.
  Quite apart from our dislike of some of the proposals in the Bill, we are also very anxious about the cost. It will cost at least £5 million a year for the administration of the Price Commission alone. The cost to industry itself will be incalculable, and therefore the cost to the consumers in the higher prices which will result. On top of that, the Government are proposing to spend another £3½ million a year on price information—the same price comparison schemes described in The Guardian on 1st January following a survey as unwanted by two-thirds of the housewives and as the biggest flop of all time.
  How can the Government justify expenditure of this nature at a time when

  1279
  there is having to be so much painful retrenchment in other areas of Government spending? For this sum they could have provided 625 extra beds a year for the National Health Service, or 600 additional kidney machines a year. So much for the social accountability of this Government! But, then, the Labour Party did not invent compassion, or caring, or the concept of social obligation. Nor has it the monopoly in them. They are concepts and ideals upheld sincerely on both sides of the House. The difference is that Conservative Governments pay more than lip-service to them.
  The Government's record on prices has disqualified them from any claim of compassion or caring, because they have inflicted more hardship on the people in this respect than any Government before them. There cannot be an hon. Member on either side of the House who is not desperately concerned and appalled by what inflation has done to the people over the past three years. This Bill is not going, to overcome inflation, but it has the potential to do very great damage.
  Surely the Labour Party realises that the people are sick and tired of deception, subterfuge and cosmetic gimmickry. What they want more than anything else and are yearning for is a return to long term price stability, and the only way they can have that is by good economic management and by allowing the private sector, free enterprise and fair competition to flourish.
  But consumers need to be assured that the competition is going to be fair. Tinkering about on the edge of such policies is a dangerous diversion. The Government are once again introducing a political measure that will lead to the decline of many companies and the failure of some.
  Above all, it will not help consumers. Its main purpose is the delusion of consumers and the temporary placation of the TUC, and I shall not hesitate to ask my right hon. and hon. Friends to vote for our amendment declining to give the Bill a Second Reading.
  Several Hon. Members rose—
  Mrs. Wise: On a point of order, Mr. Deputy Speaker. The second amendment on the Order Paper is not being called, and I ask for your help in doing some-
  1280
  thing about a situation in which the House behaves as though there can be only two points of view on any question—that of the Government and that of the official Opposition.
  Mr. Deputy Speaker (Mr. Oscar Murton): The question of which amendments are selected is entirely a matter for Mr. Speaker's discretion.
  5.45 p.m.
  Mr. Sydney Tierney: I cannot follow my right hon. Friend the Secretary of State as enthusiastically as perhaps he would like, but I certainly do not want to follow the line of total destructiveness adopted by the hon. Member for Gloucester (Mrs. Oppenheim). With the present powers expiring on 31st July, I am pleased that my right hon. Friend has taken the opportunity to review the prices situation. We had a consultative document, and now we have the Bill.
  Anyone with knowledge of price fixing manipulations understands the enormous difficulties of any Minister in reviewing adequately and investigating fully price movements. Consequently, there are many different and opposing attitudes as to what should be done. Irrespective of the election tomorrow, I welcome the greater powers contained in this Bill, for there is dire need to do something about the prices situation. I ask my right hon. Friend not to hesitate to make these powers more stringent if he sees the necessity to do so.
  No doubt my right hon. Friend has been advised from many quarters to do nothing, while from others he will have been advised to leave it all to competitive forces to find their own price levels. Perhaps the latter course would be acceptable if competitive forces were always duly competitive. But the reality is that there are manufacturing and service industries which have freed themselves from genuine competition by buying it off. Many of them are big and powerful enough to wield great influence in price-level fixing in their own industries. It is natural that they should want to reward themselves in a generous way for the efficiency and first-class service that they claim to supply.
  I am glad to note that one of the aims of the Bill is to make competition as

  1281
  effective as possible. Because of inflation generally—the hitherto unknown high level of increases in food prices in particular—there has been an understandable and justifiable outcry for a general price freeze. If it were conceivably possible to have one, it would be a tremendous contribution to solving the inflation problem, but it cannot be done for a number of practical reasons, mainly factors outside our control, such as world prices and our commitment to the Common Market, which the Conservative Party ordained for us. I believe that subsidies on basic food commodities should have been continued for some time to come in order to alleviate some of the worst effects of spiralling prices.
  Because the impression is given that some price rises are inevitable, or are accepted as such, and housewives no longer gasp in amazement when something goes up by more than 3 per cent. or 4 per cent., there is need to be more vigilant than ever. We can all remember the shock of housewives at much smaller price increases only a few years ago. When price increases are inevitable because of higher world raw material prices, for example, particularly when they are presented in overall percentage terms, it is not always possible to assess exactly the total increases on, say, a manufactured commodity weighing only seven or eight ounces. When this difficulty arises, there is often a "rounding off" exercise, and we know from experience that this usually means a rounding up of the price, a decrease in the weight, or both. This is an area in which there should be special vigilance. I am pleased to note there are powers in the Bill to ensure that cost increases are not always regarded as inevitable and that the sort of circumstances that I have decribed will be investigated by the Commission.
  My right hon. Friend the Secretary of State found that the discount buying and price-cutting operations of the bread and flour industry were not all they appeared, but I congratulate him on making his own investigation. He at least brought the operations into the public gaze and threw some light on systems that confuse and bewilder shoppers every day.
  The most difficult thing to establish nowadays is the true retail price of many
  1282
  commodities. Housewives come across contradictions and inconsistencies over a vast range and increasing number of commodities every day. The price paid sometimes depends on whether the shopper lives in the country or in a town and often bears no relation to the cost of preparation or distribution, which have been the usual criteria for prices. Often prices depend on the size of the store and goods are cheaper in larger garages and discount warehouses than in corner shops and other small outlets. Much depends on the bulk-buying capacity of an outlet and its ability to translate its discounts into so-called cut prices.
  I note that the Bill includes powers for dealing with the practice of recommended prices if necessary. I hope that my right hon. Friend will look at particular sections of retailing and wholesaling, especially the electrical goods discount houses, which operate a system of recommended price lists. We have them thrust before us day after day and their lists need investigation. In the durables industry, as opposed to the food industry, there are often three, four or even five recommended price lists, with their use depending on whether the goods are being sold in a sale, a mini-sale, or in some other way.
  A report in The Guardian yesterday said that, following the recent price increases, most grades of petrol would go up by 2·1p, excluding VAT, but that the rounded-off increase, including VAT, was likely to be 2·5p a gallon on pump prices. This rounding up of increases plus VAT is another problem that should be investigated.
  The report said that some garages would charge 95p per gallon on top-grade petrol, but the Motor Agents' Association stated that, through discounting, fierce retail competition would keep the national average price down to 86p a gallon. This is the sort of world we are living in when we try to determine the true retail price for a gallon of petrol. Is it 86p or 95p?
  Does this 10 per cent. variation in price tell us anything about the retail price of a gallon of petrol? Is not such a wide variation a licence for inefficient petrol stations to flourish alongside efficient ones? What does it do for the stability of the price of petrol and its true cost?

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  It certainly gives rise to misleading advertisements, such as those that offer cut prices, petrol with stamps, and other gimmicks to get the motorist on to the fore court. I have raised this matter with my right hon. Friend on a number of occasions. When the motorist leaves the forecourt, he is not able in most instances to establish the true retail price per gallon that he has paid. The last thing displayed at any petrol station is the true retail price of petrol. I know that there has been a voluntary experiment by the Department and those involved to work out a system to reduce these gimmicks and misleading advertisements. I wish that my right hon. Friend had said something about them, and I hope that he will take action if the situation does not improve.
  Clause 16 extends the power of the Secretary of State over the display of retail prices. I have written to him about the practice of petrol being advertised at 80·9p or 85·9p a gallon. I understand that this is a contravention of the Trade Descriptions Act and it is a mystery to me how one can buy four gallons of petrol at 80·9p a gallon and have it properly recorded and receive one's change in legal tender. The only way that this can be done properly is for a motorist to buy 10 gallons of petrol, and who buys 10 gallons on every trip to the gar age? I implore my right hon. Friend to look at this aspect again and to act upon it.
  Clause 18 gives permanent statutory backing to they payment of grants to local authorities for the carrying out of price surveys and the provision of advice to consumers. I know that many authorities provide excellent consumer protection services, and I should like to mention in particular the West Midlands Consumer Protection Service. It has done an excellent job, particularly in its surveys of petrol and pub prices. Such surveys have been conducted in other parts of the country and much has been done by these organisations to aid the consumer. I welcome the further assistance that the Bill provides for them.
  The White Paper says that the Price Commission will be required to follow criteria to encourage initiative and growth and to ensure adequate reward to efficient manufacturers, distributors and providers of services. My right hon. Friend referred to these points in his
  1284
  speech. I wish to comment on what is said about ensuring adequate rewards for those in these industries, particularly those who provide services in the distributive and retail trades.
  Employers in these trades will claim that they have been faced with an erosion of profitability since the introduction of price controls in 1972. I leave them to pursue that case and I am sure that they will pursue it well. The majority of employers, particularly those involved with food, will say with some justification that the cheap food policies of successive Governments have kept their margins narrow and created difficulties for the trade.
  Workers will say that these narrow margins have made jobs in food and distributive trades, along with some other industries, low-paid occupations. It ought to be said—and if they had the opportunity, they would say it—that the retail and distributive trades ought to be recognised as a more important industry within the British economy. Because this industry has suffered in the way in which it has over the years, it seems to have lost any chance in that respect.
  The Union of Shop, Distributive and Allied Workers, in which I have to state an interest, would accept that Government policy on prices has always affected its ability to negotiate higher wage rates over the past 30 years—not merely over the past six years, but for 30 years. While any action proposed by the Bill to control prices is to be welcomed, it must be made clear that profits in the distributive and retail trades must be sufficient to enable shop and distributive workers to take full advantage of a more flexible pay policy, if that is what we are to have.
  Many workers in these industries really believe that their low wages are the only subsidy left on food. Their wages must not be held at a low percentage figure in order to maintain Government policy, whichever Government that might be. I hope that my right hon. Friend will agree that the Price Commission will ensure that the wage element of cost increases found in any investigation will be passed on to where it belongs, and that workers in the trades that I have mentioned will maintain parity with workers generally in British industry.
  In the interests of work people generally, I say that I welcome the introduction

  1285
  of the principle in the Bill that all nationalised industries will be liable to investigation by the Price Commission in the same manner as private enterprise. I am glad that this is contained in the Bill. I say that because it has been our experience—this must be said—that wage increases must not be held at a relatively low percentage figure and outstripped by much higher percentage increases in public sector prices, such as those for fuel, light, gas, transport and so on. This certainly places a great burden on people in low-paid industries, such as those I have mentioned.
  There is much in the Bill that I can support. I hope that my right hon. Friend will be able to strengthen and improve other measures should the need arise. Any legislation that seeks to protect consumers from unfair price increases should have the support of the whole House.
  6.2 p.m.
  Mr. Michael Neubert: Although the Secretary of State did not present the Bill as such, as we all know to our cost, the Price Commission Bill is another chapter in the sorry story of the present Government's social contract. With record inflation, with record unemployment, with us up to our eyes in foreign debt and with the pound depreciated to new low levels, it has been a poor bargain by any standards, certainly for the country as a whole and, above all, for the trade unionists, those in whose name this compact has been agreed.
  They have seen both their job security and their standard of living seriously undermined during the term of the social contract, and yet this was the means by which the Labour Government secured office, precariously, on two occasions in 1974, and it has been the basis of their policy ever since. It is small wonder that trade unionists and their wives are leaving the Labour ranks in droves day by day and at each by-election: they have had enough of it.
  But, of course, this so-called social contract has an inherent flaw that belies its name. The original author of the phrase "social contract", Jean-Jacques Rousseau, wrote in 1762:
  "Society should be based on a social contract between equal and free individuals so
  1286
  that power cannot be exercised by one individual or group over another."
  It is clear from the dominance of the trade unions in this particular compact between themselves and a Labour Government just how that original concept has been corrupted, and clear how the phrase "social contract" is nothing but a couple of empty words.
  If one wants to see just exactly what price is exacted from the Government with each successive stage of this social contract, now entering its third year, one has only to look at the reported utterances of trade union leaders. I intend to do so, but I shall not cite the evidence of the ever-popular General Secretary of the Transport and General Workers' Union. As he will be retiring in March 1978, we have to learn to live without Jack Jones—so sooner rather than later. I shall take as an example the chairman of the TUC's Economic Committee, Lord Allen, the General Secretary of USDAW, the union to which the hon. Member for Birmingham, Yardley (Mr. Tierney) belongs.
  This is Lord Allen's price for a continuation of pay restraint for a third year. He would like to see a permanent system of selective price controls, abolition of all or most income tax for more of the lowest paid, reintroduction of subsidies on basic foods, reform of the EEC's common agricultural policy, provision of another £1,000 million a year for the National Enterprise Board, a Government veto on redundancies while grant-aid schemes are expanded, and finally, stopping the City hindering the pound from rising on foreign exchanges.
  Without commentary from me, that Cook's tour around Cloud-cuckoo-land is ample evidence enough of the total unreality of the world in which trade union leaders live. For a Government of this country to allow their policy to be determined by such advisers is a grave abandonment of responsibility.
  My hon. Friend the Member for Gloucester (Mrs. Oppenheim) has outlined the main principles of our opposition to the Bill. The first is the permanence of powers of price control without any corresponding assurance of permanent pay restraint. Then there is the arbitrary character that is likely to be the nature of the investigations that are conducted under these powers. Then

  1287
  there is the lack of defined safeguards for profitability and, therefore, for jobs in industry and the waste of scarce resources of skill and enterprise in dealing with the bureaucratic requirements of the Price Code and the investigations.
  In the time available to me I wish to draw attention to four issues that give rise to considerable disquiet. First, we have to reckon with the vagueness of the Bill on criteria. It is not that the Bill lacks criteria, but they are not defined in any terms that can give assurances to industry, and certainly not the kind of assurances that industrialists need in order to plan ahead and, in particular, to embark on major investment projects.
  In the absence of any close precise definitions in the Bill, we have to anticipate how the Bill might be implemented, and in particular we must test it by experience. Here I shall take the classic case, as it is now appearing to be, of television rental charges. Here we have an industry that had offered a service to the British people that generally met with great satisfaction and was the subject of very little complaint. The major complaints made against it, which undoubtedly gave rise to the investigation, arose as a result of the Government themselves increasing VAT on such charges—something that affected established contracts. It was as a result of that uproar, as well as the odd com plaint here or there about the level of charges, that the Government were prompted to get up an inquiry by the Price Commission.
  The Price Commission reported very fairly with the statement that, summing it up, in 1976 the specialist providers of television sets on rental made a profit of 15·6 per cent. If it is to be held that 15·6 per cent. net profit on an enterprise which has, altogether, invested more than £1,000 million in television sets is excessive, what hope does industry in this country have? What chance is there of there being sufficient profits to generate new jobs?
  It cannot be entirely irrelevant that this is a sector in which we have had calls to place controls on the importation of television sets. It might have stimulated the home market if such an attitude had not been displayed. Therefore, on that one test, industry has cause for apprehension.
  1288
  Then there is the question—already referred to in passing by my hon. Friend—of what happens when the Government seek to secure their economic strategy at the expense of the consumer. The increase of 10 per cent. in the price of gas at the beginning of this month, which has yet to come through to consumers' bills—the Government have yet to meet the full hostility of public reaction to this measure—was prompted not by any wish of the British Gas Corporation itself and not by allowable costs coming within the Price Code's requirements, but solely because the Government needed to secure a reduction in their borrowing requirement which they could have secured by reducing their own profligate spending. Instead they chose to take it out of the consumer, they chose to put a quite arbitrary tax on the captive consumers of gas. They will live to rue that day. With those two examples, industry and the consumer can have little confidence in the exercise of these powers by either the Commission or, subsequently, the Minister.
  There is a question of the inequity of wage drift. It is known that the whole principle of Government policy is that we have exchanged compulsory price control for voluntary pay restraint. Anybody can see the injustice in that, and injustice is at the rotten core of Government policy, which is why they are failing to secure support.
  Taking this at face value, we see that the Chancellor proposed last year a 3 per cent. increase in wages. Eventually a 4½ per cent. increase was negotiated—an increase of 50 per cent. over what the Chancellor had suggested. We now see the wage drift in the fact that earnings this year are running at 9 per cent., which is double what was agreed and three times the original amount proposed by the Chancellor. Just imagine if prices had been allowed to drift in that way! Prices have been rigidly controlled, and in some cases they have not been allowed to go up to their market level. Yet, despite this, the wage drift has been allowed to carry on.
  We all know how this has worked. We know that a lot of overtime is worked and people slow down on jobs. Wage restraint is not controlled at all, while prices are controlled by the Price Commission. These devious measures

  1289
  giving rise to the wage drift cause considerable anxiety all round.
  Mr. Ron Thomas: When the hon. Member talks about the earnings drift, does he agree that a good deal of this is due to increased productivity and bonus systems, which reduce unit costs and therefore should contribute to reducing prices?
  Mr. Neubert: I would not entirely agree with the hon. Member. In 1976 the major increase was in overtime earnings and there have been no striking productivity successes that would persuade me to alter my view. This is the way that people are getting around the wage restraint policy.
  There is a very important omission from this Bill. Although the Secretary of State claims that he can deal with all prices, he makes two significant exceptions—the prices of coal and steel, which are governed by the Treaty of Paris. I do not blame the Minister for this, naturally, but he cannot come to the House and blandly assure consumers that all prices, bar a few, can be controlled by his policy when the very important items of coal and steel have to be omitted.
  These commodities are important, not just as raw materials, but in the way in which they translate into retail costs in lines of particular interest to the politically sensitive Price Commission, because they will affect the consumer at his most tender point. The cost of coal has been increased already and will be again. Talking of productivity, the miners have failed the nation by producing 6 million tons less last year than in the previous year. As a result, the consumer has to pay higher prices not just for coal, but for electricity.
  Last week we saw what happened when Government and trade union interests took priority over those of the consumer. We had the ordering of a power station in advance, which will require a surcharge, estimated by the Eastern Electricity Board at £9 a month for the average consumer. This surcharge will be imposed in order to sustain the power plant industry and support the miners. When it comes to the crunch, it is the consumer who goes to the wall, despite all the brave words of the Secretary of State.
  Mr. David Penhaligon: Does not the hon. Member want the power plant industry to survive? Does he want it to go to the wall?
  Mr. Neubert: Of course I want the industry to thrive, but not at the expense of the consumer. These arrangements were not reached after consultations with the consumers. The Secretary of State has not asked the consumers whether they want to pay higher prices in order to sustain the industry and support the miners. The consumers are simply sent their bills and they have to like them or lump them.
  The Minister of State, Department of Prices and Consumer Protection (Mr. John Fraser): How many private industrialists consult consumers before investment?
  Mr. Neubert: Industrialists, by day-to-day work, consult consumers by way of market research. Unless they are sure that there will be public support for the end-product, they would be foolish to invest and would not embark on it in the first place. We are expected to accept higher electricity prices when it suits the Government, and there is no protection for the consumer at all.
  In the case of steel, this translates into tinplate, which went up by 25 per cent. last year, and has doubled in price during the past few years. This means that perhaps as much as one quarter of the cost of a canned product is the cost of the tinplate. Because British Steel suffers from chronic overmanning and restrictive labour practices in sustaining jobs which do not really exist, the consumer has to foot the bill. This is particularly bad because canned products are usually the preferred choice of poorer consumers, and therefore they will be the hardest hit.
  If we are to judge by the statements made by the Secretary of State, he has already prejudged the issue of investigations in that he has stated that he expects there will be 40 inquiries a year—40 specific inquiries and 10 sectors of industry. Yet he claims that the Price Commission can only move on a case on its merits. It can only take the initiative when it is presented with an abuse. But the Secretary of State has already planned a regular routine of such investigations, without considering the merits at all.

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  He has to keep all those people at the Price Commission thoroughly employed year by year. It would be a serious matter if these people were made redundant, and therefore he must rely on making available to them a sufficient number of cases. He could not respond when provoked by my hon. Friend on 40 cases of abuse or 10 sectors which would need full-scale treatment. He has anticipated the ability to keep a smoke screen of activity going throughout the year to cover up his inability to influence prices because of other decisions taken by the Cabinet of which he is a member.
  It is easy to promote such investigations. Recently the Secretary of State revealed in a Written Answer that funeral charges had been investigated because of complaints from seven hon. Members and 10 members of the public, a total of 17. The inquiry into intruder alarms—burglar alarms to most of us—was promoted by a dozen people. We have a situation in which half the membership of the General Management Committee of the Birmingham, Sparkbrook Constituency Labour Party, or indeed, the entire membership of the Parliamentary Liberal Party could trigger off a time-wasting, expensive and ultimately damaging investigation into prices charged or into a particular sector of industry.
  For these reasons we regret the introduction of this Bill. Not everything in it is bad. One particular merit is that perhaps it can create an educative rôle for the Price Commission in promoting greater public understanding of prices and the importance of profits in lubricating our economic engine.
  "There must be a danger in interfering too much with a highly competitive mechanism which is clearly working to the consumers' benefit."
  Those are not my words; nor are they the words of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph); nor even of the Nobel prize winner Milton Friedman. They came from a speech given last month by Mr. Arthur Sugden, Chief Executive Officer of the Co-operative Wholesale Society. The Secretary of State would do well to take account of the bluff, sound sense in those words before he gives more encouragement to the further dangerous delusions that there are benefits for the consumer in bureaucratic price control.
  6.30 p.m.
  Mr. Ron Thomas: One thing is clear above all else if we look at the amendment on the Order Paper in the name of myself and others of my hon. Friends. From what the hon. Member for Gloucester (Mrs. Oppenheim) and the hon. Member for Romford (Mr. Neubert) said, it is quite clear that those who have signed the amendment to which I have just referred are at one end of the spectrum and the Tories, it seems, are at the other end of the spectrum.
  The hon. Lady described the measures that we have before us as Draconian, and so on. When I hear a comment of that sort I say to myself "If only this were the case." Indeed, the same comment applies to some of the statements made by the hon. Member for Romford about these measures.
  I was waiting for the hon. Lady to tell us what is the Tory Party policy on prices. All we had was that she was completely opposed to any kind of control over prices, believing that with free competition prices would be stabilised. I can only suppose that she imagines that prices are fixed through some kind of auction in that very pleasant city of Gloucester on a Sunday afternoon, as they may have been 300 or 400 years ago. She surely knows that even since the writings of Adam Smith we have not had free com petition in this country. We have about 100 monopolies or quasi-monopolies and oligopolies which absolutely control the British economy in regard to capital investment, export prices and all the rest of it.
  It will not do, in my judgment, simply to sit back and say that all we need is competition, because we have not got it. We are controlled by 100 quasi-monopolies or oligopolies, and we are certainly not likely to have competition under any kind of legislation from the Tories.
  Then we are told by the hon. Lady and by the hon. Gentleman that if we can only get profits up we shall get capital investment. Yet if we look at the period of office of the last Tory Government, we find that British capitalists were given everything they asked for. They had the profits. They had large tax handouts. They had the Industrial Relations Act which clobbered the trade unions. They had a wages freeze and

  1293
  goodness knows what else. But we did not get the capital investment. Capital investment in Britain has continued to decline since 1970, if not before, so it has nothing to do with those factors.
  There are many definitions of the cause of inflation. The hon. Lady picked a couple of simple axioms—public expenditure and the wages explosion. I do not accept that there has been a wages explosion during the period of office of this Government. What I say is that the trade unions have been trying to restore living standards which had been cut by the previous Tory Government, under a pay policy which I assume the hon. Lady supported. I do not know whether she did. But it was a Tory Government pay policy and we should all be familiar with it.
  The idea seems to be put about—some of the leaders of my own party are putting it about as well—that there is what is called confetti money, as though all a trade union negotiator has to do is to go to management and say that he wants another 50 per cent. and that he is then given the money in sacks. That is not the way in which things are done. A wage claim is put in on the basis of what has happened in the past. A union putting in a wage claim has to justify his statement that prices have gone up and that the members' standard of living has been eroded.
  We are told that wage increases and bargains are creating inflation. How are trade unions creating inflation?
  I noticed, when the hon. Lady was talking about this perfect laissez-faire competition that we lost way back in the nineteenth century—if we ever had it—that she quietly slipped in the comment that there ought to be wage restraint. No price control, but there has to be wage restraint. Why must there be control over the price of labour? All the shop steward is doing is selling the labour power of the group he represents. This is presumably why the Tories say they want wage restrain but no price controls.
  Those who suggest that there is some simple explanation for the levels of inflation in Britain are doing a disservice to all of us. There is a whole list of things which are involved, and in my judgment it is completely wrong to put
  1294
  wage and salary increases in the forefront or the centre of the stage. We need to look at the continual lack of capital investment in British industry over a long period of time and at the spiral of contraction and decline which, of course, affects prices.
  I agree that devaluation comes into it, but I put the main blame on membership of the Common Market. That is one of the major reasons for our present position. We have moved from a position of surplus of about £20 million or 30 million with the EEC countries into a position of deficit of nearly £2,500 million. That is bound to have a considerable impact on the value of the pound. There are also the penal rates of interest and the low level of demand and, therefore, of effective utilisation of capacity, which have certainly pushed up prices considerably.
  We have a level of unemployment of 1½ million, a lack of effective demand, and cuts in living standards. If consumer demand were increased, many firms could meet it, because some of them are running at only 30 or 40 per cent. capacity. If demand were increased they would be able to cut their unit costs of production and should be able to cut prices quite considerably.
  Both Front Benches talk about inflation and unemployment. They say that wage claims lead to inflation and that inflation ipso facto leads to unemployment. Countries such as West Germany may have low levels of inflation, but that is after at least a million unemployed migrant workers have been sent back to Turkey and other countries. They may have a low level of inflation but they have not cured their unemployment. Policies of the kind advocated by the hon. Lady—a free market and non interference by the Government—do not work in terms of employment. This applies to West Germany and to other European countries.
  Mrs. Sally Oppenheim: Will the hon. Gentleman tell the House exactly what has worked under this Government over the last three years?
  Mr. Thomas: It would be very difficult for me to make a list of the things that this Government have done which have not had the tacit support of the hon.

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  Lady's party. We have had a lot of shadow boxing and all the rest of it, but when the Shadow Chancellor of the Exchequer in terms of public expenditure, can say to the Chancellor of the Exchequer that it took him three bites of the cherry to do what the Conservatives advised him to do in one bite, if that is not collusion on the part of Front Benches, I do not know what is.
  The failures of this Government are not because they have even begun to think of bringing in Socialist measures. They are because the Government have followed the same orthodox Treasury policies as have had the support of the Tories, despite all the shadow boxing, the threats to vote against the Government, and so on.
  Having said that, I feel rather sorry for my right hon. Friend the Secretary of State for Prices and Consumer Protection, because a few months ago he had to stand up and defend the Code. He did it in a gentlemanly fashion, but he was having to stand up to critics such as myself and to say that this Code was quite right, even though we said that it meant that capital investment relief was going up from 20 to 35 per cent. and on to 50 per cent., and questioned whether this would mean increased investment overseas. We also felt that there would be all kinds of leaks from the system. Under that Code, companies could move from a basis of historic cost to 30 per cent. of current costs of their assets.
  I can remember mentioning that a company such as ICI, with assets of over £1,000 million, was allowed this 30 per cent. increase in depreciation alongside 35 per cent. as investment allowances, and that with this companies could also disregard at the same time 70 per cent. of stock appreciation. Under that Code, if a company's unit costs fell because of increased demand, it could even pocket half of that.
  I see from the consultative document that we are now told that many companies came to regard what was laid down in the Code as an entitlement to price increases. That is exactly what we were saying at the time. I feel sorry for my right hon. Friend because he was then having to tell us that the Price Code was first-rate. There were those of us who pointed out that it meant that £1,000 million would be going from the
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  consumers and working people to the corporate sector and that this switch meant a cut in living standards. My right hon. Friend then said that it would be 1 per cent. on the retail price index. I do not know whether he has any further information on that, but I suspect that the figure is nearer 3 per cent., 4 per cent. or even 5 per cent.
  As I said at the time, we then had to ask ourselves whether the Government had any effective price controls. Many of us believe that up to now they do not. We also said that it was one thing to have a code but another to have all kinds of gateways in it which employers could go through and make it ineffective. We then have to ask our selves whether the proposals in the Bill are any better.
  Frankly, looking at the philosophy contained in Clause 2, I do not think that the proposals will help any more than the previous situation. Apart from a brief, rather vague and nebulous statement about making "adequate profits" it talks about
  "the desirability of encouraging reductions in costs by improvements in the use of resources".
  It also wants
  "to defray the cost of the capital (including compensation for the risk involved in producing the profits)".
  I should like to know exactly what that means. I should have thought that one could put any sum of money on it.
  I do not think that there is much difference between the philosophy in Clause 2 and what we had in the previous code. Again, we have
  "the need to take account of changes in prices in determining the value of asset".
  This presumably comes from the Sandilands Report. I see that my right hon. Friend is nodding in agreement. It is a dangerous philosophy that companies should be allowed to charge enough to replace all their assets over a period at current prices. Does that mean that the Stock Exchange at last is completely redundant? Does it mean that the whole idea that the capitalist system works on capitalists borrowing money to buy new assets is dead? The consumer has to pay for them, it seems. The next step is that the consumer ought to own those industries, because he has to pay for

  1297
  them. I do not see any justification for his not owning them.
  The raison d'etre of the capitalist system was all the business about some people saving and entrepreneurs borrowing those savings to expand their businesses either through the Stock Exchange or something else. All that presumably is dead. Some of us have known for a long time that it was dying, but it is now dead. The consumers will have to pay for all the new capital assets, but they will not get the capital appreciation that comes from them.
  My right hon. Friend spoke about dividend control. I am convinced that most companies, by scrip issues and other dodges, completely get round any kind of dividend control that we have ever attempted. I could go on about that, but I wish to make two other points.
  Clause 2(2)(h) talks about
  "the need to avoid detriment, from restraints on prices and charges, to the United Kingdom's balance of payments".
  I wonder whether that includes the companies which have completely refused to cut their prices and expand demand for British exports, which they could have done under devaluation. The argument for devaluation—if there is one—is that it makes one's goods cheaper overseas and one can sell more. Most companies have not reduced their prices overseas because they prefer to have higher profits and are not concerned with Britain's balance of payments or our economic survival. They are concerned with one thing only, and that is more profits. They have not cut their prices and we have not had the increased demand for our exports which we should have liked to see.
  Mention has been made of the veto, a question to which my right hon. Friend has already responded. I would remind him of what the TUC said in its Economic Review. It does not see why the Government should not have kept the Code and tightened it and had additional powers of investigation. That seems to be the TUC's line.
  I should like to return to Clause 17. I do not accept that the amendment of the Remuneration, Charges and Grants Act should be in this legislation. This Bill is concerned with prices. On the previous occasion when we had the
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  opportunity of debating this matter, many of us, rightly or wrongly, kept the House well into the early hours. Many of us were opposed to much of the policy laid down in that Act. I still insist that the clause suggests that we shall have some kind of restraint or control over wage and salary increases right through to 1980. I am completely opposed to that, as I was completely opposed, rightly or wrongly, to wage restraint and wage control policies, whether Tory or Labour, which we have had in the past. I appeal to my right hon. Friend to give us an opportunity to debate Clause 17 in much more detail. The only way is for him to make arrangements for us to debate it in a Committee of the whole House.
  Finally, I ask my right hon. Friend to comment on Clause 22(2), which says:
  "The Secretary of State may by order—
  (a) provide that such of the provisions of this Act as are specified in the order shall not apply in such cases as are so specified"
  Many of us feel that that gives wide powers. We are not satisfied that the Commission has any teeth. In any case, it seems to me that a Tory Secretary of State for Prices would soon withdraw such teeth as it had, under that clause, if not under others.
  6.37 p.m.
  Mr. Joseph Godber: I apologise to the House and to you, Mr. Speaker, for being unable to be present at the start of the debate, with the result that I did not hear the speeches of the Secretary of State or my hon. Friend the Member for Gloucester (Mrs. Oppenheim). I am grateful for the opportunity to take part in this debate.
  I must first declare an interest, in that I am a director of one or two companies engaged in manufacturing and distribution. I also have people in my constituency involved in both these activities. I should like to speak mainly in my capacity as Chairman of the Retail Consortium and to address my remarks specifically to the terms, as I see them, affecting retailers under the Secretary of State's proposals.
  The Bill has to be seen against our economic and political background. It is relevant to remind the House that the present Prime Minister, when he took over his office, talked a good deal about the need for profits and investment. I was

  1299
  present at the CBI dinner last year and can well remember the fine speech he made there. I am still waiting for him to implement a number of the matters he mentioned in his speech. I applauded that speech and I applauded the intention. We should remember that the Prime Minister stressed the need for profit and investment.
  It is equally true to say that some limited move was made for the distributor last year, with certain amendments in the Price Code introduced by the right hon. Gentleman's predecessor. In particular, the amendment on stock appreciation was of help to retailers, and the raising of the threshold was a direct help to small retailers. I express thanks for these improvements.
  Originally it was expected that when the existing powers ran out at the end of this July there would be a substantial further relaxation. Whatever our views about the present Government, we have to recognise the economic limitations on them. There is the continuing rise in prices, which is accentuated by the fall in the value of the pound. The hon. Member for Bristol, North-West (Mr. Thomas) equated this specifically with the Common Market. I cannot agree with him. My view is that it is equated more with the degree of Government over spending over the past three years, though I do not expect the hon. Gentleman to agree. There are also the IMF restrictions imposed on the Government last December and the need for a further stage of wage restraint.
  These are limitations on anyone who holds the office of Secretary of State. Therefore, strongly though the retailers were opposed to any continuation of price control, we were very ready to talk with the Secretary of State and the Government on the sort of measures they considered necessary for the immediate future.
  In passing, I would make clear that our opposition to continued control does not arise from any desire to exploit the consumer. Retailing is an intensely competitive business, and the consumer's safeguard lies in the competition provided by the vast diversity of retail firms, both large and small. That is a fact, however much the hon. Member for Bristol, North-West repudiates the degree of competition. In retailing there is genuine
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  competition, which the hon. Gentleman can see in the High Streets in his own constituency and elsewhere. There is nothing phoney about it.
  The opposition of retailers rests on the physical burden of complying with all the paraphernalia of price controls, the limitations imposed on our freedom of action, and the artificial restrictions of continued gross and net margin control. We under stood that at first it was the Government's intention to provide for only a modified form of control in the new powers which they were proposing to introduce from the beginning of August. It was only when we were told of the contents of the consultative document published in February that we realised we were to be confronted not with less control but with more.
  That is the basis of my opposition to the Bill. Not only were we confronted with new powers for both the Secretary of State and the Price Commission, but we learnt that we were to be faced with a continuation of the Price Code and a continuation for retailers of the full extent of both gross and net margin control. That is an extension of control that can not be justified. The distributive industry is now so hamstrung that we shall see a further reduction of investment in it and a further drop in employment. Confidence has been shaken, and the effects of that have yet to be seen.
  In fairness to the Secretary of State I must acknowledge that between the publication of the consultative document and the publication of the Bill he has moved to meet us on one aspect. I understand that he has now firmly committed himself by saying that the continuation of gross and net margin control will take place only if the Government publish the terms of a national wage limitation agreement before 1st July. I understand also that the Price Code is to be carried on yearly, with a maximum of three years. This is an improvement, which I acknowledge.
  In a labour-intensive industry such as retailing, it would be unthinkable to attempt to continue rigid price control when wages have been let go free. I am glad that the Secretary of State has acknowledged that. I do not think that hon. Members fully realise the extent to which the previous stages of wage control under the so-called social contract had an effect on retailing. The first stage,

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  which imposed a £6-a-week limit, may have been a real restraint on some sections of industry, but in retailing it gave a new ceiling of opportunity to workers. I am not saying that they did not need it and did not deserve it. Retailing has traditionally been a low-wage industry, and I am merely stating the facts. The point is that a £6 pay limit was an additional burden on the cost of distribution at a time when in some other industries there was a degree of restraint.
  The Bill spells out the new controls to be imposed on industry and distribution, but till we see the new Price Code for which authority is provided in Clause 15 we shall not know the whole story. I should like to comment briefly on both what is known, in the Bill, and what is vet to come, in the Price Code.
  Clause 1 and Schedule 1 deal with the membership of the Commission and empower it to work in groups. That is a change from the working of the present Commission, which has worked as one body. I do not object to the principle, but I would comment that the Secretary of State has rightly laid emphasis on the need for someone with an intimate knowledge of industry to be chairman of the Commission, but if it is to work in groups he will need a number of deputy chairmen with similar and equal experience. I hope that the Minister of State will address himself to that point when he winds up the debate. We should very much welcome reassurance on it.
  I must deplore the proposal to delete the Minister of Agriculture, Fisheries and Food from the provisions of Clause 1. Perhaps I have a personal feeling, be cause I was the Minister of Agriculture, Fisheries and Food originally involved when the first Price Code was introduced. I am sure that the Secretary of State is aware that food is the most sensitive of all items, and it seems to me, with my knowledge of the matter, that it would be sensible to maintain the Minister of Agriculture, Fisheries and Food and his Ministry closely tied in with these provisions. There is an enormous amount of expertise in the Ministry, and the Ministry has a direct responsibility. It would be a great pity to leave him out. I hope that in Committee the Secretary of State will reconsider this aspect.
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  The criteria in Clause 2 mark a new departure in legislation on price control. What I am saying does not necessarily mean that it is a bad departure, but there is always a danger in including such criteria, because one is liable to appear to exclude by implication any aspects which are not specifically stated. I have heard this argument many times in the House over a number of years, and I think that it is relevant here.
  In any case, some of the criteria will benefit from rewording, and I hope that the Minister will be flexible in Committee. Some of the criteria can be said to be helpful, some to be ambiguous, and some to be definitely unhelpful. I hope that the matter will be closely examined.
  The new powers in Clauses 4 to 14 worry me very much. It would have been one thing if they had been introduced as a substitute for existing controls, but it is another to have them as additions. That is excessive. Retailers strongly object to the power to investigate individual companies. The existing gross and net margin control gives a complete check on a retailer's prices and profits, and he can be ordered to reduce both. Therefore, what possible justification can there be for this additional power? I ask the Government to reconsider the matter. I have already stressed it to the Secretary of State, but I repeat it because it is a fundamental objection that we have. With the continuation of gross and net margin control there is total control over the way in which a retailer runs his business. To give additional powers to investigate a specific company, powers related to distribution and not to manufacture, because in manufacture the powers will be related to specific products, is unnecessary and discriminatory. I very much hope that the Government will have second thoughts about this.
  This brings me to Clause 15, which brings in the new Price Code. We do not know what will be in the code, nor will the House be able to amend it when it is brought before us. Therefore, if we have any comments we must make them now.
  I have already represented strongly to the Secretary of State the need to restore the cut of 10 per cent. in the gross

  1303
  margin imposed by the Government in 1974. Even if that cut was justified when it was introduced, it cannot be so now, when costs have risen so astronomically. The effect of a cut, as I have reminded Ministers more than once, is to force all retailers to operate under the safeguard clause, under which, as long as the net margin is below 80 per cent. of reference levels, the gross mar gin can rise to 110 per cent. As the Price Commission reports show very clearly, gross margins since the end of 1973 have ranged on average between 91 and 97 per cent. Thus, as they are over 90 per cent., this means that all those affected have to apply the safe guard clause. They cannot maintain gross margins without reference to the safeguard clause. That automatically limits their net margin to 80 per cent. It must be wrong for a safeguard clause that was introduced to deal with special problems to have to be applied to the whole range of retailing.
  I beg the Secretary of State to recognise the need—at the very minimum—to restore the 10 per cent. cut on gross margins and thus allow all retailers to operate on 100 per cent. of both their gross and net margins. It is time now to operate on the same basis as when the Price Code was first introduced. Retailers have had large increases in costs since then and it seems that there is an entitlement to greater gross mar gins. The restoration of the 10 per cent. cut would be a recognition of the fairness of that.
  I also urge the Secretary of State to raise the thresholds for category 2 and category 3 retailers. Consumers are not helped by keeping these low limits. I acknowledge that something was done for the lowest category last year, but it would be sensible and administratively wise to make some further amendments here.
  The present system must impose an enormous burden on the Secretary of State's own Department and on the Price Commission, when they now have to deal with this mass of small retailers under the code. There is very seldom a need to intervene. Competition is so keen that there is no need to intervene. But this mass of documentation still has to be provided. It would be sensible to raise the thresholds very substantially here.
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  There is a great deal more that I would like to say, but it would be unfair to detain the House for long because I know how many hon. Members wish to speak. I conclude by drawing the attention of the House to the Government's own figures showing the true state of retailing in this country at present. The Department of Industry's figures snow that capital investment by retailers has been dropping steadily since 1973. Even inflation has not been able to mask this, for the actual figures have dropped.
  When one takes account of the effect of inflation, the story is a sorry one indeed. The amount of capital investment by retailers at present cannot be much more than half, by value, what it was in 1973. The Bill will cause it to drop still further. This is a point on which the Secretary of State, if he studies the Department of Industry's figures, will see the strength of the arguments that I have advanced.
  We know that the Government wish to maintain employment, and they are aware that retailing provides a large outlet for school leavers. Therefore they should be anxious to maintain employment in retailing, but over the last two years the number of jobs lost in retailing has approached 50,000. This will continue under these proposals. There will be no alternative. It will be a question not of dismissing those who are already employed but of not employing school leavers when they become available, and that will be a great pity.
  The trend in bankruptcies is depressingly and significantly upwards, according to the Government's own figures. There can be no doubt in the minds of those who study these matters that I am not overstating my case. That is the last thing I wish to do. Of course, there are many successful firms of retailers, both large and small, in this country, but there is no easy time for retailers today.
  The consumer is not helped by an excessive control of retailing. Efficiency brought about by competition is the key note of the High Street, and, whatever the political reasons, there is no economic justification for the additional powers over retailers outlined in the Bill. That is why I am opposed to the Bill.
  It is not that I do not recognise some need for continuing control as long as

  1305
  we need continuing controls on wages, but the Bill takes it further at a time when there is no guarantee that the same thing will be applied to the salary and wage structure. The Secretary of State is going too far in his effort to placate the TUC, which is what this Bill seems designed to do. These measures will not help the housewife but could damage her long-term interests. When there is a fall in investment and employment, the standards which retailers are able to give the housewife are bound to suffer.
  I must express my opposition to the Bill and I hope that the Secretary of State, when the Bill is in Committee, will take note of the points that I have outlined.
  6.57 p.m.
  Mr. David Penhaligon: After listening to the Opposition spokesman today, the hon. Lady the Member for Gloucester (Mrs. Oppenheim), I came to the conclusion that there was little or no hope for this country. Her implication was clear. Anybody who heard her speech who is not used to listening to speeches in the House would have come away with the impression that we could scrap all income and price controls, and inflation would disappear at the drop of a hat.
  One could argue for a very long time about the causes of our economic difficulties, but at least one of the problems is that the Labour Party made promises in February and October 1974 which even some Labour Members now admit it had no hope of keeping. It made those promises on the principle of what I call "lollipop democracy" under which a party says, "If we offer one more lick to the electorate than the other parties they will vote for us".
  The electorate, or at least some of them, now know that these offers could not have been met. What disturbs me and makes me wonder whether there is any hope for the economic and political future of this country is that the Opposition are now doing precisely the same. They are offering two extra licks in addition to the one extra lick which was offered before but which was never delivered.
  If the House takes off all controls on prices and incomes we shall certainly have 50 per cent. inflation within 12
  1306
  months The House must decide whether we really want to stop inflation. I must admit that inflation has not done me much harm. I own a portion of my house and most of that was bought for me by inflation. For a large part of the British population, inflation at a reasonable rate over a significant period does very little harm. People can always change their job and avoid wage controls if they have any real skill to offer.
  The House must be honest and tell the people that the only way to stop inflation is to reduce living standards. My party was foolish enough to tell this to people in October 1974 and perhaps that is why there are only 13 Liberal Members. The only way to stop inflation is to reduce the living standards of the people of this country, and that is the process that we are going through now.
  If there is inflation at the rate of 30 per cent. until I retire, the average wage in this country will then be about £40,000 a week. A loaf of bread will be about £150. The house I was talking about, if I still own it, will be worth just over £1 million. But I cannot believe that our democracy could possibly survive the strains that that sort of inflation would create.
  The choice before the House is this. One way or another we shall have to reduce the living standards of the people in this country, and there are two ways of approaching that. We can leave it to market forces, which is what appears to be the Conservative approach. We can, alternatively, leave it to the Government to find the courage to try to share the pain—and that is all one can call it—throughout the electorate.
  I prefer the latter approach, and that is one of the reasons I shall certainly support the Bill tonight. It is a major fallacy to believe that we can abandon all the controls on our economy without the situation getting even worse, and I am not claiming that it is particularly good now.
  For my party one of the least appealing aspects of the Bill is that the powers which exist to investigate monopolies are divided up between three bodies. It appears that the Price Commission, the Office of Fair Trading and the Monopolies Commission will all have the power to investigate monopolies. I believe that the mono-

  1307
  poly laws in this country are too weak anyway. I wish that some of the trips that our politicians make to the United States were to study the anti-trust laws there. There is a great deal to be said for them.
  I cannot believe that we shall make much progress in tackling some of the monopolies or near-monopolies that exist in this country when the powers that exist are divided between the three bodies. I cannot believe that those bodies will have any real effect. Many of us know that in food retailing any further amalgamations will destroy in many towns the competition which now exists. I think particularly of constituencies such as my own which have small populations and where there is precious little competition anyway.
  I believe that the Bill should last for one year only, and I shall support amendments to that effect if I am able to do so. I am not convinced that the case has been made for a full three-year term. I am not saying that we would not sup port the renewal of the powers after a year.
  I welcome the powers of investigation. Without such powers this Bill would probably be as big a waste of time as some of the Conservatives are saying it will be anyway. The powers of investigation are a necessity, but there is a problem about their arbitrary nature. No criteria appear to be laid down in the Bill. If the Commission enjoys the confidence of the people involved that will probably help a great deal, but I shall certainly consider amendments setting out some reasonable criteria if I am appointed to the Committee.
  There are one or two companies in this country—and one has only to visit one's bank to see what I mean—which are embarrassed by the profits that they have made in the past few years. Those companies have spent the profits on anything they could think of in an attempt to get rid of them.
  Another point worth considering is the three-month freeze on prices. I can conceive at least of the possibility of that being unfair to an individual company. What happens if at the end of the three months the company is found "not guilty"—because that is how the public will see the investigation? Will the Government send that company a cheque to cover the money it would have raised if
  1308
  the price increase had been allowed? They would not get my support if they sought to do so. Three months is too long a period, and the Government should make efforts to reduce it to a more sensible term. There is a reasonable argument for fining a company afterwards if found guilty, but I support the idea of a price freeze in some circumstances.
  We shall be supporting the Bill on Second Reading. I am staggered at the Conservative Party trying to build up a pretence that we can scrap all controls and that the problem will then go away.
  I should like to point out to some Labour Members that investment is a long-term problem. I ask them to question whether investment in industry which is operating at vastly below its capacity will make any contribution to our economy. It could be investment in unemployment, not in new opportunities.
  This country desperately needs investment, but in the technologies of the 1970s. I do not know how we get that under way, but the root cause of our un employment is that the technologies developed in the late 1960s and the 1970s have totally passed this country by. I think, for example, of electronics in which we are pathetically weak.
  I wish now to pursue a pet idea which I have taken up with various people. I can see nothing basically wrong with it. It is to force the manufacturers of packaged food articles to stamp the recommended price on them when they are made. I am not arguing for resale price maintenance, but I am aware of the confusion that exists in the shops in my constituency, and no doubt elsewhere, where the recommended price is not marked on the goods.
  The shop puts the price on the article and advertises any reduction. However if one adds the charged price to the special offer reduction one rarely finds two shops in a town which agree on the original price. The confusion that that causes is understandable, and it makes price control more difficult because the consumer cannot discover the original recommended price. Manufacturers of packaged food items have no difficulty printing on the packages when the items are made. They can print "3p off" in bold lettering, so why can they not be forced to stamp on the packet the recommended price at the time of manufacture?
  7.8 p.m.
  Dr. Oonagh McDonald: The Bill seems to me to be part of a continuing process to weaken price control. The important stage in this development occurred last August when a code was introduced making rules concerning allowable costs, rules which were so complex that they made the Price Commission's task very difficult.
  The effects of those provisions under the code were to allow profit margins to double over their previous level, and now the allowable cost system has been dropped altogether. It is true that, especialliy after August 1976, that system was not particularly effective, but at least it had possibilities, and, used properly, those possibilities could have been advantageous to the consumer.
  That system had the potential of development as part of a scheme for increased planning of the economy. The Government should refuse to allow price increases unless the company concerned had reached a planning agreement. The scheme should be used as a sanction to enforce better planning by the company and therefore of the economy overall.
  The dropping of the allowable cost provisions is a further step away from th original idea of a Price Commission and price control. In August 1973 the Price Commission referred to the perfectly legitimate feeling that the consumer ought not to be expected to pay each and every increase in costs. Now we are moving rapidly into the position in which companies are protected from the effect of inflation while consumers are not. It is not surprising that when we go back to our constituencies we find that great pressure is put upon wages and salaries and that people are becoming increasingly restive as they face one price increase after another.
  Further, in this Bill the Government have made no change to investment incentives. These incentives, rather than being handed out in a general way, should be allowed to those companies who can actually give evidence of new productive investment which is to the advantage of both employee and consumer alike. The general handout in the hope that the companies will improve their investments is not on any more. Let us have the
  1310
  evidence of better investment and then let us give out the concessions.
  These are the things that are left out of the Bill, but there is one element to which I particularly wish to refer, and which I ask the Minister to confirm. I refer to a report in The Times of 28th February 1977. It says:
  "It is unfortunate that Mr. Hattersley has accepted that his new Commission will not be able to investigate price rises imposed by the EEC farm policy."
  It will not, for example, be able to investigate a protective tax put upon tinned fruit where that same fruit is not produced anywhere in the Common Market. I should like the Minister to confirm the truth of this report and to add an explanation because, after all, as we have heard today already, the increase in food prices from which we suffer by our membership of the EEC is one of the great sources of difficulties for the consumers and shoppers week by week.
  Now I want to look at the Price Code. There is control on prices through net profit margins. The reference levels were increased by various concessions in 1976 to such an extent that the Price Commission has said that the figures for periods after 1st August 1976 cannot be taken as indicating a true level of profit.
  The difference made by the introduction of the Price Code last year was quite dramatic. In the last quarter, under the old system, the net profit margins were about 59 per cent. of reference levels for category one firms. The first results published under the 1976 code dropped to 39 per cent. As it is—with the net profits margins at present allowed in the Price Commission Bill—these have to reach 100 per cent. before resulting in action to reduce prices. In other words, the effect on profit margin control is, on average, likely to be nil. It is likely to be totally ineffective for many years to come.
  There is no evidence that this average means that some companies will be effected by such control. In the first three-month period after the start of the 1976 code not one of the 2,447 reporting units providing goods and services extended its net profit margins to the reference level. The net profit margins may be only one third of the allowable reference levels.

  1311
  Profits could at least double before these levels acted as a restraint.
  We could, of course, be wrong about that and if we are, the Minister should say so. We should like an estimate of the current relationship between net profit margins and the Price Code's profit margin reference level. Then we shall have some idea how effective that part will be.
  Mr. Giles Shaw: In dealing with profit margins under the code, I trust that the hon. Member for Thurrock (Dr. McDonald) will recall that these are based upon the years 1969–72 which formed the base reference level. Does the hon. Lady say that, if profit margins creep back up to that level, that is too great a rate of profit? Would she like to see a return to the rate of unemployment that existed in 1969–72?
  Dr. McDonald: I want to deal with the general question of profits and investment later in my speech, so perhaps that would be the most effective way of replying to that point.
  I have talked so far about what is in the Bill but I also want to talk about the investigatory powers. There are some improvements here. Power is given to the Secretary of State to enforce recommendations made by the Price Commission following a report on a sector of industry, but there is room for further improvement here. It would be better still to single out monopolies in the investigatory powers allowed. There are, of course, powers for the Secretary of State to which reference has already been made. He can veto an investigation and set it aside.
  I wonder where the pressure will come from that will be imposed on the Secretary of State to stop an investigation taking place and when he will think that it would be reasonable for him to do so. Pressure could take different forms. It could come from the company concerned or from companies involved in a sectoral investigation. There may be some kind of outcry to which the Secretary of State might feel that he must give way.
  We can get some idea of the relevance and of the number of investigations—the total will be about 50, which is probably all that the Commission can handle—if we
  1312
  take for an example the third quarter of 1976. There were 1,900 notifications of price increases received in that quarter by the Price Commission and that, of course, was for only three months out of a whole year. We can thus obtain some idea of the small number of price increases that could theoretically be investigated by the Price Commission.
  The point is that the Bill is a weak Bill. This is a Weak method, of attempting to control prices and it does not get to the nub of the problem. It is the wrong approach altogether. There is only one way in which we can begin to deal with the whole problem of prices, bearing in mind that 100 manufacturing companies control at least 50 per cent. of production, 50 per cent. of exports and so on. The only way in which we can talk about prices in a sensible and effective way is in the context of a planning agreement where the trade unions are involved in the negotiations. We can then begin to talk about the pricing policy of the company, not only as regards one particular product but regarding a whole range of products. We can look at such aspects as cross-subsidisation of products and so on.
  That is the context in which we can begin to talk about a proper pricing policy and that is also the context in which we should talk about profits. We hear a lot, especially from hon. Members opposite, about profits, how they are necessary for investment and that, any way, profits have been declining, that they are only paper profits and that one must not be misled by the figures that one reads in the Financial Times that show massive percentage increases. We are told that we must not be misled because these are paper profits and they are not real.
  Then one looks at the increases in dividends and sees that the Treasury allowed 315 dividend increases above 10 per cent. in one year—and that is 315 out of 3,000 companies—and one begins to wonder what shareholders are getting. Are they just receiving bits of confetti through their letterboxes and bank accounts or real money that they can go out and spend? Incidentally, the allowance of 315 increases in the last year sounds a much more flexible policy than last year's pay policy. I did not notice any groups of workers receiving increases

  1313
  above the pay norm—and certainly not 315 groups.
  Mr. Michael Shersby: Will the hon. Lady tell the House how pensions funds are supposed to protect the interests of their pensioners if dividends are not at a satisfactory level?
  Dr. McDonald: I am sure that pensioners who support the Opposition will be pleased with the crocodile tears that he weeps on their behalf.
  Mr. Shersby: Answer the hon. Member.
  Dr. McDonald: It is an irrelevancy. Those who have shares and receive dividends should remain within the norm just the same as anybody else. They should not receive increases above the 10 per cent. level which is supposed to be part of the restrictions on prices and dividends as well as on pay. If companies cannot get round dividend restraint by applying to the Treasury for an increase and having it allowed, they can do what GEC does—that is, invent or make use of capital notes and in that way hand out £178 million to their shareholders. That means an increase not only in income for them but in assets, since capital notes can be used in that way. It is not enough to sit back and allow profits to rise and to have inadequate controls on dividends.
  Again, we come back to the notion of planning agreements in which profits, prices, manpower policy, and so on, are all agreed between the Government and the trade unions. In that way the Government are able to ensure that investment takes place in this country, as opposed to abroad, and provides jobs for people in those parts of the country where the Government feel that it is necessary for jobs to be provided. That is the only way to ensure that investment takes place in a rational manner to the benefit of the whole country rather than to the benefit of a few people who can find ways to get round the restrictions imposed on working-class people who meanwhile have to suffer the effects of continually rising prices to increase profits, and dividend pay-outs to shareholders.
  We shall pass the Bill, but the Government should look again at their industrial and economic strategy and see that
  1314
  price control makes sense only as part of a proper industrial and economic strategy.
  7.23 p.m.
  Mr. Kenneth Baker: The hon. Member for Thurrock (Dr. McDonald) has argued eloquently and well for a different economic policy. I am sure that she would not expect me or the Government to agree with her views.
  Those who have attended many debates on prices and incomes legislation could not help but feel, as the debate progressed, that we have been here many times before. When the Bill was introduced by the Secretary of State I recalled a similar incident in a similar debate in 1968 when he was then a junior Minister. At that time he was trying to sell to the House and the country phase 3 of the previous Labour Government's prices and incomes policy, which was a wage and price norm. The speech made by the Minister today could have been made in 1968, and the speech that he made then was made today because he said that he had all the weapons in the wage and price norm which would lead to the promised land if only we could grit our teeth and follow him like the boy carrying the banner to Excelsior. But the right hon. Gentleman has hopelessly exaggerated his powers.
  Mr. Skinner: My right hon. Friend has always done that.
  Mr. Baker: The hon. Member for Bolsover (Mr. Skinner) is right. It has become fashionable to say that the Chancellor of the Exchequer is a political thug because he throws his weight around. The Chancellor does that because he has the powers. The Secretary of State for Prices and Consumer Protection would like to be cast in the same mould. I believe that he would like to speak boldly and to throw his weight around. The trouble is that he is a sort of rubber thug, because the weapons at his disposal, as he knows, are not really strong enough.
  Mr. Skinner: That sounds dirty.
  Mr. Baker: The hon. Member for Bolsover must take that up with his right hon. Friend.
  Mr. Skinner: The hon. Gentleman said it, not I. I am not here to worry about him.
  Mr. Baker: Anybody who speaks in a debate on a Prices Bill should not exaggerate the claimed effectiveness of any prices policy. The powers that a Minister can exercise over prices, as has been proved over the last eight years, are marginal.
  There are two factors which blow up and through any price code or prices policy. The first is a falling exchange rate, which is the result in turn of economic mismanagement, and that must destroy any kind of price control operated through a price code or prices policy. The second factor which destroys a price code is rising raw material costs which are outside our national control. There should be greater frankness on both sides about what any Minister can do about prices under any Administration.
  There must also be a greater aware ness of the damage that can be done by advocating extremely simple solutions. It has recently been advocated that the way to combat inflation is to have a price freeze. There is now a growing awareness throughout the country, and certainly throughout the trade union movement, that a total price freeze leads to less investment and more unemployment. They are the two ends of the same see-saw. I see indications of dissent on the Government Benches, but that is what the Secretary of State said only a week ago. The right hon. Gentleman rejected the idea of a complete price freeze, and I was supporting what he said.
  Mr. Martin Flannery: The hon. Gentleman always does.
  Mr. Baker: I do not entirely agree with everything said by the Secretary of State. However, I do not want to exacerbate feelings between Labour Members below the Gangway and their own Front Bench. That is not my way.
  Mr. Skinner: The hon. Gentleman would have a job to do that.
  Mr. Baker: There are good and bad elements in the Bill. One good element is that the Bill marks the abandonment of the attempt to conrol prices through costs. The 1973 Price Code, introduced by the Conservative Government, was the first attempt to try to control prices
  1316
  through the level of costs in a particular company or industry. The Government have now accepted that that is not feasible. Indeed, they accept that costs establish only the level below which goods cannot be sold without a company going bankrupt. Rarely do they establish the level at which goods are sold. The prices at which goods are sold are determined by many factors other than the cost of the raw materials and labour which go into their production. The costs path which has been followed since 1973 has now been abandoned. Indeed, I suspect that the Government will fairly soon abandon the margin controls which have been retained in Clauses 9 and 15.
  Competition is by far the most effective way of keeping prices down. For example, last weekend I bought a pair of garden shears. The choice open to the consumer who wishes to purchase an item of that kind is enormous. He can go to Woolworth's, a garden shop or centre, or an ironmonger's shop. The fact that there is such a wide choice available means that prices for such implements are kept down. That is true of a great variety of goods in this country.
  Mrs. Wise: I am sure that the hon. Gentleman will agree that he does not buy garden shears very often, but, presumably, he often buys detergents and soaps. Is he aware that only two companies control 90 per cent. of the market in detergents and soaps, and that that can be matched for most of the other key foods and household goods?
  Mr. Baker: I hope that the hon. Lady will contain herself, because I intend to speak about imperfect competition and the monopoly situation of certain companies.
  A further example, if an example is needed, can be taken from the work of the Price Commission. It recently produced a report on the charges of under takers. An investigation into those charges was not necessary, because if one picks up any local paper on any day one will find advertisements from between 12 and 20 different undertakers. After a lengthy study the Commission decided that competition worked in that industry and that the consumers—or the relatives of the consumers—benefited considerably.

  1317
  The market is the best determinant of price for the majority of goods and services. Indeed, the Government accept that, because Clause 2 of the Bill states
  "the need to safeguard the interests of users of goods and services by promoting competition between suppliers".
  That is one of the criteria that the Government are putting into their legislation. They are providing it not only for the private sector but for the public sector, and I welcome that.
  The clause goes on to state that where competition is restricted or cannot be promoted, the Commission must restrict prices and charges.
  That brings me to monopolies and imperfect competition. The rôle of the Commission is investigatory, like that of the Monopolies Commission. It is regulatory like the Monopolies Commission. It has powers of investigation as does the Monopolies Commission. The Price Commission should become part of the Monopolies Commission, and the Office of Fair Trading should also be combined with that larger Commission, because the function of those three bodies is to deal with similar matters. They must deal with the state of imperfect competition when the market is dominated by a handful of companies. The duty of the Office of Fair Trading is to control and examine services and the level of services. I hope that those three bodies will be combined and that the Price Commission will become part of the Monopolies Commission.
  The Price Commission should be concerned with the 200 or 300 companies which represent between 60 per cent. and 70 per cent. of the country's output. It should not concern itself with the manufacturers of goods such as garden shears and services such as those provided by undertakers.
  I accept that there is a rôle for the Price Commission in examining the trading activities and prices of certain companies. The Monopolies Commission has that power. If the Price Commission operated with the Monopolies Commission it would operate in an established framework which has clear criteria.
  Many hon. Members have said that the criteria in the Bill for investigating price increases are too lax. I agree with
  1318
  that. One of the criteria to be established is that the Price Commission should not have the power to investigate a price increase in a company unless that company has 5 per cent. of the market. I advocate clearer criteria.
  I was a little puzzled by the statement of the Secretary of State. He said that under existing proposals in the Bill the Price Commission would probably undertake about 40 inquiries a year. That means that perhaps 10 inquiries would be conducted at any time—20 at the most. There will be 660 civil servants to conduct those inquiries. I cannot believe that each inquiry will require the services of 60 civil servants. Even if one doubles the workload, 30 civil servants conducting one inquiry would be over-manning on a massive scale. I hope that in Committee we shall be able to probe the Secretary of State further on that issue. The present staffing of the Price Commission cannot measure up to the responsibilities imposed by the Bill.
  Mrs. Sally Oppenheim: Is my hon. Friend aware that under the Swiss system of price controls there have been about 30,000 investigations in three years and that only 15 people were employed in the price investigation department?
  Mr. Baker: All I can say is that they must have been very busy. Earlier today I saw nine civil servants in the Official Box. I do not remember seeing so many there before. They cannot have been very busy preparing their investigations.
  The criteria in Clause 2 are broad and vague. Many of them are value judgments. They deal with promotion, competition, fair trading and defraying the cost of capital. Will current cost accounting be taken into account? That is critical to the rate of return on investment.
  Clause 9, which has the engaging title of "Safeguard for basic profits"—what ever that means—is also vague. There are to be safeguards which companies under investigation will enjoy if basic profits—whatever they may be—are eroded. The method of investigation during an inquiry is totally unsatisfactory. If a company puts up a price, whether it informs the Price Commission or not, it is subject to investigation. If that happens a price freeze is imposed for four or five months. That is unacceptable. The 660

  1319.
  civil servants involved could decide within a week or two. Why should a price freeze hang over a company for that length of time? I suspect that it is likely that when a company informs the Price Commission of a 10 per cent. increase there will be a haggle about whether there should be an inquiry. I suspect that there will be an inquiry if the price increase is 10 per cent. but not if it is 5 per cent. That would mean that we should need fewer civil servants.
  I turn to the nature of the Price Commission. Under the Bill it is given an almost semi-judicial rôle. It must examine the case for price increases in an impartial manner in the same way that the Monopolies Commission must decide whether a monopoly exists. The Price Commission should not, therefore, be representative of interests such as the CBI, the TUC or the consumer. Members of the CBI and the TUC and consumers should be price commissioners but they should not be on the Commission because of their representational rôle. I understand that the Secretary of State is looking for a Price Commissioner who is representative of the ordinary consumer. I should like to know when he finds that paragon. Will it be male or female, elderly or young? I hope that it will be one of my constituents. It shows the absurdity of trying to find representatives for bodies of this kind who allegedly represent interests. The function of the Price Commission is judicial, and its members should be detached from interests and should examine each case impartially.
  I have suggested that the Price Com mission, the Monopolies Commission and the Office of Fair Trading should be rolled into one body. I also believe that the Department of the Secretary of State, which has himself and two other Ministers, should be absorbed into the Department of Trade. I do not see any justification for a separate Department. It falls naturally into the regulatory functions of the Department of Trade, and it is an anomaly that we have a small separate Department dealing with this range of consumer affairs. The amalgamation would be much more sensible.
  It would mean that the right hon. Gentleman would cease to be a Cabinet Minister in his present function. I am sure that he would be a Cabinet Minister in some other function. I do not want
  1320
  to dash the cup entirely from his lips, but the function of his Department would be better conducted under the Department of Trade. By that recommendation, Idash the cup from the lips of my hon. Friend the Member for Gloucester (Mrs. Oppenheim). But I am sure that another function in the Shadow Cabinet would be found for her.
  In approaching the area of price control, the Government do no service to the awareness of the public if they exaggerate the force that they have. Unless we go in for the sort of economic philosophy and system for which the hon. Member for Thurrock argued, which is a totally planned and controlled economy from be ginning to end, any system of price and wage control that we have must be flexible and must accept the realities of life. The Secretary of State cannot control the weather and cannot control forces which are outside his control. It would be better if we as politicians recognised these facts and said frankly that, what ever powers the Minister has under this Bill, we cannot reduce or control prices. Certainly the right hon. Gentleman can not. There is a rôle for him. It is to investigate companies which act in an area of imperfect competition. That is a legitimate rôle for Government. Be yond that, I thing that there is a very limited rôle for any Government.
  Several Hon. Members rose—
  Mr. Deputy Speaker (Mr. Bryant God-man Irvine): I ought to advise the House that the Front Bench speeches are expected to start at 9.15. Nine hon. Members are still trying to catch my eye. A little mathematics will indicate 10 minutes for each of them if everyone is to be happy.
  7.43 p.m.
  Mr. J. W. Rooker: I shall try to comply with your suggestion, Mr. Deputy Speaker. I do not want to deal with the whole range of this Bill. That would be repetition because it has been done already.
  I intend to devote most of my remarks to the incomes aspect. However, if I might make just one comment on the prices aspect, it is to point out that this Bill gives very wide discretionary powers to the Minister.
  It is all very well for the Government to propose these powers. They are on

  1321.
  our side, and we are in charge. But simply because my Government are proposing these powers, I do not necessarily accept that that is a good way to govern the country. The powers are much too wide. There is no accountability to this House and to the people's elected representatives. In the short time that I have been a Member of Parliament, I have seen more and more Bills coming forward giving a greater degree of discretion to Ministers. It is a trend which I do not like. I do not like the principle. I know all the problems which would arise from taking another course of action, but I still think that this House should take far more decisions than it does at present.
  In Clause 22(2), we find no provision for a report back to Parliament to wipe out a whole industry from the coverage of this Price Commission Bill. I know that my right hon. Friend the Secretary of State would not say it and I suspect that my hon. Friend the Minister of State will not admit it, but the fact is that we distinguish between private and public enterprise in a way which people outside this House do not generally appreciate. It is difficult for Questions to be tabled on matters of detail affecting the nationalised industries. But I want the Price Commission to be involved in investigations into nationalised industries. I do not want a repetition of the fiasco that we have just had about gas.
  After this Bill is on the statute book and we have conned the country into thinking that we have toughened up price control, the Treasury may decide to tell the Post Office to put another 1p or 2p on the price of a stamp in order to cut down the borrowing of the Post Office. The Price Commission will not have a chance to conduct an investigation. It will be cut out straight away by the Minister. It will be a Cabinet decision.
  Mr. John Fraser: It is because we already have a system of investigating nationalised industries that my hon. Friend has been able to make his com plaint about the gas industry. Without that prices supervision, these matters would not have come out into the open.
  Mr. Rooker: But if the conclusion was reached on the evidence that a price increase was not justified, that decision
  1322
  should stand. It should not be over turned by Ministers, be they Labour, Tory or Liberal. The fact is that the public have been conned, and I do not want to be a Member of a House that passes Bills which perpetuate this kind of con trick. No one will be able to deny that the example which I have given of a Post Office price increase cannot arise where the Price Commission may say that it is not justified and where Ministers may say that they will not allow an investigation or, if the Price Commission has started one, that they will not accept its findings, or that they will veto the investigation after it has started. That can all be done under this Bill, and it is not good enough.
  The hon. Member for Gloucester (Mrs. Oppenheim) preached hell-fire and dam nation against the Bill. But the Opposition will not vote against the Second Reading. They will be voting for their amendment. However, subject to what is said after 9.30, it may be that some Government supporters will vote against the Bill to try to persuade the Government to bring before the House a measure which is a little more effective.
  I come briefly to the aspect concerning incomes. We have heard of the Prices and Incomes Act of the previous Labour Government. We have heard of the Counter-Inflation Act of the Tory Government. The titles of both could reason ably be said to cover prices and incomes. However, I do not think that it is reason able in the Price Commission Bill to deal with incomes policy. I have argued this publicly. I have argued it privately with my right hon. Friend the Secretary of State.
  The Government have perpetrated a sleight of hand. I do not wholly blame them. I blame the civil servants for sticking this re-enactment of the Remuneration, Charges and Grants Act in this Bill. It could have been in the Finance Bill. It should have been in a Bill of its own from the Department of Employment, as the 1975 Bill was. In that way, we would have had a chance to discuss what has happened in the two years since July 1975 when we were forced to sit day and night to rush through the previous Bill.
  I do not accept that a one-day debate on a White Paper is good enough. I should like to see Clause 17 removed

  1323.
  from the Bill in Committee and to have the Government bring it back after publishing a White Paper following discussions with the TUC.
  It seems that we are in the same situation that we faced in 1975. We then passed the legislation that was required. It is dressed up incomes legislation. We should pass what is required only in the full knowledge of the circumstances of the deal with the TUC. This should be after the White Paper is put before the House and agreed by the House.
  I do not accept the TUC statement issued today. There was one hell of a row this morning at the TUC General Council over parts of the Bill. When the Council last sat the Bill had not been published. I know that there was consultation. They had the consultation document but the Bill was not published. In fact, it was published on 1st April. The General Council issued a statement, but I do not accept its statement that
  "the Bill does not pre-empt discussions now taking place with the Government on what should follow the present pay round;"
  Of course it pre-empts what will take place. It is all very well saying that there will be a stage 3 and we might want a stage 4 and even a stage 5, but if we are being fair and open on these matters the time to make a decision is when the policy comes to an end.
  I am prepared to help in putting through a special Bill each year. I know that there are problems in taking that course. We do not have to wait until the latter part of the summer sitting and all the problems of the log jam as a result of Bills coming from Committee. I am sure that such a Bill would be accepted at other times of the year. We do not have a rigid statutory pay policy that it is accepted will continue for ever. We have a policy that operates from year to year. It is not good enough to state in the Bill by implication that the policy will continue until July 1980. The clause should be removed until an agreement has been made. If that mechanism helps the Government and the TUC to get together earlier in the year, so be it. That is all to the good.
  I am not a free-for-aller. A free-for-all is not a fair-for-all. On the other hand, I do not like the present situation. It is a situation from which we have not gained. The low-paid workers involved
  1324
  with industrial wages councils have not gained. We listen to Opposition Members bleating about those who they claim have suffered under the economic situation in the past few years. They say that take-home pay has been affected. One would imagine that everyone has abided by the terms of the pay limits. We know that they are voluntary and, by and large, accepted by millions of workers through out the country. They apply to all except those who are plant managers at British Leyland who are moved around the country to get fictitious promotion, or company chairmen.
  However, by and large the people have accepted the pay limits and work within them. I know that earnings have increased for other reasons, but the increases have been considerably less than those that were gained before the introduction of the pay policy.
  What is not fair is to perpetuate a system that cons the workers. It is not fair to suggest that we have a tough and rigorous price control, which we have not and which will not be introduced by the Bill, and a pay policy that the Bill will perpetuate for another three years, a policy that applies equally to all. There is a £4 maximum for everyone this year. It will apply to hon. Members and to yourself, Mr. Deputy Speaker. It will apply to civil servants. It may even apply to those in the Press Gallery. However, there are exceptions. It is the exceptions that totally undermine confidence in the policy. They undermine the confidence of the workers who have gone along with it.
  I cannot understand why we do not get more bleating from the TUC, the leaders of which, I must confess, are as much out of touch with their members as are members of the Cabinet. Let it be clear: I do not represent the TUC General Council. A statement has been given to some of those who have expressed disquiet about the Bill. It is stated that the TUC General Council does not want any Member of Parliament to vote against it. It would not like that to happen tonight. But I do not represent the members of the TUC General Council, I represent my constituents.
  It is the members of the TUC General Council who, by and large, have let down my constituents, including my trade unionist constituents. It is relevant to point out that 50 per cent. of the workers

  1325
  in my constituency are skilled and semi skilled persons employed in manufacturing industry. They have been let down because in some respects many members of the TUC leadership are out of touch with the members. That is why there was lobbying last week. I refer to the lobbying that took place by the elected representatives of the workers. We do not need 20,000 people outside to tell us that there are problems in industry. Their elected representatives came to the House. That is legitimate representation. Most people do not want to lose a day's pay.
  I shall give an example that typifies what I have been saying about breaches of the incomes policy. All industrialists, company chairmen, trade union leaders and Ministers are saying something like this:
  "If there is to be a phase 3 of the incomes policy operating from August, which we believe to be necessary, it is essential to allow adequate flexibility within an overall maximum."
  When that has been said there is usually also some comment about differentials. Everyone is saying something like that, including company chairmen such as Viscount Caldecote, the Chairman of the Delta Metal Company. I have quoted a passage from the annual report of that company, the report being released three days ago. It is a good company. I have respect for its managers and its workers. A great deal of growth has been generated.
  The Delta Metal Company has not paid much corporation tax. It has made large profits but has not paid much corporation tax. The hon. Member for Gloucester says that the corporation tax that is paid by the private sector is funding our social services. I do not have the figures at hand but the total revenue from taxation in this country is about £40,000 million. Corporation tax is estimated to yield £2,500 million. I believe that about £17 million comes from income tax. The rest is made up by VAT, customs and excise duty and minor taxes.
  The Delta Metal Company has not paid much corporation tax because like many other companies it has availed itself of the deferred tax arrangements. For example, Lucas Industries has £31 million of deferred tax in the kitty that it is not spending on creating new jobs.
  1326
  I have referred to the remarks of the Chairman of the Delta Metal Company. I met Viscount Caldecote at a Dinner that the company gives to hon. Members on both sides of the House who have a constituency interest. The Dinner was held shortly before Christmas. Viscount Caldecote made a speech attacking my Government. I interrupted him and I asked him afterwards whether his £70 a week pay increase of the previous year was paid before the introduction of the £6 policy. I asked him that question because it covered the year before we started the policy. The implication of the answer was that it was paid before the £6 policy was introduced. The latest report covers the half-year of £6 and the half-year of £4—namely, the present period. Viscount Caldecote's remuneration from the Delta Metal Company—he has other jobs—has increased by £4 a week. That is more than £6 a week and more than £4 a week.
  As I am entitled to do, I have referred the matter to my right hon. Friend the Secretary of State for Employment under Section 3 of the Remuneration, Charges and Grants Act. That measure appears to enable me to question whether remuneration exceeds the limits deter mined by the pay policy and the White Paper. Viscount Caldecote is earning £30,000 a year. After the Budget his net take-home pay increased by £20 a week. That is in addition to his pay increase, his four other directorships and his £16·50 a day for signing on in another place.
  It is this situation that makes me bloody livid about the contents of the Bill, the perpetration and perpetuation of a con trick on the workers. We are saying that we shall screw down prices and introduce a pay policy that is fair for all, but unless my hon. Friend can match some of the arguments that I have advanced I might consider voting against the Second Reading of the Bill.
  I do not hold my hon. Friend person ally responsible. I know that he is an honourable member of the Administration. Not all members of the Administration are honourable in this respect. Some speak with forked tongues. I exempt my hon. Friend from that charge. I want him to answer the points that I have made. If he does not, I might consider—I do not want to have to do so—voting against Second Reading.

  1327
  These points on incomes policy have to be brought out. It is no good hiding behind the statement issued today by the TUC General Council. It is irrelevant to introduce statements that were made before Clause 17 became an issue. The members of the General Council did not really know about this. In their statement they made no remark about the three-year extension of the pay policy. They have referred to other aspects of Clause 17 but not about the three years.
  In Committee my hon. Friend must go along with the view that the three years must be reduced to a maximum of two years. That would maintain some consistency with the previous two years for which we have legislated. It would keep us from a position in which we might be forced into a General Election with this legislation on the statute book. With its incomes content and prices content being so discriminatory, it would be a godsend to a Tory Government and Tory Ministers. I wish to protect my own Government and party from being in that situation.
  8.0 p.m.
  Mr. Michael Shersby: I have listened with interest to the speech of the hon. Member for Birmingham, Perry Barr (Mr. Rooker) with some of which I am in agreement, but I hope that he will forgive me if I do not follow him in precise detail. The matters upper most in my mind are the need to control inflation, the need to maintain a high level of investment, which in turn means jobs, and the need to ensure that the consumers continue to enjoy a wide range of choice of food products.
  With inflation running at a rate approaching 20 per cent., the price of food, the basic necessity of life, is upper most in the minds of most of my constituents, and, I dare say, in the mind of every Member of this House. Any housewife in any High Street will say how difficult it is for her to manage her family budget in the inflationary situation in which Britain is placed. Her prime concern is, therefore, with the price of food.
  Consequently, what the housewife wants to see is the Government tackling inflation, but at the same time I do not believe that she wishes to see them commencing the destruction of manufacturers
  1328
  who are her partners and who are providing the food that goes into her shopping basket. Moreover, I do not believe that she wants to see a Bill which threatens investment in food manufacture and the jobs of many people in the British food industry.
  Unfortunately, the Bill as drafted will undoubtedly threaten investment and, in my opinion, will lead to fewer jobs. It will create instability and uncertainty amongst the food producers, and it may well affect the choice of goods that will ultimately be available to the consumers in the High Street shops. In my view, the Bill, which is, of course, part of the Government's social contract with the trade unions, is designed mainly to give the appearance that the Secretary of State is doing something to hold down food prices in order to meet anticipated union pressure about increased prices which the Secretary of State and we all know are already in the pipeline, and about which very little can be done. But the price that the country will have to pay for this kind of window dressing may well be too high. The price may be fewer jobs, resulting from less investment, and I want to explain why I believe that to be so.
  Clause 4 contains the power, which the Secretary of State today said is to be permanent, whereby the Price Commission can prevent a price increase simply by deciding, without explanation, to investigate it. Moreover, Clause 5 extends that power still further—to freeze a price for which no increase has been proposed and for which no notification is required. I believe that these two clauses represent government by administrative fiat to be exercised by the Secretary of State and his appointed placemen, instead of government subject to the consent of Parliament at regular intervals.
  On the Secretary of State's own admission, the Bill is likely to affect some 40 companies a year. This power to freeze prices will be exercised by a group of any three members of the Price Commission appointed by the Chairman. That is an enormous power to place in the hands of three men. At present, we do not even know who they will be. We cannot even be sure that they will be wise men or women. I hope, therefore, that we shall be told what experience of a complicated

  1329.
  industry like the food industry the people who will serve on the Price Commission will have. I believe that it is just this sort of power, given to an appointed body directly under the personal power of the Secretary of State, which creates uncertainty.
  How, for example, can any food manufacturer plan his production and his investment when, at any time, without notice, the price of his goods can be frozen for several months because three members of the Price Commission, who will be subject to considerable pressure not only from the trade unions but from other sections of the community, have decided to recommend an investigation? I believe that there is a very great danger here that, in taking power to penalise what he today called the tiny minority whose conduct he may find unacceptable, the Secretary of State may utterly destroy the confidence of the great majority of reputable food manufacturers.
  The Secretary of State has tried to reassure the House that these powers of the Price Commission will not be abused. He has said that the membership of the Commission will be acceptable to industry and the community at large. But the House cannot know that until the members are appointed, and even then, food manufacturers, for example, will not know why one firm has been selected for an investigation and another has not. That is an appalling situation.
  The Secretary of State said that the efficient socially responsible company has nothing to fear. He added that he will use his powers to increase a maximum price recommended by the Commission. What precisely does he mean by these statements? Will the Minister tell us precisely in which circumstances the Secretary of State would use his power to increase a maximum price recommended by the Price Commission? Would he perhaps, if some error were made by the Commission, use his power to redress the situation and to allow a manufacturer to recoup the money lost by the freezing of his prices?
  The whole essence of the Bill, as I see it, is that it puts this tremendous power into the hands of an appointed Commission without the House of Commons having the power to exercise proper control.
  1330
  It will create very grave concern in industry and will sap its confidence. Does the Secretary of State perhaps not appreciate that the exercise of such power without proper safeguards can deprive food manufacturers of their legitimate profits in such a way as to threaten jobs?
  It is intolerable that the Government should try to operate by means of what is little more than a tribunal operating within the Price Commission in such a way that it could have dire and perhaps unforeseen effects on employment. There can be no doubt that the uncertainty that will be created by these measures will result in a reduction or a cancellation of investment programmes. It will not, therefore, be of much consolation to the housewife for the price of a particular range of food to be frozen for several months if perhaps her husband's fellow workers or her own in the food industry lose their job prospects into the bargain.
  If there is to be any industrial support for the Bill as an anti-inflation measure, there must be proper safeguards to pre vent a trio of Price Commission members from arbitrarily using their power in such a way that it can threaten the whole fabric of an industry. If satisfactory safeguards cannot be devised in Committee, it would be wiser for the Government to drop the freeze-during investigation power, because it is this which is sapping the confidence of industry. I say this because it may not be realised in the House that the profits of the food industry on an historic cost basis averaged about 4 per cent. in 1976. If the Bill were enacted in its present form, therefore, it is not difficult to see that one year's profit could be lost in one month, and that three years' profit could be lost in three months, if there were delays in implementing unavoidable price increases.
  I hope that the House will also realise that many companies in the food and drink industries have made a commitment to future investment in support of the Government's declared industrial policy. This depends upon confidence in the food industry that the necessary cash can be raised for working capital and the expansion of fixed assets.
  Let us take some examples of investment. Rowntree Mackintosh plans to

  1331.
  spend £65 million over the next three years on fixed assets alone. Cadbury Schweppes intends to spend £28·5 million on modernisation of production facilities and Allied Breweries has announced that it intends to spend a massive £164 million on modernisation and expansion of its plant.
  We are all keenly aware of the contribution that such companies make to our export drive, but if the Price Com mission, using the powers in the Bill, were to freeze prices for several months during investigation of increases, there can be little doubt that the effect would be to cause many companies to revise their investment plans. They can have no confidence that their cash flow would be adequate if the Bill is passed as it stands.
  Only the deletion of the power to freeze prices during investigation or the insertion of safeguards at an acceptable level will ensure that planned investment programmes remain in being, and it is only then that the future of jobs in the food industry can be secure.
  The consumer is faced with grave con sequences if the Bill is passed. The housewife looks upon the food manufacturer as her friend and partner. She is in close contact with the manufacturer because of the intensive market research that he carries out and because of the many other ways in which he keeps in touch with his customers. The house wife will not take kindly to the effects of the Bill. It will have little effect on rising prices and I agree with the hon. Member for Birmingham, Perry Barr that it is simply an attempt to con the country.
  It is a bad Bill, and if it is given a Second Reading I hope that it will be substantially amended in Committee to take account of the problems to which I and other hon. Members have referred and which the industry has drawn to the attention of the Secretary of State with out getting the impression that he cares much about what it is has to say.
  I intend to vote for the amendment.
  8.13 p.m.
  Mrs. Audrey Wise: I challenged the hon. Member for Gloucester (Mrs. Oppenheim) during her speech to say whether she was in favour of any price control at all and, if so, what kind and in what circumstances.
  1332
  She declined to indicate that any price control would be acceptable to her or her party, and said that she preferred to put her faith in what she calls fair competition. If we lived in a world where there was fair competition, that would be a more understandable reaction, but I wonder whether the hon. Lady knows that in 20 of the 22 main industrial and service sectors of our economy half the assets of the whole sector are controlled by six firms or fewer. That is a very high degree of monopoly, and one can not speak of fair competition in these circumstances.
  These huge empires do not compete on price terms at all In retailing, for instance, they compete through gimmickry promotions. It used to be by plastic roses and although it has become somewhat more sophisticated, it is still that sort of competition and not price competition.
  The situation is at its worst in food and key household products. We have heard much about competition in the High Street, but retail distribution is one of the sectors controlled by six giant concerns. When the housewife enters one of the numerous stores that look like small High Street shops she is really getting entangled in the tentacles of one of these six enormous octopuses.
  Mr. Giles Shaw: Is not the Co-op one of the six, and should not the hon. Lady be rather proud of that?
  Mrs. Wise: That is beside the point. The Co-op is not like the other five. It consists of an association or even autonomous societies, town by town. It is a co-operative owned by its consumers.
  When the housewife goes into one of the shops owned by the retail giants the situation gets even more ludicrous. An hon. Member who was earlier speaking about competition mentioned garden shears and when I pointed out that we do not buy garden shears every week he changed his example to talk of under takers and sought, by reference to garden shears and undertakers, to prove that we are living in a truly competitive society. I told that hon. Member about detergents and soaps, in which two giants control 90 per cent. of the market, but there are other examples.
  Salt is an everyday commodity and two giants control 90 per cent. of that

  1333
  market. Three giants control 80 per cent. of the margarine market and three giants dominate the condensed and evaporated milk market. In all these sectors there is also considerable overlapping with the same giant often controlling enormous amounts of the food market. One food after another is controlled by the same giant companies.
  Mrs. Sally Oppenheim: I share some of the hon. Ladys concern about the concentration of power in monopolies, but if our economic climate were different, and if measures such as this Bill were not introduced, more people would be jumping up to compete with the giants, and more of them would stay in business longer.
  Mrs. Wise: If the hon. Lady looks at a bit of economic history she will see that the concentration of power has been a steady progression decade by decade—we shall soon be able to say century by century—whatever kind of Government have been in office. The concentration of power is an inherent characteristic of capitalism and the hon. Lady had better learn that. It has nothing to do with the rather feeble legislation before us. The idea that we can rely on fair competition for the protection of consumers is nonsense. I share this view with my right hon. Friends on the Front Bench. That is why they have brought forward this legislation, and though we differ about how effective the Bill will be, we can have no doubt that the Opposition's attitude means sacrificing the consumer to the unbridled pursuit of private profit.
  Turning to the Bill and how effective it will be, I shall not refer to Clause 2, which has already been dealt with in detail by some of my hon. Friends. I regret the presence of the tiny Clause 3, which terminates the present requirement that there should be quarterly reports from the Price Commission. It is a pity to move from quarterly to annual reports and I wish that the clause had not been included.
  I wonder whether the change is because of the rather embarrassing disclosures that have been made in the quarterly reports. The report published in January made clear that the Commission could not express a view on the movement in
  1334
  profit margins. Considering that the Price Code depends on these margins, I thought that rather odd, but when I attempted to raise it at Question Time I was not sure whether my right hon. Friend had even read the report. He did not seem to be aware that on page 6 the Commission said:
  "The calculation of profits and profit margins for price control purposes is now highly artificial and bears little resemblence to profits as calculated on accepted accounting principles. This means that there will be a sharp divergence between 'Code' profits and the profits appearing in companies' published accounts, the Code profits in many cases being substantially less than the published profits."
  If we are to have a Price Code based on profit margins it would be a lot better if they were real profit margins and not what the Price Commission itself calls highly artificial ones. The Price Commission also said that in some circumstances
  "companies will be showing 'losses' for price control purposes while their published accounts will show substantial profits."
  That entitles us to look with some scepticism at this kind of machinery.
  Although that is a matter of history, we are renewing the legislation as well as altering it. Therefore, the matter is very relevant to the Second Reading of the Bill.
  The same report tells us:
  "The tables in Appendix 7D therefore simply indicate the extent to which companies have, or have not, kept within their reference levels. They cannot be used as indicating the true level of profits, still less can they be used to indicate the trend of profits over time."
  What is happening to the trend of profits over time surely has great bearing on whether price increases can be regarded as in order or justified. Therefore, I have been very worried about the present operation of the Price Commission, and I wonder whether these disclosures are why we are moving from quarterly reports to annual reports.
  I come to Clauses 4 and 5, which concern the veto on inquiry at any stage. I am not reassured by my right hon. Friend's remarks on this matter. I hope that he will find time to elaborate further why it is necessary for him to be able to prevent investigation. If he reserved the right to reject recommendations, I could understand and accept it, and I should regard it as proper, because I do not believe in government by commissions, whether they are price commissions

  1335
  or commissions of any other kind. I believe in government by elected Ministers in Parliament. Rejecting recommendations would be one thing, but stopping an investigation is quite another thing. There may be companies that would say "Let us have a planning agreement in order to avoid an investigation by the Price Commission." The door would be open to that kind of thing. I see that my right hon. Friend nods his head. I should regard that as a very great move away from the sort of motive that should imbue the signing of planning agreements.
  What a funny clause is Clause 8. The Explanatory and Financial Memorandum says that where the Price Commission gives notice of a breach of an undertaking that it has been given by a company the Secretary of State
  "may invoke his order-making power … or accept a further undertaking."
  Therefore, we can go from undertaking to undertaking. That does not seem to be a very strong provision.
  However, Clause 9 is strong, because it lays on the Secretary of State a duty. That is a bit of a change in the Bill, because it is prepared with popwers that may or may not be invoked. I hope that they will be invoked if they are useful, but the word used is "may". However, this clause imposes the duty on the Secretary of State of making regulations laying down minimum levels of profit that companies must not be prevented from earning during the course of an investigation or as a result of recommendations made following an investigation. Therefore, the firmest duty laid on the Secretary of State is the duty to ensure the maintenance of profits. I wonder whether that will be enforced. I rather think that it will be. I am sure that the maintenance of minimum profits is more likely to be firmly enforced than is the maintenance of minimum wages under the Wages Council regulations.
  Therefore, up to and including Clause 9 the Bill is not really very good. One of my hon. Friends has talked at length about Clause 17. I shall not repeat what he said, although I agree with it. Clause 22(2) is really a gem, because it enables the Secretary of State to lay to one side all the rest of the Bill when he so chooses. It states,
  1336
  "The Secretary of State may by order (a) provide that such of the provisions of this Act as are specified in the order"
  Hon Members: The 1973 Act.
  Mrs. Wise: It says "this Act". Surely "this Act"—I do not understand the Bill otherwise—means just that. If we are referring to some other Act, that should be made clearer and an amendment would be necessary. If we are referring to some other Act, I might be reassured, but as I read the subsection it says
  "The Secretary of State may by order—
  (a) provide that such of the provisions of this Act as are specified in the order shall not apply in such cases as are so specified".
  I read it as meaning that the Secretary of State is able to say "I order that the provisions are not applied."
  Mr. Rooker: The point is made abundantly clear in the first three words of Clause 22—"In this Act". One then gets the interpretative subsection and, therefore, subsection (2) talking about "this Act", clearly means the Bill when it becomes an Act.
  Mrs Wise: That is right. I see no other possible meaning. If my right hon. or any other hon. Members interpret this differently, perhaps it should be looked at again.
  Therefore, I regard that as a clause that gravely weakens the whole Bill. It means that in many real ways we do not know whether we are passing a Bill or simply a shadow of a Bill. I am dissatisfied on that matter.
  In a situation of very high levels of inflation, in which I and my right hon. Friend would undoubtedly agree that something should be done about that inflation, instead of being faced with provisions that would have an effect on the levels of prices we are faced with quite a long, complicated Bill which, when analysed, is found to be so full of "ifs", "buts" and "maybe's" that I am very doubtful indeed of its value.
  We could control prices for a time. We had firmer price control legisltion shortly after we were elected. We can buy useful time by price control. If we buy time we can use it in order to make the basic changes which in our economy, are the only lasting solution. I would agree with hon. Members in all parts of the

  1337
  House who say that the capitalist system cannot be run on the basis of restraining profits indefinitely. That is quite right. That is why when we attempt to restrain profits without making basic changes in the economy we are forced to come forward with even weaker and weaker versions.
  My right hon. Friends should look at this again because we are failing to keep down the cost of living for ordinary people, and we must do so. We cannot leave the task to the Conservatives because they are not even in the business of protecting ordinary people. We are, and, therefore, we must make a better job of it. This Bill, as an instrument for enforcing the protection of ordinary people, is totally inadequate. It will not hold down the living costs of ordinary working people in this country.
  8.30 p.m.
  Mr. Giles Shaw: About this time in the Second Reading debate one begins to feel very sorry for the Secretary of State. We have not had a single contribution from either side of the House supporting the Bill that he seeks to enact.
  There are various criticisms of the Bill, including major criticisms of its philosophy such as that which we have just heard from the hon. Member for Coventry, South-West (Mrs. Wise). Even from the Liberal Bench—and alas it is empty now—we have had only qualified approval. I noted with interest that the hon. Member for Truro (Mr. Penhaligon) thinks that the Bill should be enacted for only one year. I believe that at one time this was a widely canvassed proposition. From all parts of the House we have heard criticism in varying degrees. That is not surprising. In every debate on the subject of prices legislation, or about preventing something from happening, we all tend to express our dislike.
  This is fundamentally an enabling Bill, and one of the difficulties in trying to prepare comments for such a debate is that with an enabling measure we cannot discover how it will operate or the significant features that will affect those who have to operate it. Whatever the comments of hon. Members below the Gangway, industry has to operate a Bill which is designed primarily as a part of the
  1338
  Government's policy of intervening in industry's pricing.
  We should remember that this is about the fifth year in which there has been continuous influence, to a greater or lesser degree, on the pricing of consumer goods. In the first year there was a 5 per cent. agreement among the top 200 companies—a voluntary arrangement that they would not increase their prices by more than 5 per cent. That lasted extremely well and was honoured totally by the top 200 companies in the CBI.
  Since then we have had the various phases of the Conservative Government's counter-inflation policy followed by the various phases of this Government's pay policy. For five consecutive years there has been Government involvement in the pricing process of the major part of British industry—the larger employers and exporters, and, I admit, the larger profit earners. Five years is a very long time. One factor which has made it just about bearable is that in that period it has changed markedly in degree. There have been short sequences during which a certain level of restraint was applied, and then it was altered.
  I find it objectionable that the measures proposed in this Bill are permanent. This is causing a great deal of anxiety in industry today. After the longish period of five years in which we have had lower living standards, significantly less investment, more unemployment and more bankruptcy than our major competitors, the Government may well have come to the view, that as this followed all the systems of intervention in pricing for industrial goods and services, there may have been a cause and effect here. They may have taken the view that enough was enough.
  I suspect that a discussion of that kind took place. The legislation so far has hardly proved a successful operation for Governments of both parties. There may well have been a chance that the Government might have felt that the time had come to put away the legislative process, and, when the whole panoply of powers had expired in July, to get around the table and discuss something different—something voluntary and based on consent. But clearly that opportunity has been thrown away.

  1339
  I suspect that the TUC would have none of it, and I do not blame it for that. It has to show its members that it is using its muscle power to extract concessions from the Government, and the Government have allowed themselves to be put in a position whereby these tactics can be used by the trade union movement. The argument is that if there is to be further restraint of a voluntary nature on wages there should be greater controls of a statutory kind on prices.
  Let us make no bones about it. The first principle upon which the Bill is based is that of appeasement. It is to appease the trade unions in their negotiations that there is something in it which can be waved at their members. It is saying, in effect, that here is a powerful new Statutory Instrument to provide further restraint on prices.
  I do not like policies based on appeasement, and it is not to be wondered at that Mr. Jack Jones keeps waving a piece of paper on which, no doubt, are the words "Freeze in our time", because he seems to be keenest of all on trying to extend the nature of price intervention into a total price freeze.
  The second principle which follows from appeasement is that of survival. The Government clearly intend to clutch this particular opportunity of negotiating a phase 3—whatever its merits, this is their clear intention—boosted by this Bill, in order to survive just that little longer, despite what the electors of Stechford have said or what the electors of Grimsby no doubt will say tomorrow. Survival is certainly their intention.
  It is not the public sector that is involved in buying survival. The price of survival has to be borne by the private sector. As we have seen with gas prices, there is one law for the nationalised industries, when it comes to operating under the Price Commission, and clearly another for the private sector.
  This Bill seeks permanent powers and sets up a Commission which can investigate prices at will and freeze them during the period of investigation. Many hon. Members have argued that it is a major deterrent to have price freezing during investigation as opposed to the acceptance—which has been put to the Minister on many occasions—of allowing the price
  1340
  to move through and then rolling it back at the end of an investigatory period if it is found to be not justified. But not only under Clause 5 are category 1 and 2 companies to be so investigated. Any company can be so investigated. Indeed, it can have its prices frozen accordingly. This means that although the Minister can say that there may be only some 40 investigations undertaken, spread over 40 sectors this can effectively stultify the whole market.
  A major branded article or the market leader may be investigated, and all other competitors within that market will not be able to increase their price, however justifiable, because no competitor will be willing to raise its price above that of a frozen market leader. Although 40 sounds a small number, it can indeed produce a complete stultification of the normal market pattern, and distortion will be piled upon distortion.
  The Bill as drafted does not require reasons to be given for these investigations. Although Clause 2 does indeed speak of matters which the Commission has a duty to regard, it is significant to note that Clause 2(1)(a) states that it must
  "have regard to all matters which appear to the Commission in the particular circumstances to be relevant with a view to restraining prices of goods and charges for services so far as that appears to the Commission to be consistent with the making of adequate profits by efficient suppliers of goods and services".
  Whatever the safeguards under Clause 9 in regard to profits, these matters can be taken into hand only in so far as the Secretary of State considers them to be relevant to the investigation. There is no question of the safeguard level being available to all. It is only if it is deemed to be relevant.
  The consequences of a delay, a price freeze—to which my hon. Friend the Member for Uxbridge (Mr. Shersby) referred—can be quite traumatic. Certainly that is true in those industries, such as the food industry, which depend on relatively low margins and have relatively high costs, especially in regard to commodity prices.
  It has been argued that if a tea company had its prices frozen for four years it would lose at least 40 per cent. of its total annual profit. A company might be involved in a seasonal business, such as

  1341
  the Christmas trade. In many cases it might be the total objective of a certain company. If it were subject to an investigation it would lose its entire annual profit, and probably a large share of its perpetual market.
  Price-freezing for that length of time must be regarded as a very dangerous power to give the Minister. I know that there are the safeguard clauses, but the right hon. Gentleman has so far failed to convince industry and its representatives that the safeguards to be applied to profits will be fair and sufficient. He has a duty to issue regulations. We must ask the Minister who winds up the debate to give an assurance that the regulations will be produced during the Committee stage, if the Bill reaches Committee, because we must be able to argue whether the profit safeguards and the whole of Clause 9 are an effective part of the Bill. We cannot so argue without knowing what the Secretary of State has in mind with regard to safeguards. Will he guarantee to publish the regulations, so that they can be considered along with various other parts of the Bill in Committee?
  Representatives of the industry are now so punch-drunk with codes and regulations that one director of finance to whom I spoke about the Bill shrugged his shoulders and said "Oh well, publish the rules, and I suppose that we shall go on playing the game." That says a great deal for the fact that by and large British industry has co-operated with Governments of both parties to the nth degree in carrying out their part of the bargain. Industry's average profitability has steadily declined, despite the closeness of such co-operation.
  We must ask "Whose game are we playing, and under whose rules?" I have no doubt that the Secretary of State views himself as appearing to the TUC representatives as a man of action, as the poor man's Red Adair, manfully plugging the blow-outs on the prices field, where apparently great gushers of illicit profits are there to be tapped underneath, and he will prevent them spurting out.
  In another guise, he no doubt views himself as appearing to the housewife as a Rob Roy, the Sheriff of Sparkbrook,
  1342
  helping consumers in distress. No doubt every Esther deserves her Rantzen.
  To the industrialists the right hon. Gentleman says "Trust me. It will not be very difficult. There will not be many of these investigations. The powers will be little used. The Commission will be full of friendly people. Can you let me have a name or two on a piece of paper as you leave?" But each price increase turned down will mean a dramatic shift for some company somewhere and put profits and jobs at risk.
  Whom are we to believe when we hear explanations of how the Bill will be applied? Is it really to be a cosmetic exercise, as all the Members below the Gangway on the Government Benches seem to believe, or is it for real? Are its provisions to be forcefully applied, with frequency and determination? I shall give the Secretary of State the benefit of the doubt. I believe that he means it, that he means to use the powers in the Bill, and to use them aggressively and frequently. As I read the future in the tea leaves, with the right hon. Gentleman's position in a Cabinet that has undertaken as the other half of the social contract that it will take concerted and effective action in the matter of prices, I think that the right hon. Gentleman has no choice but to use the Bill effectively, hard and with frequency.
  Therefore, I believe that we are here seeing a massive increase in the Government's power to influence industry, and that there is a clear opportunity for those powers to be abused. I shall not suggest that they will be used for all kinds of political purposes, but I am certain that they will be used for some political purpoes at some time in the remaining months of this Government's life.
  The Bill is clearly a major piece of Socialist legislation, designed further to sap the morale of the private sector and to control profit margins. There seems to have been some debate about whether it should be called the "Price Commission Bill" or the "Profit Commission Bill". The hon. Member for Coventry, South-West does not really believe that the Bill will have controls on profits. I assure her that she is wrong. Controls on profits will indeed be provided by the powers in the Bill. Control of prices is only the

  1343
  outward and visible sign of a regime that has profit control as its objective. If that is the objective of the Bill, is not it time that the kidding stopped? Do the Government really believe that the profits of British industry are high enough to warrant control, despite the comments of Labour Members below the Gangway.
  In the food industry, to which my hon. Friend the Member for Uxbridge referred, the figures of the Food and Drink Industries Council show that the top 31 companies have massive turn over totalling £4,500 million, selling their products through so many High Street outlets, and no doubt including the co-operatives. Their average percentage return on sales value in the last two quarters of last year was 0·58 per cent. in the quarer ending 30th September, and 0·09 per cent. in the quarter ending 31st December.
  Are we to believe that major restraints on profits are required under these conditions? The correct policy and I believe the only policy is to launch a crusade for the creation of wealth, not the stifling of wealth. The professional management in British industry is about the only contributing part of the economy that thinks about the long-term position. They are professionals, dedicated to their jobs. If there is a case for an orderly return to free collective bargaining—and there is indeed such a case—there should equally be a commitment to a return to free competitive pricing. Without more wealth created there can be no free collective bargainers. We should look at what can be done and what can be released, not at what can be stopped or deterred.
  I accept that much of the problem lies in the fact that British industries have been slow to talk about their profits, earnings and wealth-creating capacities in a popular and positive way. They have been far too reticent in replying to attacks claiming that making profits is somehow an unhealthy activity and should be hidden, but at least a number of companies are beginning to reply.
  I have here an advertisement containing the company accounts of a food company, United Biscuits, whose chairman is the present president of the Food and Drinks Industries Council. The company has set out its 1976 figures in a leaflet entitled:
  "How we created wealth in 1976 and who benefited."
  1344
  The company set out the total amount of wealth created. The company had sales of £521 million, less £346 million as the cost of materials and services brought from outside, leaving £175 million of wealth created. That represents 33·6 pence in every pound of sales. The shares in that sum included benefits to employees, which took 25·1 pence benefits to the State in taxation, of 3·1 pence, benefits to lenders in interest charges which were 0·5 pence and benefits to shareholders in dividends of 0·8 pence. Benefits to the company in profits ploughed back for investment were 4·1 pence—the next largest figure.
  This is what industry is all about, namely the generation of wealth and the use of profits creatively. Bigger profits lead to bigger investments and that leads to better job security and more efficient production. That is what we should be encouraging, and the Bill seeks to undermine it, which is why I object strongly to the Bill.
  Mr. Deputy Speaker: I have every sympathy with hon. Members who have sat in the Chamber throughout the debate and are still anxious to take part. There are still four hon. Members who wish to take part. We have roughly 25 minutes. Therefore, if we have four six-minute speeches they can all be accommodated.
  8.50 p.m.
  Mr. Ivor Clemitson: There has been a singular failure by politicians and economists to make a convincing analysis of inflation. We are told that rising costs mean rising prices, which is a statement of the obvious of stunning banality. We are told that increases in the money supply mean price rises and so on. I merely note the superficiality of the analysis. I shall not attempt any analysis in depth myself.
  But it is no wonder that in the absence of an adequate analysis we have not found a satisfactory answer to the problem of inflation, which is a post-war phenomenon. Simple analogies between the present recession and that of the early 1930s just will not wash because in that period prices in absolute terms were actually falling. That means that we cannot provide the simple accelerator-brake techniques for regulating the economy, and what may appear with hindsight to have been perfectly reasonable policies

  1345
  to pursue in the early 1930s are not so in the late 1970s.
  I would be the first to argue that the Government have done a number of useful things over the past three years in somewhat difficult circumstances. It is perfectly legitimate to argue that we went into the present recession in a far weaker position than almost any of our competitors. In spite of what the hon. Member for Pudsey (Mr. Shaw) says, not all international comparisons show us up in a bad light. In the six years leading up to 1976 there was an increase in employment in the United Kingdom of about 30,000, whereas Germany suffered a loss of 1,600,000.
  We have done badly on international comparisons in prices. It can be argued that there have been a number of mitigating circumstances. We know all about the monetary explosion of the early 1970s. We know, too, of the rises in commodity prices and the price of oil. We have heard about the vulnerability of our currency. It is fair to point out that membership of the EEC has had an inflationary effect which even protagonists of the EEC cannot deny. Of course, all these factors have served in one way or another to push up retail prices.
  Must we therefore adopt a defeatist attitude towards inflation? Must we say that little or nothing can be done about it? There is no doubt that the first two phases of the pay policy have been adhered to by the vast majority of the workers with a great deal of restraint. But we shall not have much chance of getting a phase 3 agreement, or one that will stick, unless something pretty dramatic is done about prices. I am sure that the majority of workers do not want a free-for-all if by that is meant roaring inflation and the devil take the hindmost.
  The workers are saying loud and clear, however, that something dramatic must be done about restraining price increases, particularly on essential goods. It is a sad fact that the percentage rise in the costs of food and fuel and light have been greater over the last three years than the percentage rise in the retail price index as a whole. If something is not done about prices either we shall not get a phase 3 agreement or we shall get one at the top level which will not stick at the
  1346
  grass roots. In many ways that would be he worst possible outcome. The consequences would be very bad for the country, and particularly bad for the trade union movement.
  My right hon. Friend the Secretary of State said that the nub of this Bill was concerned with investigating and freezing particular prices. Clearly, the Opposition do not like freezing at all. My Front Bench may like a bit of freezing, but is opposed to anything like an overall freeze. I merely ask my right hon. Friend to look again at the possibility of a wider, more general freeze. I know the arguments that are deployed against the idea—that profits would be squeezed, firms forced into liquidation and unemployment increased. However, one cannot have the argument both ways. If one is saying to the trade unions that a free-for-all would mean rocketing inflation which would mean that our goods would become more uncompetitive and more people would be out of work, surely it is just as arguable that to hold prices down would be to make our goods more competitive, particularly when we have a great deal of spare capacity. Two totally conflicting arguments are being deployed.
  Of course, a fairly general price freeze would be rough justice but so is pay restraint rough justice. It is perfectly legitimate for the man on the shop floor to ask why prices have been allowed to rise every three months when he can have a wage rise himself only every 12 months. This is particularly true in the case of beer, which is dear to the hearts of many of my constituents. They see the Price Commission as having been almost an open invitation to the brewery companies to put up prices every three months.
  Whether this Bill is the sort of dramatic initiative against inflation for which people are looking is, I am afraid, and as my hon. Friends have said, open to serious doubt. What is not open to doubt is that the Opposition have no consistent and agreed policy on inflation at all. Clearly, they do not like price control, and hence their criticisms about it having any kind of permanence. They are not sure about wage control. They have virtually every possible shade of opinion on this subject. Monetarism is now in fashion, even among those who were members of a Government who hardly bowed the knee to that economic

  1347
  idol. A devotion to economic competition lingers on, and that would be all right if it were not linked to a delusion that competition is still the norm in our economy instead of being the exception. Altogether, there is such a mishmash of conflicting doctrines and opinions about what to do that it would take a genius to sort it out—and I do not see many geniuses on the Opposition Front Bench. I amend that; I do not see any, and any who were approaching being a genius have departed to the Back Benches.
  Should the Opposition Front Bench unfortunately find itself on this side of the Chamber, the tiger of inflation would have long escaped from the cage before they had decided how to bolt the door.
  The Bill will, of course, receive my support. However, far from the Bill being weakened in the face of attacks from the Opposition—aided and abetted by commercial interests—I hope to see the Bill strengthened during the course of its progress.
  8.58 p.m.
  Mr. Geoffrey Dodsworth: The heart of the Bill lies in its new investigatory powers, and, in particular, the heart of the matter lies in the relationship with the nationalised industries. This is an area of public responsibility and authority in which the Government have a duty to act.
  I am concerned to demonstrate, briefly, the relationship that exists between Ministers and Parliament and, in turn, between Ministers and the nationalised industries. The Price Commission's report in the latter part of last year told us that the power to control nationalised industry prices, both initially and subsequently, is firmly vested, subject to special conditions, in the Minister responsible and not in the Price Commission. The Price Commission's powers are limited and likely to be of little practical application. I know that it may be said that we shall have a new investigatory operation and opportunity, but there is a power of exclusion referred to in the consultative document, which points out that coal and steel might be excluded. We have there a sign of things to come.
  I am concerned that Parliament should accept its responsibilities regarding the voting of funds and that Ministers who
  1348
  dictate to industries should report to Parliament. There is provision for the utilisation of the veto on investigatory powers by the use of the negative procedure. I think that it would be better to use the affirmative procedure. I should like to be sure that any nationalised industry which is to be excluded from investigation is made the subject of the affirmative procedure. That is in the interests of both Parliament and the nationalised industries. They are the victims of the present procedure. They are the shuttlecock between Parliament, Ministers and the heads of those organisations. Not so long ago the head of one nationalised industry referred to it as being a nightmare for management. I can well understand that.
  Let us consider the catalogue of possible price increases on British Rail, gas, electricity and postal charges. Those are areas which lie at the heart of our economic policies. It seems wrong to have a Minister with dictatorial powers to exclude them from consideration.
  The Select Committee on Nationalised Industries provides a good illustration of the difficulties facing it. In a recent report it referred to being seriously hampered by the lack of yardsticks against which to assess performance, lack of staff resources, and difficulties of identifying the crucial issues underlying the partial information contained in public accounts.
  The Gas Corporation is a classic illustration of giving partial information. In its 1975 accounts the deficiency payment was incorrectly calculated. We have now seen the recalculation providing for depreciation and it looks as though the corporation is not making as much money as was first forecast.
  The appalling behaviour of the Secretary of State for Energy has been rightly demonstrated by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). Looking at the reasons given by the Minister, we find that he overrode the Price Commission. I understand that Schedule 2 of the Counter-Inflation Act will still be in operation. Therefore, we shall have one Minister saying "There shall be no investigation" and another Minister saying "There shall be no price increase." What kind of control is that?
  The gas price increase was for purely political reasons. Incidentally, the reasons

  1349
  were published after the increase had been approved. The announcement was made in the London Gazette on 5th April, and only after I pressed the Minister why he failed to observe the proper terms of the original Counter-Inflation Act. That is an example of the Minister failing to carry out his responsibilities. That action was taken for political reasons. The Gas Corporation was told that it had to respond to the Government's intention to reduce capital indebtedness and that had to be done by increasing gas prices. It meant that the consumer was taxed. That was an irresponsible way for the Minister to act. It was a tax without redress.
  We must ensure, in considering the Bill, that consumers dealing with nationalised industries are fully represented and that any price increases are subject to the fullest possible scrutiny. I suggest that the Select Committee should have more searching powers to examine price increaess. That mechanism would commend itself to Parliament.
  Mr. Deputy Speaker: There are 10 minutes left for two speakers.
  9.4 p.m.
  Mr. Eddie Loyden: Labour Members have clearly indicated that the question of prices is the key to the whole future of the social contract. I want to deal with that aspect in this brief contribution.
  The demonstrations that are taking place in the country, including that which took place at the House last week, are clear indications, not of the rumblings of the rank and file of the trade union movement, but of their anger about prices. Prices have become at least as important a factor as unemployment. Price increases hit all groups, including the unemployed, the employed, the sick, the aged, and the single parent families—all those people whom this Government allegedly intend to protect. Prices are the key issue. It follows that if there is any system of controlling prices—which I doubt—it will be that upon which the future of the Government will depend.
  The Bill must be seen as an effective way of dealing with prices. It is evident to those of us who have had any dealings with the Price Commission that the present arrangements are weak and, in
  1350
  many cases, non-existent. There is evidence, from questions about certain commodities, that constituents often do not understand that a particular price increase is not covered by the responsibilities of the Commission.
  I was startled to discover from the Department of Trade that the Commission has no control over the surcharges imposed at ports by the various bodies that operate on behalf of shipowners. Everyone knows that surcharges on goods that are landed at ports increase a whole range of prices. There are many instances which show that the present activities of the Price Commission are inadequate.
  The situation is linked to the future of the social contract. Members of the TUC have either not read the Bill, or, if they have, they have failed to understand it. That is the kindest way of explaining the TUC's position. If members of the TUC have read the Bill and understand it they are pulling a "con" trick on the workers by arguing that the Bill will protect their standards of living and form part of a future deal.
  With my hon. Friends I am concerned that the Bill will contain provisions which should be in a different Bill. That happened with the Housing Finance Act in which counter-inflation measures were included. This Bill contains an extension until 1980 of the pay policy. That should concern us all. If there is no evidence that attempts will be made to take out that clause in Committee I shall not support the Second Reading of the Bill.
  The Government must recognise that the working class, which has supported them for a long time, is suffering from lowered living standards. Unless the Government gain control over prices the social contract will not survive.
  9.9. p.m.
  Mr. John Wakeham: By listening to the debate, as I have, one can tick off the points one intended to make. I find that I have four short sentences of my speech left and I propose to deliver them.
  First, I am concerned that the treatment of distributors in this legislation is both unfair and illogical. A rule covering both gross and net margins for distributors represents a control of cost increases which may be reflected in prices.

  1351
  It is illogical that these rules should continue to be applied when allowable cost provisions for manufacturers and services are being dispensed with.
  Secondly, I re-emphasise one of the arguments of my right hon. Friend the Member for Grantham (Mr. Godber). The Government should not forget that in May 1974 the gross margins for wholesalers and retailers were reduced by 10 per cent. If we are to have this legislation enacted, the continuing need for this reduction should be considered.
  My third point relates to the new powers of investigation. There is no justification for investigations into a firm unless the firm's reference level has been or is likely to be exceeded, and no prenotification of a price increase should be required if the proposed increase does not itself raise the firm's profit level above its reference level.
  Fourth, I believe that a number of the investigations may be extremely complex and may be the subject of different interpretations, depending upon the accounting conventions. Therefore, it would be much more preferable for draft reports and recommendations to be discussed with the firms concerned so that any errors of fact or omission might be cleared up at the time and also so that the companies concerned might make written submissions to the Secretary of State with his report from the Price Commission before any action were to be taken affecting the profitability of those enterprises. This is especially important in terms of current cost accounting. If the proposed suggestion were that this standard should be introduced for large firms before small firms, it would result in two different systems of accounting, and this might be extremely relevant to the question in hand. Therefore, I believe that firms should be given the opportunity to make representations on draft reports before they are finalised.
  These proposals clearly constitute a dramatic change in the mechanism of price and profit controls and the philosophy of their application. The switch is one from an arithmetical calculation to one where there are many subjective judgments involved. If the subjective judgments are made correctly many business people will accept them, albeit reluctantly. A great deal will depend on the revised constitution of the Price Commis-
  1352
  sion and on the importance of getting people who have the right background and experience to carry out this job.
  I do not like this Bill, but, if we have to have it, it will be made much more acceptable on the basis of people who are generally acceptable to all sides of industry for their knowledge and experience of the commercial considerations concerned.
  9.13 p.m.
  Mr. John Nott: Today's debate on the Second Reading of the Price Commission Bill concludes another parliamentary stage—and, I believe, largely an irrelevant one—in this country's long and so far unsuccessful fight against inflation. Although to the superficial observer it might seem that any measure with the evocative name of the Price Commission Bill would be at the heart of the fight against inflation, I do not believe that this is so. Rising prices are a symptom of inflation and not its cause. The House would be in error if it thought that any administrative control over prices generally could be effective for anything other than a very limited period of time.
  That is what the author of this rather peculiar Bill meant when he said at the very outset of his speech that inflation could not be abolished by an Act of Parliament. If I may say so, that was the best sentence in his speech.
  We have now had a Price Code for a little more than four years, and inflation is still running at nearly record levels. When the Price Code was first introduced in 1973, I do not think that it was claimed, any more than it can be claimed today, that administrative controls on prices in a country which imported nearly half its food and nearly all its raw materials and which was still at the centre of an international financial system could be anything other than short term in their effects. In so far as price controls can have, or ever have had, a short-term effect on prices, they can only have that effect at the expense of resources that would otherwise be deployed in new investment and new jobs. The history of the past few years surely illustrates the truth of that assertion. In spite of genuine attempts, well-meaning though many of them have been even if they have been misguided, to stem

  1353
  the rise in prices though price controls, inflation today, if measured on a three-month annualised basis, is running at 19·9 per cent. against 8·4 per cent. in October 1974. I do not believe that these controls have worked effectively in the past, nor do I believe that they will work effectively in the future.
  As well as failing—surely the record of inflation after many years of price controls of the sort that we have had must show that they have failed—they have had a significant adverse impact on the resources of the company sector. Although this is not a quantifiable aspect, my right hon. Friend the Member for Grantham (Mr. Godber), my hon. Friend the Member for Uxbridge (Mr. Shersby) and many others have given illustrations of how profitability in industry—namely, the amount of money retained by companies to plough back into investment and new jobs—has fallen since 1973. As I have to make a shortened speech, I shall not give a host of examples. I shall refrain from doing so, as many of them are well known.
  The food industry is a prime example. I have statistics provided by a panel of 31 food companies with sales amounting to about £4½ billion in 1975. The statistics were collated by the Institue of Grocery Distribution. They show that after taking into account inflation—my hon. Friend the Member for St. Marylebone (Mr. Baker) made the same point about inflation—pre-tax profits as a percentage of sales for the year ending 31st December 1976 were running at less than 0·01 per cent.
  The CBI's view was summed up in one paragraph of its representation, in which it stated:
  "Industry's profitability is already dangerously low … around 3½ per cent. was the real rate of return on capital of industrial and commercial companies … in 1975 and 1976 with a return of 13 per cent. in 1960 and … 10 per cent. in the 10 years to 1972."
  I do not think that there is any dispute about the manner in which profit margins and the capacity of companies to plough back their resources into investment and new jobs has been seriously eroded by a succession of measures. But the impact of price control, especially margin controls, is ever more damaging even than
  1354
  the medium-term impact on jobs and living standards implies.
  Even in a fully-fledged Socialist economy, where profits as we define them in a capitalist State do not exist, the allocation of resources to meet changed patterns of demand and changes such as poor harvests, droughts, frosts and natural calamity can be achieved only through the price mechanism. That applies to a fully-fledged Socialist economy or a capitalist economy.
  I have listened to several speeches made by Labour Members, not least those from the hon. Members for Thurrock (Dr. McDonald) and Coventry, South-West (Mrs. Wise). If they made such speeches in a centralised bureaucracy in Eastern European countries, they would be branded as Right-wing deviationists, not Left-wing Socialists as they are here. They seem to show a total incapacity to understand the function of the price mechanism in adjusting supply to varying demand. If we look at the history of price control since the early part of the 1970s—surely this could not happen in a centralised bureaucracy for reasons different from those that would be advanced by Labour Members below the Gangway—we see that the whole allocation of our resources in the company sector has been largely frozen to reference levels that were fixed in the early 1970s. So there has been virtually no redistribution of resources in our economy to meet international and domestic demand. That is a recipe for a stagnant economy in which the creation of wealth will stop completely.
  Mr. Hattersley indicated assent.
  Mr. Nott: I am glad that the Secretary of State nods in agreement. Indeed, that is precisely what he and other members of the Government have been saying. Today he quoted precisely the words he used when he spoke to the Industrial Society on 22nd February. He said then, and repeated today:
  "There is only one way in which that objective"—
  the objective of overcoming inflation—
  "can be achieved—the creation of an economy in which the sterling rate is stabilised, domestic credit expansion restrained, and the progress towards increasing exports and expanding production is accelerated. There is no alternative easy path."

  1355
  He went on to say:
  "… had there been no depreciation and none of the measures needed to support the pound, inflation would now be close to single figures. That is not an excuse. That is an explanation. More important, it is irrefutable evidence that the best prices policy we can have is an economic strategy that eventually creates a stable pound and an expanding economy.'
  Of course the right hon. Gentleman is right.
  Mr. Heffer: Many of us have been arguing the need for a different economic strategy for a long time, and have pointed out that if we have price controls under the capitalist system we shall, of course, have a position in which capitalists will not invest. We have explained that time and again. In that sense, there has been total agreement. The logical conclusion is not to do the half-hearted business in which one gets the worst of both worlds but either totally to accept the Opposition's point of view of complete unfettered free enterprise or begin to plan resources in the way that some of my colleagues have suggested.
  Mr. Nott: I will come later to the hon. Gentleman's expression "unfettered free enterprise". I agree with him on his main point. I find his position and the position of the Tribune Group and, for all I know, that of Mr. Jack Jones infinitely more logical than the position of the Social Democrats who go on moaning about wanting a mixed economy but do their utmost to destroy it—and I suppose that Social Democrats still comprise about two-thirds of the Cabinet. At least the hon. Member for Liverpool, Walton (Mr. Heffer) and his friends want to destroy the price mechanism—I accept that—because it would be the quickest and best way of ending the capitalist system and the mixed economy and bringing us to the situation where the Government can direct labour, capital and goods. That position is more understandable than the position of the Social Democrats who form today's Government.
  We had a contribution from the Liberal Party—interesting as always. I hope that I shall not be misquoting the hon. Member for Truro (Mr. Penhaligon) when I put his argument as follows: "We Liberals are the only party in the House which actually wants to reduce the standard of
  1356
  living of the British people, and we have only 13 seats because we are honest about it. There are two ways of reducing living standards. Either one leaves it to market forces or one shares out the pain all round, and, because I believe that it is better to have the pain shared out all round rather than leave it to the market economy, I shall advise my right hon. and hon. Friends to vote with the Government tonight." That is almost, if not precisely, a correct version of what the hon. Gentleman said.
  Mr. Penhaligon: The hon. Gentleman puts is amusingly, but does he not accept that in a world economy that is not exactly buoyant, a reduction in the average living standards of the British people will be the result if we wish to reduce inflation in this country over the next 12 to 18 months?
  Mr. Nott: I do not accept that that is necessary. I fear that living standards will fall sharply in the next two or three years, but I do not accept that it should be an objective of policy. Indeed, the objective should be precisely the opposite, but I cannot debate that now.
  I do not think that there is any public clamour or demand in this country for an intensification of price controls as the Secretary of State was asserting in Grimsby. For all I know, that was also asserted by those wet slabs of cod and filleted haddock that call themselves Liberals. We know what sort of sign the Grimsby fish fingers will give to Liberals tomorrow.
  There is complete public scepticism about the Government's ability to control prices. There is no doubt about that, and because there is such disbelief and scepticism by the public, there has never been a better opportunity to make a change of policy and direction. I shall be saying a few words at the conclusion of my speech about what we should like to see happen.
  "Our people are not children. They know the score—and especially that no short cuts, no gimmicks, no six-month miracles will cure our difficulties"
  Those are not my words. They are the words of our great navigator the Prime Minister who, in his best general practitioner style, wrote them for his friend Mr. Rupert Murdoch in the News of the World. How right those words were!

  1357
  One of the few benefits of the rosetinted-dawn style of politics practised by the Chancellor of the Exchequer—with its references to miracles appearing next year or the year after and his "by the end of the year we really shall be on our way to the so-called economic miracle that we need" is that it has made the people of this country completely sceptical about the efficacy of price controls and thoroughly realistic about the capacity of politicians to play God in the market place. This is a healthy situation and one on which we can build.
  When the right hon. Member for Huyton (Sir H. Wilson) was our chief navigator, people were taught to believe, and did believe, that he could make fish swim and crops grow. For all I know, the right hon. Gentleman still believes that. We do not have the benefit of his advice in our debates nowadays.
  Clearly, the public are utterly sceptical about the efficacy of price controls of the kind contained in the Bill, and that provides politicians of both parties with the opportunity to make the necessary changes.
  I should like to deal for a moment with what are known as the "consumer interests" These are a few people whom politicians appoint to jobs and meet at cocktail parties in London and the South-East but of whose activities—and this is no criticism of them, as I shall explain later—the general public seems almost blissfully unaware.
  We must not exaggerate the views of what I call the statutory female aggravator. [HON. MEMBERS: "The hon. Gentleman should look beside him."] I realised that there was a possibility that some hon. Members might point in the direction of my right hon. Friend the Leader of the Opposition, but she is one of the boys and, in so far as she is an aggravator, it is as an aggravator only of hon. Members opposite. These aggravators who nest in the pages of The Guardian are every so often offered by successive Secretaries of State a tasty morsel, such as the price check scheme or the shopping basket scheme, and red triangles are offered to them. However, nothing ever comes of it.
  In the recent consumer protection study a scientific sample of 1,000 housewives—if one can imagine quite what that would
  1358
  look like—was questioned. Only 2 per cent, claimed any knowledge of the Department of Prices and Consumer Protection. Over 60 per cent. said that they had never heard of it, or that they knew nothing about it of any consequence whatsoever.
  It was considerate of my hon. Friend the Member for St. Marylebone to propose a merger of the Departments that are now shadowed by myself and by my hon. Friend. However, I must tell him that I would not wish the Department of Prices and Consumer Protection on my worst enemy. Nevertheless, I appreciate his friendship.
  It must be very galling for the Secretary of State. He is always bouncing up and down, popping up quite by chance in front of television cameras or in the pages of the Sunday Press.
  Mr. Hattersley: Tomorrow.
  Mr. Nott: I always admire the ebullience of the right hon. Gentleman. Unfortunately, the ambitions that well up inside him lead to frequent blow-outs. Also, unfortunately, there is no Red Adair around. There are only the Reds below the Gangway. What they do is to come along and cap the blow-out by igniting it with a match.
  I now come quickly to the Bill itself. The best source of information on the Bill is the interview that the Secretary of State gave to Mr. Gordon Leak the other day. Mr. Leak asked the Secretary of State:
  "Would the price of any product be lower today if these controls had been introduced three years ago?"
  The Secretary of State answered,
  "Some prices certainly would. But not overall."
  Precisely. That was just the point that the Secretary of State was nodding about. In other words, inflation would not have been affected at all—that is what he said—but some prices might be different from what they are now. What is the purpose of a policy which creates the distortions of price controls but which, by the right hon. Gentleman's own admission, has no ultimate effect upon inflation at all?
  Then Mr. Leak says,
  "I asked the Minister to give some examples of price rises that might have been blocked had his policy been in operation last year."

  1359
  The Secretary of State answered,
  "No, I can't … But, clearly, I have very many examples in my mind. … Certainly there were some price increases which were allowable under the old Price Code but which … by my standards were unjustifiable."
  What does that mean?
  Mr. Leak went on to say that now, under the new arrangements,
  "claims will also have to be what Mr. Hattersley calls socially accountable."
  We had the phrase "socially accountable" today. What is a socially acceptable or socially accountable profit? What does it mean? Presumably, if the hon. Member for Bristol, North-West (Mr. Thomas), who is a Socialist Back Bencher, sells his council house for a large profit—he bought one the other day—that will not be a socially acceptable profit. However, if the Chancellor of the Duchy of Lancaster—the right hon. Member for Manchester, Central (Mr. Lever)—who is rich and socially acceptable in every way, makes a profit, that will be all right. What does a "socially acceptable profit" actually mean?
  The Secretary of State then said,
  "An efficient socially responsible company has nothing to fear."
  What is a socially efficient company? What can that mean?
  Dr. McDonald: I have been most entertained by the hon. Gentleman's buffoonery this evening. However, perhaps he could take the last 30 seconds or so of his speech to tell us what Tory policy on prices is.
  Mr. Nott: Furthermore, many of my hon. Friends touched on other points in the Bill. They said that immense uncertainty and delays would be created by it. My hon. Friend the Member for Pudsey (Mr. Shaw), who has worked very hard in this area of our affairs, makes that point, and points have been made about the complete lack of knowledge about safeguards. Here we have the Bill in front of us now but the safeguards are not given until later.
  We do not know the membership of the Commission. We know that the Secretary of State will appoint members of the Commission and that he intends to have more representatives of other interests apart from industry on it. Who will be on it? We have no idea. I suppose that Mr. Len Murray and Mr. Clive
  1360
  Jenkins will be on it, and no doubt there will be a statutory female aggravator as well. Maybe Lord Short and Lord Beswick will be on it as well—the normal collection of people appointed by a Labour Government. How shall we know how the whole policy for companies is to be organised until we know the members of the Commission?
  The Commission will have unprecedented powers, and so will the Secretary of State. In Clause 10 the Secretary of State may direct the Commission to examine the profits, costs, efficiency and plans for activities or use of resources. Those are extremely broad powers. The hon. Member for Coventry, South-West drew attention to Clause 22(2)(a), under which the Secretary of State may by order
  "provide that such of the provisions of this Act as are specified in the order shall not apply in such cases as are so specified".
  What is the Bill for? Why do we have the Bill at all if the Secretary of State can vary it by order and change it when he feels like doing so? I hope that the Minister of State will answer these questions when he winds up.
  Mr. John Fraser: If I get a chance to do so.
  Mr. Nott: I thought that we were taking 20 minutes each.
  Mr. Fraser: I was to have 25.
  Mr. Nott: I am sorry; there has been a genuine misunderstanding here. I hope that the Minister will give me another few minutes.
  I have been challenged to say what we would do. We accept that Governments have to be equipped, either directly or through their agencies, with powers to prevent the abuse of market power. We accept that. Firms that can raise their prices with impunity either as members of a price ring or through restrictive practices cannot be permitted to do so and must be prevented from doing so under a defined statutory procedure.
  At present the Office of Fair Trading is not given any real assistance by the Government in investigating complaints that it wishes to investigate. It does not have the powers to investigate many complaints. The Monopolies Commission is often not allowed to investigate many things that the Office of Fair Trading

  1361
  wants investigated. There is conflict between industrial strategy and competition policy, but competition policy is not being undertaken by the Government at all.
  The sensible answer is to fold up the Price Commission into the Office of Fair Trading so that price investigations would be concerned with and embrace competition policy. That is what we propose, not the whole panoply of controls and long-term investigatory procedures proposed through the Price Commission in this Bill. We cannot have three bodies all falling over each other and all broadly concerned with the maintenance of fair trading in one way or another. This places an impossible burden on industry and creates a bureaucratic machine totally without relevance to its effectiveness.
  The Government's record on prices is staggeringly bad. Not only have they created 1½ million unemployed by squeezing margins through price control and heavy taxation but they have, as a result of their profligate expenditure, driven down the price of sterling so that internal price levels have got totally out of hand.
  In order to meet the social contract, the Government have raised taxation to unprecedented levels, with war widows being taxed for the first time. They have raised the relevant margins of those out of work as against those in a job, and the two flat-rate increases in stages 1 and 2 of their pay policy have eroded differentials and created an impossible situation for a further stage of an incomes policy.
  When Mr. Gordon Leak asked the Secretary of State what was in the Bill for the housewife, the right hon. Gentleman claimed:
  "It will prevent some price increases. But it is not a policy which is expected in itself to bring down the inflation rate. The way to get the inflation rate down is by running a successful economy."
  That we can endorse, but we cannot endorse the Bill.
  9.40 p.m.
  The Minister of State, Department of Prices and Consumer Protection (Mr. John Fraser): One thing is remarkable about the two speeches we have had from the Opposition Front Bench. With the exception of about 40 seconds' passing reference to the Director General of Fair
  1362
  Trading, we have had not one prescription, not one constructive suggestion from the Opposition specifically dealing with the question of prices. I hope that the House and country will note that.
  What the hon. Member for Gloucester (Mrs. Oppenheim) had to do, as did some of her Back Benchers, was to resort to a paranoiac fantasy about the operations of the Price Commission and the criteria in the Bill. The hon. Member for St. Ives (Mr. Nott) fell into the same trap. He talked about uncertainty and delay. Other hon. Members talked about goods being off the shelf. They said that the Bill would be damaging and dislocating, that it would bring about bankruptcy.
  All those arguments are a ludicrous hypothesis. We have already had a considerable period of experience in the operation of monopolies and mergers legislation by this Government and a Conservative Government. The criteria in the Fair Trading Act are not dissimilar in nature from the criteria in the Bill. The scale of responsibility of the two bodies is not substantially different. The scale of responsibility of the Price Commission and the Director General of Fair Trading is not substantially different. The Monopolies Commission has dealt with such wide-ranging matters as oil companies, as mergers between the banks, as the brewers, the bakers, and single firms such as Xerox and Birds Eye. It has not acted capriciously. It has not been arbitrary. It has not tried to wreck a company. To invent this fantasy about the way in which the Price Commission, my right hon. Friend the Secretary of State or the servants of the Commission would act, to suggest that they would try to wreck and dislocate industry, is utterly wrong-minded. It is perhaps the only way that Opposition Members can find by which to oppose the Bill.
  We can have a good-quality Price Commission, as we have had in the past, which represents and has at heart the interests of industry, the consumer and the nation. I do not believe that those interests are contradictory. All the experience of operating other areas of competition policy shows that the suggestion that the Commission will be out to wreck or that the criteria are not sufficiently tight is untrue.
  The second strand of the debate was about competition. The hon. Member

  1363
  for Romford (Mr. Neubert) thinks that we have plenty of competition. The hon. Member for Gloucester says that market forces are enough to decide adequate prices. But my hon. Friend the Member for Bristol, North-West (Mr. Thomas) thought that we were frozen by monopoly, and my hon. Friends the Members for Birmingham, Yardley (Mr. Tierney) and Thurrock (Dr. McDonald) I think agree that there is a huge concentration of power that needs to be accountable to the general public and the consumer.
  The hon. Member for St. Marylebone (Mr. Baker) was rather more thoughtful about these matters. He said that perhaps there should be a merger between the Price Commission and the Monopolies Commission. I do not think that I need emphasise the close relationship between the new prices policy and competition policy. It has been argued, as the hon. Gentleman argued, that the two should be merged or, with less justification, that competition policy makes prices policy unnecessary.
  It is unrealistic to argue that prices policy is unnecessary in a complex and imperfectly competitive society. The concentration of a large proportion of industrial production in a relatively small number of firms is a fact of life. Some larger manufacturing units may produce economies of scale which benefit the community as a whole. In other cases the resources are so large that it is necessary to have large investment projects to complete on equal terms with overseas rivals, and the investment can be found only by large enterprises.
  As a result—and these are the facts of life—roughly 40 per cent. of net manufacturing out put is concentrated in the top 100 firms. In 1972, about a quarter of all manufacturing sectors were concentrated to the extent that five firms accounted for more than 70 per cent. of gross out put in each sector. Even in the food and drink manufacturing sector, which is fiercely competitive in many respects, there are some 50 well-known products in which a single firm holds more than 40 per cent. of the market.
  In these circumstances there are many opportunities for firms to limit competition and exploit their market power. Even where there is no clear monopoly in an industry, sophisticated technology gives
  1364
  considerable scope for product differentiation within the industry; many sophisticated consumer products can be serviced, or have spare parts supplied, only by the firms which manufactured them; heavy advertising can be used to keep competitors out of the market; and nationally based firms can adjust their marketing strategies in different regions to limit the growth of local competitors.
  As regards pricing itself, uncompetitive pricing is not confined to monopolies as defined in the legislation. Where a market is dominated by a small number of firms, oligopolistic practices such as parallel pricing and price leadership are likely to occur. The Monopolies Commission report on parallel pricing in 1973 mentioned over 50 industries in respect of which complaints about parallel pricing were received.
  In its monopoly investigations the Monopolies Commission has on many occasions concluded that the appropriate course for dealing with a monopoly situation is not to break up the monopoly but to maintain long-term surveillance over prices or profits. Examples of industries on which such action has been taken are detergents, breakfast cereals, colour films, contraceptive sheaths, chemical fertilisers and clutch mechanisms. [Interruption.] Some ex-public schoolboys will always giggle at the mention of contraceptive sheaths.
  There is a clear rôle for prices policy, therefore, not only in examining firms or sectors where there are uncompetitive pricing practices which do not fall within the technical definition of a monopoly but also in supervising pricing in sectors where the promotion of competition is impracticable and where it may be necessary to intervene to prevent the abuse of market power.
  A great deal of the Bill is about the powers of monopoly and the control of the market and the figures are convincing enough to show that we need price intervention as well as the supervision of the Monopolies Commission.
  I wish to turn to some of the points made by my hon. Friends, particularly about Clause 17. The clause is included in order to continue where appropriate, and to keep in parallel the duration of the provisions on profit margin controls, dividends and the back-up powers on

  1365
  pay. The TUC raised no objection to this and agree that these existing provisions should be continued.
  Of course the House will realise that this is only an enabling provision and that the continuation of the back-up powers on pay beyond 31st July would be entirely dependent on the laying of a White Paper which would have to be approved by affirmative resolution of each House. The White Paper will of course be dependent on the outcome of discussions which the Government are now starting with the TUC about arrangements for pay after July.
  Perhaps I may put to my hon. Friends in this way. Unless there is voluntary agreement Clause 17 cannot operate. It does not operate automatically for a period of three years, and is subject to the most stringent parliamentary procedure for the annual renewal of the provisions after the first year. To my hon. Friends who have doubts about these matters I direct their attention to a Press release given out by the TUC this afternoon on this matter.
  Secondly, my hon. Friends have expressed concern about the veto power of Price Commission investigations. I reassure them that the power is for use only in exceptional circumstances where the Secretary of State may be aware of an important factor that escaped the Price Commission's attention or on which the Price Commission would not have access to information. I find it extremely difficult to give an example, but that perhaps is proof of the exceptional nature of the veto provision. I can tell my hon. Friends only that my right hon. Friend would be just plain "nutty" to veto an investigation by the Commission without patent justification and in the most exceptional circumstances.
  Mr. Hooley rose—
  Mr. Fraser: I am extremely short of time, and I am unable to give way to my hon. Friend.
  I turn now to the exemption provisions. The power to grant exemptions must be wide, although its exercise will not be wide. It is difficult to write a list of specific exemptions into the Bill partly because if one did that one might wish
  1366
  to withdraw it later and that would require further legislation. The number of exemptions will be kept strictly to a minimum.
  Let me give one or two examples of what they would be. They would be the control of coal and steel prices on which we are circumscribed by international treaty. Second, they would be prices which are not determined in a way which is susceptible to statutory restriction. An auction would be one example. Thirdly it would be prices controlled by other bodies. That would include bus fares which are fixed by the traffic commissioners or taxi fares which are fixed by my right hon. Friend the Home Secretary. I hope therefore that our intention to bring every price or charge within the scope of investigations wherever practicable is perfectly clear.
  Some of my hon. Friends think that the Bill is not tough enough, while some Conservatives think that it is too tough. My hon. Friends underestimate in some ways the powers in the Bill because they equate one investigation or examination with one price, and that is a mistake. That belief underestimates the side effects of an inquiry. Every examination and investigation will have a ripple effect. Investigations of prices of end products will feed back into the prices of the suppliers of the companies directly concerned. Conversely, investigations into the suppliers of basic chemicals and other similar intermediate products would if price restrictions resulted have a moderating effect on a wide range of consumer prices.
  I could give many examples on this score. To draw a geological analogy, an investigation or inquiry will be an epicentre and there will be inquiries and investigations from which the reverberations could measure eight or nine on the Richter scale. The effect will not be limited absolutely to the price being investigated but will extend to many other areas.
  I invite hon. Members to look at the subjects which have already been investigated and which show that the inquiries do not equate simply with one price. Take, for instance, the investigation of bread prices. This is not one price, but the prices of a range of activities by a number of food producers. Television

  1367
  rental charges were not one price, but the activities of a large number of people quoting a large number of prices. Therefore the examination affected not just one single area of product activity, but the practices of manufacturers, distributors and wholesalers right across the board.
  In the past references have not been capable of leading to orders, but if the House looks at the recent list of references it will see that each inquiry potentially affects many prices directly and probably far more indirectly. One rocket, if one could describe an inquiry or examination like that, could light up the entire sky.
  I turn now to some of the consumer protection measures in the Bill. Clause 12 gives the power after examination to prohibit firms from recommending resale prices. The reason for that lies in many shops and in many advertisements which make ludicrous claims concerning recommended retail prices. The reductions which are offered are made on entirely artificial recommended prices.
  The Conservatives believe in competition, and I believe that they believe in fair competition. But many recommended prices are artificially inflated to give an illusion of competition where no competition exists. We have recently had an example of a Price Commission recommendation being totally disregarded by one firm. Following an inquiry into the prices of small electrical goods, one appliance manufacturer—Hot point—promptly started and heavily advertised a new discount on its own retail recommended price.
  That is simply fooling the public. The Price Commission has already come to the conclusion that recommended prices can be misleading and we are right to do something permanent about them now.
  Clause 16 allows the Secretary of State to require the display of prices for retail services as much as for goods. Again, it is right if we are to have an open, fair and competitive commercial situation that people should know the price of a service, item or goods before they make their purchase decisions. There is a rather old-fashioned idea that in some areas it is somewhat impolite to ask the price and that there is something not quite nice in asking how much something costs.
  1368
  We take a much more down to earth attitude than some hon. Members opposite and believe that the Government should take powers to require the display of prices of services as well as of products. If it is right to require the display of the price of petrol, then why not the price of car hire, hairdressing, minicabs, funerals and other such services. Hon. Members may giggle about these things, but these are important consumer purchases—some of them taking place only once in a lifetime—and they are of considerable significance.
  Clause 18 authorises, on a permanent basis, a grant of £3·5 million for consumer advice centres and price surveys. I believe that the House and the country as a whole supports the idea of being able to give consumers information, guidance and assistance before they make their purchases and in giving the ordinary consumer a powerful friend in the high street when he wants to complain about an inadequate purchase.
  The hon. Member for Gloucester said nothing about her prices policy. Perhaps she will tell us when she has a chance—not now because I do not wish to be interrupted and because, earlier, she took a longer time than I shall take—whether, in the light of her remarks on Clause 18, she is now totally opposed to consumer advice centres and price surveys.
  The main feature of the Bill is that it puts—to the chagrin of the Conservative Party—the prices policy on a permanent basis. For the last 11 years, excepting one complete year, there have been statutory prices powers. There was only one complete calendar year, 1971, when the Conservatives were in office, when there were no such powers. They were talking about the "dash for growth". In 1971 they had a dash for nudity and for nakedness. There were no statutory intervention powers and part of the disaster that resulted was the inflation that has taken place since then. The Conservatives were rapidly converted and came back to the House with prices Bills in 1972 and 1973. They produce the sort of inflexible code that we now must operate.
  We have now come to the end of the debate. As I said at the beginning, I remain mystified about Conservatives' policy on prices—unless their policy is no

  1369
  policy at all. Tonight Conservatives can choose to support a Bill that contains flexible and permanent powers, which the country demands. They can choose to do that, but I doubt that they can make up their minds. Mendes-France said
  "To govern is to choose". The Conservative Party is capable of neither.
  Question put, That the amendment be made:—
  The House divided: Ayes 267, Noes 279.

  Division No. 113]

  AYES

  [9.59 p.m.

  Adley, Robert

  Fox, Marcus

  Marshall, Michael (Arundel)

  Aitken, Jonathan

  Fry, Peter

  Mates, Michael

  Alison, Michael

  Galbraith, Hon T. G. D.

  Mather, Carol

  Amery, Rt Hon Julian

  Gardiner, George (Reigate)

  Maude, Angus

  Arnold, Tom

  Gardner, Edward (S Fylde)

  Maudling, Rt Hon Reginald

  Atkins, Rt Hon H. (Spelthorne)

  Gilmour, Rt Hon Sir Ian (Chesham)

  Mawby, Ray

  Awdry, Daniel

  Glyn, Dr Alan

  Maxwell-Hyslop, Robin

  Bain, Mrs Margaret

  Godber, Rt Hon Joseph

  Mayhew, Patrick

  Baker, Kenneth

  Goodhart, Philip

  Meyer, Sir Anthony

  Bell, Ronald

  Goodhew, Victor

  Miller, Hal (Bromsgrove)

  Bennett, Dr Reginald (Fareham)

  Goodlad, Alastair

  Mills, Peter

  Benyon, W.

  Gorst, John

  Miscampbell, Norman

  Berry, Hon Anthony

  Gow, Ian (Eastbourne)

  Mitchell, David (Basingstoke)

  Biffen, John

  Gower, Sir Raymond (Barry)

  Moate, Roger

  Biggs-Davison, John

  Gray, Hamish

  Molyneaux, James

  Blaker, Peter

  Griffiths, Eldon

  Monro, Hector

  Body, Richard

  Grist, Ian

  Montgomery, Fergus

  Boscawan, Hon Robert

  Grylls, Michael

  Moore, John (Croydon C)

  Bottomley, Peter

  Hall, Sir John

  More, Jasper (Ludlow)

  Bowden, A. (Brighton, Kemptown)

  Hall-Davis, A. G. F.

  Morgan, Geraint

  Boyson, Dr Rhodes (Brent)

  Hamilton, Michael (Salisbury)

  Morgan-Giles, Rear-Admiral

  Bradford, Rev Robert

  Hampson, Dr Keith

  Morris, Michael (Northampton S)

  Braine, Sir Bernard

  Hannam, John

  Morrison, Charles (Devizes)

  Brittan, Leon

  Harrison, Col Sir Harwood (Eye)

  Morrison, Hon Peter (Chester)

  Brocklebank-Fowler, C.

  Harvie Anderson, Rt Hon Miss

  Mudd, David

  Brooke, Peter

  Hastings, Stephen

  Neave, Alrey

  Brotherton, Michael

  Havers, Sir Michael

  Nelson, Anthony

  Brown, Sir Edward (Bath)

  Hayhoe, Barney

  Neubert, Michael

  Bryan, Sir Paul

  Heath, Rt Hon Edward

  Newton, Tony

  Buchanan-Smith, Alick

  Hicks, Robert

  Nott, John

  Buck, Antony

  Higgins, Terence L.

  Onslow, Cranley

  Budgen, Nick

  Hodgson, Robin

  Oppenheim, Mrs Sally

  Bulmer, Esmond

  Holland Philip

  Page, Rt Hon R. Graham (Crosby)

  Butler, Adam (Bosworth)

  Hordern, Peter

  Page, Richard (Workington)

  Carlisle, Mark

  Howe, Rt Hon Sir Geoffrey

  Parkinson, Cecil

  Carson, John

  Howell, David (Guildford)

  Pattie, Geoffrey

  Chalker, Mrs Lynda

  Hunt, David (Wirral)

  Percival, Ian

  Churchill, W. S.

  Hunt, John (Bromley)

  Peyton, Rt Hon John

  Clark, Alan (Plymouth, Sutton)

  Hurd, Douglas

  Pink, R. Bonner

  Clark, William (Croydon S)

  Hutchison, Michael Clark

  Powell, Rt Hon J. Enoch

  Clarke, Kenneth (Rushcliffe)

  Irving, Charles (Cheltenham)

  Price, David (Eastleigh)

  Clegg, Walter

  James, David

  Prior, Rt Hon James

  Cockcroft, John

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

  Pym, Rt Hon Francis

  Cooke, Robert (Bristol W)

  Johnson Smith, G. (E Grinstead)

  Raison, Timothy

  Cope, John

  Jones, Arthur (Daventry)

  Rathbone, Tim

  Costain, A. P.

  Jopling, Michael

  Rees, Peter (Dover & Deal)

  Crawford, Douglas

  Joseph, Rt Hon Sir Keith

  Rees-Davies, W. R.

  Crouch, David

  Kaberry, Sir Donald

  Renton, Rt Hon Sir, D. (Hunts)

  Crowder, F. P.

  Kershaw, Anthony

  Renton, Tim (Mid-Sussex)

  Davies, Rt Hon J. (Knutsford)

  Kimball, Marcus

  Rhodes James, R.

  Dean, Paul (N Somerset)

  King, Evelyn (South Dorset)

  Ridley, Hon Nicholas

  Dodsworth, Geoffrey

  King, Tom (Bridgwater)

  Ridsdale, Julian

  Douglas-Hamilton, Lord James

  Kitson, Sir Timothy

  Rifkind, Malcolm

  Drayson, Burnaby

  Knox, David

  Rippon, Rt Hon Geoffrey

  du Cann, Rt Hon Edward

  Lamont, Norman

  Roberts, Wyn (Conway)

  Durant, Tony

  Langford-Holt, Sir John

  Ross, William (Londonderry)

  Dykes, Hugh

  Latham, Michael (Melton)

  Rost, Peter (SE Derbyshire)

  Eden, Rt Hon Sir John

  Lawrence, Ivan

  Royle, Sir Anthony

  Edwards, Nicholas (Pembroke)

  Lawson, Nigei

  Sainsbury, Tim

  Elliott, Sir William

  Lester, Jim (Beeston)

  St. John-Stevas, Norman

  Emery, Peter

  Lewis, Kenneth (Rutland)

  Scott, Nicholas

  Ewing, Mrs Winifred (Moray)

  Lloyd, Ian

  Shaw, Giles (Pudsey)

  Eyre, Reginald

  Loveridge, John

  Shelton, William (Streatham)

  Fairbairn, Nicholas

  Luce, Richard

  Shepherd, Colin

  Fairgrieve, Russell

  McAdden, Sir Stephen

  Shersby, Michael

  Fell, Anthony

  MacCormick, Iain

  Silvester, Fred

  Finsberg, Geoffrey

  McCrindle, Robert

  Sims, Roger

  Fisher, Sir Nigel

  McCusker, H.

  Sinclair, Sir George

  Fletcher, Alex (Edinburgh N)

  Macfarlane, Neil

  Skeet, T. H. H.

  Fletcher-Cooke, Charles

  MacGregor, John

  Smith, Dudley (Warwick)

  Fookes, Miss Janet

  MacKay, Andrew James

  Speed, Keith

  Forman, Nigel

  Macmillan, Rt Hon M. (Fainham)

  Spence, John

  Fowler, Norman (Sutton C'f'd)

  Madel, David

  Spicer, Michael (S Worcester)

  Sproat, Iain

  Thomas, Rt Hon P. (Hendon S)

  Wells, John

  Stainton, Keith

  Thompson, George

  Welsh, Andrew

  Stanbrook, Ivor

  Townsend, Cyril D.

  Whitelaw, Rt Hon William

  Stanley, John

  Trotter, Neville

  Wiggin, Jerry

  Steen, Anthony (Wavertree)

  van Straubenzee, W. R.

  Wilson, Gordon (Dundee E)

  Stewart, Rt Hon Donald

  Vaughan, Dr Gerard

  Winterton, Nicholas

  Stewart, Ian (Hitchin)

  Viggers, Peter

  Wood, Rt Hon Richard

  Stokes, John

  Wakeham, John

  Young, Sir G. (Ealing, Acton)

  Tapsell, Peter

  Walder, David (Clitheroe)

  Younger, Hon George

  Taylor, R. (Croydon NW)

  Walker, Rt Hon P. (Worcester)

  Taylor, Teddy (Cathcart)

  Walker-Smith, Rt Hon Sir Derek

  TELLERS FOR THE AYES:

  Tebbit, Norman

  Walters, Dennis

  Mr. Spencer Le Marchant and

  Temple-Morris, Peter

  Watt, Hamish

  Mr. Michael Roberts.

  Thatcher, Rt Hon Margaret

  Weatherill, Bernard

  NOES

  Abse, Leo

  Ellis, John (Brigg & Scun)

  Latham, Arthur (Paddington)

  Allaun, Frank

  Ennals, David

  Leadbitter, Ted

  Anderson, Donald

  Evans, Fred (Caerphilly)

  Lee, John

  Archer, Peter

  Evans, Ioan (Aberdare)

  Lestor, Miss Joan (Eton and Slough)

  Ashley, Jack

  Ewing, Harry (Stirling)

  Lever, Rt Hon Harold

  Ashton, Joe

  Fernyhough, Rt Hon E.

  Lewis, Ron (Carlisle)

  Atkins, Ronald (Preston N)

  Fitch, Alan (Wigan)

  Lipton, Marcus

  Atkinson, Norman

  Flannery, Martin

  Lomas, Kenneth

  Barnett, Guy (Greenwich)

  Fletcher, Ted (Darlington)

  Loyden, Eddie

  Barnett, Rt Hon Joel (Heywood)

  Foot, Rt Hon Michael

  Luard, Evan

  Bates, Alf

  Forrester, John

  Lyon, Alexander (York)

  Bean, R. E.

  Fowler, Gerald (The Wrekin)

  Lyons, Edward (Bradford W)

  Beith, A. J.

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

  Mabon Rt Hon Dr J. Dickson

  Benn, Rt Hon Anthony Wedgwood

  Freeson, Reginald

  McCartney, Hugh

  Bennett, Andrew (Stockport N)

  Freud, Clement

  McDonald, Dr Oonagh

  Bidwell, Sydney

  Garrett, John (Norwich S)

  McElhone, Frank

  Bishop, E. S.

  Garrett, W. E. (Wallsend)

  MacFarquhar, Roderick

  Blenkinsop, Arthur

  George, Bruce

  McGuire, Michael (Ince)

  Boardman, H.

  Gilbert, Dr John

  MacKenzie, Gregor

  Booth, Rt Hon Albert

  Ginsburg, David

  Mackintosh, John P.

  Boothroyd, Miss Betty

  Golding, John

  McMillan, Tom (Glasgow C)

  Bottomley, Rt Hon Arthur

  Gould, Bryan

  Madden, Max

  Boyden, James (Bish Auck)

  Gourlay, Harry

  Magee, Bryan

  Bradley, Tom

  Graham Ted

  Mahon, Simon

  Bray, Dr Jeremy

  Grant, George (Morpeth)

  Mallalieu, J. P. W.

  Brown, Hugh D. (Provan)

  Grant, John (Islington C)

  Marks, Kenneth

  Brown, Robert C. (Newcastle W)

  Grimond, Rt Hon J.

  Marshall, Dr Edmund (Goole)

  Buchan, Norman

  Hamilton, James (Bothwell)

  Marshall, Jim (Leicester S)

  Buchanan, Richard

  Harper, Joseph

  Mason, Rt Hon Roy

  Butler, Mrs Joyce (Wood Green)

  Harrison, Walter (Wakefield)

  Maynard, Miss Joan

  Callaghan Rt Hon J. (Cardiff SE)

  Hart, Rt Hon Judith

  Meacher, Michael

  Callaghan Jim (Middleton & P)

  Hattersley, Rt Hon Roy

  Mellish, Rt Hon Robert

  Campbell, Ian

  Hatton, Frank

  Mendelson, John

  Cant, R. B.

  Hayman, Mrs Helene

  Mikardo, Ian

  Carmichael, Neil

  Heffer, Eric S.

  Millan, Rt Hon Bruce

  Carter, Ray

  Hooley, Frank

  Miller, Dr M. S. (E Kilbride)

  Carter-Jones, Lewis

  Hooson, Emlyn

  Miller, Mrs Millie (Ilford N)

  Cartwright, John

  Horam, John

  Molloy, William

  Castle, Rt Hon Barbara

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

  Moonman, Eric

  Clemitson, Ivor

  Howells, Geraint (Cardigan)

  Morris, Alfred (Wythenshawe)

  Cocks, Rt Hon Michael

  Hoyle, Doug (Nelson)

  Morris, Charles R. (Openshaw)

  Cohen, Stanley

  Huckfield, Les

  Morris, Rt Hon J. (Aberavon)

  Coleman, Donald

  Hughes, Rt Hon C. (Anglesey)

  Moyle, Roland

  Colquhoun, Ms Maureen

  Hughes, Robert (Aberdeen N)

  Mulley, Rt Hon Frederick

  Conlan, Bernard

  Hughes, Roy (Newport)

  Murray, Rt Hon Ronald King

  Corbett, Robin

  Hunter, Adam

  Newens, Stanley

  Cowans, Harry

  Irvine, Rt Hon Sir A. (Edge Hill)

  Noble, Mike

  Cox, Thomas (Tooting)

  Irving, Rt Hon S. (Dartford)

  Oakes, Gordon

  Crawshaw, Richard

  Jackson, Colin (Brighouse)

  Ogden, Eric

  Cronin, John

  Jackson, Miss Margaret (Lincoln)

  O'Halloran, Michael

  Crowther, Stan (Rotherham)

  Janner, Greville

  Orbach, Maurice

  Cryer, Bob

  Jay, Rt Hon Douglas

  Orme, Rt Hon Stanley

  Cunningham, G. (Islington S)

  Jeger, Mrs Lena

  Ovenden, John

  Cunningham, Dr J. (Whiteh)

  Jenkins, Hugh (Putney)

  Padley, Walter

  Davidson, Arthur

  John, Brynmor

  Palmer, Arthur

  Davies, Bryan (Enfield N)

  Johnson, James (Hull West)

  Pardoe, John

  Davies, Denzil (Llanelli)

  Johnson, Walter (Derby S)

  Park, George

  Davies, Ifor (Gower)

  Johnston, Russell (Inverness)

  Parker, John

  Davies, Clinton (Hackney C)

  Jones, Alec (Rhondda)

  Parry, Robert

  Deakins, Eric

  Jones, Barry (East Flint)

  Pavitt, Laurie

  Dean, Joseph (Leeds West)

  Jones, Dan (Burnley)

  Pendry, Tom

  de Freitas, Rt Hon Sir Geoffrey

  Kaufman, Gerald

  Penhaligon, David

  Dempsey, James

  Kelley, Richard

  Perry, Ernest

  Doig, Peter

  Kerr, Russell

  Prentice, Rt Hon Reg

  Dorman, J. D.

  Kilroy-Silk, Robert

  Price, William (Rugby)

  Douglas-Mann, Bruce

  Kinnock, Neil

  Radice, Giles

  Dunnett, Jack

  Lambie, David

  Rees, Rt Hon Merlyn (Leeds S)

  Eadie, Alex

  Lamborn, Harry

  Richardson, Miss Jo

  Edge, Geoff

  Lamond, James

  Roberts, Albert (Normanton)

  1372

  1373

  Roberts, Gwilyn (Cannock)

  Spearing, Nigel

  Walker, Harold (Doncaster)

  Robinson, Geoffrey

  Spriggs, Leslie

  Walker, Terry (Kingswood)

  Roderick, Caerwyn

  Stallard, A. W.

  Ward, Michael

  Rodgers, George (Chorley)

  Steel, Rt Hon David

  Watkins, David

  Rodgers, Rt Hon William (Stockton)

  Stewart, Rt Hon M. (Fulham)

  Weetch, Ken

  Rooker, J. W.

  Stoddart, David

  Weitzman, David

  Rose, Paul B.

  Stott, Roger

  Wellbeloved, James

  Ross, Stephen (Isle of Wight)

  Strang, Gavin

  White, James (Pollok)

  Ross, Rt Hon W. (Kilmarnock)

  Strauss, Rt Hon G. R.

  Whitlock, William

  Rowlands, Ted

  Summerskill, Hon Dr Shirley

  Willey, Rt Hon Frederick

  Ryman, John

  Swain, Thomas

  Williams, Rt Hon Alan (Swansea w)

  Sandelson, Neville

  Taylor, Mrs Ann (Bolton W)

  Williams, Alan Lee (Hornch'ch)

  Sedgemore, Brian

  Thomas, Jeffrey (Abertiller)

  Williams, Rt Hon Shirley (Hertford)

  Selby, Harry

  Thomas, Mike (Newcastle E)

  Williams, Sir Thomas (Warrington)

  Shaw, Arnold (Ilford South)

  Thomas, Ron (Bristol NW)

  Wilson, Alexander (Hamilton)

  Sheldon, Rt Hon Robert

  Thorne, Stan (Preston South)

  Wilson, William (Coventry SE)

  Shore, Rt Hon Peter

  Thorpe, Rt Hon Jeremy (N Devon)

  Wise, Mrs Audrey)

  Short, Mrs Renée (Wolv NE)

  Tierney, Sydney

  Woodall, Alec

  Silkin, Rt Hon John (Deptford)

  Tomlinson, John

  Woof, Robert

  Silkin, Rt Hon S. C. (Dulwich)

  Torney, Tom

  Wrigglesworth, Ian

  Sillars, James

  Tuck, Raphael

  Young, David (Bolton E)

  Silverman, Julius

  Valey, Rt. Hon Eric G.

  Skinner, Dennis

  Wainwright, Edwin (Dearne V)

  TELLERS FOR THE NOES:

  Small, William

  Wainwright, Richard (Colne V)

  Mr. James Tinn and

  Smith, John (N Lanarkshire)

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

  Mr. Frank R. White.

  Snape, Peter

  Question accordingly negatived.
  Main Question put forthwith pursuant to Standing Order No. 39 (Amendment on Second or Third Reading), and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  PRICE COMMISSION [MONEY]
  Queen's Recommendation having been signified—
  Resolved,
  1374
  That, for the purposes of any Act of the present Session to make further provision about the Price Commission, it is expedient to authorise the payment out of money provided by Parliament of—

  (1) grants in respect of expenditure incurred after 31st March 1977 in connection with the collection and dissemination of information relating to prices and charges and other information of interest to users of goods and services and in connection with the giving of advice relating to prices and charges;

  (2) any administrative expenses incurred by a Government department in consequence of that Act; and

  (3) any increase attributable to that Act in the sums payable under any other Act out of money so provided.—[Mr. Ashton.]

  EUROPEAN COMMUNITY (INSURANCE)
  Motion made, and Question proposed,
  That this House takes note of Commission Documents Nos. R/3247/73, R/3134/74 and R/402/75 on Direct Life Assurance and the Department of Trade's Supplementary Memorandum dated 26th April 1977.—[Mr. Ashton.]
  Mr. Speaker: The Question is, That this House takes note of Commission Documents as set out on the Order Paper. As many as are of that opinion say "Aye". To the contrary "No".
  Several Hon. Members rose—
  Mr. Speaker: I think that the Ayes have it. The Ayes have it—[Interruption.] Order. Would hon. Members who wish to leave the Chamber please do so quietly.
  Mr. Nigel Spearing: On a point of order, Mr. Speaker. Has the business concerning EEC life assurance been moved?
  Mr. Speaker: I looked in the hon. Gentleman's direction. I shouted at the top of my voice and I put the Question and collected the voices for the Ayes and for the Noes. I did it quite clearly. I myself was surprised.
  Mr. Roger Moate: Further to that point of order, Mr. Speaker. Is it not the case that the motion was to have been moved by the Minister? Further, is it not the case that the proposition was to be put before the House on the recommendation of the Scrutiny Committee so that the House might consider the proposition? Is it now to be taken, or are we to assume, documents?
  Mr. Speaker: Obviously, I do not wish in any way to be unfair to the House, but I clearly put the Question. I read out "That this House takes note of Commission Documents" as on the Order Paper.
  Mr. J. Enoch Powell: Further to that point of order, Mr. Speaker. Is it not the case that this motion requires to be moved before it is put by you from the Chair, and that it
  1376
  falls to be moved by the Minister responsible for explaining the documents to the House?
  Mr. Speaker: I understand that any Minister can move it, and one of the Whips moved it in my hearing. I do not want anyone to feel cheated of a debate. That is the last thing I want to happen.
  Mr. Spearing: That is what has happened.
  Mr. Speaker: Order. It is most unfortunate that the hon. Gentleman did not hear me put the Question.
  Mr. John Nott: Further to that point of order, Mr. Speaker. Of course we accept what you say, but this is rather an important matter and there was a lot of noise in the House. We did not hear.
  Mr. Speaker: The hon. Gentleman is quite right; there was a lot of noise in the House. I have no doubt at all that I put the Question clearly, but obviously some right hon. and hon. Members who wished to debate the subject, and expected to debate it, did not hear me put the Question.
  The Under-Secretary of State for Trade (Mr. Clinton Davis): Further to that point of order, Mr. Speaker. I think that this is a regrettable situation, and I must confess that I did not think that the situation was rendered audible. I do not know how the matter can be put right. Suffice it to say that this is a very important matter.
  Mr. Speaker: I can put it right. When I had the honour of being elected to this Chair, the right hon. Lady the Leader of the Opposition told me that I could do a lot of things with the support of the House and that I could do very little without the support of the House. If it is the will of the House—
  An Hon. Member: No.
  Mr. Speaker: Obviously, it is not the will of the hon. Member who speaks from behind me, but I want to be fair and I do not wish to cheat the House of a debate which it expected to have. The only way in which I can do it, since I have already put the Question, is to put the Question again. I should leave this Chair with a great sense of injustice

  1377
  if I felt that hon. Members had not heard me put the Question, and I will take the responsibility myself now for calling the Minister to move the motion. I call Mr. Clinton Davis.
  10.23 p.m.
  The Under-Secretary of State for Trade (Mr. Clinton Davis): I beg to move,
  That this House takes note of Commission Documents Nos. R/3247/73, R/3134/74 and R/402/75 on Direct Life Assurance and the Department of Trade's Supplementary Memorandum dated 26th April 1977.
  I welcome—indeed, now particularly welcome—the opportunity to debate these documents. This is the first time that an insurance directive has been considered by the House, and for that reason alone I think that it is necessary that the House should not be precluded from considering the background and the substance relating to these matters. As we all know, the insurance industry is a vital exporter, and European proposals affecting it are of corresponding interest. I start, therefore, by speaking generally about the insurance common market before I deal with the subject specifically before the House.
  The first point to make is that the insurance common market has not yet made much progress. Despite a mandate from the Council of Ministers requiring the whole insurance common market to be established by the end of 1969, the only directives in operation when the United Kingdom joined the Community were those covering motor insurance and reinsurance, which, in any event, is not supervised in most other member States.
  Shortly after our accession, hopes rose when a directive facilitating freedom of establishment for non-life insurers was adopted by the Council of Ministers in July 1973. This had already been in the final stages of negotiation before we joined the Community. Evidently, the then Conservative Government saw the directive as a log jam and considered that once it was broken other directives would follow in reasonable sequence. Accordingly, anxious not to cause delay, they sought only the minimal essential modifications, as they saw them, to the draft. I have to say that their optimism was not justified by subsequent events.
  Undoubtedly the main reason for this lies in the substantial differences in atti-
  1378
  tude which exist between member States. International trade is not a factor which is of major significance to the insurance industries of most of the other members of the Community. For us, different considerations apply. Our industry contributes substantially to our invisible earnings overseas. London is the centre of the international insurance market. In some European countries insurance industries are subject to a rigid system of controls, including controls of tariffs and policy conditions. These have evolved over a number of years within policies of consumer protection. Of course we also protect our consumers, and rightly so, partly through supervision of the industry by the Department of Trade under the Insurance Companies Act 1974 and the subordinate legislation that has emerged from it and partly by the Policyholders Protection Act.
  I would add, in parentheses, that a report appearing in Lloyds List last Monday that this Act was incompatible with or might be superseded by the EEC proposals is entirely without justification. As a result of strict controls in Europe, our insurers have so far been able to do relatively little business there. In 1975, out of total premium income from fire and accident business of £2·76 billion our main companies earned no less than £1·7 billion overseas. But business with other Community countries provided less than £0·36 billion—that is, one-fifth of total overseas earnings—which is less than we got for business in the USA alone.
  Given their traditional tight protective system and, in consequence, the small part played in international trade by their companies, I think it is fair to say that most of the member States have little interest in the directives and in establishing a common market in insurance. This is unfortunate because, as a result, not only are we denied our expected earnings from Europe but Europe is unable to provide the necessary base from which the European insurers as a whole might complete for business throughout the world. Unquestionably the business is there, particularly in the larger and larger risks that have to be covered. It is our desire to see member States competing effectively for this business and not held in a straitjacket.
  Faced with this situation, the Government took an initiative in the Council of

  1379
  Ministers earlier this year. We have secured agreement that directives on life establishment—the subject of our debate—and freedom of services for non-life insurance should be adopted speedily; if not, a further report will have to be made to the European Ministers next March. We have taken the precaution of insisting that these must be directives conforming with the treaty—that is, that they cannot, and must not, be expected to include a whole host of restrictive and detailed provisions, whatever their guise.
  The issues that we are debating specifically tonight cannot be seen in isolation. They must, I think, be viewed against the background that I have described—the way in which our approach has developed and the main thrust of what we are seeking to achieve.
  Discussions have been continuing at Council level since the end of 1974, I do not yet know when they will end, but the major points of disagreement are beginning to crystallise, so that they can be sent to ambassadors and then to Ministers for resolution.
  The major points outstanding can be identified in large measure with the differences that I have already outlined. That was why I was at pains to go through that background. They concern the operations of composite companies and the composition of minimum solvency margins. I shall deal in outline with two main aspects.
  The future of composite operations is covered by Article 13 of the directive. Currently there is a majority in Europe that does not support this form of undertaking. However, we want to be able to continue to authorise new composite companies as well as allowing continued operations of existing ones. We may get agreement to the latter point, but I think that it is very doubtful whether agreement will be achieved on the former.
  The continued existence of composites raises a further question of whether, and, if so, how, they should be able to undertake business throughout Europe. They are already able to open agencies or branches for non-life business under the first co-ordination directive. Specialist countries have agreed to the continuation of this arrangement, but they are not prepared to see life branches with similar possibilities. Instead, what they want,
  1380
  at least, is a branch of a specialist subsidiary.
  Concerning the second main issue—the calculation of solvency margins—there is no doubt that these are matters of some technical complexity. I shall try to simplify them as much as possible, not only for the benefit of the House but also for my own sakes.
  Here in the United Kingdom—also in Ireland—as part of our supervision of life insurance companies actuarial methods are used. These involve assessing the liabilities of each company in relation to its own particular collection of assets. The latter are valued on a prudent basis. Other member States of the Community rely on a more approximate method and, in consequence, require inbuilt safety limits. The two systems clearly have the same objective, but they proceed by very different means.
  The majority of member States do not wish to be tied to a mathematical evaluation of each company on actuarial bases. Nor do they feel able to trust a formula that does not have included within it an explicitly stated safety margin, such as that built into the methods they use. They are also unhappy about having alternative systems adopted as part of a common market. As a consequence of this, we are under great difficulties in seeking to negotiate acceptance of our system under Article 18 of the directive.
  There are other matters affecting these points which are currently under discussion, but I do not propose to go into detail here, though I shall do so later if hon. Members raise points on them and the House gives me leave to reply.
  As I have indicated, our essential difficulties are that life insurance supervision in the United Kingdom works on the basis of different principles from those commonly used on the Continent. What we have to decide is, first, whether, if we modify these principles, our industry will still be able to operate according to its usual practices and, particularly, to offer the wide range of policies now available to consumers at fair prices, and, secondly, whether some negotiated compromise would harm our overall expectations from insurance in Europe and the world at large. I would like to assure the House that my officials have been, and will continue to be, in close touch with

  1381
  the industry on this directive and, indeed, all other draft EEC directives. Moreover, the comments of hon. Members will be particularly relevant in our consideration of these matters. I would ask them, however, to remember that all co-ordination must involve some compromise; the question is the extent to which we can go. I hope, therefore, that we can concentrate on the likely practical effects of the proposal before us, recognising that a directive on this subject is an essential step in the creation of a genuine common market in insurance, which it is our objective to achieve, because it is by achieving this that the best interests of our industry—which has nothing to fear from competition—may be advanced.
  Mr. Tim Renton: While I appreciate that the question of solvency margins in technical and complex, will the Minister say, in general terms, that the solvency margins adopted by our life assurance companies and calculated on an actuarial basis are more conservative than those adopted by our EEC competitors? If ours are more conservative, is it fair to say that we would have little problem in meeting the standards generally adopted in the EEC.
  Mr. Davis: It is very dangerous to indulge in the use of the word "conservative" in this and in many other respects. We are seeking to enact a situation in this and other matters which is acceptable and beneficial to our industry.
  I have indicated that there is a need in all methods of negotiation of this kind for some degree of compromise to be effected, but compromise on both sides. I believe that the sort of evaluation that the hon. Member invites me to undertake would not be of any assistance in producing the effective answer to this difficult problem. I hope that the hon. Member will forgive me for saying that. I hope that the House will be in a position to help us by expressing strong and constructive views about these matters, which are very important to our insurance industry.
  Mr. Douglas Jay: As I understand it, all these instruments are directives, and presumably require some form of subordinate legislation here
  1382
  before they become the law of this country. Do I understand that the directives are very far from being agreed upon between other member States, and that there are quite a number of stages to go through before there is any question of legislation binding this country?
  Mr. Davis: My right hon. Friend is absolutely right. It is helpful to my officials, however, when they undertake these negotiations to have the views of the House. I firmly believe that the House is entitled to express a view on these sensitive issues, and, in so far as is possible, that view should be brought to bear in the difficult negotiations that I have outlined.
  I have tried to reach the end of my speech, but I seem to have subjected myself to cross-examination. I think it would be better if hon. Members put their points and I responded to them at the end.
  10.39 p.m.
  Mr. Cecil Parkinson: I think that we shall be able to help the Minister to be firm by stating that we hope that he will maintain a firm negotiating position in the negotiations about the directive.
  When one examines individual directives in detail one realises how indebted the House is to the Select Committees of the House of Lords and this House which examine the proposed legislation and the huge volume of draft directives which pours into the Committees. I invite hon. Members to look at the Sixth Report of our Committee and see the huge range of subjects covered. I invite them to spend the couple of days necessary to go through any one of the directives mentioned. One comes away from the exercise confused and full of admiration for the work of the Select Committees, which do the valuable job of going through the draft directives and stopping the non-senses which would be perpetrated if some of the draft directives were ever to become anything other than draft directives.
  The objective of those who issued the first version of the directive—there have been a number of versions—was entirely laudable. It was the liberalisation of insurance throughout the EEC and the co-ordination of insurance provisions to

  1383
  ensure adequate protection for insured persons and beneficiaries in all member States. Who could object to those aims—to have a freer market in insurance and to have standard protections for those who take out policies in member States?
  The British life assurance industry's attitude was very well expressed in evidence to the European Communities Committee of the House of Lords by Mr. Purchase, Chairman of the EEC Committee of the Life Offices Association, on 17th April 1975. In very interesting evidence he said:
  "In general terms, we in the Life Assurance Industry would welcome the directive for two or three reasons. First, it will give our members the right to establish themselves in a European country if they wish to do so at any time in the future. Secondly, there are certain differences between British technical principles and Continental principles, and this directive would retain our own approach. That is important, because the directive, if passed, would have to be translated into British law and would therefore apply to all of our business."
  The evidence failed to take account of the full impact of the European Court's decision, handed down on 21st June 1974, in the Reyners case, when the Court confirmed that the freedom of establishment, the right of insurance companies in member countries to open up in other member countries, already existed under the Treaty of Rome and was part of the Treaty and, therefore, that there was no need for a directive on the subject. The first—and, I suspect, the most important—reason why Mr. Purchase welcomed the directive proved to concern something that was unnecessary, because the right of British companies to trade in the Common Market come to them automatically under the Treaty. One wonders whether the Life Offices Association would have been quite so enthusiastic about the directive, because the major reason for its welcoming it proved to be invalid.
  The second object of the United Kingdom industry was to preserve the right for the British to follow their own well-established technical principles. We are constantly being told how far we lag behind our Continental competitors in a variety of fields and how we should modify and modernise our procedures by copying theirs. That may be relevant in a number of fields, but it is certainly not a relevant argument in life assurance, where we are the undisputed European leaders. With life funds, according to the latest
  1384
  figures available, 45 per cent. larger than those of Germany, nearly six times larger than those of France, four and a half times larger than those of Holland, and 15 times larger than those of Italy, our industry is the largest, and has been consistently the most successful, in Europe for a very long time. I hope that it does not sound chauvinistic to say that no British Minister need apologise for arguing that there is no good case in the directive for abandoning principles in insurance that have stood us in good stead for a long time and have enabled the United Kingdom industry to build itself up into a dominant position.
  The difference between the technical principles involved here and in the Continental system were well summarised by Mr Dick, of the Insurance Division of the Department of Trade, in his evidence to the House of Lords' European Committee on 20th March 1975, when he said:
  "If one tries to describe as briefly as possible what the difference is between the majority of Continental countries and this country, it is that the supervisory authorities in those countries control premium rates, the conditions of insurance policies, the kinds of things that insurance companies can invest in, whereas in this country we have a system which deliberately decides to leave to the insurance company itself as many of the business decisions it has to make for it to make itself in the light of the business conditions, and then we from time to time examine what they have done and the Secretary of State for Trade would only intervene in the affairs of a particular company if he saw good reason to do so"
  The Department works on the sound principle that the British life insurance industry knows what it is doing. It needs watching, but it does not need to be put in a straitjacket.
  The net result of this general approach has been that we have an insurance industry that is flexible and capable quickly of producing interesting and sound new policies which please the customer as a result of the wide variety of choice in the sort of policy in which he may be interested.
  The Continental system is extremely inflexible and rigidly controlled. The result is that there is little variety between insurance companies. For instance, if a new policy is evolved in Germany, the whole industry produces the policy at the same time, on the same terms and under the supervision of the same people.
  The Department has argued forcefully in the negotiations—I hope that it will

  1385
  continue to do so—that we prefer a system which is more responsive to the customer and in which the customer really has a choice between companies. We accept as a result that there may from time to time be the odd company that does not perform as well as the others. That is one of the risks in the business when there is a choice for the customer. He can choose the company that he wishes to patronise.
  The Belgians have been trying for seven years to get permission to introduce a unit-linked insurance scheme. Such schemes were first produced by British companies, which decided that there was a market for them. They were blessed by the Department of Trade and were being offered by the British companies within weeks of the policy being evolved.
  We prefer to fight to ensure that British companies can continue to offer the flexibility and responsiveness that is such a feature of their activities.
  There are three main areas in which discussion and negotiations are continuing. The Minister referred to them in his speech. One is on composite companies and the provisions of Article 13. Many of our companies are composite companies carrying on life insurance business and other business with separate funds. The funds of the life insurance company are not available to meet losses on indemnity insurance. These companies have managed happily to combine two firms' business for some time and see no reason for the system to be altered.
  In Germany and other Continental countries, though certainly not in all EEC countries, there are more specialised companies that cannot carry on both activities. As a concession, the British industry is prepared to accept that no new composite companies should be allowed to be formed and take up composite insurance business. Speaking personally, I find it slightly illogical that we should allow companies to carry on doing composite business and say that it is not in any way objectionable and then say by way of a concession that we shall not have any new companies in that field. If the companies are doing a worthwhile job and are performing sensibly, new companies should be allowed to evolve.
  1386
  If they are not, they should be stopped. But we know that they are performing well, to the best of my knowledge, nobody has argued otherwise. So I hope that that concession, which I believe is a slightly nonsensical concession, will be made, along with the next concession that I shall mention, as part of a package which produces an acceptable directive. I do not believe that it is a major infringement of the sovereignty of British companies. It is an unnecessary one, and I do not think that it is one that we should concede unless our Continental neighbours also make concessions.
  Mr. Ian Wrigglesworth: Does the hon. Gentleman not agree that in spite of the concession composite companies should have the power to establish subsidiary companies under their wings?
  Mr. Parkinson: As I understand it, one of the results of what I am saying is that a British composite company operating overseas would probably have to do its life assurance through one company and would probably have to set up a separate entity to do its indemnity assurance. I believe, from discussions I have had, that this is acceptable to the British insurance industry.
  The other item on which the British are prepared to make concessions in certain circumstances is on the basis for the calculation of solvency margins gross of re-assurance. I apologise that this subject is larded with jargon, but I have been able to discover no way in which to avoid it.
  There is an important point at stake here if we accept that we must move nearer to a Continental system of calculating solvency margins gross of reassurance. It will be quite absurd if we reach the situation in which the direct insurance company is carrying a gross margin covering the net liability on the policy and the re-insurer at the same time, is also providing the same gross margin to cover the same risk.
  For example, it is quite possible that under the proposed concession we should have a group in which one office reinsures with another. If we accept the system without changing our own rules, both offices will be making the same gross provision against the same risk. Within the group there will be two provisions

  1387
  for the same risk. I hope that the Department will examine that and that the Minister will comment on it when he winds up. I hope that he will assure the British industry that he will find a way of avoiding what would obviously be a nonsensical situation.
  Another major point concerns the whole question of the solvency margin. The Minister outlined the different approach to this problem. In this country we rely on the actuary making various actuarial valuations into which he builds an implicit margin. There is no explicit solvency margin, but in his calculation he builds in a margin that is implicit and will cover and provide a margin of solvency. In the German system there is a system of minimum valuations with an explicit solvency margin.
  The British industry felt that the problem had been dealt with and that it had been agreed that both systems should be allowed to continue. In one of the drafts it was provided that both systems would be allowed to continue, but in the new draft—which, although we are not discussing them tonight, is a direct descendant of some of the innumerable drafts that have already been produced—Article 18 has been further modified. It has been modified in a way that brings dismay to even the most ardent supporters of the EEC.
  Article 18 of the original draft provided for both the British implicit system and the German explicit system to co-exist. Then the French came along and slipped in a further provision, which is Article 31(b) (iii). That would have the effect of torpedoing the British system. If the French additional sub-sub-article were allowed to be included the British system would be totally undermined. The British have responded by tabling Article 18 111 (1) (b) (iv), which will have the effect of torpedoing the French torpedo of the British system.
  The commonsense thing would be to go back to the original directive that allowed both systems to co-exist. It makes one angry to see this tortuous way of adding sub-clauses to already complicated drafts that have the effect only of cancelling out each other and of returning the situation to its original position.
  The British industry has made clear that it is prepared to make concessions on
  1388
  the first two items to which I have referred. It does not feel that we should give way on the third item, and I entirely agree. I hope that the Minister or his officials will go to the negotiations and make that absolutely clear to our continental partners.
  If there is a right of establishment and if British companies, under the Treaty, have the right to go into other EEC countries and open offices, a major reason why the British industry was in favour of this directive has disappeared. If the directive as now drafted becomes statute it will effectively achieve absolutely nothing. The present system, without the directive, means that British companies would be allowed to go into the EEC countries and would have to conform to the rules of the individual countries. The net result of the directive—if we get it, after years of negotiations, into the shape that we want—will be that British companies will be able to do precisely that.
  I hope that the Minister will urge on his Continental colleagues the necessity of bringing these protracted and potentially absurd negotiations to an early conclusion. If it he is unsuccessful it will not matter much at all because, thanks to our rights under the Treaty, we shall operate in any case and we shall obtain the result that we want.
  11.0 p.m.
  Mr. Ian Wrigglesworth: I was overcome by the gratitude and praise expressed by the hon. Member for Hertfordshire, South (Mr. Parkinson) for the Scrutiny Committee, of which I have just become a member. I am sure that the Members who pore through the many documents to which the hon. Gentleman referred will be pleased by his comments.
  I speak as a Member sponsored by the co-operative movement, which includes a large and successful insurance society. However, I have no direct connection with that society.
  These documents were prepared some time ago and there have been developments in life assurance since then. As the Select Committee report states, the life assurance industry welcomes the proposals for draft directives, although there would be no direct advantage to the industry in their adoption, since the decision of the European Court in 1974 ruled that

  1389
  freedom of establishment already exists within the EEC.
  Furthermore, whilst the proposals may reflect the British approach on some technical aspects, they reflect the Continental approach on many more. If adopted in the form of the latest draft of the proposals, as the hon. Member for Hertfordshire, South and the Minister have made clear, they would undoubtedly hamper the development of the British insurance industry not only in Europe, but in this country and in the many other countries where British insurance companies transact business. That would be a very serious matter.
  Therefore, whilst we might welcome an agreed directive as a first step towards greater freedom to transact insurance within the Community, it is important that the outstanding technical problems are resolved in a manner satisfactory to the British insurance industry so that its development is not hindered. I know that the Department of Trade has been working hard to achieve this end, but perhaps it could press even harder to ensure that the rather more liberal basis on which we permit life insurance to be transacted in this country, which may be an important reason why our insurance industry has been more successful than that on the Continent, is retained for the future.
  The points involved are technical, as the House has heard, and I should not wish to take up time unduly on them. There are, however, two matters which are extremely important, and I should like to mention them briefly.
  The first is a point not specifically mentioned in the report of the Select Committee. It is that relating to the different methods of calculating reserves, to which reference has already been made. We think that our system is the better. The Continentals think that theirs is. Both systems are sound and it should be possible for the life assurance directive to permit both to continue and not to exclude ours.
  Other countries, however, appear unwilling to permit this. We have sought to achieve a compromise, but up to now nearly all the compromises appear to have been made on our side. I hope that the Department of Trade will do its utmost to persuade the other countries to permit our
  1390
  system to continue as well as their own. It may not seem a vitally important point, but it seems completely unreasonable, when our system is as good as that on the Continent, that we should be forced to change a satisfactory practice that we have used for 200 years because they wish us to do so. After all, we have never sought to require them to change their practices in this respect, despite the long history and success of our system.
  My second point concerns composite companies, such as the Co-operative Insurance Society. Composite companies, which transact both life assurance and non-life insurance, have not grown up by accident. There are considerable economies in administration to be obtained by transacting life assurance and non-life insurance together, using the same selling and servicing organisation. It is, therefore, a considerable concession on our part to agree that no new composite companies shall be established, although I hope that an exception can be made for newly established subsidiaries of existing composite companies.
  The present draft directive goes further and provides that existing composites should divide their assets into two portions representing life assurance and non-life business respectively, as we have heard. It is not clear whether this would require existing composites to divide share capital and general reserves which they at present hold as a "last resort" reserve in common between life and non-life business. I understand that the Department of Trade takes the view that the draft directive would require no more than the present insurance Acts in this country require, namely, that funds relating to life assurance business should be kept separate but that general reserves can be held in common between life and non-life business. I hope that the Department of Trade will make sure that no ambiguity is left in this connection by the draft directive so that no change in our present law will be required.
  Any change requiring general reserves to be divided between life and non-life business would have the most serious consequences for the Co-operative Insurance Society and for its mutual business. The CIS transacts its business on a co-operative and mutual basis in both life and non-life sections and, therefore, cannot raise equity capital to support its non-life

  1391
  business. For this society to be forced by the directive to have to separate its non-life business into a subsidiary company would mean that it could no longer transact non-life business on a wholly mutual basis, and it would probably have to suffer considerable taxation disadvantages.
  There is a great deal to be said for insurance being transacted on a mutual and co-operative basis. I hope that the Minister will be able to assure me that the Department of Trade will do its very best to ensure that there is nothing in the directive that will go further than our present law or enforce the separation of funds and assets between life and non-life business.
  11.7 p.m.
  Mr. R. A. McCrindle: My interest in and association with the world of insurance is fairly well-known to the House, but I start, nevertheless, by declaring an interest as the parliamentary consultant to the British Insurance Brokers Association. That is perhaps, in this context, an indirect interest, but it is worth emphasising, because, throughout the negotiations to produce this draft directive, insurance brokers and insurance companies have taken a broadly identical view, and brokers are as anxious as insurance companies to see that the directive comes to fruition, so that when companies are able freely to establish within the EEC, brokers will be able to follow and support them.
  I have a great desire to see this freedom to establish life assurance companies in the EEC. It is regrettable that we should have run into a number of very technical difficulties at this rather advanced stage of our consideration of the matter.
  I recall that during the 1960s I travelled extensively throughout Europe partly to interest Europeans in some British unit trusts and in British life assurance products. Although I can claim some success on the unit trust side, I was constantly frustrated by the conflicting requirements of the various national approaches to life assurance.
  I believe that as soon as we can achieve some movement towards the establishment of United Kingdom companies in the EEC we shall bring to this
  1392
  country an increased opportunity to improve our invisible earnings. I am confident that the United Kingdom stands to gain by being able to establish freely in EEC countries.
  Although I welcome the progress that has been made so far, I regret the obstacles that remain. I recognise that we cannot expect the acceptance of total British practice, but we should not easily allow the Continental practice totally to supersede a system that has been tried and tested over the years and that has built up experience. It would cause difficulties if the British insurance companies were forced to turn back the clock.
  In my short speech, I wish to concentrate on the two most contentious points—solvency margins and specialisation. I congratulate by hon. Friend the Member for Hertfordshire, South (Mr. Parkinson). I am sure that he will not take it amiss if I say that until today I had not thought of him as a major expert in insurance. He has obviously taken a great deal of time and trouble to mull over the details of this complicated issue. His historical analysis was masterly.
  Until 1975 the EEC's approach to this matter seemed broadly to reflect British practice, but it aimed to permit both British and Continental methods of valuation to run alongside each other. Recently there has been a growing demand on the Continent, particularly in Germany, for the Continental method of valuation to be adopted.
  Attempts have already been made by hon. Members to present to the House in non-technical language, a description of the subject of tonight's debate. I shall attempt to give a shorter, thumb-nail sketch. The British method includes the calculation of reserves using conservative acturial assumptions. I stress the word "assumptions", because part of Continentals' objection and failure to understand why we are so anxious to maintain our system is that they cannot conceive of any situation in which the word "assumption" can apply to the calculation of reserves.
  Their approach is not to leave to the actuaries freedom to exercise discretion. The Continental method—or the prescribed basis—gives less freedom to actuaries and has become an in-built part of the system. The freedom of actuaries

  1393
  in this country has led to rises in the payments of endowment and life policies over the years.
  Both systems are acceptable within their own national contexts. Co-existence between the two is possible. But pressure is growing for a compromise, which may have to be sought. I cannot see what is wrong with returning to the system that was previously acceptable to our EEC partners, namely, the co-existence of both systems. If a compromise is attempted, the horribly complicated formula that we are experiencing tonight will be nothing compared with the difficulty of understanding how it is to be applied in future.
  The Continentals fail to understand that the adoption of their system would not be acceptable to the British in relation to two specific types of policy. I refer first to what is almost a British phenomenon, which is the single-premium life policy. Twenty years ago, the only type of single-premium transacted by British insurance companies would have been an annuity. But now there is a growth industry in the single-premium life assurance business, and there are many varieties of policy that one can find on the British market. It would be very difficult, in my opinion, to continue to pursue this aspect of life assurance while applying the Continental system.
  There is another type of insurance which again may hardly apply on the Continent, and that is the non-profit whole life or endowment policy where there are no bonuses attached. Sometimes it is suggested that hardly anyone in 1977 effects a non-profit policy and so the Continentals may dismiss this as so much eyewash. But it is not.
  There are two distinct areas in which non-profit policies continue to apply. If a young couple are taking out a mortgage with a view to repaying it by an endowment policy, often their aim is to minimise their repayments, and one way is to opt for a non-profit rather than a with-profits policy. Then again, if there is an eventuality where a given sum will have to be paid on a given date in the future, it is possible for a non-profit policy to be effected. The single-premium life assurance policy and the non-profit life policy, which are both vital to the British insurance business, would be in-
  1394
  consistent with the Continental scheme of things.
  What about the argument put forward by the Continentals that there would be a distortion of competition if the British system were adopted? Not only do I think that that is vastly exaggerated, but I am not sure that we should be talking about competition at this stage. I would rather get much further along the way to getting this directive into operation and leaving the effect of competition to what might be called the "sharp end" of the market. When we are all established in Europe, we can consider the effects of competition. But I consider that in many ways the Continentals are exaggerating the effect of it at the moment.
  I turn to specialisation. Effectively, we are being told that a firm must be a specialist life company, like Standard Life, Scottish Widows', or Equity & Law, or it must, if it is a composite, create a specialist life subsidiary. Effectively, that would prevent very well known companies such as General Accident, Guardian, Royal Exchange, the Royal and the Phoenix going ahead as they are constituted at present.
  Why should that be so? The companies that I have named, many of them old-established composites, are among the strongest of the British companies. It would be folly to overlook the very great experience in life assurance that these composites have. Very often they have separate life departments and in many instances they are subsidiary companies of the composites. I urge the Minister to resist the suggestion that there should be this specialisation and this need to set up subsidiary companies.
  I have no wish to stand against the concessions about which my hon. Friend the Member for Hertfordshire, South spoke. But we must be careful that we carry these major British institutions, the composite insurance companies, along with us. We are told that trading accounts will be distorted, as I read the draft directive. I reject that. It is reasonable for the composites to be required to have separate management for their life assurance. It is reasonable to ask for separate life accounts. But there is no reason for the establishment of subsidiary companies.

  1395
  I end by saying that we are well along the way but that it is most disappointing that we have not progressed further. I believe that some firmness and resolution are called for on the part of the British Government although nobody wants to be extreme.
  These are high technical matters but on the two points to which my hon. Friend the Member for Hertfordshire, South and the hon. Member for Thornaby (Mr. Wrigglesworth) have concentrated their remarks, namely, the solvency provisions and specialisation, the British have a good and logical case. I feel sure that the whole House would support the Minister if he were to try to obtain some advantage for our position as the negotiations proceed.
  11.21 p.m.
  Mr. Roger Moate: I endorse what my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) said about the speech of my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson). I think that my hon. Friend displayed a mastery of the subject, while putting the whole matter into perspective. My hon. Friend demonstrated that it is far more important to get this matter right than to hasten into a decision that probably has little significant effect, certainly in the short term. The effect of the Reyners judgment ensured that insurers already have the right of establishment, the right to provide services throughout the EEC.
  We are assured by the explanatory memorandum and the remarks that have been made already that the key issues are solvency and specialisation. Anyone who has been through the vast mass of papers on this issue deserves considerable admiration. The whole bundle from the Vote Office must total several hundred pages. I commend the Scrutiny Committee if it has scrutinised with its usual thoroughness. It is a measure of the problems that we face as a House that we get this indigestible quantity of paper and are expected to comment intelligently upon it. Fortunately, we have the Scrutiny Committee to undertake some of that task before the matter reaches hon. Members on the Floor of the House.
  My main object is to comment on the two restrictions that have been mentioned. Emphasis has been laid on the great
  1396
  contrast between the Continental practice, in many cases, and the traditional British approach to insurance. On the Continent there is strict supervision of investment. There is even strict supervision of policy wording and premium rates. In many EEC countries there is a protectionist nationalist approach to insurance. That contrasts very much with the British approach, which, while allowing a great deal of supervision of company accounts, has been based on immense freedom and flexibility for the insurer.
  The result of the British system has been great and flourishing international insurance whereas in the EEC the companies are, broadly speaking, substantial only in national terms. The reason that I emphasise this is that I am a little sceptical about the whole concept of an insurance common market. Although I have doubts about the Common Market, I have no doubts about the desirability of the freest possible competition in these matters. There is no doubt about the ability of British insurance to compete and succeed against virtually all other insurance industries in the world.
  It is a paradox that the British insurance industry benefits to a large extent from the nationalist and protectionist approach of many other countries, in the sense that they remain national industries whereas we have become truly international. The longer they maintain their practice, the less competition they offer. The longer they remain national insurance centres, the more re-insurance comes into the London market.
  I suspect that there is little substantial benefit to come from an insurance common market in traditional terms. Where there might be some benefit is in those very areas where we have been told that the British insurer is so successful and the Continental insurer relatively unsuccessful. I am thinking especially of domestic insurance.
  We are often told that life assurance per capita in the United Kingdom is so much higher than on the Continent. Why is this? It is largely because of the success of the composite offices in this country.
  I suspect that the obstacles to which my hon. Friend the Member for Brentwood and Ongar referred and the problems of negotiation arise largely because

  1397
  the Community is aware, as are many of the national industries, that if the British composite companies are allowed freedom to operate throughout the EEC, a considerable impact could be made on the insurance industries of those countries.
  It may be in the end that our system and that of the rest of the Community are largely incompatible. I hope not, however, because I think that there are opportunities for the British insurers. But I do not believe that it can be right for composite offices—the offices that can, perhaps, gain most by expanding in the Community, if that becomes possible—to be hindered in the way proposed.
  I hope that the Under-Secretary of State will feel that the mood of the House is that there is no need to hurry into a bad decision on this subject and that he has the backing of the House and of the British insurance industry in trying to ensure that these substantial British composite offices have a right to continue to trade in their traditional form throughout the Community. That right should be applied equally to new composite offices which are formed. I see no reason why even they should be forced to set up subsidiary companies in order to transmit life business.
  I hope that the hon. Gentleman will use the expressions of view in this debate to secure the negotiating objectives which I think are already in his mind—to secure even further concessions than those indicated in the draft directive.
  11.27 p.m.
  Mr. Clinton Davis: This has been a valuable debate in so far as hon. Members have urged me to be firm and resolute. That is always helpful to a Minister when he is going to work on negotiations. The fact that I intended in any event to be firm and resolute is by the way. Hon. Members have expressed their views on a number of important issues that arise out of the directive. There is no questioning the fact that there are substantial differences of opinion between ourselves and the other Member States, and these reflect the difference of approach to which I and others have referred.
  I accept the suggestion by the hon. Member for Faversham (Mr. Moate) that we do not want to get into a position where, because some people might suggest
  1398
  that it is necessary to make over-swift decisions, we do something injurious to the industry. I have no intention of allowing that to arise. But the fact is that we are approaching the point where decisions have to be made, and we do so in the best interests of promoting the long-term objectives which I outlined and to which even the hon. Gentleman, who is not a fervent admirer of the Community, also subscribes.
  It is in the context of seeing a genuine common market in insurance that we have to view this directive. Having given the general approach which I and my officials are applying to this matter, I think that the House would not wish me to reveal our negotiating hand totally tonight. The value of a debate of this kind is that it indicates to others the depth of feeling that hon. Members have and that the industry in this country has. I can give the House an assurance that the views expressed in the debate will be taken fully into account. As I indicated earlier, the continuing dialogue which goes on in this matter between my officials and the industry is an essential part of the negotiating position that we take, because we derive considerable strength from the expertise that the industry is able to offer to us.
  I think that I can conclude my general remarks, although optimists must not believe that, because this is my first "finally", I am about to sit down. It is certainly not our intention to agree to anything that will harm the United Kingdom industry, but I do not believe that we shall eventually be faced with a decision of that character anyway.
  I come now to the specific points raised by hon. Members. I do not claim to be an expert in this field. I do my best, although it may not be a very good best. The hon. Member for Hertfordshire, South (Mr. Parkinson) has been praised for his newly found expertise, which I admire. I certainly admired his presentation of the case on this occasion rather more than I did on another occasion when he intervened on the subject of the "Globtik Venus", an issue on which I felt more at home.
  On Article 18, III, 1 (b) the hon Member for Hertfordshire, South said that the original position that had been adumbrated was preferable to the revised version, and that, therefore, no

  1399
  great harm would be done if we went back to that position if these negotiations, with all their difficulties and complexities, were to founder. The trouble with that argument was that the first version, although more acceptable to us, was not acceptable to others. We there fore tried another approach, but the first version is still not acceptable to others. That is the problem with which we find ourselves. The fairly simple view—I do not mean that in any demeaning fashion—postulated in that way by the hon. Member for Hertfordshire, South is not quite as simple as it may seem.
  The hon. Gentleman referred to the European Court's decision in the Reyners case, and asked "Did it not confirm that the right of establishment already existed under the treaty"? My reply is that it did. It confirmed the right of establishment in the insurance field, but it recognised the necessity for co-ordination, which the directive is designed to achieve.
  The hon. Member for Hertfordshire, South, also asked whether United Kingdom solvency margins were greater than those in any other country. I am advised that generally they are much the same. It is very difficult to give a complete evaluation on a matter of this kind, but there are types of non-profit contract in the United Kingdom that do not appear in some member countries, because detailed actuarial control is not operated in those countries. That is one of the points of difference.
  The hon. Member for Hertfordshire, South then asked whether there would be duplication of solvency margins if every company had to relate those margins to its gross liabilities without deduction of re-insurance. I understand that this would be true if the solvency margins were to be calculated on the gross liabilities without deduction, but that is not the case. The current negotiations are related to the amount of the deduction for re-insurance which can be made before calculating the amount of the solvency margin. I have tried to deal with most of the points raised by the hon. Members.
  I turn next to the observations of my hon. Friend the Member for Thornaby (Mr. Wrigglesworth), who specifically asked whether the draft directive would require more than the current requirements in the United Kingdom on the
  1400
  division of assets by companies. I understand that that would not be the case. The directive makes no reference to general reserves, only to assets.
  I hope that that deals with that specific point.
  My hon. Friend also asked about allowing both systems of financial calculation to continue. The directive allows both systems for calculating reserves, which are necessary to cover liabilities, to continue. It is important to stress that point. The difference has arisen only on the calculation of the solvency margin to be held in addition to the reserves.
  I turn now—I was about to say "to my hon. Friend", because he so frequently is—to the hon. Member for Brentwood and Ongar (Mr. McCrindle). I assure hon. Members that by that remark I intended the hon. Gentleman no harm: I shall certainly be needing his support, and therefore I immediately withdraw the suggestion that he is an "hon. Friend" of mine.
  The hon. Member asked why composites should be forced to establish subsidiaries for life assurance. I think that the anwer to that is that they are not asked to constitute a special life subsidiary for their United Kingdom operations. They may continue to operate as composites in the United Kingdom. The proposal is that a subsidiary should be established if the composite wishes to do life business in specialist countries. Of course, that is the big question.
  Mr. McCrindle: I hope that I in no way gave the impression that, although it is bad enough, perhaps, to be required to establish a life subsidiary to transact life business in the EEC, even worse, companies would have to create a separate subsidiary to go on transacting business in the United Kingdom in future. All along I have assumed that that was not so, and I am delighted that the Minister seems now to be confirming it.
  Mr. Davis: I am delighted to confirm it. I dare not say that the hon. Member and I see eye to eye on so many issues, because that is obviously damaging and repugnant to a number of his hon. Friends.
  The hon. Member asked about single-premium and non-profit policies not fitting into the Continental system. I

  1401
  think that is quite true. Officials from my Department have gone to great pains in Brussels to try to explain this and to seek a version of the directive that would not militate against such policies. This matter is still under negotiation. It would not really be politic for me to go into that at this stage.
  Mr. Wrigglesworth: Will my hon. Friend comment on the problem faced by mutual societies in not being able to raise equity capital to back up their business?
  Mr. Davis: I am not in a position to deal with that specific point.
  Mr. Dennis Canavan: Why not?
  Mr. Davis: I cannot be in a position to deal specifically with every single point that is raised. If I could please my hon. Friend the Member for West Stirlingshire (Mr. Canavan) on every issue affecting this matter, I should be delighted, but I must be caught out on one thing on a matter as technical and complex as this. I shall write to my hon. Friend the Member for Thornaby about the question he raised, and there may be other ways—
  Mr. Canavan: Will my hon. Friend write to me too, please?
  Mr. Davis: If my hon. Friend wishes me to write to him, I shall be only too delighted to do so. I do so with relish whenever he writes to me. But I think that he ought to write to me first.
  I am grateful that we have had the opportunity of this debate. At one stage this evening it seemed that it was to be denied to us. That would have been very regrettable. I am particularly grateful that our stand in these negotiations should have received this united form of assistance from both sides of the House.
  Question put, and agreed to.
  Resolved,
  That this House takes note of Commission Documents Nos. R/3247/73, R/3134/74 and R/402/75 on Direct Life Assurance and the Department of Trade's Supplementary Memorandum dated 26th April 1977.

  MR. T. P. D. TAYLOR
  Motion made, and Question proposed, That this House do now adjourn.—[Mr Coleman].
  11.40 p.m.
  Mr. Graham Page: I am rewarded for having waited this length of time. I have a constituent who has suffered at the hands of a rogue, and he is a rogue whom counsel, advising the Director of Public Prosecutioins, has described as a public menace.
  My purpose in raising this matter on the Adjournment is that I want to protect the public from this menace. I want the rogue prosecuted for crimes that I believe he has committed. However, the Director of Public Prosecutions has refused, even with the complete and damning facts before him in the massive police report that he has received, to prosecute this man.
  For nearly two years I have discussed this case with the Solicitor-General, and I am pleased that he is here tonight. It may be a coincidence that, on the very day it became known that I was successful in getting this debate, the Director of Public Prosecutions saw fit to anticipate the debate by writing to the rogue out of the blue to confirm that he would not be prosecuted.
  I propose to use the privilege of hon. Members of this House to state the facts as I believe them to be, even if it is necessary for me to make serious allegations in that statement. The man concerned is Thomas Patrick Denton Taylor. He is qualified as a solicitor, but also practises as a tax consultant.
  Mr. Dennis Canavan: Is he a Tory?
  Mr. Page: I hope not, from what I have to say. In 1970 he entered into an oral partnership with my constituent James Francis Kenny. One of the objectives of the partnership was to acquire and develop land known at the Forum site at Southport, in which Mr. Kenny had an interest. He was also at an advanced stage of negotiation for acquiring further interests. By deceit and dishonesty in 1970–71, Mr. Taylor defrauded Mr. Kenny of all his share in that property and development project.

  1403
  That deceit and dishonesty were brought about, first, by writing, unknown to Mr. Kenny, a letter over a forged signature requiring the leasehold interest in the property to be assigned to a company of which Mr. Taylor was proprietor—the company was called Messina Securities Ltd., incorporated in the British Virgin Islands—secondly, by ensuring that the freehold interest in the property was also conveyed to Mr. Taylor's British Virgin Islands company, Messina Securities Limited, and, thirdly, by forming a company of the same unsavoury name in England and forging, with his clerk and fellow conspirator, Robert Thomas Shade, a lease from the British Virgin Islands company to the English company of the same strange name by the old trick of deliberately making illegible signatures on the document.
  The next step in this deceit was to mortgage the English company's leasehold interest to a company belonging to Mr. Ellis Bor, whom I must call another fellow conspirator, and to persuade Mr. Kenny to agree to guarantee jointly with Mr. Taylor the repayment of the mortgage, and then leaving Mr. Kenny as the sole guarantor, and then ensuring that three days after the mortgage the British Virgin Islands company demanded that the broken covenant be remedied, so that Ellis Bor's company, the mortgagee, could realise its security by saying that it was in jeopardy and demand repayment, and in default exercise its power of sale. It sold to the English company below value by means of another of Ellis Bor's companies advancing most of the purchase money.
  This is a complicated story, as all fraud must be, especially when there is conspiracy among a number of persons. But the result was that Mr. Taylor and his associates ended up with the asset of the reversion and with the right to kill the English company's lease by enforcing the restrictive covenant. That asset and that right certainly had value. I presume that they have been sold, but not a penny has come to my constituent, Mr. Kenny, from that transaction.
  That was a transaction based on forgeries and fraud, but it was not an isolated transaction. There was another case related to land at Dodleston in Cheshire, where much the same technique was operated by Mr. Taylor of having a "phoney"
  1404
  company, in this case called Marshcrest Properties Limited, with fabricated minutes of the company, all leading eventually to the exclusion of Mr. Kenny from any share in property in respect of which he had consolidated negotiations for development.
  I am informed that the police are now investigating two other projects of Mr. Taylor's, one relating to insurance and the other relating to clients' moneys. In neither of these is Mr. Kenny involved, so I think that I was justified in thinking that not only my constituent but the public in general should be protected from this public menace, as he is being called in advice to the Director of Public Prosecutions. My constituent has indeed suffered, partly by his own fault in, in exasperation, disobeying a court order and finding himself in gaol for contempt of court.
  However, the police investigation in which I am interested, and in which I think the House will be interested, is that which lasted nearly four years into Mr. Taylor's activities and which took the police investigators overseas. It was a very thorough investigation and resulted in a 400-page police report to the Director of Public Prosecutions.
  I have not read the report, of course, and have not even seen it. I am only told that it is of that size. But I know that it covers three periods of investigation. The first was for a year or more, up to May 1973. That investigation culminated in the police arresting Mr. Taylor and his clerk, Mr. Shade, and charging them with the forgery of the lease which I mentioned, the lease in April 1971 from the British Virgin Islands Company to the English company.
  The police started that prosecution but the Director of Public Prosecutions was, I understand, advised in July 1973 that there was insufficient evidence upon which to continue the prosecution. Therefore, the police dropped it and left it to continue as a private prosecution. Not surprisingly, it foundered and was dismissed because, as I understand the position, the forgery was held to be a fraud by Mr. Taylor on Mr. Taylor's British Virgin Islands Messina Securities Ltd, and of course that company would not appear to say that it had been defrauded. It seems that the court found that the fraud

  1405
  on the ultimate victim was too remote for the prosecution at that stage.
  The second part of the police investigations into Mr. Taylor's activities proceeded almost immediately and continued through 1973. On that second report the Director of Public Prosecutions was advised by counsel that Mr. Taylor was without doubt a devious trickster, a complete stranger to the truth, and that, if lying was a crime, his conviction several times over would present little difficulty. Counsel also advised that there was a proven readiness by Mr. Taylor to make false signatures, that he had acted in a deceitful way throughout and that his activities proved conclusively that he was a fraudulent liar. But the Director was advised that there was still insufficient evidence on which to prosecute.
  The police therefore continued their investigations and on their third report to the Director in December 1975 he was again advised by counsel. He was advised that Mr. Taylor was a knave and that there was strong suspicion that two of his associates were little better, and that they all had low standards of honesty and integrity. Counsel then repeated that Mr. Taylor was a devious trickster, a fraudulent liar, and a public menace.
  At this stage I should mention that one of the most peculiar aspects of the activities of Mr. Taylor and his associates is the involvement of well-known merchant banks with well-known names on their boards in financing these activities.
  Mr. Canavan: Name them!
  Mr. Page: I was going to name the banks in a moment. But I think that on the facts of the involvement of well-known and apparently reputable banks perhaps the Director thought that if those banks trusted Mr. Taylor, the Director's counsel's description of him must be exaggerated. In the Forum site discussion did not the Northern Commercial Trust Ltd. and Continental Bankers Agents Ltd. make completely unsecured loans to the British Virgin Islands company with that doubtful name of Messina Securities Ltd.? Did not the North British Bank Ltd. and the Central Bank Ltd. lend money Mr. Bor and Mr Taylor which facilitated the juggling with leases between the two Messina Securities Ltd.
  1406
  companies? Did not a one-time manager of the Northern Commercial Trust Ltd. go into business with Mr. Taylor in a company called Monarch Insurance Co. Ltd.?
  Whether that did influence the Director of Public Prosecutions, or whatever the influence of that faith of the bankers in Mr. Taylor upon the decision of the Director, I think that the Director fell back on the advice he received from counsel at that stage, which was that a criminal prosecution against Mr. Taylor would be contrary to public interest because the interval between the offence constituting the alleged crimes and the date of trial would be long. But is not that very frequently so in the case of any prosecution for fraud and conspiracy? Is there not bound to be long investigations before a case is brought on for trial, and is not that a very usual circumstance in such cases? It does not seem to me a good excuse for not bringing a prosecution after all the accusations which counsel had made in the advice he had given to the Director of Public Prosecutions.
  The second reason that counsel gave for not bringing a prosecution because it might be against the public interest was the cost of criminal proceedings. I have never heard it alleged that we ought not to prosecute because it might be an expensive case. It is quite wrong to use that as a reason for not prosecuting a man who has been declaimed by learned counsel to be a public menace and a fraudulent liar.
  The third point was the complexity of the prosecution. It was said that it would be against public interest to proceed with a prosecution because the transactions had been so complex. They are always complex in cases of fraud and conspiracy. One can think of innumerable cases where the hearing has taken weeks and sometimes months because of the complexity of the case.
  The fourth reason why it would be against the public interest to prosecute—as counsel advised the Director of Public Prosecutions—was the likely result of criminal proceedings. I do not know what he meant by that—perhaps he was fearful that a prosecution might not succeed. That is so in any case, but here I should have thought that, after the descriptions of Mr. Taylor by three eminent counsel

  1407
  advising the Director of Public Prosecutions and the sort of descriptions that I have mentioned, one could have said that the success of the criminal proceedings was a probability, if not almost a certainty.
  I consider that the reasons for not prosecuting are not valid. They are bad having regard to the general advice that was given to the Director of Public Prosecutions over the conduct, behaviour and character of this man and his associates. In those circumstances a prosecution ought to have been instituted against this public menace for the public protection.
  11.58 p.m.
  The Solicitor-General (Mr. Peter Archer): Before I say anything about the case that the right hon. Gentleman has raised I hope that the House will forgive me if I make a few general remarks in order to explain the course that I propose to take. The House will understand that they are intended to be general and that they do not necessarily all apply to the facts of this case.
  Those who have to decide whether to prosecute someone are rarely confronted with a simple issue. The first question that they must decide is whether there is evidence available on which a court could properly be asked to convict. If the answer is "No," that is the end of the matter, and there should be no prosecution.
  If the answer is "Yes", there then arise further questions. In 1925, Sir John Simon, then a Law Officer, told the House:
  "There is no greater nonsense talked about the Attorney-General's duty than the suggestion that in all cases the Attorney-General ought to decide to prosecute merely because he thinks there is what the lawers call 'a case'."—[Official Report, 1st December, 1925; Vol. 188, c. 2105.]
  That was quoted with approval by Sir Hartley Shawcross, as he then was, then the Attorney-General, on 29th January 1951.
  The next question is, "Is there a reasonable prospect of a conviction in all the circumstances?". Even if the answer to the first question is affirmative, it would be oppressive to impose the strain and expense of a trial upon anyone when there is no reasonable prospect that he would be convicted.
  1408
  Even when both of these questions are answered in the affirmative, there are other questions to be asked. For, of course, it is precisely when there is a prospect of a conviction that there is greatest risk of an injustice. One has to consider how long ago it all happened and whether memories of those events can be relied upon. One has to ask how complicated the evidence will be, how long and expensive a trial may be involved, whether public expense would be justified when all these factors are weighed against the seriousness of the offence, the importance of the matter, and any probable sentence that may be passed. One needs to ask about the accused personally, the state of his health, his age, and whether it would be oppressive, in all the circumstances, to prosecute him. The ultimate question is whether it would be in the public interest, in the broadest sense, to bring proceedings.
  Where the Director or the Law Officers have participated in this procedure, they are of course responsible to Parliament. It is right that the Law Officers should be subjected to questioning in the House, though the House will always be conscious of the need to preserve the Director's independence.
  The letter to which the right hon. Gentleman referred was written by someone, who was not aware that there was to be this debate, in response to a letter which arrived shortly before from Mr. Taylor's solicitors. There are difficulties about ventilating these matters fully in public. If one has decided to prosecute someone, the matter is sub judice, and it would be wrong to explain in detail why one has so decided. If one waits until the proceedings are concluded, it is not always fair to ignore the sifting and testing of evidence which have taken place in court and to rehearse the evidence which was originally available when the decision to prosecute was taken. If one has decided not to prosecute someone, it may be very unfair to embark upon a disquisition why he was ever suspected, of what allegations were made against him, by whom, and on what grounds.
  Sometimes it may be unfair not only to those who were potentially accused, but to those who have played a part in the story. It is difficult to hold a balance fairly between disclosing the facts fully to the House and protecting individuals

  1409
  from allegations which are unsifted and untested.
  Therefore, I do not propose to rehearse the facts of this case, except to trace the history of the matter, so far as I know it, since Mr. Kenny formed the view that he was the victim of a fraud. I believe that the right hon. Gentleman attempted the impossible by trying to bring within the compass of a 15-minute speech the complicated facts in this case. I hope that he will forgive me when I say that he did not succeed in that aim.
  If I were to elaborate on the original transactions, however fair I might seek to be within the limited time available, I might be accused, possibly quite properly, either by Mr. Kenny of omitting something important or by Mr. Taylor of mentioning matters on which he has had no opportunity to comment. The events which gave rise to this case took place in 1970 and 1971. Since then—I quote from statistics given by Mr. Kenny in one of his letters—there have been 19 Chancery actions and the matter has been considered by 16 firms of solicitors and 38 counsel. Charges against Mr. Taylor have been preferred and withdrawn, and a private prosecution against him initiated by Mr. Kenny has been dismissed.
  To the best of my knowledge, Mr. Kenny has not succeeded in persuading any court that he is right. The question of prosecution has been carefully considered by counsel—some of whom were referred to by the right hon. Gentleman—in five opinions and they are all to the effect that a prosecution would not be justified.
  Rarely can any contemplated prosecution have received such careful and protracted consideration. More than once, matters which everyone thought were closed have been re-opened and reconsidered. That seems to have arisen from two factors: first, the passionate conviction of Mr. Kenny that he is the victim of fraud—I accept at once that he holds that conviction with complete sincerity—and, secondly, the great care that the right hon. Gentleman has devoted to this case on behalf of his constituent.
  The events, as I say, took place in 1970 and 1971. Mr. Kenny complained to the police, and there was a long and careful investigation. Everyone who has con-
  1410
  sidered the matter has paid tribute to the care with which the police report was compiled.
  On 18th January 1973 charges were preferred against Mr. Taylor, first, of conspiracy to defraud and, secondly, of the forgery of a counterpart lease. Later the Director of Public Prosecutions considered the position, and instructed counsel. The evidence, which at that time related to the Forum site transaction, was considered by junior and leading counsel. I have an opinion by them, dated 13th July 1973, in which they advised in the clearest terms that the evidence did not warrant proceedings either for conspiracy to defraud or for forgery, and on 21st August those charges were formally withdrawn.
  Mr. Kenny then brought a private prosecution in respect of the forgery. That came before the stipend diary magistrate by way of committal. It was argued by a very distinguished and competent counsel, but dismissed.
  Mr. Kenny was not content to let the matter rest there. I quote from a letter written by Mr. Kenny:
  "After the withdrawal of these charges I bitterly complained to Sir Norman Skelhorn of the handling of this case. Mr."—
  and he names the official in the DPP's department dealing with the matter—
  "dealt with my complaint and informed me 'it you will bring me further evidence I will reopen the case'. I brought him evidence … and true to his word Mr. … re-opened this case."
  The Director took a further opinion from junior counsel dated 23rd April 1974, this time relating to the Dodleston transaction. It is a full and careful opinion, occupying 11 pages. It concluded that the evidence available did not justify proceedings, but it suggested that certain further inquiries might be made.
  At this juncture Mr. Kenny alleged that both junior and leading counsel, who were well known in Manchester, were too involved in the local community to be objective, so he asked that the matter should be considered by counsel from London. It is not often that such a request is made and rarely is it sympathetically received I should make it clear that what transpired does not indicate any reflection on the counsel concerned. Nor is any reason known to the Director for suggesting that their opinions were other than fair and

  1411
  objective. But Mr. Kenny is a forceful and persuasive man, and he had his way.
  The matter was considered by leading counsel from London, who gave two opinions. He gave a long and careful opinion on 15th December 1975 devoted to the alleged conspiracy to defraud in relation to both transactions, and he advised that the evidence did not justify proceedings. In a further opinion, dated 20th January 1976, he considered the alleged forgery, and again concluded that the evidence did not justify proceedings.
  In the light of those opinions the Director arranged a consultation attended by counsel and the police. It took place on 9th February 1976. I am told that it occupied a whole day and those present concluded that the evidence did not justify proceedings. On 23rd April 1976, following certain further information which had become available, there was a further conference with junior counsel on the alleged forgery, and again the conclusion was that the evidence did not justify proceedings.
  At this stage all these people had considered the matter. The public had been put to a great deal of expense. I am not complaining. It is right that these matters should be investigated carefully. But I was then invited to consider whether yet further expense should be incurred.
  There was a further aspect of the matter with which I was confronted. Mr. Taylor had been aware throughout this time, as it was right that he should be, that, notwithstanding that the charges preferred against him had been in one case withdrawn and in the other dismissed, the possibility of initiating further proceedings was still under consideration, and by this time he, too, was complaining of injustice.
  I have a copy of an opinion by distinguished counsel instructed on his be half whose name is not included in Mr. Kenny's list of 38 counsel. He recommends that the DPP should be shown a copy, since it sets out Mr. Taylor's side of the case, including allegations against Mr. Kenny. I have not considered those allegations. I mention them only to show that Mr. Taylor is entitled to some finality in the matter.
  I had been exchanging correspondence with the right hon. Gentleman since he wrote to me on Mr. Kenny's behalf. On
  1412
  9th September 1976 he wrote to me again, setting out Mr. Kenny's allegations, and considering fairly and carefully the evidence shown to him. On 15th September I replied that I would myself consider the matter. I did so and, after reading the papers and holding more than one consultation, I concluded that there was no reason to disagree with all those who had advised.
  In addition, I had to bear in mind that these complicated events occurred in 1970 and 1971, and if proceedings were launched at the end of 1976, there was no reasonable prospect of a committal for many months, and two or three years might well have elapsed before the case was considered before a jury. I emphasise that this was not the only reason why I reached that conclusion, but had it stood alone, it would have been a very weighty consideration.
  I have subsequently discussed the position with the right hon. Gentleman. He has seen the various opinions of counsel, which, so far as I know, is unique in these cases, and I should not like it to be thought that this is a precedent. After the use the right hon. Gentleman has made tonight of opinions shown to him in confidence, I can assure him that it will not be a precedent.
  A great deal of attention has been paid in this case to Mr. Kenny's allegations. He appears to consider that the issue of criminal proceedings against Mr. Taylor would assist him in his civil proceedings, in which so far he seems to have met with little success. I am not clear why they would assist him, but even if that were so, it is not a matter to which I can give great weight.
  As each successive counsel has considered the matter, he himself has been the subject of allegations by Mr. Kenny in the numerous letters which he has written, some of them in somewhat unrestrained terms, and each time he has demanded that someone more objective or more competent should look at the case. Each time he has persuaded some one that the matter should be considered still further. It is a tribute both to his persistence and to the system of public administration in this country.
  But the right to be heard does not entail a right to insist that those who hear should agree. No one could have presented the argument more persuasively

  1413
  than the right hon. Gentleman in correspondence and tonight under pressure of time. But all those concerned are entitled to ask that the matter should at some stage be considered closed. I have heard nothing today from the right hon. Gentleman which persuades me to the contrary.
  Mr. Graham Page: The Solicitor-General has given the impression that everybody agreed that the evidence was insufficient. What was the advice from the police in their long report?
  The Solicitor-General: The right hon. Gentleman knows very well that, much as I should like to answer that, I cannot.
  Mr. Canavan: Why not?
  The Solicitor-General: Because the police report contained information given
  1414
  in confidence to the police by the people concerned.
  Mr. Canavan: Why can it not be given in Parliament?
  The Solicitor-General: The answer to my hon. Friend is that if police reports were ventilated openly and publicly in this House, the police would get little co-operation from the kind of people quoted in that report, who gave their evidence in confidence. It would be counter-productive—
  The Question having been proposed after Ten o'clock on Wednesday evening, and the debate having continued for half an hour, MR. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at ten minutes past Twelve o'clock.

  Second Reading Committee
  Wednesday 27th April 1977

  The Committee consisted of the following Members:

  Mr. Arthur Blenkinsop (in the Chair)

  Adley, Mr. Robert (Christchurch and Lymington)

  Horarm, Mr. John (Under-Secretary of State for Transport)

  Crowther, Mr. Stan (Rotherham)

  Lambie, Mr. David (Central Ayrshire)

  Ellis, Mr. John (Brigg and Scunthorpe)

  McDonald, Dr. Oonagh (Thurrock)

  Fowler, Mr. Norman (Sutton Goldfield)

  Moate, Mr. Roger (Faversham)

  Fry, Mr. Peter (Wellingborough)

  Morrison, Mr. Peter (City of Chester)

  Galbraith, Mr. T. G. D. (Glasgow, Hillhead)

  Penhaligon, Mr. David (Truro)

  Watkins, Mr. David (Consett)

  Goodlad, Mr. Alastair (Northwich)

  Weetch, Mr. Ken (Ipswich)

  Harper, Mr. Joseph (Pontefract and Castleford)

  PASSENGER VEHICLES (EXPERIMENTAL AREAS) BILL [Lords]
  10.30 a.m.
  The Under-Secretary of State for Transport (Mr. John Horam): I beg to move,
  That the Chairman do now report to the House that the Committee recommend that the Passenger Vehicle (Experimental Areas) Bill [Lords] ought to be read a Second time.
  This is a small Bill, with a particular and limited aim. Therefore, in introducing the Bill I propose to concentrate on the Bill itself and its immediate context, and not to discuss the general issues of Government policy on transport as a whole, and rural transport in particular. In any case, these matters have been the subject of long consultation leading up to the White Paper that we hope to produce later this Session. Those issues have been thoroughly ventilated, and there is little definitive that I can add until that White Paper has been produced. I should, therefore, like to stick to the Bill.
  The present programme of rural transport experiments has its origins in consultations on the problems of rural transport with both sides of the bus industry, with local authority associations and with
  1416
  other interested bodies. From these consultations it was clear that there was no consensus on the best way of tackling the issue.
  The problems differ considerably from area to area, in both nature and scale, and there was clearly no single solution that could be shown to be acceptable throughout the country. Sweeping changes in licensing law across the board might benefit some areas, but elsewhere their effect could do much harm to surviving services.
  It was also clear that though alternatives to ordinary bus services were being tried out in various parts of the country, no systematic effort was being made to exploit fully the wide scope for flexibility in the provision of services which already exists in the licensing system. What appeared to be needed, therefore, was a range of solutions that could be fitted into the circumstances of individual areas.
  Therefore, it appeared sensible to promote a series of experiments in various parts of the country to test, on the ground,

  1417
  what could be done to help rural communities. The experiments are under the overall control of a steering committee. I chaired that committee, which is made up of representatives of local authorities, bus operators, trade unions, taxi and voluntary interests, consumer organisations, as well as Scottish and Welsh Office Ministers. Responsibility for the detailed arrangements and proposals for experimental schemes for each area is in the hands of local working groups made up roughly in the same way as the steering committee.
  The steering committee held its third meeting on 24th March 1977 and gave the go-ahead for 16 experiments in four selected areas—Dyfed, South Ayrshire, Mid-Devon and North Yorkshire. Perhaps it will assist the Committee if I outline the sort of schemes that are now going forward, and those that will go forward completely if the Bill is enacted.
  There are, as I said, a total of 16 schemes. Some are, however, similar, involving the same sort of methods, and there are not 16 different types of scheme. There are two flexible route services using small, professionally driven buses and offering pick-up on demand. There is a volunteer-driven community minibus, also with flexible routing. There are three variants on a new form of operation involving shared hire cars charging each passenger separately at rates comparable to bus fares. These will provide highly flexible, low-cost feeder services to local centres, to longer distance bus services, and, in one case, to a local rail service.
  There are four schemes involving the use of private cars to provide an organised transport service authorised to charge fares in areas of particularly low demand for public transport. There are two hospital transport schemes which may involve hire cars, private cars or minibuses to tackle the problems of people living in remote areas who need to get to centralised hospitals in towns, to visit patients, or to attend clinics.
  There are three post bus services. This is a familiar concept in some parts of the country—notably Scotland—that is not so widely used in other areas, and we want to see whether the possibilities of development are good. There is also an emergency car service catering for unexpected and urgent transport needs.
  1418
  In addition, a special zone will be designated in the Devon study area where motorists will be able to make private arangements to give lifts for payment—which is at present illegal—on a regular basis. In this case, motorists will have to make sure that their insurance cover is valid for such an operation.
  That is the panoply of various devices that have been suggested, not by the Department at the top, but by working groups working from the bottom and reviewing the situation in each area.
  The experiments will begin this summer, as soon as possible. We expect to have usable results well before the two years, which is the minimum period considered in the Bill. We expect to have a clear indication of the sort of findings in some cases well before that time, possibly in a matter of months—half a year—rather than have to wait the full two years.
  There are some schemes which, clearly, can operate under the existing law. For example, a volunteer-driven community minibus, which is analogous to the Norfolk community bus, can operate under existing legislation. Equally, the two flexible route services, using small professionally driven buses can operate under the existing legislation. They offer a different type of bus service. It is more of a pick-up-on-demand service. Post buses can also operate under the present licensing arrangements. There is, therefore, no need for the Bill in respect of some of the services that we are putting into operation.
  In other cases, we clearly need to change the law. As I have said, it is illegal to charge for taking a passenger in one's car on a regular basis. That is outside the present law. I have no doubt that it occurs from time to time, but it is illegal. If charging in this way is to operate on a properly developed area basis to see exactly what rôle it can play in meeting transport needs, it needs to be outside the existing licensing arrangements. People will then have no fear of being penalised. Several of the other schemes that I mentioned are also outside the existing licensing law.
  Essentially, the Bill revolves round three areas. First, the use of one's private car. Secondly, the shared use of taxis and hire cars—again unconventional

  1419
  and outside existing licensing arrangements. Thirdly, private minibuses. Those are roughly the areas where existing licensing arrangements need to be changed in order to conduct the sort of experiments that we have in mind.
  I shall now briefly go through the clauses of the Bill to clarify them for the Committee.
  Clause 1 defines an experimental area. This is an area designated in accordance with the Bill's provisions, within which the requirements of Part III of the Road Traffic Act 1960 may be modified. My right hon. Friend the Secretary of State may designate by order the whole or part of a county to be an experimental area.
  The order will be effective for up to two years, but it can be extended by order for periods of not more than two years at a time. Before making the order, there must be consultations with the local authority, both sides of the bus industry, and any others that seem appropriate. There was some feeling in another place that the time scale for these two-year orders should be lengthened. There was a debate about that, and eventually the amendments designed to lengthen them were withdrawn.
  Clause 2, which is the heart of the Bill, delineates the powers of local authorities to grant authorisations for the use of certain vehicles within a designated area for the carriage of passengers for hire or reward. Where a vehicle is used in compliance with an authorisation, it will be treated as not being a public service vehicle. It will fall outside the public service vehicle provisions.
  Authorisations will be of two kinds—general or special. The general authorisation will cater essentially for the over the-fence, neighbourly type of arrangement to carry somebody in a car on a regular basis. It would obviously be ludicrous to have a bit of paper for each private car owner operating in that way, So there will be a general category to cover such arrangements.
  The special authorisation will operate where a service is run in a more formal and organised way. In that case, the vehicle operator will need a piece of paper to indicate what service is being run.
  Mr. Robert Adley: In Clause 2 there is a reference to a local authority being concerned with an experimental area. The Minister mentioned county councils. Should that have been a reference to a county council, or to a district council? Will the Minister state what the situation will be in adjoining counties, or in adjoining local authorities? He is obviously aware that busses, and people's needs for them, do not stop at county boundaries.
  Mr. Horam: My next sentence is literally about that. I should of course, have referred to county councils. They are the transport authorities in rural areas. There will be special provision for adjoining designated areas so that authorities can issue permits that apply to more than one experimental area.
  There was a separate point, I think, implicit in what the hon. Gentleman said. It concerns arrangements outside an experimental area, and I shall come to that later because there was some discussion of the subject in another place.
  The approval of my right hon. Friend the Secretary of State is required for the granting of authorisations.
  Clause 3 permits authorities to make the same arrangements for the granting of travel concessions with those operating vehicles under authorisations as they can at present with those who operate public service vehicle undertakings. The clause was added in another place to meet representations made on behalf of local authorities. I think the feeling was that they did not want to put the arrangements at a disadvantage compared with those which they had worked out for giving concessionary fares on ordinary buses. In deference to the views of another place, the clause was added to the Bill.
  Clause 4 deals with the short title, interpretation, and extent of the Bill when enacted.
  The schedule provides that certain conditions have to be attached to every general authorisation. In the case of special authorisations, it provides powers for the local authority, rather than the Government, to attach conditions relating to such matters as the route, timetable, advertising, charges, and so on. The schedule also deals with the duration and revocation, or variation, of authorisations, and with publicity and other procedural matters.

  1421
  In another place, it was suggested that publicity should be given to intentions to grant authorisations. The steering committee was consulted on the matter between stages on the Bill, at its meeting in March. As a result, an undertaking was given in another place that the Government would bring forward a suitable amendment at the Committee stage in this House to deal with publicity for proposals to grant authorisations.
  A further matter discussed at the meeting of the steering committee, which represents all the interests involved, concerned the form of authorisations. The preparation of experimental schemes for presentation to the committee had pointed to the desirability of certain amendments to the Bill in that respect. Indeed, one working group was doubtful whether a particular scheme it favoured was feasible without an alteration to the terms of the Bill.
  In a number of schemes dependent on the Bill—this refers to the point made by the hon. Member for Christchurch and Lymington (Mr. Adley)—the intention is to help people in a remote area to get to places outside that area, such as a large or specialised hospital, or a major shopping centre. Under the Bill as at present drafted, journeys under authorisations must take place entirely within designated experimental areas. Thus, extremely extensive and yet closely defined areas would need to be designated. It would be simpler, more convenient, and more effective from the point of view of monitoring if there were additional forms of authorisation which allowed for journeys starting or finishing within an experimental area but connecting with places outside it.
  The steering committee entirely accepted the case for having new forms of authorisation to provide for this additional flexibility in designing schemes, and suitable amendments to the Bill are being prepared. The House authorities advise, however, that the amendments would, strictly speaking, be outside the scope of the Bill as at present drafted, and that accordingly the House would need to instruct the Standing Committee before it could consider them. My right hon. Friend the Secretary of State will accordingly be putting down an appropriate instruction.
  1422
  I hope that I have dealt adequately, reasonably clearly and shortly with the general purpose of the Bill, the clause-by clause arrangement, and one or two matters that were brought to our attention in the course of the debate in another place. That was a very useful and thorough debate, and went over the ground very satisfactorily.
  The purpose of the Bill is to help us to obtain hard information about the sort of transport problems that exist in rural areas and to see what experience and evidence can teach us about sensible ways forward. We want to find out what works in practice, as opposed to what has often been said works in theory. Many people anxious to improve the situation have had many ideas about what would work in these situations. It is important now to get down to the task of finding out what does work.
  A good example is post buses, which are widely mooted as a solution to our problems in England because they have been fairly successful in some of the remoter areas of Scotland. But there may be reasons why they are a success in Scotland and may not be so successful in this country. If we look into that possibility and get some experience on the ground, we can find out whether there are any differences geographically or in any other way that make the operation of a successful post bus system different in Scotland. That is the sort of example that we want to study.
  I think, also, that the experiments will add to the store of knowledge which the Government accumulate, and which they can then convey to local authorities. One of the problems in local transport is that too often local authorities do not know what is going on in other areas. They are not aware of good schemes of pedestrianisation, cycling provision, or the kind of traffic management schemes that have been successful in other parts of the country.
  It is one of the Government's jobs which often has not been done well in the past to make sure that local authorities know what is going on in all parts of the country, so that the best evidence and the best practice are brought to bear on a particular problem. We shall be pioneering various types of experiment that we can then use to show local authorities,

  1423
  by example, the sort of things that they can do, if they so wish.
  I am sure that the Bill will be a continuing part of any sensible approach to solving the problems of rural transport. It is a matter that exists quite independently of what may be the particular state of the licensing law at any point in time. We can gain from looking at this matter as a continuing programme designed to help us to find a way forward in an area where there has been much talk but not a lot of hard evidence. That is what the Bill is designed to provide, and on that basis I commend it to the Committee.
  10.49 a.m.
  Mr. Norman Fowler: I shall speak very briefly. This debate is taking place in a Committee Room upstairs instead of in the usual place, the Foor of the House, because it was put to us by the Government that, unless we agreed to taking it in Committee the Bill would fail because of the difficulty in finding time on the Floor of the House. Therefore we agreed, although I am bound to say that at the time we agreed to it the situation was somewhat different from what it is now.
  The reason we agreed to take the Bill in Committee upstairs is that we attach great importance to rural transport. Although we do not believe that the Bill goes anything like far enough, it is at least a faltering step from the Government who, up to now, have appeared so frozen in immobility that we wondered whether any life remained in this subject.
  Frankly, this is not one of the most dramatic pieces of legislation that even the Department of Transport has brought before this House. It is a mouse of a Bill, but it does no harm, and it might even do some good. Clearly, therefore, we shall not obstruct it, and, equally clearly, our attitude contrasts sharply with the attitude of the Labour Party when confronted with a similar situation in 1974 when it took office, and I believe that it is worth recalling the history of this measure.
  The transport problems of rural areas are not new. They have existed for many years. Indeed, they existed even before the war, but undoubtedly they have developed since then. To summarise, whereas in urban areas the problem is of too many people trying to travel, in rural
  1424
  areas the problem is clearly one of too few people making use of the existing transport facilities. Therefore, there is a major difficulty in preserving an adequate system of public transport because of a combination of falling passenger demand—falling because of the progressively greater use of the car—and increasing operating costs.
  The potential demand for transport services is low and fragmented, and it will clearly remain so in rural areas. Even in the 1920s and 1930s, when there was little competition from the car, many of the rural services were unprofitable. Since then, car ownership has become more common, with 70 per cent. of households in rural areas now having cars—appreciably more than in urban areas, and appreciably above the national average. I point out, however, that that does not necessarily mean mobility for all the family.
  At the same time, the old concept of cross-subsidisation—the support of non-economic routes by more profitable routes—has become less and less valid. We therefore have a position where conventional public services have been reduced, although a real and urgent demand for transport still exists among, for example, the elderly, housewives and the young—three of the biggest groups that are affected.
  It was to help that specific problem that my right hon. Friend the Member for Yeovil (Mr. Peyton), when he was Minister for Transport, brought forward his 1973 Road Traffic Bill. In January 1974 the Bill received its Second Reading. Three clauses in the Bill introduced modest reforms in the licensing system, and I believe it would be conceded that they were modest reforms.
  For example, they permitted the development of minibus services and the giving of lifts for payment. No one would claim that those reforms were revolutionary. Indeed, the major complaint of the right hon. Member for Sheffield, Park (Mr. Mulley) who at that stage led for the Opposition on transport matters, was that they did not go far enough. He said:
  "We would have liked to see something more dramatic to meet the problems of public transport, especially in rural areas."
  A Labour Back Bencher, the hon. Member for Glasgow, Kelvingrove (Mr.

  1425
  Carmichael) intervened in the debate to say that he hoped
  "that there will not be too many pettifogging regulations about the use of minibuses"—[Official Report, 30th January 1974; Vol. 868, c. 472–4.]
  What actually took place? A General Election intervened, and the progress of the Bill was brought to an end. When the Labour Party came to power it reintroduced the Bill, but with one exception. It left out the three clauses on de-licensing. The party which a few weeks previously had talked of dramatic solutions now turned its back on all reform, while with true irony the Back Bencher who had said that there should not be too many pettifogging regulations was the very same junior Minister who argued against the amendments to the Bill to have the de-licensing proposals reinserted. That was the history of the situation at that stage.
  The amendments were put to the vote. They sought to reintroduce those modest reforms put forward by my right hon. Friend in 1973, and they would have allowed new services to develop. The amendments were voted down by the Government, and among the 114 Labour Members who voted against those reforms were the right hon. Member for Dudley, East (Dr. Gilbert), then the Minister for Transport, the right hon. Member for Stockton (Mr. Rodgers), now the Secretary of State for Transport, and, last but not least, the hon. Member for Gateshead, West (Mr. Horam), now the Under-Secretary of State who has introduced this Bill. They are among the incredible total of Government transport spokesmen whom we have seen during the past few years.
  Even more was to come. For the next two years, the Government did precisely nothing. The right hon. Member for Sheffield, Park gave way to the right hon. Member for Dudley, East. Whether that was an advantage, I leave the Committee to decide. Eventually, in November 1975, a dramatic Government announcement was made. The Government were to set up a committee to consider the problems of rural transport. That was from the party that had complained that the progress on rural transport had not been dramatic enough.
  Such was the priority that the Government gave to that committee that it took
  1426
  seven months for the committee to meet for the first time, and now in May 1977, we have a Bill that proposes nothing more than four limited experiments. The matter is entering its final stages.
  We shall not delay the Bill, because the Government have themselves done their worst in delaying the reform of rural transport, but we believe that the Government have a shabby and disreputable record on rural transport. Above all, they have shown a total disregard for the needs of rural areas and the people living in them. It is not just that they have not given priority to those needs. They have ignored them. They have wasted three years, and they have made the position considerably worse.
  If one takes into account the Budget proposals of the Chancellor of the Exchequer only a few weeks ago, one finds that motoring costs have been increased. In which places does that hit hardest? The answer is, of course, in the rural areas where the car is not a luxury, but is essential to mobility.
  It is interesting that the Automobile Association has just conducted a survey on car ownership. It carried out the survey among motorists, and it was found that two-thirds of them used their cars to travel to work. That need was greatest in the rural areas. In other words, the car was indispensable for travelling to work.
  That fact was underlined by the answers to another question. Motorists were asked to respond to the statement "I could not do without my car". The statement was agreed to by 58 per cent. of the working population in urban areas, by 65 per cent. of those in surburban areas, and 78 per cent. in rural areas. Among the non-working population the proportion was a little lower. It was only 68 per cent. in rural areas, but again it was the highest of the three categories.
  I think it will be conceded by hon. Members on both sides that the car is most essential in rural areas, and that the Budget price rises will increase the problems of mobility, rather than decrease them, yet the Chancellor of the Exchequer in his Budget Statement talked not only about energy conservation—which I hear he is also discussing in Washington—but about the increases being an aspect of transport policy. We shall wait to hear what that aspect of

  1427
  transport policy is, because so far the Secretary of State for Transport has refused to reveal even the slightest glimpse of where it fits into his transport strategy.
  There is nothing to cheer about in the Government's attitude towards the problems of rural areas. There is nothing to admire. Certainly the Bill does no harm, but it fails to measure up to the challenge of rural areas. It permits experiments, but we have had experiments before. Indeed, the 1973 Bill was based on the result of experiments. I doubt whether these new experiments will take the argument much further. At the end of the day, crucial decisions will still need to be made on the question of licensing.
  Even given the limitations and the lack of ambition of the Government's approach, an alternative approach was available to the Government. Had they taken the approach of setting up a committee, they would have done better to have given that committee the task of considering how the licensing laws could generally be reformed. Experiments and innovating services could have developed naturally throughout the country, and not just in four areas. In other words, the aim should have been to give power locally with, on a national level, the committee considering how the law could be reformed to enable such innovations and changes to develop naturally.
  The case for that is very strong, and I say that for two major reasons. First, in my view, it is not too revoluntionary to suggest that an Act that was passed in 1930, based on a Royal Commission report of 1928, might not be totally relevant to the conditions of the late 1970s. The Act was passed at a time when minibuses scarcely existed, when the car was still a luxury, and when it was not the case that such a high proportion of those living in country areas owned a car.
  Secondly, the whole basis of the traffic commissioner system, or at least part of that system, has changed. Clearly, there is a need for a safety checking system. I do not dispute that. But we must remember also the basis of the licensing system itself. That basis was that a provider of profitable routes was protected, and the price paid was the support of more unprofitable routes, notably in rural
  1428
  areas. There was a quid pro quo for that licensing arrangement.
  Whatever one may think of the basis of that system—even that is open to challenge on a number of theoretical and practical grounds—it is certainly not the case today. Cross-subsidisation goes on, perhaps internally on a route where the profitable parts of the day subsidise the unprofitable parts of the day, but it has long since ceased to be a factor that profitable routes subsidise the unprofitable routes. That just does not happen any more, and it is time that the Government recognised not only that, but also the logic of that situation.
  The position has changed. Today the demand is for low-cost transport, both from the point of view of the traveller and of the provider, and the local authority. It also follows that there will be no one general solution that will necessarily apply to every part of the country. As the Economist pointed out one or two weeks ago, post buses have done better in Scotland than in the rest of Britain. We should not be surprised about that.
  Different areas will work towards different solutions. Oxfordshire, for example, is working towards another solution which, in the view of the Oxfordshire County Council, is to the benefit of the people in that county. But it does not follow that that will be to the benefit of, or be a blueprint for every other county. Each county, and each rural area, must be allowed to develop its own system to meet its own needs.
  What we can demand is that the national law enables such local initiatives to be taken. The law should not be allowed to stand in the way of innovation, as so many operators and authorities complain to me is the case today. That is the challenge which the Government should have met, but which they have failed to meet over the past three years.
  I shall not take this any further because we shall want to pursue the arguments on rural transport in a debate on the Floor of the House, rather than in the debate today, but it helps to explain our attitude to the Bill. In the meantime, we shall certainly allow the Bill to have a Second Reading because it recognises, for the first time in this Government's reign, that there is a problem with rural transport. However, we remain deeply

  1429
  disappointed that it is such a mouse of a Bill and that it has failed to measure up to the real and urgent social problems of rural areas today.
  11.6 a.m.
  Mr. David Watkins: I, like the hon. Member for Sutton Coldfield (Mr. Fowler), give the Bill a critical welcome, although my criticisms are somewhat different from and, I hope, of a more constructive nature than, those that he made. Perhaps in some ways the hon. Gentleman is to be congratulated. He has carefully chosen Opposition Front Bench cliches that are very much in line with what we have come to expect from members of the present Official Opposition Front Bench.
  There are, as the hon. Gentleman has rightly said, existing problems that existed even before the last war. He might find it instructive to look back to that period when, with those problems already developing, the Labour-controlled Durham County Council introduced a Bill into the House specifically to take powers not entirely dissimilar to those that we are now debating. The Committee might find it instructive to read the scorn, and even personal abuse, that was poured on members of that council. Comments were made by members of the Conservative Party about the then chairman of the council which would have been libellous if said outside the House. I take the point that it is a long-standing problem, but it must be approached rather more constructively than it was by the hon. Gentleman.
  I listened with great interest also to the speech of my hon. Friend the Minister. I appreciate that the nature of the Bill, and the problems with which it seeks to come to terms, presents certain difficulties. It is, as he indicated, to a large extent an experimental Bill. It is seeking to deal with wide-ranging differing problems and the nature of the various regions of the country—England, Scotland and Wales—to which the Bill must, of course, have overall application.
  Even allowing for those wide-ranging problems, and the obvious problems of drafting a Bill such as this, there are certain queries that ought to be raised on the content of the Bill, and I hope that I shall receive answers to them.
  1430
  It is surprising that there is no definition of what constitutes an experimental area. My hon. Friend said that the appropriate clause defined that, but the definition, as far as I can see, leaves the Secretary of State to define what he considers to be such an area.
  Having due regard to the experimental nature of the Bill—if one can use that phrase—and the wide-ranging problems, that may be desirable, but, on the other hand, the only real definition in Clause 1 is that the Secretary of State may designate such an area as one where
  "Part III of the Road Traffic Act 1960 … may be modified."
  That can mean almost anything, and there ought to be a more precise definition of the nature of the modifications, because nothing in the Bill gives any indication or any reason for so designating an area.
  That is not written into the Bill, and my hon. Friend indicated that the problems of definition and the whole wide-ranging nature of the problem make it difficult to lay down precisely what is intended. Nevertheless, I feel that because the Bill is loosely drafted in this manner it merits closer consideration at a later stage.
  I accept that there are areas in which something must be done. I should like to cite my own constituency. I do so not to make a constituency point, but because it is a county constituency with some relatively remote districts. It is typical of the constituencies of many hon. Members on both sides of the Committee and of the House.
  In my constituency there are many areas where it is not economical to run bus services, and therefore services have been cut. At the same time, fares in relation to the incomes of those who do not possess their own transport have become astronomical and prohibitive.
  I represent not one of the lush southern county constituencies but one in the North-East where the conditions of life are somewhat grimmer. The income level is low. I have constituents who are finding it increasingly difficult to go to town in order to shop, because of the high level of fares. In addition—and I accept that it is not economical for the services to be run—there is often no service.
  It is obvious that something must be done. It is that problem, perhaps above

  1431
  all others, with which the Bill seeks to deal. What I am slightly worried about is that, in seeking to deal with the problem, the Bill does not define precisely what is to be done. The terms of reference are very wide. I note in that respect that, in accordance with the Bill, the Secretary of State must consult local authorities and representative bodies.
  Although my hon. Friend the Minister touched upon the nature of some of the representative bodies, I should like to see them more clearly defined. I hope, for instance, that it is not to be only the Traffic Commissioners. I am not sure whether it was a good or an ominous thing that my hon. Friend specifically did not mention the Traffic Commissioners. My experience is that the Traffic Commissioners never seem to do anything except endorse applications for ever higher fares, which causes ever fewer people to use the buses and exacerbates the problem.
  The Committee should have a fairly clear declaration of intent, if I may use that phrase, of precisely who will be consulted if the Bill becomes law. There has been a vague mention of consumer bodies. I wonder to what extent these bodies, with all the panoply that we have set up, are representative of passengers, or potential passengers.
  Mr. Norman Fowler: Hear, hear.
  Mr. Watkins: I note the "Hear, hear". I wonder to what extent passengers, potential passengers and ex-passengers bother to acquaint themselves with the channels that are available to them for their views to be represented. I am sure all hon. Members will agree that it is invariably the Member of Parliament to whom, sooner or later, they fly.
  There is another aspect of the Bill about which I must express some unease, and that is the safety of passengers. Because the public service vehicle regulations do not apply, the protection of passengers will have to be looked into very stringently. For instance, what provision will there be for inspection of the vehicles to be used, in line with the frequent and stringent inspections that are made of public service vehicles?
  I hope that it will not be the same practice as that which applies to a private
  1432
  car or other vehicle, where an MOT certificate is issued annually after the appropriate period.
  It seems to me that there is an important issue here. If people are to be carried for hire and gain in private and commercial vehicles, apart from public service vehicles, there must be stringent examination to ensure the safety of the vehicles in which they are carried.
  Any driver may give someone a lift in his car. My hon. Friend pointed out that that is illegal, although it will be legalised by the Bill. One of the things that causes me concern is the extent to which the insurance cover of the driver will genuinely extend to any passengers whom he is carrying. It is often the case that following an accident involving passengers, irrespective of whether they are being carried for hire, if they are not members of the driver's family there are long, drawn-out arguments over the liability of an insurance company to pay out.
  It is regrettable that insurance companies, which are always so anxious to take, and continuously to increase, their premiums, are noticeably reluctant to pay out when it comes to the insured person making a claim. An accident can often give rise to long, drawn-out claims. On the general issue, whilst it is true that having insurance to cover accidents is important, even more important is the avoidance of accidents.
  My hon. Friend said that the responsibility for having insurance cover will be on the driver of the vehicle. There must be some means of knowing precisely what sort of check there is to be on whether the insurance cover is adequate, and, secondly, how drivers who make their vehicles available for the purposes of the Bill will know their responsibilities.
  I am not against the idea of the responsibility being put upon the driver, but in complex matters such as these something has to be done to make clear, first the need for insurance cover, and, secondly that the drivers and owners of vehicles know what their responsibilities are in this respect.
  As I said at the beginning, I give the Bill a critical welcome. I believe that it is an interesting and important measure, but it leaves answers to be given to many

  1433
  questions, some of which I have sought to pose. For example, precisely what is meant by a "designated area"? Who will be consulted in the process of designating such an area, and how will the safety of passengers be covered?
  I hope that the Committee will be given answers to some of these questions. The Bill may well need modification in Committee in order to cover some of the points that I have raised. Nevertheless, I agree with the hon. Member for Sutton Coldfield that, notwithstanding any criticisms of it, the Bill ought to be given a Second Reading.
  11.18 a.m.
  Mr. David Penhaligon: When I knew that I was to be on this Committee I tried to find the reasons for the origins of the 1930 law. I was told by people who remembered the occasion that, apparently, there was ruthless competition in some areas for passengers, with buses racing each other to the bus stops in order to pick up passengers, and the Bill was designed to stop that. I cannot conclude that in Cornwall the Bill was 100 per cent. successful, because nobody would ever accuse the buses of racing, nor would he accuse them of going in for ruthless competition.
  Although my points are, in many ways, general, I shall tie most of them into Cornwall, because in many ways Cornwall is a good example of the problem to which the Committee is referring.
  I believe that the problem is substantially worse than the words that have been spoken in this Committee today have indicated. It is worse, not because of the situation as it is today, when massive subsidies are being paid to the buses, but because of what will happen in five to eight years' time.
  Let me give the Committee an example. St. Austell, which is a substantial town in my constituency, is based in the hinterland, with old clay-mining villages all around it. I have a list of losses on the bus services running out of St. Austell last year, and the figures are amazing.
  The losses were as follows: St. Austell to Bodmin £12,000; St. Austell to Newquay £46,000; St. Austell to Luxulyan £6,000; St. Austell to Fowey £26,000; St. Austell to Tywardreath £3,000. There
  1434
  are not many buses running to Tywardreath, and that is why the loss is less there. St. Austell to Gorran Haven £13,000; St. Austell to Penwithick £12,000; St. Austell to Carthew £8,000; St. Austell to Bugle £11,000; and St. Austell to Boscoppa £19,000.
  The idea that profitable bus services subsidise the others is absurd. I have a list of the bus services in Cornwall. There are about 85 different routes, and somehow—I congratulate those concerned on their efforts—the Newquay to St. Ives route runs at a profit. That poor little trip, which makes only £900 a year profit, is somehow supposed to subsidise virtually all the other bus trips in Cornwall.
  That situation does not worry me all that much, because at least there is a bus service. What worries me is that one day—the Official Opposition seem to be indicating that they will apply the hatchet on these services—someone will come along to Cornwall and say that there can no longer be bus service losses and that the subsidies must end. Frankly, that would decimate life in whole parts of my constituency, especially the areas around St. Austell and to the south of Truro.
  There are parts of Cornwall that are far worse off than mine. My hon. Friend the Member for Cornwall, North (Mr. Pardoe) and the hon. Member for Bodmin (Mr. Hicks) have Bodmin Moor in their constituencies, and transport in that area has virtually disappeared.
  I looked up what it costs to run a bus. This indicates another part of the problem. According to the figures that I have, which are supposed to be estimates for this year, the average cost per mile is about 50p per mile on the longer trips, and as much as £1·50 per mile on the short trips. As bus fares in Cornwall are approaching 7p per mile, it means that for the average journey—on some of these buses there are as few as five or six people—the figures do not add up.
  People ask why these routes are not scrapped if they are not being used. It is far more complicated than that in rural areas. That is why I welcome the Bill. It will enable some research to be done into the subject, but, having been a Member of Parliament for two and a half years I am becoming increasingly sceptical about the Government's claims

  1435
  to carry out research. It seems to me to be the best and most reasonable excuse for doing nothing.
  The problems of transport, in parts of Cornwall, and in Devon, Scotland and many other rural areas, are changing the whole fabric of life. The structure of the old village from which people used to commute because there was a transport system to local towns is being destroyed because of the difficulties of rural transport. The only people who go to live in the villages of my constituency—and I suspect those of other hon. Members—are the slightly better-off. Indeed, some of the villages in my constituency are now little more than commuter villages.
  One of the ironies of Cornwall, with its enormous housing problem, is the reluctance on the part of some constituents, especially those at the bottom of the income structure, to go to rural areas. That is not because they are not desperate for a house, but because they realise that if they go to a council house in the village they are condemned to virtual unemployment because they cannot afford the public transport to the nearest job. This will upset some of the bus drivers and workers in my constituency, for whom I have a great deal of admiration, but I think that there are parts of my constituency where the private car will, in the end, be the only answer.
  I should like to see as an extension to the Bill a clause to enable the county council to take the lead in approving people who are willing to pick up anybody en route from their village into the local towns, and giving them a nice badge to stick in the front of their cars. The system would operate on a casual basis, but in any part of any constituency, at any time of the day or night, cars are to be seen on the roads. One can only think that those empty seats, which are, in effect, being paid for, must in some areas—particularly the remote rural areas—provide the backbone of a rural transport system.
  With all the optimism in the world, I cannot believe that some of the problems in my areas will be solved by minibuses or, frankly, by anything else run on a fixed-schedule basis. There is, for example, a village called St. Mawes, which many hon. Members on this side
  1436
  of the Committee visit during the summer. St. Mawes has no public transport at all, and there are 1,000 people living there. It is perhaps not strictly true to say that there is no public transport, because on a fine day one can catch the boat to Falmouth, and then go from Falmouth to Truro by bus. But apart from that nonsensical possibility, there is no public transport at all in St. Mawes.
  I have spent a lot of time looking into the problems of St. Mawes. There are seven Rolls-Royces there, which must be the record for any village of 1,000 people. I suspect that none of those owners has any great problem about there being no bus service. But in Mawes there are about 100 to 120 perfectly ordinary Cornish folk who wish to make a living as best they can in their county where they were born and brought up. Their difficulties are, of course, obvious. What they have done is to buy motor cars and run them themselves. I am sometimes dubious about some of the motor cars that I see in Cornwall being run on shoestring budgets, but the alternative is not to move at all from one area to another.
  The hon. Member for Consett (Mr. Watkins) said that an enormous bureaucracy was needed to check whether a private car was safe for any passengers that it might carry.
  Mr. David Watkins: It is a gross misrepresentation for the hon. Gentleman to say that I advocated a vast bureaucracy. Is he contesting that it is in the interest of passengers and the drivers of vehicles that the vehicles should, first, not be safe and, secondly, not be properly insured?
  Mr. Penhaligon: I do not disagree with that. I was about to make that point. Because the person who is hiring the car will also be the person who is driving it, I should have thought that the real danger of someone knowingly driving his car when it was dangerous was rather different from a large company whose boss was somewhat removed from the individual problems of a vehicle about which he could not be expected to know every detail. Although there are MOT tests, which are better and more effective than many people say, I do not want an enormous increase in the amount of testing required for the vehicles to which I referred.

  1437
  I understood that the insurance problem had been sorted out. I was assured by somebody that the insurance certificate now has a clause dealing with hire or reward. I was told that all insurance companies now put that clause in their insurance cover. I do not know whether the Minister can confirm that, but I am told that that is so. It appears that insurance cover is no longer a problem, but if what I have been told is not correct the matter must be sorted out, because we cannot have accidents, of a major or minor complexion, following which people are not able to receive payments to which they should be entitled.
  I shall not oppose the Bill. Frankly, there is not a great deal in it to oppose. I wish that it were more widely based than it is. A friend of mine in another place moved a number of amendments to that effect. I believe that Westminster, or what I call the London bureaucracy, should take its fingers out of this pie and give the power back to the people in the areas who at least have some understanding of the difficulties.
  With all respect to the Minister, I cannot believe that sorting out the bus services to Luxulyan, Tywardreath and other parts of my constituency is what he is best qualified to do, while representing Gateshead and commuting to this place. If ever there was a cause for devolution, this is it. This is one of the issues on which we must push power back to the people where they live.
  My final point concerns the problems being caused for the elderly. In Cornwall, there is no concessionary bus fare scheme. It is not for lack of effort. A majority of members on the local council do not support my sort of politics, and they oppose my suggestion time after time. I have argued endlessly with them. In many ways, there is logic in their argument. They argue that losses to the bus company would be substantial. That, of course, is true, because about the only passengers left are those who go to school, and the elderly.
  I wonder whether that attitude of the Cornwall County Council is not causing far more hardship than individual councillors realise. I cannot believe that a bit more on top of those losses would
  1438
  make much difference at all. In fact, some of the bus services do not take 30p a mile.
  Cornwall County Council now spends £1 million a year on carting children to school. I keep intending to put down a Question asking whether the Minister has the national figure for carting children to school, but it costs £1 million in Cornwall. We have a hospital car service which costs about £750,000 a year to run. I have been told by a representative of British Rail—frankly, I do not believe it—that local—not main line—train services in Cornwall lose £1 million a year. I do not believe that, because not enough people ever get near the trains to lose that much on local services in Cornwall.
  If one adds those figures together—£1 million for the buses, £1 million for carting children to school, £750,000 for the hospital car service and a loss of £666,000 on the buses—they show that a large sum is being spent on providing transport in one rural area. Cornwall has only five parliamentary constituencies, so the national figure must be colossal.
  If I were convinced that that money was being spent wisely and that it was giving my constituents a good local transport system on which they could rely over the next two or three decades to provide them with a service, I should be a great deal happier than I am. But all these subsidies are from Departments that have no connection at all with one another. At present, there seems to be no way of co-ordinating them.
  My main criticism of the Bill is not its limitation, but the relatively small power that it gives to the county councils to try to suggest solutions for their own problems in their own areas. In the final analysis, the councils will have to do that because, as so often with rural problems, this place just does not understand them.
  11.33 a.m.
  Mr. Roger Moate: It was encouraging to hear the Liberal Party proclaiming its concern for rural transport. Most of us were impressed when that party positively asserted its opposition to increases in petrol tax. We felt that the Liberal Party was demonstrating its genuine concern for people in rural areas. But how disappointed we were when the Liberals expressed that conviction in the House simply by abstaining and sitting on their

  1439
  Bench! However, today we have a reassertion of the Liberal Party's concern for rural transport, and we welcome it.
  I echo what the hon. Member for Truro (Mr. Penhaligon) said about the nature of the crisis in rural transport. No one, on hearing the Minister today, would have sensed that there was a crisis in rural transport, but there is, and I agree with the hon. Member for Truro when he says that it will get worse. One would not have gathered that from the Minister's words today.
  The hon. Member for Truro said that, to judge from the noises coming from it, it was the Conservative Party that was likely to make Draconian cuts in public expenditure and reduce subsidies for travel. That may or may not be right. However, it should be understood that the present threat to cut subsidies, whether to the railways or to the buses, is coming not from the Conservative Party, but from the Government. No matter which party is in power, there comes a time when the reality of providing subsidies has to be faced.
  I suspect that the Government are receiving some sympathetic support from the Opposition. Often it is not a Conservative Government who say that subsidies have gone too high, whether on rail or buses, but a Socialist one. I emphasise that, because I believe that it is in the interests of the travelling public generally to get away from subsidies. There always comes a moment of truth.
  Mr. Penhaligon: I basically accept the tenor of the hon. Gentleman's argument. That was the point that I sought to make. Subsidies are getting so big that the day will come when somebody will question them, but it is not the Labour Party that has been talking of public expenditure cuts of £5,000 million a year. How does one make cuts of that magnitude? The Government have made cuts, and many of their own supporters have taken a deep breath and not been very enthusiastic about them, but there appear to be some Conservatives who suggest that even bigger cuts would be better.
  Mr. Moate: I hesitate to stray out of order, Mr. Blenkinsop. All I say in response to the hon. Gentleman is that it is extraordinary that two or three years ago we were saying that there was a need for £4 billion cuts in public expendi-
  1440
  ture, and now the Government are proclaiming with pride that they are carrying out precisely that programme. We can leave the point there and return to the Bill.
  Let me take up one or two of the points made by the hon. Member for Consett (Mr. Watkins). He always conducts his defence of, and even his attacks on, Government policy with great vigour. On this occasion, however, he had more vigour than conviction. He made some fundamental points about the crisis in public transport, and, by implication, if not explicitly, he damned the Bill as inadequate.
  I must also take up the hon. Gentleman's point about lush southern constituencies. I represent a Kentish seat, and I suspect that the problems facing the people in our rural areas are just as great as those in other parts of the country.
  Mr. David Watkins: I should not want the hon. Gentleman to misunderstand me. Perhaps I did not make clear that there is a much lower level of car ownership in North-East constituencies with rural areas, such as mine, than there is, on the whole, in southern county areas.
  Mr. Moate: That may be true as a generalisation, but, knowing my area, which is probably not untypical of the south-east of England—and it is probably true of, say, Cornwall and other parts of the United Kingdom—there are many isolated communities with an ageing population where the level of car ownership is not up to the level of, say, the whole region.
  Let me deal with one part of my constituency. In the Isle of Sheppey, in what the hon. Gentleman would call a lush southern area, the unemployment rate is more than 10 per cent., and that is within a specific employment district. That is not a lush southern pasture. It is, perhaps, a reflection of the standard of living and the quality of life in those areas.
  The Chairman: Order. I draw the attention of the Committee to the fact that it is the general desire of hon. Members that we should complete our proceedings this morning. Hon. Members should not, therefore, stray too far outside the terms of the Bill.
  Mr. Moate: Thank you, Mr. Blenkinsop. I was about to say that in our area we have similar problems of reducing services, isolated communities, and astronomical bus fares. Faced with the problem of public expenditure cuts, I can see little but gloom for the bus services in the years ahead. The situation will continue to deteriorate. That is why I feel that this is about as miserable and feeble a Bill as one could possibly have.
  One recalls the phrase about mountains labouring mightily to produce a mouse. That is precisely the circumstance here. It is extraordinary that, after at least a decade of debate on the problems of rural transport, and at least a decade of experimentation with a variety of schemes, the Government have come forward with a Bill to have four experimental areas, with a number of fairly minor experimental schemes in them.
  The Minister says that he wants to find out what works in practice, and not just in theory. That comes from the party that came into office proclaiming that it knew what to do with public transport. It was to have an integrated and co-ordinated transport policy. Three years later, experimental schemes are to be introduced to find out what works in practice, as opposed to in theory. That is a splendid conversion, and if the Government apply that to the rest of their manifesto there might not be much of it left.
  Mr. Penhaligon: That is what we are trying to do.
  Mr. Moate: There are better ways of doing it. That is all that I say to the hon. Gentleman. He could have dealt a more deathly blow at Socialism by adopting other tactics.
  The Minister said that the experiments would add to our store of knowledge, and I thought that that was a terrifying statement. We are talking about a situation in which the people of our villages have no bus services. It is not very encouraging to the old lady waiting for a bus that might never come to say: "Do not worry. The Minister is conducting an experiment in North Yorkshire and the results will add to his store of knowledge." That might be helpful in producing the next Labour Party Manifesto, but it is like a squirrel storing nuts for
  1442
  winter. It is not of much benefit to the public.
  I was puzzled why the Bill had come here for a Second Reading. I gather that the reason is that the Government's commitment—even to a scheme as experimental as this—was so feeble that they could not guarantee to find time for it on the Floor of the House. That is a somewhat devastating state of affairs. I assume that my hon. Friend had a momentary lapse, or a fit of compassion, and decided to try to save the Government the embarrassment of having to admit in a more public place that they had no policy to deal with the crisis of public transport, which I find appalling.
  It is worth looking briefly at the history of the Bill. In 1973, when positive proposals were put forward by the Conservative Government to relax the licensing system, they were opposed by the Labour Opposition. When the proposals were brought forward in 1974, they were accepted in the Lords but rejected in the Commons.
  Mr. Norman Fowler: The significant thing is that when the Bill was proposed by my right hon. Friend the Member for Yeovil (Mr. Peyton) the propositions in it were broadly accepted by the then Opposition transport spokesman. Indeed, a number of Labour Members urged the Conservative Government to go even further with their proposals. It is not, therefore, true to say that the measure was opposed by the Labour Party. The opposition to it came later.
  Mr. Moate: That is an interesting point. It seems to me to provide evidence of the Labour Party proposing something in theory, but doubting it in practice. It has certainly resisted any relaxation of the licensing system.
  When the Labour Government came to office in 1974 and removed the amendments from their Road Traffic Bill, they announced that there was to be a process of consultation. That is a familiar phrase from a Labour Government's transport Minister. How long did that consultation take? It took until the end of 1975, and the Government then said that there would have to be a short Bill to allow experiments. That was 18 months ago. What on earth has happened in the meantime? This is an extraordinary saga

  1443
  of foot dragging and dilatory attitudes, indicating a clear lack of concern and understanding of the problem that exists in the rural areas.
  I should not mind too much if I thought that the experiments would go to the heart of the problem, but I do not think that they will. The areas are limited, and that makes sense because these are, after all, only experiments. It seems to me that the long-term answer to our transport problems is the harnessing of enterprise and the profit motive to the provision of minibuses. One could argue that they will be public transport minibuses, but the answer certainly lies in commercial minibuses of one kind or another.
  Car-sharing schemes are all well and good, and there was a reference to a social car scheme run by the WRVS, for instance. I am sure that that is a worthy scheme, but I do not think that the problems of the rural areas will be solved in that way. The answer lies in commercial minibuses, publicly or privately operated, under whatever system of control and scrutiny is necessary.
  If I have understood it correctly, the Bill provides only for privately owned cars or minibuses, or for commercially owned cars and not for commercially owned minibuses.
  That seems to me to be leaving out the key to the problems of rural transport. The Minister in another place said:
  "The essential point here is that the Bill is not intended to provide short cuts for people who want to be in the business of carrying passengers. This is a perfectly proper aim, but the licensing system is there to regulate professional activities with buses."—[Official Report, House of Lords, 15th February 1977;c. 1518.]
  That is the problem. We do not want to provide short cuts for people who want to carry passengers. Perish the thought that we should encourage people to want to carry passengers. We shall have nice, social, equitable, car-sharing schemes. Frankly, I view that with some scepticism, except on a very limited scale.
  The answer to our rural problems does not lie there, so why on earth are the Government not extending these experiments to include genuine commercial schemes to enable those who feel that they can make a profit out of them to provide services in some of the rural areas where they are prevented from
  1444
  doing so at present because of the licensing system? It seems to me that part of the answer lies in trying to encourage the local garage or local taxi owner to extend his services to provide commercial minibus services in that area.
  I do not believe that we shall break this problem until there is a general relaxation of the licensing system. The general attitude is one of non-profit for the individual operator. I can think of many places on the Continent where the individual operator, the small man, provides rural services of the kind that the Committee is considering.
  My hon. Friend the Member for Sutton Coldfield (Mr. Fowler) made the point that the present system springs from the 1928 Royal Commission. We are therefore talking about a licensing system that is half a century old. It is that old sysem that is preventing the development of the rural bus services, the minibus services, that we need and which will, in the long term, provide the answer.
  This is a pretty miserable Bill. The very nature of its presentation is an indictment of the Government's failure to deal seriously with the problems of rural transport in recent years. For a Bill of this sort to come three years after the Labour Party was elected on a ticket of knowing what to do about transport is an appalling admission of failure by the Government.
  Of course one wants the experiments to go ahead—there is no point in stopping them—but I hope that when my hon. Friend the Member for Sutton Cold-field takes over responsibility for the transport policies of this country—which will not be long now—he will say that the period of experimentation is over.
  We know all that there is to know about experimentation. What we have to do is to break with the past and get rid of the straitjacket, the dead hand of licensing that exists over many areas, and, by introducing greater flexibility, encourage people to provide services to the public, with either local authorities or private operators providing flexible services in those villages which at the moment are losing their transport services.
  11.48 p.m.
  Mr. Adley: My hon. Friend the Member for Sutton Coldfield (Mr. Fowler)

  1445
  made a pertinent speech and referred to the real and urgent need for transport improvements, particularly in rural areas.
  The Minister spoke to the Bill but did not take this opportunity, which I rather regret, to elaborate on the further moves which he said the Government would have to take to provide, or to cut the strings to enable others to provide, better transport for people, which we all know everybody desperately needs, and which many of us believe could be provided if a lot of red tape was cut away.
  This is a small Bill. In content it is non-controversial, other than that we feel that it does not go anything like far enough.
  I agreed with the hon. Member for Truro (Mr. Penhaligon) when he said that Westminster and Whitehall are not the places to deal with these problems. The Explanatory and Financial Memorandum states that Clause 1
  "empowers the Secretary of State by order to designate the whole or part of a local authority area as an experimental area".
  Why on earth must it be left in the hands of the Secretary of State to make these decisions?
  The hon. Member for Truro said that transport was an ideal area for devolution, and I agree with him. The Secretary of State is not the right person to be responsible for designating these areas, because he is responsive to pressure from the National Bus Company, from the T&GWU, and from different county councils which may not all have in mind the spirit of freedom which, presumably, is the motivation behind the Bill.
  I give the Bill a limited welcome, but it is only a minor step down a long road It does perhaps implicitly acknowledge that competition is the only likely spur towards providing the travelling public, and the potential member of the travelling public, with a better, cheaper and more effective bus service.
  The Minister referred to the existing licensing system—a system which we have heard this morning has not changed since 1930. There can, surely, be no one who believes either that the circumstances pertaining to transport in 1930 are in any way similar to the circumstances of today's, or that the activities of the Traffic
  1446
  Commissioners are universally considered to be wholly satisfactory.
  I turn now to the next stage in the Bill; namely, what will happen when requests for designation come forward. It appears—perhaps the Minister will put me right if I am wrong—that the only people who will be able to make requests formally to the Minister are the county councils, or possibly district councils. Orders for designation to the Department cannot be considered formally if they come from bodies other than local authorities. If that is correct, it is a great shame.
  The Minister will be familiar with the system of airport limousine buses which operates in the United States of America. Perhaps I should declare an interest, in that I am connected with a hotel company. The assumption behind the Bill is that all these problems are responsive only to proposals put forward by local authorities, and also that they arise only in rural areas. That is far from the truth. If for example, a transport operator wanted to operate an airport limousine service similar to those operated at most major American airports, could that be considered by the Department, or would it have to be put forward by the relevant county council? If a scheme was proposed for, say, Heathrow, would the GLC have to approve the scheme before it was put to the Minister?
  Can the Minister say something, either now or later, about what will happen in the event of a disagreement? A district council might have ideas that differ from those of the county council. For instance, the Christchurch District Council in my constituency might have ideas about operating bus services which differ from those of the Dorset County Council. How will such a dispute be resolved? Is it only county councils that have the power to make representations for designation to the Minister?
  I said a moment ago that the problem of passenger transport services does not arise only in rural areas. The Minister must be aware that one or two experiments of park and ride have been tried. The hon. Member for Truro mentioned that his constituency, like mine, suffers—or benefits, whichever way one looks at it—from a vast influx of people during the summer months, when there is tremendous pressure on car parks. Is it

  1447
  the Minister's idea that park and ride schemes from car parks to seafront areas or to shopping centres should be encouraged? If so, are they to be operated or recommended only by county councils?
  Again echoing a point made by the hon. Member for Truro, local people know the services that are needed. The essential thing about a park and ride scheme is that it should be responsive to local needs and local demands. It does not make sense to me that the decision whether a park and ride system should operate anywhere in Great Britain should be dependent upon the blessing or otherwise of the Secretary of State.
  The point about the remoteness of the Secretary of State, and his knowledge, from the problems of local people was passingly referred to in a different way by the hon. Member for Consett (Mr. Watkins), when he said that Members of Parliament are the people who receive representations about inadequate or unsatisfactory bus services. I suspect that that again has a lot to do with the attitude of the National Bus Company which, in the minds of our constituents, fulfils a similar rôle to that of the Department of Health and Social Services, or the Treasury, in that it is some distant foreign body without any immediate contact or relevance to local problems.
  The hon. Member for Truro spoke about the St. Austell bus services operated by Western National. He did not mention Western National, but obviously he was referring to that company. I do not know how his local bus drivers in the St. Austell bus garage feel about the management of the National Bus Company, but I know that my hon. Friend the Member for Folkestone and Hythe (Mr. Costain), for instance, has fairly strong views on this matter, which he has expressed to the Minister on previous occasions.
  Clause 3 refers to travel concessions. I hope that I shall not be out of order, Mr. Blenkinsop, if under that heading I take up the question of concessionary fares—the relationship between the National Bus Company and the county councils, and the provision of concessionary fare schemes for the elderly. The Minister knows that I am exceedingly unhappy with the present arrangement.
  1448
  I think that it is wholly unsatisfactory. I cannot understand why in this area, and this area alone—
  The Chairman: Order. That does not come within the context of the Bill, so any reference to it should be brief.
  Mr. Adley: I shall keep it brief, Mr. Blenkinsop, although I respectfully point out that the clause on travel concessions was inserted in another place. I hope, therefore, that you will not consider it wholly irrelevant to the Bill.
  I shall be brief. My point relates to the centralisation mentality of the National Bus Company. The reason why Dorset County Council, Cornwall County Council and numerous other county councils and district councils may, or may not, provide concessionary fare schemes is that in public transport, and in public transport alone, it is assumed that the local ratepayer, not the State, accepts responsibility for people when they reach the age of 60 or 65.
  That seems a good deal for the National Bus Company, but it is a bad deal for ratepayers. I hope, therefore, that the Minister will continue to prod the NBC into recognising that its virtual monopoly position should lay upon it a responsibility to devise a more satisfactory concessionary fare scheme.
  The Bill relates to public service vehicles. I assume—it does not say so—that these public service vehicles have four wheels and rubber tyres, and therefore the measure is related only to buses and cars, and not to trains. I wonder what would have happened if the railways had not been nationalised and the GWR and the LMS were still running competitive services to Birmingham. I wonder what they would have done, with modern marketing techniques, about the provision of better services. The lack of marketing techniques by the NBC is one of the main causes of dissatisfaction with the bus services that it operates up and down the country.
  The withdrawal of scholars' concessions by British Rail is another point which I am sure I should be out of order to raise—
  The Chairman: Yes, entirely.
  Mr. Adley: —so I shall not go into that.

  1449
  Let me end as I began, by giving a modest welcome to the Bill. In my view, it is merely a start. It would be wrong for the Conservative Party to oppose the Bill. After all, far wider-reaching proposals were contained in the Conservative Party's proposal in 1973, which my right hon. Friend the Member for Yeovil (Mr. Peyton) was trying to steer through the House. This is a very small egg indeed, but I suppose a small egg is better than none.
  12 noon.
  Mr. Horam: The hon. Member for Sutton Coldfield (Mr. Fowler) launched into what we have come to expect as his usual tirade on the subject of rural transport. Wherever the subject is mentioned, one is supposed to have the answer to the whole problem concealed in a short five-minutes speech to a small Bill. I suppose that the hon. Gentleman was wise once again to go down his well rehearsed path. The Conservative Government achieved nothing. In four years of government they had nothing to show in respect of rural transport experiments. Indeed, my right hon. Friend the Member for Blackburn (Mrs. Castle), in her Transport Act 1968, did far more for rural transport than successive Conservative Governments ever did.
  Let us look at the record of the Conservative Government, who, the hon. Gentleman says, at least tried to do the right thing. In 1971 they had a consultation document which was launched with great bravura about new experiments and a spirit of freedom, to quote the hon. Member for Christchurch and Lymington (Mr. Adley). By 1973, however, when the Bill came forward, it was much watered down and most of the ideas which had been in the 1971 consultation document were heavily modified in the light of subsequent experience. Even after the 1973 Bill was introduced, there was further consultation promised and further watering-down was about to take place.
  When the occasion finally came, with Conservative Peers putting down amendments to the then Labour Government's Bill, not even the commercial minibus, about which the hon. Member for Faversham (Mr. Moate) waxed so eloquent, was to be seen among those Conservative
  1450
  amendments. That shows, perhaps, that all the change of Conservative philosophy which occurred sharply in the middle of the 1970–74 Government was having an effect. Perhaps there was also a little more wisdom about the real difficulties in this area.
  I hope that the hon. Member for Sutton Coldfield, now that he is launched on his path of claiming that we must have more freedom in these matters, with more right to have innovations and so on, will not find himself, if he ever becomes a Conservative Minister for Transport, once again, like the right hon. Member for Yeovil (Mr. Peyton), eating his own words at a late date—as he accused my right hon. Friend the Member for Sheffield, Park (Mr. Mulley) and others of my hon. Friends of doing.
  Mr. Norman Fowler: Everything the Under-Secretary says makes it more clear to me that, if it is not myself, there will be a Conservative Minister for Transport fairly soon.
  I put two points to the Under-Secretary. In the other place, Ministers were complaining that the Conservatives did not consult. The hon. Gentleman is now saying that we were consulting too much. I do not mind what case the Government use, so long as it is the same argument.
  Second, we put forward the 1973 Bill, and that Bill, with the modest reforms in it, did not become law only because of the Under-Secretary's Government and, incidentally, in the end because of his vote. Does the hon. Gentleman now stand by that and accept that?
  The Chairman: Order. Let us pay some attention to the Bill.
  Mr. Horam: Yes, indeed. May I say, Mr. Blenkinsop, that it was not I in my modest, short and relevant speech—I think you will agree that I was exemplary in the degree to which I kept to the Bill—who launched this torrent of remarks about the whole problem of rural transport, which we are not considering in its generalities here.
  Mr. Norman Fowler: On a point of order, Mr. Blenkinsop. This is a Second Reading debate about rural transport. This is not the Committee stage. We are

  1451
  talking about the problems of rural transport, and if we cannot do so when considering this miserable measure to deal with that problem, the whole process becomes a farce.
  The Chairman: That is not entirely a point of order. We have had a fairly wide discussion, and I do not think anyone can complain of that. I only point out that this is a Bill which is very limited in its actual scope.
  Mr. Horan: The hon. Member is now shooting so wide that I am not sure whether he is shooting at you, Mr. Blenkinsop, or me. None the Jess, he seems to have somebody in his target, although he is very unsure about his aim.
  Unfortunately the Conservatives have been very unsure of what they want to do about rural transport, and have changed their minds continually from year to year, as previous experience of their Government shows. The hon. Gentleman summed up the position when he said that what he would do, and what we should be doing, is not having a steering committee to look at experiments but a committee to look at the whole problem of rural transport. I note that it is also proposed that there should be a committee to examine motor cycle safety and another to consider insurance write-offs.
  I thought that committees were a disease of Government, but they now appear to be a disease of Opposition as well. I do not know whether the disease is limited to the hon. Gentleman the Shadow Minister of Transport, but it is surprising that the Opposition have begun to approach things in this way.
  Mr. Norman Fowler: The hon. Gentleman, not content with misquoting me in the last debate on motor cycle training, which I was glad to see Hansard got right and he got totally wrong, is now misquoting my remarks in this Committee. What I said—I implore the hon. Gentleman to take the trouble to listen—was that if the Government wanted to set up a committee, it would be better to have one to look at the licensing system rather than use this Committee. I want the licensing system reformed, not a committee. If, however, the Government want a committee, let it examine the correct subject.
  Mr. Horam: All I am saying is that the hon. Gentleman has an undue faith in committees, which I have not. I prefer a certain amount of action rather than a pathetic attempt to sweep everything under the table by the use of more and more committees. One fact that the hon. Gentleman does not seem to recognise is that the licensing system was reviewed by the Thesiger Committee in the 1950s. That was not mentioned. Let us get the facts right before we proceed to elaborate further on methods of non-action.
  The practical remarks of the hon. Member for Faversham dealt with the problem more clearly than did those of the hon. Member for Sutton Coldfield. The hon. Member for Faversham put his faith in commercial minibuses. He pointed out that the commercial minibus was not within the scope of the Bill, and he is right.
  I ask the hon. Gentleman to look at the matter more sensibly than he appeared to be doing. The size of the bus is immaterial; the problems of rural transport will not be solved by our discussing whether to have minibuses or double-decker buses. I think that the hon. Member for Truro (Mr. Penhaligon) would agree with that. There are far more important considerations at stake.
  It is absurd to suggest that there should be a minibus running over routes, either in competition with existing services or by itself. It does not begin to solve the problem. If he were to look at the matter more seriously, he would see that. I am not accusing the hon. Gentleman of not wanting, or trying, to help, but there is a danger of putting forward ideas that, on second thought, have nothing much to offer.
  Mr. Moate: The point that the Minister has just made makes sense only in the context of inflexible schedules for bus services. If that is the case, of course it does not really matter whether there is a 50-seater or 10-seater bus. He said that I assumed that a minibus would have to keep to timetables, whereas what I meant was that on the Continent one finds that rural services are often provided by commercial minibuses. They do not necessarily run to fixed timetables.
  Mr. Horam: I do not understand the difference between a commercial big bus and a commercial minibus service, apart

  1453
  from the size of the bus, which is not the heart of the matter. Apart from being an unwise proposal, I think that the Opposition would do better to acquire a little more knowledge of the subject before making generalisations.
  Let me now turn to the remarks of my hon. Friend the Member for Consett (Mr. Watkins). In contrast to the Opposition, he spoke many wise words on the subject. I know the problems in his area particularly well. Like my hon. Friend, I was brought up not in the lush pastures of Southern England but in the harsh, bracing environment of Durham.
  Mr. David Watkins: Not in a constituency where there are seven Rolls-Royces per village.
  Mr. Horam: I should hasten to add that my reference to the harsh bracing atmosphere of Durham could equally apply to that of Cornwall.
  The Chairman: Order. This is not a tourism Bill.
  Mr. Penhaligon: I assure the hon. Gentleman that Cornwall has the lowest average wage of any county in England and the highest unemployment, so it is hardly lush.
  Mr. Horam: Exactly. I was suggesting that the hon. Gentleman's area, precisely because of such circumstances as those to which he has just referred, has more in common with that of my hon. Friend and myself.
  My hon. Friend suggested that the definition of an experimental area was rather loose. Indeed, it is loose and is designed to be fairly loose. It is the experiments which matter. We do not necessarily want to complicate the experiments by having too much of a legal back-up. All that the Bill does is enable certain changes in the licensing laws to be made so that the experiments may take place. In a sense, the Bill is an adjunct to the real action of the experiments. In practice, an area that has been selected and surveyed as suitable for an experimental service will be the basis for suggesting which areas should be experimental areas.
  In trying to be practical and down to earth, the Government have perhaps strayed into inviting my hon. Friend's
  1454
  criticism on that score, but I believe that it is sensible to be as wide as we possibly can in this area to give the maximum opportunity for people to designate suitable areas to be experimental areas. We do not want to confine people too much. We have already run into one problem in respect of buses running from an area to one which is not an experimental area, which comes from drawing up a Bill in this way. We do not want to run into too many problems of that kind, though I understand my hon. Friend's concern.
  On the people to be consulted, local authorities, bus operators, taxi operators, unions, of course, the WRVS, the National Consumer Council, the National Council for Social Services, local Women's Institutes, parish councils—all of these are the sort of bodies which will be consulted.
  I noted that towards the end of his remarks upon this subject my hon. Friend rather doubted the value of consultation in some cases, and, indeed, the representative nature of those who were being consulted. I was agreeing with some of his sentiments in this matter, but none the less the Government are undertaking whatever consultations seem sensible from the point of view of obtaining a representative body of opinion.
  On safety, the schedule requires that local authorities have regard to the fitness of vehicles to be used under the special authorisations. That is where a vehicle has a particular permit to do a particular job.
  On the question of more general authorisations, the Government will be seeking to give proper publicity to the necessary insurance aspects. I agree that if one enters this area one opens up a new sphere as regards safety. Indeed, part of the point of PSV licensing is that it guarantees certain things in some respects.
  If one goes outside that area, one has the guarantee diminished to a degree. I would not pretend that there may not be problems here, but I believe that what the Government are trying to do in the Bill does the most one can do to ensure both specifically, in the case of vehicles which are used by special authorisation, that they are suitable and the local authority finds that they are suitable,

  1455
  and in the case of the general authorisation that the Government make known to people as widely as possible what obligations they are undertaking if they give people a lift and operate their vehicles in this way. I believe that that is the most the Government can do in the existing situation.
  The hon. Member for Truro has temporarily left the Committee room. May I say to him, so that it is on the record even if he does not hear it now, that the British Insurance Association put out a Press notice in June 1975 saying that insurers accepted that taking a contribution towards petrol costs, but only towards petrol costs and nothing more, would not be regarded as vitiating the ordinary domestic car policy.
  More generally, the Motor Conference is closely involved in the preparation of experiments, and proper advice will therefore be given on general insurance matters. I can assure the hon. Member on that.
  The hon. Member for Christchurch and Lymington asked me a number of questions about the county council's and district council's responsibility. The county council is the transport authority; it takes primary responsibility in these matters. The district councils will be represented on the working groups, so the district councils' point of view will be taken into account in the setting up of experiments. But the local authority power will rest with the county councils.
  It is not just rural areas which are involved in the Bill. As my hon. Friend the Member for Consett said, the Bill is drafted in a fairly general way, although, of course, we are tackling rural areas in the first instance because the problem is most urgent there.
  The hon. Gentleman instanced a limousine service—a transport operator wanting to operate a limousing service. I am not quite sure what he had in mind. Perhaps it was to operate around Heathrow.
  Mr. Adley: Let me explain that it is a service which is mainly operated at airports in the United States. A large car or minibus picks up people when they get off a flight and takes them to various destinations—their hotel, home or whatever it may be. The vehicle does a little
  1456
  runabout and then comes back to the airport. It sits at the airport and picks up passengers as flights come in.
  Mr. Horam: Clearly, that does not fall into the category of rural transport, and it is rural areas which we are considering for the first four experiments. None the less, it is certainly something which we could take into account, though the hon. Gentleman is right in supposing that any application for such an experiment would have to come through the relevant local authority. That is so simply because it is the local authority which has the function of looking after transport in an area, and it is the only body which can take an overall view.
  The whole point of having experimental areas is to have a number of different types of experiments in order to take a comprehensive look at what would happen. One particular service may have an effect on other services. Therefore, it is right to take an overall look, and it is the local authority which is in the best position to do that.
  Mr. Adley: With respect, the Bill does not use such phrases as "rural areas". It refers to
  "the law relating to public service vehicles".
  It would be a disadvantage if people were to get the impression that this Bill was only for rural areas, important though they are. Can the Minister make clear that he would welcome representations to the Department by county councils—if they have to come via that route and that route alone—which may cover the middle of cities or large towns?
  Mr. Horam: I confirm that the Bill does not simply relate to rural areas. Experiments can be set up in any part of the country. The powers are defined in such a way that we can carry out experiments in any part of the country. But, as the hon. Gentleman said, suggestions for them should be routed through the county councils, which are the local authorities responsible for transport.
  Mr. Moate: In relation to car-sharing schemes, is the Minister contemplating car-sharing applying to ministerial limousines, perhaps sharing them with members of the Opposition?
  Mr. Horam: If members of the Opposition feel that they should have a car

  1457
  suitable to their position, that is an interesting idea which I am prepared to look at. I know that various ideas are being considered about how we can cut back on public expenditure in relation to Government car sharing. I personally do not have a Government car. I am one of the few Ministers who do not, because I take a moral view about it. I believe that public expenditure should be restrained. We should look at these matters extremely carefully before—
  Mr. Norman Fowler: That is an interesting point which relates directly to the Bill. The Under-Secretary has just said that he takes a moral view of the situation. Does that mean that all the other Ministers who have cars take an immoral view?
  Mr. Horam: Absolutely. I think the idea of having a car totally at one's disposal for the entire day is wholly immoral, and I universally condemn my colleagues in this respect. I am really surprised that they continue to use cars.
  The Chairman: Order. I hope that we shall consider the Bill, and I hope that we are moving towards a conclusion.
  Mr. Horam: I hesitate to say that I am setting a shining example in this respect. A better explanation may be simply that I came most recently into the Government and that a car was not available.
  Mr. Adley: I want to bring the Minister back to the question of designation, before he finishes his speech. I think that I speak for a number of my hon. Friends when I say that we are not satisfied that this Bill is the way to tackle the problem.
  Perhaps I can relate this question to the Minister's own constituency. Does he believe that, if there is a demand for a service for shoppers from a housing estate in Gateshead to the centre of Newcastle, the Tyne and Wear County Council is more likely to interpret the wishes of the people concerned than, say, the Townswomen's Guild or the local residents' and ratepayers' group?
  Our point is that at the moment this is a bureaucratically-minded Bill. It assumes that the county councils know everything there is to know about trans
  1458
  port in their areas and that they shall be the only bodies to put up propositions to the Minister. Can the Minister give a glimmer of hope to those of us who feel that individuals and small groups of individuals are as likely as—if not more likely than—a county council to know their precise transport requirements? The county council may be as bureaucratic as any Government Department.
  Mr. Horam: The hon. Gentleman seems determined to misunderstand me. On the working groups which are looking at the experiment and devising individual schemes, all the bodies which he has just mentioned—Women's Institutes, the parish councils, the operators, the unions, the WRVS, the consumer associations and all real community groups in any particular area—are represented. The whole point of a working group is that it should be as close to the grass roots as is possible, without getting people off the streets to serve on the groups.
  I emphasise that this is a non-bureaucratic and not over-legal way of looking at things. It is an attempt to get outside the existing licensing arrangements and the existing scope of transport to look at things very much from the grass-roots point of view.
  Mr. Adley: Will the hon. Gentleman now answer the question that I posed in my speech? With respect, he will not achieve anything by being rude to me and saying that I am deliberately trying to misunderstand. I asked him what happens if there is a disagreement. I cited the possibility—we are not saying that it will happen—that people in, say, part of Christchurch wanted a service and thought it an excellent idea and, all the grass-roots consultation having taken place, they put it up to the Dorset County Council, but the Dorset County Council decided that the application was frivolous or inappropriate and would not forward it to the Department of Transport. What would happen in that instance? Is there no route to Whitehall that people can take other than through the county council?
  Mr. Horam: The working groups come forward with their proposals, which then go forward to the steering committee of which I am the chairman. That is the

  1459
  route by which any scheme comes forward. There is a balance there, I think, between the legitimate interests of the county council and the clearly expressed views of any other organisation which may be on the working group.
  There is no way in which the county council can block an idea or stop people, if there is a sufficient number, from going forward. We have set up these arrangements precisely to get as far as possible schemes which people actually want and will use.
  I share the view of my hon. Friend the Member for Consett that there is some doubt about whether some of the organisations which purport to represent ordinary people in a community have the right ideas or know what ordinary people will in practice use. I think that there is some reason to doubt that. We may well find that some of the schemes which are set up after consultation are in fact wrong in the sense that, perhaps, they are, for example, too reliant on volunteer work. But, in practice, some schemes which are not well thought of go very well. The point of having these experimental areas is to find out what people will use and what the consequences would be of the relaxing of licensing arrangements for a particular area, looking at every sort of transport in that area.

  THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:

  Blenkinsop, Mr. Arthur (Chairman)

  McDonald, Dr.

  Adley, Mr.

  Moate, Mr.

  Crowther, Mr. Stan

  Morrison, Mr. Peter

  Fowler, Mr. Norman

  Penhaligon, Mr.

  Harper, Mr.

  Watkins, Mr. David

  Horam, Mr.

  Weetch, Mr.

  Lambie, Mr.

  The hon. Member for Truro was out when I made some reply to his speech. I answered his point about insurance. He also stressed his opinion that local people know best, and I am glad to say that the Opposition took that point up. I am sure that he is right. I am also sure that the Government in Whitehall are not the right body to work out the best bus service out of Luxulyan or some of the other villages which the hon. Gentleman mentioned.
  The Bill gives people more power locally to do what they want. That is the point of it. It relaxes the national licensing arrangements in particular cases. It is a step against big government and bureaucracy and in favour of letting local people decide what they want to do in transport. I am in favour of that, the Government are in favour of that, and it is absolultely right. The more we can get down to that level of decision making in transport, the surer we shall be to solve our problems.
  Question put and agreed to.
  Ordered.
  That the Chairman do now report to the House that the Committee recommend that the Passenger Vehicles (Experimental Areas) Bill [Lords] ought to be read a Second time.
  Committee rose at twenty-six minutes past Twelve o'clock.

ENVIRONMENT
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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 Manchester.

OIL EXPLORATION: DRILLSHIPS AND RIGS
The Earl of LAUDERDALE: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have any proposals for encouraging British investment in the construction of drillships and semi-submersibles for charter to exploration companies.
Lord STRABOLGI: My Lords, the Government are conscious of the problems faced by British builders of exploration drilling ships and rigs as a result of the current worldwide recession in this market. Drillships and rigs are eligible for financial assistance under the standard provisions of the Home Shipbuilding Credit Scheme. We would give careful consideration to any proposals for additional assistance that would lead to an early order for a dynamically positioned drillship. No United Kingdom yard is currently engaged in the building of semi-submersible rigs, and in view of this, and the current world surplus in this type of rig, the Government do not envisage giving any special assistance towards the construction of semi-submersibles.
The Earl of LAUDERDALE: My Lords, in thanking the noble Lord for that reply, may I particularly express thanks, which I am sure will be reflected in the industry, for the information which he has given and the distinction which he has drawn between dynamically positioned drillships and semi-submersibles? But is it not the case that, at the end of the day, the demand for exploration drilling rigs depends on the early confirmation of licences which were awarded in the last round?
Lord STRABOLGI: My Lords, I think that that is really more appropriate to the next Question of the noble Earl.
The Earl of LAUDERDALE: Then, my Lords, may I put that on ice for the moment and ask the noble Lord this question? Would he not agree that it is a disincentive to investment that the BNOC have a principal part in this situation which has discouraged applications for licences, so that 27 blocks were not even applied for at the last round?
Lord STRABOLGI: My Lords, we are at the moment talking about the construction of rigs and drillships.
The Earl of LAUDERDALE: My Lords, it is the demand for these which we want to stimulate. The noble Lord has agreed that there is a recession in demand.
Lord STRABOLGI: My Lords, I could perhaps briefly put the position to the noble Earl. He does not seem to be aware of it. There is a surplus of semi-submersibles, which are the rigs used in the North Sea. There is no use in the North Sea for DP drillships, nor at present for Type 84 jack-up rigs. But the Government have instructed the BNOC to order a jack-up rig from Marathon, for which they will then help them to find a buyer on the world markets, because it is not suitable for North Sea conditions. Also, in order to help the industry they are helping Scott Lithgow to sell and find a buyer for their third dynamically positioned drillship.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, if I may intervene in this mysterious dialogue, could the noble Lord explain to me—I expect that the rest of the House knows—what is meant by a dynamically positioned drill-ship, a jack-up rig and a semi-submersible?
Lord STRABOLGI: My Lords, I am very surprised that a former Minister of Technology should ask me that question.
Lord HAILSHAM of SAINT MARYLEBONE: But what is the answer, my Lords?
Lord STRABOLGI: My Lords, a rig is the same as a semi-submersible.
The Earl of LAUDERDALE: My Lords, would not the noble Lord agree that the stimulation of the production of jack-up rigs, which have been built in America for many years and used in the Gulf of Mexico and in other shallow waters, is really quite out of date for the North Sea? It is like encouraging the production of brontosauri.
Lord STRABOLGI: Of course, my Lords; I said that to the noble Earl. What we are trying to do is to help this industry by finding a buyer in other markets.
Lord WYNNE-JONES: My Lords, would my noble friend agree that, as every schoolboy knows, a semi-submersible is something which can be half submerged?
Lord BALERNO: My Lords, can the Government give the House any information about the troubles which are causing the delays in the construction of the terminal at Sullom Voe, which is a matter of very considerable importance?
Lord STRABOLGI: My Lords, there have been delays in the timetable for the engineering work at Sullom Voe, and the processing plant will not start to come into operation until mid-1979. However, the constructor is making arrangements so that the terminal can handle crude oil from spring 1978 as planned, by bypassing the processing facilities and thus on this account, avoiding substantial delay in the build up of production.

CONTINENTAL SHELF: DRILLING PROGRAMMES
2.43 p.m.
The Earl of LAUDERDALE: My Lords, I beg to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government with how many of the 47 applicants offered exploration licences in the United
552
Kingdom Continental Shelf in the fifth round have drilling programmes been approved.
Lord STRABOLGI: My Lords, none as yet. As we stated at the time of the announcement of the conditional offers to 24 applicant groups, Her Majesty's Government expect that it will take some further time for the programmes to be worked out and agreed.
The Earl of LAUDERDALE: My Lords, in thanking the noble Lord for that Answer and reverting to my previous supplementary, may I ask him this question? Would he not agree that 11 weeks have gone by since the fifth round, and that the longer the delay persists in confirming licences then awarded, the less is the incentive to invest in rigs whether they are semi-submersibles, dynamically positioned, jack-ups or what-have-you?
Lord STRABOLGI: My Lords, whatever the date of the confirmation of the conditional offers, the major part of activity this year under fifth round licences is likely to comprise seismic explorations. The amount of drilling possible will not be significant, although the Government hope that a start can be made upon it. The award of licences does not have to be delayed until all 22 groups have settled satisfactory operating agreements and work programmes.
The Earl of LAUDERDALE: My Lords is it not the case that the intervention of Bee-NOC—which I believe is the way that the noble Lord's Department will describe it but which is known to some of us as BNOC—has been a decelerating factor in North Sea exploration, and is it not also the case that to promise merely seismic work this year is a great disappointment to many of us?
Lord STRABOLGI: No, my Lords. Operating agreements are complex. Naturally, important documents of this kind cannot be settled without careful consideration by all the parties involved. I do not think that the involvement of the British National Oil Corporation has been responsible for any delay.
Lord DAVIES of LEEK: My Lords, as we have so much information about

553
the North Sea and other seas, may I ask my noble friend what progress is being made in the Celtic Sea? As a non-avaricious and non-acquisitive Welshman, now producing Welsh whisky as well, I should like to know what oil drilling is taking place in the Celtic Sea and what is the production amount.
Lord STRABOLGI: My Lords, I am glad that I am able to tell my noble friend that, of the seven exploration wells which were drilled in the area of the Celtic Sea, the last was completed in February and that we are aware of plans to drill another four. In the light of present knowledge, it must be recognised that perhaps not all drilling obligations will be fulfilled, but it would take only one successful well to transform the picture and stimulate renewed interest in the area.
Lord HARMAR-NICHOLLS: My Lords, if I may revert to the Answer which the noble Lord gave to my noble friend—that they are experimenting with by-passing the crude oil at Sullom Voe— will not this bring about the risk of gas flaring in a way which may be dangerous?
Lord STRABOLGI: My Lords, because the crude oil has to have the gas taken out of it offshore before passing through the incomplete Sullom Voe facilities, there could well be extra gas flaring, as the noble Lord rightly surmises. This requires the Government's consent and my Department will be examining the relative advantages to the nation of early oil production as against some extra gas flaring.
Lord LEATHERLAND: My Lords, without referring to Bee-NOCs and jack-up rigs, may I ask my noble friend whether it might not be a mistake to issue too many licences too quickly and to drain the North Sea dry of oil, instead of taking a long-term view and spreading the oil recovery over a period of years?
Lord STRABOLGI: No, my Lords, I do not agree. The estimated reserves are 3,000 million to 4,500 million tonnes. The revenue expected from oil in the 1980s is expected to be about £4,250 million a year, which is very encouraging indeed and which I am sure will give great pleasure to the noble Earl opposite and to his friends.
The Earl of LAUDERDALE: My Lords, in expressing my great pleasure and that of my noble friends at the noble Lord's answer, may I ask him whether he would agree that, as against the conservationist argument put just now by the noble Lord, Lord Leatherland, we all have a common interest in maximum exploration, whatever exploitation follows?
Lord STRABOLGI: My Lords, yes, of course.

OVERSEAS STUDENTS AND LANGUAGE SCHOOLS
2.47 p.m.
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 action is being taken to make sure that students coming to the United Kingdom to attend language schools—

(a) return to their own countries on completion of the course;

(b) are attending genuine schools which are not set up in order to encourage illegal immigration.

The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, each student is checked to ensure that he leaves the United Kingdom on completion of his studies unless he qualifies to remain on some other basis. As for the second part of the Question, the Immigration Rules require an applicant for an extension of stay as a student to produce evidence of enrolment for a full-time course of daytime study, and of regular attendance, which are checked with the school concerned. Where the Home Secretary has evidence of the unreliability of a particular school's records, it is open to him to refuse to accept time spent at that establishment as counting towards the weekly minimum number of hours of study required to qualify a person for admission or an extension of stay as a student.
Lord ORR-EWING: My Lords, has the Minister read the transcript which I sent to him of the television programme that was broadcast on London Weekend

555
Television on 27th March? What comment has he to make on the statement by an official of the General and Municipal Workers' Union that some of these language schools are there to provide pieces of paper to bogus students, who then stay on in this country as illegal immigrants? What steps are the Home Office now taking to tighten up on the inspection and regulation of these schools—albeit a very small minority, because the great majority of them are entirely efficient and dedicated to the task of teaching languages and other subjects? What steps are being taken to deal with this minority, and have any licences been withdrawn in the last two or three years?
Lord HARRIS of GREENWICH: Yes, my Lords, one licence has been withdrawn. So far as the second part of the noble Lord's question is concerned, I understand that the position is that the Secretary of State for Education and Science operates an administrative, non-statutory procedure under which recognition as efficient is granted to independent establishments which offer courses comparable to those available in local education authority colleges. This is a non-statutory arrangement which is administered by the Secretary of State for Education and Science and not by the Home Secretary. If, however, the Home Secretary believes that there is an abuse he can take action and, as I have indicated, he has done so in one particular case.
Baroness GAITSKELL: My Lords, I should like to ask the Minister what hard evidence exists that these language schools have been set up?—because we cannot take simply a TV series or a TV programme as hard evidence about these educational programmes.
Lord HARRIS of GREENWICH: My Lords, where there is any indication that there is an abuse of the arrangement, as I have indicated the Home Secretary will take action, and he has done this in one particular case. But certainly in response to what my noble friend has said, I think that in all parts of the House we should recognise that this country derives a great deal of advantage as a result of having non-British students in our educational institutions.
Baroness VICKERS: My Lords, are lists available in the embassies or the offices of the British Council which people in the countries overseas can scrutinise to see which are the really reputable associations for teaching the English language?
Lord HARRIS of GREENWICH: My Lords, without notice I am afraid I cannot answer as to how much information of this sort is available in posts abroad, but I will certainly inquire and ensure that a letter is sent to the noble Baroness.
Lord SEGAL: My Lords, since the knowledge of English acquired by many of these foreign students is often incomplete, would not the Government consider providing a larger allocation to the British Council for the purpose of establishing continuation schools in their countries of origin, similar to the one opened by the Foreign Secretary in Cairo two days ago?
Lord HARRIS of GREENWICH: My Lords, with respect to my noble friend, I think that question covers rather different territory from that raised in the original Question.
Lord ORR-EWING: My Lords, in reply to the question asked by my noble friend Lady Vickers, is the noble Lord aware that the association of recognised English language schools publish a very full list of recognised and responsible schools? Is he further aware that there are now 80.000 language students coming to this country every year, which by and large is wholly admirable and probably to the great advantage of our country, but as long as there are arrangements which are not so respectable and responsible and can be described, as they were in this instance by a trade union official, as "a Home Office fiddle", there is obviously room for improvement in the manner in which these schools are inspected and the assurance that students who report do actually attend the schools as registered students and do not just use it as an excuse for staying in this country?
Lord HARRIS of GREENWICH: My Lords, I think we all recognise that many of these schools do useful work; but certainly there is a common interest to

557
ensure that there is no abuse, and, where there is abuse, that action is taken to remedy it.

THE EASTER ACT 1928
2.53 p.m.
The Earl of LISTOWEL: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when they intend to bring into force the Easter Act 1928.
Lord HARRIS of GREENWICH: My Lords, the Government remain of the view that the Act should not be brought into force without the full concurrence of the Churches. Our understanding is that the Churches themselves would not welcome such a move at this juncture.
The Earl of LISTOWEL: My Lords, I thank my noble friend for his reply. But may I ask him whether he is aware that next year Easter Day falls on 26th March and that most people in this country, especially those with families would prefer to have the Easter holiday weekend in April? May I also ask him whether he does not consider that 49 years is sufficient time for the Government to have regard to the opinion of the Churches, which is the only requirement in the Act? May I further, and finally, ask him whether, if the Act is in fact a dead letter, as I think it must be if the Government continue to wait for the agreement of all the Churches, the Government would consider separating the religious festival from the Bank holiday so that at least the Bank holiday could be fixed on a later date in April?
Lord HARRIS of GREENWICH: My Lords, I am obliged for what my noble friend has said. As he will recognise, the language of the Statute itself makes it quite clear that the Government must take account of the views of the Churches in this matter, and there is no unanimity of view. I understand that this matter was discussed last year at the Assembly of the World Council of Churches in Nairobi, and the terms of the Assembly's Resolution which was passed on that occasion were as follows:
558
"…recognises that, at this stage, a specific proposal would not lead to a date uniting all Christians in the celebration of Easter on the same day; Expresses the hope that the urgent desire to find a common date can be fulfilled as soon as possible by common decision of all Churches; Instruct the Central Committee to encourage further developments."
That is the latest situation.
Lord DERWENT: My Lords, as it appears to be the custom for the ex-Chairman of Committees to ask this Question every year, would Her Majesty's Government use their best endeavours to see that the Question need no longer be asked by the time the present Lord Chairman retires?
Lord HARRIS of GREENWICH: My Lords, I think it would be the desire in all parts of the House that we should ensure that that should be so.
The Lord Bishop of MANCHESTER: My Lords, is the noble Lord aware that the great majority of Church leaders in Britain have declared themselves to be in favour of the principle of an agreed date for Easter, at any rate within Western Christendom, and that the Archbishop of Canterbury is at present in correspondence with the authorities of the Roman Catholic Church on this matter? Is the noble Lord also aware that one of the chief obstacles to a universal agreement in this matter is the difficulty which the leaders of Eastern Orthodox Churches living in Communist countries have in communicating so momentous a change to the members of their Churches without incurring the suspicion of pressure from the secular Government; and that this is a difficulty which has had to be sympathetically considered for a good many years by the Churches in the West?
Lord HARRIS of GREENWICH: My Lords, I am sure we have all listened with interest to what the right reverend Prelate has just said.
The Earl of HALSBURY: My Lords, would the noble Lord agree that, in conformity with the modern trend to reduce the incidence of unemployment by reducing the number of working days, there is a case for establishing two approximately equinoctial holidays—a religious one depending upon the lunar calendar and a secular one depending upon the

559
solar calendar, so that we have two holidays and both the religious and the secular are suitably obliged thereby?
Lord HARRIS of GREENWICH: My Lords, I take note of what the noble Earl has said, as no doubt will my successors at this Box. I think we should all welcome any movement on this matter which has, quite rightly, been the subject of discussion in this House on a number of occasions.
Lord FERRIER: My Lords, while congratulating the noble Earl, Lord Listowel, on re-lighting the torch carried for so many years by the late Lord Merthyr, may I urge the Government to re-address themselves to this subject, particularly in the light of what the right reverend Prelate has just said, because next year is not only the fiftieth anniversary of the passage of the Act, but it is a very peculiar year in that the 1st April falls on a Saturday and therefore under the Act Easter falls on the latest possible day, namely the 16th, so that there is a three week difference between Easter under the Act and Easter under the Prayer Book?
Lord HARRIS of GREENWICH: My Lords, I accept that what the noble Lord has just said is right. Easter Day certainly is early next year; but it will reassure him to discover that in the following seven years Easter Day will fall in April, and indeed not much outside the span of the Easter Act, namely, between the 9th and 15th April.
Baroness EMMET of AMBERLEY: My Lords, in view of the very interesting interchange there has been today in your Lordships' House, would the noble Lord agree to send the report of it to the most reverend Primate, who is visiting the heads of the Churches at the present moment, with a view to securing his help in this difficult matter?
Lord HARRIS of GREENWICH: My Lords, I will gladly ensure that a copy of the exchanges today is passed on to the Archbishop's office.
Lord FERRIER: My Lords, if the noble Lord objects to the proposal made by my noble friend Lord Derwent, that
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the retiring Chairman of Committees should take up this torch, I hereby offer to do it myself, because I supported the late Lord Merthyr in the days of old. The question I should like to ask is this: in the reconsiderations which I hope will take place, will the noble Lord take into account the problems of the Southern Hemisphere and consult the Government of Australia, where an early Easter offers very severe problems to them in connection with their agriculture?
Lord HARRIS of GREENWICH: My Lords, I am sure we should like to consult everybody, but I must tell the noble Lord that if we want to get a degree of agreement on this, if we start consulting other Governments as well as all the Churches involved, it may be quite a number of years before we are able to take any action.

GOVERNMENT STATEMENTS
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m. my noble friend Lord Harris of Greenwich will repeat a Statement on possible changes in British nationality law. This will be followed by my noble friend the Leader of the House who will repeat a Statement on the outcome of the Common Agricultural Policy price negotiations.

ACTS OF PARLIAMENT (CORRECTION OF MISTAKES) BILL [H.L.]
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords I beg to introduce a Bill to facilitate the correction of mistakes in Acts of Parliament. I beg to move that this Bill be read a first time.
Moved that the Bill be now read 1a.— (The Lord Chancellor).
On Question, Bill read 1a. and to he printed.

AGRICULTURE
3 p.m.
Lord MIDDLETON Lord MIDDLETON rose to draw attention to the situation in agriculture; and to move for Papers. The noble Lord said: My Lords, I beg to move the

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Motion standing in my name. Just two years ago British agriculture could show an excellent record of growth and efficiency. Net output was growing steadily at a rate of about 5 per cent. a year; output per man was increasing at a rate of 7 per cent. a year, double that of manufacturing industry; farmers and farm workers, in number about 670,000, were producing from a shrinking acreage 68 per cent. of the temperate foodstuffs required by 57 million people.
At that time world prices of cereals and protein foods were rising very steeply, as were the prices of energy and other inputs. The value of the pound relative to that of other currencies was falling, so that the rising cost in sterling terms of bringing in supplies from abroad would seriously affect the balance of payments. There was a strong economic case for increased home food production. In April 1975 the White Paper Food from our own Resources was presented to Parliament and was well received by the industry. It showed that in the previous two years the United Kingdom's net deficit in trade in respect of food and drink rose from £1,750 million to nearly £3,000 million. The Paper concluded, first, that world and Community foodstuff prices were likely to rise between 1975 and the early 1980s, and that the risks of shortages and price fluctuation justified a policy of expansion of food production in the United Kingdom; secondly, that the industry's net product could expand at a rate of about 2½ per cent. a year and should be encouraged to do so; thirdly, that the Government would frame their agricultural policies in the light of these conclusions.
I am grateful for having the opportunity of drawing your Lordships' attention to what has happened to the agricultural industry since 1975. Perhaps the most alarming trend has been the marked decline in net output. Instead of expanding, output is falling at a rate of 10 per cent. a year. The industry's costs have increased sharply, and net income is falling. The Government's own estimate is for a fall this year of 9 per cent. in real terms. The level of farming net income in an industry that is largely self-financing provides the basis for subsequent capital investment. This is clearly stated in the 1977 Annual Review. It says:
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"Retained earnings are a principal source of investment for the industry and this fall in net income is associated with a further reduction in the volume of new investment, particularly in buildings and works. In volume terms new investment in plant, machinery and vehicles is expected to be between 2 and 3 per cent. lower than in 1975, and that in buildings and works to be some 19 per cent. lower."
That is the Government's estimate.
Last year's stock returns showed fewer dairy cows, fewer beef cows and fewer sheep, and the Review tells us that the pig breeding herd is contracting. That is borne out by the large numbers of sows being slaughtered in the last month or two. This is not a very happy picture if we are looking for expansion. However, in the Annual Review the Government say cheerfully that there is nothing whatever to worry about and that it is all due to the weather.
"Had it not been for the exceptional weather"—
we are told—
"the level of production could have been expected to show reasonable progress."
I believe that this optimism may be misplaced. I believe that there is a growing lack of confidence that stems from more fundamental causes than the vagaries of the weather, and that this must cast doubt upon the ability of the industry to show progress towards the Government's 1975 projected expansion. I therefore ask your Lordships to consider some of the disabilities which together are having a depressing effect on farming confidence.
I suppose the first shock to the mood of confidence with which British farmers entered the EEC was caused by the difficulties with beef in 1974. The noble Lord the Leader of the House is only too familiar with the problems that then arose. Very briefly, at the first round of EEC price decisions, the incoming Labour Government decided not to operate the EEC intervention system for beef. Producers were therefore left without any floor in the market. Many suffered serious losses, and there was a sharp reduction in the breeding herd until variable premiums were introduced in November 1974.
Far more serious and far more intractable is the problem of the rapidly eroding competitive position of British farmers resulting from the fall in the value of sterling. These marketing and monetary

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matters were debated in this House just over a month ago with a very high degree of knowledge and expertise, and I do not propose—even if I had the skill to do so—to cover that ground again. I would merely say that it is very easy to see the dilemma facing a Government, who are battling against inflation, trying to keep down costs to consumers, and trying also to have regard to our balance of payments.
Nevertheless, Government have a responsibility for the agricultural industry. No more than any other industry can industry remain healthy when margins are squeezed unmercifully by Government. Action, or rather inaction, on the green pound has led to a feeling among farmers that Government have found a way of permanently insulating British agriculture from Community farm price levels. This unease has been confirmed recently by the Government's bargaining posture on the green pound. Consumers may feel that they have a champion in the Minister of Agriculture, but producers know that their returns are suppressed because of the artificially over-valued green pound while their costs increase in line with the actual depreciation in sterling.
The gap between the market and the green rates for sterling against the unit of account rose this year to 35 per cent., and even after last Monday's agreement in Brussels the price differential is still of a similar order. No British industry could for long compete in Europe in a situation where, as for beef producers, prices are some 70 per cent. higher in Germany, or, for pig producers, 35 per cent. higher in Denmark, than they are in the United Kingdom. The list of these price differentials is endless, and they are largely, if not entirely, due to currency differentials, and the operation of MCAs—monetary compensation amounts.
Apart from the land itself, probably the overriding factor governing the productive capacity of agriculture is the availability of finance. It has never been easy for farmers to pay for capital from sources outside the industry, and, as the Government so readily acknowledge, a large part of its capital requirements are financed out of income. Let us not forget that it is the occupier's income which
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normally provides the working capital and it is the owner's income which must provide for investment in land, in buildings and in works of all kinds. In relation to 56 per cent. of the farmland in Great Britain the occupier and owner are the same person. The remaining land is farmed on a landlord-tenant system, which is acknowledged to be extremely beneficial to the economic efficiency of food production.
It is the industry's view that one factor which contributes to no small extent to that decline in capital formation, which is acknowledged and described in the Annual Review, is the present system of taxation, both revenue and capital. Farmers believe that the present system of revenue taxation ignores the particular circumstances which they face. Profits can be expected to fluctuate from year to year and the income tax system should permit the prudent farmer to husband the moneys earned in a good year against the contingencies of a hard year. Furthermore, a fairer way of dealing with the income derived from the business of letting land is to treat it as any other business for income tax purposes. Those are two ways in which action by the Government would undoubtedly provide more favourable conditions for capital formation.
However, no single fiscal action by the Government would provide a boost to confidence and investment of the kind which would be provided by a mitigation of the threat of capital taxation as it affects the owners and occupiers who farm land. The taxation of capital is a matter about which all noble Lords feel strongly. The matter is bound up with the whole question of private and public ownership and with the social structure of our society. The arguments have been well aired on many occasions in this House, and I do not propose to cover that ground again. I would merely say that if a tax is to be levied on the transfer of assets, including productive assets, farmers and landowners will expect to bear some burden. However, the structure and especially the rates of capital taxation are now urgently in need of review. At current rates the cumulative effect of capital transfer tax, capital gains tax and stamp duty on low yielding long-term assets can only damage the efficiency of British agriculture.
Farmers are concluding that, despite the available reliefs, taxes can be paid only by selling land, machinery or livestock, which are essential to carry on the business. They believe—rightly or wrongly—that for many years the burden of capital taxation has been placed upon them for political reasons rather than for revenue reasons. They believe that it is progressively inhibiting investment without which expansion of production is impossible. They regard the present penal rates as certain to erode the capacity to invest of just those businesses—of the many which go to make up the industry—which produce the bulk of our food. Although the larger farm businesses in the United Kingdom make up only 15 per cent. of the total, they produce more than half the total output. Individual farmers and landowners are increasingly aware that their European competitors do not face similar burdens. Such comparisons of rates as I have seen show that French and German farmers I are able to reinvest a much higher proportion of their profits.
One of this country's great assets is its farm structure. The average size of holding is 150 acres compared with 50 acres for the nine countries of the EEC. In the long run the periodic removal of large slices of capital must cause fragmentation and our relative advantage will decline. If we are to preserve and make the best use of this advantage in efficiency of food production, tax rates on existing owners need to be reduced.
In addition to these financial disabilities, there are the various political and fiscal threats which are not conducive to a feeling that the industry has a particularly happy future if the more extreme elements have their way. On top of the likely impact of existing taxes there is the threat of a wealth tax. Based on the type of wealth tax shown in the original Green Paper, it can be shown that in his lifetime the owner of a modest 350 acres would be bankrupted by a wealth tax alone. That proposal was hardly a morale booster.
Then there is the question of the rerating of agricultural land which was proposed in the Layfield Report. Whatever the theoretical advantage, the fact is that if this were implemented it would impose a burden of £120 million a year upon the industry, quite apart from the
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problems and costs of valuation both initially and annually. That certainly would be one way of increasing the cost of food production.
It is hardly a signal for investment for expansion when the National Executive of the Labour Party in its document, Public Ownership of Agricultural Land—Immediate Proposals for Action commits itself to what it describes as an interim measure to all-out nationalisation, to the creation of an ever-expanding public stake in agricultural land by what it calls the "voluntary transfer of ownership" as a means of paying CTT and wealth tax.
Nationalisation has usually been justified as a kind of rescue operation for an industry that has failed the nation. Does the performance of British agriculture up to now demonstrate failure? I should have thought that it provided an excellent example of how an industry can perform when it is unhampered by dogma—where success depends upon personal effort and where the pride of private ownership provides the incentive to invest for the future.
Then there is the legislation factor. The Agriculture (Miscellaneous Provisions) Act and the Rent (Agriculture) Act and their passage through this House are too fresh in our minds to call for any rehearsal of the arguments. Just how severe the effects will be on the landlord-tenant system, which was a matter of concern to the Young Farmers' Federation, or on the manning of our livestock farms, only time will tell. However, the fact is that this type of legislation has an unsettling effect and it certainly does not produce any extra food.
Finally, there is a strong feeling that we have no firm strategy with regard to land use in this country. We have about 47 million acres of agricultural land, of which only about 40 per cent. is capable of growing crops. The estimate in Food from our own Resources was that about 70,000 acres a year were being permanently lost to development of various kinds. Some depressing figures were recently provided by Dr. Alice Coleman in an article published in the Architects' Journal to show that far too high a proportion of these acres are taken from our best farming land where yields are high and food is therefore produced most economically.
The Centre for Agricultural Strategy, under the chairmanship of Lord Rothschild, last October produced its first report entitled Land for Agriculture. I expect that by now many noble Lords are familiar with it. The report concludes by saying:
"It is no exaggeration to say that, without a more positive approach to land use planning now, there is danger of land scarcity in the future".
It goes on to say:
"It is essential to insure against this unacceptable outcome by instituting more effective monitoring of land use together with harmonisation of the work of various bodies involved in land use planning".
My own experience of planning leads me to agree wholeheartedly with these conclusions and with the recommendations which are contained in the report.
Those then are some of the factors which I believe to be damaging to confidence within the agricultural industry. I appreciate that two years is only a short time in which to assess a trend, but we simply cannot explain away the whole of a 20 per cent. drop in net output by blaming the weather. Of course we had exceptional conditions last summer. We had a very difficult autumn and winter, and no farmer is particularly pleased to see a white Easter. However, whatever the causes, the 2½ per cent. a year expansion has not taken place and instead output is falling.
The industry now needs to know what the Government's policy is. The Annual Review White Paper states that,
"the policy of expansion and the priorities set out in Food front our own Resources are still valid and should continue to guide decisions on Agricultural Policy".
There are, however, a good many indications, both in the form of positive action and where no action has taken place, that the Government feel that the 1975 case for modest but sustained expansion no longer has priority. If that is so, then I beg that they should say so and tell the industry what is expected of it into the 1980s. If it is not so, then the Government must take steps to dispel the deep-seated fear among farmers that the Government are flirting with the short-term advantages, which are political rather than economic, of going back towards
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the turning which leads to a cheap food policy. The reality is that such a policy is a mirage and its pursuit can only weaken the whole country.
Quite apart from price decisions and green pound decisions, there is much that could be done by Government action to resolve some of the disabilities that I have indicated as having a damping effect on confidence and, therefore, upon output and upon investment for the future. Unless some attention is paid to these matters it will be very hard to convince farmers that the Government really intend to promote the health of that industry which, above all others, has served our people so well and, with encouragement, can play a vital part in our national recovery. My Lords, I beg to move for Papers.
3.22 p.m.
Baroness ROBSON of KIDDINGTON: My Lords, may I thank the noble Lord, Lord Middleton, for introducing this subject in your Lordships' House today. The industry whose future we are debating this afternoon is one that has probably served the nation better than any other industry within our country. It is an industry where there is a better relationship between labour and management than in many others in this country. It is an industry where both worker and manager have the land, as such and food production, as such, basically at heart rather than their own personal advantage. It is one to which this nation owes an enormous debt of gratitude.
I am grateful to the noble Lord, Lord Middleton, although in many ways I want to deal with the subject in a different way. I want to do this basically because there are a large number of expert speakers in your Lordships' House today and I think that it is probably better if one sticks to making one or two points. The noble Lord, Lord Middleton, took the decision that he was going to avoid discussing the general economic inflationary impact on agriculture and deal with agriculture itself. I have taken the opposite decision because I do not believe that you can discuss the agricultural problem without setting it in the context of the general inflationary position this country finds itself in. So I hope your Lordships will hear with me if I bring in one or two

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general economic points in order to try to put the agricultural industry in the context of the general inflation.
The other day in the other place, in his Budget speech, Mr. Healey made the point that the recovery of the pound from its low point of 1·54 dollars to 1·70 dollars—.a rise of 16 points—had reduced the cost of our imports between £2,000 million to £3,000 million. One must therefore, I believe, logically assume that if over the past few years the value of the pound had not fallen from 2·4 dollars to 1·71 dollars, the present rate, we would have prevented raising the costs of our imports by no less than £12,000 million to £16,000 million. I believe that the failure to keep our currency sound is one of the principal reasons for the rate of inflation still running in this country.
I suspect that it is this depressingly high rate of inflation, and its impact on the cost of living, which has resulted in Her Majesty's Government's instructions to Mr. Silkin firmly to resist the devaluation of the green pound to the extent expected by our partners in the European Community and to the extent rightly expected by the agricultural industry in this country. This resistance, as we know, has created enormous difficulties in the livestock industry generally. Your Lordships have read ad nauseam of the fashionable economic concept that a substantial devaluation of sterling leads to a British export boom. I personally question this theory as it appears to leave out of account the inflationary impact forced by the additional costs of our imports to which I have already referred. In actual fact, devaluation is equivalent to a 38 per cent. to 40 per cent. tariff on imports, without collecting it. And what appears to he forgotten is that the increase in the cost of imports of these substantial, enormous sums must be recouped in the prices of British exports, which must erode their competitive advantage. This goes to the root of the popular theory that a reduction in the exchange value of the pound will lead to increased exports.
I was therefore astonished to read Mr. Brian Gould's letter in The Times yesterday asserting that our export prices remained uncompetitive, and asking for further devaluation. Surely this would again add to the grievous burden on British agriculture by raising the cost of imported
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feeding stuffs, which leads to our Ministry of Agriculture resisting even more strongly adjustments in the green pound, and making it impossible for the British dairying and livestock industries to function on a profitable basis. Would it not therefore be better, and the only longterm solution for British agriculture in common with other industries in this country, for Britain to cheapen her imports by allowing the value of sterling to rise?
One has the impression, when reading the financial columns of our Press, that the Bank of England has actually intervened to prevent the value of sterling from rising above the apparently set level of 1·70 dollars to the pound. In the Sunday Times on 1st April 1977 there was a quotation from an economic study by Messrs. T. Burns and A. Budd. With your Lordships' permission, I should like to quote from it:
"What should the Government do? We argued in January that the most effective way to control inflation is to allow the exchange rate to move up under the free influence of market forces. We did not expect such pressures to emerge until 1978 but it is already apparent that the upward movement is being resisted. This strategy of attempting to maintain competitiveness by holding down the exchange rate overlooks the fact that the squeeze upon the money side such as we are experiencing now can only have an impact upon the inflation rate if it is accompanied by the recovery of the exchange rate".
Your Lordships may ask me why I have repeated these, to many of us, obvious problems of the overall inflation within our nation. I have done it for a particular purpose: because I believe that in the policy of containing inflation the heaviest burden has been put on the agricultural industry; the burden has been carried at the expense of agriculture in the forlorn hope of trying to help the rest of British industry. In doing it, I believe it has not in fact achieved its purpose, and that is one reason why Her Majesty's Government have had to insist that our approach to the green pound has not been as generous as one would have hoped.
Another problem in agriculture caused by inflation is that it has affected the industry quite differently depending on whether one is a grain or livestock farmer. The forecast on the London Grain Market at present for futures is that barley will be priced at between £88 and £94 a ton from November onwards and that wheat

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will rise to £94 in November and to £100 in March of next year. If one happens to be a cereal farmer in Britain capable of growing two tons to the acre, an income of £200 is no doubt extremely acceptable; but it is the cause of unqualified gloom among livestock farmers, particularly in pig breeding and dairying, and this is a stark indication of the heavy decline in the value of the pound.
Had we been able to maintain the value of the pound at 2·40 (or should we at the moment allow the pound the natural rise that it appears to be having) our grain imports from Canada and the United States could have been at as low as £60 a ton. If that had been the case, it would have strengthened the negotiating power of Mr. Silkin and enabled him to support amore generous devaluation of the green pound. I believe that these sort of figures vividly illustrate the true course of Britain's high rate of inflation and the reason for the imbalance of British agricultural prices as between arable and livestock farmers.
Another way in which the high rate of inflation has affected agriculture was touched on by Lord Middleton; that is, the effect of CTT particulary on the owner farmers of this country. If one has a 300 acre farm and the land is valued at £500 an acre, the gross duty under ordinary CTT would be £31,000 on which, thanks to hard negotiating, agriculture got a 50 per cent. discount. That is manageable in many ways—it is hard, but manageable—but because of the loss of the value of the pound, the value of land in the devalued currency has increased at such a rate that a 300 acre farm today is valued at £300,000, on which the duty would be £104,000, and, even with a 50 per cent. relief, that would still saddle the son of a farmer with £52,300 to find from income. The farmer who is dedicated to farming his land is not interested in the artificial increase in the value of his land; he wants to go on farming, he wants to hand the farm on to his son, but he does not wish to saddle his son with a mortgage for ever and ever.
Inevitably there is the problem whether the farmer should hand over his farm before he himself gives up farming, to try to avoid some of the higher duties; I but he then has to pay capital gains tax,
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which of itself turns out to be the same amount of money. Thus, on the whole, he will tend to hold on and his son or family will have to pay the capital transfer tax. This for a farmer will come at a time when he is quite an adult; he has probably worked on his father's farm for the whole of his life. He may inherit it and have to pay the capital transfer tax when he is 60 or older, and it could easily mean that he would not manage to get himself out of debt before it was his turn to hand over to his son at a similar age.
This is an unforgiveable state of affairs and something the Government must look at—although not necessarily because they were not aware of the problem. It was agreed that land should have special relief, but that has been eroded completely because of the inflation that has hit our currency. It is high time we looked at this problem once again, otherwise I fear we shall find the farmers of this country—the owner farmers of whom we are particularly proud, because land is best farmed if it is farmed by the owner and his family—selling out and taking a secure tenancy, and that will mean that our countryside will not be the countryside that we in Britain are used to. The countryside is of benefit to the whole of our nation, it is the garden of England and it is an environmental asset, due largely to the efforts of the owner farmer. Let us make certain that he can keep his farm.

BRITISH NATIONALITY LAW
3.37 p.m.
Lord HARRIS of GREENWICH: My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Home Secretary. The Statement is as follows:
"A discussion document on possible changes in our nationality law, which I have presented to Parliament, is published today.
"Our present law on nationality has for long been outmoded and difficult to follow. Accordingly, w hen the present Government took office my predecessor set up a working party under my honourable friend the

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Member for York, who was then Minister of State, to examine the whole question as we had promised in the Labour Party Manifesto of February 1974. The discussion document is based to a large extent on their work.
"I emphasise that the document is a set of ideas for discussion. It is not a set of proposals for legislation. The Government do not intend to introduce early legislation. Nationality law affects all of us and thousands of people living overseas, so before we embark on change there must be a full opportunity for people and representative organisations to express their views.
"The main suggestion canvassed in the document is that we should have two citizenships—a British citizenship for those with close ties in this country, and a British overseas citizenship for the remainder of those people who are now citizens of the United Kingdom and Colonies. British citizens would have an unqualified right of free entry to the United Kingdom, while the right of entry to a dependency would be reserved to those who are British overseas citizens by virtue of a connection with it. The question who should obtain which of the citizenships on the coming into force of the new law is discussed in some detail.
"In addition, the document contains, for example, some discussion about the distinction in the treatment of men and women, both in the transmission of citizenship and in the acquisition of it through marriage. It also mentions possible changes in the requirements for the grant of naturalisation which have remained largely unchanged for many years.
"An important point to keep in mind is that the changes discussed in the document would not affect anyone's existing right of entry to the United Kingdom. In particular, the obligation which successive Governments have assumed towards holders of United Kingdom passports from East Africa would be maintained, and the special voucher system would continue.
"As I have said, the Government do not intend to introduce a Bill in the near future. The purpose of this document is to invite views from honourable Members, private indivi-
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duals and representative bodies. We will want to study very carefully what is put to us and in that spirit, therefore, I commend the discussion document to the attention of the House."
My Lords, that concludes the Statement.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, the House will be grateful to the noble Lord, Lord Harris of Greenwich, for repeating that important Statement. I must be careful not to fall into the temptation of initiating a debate in the midst of a discussion on agriculture, especially as I have not yet had the opportunity of reading the discussion paper, which we will all want to study very carefully. However, this is a matter upon which I have been urging action for very many years, publicly, when the Labour Party was in office and less publicly when our own side was in office. So far I have achieved nothing.
When I was a boy, the human race could be divided for this purpose into two categories. There were British subjects and aliens. That was rather nice and simple and there was a modification in time of war when aliens were subdivided into enemy aliens and friendly aliens. Since the war, the matter has assumed the most appalling complexity. In place of two rather simple categories, we have British subjects who are members of the Commonwealth and who have Commonwealth citizenship; there are British citizens of the United Kingdom of Colonies, subdivided into those who have patrial rights and those who have not; there are British subjects who live here with the right of entry and there are EEC nationals who are governed by the Treaty. That makes five or six different categories of human beings, all with different packages of rights.
I do not at all complain that, in these appalling circumstances, the Government have not produced anything better than a discussion document. In view of the intractability of the subject, I feel it would be captious of me to complain. However, I must warn the Government—and I speak only for myself and do not know whether I speak for any others of my noble friends—that, in point of fact, however much discussion takes place about this subject, we shall not make it simple nor shall we achieve unanimity. Sooner or

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later a Government must come forward with the intention of passing a law to simplify this matter. However long we wait, that law will not be non-controversial. It will bristle with controversy from beginning to end. But my belief is that the longer we fail to grasp the nettle, the bigger the muddle we shall get into in the end. I therefore wish the discussion paper all success and I hope that whatever Government are in power they will, after a reasonably short time, have the courage to grasp the nettle and make some sense of a legal situation which is intolerably complex.
Lord WADE: My Lords, on behalf of my colleagues, I should like to thank the noble Lord for having repeated this Statement. We shall, of course, have very carefully to study this discussion document. Many of us recognise that, in 1948 and subsequent years, the basic problem of British nationality was not tackled and that that is part of our trouble. As a result, the law has became more and more complex and with each change the anomalies and hardships have been added to. That being so, I welcome the Statement that has been made today. But I have one question and one suggestion.
The question is this. I heard the noble Lord say that the changes discussed in the document would not affect anybody's existing right of entry to the United Kingdom. Does that mean that there will be no change in the concept of patriality and place of abode and the many other expressions whose value I personally doubted when they were introduced? Is that ruled out? Surely, we must consider that in discussing this subject.
Secondly—and here I am perhaps a little more optimistic than the noble and learned Lord, Lord Hailsham—will Her Majesty's Government consider the possibility of setting up an all-Party Committee, drawn from both Houses, with, say, a Law Lord in the Chair? This would be an attempt to look at the subject as objectively as possible and to endeavour to reach as much common ground as possible. If that could he done, it would be a very important step forward.
3.45 p.m.
Lord HARRIS of GREENWICH: My Lords, I am very grateful for what the
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noble and learned Lord, Lord Hailsham and the noble Lord, Lord Wade, have said in response to the Statement, and for the manner in which they did so. I should like to deal first with the points raised by the noble and learned Lord, Lord Hailsham. He is quite right of course. The existing situation is appallingly complex and anyone like myself who does not deal with this matter on a day to day basis (for instance, briefing myself before this afternoon's Statement) must feel bound to confirm the view that the noble and learned Lord has of the existing law.
In a glossary to the Green Paper there is a list of the various terms and expressions used in the British Nationality Act, which governs the existing law on this matter. They range from "British subject" and "Commonwealth citizen", through "citizen of the United Kingdom and Colonies", "British subject without citizenship", "British subject by virtue of Section 2 of the British Nationality Act 1948", "British subject by virtue of Section 1 of the British Nationality Act 1965", "British protected person" to "alien That gives an indication of the complexity of this matter and of the formidable problems that arise in trying to deal with it. Nevertheless, we have made a start in dealing with the problem and I am sure that that will be widely welcomed.
The noble and learned Lord added that, sooner or later, a Government would have to come forward with legislation. I entirely agree with him. I believe that the state of the law is profoundly unsatisfactory. That is why we have come forward with the Green Paper at this time. So far as the noble Lord, Lord Wade, is concerned, the only comment that I made in the Statement was that dealing with the problem which would inevitably arise in making a Statement of this sort; that is, that there was some likelihood or possibility that we intended to withdraw some existing rights. I only want to indicate that there is no question of doing that.
As regards the second point raised by the noble Lord, Lord Wade, when he suggested an all-Party Committee, consisting, I understand, of Members of both Houses, we have made a start with the publication of the Green Paper. I

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do not know whether that will take us any further but, certainly, I shall draw the suggestion of the noble Lord to the attention of my right honourable friend the Home Secretary.
Baroness GAITSKELL: My Lords, there is no doubt that the laws in question are very complex, but should we not all the same be proud of the liberal laws we have had up to now? They are better than the laws of any other country in the world.
Lord HARRIS of GREENWICH: My Lords, I am sure that Governments of different persuasions have done their best to administer the laws in a liberal and reasonable manner. I agree entirely with what my noble friend has said, but the existing law is so complex that it is inherently unsatisfactory and it is for that reason that we have come forward with the Green Paper.
3.49 p.m.
Lord FOOT: My Lords, it is my recollection that, when Mr. Alex Lyon, who set up this Working Party, was Minister of State at the Home Office, he gave an indication that it was the intention of the Government to introduce a Citizenship Bill during this Parliament. That is my recollection of what he said when he was Minister of State. Bearing in mind what the noble and learned Lord has, in my respectful opinion, quite properly, said about this problem only becoming more complicated the longer we postpone tackling it, can the noble Lord give us any indication as to whether it is the intention of this Government—if they last long enough—to introduce this legislation during the present Parliament?
Lord HARRIS of GREENWICH: My Lords, to answer that question, one would have to know how long this Parliament was going to last. I am quite sure it will last for a significant period of time and that the noble and learned Lord, Lord Hailsham, would welcome that expression of view. As I indicated, the position is that we cannot give any indication as to when we can come forward with legislation. This is a very complicated matter. Having published the Green Paper and invited comments, we must clearly await the receipt of those comments. I feel that it
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would, for instance, be quite unrealistic to assume that there was any question of legislation in the next Session of Parliament.

CAP: PRICE NEGOTIATIONS
3.50 p.m.
The LORD PRIVY SEAL (Lord Peart): My Lords, with the leave of the House, I will now repeat a Statement being made in another place by my right honourable friend the Minister of Agriculture. I should like to apologise to noble Lords opposite for the fact that they have had copies of the Statement for only a short time, and indeed I have just read the Statement myself now; but we are having an agricultural debate today. Certain matters have been reported in the Press, and I know that there has been general comment about the Review itself. The Statement is as follows:
"With permission, Mr. Speaker, I should like to report on the outcome of the Council of Ministers (Agriculture) on 25th/26th April. My honourable friend the Parliamentary Secretary represented the United Kingdom for the discussions on agriculture, and my right honourable friend the Secretary of State for Scotland for the discussions on fisheries.
"Agreement was reached on Community farm prices for 1977/78. The common support prices will rise by 3·5 per cent. for most commodities, representing a substantial decrease in real terms.
"There will be a Community financed butter subsidy for the United Kingdom which was not included in the commission's original proposals of 8½p per pound, which should lead to an immediate fall in shop prices of about 5p per pound. Prices thereafter will begin to rise again, but increases and decreases throughout the year are expected roughly to cancel out. The subsidy will continue thereafter until 1st January 1979, though the rate has yet to be decided.
"For beef our premium system, with intervention only as a fallback, will be continued not merely until July, as the Commission originally proposed, but for the whole of 1977/78. I am confident that agreement will be

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reached in the course of the year that the premium system be retained permanently. I shall announce this week the scale of United Kingdom target prices for 1977/78, but the average will be £30·28 per live cwt. and the level will rise to over £32 next March.
"The Commission's proposed levy on isoglucose will be fixed at the maximum at half the level proposed by the Commission.
"The action programme for milk has been improved. There will be no tax on vegetable oils and fats—that is, no margarine tax. There will be no regulation on the 'exclusive use' of milk products or their labelling, although this will be further examined. There will be no ban on national aids for investment on farms. The action programme now comprises incentives to farmers, financed wholly by the Community, to cease to market milk or to convert to beef or sheep production; a 'co-responsibility levy' of 1·5 per cent. from 16th September; Community aid for school milk programmes; and Community aid for accelerated programmes for eradicating brucellosis, tuberculosis and bovine leukosis.
"I now think it right to make a small move in the green pound. It will be devalued by 2·9 per cent. rather than the 6 per cent. proposed by the Commission, to take effect from the beginning of each marketing year, with two exceptions. It will apply to pigmeat from the beginning of May thus reducing the monetary compensatory amount immediately by about 8· per cent. and without at the same time reducing MCAs on cereals. This will provide some relief to our pigmeat industry. We shall continue to press for a more fundamental change in the calculation of these amounts. The change will also be deferred for milk products, and will apply in two equal steps on 16th September 1977 and on 1st April 1978.
"The change in the green pound will he reflected in higher common support prices for United Kingdom farmers in sterling terms. After allowing for the deferment of the change for milk products, however, the effect on retail prices will be very small. Its effect on all food prices between now and
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April 1978 will be more than offset by the butter subsidy which we have negotiated.
"I consider that this package achieves a fair balance between producers and consumers. The effect on food prices in the shops has been cut to the minimum, and the green pound devaluation more than offset by the butter subsidy. The effect on average food prices of this settlement during the period to next April is estimated at one-third of 1 per cent., so that with the transitional steps the overall effect will be 1·25 per cent. When all the effects excluding the transitional steps are fully passed through, the increase in the RPI would be less than one-third of 1 per cent. Agricultural support prices in the Community as a whole will fall in real terms, but United Kingdom farmers will get a big boost to their support prices from the combination of the transitional steps, the common price increases, and the small devaluation of the green pound.
"I believe that the outcome of these negotiations represents a very good deal for both British housewives and farmers. The final package is a considerable improvement on what was originally proposed by the Commission. For us the key objective was to keep consumer price increases to an absolute minimum, while at the same time obtaining a fair deal for the farmer. I recommend the package to the House.
"The Council also agreed to certain changes in the basic regulation on hops which will strengthen producer marketing. I believe these will be welcomed by the Hops Marketing Board and the farmers' unions.
"The Council agreed on a mandate for the negotiations with the ACP countries on sugar prices for 1977/78. These will start on 28th April.
"The Council decided to extend the present ban on fishing for herring in the North Sea for a further month, and to consider the herring situation as a whole—including waters to the West of Britain as well as the North Sea—at the next Council.
"I should take this opportunity to tell the House that Commissioner Gundelach has notified me that he is studying how the functions of the Milk Marketing

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Boards can be maintained, with particular regard to the means by which the Boards help to maintain the level of liquid milk consumption, thereby reducing intervention on dairy products, with a view to making appropriate proposals."
My Lords, that concludes the Statement.
3.57 p.m.
Earl FERRERS: My Lords, the House will be very grateful to the noble Lord for having repeated that Statement, and I am grateful to him for his apologies that the Statement was not distributed a little earlier. I received my copy at a quarter to four, and having received it I found that half of it was illegible because something had gone wrong with the photo-copying machine. But there was probably one advantage because my copy was marked "Final Version", and possibly there were fairly late alterations to the transcript. One is bound to say that one wonders why.
The Minister said in the Statement that this would be a package which was acceptable to the consumer and to the farmer. I am bound to say at the outset that quite clearly this is a consumer-orientated package, and in saying that I would not want to infer that the consumer's interests should not be taken into account; of course they should be, and of course the Minister has done so. What I would point out is that the interests of the consumer and the interests of the farmer are very similar, and where the Minister has made the mistake is that he has delayed the whole of the Common Market negotiations over the Farm Price Review by one month; and what has he got out of it?—a subsidy of three-quarters of a penny per pound on butter! Almost everything else has been the same as he would have negotiated one month ago, and this has caused great consternation to those of us who have watched the negotiations going on.
The Minister says in the Statement that the effect on food prices between now and April 1978 will be more than offset by the butter subsidy. I will not take too long because I intend to refer to this matter in what I have to say later, but I would only hope that in the future the considerations
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of the Farm Price Review will go much higher than the considerations of a price for butter.
My Lords, in view of the fact that farmers' costs have gone up 20 per cent., I should be grateful if the noble Lord could tell me whether or not I am correct in thinking that the increase in prices which this Statement allows increases their institutional prices by only 10 per cent. I should also be grateful if he would explain how this package affects pig producers. They are facing disaster and huge losses. How will this package help them? I should also like to ask the Minister what effect this is going to have on the price of milk, both to the housewife and to the farmer.
Baroness SEEAR: My Lords, we on these Benches also thank the noble Lord the Leader of the House for repeating this Statement. We, too, have some difficulty, in that we received it even later than a quarter to four and have been able to have only the most cursory examination of what it contains; and as it contains a very considerable amount of detail it is, of course, quite impossible, as well as being inappropriate, no doubt, to comment in any detail on what the Statement in fact says. The fact of the matter of course is that it is a compromise—a compromise attempting to satisfy both the farming interests and the consuming interests. While accepting that there is an overlap of the interests of these two groups, on many points, particularly in these negotiations, those interests are in conflict, especially in regard to what is to happen to the green pound. Whereas, obviously, it is in the interests of the farmers that the devaluation of the green pound should take place as quickly as possible, the consumers in this country are very anxious to see that that devaluation does not proceed swiftly.
So the Government were faced with the need for a compromise, and the Statement reflects that this is in fact a compromise, with an attempt to do something for the farmers (which no doubt, to a considerable extent, cannot satisfy them) and something, albeit very little, for the consumers. We are told that the rise in prices will be compensated for by the fall in the butter price, but we are also told that that fall in the butter price will be

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only temporary and that butter will proceed to rise again after a very few months. The fact of the matter is, of course, that this unsatisfactory Statement reflects a very unsatisfactory state of affairs, both in this country and in the Common Market.
Until we are able to get real reforms in the CAP we cannot get a satisfactory settlement, and until we are able to put our own house in order in terms of inflation we cannot deal with these matters in this country; nor are we in a position, of course, to take any effective action in relation to Europe because of the situation of being the people who, on the one hand, are asking for assistance from Europe and, on the other, are at the same time trying to get them to reform and to change proceedings in the interests of Europe as a whole. This is an impossible position for the Government to take up. So this is a compromise situation, probably the best that we can reach as long as there are these two fundamental problems which need to be dealt with, both in this country and elsewhere; and we are in no position at the present time to deal with either of these problems.
Lord PEART: My Lords, perhaps I could reply quickly to the noble Baroness on the question of reforms in the CAP. I cannot accept this. I myself actually negotiated the beef premium, which was something very much like our own deficiency payments system, and this was welcomed by the industry. This was a major reform in the ongoing business of the Community. Added to that, there was the CAP sugar arrangement which I mentioned, which affected countries outside which had traditional links with us and supplied our market with sugar. The guarantee of access which was achieved in negotiations was a major step forward. The use of the commercial firm to assess what should be correct prices was, again, another step forward. There was the liberalisation of trade within the Community. This is what we did, and this has been carried on into this Price Review; and I am glad that my right honourable friend was able to get the assurance on the beef premium system. I am tempted to develop the arguments which I shall be developing later, when I wind up—and this, of course, was mentioned earlier by
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the noble Lord, Lord Middleton. It is rather unfortunate that we should have this intervention at this stage. All I would say is that we have done that, and whatever arguments there may be about a compromise there has been progress because of what has been done over a period of time.
The noble Earl put to me one or two specific points. I think his most important one was: What is the situation now for pig producers? All I can say is that in recent weeks the indications have been slightly more encouraging, with sow slaughterings down somewhat. The Council, I understand, could not agree on a solution to the MCA problem in the price discussions, but I understand that the Minister of Agriculture will continue to go on pressing for one. In the meantime, the Department's view is that the temporary subsidy is giving positive financial support, and the green pound devaluation will be of some help. Moreover, the introduction last week of a Community scheme of aids to encourage private storage will also have a beneficial effect on the pig market. I think I can also mention when the green pound change will take effect for pig producers. I understand that the devaluation will have an immediate effect in lowering the MCA. For example, the bacon MCA will come down by about £22 per ton, which is about 8½ per cent., but producers' costs will not be affected yet because the devaluation for cereals does not take effect until the beginning of the cereals year in August. I will leave my other points to specific parts of my speech when I wind up.
Baroness GAITSKELL: My Lords, may I ask my noble friend the Leader of the House whether, in order to convince the British housewife that the Minister has achieved a fair deal, he could hold a Press conference and translate this very important Statement into understandable and plain English, and not bamboozle her with percentages, as Governments have always done until now? Also, would it not be pertinent to ask, when others criticise the Minister about a compromise: Since when have negotiations always led to victory?
Lord PEART: My Lords, I do not disagree with my noble friend, but the Minister will certainly have already given a

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Press conference; I am certain of that. That is the practice. I would hope that he would give a Press conference, not merely for agricultural journalists, but also to put in good and simple English what it means. But it is not easy. There is a lot of gobbledegook about all this; I know that. I speak from experience. I am like the noble Baroness now: I tried to grasp it very quickly, in a few minutes, in order to deal with this very technical question and answer period. I will do my best when I wind up.
Lord MACKIE of BENSHIE: My Lords, may I ask the Minister one or two questions? Before doing so, on the technical nature of this subject, perhaps I may say that it is not the public not understanding the language that I worry about; it is whether the Minister understands it. Perhaps I may say first that the one good thing that appears to have come out of these negotiations is that there is hope that our excellent system of marketing, the Milk Marketing Board, will be understood and allowed to continue, which is what I took out of the Statement. That is a real step forward. Could the Minister tell us what the money available per pig will be because of the change? I have been going round my most competent friends in the pig world, and the best of them tell me that they need at least £5 per pig to bring the thing into profit at all. I very much doubt whether the 3 per cent. will go anywhere towards that; and I am very disappointed to hear that little progress has been made in the calculation of the MCA on pigmeat, which is grossly unfair. I should have thought that a very strong case could have been made for recalculating it, to the great benefit of the consumer, if so much time had not been spent on the price of butter.
I doubt whether this is a fair balance. I think it may well affect the consumer very badly if the feeling among pig producers and beef producers continues as it is. I do not think that £30 to £32 will produce much beef in this country. The fall in the breeding herd at the moment is considerable, and certainly all the college costings I have seen do not show any profit at a figure of £30 to £32. I should like the Minister to comment on this and to say whether he envisages any more changes in the 3 per cent., in the green pound, in the future, or whether he thinks that this
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minute change will be enough to bring our agriculture into line with Europe.
Lord PEART: My Lords, when I have dealt with the green pound I have always said that every Minister who has had to deal with this—and my successor will have to do the same—has had to consider it in the light of the circumstances appertaining at each Price Review. I, in fact, made four changes in the green pound, and it may well be that there will be other changes. I do not think that we should insist on a hard and rigid position on that. I will check on the question of whether or not it is enough, and, in my final speech, will confirm what the noble Lord has said. He mentioned a figure of £5 and he asked what it was. I have not got the answer immediately. I am glad that he stressed the importance of protecting our marketing boards. That, again, is something the Government have done and something which is of benefit to farmers and consumers. I believe that one should not get into this terminology of the consumer versus the producer. I have always argued this. I believe that if you produce food reasonably well, then it is good for the consumer. I have always taken this view.
The Minister has put forward our position very strongly to the Community about the need to protect our marketing boards. The question of marketing boards in general remains unaffected; but by yesterday's agreement on the revision of the EEC's hops régime we have a move forward. The Government aim remains to ensure that we maintain the functions of the boards. I think they are essential to the orderly marketing of the products concerned. Milk is a classic example; and I wish that the Community would adopt our structure there.
Lord MACKIE of BENSHIE: My Lords, may I ask one question? Could the noble Lord say when the guarantees such as those for potatoes which depend solely on our own Government will be announced?
Lord PEART: My Lords, I think that if I start following up all this now I shall be in conflict with Standing Orders. I have been reminded of this; and I read from the Companion to the Standing Orders:

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"Ministerial statements are made for the information of the House, and, although brief comments and questions for clarification are allowed, such statements should not be made the occasion for immediate debate, unless the House so order".
We have an immediate debate and I will pursue these matters there.

AGRICULTURE
4.12 p.m.
Debate continued.
Earl FERRERS: My Lords, perhaps we may continue the immediate debate. I would say at the outset that I should like to thank my noble friend Lord Middleton for introducing this debate today. It has come at an opportune time even though the result has been a somewhat disorderly process of speeches relating to agriculture, some of them partly on the Statement and some partly on the debate. I do not propose to comment in detail upon the specific proposals which the noble Lord has made, first because they are too complicated and, secondly, because they need consideration. I wish my remarks to contribute to what one might call the wider and more general scene in which agriculture has a considerable part to play and in which, as a farmer, I should declare an interest.
In the national debate and in the media, the interests of agriculture and the interests of the consumer appear to be in total opposition to each other. I agreed very much when the noble Lord, Lord Peart, said that, in fact, that is not so or should not be so; but the way these things are produced gives that impression. So fundamental is this misconception that it needs to be nailed at the outset. It is in the consumer's interest to take account of agriculture's interests; yet over the years agriculture has taken a lower position in the pecking order of priorities of people's consideration. I sometimes wonder why this is so. I think that it may be that when things are going right they get taken for granted and it is only when they go wrong that they come to the top of the pile for attention. If British Leyland goes "bust" or British Airways has a strike, the nation's attention is, quite properly, riveted. When British agriculture continues quietly to supply half the
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population of the country with probably the cheapest food in the world without going "bust" and without a strike nobody bothers to say, "Hurrah for this success! I wonder how that has come about. Is there something we can learn from this?" I think it should be trumpeted from the roof tops; but we just take it for granted. But, my Lords, we take agriculture, whether our own or Europe's or the world's, for granted at our peril.
Most of the country's resources are finite—resources such as coal, tin, copper, lead and oil. The more they are plundered, the quicker they are exhausted. Agriculture, as a resource, far from being finite is both infinite and renewable. At a time when all the common forms of energy are measurable and decreasing, when President Carter calls upon the American people to restrict their use of energy because it is running out, it behoves us to remember that, farmed well, agriculture is not only a source of food but also a source of energy, of increasing energy and of infinite energy. What is more, the residue of agricultural energy is the renovation of the resource. In simple detail, the residue of the oil which fuels the lorry is the stink of diesel; the residue of the oats which fuel the horse is the stink of muck—and the muck itself in turn rejuvenates the resource for a bigger contribution the next time round.
My Lords, I would not wish from this to suggest that I am prophesying, as others may, a return to the era of the horse and buggy nor that I am so juvenile as to suggest that power stations will be run on oats. I seek to emphasise a fact which people do not recognise: that agriculture is a source of energy as well as a means of filling people's bellies. If, as the pundits forecast, the population of the world will double in the next 40 years, then, ipso facto, at some time there will be a shortage not only of energy but also of food.
Looking at the broad canvas of life, agriculture should, by any standards, be cherished and developed. The importance of it far transcends the problems of whether or not the farmer or farm worker is getting an adequate return for his work, important though that is; or whether the consumer is receiving adequate, cheap food, desirable though that may be. If the national debate on

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agriculture is to descend, as it always does, to that level, I suggest that we are playing with straws and are unmindful of the stack. So, as a world resource, and as a national resource, agriculture must never de taken for granted or undervalued. My fear is we do both. The question that I would ask is this. As a nation, are we getting the best out of our agriculture not just as a means of satisfying short-term needs as economically as possible but of ensuring that it can contribute adequately to the long-term demands which will be bound to be made of it?
If I am able to carry your Lordships thus far, I would go on to state the obvious; but, because it is obvious, it deserves restating. Agriculture is a long-term business employing large resources of land and capital although, in this country, very few people. Mr. de Paula put it quite clearly in a publication called Farm Finance and Fiscal Policy when in reference, among other things, to the slow turnover of agriculture and to the capital investment in it, he pointed out that the National Coal Board takes seven months to turn over its gross assets; Marks and Spencer take eight months to turn over their gross assets; ICI, 13 months; and British agriculture takes between four years and nine years to turn over its gross assets. The degree of capital intensity in the industry, using the same comparisons, can be show n by the fact that the National Coal Board has £3,000 of assets invested for each person employed; Marks and Spencer has £12,000; ICI has £16,000; and agriculture has £38,000 of assets invested for each person it employs. All but 8 per cent. of this is provided by the landlord and tenant; only 8 per cent. by outside borrowing.
If there be a moral to this story, it must be that agriculture is a vast but economical slow-moving industry. It is a peculiar industry and, as such, requires peculiar treatment. If it has long-term requirements which it must fulfil, then we must subject it to long-term considerations and not perpetually frustrate those aims by the inevitable pressures and expediencies of short-term manoeuvrings. There is, I readily accept, bound to be a conflict of interest here; but try how you will, my Lords, you will not make the industry alter direction quickly. Like an old-fashioned steam-roller, it just pounds on deflecting a little one way or the other.
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Are we therefore going in the right direction? I venture to think not—at least, not sufficiently in the right direction. My noble friend Lord Middleton quite rightly referred to the Government White Paper Food from our own Resources which was published in 1975, and which stated that they looked for an increase in output of 21½ per cent. a year until 1980. That was when the noble Lord was Minister. In other words, within the five-year period there was an anticipated increase of production of 12½ per cent. Now, two years after the start, far from seeing the increase, we have seen the decrease of 20 per cent. to which my noble friend referred. So to achieve the Government's target by 1980 we will have to see an increase of 32½ per cent. over the next three years.
I for one cannot see how that is going to be achieved, though I do not seek to blame the Government wholly for this drop in production, because my noble friend quite rightly said a large proportion of it is due to the weather. But weather or Government, in the end it is not just the farmers who suffer but the nation and the balance of payments—and the consumers who see the cost of food go up.
Had the 2½ per cent. annual increase been achieved, we would be saving ourselves some £750 million per year on annual imports. It has not been achieved. Production has gone down. During 1976 alone the cost of food imports rose by some £700 million, and the cost of producing food rose in this country by 20 per cent. in one year and it has doubled in the past four years. Yet at the same time we as a country have been producing less of the nation's food requirements; and, worse still, the proportion of the food which we could grow has dropped, and productivity per man has dropped by 14 per cent. in two years.
At the moment I suggest that we are losing out on fulfilling short-term requirements, and we are not properly positioned to fulfil long-term requirements. One of the ways in which this situation can be remedied is by investment. It is vital that investment is made in agriculture, despite inflation and recession. This can be done in one or two ways, or both. First, we can increase the price paid for the product and therefore the profitability to the farmer. What few people realise is that three-quarters of agriculture's new

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investment is found out of farm profits; and if the profits are not there, the investment will not be forthcoming. It is as simple as that.
The second way is by nurturing that unquantifiable but vital object to which my noble friend Lord Middleton referred: confidence. This is the key to all investment in any industry. Here I should like to say, in the most courteous way I can, that many of the present Government's actions, which were taken to redress what they saw as injustices in various aspects of our life, have, nevertheless, had a far from beneficial effect on the confidence of agriculture. I refer, as indeed my noble friend did, to such things as capital transfer tax, which, at a time of rising costs, can only result in farms becoming smaller; or capital gains tax, which, by intending to tax unfair gains, has in a period of inflation become a tax on inflation, and has thereby reduced to agriculture what has historically been one of its prime sources of funds, namely, the disposal of fixed capital assets to provide capital for expansion. Again, I instance the granting of hereditary tenancies, which, for all its meritorious reasons, can only have the long-term effect of making agricultural rents go sky high, of ensuring a complete dry-up of investment in tenanted holdings, and no farms for younger farmers to farm. Similarly, the tied cottage provision, whatever its merits may be, can only have a detrimental effect on investment.
In referring to some of these aspects of legislation—and these are a sample—I do so not to rehearse again, or to accentuate again, our points of disagreement on them, but to re-emphasise that whatever their merits may have been in other directions—and I readily acknowledge that there are many considerable merits for them—their effect on agriculture, which was not the prime cause or the objective of the legislation, has been highly damaging to the confidence required for investment.
One cannot consider investment and productivity in isolation of our position as members of the European Economic Community. We all get worked up—and understandably so—about mountains of butter and sugar, and lakes of wine and milk, and so forth. These are graphic
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expressions; but I believe that we have to be tolerant of them. In any form of managed agriculture what one is hoping to achieve is in fact the impossible; it is the balance between supply and demand. Despite the plethora of devices, incentives and restrictions which ingenious man can devise, in the end production is controlled by the weather, and—thank goodness!—no ass has succeeded in controlling that yet.
In seeking to control the fortunes of any primary product, to say nothing of a number of primary products which react against each other, all one can hope to do is to control the extremes of fluctuation. In my modest judgment we have therefore to be prepared to accept excesses from time to time in order to guard against short falls which, equally, are hound to occur but which are far worse. One has only to reflect on what happened 12 months ago to potato prices, following a bad harvest—not only in this country but the whole of Europe—to realise that to achieve a surplus is not necessarily always anti-social. Again, last week-end we had reports of the £1 and £2 cabbage. This is what happens in a shortage, and there is no point in conducting a witch-hunt on the basis that some knave is profiteering. The fact is that whenever there is a shortage of a primary product, the law of supply and demand inevitably operates, and prices rise.
Baroness PHILLIPS: My Lords, would the noble Earl forgive me? He is developing his argument—which is extraordinarily interesting—but surely the laws of supply and demand do not operate at the moment. The £1 cabbage is with us because of the shortage of cabbages; but cabbages do not become cheap when we have an overproduction or when the Almighty is more bountiful to us.
Earl FERRERS: My Lords, my understanding of the situation, which I am sure the noble Baroness knows more about, is that the reason why the £1 cabbage was £1 and not 50p or 25p was because there was a shortage. If the noble Baroness and her housewifely friends desist from buying cabbages at that price, she will find that the law of supply will operate and prices will come down. The noble Baroness is absolutely right to refer to this.

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The point I was trying to make was that I saw that somebody suggested that there should be an inquiry to find out who is profiteering. In fact, whenever there is a shortage of a primary product this is hound to happen. These phenomena are not the fault of the farmers who, because there is a shortage, probably do not have much to sell; it is not the fault of the Government, nor of the EEC. They are the effects of Nature, and if the price to be paid for minimising shortages is the occasional surplus, then so be it; and, like an insurance policy, we have to pay for it. But I agree that we must try to become more sophisticated as to how we prevent and how we deal with those surpluses.
I would here suggest that we should beware of the simple argument: let the countries which produce the surpluses have the benefit of the surpluses. That is an easy argument to understand, but if you feed back into an already saturated market the excess, you exacerbate the saturation. The logical way out is to cut your loss and remove as quickly as possible the excess. The quicker you do that, the quicker you get back to stability. For all its faults, the Common Agricultural Policy has enabled the Common Market to come about. Clearly, it must be altered and adjusted and the emphasis shifted not merely for the benefit of just ourselves but for all the members of the EEC, and in this we must play our full part as members and colleagues together. But I believe there is a very real possibility that if the present Minister continues to insist on getting what he believes to be the best possible solution for United Kingdom consumers alone, irrespective of the views of his partners who have equal if differing interests, then he is in real danger of prejudicing the standing of the United Kingdom in Europe and alienating the friendship and respect which exists there for our country. I am bound to say to the noble Lord, Lord Peart, that the conduct of his successor in Europe over these last negotiations has been as embarrassing to us at home as it must have been to his colleagues in Europe.
Lord NORTHFIELD: No!
Earl FERRERS: The noble Lord says, "No": but one must remember that at
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this time he has been occupying a privileged position of authority as President of the Council of Ministers and he has believed that he was acting as the champion of the British consumer. That is, of course, a perfectly fair line to take, but he has shown a discourteous disregard for his European partners—
Several noble Lords: Oh!
Earl FERRERS:—and, my Lords, an astonishing disregard for the interests of British agriculture, for which he is the Minister; and he has been prepared to frustrate and indeed to block the Community's plan, all for less than one penny per pound subsidy on butter. Whatever good reasons there may be, he has held up those negotiations for a month, and what has finally come out of them is remarkably little, I would venture to suggest that was not "tough bargaining". It was not successful bargaining. It was a humiliating process in which I fear he has been left with few winnings and even fewer friends—
Lord DAVIES of LEEK: You are spoiling it.
Earl FERRERS: My Lords, the noble Lord, Lord Davies, may say that I am spoiling what I have to say. If it was capable of being spoilt, that is at least a compliment. But I do not make these remarks without having thought about them, because I realise it is a serious thing to say. But I do say to the noble Lord, Lord Davies of Leek, quite sincerely that in the European Community we have got to act as partners. We cannot go and try to run it our own way. We have got to act on a collective basis. The noble Lord, Lord Peart, knows that. Here we have had a situation where the United Kingdom, however good the reasons were, have said, "We are not going to agree and we shall not agree." We have frustrated the agreement for a whole month, with very little result, and the fear is that such action will have alienated our friends in Europe.
An attitude of mind is what has got to be accepted to make a success of the Common Market. A common attitude of mind is bound to be the only force that will make any Community effort go. An attitude of mind which is determined to

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keep the green pound wildly out of line with the currencies of other countries is not one which can contribute to a Common Agricultural Policy. When the system was conceived, it was never anticipated that the currencies would take the heavy and unequal battering which events have proved they were to take. The noble Baroness, Lady Robson, was quite right when she said that it was inflation that has in fact been the cause of the green pound being out of alignment. But there is nothing common or even fair about trading which follows a pattern in which the green pound is out of alignment by 30 per cent. or so. Food is imported into this country with vast EEC subsidies on it. That is fine for the consumer who gets his food supplies subsidised, but it is unfair to our Community partners who are providing the funds and it is also unfair to British farmers who are being denied their proper return. Every 10 per cent. by which the green pound is artificially inflated keeps United Kingdom farm incomes down by £225 million per year. That is over and above the effect that we see on the home market, where Irish cattle can come in carrying an EEC subsidy, which then lowers the market for British cattle, which of course have no such subsidy.
Again, over the question of pigmeat, to which the noble Lord, Lord Mackie, quite rightly referred—we have seen the pig producers facing frantic losses simply because of the imports of pigmeat from the Common Market, which have carried subsidies to which the British producer has not been a party. In effect, it could be argued that the consumer has largely been subsidised by the British farmer. The political temptation for any Minister—and the noble Lord, Lord Peart, will know this only too well—who is pressured by a Government, quite rightly trying to contain inflation and to respond to the short-term needs of the 100 per cent. who are consumers as opposed to the 3 per cent. who are engaged in agriculture and yet whose interests are in the end the same, is tremendous. But that is short-sighted in the long-term interest of consumers because the long-term interest must be an adequate supply of food.
However intractable our own problems appear to be, it does one good to realise that there are others who are deeply envious
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of our situation. On a recent visit to Australia and New Zealand, one man said to me: "You are so lucky. In England you have your agriculture so well buttoned up." I do not know whether many people in this country would agree with that, but it is a refreshing view to hear and it does one good to realise that there are other agricultures which, for all their advantages of size or climate, have to operate in world markets with no protective sysem and no Government help. Theirs is a real plight. As a result, the cattle farmers in Australia, right across the board, are losing money and New Zealand are apprehensive about their future markets. Their cheese quota comes to an end this year and their butter quota gradually reduces and comes to an end in 1980, when it will be reduced to 115,000 tons. Even then, it is half their total production and I wonder what the future holds for them. When one considers that the whole EEC production of butter for 1976 was 1,750,000 tons, one realises what a small proportion New Zealand butter represented, and I only hope that the right honourable gentleman will not fail to argue the case for continued entry of a reasonable amount of New Zealand dairy products.
I said at the outset that agriculture has far more to offer than just providing a livelihood for those engaged in it, and so it has. Less than 3 per cent. of the workforce produce more than half our food requirements to a value of some £6,000 million— more than the total agricultural output of Australia and New Zealand put together. The increase in productivity per man over the years has been higher than that in any other industry, and that has happened without strikes, without confrontation and without bitterness. In an age when industrial unrest and disquiet, for whatever reasons, sickens society as much as it does industry and sets man against man, and even causes disruption within the home, it is not irrelevant to look at agriculture and ask: What is different here? Perhaps, being a fragmented industry, it has less uniformity and less conformance. Perhaps, consisting of individualists, it has less desire for uniformity and for conformance.
Might we not reflect that, despite high-sounding but fundamentally self-orientated phrases such as "industrial muscle" and "the power of industry",

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a nation is made up of individuals—individuals who wish to think, to live and to behave as individuals? Yet those same people find that the gradual metamorphosis of industrialised society has precipitated them, frequently unwillingly and sometimes unwittingly, into big battalions which, by their very nature, are designed to prevent their doing what they want to do—to prevent individuals from being individuals. If it be that smaller and more diffuse conglomerates of people, both of management and of managed, bring a greater understanding to each other and to each other's problems and a greater contentment in life, as well as providing the format for a highly successful industry, it may be prudent for both politicians and industrial economists to throw that fact into the melting pot along with all their other figures which are designed, whether by prognosis or by result, to prove just the opposite. British agriculture is a success story and I only hope that we do not, either by design or by mistake, take it for granted.
4.40 p.m.
The Lord Bishop of CARLISLE: My Lords, I am grateful to the noble Lord, Lord Middleton, for introducing a subject which is of great national importance, and one that in particular concerns so many of the people in the County of Cumbria, where I myself serve. It is because of this, and because of the known generosity of your Lordships, that I am emboldened to make my maiden speech on this subject. Perhaps, however, I, too, should declare an interest. I am the only member of the Episcopal Bench to have a flock of sheep not just of the two-legged variety, but of the four-legged woolly kind. I am the proud possessor of what we would call in Cumbria 11 "yows", and one "tup" and, as inform my brethren on the Bishops' Bench, the advantage of the woolly sheep is that although they may do a lot of bleating they can neither use a telephone nor write a letter!
It would not be right for me in a maiden speech to raise any controversial issues, however important or germane they may he to the subject in hand. I must therefore leave to others any discussion of tied accommodation, or the capital transfer tax and its effect on family farms at a time when consolidation is very badly
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needed, rather than disintegration. Nor would it be proper for me to comment on the present taxation policy, which appears to be severely hampering our forestry which is of very great importance in Cumbria, where I believe we have an outstanding contribution to make, especially with our excellent forestry department at Newton Rigg, which, as your Lordships will know, has an international reputation. Perhaps all that I would say is that that excellent White Paper Food from our own Resources, which has already been referred to, may have many of the answers and I hope that it has not been forgotten.
I want therefore to confine my remarks to one area, that of upland farming and the importance of our agricultural policy there. The excellent discussion paper The Countryside: Problems and Policies, which emanated from the Countryside Review Committee which was set up in 1974, spoke of the considerable bitterness which modern farming can so often cause; in particular, in the improvement of upland where the drive for higher output can also lead to a loss of access, so that improvement of grazing or the introduction of arable into the large-scale scenery of hill country is seen by many as, at best, alien; at worst, a desecration.
I would plead that upland agriculture is not just to be considered as an uneconomic food production exercise, although indeed without Government grants it would hardly have survived at all, but rather that it is an integral part of the whole agricultural system, and that it is possible for the rightful expectations of farmers, ecologists and holiday makers, all of whom see the uplands from a particular angle, not to be mutually destructive but to be complementary. Certainly, the EEC grants are being very well used in the Farm and Horticultural Development Scheme to help the larger of the hill farms, but could that scheme possibly be made more flexible to help the small hill farmer as well?
I have no doubt that your Lordships will also be aware of an experiment, born in the Lake District nearly 10 years ago, called the Upland Management Experiment—UMEX for short—which has now moved into what we might call a very healthy adolescence and which, in a very realistic fashion, has come to grips

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with the problems. One farmer summed up the situation which existed and, if I may, I will quote his words:
"The Lake District is undergoing rapid change once again, where the combined effect of uncontrolled numbers of visitors, the decline in farming and the associated decay of the landscape have far-reaching implications for the social and community life of the area. Very substantial change in the population of the Lake District (as in many other upland areas) is taking place. The indigenous community is moving out. Farms are running down, small hamlets and villages declining to the point where a viable community is not possible. In their place, strangers move in who may be present for only a short time and who have little or no connection with the land and even less dependence on it. The changes in the landscape are a reflection of such fundamental social change."
There is no need for me to underline the seriousness of the situation which those words describe.
I will not take up your Lordships' time by describing how the experiment has worked out, but will say only that that same farmer was able to report last summer that as a result of UMEX, which has now developed into the Upland Management Service,
"…the area will be able to evolve in a way which will ensure the future of a viable farm system, so protecting the landscape and, therefore, recreational interest, from continuine decay or partial fossilisation."
In addition to the improved amenities for the visitor, the lansdcape has been better maintained and the scheme has generated more employment, bringing money into an area where farming and rural industry had been declining. I dare to hope that one result of this debate may be that the Upland Management Service will go on being developed, and that the importance of the upland areas to our whole national scene may be realised afresh by all those who are concerned in this business of agriculture.
I hardly dare to quote poetry to your Lordships, but there is, I fear, a somewhat scurrilous paraphrase of Gray's Elegy in a Country Churchyard circulating in the area from which I come, which has as its title An Upland Lament, and I am afraid that, sometimes, rival paraphrases of this kind have just an essence or a germ of truth in them. It says:
"Ecologists toll the knell of changing ways,
The caravans wind slowly o'er the lea.
The farmer sadly leaves his farming days,
To tend the camper and the EEC."
4.49 p.m.
Lord DAVIES of LEEK: My Lords, it has, indeed, been a privilege and a great pleasure to listen to the right reverend Prelate the Bishop of Carlisle, who spoke for just seven minutes of delightful thinking and language on the problems of farming. I had the honour to represent a constituency which had 3,000 farms in it, 1,400 of them being under 30 acres, in the Pennine upland areas. As a young boy I lived on farming land in upland areas in Cardigan and visited church on harvest day, when the little Welsh church was lit up by the sinking sun and the vicar was illuminated—wrongly, I sometimes think —by the brilliant sun, while the hay was redolent and the turnips and cabbages showed the work of the men on the land.
All that was brought back to me in the right reverend Prelate's speech today. But, together with the language, there was a philosophy and a deepness of thought that made a man realise that the further away he gets from the source of his food and his eating, and the more sophisticated he gets because of the technology of his world, the more he is in danger of destroying the very lifeblood of his existence—agriculture, the land and good farming. I am sure that we in this House are grateful to the right reverend Prelate. We shall he delighted to hear him speak on other subjects, for his erudition, ecclesiastical knowledge and obvious knowledge of agriculture will he available henceforth to all of us.
I like the noble Earl, Lord Ferrers. I find that he is a charming human being; I have travelled with him. Much though I was yearning to interrupt his speech, how I controlled myself! Perhaps I am learning that F should not interrupt. Therefore I will refer only in passing to his excellent speech. It was a little too rough. When one speaks about farming, nobody can blame Labour, in its years in and out of power, for not understanding the problems of agriculture. The 1945 Labour Government reconstructed British agriculture and—never mind about politics—brought to it a breath of fresh air. In the 1870s and in the 1920s, British agriculture was in the dumps and forgotten. Because of the actions of this Labour Government. British agriculture is on the front page of British. European and world news.

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I was delighted to hear the noble Baroness speak about one of the fundamental problems. If you own only a very small farm of 25 acres—I knew people who had to eke out their livelihood on farms of that size and smaller—there is a great temptation to sell it for anything up to £150,000 because of inflationary prices. There is a great temptation to leave the farm and grab the lucre. I will not develop this point, because the House is well-informed and all noble Lords speaking in the debate have wide knowledge and understanding. It is obvious to this House, and it should be obvious to the nation, that the inflationary selling of land is a deterrent, in the ultimate, to the production of cheap food.
I wonder how many noble Lords were at the Farmers' Club on 8th December? The Minister of Agriculture, Fisheries and Food spoke to the Farmers' Club and said that we in Britain ought to be trying to bring about the most efficient kind of farming which the Nine can produce, but asked whether the other Eight will allow us to do it. The Minister then gave examples to the club of why we should not try to apply exactly the same test to every single country in the EEC. That is what the speeches in both this House and the other place have been trying to do. It is absolutely idiotic to try to apply the same agricultural production tests to British farming as are applied to French, German, Dutch, Danish and other farming. The mistake of the Common Agricultural Policy is that it tries to do exactly that.
I want us to take in the point that when we criticise the findings of the CAP we do so not in a destructive way but in order to be constructive. For example, the noble Lord, Lord Mackie of Benshie, made a plea for the marketing boards. He should inform himself about these boards. At the Farmers' Club the Minister said that these boards are an excellent instrument in the hands of British farming. But what is happening this week? This week the dairy manufacturers of France, Germany, the Netherlands, Eire and Denmark have launched a campaign to prove that Britain's five dairy marketing boards are monopolies and, therefore, are completely contrary to the Treaty of Rome. They are having a conference to launch that campaign and are going to charge Britain with having a marketing
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board monopoly that is contrary to the Treaty of Rome. Let us not become involved in too deep an argument about this. These manufacturers saved British agriculture during the transitional period.
Do noble Lords, who support 101 per cent. in some cases the Common Market, agree that the marketing board system should he swept completely aside? Do they not agree with our Minister's efforts in Brussels to try to protect it? Do they not know that Sections 53 and 54 of the Treaty of Rome imply that we cannot apply certain methods of subsidy or encourage work in industry under Sections 10 and 12 of the Industries Act without the sanction of Brussels? In other words, Sections 10 and 12 of the British Parliament's Industry Act are contrary to Sections 53 and 54 of the Treaty of Rome, and now they are trying to prove that the marketing boards are contrary to the Treaty of Rome. What is the matter with the country? Are we afraid?
I will try to speak for less than 15 minutes; I have already spoken for eight. There is another attitude. We are called by some people a nation of spongers. Therefore at last the Government are now producing, and every noble Lord can obtain a copy of it, a paper which is published each month that deals with Britain's economy. When I look at it what do I find? I find rising confidence. When I listened to the threnody of the noble Lord opposite—it was a threnody in a minor key, lamenting—I should not have thought that we had done anything. But when one reads some of the newspapers one finds that sterling is rising in confidence, that our production is increasing and that the fight against inflation has been succeeding—marginally, I agree; but it has been courageously succeeding. We have improved our balance of payments, and our industrial investment has also improved. However, most of the investment is not coming to Britain. The multinationals and the big British firms are investing in the Common Market and are therefore putting us in an invidious competitive position compared with the Market. We speak about our North Sea oil reserves of 550,000 barrels a day, bringing us in £4,000 million, yet we go around shouting, "Ichabod, Ichabod, the glory has departed". Why do we not do something about it?

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Foolish people make Imperialistic speeches in 1977 as though we were living in 1877. They speak about the role of the Foreign Office. We have more ambassadors and more dignitaries than Tommy Lipton had tea leaves 60 years ago. We are loaded with the edifices that were in existence in the last century at the height of our Imperialism. Why do not we as a nation prove that we can be the most prosperous nation in Europe? We can do this if we cut our commitments overseas and if we stop pretending that we are a military Power, on a par with Russia and the United States of America. We can do it, but it requires a change of heart and a real understanding that we are living in the 20th century when war no longer solves problems.
I shall have to cut half of my speech; I am going to speak only for 15 minutes. The other day I went with my wife to do some shopping, and she showed me a cabbage which I would not have cooked for my dog. I am not going to tell your Lordships the price that she paid for it. My wife did not tell me, but I know that my greengrocery bills are bigger now than they have ever been. Some people who seem to have ulterior motives are still trying to pretend that we are spongers, but the Cambridge Economic Policy Review said this—and I want to spike this down because I am tired of being told that the Common Market is subsidising us:
"The total balance cost to the country of buying relatively expensive food and making a net contribution to the Community's agricultural budget is currently running in excess of £600 million a year".
I was interested to hear that Mr. John Silkin, the Minister of Agriculture, Fisheries and Food, has spoken out at Luxembourg in an effort to get what I would consider to be an attitude to agriculture that in effect says that, although we are in the Common Market, each country has to farm according to the idiosyncrasies of its farmers and the type of land and of climate in which he is farming.
In passing I would say, particularly to my noble friend Lord Collison, that what is forgotten in all this is the farm worker. I know that farm workers are better paid than they were when I was a child, watching them in Llandyssil market or in
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cattle markets in Monmouth, or in Leek when I was a young man. Whatever we say about the farm worker, he has been one of the most loyal workers in British industry, and, strangely enough, he has as great an affection for the farmer as he has for his animals. It is part of his living, but despite his £48·80 a week in money terms—and we know that that is 19 per cent. higher than the figure the year before last—he is still 0·5 per cent. lower in real wages than he was two years ago. As long as we have food prices like this no Prime Minister, whether he is Liberal, Conservative or Labour, can get an intelligent incomes policy which will help the British industrialist and the British farmer—and if you do not believe me, believe our erudite Committee.
My study is loaded with copies of documents. There is one Committee which sat and discussed this matter 54 times; there is the White Paper on green money; there is the TUC Economic Review, and there is a report of the Select Committee from which I should like to quote one portion. It says:
"In the view of the Committee"—
that is our Committee—
"the renewed growth of the Guarantee Section of FEOGA"—
that is one of these damned acronyms, which in English means the European Agricultural Guidance and Guarantee Fund—
"threatens to swamp the whole EEC budget, and to retard the development of other policies such as the social policy, the Regional Fund and joint expenditure on research".
It also says:
"Measures to make processing, marketing and farm structure more efficient occupy far less attention than that given to the support of farm price levels".
Then the trade union Economic Review —and they know what they are talking about—says that,
"the generally high CAP support prices are at levels which suit EEC producers and"—
and here is the 64,000 dollar point—
"reflect the use of food prices as a social instrument to support a relatively inefficient European agricultural structure".
That is the point—European agriculture—and then they give the figures of the sizes of the farms, and the large farms of Germany and of France—all of them, thousands and thousands of little acreages,

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which ale subsidised by the Common Market system; and they are subsidised now, believe it or not, as much as anything at the expense of the British farmer. If this House would take the trouble to study some of these documents which are now overwhelming us, the remoteness of this system would suddenly dawn upon us.
What are we to do about it, my Lords? That is a question for the future which we shall leave to another debate. Let us be fair to the Government now in power. As the Common Market is now working, no Conservative or Liberal Prime Minister would have got a fairer deal than we have at the present moment.
5.6 p.m.
Lord MONK BRETTON: My Lords, first I should like to congratulate the right reverend Prelate on his maiden speech. I am so glad that he spoke about the hills because I should not be able to do that, beyond the fact that I remember attending the CEA Conference in Edinburgh, the first time it had ever been held in the United Kingdom, and I recall that the opinion of Europeans dealing with the upland areas in their respective countries was that we gave our hill farmers a fairly hard time one way and another and the principal reason they had survived was the great technical back-up we were able to give them and the quality of the advice from our colleges, and so forth.
I should like to refer to the remarks made by the noble Lord, Lord Davies of Leek. My worry is that one watches the progress of French farming under the Common Agricultural Policy and one notices that they are making great strides with their structure. I am not so sure that if European agriculture is grossly inefficient now it is going to remain so for very long, and the principal worry is that we may become too complacent and make no progress and we shall be seriously overtaken. I would add the comment that I hope the Labour Government manage to keep the reputation that they had from the time of the 1948 Act, and I am most concerned whether they are not losing it now. We have already heard a good deal on the general position and I do not want to go through that agate, but to deal with some of the specific points where I believe the shoe pinches,
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in the hope that if something could be done about those specific points we might be able to progress a little better.
For a start, on the subject of confidence, figures have been given about the income of farmers having declined in real terms. I have a note here that since 1973/74 the figure is minus 18 per cent. Of course these are averages and I emphasise the big variations that there must have been in 1976–77—did one grow potatoes? Was one a livestock farmer? Was one a pig farmer? Was one in the drought area or not? The drought did not seriously affect farming in the North. It must be emphasised that averages can conceal a very great deal. Certainly confidence was not too good even two years ago and since that time there is no doubt that understanding of the implication of CTT and the consequent need to keep liquidity has been dawning steadily on the farming community. That will create conflict with investment. Whether we shall be insulated in the future from the CAP has also worried farmers a great deal.
Regarding the Statement today, which leads on from the question of confidence, there is something I should like to ask about it. One fears that Irish yarded cattle may very well flood over to the markets here next autumn. Farmers will be grateful indeed to hear of the underlying support measures that have been introduced, but I personally wonder whether the markets will be perhaps quite good all through the summer and down to support levels as Irish cattle come over in the winter, and whether that is going to discourage farmers in the United Kingdom from yarding cattle to fatten next winter. Our seasonal scale seems to have gone completely awry these days. We used to get lower prices in the summer and higher prices in the winter when it is more costly to produce fat cattle. This change is a very significant thing. I do not know quite how long it will go on. I think guidance on that would be very welcome indeed.
On taxation I should like to say as much as I can as quickly as I can. The averaging of farmers' profits has been mentioned, and it might interest the House to know that in Australia for anyone who can be classified as a primary producer, three-year averaging of all income has been available, I believe, for a long time. I think that

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some means whereby a sole trader or partner can put money to reserve in the way that a company can would be better still, and something worthy of thought. However, perhaps of greater importance still, there is the problem of inflation and tax. It is more important to achieve accurate and fair assessment of the real profits of businesses in this country, where we have high taxation, than it is practically anywhere; whether we have done enough over this, with the complications caused by inflation, is very much open to question.
We have indeed stock valuation relief, which was vital; it is temporary only. We have, however, to await a full solution. The 100 per cent. allowance for machinery was given. Something that was not done at all was to consider amending the allowances for agricultural buildings; there has been no change at all. There was a proposal moved in another place last year that the period of write-off should be reduced from 10 years to three, with some flexibility in that. The proposal was turned down on the score that it would cost £15 million. I find it worrying that nothing was done.
I should like to say that I do not believe that a wholesale rush into indexation because of inflation would have been right. I agree entirely with the Government's attitude to that in the main. However, the matter is different as regards depreciation. In fact, I believe correct depreciation and assessment to tax of businesses must come before anything, because it is fundamental to our recovery not to damage businesses through taxation.
If one considers the position of someone who invested, say, £50,000 in buildings in 1972, he is getting his 10-year write-off. If one considers it using the concept of a depreciation fund, which at the end of 10 years builds up so that he has sufficient money, or what should be sufficient real worth, to be able to make a similar investment again, I think we shall find that that man will be left with only about half the real worth that he put in; and if his actual physical investment is of no further economic use in 10 years he will have lost half his money by investing at all. This is certainly a thought that does not encourage investment. So I hope that something will be done about reducing the
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write-off period, not necessarily to three years but so that some compromise is found. Another suggestion I have is that specialist buildings, which are pretty temporary in nature, might be treated in the same way as plant, or perhaps on a 25 per cent. reducing instalment system. I hope these comments are not controversial. They are meant to be strictly as constructive as possible.
I would say a little about CGT and CTT, the two capital taxes. We do have very high rates in this country by comparison with many others, and one wonders very much where this is going to lead us. There is no doubt that the farmer with more than 1,000 acres and the owner of let land, neither of whom has an agricultural allowance against CTT, are really in a state of what I would call suspended animation. Whether it is intended that they should continue to exist or not appears singularly open to doubt. The effect upon them of having to build up cash resources in an attempt to pay CTT is defeating investment.
I understand that there have been cases of difficulty in the middle brackets—the smaller farms—where gifting is being attempted; not so much because of capital transfer tax but because of capital gains tax, which comes on top of it. We must recognise the dangers of capital gains tax. It has been defined as a tax the rate of which is determined by inflation and which is a flat-rate tax upon wealth. In these circumstances it may very well hit the people in the middle, some of whom are the middle-sized farmers. We need to consider what is happening in this area and whether—I hope that I am not asking too much or being controversial—the remaining capital gains tax notional assessment on gifts might not be withdrawn and matters rearranged.
The land-owning situation is definitely a matter of concern. I fear that if nothing is done there will be a long period of stagnation and possible disaster. The landowner shoulders many burdens and difficulties compared with those who are considered to be running a business—it would be so much easier if they were recognised as running businesses. I cannot emphasise that too much.
There are great limits to the extent to which the institutional investor can replace the private owner. The scope is limited,

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because the institutions are interested in Grades 1 and 2 land only. There is the matter of cost. Professional land agents are excellent people and I have absolutely no quarrel with them. However, more such people would need to be employed, whether land is held by institutions or nationalised, than with private landowning.
The third possibility in default of institutional ownership or nationalisation is fragmentation. I fear that this will take place to a great extent in areas where the institutions are not interested, and there is a danger that in the end no one may be adequately interested. I could raise many more matters, but I hope that those few small points which I have mentioned will not be forgotten.
5.24 p.m.
Lord WOOLLEY: My Lords, I do not propose to weary the House with a great many statistics. In the debate so far we have been very well informed and I find it is very interesting and extremely encouraging to experience the great depth and width of knowledge that exists in your Lordships' House on this great industry of agriculture. I know that many noble Lords are very expert on this subject. As a working farmer with more mud on my boots than ideas in my head these days, I feel somewhat inadequate. However, there is something to be said for mud on one's boots—at least it gives one a sense of perspective, and T prefer it.
I should like to thank the noble Lord, Lord Middleton, for introducing this debate. I listened to his speech with great interest and admiration. If I may say so, he covered the field remarkably well. He omitted very little of importance. He avoided—which I may be unable to do—any real reference to the Common Market. That was an exercise in restraint which may be beyond my capacity. However, the noble Lord, Lord Davies of Leek, made up for that.
May I also say how much I enjoyed listening to the maiden speech of the right reverend Prelate the Bishop of Carlisle and how fitting it was that he should talk to us about the uplands from whence he comes, and the uplands generally. That is an important aspect of the life of this country and perhaps many other countries. One of my great delights has been to see
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the tremendous improvement in British agriculture generally since the War. That has been a great joy to a farmer. I have travelled the line from Cheshire to London for many years. There has been a vast improvement in the standard of farming since the War, which is tremendous. That is great wealth and a great asset. Perhaps the greatest physical asset that any country possesses is its land. We have this great asset and, as the noble Earl, Lord Ferrers, said, very often it is underestimated and insufficiently appreciated. That is true; we have been wasteful of it.
As the noble Earl said, the difficulty is that agriculture is a long-term industry. We have heard that said many times and it is a fact. Politics is a short-term profession. The difficulty is that agriculture is food, and food is politics, and we are mixed up with politics. I appreciate that it is very difficult for the politicians to take long-term views because it is always the immediate and the expedient that presses upon them. I suppose that statesmen take long-term views but I do not think that we can afford many statesmen today. That sort of time is not available to us.
I greatly sympathise with the Government's dilemma. I sympathise with the Minister of Agriculture. I must be one of the few farmers in this country who has much sympathy for him, although as a rule I do not express it—I certainly did not express it before the recent negotiations. The Minister is really on the spot; it was predictable that he would be. The noble Lord the Leader of the House is also on the spot. I should like to congratulate him on his handling of the variable premiums, and pay tribute to him. In 1974 I lost a great deal of money on beef cattle and do not like to think about it. However, the variable premiums that he negotiated later that year at least put a bottom in the market. We are talking of about £32 per hundredweight for beef cattle now. Many of my cattle, although not all, will be no use at all at that sort of figure, but that is farming. Those who bought cattle last autumn and this spring, and who have fed them at the present price of feeding stuff, have lost a great deal of money.
The people even worse off are the pig producers. Some reference was made to the number of sows going to market diminishing. Of course they are diminishing. There are fewer of them to go.

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After a little while they will diminish altogether, the way things are going on, because the prospect for pig producers is a dismal one indeed. I know very good men who have been in the industry after their fathers before them, first-class people, who have had enough. They cannot stand it any longer. These are difficulties. When one thinks about the situation it is easy to talk about the difficulties, it is easy to discourse about the problems, but it is difficult to come up with any meaningful answers. This is the difficulty we find ourselves in—or I do, at any rate—and I do not pretend to have the answers.
If one looks back—and it is not a bad thing to look back to some extent, as long as one does not become backward looking—we had a system which was worked out (and I see here my noble friend Lord Netherthorpe, who knows even more about it than I do) and we soldiered on with it, as did the noble Lord the Leader of the House, when he was PPS to Toni Williams, in working the system under the 1947 Agriculture Act. Reference has been made to the marketing Acts. In my farming life, which is extending over a few years now, the greatest things have been the Agricultural Marketing Acts in the early 1930s, the 1947 Agriculture Act, and the 1948 Agricultural Holdings Act giving reasonable security of tenure.
We worked on from there and we had the amending Acts, and so we went forward. But what was it all about? What did we do? It was to reconcile the needs of a thriving, viable, vital, vigorous agriculture with the overall needs of the country, not only nationally but internationally, and to combine the necessary support and protection for home agriculture with the maximum degree of liberalisation of trading throughout the world for a great trading nation. This was done. I always remember a long talk I had with Mr. Harold Macmillan in 1960. He said to me, "Whoever worked out this sytem was indeed a genius because it reconciles what could be nearly irreconcilable: the needs and interests of a great food consuming country and the vital significance of the price of food in the social and economic life of this country with the requirements for a thriving agriculture".
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Well, this was done. It was difficult. It was a difficult operation. I think it just about stretched the practical to the limits in doing this and keeping a balance within the United Kingdom—Scotland, Northern Ireland, Wales, England—and to do this between the different commodities, so that we got away from this "up corn, down horn" which we have got now and are suffering from very badly, and to keep the balance and to keep the industry moving forward. It is a wonderful thing to see how this has in fact been achieved. One only needs to look at the country and hear the statistics that have been produced today to realise what was achieved with the right system and the right relationship between Government—successive Governments—and an industry.
Of course it was hard going. Of course there were continuous struggles and disagreements, but at least one was struggling with one's feet on firm ground. This was the great difference. When one looks at the situation today one is rather in the position of the old countryman who was asked by a passing motorist the way to some destination. After some considerable thought he said, "I think if I were going there, I wouldn't start from here!" That is rather what I feel. So far as I am concerned, we would never have been here if I had had the say about it. But I did not, and here we are, and this is where we have to go from. I do not believe that, with the best will in the world, we are really going to make a success of the Common Agricultural Policy as long as it is pretended, and we still make ourselves believe, that it can operate in this overall way that is being attempted now. I do not think that this can be done. There has to be more flexibility. There has to be more derogation to individual countries. This is the sort of fight that the Minister of Agriculture has been forced to put up.
I do not quite go along with the noble Earl, Lord Ferrers, who seems very concerned about what our co-members in Europe will think about us. I do not suppose that the French are quite that sensitive about the ethics of international negotiation. I do not think that they will really be terribly surprised. Anybody who thought, or imagined, that the British Government, having gone into the Common Market, were just going to go happily

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along and accept all these things must have been very naive. Everything that has happened has been predictable, and indeed was predicted, except that I do not think that anyone, so far as I know, predicted the green pound and that we would be receiving very large subsidies contributed to a considerable degree by the German Government. Apart from that, it has been very predictable.
It is a difficult situation. I have great sympathy for those who are trying to make it work. The overall thing I should like to say is that the Government, whatever Government it may be, must not make the mistake of trying to use agriculture as the scapegoat. Confidence is at a lower ebb than I can remember since perhaps the late 1920s. People are disturbed. They do not know where they stand. They are confused. I do not want to exaggerate the financial position, and I do not think that farmers are expecting that they will be exempt from the financial stringency that is necessary for the circumstances of the country at this time. What they do need is a clearer view ahead. You need to be able to see where you are going with reasonable assurance and with stability—assurance that the bottom is not going to drop out of things. We have a degree of stability. I know that the noble Baroness, Lady Robson, said earlier that inflation may have had a great deal to do with the problem of these rapidly mounting costs. But we are in the position where I do not think that agriculture has gone beyond the point of regaining its forward impetus. I am sure that this can and will be done provided that the circumstances are such as to enable it to be done.
The noble Earl, Lord Ferrers, referred to a steamroller. I do not know whether we could be likened to a steamroller. We may have a little more flexibility than that. I agree that we were a bit heavy footed. But the steamroller. I think he would agree, needs some fire in the fire box, and this is the responsibility of Government whichever way they may do it. They cannot escape the issue, and if they have gone into a policy that is a dear food policy, which they have, they cannot escape from this by trying to make the farmers carry it on their backs.
5.40 p.m.
Baroness ELLIOT of HARWOOD: My Lords, I follow with some diffidence such
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a great leader of the NFU as the noble Lord, Lord Woolley. I do so with much the same feeling he expressed, in that I, too, have mud on my boots, although mine comes from the hills of Scotland, the area on which I shall be concentrating somewhat in my remarks because it is in the uplands and hills where I engage in agriculture and which I know best.
However, I have also had a good deal to do in my life with consumers and consumer organisations and I feel sure that it is no good trying to isolate the interests of the farmer from those of the consumer; both at heart have the same interests, because, if we are to produce enough food for the consumers at the lowest cost and in the most efficient way, the farmer must have the best conditions in which to produce that food. We shall not achieve that by importing a great deal more food because of agricultural production going down. In other words, it will not be in the interests of the consumer, who will have to pay far more by way of taxes, so making food more expensive. At the end of the day, therefore, the farmer and the consumer both benefit if we can achieve the sort of agricultural policy about which Lord Woolley was speaking.
I agree with those who have said that the Labour Party has produced two remarkable Ministers of Agriculture; Tom Williams and the present Leader of this House, who was until recently Minister of Agriculture. I do not wish to be controversial in my remarks today, but I must say that, considering the good record which those two Ministers had, it is rather disappointing that, while what I thought was that very encouraging paper was produced —Food From Our Own Resources—since its publication we have seen a reduction in production.
The Annual Price Review shows that in 1975–76 there was a 10 per cent. reduction in agricultural production and in 1976–77 another 10 per cent. reduction. I sympathise with Lord Woolley on the question of cattle. I was in the fortunate position last year of selling store cattle at what I thought was, and indeed turned out to be, a very good price. But the unfortunate people who bought from me fattened them and, if they put them on the market today, they will get less money than I got when I

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produced them as stores. That cannot be fair, and nobody will go on buying cattle to fatten if, when they sell them, they get less than they paid the person who produced them off the hills.
Another curious effect of inflation occurs in the financial returns one sees in the agricultural newspapers and pamphlets, the latter of which we all, like the noble Lord, Lord Davies of Leek, get in large quantities. In these documents some very large figures are quoted, but the enormous turnovers really represent inflation; it is inflation accounting. One gets an enormous turnover only to discover, if one analyses the figures on an inflation accountancy basis, that one is no better off than when one was dealing with far lower figures.
Lord DAVIES of LEEK: My Lords, the noble Baroness is absolutely right.
Baroness ELLIOT of HARWOOD: At the end of the day one is perhaps only slightly better off, my Lords, but this gives a rather false impression to people who do not understand inflation costing and the problem caused by the rising cost of production, let alone the rising prices which we see recorded. This has the unfortunate result that when production goes down—this was stated in a paper I received from the NFU —we must import more; by importing 5 per cent. more in 1975 we added £734 million to our total import bill.
It has already been mentioned that it takes a long time to make up any reduction in livestock. A reduction of, say, 10 per cent. in livestock over two or three years takes a very long time to make up. When we need more cattle, sheep or whatever it may be, we cannot turn on a tap and suddenly discover many more animals on the market. The noble Earl, Lord Ferrers, explained how it can take between five and nine years to change a policy or develop a policy further. I feel strongly therefore that we must keep a careful watch on the figures of production, even more so than watching the financial results at the end of the day, because, as I say, it takes a long time to make up lost production.
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We have been waiting a long time for the negotiations in Brussels to be brought to a successful conclusion. The Leader of the House explained that he saw the figures only when he rose to answer a Question; I saw them for the first time when reading The Times this morning and, therefore, I could not possibly say whether the figures will he very helpful. However, we hope that the negotiations which have been completed will not have come upon the scene too late and that it will be possible to stop the decline in the breeding stock, something to which I have referred and which is one of the had things happening today.
I have no experience of the production of pigs although I have had some experience of milk production; at least, friends of mine produce milk and I therefore have some knowledge of the subject. I was glad to note in the results available today that the Milk Marketing Board and our marketing arrangements are to continue. Some noble Lords may be old enough to remember that the man who started the Milk Marketing Board in the years 1931 to 1933 was no less a person than my husband, who was for many years Minister of Agriculture. I have been discussing some of these very matters in Brussels with the group—Committee D of this House—which deals with agriculture. We went to see M. Lardinois and when I told him that it was my husband who started the Milk Marketing Board he gave me the impression that he thought I might have been Methusulah; he had no idea it was started as recently as that, although of course it was a good time ago. Perhaps I regard it as recently because I am extremely old, but, then, it will be within the living memory of a number of noble Lords here today.
I hope we will fight to keep the Milk Marketing Board because it does great work, not only in organising the dairy industry but in the selling of milk. The EEC does not have any such selling agencies; it has no method of selling milk, no doorstep selling. That form of selling is done and encouraged by the Milk Marketing Board at the same time as organising dairy production. I am sure that in this modern world we must have selling as well as production machinery because that is the way to get on the right side of the consumer.

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Another problem which I hope will be solved, hopefully in the near future, is that involving the replacement of machinery and equipment used in agricultural production. I am sure we are all attracted—I certainly am—by the glossy brochures we receive about new machinery of all sorts. When I read about these machines I feel that I should love to buy them and I am certainly one of those who can be impressed by such brochures. However, when considering the results of new machinery one must be very circumspect—canny, as we say in Scotland—because it is no good investing money in machinery, however attractive it may be, if it will not help to produce cheaper and better.
Equally, one cannot buy new machinery as an investment unless one has profits and it is no good those profits being inflation profits, they must be money which is made good use of and put into machinery or whatever one is replacing, otherwise one will be in a very difficult situation. One of the most important things is to have enough profit at the end of the day to be able to make the replacements which will render one's production more efficient every year. That is also in the interests of the consumer.
I have seen it said, again in some document that was sent to me, that the reduction in value of capital as far as farm machinery is concerned has been 20 per cent. in the last 12 months. The cost of machinery has gone up by 20 per cent. It is not easy to make an extra 20 per cent. with rising costs, but that is what one will have to do if one is to equip one's farm as one would want. That is where the question of paper money comes in and where inflation is so dangerous. It may well appear in one's accounts that one's returns have gone up by 20 per cent. but put against expenditure one finds that nothing of the kind has happened.
I should like to say that those of us who are in the world of sheep and wool, as I am, are indebted to the Government because, in their Price Review, the Government at last did something to help those who produce sheep and wool. I should like to say to the noble Lord the Leader of the House that we are grateful for the kind help which was given to us in the Price Review this year.
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As regards the CAP and all that that means, I believe that we in this country should concentrate on what we can produce best. That sounds very obvious and trite, but I feel that it is an important point. For instance, in Scotland, with our very large upland areas and in Wales, too, as the noble Lord, Lord Davies of Leek, emphasises, we should concentrate on using the great upland areas to produce store cattle and store sheep. We should carry on the basic production which can be turned into beef by the noble Lord, Lord Woolley, with his great farming capacity, but this must not be done at a loss. Otherwise our store cattle will not be bought and our hills will he wasted, which would be a great pity, for we cannot use them for anything else. I do not want our uplands turned into caravan sites or parks: I want them to produce food and therefore we must consider those things in relation to the upland areas.
I was very glad to read in The Times when I was trying to find out what had happened in Brussels that the variable beef premium scheme was to continue. The Minister is to be congratulated on that. I believe that if we can only keep up the impetus in production and can give confidence to the farmers—something that the noble Lord, Lord Woolley, rightly said we lacked at present—there is no earthly reason why our agriculture, which is extremely efficient, should not go ahead as it has in the past.
On the question of the adjustment of the green pound, there is an odd thing about the cost of so much that goes into retail sales. I cannot quote figures, but I remember somebody telling me years ago that, if one takes a loaf of bread as an example, the proportion of the cost of that bread which is due to rates, taxes, labour and distribution is very much higher than the cost of the wheat, which is relatively very small indeed. The cost of the wheat is far less than that of the other things that have to go into the final price of a loaf of bread. I believe that, if one applies that to other items one will find the same thing. Therefore, I am not nearly so frightened about the rise in the retail cost of food as a result of the change in the green pound as are some people. I do not believe that it will make all that much difference to the retailer, though it will make a difference to the producer, who

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will get a better price. It will be only a small proportion of what the retailer has to charge over the counter. Indeed, I believe that we could devalue the green pound even more without a very high rise in retail prices, but that still has to be seen.
The aim of our agricultural policy should be the best use of the land itself and the most efficient production. It should also aim for the best conditions for the agricultural worker. Someone said today that farmers and agricultural workers were good friends. I have a family at home on my farm, four generations of which have worked for three generations of Elliots. There are jolly few industries where one gets that sort of continuity. That is a marvellous thing and, in my experience—though there are always exceptions—the relationship between the agricultural worker and the farmer has always been of the best and friendliest kind. Indeed, I sometimes wonder whether I am talking about my farm or they are talking about their farm when we discuss conditions! Therefore, in this scheme of production, I am 100 per cent. behind those who want to see the agricultural worker paid a proper wage for what he does. I have had very good fortune and I believe that the agricultural workers are, on the whole, some of the best workers that we have in this country.
This is a very important debate. This is something that will mean a lot to the industry. I have great faith in the noble Lord the Leader of the House because I believe that he understands agriculture. I hope that he will speak up as hard as he can for the industry in the Cabinet and then we shall all feel that we are engaged in something that is helping the country through the present very difficult time.
5.58 p.m.
Lord WALSTON: My Lords, as always in this House, the debates on agriculture are marked by many speeches of great wisdom and knowledge and we are all grateful to the noble Lord, Lord Middleton, not only for his speech but also for giving us the opportunity to listen to other speeches. In particular, perhaps I may say how very much I appreciated the speech of the right reverend Prelate, the
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Shepherd of Cumbria. I hope that both his four-legged and his two-legged flocks will prosper under his wise guidance.
Some of the speeches that we have heard reflected a certain element of doom. Perhaps that was natural because, after all, we are a political body and it would be naive of us to expect that a certain amount of political capital would not be made by the Opposition and by the Government Benches, even in a matter such as agriculture. Having farmed for well over 40 years, I should like to say quite categorically that I have never known agriculture to be in a healthier state than it is today. The land is more fertile than it has ever been. It is better drained than it has ever been. The buildings are in better order than they have ever been. The farms are better equipped with modern machinery and with good quality livestock. The farm workers, and the farmers themselves, are more skilled and more trained, and they have available to them more professional and practical advice than has ever been the case in the past.
I do not think that we should forget that, nor do I think that we should forget that had things been the opposite, we would all of us have been the first to blame those who were responsible, those who have been in charge of our agricultural destinies over the past years. Therefore as in my view this is now the case, I think that we should give some credit—not all the credit—to my noble friend the Leader of the House for the part that he played in bringing this about.
Having said that, I do not intend to proceed to do nothing but praise the Government or to support existing policies, wherever they may be made, but I support entirely the stand which my right honourable friend the Minister of Agriculture has taken in Brussels with regard to the general thesis that more emphasis must be put on the consumer in agriculture and less on the producer. In my view there has, since the very inception of the common agricultural policy been an over-emphasis directed towards the producer—important though he certainly is—and insufficient towards the consumer. I think that it is absolutely right, particularly at the present time, for any Government Minister in this country to support to the full the anti-inflation policy and all

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the efforts that the Government and the people of this country are making to keep inflation down.
I am quite certain that farmers are no more backward in supporting that policy than is any other member of the community, whether he be a worker or an industrialist. Whether it he a pay freeze or whatever, farmers are prepared to play their part in helping to overcome inflation in this country. For that reason I think that it is absolutely right that the Price Review of the Commission at present in Brussels should be kept at its very low figure, though undoubtedly it is far too low to recompense farmers for their rising costs. I also think that it is right that we should make very strong efforts to restrain the revaluation of the green pound. It must not be impeded altogether. It must move, and progressively as our position gets stronger over the years we must regain parity, but at this stage we must fight for a small movement, which has been achieved.
But, my Lords, while I do not go so far as the noble Earl, Lord Ferrers, did in the comment he made about my right honourable friend the Minister of Agriculture, I believe that it must be borne in mind that in the years ahead, in the months ahead and even in the weeks ahead, we have a crucial part to play in reforming the Common Agricultural Policy, in improving it, in retaining our marketing boards,—great progress has been made there—and in many other ways, including one particular way which I shall come to in a moment.
I believe that we are far more likely to make progress if our relations—and that includes the personal relations of the Ministers dealing with these matters—with colleagues and partners in the Community are good, and if we show ourselves to be well aware of the importance of the Community policy as a whole and accept our full responsibilities as full partners in the Community. Anything which tends to give people the impression that we are reluctant members, that we are trying to gain special things for ourselves which we deny to other people, cannot improve our position when we are dealing with these longer-term and very important facts which are being dealt with at present. I believe that that must be very much borne in mind in all negotia
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tions in Brussels, and I am quite sure that my noble friend goes along with me in that view.
While I have said that we must hold down prices for the farmer and food prices at present, that does not in any way detract from my belief that as the years go by we will have to face the unpalatable fact that we must pay more for our food. Our strong position as the sole importer of food in the world has disappeared. Many other countries are now buyers of food. Japan is an obvious example here, and there are the Middle East, the oil States, and many others, too. They are competing in the market where formerly we were alone. The population is rising and demands for higher standards are increasing all the time. Therefore, it is inevitable that food prices will rise in comparison with the cost of industrial goods. It also follows that the need to produce more food from our own resources becomes greater and greater. We must not allow ourselves to be led astray by the relatively short-term extra income coming from North Sea oil. That gives us a breathing space, but it does not fundamentally alter the long-term position.
Therefore our policy, the Community's policy, must be directed towards a greater reward for those who produce food, relative to other people, and a sufficient reward to them to enable them to continue with their modernisation, their increase in efficiency, and their efforts to prevent prices rising as high as they otherwise would if there was not this mechanisation, this increase in technology, and all the rest of it. In doing this we must act as a member of a Community; we cannot pursue our own individual agricultural policy or economic policy. I know that certain people like the noble Lord, Lord Woolley, and my noble friend Lord Davies of Leek would be happier if we were able to do so, but I will not argue with them about that; that argument, thank God! is over. We are members of the Community, we must act as such.
To my mind one of the greatest weaknesses of the Common Agricultural Policy is not that it pays too much for any given commodity—though in my view, certain prices are too high, but that is not its basic error—but that it will pay the guaranteed price, the intervention price (call it what you will) for an unlimited

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quantity of a particular commodity. By all means pay the European milk producer a fair price for his milk, but only for that quantity of milk which we require for our own consumption here, and not for as much as he feels inclined to produce.
Therefore this means that the Common Agricultural Policy should in the first place be based on what one can call a five year plan, a projection of the food requirements for the Community over a four, five or six year period ahead. The farmers of the Community should be told that, and they should be told what price they will get, taking inflation into account, for the particular amount of a given commodity. If they care to produce any more than that they can do so, but at their own risk, and they would have to take whatever the world price may be.
There are many technical complications in the way of achieving this. I will not go into the details of how it can be done. One can have individual quotas. In certain cases, as for sugar beet, this is already done. One can have a standard quantity, as we used to have in this country for milk. One can have a co-responsibility levy, whereby if the production exceeds the given amount it is automatically reduced by the producers taking on responsibility for disposing of the surpluses. There is a whole range of ways in which it can be done, and there are many very clever people in Brussels who could work out the best methods. I urge our Ministers to take the lead in promoting this idea of paying a good price, but a price for only that amount of food which is required, thereby putting an end to these enormous unwanted surpluses.
But despite being full Members of the Community there are other things which we can do entirely on our own, which do not need any agreement in Brussels. Particularly among those is the point which has been raised by several noble Lords and by the noble Baroness, Lady Robson, concerning taxation. There is no doubt about the fact that farming, in company with many other businesses, and particularly small businesses, is very hard-hit by inflation. I am talking about farmers; I am not talking about landowners. That is a different matter, and I would urge your Lordships, in all
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your Lordships' discussions and thoughts on this, to keep the distinction very clearly in mind.
I would take issue with the noble Baroness, Lady Robson, when she said—and I think these were her exact words—that land is best farmed by the owner-farmer. I disagree very strongly with that, and I think it is a very grave reflection upon approximately half our farmers, who are tenant-farmers, many of whom are as good, technically, as any owner-occupier. In fact, in many cases I would say just the reverse of what the noble Baroness said, because they are not so short of capital and have not got a very large proportion of their assets sunk in their land, but can deploy all their assets in their farming capital.
I am always tempted to embark on arguments concerning land ownership; but to do so would take too long. However, I would urge all noble Lords to respect the importance of the landlordtenant system and to realise that you can have a landlord who, though it may be the State, the Church or an institution, is every bit as good and every bit as personally involved as many of our private landlords are, be they the great landlords with their resident agents running the show or be they absentee landlords working in London offices and leaving it to a local estate agent to do it for them. There is intrinsically nothing worse in having an institutional landlord of any kind than in having the present form of private landlord that we in fact have.
Coming back to the tenant capital, which is the most important part of it, I think I am right in saying that the requirement for tenant capital over the last five years has just about doubled; and that money, as the noble Lord, Lord Middleton, and others, I think, have quite rightly said, has come in the main from the farmers' own savings. That is where the finance comes from. In my view, over that period agriculture has made sufficient profits to enable it to finance its expansion adequately. But it is not the profits which are the important thing; it is the retained profits, and if your profits are taxed at the present rate—and, as I say, this goes for all sorts of industries as well as agriculture—it is very hard indeed to find that extra money

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to buy those lovely machines in the glossy catalogues to which the noble Baroness, Lady Elliot, referred.
I know we have the very valuable concession of 100 per cent. depreciation in the first year. That is of very considerable help; but it is not really of so much help to be allowed to depreciate your combine harvester or your tractor 100 per cent. in the first year, even if you have the profits to make use of it, if in three or four years' time, when you come to pay for it, you have to pay double what you originally paid. You have got your 100 per cent. depreciation (and I think the noble Lord, Lord Monk Bretton, mentioned this, too) but you have not got enough money to buy the new machine; it has to be borrowed from some source or another. I would suggest to the Government that they give very serious thought indeed to some system whereby agriculture is allowed, not 100 per cent. depreciation but possibly 150 per cent. depreciation, spread over three, four or even five years, so that at the end of the day, when the machine is disposed of, you do have enough money put aside, untaxed, from your depreciation allowance, to buy a new one. I think that something of that kind would go a long way towards removing one of the biggest existing impediments to increased mechanisation and efficiency of our agriculture.
My Lords, in summary, may I repeat what I said at the beginning. I believe that agriculture is in a very healthy state, despite having weathered two extremely difficult seasons; that the Common Agricultural Policy must now be the linch-pin of our own domestic agricultural policy; and that, with proper leadership from this country and with a proper relationship between our own Government and the Governments of our partners in the Community, we can improve the Common Agricultural Policy in a way which will satisfy both producers and consumers. I believe that even within the confines of our own domestic anti-inflation policy we can arrange things in such a way that the farmer is able to continue producing more food of the sort the consumer wants, at constant prices and at lower prices than would be the case if there were not the incentives for investment and improved technology. This is an essential thing for us to do in view of the changing world
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food situation and the growing importance of domestic production in ensuring our own food supplies.
6.16 p.m.
Lord LYELL: My Lords, I believe that the whole House will be very grateful to, and indeed in the debt of, my noble friend Lord Middleton for introducing the valuable debate which we are having today. In the course of the debate we listened keenly and appreciatively to the information which was contained in the Statement, although of course this information will have to be dissected and digested a lot further. Also in the course of the debate we have all appreciated the maiden speech of the right reverend Prelate the Bishop of Carlisle, and indeed his close knowledge of upland farming and its contribution to the farming industry as a whole. We hope that in the future we shall hear a lot more from him, speaking on matters that pertain to four-legged sheep and, I hope, to two-legged sheep, and to the lives of all of them.
My Lords, among so many expert and qualified agronomists, working farmers and businessmen, I too have some mud on my boots. I also have plenty of ink in my pen; and I regret to say that I have other subjects—the law of patents—on my brain for tomorrow. Nevertheless, I believe that in this debate it is for me to play the part of the still, small voice which followed the Biblical fire, storm and tempest—and I would not seek to allocate those elements among any of the speakers who have preceded me. Indeed, we have had some remarkable speeches this afternoon. I have to declare a small personal interest in a farm in Scotland, but I hope that my remarks will be taken as reflecting the general views, feelings and worries of the agricultural community, particularly in Scotland.
First, all of us who are involved in farming in any way have been keyed up, and indeed expectant, for this afternoon's Statement. At first sight, the provisions and the figures appear to be a little more favourable to arable farmers than to livestock farmers; but nothing is as simple as that, of course, and we await the lengthy dissertations and articles and those large quantities of paper which, over the next month or two, will flood through the letter-boxes of all those in the

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agricultural community. Secondly, I believe that in spite of the very pertinent remarks of the noble Lord, Lord Walston, there is widespread apprehension in certain sectors of the community, and particularly in the livestock section. In the livestock section of the agricultural community there are already shortages of beef and of pigmeat and it is believed that these are going to get worse later this year and that, certainly by the winter, there are going to be fairly grave shortages, particularly of pigmeat.
We listened with appreciation to the noble Lord, Lord Woolley, as he pointed out the great problems of beef producers. He mentioned losses by beef fatteners and there I, too, have an interest to declare. My hair is still in my head; nevertheless, the beef industry will fight on. In that respect, all of us in that section of the industry are grateful for the efforts made over the past three years when the noble Lord the Leader of the House was, in another incarnation, in Brussels and down the passage. We are pleased that this beef premium is going to continue and looks as though it might find a permanent place in the agricultural policy of the Community. Certainly, at this particular stage of the year buyers of cattle seem to be paying high prices in the storings for what they are getting. They must have confidence that the proposals we have heard this afternoon will mean that the Government share their confidence. Indeed, it is most encouraging that the Council of Ministers accept the continuation of the beef premium system.
My Lords, the main purpose of my comments this evening is to raise one or two detailed points on the subject of pigs and pigmeat. This is one element of agriculture in which I do not have any interest at all. Noble Lords, and particularly the noble Lord the Leader of the House, may have heard that there was a delegation from the pig producers—and not just the pig farmers but the curers, the processors and the entire pig industry—in the other place on Monday of this week, when we were possibly occupied elsewhere. I happened to be in the vicinity and I heard at first hand of the problems of the pig producers. Militancy was not evident, but what was evident was a feeling of desperation that the pig industry in the United
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Kingdom is in particularly grave straits and that by this winter many of these producers felt that they might have no option except to give up pig farming altogether. The noble Lord, Lord Woolley, referred to one long-time pig farmer who is leaving that section of the industry. Certainly, I was concerned, and am concerned; but what is encouraging is that it is clear that the agricultural experts, who have close and detailed knowledge of the CAP and all the negotiations which are going on now and have been going on, are also very concerned about the pig and pigmeat market.
Noble Lords may have seen in the plethora of information that we have been reading in the Press today that particular emphasis is placed on the difficulties of pig farmers. This includes the processors and curers. Every speaker has laid particular emphasis on their difficulties. It seems to me that the proposals laid before us today will make only a marginal difference to pig farmers, particularly in view of the enormous amount both in money terms and percentage terms of the monetary compensatory amount payable on pig-meat entering the United Kingdom particularly from Denmark and the Netherlands. From the calculations that any of us, particularly myself, are able to make, it seems that up to 35 per cent. of the price paid to producers abroad in the Netherlands and Denmark comes from the monetary compensatory amount and from something called the transitional compensatory amount. I am informed that the amount per metric tonne of bacon and pigmeat paid out in this way is in the region of £300. This brings the price of pigmeat in the United Kingdom to its present level of around £900.
The welcome news that we have had read out to us today by the noble Lord the Leader of the House, and which we have discussed, especially the devaluation of the green pound, means that the MCA payable in respect of Dutch and Danish pork, bacon and ham, will drop from £256 to £234 per tonne thereby (as we would say in Scotland). The noble Lord the Leader of the House said that this was an improvement of approximately 8 per cent., but the farmers pointed out to me earlier this week that, even though this improvement is welcome, their costs have gone up by 35 per cent. for feedingstuffs and from 25 per cent. to 30 per cent. for

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the other costs they have engendered during the year. Nevertheless, an 8 per cent. improvement is welcome.
Certainly, the whole agricultural industry appreciates that the pig subsidy of 50p per score was a gesture by the Government; but, alas! this good will has been swept away by a continuing rise in the cost of feedstuffs and other costs which visit the pig farmers. Noble Lords will be aware of the widespread anger and resentment felt in member countries of the Community over the Government's decision to make this particular payment of 50p per score, especially after the devaluation of the green pound was delayed from last autumn until today. I think this ill-feeling in the Council of Ministers must be all the more regrettable to the noble Lord the Leader of the House whose natural charm is currently visited upon us but which was in days of yore greatly appreciated in the EEC when the farm prices were under discussion. The words "natural charm"—and I am delighted to quote them—are not mine but those of the expert correspondents who could see what a beneficial influence was cast upon the proceedings abroad when he was there. I think we are all sad that it seems that some of the good will engendered by the noble Lord has been dissipated throughout these lengthy negotiations, these four months, for, as my noble friend Lord Ferrers said, a halfpenny on butter.
Nevertheless, the pig producers whom I met spoke very respectfully of the noble Lord the Leader of the House. However, they spelt out their fears to us most clearly. These pig producers appreciate the 50p per score payment, but what worries them is the feeling that the MCA, as at present calculated on the basis of 85 per cent. of the pigmeat intervention price, discriminates too harshly on them, because they feel that if the MCA were to be calculated on the intervention price for feeding stuffs for pigs which goes as far as maize, barley, oats, rye and so on, the MCA would be more than half. If there is one major grievance, I believe that this is it.
The Dutch and Danish pig population is approximately the same as ours; that is, from 7·5 million to 7·7 million animals. Yet our numbers are declining rapidly and sows are being slaughtered currently
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at the rate of 8,000 a week instead of the normal figure of 6,000 a week. This is a very grave sign of lack of confidence in the industry. All of us appreciate that the Government, though they may wish to, are unable to perform miracles. We ask that some method of reducing the MCA on pigmeat be explored and be put into action as a matter of urgency. This, together with the devaluation of the green pound, would go some little way towards the salvation of the British pig industry.
As a more general plea, could the noble Lord the Leader of the House tell us what long-term guarantees the Government could give to farmers and to the farming industry, to the processors and to everyone involved in agriculture directly and indirectly, especially in view of the consumers' interest having a major part to play in prices legislation? All of us who farm or who are involved in agriculture recognise that the housewife will not and cannot pay exorbitant prices for our produce. Yet, at the same time, no industry can be carried on with mounting losses. Certainly these losses are evident in the beef market, and in some sectors of the industry they are far more grave than elsewhere.
All of us here in this House and in the country, farmers, agronomists and those with continuing healthy appetites, see that the CAP is not perfect; yet there is a fair amount of political leeway in any negotiations which take place there or, indeed, we hope, in this country. It seems to us that relations in the Council of Ministers have been unnecessarily stretched but certainly have not been irreparably damaged. Our debate has taken place amid a flurry of activities of the Price Review. However, I would feel that the House would consider a longer view of agriculture, and I think that for this reason the remarks of the noble Baroness, Lady Robson, on owner-occupiers as farmers have been particularly appreciated.
Would the noble Lord the Leader of the House convey to his colleagues in the Cabinet and Government that agriculture as an industry recognises that it cannot be immune from the nation's economy, be it weak or be it strong? Would he accept that the Common Agricultural Policy and the Annual Price Reviews are looked upon merely as annual reports, while we in the farming industry have to take a view over five or even 10 years?

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For the same reason, do the Government accept that there is continuing fear and apprehension as a result of far-reaching changes in taxation, be they with us or proposed? The noble Lord, Lord Walston, spoke of glossy machinery. Indeed, he presented a case for increased depreciation allowances. However, we have to recognise that in a period of inflation we need tax reliefs for not only these glossy machines on the farm but also we need stock reliefs to pay for these glossy black cattle that I find in my area and elsewhere. Noble Lords will appreciate that one is taxed in the same way on stock in trade as on machinery. We need the stock relief, my Lords; we are very happy that we are getting it and we hope that it will continue.
Surely if this fear of major changes in taxation, be it capital, income or local taxation, affects the efficiency of British agriculture, could at least concessions be considered? My noble friend Lord Ferrers referred to fiscal and other measures, tied cottages and so on. Although these measures appear laudable, my noble friend stressed—and I hope all of us will continue to stress—how often such action has the most unexpected results which are entirely detrimental to British agriculture, and, let us not forget, to the British consumer.
My Lords, we are all very grateful to the noble Lord, Lord Middleton, for the opportunity to hold this debate, to discuss the immediate problems which concern our agricultural industry and for giving us the chance to ask the noble Lord the Leader of the House a number of questions—both current and looking to the future—regarding the industry and the country.
6.33 p.m.
Lord WISE: My Lords, I, too, add thanks to the noble Lord, Lord Middleton, for initiating this debate. The Statement the noble Lord repeated is most opportune. I should also like to add my congratulations to the right reverend prelate for his excellent Maiden speech. I am a great lover of the hills, and being a member of the International Sheep Dog Society, I have many friends who are hill farmers. I envy them their sheep dogs but I certainly would not want to be a hill farmer myself—I consider it much too much like hard work.
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I agree with the noble Lord, Lord Walston, when he said that farming today is in a fairly reasonable state; buildings and drainage are better than they have ever been. That is undoubtedly so. But I cannot share his optimism of the future. The people who have invested heavily in these improvements must be a little despondent now. The speeches today all reflect the general feeling of the industry and the fears which it has. The lack of confidence and the lowering of profit margins is surely indicated by the fact that the industry's gross investment in buildings declined again in 1976 and, I understand, is now only some two-thirds of its 1974 level. Likewise plant and machinery investment I understand has also declined by some 5 per cent. since 1974.
We are losing sound agricultural land at the rate of some 50,000 acres every year for urban and road developments, and other uses. The estimates for future demand are even greater. That is a very sobering thought. Surely it is in the nation's interest to utilise to its fullest extent every other available acre. Noble Lords have spoken very fully and comprehensively on many of the problems which are facing industry today: the problems of land usage, taxation, investment and the economic position in general. I do not want to go all over those again, but there is one matter which worries me. May I quote a small part from the introduction of the report of Lord Raglan's Select Committee on the European Communities regarding EEC farm prices, which your Lordships debated a few weeks ago. This says:
"The price that the consumer pays consists of three elements. The agricultural raw material price, the cost of processing and the further charges in distribution. The agricultural element varies greatly from product to product and is decreasing steadily in relation to the other two".
This I find most disturbing. It seems to me somewhat indefensible that food prices are continually rising disproportionately higher than the price paid for the basic commodity.
I can well remember the discussions that I had with my good friend the late Lord Royle regarding meat prices. I am sure that noble Lords will remember how logically and persuasively he put forward his point of view. He never wholly succeeded in convincing me that

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sometimes the price of meat in the shops was high in relation to the farm gate price. One appreciates that not only in meat but in all other commodities there is much handling, processing, packaging and conveying before it eventually reaches the housewife. I am not implying in any way that a greater profit than should be is taken at any particular step. I cannot, for I am not in any way qualified to assess this. But possibly there are too many steps; possibly, it passes through too many hands. But I feel that it would be a very worthwhile exercise if the noble Lord and his Committee could study this in some depth.
The farmer is the only link in this chain who is unable to recoup his extra costs as they arise from time to time by passing them on. Tractor prices rose a day or so ago from between 6 per cent. and 7 per cent. Fuel prices I believe have risen again today by 1p or 1½p a gallon. But these price rises will not put one penny a ton on the price that the farmer receives for his corn next harvest. The merchant who buys it will be able to pass on his increased costs of his customer.
Again, I would welcome a study into the structure of agricultural marketing. This is probably the most important facet of the whole business, and is probably where it fails most. So much money, expertise and hard work goes into producing a first-class product and then it is just left to the forces of the open market. Farmers are beginning to combine. Groups and syndicates are being formed, mostly connected with buying, although not wholly so. Producer groups are being formed. For example, I am sure that one of the problems which big industry faces could certainly be alleviated by more efficient and better organised marketing. The industry is cyclical in operation, continually suffering from either under- or overproduction, each in effect causing the other. A more orderly system of marketing ensuring continuity of supply would certainly be of great benefit.
Having said that, I am somewhat bereft of ideas as to how that could best be achieved. The noble Lord, Lord Walston, again touched on that in his speech. I am certain that not only in pigs but in all other commodities, continuity of supply, regulated to meet demand, is essential. Perhaps that might be achieved
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by standard quantities and similar measures. Personally, I should like to see more producer boards but I do not suppose that is possible. At any rate, I would welcome a study being made into the whole subject.
Mr. Silkin has enormous problems. It is incumbent upon him, obviously, to keep food prices as low as he possibly can and obviously it is a matter of political expediency. Nevertheless, that does not absolve him from his obligations to the agricultural industry. It is essential that supplies are continuous, and the Government have stated that it is their policy to produce even more at home—a policy with which I would think there is complete accord. We can do it, my Lords. We have the technical skill and the expertise, but we must have in addition the where-withal. Increased investment is essential, and that can come only from profit.
I sometimes look back on my childhood in the years before the war and, on reflection, I am sure that my parents spent a far greater percentage of their income on the basic necessities of life providing for their family than I do or in fact ever have done. That must surely be typical of all families. Our standard of living is far higher. It is a good thing and we are all grateful for it. We have our television sets, our wall-to-wall carpeting, and so on. We now tend to accept these luxuries as the norm and we also accept price increases for them as they come along. If we expect and are prepared to pay the full price of the luxuries of life, surely we must expect and be prepared to pay the full cost for the basic necessities of life.
6.42 p.m.
Viscount TRENCHARD: My Lords, my excuse for speaking in this debate is some 30 years in the food industry, in manufacturing and in retailing and, from the buyers' point of view, buying food across the farm gate in this country and abroad, and buying overseas food for this country. Today I have no commercial interest in that industry but perhaps I should declare that I am still President of the Bacon and Meat Manufacturers' Association and of the IGD, a body which spans food manufacturers and retailers. I am also a member of the ARC.

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The noble Lord the Leader of the House, Lord Peart, knows very well that in the past my views have not always coincided with those of the NFU and that, if anything, I have been one who has advocated freer trade and not too much special protection. I have always added that competition must be fair and that measures must be taken to prevent serious dumping. It is against that background that I say to him today that I am more alarmed at the future supplies of food in this country, at prices which our consumers can afford, than I have ever been, and I am more nearly aligned with many of the views of the NFU than I have ever been.
I do not believe that the country as a whole has yet fully absorbed the full degree of our poverty, by international standards, and what the pound sterling will truly buy. I do not believe that we have absorbed the consequences of the inflation of recent years at home, which is still continuing. I think this lack of understanding of the position and the traditional belief in Britain that we shall always be able to buy food has been made worse because, for two decades up to 1973, we frankly got the majority of our food in this country below the cost of production and distribution.
How was that so? For those two decades until 1973 there were far more than the normal surpluses in the world, and particularly of basic commodities such as grain. We had very high subsidies at home, whether called "agricultural" or "food", and wherever you inject subsidy it brings down the price of food. Finally, we had a very sympathetically-valued pound—one really has to say an overvalued pound—based on our past economic performance rather than on our current economic performance. Those three things have made it more difficult for the British consumer to take in and understand the price rises that have occurred since 1973.
I think they are still being shielded to quite a high degree by the £400 million a year subsidy from the EEC; and while I believe that is extremely helpful in our essential battle against inflation, looking to the long term it worries me, and I almost have to use the word "immoral" about it. I think we should thank the
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EEC so far. There are things which are wrong with the CAP—and I agree with various speakers who have mentioned them today—but before we went into the EEC we thought we would have to pay a premium for food but that we should get most of it back by paying less tax for subsidies. In effect, at the end of 1973, we had the biggest commodity price explosion of the century, worldwide, and the fact that we were in the EEC in 1974, if anything, saved us money rather than cost us money. Food was actually cheaper in the Market than outside.
What of the future? Most agricultural experts do not believe there will be so many surpluses over the next decade as there were over the two decades up to 1973. There will be some, in the nature of the business, but they will be less and there will be longer perods of shortage. One thing is quite certain: we shall not often be able to buy those surpluses unless our pound strengthens a very long way. Others will buy them.
I think it is safe to assume that there will be fewer subsidies in the next decade if Government expenditure, which all Parties agree must be controlled, is to be kept under some degree of control. I believe that the pound is now more realistically valued. I may not have the credentials to be able to emphasise just how much oil might boost it, but certainly without oil our inflation now has caught up with any backlog of over-devaluation that existed.
By the time Europe ceases—and I believe that Europe must cease—to subsidise food to the extent that is being done at the moment, it will pay us poor British to be able to produce a very substantial part of the temperate food stuffs—over £2,000 million worth of them—that we import into this country today. I hate to say so, but I believe we are now the peasants. My farm friends, I believe, are efficient peasants. They have invested quite heavily in recent years. Their units are reasonably large if they are not fragmented by taxation. They are therefore low-cost producers, and they are low cost for another reason. Farm wages, I am afraid, today are only half those in most of the continental countries; indeed, they are only one-third of some of them. We are also talking about supplying our own market and thus distribution costs, which are very import-

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ant in food, particularly in the very large area of fresh food, are inevitably lower. So that the whole comparative costs picture suggests that we should produce as much as we possibly can of our temperate foodstuffs in Britain.
The old dilemma of cheap food on the one hand, versus the balance of payments and more home production on the other, boosted by reasons of defence and security and social reasons, is no longer a dilemma. These alternatives are now all on the same side. Cheap food for the future for poor Britain will be produced at home in terms of things which can be produced well in our climate. The Government, to a degree, recognised this in Food front our own Resources, published in April 1975, but I believe that the formative work on that document was done in a period when the pound bought 2 dollars 40 cents. I told the noble Lord the Leader of the House, in another capacity in another place, that I believed that at the time when the White Paper was published we were being somewhat kind to some of our traditional suppliers in not wanting to upset them. So that I regarded it as a little weak at the time, and I certainly regard it as obsolete because of the movement in the rate of exchange since then.
Noble Lords have fully covered the fact that our production since the publication of that Paper has gone down and not up. We know that the weather has had a bearing on this, and that and taxation, which has also had a bearing on it, have been touched on by other speakers. The Government cannot do more than appoint a Minister for Drought, which they did last year in relation to the weather. On taxation, I just hope that they will take note of what is said, because one of the things one notices in contrast with Europe is the much more efficient, larger units that we have; and I hope that we can maintain my large-scale peasant friends!
I will venture, if I may, to raise one aspect of the green pound which has not been mentioned, and I shall probably be a bore and foolish to do it. But I do not think it is fully realised that the green pound and the MCA system distort the competitive situation against producers in a weak currency country. The reason why that happens, if your Lordships will bear with me, is as follows. If, for instance, the pound is devalued in relation to
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Continental countries' currencies by 10 per cent., the MCA system will automatically compensate the Dutch or Danish producer for that 10 per cent. What the man who invented the system left out was: What had caused that devaluation? The scheme was designed in order to maintain the status quo in agricultural trade, and to avoid fluctuations by currencies moving as I have described. But what was not taken into account was: Why do currencies move?
If, as in our case in recent years, the currency has moved because British inflation of costs as well as prices has been running at 20 per cent., while the Continental countries' inflation has been running at only 10 per cent. then the following situation arises. The MCA compensates the Dutch or Danish producer in his own currency, so that he gets the same amount. He puts up the price in London by 10 per cent., which covers his own inflationary costs compared with a year ago. What of the British producer? Because the foreigner puts up his price by only 10 per cent., he cannot move his price by more than 10 per cent., but his inflation costs have moved up by 20 per cent. and, because of oil, machinery from overseas and other things, they have really moved up more.
We have heard powerful pleading over many years from the farming lobby, if I may so call it, and not just on one side of the House there is a feeling that farmers always complain and cry "Wolf". I just want to say that, while I have been one of those who believed that in the past, I now believe that the wolf is not far away today in a great many commodities, and certainly there is no sign of the investment which is required, the essentially very long-term investment which could produce the food we shall need in two, three or four years' time.
I understand the justifiable obsession with short-term prices which Governments have had for the last four years. But if you emphasise the short term continually for four years then long-term policy suffers, and in many areas long-term policy is suffering badly and is certainly not moving in the right direction. It is a difficult message, but I believe that consumers as a whole and union members must somehow understand that we have had very favourable factors in the past and that we have been living in a bit of a fool's paradise

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as far as food is concerned. In international terms, it is still cheaper in this country than in nearly any other; of course, in pound terms it feels as though it has gone up a long way. But what consumers and union members must realise is that if the production point of view is not given more emphasis now, bearing in mind how poor the country is, inflation will be much worse in a few years' time and there really will be major shortages.
Producers need long-term confidence. The steps taken in Brussels may or may not be a good deal in the circumstances this year. But what the producers and the secondary industry based upon them must know is: Will they be returned to a position of fairer competition? Is the green pound arrangement to be phased out? It is perhaps impossible for Government to stipulate a fixed programme, but is there a long-term policy to put them on a fair competitive basis?
The note on which I should like to end is that I believe it would pay us in this country to suggest to our Continental partners that a long-term plan to phase out the green pound by easy stages should be adopted. I believe that if we took the initiative here, and convinced them that we were determined to phase out this arrangement which was never designed for this purpose—even if it was over more than five years—they would be a lot more co-operative on maintaining milk marketing boards, on fish agreements, on sugar and even on defence arrangements and the purchase of defence equipment, or the building of research stations in this country rather than in others. I believe that we shall need their co-operation in very many areas and that it would pay us to take the initiative now, to say "Thank you, Europe. We need the subsidy for quite a time, but we know that eventually, in our present economic condition, we must produce a lot more at home and we are set on that plan." I believe that we should get more co-operation, in areas that would help us and the consumer, if we took that kind of attitude.
Lord DAVIES of LEEK: My Lords, before the noble Viscount abandons that very interesting analysis of green money, I am sure he is aware of the Eighteenth Report of our own Committee on green money which stated:
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"The Committee believes that to maintain indefinitely the present level of divergence between green rates and market rates would he untenable and would run counter to the whole concept of the Common Market".
There are many difficult complications which it would be improper for me to go into now. However, I am grateful to the noble Viscount for making that speech; it was music to my ears.
7 p.m.
Lord COLLISON: My Lords, I also want to thank the noble Lord, Lord Middleton, for introducing this debate on agriculture. I believe that it is good to discuss our industry from time to time. Perhaps we should do so more frequently. Also I congratulate the right reverend Prelate the Bishop of Carlisle for what he told us in his maiden speech, which was greatly enjoyed by us all. We who work in agriculture have a love for the countryside, the hills and the vales, and the right reverend Prelate's description of the countryside came over vividly. We are very grateful to him. I intended to mention some of the facts which have been put on record in the Annual Review and to quote the accelerating cost, pointing out that although farm incomes had increased, in real terms there had been a decrease. Noble Lords have, however, thoroughly dealt with those problems and I do not therefore intend to take up any more of your Lordships' time on that aspect.
May I make two comments. The speech of the noble Baroness, Lady Robson of Kiddington, interested me. The noble Baroness will find that I shall say similar things about relations in agriculture. The noble Baroness also mentioned the possibility of allowing the value of the pound to rise rather than holding it down as we have been doing, by all accounts, in the past. It may be worth thinking about this possibility. Our balance of trade situation is improving. Then the oil is coming. It could be that in dealing with the problem of inflation we would gain an advantage if the value of the pound were allowed to rise. I leave that suggestion with those who know more about the subject than I do. However, it is a point which I thought I ought to mention.
I was sad to listen to what was said about the way in which my right honourable friend the Minister in another place handled the discussions in Brussels. I

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know John Silkin. He is a kind man, and I should have thought that he was incapable of discourtesy. In any case, I do not feel that what he had to do in Brussels was a political matter. I do not wish to make a political comment. I feel that there is another side to the coin: that John Silkin felt he had a duty to perform in Brussels which would not be liked by his colleagues in the Nine. He was in much greater difficulty than he would have been had he not been Chairman of the Council at the time. This made it much harder for him, and I think that we should recognise that fact. I do not wish to labour the point, but my view is that John Silkin ought to be congratulated on, if one may use the word, the compromise he has been able to arrive at.
It is a question of trying to decide what are the most urgent problems which face the agricultural industry of this country. Many of them have been mentioned, but the greatest degree of interest and discussion has revolved around our entry into the Common Market and the consequential adjustments which we are required to make, having become members of that Community. There is no doubt that these adjustments constitute a challenge to us all.
It is natural that we should feel the impact of the new policies. The infrastructure of our own industry has been built up over many years and developed along very particular lines. We had our own very effective support system which had to be changed. We have marketing boards which, in my view, have been highly effective. Some of us were quite worried when we learned, or half learned, that the Milk Marketing Board might possibly be illegal. I was very glad to hear what was said by my noble friend on the Front Bench this afternoon: that efforts are being made to ensure the continuation of the Milk Marketing Board. I am a great believer in these boards—not only in the Milk Marketing Board but in the rest of them.
It is inevitable that we should have felt the impact of new policies—of intervention and of direct support—compared with what we were doing in this country. It is also true that we have criticised some of the policies which came out of Brussels. For example, we were concerned about the proposal to tax vegetable fats and oils
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in order to protect butter. We were concerned that the isoglucose production was to be taxed. I am glad to hear once more this afternoon that the tax on isoglucose is to be only half the level which was proposed and that there is to be no tax on vegetable oils. These matters were criticised in our own committee, and it is encouraging to know that what was said there was taken up elsewhere and has had an effect.
The objectives of the Common Market have been precisely stated in the Treaty. One can put in other words rather than the stiff words of the Treaty what were the objectives of the Common Market when it was founded. They were to create a policy which would allow free trade in agricultural goods within the Community; to give Community farmers incomes comparable with those of workers in industry; to stabilise markets; to increase productivity and to ensure reasonable consumer prices. All of us must agree that those objectives are reasonable and ones which we desire. However, as has been said today several times, some of those objectives appear to conflict with each other.
We have heard much today about the apparent conflict which can arise when one wishes to give an advantage to the producer—when one wants to "up" his income in relation to what may be the interests of the consumer. The debate on the green pound has revolved around that question. People have looked at the Common Market at a time when food prices have been rising. They know that the Common Market policies are partly responsible for that and there will be other increases in the future because of our need for the two transitional steps that remain and because of the revaluation of the green pound. They have seen the creation—if that is the word—of these "mountains". They have seen the wine lake gradually filling up. They saw that the butter was sold and sent to Russia at low prices, but that loophole has been stopped. The general public find it difficult to understand why all this is happening and tend to blame the Market for it.
But this problem about who benefits, or who is to benefit in the future—the producer, and if it is the producer then how do we protect the consumer—is no new problem. It is a classic dilemma.

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I call it that quite deliberately. That dilemma has been in existence—I almost used the word, "always"—certainly ever since the Industrial Revolution caused many people to go into the town. Ever since that time there has been a cry for cheap food.
Writing in The Times of 11th April, Hugh Clayton said:
"The characteristic of the price debate which has continued unabated in Britain throughout the 1970s has been that most people think only of how they are affected personally. If shoppers are told that they must pay more for sugar or tea or anything eke, they seldom stop to wonder if the higher price might benefit the worker who cuts the cane or picks the leaf or does anything else".
Of course the workers are involved. The worker, as much as the farmer, is part of the industry, and it has been the complaint of the farm workers through their union, the NUAAW, that the farm worker has always remained on the bottom rung of the salaries ladder; unfortunately that remains true as we have just heard from the noble Viscount, Lord Trenchard. Paragraph 39 of the Annual Review tells us that in the year ended 30th September 1976 the average earnings of full-time hired men in the United Kingdom were £48.80 per week. That is 19 per cent. higher than in the previous year, but in real terms it is a fall of 0·5 per cent. as my noble friend Lord Davies of Leek has already told us.
We are also told that in 1976/77 weekly earnings are expected to be about £53 a week. In the same Review it is explained to us that labour productivity has increased over the years by 3.5 per cent. Of course, this is partly due to greater efficiency and a declining labour force. Nevertheless, what a good record! If it could be matched throughout industry, the country would have no problems today. I believe we have a right to be proud of what we have done. Those facts clearly reflect the enormous and rapid development in agriculture from a labour intensive industry to a highly efficient, highly complex and highly productive industry. Unfortunately the remuneration of the workpeople for the skills they have had to acquire, and are using so well, has not improved in step.
For many years—and I was in charge for many of them—the union strove to establish in agriculture what we call a
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"wage structure", in order to ensure that men with additional skills received additional pay for those skills. In the end we got it, but as Mr. Bottini, the General Secretary of the Union who followed me has just said, there are still many farm workers who should be receiving a plus rate, or at least the craftsmen's rate, but who are not receiving it. I know that it is often because they do not apply for it, but we should make efforts to see that they get what they are entitled to. Unfortunately, the present policies of wage restraint have caused—as in other industries—the differential to become less as between the basic rate and the rate of the skilled worker.
That is not to say that I am one who clamours for the destruction of the Social Contract. I certainly believe that we have to introduce more flexibility into the next set of arrangements. But, speaking for myself and in the interests of the agricultural workers, I am sure that to sink down to a situation where what "cake" there is goes to the strong arm and the strong muscle, leaving behind those who for some reason do not use the strong arm or have not got a strong muscle, would be detrimental to the prospects of farm workers rising to the same level in terms of income, and therefore of recognition, as skilled workers in other industries. It would hinder their progress towards equality of pay.
The noble Baroness, Lady Robson of Kiddington, mentioned relations. It is a matter of some interest when one realises that, in agriculture, industrial relations are good, despite the bad wages and, in years gone by and sometimes today, the long hours and the unpleasant work. People have said this is good, and so it is, and they have congratulated the agricultural industry, both workers and farmers, on the good relations in the industry. I have said this before, and I repeat it now, because I believe it is of some import to the problems of industrial relations generally: there is a very simple reason for the good relations. We are no better in agriculture than anybody else; we are men and women, employers and workers, but what we have in agriculture—and we are so fortunate to have it—is a spontaneous and continuing consultation between the employer and the worker. In agriculture, up to one or two men are employed, but never so many that a gulf

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opens between management policies, on the one hand, and the workers who have to implement the policies, on the other.
Farm workers walk the farm with the farmers, they discuss policies; if there is a change in the production line they talk about it; they also talk about their own personal lives and their friends and relations, their wives and their children. This was mentioned earlier but this is the reason—and I repeat it because if we could only achieve consultation which really worked in the other massive industries where there are so many people, this would prove to be the answer. Ever since my days on the Donovan Commission I have realised that joint consultation, understanding, discussion and participation are the key to good relations throughout the industry.
My last word is that maybe there is something else. It is not emotive to say that agriculture is a natural industry. People working in farming literally have their feet on the soil, and there are disciplines which have to be accepted in agriculture. You cannot run in the face of nature. You can certainly improve your yields and your stock and your seed and so on, but in order to achieve results you have to co-operate with nature; it is something bigger than yourself that you have to deal with and accept. I am not saying this from an emotional point of view; I think it is an objective fact which may put into our industry something which the others have not got. Do not misunderstand me, my Lords, but is it not possible that working inside a shed, working at a machine, working in an office, tends to detach one from one's knowledge of what life really is. It may be that having to accept these disciplines and deal with nature and co-operate with nature, that we are not the boss, gives the farmer and farm worker something in terms of character, and perhaps a different outlook on his life and work and on other people.
I do believe that we should be doing much more to bring townspeople and agricultural country people together. I approve very much of the organisation of farm visits, of providing educational information for use in schools. I have the honour to be President of the Association of Agriculture, which has been endeavouring to do this work, and indeed I think it is doing it very successfully; 85 farm visits have been arranged in three
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years. We are going on to another three years. I think this is a great thing and should be done, because I believe that misunderstanding can happen between people in different industries. I should like to see consultation taking place and understanding growing, so that people no longer think of employed agricultural workers as rather second-class citizens, as perhaps some still do, but learn to understand that agriculture is a great, complex and important industry, which is entitled to the same returns as one expects in industries elsewhere.
7.23 p.m.
Lord VERNON: My Lords, in a wide-ranging debate of the kind we have had today it is tempting to dwell on the reasons for the present malaise in British agriculture, reasons which have been discussed in a number of speeches which we have heard. On this aspect, I would only say this, that if anyone is doubtful about that malaise I suggest that they have a look at the February edition of the publication Green Europe. This shows that West Germany, with 30 per cent. less useable agricultural land than the United Kingdom, is producing more of every agricultural commodity than we are, with the exception of sheep and poultry, and in many instances they are producing more than half as much again. Allowing for the higher inputs in feedingstuffs and fertiliser, and allowing also for their higher manpower on the land, the statistics should, I suggest, give one food for thought.
They also give an indication of the amount of additional food that could, and, I submit, would be grown in this country, and the huge savings that there would be to the balance of payments if the agricultural industry got the support that it needs. However, I do not propose to pursue that argument, partly because I did so in the recent debate on the green pound, and partly because I wish in my speech to concentrate on the subject of land use. I shall in fact be following up the remarks already made by my noble friend Lord Middleton in introducing the debate, regarding the very important report by the Centre for Agricultural Strategy at Reading University entitled Land for Agriculture.
We live in an overcrowded island, where competition for the land available

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is very keen. One of the reasons why agricultural production is hampered is the growing annual loss of land from agriculture to other uses, and to this must be added the amount of land where the full agricultural potential cannot be realised because of urban blight. The latest figures I have seen come from a Parliamentary reply in another place and refer to England and Wales only. Between 1955 and 1960, 55,000 acres were lost annually. Between 1966 and 1970, 60,000 acres were lost, and between 1970 and 1974 the figure went up to an alarming 75,000 acres a year. Looked at in another way, the whole of a medium-sized county is being lost to agriculture every decade. A proportion of it, not very large in England and Wales, goes to forestry, but that is usually the lower quality land in the uplands, and in any case what goes to forestry can always be reclaimed.
What is disturbing is the amount of land lost to industrial use, to housing and to recreation. It is disturbing because the land taken is often the best quality land, not often Grade 1, but frequently Grade 2, on the fringe of urban development. The Ministry of Agriculture fights to retain such land, but, unfortunately, they usually lose the battle. It is disturbing because, as we have already heard this afternoon, we produce little more than half the food we need to eat, the temperate foodstuffs. Finally, it is disturbing because we now know from the report to which I have referred that losses on this scale are totally unnecessary: 80 per cent. of the land needed for development between now and the year 2,000 can be found from existing derelict and waste land. My Lords, this is an astonishing figure and one which I suggest reflects discredit on successive Governments.
So what is wrong? The answer, of course, lies in the fact that green fields are very much easier and cheaper to build on than derelict land. With that in mind, the whole planning process is weighted against the agricultural interest. We have our priorities completely wrong and Government action is required to redress the balance. At planning inquiries the Ministry of Agriculture is at a severe disadvantage as compared with the Department of the Environment and local authorities. It is short of staff and those available often have to perform other
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duties. The Department of the Environment and local authorities tend to he represented by counsel, whereas the Ministry case may be put by a surveyor. The result is obvious.
There is no consistent way of identifying and recording derelict land. Although overseen by the Department of the Environment, differing systems obtain in different counties. The report recommends that a national land inventory be established under a new organisation. But if that is not possible in present circumstances, at least a uniform system should be adopted for recording derelict land—a system in which the Ministry of Agriculture should play a significant part.
Another defect in the present arrangements is the fact that the Ministry does not have to be consulted when areas of less than five acres are taken for development. So what happens? A speculative builder gobbles up several units of four acres, and in the end he has 20 acres or more of good agricultural land which are lost forever to agriculture. In those cases the Ministry would not even be consulted. In cases where the Ministry is consulted—that is, where the amount of land lost is over five acres—the existing method of land classification plays straight into the hands of the Department of the Environment. Although it is laid down that Grade I and Grade II land should not be used where other land is available—a rule which is often ignored in practice—by far the largest category of agricultural land, about 50 per cent. of the whole, is Grade III, and unfortunately Grade III is equated by the Ministry with third rate.
I happen to live in a part of the East Midlands where all the land is graded III. Yet the same land can produce high-yielding corn crops and excellent grassland for dairy cattle. It is certainly not third rate. One of the most urgent needs, and one to which the Centre for Agricultural Strategy rightly draws attention, is to safeguard at least the better quality Grade III land, all of which is at present regarded as expendable by the Department of the Environment.
Technical Report 11/1, published in 1976 by the Agricultural Development Service of the Ministry, suggests the definition and identification of sub-grades within Grade III. That is obviously vital. However, I am advised that the Ministry

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has only 28 research officers available to classify agricultural land throughout the country, and at the present rate of progress it would take five or six years to complete the task. Clearly, more resources must be made available.
I have referred to a number of the recommendations made in the report, but perhaps the most important of all is the proposal that the onus of responsibility for decisions on transfers of land should be altered to give precedence to agriculture. As a corollary to this, it is suggested that financial incentives and the Community Land Act should be used to develop derelict and waste land in urban areas rather than agricultural land on the urban fringe. Only in the most exceptional cases should Grade I, Grade If, or the better quality Grade III land be taken for development, and then only after the Department of the Environment has been able to prove conclusively that no other land is available.
My Lords, I hope that I have said enough to show that we are in the process of squandering what the noble Lord, Lord Woolley, said was our greatest physical asset—the land of this country. It is time to call a halt. I had given notice to the noble Lord the Leader of the House that I should be raising these rather detailed matters this evening. I had in fact tabled a Motion for Short Debate on the subject but I withdrew it because of this debate. I hope that when the noble Lord replies he will be able to state whether the Government accept the conclusions of the Centre for Agricultural Strategy and whether they are prepared to implement the recommendations. Further, I hope that he will be able to comment on the specific proposal that Grade III agricultural land should be subdivided into different categories.
7.37 p.m.
The Earl of ONSLOW: My Lords, I should like to mull over three subjects this evening, which are all interlinked. I should like to suggest that, with one condition, it would be sensible to implement the Layfield Committee's recommendation that agricultural land and buildings should be re-rated. The argument for de-rating agricultural land and buildings was overwhelming in the 1920s, when agriculture was in a pitiful state,
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productivity was poor, land lay fallow and some returned to scrub. The advance of modern agroengineering had to await the stimulus of the War and the Agriculture Act 1947, and all that flowed from those two factors. In the 1920s foreign food was cheap—it is no longer; freight costs were low and we were one of the few importing countries of agricultural produce.
As we all know, the situation now is totally different. Agriculture is much improved compared to its state in the 1920s. The noble Lord, Lord Walston, gave a very fair description of the great advances that have been made. Unfortunately, there are two sectors where there is cause for worry—the pig industry is in dire straits and the gross margins on beef are being heavily squeezed. Of course we all know that Government-aided inflation is still with us—vengefully. Therefore, de-rating is a hidden food subsidy. If food is to be subsidised in this way, let us go the whole hog and exempt the noble Lord, Lord Sainsbury, and all his shops, Sir Jack Cohen and Mr. Heinz III; perhaps we should also de-rate David Brown, New Holland and other agricultural machinery manufacturers. That would be impracticable. The de-rating of agricultural land also throws on to the small industrial and domestic ratepayers of rural and semi-rural areas a heavy and unfair burden. It also affects the taxpayer through the rate support grant.
When I commenced my remarks on the re-rating of agriculture I said that there was one condition. That one condition is of course that the farm gate prices must be—and there can be no argument over this—adjusted to take into account that re-rating of agricultural land. The second of my points is to suggest that we abolish most of the subsidies to agriculture other than the hill farm subsidies and investment grants. Surely the beef-cow subsidy and the calf subsidy can be made good again by a proper end-price system. These subsidies are expensive to operate and have in the past led to chicanery in the form of amateur plastic surgery on bovine ears.
My Lords, neither the abolition of subsidies nor a reversal of the de-rating policy can be acceptable to the farming community unless the final farm gate

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price is adjusted. These two problems, however, could perhaps be mitigated from the consumers' point of view—and, as several speakers have said today, the interest of the consumer and the farmer must be indentical—if we can get a proper review and proper reform of the CAP.
I should like to suggest one or two very small ways in which this might be approached. It would be possible to suggest that we go for intervention on nonperishable commodities such as grain, and deficiency payments for perishable commodities which are expensive and costly to store. Taking the example of beef, the actual storing of it finally destroys it. The moneys for these deficiency payments could come partly from the saving of these very expensive storage costs and from a certain system of levies on imports. The price level of deficiency payments would have to be related to estimated demand. Here again I agree with the noble Lord, Lord Walston, that we cannot just go on subsidising everything that the farmer produces, irrespective of the market demand. The intervention price of grain also will have an effect on the deficiency payment.
Furthermore, we must think European and not just nationally. There are things we do immeasurably better than some of our Continental partners, and there are some things they do immeasurably better than we do. For instance, we have already mentioned the Milk Marketing Board. That is a superbly efficient organisation together with the dairy companies. You cannot get delivered milk in Paris, and I do not think you can get it in any city other than in London, and this at a price for liquid milk consumption which is quite superb. On the other side of the Channel, for instance, there are the French co-operatives. I have been round a French co-operative. We have nothing in this country which approaches it in efficiency and in marketing organisation. We must learn from them, and then perhaps they will be prepared to learn more from us.
Funds must be available to change some of the farming habits. One must take one example. Rouissillon produces a vast surplus of rather bad wine. Somehow we have to change in a European context that over-production of
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unwanted stuff. It is surely easier to produce milk in the wetter, cooler parts of the North of Europe than it is in the Southern hotter parts. It is easier to produce fruit and vegetables in the Southern, hotter parts than in the Northern parts.
I do not put forward these ideas as Holy Writ; they are just ideas. But however good our ideas, and however constructive, they are bound to get a chilly reception from the rest of the EEC if Mr. Silkin continues behaving in the way he did last week. One of the Benelux Ministers—and the Benelux Ministers, let us remember, were our greatest friends when we wanted to get into the Market—referred to the British behaviour as "criminal". However good our ideas, we must learn that you get nothing by being rude to people who control the purse strings. These ideas will get a hostile reception if presented in the way they were presented.
My grandfather had an adage, that if you are not civil to people you will not get asked out to tea. That adage ought to be followed by Her Majesty's Government. The present Prime Minister set a very bad example by being gratuitously rude in 1974 to the Speaker of the European Parliament, and then said that it was by mistake. That example has been followed by several others of Her Majesty's present advisers—I hasten to exclude the noble Lord the Leader of the House because he is always welcome to tea. We all agree that the CAP needs revision. We shall never get that revision to take into account our views not only on the CAP but, as the noble Viscount, Lord Trenchard, said on other subjects, if we set up such an intense dislike of our methods and of our manners.
7.45 p.m.
Lord MACKIE of BENSHIE: My Lords, I want to thank the noble Lord, Lord Middleton, for raising once again the subject of agriculture. It is a great pity that he should have had to do so, because one would have thought that it is a subject that did not need raising in this House; we were all agreed and a policy had been worked out for the good of everyone, including the consumer, long ago, so that all we had to do was question a few actions. But, in fact, there is once again a rather unhappy climate—very

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unhappy in the case of some producers—in agriculture, and it is one of the main factors in production, and something must be done quickly in order to restore the confidence which is lacking.
I must say that my noble friend Lady Robson put her finger on an important point which is not often enough brought out. She talked of the effects of the decline in the value of the pound, and what appears to be the deliberate fostering of a fall in the value of the pound in order to promote our exports. All my life I have tried to sell dear and buy cheaply. This always appears to me to be a good thing to do. However, some of our economic mandarins appear to think that it is good to sell cheaply and buy dear. This is absolute nonsense, and it has led us into much of the trouble we are in today.
Everyone is agreed—and goodness knows I have said it often enough!—that the world situation is such that the old cheap food policy has gone forever.
Anyone who thinks we could buy our food in the world market at £700 million less—that is the sort of figure one has heard—than we are paying now does not realise that, if we stepped into the market, prices would soar. This is perfectly true, and every sensible person accepts it. But the Government, at the moment, are in a great tizzy about green money, and I do not think they can see how they can ever get on to a position of parity where we will be able to fulfil the objectives of the Common Market and trade freely across the frontiers of the Community without MCAs, ACAs, and all the other distortions which are doing so much harm to a great many people at the present time.
I do not think that it would be such a big task. The Leader of the House will not in his own Party be a particular friend of Mr. Peter Stephenson, who is Joint Secretary of the Labour Committee for Europe, but he has produced an absolutely fascinating paper, which I have no doubt the noble Lords, Lord Vernon and Lord Collison, refered to, and which we have in Committee D. He shows quite clearly that in fact the international value set on money—the deutschemark against the pound, the franc and the dollar against the pound, and so on—is in fact unreal. When money is referred
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to not only by him but also by economists in the United Nations as valued by its purchasing power in its own country, which is obviously a sensible way to value it, the position is entirely different and there is not such a tremendous gap between the values and the prices in Europe as there is just now. A gap there is, but not such a big one as is suggested by the false value which the international money market places on the relative currencies.
If the Government pursued a revalue of the green pound in a more realistic manner, then it would be a help to them in getting rid of the incredible distortions caused by the measures taken with ACAs and MCA in order to get over this valuation. He says, for example:
"The comparison between Britain and Germany is particularly striking. During 1975, the average exchange value of the pound in terms of the West German Deutschemark was 5·434 Deutschemarks to the pound, but on a consumer purchasing power parity basis the value of the pound was in fact 7·74."
I recommend the Minister to study this paper because it contains a number of truths that are extremely relevant to the position we are in. The present lack of reality is doing enormous harm, particularly to pig farmers.
Viscount TRENCHARD: My Lords, might I point out to the noble Lord that, judged by purchasing power, the reason for those figures of a much higher valuation of the pound in terms of the Deutschemark is of course the fact that food at the time when that survey was made was so exceptionally cheap in this country, and of course food represents one-third of our Retail Price Index. In other words, it is a cart and horse circle.
Lord MACKIE of BENSHIE: Not entirely, my Lords. The noble Viscount said that food represented one-third of the Retail Price Index, which means that two-thirds apply to all the other factors. I accept that it is a cart and horse circle. Nevertheless, it is true that our pound is rather undervalued. The situation regarding the pig is quite ridiculous, with the MCAs being based on a totally unrealistic support price, which has never been used. If, as we have suggested, the MCAs were based at least on the price of food, we might begin to get somewhere, and I hope the Minister is in a position to say

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what the present measures will do in terms of the pig, as he promised when making his Statement.
Several noble Lords have referred to the question of taxation, to the iniquity of capital transfer tax, capital gains tax, the forthcoming wealth tax and so on. In my view, none of these taxes is particularly bad. I do not believe it is any disadvantage—indeed, it may be a very good thing—for a man to start out with a £50,000 overdraft if he inherits a 300 acre farm. It might make him work. There is nothing worse than for people to inherit too much money. What is entirely wrong, however, is the level of income tax. It is so high that no man, however hard he works, particularly in times of inflation, can ever hope to achieve his aim of paying this money back to the Government and achieving higher production on his farm. The tax that is wrong is income tax and, in this country, it is the highest in the world and doing an enormous amount of harm.
Many people say that we in agriculture are immensely efficient, that we are good producers and that our rate of production per man is high. Time and again we are told that we are much more efficient than the bulk of small farmers on the Continent. I am sorry to bore the Minister with papers on agricultural matters, but I have been looking at a particularly interesting one on the structure and performance of West German and United Kingdom agriculture. I have been discussing this with the noble Lord, Lord Vernon, and he has probably referred to this matter.
In the midst of all our congratulations to ourselves on our efficency per man and so on, the fact remains that the West Germans have a great many fewer arable acres than we have, yet they feed 7 million more people than we in the United Kingdom do; they do it on 70 per cent. of our utilisable agricultural area. To do this they have 1·8 million people on the land compared with 660,000 people here. I am not sure therefore that we are all that efficient. Bearing in mind that land is a very scarce commodity and that we have 1½ million people unemployed, we might be better served with a great many more people on the land helping to increase our production per acre.
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Various figures are given in this paper and they are well worth studying. For example, for cereals, on 70 per cent. of the acreage the West Germans are producing 21,255 tons as against 13,000 to 14,000 tons in this country, and all down the line one gets that sort of comparison. Perhaps we need to look again at our much-vaunted efficiency in this country. After all, we might find ourselves in the position of the Americans, who have plenty of land but also have the lowest production per acre, much lower than ours; of course, they have a very high production rate per man and a tremendous size of input of energy to achieve that production per man rate.
There are a number of factors in agriculture that we must look at long term. Certainly we want confidence among the farming community, but we also need to look at many of the practices we are now adopting. We in this country are going more and more for monoculture. Open any farming magazine and see the advertisements for new chemicals. Every time a chemist discovers a new chemical he rushes to an experimental plot to see what it will kill. It is an appalling reflection on our care in this country that the proving of new chemicals is still voluntary, and in my view this is a highly dangerous position. There are many cases where practical farmers can show how we need to revise our thoughts in this respect.
For example, if one has the labour to clean turnips by hand, it costs no more than using chemicals and the crop is increased. I think the same can be said of a whole number of products. I am very perturbed about the application of weed killers in horticulture where, with crops like raspberries, which can last for many years, severe residual effects on the soil are already being shown. The reason for this is the agricultural policy of keeping the price down. With the encouragement to greater efficiency, to make any money out of a crop one must use these chemicals, or so the advertisements say. I doubt that very much and we need to look with a great deal more care at this whole sphere.
On the question of prices for farmers, the CAP has pushed itself into a false position. Supply and demand must eventually be the ruling factor in fixing prices and farmers, in asking for fixed prices, are not asking for high prices but for a certain amount of stability. This fact

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seems to have been lost in other social factors on the Continent and we should be pressing hard for it to come back into play. The social factors of small farmers should be a different matter altogether and should not be catered for purely in terms of the end price, such as is happening with milk. Until we recognise this we shall be in a lot of trouble and the CAP will be very unpopular with many people. We must begin to apply this concept in a practical manner. If we do that, I think the Community and the CAP will he excellent for the farmer and the consumer in this country, but until we get it to work in a practical way it will probably be harmful not only to the farmer but to the consumer.
7.49 p.m.
Lord SANDYS: My Lords, I have listened with great interest to the previous 16 speeches—to very nearly the whole of each one—and what has struck me strongly is the debt we owe to my noble friend Lord Middleton for initiating this debate. I have been particularly impressed by the wide variety of opinions expressed, and I had no idea before the debate began how difficult it would be to reconcile two points of view. First, there was the opinion of my noble friend Lord Trenchard, who said, I am more alarmed about the future supply of food than I have ever been". How can that be reconciled with the view of the noble Lord, Lord Walston, who said, "I myself have never known agriculture in better health"?
Lord WALSTON: My Lords, may I interrupt the noble Lord to ease his difficulty? I stand by what I said, but I would remind him that I also said that, in the future, world supplies of food were going to become more difficult and our capacity to pay for them was going to grow less. Therefore, I am entirely at one with the noble Viscount, Lord Trenchard, in being alarmed about our ability in the long term to buy, grow or acquire by other means the food that we eat.
Lord SANDYS: My Lords, the noble Lord has released me from a considerable difficulty and I am very much obliged to him for doing so. However, there are inconsistencies here and I believe that this has been a particularly valuable debate in
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that it has allowed us to listen to these opinions. Perhaps one of the reasons why the noble Lord, Lord Walston, speaks, as he certainly does, with very great knowledge but also with some optimism, is that he comes from the Fenlands. There, they perhaps enjoy greater prosperity than do other parts of the country and of the industry which have been mentioned this afternoon especially the pig industry to which my noble friend Lord Lyell referred in some detail.
Your Lordships have been particularly pleased that this has been the opportunity for a notable maiden speech by the Right Reverend Prelate the Bishop of Carlisle. He was almost the only speaker to deal with forestry—a subject to which I shall refer later in my remarks. He dealt particularly with the uplands, a preoccupation which was echoed by many speakers, especially my noble friend Lady Elliot, who speaks with such knowledge of the hills, particularly in Scotland.
I took exception to what the noble Lord, Lord Davies of Leek, said in his closing remarks. He said, "No Conservative Minister would have got a fairer deal". I imagine that when he was addressing those remarks to your Lordships he had in mind the Statement which the noble Lord the Leader of the House had repeated; but I believe that he will find himself confounded in 12 months' time when we return to the debating table, possibly with another Government in office. I believe that negotiations can be less protracted and will engender very much less heat in their course when a Conservative Minister is once more in office.
Lord DAVIES of LEEK: My Lords, I shall manfully acknowledge that, if it so happens.
Lord SANDYS: My Lords, the noble Lord, Lord Davies of Leek, is always courteous in debate, but I believe he is misguided in his approach. I also feel that he was misguided—and this proves how different opinions in this House can be—when he produced the document Talking Points on Britain's Economy. I happen to have a copy of it too, and I drew an entirely different opinion from it. I reflected upon the fact that right at the very back of the document one finds

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references to efficient British agriculture and the rise in exports of agricultural machinery. As agriculture happens to begin with "A" and is listed as a most important industry and one of the most efficient in the world, it is a great pity that the Government did not see fit to give it an earlier priority in this document. However, I shall let that pass because priorities are always difficult. The point illustrates what a very great variety of opinion there can be about a relatively small matter. I refer, of course, to this particular small document.
I should like to begin my remarks with the Statement that was made this afternoon because the debate has of course been coloured by what the noble Lord the Leader of the House said. We read our papers this morning and I was interested to see what the Consumers' Association had to say. They described the Luxembourg deal as,
"Short term gains with long term losses"
I believe that that is an accurate statement. Consumers in this country may well welcome the short term advantage of the butter subsidy, but I am perfectly certain that they will rue the day when this agreement runs out and we reach the day of reckoning which is to come. As certainly as night follows day, the negotiations which will take place at future dates must take into account the matters referred to by my noble friend Lord Trenchard. I particularly welcomed his remarks, which were directed to a far more long term view of negotiations with our European partners.
I believe that we should take into account in this debate what took place during the drought last summer and that we should reflect upon what was suffered by certain parts of this country. I do not suggest that farms in the North of England or Scotland suffered to a great extent but, nevertheless, there were extremely substantial losses. If I may be allowed to quote a very few figures, losses incurred have ranged from £ 18,000 on a 400-acre farm to £50,000 on a 12,000-acre farm. Those figures may appear remarkable but they are accurately costed and I have no reason to believe that they are exaggerated. In large numbers of cases, water had to be brought very considerable distances in tankers at regular intervals to feed stock in large numbers.
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I believe that the drought will have much greater long-term effects than people realise, for the soil is tired. We had bleaching in 1976, and leaching in the autumn of last year when the rains began and followed through until March and April this year. So what we need more than anything else is to feed the soil, and I believe that the work carried out in all the agricultural research centres—Rothamstead, in particular, of course—and that done by ADAS and its advisers will have a highly beneficial effect upon all those who choose to ask for soil samples to be investigated. They will almost certainly discover that the pH factor in their land is lower than they thought.
I believe that there are ways of remedying this and I feel that the Government should take into account the document referred to by the noble Lord, Lord Mackie of Benshie, and others, including my noble friend Lord Vernon. That is the document Green Europe. It commends to us the value of using fertiliser to a greater extent than we do. Of course, everyone will immediately say that the cost of imports will be enormous but I most respectfully remind your Lordships of a debate which took place in this House only a week ago on the subject of the Falkland Islands. In this particular context, I feel that one should think very carefully about the situation in regard to the giant seaweed. My noble friend Lord Boyd of Merton introduced a particularly interesting Unstarred Question and said:
"As the report shows and as I have mentioned, large quantities of kelp—giant seaweed—exist around the Falkland coastlines, within areas which it is free for us to develop with the Islanders". —[Official Report, 20/4/ 1977; col. 228.]
I believe that here there is an industry which could be very beneficially expanded with the assistance of the British Government and which would reduce our imports of costly foreign fertiliser. In case the Ministry does not look at foreign debates, I should say that I am referring to column 228 of the Official Report for 20th April. It is very well worth reading because I maintain that we should look to our friends around the world to assist us in the very great task of fertilising the agricultural land of this country. Alginates Industries Limited, in which I must assure your Lordships that I have no interest whatsoever, is the firm with an exclusive right in this particular field to which I refer, and so we would do well to hope that the

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British Government will consider this position further.
I now wish to continue a little further on the Wye College study referred to as Green Europe, because I believe that there is a very interesting problem here. If we are considering, as the noble Lord, Lord Mackie of Benshie, did, the comparison between output in Western Germany and the United Kingdom—and he referred to the production of cereal and other commodities—we should bear in mind how very important it is to consider the situation in regard to the green pound. I believe, and so do my noble friends on this side of the House, that the devaluation of the green pound by so small an amount is one of the most unfortunate effects which we have considered in this afternoon's Statement.
At the same time, one must consider the question of the Annual Review of agriculture. My noble friend Lord Middleton referred in particular to the reduction in investment and he especially mentioned the 19 per cent. reduction in investment in farm buildings. This is a very significant factor when it comes to the question of confidence, and no matter how hard one may look at this factor one sees that it has spread increasingly over the past two or three years. I stood at this Dispatch Box at this time of year in 1974, 1975 and 1976 and I seem to be making the same speech over and over again. Perhaps the noble Lord the Leader of the House will be making a speech similar to those he has made on previous occasions, but this does not get away from the fact that there is a very serious problem which has accumulated and compounded over the years—
The Earl of ONSLOW: My Lords, I wonder whether the noble Lord can answer me a question in relation to his point about the 19 per cent. drop in investment in agricultural buildings. Is this a 19 per cent. drop by price or by volume? If it is by price it must mean that the volume decreases even more seriously.
Lord SANDYS: My Lords, I understand that the percentage drop is in terms of volume, but I speak subject to further investigation. I do not know whether the noble Lord the Leader of the House has further information on this point.
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It would be appropriate if at this stage I turn to a different matter; namely, the integration of farming and forestry and the whole question of the uplands policy, to which the right reverend Prelate the Bishop of Carlisle referred. He said that the forest industry was severely handicapped in the situation in which it finds itself. I would entirely agree with him in that particular regard. But I also bear in mind the Statement made on 30th March by Mr. Denzil Davies, as reported at column 163 of the Official Report of another place, and it would be churlish not to acknowledge the improvements costing a small sum, in Government terms, of £350,000 in 1977–78, rising to £1·8 million in 1980–81.
However, the central point concerns CTT. The problem concerning this has gone unanswered for the past several years. When my noble friend Lord Lovat raised it in his debate on forestry last year it went unanswered, and I wish to raise it here once again this evening. In our opinion the valuation on timber should be the value at the date of death or transfer, and not the value on sale. This is particularly significant in a fluctuating market, bearing in mind that the ownership of the crop may have been transferred two or three times in the course of its life. I speak from experience, my Lords. Only recently I felled a crop of ash which was planted in 1905. It passed through two hands in that period of time. I have the advantage of the crop today, but also the responsibility of replanting at a very much greater cost than it would have been in 1974, and certainly at a cost which bears no comparison whatsoever with the cost of planting in and maintaining from 1905.
This is a very significant area because the combination of forestry and farming is beneficial not only from an environmental point of view, to which so much attention is paid, but also especially in relation to the question of the water-table. This may not seem to be a significant factor after such a very wet season, but it is highly significant when considering the situation last summer when the water-table went lower and lower as the months went by. Those farms which were fortunate enough to have tree-surrounded fields enjoyed the benefit of years of cultivation and the combination of forestry with farming.

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It is also interesting that countries which have suffered a dust bowl have tried to reintroduce forestry and farming. I understand that in Soviet Russia there is a law in this regard, though it seems that it is being carried out only partially. I believe that the future of both the forest industry and the farming industry must be taken together when it conies to questions of both transfer tax and management, and we should look very carefully at both the amenity and the ecological value, taken together with the agricultural value of our small woodlands policy.
My Lords, I turn now to a matter raised by several of your Lordships which believe to be of the greatest significance; namely, the mitigation of capital taxation, which was mentioned first by my noble friend Lord Middleton. What must be recognised here is the situation in regard to our foreign competitors in the EEC. I would draw your Lordships' attention to one single significant factor. In France in relation to a father-to-son transfer of a farm the maximum rate of taxation is 20 per cent. of the asset value. In this country we are dealing inevitably with the upper reaches, and as inflation progressively advances we are dealing in rates of 60, 70 and even 75 per cent. on the asset value of a major farm, by which I mean a farm running perhaps to about 2,000 acres.
I was horrified to hear what the noble Lord, Lord Mackie of Benshie, said regarding capital taxes when inheriting a property. I do not believe that he could have been serious when he hoped that a young man would benefit from a hank overdraft of £50,000. I would remind the noble Lord that the rate of interest, which would perhaps be up to 14 or 15 per cent., would be his first consideration, and of course there would be the repayment of the principal after that. Is it possible, my Lords, that any young man would have the temerity to be able to invest in his farm, bearing in mind that very heavy responsibility of repaying the debt?
Lord MACKIE of BENSHIE: My Lords, I should like to say, if' the noble Lord will permit me, that I allied what I was trying to point out. I am not in favour of enormously heavy taxes; and
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capital taxes, because of inflation, have become too high. But the point I was making quite clearly, and which I should like to stress, is that the worst aspect of our taxes is the enormously high rate of income tax.
Lord SANDYS: My Lords, I fully agree with the noble Lord when it comes to income tax, but I believe that my argument remains valid—that when it comes to the question of the family farm we should have a situation of fair comparison with our foreign competitors in Europe.
My Lords, I should like to draw my remarks to a close. I believe that this debate has been particularly valuable, but there was a very strong overtone in many of the speeches—and I think rightly so—of concern and anxiety about the future of the industry. I do not believe that the noble Lord, Lord Walston, was right in scoffing at the gloom because, rightly, parts of the industry feel a very great anxiety about the prospects in the years to come.
Lord ENERGLYN: My Lords, before the noble Lord sits down, would he allow me to add three comments to his fascinating and constructive speech? The first is in regard to the water-table. I should like to underline that one of the hidden dangers in a water-table is, of course, the development of the micro-organisms, or the non-development thereof; and it could well be that, unless we follow the lead of places like Rothamstead, we can have epidemics similar to that of Dutch Elm disease, in which I am particularly interested. Secondly, I should like to draw the noble Lord's attention to the development in Hungary of the conversion of coal into fertiliser. Here is an area of interest which would be new to Britain; in other words, a new use for coal in the fertilisation of our soils.
Lastly, if your Lordships will permit me, I should like to add another source of fertiliser which has come only recently—and I declare an interest—as a result of our researches on the ash which is produced in solid fuel power stations. This so-called pulverised fuel ash contains all the trace elements which were present in the soil 300 million years ago, when the earth saw a verdancy it has never seen since. These trace elements still exist in this pulverised

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fuel ash, of which we are producing something like 5 million tons a year. Here is a source of fertiliser within the country which has never been used before. We also know from the physical characteristics of this powder that it will very materially affect the thixotropy and the pH of clays, so it has several advantages in its use in Britain, and I commend to the noble Lord the possibility of thinking about this as a source of fertiliser.
8.23 p.m.
Lord PEART: My Lords, I was going to say that I thought this was an interesting debate, but it is even more interesting now, if the noble Lord, Lord Energlyn, will forgive me for saying that. I think he is right. What he has said appeals to me, because my academic discipline at university was geology, but he is a "Prof" and I was only a humble graduate. I believe he has something here, and I hope he follows it up. The noble Lord, Lord Sandys, quite rightly talked about the effects of the drought on our farming and on the soil—bleaching and leaching—and I can assure him that it was not just peculiar to the South. Many people thought that the drought affected only the Southern areas, but we were affected in parts of Cumberland. And it has certainly affected farm income.
I detected a smile earlier on when it was said that farmers face financial difficulties and outward decline partly because of the drought and other conditions. But the simple fact is that the drought had a terrible effect on our industry. I know: I was there. I went over many parts of England to see it. In fact I thought it right to cancel a visit to Brazil. I thought it was far more important to see my own farmers than to go to look at schemes of irrigation in North Brazil. I can assure noble Lords that the drought had great effects on the industry, and it affected morale in many ways. It was something which had not happened and we had not experienced for many years. Let us hope that we shall recover from it. It may well be that the use of more fertilisers will be the right way to do it. And here we have a scientist who has indicated where there could be great developments in relation to the coal industry as well which could provide the necessary fertiliser.
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I wish to thank all who have participated in this debate. I think it has been a fascinating debate. We have had expressed a great variety of opinions. I have always said—and I say now to noble Lords—that noble Lords should never apologise for their existence. I have attended probably more debates in another place than any other noble Lord here but I can say truthfully—not because I am speaking in this debate—that the contributions of noble Lords in various spheres of activity far surpass the sort of debate which we used to have there. They far surpass anything that another place can provide. I think that is partly because, while there are political divisions, there is a great sense of responsibility to the particular industry we are debating. I do not get the feeling that we are trying to score political points all the time. Occasionally that is so. After all, somebody said that there may be a lady Prime Minister. I do not know, but that is not the issue. That person, I suspect, has been studying Chinese agriculture. I do not know whether it will make a contribution here, but that is another matter. Some people like rice rather than other commodities; but I make no complaint about remarks like that.
But has this not been a good specialist debate in the best sense? When I look around I say that all noble Lords in their own way have made distinctive contributions. I see my noble friend with whom I used to negotiate—the noble Lord, Lord Woolley. Earlier, I saw the noble Lord, Lord Netherthorpe. I was hoping that the noble Lord, Lord Woolley, could have inspired Lord Netherthorpe to make a contribution. And how well may I say the case was put. Then I heard the noble Lord, Lord Collison, who used to negotiate from the farm workers' point of view. Who knows more on Europe than Lord Walston, on my own side? When I was a critic of Europe, he used to try to lecture me and convert me to a point of view which in the end I accepted. It was the realities of the situation which convinced me to do it.
On the other side, there is the speech of the noble Baroness, Lady Robson—I was going to say, the chief spokesman for the Liberal Party. But not so yet, I think. Lord Mackie is the chief spokseman today. No?; I am afraid I am a little confused.

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Then, in the processing industry, we heard from Lord Trenchard. There were others. There was my noble friend Lady Elliot, who knows a lot as a practical farmer in the hill-land uplands, and whose husband was a distinguished agriculturist. He made a major contribution to our political life at one period. I had the great pleasure once to go on a visit with him to the Middle East to look at agriculture and other industries there.
So this debate has been remarkable; but I thought it especially remarkable for the speech of the right reverend Prelate the Bishop of Carlisle. What a delightful speech! I am really in his diocese. After all, Cumberland is important from the point of view of agriculture. In Workington, we have the home and place where Kerwin lived, who was one of the fathers of modern agriculture. But Cumberland has its problems. We have wonderful pasturelands and valleys, but we have our hill-land uplands. But I agree with the right reverend Prelate so much and with Lady Elliot and others who have had experience of uplands.
I must mention that we once had an imaginative scheme which would have helped Cumberland considerably. I refer to the Pennine Rural Development Board which we sought to set up and did create in that area. We also tried to establish one in Wales, which would have been welcomed by my noble friend Lord Davies. But I am sorry to say that because of a doctrinal attitude by a new Government that scheme, which was beginning to grow up near Cumberland, was scratched. It was a scheme which was blessed by the Country Landowners' Association, the National Farmers' Union and the Agricultural Workers' Union. I am talking now about the Pennine scheme. Indeed, I appointed a distinguished Cumbrian, Tom Cowan, chairman of that body. We were going to pump capital into the hill-land uplands of the Pennines. This would have helped our hill farmers considerably. It would virtually have worked a revolution—the sort of thing which I saw in the Community, in Munich, where Herr Urchal, the German Minister, proudly showed me what Germany had done in a similar way, but on a bigger scale, and how the State had helped. We tried to do that, but I am afraid that the Party opposite for once
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were very doctrinal. I think that they made a mistake. One day I hope we may be able to do something about it.
I want also to congratulate the mover of the Motion. I think we owe a great debt to the noble Lord, Lord Middleton. He knows the industry well—not just the farming side but the estate side—and takes a great interest in our matters. I think we owe it to him that we have had a most interesting debate. I think it is particularly apt to have had this opportunity for discussion today. It is just over a month since we debated the Commission's CAP price proposals and agri-monetary questions on the basis of the very helpful reports from our Select Committee on the European Communities. That was a most helpful debate.
Today we have had details of the outcome of price negotiations in Luxembourg. I made a Statement and I apologised that noble Lords opposite had such a short time to study it. It was a difficult and complex statement. At the time I was pressed by, I think, the noble Lord, Lord Mackie of Benshie, about the price of pigs. I made inquiries quickly. May I get that out of the way? He asked me —and he repeated this—how much the price settlement is worth per pig. I think he said that the producers required an increase of £5 per pig to break even. The answer is—and I hope that it is right; for, if not, I know the noble Lord will come back to me—that the increase in the Community basic price from November 1st, including the effects of the green pound change is equivalent to about £3·50 per pig. The actual returns to producers will depend on cost and on market forces. As I said earlier, the Government are pressing for a change in the method of MCA calculations. We shall pursue this objective with determination in the Council of Ministers.
I think he asked also about the guarantee price for milk and potatoes. I was going to write to him about that; but I can say now that the Government announced at the end of March that the existing milk guarantee price of 9·678 pence per litre (44 pence per gallon) will continue for the time being. Now that there has been agreement on common support prices for 1977/78 the Government hope to be able to make an early announcement on

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the guarantee determination for the period up to the end of the transition on December 31st 1977 when, under Community rules, the guarantee will cease to exist. The guarantee determination will relate to the whole of the period; that is, from April 1st to December 31st 1977. I have done my best to answer the noble Lord. Perhaps I should now continue.
My Lords, we have undoubtedly had a very wide-ranging debate which encouraged us to stand back a little from the immediate developments and consider the broad position in farming as a whole. I believe that the noble Earl, Lord Ferrers, was right to widen the debate. This debate would have taken place even if we had had no price determination today. If it had been postponed for two or three days, we should still have had this debate. The issues of land use, which were developed by the noble Lord, Lord Vernon, and introduced also by the noble Lord, Lord Middleton, enabled us to look at the broad position—and that is right.
Anxieties are expressed by the industry in several counts. Many noble Lords touched on them today. There is concern about rising costs and the fall in net products. It is argued that confidence is low and that we are failing to make progress towards the achievement of the aims in Food From Our Own Resources. Noble Lords have mentioned specific points of concern to them such as land use policy, taxation matters, and other matters affecting particular commodities.
May I try to assure your Lordships, first, that the Government's decisions continue to be guided by the aims and priorities in the White Paper, Food From Our Own Resources. I was proud of that paper. I always believed that it was right if I ever again had the responsibility of looking after agricultural matters that we should produce a long-term policy.
I know that I was criticised for it at the time, on the grounds that it was a little delayed; but, looking at agriculture, I believe that it was right to have a broad strategy. I think we had that in 1945. The noble Lord, Lord Woolley, will remember that period which led up to the discussions between the Country Land-Farmers' Union and the National Union
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of Agricultural Workers which in the end led to what I regarded as one of the great landmarks in agriculture. I refer to the 1947 Act.
I need not go into details, but it was a major step forward. Here we were at the end of a war, and we did not repeat history—that bad history which happened after World War I when the Corn Production Act was revoked and when farmers who had been given a little security lost it. In the post World War II period which many of us here enjoyed the situation was quite different. The 1947 Act was a great step forward. Subsequent Conservative Administrations amended it and improved it here and there. The birth of deficiency payments was mentioned by the noble Earl, Lord Onslow—which he wanted to introduce into Europe.
There was a long-term policy backed up by a White Paper which showed where the aid would be injected, what resources outside the industry would be given to it and what resources would be employed from within the industry. It achieved a revolution. We created, as noble Lords know, a remarkable partnership at an executive level between the farmers, the farm workers and the CLA. I think of the old county committees which enabled me as a Minister, when I was a Minister longer after they had been set up, to go into different parts of the countryside and talk to farmers who had virtually executive responsibility which they used to share with representatives from the Country Landowners' Association in the area and the farm workers. It was a remarkable example of what I can call industrial democracy. We are only now talking about it in other fields, in relation to the Bullock Report. But we had it then. I make no apology for defending it here tonight.
I think it is right to have a long-term policy. That policy is still there, and for so long as I am in the Cabinet I hope I shall have the strength always to support it and to make it work in the interests of those who produce the food which, in the end, benefits the consumer. I think that White Paper is a major strategic document. I think that the Opposition are quite right to mention it in all of our debates, as they do; and to ask the Minister: are you

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going really to create confidence in the industry so that you can fulfill that strategy which is there before us?
It is in our national interest to encourage an industry like agriculture which, as the noble Baroness speaking from the Liberal Benches said, can make a significant contribution to improving our balance-of-payments position. That is a fact and everyone should know it. Despite all the pessimism, the United Kingdom has made some progress towards a higher level of self-sufficiency. It is unlikely that we shall ever be fully self-sufficient, but our aim should be to displace any imports which we can produce ourselves more economically than we can obtain them from abroad.
My Lords, the noble Lord, Lord Vernon, and, I believe, another noble Lord, spoke about the losses of agricultural land to development and the longterm risk to the production of homegrown foods. Our population is still expanding although the latest figures suggest at a slower rate than hitherto, and the need for new houses, new roads, new factories and their associated infrastructure is continuing to grow. In particular, the need for these new developments and the number of potential households will continue to increase for some time ahead. Let us be clear that the land for these new developments can come only from two main sources: derelict or unused urban land and agricultural land. It is of extreme importance to our economy that the first source should be used to a maximum in order to keep the use of the second to a minimum.
How can this be done, my Lords? As the Secretary of State for the Environment said in his speech last September about inner urban policy, great waste is caused if we develop good agricultural land while spare land lies available within our cities. That is common sense. Local planning authorities should try to ensure that not a single acre of agricultural land —perhaps I may use the commonly accepted term greenfield sites—is taken for development while suitable sites exist within the perimeters of existing towns and villages.
Local planning authorities now have important and wide powers under the
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Community Land Act to go in for positive planning. They can therefore arrange for the development of their areas in accordance with planned programmes as set out in their local development plans. It is most important that they should make full use of them. My right honourable friend the Secretary of State for the Environment has recently made two announcements of considerable importance in this context. First, he has drawn attention to the need to inject new life into the communities of our inner urban areas and our inner cities. There is to be a significant shift in emphasis in Government policy and a six point programme. This includes an increase in urban grants on a steadily improving scale over the next decade.
Secondly, he has carried out a comprehensive reappraisal of the new towns, the first since the mid-1960s and has announced that five designated areas are not to be extended. Further savings of agricultural land should follow from the proposed substantial reductions in the programmes of the third-generation new towns. Nevertheless, I would agree that there is an inexorable loss of productive agricultural land to development over the past five years up to 1973–74, that is the year for which latest statistics are available.
The amount of land that went out of agricultural use in the United Kingdom each year was 146,500 acres, of which 46.300 acres were taken for residential, industrial and recreational use. These figures represent a decrease of 10 per cent. and an increase of 29 per cent. respectively over the same figures five years ago. The question is: how do we tackle this loss?
Earl FERRERS: My Lords, may I interrupt? The noble Lord said that 146,000 acres were taken out, of which 46,000 acres were for residential and industrial use. What were the other 100,000 for?
Lord PEART: My Lords, I will follow that up and give that information. That is the only information that I have at the moment.
Earl FERRERS: My Lords, it is a large amount.
Lord PEART: It is a large amount, my Lords.
Lord MACKIE of BENSHIRE: Forestry.
Lord PEART: It could be forestry. I will not commit myself to any exact figure. I will get it for the noble Lord. Noble Lords want to know what we are going to do about this. Government policy has been firm for a number of years and throughout the terms of office of a number of different Governments. Immediately after the war in 1946 the policy was to steer development away from the better quality land on to the land of a poorer quality in the same area, and not to take any mere land than was really necessary for the development in question. That is still the policy today, not because we have become used to it and are complacent, but because despite periodical, critical reappraisals, we still find that this is the most successful formula and the most practical to apply that can be devised.
The noble Lord, Lord Vernon, asked me to do something about classification, and made some suggestions. I will give him the assurance that I will follow this up. There could be something in his argument. I will not be complacent and will see that my right honourable friend is informed about it and the officials who are concerned. This formula of defending the higher quality land, limiting the acreage used, is applied by land service officers of the Ministry when they are consulted by local planning authorities on all important developments.
The cut-off for consultation used to be five acres. This is not a political point—this is not politics as such—but I understand that when the Party opposite were in Government they very significantly weakened our defences by raising the limit to 10 acres in 1971. Manpower considerations have so far prevented a return to the tighter figure. In the majority of cases the local planning authorities and land service officers have achieved a close rapport which can do nothing but good. The essential requirement in the planning of green field site development is that the planners and the land service should consult at the earliest possible moment and well before plans start to crystallise and attitudes harden.
Lord VERNON: My Lords, before the noble Lord leaves that aspect of the subject, can he say whether the Government accept the conclusion of the Centre for Agricultural Strategy that the planning system should be altered in the way that they suggest?
Lord PEART: No, my Lords; I cannot give that assurance. I said I will have consultations on that. I will let the noble Lord know of any results. If I may turn briefly to taxation because unfortunately, I am speaking at great length. I have no doubt about the anxieties which a number of noble Lords feel. There is often unjustified pessimism here. I know that noble Lords are worried about the impact of capital transfer tax on the agricultural landlord. I believe that it is too early to predict the detailed effect on agriculture with any certainty. The tax will, after all, normally fall only once in a generation, and its impact is therefore likely to be very gradual. The tax is part of the Government's measures to promote greater social and economic equality, and it would clearly be wrong to exempt landowners.
I think that the Government have however gone to considerable lengths to protect by a variety of reliefs genuine farming business. As a result, the capital transfer tax liability of the average farmer will be only around 40 per cent. of that payable by individuals with assets of similar value who are not eligible for these reliefs. It is accordingly difficult to see the capital transfer tax as constituting a serious threat to the viability of growth of most family farms. It is true that the special reliefs enjoyed by farmers are not available to private landlords, but their position is different in a number of ways. This was mentioned by the noble Lord, Lord Mackie of Benshie. The price of tenanted land is normally much lower than land offered with vacant possession, so a landlord's liability will be proportionately lower.
Landlords can further reduce their tax bills by making use of the general reliefs, and possibly also the conditional exemption for buildings of outstanding interest. I do not believe that there is this disruptive effect. I recognise that noble Lords are worried and it is something

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that we must watch carefully. It is too early to assess the eventual impact of present taxes on the farming industry.
May I say a word about other matters: the noble Earl, Lord Ferrers, mentioned legislation which has affected confidence. We went back again to the tied cottage and how this was to affect matters. From what I understand, so far things are going quite smoothly and there has been no complaint sent directly to the Ministry so far as I know. It is too early to make a judgment. All these measures taken together have created anxiety. I understand that. Perhaps next year in another debate a similar speech will be made again by the noble Lord, Lord Sandys, and no doubt I will make a more favourable reply.
It has been a great success but I think I had better conclude. I will write to all noble Lords whom I have not mentioned. I have spoken for nearly half an hour, but I should like to conclude by saying that Europe has been mentioned inevitably in this debate. People have to realise that we made a decision to go into Europe. We did not only as a Government, make a decision to negotiate. I have here the terms that we negotiated. I think they were good terms. They were terms which showed that we had decided to achieve certain objectives, for instance a general improvement in the operation of the CAP and its support systems, a liberalisation of trade and assurances which were reflected in the policies put forward and in the actions which were taken and accepted by the country.
I refer to what we did for New Zealand, which was welcomed by the Government there, concerning the access of their dairy products. I think of the 1·4 trillion tons of sugar for the CAP countries. Those are just some examples. I know everything is not perfect, but there have been changes. You cannot, contrary to what many people think, change something like the CAP overnight. You have to work there, win confidence and behave in a Community manner. I accept that. I think we have achieved much and I do not blame the Community for dear food in the world. That is too naive and I think that the noble Viscount, Lord Trenchard, agrees with me on that.
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The great thing is that we now have continuity of supply, which is so important. Of course there are problems with pigs, for example, and MCAs. Commissioner Lardinois would have loved to do something about the matters which need to be changed. He has now been succeeded by a very distinguished Commissioner, Mr. Gundelach; and with goodwill all round we shall get those improvements that we still want.
So I would say to my friends in Parliament: it is no good knocking the CAP. We are in Europe; the British people advocated it through a referendum and many of those who advocated a referendum are now trying to run away from the decision created by that referendum. I think the message I should like to give, arising from this debate, is this. We have had a Price Review and we have to make it work. We must see that our farmers are protected.
We have to recognise that, of course, there is the consumer's point of view. I often used to take a junior Minister, a consumer Minister, with me, together with official representatives from the Prices and Consumer Protection Department, when I went to Europe. I believe it is right to recognise that there is a consumer point of view. It is no good producing surpluses which are not eaten. I should like surpluses to be for the benefit of the Community, and I want us to play a bigger international role in food aid—and why not? So when people get worried about butter mountains—and I hope that the right reverend Prelate will understand what I mean—I would ask: How big is the butter mountain? Is it Skiddaw or Mount Everest? There is too much exaggeration about it. With nine very sophisticated nations in Europe producing commodities, inevitably there will be surpluses. I see nothing wrong if we have commercial agreements inside and outside Europe. Just as France sends her wine to us in greater quantities, even though we sometimes have penal taxes, America sends her grain to Russia even though the two political systems are incompatible. I do not know why we should apologise for that.
My Lords, I think this debate has shown that there are certain things which are still wrong in our own industries and

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there is an emphasis here and there which has to be improved; but with goodwill all round there is no reason why we, the British, should not continue to play a major role in Europe, which will help our agriculture and our consumers, and will be good for us internationally.
8.55 p.m.
Lord MIDDLETON: My Lords, I should like to join other noble Lords in congratulating the right reverend Prelate the Bishop of Carlisle upon his outstanding contribution to the debate. It is particularly happy that he should make his maiden speech today, with the knowledge that he has not only of the uplands of Cumbria but as a "flock master" in the most literal sense of the word. I contemplated with pleasure the pastoral uses which he might make of that which in my layman's ignorance I must describe as "a bishop's crook"—I know there is a more correct name for it, but it escapes me at the moment.
It is very appropriate that this debate should coincide with the Government's Statement on the Community price decisions. The noble Lord, Lord Woolley, said that I had avoided reference to the Common Market. I did avoid, since they were debated here only last month, the more complicated financial aspects of the Common Agricultural Policy, but I laid emphasis on the monetary and green pound problems arising therefrom. The noble Lord, Lord Woolley, is quite right. The fate of our agricultural industry is wholly bound up with the Common Market and, as the noble Lord, Lord Peart, has just said, we have to see that the CAP works. We all accept that the system is not working particularly well at the moment, but our prosperity depends upon our seeing that the CAP evolves in a sensible way as its faults become apparent and as circumstances change. It will be against our own nation's interest if any one of the Nine attempts to undermine the system for short-term political reasons.
Many noble Lords have pointed out the difficulties which are peculiar to this country. From what he has just said in a most outstanding speech, I know that the noble Lord, Lord Peart, as a former Minister of Agriculture—and here I join with the noble Baroness, Lady Elliot, in saying that he is one who is held in great
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respect and affection by the agricultural industry—is fully aware of the problems and disabilities to which I referred earlier. I am most grateful to him for the way in which he has replied for the Government. He knows I shall not agree entirely with him about tax, but I am more than grateful for the assurance that he has given, and especially grateful to him for saying that the Government stand by the policy of greater self-sufficiency as envisaged in Food From Our Own Resources. However, it will need all that he and the Government can do to give confidence to men like the farmer who said to me recently, summing up the problem of weak sterling and the value of the green pound: "All my sales are paid out in phoney money while I have to pay my bills in real money." If I may say so with great respect, the noble Viscount, Lord Trenchard, expressed the same sentiment in much more sophisticated language. I am most grateful to all my noble friends and indeed to all the speakers who have contributed to this most useful and interesting debate. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

NORTH WEST WATER AUTHORITY BILL [H.L.]
Reported with Amendments.
KENSINGTON AND CHELSEA CORPORATION BILL [H.L.]
Petition against, from the Cinematograph Exhibitors' Association of Great Britain and Ireland, the Association of Independent Cinemas Limited, the National Association of Licensed Bingo and Social Clubs, the British Bingo Association, the British Casino Association Limited and the Association of Ballrooms Limited, withdrawn.
  STOKE-DERBY PROPOSED LINK ROAD
  STOKE-DERBY PROPOSED LINK ROAD
  STRATTON-SAINT MARGARET BY-PASS
  STRATTON-SAINT MARGARET BY-PASS
  M5 MOTORWAY: EXETER SECTION
  M5 MOTORWAY: EXETER SECTION
  CHURCH OF ENGLAND VOLUNTARY AIDED PRIMARY SCHOOLS
  CHURCH OF ENGLAND VOLUNTARY AIDED PRIMARY SCHOOLS
  DESTRUCTION OF OTTERS
  DESTRUCTION OF OTTERS