Sitting of 28 April 1977

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

    Farm Incomes
    Mr. MacGregorasked the Chancellor of the Exchequer what recent representations he has received recommending that farmers should be allowed to average out their fluctuating incomes over a period of three years for tax purposes.
    The Financial Secretary to the Treasury (Mr. Robert Sheldon): My right hon. Friend has received a number of letters supporting this recommendation from national and local organisations representing farmers.
    Mr. MacGregor: May I ask the Financial Secretary two questions? First, is he aware that the Minister of Agriculture told farmers in December that he was seriously considering this proposal because of his anxiety about investment in the industry? What representations has the Minister received from that source? Second, would he not agree that, with the now seriously fluctuating incomes for farmers, because, for example, of last year's drought and the present concern about the pig industry, this proposal would help to give farmers stability and confidence and so secure the expansion we all want?
    Mr. Sheldon: I understand the point, which a number of farmers have made on this matter, but it has, of course, already been looked at over a number of years. The problem is that, although everyone is in favour of this proposal at a time of rising incomes and profits, there are obvious disadvantages at a time of declining profits and incomes when the
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    tax bill coming some time later can, perhaps, be something of a shock of those who had made calculations on a contrary assumption.
    Mr. Beith: Is it not true that the farming industry has consistently made this case in bad and good years? Should not the Minister come forward with a rather more sympathetic response on the lines of that given by his right hon. Friend the Minister of Agriculture, instead of the Government appearing to speak with two voices on this matter?
    Mr. Sheldon: I understand the problems facing farmers and a number of other professions and occupations as a result of widely fluctuating incomes. Our minds are never closed on any of these matters.
    At one stage a Royal Commission said that it was administratively impossible to average out fluctuating incomes in the way suggested. I do not make my stand on that. I mention it merely to show some of the difficulties and problems that arise.
    Mr. Watt: Does the Minister recognise that this is just one more example of the British farmer finding himself out of step with his European partners? Is it not time that in this matter as well as many others some parity was brought into the situation? Will the Minister look at this again with some sense of urgency?
    Mr. Sheldon: The hon. Gentleman should be aware of the dangers of comparing tax systems which are so fundamentally different in their structures. If he goes into the matter, I think that he will find that the kind of comparisons that he may wish to make do not have a firm foundation. On the general matter, my mind is always open to ways of helping farmers and industry whenever possible. Naturally, I bear in mind the needs of collection of the revenue.

    National Enterprise Board
    Mr. Hooleyasked the Chancellor of the Exchequer if he will now authorise additional resources for the National Enterprise Board.
    The Chief Secretary to the Treasury (Mr. Joel Barnett): A total of £1,225 million has been allocated for the years 1976–77 to 1980–81. This includes an

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    extra £100 million for the years 1977–78 and 1978–79, which my right hon. Friend the Chancellor of the Exchequer announced on 15th December 1976. The provision for later years will be reviewed in the normal way in the course of this year's public expenditure survey.
    Mr. Hooley: Has my right hon. Friend seen the recent report of the National Economic Development Office, which suggests that manipulating the exchange rate is not the best way to promote exports? Does he agree that exports depend much more on design, productivity and quality, which in turn depend upon investment? Will he look again at the allocation to the NEB in the light of the need for a much higher level of investment in British industry?
    Mr. Barnett: I certainly agree with my hon. Friend that this question of investment and industrial performance in exports generally is not a simple matter of the exchange rate. It is a matter of industrial performance and design, as he said, and the total level of investment. As I have indicated, we shall certainly look into the whole question of the amounts to be made available to the National Enterprise Board during the course of the present year's survey.
    Mr. Adley: Will the Chief Secretary confirm that the devaluation of the currency which has occurred since this Government came to office is one factor which has led to higher food prices having to be paid by the housewife?
    Mr. Barnett: I would not do that. I am sorry that the hon. Gentleman seeks to make that kind of point. The fact is that the matter is much more complicated than that, as he very well knows. [HON. MEMBERS: "No. He does not."] My hon. Friends might be right. He does not know.
    World commodity prices are not within our control but, of course, exchange rates and the level of our own exchange rate have some bearing, although we must look much further than that. The level of our exchange rate depends upon our industrial performance, and poor industrial performance in this country did not start three years ago.
    Mr. Stan Crowther: Is my right hon. Friend aware that there are large numbers of advance factories standing empty
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    in industrial estates in regions of high unemployment? Would it not be sensible to allow the National Enterprise Board sufficient funds so that it can adopt an initiating role and establish industrial production in these factories? Does my right hon. Friend agree that not only would this reduce unemployment, but it would meet the point made by my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) about import substitutions and perhaps help us to improve the balance of payments?
    Mr. Barnett: I very much agree with what my hon. Friend said. I am sure that he will have noted that we both agree with what the Prime Minister said a short time ago. He told the House on 3rd March that he has asked the NEB to investigate the possibility of its investing in the regions, particularly in the North-East and the North-West.
    Mr. Grylls: Is it not rather odd to be talking of allocating extra money to the NEB when the Government have not even fixed the capital structure of the NEB, which has been in operation for 15 months?
    Mr. Barnett: It is not at all odd. The hon. Gentleman may have noted that many sections of private industry frequently queue outside the doors of Ministers and the NEB for public money to help them in their problems. I imagine that that was one reason why the last Conservative Government introduced the 1972 Industry Act.
    Mr. Watkinson: Is my right hon. Friend aware that Lord Ryder gave evidence to the Public Accounts Committee that the NEB was providing funds for smaller growth industries which the banking sector had failed to supply? Would not my right hon. Friend accept that that is an excellent reason for adding to the resources of the NEB?
    Mr. Barnett: I agree with my hon. Friend, but at the moment there is no evidence that the NEB is short of funds for the type of investment to which he referred. Certainly it is doing an excellent job, especially to assist small enterprises.

    £ Sterling
    Mr. Biffenasked the Chancellor of the Exchequer, what proposals he has to return to a fixed sterling exchange rate.
    Mr. Crawfordasked the Chancellor of the Exchequer if he is satisfied with the present value of the £ sterling.
    Mr. Robert Sheldon: For the reasons indicated in my right hon. Friend's Budget Statement, the stability of sterling that we have been enjoying is welcome. We do not, however, have any present intention of returning to a fixed rate.
    Mr. Biffen: Is the right hon. Gentleman aware that the manifest advantages of a floating exchange rate have been confirmed, even within the past 48 hours, by the Federal German Republic Bundesbank? Does he therefore agree that sterling should float freely rather than dirtily, and will he give an undertaking to the House that he will resist pressure from the International Monetary Fund that might require the Government to return to the regime of a fixed exchange rate?
    Mr. Sheldon: I understand the hon. Gentleman's interest in a free float, which he has maintained for many years. The position of the Government is quite clear in this respect. At the end of it all, it is the market that determines the exchange rate of the pound. I am sure that the House welcomes the stability shown in the past few months, but we must realise, at the same time that an exchange rate wildly out of line with what our trading partners are prepared to pay for the pound will not last very long.
    Mr. Gould: How is investment to be encouraged in manufacuring industries if the exchange rate means that our exports are not competitive? When will the Chancellor fulfil his undertaking to the IMF that he will manage the exchange rate in order to maintain competition?
    Mr. Sheldon: The undertaking was to ensure stability and to maintain competitiveness. We have seen support for this from large sections of industry, which consider that our exchange rate provides them with a degree of competitiveness that enables them to increase their exports. A balance has to be struck, and I am sure my hon. Friend will appreciate the balance we have in this country between competitiveness and the rate of inflation and that they both ultimately have a bearing on the exchange rate.
    Mr. Crawford: Since the right hon. Gentleman is answering Questions Nos. 3
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    and 14 together, will he explain why, when the pound is stabilised, that is greeted with paeans of praise, but that when the Scottish National Party suggests that after self-government for Scotland the Scottish pound will be worth £1·20, we are told that that is economically wrong? Can the hon. Gentleman reconcile those two positions?
    Mr. Sheldon: If the hon. Gentleman is to have anything to do with the economy of Scotland, I grieve for it. If that is the way he intends to operate the exchange rate policies of his country, he will find it extraordinarily difficult to come to terms with what industry will require to invest and to make Scotland and the rest of the country competitive. I believe that the present arrangements are the best guarantee to that end.
    Mr. Wrigglesworth: Is my right hon. Friend aware of the anxiety of some of us that the market might push up the exchange rate because of the surplus on the current account later this year arising from the oil resources? Such a rise in the exchange rate could, despite the inflation rate, force our industries into an uncompetitive position.
    Mr. Atkinson: Not at all.
    Mr. Sheldon: That problem does exist, and it will depend very largely on what we do with the money from North Sea oil. If that money is added purely to consumption, the country will face the problem that my hon. Friend foresees. If, on the other hand, means are found of diverting those resources into investment and industry, they will contribute to our long-term growth, and that is the way in which we should use the money.
    Sir G. Howe: Does not this exchange of argument across the Floor of the House about what is or is not the right level for the exchange rate underline the wisdom of the Minister's original reply—that it should be judged by reference to what the market in the end decides? Does it not point to the dangers of maintaining a policy of trying to hold the exchange rate at some level determined by some politician? Would it not be better, therefore, to accept the advice offered by my hon. Friend the Member for Oswestry (Mr. Biffen)?
    Mr. Sheldon: I can only repeat what I said at the beginning, which the right hon.

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    and learned Gentleman found so congenial. Of course, at the end of it all, the market will determine the final exchange rate over a long period of time. But within those overall limits there can, of course, be excessive fluctuations and part of the task of any responsible Government is to produce stability within the limits set by the market itself.

    International Monetary Fund
    Mr. Gowasked the Chancellor of the Exchequer when he next plans to meet the managing director of the International Monetary Fund.
    Mr. Joel Barnett: My right hon. Friend is in Washington attending meetings of the IMF Development and Interim Committees, at which Mr. Witteveen, the IMF Managing Director, will also be present.
    Mr. Gow: Does the Chief Secretary recall the letter that his right hon. Friend sent to Dr. Witteveen on 15th December last when he stated that an essential element of the Government's strategy was a substantial and continuing reduction in the share of resources required for the public sector? In order to implement that strategy, what further proposals does the Chief Secretary have for ensuring that that substantial reduction will take place?
    Mr. Barnett: I recall the letter very well. We have clearly indicated in the public expenditure White Paper the share of resources taken by the public sector. We have no further plans in that direction.
    Mr. Skinner: Will the Chief Secretary tell his right hon. Friend when he returns that some of us are still more than a little anxious about the IMF conditions and the lunatic policy that continues to create a massive dole queue and is causing prices to escalate and wages to be held back, except for a few of those top industrialists who are being paid confetti money? When his right hon. Friend returns, will my right hon. Friend tell him that the result of this in the country generally means that we have got to change our policy if there is to be any hope at all of a future Labour Government?
    Mr. Barnett: I do have occasional opportunities to tell my right hon. Friend a number of matters, and I shall certainly ask him to take note of my hon. Friend's
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    comments. However, I am bound to say that whether or not we wrote a Letter of Intent to the IMF, the policies we are implementing are, we believe, the right policies for creating the right kind of stable situation.
    Mr. Skinner: My right hon. Friend is cutting his own throat.
    Mr. Barnett: I confess that cutting my throat is not something that I normally enjoy.
    Mr. Skinner: They are cutting my right hon. Friend's throat—I am not.
    Mr. Barnett: My hon. Friend and I have a very happy relationship. It depends on the fact that we often disagree with each other fundamentally. I disagree with him on this matter very strongly. I do not believe that changing the economic strategy in this way that he suggests would in the long term help reduce the dole queues or prices.
    Mr. Budgen: When the Chief Secretary next speaks to anyone from the IMF and discusses the sterling exchange rate, will he tell the IMF whether he agrees with today's report from the London Business School, which advances the argument that the most efficient way to reduce inflation is to allow the sterling exchange rate to rise under market pressures? If he agrees with that argument, will he please explain both to the House and to the IMF why the Bank of England continues to intervene in order to hold down the exchange rate?
    Mr. Barnett: I read almost everybody's forecasts, recommendations and advice. I view them all, including those of the hon. Gentleman, with the same sort of scepticism. The Treasury's forecasts in these matters are frequently better than some of the others, including forecasts on the borrowing requirement. The hon. Gentleman knows better than to suggest that there is a simple solution to this problem. The question is one of a very fine balance, as my right hon. Friend the Financial Secretary was saying a little while ago.
    There are strong arguments on both sides about what should happen to the exchange rate. No doubt the hon. Gentleman will have read other views by other economists—and the view of my hon. Friend the Member for Southampton,

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    Test (Mr. Gould)—on what should happen to the exchange rate. I believe that we are pursuing the right policy in maintaining a stable exchange rate.

    Petrol Prices and Vehicle Duty
    Mr. McCrindleasked the Chancellor of the Exchequer how many representations he has received on the increases in petrol prices and vehicle duty since 29th March.
    Mr. Joel Barnett: Up to 21st April my right hon. Friend had received 1,500 representations.
    Mr. McCrindle: Has any intimation been received by the Government about the voting intentions of the Parliamentary Liberal Party on this question? Does he expect on this occasion that votes will follow threats, or is it likely that, as on the last occasion, we shall be marched up to the top of the hill and then down again by the Grand Old Duke of North Cornwall?
    Mr. Barnett: I have to tell the hon. Gentleman and the House that I am not responsible for the voting intentions of any party in this House. That is a matter for the various Chief Whips. I have quite enough to do without troubling myself with these matters.
    I noted during the course of our debates on the Budget that the case against the 5p increase was not made overwhelmingly by the Opposition Front Bench.
    Mr. Rost: If, as the Chancellor claims, one of the main objectives of the increased petrol tax is to conserve energy, would it not have been more sensible to introduce a variable road fund licence tax on the basis of the American system, with a reduction for the more economical, smaller vehicles?
    Mr. Barnett: The hon. Gentleman will not be surprised to know that we looked at the possibility of a variable vehicle excise duty as have, I imagine, many other Governments since it was removed in 1948. There are strong arguments against a variable vehicle excise duty, which I am sure the hon. Gentleman will have read—although perhaps if he had, he might not have asked about it.
    Mr. Ronald Atkins: Does not my right hon. Friend agree that a variable vehicle
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    excise duty would not be related in any way to mileage? That is far more important in the conservation of energy than the weight of the vehicle.
    Mr. Barnett: I agree with my hon. Friend. The increase on petrol affects larger cars that do fewer miles to the gallon. It is true that, in terms of energy conservation, an increase in the price of petrol will almost certainly have a greater effect than a variable vehicle excise duty.

    Common Ownership Enterprises
    Mr. David Watkinsasked the Chancellor of the Exchequer what criteria he used in determining the fee charged by the chief registrar for the issue of certificates confirming that bodies are common ownership enterprises as defined in the 1976 Act.
    The Minister of State, Treasury (Mr. Denzil Davies): The fee charged is designed to cover the full cost of dealing with a successful application for a certificate. Each application requires detailed checking to ensure that the bodies comply with the 1976 Act.
    Mr. Watkins: I appreciate that, but is my hon. Friend aware that the fee of £50 that is being charged is too much for the smallest enterprises and the new ones, which have a particularly important part to play in the development of common ownership? Will he consider reducing the fee to, say, £20?
    Mr. Davies: I am not sure whether I agree with my hon. Friend that the fee of £50 is too much. If an organisation wishes to become a common ownership enterprise, I should not have thought that £50 was too much. If there were model rules, for instance, for all these enterprises, it might be possible to reduce the fee. But, since each application involves considerable work, we have to charge a fee commensurate with that work.

    Retail Prices
    Mr. Wrigglesworthasked the Chancellor of the Exchequer what increase he estimates that there has been in the retail price index as a result of the fall in the value of the pound over the six months to 31st December 1976.
    Mr. Robert Sheldon: A rise in retail prices of about 4 per cent. might result from the depreciation of sterling between July and October 1976 and a 7 per cent. rise from the depreciation over the whole period February to October 1976. In each case, the full impact would not come through until six to nine months from the end of the period.
    Mr. Wrigglesworth: Does not that answer indicate the wisdom of the 15th December package in the light of subsequent events? Does it not also illustrate the limitations upon any policy of domestic price control?
    Mr. Sheldon: I accept what my hon. Friend says about the wisdom of the December package—that will come as no surprise to him. Since October the improvement of the pound has resulted in a rise in the RPI by about 2 per cent. to 3 per cent. below what it would otherwise have been. I think that my hon. Friend can draw his own conclusions about the implications of this on prices.
    Mr. Ridley: What does the hon. Gentleman think was the cause of the fall in the value of the pound, and to whom should the blame be attributed?
    Mr. Sheldon: Part of the blame goes back to 1973, as the hon. Gentleman has accepted, from time to time. The main cause has been the excessive inflation in comparison with other countries, coupled with the excessive use of the printing press, causes from which we are only just recovering.
    Mr. Gould: Is it not the case that the depreciation of the pound accounted for about one quarter of our inflation rate in 1976? Is not a much more important factor in our economic prospects the need to produce and sell more? Does my hon. Friend agree that this cannot happen as long as our export prices for manufactures are less competitive than at any time since 1972?
    Mr. Sheldon: As I said in reply to a previous Question, I accept that competitiveness is also of great importance. There is a balance to be struck. I accept what my hon. Friend says about the relationship between the decline in the pound and the increase in prices. In fact, the retail price index varies by between one-quarter and one-third of 1 per cent. for every
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    1 per cent. depreciation, and it takes six to nine months to work its way through.
    Mr. David Howell: Would the Financial Secretary accept a lesson from a former deputy leader of the Labour Party, who said there are no more alibis now? If, as he tells us, the cause of the fall in the pound last year was the high differential inflation rate in this country and if, in 1977, we are once again running at an inflation rate roughly twice that of the OECD countries, what future impact does he think that situation will have on the pound?
    Mr. Sheldon: The hon. Gentleman should turn to his monetarist friends for an answer to that question. Their answer is that the winding down of inflation is a very hard and long struggle. That is what has been taking place. If adverse factors appear at any time, it is easier for inflation to increase once again than to maintain its downward descent. That is the lesson that we have learnt over the past few years and the lesson that all future Governments will have to heed.

    Widows
    Mr. Newtonasked the Chancellor of the Exchequer what representations he has received since his Budget statement from widows and widows' organisations.
    Mr. Robert Sheldon: My right hon. Friend has received a number of letters from widows, but he has no record of representations received since the Budget from widows' organisations.
    Mr. Newton: Is the Financial Secretary aware that there is great disappointment among hon. Members on both sides of the House that the Budget seemed to make no response to the problem of the discouraging effect of the tax system on working widows and the injustice done to widows and single women between the ages of 60 and 65? Can we have an assurance that he will be prepared to give sympathetic consideration to the further representations which will certainly be made during the course of our consideration of the Finance Bill?
    Mr. Sheldon: The hon. Gentleman will know that I am always happy to receive representations from the widows' organisations and to profit from the information they give me from their constituent

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    organisations throughout the country. Widows, like other members of society generally, have benefited from the tax reliefs given by my right hon. Friend in his Budget. When the hon. Gentleman asks for a special relief for widows he must be aware that by far the majority of them pay no income tax. If money is spent in this direction, it will not go to those in the greatest need, and the majority will not benefit at all. Bearing these points in mind, I look forward to our debates in due course on the Finance Bill.
    Mr. Madden: Does my right hon. Friend agree that middle and upper income groups have benefited far more from the Budget than the poor, including widows, single-parent families, and low-paid workers with families? Would he agree also that these latter groups would benefit more from an increase in personal allowances than from a reduction in the basic standard rate of income tax? Can he indicate whether the child benefit is to be reviewed regularly in the same way as other long-term and short-term benefits?
    Mr. Sheldon: My hon. Friend says that most relief has been given to those at higher income levels. But he is, of course, aware of the changes that have been taking place over the past few years as a result of the higher tax rates that have been introduced. He may recall the figures I have quoted of the ratio between the net earnings of a person on average male industrial earnings and those of a man at, say, £25,000 a year. That ratio, after taking allowances into account has shrunk to less than four to one. I believe that this is the basic reason why my right hon. Friend the Chancellor of the Exchequer has been called the most egalitarian Chancellor this country has ever known, something of which we may be proud.
    Sir John Hall: Does not the Financial Secretary agree that the real problem affecting widows lies in the difference between the retiring ages of men and women? If women are to be required to retire at 60 and not 65, should not that be taken into account? Will he consider sympathetically and with action any representations that may be made in that regard during the Committee stage of the Finance Bill?
    Mr. Sheldon: The difference between the retirement ages of men and women is a matter that is being raised more often and representations are being received in greater volume. There are problems, such as the interaction between retirement age and the age at which increased tax allowances become available, and these and other complications will undoubtedly have to be dealt with in due course.

    Money Supply
    Mr. Watkinsonasked the Chancellor of the Exchequer if he is satisfied with the growth in money supply.
    Mr. Denzil Davies: Yes. The Government have shown their determination and ability to keep monetary expansion under control, and this has made possible the recent substantial falls in interest rates.
    Mr. Watkinson: Would not my hon. Friend agree that the growth in money supply even now is well below the target set in the Letter of Intent to the IMF? Would he not further agree that this will have disturbing implications for the economy in the latter part of this year, particularly for unemployment? Does the Chancellor of the Exchequer intend to take any steps to increase the growth in the money supply?
    Mr. Davies: I agree with the first part of my hon. Friend's supplementary question. The growth of the money supply is rising at present at a rate below the target of 9 per cent. to 13 per cent. which we wish to maintain. But I do not agree with him that this will make the recession worse. In fact, one of the components of the money supply figures is the figure for bank lending to the private sector. Recently, there has been very little bank lending to the private sector, which is one reason why the growth of money supply has been fairly low. However, with interest rates falling substantially, we hope that bank lending will increase, which in turn will increase the money supply and enable the growth to be kept within the target of 9 per cent. to 13 per cent.
    Sir G. Howe: Will the hon. Gentleman recognise that the present low growth of the money supply should certainly not be regarded as an

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    excuse for creeping towards expansion of the rate of growth of the money supply as the year moves on, and that to go down that course—even to go as far as the 13 per cent. upper limit set for next year—would be to stoke the fires of the next round of catastrophic inflation?
    Mr. Davies: I never cease to be amazed by lectures from the Opposition Front Bench about the money supply. Their record was appalling in that regard. My right hon. Friend and I have said that we mean to keep the growth within the target of 9 per cent. to 13 per cent. Also, as the right hon. Gentleman knows very well, the main indicator, as a result of our agreement with the IMF, is domestic credit expansion, and we mean to keep that within the ceiling imposed in that agreement.
    Mr. Pardoe: Will the Minister say what rise in average earnings between August this year and July next year would be commensurate with the money supply guidelines that he has just stated?
    Mr. Davies: This is not a matter that can be looked at in that way. We have said clearly that we regard the money supply as important. It is one important factor in ensuring that the rates of inflation come down, and we mean to keep the money supply within those limits. That is separate, to some extent, from any agreement that will be reached in relation to phase 3.
    Mr. Atkinson: Will my hon. Friend reconsider the answer that he has just given? As a Socialist, is he not horrified to have announced to the House that he and his colleagues in the Treasury are now satisfactorily keeping down the level of demand in slump conditions? Will he now, on behalf of the Government, say to the world that this Government dissociate themselves entirely from the money supply arguments that we heard advanced from hon. Members opposite, since there is now no relevant relationship between money supply and the rate of inflation and between money supply and any of the developments within our economy? The sooner Ministers at the Treasury release themselves from the dominance of the outmoded and outdated theories that seem to manipulate
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    this Government into slump conditions, the better we shall all be.
    Mr. Davies: I disagree with my hon. Friend. The Government are not keeping demand down to the money supply. What we are doing is ensuring that the money supply is kept under control. My hon. Friend asked me why, as a Socialist, I can support that kind of policy. I had always understood that it was not part of Socialist philosophy to print money, either. It is not part of the philosophy of the Labour Party. What we want to do is control the money supply and ensure that our production and productivity improve so that we can have real growth in this country.

    Incomes Policy
    Mr. Adleyasked the Chancellor of the Exchequer when he intends to open formal negotiations with the TUC on phase 3 of his counter-inflation incomes policy; and if he will make a statement.
    Mr. Arnoldasked the Chancellor of the Exchequer what progress he has made towards securing a third year of pay restraint.
    Mr. Joel Barnett: Discussions about pay policy after July 1977 have already begun. Both the Government and the TUC remain convinced of the need to avoid a wages explosion when the current round comes to an end.
    Mr. Adley: Does not the Chief Secretary agree that the present social contract is causing alarm and despondency to skilled workers and is proving fertile ground for industrial trouble makers? If he accepts that, does he agree that, unless phase 3 manages to solve both these problems, it will turn out to be nothing more than a public relations exercise between the Government and the TUC?
    Mr. Barnett: Of course there are problems with skilled workers and differentials generally. This has not grown up just over the last two years, although it has been made more difficult because we have had to concentrate on bringing down the rate of inflation generally. The problems of differentials have grown up over successive incomes policies over many years. I agree with the hon. Gentleman to the extent that the next phase of

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    incomes policy will almost certainly have to take account of, and be much more flexible to allow for dealing with, the problems of differentials.
    Mr. Arnold: Is it not the case that policies stringent enough to achieve the Treasury's own forecasts will have to be negotiated at a time when price inflation is running at the very high level of 16 per cent. and over? Is not Mr. Jones correct, therefore, in saying that it will be impossible to lay down centrally any kind of strict means for dealing with the matter if we are to overcome the problem of differentials to which the Minister has just referred?
    Mr. Barnett: I have noted the hon. Gentleman's reference to centralism. I assume that he took that straight out of the recent pronouncement by the right hon. Lady the Leader of the Opposition about leaving everything to be negotiated at local level. I am not sure that I would necessarily go along with that proposition. Certainly there are problems here, although the remarks often quoted as coming from Jack Jones do not take account of what he actually said. He stressed the need to continue the attack on inflation and warned against a wages scramble.
    Mr. Ioan Evans: In future discussions with the TUC, will my right hon. Friend look at the TUC's economic review for 1977 and accept some of the TUC's proposals to expand the economy, and will he make the reduction of unemployment the Government's main priority?
    Mr. Barnett: My hon. Friend can be assured that we look at the proposals that the TUC expresses in its economic review, but I am sure that he will recognise that it will not help anybody in this country if we expand the economy by expanding home consumption. The way to expand the economy is to improve our industrial performance and expand it in exports and import substitution. That is the way to improve our position, to increase demand and reduce unemployment.
    Sir G. Howe: Can the Chief Secretary help the country to understand exactly what stage has been reached in the dialogue that is taking place? Do the Government stick to the view expressed by the Chancellor that the conditional tax cuts
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    will not be made final until a satisfactory agreement on new pay policy has been reached? Do the Government also stick to the Chancellor's other view that he expects such an agreement to be reached well before the Finance Bill leaves the House? Will the right hon. Gentleman answer those two questions about the Government's intentions?
    Mr. Barnett: The right hon. and learned Gentleman knows how happy I am always to answer his questions or anybody else's. I assure him that, as my right hon. Friend the Chancellor said, the 2p reduction in the basic rate of tax is conditional upon achieving a satisfactory deal with the TUC on pay policy. It is our intention to ensure that that reduction in tax will be put forward to the House—I imagine that the Report stage will be the most appropriate time—on the Floor of the House.
    Mr. Prentice: Will my right hon. Friend bear in mind that many of us would like to see the Government and the TUC get a move on? Does not the result of the votes at the USDAW conference, the Scottish TUC conference and the Welsh TUC conference reflect the fact that the majority of working people in this country are sick and tired of inflation and want to see a genuine phase 3 with specific limits written into it? Will the Government take encouragement from those conferences and not be too discouraged by Mr. Gormley's pessimistic pronouncements and Mr. Jones's ambiguous pronouncements? May we see specific proposals at a fairly early date?
    Mr. Barnett: I assure my right hon. Friend that I take encouragement from wherever I can find it. As regards getting a move on with the negotiations, I am sure that my right hon. Friend will recognise that there are great problems here. There would be no point in settling a deal with the leaders of the TUC which was not generally acceptable to its members. It therefore entails some lengthy negotiations. I do not believe that it would necessarily be helpful to rush them.
    Mr. Donald Stewart: Does the right hon. Gentleman agree with the dictum of his right hon. Friend the Member for Huyton (Sir H. Wilson) that a policy of wage restraint can work for one year and, at a pinch, two? Does he accept that,

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    since prices have been allowed to soar beyond wage increases, there is no justification for conning the trade unions into a phase 3?
    Mr. Barnett: I do not accept that we should not seek to obtain a phase 3. I recognise that the problems of getting a phase 3 will be difficult. It has been difficult in the past to achieve that kind of situation. I do not seek to blame the trade unions or their members for all the problems that we face in this country. It would be foolish so to do. Equally, I am sure that they recognise that they will not increase their living standards by a wages scramble. That is why we are having negotiations with the TUC. There is an excellent relationship between us, and I am sure in my own mind that, given the appropriate amount of time, we shall come to a satisfactory agreement.

    Construction Industry (Tax Exemption Certificates)
    Mr. Ridleyasked the Chancellor of the Exchequer how many persons who have applied for No. 714 certificates have not been given a decision, to date; and how many who have been given a favourable decision have still not been given certificates.
    Mr. Robert Sheldon: At the latest count, on 14th April, about 47,000 applicants had not been given a final decision either way, although the great majority of them had been told why their applications could not at present be approved. It is not possible to say exactly how many successful applicants have not yet received their certificates, but on 14th April about 10,000 certificates were in the course of production.
    Mr. Ridley: Is not this one of the greatest administrative disasters to have befallen even this Government? Does not the Financial Secretary think that it is disastrous that he should be encouraging firms to pay sub-contractors gross on the strength of an Inland Revenue letter whereas the law explicitly makes cleat that that is against the law?
    Mr. Sheldon: The hon. Gentleman has sought to hold up the undertaking that had been given by this Government to end the lump. I make no complaint about that. But since our legislation is at present operating successfully without
    1480
    the calamities that the hon. Gentleman foresaw, with the vast majority of those concerned having received their certificates and with only 10,000 certificates in the course of production, which will take no more than two to three weeks, it is clear that the scheme is working well, and the House should welcome that fact.
    Mr. Ridley: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest opportunity.

  PRIME MINISTER (ENGAGEMENTS)
  Mr. McCrindleasked the Prime Minister what are his public engagements for 28th April.
  Mr. Michael Morrisasked the Prime Minister if he will list his engagements for 28th April.
  Mr. Pattieasked the Prime Minister if he will list his engagements for 28th April.
  The Prime Minister (Mr. James Callaghan): This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be holding further meetings with ministerial colleagues and others.
  Several Hon. Members rose
  Mr. Speaker: Order. I intend to call first the three hon. Members whose Questions were answered.
  Mr. McCrindle: Has the Prime Minister had time today to reflect on the slogan "Let's go with Labour"? With 5·9 per cent. unemployed, prices rising at nearly 20 per cent. and now 1 million days lost through industrial action last month, can the Prime Minister tell us where exactly it is that we are going with Labour, and will he consider not taking us there?
  The Prime Minister: I am glad to say that under the wise and beneficent guidance of this Government the country is going in the right direction, which is in marked contrast to the fortunes of the last Conservative Government. The minimum lending rate is steadily coming down. It is now, I believe, 3¾ per cent. lower than it was when the Tories left

  1481
  office, and that in itself must be some incentive for investment. I am glad to say also that the money supply is now under full control, in contrast to the great extravagance in which the previous Chancellor indulged. With those factors moving in the right direction, together with exports, and the reduction in building society interest rates, there is no doubt that we are moving along the path that I have explained so often, and progress is being made in the right direction.
  Mr. Michael Morris: Will the Prime Minister make time to speak to those exporters, remind them that he is still looking for export-led growth, and explain why his Government have cut back by 25 per cent. the joint venture schemes affecting the engineering industry, boat building, shoes and, indeed, almost every exporting industry, and also why he has more than quadrupled the prices of the supply of services from Government Departments to the nation's exporters?
  The Prime Minister: I think that I am correct in saying that exports went up by 3½ per cent. in the last quarter. That rate of increase—although I should like to see it higher, as everybody would—is an example of progress in the right direction. Encouragement was given to exporters in the Budget by the arrangements that my right hon. Friend the Chancellor announced for the non-taxation of expenses incurred when on overseas visits and in many other ways. The hon. Gentleman will find, if he consults exporters, that they believe that the Government have done a great deal to make exporting profitable and, so far as possible, easier than it was before.
  Mr. Pattie: Does the Prime Minister agree with the Lord President's assertion and vision of a Socialist republic in Britain—and, if so, by what date?
  The Prime Minister: My right hon. Friend has told me that the answer is "Not next week"
  Mr. Fitt: Will my right hon. Friend consider commenting at some time today on the serious situation which now exists in Northern Ireland and which is liable to deteriorate over the weekend, in that a number of forces, legal and illegal, are attempting to defy the wishes of the Gov-
  1482
  ernment and this Parliament? Will my right hon. Friend make clear that the Government will not allow themselves to be blackmailed or bullied by the forces now attempting to do so?
  The Prime Minister: I am ready to take the opportunity afforded me by this Question to say that the Government have considered this matter, both today and on earlier days. I have had discussions with the Secretary of State. There is no doubt that my hon. Friend is correct in saying that, if such a strike were to take place it would have the most serious impact on life in Northern Ireland. It should be noted by the people of Northern Ireland that the proposed strike has met with widespread condemnation from many who normally are not in association with one another. I believe that every major political party, perhaps with the exception of the party led by the hon. Member for Antrim, North (Rev. Ian Paisley), has condemned the proposed strike.
  I ask those who are proposing it to discontinue their efforts and not press ahead with the strike. If it goes ahead, I ask those who are inconvenienced by it to get to work if they can. Undoubtedly; there will be very considerable interruption, and probably some hardship, if essential services are dislocated and interfered with. Of course, the Government cannot totally prevent that hardship, but I want the House and the people of Northern Ireland to know that we shall take all possible steps to minimise that dislocation and to keep essential services going in order that those who strike in this way cannot by that action bring about the con sequences which they wish.
  My right hon. Friend the Secretary of State will be going to Northern Ireland tomorrow. I ask all the people in that country, of whatever persuasion, to recognise the seriousness and adverse consequences of such a strike and to do their best either to thwart it or, if it takes place, to overcome it and to pursue the normal life of the Province as far as possible.
  Mrs. Thatcher: May I briefly support what the Prime Minister said?
  May I then revert to the question asked by my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle)? If the Prime Minister is so pleased about the way things are going, will he explain why, ever since the Labour Government

  1483
  have been in office, their record on inflation is four times as bad as that in West Germany, twice as bad as in France, and even worse than that in Italy?
  The Prime Minister: We have debated these issues very often and, no doubt, will continue to do so. I repeat again that the rate of inflation is the most important problem with which the Government have to deal. The steps we have taken are overcoming that high rate, as I think the Opposition know. Inflation will undoubtedly fall again during the second half of this year and the first half of 1978—[HON. MEMBERS: "When? How?"] We shall have to wait and see, shall we not? As the vote of no confidence failed, we certainly will wait and see.
  Mr. Molyneaux: With regard to the rumours circulating in Northern Ireland, is the Prime Minister aware that we in the Ulster Unionist Party are pledged to operate within the parliamentary processes? Is he aware, further, that we have already dissociated ourselves from all the proposed and rumoured breaches of the law and from any form of unconstitutional or illegal activity?
  The Prime Minister: I am aware of that, and I am sure that the people of Northern Ireland will take note of what has been said today across what I might call the divide—that is to say, that persons of all opinions and all creeds are taking the view that a strike would be most harmful to the people of Northern Ireland, and, what is more, part of it certainly could be illegal if there were any attempt to use para-military action.
  We could be facing a most grave situation in Northern Ireland. I am very happy that so many hon. Members of all persuasions are ready to support the efforts that the Government must make, both to overcome any attempt at bringing down lawful authority and to ensure that the life of the population goes on.

  SOUTHERN AFRICA
  Mr. Townsendasked the Prime Minister if he has any plans to visit Southern Africa.
  The Prime Minister: I have at present no plans to do so.
  Mr. Townsend: In view of the Prime Minister's recent grim warning about Soviet imperialism in Southern Africa, how does he account for the remark of the Foreign Secretary to the House of Commons on 19th April that the Soviet Union had every right to be there?
  The Prime Minister: There is no disparity between our remarks. The Soviet Union is a super-Power and it has as much right as anybody else to send its diplomatic representatives anywhere in the world. What we object to is the introduction of armed forces in order to try to influence one side against the other. I do not wish to be offensive to the hon. Gentleman, but I think that nitpicking by seizing upon particular phrases from what is known to be the broad approach of Her Majesty's Government will not do any good.
  Mr. John Mendelson: Will the Prime Minister accept that there will be widespread support for the useful initiative of the five Ambassadors, including the British Ambassador, when they intervened recently with the Prime Minister of South Africa on the question of Namibia? Does my right hon. Friend agree that it might be the right time for him—either alone or, again, with the other four Powers—to bring home to the Government of South Africa the fact that one of the most essential contributions that they could make to improving the situation would be to give up their racialist policy and allow more equality to all people in that land?
  The Prime Minister: I am obliged to my hon. Friend. The British views about this matter have been put both individually and, as my hon. Friend said, in conjunction with other ambassadors on a number of occasions to the South African Government, most recently on 7th April. Our exchanges have not, of course, been published, but I think that the requirements for a settlement which will meet international acceptance are well known. They were laid down in the Security Council resolution, and include territory-wide free elections, that those elections should be carried out under international supervision, and that all political parties, including the South West African People's Organisation, should be allowed to participate.
  Mr. Rifkind: On the question of international supervision, is the Prime Minister aware of reports that, while Mr. Vorster would be unwilling to have United Nations supervision of any elections in South West Africa, there are indications that he would be willing to consider supervision by the Western Powers in the Security Council? If that becomes an offer to the Western Powers, can the Prime Minister indicate what the British Government's attitude would be?
  The Prime Minister: At the moment that is a hypothetical question. Clearly, we should be willing to support any effort to ensure that the elections would be completely free and known to be so. I think that we must get the support of countries in Africa if we are to take part in this exercise, for suspicion breeds faster in that continent than almost anything else. I should not rule it out, but I think that I should have to make it a condition that there should be acquiescence in what was being done.

  ROXBURGH
  Mr. Skinnerasked the Prime Minister if he will pay an official visit to Roxburgh.
  The Prime Minister: I refer my hon. Friend to the reply which I gave to the hon. Member for Mid-Sussex (Mr. Renton) on 7th April.
  Mr. Skinner: When he meets the Leader of the Liberal Party, will my right hon. Friend make it clear to him that there are very serious misgivings within the Labour movement about the pact with this discredited bunch and that the party believes that the Liberals would not dare oppose another motion of no confidence in the Government, because they are now electorally impotent, even if they were not before? Will my right hon. Friend also tell the Leader of the Liberal Party that he does not agree with a permanent incomes policy and that he will also not agree with, or be naïve enough to accept, the idea that he will transfer the proposed petrol tax revenue to beer?
  The Prime Minister: I am sure that there are certain reservations in some people's mind about the agreements, but I warn my hon. Friend that he is out of tune with the Labour movement if he
  1486
  really believes that there are substantial misgivings because my correspondence, together with the resolutions that I am receiving from constituency parties, shows that for once he is not correct about this.
  Regarding incomes policy, I shall be happy to discuss that with the Leader of the Liberal Party if he wishes—[Interruption.] He is entitled to discuss it with me. If he intends to support us in the House of Commons, why should he not discuss it with me? As regards petrol tax, some people have got to be pretty careful. To make a hole of £450 million in the Budget, which they will be able to do only if the Conservative Opposition behave irresponsibly, will mean—[Interruption.] No, I am not threatening anyone. What I am saying is that it is very difficult for the Opposition on one day to ask me to follow President Carter's example and on the next to vote against the petrol tax.
  Mr. David Steel: May I repeat to the Prime Minister that, although we shall just have to agree to differ on the issue of petrol, I should be very happy to discuss that matter with him in my constituency? Is he aware that I should be very happy to see the hon. Member for Bolsover (Mr. Skinner) come to my constituency and speak for my Labour opponent at the next General Election?

BUSINESS OF THE HOUSE
Mrs. Thatcher: May I ask the Leader of the House whether he will state the business for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): Yes, Sir. The business for next week will be as follows:
MONDAY 2ND MAY—Supply [15th Allotted Day]: until about 7 o'clock there will be a debate on rural transport, and afterwards on the construction industry.
Remaining stages of the Redundancy Rebates Bill.
TUESDAY 3RD MAY—Second Reading of the Criminal Law Bill [Lords] and a debate on Messrs Agee and Hosenball.
WEDNESDAY 4TH MAY—Supply [16th Allotted Day]: a debate on the Royal

1487
Air Force on a motion for the Adjournment of the House.
Motion relating to the Carriage of Goods (Prohibition of Discrimination) Regulations.
THURSDAY 5TH MAY—Debate on the Fourth Report from the House of Commons (Services) Committee on the size of Hansard.
Afterwards, a further debate on sport and recreation.
FRIDAY 6TH MAY—Private Members' Bills.
MONDAY 9TH MAY—Progress in Committee on the Finance Bill.
There is, I believe, Mr. Speaker, some interest in the proposed date of the Spring Recess. The present intention is that the House should rise on 27th May and return no sooner than 8th June. I hope it will be possible to delay resumption until 13th June, but that will depend on the progress and state of business.
Mrs. Thatcher: May I ask the Lord President about Thursday's business? Is it necessary to have another debate at the present time about the size of Hansard? Would it not be more sensible to have a debate on agriculture, the need for which is becoming urgent? Also, will the right hon. Gentleman soon provide a day for a debate on the Helsinki Agreements, particularly before they come up for consideration in Belgrade?
Mr. Foot: On the last point, I shall consider the representations made by the right hon. Lady about a debate on the Helsinki Agreements, but without making any commitment about time. As for a debate generally about agriculture, that would be an appropriate subject for a Supply Day if the Opposition wanted a debate. Many of our previous agriculture debates have been on Supply Days, but I cannot say that we shall have such a debate on Thursday.
The right hon. Lady suggests that it is unnecessary to have a further debate on the size of Hansard. The resolution passed by the House asked that the Government should make a fuller report to the House than had previously been made by the Services Committee. If this change to Hansard is to be made, the
1488
House has to give authorisation for it, and therefore we are obeying the desires of the House in putting down the motion for next Thursday.
Mr. Spearing: Would not my right hon. Friend agree that "Size of Hansard" may be a misleading description for next week's debate, and that the ambit and, even more, the future of Hansard might be more appropriate?
Does my right hon. Friend recall that on Friday last the motion relating to the EEC fell through lack of a quorum and therefore still stands on the Order Paper? Is it his intention to bring it back so that the House is able to vote on this important matter relating to the free movement of dentists within the EEC?
Mr. Foot: The House could have voted on that motion on Friday. I know that there has been some criticism by my hon. Friend and others of the Government for bringing it forward on a Friday, although we did it partly in response to other representations that had been made by my hon. Friend, who wished to have a proper interval between a debate in the Standing Committee and the matter being referred to the House. Therefore, I believe that what we have done in this case will have to stand. I know that my hon. Friends still have criticisms about the whole way in which EEC legislation is dealt with, and the Government will consider the situation for the future. Therefore, I cannot promise my hon. Friend that we shall be able to bring the matter forward more quickly.
My hon. Friend referred to the debate on the size of Hansard, and it may be that other questions apart from the size of Hansard are involved—I am not denying that. There is the report of the Services Committee on the subject, for example. But the resolution of the House asked that the Government should present to the House fuller information on the whole of this subject, and that is what we have done. We are now providing time for the House to debate it, and I think that that is a proper way for us to proceed.
Mrs. Chalker: How soon does the right hon. Gentleman feel that we can have a debate in the House on the progressive implementation of the principle of

1489
equality of treatment for men and women in social security in Europe?
Mr. Foot: I cannot promise an exact date, but I will have a look at the presentations that the hon. Lady makes on the subject.
Mr. Loyden: Will my right hon. Friend discuss with the Secretary of State for Industry the question of when the report of the NEDC on the telecommunications industry will be before the House? In view of the importance of this matter in relation to employment generally throughout the telecommunications industry, will he provide time to discuss it?
Mr. Foot: I shall see what possibilities there are for providing time when the report comes forward and my right hon. Friend makes the statement about it. As my hon. Friend knows, immediately this question arose the Prime Minister took action about it. We shall see whether a debate is the most desirable way of proceeding after a statement has been made.
Mr. Michael Morris: Will the right hon. Gentleman confirm that we are to have an early debate on the statement by the Secretary of State for the Environment on the new towns? Will he consider linking with it the aspect of health service provision in the new towns?
Mr. Foot: These are all possibilities for debate, but I must remind the hon. Gentleman and others who put similar questions that the main possibility for debates in the coming weeks derives from Supply Days, and that that is partly what Supply Days are for.
Mr. Greville Janner: Will my right hon. Friend say when Lord Thomson is likely to return from his Commonwealth consultations and when we may expect a statement and a debate on the forthcoming Commonwealth Prime Ministers Conference and who is likely to attend it?
Mr. Foot: I shall see whether a statement should be made upon the subject. The Government have no proposal for a debate on the subject immediately, but I will consider my hon. and learned Friend's suggestion.
Mr. Hugh Fraser: While the Government have some time on their hands, will the right hon. Gentleman seriously consider holding before the Summer Recess
1490
a two-day debate on the whole problem of energy in this country, with all the various aspects thereof?
Mr. Foot: I appreciate the desirability of having a debate on energy, and debates on many of the other subjects that have been raised, but I repeat that many of these are obviously topics that could take place in Supply time. I must correct the right hon. Gentleman when he says he thinks the Government have a lot of time on their hands. The House will have plenty of work to be fulfilled if we are to carry out our present programme before the Summer Recess.
Mr. Bryan Davies: Now that the forces of the capital market are dictating a monopoly in London's evening papers, will my right hon. Friend confirm that the Opposition are seeking an early Supply Day to debate the freedom of the Press so that they can pursue this subject with the same ferocity as they pursued the issue of the closed shop?
Mr. Foot: I have not received any such representations. However, we shall all watch with interest the subjects for debate chosen by the Opposition.
Mr. Watt: Will the Leader of the House consider using Thursday next and the second week after Whitsun to make progress on the devolution Bill? Is the Leader of the House aware that in Scotland he is rapidly acquiring the nickname "Mac-Nero"?
Mr. Foot: That is the first that I have heard of it. However, as I have said to the hon. Gentleman previously, we are having discussions about how we should proceed on the devolution Bill. The Government are determined to proceed with it, and I do not think that the hon. Member should give up hope on this matter as readily as apparently he has. We have not given up hope and are determined to get a devolution measure on the statute book.
Mr. Peyton: May I repeat the question raised by my right hon. Friend the Leader of the Opposition concerning a debate on agriculture in Government time? Is the right hon. Gentleman aware that the fact that the Opposition have been outstandingly generous—as the right hon. Gentleman acknowledged—in giving time for discussion on agriculture

1491
does not mean that we shall always be so? The Minister of Agriculture has a lot to report and explain. Will the right hon. Gentleman now give time, because it is more than his turn?
Mr. Foot: I am certainly not being churlish about the time that has been provided by the Opposition. What the right hon. Gentleman says has been the case in many respects. However, what I want to underline to the right hon. Gentleman is the fact that many important agriculture debates have taken place in Opposition time—not merely in the life of this Government but in the life of previous Governments. That is a perfectly reasonable proposition. As for having a debate, I am sure that there is nobody more eager to have such a debate than my right hon. Friend the Minister of Agriculture who, of course, will be able to deal with these matters extremely effectively. I should have thought that the Opposition might be less than eager to have a debate and that that, perhaps, was why they have not chosen it as an Opposition subject.
Mr. Hooley: When is the House to have an opportunity to debate the extremely important Flowers Report on the problems of nuclear pollution?
Mr. Foot: I cannot give any indication to my hon. Friend when that will be, but obviously that is one of the subjects that qualify as candidates for consideration. However, I repeat that we have nothing like the amount of time available that some hon. Members seem to suggest.
Mr. Michael Latham: Turning to Monday's debate on the construction industry, will the Minister concerned be taking the opportunity not only to confirm that the Lib-Lab pact has killed off the "Direct Labour Bill Mark I" but that it has also killed off the "Mark II" Bill which consolidated existing powers?
Mr. Foot: The hon. Gentleman has got hold of the wrong end of the stick entirely. That Bill will be brought forward.
Mr. Spriggs: Will my right hon. Friend explain how the time for the business of Thursday night, relating to sport and recreation, is to be used? Will it be a
1492
short debate? Shall we have Front Bench speakers opening and closing the debate?
Mr. Foot: I hope that my right hon. Friend the Minister responsible for sport will be the Front Bench speaker in the debate. What we have done is to respond to the representations, made by my hon. Friend and my hon. Friend the Member for Newport (Mr. Hughes), that we should have an early debate on this subject because the previous one was truncated. I hope that we shall have most of the day for the discussion because it ought to be possible to deal with the question of Hansard—since the House has already had one debate on that matter—fairly speedily. I do not mean within a few minutes. Obviously some hon. Members may wish to debate the matter. However, I hope that we shall have a good deal more than half a day on sport and recreation. If that were not found to be satisfactory, we could perhaps try to get extra time after 10 o'clock.
Mr. John Davies: When are we to get on with direct elections to Europe?
Mr. Foot: The House had an opportunity of a two-day debate on the matter. The Government will take into account fully what was said in that debate, as we promised we would.
Mr. Flannery: Will my right hon. Friend accept that, as Member of Parliament for the Sheffield, Hillsborough constituency, I come under a great deal of pressure because we have a semi-final there every year? Will he also accept that that part of my constituency was like a camp under siege last Saturday? Although he has announced a debate on sport and recreation, may I ask him to let us have time for a full-scale debate on soccer hooliganism and vandalism, because it is now a national problem and there is pressure throughout the country for such a debate?
Mr. Foot: I understand that my right hon. Friend the Home Secretary is having a conference this afternoon on the subject. The Government are aware of the feelings of my hon. Friend and of many other hon. Members about it. I believe that it would be possible to raise aspects of it in the debate arranged for next Thursday. If, after that, it seems desirable to have some further discussion, we shall have to consider the matter, but I cannot

1493
make any promise. Certainly my hon. Friend's representations will be brought to the Minister's attention.
Mr. Aitken: Will the right hon. Gentleman try to find time as soon as possible for a full-scale debate on the Government's new proposals on citizenship, together with the related subject of immigration policy? Does he realise that, in giving the size of Hansard precedence over these and many other important subjects, he is revealing a most bizarre sense of parliamentary priorities?
Mr. Foot: I can understand what would have been said to me by the hon. Member and many others if the Government, having published a lengthy and complicated statement on the nationality proposals and the rest, had put the matter down for debate next Thursday as the hon. Gentleman has suggested. It would have been a ridiculous proposition. Of course that matter will have to be debated, but I think that everyone will agree that it is an extremely complicated question. The complexities are set out in the Green Paper that the Government have published, and after there has been time for consideration there will have to be proper time for debate in the House, but to have put it down next Thursday would have been an absurdity.
Several Hon. Members rose
Mr. Speaker: Order. I propose to call five hon. Members who have been standing, and, unless there is a Front Bench intervention, no one else.
Mr. Molloy: Will my right hon. Friend be prepared to consider the re-allocation of time in the House for the discussion of London affairs? At the moment, as opposed to other regions, we have the opportunity to discuss Greater London affairs only when we discuss a GLC Bill. That is not only unfair but it is an inefficient way for the House to examine a great region's affairs, as opposed to those of other regions in the country.
Mr. Foot: I fully accept that my hon. Friend wishes to speak for London on every occasion that is open to him, and he does it very effectively. But I think that London gets its fair share along with other parts of the country. However, we shall look at representations that have been made. London Members,
1494
like those from other regions, can have debates upstairs, a procedure that can also assist the House.
Mr. Budgen: When will the right hon. Gentleman allow a debate on immigration? It was on 5th July last year that we last had a debate on immigration. It is a far more urgent and important subject even than British citizenship to many people in this country. Is it not a disgrace that the Home Secretary has called for a discussion on British citizenship when he has denied us the right to discuss immigration for so long?
Mr. Foot: I do not think that the hon. Gentleman should use the word "disgrace" in that connection. I also think that he should withdraw any suggestion that my right hon. Friend the Home Secretary is denying possibilities of a debate. What the Home Secretary has published on the general subject of nationality in the Green Paper will give rise to a very widespread debate. There must also be some discussion in the House on the Franks Committee Report, and there are other immigration matters that I agree should be debated in the House. Again I say that it would not be altogether out of place if occasionally the Opposition selected the subject of immigration for a Supply Day debate.
Mrs. Renée Short: Will my right hon. Friend say when the Select Committee on Procedure is likely to bring forward a report on the reform of the sitting hours of the House? If it does not do so soon, will he himself make proposals so that they can be debated before the Summer Recess?
Mr. Foot: I do not think it would be sensible for the Government or anyone else to make proposals in the next few weeks about our sitting hours, because that matter involves the whole principle of how the House of Commons operates. That is why it has been referred to this longer-term Procedure Committee. The Committee will make its report in due course. I do not think that it would be wise to interrupt its work and ask it for a special report on the aspect of the matter raised by my hon. Friend, because it touches on so many others.
Mr. Baker: As a former editor of the Evening Standard, would the Lord President provide time next week for a

1495
debate upon what is happening in Fleet Street? Would he agree that when Fleet Street next calls for more open government and the full disclosure of all facts in a given situation, condemning decisions behind closed doors by a handful of men, it might live up to the standards which it advocates?
Mr. Foot: I have a good deal of sympathy with what the hon. Gentleman has said, and I hope that his observations will be printed on the front page of every newspaper tomorrow. I believe that it would be a tragedy, not only for the newspaper industry but for London, if the Evening Standard were to disappear from the streets of London. There are great difficulties, and it is not a question that the Government can decide. Others have the power to decide these matters.
Mr. Newens: At what time may we expect the debate on Messrs. Agee and Hosenball to begin, and how long has been allocated to it? Can my right hon. Friend assure us that there will be adequate opportunity for Back Benchers to take part, which would not be possible if there were Front Bench spokesmen from both sides in a short debate?
Mr. Foot: The time we were proposing to allocate is the time suggested on previous occasions, that there should be a two-hour debate. I quite agree with my hon. Friend that it would be intolerable if the whole or a great proportion of that time were eaten up by Front Bench speeches, but I do not believe that that would be the intention of Front Bench speakers on either side.
Mr. Forman: Will the right hon. Gentleman accept that it would be a welcome change for the House to devote more time to some of the long-term issues of both national and international importance? In that connection, will he reconsider the answer he gave to my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) about a debate on energy policy, so that we may discuss not only the conservation but the nuclear proliferation aspects as well?
Mr. Foot: I recognise that these are extremely important matters which ought to be debated in the House. The Government seek to arrange that we have debates on many wide matters, although,
1496
naturally, Government debates are, in the main, although not entirely, given over to legislative proposals. [Interruption.] I hear an interruption from some quarter about Hansard. Again, all I can say about the Hansard debate is that the Government are responding to a motion passed by the House of Commons itself. On nuclear energy questions, a very important matter, the Opposition have considerable opportunities for proposing subjects for debate in the House.
Mr. Ioan Evans: When does my right hon. Friend propose to have a debate on the Bullock Report on industrial democracy and on the Annan Report on the future of broadcasting? Will he insist that we debate those issues before the Government formulate their views?
Mr. Foot: I agree that there must be further debate on both those subjects before any legislation is brought forward. The Government are committed to carry through legislation on industrial democracy in this Parliament as one of their major measures. We must first have discussion in the House in order to shape that legislation. That is what we shall do.
Second, before any action is taken on the broadcasting report there will have to be a debate in the House, but I cannot say that that will take place in the near future.
Mr. David Hunt: Will the Lord President find time for the House to comment upon his speech about a Socialist Republic? If he made that speech, would he like to take this opportunity to explain why he made it—if possible, before the Jubilee celebrations begin—and whether he proposes to participate as Lord President in those celebrations?
Mr. Speaker: Order. Not this day.
Mr. Foot: I would not seek to stray out of order, Mr. Speaker, by replying to the last part of the question. The first part is in order since it refers to an Early-Day motion:
[That this House notes the call by the Lord President in a speech at Ashfield, for the creation of a Socialist Republic in Britain; totally rejects this suggestion; and calls on the Prime Minister to indicate if the abolition of the Monarchy is now official Labour Party policy.]

1497
Since it appears that the wording of that motion is based on a remark of mine wrenched from its context, and since it further appears to be based on a hearsay report by somebody at least 200 miles from the meeting where I was making the speech, I think that the motion would qualify as just about the most infantile Early-Day motion that has ever been put down—and that is saying something.
Mr. Rhodes James: The right hon. Gentleman will recall that last week representations were made to him by the hon. Member for Don Valley (Mr. Kelley) and myself about the need for an early debate on energy policy, which has now been re-emphasised by several of my right hon. and hon. Friends. May I urge the right hon. Gentleman to give this subject considerable priority, so that we may have an early debate?
Mr. Foot: I accept, of coure, that it is an extremely important matter. Some of these questions will be touched upon in other debates to come. It is conceivable that some hon. Members might refer to energy policy when we debate petrol—but who knows? I am not saying that that deals with the whole situation, but I repeat that the business of the House is arranged in such a manner that the Opposition have varied opportunities for raising matters in debate, and I think that hon. Members should make some of their representations—not all of them—to their own Front Bench.
Several Hon. Members rose—
Mr. Speaker: Order. It must not be taken as a precedent, but I am prepared to call two hon. Members who were very late in rising. Mr. Costain.
Mr. Costain: As the Leader of the House was in the Chamber when the Prime Minister was unable categorically to deny that it was Labour Party policy to abolish the Monarchy—except "Not next week"—will he arrange in the appropriate manner for the Prime Minister to make a serious statement on this matter on Monday, before Her Majesty comes?
Mr. Foot: I do not think that infantile propositions need serious replies.
Mr. Kelley: In view of the fact that the Cabinet has been considering—recently, I understand—the future of the turbo-generating industry, will my right hon. Friend make facilities for an announcement to be made during the next few days?
Mr. Foot: I cannot say within the next few days but, obviously, if further agreements are reached about it, an announcement would have to be made in the House.

BALLOT FOR NOTICES OF MOTIONS FOR MONDAY 16th MAY
Members successful in the Ballot were:
Mr. Michael Mates,
Mr. F. A. Burden,
Mr. Charles Morrison.
Hon. Members: Oh!
Mr. Speaker: Order. It is all quite impartial.

BUSINESS OF THE HOUSE
Motion made, and Question proposed,
That, at this day's Sitting, proceedings on the Motion standing on the Order Paper in the name of Mr. Chancellor of the Exchequer relating to the Committal of the Finance Bill shall not be subject to the provisions of Standing Order No. 40(3) and may be proceeded with, though opposed, for a period of three-quarters of an hour aften Ten o'clock or after they have been entered upon, whichever is the later, and at the end of that period Mr. Speaker shall proceed to put any question necessary to dispose of those proceedings.—[Mr. Frank R. White.]
3.58 p.m.
Mr. George Cunningham: I am sorry that I shall not be able to speak for as long on this motion as the subject matter requires. If I were to do so, I might end up in St. Mark's Hospital in my constituency, or somewhere like that.
This is, of course, a debatable motion, and the debate could go on until 10 o'clock. I am not sure, on looking at it, that it is appropriate that we should break the normal rules, which would not allow us to consider this kind of business after 10 o'clock. It is suggested that, although debate on the Finance Bill would normally continue after 10 o'clock, we should allow the motion relating to the normal decision about which parts of the

1499
Finance Bill should be considered in Standing Committee and which parts should be considered here on the Floor to be considered after the appropriate time. I am not sure that that is wise.
It is one of the failures of our procedure in the House that we have no normal method for suspending Standing Orders. What this motion does, in effect, is to suspend Standing Orders, and we do it often. What we ought to have in Standing Orders is a regular and proper method for exceptional circumstances. If we had had that, we should not have the hoo-hah that we went through last year when we had to suspend Standing Orders to deal with the hybridity question on the Aircraft and Shipbuilding Industries Bill. We make no distinction between suspending Standing Orders as a sort of normal operation, which we do to allow any opposed business other than finance business to be taken after 10 o'clock, and suspending Standing Orders because of some really exceptional circumstance.
The Committee of the House which have been charged with looking at our procedures ought to consider new ways by which, let us say, something like a larger than 50 per cent. figure of Members voting could suspend normal rules without actually taking the Standing Orders and putting them out of commission temporarily. In my view, this motion should not pass completely unopposed, and I intend to oppose it, if no one else does.
Question put:—
The House proceeded to a Division—
MR. FRANK R. WHITE and MR. HARPER were appointed Tellers for the Ayes, but no Member being willing to act as Teller for the Noes, MR. SPEAKER declared that the Ayes had it.
Question accordingly agreed to.
Ordered,
That, at this day's Sitting, proceedings on the Motion standing on the Order Paper in the name of Mr. Chancellor of the Exchequer relating to the Committal of the Finance Bill shall not be subject to the provisions of Standing Order No. 40(3) and may be proceeded with, though opposed, for a period of three-quarters of an hour after Ten o'clock or after they have been entered upon, whichever is the later, and at the end of that period Mr. Speaker shall proceed to put any question necessary to dispose of those proceedings.

ORDERS OF THE DAY

  FINANCE BILL
  Order for Second Reading read.
  4.3 p.m.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move, That the Bill be now read a Second time.
  At the time of the Budget last year, production in the main industrial countries had been rising rapidly and it was also recovering fast in the United Kingdom. We made our Budget judgment on the assumption that this growth would continue. We were not alone in this assumption.
  We now know that in the middle of the year growth in the major economies slackened, and it fell in the United Kingdom. The balance of payments deficit widened, and there were doubts about whether we could finance our planned level of public expenditure without stimulating inflation again. There was pressure on the exchange rate and a large withdrawal of officially-held balances.
  Measures to counter this crisis included the announcement of cuts in public expenditure for this year. We also made clear our determination to maintain firm control over monetary aggregates. But, before this could be achieved the exchange rate for the pound fell rapidly, bringing in its train a massive additional rise in import prices, a rise of which we are all too conscious now as it comes through into retail prices.
  The measures announced in December have been successful in re-establishing conditions in which we may look forward to an improvement in the economy, with a more stable pound, lower interest rates—Minimum Lending Rate has fallen from 15 per cent. to 8¾ per cent. over the last six months—and an improving balance of payments, both on capital and current account.
  I mention these events because we are counselled by some to introduce more expansionary measures which could be justified only if our prospects turned out to be better than they presently appear to be. It is vital that our fiscal policies should not prejudice the stability and confidence we have achieved. We must

  1501
  avoid another setback such as we suffered last year, a setback which inevitably has postponed our return to more stable prices and a higher level of employment.
  Against that background and on present information, we believe that this Bill strikes the right balance between the scope for stimulating the economy and the continuing need for firm financial and monetary control. This balance cannot appeal to those who have been disappointed, because the benefits proposed in the Budget do not, and cannot, compensate everybody for the fall in their individual incomes which has followed the fall in national income over the past three years.
  If, in the event, it emerges that there is scope for further fiscal relaxation, the remedies would be by no means as drastic or painful as the measures necessary to resolve another crisis of confidence, a crisis which could easily follow an ill-considered attempt to expand activity faster than our real economic position permits.
  This has been a cautious Budget. I do not apologise for that, for, in the light of experience in this country over many years, it would be the height of folly to plan as has been done by successive Governments, on over-optimistic assumptions.
  I now turn to our view of our economic prospects. As long as our inflation rate remains excessive and our external balance in deficit, we cannot sustain a significant expansion of public spending or personal consumption.
  The sectors providing the main contribution to growth will be manufacturing investment, North Sea oil and gas, and net exports of manufactures. The most important sector for employment and potential growth in output this year is industry. Many of the conditions are right for increasing the share of British industry in markets both in the United Kingdom and abroad. The rise in import costs occasioned by last year's depreciation of the pound has largely been absorbed and the rate of inflation in industrial input prices is falling. Labour costs under the incomes policy have been rising more slowly this year than among many of our competitors. Exports are often more profitable than sales in the depressed home market; spare capacity
  1502
  exists for taking advantage of opportunities.
  The vital factor is the extent to which advantage is taken of these opportunities. It is no use having the potential to produce and sell more if that potential is not realised. Last year, our trade performance was disappointing. After raising our share of world trade in manufactures in 1975, we appear to have lost some ground in 1976.
  Exports of goods and services for the United Kingdom are expected to rise at 5½ per cent. in volume between the first halves of this year and next. These may possibly be considered cautious assumptions; certainly the right conditions exist for us to better the performance assumed, and we should be very pleased to see these assumptions confounded by a surge in production as British industry regains ground from its competitors. Full employment and a substantial rise in living standards in Britain depend on success of this kind.
  But no Finance Bill can ordain these things. Its measures can only strengthen conditions in which an improvement in industrial output, net exports and living standards can occur, and that is what this Bill aims to do.
  Industry needs to press ahead with its planned increase in investment and to take full advantage of opportunities to consolidate and expand its export markets; and the banking system must concentrate on providing industry with the financial support it needs. At the same time, it is essential that people at work continue to moderate their pay increases, and this means that the TUC and the Government must reach a further pay agreement for the period after 31st July when the current agreement runs out.
  I was gratified to note that the right hon. and learned Member for Surrey, East (Sir G. Howe) agreed with what I have just said—at least, I think he agreed with it—because I saw a letter he wrote to the Chairman of the Trade Union Advisory Committee of the East Surrey Conservative Association. I assume he manages to find the odd Conservative trade unionist in East Surrey. I understand why he did not write to any in South Wales, for example—
  Mr. Eric S. Heffer: Or Liverpool.
  Mr. Barnett: Or Liverpool. There was some doubt about what the right hon. and learned Gentleman's letter meant amongst those journalists who commented on it. Ian Aitken wrote in The Guardian on Monday:
  "However, in a passage of more than usual opacity, Sir Geoffrey went on to suggest that a Tory Government might be forced to set some kind of overall limit to the amount of money the nation's economy could afford in pay increases."
  That is a little more than has been said previously by any Conservative Front Bench spokesman. I imagine he had to be a little opaque if he was not to upset some of his right hon. and hon. Friends. Ian Aitken went on:
  "Sir Geoffrey's words seemed likely to be studied with anxious, if puzzled, care by trades union leaders as well as Tory trade unionists"
  I am sure it will be read with great interest by many hon. Members, but we can at least assume, as the right hon. and learned Gentleman has not contradicted me, that the Conservative Front Bench is now in favour of our achieving a pay agreement with the TUC.
  I know that many workers are restive about the impact of the current pay policy. It is natural that they should be, at a time when living standards are under severe pressure. I can well understand that this makes many of them wary about a further year's pay agreement. But this wariness is misguided if it stems—as I think it commonly does—from the belief that pay policy is the sole cause of the pressure on living standards.
  The real reasons why living standards are under pressure are much more complex. Over a number of years, world developments and our own poor industrial performance have made our imports more expensive in relation to our exports: that is to say, the world terms of trade have been turning against us. In the long term, the only way to compensate for this is by increasing our real output at home, and particularly that part of it aimed at export markets and import substitution. Other countries have done this. For too long Britain has not. As a result, our problem has been not simply that which confronts all Governments of how to divide the national cake. There has actually been less cake.
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  We can meet this situation for a time by persuading what might be called "the international baker" to let us have more cake on the slate. But the time comes when we simply must face the underlying reality of our situation. Eventually, the exchange markets will in any case bring this reality home to us—which is exactly what they did last year.
  It is the aftermath of that reaction, the impact of depreciation on prices, which has made inflation run ahead of increases in wages. Had there been no pay policy, domestic inflationary pressures would have been that much greater, and these would merely have added to the pressures arising from depreciation. Workers might have had bigger cash incomes, but they would simply have faced still higher prices.
  The painful adjustment to our living standards was inescapable. It is the achievement of pay policy that the adjustment has taken place at lower rates of inflation. That is what pay policy is about—cutting inflation down below what it would otherwise be.
  There can be no pretence that, when the current pay round comes to an end, there is some miraculous route through a wages scramble to higher living standards. Living standards are not just a matter of cash. That is a wholly shortsighted view. The only way to secure rising living standards for the future is to develop the industrial strategy to provide a foundation for expanding real national output. Until we do that, there is no choice but to moderate the cash increases in our pay. If we do not, higher pay can be secured only at the cost of higher prices and more unemployment.
  Mrs. Barbara Castle: I appreciate that there is not as much cake to distribute as we should like, but has it not always been part of the Labour Government's policy to protect the weakest members of the community? Can my right hon. Friend tell us when either he or his right hon. Friend will announce the details of the next uprating?
  Mr. Barnett: As my right hon. Friend knows—indeed, as I said in my Budget speech—we shall maintain our commitment to an uprating in pensions and short-term benefits. It will be made at

  1505
  the appropriate time, and it will be in line with our commitment.
  Mr. Patrick Jenkin: That really is not good enough, because the Secretary of State for Social Services has told me that he has made his review—as he was bound to do—under the statute. The question of the uprating, as we now know from the court case of Metzler v. Department of Health and Social Services, is something quite different. Why cannot we have the result of the Secretary of State's review? He has told me that he has done it. We need that—even if the right hon. Gentleman intends to delay the announcement of the uprating still further.
  Mr. Barnett: The right hon. Gentleman is quite remarkable. He is remarkable because, together with his right hon. Friends, he wants to see massive cuts in public expenditure, massive reductions in the highest rates of tax and massive increases in pensions. My right hon. Friend the Member for Blackburn (Mrs. Castle) at least is more honest in these matters.
  There is no question of our going back on our commitment on upratings. My right hon. Friend understands that. I know what the right hon. Member for Wan stead and Woodford (Mr. Jenkin) is asking for and an announcement will be made by my right hon. Friend the Secretary of State for Social Services at the appropriate time.
  Mr. Jack Ashley: What my right hon. Friend says about the Opposition is quite right, but a question was put by my right hon. Friend the Member for Blackburn (Mrs. Castle) and I think that the Minister should give a definite, clear and specific answer because many Labour Members are waiting for an answer.
  Mr. Barnett: I understand the point put by my right hon. Friend and my hon. Friend, but the Second Reading of the Finance Bill is not the appropriate occasion to announce the uprating of social security benefits. The uprating will be announced in due course.
  Mr. Patrick Jenkin: Why not now?
  Mr. Barnett: I am surprised at the right hon. Gentleman. I do not know what he is seeking to do, other than to be his irresponsible self.
  Mrs. Castle: Could my right hon. Friend tell the House what is the latest possible date administratively for announcing the uprating if it is to come into operation in November, within the 12-month period laid down by the Act?
  Mr. Barnett: The interesting thing about questions in this House, as my right hon. Friend knows, is that normally they are asked when the questioner knows the answer better than the person answering. In this case my right hon. Friend knows that very well because she has been Secretary of State. She also knows that there is ample time to make the announcement. I can assure her, if she does not know, that there is ample time to make the announcement about the uprating and honour our commitment, which we are pledged to do. That is the situation.
  I assure my right hon. Friend and all my hon. Friends that we seek to help those on the lowest incomes very much more than the Opposition would seek to do. They seek to cut thousands of millions of pounds off public expenditure to reduce the higher rates of tax. Then they have the hypocrisy and humbug to talk about lower income groups and benefits.
  Mr. Patrick Jenkin: I am grateful to the right hon. Gentleman. Presumably his attention has been drawn to the recent booklet published by the Child Poverty Action Group which states that taxation has now become the engine of oppression of the poor. Until we know what the uprating is to be, how on earth can we judge the size of the personal allowances and tell whether the Government have made the poverty trap worse this year than it was before?
  Mr. Barnett: The right hon. Gentleman equally knows the pledge we are committed to under the terms of the Act as regards the uprating. [Interruption.] The right hon. Gentleman should know that very well. A minimum uprating is demanded of this or any Government. We did it last year. The courts found in our favour, as the right hon. Gentleman knows very well. I am not sure what the right hon. Gentleman is saying. Does he want to increase

  1507
  public expenditure by a further £500 million? Is that what he is saying? I wish the right hon. Gentleman would be honest with the House. It is quite remarkable that the right hon. Gentleman constantly seeks to evade any responsibility that he may have had in the past. We shall meet our commitment in this respect, but it is not necessary for me to announce the uprating at this time. That must be a matter for the Secretary of State and he will make the appropriate announcement at an opportune time.
  Mr. Nigel Lawson: When?
  Mr. Barnett: In good time to ensure that the uprating takes place and that pensioners do not suffer.
  Dr. Jeremy Bray: It may have crossed the minds of some hon. Members that the timing is linked in some way with talks with the TUC. Would my right hon. Friend care to comment on that point, because it seems to me that we would not get a more favourable settlement out of the TUC by any delay in an announcement?
  Mr. Barnett: I assure my hon. Friend that if there is a delay in the uprating it has nothing to do with the TUC talks. The announcement will be made at an appropriate time to ensure that we meet our commitments. I cannot be fairer to the House than that. That is the situation.
  Mr. Ralph Howell. May I ask a question?
  Mr. Barnett: If it is on the same point, yes. On reflection, if the hon. Gentleman does not mind, I think that other hon. Members might wish the debate to continue. I have given way more than enough. The House knows that I am probably more courteous than most in giving way. In fact, many of my hon. Friends have complained about how frequently I give way. On this occasion I hope that the hon. Gentleman will forgive me if I say that I feel that I have dealt more than adequately with the somewhat intemperate remarks of the right hon. Gentleman. I do not intend to give way.
  I do not mean to suggest that the next pay round can or should be a mere
  1508
  replica of either the £6 round or the current round. We have had two years of a very tight and inflexible policy.
  We recognise the case now for a more flexible approach, which leaves more room for normal collective bargaining between individual employers and trade unions. But this is not the same as saying that there should be no policy.
  As the TUC's Economic Review recognised, the prospect of a single figure inflation rate during 1977–78 depends crucially on a single-figure increase in earnings. Whatever may be done to provide for flexibility must be compatible with these objectives. There can be no question of allowing them to slip out of our grasp, just when we are about to reap the full benefits of the last two years.
  If we are not diverted from the steady progress we have been making towards creating a sound economy we can begin to see a reduction in direct taxation and an increase in real net take-home pay. That, plus a deliberate switch from direct to indirect taxes can, and will, put more cash in pay packets.
  It is right that we should do so, for the United Kingdom now relies excessively on direct taxes. The structure and the incidence of these taxes make the burden seem even heavier than it is. This is particularly true of income tax, where there is a heavy emphasis on marginal rates, particularly the starting rate of deduction, which is 40·75 per cent. including the national insurance contribution. The Budget has brought down effective rates significantly and will bring us closer to international averages.
  There are, however, limits on the extent to which the shifts can be reversed in any one year. The distributional consequences of too sharp a correction could be adverse. Increases in indirect taxes feed quickly through into the retail price index and can have unacceptable effects upon particular industries and on employment in those industries. The indirect tax changes this year were chosen, among other reasons, for their minimum RPI effect—something less than 1 per cent. This was so as not to jeopardise a successful pay policy.
  All these factors must be taken into account. But we would be foolish not to recognise that there is a widespread feeling in the country that taxes on income

  1509
  are too heavy and that it would be better to rely more on those taxes where there is an element of choice. A tax which one appears to choose to pay is almost always more tolerable than a tax which one has to pay, and it goes without saying that that does not necessarily mean that the indirect tax increases will be popular.
  In any case, we cannot go too far down this road. Income tax must remain a major source of revenue and play its part in ensuring that the burden of taxation is fairly shared. But I have no doubt that we have been relying too heavily on income tax, and the price being paid in terms of work effort, morale and incentive is becoming dangerously high.
  Against this background, I turn to the major measure to increase indirect taxes: my right hon. Friend's proposal to increase the excise duty on petrol by 5p a gallon—an increase which, allowing for VAT, has the effect of raising the price of petrol to the private motorist by just over 5½p a gallon. This increase has proved to be a somewhat controversial element in the Budget package. I do not say that the other increases in indirect taxes—in the duty on derv and on heavy oil, in the vehicles excise duties and in tax on cigarettes—have been rapturously received either by this House or in the country at large. But their merits, on grounds of energy, transport and health policy, have been recognised and have, I think, been by and large explicitly or tacitly accepted.
  With the petrol duty, it is a different story. Hon. Members, especially some of my hon. Friends and hon. Members on the Liberal Bench, have been concerned about the impact of the increase on the rural motorist and the shift worker and, indeed, on all those who are completely dependent for essential journeys on their cars.
  The official Opposition have not exactly made a powerful case against the 5p. Indeed, the main burden of the Shadow Chancellor's case was to quote copiously from a speech by the hon. Member for Cornwall, North (Mr. Pardoe). The right hon. and learned Gentleman did not seem able to make a very strong case or, indeed, any case at all, against the tax.
  We are, of course, sympathetic to the concern about this increase in petrol duty
  1510
  and obviously my right hon. Friend weighed it carefully in the course of constructing his Budget. But he was moved by other, and I believe powerful counter-arguments which I should like to explain further to the House.
  First, my right hon. Friend could not, consistent with his overriding objectives in terms of the public sector borrowing requirement, propose income tax reliefs on the extensive scale contemplated without raising some fresh revenue from indirect taxes.
  None of the alternatives is attractive. To raise the basic rate of VAT has an adverse effect on the prices of a wide range of household essentials and an adverse effect, therefore, on the prospects of securing a satisfactory third-round pay agreement this summer. Room for manoeuvre was, therefore, necessarily circumscribed.
  Within this constraint, my right hon. Friend the Chancellor produced a carefully selected and carefully balanced package of indirect tax increases aimed at raising the required revenue with minimal effect on the RPI while paying clue regard to other, wider, objectives in other policy spheres. Petrol, as a major revenue source, was bound to figure in this package.
  Secondly, in seeking a contribution from petrol, my right hon. Friend was heavily swayed by considerations of energy policy. The fact that we are already beginning to reap the benefits of North Sea oil and the prospect that we shall achieve self-sufficiency in oil during the next decade does not diminish the need for energy conservation, particularly in oil.
  The prospects for the 1980s must be set in the context of the every-growing pressure on world fuel supplies and the importance of ensuring that we deploy the riches of the North Sea—and they will be only temporary riches—for the maximum benefit of the balance of payments, and hence for our capability to achieve sustained faster growth and a permanent improvement in the level of employment.
  The House will be aware of the striking initiative which President Carter is taking in this vital area of policy. It will have noted that his proposals include a new tax on petrol which would increase by 5 cents

  1511
  for each year in which petrol consumption fails to fall 1 per cent. below the consumption of petrol in an agreed year. This could mean an increase of of up to 55 cents in the United States Federal tax on petrol.
  Mr. Heffer: Surely my right hon. Friend is aware that in the United States petrol is much cheaper than it is in this country. Is he aware that the Liberals are not alone in their opposition to the increase in petrol prices? Many of my right hon. and hon. Friends feel that the Government's policy should be changed. I urge my right hon. Friend to look at the matter again before we come to the appropriate clause.
  Mr. Barnett: My hon. Friend knows how fond I am of him, but he cannot have listened to what I said. I said that I had received representations from my hon. Friends and from Liberal Members. Of course I know that in the United States the price of petrol has been very low. But President Carter has recognised that there is an important energy reason for starting to make substantial increases in the price of petrol. He is seeking to persuade Congress and the country to go along with that.
  Apart from the small increase of about 1p a gallon attributable to the tax changes made in the Budget of last year, there has been no deliberate increase here in the burden of road fuel taxation borne by the private motorist since the higher rate of VAT for petrol was introduced in November 1974. The increase in duty now proposed by my right hon. Friend goes only some of the way towards restoring the real rate of duty which, in recent years, has been severely eroded by inflation. Our duty, even at its new level, is still by far the lowest in the EEC, and the retail price, with the possible exception of Luxembourg, is also the lowest.
  I do not deny that my right hon. Friend's proposal will be felt by the private motorist. But the additional burden needs to be kept in perspective. For the private car owner driving 8,500 miles a year in an ordinary family car giving 10 miles per gallon, the increase in the annual petrol bill, taking account of the consequential VAT change, will be about 30p a week. That is the result of the measure. At the same time, the effect of
  1512
  the duty increase on the cost of public transport is being offset by a fully-compensating increase in the grant payable to operators of stage bus services.
  We do not pretend that the increased price of petrol poses no special problems for private motorists in urban areas. But it is not only they who have serious problems. The problems also apply particularly strongly in rural areas where there is no bus service. If I was not aware of that before I have been made aware of it by strong representations. Although that is a problem there is a general recognition on all sides of the House that, even if it were judged desirable in principle, there would be no administratively practicable means of extending special relief to motorists in this category.
  The House should know however that it is none the less the Government's intention, in the context of the White Paper on Transport Policy, that my right hon. Friend the Secretary of State for Transport has in preparation, to examine carefully what might be done to help with what is a genuine problem in rural areas.
  When all these considerations are taken into account, together with the obvious fact that if oil taxes are not increased at least in line with inflation there would be a declining proportion of total taxes taken by this particular indirect tax, I hope the House will accept the need to retain the suggested increase. Certainly, the alternatives would not be popular. Above all, those who oppose it must in fairness answer the question whether they would ever increase it. If the answer is "No", then they would have to argue for a steadily diminishing petrol tax in real terms. I do not believe that there is a credible case for such a policy. If the answer is "Not this year", I am entitled to ask "When"?
  Frankly, there is never a popular time for increasing any tax. But for all the reasons that I have given, I have no doubt that the Chancellor was right to increase the duty this year, by simply maintaining the rate in line with inflation.
  Mr. Ian Wrigglesworth: There is another reason why the Chancellor of the Exchequer was right—because there would be a howl of anger from the working men of the North-East and areas such as my constituency if any money were added to their pint of beer.
  Mr. Barnett: I note that view. It is interesting that the official Opposition are strongly in favour of a switch from direct to indirect taxes generally. But, as soon as a switch is implemented they say "No, not this one" and "Not this year" I was surprised in the debate on the Budget Resolutions that many hon. Members whose views I have respected in the past, including some Opposition hon. Members, who, despite what they have already said on this matter, felt that they could vote against this increase. They do not have a case and they must know it. They have not made out a case.
  Some hon. Members have sought to make out a case for the rural areas. The hon. Member for Cornwall, North sought to do that. I recognise that as a strong case but the Opposition have not made such a case.
  Mr. John Pardoe: Will the Chief Secretary scotch the canards about the 1p on a pint of beer? That was a threat by the Chancellor of the Exchequer for the benefit of working men's clubs in Leeds, which have become the equivalent of match sticks in the Treasury. It is legitimate for the House to debate where it wishes the burden of taxation to fall. Many would prefer to tax the beer drunk by the supporters of Manchester United than to tax the private motorist.
  Mr. Barnett: The hon. Member is on dangerous ground. I am a supporter of Manchester United. However, it does not follow that I support their drinking beer in quantities, whether high or low. The hon. Member for Cornwall, North accepts the basic Budget strategy. If £300 million were lost by a reduction of the 5p increase in petrol prices it would have to be replaced from somewhere.
  No single indirect tax or any other tax is popular. That may not be strictly true, but even among those taxes that are generally thought to be popular, in my short experience at the Treasury, I have found that a few people at least find some unpopular. I ask hon. Members not to imagine that there is a simple, soft option alternative to replace the loss of revenue that would be caused by going back on this 5p increase.
  Perhaps I can now conclude by saying that whilst the petrol duty has been controversial, there has been no credible
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  alternative suggested by the official Opposition to the Budget strategy as a whole. I am not surprised, since the Budget and this Finance Bill which puts forward the legislative proposals set out by my right hon. Friend, provides a basis of hope for the future.
  It is now up to both sides of industry to grasp the opportunity. I am confident they will. That is why I recommend the Bill to the House.
  4.40 p.m.
  Mr. David Howell: At the outset, I should perhaps explain that I shall not be advising my right hon. and hon. Friends, at the end of this debate, to divide against this Finance Bill. I take that view not because the Bill is packed with good ideas. On the contrary, it is bereft of almost any creative thought. Nor do we take that view because we are cowed by the awful threat of the Chief Secretary in The Guardian the other day that if there is too much criticism of Treasury figuring, the Treasury will cease to publish these things. If I thought that we could stop the Treasury publishing Finance Bills such as this one by being rude about them, nothing would hold me back.
  Mr. Joel Barnett: Perhaps if the hon. Gentleman had done me the courtesy of reading carefully the article to which he has referred—I am sure that he has it with him now—he would have seen that what I had in mind was that someone who was perhaps more worried about criticism, a future Chancellor or Chief Secretary, for instance—someone from the official Opposition for the next 20 years, or some time perhaps—might be so upset by the criticism that he might refuse to publish.
  Mr. Howell: I shall pass over that episode in the Chief Secretary's turbulent life and move on to more serious matters.
  The reason why we shall not divide the House against the Bill is that we recognise that it contains the first feeble moves, in some clauses, in the right direction, but otherwise it is wholly inadequate to the colossal problems of taxation and incentive that face the country. The most notable thing about the Bill this year is what a very fluid affair it is and how it leaves in a state

  1515
  of extreme uncertainty some of the major areas of fiscal and budgetary policy.
  Of course, the Chief Secretary will know that we are perfectly used to Finance Bills taking off at the beginning of April, staggering along until July and then flopping down and having to be hurriedly replaced by July packages. That is the normal form of the present Government, and it looks as if it will be the normal form again this summer. We are quite used to this situation. However, this poor document is unique in that it hardly got off the ground at all before it began to come apart in early April.
  That disintegration has shown itself in a number of ways. First, I want to deal with the mystery of the so-called conditional cuts—the reduction in the standard rate of income tax to 33 per cent., which was proposed by the Chancellor in his Budget Statement. As every day goes by we hear, from leaks in the newspapers, that the cuts are not conditional at all, and that, on the contrary, the Government and the TUC are not discussing some deal related to the proposals for reducing the standard rate of income tax from 35 per cent. to 33 per cent. They are not talking about that at all. They are really talking, so we learn, about an autumn reflationary package, which we are told is to come on top of the cuts which, after all, will not be conditional but will be bundled into the Budget anyway, regardless of whether or not any conditions are fulfilled.
  This is very odd and worrying. The Chief Secretary was very far from satisfying the House earlier at Question Time when this issue was raised, because the Chancellor said in his Budget Statement,
  "it would not be prudent to commit myself absolutely to this decision until a satisfactory agreement on a new pay policy has been reached, as I expect to happen well before the Finance Bill leaves the House. To do otherwise would be to take risks with the growing confidence which is being shown in our economy both at home and abroad." — [Official Report, 29th March 1977; Vol. 929, c. 283.]
  That was the position, and yet by last Friday the whole situation had changed, because last Friday we had the Prime Minister confirming that Ministers had abandoned any attempt to get agreement
  1516
  with the trade unions before the end of the conference season in mid-July— indeed, he said, I think, before the end of the present pay round, and that would be the beginning of August. The Prime Minister went on to declare—and this is quite a different story from the Chancellor's—that he was "relatively relaxed" about the timetable, and he said,
  "What I do ask is that the Government, which must take final responsibility for these matters, should know where it stands by the time the present agreement runs out"
  It is not unreasonable for us to ask, as well, that we should know where the Government stand.
  However, that leaves some very important questions totally unanswered by the Chief Secretary. Will the tax cuts be introduced well before the Finance Bill leaves the House, as the Chancellor says, regardless of whether a satisfactory agreement, whatever that may be, has been reached? Or are the tax cuts to await the pleasure of the TUC at the end of the present pay round, in which case the Report stage will almost certainly be over? It is extremely important from the point of view of the House and public policy that we know just what is planned.
  Or, will the conditional tax cuts not come in this Bill at all but, in fact, form part of the next package, the July or autumn package, in which by all accounts the prudence to which the Chancellor refers will take a back seat and we shall be reflating the economy from a base rate of, presumably, 13 per cent. to 15 per cent. inflation?
  If that is the prospect, it is a hair-raising one. It would, of course, be the ultimate sell-out for the working people of this country. We on this side of the House, here and now, warn against it. It would be going well beyond the prudence to which the Chancellor referred in his Budget speech. In fact, it would be taking a risk. The Chief Secretary will remember vividly what happened in 1976 when the Chancellor decided to take a risk with the borrowing requirement—and look at the disaster in terms of jobs, unemployment and inflation that resulted from that.
  Therefore, we want to know a lot more about what the Government are planning on this front and what the real timing is

  1517
  It is not fair to the House to leave these matters in obscurity.
  Personally, I share the Bank of England's view that even if we were to halve the inflation rate, from 16 per cent. to 8 per cent., it would still be far too high, and a very poor starting point for any very major reflation, of any kind. I take the view, to borrow a phrase, that inflation is unsafe at any speed.
  I shall return shortly to the links between this Bill, pay policy and inflation. I should perhaps pause only to record that when the Prime Minister says on the subject of pay demands that he will not print the money and will insist on sticking to cash limits, in our view he is on the road to wisdom about pay restraint, and he has our full support. That is the right way to start thinking of these problems.
  The second uncertainty concerning the Bill is the position of the Liberals—which is always interesting when it can be discerned. It proves, this time, interesting again. If I understand it aright, the Liberal position—or as it was on the night of 4th April—was that while for a number of very prudent reasons, of which, I think, the first was probably survival, the Liberals were not prepared to support us then in our opposition to the relevant resolution, which would have killed the petrol tax, since then they have decided that at the Committee stage they will, in their own words, kill the increase.
  However, since then again, as I understand it from listening to the Leader of the Liberal Party on the radio, there have been intensive discussions on this matter between the Liberal Party and the Government, presumably in the Lord President's liaison committee, so hon. Members and the House do not know the position. A private deal may have been done—an entirely open and aboveboard private deal, but a deal all the same. If there has been a deal, no doubt that will emerge in due course.
  However, this morning's newspapers tell yet another story. They suggest that the Liberal Party has decided that, single-handed, it will bravely kill the giant and that it will do away with the increase, despite any soft words from the Chief Secretary. We therefore look forward to seeing that come about on Monday. It is fair to note that the exciting thing
  1518
  about this new era of stability under the Lib-Lab pact, is that one never knows from day to day what on earth is to happen next.
  We ourselves are hostile to the whole of the clause governing the petrol duties and the fuel duties. We think—I shall have to say this slowly and loud enough for the Chief Secretary to hear now that he has left the Chamber—that 10 per cent. VAT would be a far better means of raising revenue than selective taxes.
  It is a myopic absurdity that the Chief Secretary should say that we are proposing no alternative. He knows that my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) has proposed this alternative decisively and clearly. It is our view that 10 per cent. VAT would be much better than imposing this selective tax on petrol. I believe that the Liberal view is that they would put VAT up to 20 per cent., so no doubt they will be following perhaps some way behind on our proposals when we put them forward.
  We note the Chief Secretary's explanation, which strikes us as a little belated, that the increase is all to do with the Government's conservation of energy policy. I hope that the Government will not insult our intelligence by asking us to believe that, although I suppose they are justified in bringing forward this argument after the event. The original proposal was obviously designed, as the Chief Secretary said earlier, for raising revenue without having to put VAT back to where it always should have been, but now we are told suddenly that it is all to do with President Carter and energy.
  Dr. Bray: Is the hon. Gentleman saying that there are no energy considerations in this matter? I should have thought that the most elementary view of the likely impact of the United States' energy policy on this country was that it was very much in our interests to ensure energy conservation.
  Mr. Howell: After the relatively small increase in petrol prices the overall impact on energy will not be very large.
  A Select Committee which examined this problem came to the conclusion that if we wanted to have an impact on energy consumption by raising the price of motor fuels the increase would have to be of the

  1519
  enormous size that President Carter is proposing in some of his plans. Operations of this kind are very marginal indeed. I am not denying that there is any energy impact at all, but I ask that we be spared the sudden discovery, after the event, that this is all to do with energy, when it is no such thing.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): Perhaps the hon. Gentleman may recall that the Chancellor stated the energy considerations at the time of the Budget.
  Mr. Howell: It was one of the reasons given at the time but now it seems to have become part of a carefully thought-out energy programme. Please do not ask us to swallow that nonsense.
  The third area where the Bill is disconnected from reality concerns the middle income groups and middle management, about whom we have heard a great deal both before and during the Budget. The public relations before the Budget was largely saying that this time the Budget would really help the middle income man, who last year, in the Chancellor's own words, "took quite a caning." In the Budget tables, the calculations show that the man or family on about £6,000 a year—that is about £120 a week—would receive about £150 a year extra out of the proposed changes if all the conditional tax reliefs were introduced. I suppose that it is on this basis that the Chancellor felt able to say that most people's living standards would stabilise at the present levels and that we were "through the worst" as regards living standards. That may be the assertion at Westminster, but in the country the situation is quite different.
  In Britain we are facing something approaching a management catastrophe. The House had better realise that, before hon. Members are overwhelmed by the Government's assertions that everything is getting better. Everyone realises that workpeople on the shop floor and income earners at all levels have made sacrifices, and that there are many more sacrifices to come. But for management and skilled workers the situation is out of all proportion. Hardly a day goes by without the most devastating survey appearing, bringing home the position of middle management. The most recent of these, pub-
  1520
  lished in The Times yesterday, was the National Management Salary Survey, which explained that management salaries rose by 1.8 per cent. in 1976, compared with an increase in the index of average weekly earnings of all employees of 11·8 per cent.
  When we look at the £150 which is supposed to have brought such marvellous benefits to middle managers or those on £6,000 a year, we see that, out of this £150, straight away £40 goes back in higher petrol and heating costs and higher vehicle excise duty—if it is passed by the House. The additional tax on company cars will be another £100; the child benefit scheme at the higher income levels will make the manager worse off, the higher national insurance contribution will take another £25, and next year he will be paying higher tax on the interest-free loans—or on the additional increment of interest-free loans, or low interest loans, which he may use to buy his commuter rail ticket. His rates and fuel bills will be up. The marginal tax rates will still remain the highest in the world outside Algeria and Tanzania.
  We tell the Chancellor and other Treasury Ministers not to tell British management that they are better off or "through the worst" or that something is being done for them. If Ministers go on like that they may endanger the deep respect of British management for Treasury policies and Treasury statistics.
  Sir John Hall: Does my hon. Friend agree that in the report in The Times, although there was an overall increase of 1·8 per cent. in the salaries of middle and senior management in that period, some managers and senior managers experienced a fall in gross income?
  Mr. Howell: I agree with my hon. Friend. The overall picture is one of a dramatic fall in living standards amounting to as much as one-third in net living standards in the last three years. We cannot go on like this. No country in the world would treat its management cadre like this, even the Soviet Union. Indeed in the Soviet Union they would do much better.
  Mr. Ashley: I appreciate that there is a problem in middle management, but I am getting the impression from the hon. Gentleman that he is obsessed with the problems of middle management. Any

  1521
  increase for middle management must necessarily come out of increases for lower-paid workers or the less well off unless production is to be increased. If the hon. Gentleman goes on arguing this case, to which unfortunately the Government are giving way, the lower-paid workers will suffer as a result of this campaign.
  Mr. Howell: With respect the hon. Gentleman is not right. He is unfair in accusing me of being obsessed with middle management. They are only a part of the argument. He is wrong in suggesting that there is an option between more incentive for middle management and the standards of working people on the lower grades. Unless incentives are built back into middle management, the standards of all workpeople will fall faster than they are at the moment. I am arguing in the interests of all workers.
  Mr. John Cronin: Does the hon. Gentleman appreciate that he is rather implying that it is especially the Government's job to reward middle management? Is it not the case that middle management in this country is paid much less than in most other countries in Europe? Is not that the result of the chronic inefficiency of much of British industry?
  Mr. Howell: I am talking about the Finance Bill and the taxation aspect. I am sure that the hon. Member for Loughborough (Mr. Cronin) is not suggesting that tax has nothing to do with net rewards of management in the United Kingdom. If he said that, it would be totally against the experience of most people who have anything to do with industry.
  I now leave the question of the management catastrophe, but I ask Treasury Ministers to face this problem and to recognise that they have done less than nothing to restore morale and incentive to middle management, without which economic recovery and jobs will not come.
  Some people may at least escape the additional taxation on benefits from employment under the Bill next year through the provision that raises the starting point for assessment for taxation on benefits from £5,000 income plus all
  1522
  expenses to £7,500. But we are totally bewildered as to why that provision is brought in only for next year. The figure of £5,000 is at a lunatic level. It is not a person's income that provides this figure, but a calculation of income plus all expenses received and paid out in the pursuit of a job. That means that the £5,000 base puts almost the average earner with two children into the level at which he is treated as being in higher-paid employment.
  Labour Members discovered that to their dismay last year, and some of them came rushing into the House to tell the Treasury Bench to ease these proposals because thy would cut into the earnings of large numbers of trade unionists and other workers on extremely modest incomes. If the situation was bad last year it will be much worse this year. This is the year when the threshold should have been raised, not just to £7,500 but possibly to £9,000 or higher. By next year, with the Government's plans to give us more inflation, £7,500 will not be very much above the level of average earnings plus expenses that a man on modest average earnings might incur in going about his business.
  I therefore ask Treasury Ministers to look at this matter again. The figure of £7,500 seems to have been plucked out of the air. The phrase "higher paid" means anything that the Treasury and the Inland Revenue want it to mean at any one time, and that is absurd.
  Another group which is rapidly becoming worse off is a group which will not attract great sympathy from Labour Members but which is important to the welfare of us all, particularly the work people. I am referring to those who operate in partnerships and who are technically self-employed. Penalisation of partnership operations is particularly silly since many of our successful businesses, particularly those engaged in invisible earnings, operate through the partnership structure.
  It is true that the Bill provides for employees working overseas so that provided they fulfil the criteria proposed in the Bill there will be some easing of the income tax on their overseas earnings. Provision is made for any organisation which sets up overseas to gain the same kind of benefit. But the hard-working partner

  1523
  of a United Kingdom partnership—say, a consultant engineer, an insurance specialist or a consultant in civil engineering—who is technically self-employed, can sweat as much as he likes overseas but will get no help from the Bill and no easing of the high tax rates for self-employed people.
  One argument that my right hon. and hon. Friends would advance is that this is another case for lowering the ludicrously high income tax rates on middle and upper incomes. But if the Government are determinted to keep those rates, let them at least extend their concession to self-employed partners of United Kingdom partnerships when they work overseas. We know why the self-employed are left out. This is all part of the war that Labour Members have delared on the self-employed and on smaller business and which the Government pursue through every means at their disposal.
  I realise why that is. The self-employed do not fit into their scheme of things. We see their distate of the self-employed in the proposals on VAT in the Bill. A vast schedule concerned with VAT is attached to the Bill. It is mostly concerned with harmonisation with the EEC. I gather there are a number of important statutory instruments to come in relation to the schedule. The more we hear about the schedule, the sooner those instruments come the better.
  There are also some worrying implications in the schedule about which we wish to know a lot more. There is one which may seem small, but it may affect many of our constituents. It is on page 51 of the Bill. Paragraph 3(5) and (6) contain proposals which appear to mean that the Commissioners of Customs and Excise, having received from a trader certain amounts of money in taxes on output—which are sales—and being due to pay back to the trader from taxes on inputs —that is materials and other things paid in—can pay back that money at their discretion instead of immediately. If that is so it is one more heavy impost on small traders. It is a minor and technical point, but it should be explored.
  There is a much more serious matter which is not in the Bill and which relates to VAT. It is that no attempt is made to raise the threshold at which one must
  1524
  register for VAT. Why is that? The level is £5,000, and everyone knows that that is far too low. Is this something to do with the EEC Sixth Directive? Can the House be told the position on this matter? If we are free of any Community rules on the matter, why do we not index up our threshold? The Financial Secretary has been taking a personal interest in this matter, and he must explain what has happened. We shall be moving amendments to raise the threshold to the point it should have reached.
  Mr. David Mitchell: My hon. Friend the Member for Guildford (Mr. Howell) put down a Question to the Treasury earlier this year asking what had happened in the EEC discussions. Did he notice that in his reply to a Question put down by me on the same day, the Minister said that it was generally agreed that member States should be free to maintain their existing turnover limits for the registration of small businesses? Concealed in that there might be an undertaking by the Government not to increase that limit. I hope that we may have an assurance that the wording in the reply is accidental.
  Mr. Howell: I am sure that the Financial Secretary will note that question and clarify the matter which needs clarification.
  I turn now to the investment income surcharge where thresholds have been raised, but they are still disgracefully low. They still impose the surcharge at levels well below average earnings. Mostly that hits old people, but it generally discourages personal risk incentive. In particular, it is wrong of the Government to treat maintenance income for divorced women as investment income and to stick a surcharge on it at any level. I hope that the Financial Secretary will produce a better argument on that point than he did last year.
  There is nothing in the Bill to carry through the Government's intentions on capital gains tax, which remains a tax on inflation and on business assets when sold or transferred. There is nothing to lift the starting point of capital transfer tax from the £15,000 that it was in 1974. This must mean that capital transfer tax rates are being dramatically raised. They are doing fearful damage to jobs

  1525
  in small businesses which are having to close down.
  We are not impressed by the further delay in settling the Government's views on the tax deferral system for stock relief. Deferral should be made permanent, and it is no use the Chancellor bravely asserting that the scheme should be better understood by the financial community. The plain fact is that auditors and some bankers do not accept the Chancellor's word as a bankable asset. They look at the tax liability in the balance sheet. We think that ought to be dealt with. It could be done without danger of abuse, and we shall be proposing an amendment accordingly
  Those are minor but not unimportant areas where the Bill is lacking. There is a great deal that the Government could have done in these areas to give enormous extra incentive to create new jobs, output and wealth in important areas of the economy, particularly in the services and invisibles sector. But they have decided not to do so for reasons we can recognise and through a general reluctance to make changes in this area, and that is to the disadvantage of our country as a whole.
  Finally, I return to the pay deal aspects of the Finance Bill to which it is all supposed to be geared. It is understandable that the Chancellor, with the Lord President, having masterminded stages 1 and 2 of the pay policy, should hanker after another deal. That is something that he took pride in before, despite the hideous consequences of such deals for differentials, incentives, productivity and jobs. Working people are bitter about the undertakings given to them in order to secure their restraint.
  Of course it is natural that the Chancellor should want to have another go. But we are telling him what a great many trade union leaders and shopfloor workers have been telling him, and what even the Prime Minister has told him in his more lucid moments. That is, that while pay restraint is crucial, the Government's prime rôle in its achievement is not to get stuck in yet another self-defeating, high-cost deal. Their aim must be to hold the money supply and the cash limits that have been set. We recognise that while cash limit arrangements have yet to be put to the full test, the point where the
  1526
  cash limit ceiling will come into conflict with some wage demand has not yet been reached, and a great deal of political will will be required there.
  I welcome the recommendations in the Public Accounts Committee report. These suggest that the whole cash limit system should be reinforced by parliamentary procedures so that Parliament can join the process of assessing the strength and validity of cash limits as they are developed. It is up to us all to work towards a more effective arrangement of that kind.
  Within these limits the aim must be—and I shall be surprised if this is challenged by the Government—to return to responsible collective bargaining—free but within a responsible framework. The need for that cannot be refuted. The Leader of the Liberal Party does not do anyone a service by pretending that the only choice is between a centralised formula, which he thinks is fine, and free collective bargaining, which he describes as pay anarchy. This is a false antithesis, that clouds the argument. Also, it does not help us to move out of the ghastly dilemmas in which we have been placed by stages 1 and 2.
  Those who say that we cannot have a deal for stage 3 along the lines of stages 1 and 2 are right on three counts. First of all, such a deal is impossible. We all know the need to unravel the differentials, and restore shattered pay structures. This is not amenable to the approach of stages 1 and 2.
  Secondly, it is undesirable in the sense that nothing could be worse than for the Government to try to buy a magic centralised pay formula by taking financial risks or freezing prices. The Chancellor took risks last year with the public sector borrowing requirement, and look what happened. It would be utterly disastrous for this country if any attempt were made to buy a spurious formula with limited validity for that kind of price.
  Thirdly, a settlement along the lines of stages 1 and 2 is unnecessary. I call in aid the Prime Minister when he says that we are not going to print money. Of course he is right. It is the monetary and public spending framework that will provide the Government with their broad pay judgment, and will determine whether there is a wages explosion.

  1527
  Within that framework pay negotiators at all levels are best placed—on the basis of concerted understanding of the overall position—to decide the trade-offs between pay and jobs
  That is the position that we, on these Benches, take on these matters. We look very critically at the huffing and puffing of the Secretary of State for Prices and Consumer Affairs who sees a direct relationship between the need for a formula or a new arrangement, and an immediate pay explosion if that is not achieved. Workpeople do not want another wretched deal that gives them the false apparatus of price controls. Instead, they want the chance to see their discipline matched for once, and not thrown away by the actions of the Government, by Government financial prudence and policies that will raise confidence, give bigger incentives, new jobs, lower taxation and a chance to see new wealth shared in the pockets of the workers rather than the State.
  The Conservative Party has put forward positive proposals on profit sharing. The Liberal Party used to think along those lines as well before it joined the collectivist camp. We think that this is the fresh approach that is needed.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): It is difficult for the Government to keep track of the changes taking place on the Conservative Front Bench in attitudes to pay policy. We have heard a number of statements from the right hon. and learned Member for Surrey, East (Sir G. Howe) and the Leader of the Opposition. Now the hon. Member for Guildford (Mr. Howell) is adding another gloss of a different kind. Is he repudiating completely the approach of his right hon. Friend the Member for Lowestoft (Mr. Prior) who wants a phase 3? Is the hon. Member against any attempt to carry out phase 3 negotiations?
  Mr. Howell: I will repeat one sentence, and the Financial Secretary can read the rest of my argument in Hansard tomorrow. His idea that I am repudiating phase 3 is misplaced and does not follow what I said at all. I have been arguing against a stage 3 in the mould of stages 1 and 2. I said so in precise words, and if hon. Members opposite were not listening to our proposals then we shall have
  1528
  greater difficulty in reaching a common understanding. This is the fresh approach that is needed on pay and this should be helped by any tax legislation brought before the House. I am sorry that the Financial Secretary has not followed my words but he can study exactly what I said in Hansard.
  We see no sign whatever of the right approach in this Finance Bill and there is no sign of it forthcoming from the Lib-Lab régime. The fresh approach needs a different kind of Budget, a different kind of Finance Bill, a different kind of policy and a different Government to see the nation through the crisis ahead. That is what we are offering, and that is what the nation indubitably wants.
  5.18 p.m.
  Mrs. Barbara Castle: I make no excuse for returning to the question of the uprating of pensions and benefits, even though the Chief Secretary has implied that it is inappropriate to raise it on the Second Reading of the Finance Bill. It would not have been necessary to do so had the announcement been made at the usual time. To suggest that the level of increase in pensions and benefits, their timing and the criteria on which they are based have nothing to do with the Budget judgment, and, therefore, the Finance Bill, is ludicrous.
  I return to this issue because the delay in making the announcement is not only puzzling but is rather worrying. It has certainly worried old-age pensioners, a number of whom I met only yesterday at a meeting. They were, quite frankly, bewildered and afraid because they thought that they had been left out completely, and they wondered what was going on. When one tells them that they have not been left out and that the Government are standing by their commitment embodied in the legislation which I had pleasure in piloting through the House, one is aware that there is a very strange hiatus in the argument.
  The pattern on which the announcements of upratings have been based in the years since the legislation was carried through has been that an announcement is normally made by the Chancellor at Budget time. Since February 1974, when a Labour Government was returned to power, the Chancellor has announced in three Budgets the fact and date of the

  1529
  next uprating. Last year he announced on 6th April that pensions would be increased on 15th November, some 32 weeks away. Here we are at 28th April, three weeks later than last year, and there is still no announcement. Not even the faintest indication of an announcement has been given to us this afternoon.
  I asked my right hon. Friend the Chief Secretary a question about the administrative period. When I asked what was the deadline for the announcement, if it was to be administratively possible to carry the uprating through by November, he said that I should know. I certainly do know, which is why my concern deepened at every word he said.
  I remember as Secretary of State for Social Services, after we were returned to power in February 1974, rushing through an uprating in the record time of 19 weeks. We carried it through by July that year. As a consequence there was a strike by the staff, who said "You can't do that to us" They were right, because it meant a total dislocation of their work schedules, an excessive amount of overtime in the summer months, great problems for the married women because of overwork, and so on. Therefore, since then I committed myself—and no doubt my successor has done the same—always to allowing a reasonable administrative margin. That margin is 28 weeks. If we are to give 28 weeks' notice this year, our deadline is next Tuesday, in five days' time, if the uprating is to come into operation by 15th November.
  What are the Government waiting for? It is not a normal procedure that they are following. What is causing the difficulty? Can it be that my right hon. Friend the Chancellor is now caught in a trap of his own making? He decided last year that we must abandon the historical method of uprating and go for the forecasting method. He must now be in a slight difficulty about his forecasting. He has certain pay negotiations in hand. Figures are bandied about for the sort of targets he has in mind for the level of inflation, which we know will not be down to single figures this year and which, he tells us, will be down to single figures next year only if earnings do not go into double figures. The conclusion of that little piece of bargaining is a considerable way off. Is that the diffi-
  1530
  culty? If it is, I suggest that this year my right hon. Friend should switch back to the historical method of uprating. That is a simple way out of the difficulty.
  Or do my right hon. Friends the Chancellor and the Secretary of State intend to push the announcement back to an administratively dangerous date, an administratively impossible date, in order to see what kind of pay policy and earnings level they will have? Under the legislation that we introduced, the uprating must be in line with prices or earnings, whichever are more favourable to the pensioner. If the Chancellor has to wait until the end of July before he knows what the earnings and price levels are likely to be in the coming months, that will mean that there cannot physically be a November uprating.
  Therefore, the position is extremely worrying. The House is owed more of an explanation than we have had so far and the pensioners are owed more reassurance than they have had so far. Their anxiety is running very deep.
  But the delay carries one bit of comfort. If there is still time administratively to uprate pensions and benefits by November—and we were told that there was plenty of time before an announcement need be made—there is still time administratively to introduce an increase in child benefit.
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I am listening carefully to what the right hon. Lady says. I should like her to relate it to what is in the Bill.
  Mrs. Castle: It is extremely closely related, Mr. Deputy Speaker, because the Bill contains clauses dealing with child benefit and child tax allowances. They add up to a complex of provision for family support, and I believe that they go together. I repeat that in the past the Chancellor has always included the level of uprating in his Budget judgment on which the Finance Bill is based.
  I move from the date of the uprating to the possibility of uprating child benefit this year. I do so because I have already explained to the House, in the Budget debate, that the major flaw in the Budget is its effect of introducing tax changes which reduce relatively the level of support we give to families. This is also a serious flaw in the Bill. The

  1531
  machinery by which that disaster is achieved is embodied in the Bill, because we are to reduce child tax allowances in order to help pay for making the family allowance tax-free.
  When I say "disaster", I want to make it clear that I am in favour of this switch, which is outlined in Clause 22 and other clauses, because it is an essential start to the introduction of an effective child benefit scheme under which the child tax allowances are phased out and tax-free benefit is introduced instead. Under our phasing-in programme for child benefit, these steps are essential, and for that reason I should not dream of opposing them, because I asked for a start to be made in phasing-in, and this is it.
  As is clear from the Bill, however, it has meant that this year, when my right hon. Friend is to give away £1,800 million in income tax reliefs of various kinds, not a penny of that can go or is going in child tax allowances to help families. Of course, this means that we are continuing the process under which—over a period of years now—the net income of families with children has been declining as a proportion of the net income of single people.
  In the Finance Bill we are dealing with a great boost for the single and childless and we are leaving families with children without anything to protect them against the price rises that face them in the most acute areas. That includes food, because the disastrous consequences of the common agricultural policy have not yet taken effect on family budgets. The levels of food price rises will reach—not because of any fault of the Government but because of the insanity of this country's decision to join the EEC and so fasten inescapable food price increases on our country—even higher levels. The consequence of all this on family budgets is absolutely frightening.
  Only last night I was talking to some young mothers, and their anger and fear was tangible. It was not artificial or created or general pique. They were afraid about how they will feed and clothe their families in the coming year. Let us not forget that this is a year in which all the Chancellor of the Exchequer's calculations about how to balance his Budget and so on will put up prices enormously.
  1532
  The misery that will face these families in the coming months will be endless.
  I cannot over-emphasise the urgency of the situation because we have debarred ourselves from increasing child tax allowances. The hon. Member for Guildford (Mr. Howell) referred to the talk that we have heard about an autumn Budget and about another taste of reflation because the Government have been so successful in controlling the money supply, through cash limits and other means, that we have economic overkill. The hon. Member seemed to be shocked at the idea. That was because Conservatives believe in strength through misery. I fear that we are dangerously near the economic situation of weakness through misery.
  I welcome the suggestion that we face the possibility of another reflationary boost this autumn provided that the Chancellor can strike a reasonable bargain over the pay policy, but the Chancellor will not know that until July. I am alarmed because by then it will be administratively too late to increase child benefit. If the Chancellor comes along with more tax reliefs in the autumn, under the formula of the Bill we shall be compelled to leave the children out. That is the situation that the House cannot and must not ignore.
  We have all, on both sides of the House, been party to the phasing in of child benefit, and this is the situation in which we find ourselves as a consequence. Presumably we shall all be voting for child benefit in this Finance Bill. I ask the Chancellor, through the Chief Secretary, please to make up his mind in time whether some £900 million will be given away in the autumn. If that is to happen will the Chancellor please take steps now before the uprating—the date of which he has not yet announced—so that that money can be spent in introducing at least a reasonable level of child benefit? Some £900 million would make available £2.70 a week for every child in the community. That would make a dramatic impact on the condition of large families and of families with low incomes.
  There will be something like a revolution among the women of this country, if, in the autumn, the Chancellor says that restraint has been overdone and that he will put a boost into the economy by increasing tax reliefs but there is nothing

  1533
  for the kids. I repeat, the Government's own delay in announcing the date of the November uprating has given them time to face this situation.
  We have not even had an assurance that child benefit will be uprated automatically, along with other benefits, in the November uprating. That is something for which hon. Members have pressed and for which some of my hon. Friends pressed when I, as Secretary of State, was putting the Child Benefit Bill through the House. I should have adored to accept that proposition but the Government felt that it should not be accepted then.
  If we are now in an era in which we are talking about giving away £1,800 million and perhaps another £900 million, do the Government say that we cannot include the child benefit in the November uprating? If that uprating were 16 per cent.—it was 15 per cent. last year—it would cost the Government £3 million. Cannot we show at least enough interest in the country's children to make that commitment of principle and that small gesture? Cannot we abandon the decision to increase the price of school meals? Cannot we take the family problem seriously?
  I am sorry only that, owing to the structure of the Bill and the structure of the compromise that we have reached over child benefit, I am inhibited in moving an amendment to the Bill that would put my policies before the House. If I did that, I am sure that I would win.
  5.38 p.m.
  Mr. Reginald Maudling: I am glad that my right hon. and hon. Friends on the Front Bench have decided not to oppose the Bill on Second Reading because I agree that it represents a step in the right direction—slow, faltering and timid perhaps, but, nevertheless, a move in the right direction, particularly in its transfer of emphasis from direct to indirect taxation.
  I was fascinated to hear the Chief Secretary talking this afternoon about the iniquities of direct taxation. What a conversion, and what an extraordinary repetition of the arguments that have been put by this party for many years and that have always been rejected by the party opposite! No doubt there is always room for people to repent. I am
  1534
  glad that the emphasis has rightly been moved and I hope that the process will continue, although I am disturbed about the particular form that it has taken.
  There is some unwisdom about the imposition of tax on petrol, and I agree with my hon. Friend the Member for Guildford (Mr. Howell) that it would have been a better move to have put the rate of VAT at 10 per cent. The effect of that on the retail price index has been exaggerated at times in terms of wage negotiations. The increased price of petrol will have more effect during such negotiations than an increase in the retail price index.
  There is another dangerous argument here. The Chief Secretary referred to what President Carter has said about conserving energy by putting up the price of petrol. That is all very well, but what will the producers and our Arab friends say about that? No doubt they will comment "All right, if you want to see the price of petrol higher, we shall do it for you, thank you very much." They will say that we have been pressing them hard to keep down the price of oil because of the inflationary effect of high oil prices on Western economies, yet now we are deliberately putting up prices ourselves. That is a difficult case for us to argue.
  The Saudis produce far more oil for Western consumption than it is in their national interest to produce. It suits them better to keep the stuff in the ground because they cannot spend all the money they get for it. They have been trying hard to moderate the increase in petrol and oil prices for the benefit of Western democracies, yet now the West is putting up prices for the sake of its own economies. The Saudis will be bewildered about what Western democracies really want.
  Dr. Bray: Does the right hon. Gentleman not agree that if the Arabs wanted to increase their income from oil they would not put up the price because that would reduce their incomes, which would be very silly?
  Mr. Maudling: I do not think that is true. It is crystal clear that one of the reasons the price of oil has not gone up more is that the Saudis and the Gulf States have not wished further to embarass Western economies by further

  1535
  inflationary price increases. They have done that after considerable argument with their colleagues, but now they find the British and American Governments deliberately putting up prices and that leaves them in an awkward situation. This is an important factor in the long-term relationship between oil producers and consumers.
  I return without apology to the problems of incomes policy because it is vital. The collapse of incomes restraint and a return to a free-for-all this year would be disastrous for this country and its people.
  Our economy is making some progress. The balance of payments is becoming stronger, confidence in sterling is better than it was a few months ago, and the increase in unemployment seems to be stabilising, although the figures are hard to read. In addition, North Sea oil is approaching rapidly in amounts that will be significant for our balance of payments. However, this slow and faltering improvement could be jeopardised by a new explosion of wage increases, and the tender plant of confidence in sterling could wither in a very short time.
  There are two widespread delusions in this country. The first is that there is such a thing as free collective bargaining to which we could return, and the second is that the effect on prices of a wage explosion could be contained by what is called strict control of the money supply. Both are dangerous illusions, because if we followed them we should find ourselves in a very difficult situation.
  The Leader of the Liberal Party said recently that free collective bargaining should be called free collective chaos and I was rude enough to suggest that it should be called free collective blackmail, because that is what it could become. If unions used their monopoly power without restraint a new spiral of cost inflation would be inevitable. As has been mentioned already, there is dissatisfaction with the present state and phase of incomes policy and pay restraint. There is general resentment that living standards are being brought down, and unions and other people making wage claims want to preserve their own living standards, even if by doing so they depress the living standards of other people.
  There is also a serious problem of erosion of differentials. My hon. Friend
  1536
  the Member for Guildford rightly referred to the difficulties of management in this country, and the figures he quoted, with other figures that have been published recently, underline dramatically the enormous change that has taken place. There is no doubt that the change in the real living standards of management in this country is bound to have a serious effect on the performance of British industry.
  These are genuine and real criticisms of the present state of incomes restraint and the pay policy, but the answer is not a free-for-all. It is to have more flexibility within the policy. A free-for-all would not solve the problem of differentials because, in general, the people who have been losing their differentials are those with the least industrial muscle and they might suffer even more in a free-for-all.
  There should be more scope for kitty bargaining, and particularly for local schemes to increase productivity, such as output bonuses and so on, but the basis will be nationally agreed rates. As long as there are national unions, we shall have national negotiations, and any attempt to fragment the trade union structure more than it is at present might be less than helpful. Of course, in many occupations, including teaching, for example, it is not possible to increase productivity, and often productivity is increased not because of increased effort by the labour force but because of increased investment.
  While there is room for flexibility, wages will still generally be determined on a national basis and not pit by pit or school by school. As long as we have national negotiations, they cannot be free negotiations. There cannot be free collective bargaining in any true sense of freedom as long as unions have their monopoly powers. We cannot have free negotiations with people who can turn out the lights in a few hours' time.
  In all major negotiations, a third party —the consumer—must be included. What freedom does the consumer have? What freedom would he have if the determination of wages were left entirely to employers and unions? For many years it has been the job of Governments to represent the broad interests of the consumer in the determination of the wage structure in this country.

  1537
  I do not believe that this talk of returning to free collective bargaining has any reality in the modern world. Equally, I do not believe there is much substance in the argument that we can use strict control of the money supply to prevent a wage explosion passing into a price explosion.
  The movements of M1 and M3 are capricious and unpredictable. The Treasury does not know from one month to the next whether the borrowing requirement will be £8 billion or £9 billion. It is impossible to predict the sale of giltedged at any given time, and no method is known to mortal man whereby one can maintain, in mathematical terms, strict control over the money supply, whether it be M1 or M3. The relationship between money supply and effective demand is still shrouded in mystery. Effective demand is what matters. It is not the amount of cash in banks or building societies that matters, but what people intend to do with it. On the whole, people spend what they earn, borrow or dissave. It is these decisions that matter, and not some strange mathematical formula about M1 or M3.
  We still have lingering symptoms of the quantity theory. A letter in The Times recently recalled that Keynes said to the editor of a well-known newspaper that, by modern surgery, even an inflamed quantity theory could be removed without serious danger. I believe that this is an operation that should be carried out.
  It is argued that even if wages increase and we maintain the total amount of money that can be spent, prices will not increase but unemployment will. That is a total fallacy. If unemployment rises, production will fall. There will be fewer goods on which the same amount of money is spent, so prices will still increase. The idea that we can maintain the general level of prices by containing the general quantum of purchasing power in conditions of high unemployment is, to my mind, rubbish. We are aware of the doctrine of the high priests of monetary theory that it takes two years to have any effect: that which happens at the end of this year was determined two years ago by the movement of the money supply. If anyone believes that whatever happens to wages in the next 12 months will have no influence on the level of
  1538
  prices because that was determined two years ago by the movement of the money supply, he can only be a professor.
  I am not convinced that credit restraint or cash limits—I accept that they are both extremely important elements of Government policy—are answers to a wages explosion. All experience in recent years has demonstrated quite clearly that that is so. A tight money situation does not in practice compel employers to resist wage demands. In those circumstances it is a fact that cash flow becomes of the greatest importance. Employers are more liable to give way to wage demands so as to maintain cash flows. In that way investment is sacrificed. As a result, there is stagnation and no investment.
  Mr. John Lee: I have been listening to the right hon. Gentleman with a great deal of interest and sympathy. Judging by the expression of those who sit on the Opposition Benches above the Gangway, I think that there is more sympathy on the Government side of the Chamber than on the Opposition side. The right hon. Gentleman has demolished the monetarist argument. Does the right hon. Gentleman agree that, if we are to have effective investment in the situation he has described, we must have tough Government intervention and a siege economy? Is not that what is needed?
  Mr. Maudling: I believe that the very opposite is the case. I was worried that the hon. Gentleman was nodding in apparent agreement when I was speaking. Experience has shown that investment takes place only when the man who makes the investment sees a market for his goods. Tax incentives do not work very well. Government direction is usually counter-productive. The only chance of getting the level of investment that we want is to make investment profitable and desirable for investors. That is not achieved, with great respect, by Government intervention.
  I doubt whether cash limits on public services are effective in controlling prices. Of course, these are old arguments. Similar arguments took place when Lord Beeching was in charge of transport many years ago. If a cash limit is imposed upon a public service and it is

  1539
  then said that it wages increase services will have to be reduced, that is no answer to inflation. In those circumstances the public will be paying the same amount of money for a much reduced service. They will be paying the same amount of money for fewer goods or services. That is just as inflationary as paying more money for the same amount of goods and services.
  I recognise the importance of cash limits and credit restraint in the right circumstances, but they are not the answer to a wage explosion. I can see no alternative, but continuing Government influence on the level of pay settlements at a national level. The form that that influence takes must change. There must be more flexibility. There must be changes in detail. The negotiations and the formulation of a change in policy will obviously be exceedingly difficult, but the effort will be profoundly worth while because any alternative will be disastrous.
  5.54 p.m.
  Mr. Jack Ashley: The speech of the right hon. Member for Chipping Barnet (Mr. Maudling) will have commended itself to many more hon. Members on the Government side of the House than on the Opposition side. The way in which the right hon. Gentleman dealt with the problems that face us and the theories offered to the House by the monetarists will have been taken very seriously by my right hon. and hon. Friends.
  I was glad to hear the right hon. Gentleman refer to the dangerous delusions that we often hear expressed. His brand of common sense was a breath of fresh air to many of us as we hear so much hot air about these economic problems. The support that the right hon. Gentleman gave to the Government's efforts to try to negotiate phase 3 of the social contract will be echoed throughout the country. As the right hon. Gentleman said, there will have to be changes. There will have to be more flexibility and there will have to be regard to differentials. There is a great need for phase 3 to be carried out, and I am hopeful that the Government will be successful.
  I have always been regarded by the Government as a loyalist, but I must warn the Treasury that it is tending to become
  1540
  presumptuous in its approach to Labour Back Benchers. It is tending to take them for granted. In this brief speech I hope to let the Treasury know that it is beginning to play with fire and that some of us are beginning to make up our minds that we are not prepared to be pushed around by Treasury Ministers when we put forward specific objectives and the interests of certain groups. We are not prepared to have the Treasury pooh-poohing those groups.
  By all means let us acknowledge the difficulties confronting the Government. I recognise as well as anyone else that there must be constrains on public expenditure and I have great contempt for the political stunts that are sometimes offered, as well as some of the simple solutions and panaceas. That is why I stand behind the Government on the whole and support the Treasury's attempts to deal with these difficult and intractable economic problems.
  Although this will be rather like a red rag to Conservative Members, I believe that only a Labour Government can negotiate phase 3 with the trade unions. It would be impossible for the Conservatives to do that. That is because history is against them. Their preoccupation with middle income groups, management and the self-employed makes trade unionists suspicious. I do not dispute that they are right to raise such matters and I accept that there are legitimate problems faced by the middle income group, middle management and the self-employed, but the fact is that because of these preoccupations, trade unionists distrust the Conservatives' approach to phase 3.
  Curiously enough, the Government are now beginning to fall into a trap of their own making. Although they are right to have regard to the fears of trade unionists about differentials and flexibility, they are beginning to go too far. In the Budget specific help was given to married working men because their pay packets lost 70p a week although their wives received £1 extra. The Chancellor said that he was proposing a substantial increase of the married allowance to provide family men wtih special help during the transition to the child benefit scheme. My right hon. Friend is conscious of the need to see the effect of this change on the public's pay packet. Obviously the Chancellor is trying to get phase 3, and good

  1541
  luck to him. In that respect I support him. The danger is that the Government will go for differentials in so bullheaded a fashion that they will overlook the less privileged sections of the community, the low-paid and the disabled.
  The Chief Secretary prides himself upon being tough and standing up for public expenditure restraint. But a picture is beginning to emerge of a brave Chief Secretary placating the most powerful and bravely fighting the disabled and underprivileged whom I and some of my colleagues seek to help. It is a picture of a Goliath knocking down the little Davids and apparently being very proud of it. I cannot say what Ministers say in private, but the word is going around that certain Ministers are refusing any advances for underprivileged groups, such as vaccine-damaged children and others of that kind. Those groups do not have the power of the trade unions. They do not have the support of shop stewards and they cannot call a strike.
  I warn the Treasury that if it wants to play it rough with these groups—vaccine-damaged children, low-paid workers, widows and so on—that is fine. It will have to play it rough with those Back Benchers who try to represent such people. The Treasury is turning loyalists into rebels. We are prepared to organise and to fight. If the Government have to be defeated on specific issues of this kind, the Government will be defeated. It is as simple and as plain as that.
  I recognise that there are grave economic problems facing the Government. I have loyally supported them throughout the years. I am now beginning to think again. A certain amount of sympathy has been expressed by the Department of Health and Social Security towards these groups. I want the Treasury to reconsider its attitude and not to pooh-pooh these groups. I, too, want to help trade unionists, but I am not prepared to see the little guys pushed around. They are now beginning to be pushed around by the Government, and it has got to stop.
  I hope that the message will get home to the Chief Secretary and all his colleagues. I say that in a spirit of friendliness because I know that the Government are faced with massive monetary problems. They will have my support, as they have had it in the past, but I make an
  1542
  earnest plea to the Treasury and to the Government not to go for the weakest in their anxiety to correct the balance of payments, to get rid of deficits and to reduce inflation.
  I know that Ministers can stand at the Dispatch Box and quote what has been done. I have done that on a party political platform. We have a far better record than the Tories on these issues. I have argued that, but I argue now for what can be done in the present situation, and a lot more can and should be done. I hope that the Government will take all those considerations into account when they are dealing with the Bill and with consequent amendments which I intend to table.
  6.4 p.m.
  Mr. Andrew MacKay: It gives me much pleasure to follow the hon. Member for Stoke-on-Trent, South (Mr. Ashley). I have a considerable regard for the hon. Member. I hope that in my service to the House I am able to do half as much for the underprivileged as he has done.
  It is with a feeling of a great sense of occasion that I take a small part in this Second Reading debate on the Finance Bill, particularly bearing in mind that I am following on my right hon. Friend the Member for Chipping Barnet (Mr. Maudling), one of the most distinguished Chancellors during my lifetime. As Member of Parliament for Stechford, I am succeeding another distinguished Chancellor of the Exchequer.
  It is a tradition of this House that a new Member's maiden speech includes complimentary references to his predecessor. In my case I mention Mr. Roy Jenkins not as a perfunctory courtesy to the House but out of a genuine regard for that considerable statesman. I know that it is a regard shared by all sections of the House for a man who has not only held the two great offices of Home Secretary and Chancellor but has shown a degree of integrity in public life which has enhanced people's views of politicians in an age of increasing cynicism. His work for European unity has been fittingly rewarded by his appointment as President of the European Commission. I know that all hon. Members will wish him well in this difficult but vital role. We feel a little more confident about life

  1543
  in the European Community now that he is at the helm.
  During his 26 years as Member of Parliament for Birmingham, Stechford, Roy Jenkins built up an admiring public. We in Birmingham have a fine record of finding, supporting and promoting distinguished statesmen dating back to John Bright, through Joe Chamberlain and up to the present day. These are men of vision serving their country from that soundest of bases, the great city of Birmingham.
  I am pleased to say that my constituency of Stechford forms an important part of the city of Birmingham. It stretches from the south-east boundary, which is made up of the M6 motorway, to the centre of the city and the main commercial areas. The village of Stechford dates back to Saxon times and has gradually, during the course of this century, been complemented by many residential suburbs, namely Hodge Hill, Ward End, Washwood Heath, Shard End, Glebe Farm and Kitts Green. As befits the workshop of Europe, we manufacture a wide variety of electrical goods as well as all other forms of manufactured goods.
  For instance, at Metropolitan Cammell we build London buses. I suspect, Mr. Speaker, that we even build the buses which operate in the city of Cardiff. In a neighbouring factory we supply the railway carriages for the London Underground. We have just had an exceptionally good order for the Tyne and Wear Metro and, more important still from an export point of view, we have had a first-class order for the new Hong Kong Metro. That will be of considerable value for this country.
  We also supply the country with domestic and other electrical appliances, such as cookers and refrigerators, from Parkinson Cowan. We export a large number of trucks all over the world from British Leyland's factory at Washwood Heath. Many residents travel across constituency borders to a wide variety of manufacturing and engineering companies. These are the companies upon which the prosperity of the city of Birmingham depends.
  More complex still are the many small businesses and self-employed workers who make up the majority of the working elec-
  1544
  torate in Stechford. Very often they are the base upon which the bigger companies depend for skilled production of components and for efficient retailing.
  As a member of a family which has lived in Birmingham for five generations, and having worked in such firms, I am naturally biased when discussing their attributes. Consequently, I ask the House to forgive me if I dwell on this subject for a just a little longer.
  There is an air of despondency and a listless feeling in small businesses throughout the country. Their numbers are diminishing through bankruptcies and voluntary liquidations. Those that are surviving have no wish to expand, and there are few firms jumping up to take their place. This is a tragic state of affairs.
  —Let us look at what a thriving, self-employed small business sector could do for our country. It generates competition, it serves the consumer much more ably than do many of the large multinationals, it is in closer touch with market trends, and it has a fine record of happy industrial relations. Even more important, it is an excellent outlet for the kind of entrepreneurial skills which made this country great.
  Although I am trying desperately hard not to be controversial in my maiden speech, I must say that these small businesses genuinely feel that they have been abused by successive Governments, because by their very nature they are fragmented and they did not realise until too late the need for an effective parliamentary lobby. They require no special favours, no charity, and no commissions to advise them on how to act. They simply need an incentive to work, without being strangled by red tape.
  I believe it is generally accepted in all parts of the House that we are somewhat over-legislated. But nowhere is the burden of such legislation felt more greatly than among small businesses and self-employed workers. They do not have the staff to cope with the unnecessary bureaucracy imposed by Governments who have entered areas which they know little about and in which, with respect, I consider they should not be. Perhaps I shall say more about this in another debate.

  1545
  I appeal to the Government to give small business men and the self-employed a financial incentive by substantial cuts in direct taxation. Although they appreciate the small cuts that were made in the Budget, I do not think that the Chief Secretary would by any stretch of the imagination consider that they were substantial or anywhere near enough.
  We must encourage the expansion of new enterprise by giving that incentive. By encouraging expansion we shall create real jobs for the future, which is what every hon. Member wants. We must make the risk worth while. To this end, it would surely be advantageous to give special tax concessions to small businesses and to companies that are ploughing back their profits into new plant or machinery or to those that are creating new jobs through expansion and opening up new factories, shops and firms.
  Let us tap the considerable resources of ingenuity that we have in this country so that there is a feeling of optimism, with everyone working at full stretch and reaping ample rewards for his endeavours. This will help stamp out the cynicism that the Prime Minister last week so rightly suggested was pervading the country.
  I hope that in my short contribution I have made some valid points that the Minister can take up at the end of the debate. I know that there are very many small business men and self-employed people not only in my constituency but throughout the country, who will be interested in his reply.
  6.15 p.m.
  Mr. John Cronin: It is a long-standing and pleasant tradition of the House that when one follows an hon. Member who has made his maiden speech one should express more detailed appreciation than is generally accorded. I am happy to be able to comply with that tradition. I thought that the hon. Member for Birmingham, Stechford (Mr. MacKay) spoke with great lucidity, deployed his arguments skilfully and spoke with an attractive modesty. All of us from both sides would probably feel that we appreciate his courtesy in referring to his predecessor, a member of a different political party, in such complimentary terms.
  1546
  All of us would probably agree that much should be done to encourage small businesses. I would carry this argument a little further and say that there is a good case for big businesses being divided into smaller divisions, instead of our having the somewhat monolithic situation that occurs in the hon. Gentleman's own constituency with British Leyland. Nevertheless, I thought that the hon. Gentleman made an attractive and pleasant speech and I am sure that we shall hear much more of him with great pleasure in the future.
  I give the Finance Bill a warm welcome. I have certain objections to some minor points. My objections are largely about the things that are not in the Bill rather than those that are in it, but quite a few of them could not be put into a Finance Bill. I certainly welcome the income tax reductions. I am glad that the average married man will now be £2 better off in his pocket. It is certainly an attractive situation that 850,000 members of the lower income groups no longer have to pay any tax. I am also happy that retirement pensioners are having the threshold at which they pay tax raised by £140 to £1,695.
  It is satisfying also that something has been done for middle management by raising the levels at which the higher rates of income tax apply and also, in respect of exports in Clauses 28 and 29, by giving certain relief to overseas employees. However, I must say that these clauses are hedged by provisos and stipulations which make their value rather more doubtful now than perhaps will emerge when we deal with them in Committee.
  It must be clear to all that employment and the prosperity of our nation depend to a very large extent on the skill and energy of executives in middle management. They are the people who get the business, and they certainly deserve consideration from the Treasury, if only in order to bring employment to the highest level and improve our economic condition.
  I turn now to the proposed cut from 35 per cent. to 33 per cent. in the basic rate of income tax. This is subject to agreement on a pay policy. I believe that all right hon. and hon. Members will agree that the pay policy so far has been

  1547
  full of injustices and anomalies, some of them very grave, and that the effects on differentials and on productivity have been far from satisfactory.
  I imagine that all will agree with what was said by the right hon. Member for Chipping Barnet (Mr. Maudling) about the need to return to orderly collective bargaining. But it must be orderly. It is vital that there be no pay explosion. Plainly, phase 3 is essential if we are not to have a serious wage explosion.
  Nevertheless, a pay policy does not stop inflation, and I think it important that the Government should make this clear to the general public. A pay policy does no more than reduce inflation to a level lower than it would be without the policy. It is no magic panacea. None the less it is essential, and I am sure that the Chancellor and other Treasury Ministers will withstand the strong pressures that will be put upon them to make the pay policy far more lax than they would wish it to be.
  There is a built-in difficulty in all pay policies. If we make the norm or pay ceiling high enough to accommodate all cases of extreme anomaly and injustice, that norm will be regarded as a standard entitlement for everyone and there will be a rush by trade unionists to take advantage of it. On the other hand, if we make the norm too low the whole thing becomes unworkable and it is impossible to make the pay policy stick. I hope that the Government will have a moderate norm or ceiling, with case-by-case examination of anomalies, preferably with the active participation of the TUC. If we can bring in the TUC to take part in a more active way, this will be a great help to the Government, I am sure.
  I turn now to a matter which is not covered in the Bill but which is closely relevant to it, namely, the whole problem of price control. The Chief Secretary to the Treasury pointed out that inflation was dependent on many factors outside the Government's control, saying that world terms of trade were a cause of inflation, that our poor export performance was a cause of inflation and that even the fall in the parity of sterling was a cause of inflation.
  Those factors are outside the Government's control, except, perhaps, the parity
  1548
  of sterling. I should like the Minister to give some indication of the Government's policy regarding the parity of sterling. One gains the impression that there is a deliberate attempt to keep sterling down when it is, in fact, tending to rise, presumably on the assumption that that will make our exports more competitive. At the same time, however, it increases inflation through the cost of imports.
  I am sure that both sides of the House will agree that fiscal measures such as we have in the Bill are not enough to reduce inflation substantially. Moreover, the effect of fiscal measures is inevitably delayed. I ask the Chief Secretary, therefore, to consider—and to talk to his colleagues about it—more direct price control, since that would have an immediate effect. I appreciate that this is principally the province of the Secretary of State for Prices and Consumer Protection, but I have no doubt that there is close co-operation between the Treasury and that Department.
  Price control of a direct nature, even if only partially successful, would at least have a good psychological effect. I admit frankly that the disaster for the Government at Stechford—I say this with all respect to the hon. Member for Stechford—was largely due to the electorate's dissatisfaction about prices, and I fear that the Labour seat at Grimsby will be in severe jeopardy today for the same reason.
  In my constituency I have a vociferous, energetic and intelligent Labour Party. I try to maintain frequent exchanges of view with my Labour Party members at meetings, and every speaker—I am talking here of active Labour Party members—seems to condemn the Government's policy on price control. I believe that they reflect the views of the electorate, and I ask my right hon. Friend the Chief Secretary to convey that fact to his colleagues, because this is one of the most serious issues. If the Government were to lose the next General Election—in that event, I should certainly adopt the old saying "Aprés moi, le déluge"—I think that that disaster would be almost entirely the result of dissatisfaction with what has up to now been the Government's unhappy record in controlling prices.
  I turn now to some minor aspects of the Bill, and I refer first to Clause 4

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  on hydrocarbon duties. Several hon. Members have referred to this already. I take the Chief Secretary's point that energy conservation must be regarded as an important aspect of policy, even by the Treasury, but I am not sure that I accept his view that his policy of increasing the petrol duty is justified simply because it brings duties into line with inflation. If he were to use that argument on such matters as taxation he would find himself in very deep water.
  I understand the point when my right hon. Friend says that for a person with an average-size car the extra cost is only about 30p a week, but I must remind him that for a good many people with small cars that is a quite substantial sum out of their weekly earnings, and especially so in rural areas where incomes are on the low side, to say the least.
  In Leicestershire, part of which I represent, there is a good deal of hardship and a good deal of ill feeling. People in rural areas are looked after by bus services which, to put it mildly, do not give universal satisfaction, and as a consequence they tend to use cars much more than they would wish. I feel that they can rightly and properly object if they are penalised in this way.
  An important adjunct of the Finance Bill is the Government's control of the money supply. I was very favourably impressed by the determination expressed by the Prime Minister and the Chancellor of the Exchequer, and again today by the Chief Secretary to the Treasury, showing that the Government firmly intend not to increase the money supply to an extent which would be incompatible with the interests of the economy. I cannot help saying that this is a big change from the situation which prevailed in the days of the Tory Government when the right hon. Member for Sidcup (Mr. Heath) was Prime Minister. When I heard the hon. Member for Guildford (Mr. Howell) congratulate my right hon. Friend the Prime Minister on his determination in this matter, I could not but think that if he had said the same thing four years ago his promotion would have been seriously delayed in those rather slap-happy times when money was printed without regard to the effect on the economy.
  I hope that the Chancellor will not depart from his target—that is, not to
  1550
  increase the money supply by more than about 10 per cent. It is important that every industrialist and every trade unionist who takes a bigger reward out of the economy than is justified by what he produces should lose thereby, and that will be the effect of the Government's firm stand, which I hope they will maintain.
  The Chancellor and his junior colleagues at the Treasury have had a good record. Last year, when there was the threat of an explosion in the money supply by raising interest rates and cutting the Budget deficit the Chancellor turned an important corner for the economy. I realise that my right hon. Friend has been Chancellor during a period of high unemployment and seriously rising inflation, but it should be remembered that this is merely a coincidence of time. He has followed a succession of Chancellors whose policies brought about that situation.
  In my view, therefore, the Chancellor and his Treasury Ministers are doing a good job. They are certainly the best Treasury Ministers we can have. They have an unrivalled record of knowing what can go wrong and, therefore, being able to counteract it. In the course of their stormy journey I wish them all luck, particularly in coping with the vital phase 3 negotiations. I am sure that Treasury Ministers will weather this storm, and I am equally sure that all hon. Members on both sides of the House hope that they will be successful.
  6.30 p.m.
  Mr. John Pardoe: I add my congratulations to the hon. Member for Birmingham, Stechford (Mr. MacKay) on an excellent maiden speech. I particularly welcomed his comments about his most distinguished predecessor. The hon. Gentleman told us a great deal about Stechford and how it was contributing or helping to solve some of the underground problems of others. I also welcomed his comments about small businesses. We shall be returning to that subject on many occasions during the Committee stage of the Bill. I hope that we shall hear the hon. Gentleman on this and other subjects in future.
  The Government expected the Budget to be popular. Strange leaks were emanating from Treasury quarters before

  1551
  the Budget was announced which indicated that it would dish the Tories and out-Tory the Tories with regard to cuts in income tax. Indeed, I think that the Conservative Party itself half feared that this might be the case, and immediately following the Budget the reaction of the right hon. Lady the Leader of the Opposition was to talk about "a Budget of survival". In fact, as the Gallup Poll has indicated—if one can believe these things at all—it is the most unpopular Budget in 25 years.
  The Government were taken very much by surprise. The reason, of course, is partly frustration with falling living standards that all of us have experienced. It affects not only middle management—the people whom the right hon. Lady was talking about—but also families, particularly those with the problem of raising a family, and pensioners.
  Everyone has experienced the frustration of having to make ends meet with fewer resources over the last two or three years. But apart from that general sense of frustration about the failing of the British economy in recent years—I would say over a longer period—the Treasury got the petrol thing completely wrong. The massive outcry against the very sharp increase in the petrol tax took the Government entirely by surprise. I was not taken by surprise because, like many other hon. Members who have spoken today, I represent a rural constituency. Perhaps in Leeds, where the Chancellor comes from, they do not have rural buses and, therefore, do not quite understand the problem.
  There will be plenty of time to discuss the Bill in detail during the Committee stage, some of it on the Floor of the House. Some of the comments of the hon. Member for Guildford (Mr. Howell) seemed to suggest that there might be some backstage deal or agreement about what amendments the Liberals would support. In answer to the hon. Gentleman, I would say that the Budget and the Finance Bill are without any agreement between the Labour Government and the Liberal Party. The Budget was clearly put together and announced before the agreement came into force. As I have indicated, we were not consulted.
  Therefore, the Liberals will be tabling a specific amendment on petrol, as no
  1552
  doubt will other right hon. and hon. Members, to end the increase on a specific date. Of course, whether our amendment is carried does not depend entirely on us. It depends on getting enough hon. Members from all parties to support our amendment.
  Mr. Nicholas Ridley: Does the hon. Gentleman's announcement that the Budget and the Finance Bill were in no sense part of the agreement between his party and the Government mean that when we come to the July package, or the October or December package or whatever it is, he will expect to be consulted by the Government before that package is put together?
  Mr. Pardoe: It does not indicate any such thing. The hon. Gentleman will not draw me that way. He will have to wait and see. He will, no doubt, be very good at doing that by the time this agreement has run its course.
  Mr. Peter Rees: Since this is a matter of general importance, not only to the House but outside, are we to understand that economic and fiscal affairs are without the agreement between the Labour Party and the Liberal Party?
  Mr. Pardoe: The hon. and learned Gentleman is excessively good at making rather trivial points sound enormously and pompously important. It is sometimes entertaining and sometimes simply boring. On this occasion it is simply very very boring. It does not even bear any relation to what I was saying. I simply said that this Finance Bill and this Budget were without the agreement between the Liberal Party and the Government.
  With regard to petrol tax, however, we shall be tabling an amendment and we shall certainly press it to a vote. It is perfectly legitimate for the House to debate alternative ways of raising tax revenue. There is no reason why Parliament should not get involved. The fact that it has not been able to get involved in the past is simply because we have had single-party majorities and, therefore, that argument has not been able to win the day.
  I do not know where the hon. Member for Guildford got the figure of 20 per cent. as Liberal Party policy for VAT. I have never seen such a suggestion, and

  1553
  I certainly have never made such a suggestion myself. On many occasions I have asked for a flat-rate VAT of 10 per cent. One VAT rate would be infinitely preferable to the petrol tax increase. Indeed, even if one allowed the petrol tax increase, a single-rate VAT would still be preferable. I believe that 10 per cent. would be preferable because for a great many people it would be so much easier to administer. The compliance costs of VAT are more important than the actual Customs and Excise costs, yet Governments do not take them sufficiently into account.
  We shall also have the opportunity on various amendments to debate the tax system generally during the various stages of the Bill. The Chief Secretary today argued—all of us thought very convincingly—in favour of switching the burden from taxes on income to taxes on expenditure. We would certainly agree with that. But one has to ask "How?" and "Which tax?". It is perfectly legitimate to choose between taxes on expenditure. Moreover, I remind the Government that there is a severe political difficulty about making the switch from taxes on incomes to taxes on expenditure if we do not index the whole tax system. The unpopularity of the increase in the petrol tax has indicated just that, because unless we index the whole tax system it is altogether too easy to raise revenue from income tax. It happens automatically because of the effect of inflation on the revenue from income tax. One merely needs to leave it alone and income comes pouring in.
  It is much more difficult to raise very specific taxes on expenditure because people notice the increases so much more. Such an increase happens at one particular point. It is abrupt and sudden. That is what happened to petrol. I suggest that had the petrol increase been spread over the cost of living, or alternatively, over a period, the outcry would not have been as great. I do not say that that is what we should have done, because I would oppose the increase in the petrol tax for other reasons.
  I do not accept the Chief Secretary's argument that we should simply increase taxes in line with the cost of living because we can then change the rate if we have a mind to do so. It remains for Parliament to do so, and that is an important advance.
  1554
  The Finance Bill is sometimes used as a weapon or vehicle for making comments about the state of the economy generally. Frankly, on the Budget judgment I admit to being an agnostic. I do not think that it matters too much what the particular judgment is at any one time, provided one does not think that it is a judgment for all time or for the next 12 months.
  I want to downgrade the importance of the Budget and its one day of the year. This can be changed, depending upon circumstances. In any case, it is notoriously difficult to forecast the public sector borrowing requirement, which is a fairly crucial statistic, let alone the money supply. That is even more difficult to forecast. As those things are taken into account in fixing the Budget judgment—certainly since the IMF agreement—one has to see how the trends develop.
  I think that probably the Chancellor has brought in a cautious Budget and that it is about right at this time of the year. However, it will not do anything for unemployment, which will inevitably continue to rise, and I do not think that it will do anything to stop the fall in living standards either. Politicians ought to ask themselves whether it was not inevitable that living standards had to fall following two events. The first was the rise in the money supply during 1972–73. The money supply increased by 60 per cent. in three years, and that is to be found in Table 112. One can see what happened to the money supply in those years. I do not want to rake over that period, but that happened, and if one has to get the rate of inflation down it is inevitable that living standards have to fall. Secondly, following the large increase in oil prices in 1973 we had, in a sense, to export a part of our living standards for a period of time. There is no reason why we should not be able to catch up in time, but during a period of three or four years a fall in living standards was inevitable.
  I turn next to the conditional element in the Burget—that is, the pay policy. I was dispirited when I heard the speech of the right hon. Lady the Leader of the Conservative Party the day before yesterday about her party's attitude to pay policy. I much prefer the constructive attitude of the right hon. Member for Lowestoft (Mr. Prior) and the speech this

  1555
  afternoon of the right hon. Member for Chipping Barnet (Mr. Maudling).
  Having listened to the right hon. Lady and some of her colleagues on the Conservative Front Bench, I thought "We have been here before". I understand the desire of any Opposition to cut free from the encumbrance of pay policy. I understand particularly the desire of the present Opposition to cut free from the encumbrance of pay policy. I understand particularly the desire of the present Opposition to cut free from the encumbrance of pay policy, because the argument is advanced, and it must infuriate Conservatives, that the Conservative Party will not be able to get a pay policy anyway and, therefore, it is necessary for it to say that it can govern the country without it.
  The right hon. Lady said that she does not want any national agreements, but only locally-negotiated ones. That is eminently desirable. I think that we should all prefer to have locally-negotiated agreements. The problem is how to get them. How does one enforce them, or how does one stop trade unions from negotiating national agreements and force them into negotiating only locally?
  The consequences of not getting a pay policy were in no way over-estimated by the right hon. Member for Chipping Barnet, and I think that it was right for him to lay his cards on the table. In theory, at some time a reduction in the money supply will do the trick. If it does not, we shall have to bring Professor Milton Friedman before the Bar of the House to answer questions.
  At some time it will happen, but if we rely only on the money supply—in the public sector that means relying on cash limits—and there is no pay policy, what will happen? There will be enormous pressure from some trade unions for large increases, and some trade unions, by reason of their bargaining power—which is related not necessarily to their contribution to the economy at any one time but simply to their nuisance value—will be able to get a substantial increase. If the money supply is kept constant and if cash limits are imposed, other people will not get anything like as much, and many will be without any incomes. They will become unemployed.
  The inevitable consequence of relying on the money supply and cash limits
  1556
  alone, without a pay policy, will be a substantial increase in unemployment, and with it a substantial increase in industrial unrest by the public sector unions, which will come up against cash limits and be forced to strike. That is the problem. Therefore, I think that to duck the issue and run away from the need for a pay policy is not facing the responsibilities that one has in the present situation.
  If one asks how much pay policy should give—and that is a fairly crucial question—one gets different answers depending upon whom one asks. If I ask myself how much I need, inevitably one answers that question by saying "I need enough to compensate for the rise in the cost of living, and that is probably 17 per cent" If I ask how much the economy can afford—that is, how much the economy produces to pay for this in real resources—the answer is "Nothing" or "Next to nothing".
  To pay nothing is clearly politically impossible. To pay nothing at all as an overall increase across the board would not be politically feasible. There has, therefore, to be an across-the-board increase. We have to keep it as low as possible by negotiation, and not more than 5 per cent. seems to be the absolute limit for that part of the increase.
  We then need a further amount for differentials. We come back to local plant bargaining, because that is the only place where the differential can be bargained over and negotiated in a sensible way. If there was no initial increase, any amount that we voted, or any amount that was decided on in the negotiations for this purpose, would be spread too thinly to deal with the problem of differentials. I guess that about another 5 per cent. will have to be allowed to deal with differentials at the plant bar gaining stage. That makes an increase of 10 per cent., but that does not give an average increase of 10 per cent. It is bound to be higher than that.
  In addition, there must be some incentive for increased efficiency and extra production. However, productivity deals have a bad reputation because most of those on which we voted in the late 1960s were "phoney". There was no connection between promise and performance. People tended to get paid for the productivity that they had promised to

  1557
  deliver. They did not deliver it, but they were still paid. Productivity deals have a bad reputation, and no one will negotiate for that sort of thing again. That, however, is putting the cart before the horse. We need genuine productivity deals that are self-financing and in which the pay comes after the productivity is delivered. If we can get to that situation, the sky is the limit for the British economy.
  We need incentives in some industries and in a range of organisations. They must be able to negotiate a pay deal that allows them to decide which pay bonuses to take. In coal and steel we shall have to go for direct production bonuses because it is possible to measure production, and a pay policy will have to allow for that. In other industries, particularly in the private sector, added value may be a better measure, and an increase in added value per employee might be a better measure of effectiveness. In yet other industries we shall have to go for profit-sharing schemes that are widely spread. The hon. Member for Guildford said that he was not sure whether the Liberals were still committed to profit-sharing. I assure him that we are.
  The hon. Member for Guildford talked a lot of nonsense about our having joined the collectivist camp. The hon. Gentleman was a supporter of the previous Tory Government. One could not get more collectivist than that. I understand that it is Conservative Party policy to get back to free collective bargaining, and that, too, is pretty collectivist.
  One must face up to the problem of enforcement. All that a voluntary pay policy has done is to shift the responsibility for enforcement on to the trade union leaders. Parliament should take that responsibility. The buck stops here. Eventually we shall have to take that responsibility. The right hon. Member for Chipping Barnet said that the public interest must be taken into account in negotiations. He asked who represented the public interest. Who represents the public interest if Members of Parliament do not do so? Parliament must do its job.
  We cannot return to free collective bargaining. We should use these negotiations to find a new way of determining
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  wages. That must be the main aim of British economic policy over the next three months.
  6.51 p.m.
  Dr. Jeremy Bray. The hon. Member for Cornwall, North (Mr. Pardoe) made a wide-ranging speech. Obviously the particular matter which is of importance to the House is his reaction to the proposed increase in petrol tax. I sympathise with his concern about rural transport. However, he will agree that a general reduction in petrol tax is an inefficient way of trying to help. That is because 80 per cent. of petrol must be consumed in towns by town dwellers.
  Those in rural areas—in the constituency of the right hon. Member for Orkney and Shetland (Mr. Grimond) for instance—will be helped little by such a reduction. A number of hon. Members and I visited Orkney and Shetland during the Easter Recess. There was no doubt that transport costs were the biggest single issue there. It is the wish of the hon. Member for Cornwall, North to do something to alleviate that situation. I urge him to turn his mind to ways in which more effective support could be given to all country dwellers generally by using the large funds that are represented by the proposed increase in petrol tax.
  Understandably the Chief Secretary had nothing new to offer in his analysis in the absence of the Chancellor of the Exchequer who is in Washington. The situation continues to develop regardless. In his Budget the Chancellor offered a 2 per cent. reduction in standard rate of income tax. Unions have been doubtful in their reaction to that. They are doubtful whether any stage 3 is negotiable at all. I wonder whether the Chancellor will make that 2 per cent. reduction in the standard rate, regardless. Perhaps he will suggest a larger figure.
  Inflation dangers remain acute. Interest rates have been further reduced. The minimum lending rate has fallen more than equivalent rates in other countries. There is pressure on building societies to reduce their borrowers' rate. The exchange rate is being stabilised. Generally the situation is developing in a way which is not out of line with what the Chancellor of the Exchequer expected at

  1559
  the time of the Budget, but it gives cause to the House to wonder whether the reductions that he planned then are appropriate to the situation now.
  The effect of high interest rates last year, the IMF loan, the safety net, supplementary special deposits and restrictions on financing Third World trade have stimulated a massive inflow of funds, the unwinding of leads and lags, a massive sale of gilts and a reduction in M3. Interest rates have fallen. The margin of interest rates over foreign interest rates has become much lower than the gap in inflation rates between this country and others. The rate of inflation, interest rates and exchange rates are so unstable that people wonder what will happen and what the Government will do. The economy is in the doldrums and pressures on the pound may go all over the place.
  The Government want to hold the exchange rate to arrest inflation. They want to keep interest rates low to encourage investment. They fear that, if they pursue that course with inflation still high, negative interest rate may create a crisis of confidence. The possible outflow of funds, a fall in the sale of gilts, rises in DCE and money supply, a sharp rise in interest rates and a sharp fall in sterling, are all too familiar as elements in a July crisis. All that can happen before any of the machinery of the safety net comes into operation, because that is contingent only on the movement of official holdings of sterling. Inflationary wage settlements later could greatly exacerbate the dangers.
  What advice are the Government receiving in this uncertain situation? The IMF wants its money back. Most banks do. It is not really interested in inflation. It wants its money back in SDRs. It is not concerned how many pounds one has to pay for SDRs.
  The Financial Times reported from Washington yesterday:
  "IMF staff have made it clear that they are concerned that Britain may not have let the pound fall far enough yet to reflect the continuing effect of inflation on its competitive position."
  That reflects the theoretical, not to say doctrinaire position of the IMF staff and Mr. Polak in particular, not only in the artificial invention of domestic credit expansion, but also in his address at the
  1560
  conference in Washington last month on United States-European relations. Here he stressed the reluctance of economies and Governments to "adjust" as opposed to "co-ordinate"—that is to say, to accept the devaluation implications of inflation. He says that one can pursue what domestic policies one likes provided one is realistic with the exchange rate policies that go with it. One should adjust exchange rates to match. That is successfully achieved in some South American countries.
  According to the Financial Times report, the IMF is saying that the pound should be allowed to slide gently down and that it should not be over-defended. It is saying that we should defend it by DCE and public expenditure rather than by interest-rate policy. So much for the IMF. It is eccentric, but it has an influence on our affairs.
  There are also the portfolio monetarists. Their broad doctrine is that holders of currencies have a view about how much of each currency they want to hold. If too much currency is supplied the price will fall. That means that short-term behaviour is dominated by capital flows. Current flows only affect rates as they alter the portfolio balance. These monetarists have many representatives. One such group exists at the London Business School—Terry Burns and Alan Budd in particular. They are arguing in their most recent forecast, reported in the Press today, that if Government combine tight money policy and seek a low exchange rate or an undervalued exchange rate they will get the worst of all worlds in combining a recession, as a result of the tight money policy, and inflation, as a result of the ever-increasing price of imports. Their advocacy is of a deliberate attempt to raise and maintain the exchange rate to let it float but with the expectation that it will float upwards.
  Peter Jay, again writing in The Times today, wants a clean float, but a clean float aimed at a current non-oil balance of payments, thus building up vast surpluses to build up investment and capacity in an economy which he fears is going through the process of de-industrialisation. That is a powerful argument and, I think, one with which many of us would sympathise—that we cannot use the oil revenues as a bonanza and must

  1561
  use them to seek structural change in the economy. His implication for currency drawn from this—although I am not sure that the hon. Member for Guildford (Mr. Howell) would agree—is the expectation that the clean float would take the pound downwards. Quite how he expects holders of sterling to discriminate between an oil balance and a non-oil balance is not entirely clear, but, nevertheless, his prescription is that the Government should push the exchange rate down.
  Sam Brittan—they have all had a go today—writing in the Financial Times, wants a clean float, and he also expects it to go downwards, but not yet; perhaps later on this year. He produces convincing graphs in the Financial Times today to show that at present the exchange rate is not over-valued. However, this is clearly a moving target, and as rates of inflation in this country continue at a higher level than rates of inflation overseas, sooner or later the question is bound to come: how will the pressures on the exchange rate move and what should be the Government's policy in relation to it?
  All these differences of point of view—and they would all describe themselves as, I suppose, monetarists of one kind or another—are, as Terry Bums points out, crucially dependent upon the very obscure long-run properties of the individual equations, models actual or mental that these chaps have of how the economy works. Terry Burns goes to the trouble of formulating these numerically and quantitatively, and testing them. That is a degree of menial labour that neither Peter Jay nor Sam Brittan finds necessary. They are, perhaps, more fundamentalist in their pursuit of this background.
  Coming more closely to the Chancellor, what about the Treasury? The Treasury listens to everyone, and it tries to test alternative theories on the evidence; and a great many theories it has had to test. Specifically, it seeks to link a flow of funds model to its national economy model, and it seeks to find relations linking the real and monetary variables in the ways described by the monetarists, be they primitive, insular or international monetarists, as Sam Brittan describes them. The Treasury is not very successful in testing the theories that are put forward, for two reasons. First, the data really are not very helpful; it is not at
  1562
  all clear from experience which of the theories are right; but also, I am afraid that the Treasury has difficulties because it has gone about its model building in a rather ham-fisted way. It convinces no one, least of all the Chancellor.
  Skirting around the Chancellor for a moment, there is, of course, the Opposition, whom I describe as Billy Bunter monetarists. They complain that we give too much money to everyone else. They say "Just let me and my friends have the money in the till, cut our taxes, and we shall make gorgeous pigs of ourselves and you will see how the tuck-shop prospers". That is more or less how it comes across in all those dreary weeks in Committee on the Finance Bill, to which we on this side of the House look forward with such mixed feelings.
  Mr. David Mitchell: Has the hon. Gentleman considered the enormous benefits to everyone if the tuck-shop booms and a lot of jobs are created?
  Dr. Bray: That is a view. No doubt the hon. Gentleman would have the economy as one big tuck-shop. It is a marvellous idea, but not entirely convincing. Any morsel of half-understood economics that helps to fill the belly will do, with not a man in the Shadow Cabinet, I suspect, worried about whether the evangelically fundamentalist monetarism of the right hon. Member for Leeds, North-East (Sir K. Joseph) makes any sense or not.
  If that be the attitude of the Opposition, which does not help the Chancellor much, what about the Chancellor himself? He is in an exceedingly dangerous position. He has made promises. All of us on the Government side of the House have made promises in the social contract. We have said "If you keep wages down, we shall keep prices down, and we shall then—and this is the only way in which we can do it—be able to reduce unemployment."
  That has been the argument now for three years or longer. Unemployment has gone for a burton. Prices took off again due to the fall in the pound last autumn. People have simply stopped believing the arguments—people in the country: not only people below the Gangway on the Government side of the House but people above the Gangway; and the Chancellor had better take notice.

  1563
  What, then, is he to do? The argument that Ministers are now putting is "We have to restrain wage increases because if we do not do so all hell will break loose, including a Tory Government" That is a formidably powerful argument, but it is not really an economic argument. The argument "Restrain, or else unnamed disasters will follow" is one in which people begin to question the logic, and they have good cause to do so. One may ask what alternatives there are.
  I would want to look more deeply at the foundations. In the United States the monetarist debate went through in one wham, bang, fizz. Within a year of a paper being published by Friedman, a dozen empirical papers, qualifying or refuting what he has said, were published. The reason why the debate drags on so interminably and boringly in this country is, first, the very small number of prime researchers in the field using United Kingdom data and, secondly, the low productivity of applied econometrics in Great Britain. Thirdly, there is the very large bandwagon of camp followers in the City, the House and the Government who simply parrot the prime work, which is of such extremely limited content.
  What is much more interesting for United Kingdom economists than reworking the theories in economics on United Kingdom data is, obviously, to work on the frontiers. This is very much more interesting professionally and much more stimulating intellectually. Let me give an example. I have with me three papers. They are highly monetarist papers, two being by Aoki, one to be published shortly in the "Journal of International Economics", and one, developing the field, by Buiter of the London School of Economics, "Optimal foreign exchange market intervention with rational expectations" All those are central to the main international monetary problems. They are at the frontiers of research in economics, and no one from the Treasury or the Bank of England has bothered to go anywhere near Buiter of the London School of Economics to find out what was going on, whereas in Washington there would be a parallel man in the Fed, working the data on a United States model and saying "This is tripe" or
  1564
  "This has implications", and the answer comes so much more decisively.
  If the Chancellor wants to get that quick, brisk feedback in the testing of theories he must organise himself to make use of the very much more limited resources that we have in this country. I wrote to The Times on 16th March criticising the Treasury for simply not keeping up to date technically. Last week I am glad to say that there were a dozen or more Treasury economists at the conference in London on "Recent developments in national economic policy formulations." There was a group of Americans, including Professor Klein, economic adviser to President Carter; Gregory Chow, the first member of Friedman's workshop on monetary theory at the University of Chicago, who has latterly done more interesting work; Kendrick, who has done pioneering work on the effects of model uncertainty; and Helliwell, who has been advising the SSRC on the work of the National Institute. Yet there were no Press present, no Conservative Members, although the conference was developing arguments fundamental to the management of the economy. There was an encouraging number of applied economists, and perhaps they learned something of the way we have been lagging behind in technique in the United Kingdom.
  How can the Chancellor stimulate better work in the United Kingdom? At the moment he is in an extremely uncertain and dangerous situation, with people trying to blow him in all directions on exchange rates, interest rates and so on. He has to stimulate the work most of all in the Treasury itself. I am afraid that he has come out instead with a whole series of gratuitous swipes at his advisers. It is all very well for me to take swipes at Treasury officials, but when the Chancellor himself does so it does not raise the morale or increase the confidence of the Treasury officials that they are getting across.
  I tried to check with the Treasury on whether a report in the Financial Times yesterday had unfairly reported what the Chancellor said, and I was told that the Treasury had no reason to believe that it had. It said:
  "The Chancellor, who is in Washington to attend a meeting of the interim committee of the IMF, paid the Fund a compliment for its

  1565
  réle in last year's negotiations with Britain which resulted in the $3·9 billion loan. He said that the approach suggested by the Fund, and eventually agreed by Britain, 'does appear to be right', even if it was not favoured by 'Treasury slide rules and blueprints'."
  What does the Chancellor mean about it being right? What evidence is there that the IMF conditions imposed on this country at that time are having any effect on restraining inflation, restoring the balance of payments or encouraging investment in manufacturing industry, or the growth of the economy which are the broad economic objectives of any Government? There are no conceivable reasons the Chancellor can have for saying that the IMF was right. Is he saying technically that the Polak model and the absurd primitive monetarism on which the IMF works is better than the efforts of the Treasury? That is an insult to his own staff in the Treasury. The Chancellor must either have been bootlicking, speaking out of ignorance or from informed belief. I would never accuse my right hon. Friend of bootlicking. I do not believe that he is informed on these matters because he does not read the literature. I sympathise with him on this. I would not rebuke any Chancellor for that, but he should encourage other people to read the literature to help in the advice that they give him. I believe that he is speaking out of ignorance on these matters. I hope that he will find ways to make amends to his own officials.
  When I have criticised officials I have taken care to be constructive and make suggestions on how they should buck up their practice. I have made some suggestions, some have been taken up, even though they are always taken up too slowly. I ask Opposition Front Bench spokesman, too, to bear in mind the impact of the remarks that they make on the people who will have to advise them if they find themselves in Government. I hope that Treasury Ministers also will take into account the effects of their remarks and to give some encouragement and guidance about what is useful and helpful to Ministers.
  We must be enabled, whether as Back Benchers or Ministers, properly to consider the very difficult problems that we face in the economy. I moved a schedule to the Industry Act 1975 requiring access to the Treasury model and the published forecasts. Last week there was a meeting
  1566
  of the econometric seminar of the Social Science and Research Council, attended by 70 econometricians, all British. They met to consider the best means of access and of using the Treasury model and the econometric programmes needed. It was a quality of effort that the Treasury could not conceivably organise in house and should not be excepted to organise in house under its direct control on work on the national eonomy, whether in the context of the Treasury model or more widely.
  The usefulness of all that effort is gravely hampered by the reaction of the Treasury to that schedule. I am sure that the reaction was determined by Ministers, not officials. The forecast that the Treasury is required to publish, instead of providing the base lines from which people can make other forecasts, and test other theories, is so derisory in the scantiness of its coverage that it provides no guide to the real thinking and argument on which the model is based. What are needed are full data and full forecasts made from the model so that people can make alternative assumptions.
  When I moved the schedule alarm was expressed that the variables were so sensitive—such as the retail price index—that it would gravely affect inflationary expectations, but all the most sensitive variables are published, and were published at the time of the IMF Letter of Intent. They have been used in debate but it cannot be argued that they have had a devastating effect.
  I shall accordingly table an amendment that the Treasury should honour the intention of the original schedule and so enable these able and eager outside workers to assist the Government and the Opposition with the general process of economic debate in this country. They should come clean and make the full material for the use of the Treasury model available so that instead of wasting their time guessing or guesstimating the 3,000 numbers that are needed to run the Treasury model they should be able to stand on the shoulders of the work done in the Treausry and get on with the serious business of testing and developing the model. I hope that the Government and the Opposition, after they have considered this matter further, will see their way to accepting that amendment.

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  This is important because it underlines the reason why the Chancellor finds himself in such an unsatisfactory and dangerous position at the moment. As Burns points out, the arguments, whether monetarist or non-monetarist, are crucially dependent on the highly uncertain long-term properties of individual equations, particularly narrow features of the models. People can argue that they are not influenced by such absurd things as models and that they have their direct and primitive perceptions of what goes on.
  Sam Brittan, having put forward all the different monetarist views of exchange rates, says:
  "Of course in real life there are effects in all directions, and the three circuits of cause and effect are in simultaneous operation. But the type of economics that just says that everything depends on everything else is of little use or interest, and both experience and reason suggest that the third circuit (of money supply on exchange rates, on prices, on wages) is the main one into which the others feed."
  I say to Sam that that is just not good enough. How big are the effects? What are the lags? What are the uncertainties? What are the implications for policy? It is all very well for him to say that experience and reason give the conclusion. The fact is that those who have looked most closely at this from experience cannot find any such thing.
  It follows from my argument that in any particular recommendations to the Chancellor I would want to see a great upgrading of the apparatus. I am a politician and realise that the effects of the analysis would be only to show the very severe limitations of the situation in which the Chancellor is placed. It would not solve his political or economic problems. It would give him a better indication of the constraints upon him. It would also give him a more realistic guide about what to do. Without having that apparatus, my judgment of the direction our policy should take is that it should be nudged towards reflation. Whatever other effects there might be there would be a major capacity effect.
  Mr. David Mitchell: Has the hon. Member considered what would be the econometric model of the House of Commons in which all hon. Members took more than half an hour over their speeches?
  Dr. Bray: Given the balance of the parties in the Chamber at the moment I believe that we shall see the indulgence of the Deputy Speaker in these exceptional circumstances in which very few Labour Members will be seeking to speak and Conservative Members will be able to speak in succession to one another.
  Mr. Deputy Speaker (Sir Myer Galpern): The hon. Member for Motherwell and Wishaw (Dr. Bray) is under a misapprehension. It could be that the Government Benches will be flooded with Members when it is realised that there is no one on them at the moment waiting to speak, and, therefore, the balance might not work out in the way in which the hon. Member suggests.
  Dr. Bray: You are extremely know ledgeable about the behaviour of Scottish Members on Thursday nights, Mr. Deputy Speaker, and you will, therefore, know that it is unlikely that these Benches will be flooded in the way in which you so joyfully anticipate.
  Mr. Deputy Speaker: Membership on the Government Benches is not restricted to Scottish Members.
  Dr. Bray: Other hon. Members sometimes appear to think so, Mr. Deputy Speaker. However, I accept the wish of other hon. Members to speak and I shall give them every opportunity to do so.
  I was attempting to draw conclusions about what the Chancellor could do in the present situation. There is undoubtedly a major deterrent to investment at the moment in that firms have so much idle capacity. What do they need to invest in? With exports, a major factor is that the poor level of investment for many decades past has led to non-competitiveness from other factors as well as the price factor. Also undoubtedly there has been a long-term deterioration in the balance of payments which has resulted from the general failure to modernise.
  If we are to get both exports and investment right we have to look at the possibilities of reflation. I do not suggest that it is possible to do very much, but by shifting the emphasis back from inflation to full employment there would be a powerful impact on industry which would not have the effect on confidence

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  that Conservative Members fear. There would be a powerful effect on the possibilities for wage bargaining during the coming year when it would become clear to the unions that there would be some prospect of raising real earnings and real output, and there would certainly be a powerful political effect on Labour Members and Labour supporters in the country.
  The implication is quite clearly that the Chancellor would have to adjust to the prospect of continuing higher inflation and concentrate on being able to control it at a higher level rather than looking for a dramatic and quick reduction. This requires us to look at the possible necessity of introducing indexation more widely—for example into mortgage repayments for householders—and all the other issues which have been raised in connection with a high rate of inflation.
  I am not saying that there will be a renewed and rapid rate of inflation, but if we prepared sensibly for a period of double-figure inflation rather than banking everything on a return within a year to single-figure inflation the changes are that we would get back to single-figure inflation more quickly and we should get into the economy a degree of growth which would help us to reduce the rate of inflation more rapidly.
  The Chancellor and the Prime Minister certainly cannot afford to suggest that there is scope for any kind of wages free-for-all, but to say that there is scope for reflation is not to invite a return to a free-for-all. There will be a need gradually to allow the pound to slide, a need to expect interest rates to rise again, and a need to look for a larger reduction in the standard rate of income tax than 2 per cent. because of the effect of fiscal drag.
  We shall break out of the tunnel we are in in some way. It seems to me sensible, therefore, for the Chancellor to consider breaking out in a reasonably planned and carefully engineered way rather than in the clumsy method chosen by Labour in 1969 and by the clumsy attempts of the Conservatives in 1972 and 1973.
  7.25 p.m.
  Sir John Hall: I have listened with rapt attention, as I am sure
  1570
  the whole House has done, to the interesting, if rather over-long, address on economic theory by the hon. Member for Motherwell and Wishaw (Dr. Bray). What seemed to come out of it was support for the old saying that if all the economists in the world were laid end to end they would stretch in all directions. I am not sure what else came out of that interesting address. Perhaps I may bring the debate back to the Second Reading of the Finance Bill.
  I have sat through the Committee stages of every Finance Bill introduced by the present Chancellor, and I start by expressing my grateful relief that the present Bill is the shortest of the five. It has 50 clauses and nine schedules. Furthermore, I would be the first to acknowledge that this is the first of the five Bills to take account of the need to reduce taxation and to acknowledge that direct taxation is too high. The reductions in direct tax are too small to have any real effect, but at least they provide the illusion of some relief to an aching back, even if that relief is illusory.
  It has been estimated by the Chancellor on several occasions that the tax burden at both ends of the tax scale is too high, and it is true that there are a very large number of people on lower income levels who, even after the Bill is enacted, will still be taxed but should not be.
  It is also true that a number of people in the upper ranges are bearing too heavy a burden of tax, and several hon. Members have referred to the impact of pre sent taxation on middle and senior management. I make no apology for returning to that now. It is largely on the leadership, energy and enterprise of middle and senior management that our industrial future lies. When middle management gets the sort of rewards already described this afternoon, it is hardly surprising that industry does not get the effort from it that it needs.
  We constantly criticise industry and say that the standard of British management is low. In many cases that is true. Industry, however, will not get the kind of men it needs in an undertaking such as British Leyland if those men are paid the poor rewards that are given today, which are so poor that management finds itself falling far behind the rise in the cost of living.

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  Recently I was talking to constituents of mine who come within the middle management range and are on incomes of between £5,000 and £7,000 a year. Most of them are commuters. Let us consider the effects of the Bill on their standards of living. The relief given in the Bill is completely swallowed up by all the other imposts that these people have to bear.
  Consider a man in my constituency who has had to face three or four swingeing increases in rail fares. He also has to meet a 15 per cent. increase in rates—a fairly low figure compared with the rest of the country. He will have to pay additional tax arising from the new assessment for the private use of his company car—that came into operation on 6th April. Taking all these imposts and others into account, not only is he worse off than he was a year ago but he is considerably worse off than he was three years ago when the present Government came into office.
  The Finance Bill is regarded as the legislative means by which the Government act to strengthen the national economy. Hon. Members on both sides will agree that it is essential to encourage initiative, enterprise and effort of individual people. Decisions are taken by individuals, not soulless companies. It is people who decide whether they will export, invest or take risks, and it is people whom we should be encouraging. But there is nothing in the Bill to make people feel, whether they are working in industry or providing capital through savings, that they will get worthwhile rewards for the effort they put in.
  In an excellent maiden speech, my hon. Friend the Member for Birmingham, Stechford (Mr. MacKay) said that the atmosphere today, resulting from a combination of pay restrictions and penal taxation was causing depression and increasing dismay. Even this Bill's greatest friends cannot claim that it does much to alter that situation.
  The Chief Secretary in his opening speech referred at some length to the pay policy and the necessity for stage 3. This was taken up by various hon. Members on both sides. I have always been opposed to pay restrictions and, indeed, to any pay and prices policy, even when it was introduced in a much more modified form by the previous Con-
  1572
  servative Administration. Any attempt to restrict pay increases and any attempt by the Government, through the trade unions, to regulate the amount by which pay can increase produces distortions and anomalies and places increasing stress on industry. This has been the experience of the last two or three years. It becomes increasingly difficult to break out of that situation without stimulating an upsurge of pent-up demands.
  In a country with as many trade unions as we have—we are suffering from being the pioneers of the trade union movement—it is impossible to maintain a policy of pay restriction for very long. There may be circumstances from time to time when a pay and prices freeze is essential for a very short period. If that arises, it should be a freeze across the board without exceptions and only for a short period. If it is continued over a long period it brings increasing trouble, and rather than restricting the growth of wages it tends to increase it.
  When the Government give a target or a maximum pay rise, that maximum becomes the minimum for every wage earner. All too frequently many workers who would have been prepared to settle for a much lower figure than the Government's target will demand the maximum available. That is only human nature. The same thing happened with rationing in the war and shortly afterwards. Even those who did not want the commodities insisted on taking up their entitlement simply because they felt it was their entitlement. One sees the same reaction when a maximum figure is placed on pay demands and wage increases.
  Successive policies restricting pay increases and rewards by all Governments have produced a low-wage, low-productivity economy in this country. We should go all out for increasing national wealth and not restricting the rewards that can be gained by those who contribute to the development of our national wealth.
  I have some sympathy with the hon. Member for Cornwall, North (Mr. Pardoe) in his proposals to reward effort by sharing profits. He suggested, for example, that a productivity deal should be based on payments after the productivity had been obtained. Then there is a system by which profits could be

  1573
  distributed in one form or another among those who contribute to making them. There are various methods by which the work force at all levels could at the end of the trading period share in the profits they have helped to make.
  In France there is legislation whereby firms set aside some part of their profits, and at the end of the trading period this goes to employees for improving their social conditions and amenities. Equally, it could be paid in the form of an additional wage or reward, in some cases without being subjected to taxation.
  Profit-sharing schemes are in existence in this country whereby at the end of the period the profit due to the workers is calculated and translated into shareholdings which are issued in proportion to the wages earned. This share bonus is paid with the deduction of only limited tax or none at all. There is a case for introducing profit-sharing schemes of that kind. We should concentrate on giving reward for effort. This would produce results, as workers could share and could be seen to share in the successes of the enterprises with which they were personally concerned.
  There is nothing in the Bill to encourage investment. Over the past 10 years, and particularly the past three years, investment income has risen far less than the cost of living. That trend has been aggravated by the present dividend restriction policy. One has to have almost all one's trading operations overseas before one is allowed by the Government to increase dividends, or one has to negotiate a merger that will persuade the Government to allow an increase. Apart from the adverse effect that the restrictions have on pension funds, which hits those who were hoping to get good pensions, it also penalises those who are living largely on invested savings. To that extent I welcome the increase of the investment income surcharge exemption by £500. If it were to rise to the real value of £2,000, which it was when it was originally established by Lord Barber, it would have to rise to about £4,000.
  The investment surcharge is grossly unfair discrimination between one class of taxpayer and another. Arguments about this have been rehearsed many times before and have been rehearsed again today. I think that there is abso-
  1574
  lutely no justification whatever for charging 10 to 15 per cent. on incomes which are well below average industrial wages simply because they derive from savings. There is a savage contrast here between the treatment of those who save for their retirement out of their taxed income and who are then subjected to the surcharge on investment income, which is being outpaced all the time by the growth in the cost of living, and those who enjoy indexed pensions, who pay normal tax on them and whose pensions are growing at a much faster rate than the cost of living. There is grave discrimination between the treatment of these two classes of pensioners.
  There is nothing in the Bill to encourage savings, and I very much regret that. The Chancellor has not raised the limits on holdings of index-linked savings, and particularly indexed retirement bonds, which is one of the few ways in which the modest saver can safeguard the value of his savings in that he can retain the value of his original savings. What equity is available where that can be done? An extremely high rate of interest is needed after tax if the saver is to maintain the capital value of his total savings. Therefore, I hope that even now the Chancellor may consider increasing the limit on the savings bonds that can be held by any one person.
  I also regret the persistent refusal to index capital gains tax. It is undeniable that, with the rate of inflation of recent years, it is a tax on capital. It can be nothing else. It is more penal that the wealth tax because it hits everyone, from the smallest to the largest investor, whereas the proposal for the wealth tax was, I understand, that a large sum of capital would be exempted and would not come within the purview of the tax.
  The effect of the capital gains tax and capital transfer tax combined will be devastating to individuals over the years and damaging to the national economy. I suppose that it is too much to expect a Socialist Chancellor to reform the capital gains tax, which is destroying capital by stealth, and that we shall have to look to the next Tory Chancellor to do it.
  Talking about doing things by stealth, I was interested to see the way in which metric measurement is introduced in Clause 7. The history of the switch to

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  metric measurement in this country has been one of doing it gradually, bit by bit, in a way which it is hoped would escape the notice of the people as a whole. The Government have been rather dishonest in the way in which they have tried to introduce metric measurement over recent years.
  I shall not deal with the petrol tax, which has already been exhaustively discussed and will, no doubt, be exhaustively as well as exhaustingly discussed in Committee.
  I want to refer to Clause 25 and the improvements in the benefits which can accrue to those who are self-employed. The trouble about the improvements granted by the clause is that they seem to me to benefit only the well-off. Those who are earning less than £20,000 will not benefit to the maximum extent possible. The Chancellor might have considered allowing everybody to put aside the same amount towards his or her annuity—£3,000 under the clause—instead of restricting it by imposing a limit of 15 per cent. of total income for the year. I hope that he will give some thought to that and even perhaps move an amendment in Committee.
  To sum up the Bill, it can be said to show a glimmer of movement in the right direction in so far as it acknowledges for the first time since we have had the present Chancellor that there must be a switch from direct to indirect taxation. For that reason, I am not as opposed to the increased petrol tax as are some other hon. Members on both sides of the House. One cannot argue too much against the impact of direct taxation, say that we must switch to indirect taxation and then immediately protest if an indirect tax is raised. Therefore, I do not altogether oppose the increased petrol tax. I am glad to see the Chancellor moving in the direction of a switch from direct to indirect taxation. It is far better to tax people in such a way that at least they have a choice, so that they may decide whether to pay the tax when they buy something that they want or to save their money. The income tax system leaves one no choice.
  Though I welcome the Bill for its movement in the direction of indirect rather than direct taxes, it will do nothing to stimulate industry and nothing to get
  1576
  it moving in the direction the Government wish, because it does little to stimulate the individual and make him feel that he will be properly rewarded for the effort he is asked to make.
  7.44 p.m.
  Mr. William Hamilton: I entirely agree with what the hon. Member for Wycombe (Sir J. Hall) said about the switch from direct to indirect taxation. It used to be a firmly-held dogma of my party that direct taxation was preferable to indirect taxation, but I think that the Labour movement is moving towards the idea that such a switch is desirable as long as the indirect taxes are kept from essentials. That is the political nub of the problem.
  I want to make a speech largely concerned with a hobby-horse of mine. Hon. Members will not be surprised when I outline certain objections that I have to what the Government have done in the past. I hope that my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) will excuse me if I do not engage in discussion of the kind of theories of which he spoke. I am sure that his constituents will avidly read reports of his speech, but I guess that it will not cut much ice with the hardy and horny-handed men in the TUC with whom the Government must come to some agreement in the next few months.
  In that context, I want to re-emphasise what my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) said. I have rarely seen my hon. Friend in such an angry mood, and I think that he had good cause to be angry. Whether or not it is the case, there is a commonly-held belief that, at a time when they should be bending over backwards to protect the weak and the helpless, the Government are not doing enough in that direction. Indeed, the reverse seems to be the case. There is a disturbing amount of evidence that we are not doing too well in that regard.
  By that criterion, it is true that two years of strict incomes policy have tended to give the lower-paid a better deal than they would have got under free collective bargaining. It is significant that the unions basically representing the lower-paid are in favour of a third year and that the unions that are not in favour are those with muscle, generally representing higher-paid workers.

  1577
  The very success of the policy in the first two years has created or accentuated the differentials problem. This makes a third year that much more difficult to obtain. Even so, there is no doubt that the direct tax burden today weighs proportionately far more heavily on the ordinary working man and woman than on the richer sections of the community. Many statistics can be obtained to prove that. One sees it when one goes round one's constituency every weekend. One meets people taking home £20 a week who have had tax of perhaps £10 a week taken from them, which is an enormous burden. When I was in a working-class home in Durham in the 1920s and 1930s, one thing that was never talked about was income tax. We did not know what it was. Now, however, it is the talk in every home, because it is an increasingly burdensome problem that ordinary working people should not be asked to bear.
  In addition, it is the very same people who are suffering most from the cuts in public expenditure, whether in education, health or housing. It is in that context that I want to raise the point to which I referred earlier. My right hon. Friend the Chief Secretary and I served on the Select Committee dealing with the Civil List and Royal income and expenditure a few years ago. Then a Back Bench Member, my right hon. Friend adopted in the Committee a very breezy and abrasive approach to the claims put forward by the Royal Family. I am now bound to tell him and the Treasury Bench in general that he seems to reserve that abrasiveness and his rough-tongued Treasury posture for local councils, education authorities, health boards and rough diamonds such as Joe Gormley, Jack Jones and Len Murray.
  Treasury Ministers say to such people that they want them to curb their demands for another year and that the golden decade will then begin to dawn. Ministers warn that if this is not done all will be lost. That may well be sound advice, and I hope that it may eventually be accepted. It is simply a pity that the same advice was evidently not given when the shop stewards from Buckingham Palace knocked on the Treasury doors in 1976.
  During the last few weeks and months I have co-operated, loyal party supporter
  1578
  that I am, in tabling inspired Questions for Treasury Ministers. However, my Question of 3rd February was inspired not by the Treasury but by my own suspicious curiosity in these matters. I asked and sought to elicit information about what had happened to the Royal annuities since the Civil List Act was passed in 1972. I elicited information which might otherwise have been suppressed and which might not have been known until it was elicited in the form of a Written Answer.
  I want to put some of the facts on record. The Queen Mother's income was increased from £95,000 a year in 1975 to £140,000 in 1976—an increase of about 50 per cent. in one year, and most of that is tax-free. We talk about the burden of taxation, but does it not apply to the people to whom I now refer? Prince Philip's annuity was increased from £65,000 to £85,000 in one year—a one-third increase. Princess Anne's annuity was increased from £35,000 to £45,000, from £700 a week to £900 a week, while Princess Margaret's went up from £35,000 to £50,000. The Duke of Gloucester was receiving £5,000 a year in 1974, £15,000 in 1975 and £28,000 in 1976—all this under a Labour Government. The Duke of Kent was receiving £35,000 a year in 1975, and that was raised to £45,000 in 1976. Princess Alexandra was receiving £22,000 in 1974 and £30,000 in 1975, while in 1976 it was £40,000. As I have said, all these annuities are tax-free.
  I tried tirelessly, week after week, to secure an Adjournment debate on these matters but I was eventually worn down by those in charge and, therefore, had to seek other means of raising the issue. Meanwhile I asked certain Questions of Ministers. On 24th February I asked the Secretary of State for Employment whether he was:
  "satisfied that all pay settlements made in the last 12 months conform with the terms of official incomes policy."
  The answer was:
  "My Department maintains comprehensive monitoring only of major settlements. In the last 12 months, all of these have been entirely in conformity with incomes policy and I have every reason to think that the TUC guidelines have been generally observed"—[Official Report, 24th February, 1976; Vol. 926, c. 672–3.]
  On 1st March I asked a more specific Question of the Chancellor of the

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  Exchequer: whether the increase in the Royal annuities made in 1976 conformed with present incomes policy. His answer was "Yes". Apparently, all the figures that I have produced and made public satisfied the Chancellor that they set an example to the Transport and General Workers Union, to the shop stewards at Heathrow and at British Leyland, and to those up and down the country in coal mines and factories.
  I now wish to ask the Treasury some specific questions, and I hope that they will not be treated lightly. From where did the initiative for those increases come? Did the Buckingham Palace bargainers knock at the Treasury's door first or did the Chancellor, in a fit of compassion for the new poor, himself take the plunge in pleading that these crumbs from the Treasury should be accepted? While the Government behave in such a sycophantic and insentitive way in these matters and in the taxation of Royal wealth, secrecy about their shareholdings and so on, they cannot expect too much enthusiastic support from hon. Members such as myself in obtaining a further stage of the incomes policy.
  As I have said, it is probably desirable that the further stage should be obtained, but it is going to be hard to achieve any firm and specific commitments from the TUC and, more vitally, from the shop floor. Anything that falls short of being specific and firm will probably be the worst of all possible outcomes of the current talks. The Prime Minister was right in his speech at the USDAW conference when he said that if we do not obtain something firm and specific we shall have failed.
  I must enter this caveat. It is a highly dangerous and undesirable constitutional innovation for the Chancellor to appear to be dancing the tune called by some outside body or bodies, whether the CBI, the TUC, the Labour Party National Executive or the Liberal Party. The sovereignty of Parliament is limited in the sense that the Government must be sensitive and responsive to representations made by outside bodies, otherwise the Government will lapse into some kind of dictatorship.
  I fear that the process may have been allowed to go too far the other way when it seems that Parliament and the
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  Government are being swept along by outside forces and by sectional interests that may not be as powerful or as representative of the people as they sometimes claim to be. It is highly undesirable for a Chancellor to use his Budget as a carrot or bargaining counter and to be influenced more by forces outside the House than by those inside it. The Chancellor must use his own judgment and make his own Budget decisions on the merits of the case and the facts as he sees them and then take the consequences.
  In conclusion, I wish to refer to one or two specific matters in the Finance Bill. The Bill has not been referred to as much as it might have been in the debate. That is understandable, because we use this occasion for a broad debate on the economic prospects of the nation, but there are one or two specific questions that are likely to cause some controversy, and possibly some defeats for the Government, during the passage of the Bill. I refer specifically to petrol tax.
  It is undeniable that we must take additional measures to conserve energy, but I do not accept the case that has been put forward tonight. It is easy to be against any tax, but those who oppose it must put forward alternative ways of finding revenue or of cutting public expenditure by the same amount. If a choice has to be made between 5½p on a gallon of petrol and 3p on a pint of beer, I guess that my constituents would probably opt for the tax on petrol. I may be wrong, but I mention that to demonstrate that the alternatives are not as easy as some people may suggest.
  In general, the Government may be getting on to the right road, but there is much that they could do to satisfy hon. Members such as my hon. Friend the Member for Stoke-on-Trent, South and me and to give us more evidence than we have had in the past two or three years that they are doing everything practicable to help those who cannot help themselves while penalising those at the other end of the scale who can easily bear much greater burdens than they have borne hitherto.
  8.1 p.m.
  Mr. David Mitchell: I resent the carping of the hon. Member for Fife, Central (Mr. Hamilton) at the Royal Family and the cost of the Civil List. The

  1581
  Royal Family give employment to many more people than the hon. Gentleman will ever employ, and the foreign exchange earnings from the attraction of tourism to this country arising from the Royal Family's activities are greater in one year than will be the hon. Gentleman's contribution to our economy during his whole life.
  Mr. William Hamilton: That should get the hon. Gentleman an honour.
  Mr. Mitchell: In his Budget speech last year the Chancellor of the Exchequer promised that inflation would fall, that output and investment would rise, that unemployment would fall and that we were on our way to an economic miracle. This year he opened the cupboard and found the same speech again. He blew off the dust and we heard all the same promises, with the exception of the economic miracle. I am not quite sure where that has got to. As so often happens with Labour Governments, the sad and unhappy reality is that living standards have fallen and unemployment has continued to rise. The judgment on this year's Budget is that it is a Budget of lost opportunities—one might almost say, the Budget that never was.
  I should like to look at the Budget from the point of view of smaller businesses. It is beginning to be recognised what a great importance these businesses have for the future of our economy, particularly in job creation.
  Unemployment is now structurally different from what it has been for a very long time. We can see that in the fact that British industry is now turning out no more than it was producing during the three-day week. There is vast under-utilised capacity throughout our manufacturing and commercial life. Demand can rise considerably before extra labour has to be taken on.
  The one sector of the economy in which this is not true is the small business sector, because that has never been able to afford to carry any surplus fat. In the growth of small businesses and the starting of new businesses we have real prospects for dealing with the problem of unemployment in a far larger proportion than hon. Members have yet realised. I was delighted that my hon. Friend the Member for Birmingham, Stechford (Mr.
  1582
  MacKay) chose to make this the theme of his maiden speech and put it so well.
  There are three things from which the small business sector suffers—an excess of Government, a lack of finance to enable it to keep pace with inflation, and a lack of incentive. Taken together, they have resulted in the highest level of bankruptcies ever recorded in this sector, not only since the war but including the depths of the depression, and this has played its part throughout industry with a resultant falling off of jobs, and a doubling of unemployment.
  I should like to spend some time looking at the lost opportunities in the Budget. The first concerns the excess of Government. The Bill gives the Government an opportunity to do something helpful and effective, namely, to simplify VAT. I shall recommend four simplifications, and I hope that the Treasury will introduce amendments in Committee to give effect to them.
  First, the threshold has remained at £5,000 since 1972. In real terms, this sum was £8,540 last year and must be about £10,000 this year. If the Government raise the threshold to £10,000 about 250,000 small businesses, traders and self-employed people would be taken out of the VAT net. This would result in a substantial reduction not only of the time of the Customs and Excise staff but, more important, of the time of these businessmen in dealing with VAT returns and all the other paraphernalia that goes with them when they could be getting on with running their businesses.
  Secondly, we should return to a single rate of VAT. It may be that the conflict the Government face in connection with petrol tax and its effect on rural areas may result in their accepting my view.
  Thirdly, the Government should also take action over bad debts, because there is a legal loophole being used by many firms. That should be brought into operation for all companies. The firms are simply issuing credit notes cancelling sales in cases of bad debts. In that way they escape having to pay VAT on the bad debts. That system should be introduced formally by the Treasury and made subject to proper investigation.
  Fourth, I ask why the Treasury does not accept that it could move to a system

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  under which VAT payments were made on an estimated basis every quarter with accountants providing a full and proper reconciliation of the amount due to the Treasury at the end of the year when the companies' accounts are made up. One way of doing this would be to convert the 8 per cent. rate of VAT into a percentage of each company's turnover. It may be 1·95 per cent. or 2 per cent. The Treasury ought to allow companies to pay that percentage each quarter. That is the one figure that every company knows, and such a scheme would be simple and straightforward. Little work would be involved and it would enable the burden on the small business sector to be dramatically reduced.
  Another lost opportunity in the Budget was the failure to cut corporation tax. With inflation, businesses are cash hungry; they need more cash to do the same volume of business. The Government's answer is stock relief, but that is only part of the solution. It is no relief for the other requirements for working capital—for example, debtors, the increased cost of national insurance and the cost of complying with endless regulations.
  In any case, stock relief applies only to the companies that can afford to lay out the money to buy extra stock. If a company finds itself in difficulty it has to pay back the relief, as it is only a deferred liability. In these circumstances stock relief is not as effective in dealing with the problems of inflation as a reduction in corporation tax.
  Stock relief helps investment in stock, but we need quality of investment. With great respect to the Chancellor, increasing stock is not the best form of investment, and is not the best quality of investment advice. At present the Chancellor is giving a great incentive to the least desirable form of investment.
  If we compare the United Kingdom's economy with other economies we find that we carry more stock per volume of turnover than most other countries. That is not good. I am sure that the Treasury would accept that it is a bad thing in many ways, and that we should seek another way of dealing with the problem. I believe that the right approach is to
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  reduce corporation tax so as not to reduce the distortion that comes from stock relief.
  If the Chancellor is to continue stock relief I hope that he will do something to correct the unfairness for the self-employed and the partnership, where the profits taken as salary have to be added back before arriving at a 15 per cent. reduction in relation to the stock relief.
  Like all my hon. Friends, I welcome the increase in the small business corporation tax definition for companies below £40,000. I draw the attention of the House to the fact that, generous though it may sound, it has not kept pace with inflation. Since 1974 the relief has increased by 60 per cent. but inflation has increased by 77 per cent.
  The logic of the situation is that the Government should recognise that the small-firm rate of corporation tax was introduced because such companies are much more reliant than others on retained profits for the financing or expansion of the business. The logic is to go to the point at which companies are large enough to be able to obtain significant outside help and are not reliant upon retained profits. At present that is a level of £100,000 or more. A business of that size can talk on equal terms with merchant banks or move towards a flotation. Bearing in mind the need of small firms to retain their profits, logic demands that the figure is taken from £40,000 to a much higher level.
  By way of light relief, I welcome the self-employment retirement annuity contribution being increased to £3,000. I am grateful for this movement because it is the effect of an amendment that I introduced last year. Inflation has already made this movement out of date. In politics gratitude has been described as the anticipation of further favours to come. Further favours are very much needed by the self-employed, and I hope that we shall see a move in that direction.
  There is to be provision of £100 million for inner cities over two years. The Chancellor spoke of the Government consulting local authorities about the allocation and programming of this expenditure. Will the Minister give an assurance that it will be used not for local authority direct labour organisations but to help the

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  construction industry, especially the smaller firms within the industry? If that is not the position, it will have been almost a deception for the Chancellor to have spoken about aid being given to the construction industry.
  I turn to the tragedy of unemployment. There is nothing that destroys a man's self respect more than enforced idleness. This is not merely a case of lost opportunity on the part of the Chancellor. No opportunity has been missed by the Government to strangle the creation of new businesses and the expansion of small firms. Such undertakings need less overheads of Government. Above all, they need incentives. The economy needs the harnessing of their motivation.
  As each month goes by, and the Government make business more difficult and create greater disincentives, the level of incentives needed to revive the economy in the small business sector becomes greater and greater. The employment protection legislation, which makes people wary of taking on extra labour, additional redundancy payments liability, price controls, the promise of a wealth tax, capital gains tax and capital transfer tax are all adding to the disincentives to start a business or to take on more staff.
  As the disincentive effects of the Government's other activities mount, so it is necessary for the Treasury to give a greater financial incentive to overcome them so that we may see the real revival of the economy that we need. The growing effect of the present dismotivation is disastrous.
  The Government want employment—I believe that—but they do not want employers. The Government want investment—I believe that—but they do not want investors. The Government want a dynamic economy, but they have destroyed incentives. That is a circle that cannot be squared.
  8.17 p.m.
  Mr. Michael Spicer: I begin by referring to the speech or address by the hon. Member for Motherwell and Wishaw (Dr. Bray). In many ways I have a great deal of respect and admiration for the hon. Gentleman. I hope that he will not take it amiss when I say that when listening to his addresses I always feel that I should be paying a
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  heavy fee for doing so or should not do so at all.
  I was horrified when the hon. Gentleman promised that in Committee he would introduce an amendment to put further bureaucratic burdens on the Treasury in addition to those he has already put upon it in the schedules to the Industry Act 1975, which he was extremely effective in introducing and forcing the Government to accept. Those schedules force the Treasury to produce their economic models and to discuss the workings of those models. Many of us felt that the facts, figures and calculations would be useless by themselves. That has been proved to be the case. They are useless unless we can get an insight into the assumptions being made behind them. That is now the hon. Gentleman's complaint.
  If we are to place further burdens on the Treasury and employ further officials to carry out the burdens, we are treading into a quagmire. In order to know what assumptions are being made, it will be necessary to allow everyone, including one's clients, to sit in on all the Treasury debates. There is no other way of knowing the nature of the assumptions that are being made. It may be that one day we will come round to the Carter Cabinet by television, but until we reach that stage the most that we can expect from the Government is for them to give us a clear view of their basic assumptions about the future in general terms. Will those terms be acceptable to those who attended the seminar of 70 econometricians? A number of us felt that the present position would arise when the hon Gentleman introduced the schedules. The penalties that we are paying for the Schedules are now coming to light.
  Dr. Bray: Before the hon. Gentleman embarked on this path, he should have declared his financial interest as a proprietor of a firm called Economic Models Limited, which is a direct competitor of the surveys available from the Treasury. Although this lends authority of a sort to what the hon. Gentleman has to say, it also imparts a definite interest of which hon. Members on both sides of the House should be aware.
  Mr. Spicer: I apologise for not declaring that interest. I do not declare it every time because it is clearly written

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  in the appropriate annals and there is nothing to discuss on the matter. In my judgment it is not instrumental—at least, not significantly so. I do not see the Treasury model to be any kind of competitor to another sort of service. There was nothing behind what I said that was significant in that respect. The hon. Gentleman is doing himself less than justice by raising that point. All I was doing was taking his argument on its merits—which I think are few—and saying that to impose yet further, totally superficial burdens upon the Treasury would not achieve anything. I do not see the jump from that to the solution of our economic problems.
  Dr. Bray: I did not wish in any way to be offensive, but if the hon. Member looks in the Register of Members' Interests he will see that registration there does not exempt a Member from declaring his interest in the course of debate. Secondly, the hon. Member will recall that we have discussed the impact of the publication of full Treasury forecasts on private forecasting services. I have personally assured him that in my view it would have a stimulating effect on business. Furthermore, in terms of the added bureaucracy involved, I have shown that if my suggestions were taken up there would be less work involved than is at present carried out in the Treasury. All that I want is the Simple, bald computer print-out from the Treasury, made available at as exorbitant a fee as is required. That would involve no further work and would bring extra revenue for the Treasury.
  Mr. Spicer: I totally disagree that that would not impose extra burdens. The competitive point has nothing to do with this at all. That was not the purpose of my raising this issue. I do not see it as competition. I was simply concerned that the hon. Member, who knows a lot about these things, should be leading the House and perhaps the Government down a totally false path. We shall never be able to establish anything as theoretically perfect as the hon. Member wishes or pretends can be established.
  I agreed with one thing that the hon. Member said—namely, that in order to form a view about the Bill it is necessary
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  to form a view about how the economy is going. On a medium-term view of the economy, in my view it is getting progressively worse. On a short-term view, the dilemmas which the Government find facing them—to a large extent they are of their own making are considerable.
  On the one hand—this seems to have escaped the attention of a number of Labour Members—inflation is still running at 16 per cent. There is talk of its coming down, but no one is saying that it will come down below 10 per cent. in the foreseeable future. At the same time, unemployment seems to be rising. There are a number of fears that the economy is running into at least a temporary recession. The hon. Member for Motherwell and Wishaw said that this might be the case. There is certainly a great deal of over-capacity and a high level of unemployment.
  Against all this, it is said that oil is coming along. It is true that there will be no balance of payments problem in the next five years beginning from next year. It is possible, contrary to general belief, that sterling, far from sliding if it is left to itself, will begin to rise. Against that and the Government's immediate hopes in terms of electoral prospects, there is one fundamental trend in the world today. This can be seen if one looks particularly at Japan. It is also occurring in the United States and to a lesser extent in Germany. I refer to something which can be classified only as a totally new Industrial Revolution. I do not think it has yet been recognised as such.
  We are talking now of countries whose industries are contemplating productivity increases which are measured not in terms of machines using three people instead of five but in terms of the total abolition of people in factories. If we take the example of Hitachi outside Tokyo, or certain parts of the Japanese shipbuilding industry, we can see this trend, involving the replacement of production lines by computer processes.
  This process gives rise to horrific questions for this country in the medium term. First there is the worrying, even terrifying, question of whether we shall be able to compete at all with countries such as Japan which are about to register not simply the sort of productivity increases

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  we have seen and have come to respect and fear in the past 10 years but massive new increases in productivity. There is, first, the trade threat which is posed to this country by such a development. The second question is, what can we do about this? If we engaged, as we might, in a productivity race, we should be faced with massive redundancy and unemployment problems. The dilemma is facing this country in the medium term because we have acted so late and other countries have got so far ahead in the race. We have grave problems.
  It is in that context that we must look at the Bill and ask to what extent it offers any hope in the medium term. If we look at it in any kind of long-term context, it can be seen to offer little hope. It is true that it is a holding operation. Some have even called it a feeble move in the right direction. Most Opposition Members would accept that we should move from a system of excessive direct taxation to one more inclined towards indirect taxation. Even so, a number of hon. Members have pointed out that any move towards more indirect taxation should have been fairer than that which is proposed.
  The move that we propose, increasing VAT from 8 per cent. to 10 per cent., would have been much fairer. The arguments which the Government have raised for the petrol tax in terms of indexation—that seemed to be the main argument of the Chief Secretary—would ring more true if they applied the same indexation arguments to allowances and the other side of the tax coin.
  The question goes deeper than that. It seems that the country is faced with a choice. One option is to go the Socialist way. There is now a clearly-defined Socialist way which would involve import controls in particular and certainly internal controls.
  Returning for a moment to the speech of my right hon. Friend the Member for Chipping Barnet (Mr. Maudling), it seemed highly significant that when he was extolling the virtues, as I understood it, of a prices and incomes policy, the hon. Member for Birmingham, Hands-worth (Mr. Lee) should intervene and quite legitimately point out that if we were to go that far we might as well go the whole hog and control everything.
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  That seems to be one alternative for this country. But we have to point out that if we start along the lines of an incomes control policy it starts voluntarily but it cannot exist that way. Eventually, it has to be compelled in some form or another. We have to have a prices policy, a rents policy and control of labour policy, because it does not work without those either. As was pointed out, quite rightly, to my right hon. Friend the Member for Chipping Barnet, we have to go the whole hog to controls right the way across the board.
  The only other alternative is to do what was suggested so eloquently by my hon. Friends the Members for Wycombe (Sir J. Hall) and for Basingstoke (Mr. Mitchell) and others—to start to make the free enterprise system work. That, above all in the present context, means providing the right kind of circumstances in which it is worth investing, so that small and large businesses invest and increase productivity.
  I accept that there are areas of overcapacity at present. That makes it even more absurd to have a control policy by which, in many cases we pump resources artificially, compulsorily or without any reference to the market place into areas where there is no demand for the goods produced, or at least a less than adequate demand. The market place has to be the means by which these matters are sorted out. The alternative is to go the whole hog towards controls. What we cannot do is have a kind of half-way attempt at both. This is one course which the country will no longer bear. We have tried it for 25 years. It will not work.
  If we are to have a Bill which is to be motivated by Conservative principles, let us have a Conservative Government to put it into practice. The hon. Member for Stoke-on-Trent, South (Mr. Ashley) made the point that only a Socialist Government would introduce an incomes policy. Perhaps that is true. I do not know. But only a Conservative Government can introduce a Conservative Budget, which this Bill is on the lines of tentatively doing. We must have a Conservative Budget with credibility. What the country needs is not this Bill but a change of Government and a total change of direction.
  8.31 p.m.
  Mr. Robert Cooke: The preservation of an ever more accessible British national heritage of fine architecture, works of art, gardens and landscape has the interest and support of hon. Members of all parties. Throughout the long debates on capital transfer tax and wealth tax a growing understanding of the problems and possibilities of this heritage has emerged.
  The Government have accepted that historic houses of outstanding national importance, their historically related contents and their amenity lands, can be exempted from CTT, conditional upon public access. A number of cases have already been processed and agreed. Every case requires detailed Treasury approval. The most stringent conditions have been laid down and will be enforced on pain of loss of exemption in the event of a breach of the conditions. This has all been designed to enable a growing number of owners to hold on to their houses and open them for the public benefit.
  How then, the House may ask, can a disaster like Mentmore happen? The answer is not simply that Mentmore was caught by the old estate duty. Even if it had been caught under CTT, the owner of that house would have been faced with a massive capital tax demand upon the whole of his estate. Although he would have been able to have claimed exemption in exchange for considerable public access to Mentmore and its collections, he would still have had to meet the heavy charge on the rest of his estates. How could he have paid the tax? He could have sold much of the estate, leaving Mentmore unsupported and a chronic personal liability. On economic grounds, he would have been more likely to have sold some or all of the valuable contents, thus dispersing a valuable national asset regarded by many as a priceless part of our heritage.
  This is the choice that will face the owner of every historic house of national importance under CTT. Unless we protect the private capital resources needed to produce income to achieve the public purpose of keeping an accessible heritage intact, we shall have to our shame an ever-quickening succession of Mentmore situations involving places of far greater national significance.
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  Those of us who saw this coming implored the Government to act in time. Last year, they introduced a new clause on maintenance funds for historic houses, but what emerged was a sinking fund. An irrevocable gift to a trust had to be made. The whole capital had to be burned up within 80 years because of the rule against perpetuities, and the income was to be taxed at the donor's top rate.
  The Government themselves admitted—the Chief Secretary came to a great conference at the Festival Hall and admitted it—that few can take advantage of that proposal. The right hon. Gentleman said that we must wait and see what happens.
  We have got to do better than that. How can we persuade those who still have them to designate capital resources to produce income to support an accessible heritage? Surely, we can do it by telling them that, so long as the designated assets are set aside to produce income for this public purpose, they will not be attacked by capital taxes. If, at the end of the day, they cannot continue with their obligations under the exemption the assets would then attract such capital taxes as Parliament decreed.
  Treasury supervision of such a scheme for designated maintenance funds follows quite naturally from the work already being done for buildings, their contents and their settings. The Historic Buildings Council, perhaps amplified into a heritage commission, could supply all the expert advice which any Government could possibly wish for.
  This is the key to the whole problem. It is the only way to avoid either the continuing sack of our remaining houses, leaving lifeless empty shells, or massive public expenditure on acquisition and upkeep.
  I do not need to explain to the House why the National Trust is not the answer, just as even a rejuvenated, reinvigorated, reconstructed—or whatever—Land Fund is not the answer. Nor can the answer come from some new, publicly subscribed heritage fund, which would simply debilitate all other publicly subscribed funds.
  I am supported here by the Revenue's paper on the wealth tax. The official view was:
  "The Government recognise that private owners can look after the architectural heritage

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  more cheaply and more efficiently than the State or institutions such as the National Trust."
  There is a massive volume of evidence, which poured from a whole procession of distinguished witnesses as I sat in the Chair for the heritage sessions of the Select Committee on the Wealth Tax, all supporting that view. All the national amenity societies, which have approached so many Members of Parliament and for which I speak on this occasion, support that view. It is a cause widely supported both across the House and nationwide, and all support the view which I have now expressed.
  We in the Opposition are committed to a practical and lasting solution to the problem. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who is to wind up for our side, will endorse that view. The Government, too, I believe, share our aim. They have it in their power to act now. If they cannot table a new clause, perhaps they will support one if we table it in Committee.
  To sum up, we seek to preserve and enhance an ever more accessible living and lively heritage of landscape, buildings and works of art. We intend to halt the decay, destruction and dispersal caused by the threat of capital taxation. We aim to restore confidence and to pro vide a safe and settled future for our heritage.
  8.38 p.m.
  Mr. Ronald Atkins: I noted that the hon. Member for Worcestershire, South (Mr. Spicer) referred to import controls as a Socialist measure. I think that they might be regarded as measures of common sense. They are not particularly Socialist. Their advocacy can be found in the Lombard column of the Financial Times, occasionally even from the CBI, and from the Institute of Applied Economics in Cambridge. In fact, import controls are applied by almost every country in the world, most of them with what can be described as conservative Governments. It is merely a measure which we might need in order to survive.
  One of our problems has been the large volume of manufactured goods still coming into this country. There have already been references to Japan. Japan, among other countries, has been using controls of one kind or another for years.
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  Although doing it covertly, the Japanese are none the less doing it. I do not mind if we use the same sort of controls; we certainly should not be the odd man out in the world, and I feel that such controls may be necessary in future, especially if we try some spending to tackle the problem of unemployment.
  Let it be remembered that unemployment itself is a factor in inflation nowadays, because there is a large body of consumers who are not producers. That is a point which has been referred to by the Institute of Applied Economics in Cambridge University.
  I briefly want to refer to taxation on road users. The outcry over the 5p per gallon on petrol was remarkable in view of the fact that the oil companies have been making similar increases from time to time without any outcry at all. It was also remarkable since, before the Budget, everyone was saying "Let us increase indirect taxation so long as we reduce direct taxation". Yet as soon as indirect taxation measures are introduced there is an outcry. Of course, all taxation is unpopular, and it is easy enough, when in Opposition, to criticise a particular tax, but I cannot understand the venom about this form of taxation.
  In the first place, the proportion of taxation on petrol has not risen in line with the price. Petrol in this counrty is still the cheapest in Europe and one of the cheapest in the world. It is still related to the amount that one makes use of the roads and that seems to be fair enough. It is also a conservation measure—much more than any grading of vehicle tax would be.
  It is unfortunate that so little revenue is being raised from the heavy lorry which the Chancellor admits does not pay its resource costs by any more than a minor amount. There is a big gap in this area which needs to be made up. The heavy lorry is the most damaging vehicle and is environmentally and congestion-wise the most troublesome. It is most unfortunate that the gap which exists is not being filled more rapidly.
  I find the 25 per cent. increase in the vehicle excise duty a step in the wrong direction. It is a retrograde step. This country is not unique with regard to this duty, but it is one of the few countries that relies on it to any great extent. It is

  1595
  inequitable because it hurts the poorest motorists. Motorists who do less than 8,000 miles a year would benefit if all the taxation were put on petrol instead of on the vehicle duty. It is the poorest motorist who finds the greatest difficulty in finding £50 when taxing his car while at the same time having to pay for insurance, MOT and the rest. It is a form of taxation that I would like to see phased out because it is inequitable. It is inequitable that a Rolls-Royce, which does 100,000 miles a year, should be taxed the same as a Mini which does only 500. It is also a tax which encourages the use of petrol in the sense that a man does not realise the cost of his journey when only part of the tax that he pays is on petrol. It is, therefore, unfortunate that this tax has not been abolished.
  I want to refer briefly to the construction industry. It is true that an additional £100 million has been made available for inner city areas—for a very limited number of inner city areas. I am sure that my city will not benefit from it. It is a paltry amount in terms of what the construction industry requires. This is one area where the Chancellor could safely have released more funds in order to get the economy moving again. Since the Budget it has generally been acknowledged that the economy is growing much too slowly and needs an extra boost. It seems to me that the construction industry is the safest of all industries in this regard. It has the greatest unemployment. It uses British labour, and since wages would be paid instead of social security benefits in some cases it would not be inflationary. It is an industry that uses largely British materials.
  It is significant that Britain got out of the depression of the 1930s largely because of housebuilding. Many experts acknowledge that it was the building industry that led Britain out of the depression in 1935, 1936 and 1937. I believe that this is one industry in which the Chancellor could have released funds, not only for the sake of the industry, not only to meet the urgent needs of people for houses, not only to clear up dereliction in our cities, but to lead the country back to prosperity.
  8.45 p.m.
  Mr. Jasper More: I want to say a few words with reference to Clause 42, which relates to forestry. Recently, an inter-departmental committee under Treasury auspices went into various matters concerning private forestry. I hope that it took into account the critical position in which forestry in this colintry finds itself. The situation could not be better summarised than it was during the debate on the Queen's Speech by, oddly enough, the hon. Member for Ludlow who said:
  "The position regarding forestry in this country is, on the one hand, very simple and, on the other hand, potentially very serious.
  We produce about 8 per cent. of our timber requirements. Next to oil fuel and food, timber and timber products are our largest imports. It is estimated that in the present year the value of these imports will be able £2,000 million.
  Attention should be drawn to four alarming features. First, the cost, as with the cost of all imports, has risen alarmingly as a result of inflation, which is estimated to be axle 25 per cent. this year. Secondly, a considerable proportion of the potential supply of our timber imports is under Communist control.
  Thirdly, year by year an increasingly larger proportion of our timber imports comes in the form of timber products. That is damaging to our own timber processing industry and means increased import costs.
  Fourthly…timber is a very bulky crop and is a dangerous commodity on which to have to depend for imports in an age when more and more submarines seem to be ranging the oceans of the world."—[Official Report, 24th November 1976; Vol. 921, c. 122.]
  Timber grown in this country depends in almost equal shares on the public sector represented by the Forestry Commission and on the private sector represented by private planters. Not much notice has been taken of this, but it is a fact that, in the present year, as part of the cuts in finance, the Forestry Commission has had its budget reduced by 12 per cent. I think it should be said publicly that there ought to be a protest about that, on the ground that the Forestry Commission enterprise—and I invite Ministers to listen to this—cannot really be classified as expenditure. From the time that the Forestry Commission was founded in 1919 the money spent has been, in a very real sense, capital investment.
  The Commission has to take a cut of £3 million in its budget, and the main

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  concern is over the decision to forgo to the tune of £1,800,000 the purchase of land that might be offered to it during the coming year. The Commission's stock of plantable land is already far short of the requirement to maintain planting within the level approved by forestry Ministers for the current three-year programme, and the effect of the present cut will reduce that even more. That has rightly been protested against by the staff of the Forestry Commission, and I hope that the Government will take notice of it.
  I now come to the question of the private sector, and I want straight away to express the gratitude of private planters in the forestry industry for the recommendations and decisions of the recent inter-departmental committee. It has done a lot by way of concessions in connection with such things as grants, and one important concession in connection with capital expenditure tax is embodied in Clause 42, to which I have referred. I am sorry that it has not solved the whole problem. The problem that must be solved is that of confidence. Lack of confidence has produced an alarming fall in private planting in recent years.
  One more important modification in our capital transfer tax must be made to restore confidence. Although it sounds ungrateful, the decisions of the interdepartmental committee spoiled the ship for a ha'porth of tar. This further concession would not cost the Treasury a large sum immediately, because it is dependent upon the chances of life and death, but it would make all the difference to an industry which looks to the distant future. I hope the Government will take notice of that because it was pressed on the Committee by almost everyone who gave evidence. I hope that this matter can be pursued in the Standing Committee on the Finance Bill.
  8.51 p.m.
  Mr. Malcolm Rifkind: The hon. Member for Preston, North (Mr. Atkins) referred to the unpopularity of the Budget. One cannot help but remember Edmund Burke's remark
  "To tax and to please, no more than to love and to be wise, is a power not given to man."
  When he coined that phrase he must have had a premonition about the present
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  Chancellor of the Exchequer. What other Chancellor could return to the taxpayer £1,300 million and promise a further sum of £1,000 million only to find that largesse thrown back in his face?
  The Budget has been described as one of the most unsatisfactory Budgets for a generation. Only two days after the Budget, the electors of Stechford returned a Conservative Member for the first time. It is perhaps appropriate that my hon. Friend the Member for Birmingham. Stechford (Mr. MacKay) made his first speech today and more appropriate that the electors of Grimsby and Ashfield are passing today their judgment on the performance of this Government.
  Is it that the British people are being ungrateful in not recognising what the Government have done for them? I do not think so. In part, the electorate's reaction is a verdict on the catastrophic way in which the Government are running the country. People have recognised certain aspects of the Bill which the Chancellor and his colleagues would have preferred them not to notice.
  The British public will still be slightly worse off than they were a year ago because of the Government's disastrous handling of the economy. For that reason the public are not prepared to accept this Budget as an advance, as the Chancellor hopes them to do. They know that he is not some bushy-eyed Santa Claus but that he believes, as do all Socialists, that taxation is a virtue in itself. They know that the Chancellor is the person who looks to the British public with his hands in their pocket and sees them, much as Robert Browning saw his last duchess—I paraphrase:
  "He likes what e'er he looks upon and his looks go everywhere."
  I shall concentrate my few remarks on a matter of more general import which relates to the Budget and previous Finance Acts. One of the most alarming tendencies in recent years has been the increasing inflexibility, complexity and incomprehensibility of our tax law. That problem is increasing enormously.
  There was a fascinating report by the Board of the Inland Revenue last year. I refer in particular to page 3, where the Board pointed out that in 1918 an intelligent citizen wishing to know the tax law on income had merely to read 180 pages

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  to be fully versed in the whole tax law relating to income. It is astonishing that not many years later that same citizen, instead of having to read 180 pages, has to read 3,600 pages in four volumes of tax law. He would still not have read last year's Finance Act or the Development Land Tax Act. We know, for example, that since 1970 alone 11 new Acts concerning tax have been brought on to the statute book. In the last 20 years, a whole host of new legislation—corporation tax, capital transfer tax, capital gains tax, development land tax, petroleum revenue tax and many more—has added to the problem.
  This is a problem that is not simply one of irritation to the public. I refer again to the report of the Board of Inland Revenue, which says on page 3:
  "The bulk and complexity of existing legislation poses formidable problems for the Revenue no less than for taxpayers and their advisers"
  The view of the Board of Inland Revenue is echoed by the Institute of Taxation in its submissions to the Chancellor. Referring to the increase in the volume of legislation, it states,
  "this sort of increase in the volume of legislation cannot continue indefinitely. Indeed, we would go further in saying that the time has come to stop all taxation legislation except that needed to cure serious anomalies"
  If that is the view shared not only by the public but by the Board of Inland Revenue, the Institute of Taxation and many other sections of opinion, how do we then judge the Bill? In some ways it is an improvement on its predecessors. After all it has a mere 78 pages, as compared with the 110 and 144 pages of its two spring Budget predecessors. Flow-ever, in terms of obscurity it is no improvement whatsoever.
  I give one example. I refer the House to Schedule 7, which is concerned with earnings from work done abroad. If hon. Members look at paragraph 1(3), they will see this excellent example of obscurity.
  "Where…a period consisting entirely of days of absence from the United Kingdom ('the relevant period') comes to an end and there have previously been one or more qualifying periods, the relevant period and the (or, if more than one, the last) qualifying period together with the intervening days between those periods shall be treated as a single qualifying period".
  1600
  One should say "period" at this stage.
  It is no wonder that the public are not only confused but alarmed about the consequences of this type of legislation. It has profound consequences for two separate areas. It has profound consequences for Parliament, because when we have tax and fiscal legislation of the most incredible complexity it becomes in practice extremely difficult for the vast majority of Members of Parliament to put forward useful contributions to representing their constituents on tax and fiscal matters. It is not surprising that the deep interest in fiscal matters in the House has become increasingly reserved to a very small number of hon. Members—among whom I do not include myself—who have the competence to venture into these matters and understand entirely what they are doing when they so do.
  It may be that there are many aspects of business before the House in which only a handful of hon. Members participate. One could point to defence, social security matters, overseas aid or energy. However, the fact that so few hon. Members participate in deliberations on the Finance Bill, the main Bill before the House in any one year, is much more alarming, because tax and fiscal matters are not a sectional interest. They affect all the 635 constituencies in the United Kingdom and every member of the public in every constituency. If there is such a minute interest in terms of involvement in fiscal matters in the House, the complexity of the legislation is partly to blame.
  An even more worrying factor is the inability of even intelligent, educated members of the public to understand the tax law that they are obliged and expected to obey. One of the basic maxims of our law is ignorantia iuris neminem excusat—ignorance of the law excuses no one. That is a perfectly sound and reasonable motif and expectation in a country or a society in which the law can be learned by anyone sufficiently interested to take the trouble to do so. It was a perfectly desirable and ethical requirement in the nineteenth century when any educated member of the public could acquaint himself, without too much difficulty, with the law under which he was obliged to live. Today, however, when this one small section of our law—fiscal law—runs to 3,600 pages in four volumes,

  1601
  clearly that has a very worrying effect. The public, being unable to understand the tax law under which they are obliged to live, become increasingly alienated and hostile to it.
  I shall give one more example in relation to the Finance Bill, that of VAT. A number of my hon. Friends have argued strongly for single rate of 10 per cent. in terms of fairness and to provide an alternative if the Government wish to drop the increased charge on petrol. I support this proposal, but for different reasons, namely, on the ground of simplicity.
  The VAT system is already sufficiently complicated and burdensome and enough of a nuisance to all businesses, especially small businesses, that anything that could lighten the burden would be welcome. If the Government returned to a single-rate system, as was devised for VAT when it was first introduced by a Conservative Government, with one single act the Government could convince small businesses and people throughout the country of their good intentions.
  I accept that in the modern world it is inevitable that legislation, particularly fiscal legislation, will be complex, but much of the problem and the complexity that we are dealing with in this obscure legislation, with its curious wording, has occurred because Governments of both parties, and particularly those of a Leftwing disposition, have considered as their main objective the pursuit of equity. In order to achieve equity, however, they have produced all sorts of foolish legislation created to try to close every loophole and to fill every gap and make allowances for every possible circumstance.
  Important though the pursuit of equity may be, the pursuit of simplicity is an equally important criterion of public life. It is of major importance in any democracy that an ordinary citizen who takes the trouble should be able to understand the law under which he lives. If that applies to other aspects of the law, it applies particularly to fiscal matters. While I hope that the Government do not abandon equity, they should pursue simplicity as of equal importance and establish that as the criterion for the future.
  9.2 p.m.
  Mr. Paul Dean: In commenting on the Budget The Times wrote on 30th March:
  "The Budget limps in the right direction".
  I suppose that we should be thankful for small tax mercies, especially from a Government whose natural instinct is to be a big spender and big borrower, and, therefore, advocates of high taxation. Against their instincts, the Government are moving in the right direction. The pressure of events is forcing them to change course and to reduce some of the enormous tax burden that they have imposed in the past three years.
  The howls of anguish that the Chancellor set out to create have gone sour on him. He is now getting the anguish of voters in by-elections, and, no doubt, in a few hours from now there will be more anguish for him when we hear the results of the by-elections at Grimsby and Ashfield.
  The Chancellor is now being forced to recognise that disincentive to work, to earn, to accept responsibility, which is built into the tax system. As my hon. Friend the Member for Guildford (Mr. Howell) said earlier, no wonder managers in industry and commerce are embittered and demoralised. It is no wonder that people with professional qualifications or skilled trades are discontented. It is no wonder either that the widow who goes out to work is unhappy when she complains about the tax threshold which is now so low that it catches every penny she earns. High marginal rates of tax at one end and low tax threshold at the other are creating an unhealthy situation in which hard work seems to be a mug's game, and there is a similarly unhealthy situation in saving for retirement.
  It used to be possible at one time to talk about the rewards of thrift. Alas, all too often today the appropriate phrase should be the penalties of thrift. There are too many examples of retired people with modest savings who would have been better off if they had spent the lot during their working lives and relied in retirement on social security.
  I am thinking in particular of the retired person who worked abroad, and because he did that has no National Insurance pension and no occupational

  1603
  pension. He is relying on investment income, and he is being clobbered by the investment income surcharge, which is still an enormous burden on a modest income even with the improvements that are provided in the Bill. I am thinking, too, of the retired person with the national insurance pension and the small occupational pension in addition. All too often these people, close to the supplementary benefit margin, are caught in the tax trap because tax allowances have not kept pace with inflation.
  Mr. George Cunningham: Surely the hon. Member will agree that anyone who in his working life wanted to save for retirement and knew that he was not even partially covered by the State scheme could have put his money into a scheme under the Finance Act 1956? The pension he drew would be regarded as earned income and would not be caught as investment income. Is that not right?
  Mr. Dean: Not in every case. There are some cases where that is true, but there are a number of cases, particularly of people who have worked abroad and who retired some time before the more modern provisions came into effect, whose only recourse was through the type of savings now caught by the investment income surcharge.
  I mention these as just two examples of where, as a result of prudence and thrift in earlier years, people are reaping the penalties rather than the rewards of their savings in retirement.
  I hope that the Financial Secretary will deal with the points which have been made from both sides of the House, but particularly that from the right hon. Member for Blackburn (Mrs. Castle), concerning the increase in the retirement pension and other benefits. The Chief Secretary made a wholly unsatisfactory speech today. I agree completely with the right hon. Lady. It is clear to me as a former Minister in the DHSS that the Government are running things very close indeed. If they do not very soon announce the increase to be made in November there simply will not be sufficient time to put in hand the necessary substantial and complicated administrative changes. Not only are the Govern-
  1604
  ment running dangerously close on the administrative arrangements. How can we effectively judge the Bill and the allowances which are changed by it when we have only half the picture, when we do not know what increases will be made in cash benefits?
  Those are two reasons why we must know very soon what the figures will be. It is highly unusual, as the Government know, for this not to be announced in outline in the Budget and fully detailed in a speech the following day. That is normal procedure under this Government and the previous Conservative Government. It is very important, if the House is to judge these matters fairly, and pensioners are to receive an assurance that they will get their increase at the normal time of the year, that these figures should be announced without delay. I hope that the Financial Secretary, in his reply, will tell us more about that.
  Finally, I refer to retirement annuities for the self-employed. I declare an interest in pensions, and a personal interest in retirement annuities. I welcome, as the whole House does, the increase to £3,000 in the maximum contribution that can be made annually and which will qualify for tax relief as laid down in Clause 25, but this increase is not adequate in itself, for two reasons. The first is that it does not enable the self-employed to cope adequately with the levels of inflation that we have suffered in recent years. Secondly, the self-employed will be disadvantaged when compared with employees under the new pension arrangements due to start in April next year.
  It is important for the Government to bear in mind that this is the last Finance Bill before the new pension arrangements for employees come into operation in April next year. Therefore, this is their last chance to put the self-employed on a broadly comparable basis. The Government have decided to exclude the self-employed from the new earnings-related scheme starting next year. I do not argue the merits of that decision now, but having decided to exclude the self-employed, the Government are under a particular obligation to enable them to provide for themselves broadly the equivalent benefits, and to get tax relief on the required contributions. That obligation has not been fulfilled in this Bill.

  1605
  There are in the new State pension scheme for employees, two essential features which must be fulfilled either through the State scheme or through conditions which occupational schemes must fulfil in order to contract out. Contributions must be revalued annually in line with the increase in earnings—in other words they must be on an escalator; and the pensions must be inflation proof up to a guaranteed minimum level whether they are provided by the State scheme or by an occupational scheme. Very few self-employed people will be able to match the conditions that the Government are laying down as the acceptable minimum for employees.
  Surely it is right that, if such conditions are laid down for employees, the self-employed should be enabled to provide similar standards for themselves. The limiting factor here is the 15 per cent. earnings limit, which is quite inadequate to cope with inflation at its present levels, or to provide the sort of level of pension that is accepted as decent in present conditions.
  The older a person is when he starts his retirement annuity the more inadequate the 15 per cent. limit. In this area it is usual to start saving for retirement comparatively late in life. In the early years a self-employed person is very often ploughing his profits back into his business. The provision for retirement inevitably is secondary, and is concentrated in the later years of the working life. Therefore, there should be a substantial increase in the 15 per cent. limit, particularly for older self-employed people, or—in my view, better still—the Government should allow the self-employed to make, in a specified number of years before retirement, whatever contributions are required to secure a two-thirds pension.
  Modest amendments on those lines are the only way in which we can give the self-employed an opportunity to provide for themselves an adequate level of pension and in which we can provide them with an opportunity to gain for themselves a level of pension broadly equivalent to that which is being laid down in the new State scheme for employees.
  I appeal to the Government to recognise the force of those arguments, which can be backed with detailed figures, with
  1606
  which I shall not trouble the House now, and to recognise that this is the last opportunity to do this in a Finance Bill before the new State arrangements for employees come into operation next April.
  9.16 p.m.
  Mr. Peter Rees: My hon. Friend the Member for Somerset, North (Mr. Dean) has deployed an impressive, not to say overwhelming, case for a further improvement of the rules for retirement annuities for the self-employed. I must here declare a special and personal interest in that I am self-employed. I hope that we shall be able to return to the matter and have the benefit of my hon. Friend's statistical evidence when we debate Clause 25 in Committee.
  It is not often that I have occasion to congratulate the Government Front Bench, but on this occasion I congratulate them on producing what I believe to be the shortest Finance Bill since 1970. Perhaps there is an omen in that. The reason is not hard to seek. The Government are
  "As idle as a painted ship
  Upon a painted ocean"
  Whether the Prime Minister is the Ancient Mariner and the Leader of the Liberal Party the albatross, or vice versa, I leave the House to speculate. At any rate, the Government's comparative immobility gives the House and perhaps the Government a pause to reflect and chart the fiscal and economic course of this Labour Government.
  The tax system is always used by any Labour Government in the initial stages—it was true of 1965 and was certainly true of 1974 and 1975—as an instrument for paying off old scores, for avenging imagined slights to people such as Mr. Jack Jones and his colleagues. Reality eventually breaks in. The first sign is when the Government try to stimulate the country's economy with infusions of public money into ailing industries. Then comes the final realisation that it is the human spirit, the entrepreneurial drive, that is important in business, farming and the professions. The Chief Secretary by implication conceded as much in his memorable words on the impact of direct taxation. I am sure we shall have occasion to remember them and cite them time

  1607
  and again in our debates, whatever Government are in power.
  There is joy in heaven over one sinner that repenteth. That was the theme of the impressive maiden speech of my hon. Friend the hon. Member for Birmingham, Stechford (Mr. MacKay). [HON. MEMBERS "Where is he?"]. He could not have conceived that the debate would go on so long and find me soliloquising to an empty Chamber at 20 minutes past nine, but he will perhaps learn about the torpidity of debates on Finance Bills when there is a Labour Government. Certainly they lack support from their Back Benches.
  Mr. William Hamilton: Get on with it.
  Mr. Rees: The hon. Member for Fife, Central (Mr. Hamilton) took his time and, with the benevolent connivance of the Chair—not you, Mr. Speaker—diverged into such irrelevant matters as the Civil List. I hope that I shall be allowed at least a comment on speeches from the Conservative Benches, including a maiden at that.
  I should like to remind the House of the rather impressive and wise words of someone who took up farming. I am not certain whether it would be called hobby farming. Alas, he is with us no longer. He said:
  "This year we find we pay 40 per cent. corporation tax"—
  the House will judge that this was written some time ago—
  "and with income tax and surtax as well on what is distributed we have to pay 80 to 90 per cent. and so we have to give the whole profit to Pritchitt"—
  his farm manager—
  "because there is no other way of doing it…From this farm responsibility I have learned about growth. about investment and about tax. It is a business with a £30,000 turnover and I have learned a tremendous lot about business management"
  The House may be curious to know from what work I have culled this. It is from the Crossman Diaries. There is also some good stuff about his colleagues. There is nothing like a candid right hon. Friend for describing the quality of Labour Administration, but I shall not touch on that now nor on what he said about the Prime Minister and the Chancellor of the Exchequer. I shall reserve that for another occasion.
  1608
  We now have the fascinating spectacle of the Chancellor of the Exchequer retracing his steps, perhaps hesitantly, over ground covered during the last three years—his sticky hand clasped in that of the hon. Member for Cornwall, North (Mr. Pardoe). I wish that the hon. Member had stayed to lend moral support to the Financial Secretary in his wind-up speech, because the right hon. Gentleman will need it and he will not get it from the Benches behind him so he needs it from the Liberal Bench. Perhaps that is why the right hon. Member for Orkney and Shetland (Mr. Grimond) has now come into the Chamber—to give the benefit of his wisdom and experience and to support the Labour Party in the financial field. We were unable to discover from the hon. Member for Cornwall, North whether the Lib-Lab. pact covers economic and fiscal matters although the country will be anxious to discover that and to know what Liberal Party advice is channelling to the Chancellor of the Exchequer.
  As we retrace our steps we come to capital transfer tax. We have heard great words of wisdom from my hon. Friend the Member for Ludlow (Mr. More), who knows so much about these matters. I do not wish to gild his lily but to emphasise to the Financial Secretary that although the forestry interests—and here I declare an interest—are grateful for the minuscule relief that has been given in the Bill—and that does not affect me—if the Treasury wishes planting to be resumed on a considerable scale two things must be done. Capital transfer tax imposed on woodlands at death must be computed by reference to the value at death and not to the value of those woodlands when cut. Secondly, those woodlands must be valued as an estate by itself. That is the minimum that is required if private forestry is to be resuscitated. We shall have occasion to come back to these matters, but rates and grossing up must be gone into because, at the level of inflation that we have endured during the last two or three years, capital transfer tax is no more than confiscation.
  I now come to Schedule E as treated in the Bill, and I particularly wish to refer to overseas earnings. Here we have a classic instance of Labour legislation enacted in the white heat of puritanical indignation, stimulated perhaps by

  1609
  Lonrho memories. What advice Ministers have received on this is a matter for conjecture, whether it was good advice from the Board of Inland Revenue which was rejected or whether it was bad advice which was accepted. We must assume that this policy was hatched out by the Chief Secretary and his colleagues.
  Whatever small measure of avoidance there may have been under the old rule, by and large those rules were understood and worked reasonably satisfactorily. We warned the Government on this matter during 1974. This is a classic instance of legislating first and repenting at leisure.
  The measures have proved so restrictive that there have been two consequences. First, the haemorrhage of talent and enterprise to such probable and improbable parts of the world as the Persian Gulf, South America and the United States has continued and increased. The Chief Secretary is laughing. I am flattered that he finds my modest contribution so witty, but I am not sure that those outside this House will be entirely reassured by his response to what are intended to be serious points.
  The other consequence is that various companies which entered into considerable commitments in rather insalubrious parts of the world and found themselves almost unable to fulfil them because, they could not induce their employees to go to those parts. There has been a measure of repentance by the Government, but it is not sufficient.
  I wish to put some specific points to the Financial Secretary, and if he does not answer them, I shall take them up again in Committee.
  Why are the ameliorative measures limited to employees only? Why are they not extended to the self-employed, those in partnership or trading on their own, and those in the professions? If there is a case in principle and logic for relief for employees there must be the same case for extending relief to all those who benefit this country, and, may be, themselves too, by working overseas.
  Why have not the Government chosen to give relief to those who incur expenditure when occupying positions abroad, albeit, perhaps, concurrently with positions at home? The 25 per cent. relief that a person may get when taking up a
  1610
  directorship of a subsidiary company in Buenos Aires may not even cover the cost of subsistence there.
  The Government have been singularly short sighted and we shall have to return to these matters in Committee if we do not get satisfactory answers from the Financial Secretary when he winds up the debate.
  I turn to benefits in kind. In an ideal world such benefits should be taxable in the same way as monetary income, but we do not live in an ideal world, particularly after three years of Labour Government. Benefits in kind will be found at almost every level in most businesses, and include the person working in the biscuit factory who is allowed to take home a packet of biscuits a day, the coal miner who gets free coal, and the employee who has use of a firm's car. These benefits are not concentrated—except in Labour Party mythology—in the higher echelons of business.
  A tender concern has been expressed on both sides of the House for middle management. I am not sure why the concern is limited to middle management, because industry depends on all levels of management, but I recognise that middle managers have suffered more than most from inflation, the erosion of their standard of living, and the structure of our tax system. They will not be pleased with what the Chancellor of the Exchequer has done about motor cars.
  We shall have to return to that and to the question of free accommodation, which is dealt with more specifically in this year's Bill. The Government have realised that their ill-thought-out pledges to the Labour Party, and perhaps to the TUC, have led them into a hornets' nest in which they are likely to suffer as much as those at whom they aimed their shafts. We shall have to scrutinise carefully who is to be caught by the provisions relating to accommodation and, perhaps more important, who will escape.
  The Chancellor of the Exchequer, with a rare blend of political adroitness, has managed to offend practically every section of the taxpaying public—those who pay tax on incomes barely above the subsistence level, those who pay tax on incomes at 98 per cent., management at all levels, the self-employed and the retired.

  1611
  I think it was the late Mr. Richard Crossman who said:
  "I do not suppose that there is any man who is more disliked and out of touch with the Parliamentary Labour Party than Denis Healey"
  I leave that judgment to the House. If the Chancellor is out of touch with the Labour Party, with which, presumably, intellectually, temperamentally and philosophically he should be in tune, why should we be surprised that he is out of touch with the country as a whole?
  I give the Chancellor one tiny word of advice. If he is privileged to introduce another Finance Bill, perhaps he will consider whether he cannot, without any great expenditure of public money, ease the pressure of the tax system on the taxpaying public.
  There is a great deal in the 119th Report of the Board of the Inland Revenue that repays close study. On page 3, when referring to the corpus of legislation in the past year, it states:
  "Nevertheless its bulk and its complexity pose formidable problems for the Revenue no less than for taxpayers and their advisers"
  It goes on to record the number of people who have been recruited. This is a sinister aspect. Some 500 or 600 cadet valuers have been recruited. No doubt they are well intentioned and worthy people. It will take years for them to catch up with the arrears imposed by the capital transfer tax. No doubt they will cease to be cadets and become hoary veterans in that process.
  I am not so much concerned with Inland Revenue officials. After all, they are remunerated by the public purse. As I look through the list I find them rewarded with CBs and CMGs. Undoubtedly they are devoted servants and I do not begrudge them the honours that have been so liberally bestowed. After these years of Labour Government I am sure that they all merit KGs or KCBs for service in the face of the enemy. I am more concerned with the taxpaying public and their compliance costs.
  I believe that the Chief Secretary was once in professional practice. I refer to the days when he used to rub shoulders with Manchester United. Has the right hon. Gentleman ever thought of his former clients groaning under the imposi-
  1612
  tions that he and his right hon. and hon. Friends have imposed upon them? Has he thought of the professional fees that his former firm is now having to charge for the most minuscule services? Like my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind), who had some shrewd things to say, I believe that the Chancellor should consider how the tax system might be simplified and eased.
  Having a slight professional acquaintance with these matters I do not pretend that any simplification will be a simple task. Probably the best solution is to bring down the rates. If we bring down the rates the taxpayer will accept living with a certain amount of rough edges, but with taxation at its present level the Government are bound to introduce a mass of complex measures to prevent injustice and counter avoidance. We shall have four or five such measures to debate in Standing Committee.
  I ask Ministers to pause to reflect whether it would be necessary to have complex anti-avoidance measures if the top rate of income tax were 60 per cent. and corporation tax were reduced, say, to 25 per cent. I ask them to consider our position if we became a tax haven, as we nearly became under Lord Barber, whose fiscal perspicacity has rarely been appreciated in this place. I suggest to the Treasury Bench that in the next Finance Bill, if it survives to introduce another one, it explores that possibility. I know that it would require an effort of imagination and sympathy of which the Chancellor and—dare I say?—the Chief Secretary are no longer capable.
  The Chancellor is tiring visibly, like a bull that has lumbered around the bullring for too long awaiting the coup de grace. When he is finally dragged out by his hind legs I hope that an appreciative electorate will award his ears—such, I believe, is the custom—to my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). But, the House will ask in this perhaps slightly laboured simile, "Where stands the hon. Member for Cornwall, North?" The hon. Gentleman is the rather frolicsome bullock that escapes into the bullring by accident and is driven out with shouts of derision.
  9.35 p.m.
  Mr. Tony Newton: There can be few less enviable tasks than being

  1613
  a "tail-ender" in a debate of this type and having to follow my hon. and learned Friend the Member for Dover and Deal (Mr. Rees). I wonder how any judge finds him resistible. I am sure that in the court cases in which he takes part the public ought to pay an entrance fee to hear the proceedings.
  Sir Geoffrey Howe: They do.
  Mr. Newton: In which case they certainly get good value.
  At this time of night, when we are operating with the benefit of the exempted business rule, I shall speak briefly. Apart from the fact that most of what I wanted to say has been said, it seems that anyone would be in difficulty in saying anything substantial about the contents of the Bill taken as a whole.
  We are in the oddest position that I can remember in discussing a Finance Bill and making a judgment about the broad strategy. We do not know what the standard rate of tax will be. We do not know what the rate of pensions and social security benefits will be. We do not know what the Government's target for pay increases is to be, and there is even some doubt about the rate of one of the major indirect taxes—that is, the tax on hydrocarbon oil. When one attempts to piece together the figuring of the Budget, the Finance Bill and the Government's incomes policy for the rest of the year, one can only conclude that it is virtually impossible to make a judgment.
  It is certainly good that the Budget makes tax cuts, and I think that the Opposition welcome that. I welcome very much the fact that the Government have at last got away from the belief that it is somehow wrong to exclude middle and upper income groups from the benefits of any tax cuts that can be made. One of the best things about the Budget has been the lack of enthusiasm shown towards it by Labour Members below the Gangway. I do not believe that we can tackle the country's problems so long as we do not have those Labour Members almost permanently unhappy about what is being done. The Budget and the tax reduction proposals do not, taken together, go far enough. In fairness to the Chief Secretary and the
  1614
  Chancellor, however, it must be acknowledged that they are a great deal better than nothing.
  I very much doubt whether many of my constituents will be that much better off when they take into account other Government policies which ought to be considered along with the Budget—the extent to which rates have been forced up by Government policy, the consequences of the petrol and oil duties, the new gas tax and its effect on gas prices and the extent to which Government policy has forced up transport fares for people living in a constituency like mine. All those things would have happened to them irrespective of the Budget and in that sense the fact that there is a tax bonus for most people goes some way to soften what would otherwise have been a worse blow.
  I do not want to follow the hon. Member for Motherwell and Wishaw (Dr. Bray) in his, at times, long and interesting dissertation about the more academic problems of economic policy. No doubt it would be good if the Treasury and Treasury Ministers were up to date with all the latest econometric research. What would be quite wrong would be for the hon. Gentleman, and still more the Ministers whom he was advising to get to grips with this mass of paper, to run away with the idea that there is some magic theory still less some magic set of statistics as yet undiscovered, which holds the answer to our economic problems. Of course there are improvements to be made in the technical management of the economy in the Treasury's calculations and in the advice it gives to Ministers. Fundamentally, however, both Front Benches would agree—certainly all my hon. Friends would agree—that the solution to our economic problems rests on political decisions and judgments as to how far people will respond to Government policy aimed at getting the economy on the move.
  I shall not attempt to rehearse the stock Tory argument on that aspect tonight. My hon. Friends have made their views clear, and I agree with what they have said. All I say—I wish that the hon. Member for Motherwell and Wishaw were here—is that it is a grave error to believe that there is some academic device or theory which will suddenly solve Britain's economic problems.

  1615
  The ingredients which, above all others has been missing over the past few years has nothing to do with statistical errors. It has been the absence of confidence—confidence among people abroad in our currency and confidence among people at home which would lead them to invest and provide new jobs. That is far more a political factor than anything economic in the narrow academic sense.
  In all that has been said about incomes policy and taxation policy in this and other debates, I have sensed that right hon. and hon. Members on the Government side, whether on the Front Bench or on the Back Benches above or below the Gangway, still have not fully recognised how what they are doing is seen in the country.
  Although they have been forced, with some reluctance, to acknowledge the error of their past ways, I cannot understand how the Chancellor and the Chief Secretary, who have made speeches both on the Budget and on the Bill defending their tax changes, could conceivably have made the speeches which they made on earlier Bills when they were creating so many of the problems which they are now trying to correct. However, it is a gain that they are now saying somewhat different things, and it is a gain that the Conservative Opposition have in that sense won the argument all down the line over the past two or three years. Ministers are now being forced to say what we have been saying for many years.
  However, as I say, I sense that Ministers and hon. Members opposite still have not fully recognised the extent to which what they are now saying and doing, although it may be unpopular with the left wing below the Gangway, is far from unpopular in the country. The country knows far better than Labour Ministers have until very recently seemed to acknowledge that fairness and equality are not the same. Both in their fiscal policy and in their incomes policy, the Government have pretended that fairness and equality are in some sense identified in the public mind. If they still thought that, they need only contemplate the stirkes over pay policy which have taken place in the past two months. In a word, most of those strikes have been strikes against Socialism. They have certainly been strikes against a pay policy which
  1616
  was attempting to force everyone into the same mould at the same level, regardless of different skills, different effort or different capacity.
  That is not seen in the country as fairness, and I believe that Ministers would be well advised in the country's interest to recognise that there is strong popular support for moving much further than they have yet been prepared to go towards rewarding effort and recognising differentials, not only in pay policy but also in fiscal policy—that is, in continuing the approach which they have very tentatively started in some parts of the present Budget.
  I come now to one or two detailed points on the Bill. Obviously I welcome a great deal of it, and I shall not list the proposals which I welcome. I wish, first, to comment on the petrol duty proposals and the effect on rural areas. It seemed from what was said by the Chief Secretary and one or two of his hon. Friends that they still do not properly understand why the petrol tax increase has caused such a storm in the rural areas.
  The Chief Secretary says—one can appreciate the point in a statistical sense—that 5½p a gallon on petrol is not a great deal. He works out that for a motorist with a modest car doing a modest mileage it is 30p a week, and in that sense he virtually brushes the problem aside. He asks what all the fuss is about.
  The fuss has three genuine worries behind it. First, the Government are deliberately adding to what has already been a vast increase in petrol prices. People have reluctantly had to accept that increase, being aware that it has been imposed on us by outside forces. They do not like it, but they accept it. Nevertheless, they do not see why any Government should deliberately go out of their way to make it worse.
  People in rural areas feel, and I agree, that this increase comes on top of what has already been a disproportionate burden on those who do not happen to live in one of the great metropolitan areas. They have already suffered far larger increases in costs—for example, in rates—than others have done over the past few years, and at the same time they have suffered a great reduction in their

  1617
  public transport services, which is another source of worry. I do not think they would accept the Chief Secretary's argument. They would, no doubt, accept that energy saving is desirable.
  But, of course, if the Chief Secretary were to press his argument very far, he would no doubt seek to stop people from living in villages. Villages are inherently rather inefficient places from the point of view of energy use because they involve people in more travelling. They involve them in a larger use of energy than if everyone were concentrated close together in towns.
  I do not believe that the energy-saving programme can be pressed as far as the Chief Secretary appears to want to press it. If he wants to save energy, he ought to be looking at other ways. The point I should like to emphasise most strongly, however, because it is perhaps the root of much of the objection in villages and more rural areas, is the absence of any positive side to this package.
  The Chief Secretary predictably referred to President Carter and to what he had done with regard to energy. He referred to the fact that President Carter was raising petrol prices and the rest. But the key thing about the Carter package, which is totally lacking from what this Government are doing and have been doing over several years, is that it has a positive side. This Government's package is all stick and no carrot. President Carter has included tax incentives for people who will buy smaller cars, and he claims that some people will be better-off despite the petrol tax increases.
  What is more, the Chief Secretary rather vaguely referred to the hope that the transport White Paper might provide some relief for the people we are concerned about. The rest of us must simply be sceptical. There has been no sign whatever of a serious attempt by the present Administration to provide a new rural transport policy. It is, of course, a difficult problem and one which has been perplexing Governments for a long while. But after three years in office the Labour Government have come forward with a Bill which will simply provide for a few experiments in rural transport. There is no positive programme at all to prevent the decline in rural public transport.
  1618
  If the Chief Secretary is not careful, the result of his policy and the arguments he has used this afternoon will be a further decline in village and rural life. It will make it increasingly difficult for anyone who is not well off to live in the villages. The real point that the Chief Secretary has missed is that the people who are now being squeezed out of villages, because of transport costs, inadequate transport and the rest, are the elderly and those on low incomes. Villages are increasingly being forced into a mould where only relatively well-off middle and upper income groups can afford the cost of living in them. That may be what the Government want, but it will drastically change the character of English life, in my view for the worse. That is my fundamental objection to what the Chief Secretary has done and to his argument this afternoon.
  But what about the alternatives? There seems to be some suggestion from the Government that a 10 per cent. rate of VAT, as suggested by some of my right hon. and hon. Friends, is the least desirable alternative to the petrol tax increase. I do not see why. The effect on the retail price index would be substantially the same. There would certainly not be very much difference, according to the figures that we have been given. In the light of the Chief Secretary's own argument, VAT could well be fairer than the petrol tax increase.
  In a debate on public expenditure not long ago, the Chief Secretary spent a large part of his speech arguing that indirect taxes in general and VAT in particular were not regressive taxes because they left out essentials such as food, fuel and transport. But, of course, petrol falls on those items. The petrol tax increase will to some extent raise the price of food, and the hydrocarbon oil duty, also covered by the Chief Secretary's argument, will raise the costs of heating.
  The Government have already imposed—one can well see this partly as an alternative to being courageous over VAT—a substantial additional tax on the price of gas, which again is a basic essential. It is fair for us to argue that, far from being less regressive, what the Chancellor has proposed with the petrol tax and in refusing to take the obvious alternative of

  1619
  a 10 per cent. VAT rate is less progressive and more regressive and will hit hardest the poorer sections of the community.
  I propose now to deal with three points about the social justice aspect of the Budget. It was striking how strongly the hon. Member for Stoke-on-Trent, South (Mr. Ashley) felt that his right hon. and hon. Friends were ignoring their commitment to the less-well-off members of our society. There might be matters on which the hon. Gentleman and I do not agree, but I feel that much of his criticism of the Government was well merited, and I want to pick up two points in the Budget which seem to reinforce what he said.
  There is, first, the treatment of retired people. My hon. Friend the Member for Somerset, North (Mr. Dean) spoke with some eloquence about this. For the second year running, the Government are to make the tax position of many retired people considerably worse. We had a substantial argument last year about the way in which the age allowance had been raised by less than the amount of the pensions increase, with the result that any retired person with income over and above his national insurance pension had to bear an extra tax burden.
  By any possible calculation, albeit that we still have not had the social security uprating, the same thing will happen again this year, because the increase in the single age allowance is only about 7 per cent. and the increase in the married age allowance is only 9 per cent. Unless something far more dramatic and controversial is being contemplated for the social security uprating, pensions are bound to rise by more than 9 per cent.
  If that does not happen, there can be no doubt that pensions will not compensate for the rise in inflation, and if they go up by more than 15 per cent. as a result of this inadequate increase in age allowance retired people who have some savings income, additional pension, or whatever it may be will find that the tax bite on them has been increased. To allow that to happen for the second year running would be deplorable. It is a pity that the Government have not reviewed the £3,250 upper limit on incomes that can benefit from the age allowance.
  1620
  That was fixed some time ago, and it ought to have been reconsidered in the light of inflation.
  Earlier in the day I had an opportunity to question the Minister about the situation with regard to widows, and I think that I made my main point then. There is great disappointment that nothing has been done to deal with the disincentive effect on widows with earnings over and above their pensions. This remains a cause of great bitterness, and the situation will get worse rather than better as a result of the Budget.
  There remains also—I am particularly disappointed about this—the unfair situation whereby women between the ages of 60 and 65 who are on retired incomes under the national insurance system do not get the tax allowance that is available to retired people under the tax system. Following a reply that the Minister of State gave some weeks ago, I had hoped that Ministers were about to change their minds. It is a great pity that they have not done so, and I hope that they will reconsider this during the passage of the Bill.
  The next matter to which I wish to refer is one that I had an opportunity to raise in the House recently, and I shall therefore not elaborate it now. I am referring to rail fares paid by the commuting population. It is a difficult argument whether tax relief is justified in some great argument about principle. What is not open to question is that people in this group—I accept that they are not necessarily poor, but some are not well off, and some are better off—have borne a wholly disproportionate part of the burden of adjustment to our difficult economic circumstances over the past two years. In many cases the real standard of living of some commuters has fallen between 20 per cent. and 25 per cent. over the past two years, and that is more than we should have asked of any section of the community.
  It would be possible to devise a justifiable and workable form of tax relief which would help to offset some of those difficulties. It would create a fairer situation and probably make it possible to pursue a rational railways policy. I am sorry that we have not heard anything about that yet. I hope that we shall get a chance to discuss it in Committee.

  1621
  The Finance Bill is moving in the right direction in its broad proposals for tax reductions, but we need more of them. In some respects the Government have not been as fair or as generous to some groups which should have demanded their attention.
  9.55 p.m.
  Mr. Nicholas Ridley: My first, extremely pleasant duty is to congratulate my hon. Friend the Member for Birmingham, Stechford (Mr. MacKay) on his most distinguished maiden speech. All who heard him will agree that he spoke with great clarity and confidence. He impressed all who were privileged to be here.
  In my political career I have been fortunate and privileged to congratulate the maiden speeches of two Benjamins—two of the youngest Members of the House. I suspect that the stay in this House of my hon. Friend the Member for Stechford will be longer than that of the hon. Member for Nuneaton (Mr. Huckfield). I am also sure that he will progress more in the esteem of the House than the hon. Member for Nuneaton. He is the better of the two Benjamins.
  I shall mention some of the lesser points to which we shall return during the Committee stage. In particular I shall touch upon forestry, which was raised by my hon. Friend the Member for Ludlow (Mr. More), and the question of historic houses, which was raised by my hon. Friend the Member for Bristol, West (Mr. Cooke).
  In both those cases the value upon which capital transfer is now to be calculated is not the value at the time of deferment of the tax. It is the value either at the time of a breach or at the time of felling the woodlands. That is extremely unfair and confusing. It makes it impossible for people to calculate their tax liability. We should come back to that in Committee.
  I also want to press a matter that was raised by my hon. Friend the Member for Guildford (Mr. Howell), was asked about the present threshold for VAT registration. Has anything come out of Brussels which will tell us that we may raise the threshold? We shall seek to raise the threshold in debates upstairs. We must also do something about the investment income surcharge on maintenance payments to divorced wives.
  1622-1624
  Small businesses will be discussed on many occasions upstairs. I was delighted to hear my hon. Friend the Member for Basingstoke (Mr. Mitchell) urge that further assistance be given to small businesses. I was even more delighted that my hon. Friend the Member for Stechford made that the theme of his speech. I assure him that we shall support him in all that he seeks to achieve. I was also pleased that he spoke so generously about his predecessor, Roy Jenkins. I remember the days when the former Prime Minister, the right hon. Member for Huyton (Sir H. Wilson), used to boast about the enormous talent of the occupants of the Treasury Bench. Where has it all gone now? I shall not dignify them, as Disraeli dignified his predecessors, by saying that they are a range of exhausted volcanos. They are a range of eroded foothills. The Chancellor himself might well be described as a foothill—
  It being Ten o'clock, the debate stood adjourned.

  BUSINESS OF THE HOUSE
  Motion made, and Question put,
  That the motion relating to Ways and Means may be proceeded with at this day's Sitting, though opposed, until any hour.—[Mr. Stoddart].
  The House proceeded to a Division—
  Mr. BATES and Mr. COLEMAN were appointed Tellers for the Ayes, but no Member being willing to act as Teller for the Noes, Mr. SPEAKER declared that the Ayes had it.
  Question accordingly agreed to.

  FINANCE BILL
  Question again proposed, That the Bill be now read a Second time.
  Mr. Ridley: After that little break, I should like to turn to the Chancellor. I wish that he were with us, but I understand why he is not. I think it is true to say that the Chancellor has had to be retreaded, retrained. He has had to be retrained in so many things that he is scarcely recognisable as the Chancellor who three years ago came in with all those idiotic economic ideas. He has had to be changed in his attitude to public spending. He has had to be retrained in his attitude to taxation. He has had to be trained in his attitude to economic management.
  First of all, on the question of spending, after the Chancellor's orgy of public

  1625
  extravagance when he first came in it is right to pay tribute to him for the way in which he has got cash limits going, he has got public spending under control and has begun to reverse the immense damage that he did in the early part of his Chancellorship. However, it is also fair to refer to the total inadequacy of Parliament's control process over public spending. It is, going through the events of this year, something about which all of us, as Members of the House, should be a little worried.
  We got the public expenditure White Paper in two parts. By the time the second part was published, there was a fortnight only before the matter was debated in the House. The General Sub-Committee managed to make a cursory report on the document, and the debate took place on the day after the report was published. The debate took place on the Adjournment, and whether or not hon. Members voted to adjourn or not to adjourn the expenditure goes through. Compared with any of the processes in any legislatures in any other country in the world, this process is an absolute disgrace. The sum of £63 billion went through the House without any opportunity of checking it in total or in detail. It must follow, now that we have allowed that expenditure to form the basis of the Government's spending plans, that all the necessary taxes that have to be raised, the Budget judgment and all the rest of the Budget apparatus follow almost inevitably from that.
  The key determinant of the level of taxation in this country is simply and utterly out of the control of the House, particularly in the way that the Government managed their White Paper and public expenditure plans this year.
  Mr. George Cunningham: It always is out of control.
  Mr. Ridley: I agree that it always is, but this year was particularly disgraceful because of the shortage of time and the way the Vote was handled. This Parliament may well come to be known as the Adjournment Parliament.
  The petrol issue, on which much has been said in the debate, arises partly out of this process. On this subject I have sympathy with the hon. Member for
  1626
  Cornwall, North (Mr. Pardoe). Having determined, with his new-found power, to reverse the petrol tax, he found that he could not do so far technical reasons, first because the petrol tax was already in force and secondly because, if he did so, he would deny the revenue which he agreed was needed. He was forced to go back to the strategy of returning to the matter in Committee.
  I was not so much in sympathy with the hon. Member for Cornwall, North on all other aspects of this matter. Now that he is a responsible Shadow Minister—and this point also applies to the Chief Secretary—he should not go poaching on other people's ground. Energy policy is the responsibility of the Secretary of State for Energy and the right hon. Member for Orkney and Shetland (Mr. Grimond). I do not believe for one moment that the hon. Member for Cornwall, North consulted either of them before embarking on his rather ill-informed energy policy.
  I remember that in the Finance Bill Committee two years ago the hon. Member for Cornwall, North made two consecutive speeches, one proving that there was great elasticity of demand in petrol pricing and the other proving that there was not. I am sure that the hon. Gentleman remembers the occasion. My view is that there is no elasticity of demand in petrol pricing. I do not believe that the 5½p will reduce the take of crude oil from overseas. It might knock ½ per cent. off petrol consumption, but that does not affect the take of crude oil because petrol accounts for only 14 per cent. of the barrel. What will be the reduction in petrol and oil supplies if the tax goes through?
  Much play was made of President Carter's initiative during hon. Members' comments on energy policy. I was in Washington when the initiative was announced, and the general view there was that it was crazy to work on the demand side for oil and oil products and at the same time do nothing to encourage production.
  We have done the same thing here. Here we have the Inland Revenue actually going to North Sea divers and trying to classify them as employed instead of self-employed and so milk them of taxes. If we want to balance our energy books

  1627
  and to increase supplies of energy products, that is not the way to do it, because if the North Sea divers leave the Continental Shelf we shall have less oil.
  The best answer is to reduce demand as well as trying to increase supplies. If it is our intention to reduce demand for oil of all sorts, why was aviation fuel left out of the clause? Why is public transport left out? Why is business travel in motor cars to be left out through the VAT exemption? All these arguments may or may not be sound, but they must be thrashed out.
  The hon. Member for Cornwall, North spoke as though he were going to get this tax knocked out of the Bill by himself, but he has to persuade 285 Conservatives to feel that they should lend him their support in what he seeks to do. It is not just a question of his persuading himself.
  Mr. Pardoe: If the hon. Gentleman had been listening to my speech he would have heard me, with unaccustomed modesty, make that very point. I said that this tax would not be removed from the Bill unless all the Opposition parties and, hopefully, some Labour Members were in favour of doing so. I said that the problem was to get everyone here on the day.
  Mr. Ridley: I am glad that the hon. Gentleman is learning the responsible ways of sharing the load of government.
  My hon. Friend the Member for Ludlow raised one interesting point. It was that quite soon the biggest imports into this country will be not of oil, since we shall get our own oil from the North Sea, but of wood pulp and forestry products. Their value will soon overtake the net value of the imports of oil. Does that mean that the Government propose to put a tax on newsprint? It would clearly be logical for them to do so. Consider the enormous thickness of some of the tabloid dailies. It would do less damage to our standard of living if they were thinned down than if the petrol tax were increased. That might be a way in which the Chancellor could raise the revenue. No doubt the hon. Member for Cornwall, North will support us on that.
  I turn now to taxation. Many Labour Members feel that since the proportion of gross national product paid in tax is al-
  1628
  most the same as that of our European rivals, we are not a heavily taxed nation. That is an accurate analysis. I have the figures. In the United Kingdom we pay 36·.8 per cent. of GNP in taxes. The figure for France is 36·9 per cent. and for Germany 37·6 per cent. But one must look at the size of the GNP. For the United Kingdom it is $216 billion, for France it is $348 billion and for Germany it is $451 billion. The populations of all three countries are nearly the same. If the tax is taken away, there is left in the private sector $137 billion in Britain, $220 billion in France and $280 billion in Germany. Therefore, the average German is left with twice as much money after tax as the average Briton.
  Mr. Joel Barnett: They start off higher.
  Mr. Ridley: The Chief Secretary has made my point. They start off higher, so they can afford to pay for a level of public services which is now beyond the British taxpayer. That is exactly what has happened under the Chancellor's stewardship. He has allowed public spending to go to levels which are beyond the capacity of our ailing economy to sustain. This has resulted in the feeling of over-taxation in every section of the community, a feeling which has been referred to time and again in speeches today by my right hon. and hon. Friends.
  I am not ashamed to refer to the marginal top rates of tax because they more than anything else illustrate the bias of the Labour Party. In the United Kingdom those top rates are, earned, 87 per cent., and, unearned, 98 per cent. The comparable figures for France are 54 per cent. and 60 per cent., and for Germany 56 per cent. in both cases.
  That is what is under attack at Walsall, Workington and Stechford, and probably at Grimsby and Ashfield as well. It is summed up in the polite new jargon word "differentials". Even hon. Members below the Gangway are asking questions about differentials as though this is a permissible Socialist form of inequality and difference. If one says "He has twice as much money as I have", that is all wrong, but if one says "There is a differential of two between us" that is within the terminology of the modern Labour Party. It is extraordinary that

  1629
  the Chancellor in his Budget should say that it was his intention to relieve not only the bottom end of the scale of income tax payers but the top end as well. Clause 15 is the legislative evidence that at long last the Labour Party is realising that differentials matter.
  The compression has been enormous due to incomes policy on the one hand and inflation and tax on the other. I shall not quote again the example of the man in The Times who was quoted by my hon. Friend the Minister for Guildford earlier today. Apparently this man's net pay has fallen from about £9,882 in 1974 to £6,300 at the beginning of 1977. I have actually worked out the figure for this gentleman in The Times in relation to the Budget that we are now considering. In fact, his income has decreased by another £100 as a result of the period between January and now, including the Budget.
  I warn the Labour Party that a sea change is taking place. The general uniformity of wages and the general attempt to compress salaries and destroy differentials, which has been at the heart and mind of the Labour Party for so many years, is now becoming almost the most unpopular piece of baggage that it carries. It will have profound effects, not only on the party's electoral chances, in which I am not particularly interested, but more importantly on stage 3.
  The problem is that the world is becoming more mobile, and people who are well paid will not stay here to be squeezed and over-taxed. They will go away, as they have been doing, unless they are better treated. The £8,500 limit in the incomes policy has helped to influence them. Indeed, it is fantastic that in the past month a million days were lost in factories because of the operation of stage 2. Stage 3 will be about differentials and about getting richer.
  The Chief Secretary said that there was no more cake. In a way he is right, but there should be a connection between the size of the cake and the pay policy itself. I believe it is because we have had this restrictive pay policy that the cake is not growing; in fact, it is shrinking. In the last four years the average real take home pay for the average man at 1976 prices has gone down by £4.04
  1630
  a week. In some sense that fall has been caused by our incomes policy.
  I do not believe that it was inevitable, as the hon. Member for Cornwall, North has claimed. I agree with my right hon. Friend the Member for Worcestershire, South (Mr. Spicer) that there has been a connection between the sort of restrictive attitude induced by the incomes policy together with the destruction of incentive and the fact that our real wealth has decreased. Other nations have had the same problems. France and Germany have had the same problems as we have had, and they do not have any oil, but without an incomes policy they have increased their standard of living and their national production. The connection is between the disincentive effect of the incomes policy and the shrinkage of national production.
  Therefore, we must be careful of a wage explosion. Here I come to the speech of my right hon. Friend the Member for Chipping Barnet (Mr. Maudling). Is he certain that there will be a wage explosion or that stage 3 will stop it? There is no certainty that explosions are stopped by statutory incomes policy, as my right hon. Friend and I surely remember from two or three years ago. There may well be an explosion, in which case perhaps it is irrelevant whether there is a stage 3. There may well not be an explosion, in which case perhaps again such a policy is irrelevant.
  We must also ask "Why only the British? Why are only the British liable to suffer this wage explosion? Are we so volatile, so militant and so unusually violent—we, the mildest of races—that this risk should be so grievous?".
  Mr. Stephen Ross: Does the hon. Gentleman agree that three years ago the Japanese had a wage explosion of about 34 per cent., and they have suffered for it ever since?
  Mr. Ridley: Yes, they did, but they have also had a production explosion, and a production explosion is very handy for paying for a wage explosion.
  This brings me to the real point, to the common ground between my right hon. Friend and myself. I hope, and between us and many Labour Members, though perhaps not all of them. This is that there may have to be all sorts of

  1631
  difficult transitional phases. But, as my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said, we have a form of automatic cash limit in the private sector, and the Government have introduced it in the public sector. All we have to do is to seek to prevent leakages in and out of these cash-limited blocks and surely we shall then begin to get some form of contained kitty in which the kitty bargaining can be controlled.
  That is really all that is meant by controlling the money supply, because the money supply is no more than the aggregate of all these cash-limited blocks. I do not believe that it is possible to have a wage explosion unless it is fuelled by money from an extraneous source. Indeed, this may be the key to getting the rate of inflation down too. If I may coin a phrase, the cost of living is eternal vigilance.
  Stages 1 and 2 have not worked to control inflation. Our inflation rate is twice that of France over the past three years and four times that of Germany. Unemployment has gone up. We must find new answers to these problems. The Government's economic management record is appalling.
  I find it the final insult that we should be told that if only we persist with the Labour Party's policies we shall eventually reach "the golden decade"—the Prime Minister's own words. Does the right hon. Gentleman mean the decade in which the only people who can afford to live will be those who bought gold? It is clear that nothing but disaster has resulted from the policies pursued by the Government hitherto. If we are to have to retrain the Chancellor of the Exchequer to the necessary extent, it might be better if we had a brand new one instead of a worn-out retread.
  10.24 p.m.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): My first task is to offer my congratulations to the hon. Member for Birmingham, Stechford (Mr. MacKay). It is always a difficult task when the hon. Member concerned replaces a Member from one's own party. In this case my task is made much the lighter because of the non-controversial way in which the hon. Gentleman spoke, the excellent words that he had to say
  1632
  about his predecessor, Mr. Roy Jenkins, and the genuine regard that he obviously had for him. I think that the hon. Gentleman endeared himself to the whole House in the way in which he spoke.
  The hon. Gentleman spoke, too, about the problems of his great city, of which he was naturally proud. I think that an echo of that pride went round the House, particularly when the hon. Gentleman spoke about small-scale industry and its contribution not only to his city but to the country as a whole.
  That point was taken up in the speech of the hon. Member for Basingstoke (Mr. Mitchell), who dealt with much the same matters and who talked about the problems of the small business. This is not a suitable time to go into that further, because I have much to say and a great many of the points that the hon. Member made—as he will understand—will be more suitably discussed in Committee because more time will be available there.
  There is one thing, however, that I wish to say and that is to assure the hon. Member for Stechford—from whom I hope to hear more on this subject in due course—that the problems of small companies have been alleviated by stock relief as well as by the reduction in corporation tax from 52 per cent. to 42 per cent. of profits in the range of £40,000 to £65,000. I cannot agree that we have done nothing for these companies, and our whole approach to small businesses is now beginning to be understood by the people concerned. Our appreciation of the valuable work they do is certainly strong and occupies an important place in my thinking and that of the Government.
  Mr. Churchill: Does the right hon. Gentleman accept that the concessions to which he has referred for small business corporation tax relief amount to less than the increase in inflation since 1974?
  Mr. Sheldon: Yes, but the hon. Member must understand also that this cannot be looked at alone. Important assistance is given through stock relief, under which a manufacturing company of the kind to which the hon. Member for Stechford referred obtains enormous advantages through capital allowances and stock relief and will be paying little, if any, corporation tax at all. That, together

  1633
  with the further relief in the Finance Bill, has been widely welcomed.
  I wish to refer briefly to what was said by my right hon. Friend the Member for Blackburn (Mrs. Castle), who asked about child benefit and about what might be done in the autumn. First, I should point out a fact of which, no doubt, she is well aware. A problem of child benefit is that the allowance for children cannot be included in the Budget judgment in the same way as was possible hitherto when there were child tax allowances. An important element of the Budget judgment is excluded from consideration because we have moved from a tax allowance decided in budgetary terms to assistance in benefit terms, which is therefore reviewed not at Budget time but at the time of the social security benefit uprating later in the year.
  My right hon. Friend also asked when the details of this year's review will be announced. The review of the rates of national insurance benefits has been carried out and details of the proposed new rates will be announced in due course. I cannot tell her any more than that, and for further information she should seek to approach my right hon. Friend the Secretary of State for Social Services.
  A great deal of time in this debate has been taken up in argument about the levels of direct and indirect taxes and how they should be adjusted one against the other. Everyone has agreed and accepted that income tax and direct taxes have been increasing considerably and that the main indirect taxes—such as value added tax, Customs and Excise duty and vehicle excise duty—have been declining steadily. We know full well why this is so. In an inflationary situation, one need do nothing yet the revenue from direct taxes will increase, while for indirect taxes one must come to the House to ask for the increases. This is a difficult task for any Government, and we have seen the problem particularly in relation to the petrol duty.
  We must understand what is happening to the direct tax system as a result of the difficulty of obtaining these indirect tax increases. It reduces the possibility of introducing the reduced rate bands that so many of my hon. Friends and myself wish to see in the income tax structure
  1634
  and the possibility of changing the higher rates in a way that many hon. Members opposite might wish. It means that we have to collect through direct taxation sums to replace what we are unable to raise in indirect taxation.
  Some problems, including levels of thresholds and the poverty trap, are a direct consequence of the relationship between the direct tax system, the yield of which increases automatically, and the indirect tax system, which the House has not yet learnt to adjust similarly in the prevailing circumstances. The discipline present in the House of the responsibilities of taxation as against the greater joys of spending used to lead to a correct adjustment between the two, but it has not done so in these changing circumstances.
  Of course, Governments have acquired the discipline necessary to increase taxes to meet the requirements of expenditure. Now that a number of these decisions fall more to the House, the absence of such discipline will result in greater distortions of the sort that we are beginning to see. For example, we must remember that, in real terms, petrol duty is very much lower than it was throughout the 1960s and even earlier. It has gone down and down and down. We have to ask whether that is the right way in which petrol duty should have moved.
  I understand the problems of rural areas. Petrol is more important there than in most other areas, but we must also understand that the amount of petrol used in rural areas is much less than the amount used in other areas—and Clause 4 applies generally. We have this great problem of the smaller users when we have to set the level of petrol duty for much larger users.
  In addition, the hon. Member for Guildford (Mr. Howell) talked about his hostility to the whole of Clause 4, which covers heating oil and heavy oils in general. He was enunciating a policy of cheap energy. We do not have to agree with everything said recently by President Carter on this subject, but there are dangers in moving towards a policy of cheap energy at a time when energy is becoming scarce in most countries and is extremely expensive to discover and when the problems associated with it are increasing all the time.
  Those of us who hoped that the discovery of oil in the North Sea would

  1635
  considerably increase investment would be very upset if these resources, which came to us rather fortuitously, were used not for investment to create jobs and the industrial climate that we require but for cheap energy to assist the sort of consumption in which we have already gone too far.
  We do not have to look into the future to see the dangers. We can see what has happened with North Sea gas, which is worth £2·2 billion a year. That has been absorbed into consumption. The great danger is that oil, which is a more important commodity but of a not dissimilar order of magnitude, might be going the same way. The policy of cheap energy is just the right way to ensure that that piece of good fortune is used not to help to create the investment that I believe is essential but to increase the level of consumption that will be absorbed into the general pattern of expenditure, so that a few years from now that piece of good fortune will hardly be discernible.
  The hon. Member for Guildford asked about Clause 13, which is concerned with the consequential arrangements upon the adoption of the Sixth Directive. The harmonisation of value added tax was an obligation incurred when we joined the European Community. Agreement has been reached subject to a reservation of the Danish Government. We are now awaiting the lifting of that reservation. That has entailed a minor change in the Ways and Means Resolution as the directive is not at this moment a decision of the Community.
  The directive lays down in detail the essential elements of a common system of value added tax. I emphasise that we remain free to operate value added tax in a way that suits our own industrial, commercial and social structures. We sought to achieve that result in the discussions in Brussels and Luxembourg and I believe that we have succeeded. We have ensured that our zero-rating that applies to about 30 per cent. of consumer expenditure will be maintained. We have avoided, too, any new administrative complexities. I made it clear in response to a Written Question from my hon. Friend the Member for Southampton, Itchen (Mr. Mitchell) that all the changes in Clause 13 are directly consequential upon the Sixth Directive,
  1636
  apart from three changes in technical matters that lead to no alteration in administrative practice.
  Mr. Nigel Spearing: I am following closely what my right hon. Friend is saying. He has referred to the Sixth Directive of the European Council. Is he indicating that he is not intending to deal with the matter in the next item of business but is incorporating the substance in his winding-up speech? Would it not be more appropriate to deal with the matter when we come to the next item of business?
  Mr. Sheldon: I was not seeking to exclude the next item of business. I was trying to give some account of the Sixth Directive and the reason for the incorporation of the Clause 13 in the Bill. Clause 13 does not affect everyday matters of concern in the working of value added tax for the vast majority of traders. I think that we have been successful in dealing with the matter.
  A number of questions have been raised about conditionality—
  Mr. David Howell: Is the right hon. Gentleman saying that my query about imput and output taxes does not arise and that my interpretation does not lead to the conclusion that I suggested? Secondly, will he confirm that we are free as a country to raise the threshold for registration for VAT when and as we wish?
  Mr. Sheldon: We are able to raise the threshold for registration for VAT in conformity with the rate of inflation from 1973. That means that we could, if we wished, raise it to £9,600 or therabouts.
  I should not like to be precise in reply to the hon. Gentleman's second question. I refer him to the Written Answer, given to my hon. Friend for Itchen in yesterday's Hansard, which deals with three proposals which are the only ones not directly consequential upon the Sixth Directive. These are all minor changes affecting technical matters and involving no alteration in current administrative practice.
  I come to the issue of conditionality. A number of questions have been put to me. One of the problems of the Budget in current years is that one of the most important elements is lacking,

  1637
  namely, the estimate of what will be achieved in a pay deal. It used to be much easier when we were talking about inflation levels of 3 per cent. or 4 per cent. and corresponding levels of earnings and when we were discussing an extension of production of maybe 2 per cent. or 3 per cent. a year. Any minor errors would have been fairly insignificant or, at least, containable.
  The difficulty now is that the earnings variation forms the largest part of the Budget judgment and the figures we are talking about as the range of estimates of pay are so large that a complete Budget judgment cannot be made without the kind of information that tends to come later in the year. Those who seek to remedy this difficulty by means of the money supply should have listened to the right hon. Member for Chipping Barnet (Mr. Maudling). There are some rather untypical Tories who are addicted to dogma and to the inevitability of arguments. We have frequently been criticised for our devotion to certain forms of doctrine, but up to now this has not been a typical Tory attitude.
  The quote of the day came from the right hon. Member for Chipping Barnet, who said that anyone who believed that wage increases did not necessarily lead to price increases must be a professor. I add to that "either a professor or possibly a member of the Opposition Front Bench." To those who look at these problems sensibly, the connection between those two factors is clear.
  The hon. Member for Guildford sought to find an alternative policy and suggested the holding down of cash limits and a return to collective, responsible, free bargaining.
  Mr. Ridley: Hear, hear.
  Mr. Sheldon: The hon. Member should be careful, because we on the Government Front Bench see considerable divisions on the Opposition Front Bench on these matters. Those who argue, like the hon. Member for Guildford, that stage 3 will be impossible, undesirable and unnecessary will have to take account of the differences of view expressed by such people as the right hon. Member for Lowestoft (Mr. Prior) and others who know that a formula for
  1638
  pay policy negotiations will not be produced by the arguments used by the Leader of the Opposition about negotiation on the factory floor. That is not the way to get any understanding, let alone to conduct dealings with the trade unions.
  Mr. David Howell: I do not wish to prolong the argument, but the Financial Secretary must not misquote. I said—he will see it in Hansard—that a stage 3 arrangement of the kind practised in stages 1 and 2, a deal which led to the disastrous consequences we now see, would not be desirable, possible or necessary in the next wage round. He must recognise that, as does the Prime Minister.
  Mr. Sheldon: It is hardly worth the hon. Member's rising to make the point that the kind of deal which no one contemplates making in stage 3 is a bad thing. No one is contemplating making phase 3 a copy of phase 1 or phase 2. It was hardly worth rising for that.
  The right hon. Member for Lowestoft wants a phase 3 and is presumably prepared to pay the price for a phase 3. The right hon. Member for Leeds, North-East (Sir K. Joseph), like the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), does not want a phase 3 and is not therefore prepared to pay the price.
  This is not a philosophical discussion of the price we ought to pay. The price to be paid is a matter of the most direct and important political consequence for the future of this country, and when the right hon. and learned Member for Surrey, East (Sir G. Howe) talks about the necessity of harrowing out the areas where the Opposition agree and those where they do not agree he is talking not about some minor consequential matter about which they will finally come to a conclusion but about one which is central to the government of this country.
  Opting out of questions central to the government of this country is no way in which the Opposition can hope for or deserve the kind of support they seek. The fact that they have been unsuccessful in acquiring that support is evidenced by the fact that they have lost their closest political allies, the City of London, where people showed what they thought about their absence of policy in this key area by the way in which the Financial Times index dived as soon as there was a pos-

  1639
  sibility of a Conservative Government. This is not a matter of congratulation for us but should be a matter of desperate thinking for the Opposition.
  I am conscious that I have not answered all the points—
  Mr. Peter Rees rose
  Mr. Sheldon: This is a smaller Bill than in recent years but it is no less welcome for that. I ask the House to give it a Second Reading.
  Mr. Deputy Speaker (Mr. Oscar Murton): The Question is—
  Mr. George Cunningham: On a point of order, Mr. Deputy Speaker. Do I understand that you are putting the Question? I wish to speak in the debate.
  Mr. Deputy Speaker: Mr. George Cunningham.
  10.48 p.m.
  Mr. George Cunningham: I am not apologising for rising after the winding-up speeches, because a considerable number of hon. Members wish to wait for those speeches out of courtesy and to hear replies to their questions. To them I simply say "Goodnight", but there are some points on Second Reading which I wish to raise.
  The Finance Bill is about revenue, not about expenditure, but the amount of revenue which has to be collected, subject only to the borrowing of the difference, is the amount which we have decided to spend.
  What is urgent, and has been for a long time, is to have a review of the methods by which we control public expenditure and the methods which have resulted from the Plowden system introduced in the early' sixties. We should not need to raise anything like so much revenue if we were to go into the forests and woods of public expenditure, not to find waste which is the result of political decisions because I think that there is not much, if any, of that kind to be found, but to find the enormous number of small items of waste which are in the books only because no one has gone into those woods and forests and found them out.
  I shall give one small example. At the moment, presumably one can say that the borrowing requirement of the Treasury is £500,000 larger that it needs to be
  1640
  —for what that is worth—because we have the practice of providing to members of the Diplomatic Service interest-free loans to buy cars. That is a practice which dates certainly from 20 years ago, so far as I know, and probably from a great deal earlier. But is there any case for our permitting members of the Diplomatic Service to raise money not from banks, which would be delighted to lend it to them, but from the Government, which means that it counts as public expenditure, and to borrow that money completely interest-free?
  The Financial Secretary knows that I asked him to look at this matter and to compare the terms upon which we are prepared to lend such money to members of the Diplomatic Service to buy cars with the terms upon which we are prepared to lend money to other public servants—namely, midwives—to buy cars. When a midwife borrows public funds to buy a car, we charge her 13½ per cent. or 13 per cent. When a member of the Diplomatic Service borrows money to buy a car, we charge him zero per cent. Yet a member of the Diplomatic Service is usually able to buy his car when he is to go abroad—those are the only circumstances in which he is lent the money free of interest—at a considerable discount off the normal price.
  This is a small item but it is one of thousands which could be found if the Treasury would set up a public expenditure pruning operation, with a small staff—I stress small "staff—who would work alongside and as part of the normal Treasury team for public expenditure control.
  In company with others, I am disappointed that the tax thresholds in this Finance Bill have not been raised more. The main task of bringing up the thresholds, if only so that they do not get in the way of social security payments, still rests with us. We have increases in the single and married allowances this year which are only just comparable with what happened last year. Therefore, any increase in the thresholds more than enough to take account of inflation is a task which remains either for an autumn Budget or for a Budget next year.
  In his winding-up speech, the Financial Secretary replied to my right hon. Friend the Member for Blackburn (Mrs. Castle)

  1641
  on points which she raised about child benefit. I must say that I am beginning to be disturbed about whether our decisions with regard to child benefit and taxation were correct. Clearly we shall have a problem in the future, because, as the Financial Secretary said, in the past we have been able in the Budget to increase the child tax allowances and bring the change into effect pretty rapidly, between the Budget in March or April and July when the tax reliefs actually find their way into people's pockets.
  My understanding is that any decision about the level of child benefit payable as from next April would have to be taken, for administrative reasons, somewhere around August, because the Department of Health and Social Security claims that it is not possible to get the books prepared and so on if we do not take the decision around August.
  Child benefit has now become the principal means—and in a couple of years will be the only means—by which we provide financial support for the family in proportion to the number of children in the family. Therefore, particularly in the next year or two, we shall want to use as much of the spare money as there is for family-related reliefs and cash payments. But the Treasury will not know in August how much money there is likely to be available next April.
  Therefore, there is a problem, and, so far as I can see, it can be solved only by the DHSS reducing the interval between the date when we need to know the rate at which child benefit is to be paid and the date upon which it actually becomes payable.
  Another problem in relation to child benefit emerges from the Bill. The Government have decided—unwisely, I think, though they seem to feel committed by the decision which they took last year—that child tax allowances for children resident overseas should be at the same level this year which we have now entered as they were last year but that in April 1978 the tax allowance in respect of children resident overseas ought to come down to the same level as child tax allowances for children resident in this country. That is a crazy arrangement because it means that we are making no reduction this year and
  1642
  we shall have to make a double ration of reduction in April 1978.
  As the Financial Secretary knows, I am completely in favour of phasing out these child tax allowances even though they will not be replaced by child benefit in respect of these children. But they ought to be phased out by a gradual process, and the sensible thing to do is to amend the Finance Bill so that child tax allowance payable for a child resident overseas in the year which we have now entered is not the same as that for last year but becomes a midway stage between what applied last year and what we expect to apply next year.
  I hope, too, that hon. Members who serve on the Finance Bill Committee—I doubt whether I shall have that privilege—will take a very serious look at the taxation of short-term social security benefits. We have been over this ground before and I do not want to rehearse the arguments. I have put forward a proposal which seemed to me to give the Treasury most of the revenue that would derive from taxing short-term benefits, avoid most of the costs and get rid of most of the anomalies under the present arrangement.
  The Treasury believes that there are anomalies and new administrative costs in my proposal. I hope, however, that the Financial Secretary will accept that there are huge anomalies in the present arrangement and that there are enormous administrative costs in paying the rebates which result from the present situation. Therefore, there ought to be a serious look at some means by which we can stop the anomaly whereby a person receiving £20 unemployment benefit pays no tax upon it, even though he has a great deal of other income—if that is the case—whereas a person earning £20 pays tax upon it.
  Mr. Newton: I hope that the hon. Gentleman will also emphasise, or perhaps he will allow me to do so, the amount of revenue involved. I do not know whether the hon. Gentleman has seen the answer that I received from the Financial Secretary only today, which points out that revenue last year from taxing sickness and unemployment benefit would have amounted to £340 million. We are talking about a very sizeable sum of money.
  Mr. Cunningham: We are indeed. I was not aware of that answer, but I was aware of the order of magnitude of the amount involved. In fact, it is considerably larger than the sum mentioned by the hon. Gentleman because it would not make sense to introduce either the taxation of short-term benefits or my compromise proposal without also applying it to supplementary benefit. Otherwise, when a person ceased to be entitled to unemployment pay he would get different tax treatment then when he actually received unemployment pay.
  The Treasury claims, though with not much certainty, that this would add only about £60 million. Therefore, the total amount is probably between £400 million and £500 million. We are talking about £½ billion. It is worth a few anomalies for £½ billion. We could get a heap of civil servants for £½ billion.
  While I appreciate and understand the points that the Treasury has made against my proposals, I do not think they can be the last word. We shall have to return to this, because the alternative to some compromise proposal such as the one I have advanced in the article in The Guardian is that we should tax Social Security benefits in a straightforward way. That would probably mean about £50 million a year being spent on administration, which is not the way I should like to do it. I hope that the Treasury will look again at that compromise proposal.
  It was suggested by one hon. Member that our tax laws were unnecessarily long and complex. It would help to make them less so if we were to have a Committee of the House—which, naturally, all other legislatures in the world have, because they carry out their business so much better than we do—charged with the responsibility, not only when the Finance Bill is before us but throughout the year, of keeping an eye on tax matters. There ought to be a taxation Committee of the House. That would help not only with regard to the language and so on of tax law but on the principles, because there could be an enormous agreement across the Floor of the House, not on the main political points but on the techniques of taxation.
  There could probably be agreement that the tax allowances that we shall always want to have for married men or
  1644
  for dependent relatives ought to be in the form of reductions in the tax that is payable rather than in the form of reductions in the the income that is taxable. That would be a simpler system and, what is more important, a more readily comprehensible system than the one that we have now.
  There would probably also be a fair amount of agreement across the Floor of the House on the relationship that there ought to be between the single man's allowance and the married man's allowance, if we want to have the married man's allowance at all. If there were a Committee such as I suggest, it would want to look into the notion of the hon. Member for Kensington (Sir B. Rhys Williams), who always throws up interesting notions on this kind of thing, of a householder allowance in place of a married man's allowance. We cannot consider these things on the Finance Bill because we are always too busy considering the items that the Government have chosen to include in the Bill.
  There is one specific matter that I want to urge on the Treasury with regard to the mobility allowance. A married woman who receives the mobility allowance is not permitted to count that as earned income, so the married woman's earned income allowance does not allow her to have that mobility allowance tax-free. There is an explicit provision in the legislation that that mobility allowance is not to count against that income.
  I see no justification for that. It is a clear case of doing it only because it has been the practice for social security payments in general not to be allowed to count against a married woman's earned income allowance. Surely we need to make an exception in the case of the mobility allowance. It is not fair to provide that allowance to a married woman—it might be the only income that she has—and then deduct tax at 35 per cent. on the whole of it and not allow her to have the normal personal allowance that we would allow if that mobility allowance was earnings.
  I come next to the question to which the House will have to address itself in the long term, and that is tax relief on mortgages. This is an emotive subject. I never understand why it is so emotive, because the Labour Party has done the principal thing to assist owner-occupation

  1645
  by means of legislation, and that is to introduce the option mortgage scheme.
  That scheme is now of little use, because anybody who can afford to buy a house must be paying tax and, therefore, does not need to use the scheme. There ought to be no dispute across the Chamber about the desirability of people owning their own homes and about the desirability of providing assistance, particularly at the early stages, for them to go into home ownership, but something that only the British House of Commons would do is to provide a subsidy to people who are paying tax at well above the basic rate. We provide a subsidy that can amount to 7 per cent. or 8 per cent. off the interest rate that they pay, at a cost to the revenue of, I think, £110 million. Why should we say to someone who is paying tax at the rate of 60 per cent. that if he borrows at 15 per cent. we shall pay 60 per cent. of the interest that he has to pay? If that proposal had never existed and someone proposed it in the House, from whatever party, he would be laughed out of court. We have only got it because we have inherited it. Right back in 1900 it was treated as income and, therefore, as an allowance.
  With the £110 million which we would save if we restricted tax relief on house loans to the standard rate, we should be able to provide additional assistance for young, first-time borrowers who are not quite able to do it. Once they get into the house market they will be all right and be able to stay in. Yet we use £110 million to provide this grossly excessive subsidy to those who are extremely well off instead of using the money to help others who really need assistance.
  It is generally accepted—although it was not generally accepted five years ago—that a subsidy is a subsidy whether one hands a person a bit of money or whether one reduces the tax that is taken from him where it is related to a specific action. If the tax rate is reduced from 35 per cent. to 33 per cent., that is not a subsidy. It is a subsidy, however, if relief is given on insurance policies. If that is not so, words do not mean anything at all.
  Mr. Julian Amery: I am sure that the hon. Member has done
  1646
  his sums, but on the £110 million about which he has spoken is he satisfied that the beneficiaries of the existing scheme do not contribute that much in taxation and rates to subsidise council house rents?
  Mr. Cunningham: That is a very interesting point. It is the kind of thing that could be looked at in a Committee of the House where one could discuss these things with less of the heat that is usually engendered in the Chamber.
  Subsidies to council house tenants are subsidies because they reduce the cost which otherwise they would have to pay. That is my view, but it is not the view of the rest of the world. The thing that is called a subsidy to the owner-occupier is not a subsidy, but for the reason given by the right hon. Member for Brighton, Pavilion (Mr. Amery). It is not a subsidy for this reason. The only effect of it in most regions where there is a housing shortage is to give an additional push to the house price inflation spiral. It does not allow the so-called beneficiaries to afford a better and bigger house than they would otherwise afford because they can buy only houses that are there. But it does allow them to offer more for a house because the monthly payments are less in relation to the amount they have borrowed because of the tax relief.
  If there is an excess of houses in an area, that situation will not be affected. Then the effect will be to allow a person to take a bigger and better house. But in how many parts of the country is there an excess of houses? That is worth a thought. By spending £1·1 billion, in the sence of forgoing tax, all we are doing is to give an additional push to the house inflation spiral that would not otherwise exist.
  There is no way by which we can reduce and legitimately abolish house loan tax relief except gradually. By "gradually" I mean over 40 or 50 years. If we did anything not only suddenly but quickly we would bust the market and bankrupt God knows how many people. It would be right for Governments across the Floor of the House to agree to move towards the phasing out of that relief, knowing that they would not be doing anything hard to the owner-occupier but were helping them as a body by withdrawing that little bit of extra push to the inflation spiral.

  1647
  Owner-occupiers do not stay in one house all their lives. They move from one house to another. The greater the inflation of house prices, therefore the harder it is for them, because although they pick up more in cash from the house they have sold they have to borrow more for the house they are buying. Therefore, it is in the owner-occupier's interest that there should be a lesser degree of house price inflation rather than a higher degree.
  I say only that this is worth a thought. If we were to address our minds to that question on this basis, we might do more good for owner-occupiers, as well as for the Revenue, than the normal bricks that we chuck back and forth across the Chamber.
  I would not normally come in at the end of a debate in this manner, and I think it is known, although I have addressed myself to the Finance Bill, why I do so. I do so because of a particular item of expenditure in relation to the hospital service touching upon a hospital in my constituency. While it would not be in order to go into that in detail—I have done so previously, so there is no need to do so tonight—it is worth mentioning as an example of how one does not control public expenditure.
  What is wrong with the system now is that the Treasury says to each big Government Department "You have got A, you have got B, and you have got C." In effect, the Treasury also says "We do not much care to know what you spend your total on." "That is your worry", the Treasury says to chief Ministers.
  That is the Plowden system. It is a crazy system because it takes away from the central institutions of the Government the exercise of decisions with regard to priorities between the sub-programmes and the sub-sub-programmes and the major projects. The habit of escaping from the responsibility of taking decisions by allocating blocks of money to different decision-takers and then saying "Now you take the decisions within that block" applies within the hospital service. We say to each region of the hospital service "You have got so much", then the region says to its areas "You have got so much", and then the area says to its districts "You have got so much."
  1648
  What happens in the end when such practices are adopted is that a hospital such as St. Mark's Hospital, in my constituency, which has a national role and an international reputation is told "You have got to close one ward"—it is highly relevant for cancer treatment—because there is another ward also in our district that takes drug addicts and alcoholics from Piccadilly, and it is a choice between the drug addicts of Piccadilly or the cancer ward.
  That is where we end up if we refuse to exercise from the top a discretion down not to that degree of detail but to a far greater degree of detail than the Treasury now exercises.
  Mr. Frank Hooley: I am rather frightened by this thesis. Is my hon. Friend really saying that we want the Treasury to be interfering at every end and turn in matters as widely ranging as energy policy, fuel policy, gas, electricity and nuclear power, as well as St. Mark's Hospital in his constituency? I find that a ghastly proposition.
  Mr. Cunningham: No, I would not want the central institutions—I say "central institutions"—
  Mr. Hooley: It was the Treasury, I understood.
  Mr. Cunningham: With respect, I shall come to that shortly. I do not want the central institutions to be taking decisions about hospital wards. That would not make any sense. However, this habit of deciding that the only way to control public expenditure is to allocate slices of it to different decision-takers is a repetitive habit. Those decision-takers do the same with their underlings, their underlings do the same with their underlings and we end up with the St. Mark's situation, in which something is being denied not because it has not got a higher priority then something else in expenditure but because it has not got a higher priority, it is thought, than the other items within that little district. That is where we end up.
  I do not, however, want the Treasury to be exercising this discretion—I am getting away from hospital wards now—between sub-programmes within the Department of Health and Social Services

  1649
  and sub-programmes within the Department of the Environment on housing, but I want the Cabinet to be doing so. I want the Cabinet to be weighing expenditure on home loss payments against sub-programmes within the Department of Health and Social Security. There is no magic frontier that bounds social security or housing policy. We should not go down to too much detail, but at the moment we have gone to the other extreme. We have separated Government expenditure into a small number of blocks, and that is the denial of the exercise of discretion.
  It is high time that we threw the Plowden Report out of the widow and got back to some degree of exercise which distinguished between major sub-programmes of central institutions. That means having unit equipped to put up cases to the Cabinet or the appropriate Cabinet committee. We have gone too far away from that practice since Plowden.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Ordered,
  That the following provisions, namely—

  (a)Clauses 4, 15 and 21, and

  (b)any new Clause first appearing on the Order Paper not later than Tuesday 3rd May and relating to value added tax, subcontractors in the construction industry, benefits from employment (motor cars) or capital gains tax,

  be committed to a Committee of the whole House:
  That the remainder of the Bill be committed to a Standing Committee:
  That, when the provisions of the Bill considered respectively by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Mr. Coleman.]
  Committee tomorrow.

  WAYS AND MEANS

    VALUE ADDED TAX (No. 2)
    Motion made, and Question proposed,
    That the Resolution of the House of 4th April 1977 (Value added tax) shall have effect as if for the words 'so as to give effect to Community obligations' there were substituted the words' as required by the draft Sixth Council Directive on the harmonisation of the laws of the Member States relating to turnover taxes copies of which were deposited in the Library of the House on 1st April 1977'.—[Mr. Coleman.]
    11.16 p.m.
    Mr. Nigel Spearing: I had hoped that my right hon. Friend the Financial Secretary to the Treasury would speak on this motion, because during his winding-up speech on the Finance Bill I indicated that I hoped and expected that he would do so.
    I apologise to hon. Members who are waiting for the important Rhodesia debate, but we have had a few procedural surprises already tonight and we may have more surprises in financial terms if we reach Rhodesia. It was not until fairly late this evening that I glanced at the second order, under the heading "Ways and Means," which I think most hon. Members would have thought "gobbledegook" if they had read it.
    It took a little time to make inquiries about what the motion contained, but I think it right that I should draw the House's attention to it, particularly since it has not been explained, however briefly, by my right hon. Friend.
    The Financial Secretary to the Treasury (Mr. Robert Sheldon): I realised that my hon. Friend wanted to speak on this. I thought that he wished to ask me one or two questions on the Ways and Means Resolution, purely to help the House. I thought that I had indicated that in my closing remarks in the Finance Bill Second Reading debate. If he wished me to rise and explain it, I should have been happy to do so. I thought that my hon. Friend only wanted to put a few questions to me.
    Mr. Spearing: I do not think it is as simple as that to some of my hon. Friends. I think it wrong that the House should take almost "on the nod" a

    1651
    motion that it does not understand. Perhaps the interpretation that I have managed to glean is incorrect. If it is. I hope that my right hon. Friend will say so.
    In effect, we are asked to substitute a new form of words for the Budget Resolution passed on 31st March. We are asked to delete the words "Community obligations" passed by the House by Resolution No. 14 on 4th April and substitute the words
    "as required by the draft Sixth Council Directive on the harmonisation of the laws of the Member States relating to turnover taxes, copies of which were deposited in the Library of the House on 1st April 1977."
    We are being asked to substitute a general obligation, which was recognised by the House, for something particular, namely, the Sixth Council Directive, to which my right hon. Friend the Financial Secretary referred. My right hon. Friend may be able to point out that there is nothing in the Sixth Council Directive that was not always known to the public and to her Members. Even if that were so, it is a matter of fundamental importance to the House that the Government should now seek to substitute a particular financial obligation for a resolution which was written in general terms and which was passed after the Budget. This matter is worth at least a short debate, since political power in the modern world is the power to tax.
    What is the Sixth Directive? My right hon. Friend spoke of it as though it were the evening paper, as though it were something that everyone knew of. That directive is R /715/77, but that fact is not stated on the Order Paper. It relates to the harmonisation of VAT throughout the Community. This 95-page document is highly complex and it seeks to insert into the Finance Bill certain obligations.
    The Budget Resolution to which it relates appeared in Hansard, under the heading "14. Value added tax", as follows:
    "That the enactments relating to value added tax may be amended so as to give effect to Community obligations, and that charges to that tax may be imposed by other amendments not affecting the rates at which the tax is chargeable or the treatment, for purposes of the tax, of goods or services of any specified description."—[Official Report, 4th April 1977; Vol. 929, c. 1013.]
    1652
    Perhaps the rates of tax cannot be changed. If this is a question of harmonising the articles upon which the tax can be charged it may be possible to change the tax on a particular article.
    Mr. Robert Sheldon indicated dissent.
    Mr. Spearing: My right hon. Friend has indicated that that is not the case. Even if that is so, however, it may be that on the occasion of some future Budget a resolution similar to the one I have read out could be passed very quickly in the wake of a heavy vote and could go unnoticed. Such a resolution could go undehated, and we could find in Committee on the Finance Bill that there was an obligation to tax which was not even debated or known of by the House.
    The document in question was not available in the House on 31st March but was placed in the Library on 1st April. Was it referred to the Scrutiny Committee? If not, why not? Is financial legislation in this case, as in other cases, treated differently? If it is, is there not a case for a proper scrutiny procedure for such matters?
    The other curious factor is that there are no copies of the document in the Vote Office. It was not until the Order Paper was printed this morning that anyone could know that it was in the Library. It appears that we have uncovered yet another pipeline of EEC obligations to be imposed on the House and the nation. I am not saying that the effects of the document are hypertoxic. We shall hear from my right hon. Friend on that score. It is stated in the document—and this is an obligation—that
    "Whereas account should be taken of the objective of abolishing the imposition of tax on the importation and the remission of tax on exportation in trade between Member States, and whereas it should be ensured that the common system of turnover taxes is nondiscriminatory as regards the origin of goods and services, so that a common market permitting fair competition and resembling a real internal market may ultimately be achieved".
    That is not surprising if one knows about the Common Market.
    If there is nothing toxic in this pipe, that does not mean that there will be nothing toxic in a future pipeline. There may be something toxic. When there are 80 pages to consider in two hours, I defy any Treasury Minister to know for certain.

    1653
    The Budget Resolution was passed by the House, although it was unknown by the House at the time. We now have requirements the direct purposes of which were not known until this debate. Even so, the words on the Order Paper do not give a clue about the matter. The document we have tonight was not printed in italics at the time of the Budget. That is another reason for supposing that this is not as clear and as open as we would want matters to be in the House.
    Recently we have been discussing the powers of the House, not in relation to the Monarchy or another place but in relation to an unelected assembly and other institutions. It may be that this directive is not noxious, but the route is there and it has been uncovered. It should be advertised that it is there and can be used for future requirements. It is an underground route which has been heavily camouflaged until now. It was uncovered to a certain extent on Monday night, when we discussed the European Communities (Definition of Treaties) Order, and tonight we have uncovered a hidden channel whereby the powers of self-determination of the House are being eroded.
    The obligations that we are being asked to undertake are not clear, and the House will not be aware of what it is doing. I submit that the procedures of the House are very good in respect of our own domestic Executive but very much failing in respect of the Executive over the water that some of us never wished to see but to which this House now has some obligation.
    11.28 p.m.
    Mr. J. Enoch Powell: I believe that it was wholly right that the hon. Member for Newham, South (Mr. Spearing) should ensure that the House did not pass the Ways and Means Resolution "on the nod". It has long been the custom—but a custom that is diminishing in intensity—of those who still audibly advocate our membership of the EEC to treat with levity the proposition that this country and its people are now taxed by an external authority outside the control of this House.
    Here it is—on the Order Paper. And it is on the Order Paper in a particularly perceptible form, even more perceptible
    1654
    than the form of the resolution that we passed on 4th April. It may well be that the form of the resolution on 4th April was very general. The House simply gave the Government the power to write into the Finance Bill whatever was required under the heading of value added tax to give effect to our Community obligations. Then the Government discovered, or have discovered since 4th April, that there are not any relevant Community obligations as yet. We are still awaiting the pleasure and decision of our masters.
    Therefore, we are now to pass an extraordinary Ways and Means Resolution that will authorise clauses in the Finance Bill which are not yet required by our Community obligations but which we anticipate will be so required. Therefore, we include in the definition of the Ways and Means Resolution a reference to a draft directive—a directive that does not yet have the force of Community law. I do not think that we could be more drastically reminded of the fact that in this respect already our taxation is an automatic rubber-stamping of taxation enacted by the European Economic Community.
    Both these forms—both the very general form of the resolution of 4th April and the form now before us—give the House no information as to the nature of the licence or the outlines which the Ways and Means Resolution is drawing for clauses of the Finance Bill. You will recall, Mr. Deputy Speaker, particularly as Chairman of Ways and Means, that the House has been very jealous of the form of Ways and Means Resolutions. Many battles have been hard fought to restrict the right of the Government either to limit subsequent debate or to render subsequent debate unduly wide by the manner in which a resolution was drawn. But here is a Ways and Means Resolution—here was and is a Ways and Means Resolution—over which the House can have no influence, because of the power which we have surrendered, and we have surrendered it in the peculiarly sensitive area of taxation.
    I think that the Financial Secretary said in the previous debate that if we had had time to get to our Hansards our eyes would have lighted upon a Written Answer—I dare not suggest to a "planted" Question—which would give

    1655
    us some particulars as to what lies behind this Ways and Means Resolution. But what I am sure the right hon. Gentleman will not say is that it is satisfactory for this House, as part of its budgetary procedure, to learn in a Written Answer on the day on which it is presented with the Ways and Means Resolution what lies behind that resolution.
    The Financial Secretary has assured the House—I am sure correctly—that in this instance he is not finding himself obliged in the Finance Bill and in any amendments to the Bill to propose changes of the law which he would not voluntarily have proposed in any case. I understood him to say that, and I understood him also to say—I am sure that this is so—that at present the Community directives do not trench upon such vital matters as rates and the ambit of the value added tax. But there is nothing in the powers which we have surrendered which makes that limitation. It is a temporary, almost fortuitous, limitation. Therefore, in passing his Ways and Means Resolution tonight we are holding up the mirror to the real surrender of power over taxation which is implicit in our membership of the European Economic Community.
    This is not an academic matter of detail, though I am sure that the House is indebted for the careful research which, in the short space of time available, the hon. Member for Newham, South was able to give to the matter and to place upon the record of the House, which is where it should be. It is a matter of principle and a reminder in principle that we have surrendered the power over taxation from this House to an external body which already has the ability to impose taxation upon the people of this realm, with which it is impossible for this House to interfere.
    I believe that it would have been wrong if this Ways and Means Resolution had been passed without some such observations being made.
    11.34 p.m.
    Mr. Ronald Bell: I should like also to refer to the extraordinary form of the Ways and Means Resolution. What puzzles and disturbs me is that it relates to the draft directive
    "copies of which were deposited in the Library of the House"
    1656
    and makes this the definition of the ambit of the resolution.
    Of course, all these things start as drafts whether they later become regulations or directives. Certainly the Scrutiny Committee, of which I am a member, scrutinises 20 to 40 drafts each week. Those drafts often change considerably before they are approved by the Council of Ministers and become directives or regulations. What will happen if the draft Sixth Directive, a copy of which has been deposited in the Library and is the basis of this resolution, is changed before it becomes a directive? One cannot then refer to a copy of this changed directive that will subsequently have been deposited in the Library because the Ways and Means legislation refers to the copy of the draft directive that has already been deposited in the Library. That seems an odd situation. Perhaps the Financial Secretary will explain what will happen.
    Will there then be a new financial resolution amending this and referring to the new draft that has been deposited in the Library? To go by reference to working papers deposited in the Library seems to be an undesirable way of operating.
    I remember that on a previous occasion in relation to our own delegated legislation the House was ill content with a Statutory Instrument which proceeded by reference to the latest edition of the British Pharmacopoeia—whatever that might be. Certainly the Statutory Instruments Committee—and I believe that my memory is correct—took the view that that was not a satisfactory way of legislating by providing by law for subsequent editions of a non-parliamentary document. That seems to be almost what the financial resolution proposes to do.
    I realise that a financial resolution is not the Finance Bill and is merely the constitutional groundwork for the Finance Bill, but it would nevertheless have to be amended if there was a change between the draft and the definitive legislation.
    Mr. Spearing: The hon. Gentleman has uncovered an important point that I omitted to mention. Is it not that the resolution refers to the document deposited on 1st April, so the Finance Bill can refer only to the provision in the draft document of the number and sub-number—whatever it is—of 1st April. If that

    1657
    were changed before it was finally approved by the Council of Ministers, constitutionally and procedurally it would be impossible without another resolution coming forward—if that is technically possible—for it to be put in the Finance Bill. That is another complication of the EEC.
    Mr. Bell: I am grateful. I could not have expressed myself clearly, but that is the point I hoped I was making.
    Mr. George Cunningham: Is that not the value of the resolution? As the resolution was originally drafted it would have been unclear, but at least it would have provided for a change in the situation also to be covered by the resolution passed on 4th April. Indeed, the resolution states that only the situation in the document in the Library will be covered.
    Mr. Bell: The difficulty is that the Ways and Means Resolution, perhaps of necessity, proceeds by reference to a document in the Library. If that were the definitive draft, that would be that. I do not know what one could do if the EEC passed an amending directive. I suppose that one would have to come back to the House. The difficulty is that at the time of the presentation of the Finance Bill the actual directive is not available; only the draft is available and that can be changed. The Ways and Means Resolution must be passed today. Therefore, the House is put in this extraordinary position.
    I imagine that we shall have a lot of this in future. It illustrates the general point made by the right hon. Member for Down, South (Mr. Powell) and the hon. Member for Newham, South (Mr. Spearing). I do not know whether the Financial Secretary can offer any consolation or whether he wishes to do so, but I fear that this is a portent of things to come. We shall have this system in ever-increasing degree and with increasing complexity and variety.
    11.40 p.m.
    The Financial Secretary to the Treasury (Mr. Robert Sheldon): The earlier draft was considered by the Scrutiny Committee and was debated on the House. We are now dealing with a change in the Ways and Means Resolution No. 14 which was
    1658
    taken at the end of the Budget debate, a change which has arisen as a result of the Danish Government's reservations on their agreement to the directive.
    Resolution No. 14 dealt with a Community obligation on the assumption that by the time we discussed Clause 13 and Schedule 6 it would be a Community obligation. However, as yet it remains a proposed Community obligation. I felt that, rather than put it in that form, I would provide the basic text to the House and talk about the draft directive so that all hon. Members could see what we were debating.
    This is a matter on which Clause 13 and Schedule 6 will be dependent. The hon. and learned Member for Beaconsfield (Mr. Bell) asked whether the draft directive would be changed. The answer is "No". It is the draft embodied in Clause 13 and Schedule 6 that will be debated in Committee on the Finance Bill. That makes clear what the document is.
    I dealt with it in my speech on the Budget, but among its more important aspects is the fact that it does not affect the practical working of the everyday matters of VAT for the vast majority of traders. These are essentially technical and minor matters that are consequential upon harmonisation.
    There were two or three critical points with which we were concerned. We have obtained considerable concessions for the VAT system practised in this country.
    Mr. Ronald Bell: The Ways and Means Resolution, as amended, says:
    "as required by the draft Sixth Council Directive".
    That directive should, therefore, be changed before we reach the clauses in question, because they may not implement what is required by the Sixth Directive. What would the Financial Secretary do then?
    Mr. Sheldon: It is not for me to complain about hon. Members being suspicious. I have often had suspicions in the past, but we are talking about a draft directive copies of which were put in the Library of the House on 1st April. There is clearly only one such draft directime. The hon. and learned Gentleman can be assured of that.
    Question put and agreed to.
    Resolved,
    That the Resolution of the House of 4th April 1977 (Value added tax) shall have effect as if for the words 'so as to give effect to Community obligations' there were substituted the words as required by the draft Sixth Council Directive on the harmonisation of the laws of the Member States relating to turnover taxes copies of which were deposited in the Library of the House on 1st April 1977'.

  SOUTHERN RHODESIA
  11.45 p.m.
  The Minister of State, Foreign and Commonwealth Office (Mr. Edward Rowlands): I beg to move.
  That the Southern Rhodesia (United Nations Sanctions) Order 1977 (S.1., 1977, No. 591), a copy of which was laid before this House on 5th April, be approved.
  The Order provides for the implementation of parts of Security Council Resolution 388, which was passed last year and which we co-sponsored. The principal objective of that resolution was to remove the benefits of insurance cover, to the extent that it was being provided by member States, from all commercial and industrial property in Southern Rhodesia and from all goods and produce in transit to and from Southern Rhodesia.
  Since the passing of the resolution discussions have been held with the two principal insurance organisations in this country, the Corporation of Lloyds and the British Insurance Association. I am pleased to be able to inform the House that both these associations willingly agreed to implement voluntarily the relevant sections of the United Nations resolution, and these have been operative for some time.
  What we are left with in the order is the provision to make effective the remaining operative clauses of the United Nations resolution and to bring our domestic legislation into line with our international obligations. The clauses are aimed at clearing up any anomalies that may exist in the areas of trade marks and registered designs.
  If I may explain a little more the nature of this part of the order, a trade name is a name by which a design is known and which may be used to confer on the products of that design the hallmark
  1660
  of distinction. Over time these names acquire considerable commercial value. Other enterprises become interested in negotiating the rights to use them and very considerable sums are paid for these rights. A trade mark has similar properties.
  Few believe that British companies are about to start licensing their trade marks to enterprises in Rhodesia at this time. Nevertheless, it has been possible to do so under the existing sanctions order. It would not have been possible under exchange control regulations for payments for their use to have been transferred, yet there might be companies that would have been prepared to see the payments accumulate in Rhodesia against the day of a settlement. Such a procedure would, after all, not cost the owner of the trade name anything.
  A trade design can refer, for example, to a textile fabric or a piece of machinery that has been produced and registered by a particular manufacturer. This is a field of considerably more importance to the illegal regime. The increasing effectiveness of sanctions is forcing it to manufacture a growing proportion of its requirements, and in order to do so it has to try to buy the necessary know-how. Again, this kind of transaction was not covered by existing legislation and the same considerations and did not come under sanctions. However, the same considerations apply under the terms of the exchange control. It is right that we should close these loopholes. We expect other countries that have not yet done so to take whatever action may be appropriate in this regard.
  Mr. Peter Rees: I did not quite follow the Minister's argument about know-how, which is only in connection with the sale or distribution of goods and has nothing to do with manufacturing. Will he touch on that in greater detail?
  Mr. Rowlands: Matters such as trade designs are a very important part of the transfer of know-how. An intrinsic part of the establishment of companies and the use of trade names and trade designs is the passing on of know-how. It is the development of that know-how that is used, for example, in the manufacturing of fabrics or the manufacturing of textile machines. If the hon. and learned

  1661
  Gentleman considers the matter closely I think that he will recognise that it is a reasonable point.
  The order is not retrospective and is completely comprehensive. Nor does it do anything about trade names already in use in Rhodesia. There is no way that we can enforce compliance in Rhodesia and it would be unfair and unavailing to proceed against the British owners of the name for agreements made, many perhaps before UDI, prior to this order. The same considerations apply to the unauthorised use by a Rhodesian firm of a trade mark.
  As to the general question of tightening of sanctions at a time when renewed efforts are being made to reach a settlement, the order is completely in line with our overall approach to sanctions, which emerged in the debate last October when the main sanctions order was renewed. Indeed, it has remained consistent throughout. It is that we favour the speedy lifting of sanctions if and when a satisfactory settlement is reached and Rhodesia is irrevocably on the path to majority rule.
  I can assure the House that once we get to that stage we can and will lift sanctions speedily. Until that time, we believe that the full rigour of our sanctions policy must be maintained. That has been the basis upon which Governments of both parties have approached negotiations concerning Rhodesia. Any weakening would, I am sure, be harmful to our efforts. Indeed it has never been the policy of either party to weaken on sanctions during the search for and before a settlement has been achieved.
  11.51 p.m.
  Mr. Julian Amery: The order is not of itself a great thing. Its impact will be limited and it will be evaded or avoided by the Rhodesians, On the substance of the matter, therefore, I do not wish to waste the time of the House.
  There is an issue of principle involved with which, perhaps, I ought to deal. When we debated the matter in October last year—and here I hope that the Minister will allow me to correct what he said in his closing remarks—there was great uncertainty, certainly on the Conservative
  1662
  side of the House, about the line we should take.
  Dr. Kissinger, with the full support of the British Government, had reached an agreement with Mr. Smith on the basis and terms on which an interim Government might be set up. Mr. Smith was assured that, if this could be achieved, sanctions would be lifted and terrorism stopped. Of course, it was never within the power of the British or American Governments to stop terrorism, but it was within their power to stop sanctions. On this issue some of us on the Opposition side took one view and some took another.
  Mr. Frank Hooley rose—
  Mr. Amery: I have not yet said anything controversial. I will give way to the hon. Gentleman later. I am merely retailing the background.
  Some of us, myself included, took the view that we wanted an assurance from the Government that if the Geneva conference, on which the Government were then embarking, were to fail through no fault of Mr. Smith, sanctions would be dropped. Some of my hon. Friends and I voted to that effect. The official position of my party, as put forward by my right hon. Friend the Member for Chipping Barnet (Mr. Maudling), was that if the conference should fail through no fault of Mr. Smith, it would be the duty of our party to move the repeal of sanctions.
  I have consulted my right hon. Friend the Member for Chipping Barnet, who is no longer on the Opposition Front Bench. He takes the view that the conference at Geneva failed through no fault of Mr. Smith. It failed because of the refusal of the African leaders to accept the Kissinger proposals as a basis for discussion. In accordance with the logic of the position we then took, my right hon. and hon. Friends should be opposing tonight what is in effect a tightening of the screw, an extension of sanctions.
  It has been the view of many in this House that if no interim Government were formed on the Kissinger basis, sanctions should be withdrawn. No interim Government on the Kissinger basis has been formed. There is now a new basis. The question arises whether it is appropriate that sanctions should be continued

  1663
  at all and therefore, whether it is sensible to tighten the screw at this stage. Personally, I think it is wrong. The Geneva Conference failed for reasons we all know—because of the refusal of the nationalist leaders to accept the Kissinger agreement as a basis for discussion. They may be right or wrong. But it was on the basis of the Kissinger proposals that the Opposition Front Bench allowed sanctions through last time.
  My view is that the stage has now been reached at which we should say "No. No more", because if we continue sanctions at this time, a time when there is mounting terrorist aggression against Rhodesia, we are clearly becoming accomplices in the murder of security forces, black and white, and of civilians, nuns, missionaries and the like. I know that the Foreign Secretary has talked about freedom fighters being men of peace at heart, but I am not so sure about that. I rather doubt whether it is wise to dignify them with that title at present.
  We on this side of the House are determined not to be associated in any way with them; yet, by allowing any increase of sanctions to go through, we should be associating ourselves with them and would be accomplices in this development. What the Opposition Front Bench will do I do not know. There are many who say that on Rhodesian affairs my right hon. Friends are so wet one could shoot snipe over them. I do not wish to take that view. I do not believe that they wish to be linked with the murder of missionaries and nuns and the authorities trying to maintain the existence of Rhodesia.
  This is not the time—the Foreign Secretary has just come back from an interesting journey—to go forward with some more pin pricks against Mr Smith and his colleagues. This is a time when we want a fairly generous approach. The Government have been too generous to African nationalists. It is surely a time to pay a little attention to the people who have maintained law and order and even relatively civilised standards in Rhodesia.
  This order is not a contribution to reaching the peaceful settlement that the Foreign Secretary seeks. Therefore I and any of my hon. Friends who may care to join me will oppose it.
  11.58 p.m.
  Mr. J. W. Rooker: I do not wish to detain the House long. I shall be blunt and say that I am as much in favour of law and order as is the right hon. Gentleman, but I should like to see it more widely spread.
  I shall stick to the point of the order. In introducing it my hon. Friend the Minister of State used the expression "know-how" as being part of the services that could be covered. That has a great deal of relevance. It is now 11·59 and for the rest of the world it will shortly be Friday 29th April, although I accept that for our business it is still 28th April.
  In the issue of the Accountants Weekly, which will be published on 29th April, a copy of which I have here, there is an article to which I wish to draw the Minister's attention. It concerns sanctions-busting, the very matter covered by the order. It is merely coincidental that the two have come up at the same time.
  The article refers to the firm of Price Waterhouse, which is to send staff in a few weeks to Rhodesia to the firm of Price Waterhouse-Rhodesia to use their know-how in making sure that the services provided by that company in Rhodesia are maintained. Other firms of accountants—five of the "Big Eight", I understand—have offices in Rhodesia under the same names. I accept that they are independent companies, but Price Waterhouse has said that it has a duty to its clients and to Price Waterhouse International. That is where its duty lies, and that is why it must maintain services and offices in Rhodesia. To its credit, the firm of Peat Marwick Mitchell has said that it would not send people to Rhodesia because that would be sanctions-busting.
  I understand that the Foreign Office was tipped off about this matter a few days ago. I hope that my hon. Friend the Minister will at least give notice that the Foreign Office will look at the matter and, if necessary, use the powers which it has to prevent this form of sanctions-busting, because it is exactly a form of activity covered by the order. It is the use of a trade name—accountants have little else apart from the name of their company—and it is the provision of services and know-how to an illegal régime and to companies which are clearly not independent in Rhodesia. Otherwise, Price

  1665
  Waterhouse would not be sending people out to Rhodesia because of what it regards as its duty to Price Waterhouse International.
  I regard this as disgraceful. It is contrary to the spirit of sanctions anyway, as Peat Marwick Mitchell has said, and it is certainly contrary to the provisions of this Statutory Instrument, which, I hope, will shortly be passed.
  12.1 a.m.
  Mr. Christopher Brocklebank-Fowler (Norfolk, North-West): I am sure that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) will forgive me if I do not follow him into the intricacies of the affairs of Price Waterhouse. I wish to raise again the general principle which lies behind this sanctions order.
  The House has on many occasions reminded itself that the purpose of sanctions is to apply some pressure to the illegal regime in Rhodesia to encourage it to bring about a peaceful transfer of power. That pressure on its own has been unsuccessful in securing any substantial movement by the illegal regime towards a settlement. Indeed—the Minister referred to this—the effect of sanctions on commercial activity inside Rhodesia has been to improve it, because, so great has been the diversification of industry within Rhodesia, that it stands poised, after independence, to expand very rapidly and to become one of the most effective economies in Southern Aferica.
  The other factors which have brought the illegal regime to recognise the need for a peaceful settlement have been a combination of sanctions, of armed threats and, more recently, particularly through Dr. Kissinger, the intensive political and diplomatic activity leading eventually to the establishment of the Geneva conference.
  What concerns me, and, I think, ought to concern the House, is that the Government are beginning to look as though they are concerned to bring pressure only one way. The truth is that the two parties to any agreement in Rhodesia have both to be pushed towards making a peaceful settlement. It applies to both. It is not enough simply to put pressure on the minority group and say that we shall push them all the way.
  1666
  The other group needing to be pushed are the Africans. Over the past few years I have several times in the House asserted that no settlement will be possible until the Africans have sorted out their leadership, until they have decided among themselves who will lead them in any negotiations with the illegal régime, with the United Kingdom, or whoever it may be.
  In my view it was the disunity among the Africans at Geneva which played the largest single part in bringing about the failure of that conference, because Mr. Smith had taken the great leap forward—it was a great leap and let us give him credit for it—of accepting for the first time the principle of majority rule. He maintains that his maintenance of the principle exists today, but, of course, the disunity of the Africans at Geneva gave him the excuse to back away, because he could not find a body of corporate African opinion with which he could conclude the kind of arrangement which he felt would provide a lasting and stable solution for the future in Rhodesia.
  One must not underestimate the rectitude of his judgment in making that decision. I invite the House to consider the fact that there are five African political parties which are concerned with gaining power in an independent Zimbabwe. There is the ANC, ZANU, ZAPU and more recently, the Patriotic Front and ZIPA. The ANC, ZANU and ZAPU all exist inside Rhodesia and the majority of their membership is within Rhodesia. The two latter parties, the Patriotic Front and ZIPA, are representative of external forces which are not active within Rhodesia.
  The Government have made a great mistake by under-estimating the feeling inside Rhodesia, because in their negotiations with the front-line Presidents the Government have been giving too much attention to what ZIPA and the Patriotic Front feel about things and far too little concern to what is thought by the members of the African parties inside Rhodesia. I believe that that is the kernal of the Government's dilemma.
  From these Benches a few days ago I welcomed the Secretary of State's mission to Rhodesia. I was glad that it took place and I am still glad. I hoped, as did my right hon. Friend the Member for Knutsford (Mr. Davies), that it would be

  1667
  successful. Personally, as I think my right hon. Friend did, I had some reservations about that. The reason for my reservations was that I do not see how an agreement can be concluded between two sides so long as one side cannot make up its mind about who is in charge and what is the party line. That remains the position among the Africans in Rhodesia today.
  In addition, in considering any transfer of power the Government have to consider not only the white population but the other minority groups in Rhodesia, notably the coloureds and the Asians, who are not represented by any political party which has been involved in any of the formal negotiations to date.
  That is a mistake, because Asians and coloureds, as well as the whites, no less than the African majority, are citizens of Rhodesia and will hope to become and remain citizens of an independent Zimbabwe. The means has to be found by the Government to involve all these groups in consultations.
  After the Foreign Secretary's statement to the House a fortnight ago he suggested that the prospect of an interim Government was still one that was in his mind, that he had not ruled out the possibility of some form of interim Government. But he said that for various reasons, in case the requirement for trust was lost, he would prefer to take the route of a jointly sponsored conference, which he described in some detail in his statement.
  Since that time the right hon. Gentleman's proposition has been accepted with some reluctance among the African leaders. Many of them obviously feel that that kind of conference will not give them the opportunity of making their stake for power in the way that they want. I conclude that that kind of opposition, which is really a manifestation of the various ambitions of the leaders of the various African groups within Rhodesia, will continue to be the major obstacle to any settlement.
  I believe that the time has come for the Government to take the bull by the horns and recognise that no further progress will be possible until the problem of the leadership and composition of the African negotiating team has been decided by some kind of reference to the people of Rhodesia. I urge the Foreign Secretary to consider again the possibility of
  1668
  taking the path of an interim Government, of deciding the leadership of the African part and the number of participants by some form of proportional representation, and of ensuring that all the arguments among the leaders about their role in a future Zimbabwe are buried at least for the time being, until there is a General Election following a constitutional conference, so that there can be genuine negotiations between a cohesive group of Africans on the one hand, and a cohesive group of other inhabitants of Rhodesia on the other.
  I believe that to bring that about it is necessary for the Government, as a matter of urgency, first, to establish some form of British representation in Rhodesia; secondly, to begin making preparations for some reference to the people of the kind that I have outlined; thirdly, for discussions to take place so that any plebiscite or referendum can be supervised by a British or Commonwealth security mission; fourthly, that rights of access and egress for all potential parties or leaders are possible for this reference.
  Those are the practical next steps that the Government have to take, and it does not matter—returning for a moment to the subject of the debate—how much more we tighten up sanctions, how much more pressure is put on the white minority in this way. Unless the Government take positive steps to unite the Africans under a sensible leadership, we shall make no progress.
  12.13 a.m.
  Mr. Michael Stewart: There is a great deal in what was said by the hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler) about disunity among the African leaders and the influence that that has had on finding a solution to the problem, but it does not follow in the least from what the hon. Gentleman said that we ought not to approve the order. Indeed, the exact opposite follows, because if Britain, by whatever route, is to have any influence in getting a solution to this problem two conditions must be fulfilled.
  First, Africans in general, both in Rhodesia and in the neighbouring States, must have confidence in the good faith of Great Britain. I ask the hon. Gentleman and the House to consider what would be the effect on African opinion if we were

  1669
  to decide at this moment to loosen up sanctions. I think that that would be—[Interruption.] That was the intention of the argument. The right hon. Member for Brighton Pavilion (Mr. Amery) wanted that. If Tory Members do not like the phrase "loosen up sanctions", let me substitute "refrain from taking a step which is a logical continuation of the sanctions policy".
  Dr. Alan Glyn: It is not a question of tightening or loosening. What we are doing is putting into effect certain regulations, the result of which will be to tighten sanctions at a time when we wish to negotiate.
  Mr. Stewart: The point I am making, which the hon. Gentleman does not seem to appreciate, is that if we are to negotiate, if we are to have any influence, at all, one of the things that we have to secure is the confidence of Africans, both in Rhodesia and in the neighbouring States. The failure to tighten sanctions in the manner proposed by the order would inevitably be taken by them as a belief that we were soft on the object of trying to get Mr. Smith to agree to majority rule.
  Mr. Peter Rees rose—
  Mr. Brocklebank-Fowler rose—
  Mr. Stewart: It will be better if I continue my speech rather than have three or four Members speaking simultaneously. Opposition Members will have their opportunity to take part in the debate. I listened patiently to the two previous speeches. If at this stage we were not to pass the order, I do not think there is any doubt about how that would be interpreted by Africans in Rhodesia and in the neighbouring States. That is one reason.
  The other thing that is necessary if any solution is to be reached is that Mr. Smith himself should realise that the British Government are not wavering in their determination to reach majority rule and bring the present illegal regime in Rhodesia—because that is what it is—to an end. If we were not to pass the order at this stage, it would be interpreted by Mr. Smith and his colleagues
  1670
  as the first sign that Britain was seeking to wash its hands of its responsibility.
  Mr. Victor Goodhew: Does the right hon. Gentleman know why the order must be passed now? It will only be an irritant and make it more difficult for his right hon. Friend the Foreign Secretary to come to an agreement. I understand that a resolution was passed a year ago. Why are we being asked to approve the order now when it will cause the maximum possible damage?
  Mr. Stewart: Failure to pass the order would do the maximum possible damage.
  Mr. Goodhew: Nonsense.
  Mr. Stewart: If the hon. Member does not agree, he can make a speech later. Failure to pass the order would do the maximum possible damage, partly because it would lose us such confidence as we have among African leaders. It would also give encouragement to Mr. Smith to think that we were seeking to wash our hands of our responsibility.
  One reason why the illegal regime in Rhodesia has continued is the hope that if it continues long enough Britain will throw in the sponge.
  Mr. Anthony Fell: Will the right hon. Gentleman give way?
  Mr. Stewart: I am not prepared to give way.
  One reason why the illegal régime has hung on is the hope that the condoning voices that are sometimes heard from the Opposition will succeed in the end. We should not do anything to encourage Mr. Smith in that view.
  The right hon. Member for Brighton, Pavilion used the word "terrorist". If a terrorist is someone who tries to obtain his political objectives by the use of illegal force, the chief terrorist in Rhodesia is Mr. Smith. There is no doubt that he is maintaining an illegal régime. The problem would end if Mr. Smith returned to his allegiance.
  Many Opposition hon. Members have been prepared to take the illegal régime for granted and assume that it has legality. They talk about concessions to Mr. Smith. We are making a concession by negotiating with him at all. We should try to reach an agreement. At the point,

  1671
  however, when there is at least a chance of reaching a solution, it would be a major error for the House to do anything that would destroy our good faith with the Africans and encourage anyone in Rhodesia to continue the rebellion and repression.
  12.19 a.m.
  Mr. Ronald Bell: It never fails to astonish me how Labour Members show such tremendous sentiment about Imperial allegiance when they are dealing with Mr. Smith. I have never noticed it in any other context of our overseas activities. I am delighted by this sensitivity towards anyone who may rebel against the Crown, if the Crown means the right hon. Member for Huyton (Sir H. Wilson). It is only a great pity that there has not been the same sentiment throughout the period of colonial dismemberment that we have lived through in the last two decades.
  The hon. Member for Birmingham, Perry Barr (Mr. Rooker) quite misunderstood the effect of the order. It has nothing at all to do with know-how. I excuse the hon. Member. What appals me is that the Minister in charge of the order could have this extraordinary misunderstanding. It has nothing to do with that at all. It is quite typical of the present Foreign Office team that we should have a Minister introducing an order that he does not understand.
  The order is all about distribution, franchises and trade marks. That is clear from the wording. If one had the remotest doubt about it, one could look at the debate in the United Nations committee when the order was agreed upon. For example, one could look at the speech of the British representative, who made it clear that it was about insurance, trade names and franchises in connection with the sale and distribution of commodities and services. It has nothing to do with know-how and technical knowledge. It is about distribution.
  The order is not, therefore, as my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) correctly said, of immense importance, because someone else will do the insurance. We shall lose the insurance and someone else will take it on. They will manage very nicely about the trade names. I do not know what we shall do if they use the trade
  1672
  names without the consent of anyone in the United Kingdom. They will be able simply to use them and not pay for them. They will get the benefit and no one will be able to do anything about it. It is, therefore, a very foolish order.
  There are a number of matters that concern me. I shall list them quickly. First of all, there is what my right hon. Friend the Member for Brighton, Pavilion said had certainly been made clear on the Opposition side of the House. That is that if the Geneva Conference broke down without fault on the part of Mr. Smith we would think that sanctions were quite wrongly continued. That was our position, officially made and endorsed unquestionably on the Opposition Back Benches.
  I realise the embarrassments that constantly attend initiative on these matters and I can quite understand that my right hon. and hon. Friends who now control the direction of the Conservative Party in these matters may feel that this is an inauspicious moment. I shall not say any more about that, except to comment that over the last 11 years when sanctions have been renewed annually I have heard it said 11 times that the moment was inauspicious for the discontinuance of sanctions.
  The argument then generally brought up—it may not be brought up tonight, of course—was that the sanctions had been going on for so long that removing them was acquiring a greater significance as each year passed. People shrank from the appalling significance of removing an operation that had been going for seven, eight, nine, ten or eleven years. That is an argument that can last for ever and get stronger.
  Speaking for myself, I should think that the earliest possible moment is the right moment for getting rid of sanctions, which have been a mistake from the begining and are now not merely a mistake but an apostasy. Our chief concern should be the British people. I am not saying that we should not have any regard for anyone else, but I believe that the reason why my constituents sent me here was to look after the British, whether in this country, Rhodesia, Australia or anywhere else. We are here to look after the British people, and we are not looking after the British people when we impose

  1673
  sanctions on them. Therefore, I describe this as an apostasy.
  The second matter is that the Minister said that the Government's idea was to remove these sanctions when we, or someone, had established majority rule or the course was irrevocably set up it. In that case, however, sanctions will never be removed. There will not be majority rule in Rhodesia. Will the Minister be coming to the Dispatch Box and proposing sanctions against Zambia, Malawi, Tanzania and Mozambique, in all of which countries there is no majority rule? There is minority rule by oligarchy in every case, with an explicit oligarchy in many cases. Even in the case of Zambia, where there was an implicit oligarchy until 10 months ago, when it made the necessary legislation to make it explicit I did not hear a rumble from the Labour side of the House. We know that those countries are either tyrannies or oligarchies, every one of them. There is a question mark about Botswana, but otherwise there is no majority rule anywhere in Southern Africa. So why impose sanctions against Rhodesia?
  If there is this dedication to majority rule, why do not the Government make real fools of themselves? If they are going to make fools of themselves with sanctions, why not do the job properly and make real fools of themselves and have sanctions against the whole continent? Why not have sanctions against the major part of the world? There is not much majority rule in the world. Once one gets away from the Anglo-Saxon countries, the Scandinavians and Western Europe, one has the lot. If sanctions are to continue for some inexplicable reason until there is majority rule in Rhodesia, I do not see how sanctions will ever come off.
  We have this extraordinary resolution passed by the United Nations on 6th April 1976. I have extracts of what was said by the British representative. It was the usual silly, mean and spiteful stuff about minority and illegal régimes. I disapprove of it intensely.
  I understood the right hon. Member for Fulham (Mr. Stewart) to ask what other Africans and those in the neighbouring States would think of us if we did not
  1674
  pass the order. My answer is that they would think the same of us as they have done for the last 12 months, if they have directed their minds to the subject at all. The right hon. Member for Fulham and other Labour Members have odd ideas about Africans and the States around Rhodesia. If they think that matters like the United Nations mandatory sanctions order are really discussed in the villages and hutments of the countries around Rhodesia, they have some very queer ideas indeed.
  They have a very poor understanding of the wishes and political desires of the majority of people in Rhodesia, as distinct from those of a few political activists.
  I have little doubt that what the majority of people in Rhodesia want is a peaceful State in which law and order are established and in which prosperity, happiness and tolerance are with them every week of their lives. That is what they have had, uniquely, in Rhodesia. It is not to be found anywhere else in Africa. It is unique. It is a wonderful thing. Yet that is the one country that we pick out on which to impose sanctions. Truly we must be mad.
  The Government's case is that we have to have a settlement. I have taken an interest in this matter over the years. As everyone knows, I have discussed it with Labour Ministers. The Prime Minister was kind enough to write me a letter the other day. I shall not misuse that freedom by quoting the whole of the letter, but the essence of it was that the settlement that he and the Government desired, the only one that they thought meant anything, was a settlement which was acceptable—and here I quote—
  "to all the African nationalists and the frontline Presidents"
  I must tell the Minister of State—he will be able to read it in Hansard tomorrow because he is not listening at the moment—that he will not get a settlement acceptable to all the African nationalists and all the African front-line Presidents. It is not possible. If he obtained a settlement that was acceptable to all those people, it would be a settlement that was also acceptable to the Kremlin. Nothing is more certain. Machel and Mugabe will not agree to a settlement which is totally unacceptable to Russia, and nor, I suspect will Nkomo, although that would

  1675
  not have been a true comment even a year ago.
  Therefore, if the Government are insisting on that—and they are so insisting, because it was on this very point that I wrote to the Prime Minister and received that assertion back—there will not be any settlement. If there were it would be totally disastrous for the interests of Britain and for the survival of any white Western civilisation in Central Africa. The Government must face up to that.
  I want to conclude with a suggestion. I have been critical up to now. I agree very much with my hon. Friend the Member for Norfolk, North-West (Mr. Brocklebank-Fowler). Like him, I have been saying this for long enough. We have transposed the concepts of European negotiation into Africa, quite wrongly. On the one hand are the Rhodesian Government, who are essentially a white Government. They speak as representatives and plenipotentiaries in negotiations. They negotiate with people who have no authority in that way, people who have two fatal characteristics. One is that they have to go back and discuss what has been agreed with their party, or whatever one should call it, in a sort of African ndaba procedure. That is a traditional procedure, and any terms which are agreed get washed away by the end of the ndaba. The other characteristic is that there is a group of people who are competing against each other in militancy. For those two reasons it is impossible to have successful negotiations.
  Therefore, the Government should be doing two things. First, they should be trying to arrange African representation which would be truly significant and which could make an agreement, sign it and keep it. Secondly, as my hon Friend the Member for Norfolk, North-West said, they should be exercising pressure not only on Mr. Smith, which is what the order is all about, but on the African nationalists and even, if necessary, on the front-line Presidents. An agreement will never be reached while the Africans believe that they can raise their demands as much as they like and that Britain will always tighten the screw on the other side while leaving them alone. That is the basic error of Government policy.
  1676
  It does not matter what Mr. Smith says or does; he is always blamed for everything by Labour Members. They start bleating about a white minority racist régime and they do not use their reason in analysing the matter. It is blind prejudice every time.
  Mr. Goodhew: Does my hon. and learned Friend realise that the Foreign Secretary, who is the only Labour Member to have been to Rhodesia to see conditions for himself, has withdrawn from the Chamber and is no longer listening to the debate? Is that not a significant factor?
  Mr. Bell: I regret the absence of the right hon. Gentleman, and there is a substratum of truth in what my hon. Friend says. Insufficient knowledge of African conditions has been a major defect of the Labour Party, particularly of Left-wing politicians, in approaching these African problems.
  There are very difficult problems about arranging for people of widely differing cultural levels to live together. The talk about majority government is absolute nonsense. People seem to think that all Africans are the same and are like the people of West Africa who have had contact with the West for many generations. In fact, only two generations ago the Africans of Rhodesia were living an almost Bronze Age existence. Yet they are expected, two generations away from the most primitive human existence, to be put in charge of a sophisticated, semi-industrial, Western society. This is pure moonshine, and it is simply not practical. It worked in Tanzania, which is a poor agricultural country, and it worked in Kenya, where there is a dominant personality at the top. In Rhodesia it could not even begin to work at all, and it is idle pretence to think that it could.
  The Government must realise that they owe as great a duty to white British people in Rhodesia as to black people. When one talks of white people there is a feeling among Labour Members that they should not be in Africa at all because it is not their country, but when the same hon. Members turn their eyes to Britain they take a different view about blacks and whites. They say that black people have just as much right as we have to be here, and they pass legislation to

  1677
  protect them. There are extraordinary double standards between whites in Africa and blacks in this country.
  I hope that the Government will correct this state of affairs and address themselves to the real problems. I urge my hon. Friends to join me in voting against the order tonight, not because of its contents but as a demonstration against the whole attitude of the Government Front Bench to the problems of the white man in Africa.
  12.38 a.m.
  Mr. Frank Hooley: I agree with the right hon. Member for Brighton, Pavilion (Mr. Amery) on two matters—that aspects of the order are highly technical and that behind it lies an issue of principle. Then we part company.
  The issue of principle is the obligation to the United Nations, an association to which we belong and in which we have special status as a permanent member of the Security Council. We initiated the process of sanctions in the United Nations and we sponsored the resolution that forms the basis of the order. It is clearly an international obligation of great moment that we pass the order tonight.
  The Minister of State made the point that until there is a return to constitutional rule and legality in Rhodesia we shall maintain the sanctions. I do not think that even the right hon. Member for Brighton, Pavilion would claim that there is any form of constitutional government in Rhodesia now. The illegal régime derives no authority from this Parliament and is accorded no recognition by any country. It cannot even plead that there is some sort of de facto authority arising from recognition by other countries. There is no recognition, legality or constitutional right of that kind. In these circumstances, this Parliament is constitutionally responsible and has an absolute right to continue the sanctions process. That is the underlying reason why we must pass the resolution tonight.
  The right hon. Member for Brighton, Pavilion suggested that we could and should lift sanctions. I am not sure, in the strict sense, that we can. Sanctions are imposed by the authority of the Security Council. I know that Conservatives have complete contempt for the United
  1678
  Nations, which is in keeping with the general attitude to other countries, but it is an important body and we are a member of it. It is very important that the House should demonstrate that we uphold the decisions taken by the Security Council, particularly when they are so fundamentally important as this kind of decision and when we not only supported the decision but helped to initiate it.
  Mr. Ronald Bell rose—
  Mr. Hooley: I shall not give way. The hon. and learned Gentleman has just made a long, tedious and very regrettable speech, and I see no reason why he should interrupt me now.
  There is another aspect of the matter that deserves some consideration. I refer to the policy of my right hon. Friend the Foreign and Commonwealth Secretary in present circumstances to concert his policy very closely with that of the United States Administration. I am very glad of this. The previous United States Administration passed what I and many others regarded as the deplorable so-called Byrd Amendment, a flagrant breach of United Nations sanctions designed to secure a supply of chrome for the United States economy. I am glad that the present Administration has repealed that amendment and thereby reasserted its support for sanctions as operated through the United Nations. It would seem to me the height of folly in the light of that for our Government and Parliament now to back down in even the slightest degree on the sanctions policy to which we are committed.
  Another aspect is that it is coming to light that certain powerful international oil companies appear to have been conniving directly or indirectly at the breach of sanctions by the supply of oil necessary to keep the illegal regime going and to supply its war machine. I am very glad that my right hon. Friend has instituted an inquiry into this so far as it concerns oil companies that have a base in this country. I hope that that inquiry will be proceeded with speedily and ruthlessly to uncover any breach of the sanctions orders made by this House over the past 11 years. But it would be foolish, while instituting such an inquiry, not to pursue the order before us.
  Conservative Members have made the extraordinary claim that what we are

  1679
  doing by the order is to exert pressure one way, that there is no pressure being exerted on the other side in favour of Mr. Smith or in support of him. We have had the most peculiar statements about the paradise that has existed in Rhodesia over the past 10 years under Smith and his predecessors. I remind Conservative Members that this paradise has included arbitrary arrest and detention for year upon year without trial and regular hanging of political prisoners without any constitutional or legal authority to carry out such executions. That is the paradise that Conservative Members are so anxious to praise and describe.
  I return to the question of pressure. The war in Central Africa is escalating. It is building up. It is reported in the Press only today that South Africa is supplying aircraft and helicopters and the sub-structure for Ian Smith to prosecute that war. We know that he has already been involved in incursions into neighbouring countries in savage attacks that have caused serious loss of life and in which he has used highly sophisticated military equipment. It now appears that Mr. Vorster has taken some sort of undercover decision to back up that process. Those who talk about pressure on one side would do well to examine what is happening in the relations between South Africa and Rhodesia.
  A great deal of play has been made on the matter of sanctions and a return to legality of differences of opinion among African leaders. I agree that such differences exist, but on one matter they are absolutely united—that there will be no progress towards constitutional rule in Rhodesia until Mr. Smith and the illegal régime are got rid of. This is common ground between Muzorewa, Sithole, Nkomo, Mugabe and the others. They are absolutely united on that.
  Until the pressure in this country, in other countries in the Western world and in Africa is successful in getting rid of this racist régime, there is no way forward towards constitutional rule and legality in a country for which this House and country have legal responsibility. I therefore have great pleasure in supporting the order. I believe, with my right hon. Friend the Member for Fulham (Mr. Stewart), that it would make a disastrous
  1680
  impression in Africa and throughout the world if the House rejected it tonight.
  12.16 a.m.
  Mr. Stephen Hastings: I am somewhat disappointed by the hon. Member for Sheffield, Heeley (Mr. Hooley). Often he makes reasonable and important speeches, but tonight he has just reflected the wooden hatred of the white Rhodesian that characterises so much that we hear from the Labour Benches. I doubt that it stems from natural ill-will. It comes from just ignorance and fashion. Those of us who know Rhodesia well have become sick of that during the past few years.
  I shall not detain the House long—what is the point? However, there are one or two questions that I should like to put to the Minister of State. First, I should like to turn to the remarks of the right hon. Member for Fulham (Mr. Stewart), who held such high and responsible office. His remarks reflected a wooden ignorance. I hope that he will forgive me, but I must say that. He has received advice from those who must have known what they were talking about, but I have known Rhodesia for many years and I am amazed that he brought himself to make such a speech tonight.
  He said that it would ruin confidence in Africa if the order were not passed. That is absolute rubbish. A similar order was passed six months ago. Suddenly, we are told, by some magic process, the confidence of Africans all around Rhodesia will be ruined if we do not pass the order. How can the right hon. Gentleman bring himself to make such a speech? What concerns Africans around Rhodesia today, particularly in Mozambique and Angola, is how they can live from day to day and feed themselves in their Marxist paradise. Surely the right hon. Gentleman knows perfectly well what has happened in those territories. How can he say such a thing?
  The Foreign Secretary has made an initiative that we have all watched with great interest, and I am second to none in wishing him well. If the right hon. Gentleman can produce the answer in this lamentable and miserable story, all credit will go to him.
  However, why do we have to put up with this so-called extension of sanctions? We have been putting up with sanctions

  1681
  for 11 or 12 years now without any noticeable effect. If there had been any, perhaps there would be some sense in this debate.
  The House knows as well as I do why sanctions have had a marginal effect, if any. The only factor in recent months that has had a profound effect is the intervention of the United States, not the British Government. Kissinger's initiative—and opinions differ on the validity of what he had to offer—began to bring Smith and his Government to take the great step to agreeing to majority rule. It had nothing to do with sanctions. Now we have this order for a so-called extension of sanctions. I am bewildered, in reading this piece of paper, to find out what it is about.
  Is there some magical deadline that forces the order to be produced now? It is to the Foreign Secretary's eternal credit that he has actually been to Rhodesia—it would be interesting to know whether the Foreign Office advised him to go—but within weeks of his initiative we are asked to pass this thing. Shall we be thrown out of the United Nations if we do not approve it? What magic quality is there about this little bit of paper?
  All the odium is endlessly flung at the white people in Rhodesia as a group. No distinction is drawn between Mr. Smith's Government and the people trying to farm coffee in outlying districts and having to put up with all the misery of terrorist attacks. They are all whites. Hatred can be flung endlessly at these people, but if Labour Members are honest, they will admit—as some of them have—that if the white people leave Rhodesia, there will be murder, bloodshed and misery for everyone. Hon. Members opposite know that.
  Why is this ridiculous little measure introduced now? It can serve only to drive a little more despair into the hearts and heads of those who, if human rights mean anything, are the only hope for Rhodesia. Let the Minister explain why we are having this debate now.
  12.52 a.m.
  Mr. Peter Tapsell: This order will enable the Government to enforce by law paragraph 2 of Security Council Resolution No. 388 passed under
  1682
  the Chapter VII provisions of the Charter of the United Nations on 6th April 1976.
  Chapter VII provisions are obligatory and binding on member States. The last Conservative Foreign Secretary, my noble Friend Lord Home, speaking to the Conservative Party Conference on 11th October 1973, after expressing his reservations about the wisdom of a policy of mandatory sanctions, said this:
  "The British Government of the day put its signature to a resolution of the Security Council of the United Nations which is binding on its members. We are a permanent member and we are in the habit of keeping Britain's word. We do not, and individual Conservatives do not, pick and choose which laws we obey and which we do not, nationally or internationally"
  That remains the position of the Conservative Party.
  Mr. Michael Brotherton: Did not Lord Home also say in that speech that the time might come when this country might have to go to the United Nations and say that sanctions had failed and, therefore, they must be dropped?
  Mr. Tapsell: If I may join my hon. Friend in paraphrasing Lord Home, he said that he did not think it would be right to take unilateral action but that, if the time ever came when the British Government felt that it was impossible to pursue that policy any longer, the most honest and straightforward thing to do would be to seek the permission of the United Nations to change the policy.
  That, however, is not what we are discussing tonight. Although the Chair has been generous in allowing us to have a wide-ranging debate, we are discussing a particular order. In the short time that I have at my disposal, and tempted as I am to follow up all the wide-ranging points that have been made about African policy generally, I must confine myself rather narrowly to the order.
  My right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) said that he feared I might prove so wet on this subject that he would be able to shoot snipe off me. The issue of Rhodesia is a matter not of wetness or dryness but of wisdom and judgment. Much as I am tempted, there is not the time at my disposal to pursue in detail, as I have done on many occasions over the years with my right hon. Friend, the immense complexities of this subject. I spoke at some

  1683
  length about Southern Africa when winding up the foreign affairs debate on 1st March, and I shall leave it there.
  It is right for me to reaffirm that the Conservative Party takes seriously our obligations under the United Nations Charter. I certainly do not think that this is an appropriate moment, when negotiations for a peaceful transfer of power are once again at a critical and delicate stage, to go to the United Nations, as my hon. Friend the Member for Louth (Mr. Brotherton) has suggested, for a change of policy on sanctions. Nor do I think that this is an appropriate time, for the same reason, for the House to withdraw the consent that it gave as recently as 20th October 1976 for economic sanctions to be continued, for the eleventh time, for a further 12 months. Beyond that, we reserve our position in the light of the circumstances that may prevail.
  We noted and welcomed the undertaking given by the Minister of State in opening the debate when he reaffirmed his and the Government's wish to see sanctions raised as soon as Rhodesia is safely on the road to majority rule.
  Dr. Glyn: When negotiations are proceeding, is my hon. Friend satisfied that this is the correct moment to introduce this very minor change which could have a disastrous effect on the negotiations?
  Mr. Tapsell: If my hon. Friend will permit me, I am coming to that point. I am about to move from the general to the specific.
  We have before us an order which, for the first time, forbids the granting for use in Southern Rhodesia of any trade name, trade mark, franchising agreement or registered design. In other words, the order is to some extent extending the definition of "goods" to embrace intangibles. In this connection, I wish to ask the Minister of State a number of questions to which I should be grateful for an answer when he replies to this debate.
  First, am I right in thinking that books and medical goods have always been permitted exemptions from the operation of sanctions and that nothing in the order applies either to books or to medical goods? Secondly, as the Minister said in moving the order, there are two substantive paragraphs to Resolution 388 of the
  1684
  Security Council and only the second is covered by the order. The first paragraph forbade the insurance of any commodities or products being exported into Southern Rhodesia or imported from Southern Rhodesia. On the face of it, if one had to choose between insurance on the one hand and patents on the other, the insurance side would be relatively easy to supervise and administer, while, I suspect, the application of the order in the spheres to which it is being applied will be much more difficult and uncertain.
  Thirdly this is a point which a great many of my right hon. and hon. Friends have already made—I must ask the Minister why the order is being brought before the House at this time. After all, as has been pointed out, Resolution 388 of the Security Council, unanimously sponsored by all 15 members of the Security Council and binding upon every country which enjoys membership of the United Nations, was passed in New York on 6th April 1976, nearly 13 months ago.
  If it is of such importance, why was not an order to implement these matters laid before the House immediately? Why, having missed that first opportunity, was the opportunity of the general extension for a further 12 months of economic sanctions against Rhodesia on 20th October 1976 not taken to extend the sanctions provisions to cover these important matters? Why is the action being taken now, just after the Foreign Secretary's visit to Rhodesia as a peacemaker, just before the possibility of another peace conference and just at a time when conciliation rather than provocation is devoutly to be hoped for on all sides?
  At first sight the timing of the order, covering only half the Security Council resolution, seems to pose a double mystery. There is the mystery of why the dog did not bark throughout the long night when horrors abounded, compounded by the mystery of why the dog is suddenly barking now, at the first glimmer of the dawn. Was it that the Security Council resolution got lost somewhere in the labyrinthine corridors of the Foreign Office? Or is it suspected that someone in Rhodesia may have been buying pool petrol in South Africa and selling it in Rhodesia under a particular trade name? I hope that the Minister will include an answer to these three questions in his reply. I conclude by saying that

  1685
  although some of my right hon. and hon. Friends have indicated their intention of voting against the order, I for my part do not intend to do so.
  1.2 a.m.
  Mr. Rowlands: Some of the questions put to me by the hon. Member for Horn-castle (Mr. Tapsell) have covered matters put to me by other hon. Members. The debate has ranged much more widely than the specific issue of the order. It has gone back to the principles of sanctions, which we debated last October. 1 have noted the main thrust of the argument—put forward by the right hon. Member for Brighton, Pavilion (Mr. Amery) and picked up in other speeches—that we should accept the failure of the Geneva conference and not now proceed with the order or with sanctions of any kind.
  I hope that the right hon. Member for Brighton, Pavilion will agree—because he seemed to imply that I misled the House in my opening remarks concerning the position last October—that I reaffirmed our position clearly. I said that we would not seek to lift sanctions or fail to continue to enforce them in the most practical and effective form before Rhodesia was irrecoverably on the way to majority rule. What we are doing tonight is consistent with that position.
  My right hon. Friend the Member for Fulham (Mr. Stewart) and my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) said that we believe it to be an intrinsic part of the way in which Britain will be able to help and maintain its honour and integrity in the initiative we are taking that we maintain sanctions in the most rigorous fashion.
  If we do not do so, our credibility and integrity in relation to sanctions will be impaired, as will our ability to speak frankly for those who want majority rule through a peaceful and negotiated settlement. Only if that can be maintained shall we be able to establish and maintain our credibility.
  If we back down and do not continue to enforce sanctions and, where we see that it is practical, extend sanctions by Security Council resolutions, our integrity will be called into question and challenged. Therefore, our effectiveness in acting—not as a mediator, not as neutral
  1686
  agency but as one committed to a solution of the Rhodesian problem by peaceful negotiation to obtain majority rule—will be damaged.
  The hon. Member for Horncastle began by saying that he and his party were committed to the implementation of Security Council resolutions which we had either co-sponsored or supported. These are obligatory under the Chapter VII provisions and we should implement them.
  Dr. Glyn: The point as I understand it is that when we renewed sanctions we already knew about this provision. Therefore, when the resolution was re- newed, why did not the Government explain to the House that this order was to follow? It could have been mentioned.
  Mr. Rowlands: I should like to explain that. It takes time to develop and produce orders. The point was made by the hon. Member for Mid-Bedfordshire (Mr. Hastings) when he pressed me, among many other things, on the timing and asked why this had taken so long.
  The hon. Member for Horncastle put his finger on the matter when he said that by far the most important part of the Security Council resolution was the first operative part on insurance. That was so, and, therefore, we took that as the first matter. By discussion and conversations with the large insurance companies and the British Insurance Association, we got a completely satisfactory voluntary arrangement to cover the first part of that resolution. That was clone as first priority in implementing the resolution.
  I think the hon. Member for Horn-castle said—and I agree—that that was the most important part of the Security Council resolution. He asked why we had done that voluntarily and were seeking to implement the second part of the resolution by order. The answer is the complexity of the issue in the second part of the resolution. In relation to insurance, by getting an arrangement with Lloyd's and the BIA we had a total and effective voluntary arrangement.
  That situation does not apply to the incredibly complex world of patents, franchises, trade marks and designs. It is a different type of operation, and we could not do the type of operation we did with Lloyd's and the BIA and obtain a satisfactory arrangement.

  1687
  Therefore the second part, dealing with the complexity of trade marks, designs and franchises, presented us with greater technical problems. We waited and obtained the general sanctions order in the October and November debates. Everybody will know the major pre-occupations we had in the autumn and at the beginning of this year.
  It has never been the intention of the Government not to implement obligatory resolutions on sanctions under the Chapter VII determination which we co-sponsored.
  I am not quite sure whether right hon. and hon. Members opposite were complaining and saying that the order should never have been brought in. I think that that lay behind their argument, because they have not believed in sanctions at all for 10 or 11 years. They have opposed sanctions in principle, and many of their arguments hung on that.
  We believe in sanctions. We believe in trying to implement them in the most effective way, and we believe that we should fulfil and enforce the United Nations resolutions on sanctions.
  Mr. Amery: I absolutely accept what the Minister said today is wholly consistent with what he said in the last debate, but it is not consistent with his Department's support of the Kissinger proposals at the time. However, the main point which I put to him is this. Is he happy that a British Government should be acting as an accomplice of terrorism against the Rhodesian régime?
  Mr. Rowlands: With respect, the right hon. Gentleman and I argued that matter out almost in the same language, word for word, last October. I do not think that it would be right, quite apart from the lack of time, to weary the House with an action replay of the argument which he and I had in the general sanctions debate then. I am pointing out that our action in bringing the order forward is totally consistent—I think that the right hon. Gentleman agrees—with our view and attitude on upholding both the principle and the details of sanctions, and it is in no way inconsistent with seeking a genuine peaceful, negotiated settlement.
  The United States is now fully backing and working closely with my right hon. Friend in the new initiative which he has taken. He had official talks with members of the American State Department this week, and he is to see Mr. Cyrus Vance in London next Friday. The United States is working extremely closely with us, and it also has rightly and properly taken appropriate action in now reinforcing sanctions on chrome.
  It is perfectly consistent with our keen support and close working with the United States that we should and will continue to uphold and enforce the sanctions legislation and Security Council resolutions which are binding on us while at the same time pursuing, as we shall, the important initiative on which my right hon. Friend has made such a good start in his recent visit to Southern Africa.
  Question put:—
  The House divided: Ayes 46, Noes 6.

  Division No. 114]

  AYES

  [1 a.m. 12

  Barnett, Guy (Greenwich)

  Gilbert, Dr John

  Rowlands, Ted

  Bates, Alf

  Golding, John

  Silkin, Rt Hon John (Deptford)

  Bean, R. E.

  Harper, Joseph

  Skinner, Dennis

  Cocks, Rt Hon Michael

  Harrison, Walter (Wakefield)

  Stallard, A. W.

  Coleman, Donald

  Hooley, Frank

  Stewart, Rt Hon M. (Fulham)

  Crowther, Stan (Rotherham)

  Jackson, Miss Margaret (Lincoln)

  Summerskill, Hon Dr Shirley

  Cryer, Bob

  John Brynmor

  Varley, Rt Hon Eric G.

  Cunningham Dr J. (Whiteh)

  Judd, Frank

  Wainwright, Edwin (Dearne V)

  Davidson, Arthur

  Kaufman, Gerald

  Walker, Harold (Doncaster)

  Davis, Clinton (Hackney C)

  Lamond, James

  Ward, Michael

  Deakins, Eric

  Luard, Evan

  Williams, Alan Lee (Hornch'ch)

  Dormand, J. D.

  McDonald, Dr. Oonagh

  Wise, Mrs Audrey

  Douglas-Mann, Bruce

  Madden, Max

  Foot, Rt Hon Michael

  Meacher, Michael

  TELLERS FOR THE AYES:

  Freeson, Reginald

  Owen, Rt Hon Dr David

  Mr. Thomas Cox and

  Garrett, John (Norwich S)

  Rees, Rt Hon Merlyn (Leeds S)

  Mr. David Stoddart.

  George, Bruce

  Rooker, J. W.

  NOES

  Amery, Rt Hon Julian

  Goodhew, Victor

  TELLERS FOR THE NOES:

  Bell, Ronald

  Hastings, Stephen

  Mr. Michael Brotherton and

  Fell, Anthony

  Powell, Rt Hon J. Enoch

  Dr. Alan Glyn.

  Resolved,
  That the Southern Rhodesia (United Nations Sanctions) Order 1977 (S.I, 1977, No. 591), a copy of which was laid before this House on 5th April, be approved.

  PETITION

    Otters
    1.22 a.m.
    Mr. John Garrett: I beg to submit a petition signed by about 2,000 residents in the county of Norfolk concerning the protection of the otter, a subject which is of much concern and about which there is great strength of feeling in the county. The petition reads as follows:
    To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament Assembled.
    The Humble Petition of the undersigned citizens of Great Britain and Northern Ireland Sheweth that
    The European otter population of Great Britain has drastically declined in numbers and is now in danger of extinction.
    Wherefore your petitioners pray that your Honourable House will take all measures as may be necessary to:

    1 Forbid the killing or taking of the otter by any means.

    2 Forbid the infliction of unnecessary suffering upon the otter.

    3 Abolish the practice of hunting or otherwise pursuing of the otter.

    And your petitioners, as in duty bound, will ever pray, etc.
    To lie upon the Table.

  SHOPS ACTS
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Walter Harrison.]
  1.24 a.m.
  Mr. Fergis Montgomery: I apologise to the Under-Secretary of State for keeping her out of her bed tonight. I do not know whether it is any consolation to her to know that we are not the only ones who are still working. The poor political candidates at Ashfield and Grimsby are still at work.
  1690
  I am grateful for this opportunity to raise the subject of the working of the Shops Act 1950 and the Shops (Early Closing Days) Act 1965. No one would disagree that laws, if we must have them, should be good and easy to enforce. The Shops Act 1950 does not fit into that category. It is coming under more and more attack. That is because more and more people regard it as a stupid law full of anomalies and difficult to enforce.
  The purpose of the debate is to draw attention to some of the anomalies, particularly as they apply to Sunday trading, on a Sunday one can buy a razor blade to cut one's corns in a chemist's shop, but one cannot buy one at a corner shop to shave. One can buy fish and chips at a Chinese take-away shop but not at a bona fide fish and chip shop. One can buy a copy of Playboy but not a hard-back copy of the Bible. One can buy fresh milk for tea and coffee but not the dried or tinned variety for a baby's feed. One can buy partly cooked tripe but not fresh meat.
  Permitted products such as newspapers, milk, flowers and fruit mix in many shops with other goods that cannot be sold on a Sunday. That leads to the baffling business of putting areas of a shop out of bounds.
  Various legal loopholes are being exploited hard and imaginatively. Among the more elaborate schemes that have been tried with varying success are trading clubs, Sunday demonstrations and the device of selling goods that are allowed—for example, selling apples for £100 and giving away with them a large double bed.
  On 10th November the hon. Member for the Isle of Ely (Mr. Freud) tried to bring in a Ten Minutes Rule Bill to amend the law on Sunday trading. He drew attention to a case that had received a great deal of publicity. It concerned a furniture shop which opened on a Sunday and was prosecuted. The shop received a change-of-use certificate and became a furniture and vegetable shop. Apparently a carrot was sold for £200 with a three-piece suite as a promotional gift. Instances such as that bring the law into contempt.

  1691
  The shopworkers' union is still implacably opposed to more Sunday opening. It believes that shop assistants need a rest day. I agree. However, I cannot agree with the other argument that making Sunday trading optional is meaningless, because if some shops are allowed to open, all shops will have to open for self-preservation.
  One has only to look at the way in which the licensing laws work in certain parts of the country, where licensees are allowed flexibility. In Covent Garden, for instance, the pubs are open at peculiar hours because the demand for alcoholic refreshment comes at peculiar hours. The licensing laws are flexible in that area so that publicans can open at a time that is convenient and when they will do the best business. The same system applies in certain steel areas.
  I am sure that the Under-Secretary has seen the report commissioned by the Home Office—"Shopping Habits and Attitudes to Shop Hours in Great Britain". The results of that report must have come as a shock to the Home Office. It showed that two households out of three want more freedom to buy on a Sunday. Most of those interviewed said that the present restrictive laws are stupid and out-dated.
  The law is difficult to enforce because local government has an ambivalent attitude to the merits of the Shop Act 1950, I believe that the procedure is that if someone lays a complaint to the local authority, the complaint is investigated. As a result, an inspector is sent to the premises. The inspector buys something which is not shown in Schedule 5 of the Act, and the result is that the shopkeeper is then warned, and if the warning is not heeded the shopkeeper is prosecuted.
  However, many local authorities dislike enforcing a law that runs against the tide of public feeling. Staff is short, and one of the staff apparently admitted in an interview, "Even we are not that keen on Sunday narking".
  There has also been a survey carried out by the Environmental Health Officers Association. Of the 230 councils in England and Wales that replied, 64 suggested that the 1950 Act should be repealed and all but one of the others were in favour of major review or amendment. Therefore, it would seem that today
  1692
  councils are having to enforce more firmly a law in which they themselves do not believe.
  My reason for raising this issue tonight is that Sunday trading has caused quite a storm in my constituency. In my constituency I have quite a number of "do-it-yourself" shops. Some of these have been opening on Sunday mornings. I think that what has happened is that a complaint has been registered, an inspector visited the shops and, with one exception, they have now stopped opening on Sundays. The shop that has refused to close is now being prosecuted.
  Since the publicity about these "do-it-yourself" shops in my constituency, I have been inundated with letters from constituents who are protesting about the fact that these shops are not allowed to open on Sundays. It is a fact of life that because of high labour costs more and more people are doing their own decorating at home and doing their own odd jobs. Perhaps the most popular time to do decorating or odd jobs in one's home is over the weekend. I suppose that if people were doing some work in their home on a Sunday morning and suddenly ran short of nails, putty or plywood, they found it very convenient if they could easily go around to the shop nearby and buy the necessary materials. If the law of the country permits us to buy partly cooked tripe on a Sunday, I cannot see why we should not be allowed to buy putty or nails.
  I think it is also true to say that the small businesses of this country have had a very difficult time over the last few years. I would hate to see the disappearance of the corner shop. Perhaps I have a vested interest, because my father had a corner shop and I know how hard he had to work. I do not want to see the disappearance of corner shops, because they fulfil a need, and I should hate to see nothing but supermarkets and multiples for the shoppers of this country.
  Most corner shops are family concerns, and it is in these shops that members of the family take part and serve in the shop. Therefore, there would not be any question of shop assistants having to work on Sundays against their will.
  All that I think is needed is a little more flexibility. The National Food and Drink Federation, which condemns the

  1693
  Shops Act as an absolute quagmire, believes that the best solution is a legal maximum number of hours for shops to open but with the shops having the absolute freedom to decide when to open. That is a view that I believe is also shared by the Consumers Association. Indeed, the Consumers Association has campaigned for reform. Recently we had a Court of Appeal ruling—I think it was in December 1976—to ban a Sunday market that was due to be held in Staffordshire. The Consumers Association welcomes that ruling because it believed that the ruling would highlight the absurdity of the law.
  I quote from the Evening Standard of 4th November 1976, which states that the shop of Mrs. Olga Bloom, owner of Bagette, a handbag and jewellery boutique in Queensway, had had two visits from Westminster City Council inspectors last summer, the first of which resulted in prosecution and a fine of £5 plus an order to pay £5 costs.
  The article continues:
  "Mrs. Bloom's shop is at the top end of Queensway where even now on Sunday the tourists swirl round like travellers cheques in the wind. Like many other traders, Mrs. Bloom opens then because she can do good business.
  'Queensway is a little Montmartre. Opening on Sunday, we're encouraging the tourists. I pay high rent and high rates. What crime is it to open for a few hours when the tourists are here?
  'I lived up north in Blackpool for many years and had four shops there. We opened seven days a week during the illuminations, closed at midnight and never had a fine. I'm not exploiting any staff by keeping open. This is a family business.
  'It's crazy: if you want to work they won't let you. The more money I make the more tax I pay and that goes to the Government. There are so many unemployed. Why are they stopping people working?'".
  I think that what was said in that article is true for most of the small shopkeepers, who are anxious to be able to open not only at a time when they will be able to provide a public service but at a time that will be beneficial to their business.
  I realise that in an Adjournment debate I am not allowed to ask for legislation. Therefore, the whole purpose of my debate has been to show that on Sunday trading the law is an ass. I hope that the Minister will agree to hold an inquiry into
  1694
  the working of the Shops Acts 1950 and 1965.
  1.36 a.m.
  The Under-Secretary of State for the Home Department (Dr. Shirley Summer-skill): The working of the Shops Acts is a subject of interest to hon. Members, to judge by the number of Questions which I answer on it from time to time, but there has been no recent occasion for a Minister to speak about it at somewhat greater length. I am grateful to the hon. Member for Altrincham and Sale (Mr. Montgomery) for giving me this opportunity to do so.
  The Shops Act 1950 was a consolidating Act, and the statutes which it superseded dated back to the period between 1912 and 1936. Its main provisions relate to the closing of shops on weekdays and Sundays, shop assistants' conditions of employment, and the hours of employment of young persons in shops. The Shops (Early Closing Days) Act 1965 is a comparatively short piece of amending legislation, of which the main effect was to give shopkeepers the right to fix their own early closing day.
  The administration and enforcement of these Acts is a responsibility not of the Government but of local government. The local authorities which carry this responsibility are the district councils and, in Greater London, the Common Council of the City and the London borough councils. Each of these authorities has a duty to appoint inspectors to enforce the Shops Acts. These inspectors keep closely in touch with each other through their own professional body, the Institute of Shops Acts Administration, which does much valuable work in keeping its members informed of developments in this complex and technical branch of the law. The institute's monthly journal is a mine of information about the ways in which people have tried to infringe or evade the law, and the way in which their attempts have been countered.
  It is sometimes suggested that local authorities are at best lukewarm or halfhearted in their efforts to meet the provisions of the Shops Acts. It is easy to make such suggestions but less easy to verify them, particularly since the administration of the Acts is not subject to Home Office inspection or control.
  However, after local government re-organisation took place in 1972 the Home

  1695
  Office issued a circular to the recently formed district councils reminding them of their responsibilities under the Act. We know that many local authorities are making determined efforts to enforce the law. The extent of their activitiy, in this as in other fields, is, of course, limited by the extent of the resources available to them, both in money and in manpower. The House is well aware of the constraints under which local authorities are working. It is also true that enforcement of the Shops Acts is not necessarily the most popular of a local authority's functions, and it may well be that in discharging it some authorities are less diligent than others.
  Parliament has, however, imposed on district councils and the other authorities I have mentioned a clear duty—in the words of section 71(1) of the Shops Act 1950—
  "to enforce within their district the provisions of this Act".
  If an authority is plainly making no attempt to discharge that duty, the remedy lies not with the Government—because we have been given no power to intervene—but in the courts. If a local authority is in breach of its statutory duty, it is open to local residents or law-abiding shopkeepers in the area to seek an order of mandamus in the High Court requiring the authority to enforce the Acts.
  The hon. Member has referred particularly to Sunday trading, with which I should like to deal. The transactions for which a shop may remain open on Sunday are listed in the fifth schedule. In addition, local authorities may make partial exemption orders permitting the sale until 10 a.m. of articles listed in the sixth schedule. In holiday resorts provisions permit opening in certain circumstances on not more than 18 Sundays in a year, generally where the local authority has made the necessary order.
  In general, the goods which may be sold come within the categories of fresh produce and items likely to be required in an emergency. But I admit that the list of exemptions gives rise to anomalies. For example, there is confusion over what constitutes refreshment, and the courts have held that it includes pies, buns and sausages and even raw kippers, but not tea and flour. The law also appears to
  1696
  permit the sale of frozen but not tinned vegetables. These anomalies are frequently used as illustrations of the absurdities of the law by those who wish to see the law changed.
  Enforcement of the provisions of the Shops Acts relating to Sunday trading is a difficult matter, and a good deal of ingenuity is being exercised in attempts to evade the law. The ease with which the law can be evaded has, however, been greatly exaggerated, and we have reason to believe that local authorities which enforce the law with determination are generally successful.
  There was, for example, the case in 1972 where a firm of house furnishers, relying on the fact that vegetables may lawfully be sold on Sundays, opened its shop for the "sale of carrots with free furniture". The price charged for a carrot depended on the value of the item of furniture chosen to accompany it: one carrot was sold for £520 and another for £20. The magistrates' court dismissed the case, taking the view that the shop was open only for the sale of carrots, but the Divisional Court held that this was merely a sham and that in reality people were buying furniture, not carrots. In the end the firm was convicted, therefore.
  Another device that has often been tried is the enrolment of customers into a "club". This was thought for some time by those who tried it to be a successful method of evasion, but last year in the case of Stafford Borough Council v. Elkenford Ltd. the Court of Appeal refused to accept its legality. This was a case in which the council had obtained a conviction before the magistrates' court, but the defendants were appealing to the Divisional Court. Meanwhile, they were proposing to continue the Sunday market, and the council applied to the High Court for an injunction prohibiting them from doing so. An injunction was granted, and on appeal to the Court of Appeal this decision was upheld. Lord Denning said
  "It should be known throughout the country that Sunday market retail trading carried on at various sites in rural areas on a large scale is contrary to the Shops Act 1950, and where it is obvious that the operators of such markets are making large profits and intend to continue breaking the law, nothing short of an injunction will be effective to stop them."
  This case marked an important advance towards more effective enforcement of the Sunday trading law. It means that a

  1697
  local authority, faced with the prospect of a Sunday market being set up in its area, need not wait to prosecute after the event. Instead, it can apply in advance to the High Court for an injunction against the organisers prohibiting them from holding the market. I am not satisfied that local authorities lack adequate powers to enforce the provisions of the Shops Act in this respect, and many local authorities bring successful prosecutions under the Act. In many cases markets, particularly Sunday markets, are extremely popular with the general public, and some authorities are reluctant to take action against them.
  It is sometimes suggested that a trader can legally open his shop on Sunday by taking advantage of the special provision made for shopkeepers of the Jewish faith, but that is less easy than some articles in the Press have made it appear. For one thing, the trader must accept the corresponding disadvantage of not opening on Saturday—a day which is likely to bring him more profit. In addition, there are safeguards against abuse of the provisions, and a person claiming to have a conscientious objection to opening his shop on Saturday may have it tested by a tribunal representative of the Jewish community or whatever the appropriate religious body may be.
  In this debate we can refer to the possibility of amending legislation only incidentally, so far as it may be relevant to the problems of administering the present law. For this purpose it seems sufficient to recall that proposals for amendment of the law relating to closing hours were made in 1947 by the Gowers Committee, and in 1956–57 the Conservative Government of the day introduced a Shops Bill giving effect to these proposals. But the Bill proved more controversial than had been expected, and had to be abandoned for lack of parliamentary time. Since then successive Governments have treated
  1698
  amendment of the Shops Act as best left to Private Members' legislation because of its controversial nature, and the history of subsequent attempts at such legislation suggests that the subject has become no less controversial over the years.
  In 1964 the report of the Crathorne Committee on Sunday Observance included recommendations for amendment of the Sunday trading provisions of the 1950 Act. In 1968 and in 1970 Lord Derwent introduced Bills based on these recommendations, but they failed to secure a passage through the House. More recently, on 10th November last year the hon. Member for the Isle of Ely (Mr. Freud) sought leave to introduce a Bill that would, he said, scrap all existing restrictions on what may be sold on Sundays. His motion was defeated by 197 votes to 93.
  Even more recently, however, the hon. Member for Shrewsbury (Sir Langford-Holt) was successful in obtaining an unopposed Second Reading for a Bill which would exempt from the early closing day requirement any shop which is entirely and exclusively operated by its owner. I am waiting with interest, as I am sure the hon. Gentleman is, to see whether the success of the hon. Member for Shrewsbury is indicative of a new consensus in the House on how the existing law could be improved.
  For the present, I am afraid that there continues to be no early prospect of Government legislation to amend the Shops Acts. That being so, I again express my thanks to the hon. Gentleman for affording me this opportunity to explain that the administration of those Acts, though not without its difficulties, does not present such intractable problems as some accounts of it would suggest.
  Question put and agreed to.
  Adjourned accordingly at nine minutes to Two o'clock.

PRICES AND CONSUMER PROTECTION
  National Consumer Council
  National Consumer Council
  Stockbrokers
  Stockbrokers
  JAPAN
  JAPAN
  INDIAN PRIME MINISTER
  INDIAN PRIME MINISTER
  No. 10 DOWNING STREET
  No. 10 DOWNING STREET
  PRIME MINISTER (ENGAGEMENTS)
  PRIME MINISTER (ENGAGEMENTS)
  ITALIAN PRIME MINISTER
  ITALIAN PRIME MINISTER
  PRESIDENT CARTER
  PRESIDENT CARTER
  OPPOSITION PARTIES (FINANCIAL ASSISTANCE)
  OPPOSITION PARTIES (FINANCIAL ASSISTANCE)
  POWER GENERATING INDUSTRY
  POWER GENERATING INDUSTRY
  BILDERBERG CONFERENCE, TORQUAY
  BILDERBERG CONFERENCE, TORQUAY
CIVIL SERVICE
  Refreshments
  Refreshments
AGRICULTURE, FISHERIES AND FOOD
  European Community (Ministers' Meeting)
  European Community (Ministers' Meeting)
  Butter Subsidy
  Butter Subsidy
  Pigmeat
  Pigmeat
  Sows
  Sows
  Pig Farmers
  Pig Farmers
  Vegetables
  Vegetables
DEFENCE
  Contracts
  Contracts
  Skyflash Missiles
  Skyflash Missiles
  Ingpen Trophy
  Ingpen Trophy
  Jetstream Aircraft
  Jetstream Aircraft
  RAF Stornoway
  RAF Stornoway
EMPLOYMENT
  Jobcentres
  Jobcentres
  Temporary Employment Subsidy
  Temporary Employment Subsidy
  Wages
  Wages
ENERGY
  Fuel Bills
  Fuel Bills
  Plutonium
  Plutonium
  Uranium
  Uranium
ENVIRONMENT
  Centres of Sporting Excellence
  Centres of Sporting Excellence
  Chelsea Football Club
  Chelsea Football Club
  Planning Policy (North-West London)
  Planning Policy (North-West London)
  Dog Licensing
  Dog Licensing
  Otters
  Otters
  Rating (Shop-dwelling Premises)
  Rating (Shop-dwelling Premises)
  Crime Prevention
  Crime Prevention
  Prisoners
  Prisoners
  Civil Defence
  Civil Defence
  Prisons (Drug Prescriptions)
  Prisons (Drug Prescriptions)
  Immigrants
  Immigrants
  Matrimonial Causes
  Matrimonial Causes
  Immigration
  Immigration
  Licensing Law Reform
  Licensing Law Reform
  Bilderberg Conference, Torquay
  Bilderberg Conference, Torquay
  Prostitution
  Prostitution
HOUSE OF COMMONS
  Members' Pay
  Members' Pay
NORTHERN IRELAND
  Forests (Fencing)
  Forests (Fencing)
  Glendermatt Link Road
  Glendermatt Link Road
  EUROPEAN PARLIAMENT (MEMBERS' ALLOWANCES)
  EUROPEAN PARLIAMENT (MEMBERS' ALLOWANCES)
OVERSEAS DEVELOPMENT
  Government Offices (Dispersal)
  Government Offices (Dispersal)
TRANSPORT
  Caravans
  Caravans
SOCIAL SERVICES
  Pharmaceutical Industry
  Pharmaceutical Industry
  Self-employed Persons
  Self-employed Persons
  Doctors' and Dentists' Pay
  Doctors' and Dentists' Pay
  Hypothermia
  Hypothermia
  National Health Service Staff
  National Health Service Staff
  Disabled Drivers
  Disabled Drivers
  Child Battering
  Child Battering
  Family Allowances (Personal Case)
  Family Allowances (Personal Case)
  Public Service Pension Schemes
  Public Service Pension Schemes
  Child Benefit
  Child Benefit
  Pensions
  Pensions
  Pay Beds
  Pay Beds
  Health Services Board
  Health Services Board
  Health Service Catering Manual (Volume 4)
  Health Service Catering Manual (Volume 4)
FOREIGN AND COMMONWEALTH AFFAIRS
  Anglo-Soviet Round Table
  Anglo-Soviet Round Table
  USSR and Africa
  USSR and Africa
INDUSTRY
  Assisted Areas
  Assisted Areas
  Government Aid
  Government Aid
  Grimsby
  Grimsby
  British Shipbuilders
  British Shipbuilders
TRADE
  Exports
  Exports
  Tourism
  Tourism
NATIONAL FINANCE
  Chancellor of the Exchequer
  Chancellor of the Exchequer
  Local Authorities (Borrowings)
  Local Authorities (Borrowings)
  Taxi-cabs
  Taxi-cabs
  Income Tax (Rebates)
  Income Tax (Rebates)
  Social Security Benefits
  Social Security Benefits
  Cornwall
  Cornwall
  Floating Rate Government Bond
  Floating Rate Government Bond
  Self-employed Persons
  Self-employed Persons
  Disabled Persons
  Disabled Persons
  National Savings
  National Savings
  Peers' Expenses Allowance
  Peers' Expenses Allowance
  Pensioners (Bonds and Shares)
  Pensioners (Bonds and Shares)
  Energy Conservation
  Energy Conservation
  Personal Incomes
  Personal Incomes
  Widowers
  Widowers
  Elderly Persons
  Elderly Persons
  Income Tax Payers
  Income Tax Payers
  Customs and Excise (Evasion)
  Customs and Excise (Evasion)
  Luncheon Vouchers
  Luncheon Vouchers
  Incomes Policy
  Incomes Policy
  Caravans
  Caravans
  Alimony
  Alimony
  Capital Transfer Tax
  Capital Transfer Tax
  Income Tax
  Income Tax
  Advance Corporation Tax
  Advance Corporation Tax
EDUCATION AND SCIENCE
  Teachers
  Teachers
  Schooling Costs
  Schooling Costs
SCOTLAND
  Craigie College
  Craigie College
  Small Businesses
  Small Businesses
  Leasehold
  Leasehold
  Salmon Netting (River Doon)
  Salmon Netting (River Doon)
  Criminology (Glasgow Fellowship)
  Criminology (Glasgow Fellowship)
  Atomic Energy Authority (Ayrshire Operations)
  Atomic Energy Authority (Ayrshire Operations)
  Kessock Bridge
  Kessock Bridge
  Health Services Board
  Health Services Board
  Otters
  Otters
  Rate Poundages
  Rate Poundages
WALES
  Government Publications
  Government Publications
  Abermule Bypass
  Abermule Bypass

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Manchester):
The LORD CHANCELLOR on the Woolsack.
The Viscount Cobham—Sat first in Parliament after the death of his father.

HELSINKI AGREEMENT: HUMAN RIGHTS
Lord JANNER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what representations they have made to the USSR in connection with breaches of the Helsinki Agreement, and in particular the serious harassment, including imprisonment, of Jewish people who have applied for visas enabling them to emigrate.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, both Ministers and officials have discussed the implementation of the Final Act of the Conference on Security and Co-operation in Europe with their Soviet counterparts on various occasions in recent months. They have made it clear that the Government and people of this country attach very great importance to respect for human rights and fundamental freedoms.
Lord JANNER: My Lords, I thank my noble friend for his reply and for the efforts which have so far been made by the Government. In view of the tragic and flagrant breaches of the Helsinki Agreement in respect of the matter I am raising, the fact that show trials are to take place which are similar to those sinister ones initiated by Stalin and the fact that an anti-Semitic campaign of a very vicious nature is taking place that is similar to that waged in Hitler's times—including steps with the media, for example very much like the shocking Sturmer publications of the Nazis—will my noble friend see to it that, in any further negotiations
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with the USSR, the Government point out that the people of this country are shocked by that kind of treatment and that we ought, not only by ourselves but with those other civilised nations with whom we are in contact, to do everything we can to prevent the escalation of that kind of campaign?
Lord GORONWY-ROBERTS: Certainly, my Lords. We shall continue to make this absolutely clear to any country that is in default of the basic human freedoms and human rights, as we have in the past both bilaterally and in concert with like-minded countries.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, will the noble Lord also bear in mind there are serious misgivings about the mistreatment of Christians in some of the satellite countries like Romania?
Lord GORONWY-ROBERTS: Yes, my Lords; I am well aware of that very important and poignant aspect. Both here in London and when one visits those countries, we make our attitude perfectly clear, I think not without some success. Progress is disappointing, but it is not discouraging.
Baroness GAITSKELL: My Lords, may I ask my noble friend the Minister whether we could not take a leaf out of President Carter's book and get down to the most basic human rights—and as the noble and learned Lord, Lord Hailsham of Saint Marylebone, said—for Jews and Christians, including, I may add, Baptists and politicians, to be allowed to leave and return to their own country. After all, the Soviets introduce every debate with a jumbo-resolution attacking us for colonialism, neo-colonialism, racism, Zionism, apartheid and imperialism. We listen to that day in and day out for three months in the Human Rights Committee of the UN.
Lord GORONWY-ROBERTS: My Lords, certainly we are in entire agreement with the noble Baroness in her comprehensive definition of human rights. Freedom, like peace, is indivisible.
Baroness ELLES: My Lords, can the Minister say whether any concerted action will be taken by other members of the

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Community and whether any Working Party is studying the question of a common stand being taken by the members of the Community at the Belgrade meeting?
Lord GORONWY-ROBERTS: Yes, my Lords; members of the Community are, like this country, engaged in bilateral representation. Also we are in close and continuous consultation on these matters in the Community, in NATO and in the Council of Europe.
Lord JANNER: My Lords, is my noble friend aware that I am entirely in agreement with the comments made regarding Christian and other denominations? May I, however, direct his attention and the attention of leaders and the people of our and other communities to the fact that the Hitler régime started its inhuman, bestial attacks on the Jewish community but that it went very much further later and attacked every other type of decent, civilised human being?
Lord GORONWY-ROBERTS: Yes, indeed, my Lords. As I said, freedom and freedom from persecution are indivisible. We are all in on this; it is a question of man's inhumanity to man. It is not confined to one section of humanity. On at least one occasion in this House my noble friend Lord Janner has pointed to the comprehensiveness of the threat which persecution of this kind presents, not only to the Jewish community but, as we have heard, to Christians, to people of no fixed religious faith and to people of all opinions, religions and races.

"PENSION AGE"
3.7 p.m.
Baroness Seear: 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 evidence there is for the assumption in the D.H.S.S. publication Pension Age, that if the retirement age for men is reduced to 60, "the retirement pattern of men between 60 and 65 would be the same as that exhibited at present by men between 65 and 70.".
Lord WELLS-PESTELL: My Lords, any estimate of how people will behave in a situation which does not yet exist is bound to be arbitrary and, I would recognise, open to question. As a working assumption, it was decided to take the retirement pattern which men follow in the five years after their present minimum pension age, and subsequent work has examined the implications of the alternative assumption that the same proportion of men would remain at work between the ages of 60 and 64 as do single women of those ages. However, as I say, I recognise that this is an assumption and that it is open to question.
Baroness SEEAR: My Lords, I thank the noble Lord for his reply. Would he not agree that it is quite extraordinary that important social policies should be based on grounds so flimsy as those he has given us—so flimsy, for example, as the assumption that men at the age of 60 will, in their retirement habits, behave in the same way as single women, for which assumption there is no scientific basis whatsoever? This assumption affects policy regarding an equal retirement age for men and women and also employment. We badly need a more scientific study to determine what reasonable expectations there would be if changes of this kind were brought about.
Lord WELLS-PESTELL: My Lords, I accept entirely what the noble Baroness has said, but in an attempt to find out how much it would cost to bring in an earlier retirement age one is faced with the fact that there are two extremes: that no man would take advantage of a reduced pension age to retire earlier than at present and, at the other extreme, that all men would retire at the new pension age of 60. We know that neither is likely to happen. There is no guide in any other country of the EEC as to how this cost could be calculated. With all its limitations and imperfections, this was a sincere attempt to try to get an answer. It may not have told us anything, but we are in the process of preparing a Paper on this very matter for an organisation with which the noble Baroness is associated.
Lord BYERS: My Lords, the Minister has been good enough to admit the total illogicality of the assumption which has been made. Is he able to tell my noble

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friend whether or not the Government will initiate a new scientific study to find out what should be the basis for social policies regarding the pattern of retirement if this change comes about?
Lord WELLS-PESTELL: My Lords, as I tried to point out, we are not unaware of its limitations and I can only say—and I really mean this—that we are looking at this matter because we recognise its limitations. But at the moment I cannot say along what lines that will be done, other than that we arc not ourselves altogether happy about it.
Lord BANKS: My Lords, would it not have been possible to make a number of alternative assumptions, thus giving an indication of the possibilities with regard to cost?
Lord WELLS-PESTELL: Yes, my Lords, if we could be sure of the nature of the assumptions that we can make. I say very sincerely that if the noble Baroness or the noble Lord have any thoughts on this matter we should be glad to hear them.
Lord HARMAR-NICHOLLS: My Lords, in order to maintain the standing that a Government publication ought to have, if the Government do not know, is there anything wrong with them saying in their publications that they do not know?
Lord WELLS-PESTELL: My Lords, surely that is precisely what the Government have done and that is what the complaint is about. We have recognised that it is arbitrary and we have said so very clearly.
Lord LEATHERLAND: My Lords, may I ask my noble friend whether, instead of thinking about spending extra Government money on giving pensions at 60, they will perhaps consider it more desirable to increase the rate of pension for those who are over 70?
Lord WELLS-PESTELL: My Lords, we are aware that there is a substantial body of opinion which would like to see an earlier retirement age, whether it be at 60, 61, 62, 63 or 64. We have been trying
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to assess what that is going to cost, because, as noble Lords will know, it is difficult to pitch at a particular age unless one knows what the cost involved will be.

THE DEVELOPING NATIONS: ROME SUMMIT
3.12 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what conclusions were reached at the Rome Summit meeting of the EEC regarding economic co-operation with the developing nations, particularly in regard to the establishment of a Common Fund to support commodity prices and to a reconsideration of the payment of debts owed by the developing world to the West; and what contribution the British representatives made to these decisions.
Lord GORONWY-ROBERTS: My Lords, as my right honourable friend the Prime Minister indicated in another place, at the conclusion of the European Council in Rome, the Community agreed that there should, where appropriate, be commodity price stabilisation agreement and that there should be a Common fund. The Community also agree that there should be a study of export earnings stabilisation measures for the developing countries and of special action in the context of debt and the transfer of resources. The United Kingdom, both nationally and as the Presidency representative, played a leading role in the Rome discussions.
Lord BROCKWAY: My Lords, while thanking the noble Lord for that Answer and welcoming those decisions—it is the first time that the principle of the Common Market has been accepted as an international concept—may I ask whether any steps are being taken to obtain contributions to the financing of the Common Fund from the OPEC and Communist blocs as well as from the West?
Lord GORONWY-ROBERTS: Yes, my Lords. The next phase of discussions will concern detailed examination of the

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sort of fund which could be economically desirable to all parties, and that would include the considerations that my noble friend has just advanced.
Lord BROCKWAY: My Lords, if I may ask a wider question, is it now recognised that some arrangement, as President Carter has said, for a new international economic order is absolutely necessary if the stagnant condition in the West is to be dealt with, and will particular attention be paid to the proposal that the EEC should stabilise commodity prices with all developing countries as well as with those which are associated with it?
Lord GORONWY-ROBERTS: Yes, indeed, my Lords. We are in fairly full agreement with the attitude of the American President on this matter. Indeed— my noble friend asked me to clarify this—the EEC has taken a most encouraging stand, both on the Fund and on the related questions of stabilisation, debt and the transfer of resources. We are moving forward to some very important studies, including a study of the position relating to some 18 commodities. I think that would cover the larger ambit of developing countries that my noble friend had in mind. There is nothing in the attitude of the EEC which is at variance with the American initiative. I believe everything in it is in conformity with that initiative.
Lord BARNBY: My Lords, when these questions of international indebtedness are raised internationally, is it not the Government's intention to press for the utmost rectitude in the repayment of international indebtedness? Secondly, with regard to raw materials, if the Government uphold the idea of supporting international arrangements to avoid fluctuations in the prices of raw materials, what sort of sum do the Government contemplate will be necessary to control raw material prices?
Lord GORONWY-ROBERTS: My Lords, on the first point in connection with debt, the noble Lord will recall that I have said that the Community agreed that there should be a study of export earnings, stabilisation agreements and a study of special actions in regard to debt and the transfer of resources. It would be rather early to indicate the approach
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to the question of indebtedness. As the noble Lord will know, there are various techniques and possibilities.

SINN FEIN: FUND RAISING MEETING
3.16 p.m.
The Earl of KIMBERLEY: 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 why Sinn Fein were allowed to organise a collection in Hammersmith in conjunction with a trade union committee on 27th March for raising funds to help finance a "campaign of harassment" against police stations in Britain.
Lord WELLS-PESTELL: My Lords, we understand that at a public meeting held by the Trade Union Committee Against the Prevention of Terrorism Act a collection was made to provide funds for that organisation. If there were any evidence that the money was collected or used for an illegal purpose the police would take appropriate action.
The Earl of KIMI3ERLEY: My Lords, while thanking the noble Lord for that Answer, may I ask whether he can say how it will be possible ever to prove this, although that fact was stated? Are not flying pickets illegal in this country, and is it not almost a subversive activity against the police to hold meetings of this sort?
Lord WELLS-PESTELL: My Lords, this particular meeting was perfectly all right. For example, Sinn Fein is not a proscribed organisation in Great Britain nor, for that matter, is it proscribed in Northern Ireland. But to come to the point made by the noble Earl about the funds, fund raising for terrorism connected with Northern Ireland is punishable under Section 10 of the 1976 Act—where funds raised are intended for terrorism. In fact four people have been charged under that section: one was acquitted, and three were convicted and sentenced to 10 years, eight years and two years' imprisonment respectively.
Viscount ST. DAVIDS: My Lords, is the noble Lord quite right in saying that there cannot be any accusation or charge unless it is proved that this fund was used for that purpose? If the fund was stated to be used for the purpose and not used for it, surely it was collected for one purpose and used for another, and that also would be actionable?
Lord WELLS-PESTELL: My Lords, if I may say so with great respect, so far as the Question is concerned we are dealing with the subject of monies collected for the purposes of terrorism, and it was to that Question that I tried to address myself.
Lord INGLEWOOD: My Lords, may I ask the noble Lord whether his original Answer indicated that the information in the possession of the noble Lord was different from his information and that in fact this money was not collected to help finance a campaign of terrorism? If so, will he make it clear? On the other hand, if he has doubts about whether it was or was not, will he also make that clear?
Lord WELLS-PESTELL: My Lords, what I said to your Lordships, and I cannot add to it, was that if there were any evidence that the money was collected or used for an illegal purpose the police would then take appropriate action. So far as this particular meeting was concerned it was perfectly all right for a collection to be taken. My information is that the meeting was held at the Hammersmith Town Hall and it was perfectly proper for them to take a collection. It is the purpose for which the money is collected and used that matters, and if that comes under the appropriate Act it is then for the police to take action.
Lord CLIFFORD of CHUDLEIGH: My Lords, is it not a fact that the funds were actually collected for the "Troops Out" campaign, and is that not just another way of putting the funds in a certain direction?
Lord WELLS-PESTELL: My Lords, ' I have no information as to the specific purpose of the fund. What I am saying is that if money is raised for illegal purposes which come under the Prevention
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of Terrorism (Temporary Provisions) Act 1976, action can be taken, and I think I satisfied your Lordships that in the past action has in fact been taken.

EDUCATION NORTHERN IRELAND) BILL [H.L.]
Lord DUNLEATH: My Lords, I beg to introduce a Bill to facilitate the establishment in Northern Ireland of schools to be attended by pupils of different religious affiliations or cultural traditions. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a.—(Lord Dunleath.)
Question, Bill read 1a, and to be printed.

RENT BILL [H.L.]
3.20 p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I beg to move that this Bill be now read a second time. This Bill consolidates the Rent Act 1968 and a number of subsequent enactments. The 1968 Act was itself a consolidating Act. It performed a useful service in bringing under one cover several complicated Statutes, the earliest of which was enacted in 1920, and whose provisions were once described by a learned Lord Justice as "a welter of chaotic verbiage". The history of rent control and security of tenure goes back to the First World War, and yet the present Bill is only the second piece of consolidating legislation in this field. Useful as was the 1968 Act at the time, subsequent developments in the constantly evolving housing situation and its treatment have rendered it now merely one of several Acts bearing on this subject, and the time has come for further consolidation.
This Bill, which has been prepared by the Law Commission, for whose continuing work in this field we have cause to be grateful, follows, so far as is possible, the structure of the Rent Act 1968. There has inevitably been some re-arrangement of old material, and some parts of the Bill deal with new subjects introduced into the Rent Act since 1968. In addition to the Rent Act 1968, the enactments con-

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solidated include: first, Part III of the Housing Finance Act 1972, which provides for the conversion of controlled tenancies in good repair and possessing the standard amenities into regulated tenancies, and which replaces a broadly similar scheme introduced by Part III of the Housing Act 1969; secondly, Part IV of the Housing Finance Act 1972, which contains a number of miscellaneous provisions and which, as originally enacted, provided for the automatic decontrol of all controlled tenancies by stages spread over a number of years.
Section 35 was repealed by the Housing Rents and Subsidies Act 1975 before all the stages had been completed, but some controlled tenancies were converted into regulated tenancies under that section and the consolidation takes account of these conversions; thirdly, Part VIII of the Housing Finance Act 1972, which introduced a new form of rent control for tenancies of housing associations, housing trusts and housing corporations; fourthly, Section 14 of, and Schedule 5 to, the Counter-Inflation Act 1973, which extended the protection of the Rent Acts to certain high rateable value dwelling houses previously excluded; fifthly, Section 18 of, and Schedule 3 to, the Housing Act 1974, which altered the rules by which housing association tenancies are exempt from the general scheme of protection under the Rent Acts; sixthly, the Rent Act of 1974 itself, which extended full protection under the Rent Acts to the majority of furnished tenancies, in place of the special, and limited, protection given to furnished lettings by the 1968 Act; and finally, Sections 7 to 10 of the Housing Rents and Subsidies Act 1975.
The provisions of the Rent (Agriculture) Act 1976, which extended rent control and security of tenure to agricultural tied cottages, have not been incorporated in this Bill. The system of protection afforded by that Act, while broadly following the Rent Acts, exhibits a number of differences and has been designed to stand as a separate scheme. Adding its provisions to the consolidation would have meant an increase of some 70 pages in an already long and complicated Bill without benefiting the great majority of its users, who would not be concerned with the special provisions made for agricultural tied cottages. My Lords, I beg to move.
Moved, That the Bill be now read 2a.—(The Lord Chancellor.)
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I do not think the House need detain itself long over this measure, but I would wish to congratulate the noble and learned Lord the Lord Chancellor on his continued work on the consolidation of British Statute Law, with the aid of the Law Commission. This particular consolidation Act provokes in me a melancholy reflection. It is the lineal descendent of a series of Statutes which began in 1915 designed to deal with what was thought to be the temporary housing shortage of the First World War, and it, like the squalid buildings in the courtyards of the Royal Courts of Justice, Strand, form a melancholy commentary on the French adage, "Il n'y a rien ainsi permanent que le proviso ire". I would only close my remarks by saying that, if only this country had pursued policies to provide enough housing for its people, rent control would be unnecessary and security of tenure could be put on a rational basis.
Lord JANNER: My Lords, I should like to add a word of congratulation to the noble and learned Lord the Lord Chancellor and to those who have participated in what I consider to be an extremely important endeavour to facilitate the understanding of a very complicated set of Acts, which, as the noble and learned Lord, Lord Hailsham, has said, started in the year 1915. I do not think this is the time to raise any question as to the advantages or disadvantages of these Acts, but merely to refer to the fact that it is important that the public generally and the legal profession in particular, should have some clearer understanding of what they all mean and what principles they stand for. I have never known, in a very long experience in the profession, extending over some 50 years now, any measures which have caused so much difficulty in understanding what they really mean and which have caused such differences of opinion among the learned authorities who have sat as judges in the interpretation of the various Acts.
I think the Rent Acts have proved a boon to this country, but, as I say, this is not the time to discuss that. I think this shows that the Government are very

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deeply concerned about helping the public and the professions to have in consolidated form our laws on specific subjects, that is some kind of complete form, or as complete as one can possibly make measures of this nature. With great pleasure I shall once again join in endeavouring to understand and perhaps eventually bring into effect, hopefully not in the very distant future, this very important measure. I hope that when Acts are consolidated, the Government, as previous Governments of all shades have done, will do their best to produce publications that are easily readable, so that the man in the street can understand the effects of the various provisions.
On Question, Bill read 2a and referred to the Joint Committee on Consolidation Bills.

STATUTE LAW (REPEALS) BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

MERCHANT SHIPPING (SAFETY CONVENTION) BILL [H.L.]
3.32 p.m.
Lord ORAM: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Lord Oram.)
Lord LYELL: My Lords, at this stage of the Bill perhaps I might thank the noble Lord, Lord Oram, for all the help that he was able to give us at an earlier stage. May I say how welcome this Bill will be in the merchant shipping industry and how the Bill, and particularly your Lordships' deliberations, were welcomed by both sides of the industry. I hope that the noble Lord will take note of the comments and the happiness that we have caused outside the House.
On Question, Bill read 3a, and passed, and sent to the Commons.

PATENTS BILL [H.L.]
3.34 p.m.
Report of Amendments received.
Clause 1 [Patentable inventions]:
Lord ORAM Lord ORAM moved Amendment No. 1:
Page 2, line 4, leave out from end to ("mathematical") in line 6 and insert (",scientific theory or")
The noble Lord said: My Lords, I beg to move the first Amendment on the Marshalled List. This Amendment is of a purely drafting nature, the purpose of which is to group discoveries, scientific theories and mathematical methods together in one paragraph, as is done in Article 52(2)(a) of the European Patent Convention. My Lords, I beg to move.
On Question, Amendment agreed to.
Clause 2 [Novelty]:
Lord ORAM Lord ORAM moved Amendment No. 2:
Page 3, line 1, leave out from ("invention") to ("was") in line 3 and insert ("to which an application for a patent relates shall be taken also to comprise matter contained in another application for a patent which").
The noble Lord said: My Lords, in moving Amendment No. 2 I should also like to speak to Amendment No. 3 which is purely consequential upon No. 2. These Amendments deal with the problem of so called "self-collision" which was raised by noble Lords opposite during the Committee stage and which I promised to look into. Taken together, the Amendments make it clear that the state of the art for the purposes of subsection (3) cannot include the matter contained in the application in suit and so cannot be used to attack an invention to which that application relates; only matter contained in another application may be used. In other words, it will not be possible for an applicant to be defeated by the disclosure in his own application. Since the matter was raised in Committee, I am now persuaded that this is the intention and effect of the corresponding provision in Article 54(3) of the European Patent Convention. My Lords, I beg to move.
Lord BELSTEAD: My Lords, as the noble Lord, Lord Oram, has said, in Committee my noble friends and I tabled Amendments relating to the problem of

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what is known as "self-collision". The Government have dealt with this, making it clear that the state of the art cannot include matter contained in the application in suit. In addition, in Committee I also moved an Amendment which referred to a case where the application in suit becomes a divided out application. The Government have not met that point, but they have met the first point to which we directed our Amendments, and for that at any rate I am grateful.
On Question, Amendment agreed to.
Lord ORAM Lord ORAM moved Amendment No. 3:
Page 3, line 6, after second ("that") insert ("other").
On Question, Amendment agreed to.
Lord ORAM Lord ORAM moved Amendment No. 4:
Page 3, line 14, after ("application") insert ("for the patent").
The noble Lord said: My Lords, this is purely a drafting Amendment, to make it clear that it is the application for the patent already referred to in the subsection to which reference is made in line 14. I beg to move.
On Question, Amendment agreed to.
Lord ORAM Lord ORAM moved Amendment No. 5:
Page 3, line 15, leave out ("made possible by") and insert ("due to, or made in consequence of,").
The noble Lord said: My Lords, in moving Amendment No. 5 I should also like to speak to Amendment No. 6, as both deal with the same point. Article 55 of the European Patent Convention specifies that a disclosure of the invention is to be disregarded if it was due to or in consequence of acts of the kind stipulated in that article. Clause 2(4) is intended to parallel Article 55 and, on further reflection of representations which have been made, we are persuaded that Clause 2(4) needs to be amended. The clause deals adequately with the situation where the disclosure was due to a breach of confidence or a display at an international exhibition. However, it is arguable that Clause 2(4)(a) does not clearly deal with a disclosure in consequence of a breach of confidence, and Clause 2(4)(c) omits the possibility of a disclosure in consequence of a display at an exhibition. These two Amendments put matters right.
On Question, Amendment agreed to.
Lord ORAM Lord ORAM moved Amendment No. 6:
Page 3, line 33, leave out ("effected by") and insert ("due to, or made in consequence of.").
On Question, Amendment agreed to.
Clause 5 [Priority date]:
Lord ORAM Lord ORAM moved Amendments Nos. 7 and 8:
Page 5, line 3, leave out from ("filed") to ("by")
Page 5, line 8, at end insert—

(a) it was filed in or in respect of the same country as the first; and

(b)").

The noble Lord said: My Lords, I should like to move Amendments Nos. 7 and 8 together. Amendment No. 7, is a small but quite important technical Amendment which puts into the correct place in Clause 5(3) the reference to the "same country", which was introduced in Committee. To put it as briefly and simply as possible, the purpose of the general provision of the subsection is that a first priority application renders ineffective a later priority application for the same invention or matter. For this purpose the place of filing of the two applications is not relevant. However, there is an exception to the general provision brought in by the word "unless" in line 8. For the purposes of this exception it is necessary under the Paris Convention that both applications be filed in the same country. The Amendment thus transfers to its rightful place in the subsection the reference to the "same country". I beg to move.
Lord BELSTEAD: My Lords, when this clause was being debated in Committee the noble Lord, Lord Oram, moved a series of Amendments which the noble Lord claimed were to clarify the situation dealt with in Clause 5(3). On that occasion we had also tabled a small Amendment which would have placed very much the same words as are now contained in Amendment No. 8 in exactly the same place as they are to be placed by Amendment No. 8. However, in Committee we could not believe that for once an Amendment of ours might be right and the Government Amendments might be wrong, because the practice which this Bill has given to the Government Front Bench in drafting Amendments has made them experts, so we withdrew our Amendment. I am delighted that on

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this occasion we were on the right track. I have pleasure in supporting these Amendments.
On Question, Amendments agreed to.
Lord ORAM Lord ORAM moved Amendment No. 9:
Page 5, line 25, leave out subsection (5).
The noble Lord said: My Lords, this Amendment arises from the recognition that the term "matter" as used in Clause 5 (5) in relation to what is disclosed in a patent application could cause the term "matter" as used elsewhere in the Bill to be given a meaning which is not intended and, in particular, prevent applications and patents from being amended by way of disclaimer and acknowledgment of prior art. The deletion of Clause 5 (5) is offset by Amendment No. 162 to Clause 122 in order to establish what meaning the term "matter" is to have in the Bill. I beg to move.
Lord LYELL: My Lords, we are grateful for the explanation that the noble Lord, Lord Oram, has given over this particular subsection because it was not immediately apparent from the deletion of the subsection why the word "matter" was going to be involved. I had remembered at an earlier stage discussing with the noble and learned Lord, Lord McCluskey, the relevance of the word "matter", but we understand that Amendment No. 162, to which we shall be coming probably at some considerable stage in the future, is intended to rectify the error that the Government seem to believe is existent in this clause.
It seems that when we come to Clause 122 we are dealing more with the definitions, because I see that Amendment No. 162 is of the nature of a defining paragraph. I take what my noble friend Lord Belstead said, that the Government are becoming more expert in these affairs of drafting, but I think that this goes a little beyond drafting. I hope this is relevant. The noble Lord, Lord Oram, has given us an explanation which I think is satisfactory, but we should like to study it. We are coming near the end of the stages when we can continue the discussion, but I think that we are satisfied at this stage and we accept the Amendment.
On Question, Amendment agreed to.
Clause 7 [Determination before grant of questions about entitlement to patents, etc.]:
3.45 p.m.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey)The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey) moved Amendment No. 10:
Page 6, line 14, leave out ("to which this section applies").
The noble and learned Lord said: My Lords, with your Lordships' permission I should like to speak to Amendments Nos. 12 and 14 at the same time as I speak to Amendment No. 10. The first two Amendments, that is Nos. 10 and 12, are purely paving Amendments for the principal Amendment, which is No. 14. They simply remove the references in Clause 7 to applications other than purely domestic applications. The third and major Amendment seeks to insert a new clause to deal with these applications and I will concentrate upon that clause. The general scheme of the new clause is parallel to that of Clause 7, with appropriate modifications to deal with the issues which will actually arise.
Perhaps I can point to what the principal modifications are. Since subsection (1) of the new clause does not seek to apply Clause 7(1) but stands on its own, it becomes clear that the question to be determined is the question of entitlement under the foreign law or treaty concerned and not under the domestic law. Thus, if the comptroller has to decide a question about a Brazilian patent, for example, he will, if it is relevant and appropriate, hear evidence on Brazilian law and apply that. If he has to decide a question on a European patent, he will apply Article 60 of the European Patent Convention. In this respect the new clause is part of the general move towards making the Bill as European as possible, in response to suggestions made during Committee.
Subsection (5) is relevant to European cases. It makes Clause 10 apply both to the comptroller's decisions under the proposed new clause and to parallel decisions of other countries where it is they, and not the United Kingdom, who have jurisdiction under Clause 80. Thus, if there is a complete change of proprietorship, licences and the like will lapse subject to safeguards for a licensee who has acted in good faith. This is in line with Article 28 of the CPC.
Subsection (6) is parallel to Clause 7(3). It may appear complicated, but it is included primarily for the benefit of the small inventor. If somebody takes another's invention and applies for a patent for it, it is wrong for the true inventor to be stuck with the applicant's choice of the type of patent to apply for. The true inventor, particularly if he is a small inventor, may not want to go to the additional burden of prosecuting an application before the European Patent Office. Subsection (6) accordingly provides that in analogous cases to those dealt with by Clause 7(3) the true inventor may file a new United Kingdom application. I beg to move.
Lord LLOYD of KILGERRAN: My Lords, now that we have passed through the dangerous seas of invention, novelty and self-collision, may I say that we support this Amendment particularly as the noble and learned Lord referred to the fact that it would be of assistance to a small inventor. In all these Amendments which the Government are putting forward it is necessary to realise that much established patent law and the phraseology associated with patent law have now been changed in view of the desirability of harmonising the national law with Community law. Some of us believe that perhaps the spirit of harmonisation and conformity with EEC law has gone a little too far, but that perhaps is inevitable. Of course it may lead to expensive litigation arising because of the change in phraseology and the construction of these new words.
Nevertheless, with the leave of the House, I should like at this stage to express my gratitude to the noble Lord, Lord Oram, the noble and learned Lord, Lord McCluskey, and the noble and learned Lord the Lord Chancellor, for all the letters they have written to me about the points I raised at Committee stage. I should like to thank them and their advisers for the arduous work they have done on this matter during the Easter Recess.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 11:
Page 7, line 25, leave out from ("date") to end of line 26 and insert ("of filing the earlier application").
The noble and learned Lord said: My Lords, this is a drafting Amendment to make it clear that it is not necessarily the actual date of filing of the earlier application which matters for the purpose of Clause 7(3), but the date of filing as determined by Clause 13. The present wording is thought to be ambiguous in this respect and the Amendment is designed to make it clear. I beg to move.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 12:
Page 8, line 15, leave out subsection (9).
On Question, Amendment agreed to.
Clause 9 [Handling of application by joint applicants]:
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 13:
Page 9, line 31, leave out ("application") and insert ("applicant").
The noble and learned Lord said: My Lords, as noble Lords will see, this corrects a clerical error in the present draft.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 14:
After Clause 10, insert the following new clause:
Determination of questions about entitlement to foreign and convention patents, etc.

.—(1) At any time before a patent under the law of any country other than the United Kingdom or under any treaty or international convention has been granted for an invention (whether or not an application has been made for that patent)—

(a) any person may refer to the comptroller the question whether he is entitled to be granted (alone or with any other persons) any such patent for that invention or has or would have any right in or under any such patent or an application for such a patent; or

(b) any of two or more co-proprietors of an application for such a patent for that invention may so refer the question whether any right in or under the application should be transferred or granted to any other person;

and the comptroller shall determine the question so far as he is able to and may make such order as he thinks fit to give effect to the determination.

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(2) If it appears to the comptroller on a reference of a question under this section that the question involves matters which would more properly be determined by the court, he may decline to deal with it and, without prejudice to the court's jurisdiction to determine any such question and make a declaration, or any declaratory jurisdiction of the court in Scotland, the court shall have jurisdiction to do so.

(3) Subsection (1) above, in its application to a European patent and an application for any such patent, shall have effect subject to section 80 below.

(4) Section 9 above, except so much of it as enables the comptroller to regulate the manner in which an application is to proceed, shall apply to disputes between joint applicants for any such patent as is mentioned in subsection (1) above as it applies to joint applicants for a patent under this Act.

(5) Section 10 above shall apply in relation to—

(a) any orders made under subsection (1) above and any directions given under section 9 above by virtue of subsection (4) above; and

(b) any orders made and directions given by a court or other competent authority having jurisdiction under the European Patent Convention to decide a question corresponding to any question which may be determines under subsection (1) above;

as it applies to orders made and directions given apart from this section under section 7 or 9 above.

(6) In the following cases, that is to say—

(a) where an application for a European patent (UK) is refused or withdrawn, or the designation of the United Kingdom in the application is withdrawn, after publication of the application but before a question relating to the right to the patent has been referred to the comptroller under subsection (1) above or before proceedings relating to that right have been begun before any competent authority having jurisdiction with respect to that right under the European Patent Convention:

(b) where an application has been made for a European patent (UK) and on a reference under subsection (1) above or any such proceedings as are mentioned is paragraph (a) above, the comptroller, the court or any other authority having jurisdiction under that convention determines by a final decision (whether before or after publication of the application) that a person other than the applicant has the right to the patent, but that person requests the European Patent Office that the application for the patent should be refused; or

(c) where an international application for a patent (UK) is withdrawn, or the designation of the United Kingdom in the application is withdrawn, whether before or after the making of any reference under subsection (c) above but after publication of the application;

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the comptroller may order that any person (other than the applicant) appearing to him to be entitled to be granted a patent under this Act may make an application for such a patent for the whole or part of any matter comprised in the earlier application (subject, however, to section 74 below) and that if the application for a patent under this Act is filed, it shall be treated as having been filed on the date on which the earlier application was filed.

(7) In this section—
references to a patent and an application for a patent include respectively references to protection in respect of an invention and an application which, in accordance with the law of any country other than the United Kingdom or any treaty or convention, is equivalent to an application for a patent or for such protection; and

a decision shall be taken to be final for the purposes of this section when the time for appealing from it has expired without an appeal being brought or, where an appeal is brought, when it is finally disposed of.

The noble and learned Lord said: My Lords, I have already spoken to the substance of this Amendment.
On Question, Amendment agreed to.
Clause 12 [Making of application]:
Lord ORAM Lord ORAM moved Amendment No. 15:
Page 10, line 28, leave out from ("made") to ("and") in line 30 and insert ("in the prescribed form and shall be filed at the Patent Office in the prescribed manner").
The noble Lord said: My Lords, this Amendment is of a mainly drafting nature, the purpose and effect of which is clearly the distinction between "making" an application and "filing" an application. The prescribed form of an application relates to its "making" which, of course, occurs before it is physically "filed" at the Patent Office. The prescribed manner relates to the actual "filing" of the application in the Office.
On Question, Amendment agreed to.
Clause 14 [Publication of application]:
Lord BELSTEAD Lord BELSTEAD moved Amendment No. 16:
Page 13, line 3, leave out ("as filed").
The noble Lord said: My Lords, I will, with the permission of the House, speak at the same time to Amendments Nos. 17 and 18. The need for these three Amendments arises from Amendments tabled to Clause 67 in Committee.

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On that occasion my noble friends and I tabled an Amendment to Clause 67 designed to protect the position of someone who infringes a patent because, unknown to the infringer, the patent application published under Clause 14 has subsequently been amended. The Government also tabled an Amendment to Clause 67 and, during the debate which took place on both Amendments, the noble Lord, Lord Oram, undertook to look at the matter again. On 29th March the noble Lord wrote to me saying:
"Clause 67(1) gives an applicant a right to sue for damages as if a patent had been granted on the date of the publication of the application. Subsection (2) contains some restrictions on the right, the one with which we arc concerned being that set out in paragraph (b), i.e. that the act complained of would have infringed the last specification to be filed which was contained in the application at that date. Thus, any amendments to the specification filed after the date of publication under Clause 13"—
which is now Clause 14—
"will not be taken into account under Clause 67(2)(b)".
The noble Lord added:
"It is our intention to publish the application as filed under Clause 13 together with any amendments filed up to that date, so there will be no question of a person infringing a document about which he cannot reasonably know".
I accept that explanation of the effect of Clause 67(2)(b) and I am grateful to the noble Lord for the explanation he gave me and for the other letters he wrote to me. However, it now seems desirable to write the effect of that explanation into Clause 14. The effect of these three Amendments is to do just that.
Amendment No. 16 is a paving Amendment, while Nos. 17 and 18 provide that the comptroller shall publish an application
"…as filed, together with any amendments to the specification filed up to that date"—
either as soon as possible after the period to be prescribed by rule or, if the applicant so requests, during the prescribed period. I might add that although the only debate on this point in Committee related to Clause 67, there is a cross-reference so far as this matter is concerned with Clause 54(2)(b), which puts Government Departments on the same footing as private individuals as regards payment for infringement between the publication of an application and grant of an application. I am therefore trying to write the
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undertaking which Lord Oram gave me into Clause 14, the clause which deals with the publication of applications.
Lord ORAM: My Lords, I am grateful to the noble Lord, Lord Belstead, for what he said, for raising this point and for drawing attention to this defect in Clause 14. He referred to correspondence between us. That is an indication that, although at this stage we have not ourselves tabled an Amendment, we have been considering the problem along the lines of the letter from which he quoted. However, the Amendments proposed by the noble Lord go too far, since it is only the last filed claims which it is intended to publish under Clause 14 together with the application as filed, these being the claims that will be effective for the purpose of the rights following publication under Clause 67 and payment for Crown use under Clause 54. Moreover, in publishing only the last filed claims, we would be consistent with the European Patent Convention.
I will of course undertake to consider very carefully what Lord Belstead has said, and it seems from his remarks that he agrees that we are both seeking the same end in this matter. At a later stage, when we have further considered the matter, we will table a suitable Amendment to meet his point. I hope that, with that assurance, he will not press the Amendment.
Lord BELSTEAD: My Lords, I am grateful to the noble Lord for that undertaking. I should like to study what he said about the last filed claims and to see whether, from what he said, the Amendment which the Government intend to table achieves the same objective as I have in mind. In the meantime, I am only too happy to wait and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 15 [Preliminary examination and search]:
3.58 p.m.
Lord ORAM Lord ORAM moved Amendment No. 19:
Page 14, line 30, leave out subsection (8).
The noble Lord said: My Lords, with the leave of the House, I will speak at the

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same time to Amendment No. 155. Clause 15(8) makes provision for remission of all or part of the search fee in cases where the applicant discloses the results of an official search. There are, however, other cases where remission of a fee would be appropriate. For example, where the applicant has paid an additional fee, in accordance with Clause 15(6), for a search to be made on a second invention contained in his application and he subsequently files a divisional application for the second invention, it should be possible for a remission of the search fee paid in respect of the divisional application to be made. We consider therefore that remission of fees would be better dealt with in the rules which will, in any case, provide for the fees to be charged. Accordingly, Amendment No. 19 deletes Clause 15(8) and Amendment No. 155 to Clause 116(2) allows rules to be made providing for remission of fees.
Lord LYELL: My Lords, we had intended to ask the noble Lord for a reasonable explanation as to why what we saw as an apparently harmless provision was to be deleted. However, he has given a quite detailed explanation and has explained that the provisions which we thought were admirable are contained in, I think he said, Amendment No. 155. We are grateful to him for his explanation and perhaps I may express my gratitude to the noble Lord and his advisers in the Department for the letters and communications that we received as a result of our deliberations at an earlier stage. They were most welcome and most clear and enabled us to obtain a better understanding of the Bill and of the Government's intentions.
On Question, Amendment agreed to.
Clause 16 [Substantive examination and grant or refusal of patent]:
Lord ORAM Lord ORAM moved Amendment No. 20:
Page 14, line 40, leave out ("relevant").
The noble Lord said: My Lords, this Amendment is pure drafting. It is intended that there shall be only one prescribed period for requesting examination and paying the fee. The word "relevant" suggests, however, that there may be different periods. The Amendment by
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removing the word thus clarifies the situation. I beg to move.
On Question, Amendment agreed to.
4.2 p.m.
Clause 20 [Information prejudicial to defence of realm or safely of public]:
The Earl of HALSBURY The Earl of HALSBURY moved Amendment No. 21:
Page 16, line 41, leave out ("from") and insert ("before").
The noble Earl said: My Lords, with the leave of the House, I should like to take together, for the purposes of debate, Amendments Nos. 21, 22, 23, 25, 26 and a manuscript Amendment to leave out Clause 21. Amendment No. 22 and the manuscript Amendment represent the nub of the matter, but the other Amendments would be useful improvements if I am persuaded to withdraw Amendment No. 22 and the manuscript Amendment. I raised these matters on Second Reading and withdrew in Committee, reserving the right to raise them again, and I now want to come back to them at Report stage.
Amendment No. 21 removes the ambiguous word "from" in favour of the more definite "before". It could of course be "after" but this reading could inflict great hardship, as it would appear to prevent the inventor from obtaining a foreign patent if the prescribed period referred to in the subsection coincided with the convention date. Therefore, there should be a period of grace before the expiry of the prescribed period in which the inventor can take action.
Amendment No. 23 deals with an absolutely intolerable situation for a British resident who makes an invention while visiting the United States of America. I have already told, in Committee, of my friend the Nobel Prize winner who committed an offence in this country by patenting an invention in America. He could have been fined £1,000 and sent to prison for two years. Had he patented this invention anywhere else than in America, he would have been committing an offence under United States law and Section 184 of their Patents Act, which requires anyone making an invention in the United States to patent it in the United States if he patents it at all. This

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unfortunate inventor was in the position that whichever country he patented the invention in he was committing an offence under the laws of the other.
It might have resulted in his not being able to visit the United States again because he would have rendered himself liable to arrest, so he would have had to sacrifice his honorary professorship and his consultancy; or, upon returning to Britain, he might have been in the doghouse here. The Amendment simply confines offences under the clause in question to inventions made in the United Kingdom. It therefore aligns our law with that of the United States. Amendments Nos. 25 and 26, in conformity with my feelings upon this matter, simply reduce the penalties under Section 21 to a simple fine not exceeding £100, and remove the offence from the scope of the criminal law.
I now come to the nub of the matter—Clauses 20 and 21. Historically, these stem from the Patents Act 1907, which made provision for certain rights of the Crown in relation to defence inventions. They survived World War I and the Patents Act 1932, unamended and unused, so far as I can determine. In the mid-1930s, during the arms race leading up to World War II, they were used but, during the war, were felt not to be stiff enough, for which reason the Defence (Patents) Regulation SRO 1941, No. 1780, was authorised to deal with the matter. An extended set of rules was incorporated in the Patents Act 1949.
In Committee, the noble Lord, Lord Cawley, suggested that the origin of these may have related to foreign exchange control. I have searched Hansard and the reports of the debates on the 1949 Act, but I have not found any reference to foreign exchange control. All I have been able to find is a reference to the perpetuation of war-time regulations. If all we can do is to perpetuate war-time regulations, I feel that it is about time that they were abolished.
Taken together, these two clauses are quite unlike any other patent legislation that I have been able to study. No corresponding provisions exist in Australia, Belgium, France, Western Germany, Japan or, I believe, Italy. The French have a provision that the subject
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matter of a patent shall remain unpublished for five months after filing. At the end of that time it is freed for publication. It may not even be worked industrially for five months after filing. United States law makes it an offence to patent any invention made within the boundaries of the United States by no matter who. There is no question of nationality, residence or domicile: it is the place where the invention was made that is caught under US law for patenting elsewhere.
Why do we need these idiosyncratic provisions other than to bolster our reputation for legal eccentricity? We live in a world of uncensored free publication. If I make a defence invention, I can publish it in the New York Sunday Times, the Daily Express, Nature, the journal of a learned society. I can put it into my sales literature. But why do we want to make a quite exceptional type of treatment for publication in the form of a patent? What is the point of preventing publication through patent action when this can occur through any other action one likes to take? Suppose I was an inventor who took the same view of the patent system as the noble Viscount, Lord Eccles, who thought it an outdated set of provisions and said, "I shall not patent anything. I don't think that they are worth the paper they are written on. I shall simply put this into my sales literature and try to sell these weapons, or whatever they are, to the Shah of Persia. I am perfectly free to do it. So why do I have to be caught in the toils of the criminal law because I make a patent application? "It is complete nonsense.
We now come to the question of who makes defence inventions. Very few categories of people make defence inventions. First, they are made in Government research laboratories, where they are caught by the Official Secrets Act. They are made by industrial consultants to the Government, who are caught by the Official Secrets Act and the terms of the contract. They may possibly be made by university professors who act as consultants to Government Departments and who must preserve security under the terms of their consultancy. The idea that a casual member of the public may make a brilliant new defence invention is extremely unlikely, for he would not have the background of what is going on in

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the field of defence research to be able to make a contribution unless he were part of the system.
Granted that patents are applied for and assigned to the Government: they serve no useful purpose whatsoever—I am sure that the noble Viscount will be very pleased to hear me say so—except to act as a certificate of invention to enable the inventor to make claims on the Departmental Awards Committee. The Government certainly will not licence their enemies, and they will be expected to licence their allies on a royalty-free basis. The royalties that we received from United States industry and the United States Government for the user of Crown patents assigned by the inventor of the cavity magnetron and Commodore Whittle were absolutely derisory. We never really received the value of those inventions at all.
Next, these clauses cut right across European practice on the multinational front. A multinational corporation will run multinational laboratories, but they will not be duplicating each other's work; each one will be specialising in some aspect of technology or another. I know of a case of an inventor, working for a big multinational corporation, who is quite literally doing the rounds of Europe from laboratory to laboratory, making further developments on his inventions as he does the circuit of Europe, using the specialised facilities of those laboratories and the colleagues whom he finds waiting to help him there. From his fertile mind there will originate, with the help of his colleagues, a great linked mass of patents, a most valuable piece of industrial property some of it produced in Britain, some of it in Belgium, and some of it in Western Germany. These clauses are merely an obstructive nuisance from the standpoint of multinational trading by the large corporations.
Lastly, they give an entirely false sense of security—they are labelled "security" and so on. People imagine that if that is complied with, then we are secure. We are nothing of the kind. Look at the fools the Americans made of themselves with all their secrecy over nuclear secrets. Their organisation had been penetrated by Communist maggots before there were any secrets, and your Lordships can be
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absolutely assured that that would be happening. This false screen of imagined security, which would arise because certain provisions in a Patent Act are being complied with, is to my mind very dangerous. One of the standard ways of suffering a very severe defeat is to seal up your castle, lower the portcullis, raise the drawbridge, and defy the enemy—but meanwhile you leave open a kitchen window at the back. That is how Byzantium fell. Provisions of this type lull us into just that kind of false security. Those are the reasons why I have put down these Amendments. I beg to move.
Lord CAWLEY: My Lords, I cannot say how strongly I support the noble Earl in what he said. But first I must apologise to the House for making remarks about exchange control off the cuff, which I now realise were unjustified. Ever since I started practising at the Bar in patents, I have thought that the predecessors to these clauses were ridiculous. The first reason why they are ridiculous is that a man may file a patent and the next day he is entitled to publish it abroad. He publishes it in a learned journal. When the comptroller first examines the patent he declares it a secret patent, and the actual inventor is not allowed to tell anybody about it, but everybody else in the world knows about it from the learned journal. There cannot be anything more ludicrous than that; and it is something which any inventor would be advised to do if he thought that his invention was likely to become a secret patent. Possibly the company with whom he is employed would then exploit it without any requirement of secrecy.
My second point is that I know one case where this secrecy was taken to the most extraordinary extent. Somebody invented an engine for small ships. The drawing that he supplied showed the engine applied to a landing craft, and the comptroller said that he would not publish the specification until the drawing of the landing craft was obliterated. There cannot be anything more ludicrous than that. I strongly support the noble Earl.
Lord ORAM: My Lords, the noble Earl, Lord Halsbury, always speaks most attractively on this and on other subjects, and by linking together no fewer than six Amendments, two of which seek to

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delete whole clauses from the Bill, he has given himself a broad canvas upon which to paint, as he did so vividly. But I am afraid that, despite the persuasiveness of his speech, I must advise the House not to accept any of the Amendments to which he has spoken. First, I should like to deal with Amendment No. 21, the first Amendment to which the noble Earl spoke. This Amendment is, it seems, designed to remove what is believed to be an ambiguity in subsection (2) of Clause 20, but I am afraid that I cannot agree that ambiguity exists. A period reckoned from the end of another period is one that comes after that period. It is not one that comes either before or after the end of the first period.
However, even if this were not so, I should still have to resist the Amendment, since the intention of Clause 20(2) is to provide a period up to three months longer than the period prescribed by Clause 14 for the publication of an application, during which time the comptroller may fully consider whether the application contains information prejudicial to the safety of the public. Adoption of the Amendment that the noble Earl has moved would reduce the period for that consideration to an unacceptable degree.
I now wish to turn to what the noble Earl said in respect of his Amendments Nos. 23, 25 and 26. I have indeed some sympathy with his Amendment No. 23, which would ease the position of the United Kingdom resident who made an invention while abroad—for example, in the United States—and then found that he could not file immediately at the Patent Office in London or Washington without breaking the law of the other country. However, the inventor's position would not be impossible in these circumstances, since he could seek and obtain authority from the comptroller to make his first filing for protection in the United States Patent Office. It is true that that would involve some delay, which conceivably could damage the inventor's prospects of eventually obtaining valid protection, but the possibility is fairly remote, and to provide a remedy at the cost of a substantial weakening of the provision which under pins the whole security provisions of the Bill could not, in the Government's view, be justified. For those reasons I must ask the House to reject Amendment No. 23, and indeed Amendments Nos. 25
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and 26. As to those two latter Amendments, the effect of them would be to reduce to purely nominal proportions the penalty for contravening the requirements of Clause 21 which, as I have said, underpin the security provisions of the Bill. Therefore, I must also resist these Amendments.
With regard to the two Amendments to which the noble Earl spoke in which it is proposed to delete Clauses 20 and 21, I should point out that Clause 20 provides for the treatment of patent application containing information, the publication of which might be prejudicial to the defence of the Realm or the safety of the public. There can be no question of deleting this clause from the Bill. Without it, it would be impossible to control the publication of information affecting national security, or to provide protection for inventions made in the field of defence, including inventions made in allied countries with which we have agreements for the exchange of classified information.
Clause 21 prohibits residents of the United Kingdom seeking protection abroad for their inventions, unless they have first received authority to do so from the comptroller or have filed an application for a patent, containing the same information, at the Patent Office. The noble Earl, Lord Halsbury, criticised this provision in Committee, when he moved Amendment No. 94 (I think it was), for the difficulty, to which he has again referred today, that it could cause to United Kingdom residents when travelling abroad. For example, a United Kingdom resident who makes an invention while visiting the United States cannot file for protection in either country without having first obtained permission from the authorities in the other, this entailing, as I have already indicated, some delay.
However, Clause 21 is the essential underpinning to the security provisions of Clause 20, and there can therefore be no question of its withdrawal. In rare circumstances, I would agree, the operation of Clause 21 might cause real hardship to an inventor, but in my view it would be quite unreasonable to eliminate that possibility at the cost of the security provisions of the Bill. I therefore hope that the House will resist the series of Amendments to which the noble Earl spoke.
Lord LLOYD of KILGERRAN: My Lords, I should like to speak briefly to the Amendment with which I have the privilege of being associated with the noble Earl, Lord Halsbury, and that is Amendment No. 22, to leave out Clause 20; and I shall confine my remarks to Clause 20. The reply of the noble Lord, Lord Oram, to the mover of this Amendment was that we really must have these clauses in the Bill for security reasons. I want to say quite frankly that it seems to me that this is security in peacetime gone mad. The noble Lord, Lord Cawley, gave one instance of it, and as the noble Earl, Lord Halsbury, spoke about Clause 20, and particularly subsection (1), I received his remarks with a certain amount of nostalgia, because when these emergency regulations for prohibiting the publication of patent applications filed in the Patent Office were made during the war it was part of my duty as a very junior scientific officer in the department of scientific research of the Ministry of Aircraft Production to advise the Comptroller General of Patents as to why certain inventions in patent applications should or should not be published.
The reason why I had been given this task was that prior to my being appointed to this position a very senior professor of physics from a well-known university had had the job and all the patent applications dealing with aircraft and ships were sent to him. He looked at them and said, "This is something in pneumatics", for instance. "It might be associated with that very important aspect of aircraft, the undercarriages of aircraft. I am not going to take any chances; I shall say that this is secret." The rooms of the Patent Office were filled with masses of documents as to which this learned professor of physics had said, "I am not going to take a chance on this; it may or may not be secret". It was part of my duty, knowing a little more, perhaps, about the immediate research work going on in the Air Ministry, to diminish the quantity of paper which was slowly clogging up the works of that part of the Patent Office.
I should therefore like to ask the noble Lord, Lord Oram, how subsection (1) of Clause 20 is to be administered. It says that if,
"…it appears to the comptroller that the application contains information of a description
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notified to him by the Secretary of State as being information the publication of which might be prejudicial to the defence of the realm…"
How is the comptroller going to decide that question without surrounding himself with gentlemen from the Ministry of Defence or from other defence Ministries? I can quite understand that the Secretary of State may wish to notify the Comptroller General that certain inventions in specific fields should not be published. It may be—and there is, I believe, special legislation in this matter—that in the field of atomic energy no disclosure should be made of information in patent applications, and many of these applications have remained secret.
It seems to me that, in a time of peace, the United Kingdom should not, in its Patent Act, have a provision of the nature of subsection (1) of Clause 20. As the noble Earl, Lord Halsbury, has indicated, this kind of legislation is not to be found in most of the countries of the European Community. I believe, as he told your Lordships, France has some regulations to this effect. I should like to ask the noble Lord, Lord Oram, whether or not he would consider, if not deletion of the whole of Clause 20, some serious Amendment to reduce the burden on the Government in deciding whether or not the publication of information in a patent application would be prejudicial to the security of the nation.
Lord ORAM: My Lords, with the leave of the House perhaps I may reply briefly to what the noble Lord, Lord Lloyd, has said. While he was speaking I was reading again the subsection to which he referred, and it seems to me that it is fully possible of reasonable administration, which is the question that he asked. I think it is the case that this carries forward provisions that are in the existing patent legislation, and I have heard of no difficulties or absurdities, other than the odd one which the noble Lord, Lord Cawley, referred to this afternoon, in connection with its administration. But, as I said in my earlier remarks, I am advised that this provision and the related provisions of Clause 21 are indeed essential for security reasons, and I do not think that, even though we hope to be living in a world where wars are less likely, we can rest too much on that hope. The noble Lord, Lord Lloyd,

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seemed to draw a distinction between the situation today and that in wartime which I do not think is as black and white in our troubled world as he was trying to pretend.
I have listened to what noble Lords have said, but nothing that I have heard has made me change my mind on the matter. I said that I thought that Clause 20 was carrying forward provisions in the existing legislation. I am now advised that it is the equivalent of Section 18 of the 1949 Act, to which I referred earlier in my remarks.
The Earl of HALSBURY: My Lords, the position seems to be that the noble Lord, Lord Oram, is not prepared to make any concession to my noble friend Lord Lloyd of Kilgerran, and since my Amendment has had support from two very knowledgeable Members of your Lordships' House, the noble Lord, Lord Cawley, and the noble Lord, Lord Lloyd, I feel that I should test the opinion of the House, unless anybody wants to intervene and speak against it in support
of the Government, and allow matters to proceed. If the noble Lord, Lord Oram, had made any sort of concession or had asked for more time, or anything like that, then I would have been willing to consider withdrawing for the time being; but, being obdurate, I feel that, since I am going to stand by Amendment No. 22, there would be no point in putting Amendment No. 21, and I therefore beg leave to withdraw Amendment No. 21, which stands in my name.
Amendment, by leave, withdrawn.
The Earl of HALSBURY The Earl of HALSBURY moved Amendment No. 22:
Leave out Clause 20.
The noble Earl said: My Lords, I beg to move Amendment No. 22.
4.29 p.m.
On Question, Whether the said Amendment (No. 22) shall be agreed to?
Their Lordships divided: Contents, 98; Not-Contents, 44.

CONTENTS

Airedale, L.

Eccles, V.

Marley, L.

Alexander of Tunis, E.

Effingham, E.

Merrivale, L.

Alport, L.

Elliot of Harwood, B.

Mowbray and Stourton, L.

Amherst, E.

Elton, L.

Newall, L.

Amherst of Hackney, L.

Emmet of Amberley, B.

Northchurch, B.

Amory, V.

Falkland, V.

O'Neill of the Maine, L.

Ampthill, L.

Forbes, L.

Rankeillour, L.

Arran, E.

Fraser of Kilmorack, L.

Rathcavan, L.

Atholl, D.

Gainford, L.

Reigate, L.

Auckland, L.

Glenkinglas, L.

Roberthall, L.

Balfour of Inchrye, L.

Greenway, L.

Romney, E.

Barrington, V.

Gridley, L.

Ruthven of Freeland, Ly.

Belstead, L.

Halsbury, E. [Teller.]

St. Davids, V.

Berkeley, B.

Hanworth, V.

Sandys, L.

Bourne, L.

Hatherton, L.

Selkirk, E.

Campbell of Croy, L.

Hawke, L.

Sempill, Ly.

Cathcart, E.

Hayter, L.

Sharples, B.

Cawley, L.

Henley, L.

Sligo, M.

Chesham, L.

Home of the Hirsel, L.

Spens, L.

Clwyd, L.

Ilchester, E.

Stamp, L.

Colville of Culross, V.

Inglewood, L.

Strathclyde, L.

Cork and Orrery, E.

Jessel, L.

Strathspey, L.

Cottesloe, L.

Killearn, L.

Suffield, L.

Craigton, L.

Kilmarnock, L.

Swansea, L.

Cranbrook, E.

Kimberley, E.

Teviot, L.

Cromartie, E.

Kinnaird, L.

Teynham, L.

Cullen of Ashbourne, L.

Lauderdale, E.

Trefgarne, L.

Daventry, V.

Lloyd of Kilgerran, L. [Teller.]

Vivian, L.

de Clifford, L.

Long, V.

Wakefield of Kendal, L.

Denham, L.

Lyell, L.

Ward of North Tyneside, B.

Derwent, L.

Macleod of Borve, B.

Westwood, L.

Drumalbyn, L.

Mancroft, L.

Wigoder, L.

Ebbisham, L.

Mansfield, E.

NOT-CONTENTS

Aylestone, L.

Kagan, L.

Segal, L.

Boston of Faversham, L.

Kirkhill, L.

Shepherd, L.

Collison, L.

Leatherland, L.

Stedman, B. [Teller.]

Cooper of Stockton Heath, L.

Listowel, E.

Stewart of Alvechurch, B.

Davies of Leek, L.

Llewelyn-Davies of Hastoe, B.

Stone, L.

Donaldson of Kingsbridge, L.

Lloyd of Hampstead, L.

Strabolgi, L.

Douglas of Barloch, L.

Lovell-Davis, L.

Taylor of Gryfe, L.

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

McCluskey, L.

Thomson of Monifieth, L.

Gaitskell, B.

Oram, L.

Wallace of Coslany, L.

Gordon-Walker, L.

Pannell, L.

Wells-Pestell, L.

Greenwood of Rossendale, L.

Pargiter, L.

Wigg, L.

Hale, L.

Peart, L. (L. Privy Seal.)

Winterbottom, L. [Teller.]

Henderson, L.

Phillips, B.

Wootton of Abinger, B.

Houghton of Sowerby, L.

Rusholme, L.

Wynne-Jones, L.

Janner, L.

Sainsbury, L.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
Clause 21 [Restrictions on applications abroad by United Kingdom residents]:
4.38 p.m.
Lord ORAM Lord ORAM moved Amendment No. 24:
Page 20, line 1, leave out ("makes or causes to be made") and insert ("files or causes to be filed").
The noble Lord said: My Lords, this minor drafting change is consequential upon Amendment No. 15. In addition, it makes the language of subsection (3) consistent with that of subsection (1). No change in effect results from the Amendment. I beg to move.
Lord ORAM Lord ORAM moved Amendment No. 27:
Page 20, line 12, leave out first ("or") and insert ("under the law of any country other than the United Kingdom or under").
The noble Lord said: My Lords, this is a drafting change to fill an unintended gap in the present text of the Bill. Subsection (4)(b) at present specifies that Clause 21 bites on an application made outside the United Kingdom only if it is an application under a convention or treaty to which the United Kingdom is a party. Clearly, however, Clause 21 should also bite on an application made outside the United Kingdom under the national law of any foreign country. The Amendment makes clear that the case is also covered. I beg to move.
Lord BELSTEAD: My Lords, with respect to the Government, perhaps they need a comma at the beginning of their
720
Amendment. If there is not a comma, as I understand it, this will read:
"In this section … any reference to either kind of application is a reference to an application under this Act under the law of any country other than the United Kingdom or under any convention or treaty to which the United Kingdom is a party."
It will therefore put together an application under this Bill under the law of any country other than the United Kingdom. I think that those are two self-contradictory statements. Unless a comma comes at the beginning of this Amendment, it is almost meaningless.
Lord ORAM: My Lords, I know that the noble Lord, Lord Belstead, diligently watches these potentially important matters. It is not easy to check these things immediately; it may well be that it is a printing error. If so, that will be dealt with. If it is more than that, I will ensure that the noble Lord's point is taken care of in due course. I think that the noble Lord will find that it is a printing error.
The Earl of HALSBURY The Earl of HALSBURY moved manuscript Amendment No. 27A:
Leave out Clause 21.
The noble Earl said: My Lords, I beg to move.
4.44 p.m.
On Question, Whether the said manuscript Amendment (No. 27A) shall be agreed to?
Their Lordships divided: Contents, 92; Not-Contents, 35.

CONTENTS

Alexander of Tunis, E.

Emmet of Amberley, B.

Newall, L.

Alport, L.

Falkland, V.

Northchurch, B.

Amherst, E.

Forbes, L.

Norwich, V.

Amherst of Hackney, L.

Fraser of Kilmorack, L.

Nugent of Guildford, L.

Amory, V.

Gainford, L.

O'Neill of the Maine, L.

Ampthill, L.

Geoffrey-Lloyd, L.

Orr-Ewing, L.

Atholl, D.

Greenway, L.

Rankeillour, L.

Auckland, L.

Gridley, L.

Reigate, L.

Balfour of Inchrye, L.

Halsbury, E. [Teller.]

Roberthall, L.

Barrington, V.

Hanworth, V.

Romney, E.

Belstead, L.

Hatherton, L.

Ruthven of Freeland, Ly.

Berkeley, B.

Hawke, L.

Sackville, L.

Boothby, L.

Hayter, L.

St. Aldwyn, E.

Cawley, L.

Henley, L.

St. Davids, V.

Chesham, L.

Home of the Hirsel, L.

Sandys, L.

Clwyd, L.

Hylton-Foster, B.

Sempill, Ly.

Colville of Culross, V.

Ilchester, E.

Sligo, M.

Cork and Orrery, E.

Inglewood, L.

Spens, L.

Cottesloe, L.

Killearn, L.

Stamp, L.

Craigton, L.

Kilmarnock, L.

Strathcarron, L.

Cranbrook, E.

Kinnaird, L.

Strathclyde, L.

Cromartie, E.

Lauderdale, E.

Strathcona and Mount Royal, L.

Cullen of Ashbourne, L.

Lloyd of Kilgerran, L, [Teller.]

Strathspey, L.

Daventry, V.

Long, V.

Suffield, L.

de Clifford, L.

Lyell, L.

Teviot, L.

Denham, L.

Mancroft, L.

Teynham, L.

Derwent, L.

Mansfield, E.

Trefgarne, L.

Drumalbyn, L.

Marley, L.

Vivian, L.

Ebbisham, L.

Massereene and Ferrard, V.

Ward of North Tynesidc, B.

Eccles, V.

Merrivale, L.

Wigoder, L.

Elton, L.

Mowbray and Stourton, L.

NOT-CONTENTS

Aylestone, L.

Hall, V.

Shepherd, L.

Collison, L.

Henderson, L.

Stedman, B.

Cooper of Stockton Heath, L.

Kagan, L.

Stewart of Alvechurch, B.

Cudlipp, L.

Leatherland, L.

Stone, L.

Davies of Leek, L.

Llewelyn-Davies of Hastoe, B.

Strabolgi, L. [Teller.]

Donaldson of Kingsbridge, L.

Lloyd of Hamsptead, L.

Wallace of Coslany, L.

Douglas of Barloch, L.

Lovell-Davis, L.

Wells-Pestell, L.

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

McCluskey, L.

Wigg, L.

Gaitskell, B.

Oram, L.

Winterbottom, L. [Teller.]

Gordon-Walker, L.

Pannell, L.

Wootton of Abinger, B.

Greenwood of Rossendale, L.

Phillips, B.

Wynne-Jones, L.

Hale, L.

Sainsbury, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
4.52 p.m.
Clause 23 [Term of patent]:
Lord ORAM Lord ORAM moved Amendment No. 28:
Page 21, line 5, leave out ("and").
The noble Lord said: My Lords, this is purely a drafting Amendment to pave the way to Amendment No. 30, to which I should also like to speak. It is logical that liability for infringement and liability of the Crown to pay compensation should be treated in the same way. Under Clause 53(5) the proprietor of a patent is entitled to payment in respect of Crown use of the
722
invention to which that patent relates. The Amendment makes it clear that this liability does not cease during the grace period of six months for the payment of renewal fees. I beg to move.
On Question, Amendment agreed to.
Lord ORAM Lord ORAM moved Amendment No. 29:
Page 21, line 6, leave out from beginning to ("an").
The noble Lord said: My Lords, in moving Amendment No. 29 I should like also to speak to Amendment No. 36 relating to Clause 26, since the two go together. They are intended to correct a defect in the Bill. Clause 22(3) provides that a patent ceases to have effect if a

723
renewal fee is not paid on the due date. However, Clause 22(4) provides for a grace period of up to six months for paying the renewal fee and, if it is so paid within that period, the patent is treated as if it had never expired. But during the grace period a third party may have commercially exploited the invention, and therefore the Bill needs to specify whether or not such exploitation is an infringement. Since the third party knows full well that the renewal fee may be paid during the grace period and that, if it is, the patent is treated as never having expired, the Government consider that such exploitation should be treated as an infringement.
That is the purpose of paragraph (b) of subsection (4) of Clause 23. However, inadvertently, that paragraph has been made subject to subsections (5) and (6) of Clause 26, which is clearly wrong since those subsections are concerned with a different situation in which the renewal fee is not paid during the grace period. In that case the patent expires but is later restored to full life. The first Amendment therefore corrects Clause 23(4) and makes it clear that a third party who operates during the grace period is liable for infringement. The Amendment to Clause 26(5) is consequential on the Amendment to Clause 23(4). It makes it clear that the rights conferred by subsection (6) arise only if the infringeing Act or the preparations for it began after expiry of the grace period. I beg to move.
Lord LYELL: My Lords, we are most grateful for the explanation given by the noble Lord, Lord Oram, on this point. We had one or two queries in our minds concerning this matter but the noble Lord has gone a long way towards clearing up our doubts and queries. Possibly he would permit us to read, digest and, we hope, learn from his remarks. Subject to that, we are very pleased that the doubts we had entertained have been cleared up for the moment.
On Question, Amendment agreed to.
Lord ORAM Lord ORAM moved Amendment No. 30:
Page 21, line 8, at end insert ("and
(c) an act which would constitute the use of the patented invention for the services of the Crown if the patent had not expired shall constitute that use.").
The noble Lord said: My Lords, I have already spoken to this Amendment. I beg to move.
On Question, Amendment agreed to.
4.58 p.m.
Lord LYELL Lord LYELL moved Amendment No. 31:
Page 21, line 8, at end insert—
"(5) Rules shall provide for the Comptroller to issue notices that a renewal fee has not been paid, one such notice to be issued during the period referred to in section 23(4) above, and the other during the two months following the expiry of the said period."
The noble Lord said: My Lords, I beg to move Amendment No. 31. The purpose of the Amendment follows upon comments which I made at an earlier stage of our proceedings—I believe, on the first day of the Committee stage. At that time I welcomed the news given by the noble Lord, Lord Oram, that the Patent Office, as he has told us, are now able and willing to send out reminders to various organisations regarding the payment of their annual fees. We are very grateful for the counsel and the comments given by the noble Lord. I was happy to accept the assurance that such notices were to be issued by the Patent Office, because I had earlier understood that that is not the present custom.
However, when we look at the Bill as reprinted, I am afraid that we cannot find anything which states that the Patent Office should take positive action in this respect. We submit that the inclusion of the new subsection (5) will ensure that renewal reminders are sent out by the Patent Office. The noble Lord, Lord Lloyd of Kilgerran, pointed out that there is a great risk of patent agents being liable for considerable sums in damages when a patent is not renewed owing to the late payment of the fee. Of course, we regard the noble Lord's comments as of great relevance, because he has great practical experience in this field. For this and other reasons, we consider that the clause should contain evidence that the Patent Office will carry out the intention which was so admirably expressed on behalf of the Government by the noble Lord, Lord Oram, at the earlier stage. My Lords, I beg to move.
Lord ORAM: My Lords, as the noble Lord, Lord Lyell, has said, this Amendment relates to a discussion that we had at Committee stage on what is now Clause 27. When we were considering Amendments which noble Lords opposite put down in connection with that clause, I said, in resisting them—as the noble Lord, Lord Lyell, has now reminded us—that the Patent Office are prepared to issue reminders about payment of renewal fees. However, I made it clear that I thought that any solution to the problem raised by noble Lords opposite would be taken on an administrative level. I am pleased to see that the idea of reminders has been taken up in this further Amendment, but I am afraid that I must resist it, because it seeks to raise what is in my view a purely administrative matter for the Patent Office, to a statutory obligation upon the comptroller. Indeed, I think that the noble Lord, Lord Lyell, almost expressed it in those terms. I am very confident that the Patent Office will not resile from any undertaking that it gives to issue reminders. As I said, it is a purely administrative matter, upon which I think it is desirable to retain the greatest flexibility. Therefore, I hope that the noble Lord will acknowledge what I have said, and will not see fit to press this Amendment.
Lord LLOYD of KILGERRAN: My Lords, as the noble Lord, Lord Lyell, indicated, I spoke to this matter at the Committee stage and indicated its importance to patent agents, as practitioners. Not only can patent agents be sued for a form of negligence, as the noble Lord, Lord Cawley, pointed out in Committee—they can insure against that—but something more serious often happens, in that an agent's professional integrity or professional status may be impaired, if it gets around that, through some accident of a junior clerk or something like that, he forgets to pay the fee.
I do not understand the reply of the noble Lord, Lord Oram. If he feels that the Patent Office are proposing to send these reminders, why cannot something be put in statutory form? I understand that the rules of the Patent Office have the force of Statute. May I therefore ask the noble Lord, Lord Oram, whether he would support the inclusion of a clause similar to this Amendment No. 31 in the rules of the Patent Office.
Lord BELSTEADMy Lords, before the noble Lord replies, may I say this. We entirely accept the undertaking which the noble Lord gave on 15th February, that it is the intention of Ministers at the moment, and the intention of the Patent Office at the moment, that reminders will be sent out. That goes a great deal of the way to meet the difficulty which has been put forward, both this afternoon and at the Committee stage. But the reason why my noble friend Lord Lyell is pressing to have something written into the Bill is that if, subsequently, the Patent Office were to cease to carry out the undertaking, then presumably, unless this was done—and I look to noble Lords with legal training on this—the Patent Office could not be sued for breach of a statutory duty, whereas, of course, the patent agent could be sued for negligence. As the noble Lord, Lord Lloyd, rightly reminded us, although the patent agent can insure against that, there is the question of his professional integrity, and presumably the patent is then lost.
In addition to that, may I put one other point to the noble Lord. I understand from our last debate, and from discussing this matter outside the Chamber since, that the Patent Office used to issue reminders before the renewal fee was due, and then that practice was changed and reminders were sent out after the due date; in other words, during the grace period. Because so much depends upon not allowing a patent to lapse, we feel that it would be right for two reminders to be issued, one before the expiration of the six months' grace period and the other during the two months immediately following that period. We are not absolutely wedded to those two provisions. If those exact provisions for the sending out of reminders are not acceptable to the Government or to the Patent Office, of course we shall be perfectly ready to be guided as to how those two provisions could be changed. But what we on this side of the House feel is that, as a matter of principle, the issuing of reminders is a matter which should be written into the Bill.
Lord CAWLEY: My Lords, I think I should say something about the fact that these reminders are fairly costly, and I wonder how the Accountant-General would feel about the comptroller operating merely under an assurance given in Parliament. I should have thought it

727
would be better to have it written either into the Act or into the rules, so that if the Accountant-General challenged what the comptroller was doing the comptroller could point to either the Act or the rules to show that he was doing something which he was obliged to do.
Lord ORAM: My Lords, if I may speak with the leave of the House, as I indicated earlier I am not anxious to advise the House to accept this Amendment. But I have listened with interest to the points that have been made by the noble Lords, Lord Lloyd and Lord Cawley, and, in particular, to the suggestion about the rules of the Patent Office having the force of law. It seems to me that that, at least, is a point worth looking at and, although we are towards the end of the consideration of this Bill in this House, there will be other opportunities at later stages. I am sure noble Lords will recognise that I am not giving an undertaking. All I am saying is that I believe that sufficient has been said by noble Lords opposite to warrant a closer look at this point, and I give that undertaking.
Lord LYELL: My Lords, as the noble Lord, Lord Oram, resumed his seat, I noted what I thought were noises of assent from these Benches. Certainly, I would not wish to upset the harmony of the discussion on this segment of the Bill. However, I think I remember that the noble Lord, Lord Oram, mentioned this point when we considered this Amendment earlier, and I believe that he made great play of the fact that he regarded these reminders as being a matter of administration. I take that point, and that may appear to be the case to the noble Lord and to the Patent Office. But as the noble Lord, Lord Lloyd, and my noble friend Lord Cawley pointed out, it is more than a matter of administration to a practitioner. Furthermore, as my noble friend Lord Belstead has pointed out, there is no indication whether the Patent Office will issue reminders, or in what form. I am confident that the Patent Office can keep in touch with the practitioners, the patent agents and industry by various formal and informal means. Nevertheless, I wonder whether the noble Lord, Lord Oram, might ponder over the point that there seems to me to be an element of liberty, not to say licence, in
728
allowing the Patent Office freedom to alter the procedure whereby reminders or renewal notices are sent out.
The noble Lord, Lord Oram, mentioned that renewal reminders were sent out in the past. When I moved the Amendment at the Committee stage, I believe that the lay Members of the House, those of us who are not involved with patents as practitioners, were not aware that reminders were sent out. The noble Lord, Lord Oram, said that the Patent Office were prepared to send out reminders. We were very pleased and grateful to receive this information, but we received it only as a result of putting down an Amendment and fairly lengthy questioning in Committee. It is this possible obfuscation and clouding of the issue that we wish to avoid.
It is for that reason that we have put down this Amendment. However, we are receiving ever sweeter assurances from the noble Lord, Lord Oram. I think that the assurances he gave us at the last stage, particularly on this Amendment, have been more or less met. Nevertheless, the noble Lord has told us that he will look further into the matter and we hope that rules may be evolved whereby reminders can be issued. Above all, the practitioners, and possibly the lay Members of your Lordships' House and others who may be involved with patents in a less professional capacity than such advisers and practitioners as my noble friend Lord Cawley and the noble Lord, Lord Lloyd of Kilgerran, may have a greater knowledge of what is required. Certainly I do not wish to disturb the harmony, nor do I wish to provoke any further discussion, annoyance or trouble for the noble Lord, Lord Oram. For that reason, at this stage I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 24 [Patent not to be impugned for lack of unity]:
5.12 p.m.
Lord LYELL Lord LYELL moved Amendment No. 32:
Page 21, line 9, after ("patent") insert ("or to an amendment of a specification of a patent").
The noble Lord said: My Lords, I should like to speak to Amendments

729
Nos. 32 and 34. They appear to follow on from our discussions and deliberations at the Committee stage, particularly when dealing with Clause 24 and the concept of the unity of a patent. At an earlier stage the noble Lord, Lord Oram, made the point very clearly that the Government accept our contention. The contention is that the Amendment of a specification in what are known as post-grant proceedings should not be allowed as grounds for revocation, on the basis that the original claims in the invention are to be taken as invalid. This aspect of revocation is spelled out very clearly in Clause 70, under the title "Revocation of patents". Where a specific claim is revoked on perfectly good, legal and valid grounds, it could be an example of a much broader inventive concept.
If the House will permit me to do so, may I carry on the possibly by now well-known example, so aptly used and explained by my noble friend Lord Belstead, of the new method of sticking a sole to the upper of a shoe. Not only will your Lordships soon be expert practitioners in the law of patents but some of us might be attempting to branch out into other areas of skill. This seems to be one example of an inventive concept whereby what I might call a soft and flexible covering is fixed or attached to a stiff or rigid base. If in times past a process was found to be equally useful and applicable to various other processes —let us suggest, even in fairly modern times, the attachment of window blinds to a roller or the attachment of a hood to the chassis and framework of a horseless carriage—but any one of the processes is found to be invalid (again on perfectly good grounds, as we found in Clause 70) and that in the revocation proceedings the patent is revoked, our understanding is that the broad, inventive concept would also be revoked. Once this common link has disappeared, the other examples would lose their validity as patents, on the ground that the unity of the concept had disappeared. Although I have made it as clear as I can, this may not be entirely clear; I have adapted an example to the best of my ability. Nevertheless, what concerns us is that we find that proceedings are taking place not necessarily over the revocation of the main patent but over the amendment of a patent.
At an earlier stage the noble Lord, Lord Oram, said that he hoped that the Government Amendments would cover the questions we had raised. Indeed, he made a very short and brief comment and said that he hoped that any Amendments he put down would cover our points. I think that Amendment No. 33, which stands in the name of the noble Lord, Lord Oram, meets our Amendment No. 34. However, we are not entirely satisfied that the point where proceedings are taking place in respect of an Amendment is covered by that same Amendment.
Let us consider again the examples I gave earlier of the hood of a carriage and the roller blind. We believe that these examples could come into the category of proceedings taking place where the amendment of a patent is under discussion. This could be the case when the shoe stitching had been perfectly fairly revoked and, consequently, the general concept. We take the point that the noble Lord's Amendment No. 33 covers our second Amendment, but we are not entirely convinced that the Amendment which has been put down by the noble Lord—possibly he thought that it covered both of the Amendments that we moved at an earlier stage and that we have put down today—covers the first Amendment. However, we look forward to hearing what the noble Lord has to say. For that reason, I beg to move Amendment No. 32.
Lord ORAM: My Lords, I can be quite brief in my reply to the noble Lord, Lord Lyell. Perhaps I need not follow him in his interesting dissertation on shoes, horseless carriages and other technologies of that kind. As the noble Lord said, I gave certain undertakings at the Committee stage. In relation to the Amendment which he has now moved, Amendment No. 32, I can say straight away that I fully agree and can advise the House to accept it. I noted also that the noble Lord recognised that my Amendment No. 33 to which he referred covers his Amendment No. 34, but he went on to say that the further points are not covered, presumably by his Amendment or by mine. Therefore, if the noble Lord will agree, I think the most satisfactory way of meeting this situation is for the House in due time to pass Amendments Nos. 32 and 33 and I will give an undertaking to read carefully what the

731
noble Lord, Lord Lyell, said about the further point that he wants covered and I will take advice on it. Then if we feel that he has raised a point of importance we can arrange for it to be covered at a later stage.
Lord LYELL: My Lords, I should like to thank the noble Lord, Lord Oram, for having listened so carefully. He was most attentive as I attempted to go through the procedures and the technologies. I think several times the noble Lord mentioned Amendment No. 32 and I wonder whether he meant Amendment No. 34. The point I was making was that Amendment No. 33 met our Amendment No. 34. Probably the noble Lord thought I was making too much of a point in connection with Amendment No. 32, but I understood him to say that he would examine it further and that he felt I had made a valid point.
Lord ORAM: My Lords, I may have added to any confusion that was already there. I think the position is that there is nothing between us at all on Amendment No. 32, and we can accept that without any reservation. As I understand it, the noble Lord, Lord Lyell, recognises that Amendment No. 33 deals with the same matter as his Amendment No. 34 and he would find it satisfactory to accept Amendment No. 33 in place of Amendment No. 34, but there is a further point which he explained and which I have given an undertaking to look into and to take up at a later stage, if need be.
Lord LYELL: My Lords, I am grateful to the noble Lord, particularly for the fact that he finds there is nothing between us on Amendment No. 32, which was the point I was seeking to make.
On Question, Amendment agreed to.
5.22 p.m.
Lord ORAM Lord ORAM moved Amendment No. 33:
Page 21, line 11, after ("patent") insert (",as they stand or, as the case may be, as proposed to be amended,").
The noble Lord said: My Lords, I have already spoken to Amendment No. 33. I beg to move.
On Question, Amendment agreed to.
Clause 25 [General power to amend specification after grant]:
Lord ORAM Lord ORAM moved Amendment No. 35:
Page 21, line 33, leave out ("determine the question") and insert ("consider the opposition in deciding whether to grant the application").
The noble Lord said: My Lords, this is a small drafting change which makes it clear that the comptroller's function is to consider any opposition to the application to amend the patent specification when deciding whether or not to allow the amendment which is the subject of the application. I beg to move.
On Question, Amendment agreed to.
Clause 26 [Restoration of lapsed patents]:
Lord ORAM Lord ORAM moved Amendment No. 36:
Page 22, line 27, after ("force") insert ("but subject to section 23(4)(b) above").
The noble Lord said: My Lords, I spoke to this Amendment when we were dealing with Amendment No. 29. I beg to move.
On Question, Amendment agreed to.
Lord ORAM Lord ORAM moved Amendment No. 37:
Page 23, line 5, at end insert—
("(9) Subsections (5) to (7) above shall apply in relation to an act which would constitute the use of a patented invention for the services of the Crown if the patent had been in force as they apply in relation to an act which would constitute an infringement of the patent if it had been in force, and subsection (8) above shall apply accordingly to the disposal of a patented product in the exercise of a right conferred by subsection (6) above as applied by the foregoing provision.")
The noble Lord said: My Lords, Clause 26 provides that where a patent has lapsed it may be restored, but subject to the right of use by third parties set out in subsection (6). Further, subsection (8) protects from infringement a person claiming through anyone exercising a right of use under subsection (6). It is logical, therefore, that where use is made of an invention by the Crown in similar circumstances that use should not give rise to liability on the part of the Crown to make any payment to the proprietor of the patent if it is restored, and that a person claiming

733
through the Crown should have the protection conferred by subsection (8). I beg to move.
On Question, Amendment agreed to.
Clause 27 [Surrender of patents]:
Lord ORAM Lord ORAM moved Amendment No. 38:
Page 23, line 16, at end insert ("and no right to compensation shall accrue for any use of the patented invention before that date for the services of the Crown.")
The noble Lord said: My Lords, subsection (3) of Clause 27 provides that where a patent is surrendered by the proprietor no action for infringement shall lie in respect of any act done before the date of notice of the surrender. This Amendment removes the liability of the Crown to make payments to the proprietor in respect of any Crown use before that date. I beg to move.
Lord LLOYD of KILGERRAN: My Lords, I hesitate to intervene, but there are now two clauses which we are considering and where Crown use has been specifically introduced. I do not remember these matters being raised at the Committee stage, although I may be wrong. I wonder why it is now necessary to introduce questions about Crown use. Have there been difficulties arising in this matter so that it is necessary to introduce these specific Amendments?
Lord ORAM: My Lords, if I may speak with the leave of the House, I think what the noble Lord, Lord Lloyd of Kilgerran, has said is true. These particular points were not discussed because Crown use arose at a later stage, but it has been discovered that these three provisions regarding Crown use to which the Amendments I have moved refer, are necessary to protect the Crown use in connection with infringement. I think when the noble Lord studies what has been said he will find that it is all in good order.
Lord LLOYD of KILGERRAN: My Lords, I am grateful to the noble Lord for that explanation. I will study what he has said when I receive Hansard tomorrow.
On Question, Amendment agreed to.
Lord STRABOLGI: My Lords, I think this may be a good moment to halt the Report stage of this Bill and to take other business, if that is to the convenience of your Lordships. Therefore I beg to move that further consideration on Report be postponed.
Moved accordingly, and, on Question, Motion agreed to.

OTTER HUNTING REGULATION BILL [H.L.]
5.30 p.m.
The Earl of CRANBROOK: My Lords, this is not so much a conservation measure, although it will have conservation results, as an animal welfare one. The background of the Bill is that in the mid-1960s the number of otters fell by something of the order of 50 per cent. over most of England and to a rather lesser extent in Wales, a fall probably caused by the residues of persistent pesticides. Your Lordships will remember Rachel Carson's Silent Spring, which was published about that time. As the Explanatory Memorandum to the Bill says, faced with this problem the otter hunts followed the normal conservation practice of continuing to monitor the position by looking for otters, but if they found one they followed it for a time and called off the hounds without killing.
Between 1900 and 1950 the otter hunts had killed between them an average of about 200 otters a year. In the five years 1972–76 throughout the whole of Great Britain 40 otters were killed, an average of 8 a year, and if your Lordships look at today's Hansard you will see there is a Nature Conservancy Council report that five were killed last year and five the year before. In short, an entirely new pattern of otter hunting has developed over these past few years, and the effect of hunting on the status of the otter is now negligible.
In 1965 when the otter population was probably at its lowest, the Mammal Society started making distribution maps of animals, all mammals, on a 10 kilometre square basis, and with the fall in the number of otters becoming greater they concentrated on the otter from 1973 onwards. I placed a map in the Library and if your Lordships look at that you

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will find that naturalists had reported otters from about 50 per cent. of the area of Scotland, where there was no fall in the 1960s. In the Midlands it is quite clear that the number of otters is relatively small, but I am not concerned with that so far as this Bill is concerned because there is no hunting which takes place there. Outside the Midlands, in the areas where hunting takes place, about 40 per cent. of the total area contains otters. It begins to look as if the otter is beginning to recover its former status. Though there has been a new pattern of otter hunting developing, I cannot forget that, between 1900 and 1950, 200 otters a year were killed on average by hunts. Then I could see no justification for the deliberate killing of an animal which is not good to eat, and which in my part of the world was certainly doing no harm, and I asked the local hunt some 40-odd years ago not to come and draw my stretch of river.
As I said, in many places the otter is starting to recover its former status, and this Bill is designed to prevent the existing pattern of otter hunting, where the objective is not to kill otters, from being replaced by the former practice of deliberately trying to kill them when they were found. Otter hunters have been able to continue to enjoy their sport without deliberately hunting to kill for the last ten or dozen years, because the normal behaviour pattern of an otter calls for a specialised pattern of hunting.
Otters have always been very thin on the ground. In the 1950s it was thought there was about one otter for every 6 miles of river, and an otter seems to require that sort of length of territory to support it. They are nocturnal, and they do not usually fish over more than quite a small part of their territory, a mile, two, perhaps three, on successive nights. So on successive days they have to take shelter in a whole series of consecutive shelters or holts on their way down the river; then they come back, using the holts, up the river. To find an otter, therefore, the otter hunters have to find where it fished over the previous night. The otter's scent is very much stronger than that of any other animal which is hunted. Hounds can pick up last night's track, or even the night before's track, and they follow that until they get to the place
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where the otter is spending that particular day, when in the old days, of course, they frightened it out of its holt and chased it until they killed it or until it got away. I am told that the major pleasure, or one of the major pleasures of otter hunting, and the only one at the moment, is watching hounds puzzle out that line, the stale drag as they call it, of where the otter went the night before. It is that pattern of otter hunting without killing that this Bill is designed to secure.
In Clause 1 the Minister has to set up an "otter committee", and the membership is set out in the schedule. That is intended to, and I think should, secure that a majority, the two deliberately chosen independent people appointed by the Minister and the scientist appointed by the Nature Conservancy Council, should show a complete objectivity. The other two members, the representative of the British Field Sports Society and the representative of the animal welfare societies, are intended to stand up for their own particular interests, or at least to make certain that those interests are considered.
There are then set out a number of essential conditions. The first two are obvious and I need not say anything about them. Clause 1(2)(c) is intended to secure that only a pack of a reasonably manageable size can be used, so that it may be under the proverbial pocket handkerchief and easily controlled, and to secure that so far as the size of the individual dog is concerned this will be such as to prevent the use of terriers being put down the holt if an otter goes to ground, driving it out, as a ferret does a rabbit. Paragraph (d) is really the most fundamental one of the whole of this Bill. That lays down that the Minister shall define the time over which hounds may follow an otter in hot pursuit, or indeed whether otters may be followed in hot pursuit at all.
If your Lordships will turn to Clause 5, the definitions, you will see that the forms of pursuing an otter are two. There is what is called a hunt, when the hounds are in hot pursuit following an otter in front of them, and that is the procedure which the Minister can control completely. But following the drag left by an otter the previous night, when the otter which left it may be one, two or three miles

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away, is neither disturbed nor at risk, is not controlled. That does no harm, and the otter hunters can pursue that to their hearts' content. I shall refer to that definition a little later.
I believe that under the present pattern of otter hunting the otter suffers from continuous daytime disturbance by fishermen, pleasure boats and over-enthusiastic river authorities removing all the bankside vegetation, although that is not so continuous but is almost as important as interference. Mammals tend to react to that sort of condition and otters have done so. There is abundant evidence that in a great many places they are tending to leave the river during the day and lie up in some holt or shelter in an alder carr or wood some distance back from the riverside where they are not disturbed. If their drag is being followed along the river bank they will never know that they are being hunted, if one defines that as hunted, and will never be disturbed.
Naturalists and conservationists should bear in mind that we should establish artificial holts or shelters in these woods, well back from the river side and thus try to encourage otters to spend the day there, away from disturbance by fishermen, boats and the huntsmen. That being so, they would not be distressed by the fact that very little shelter has been left by the river authority. I have such a holt in a wood on my own land some little distance back from our river.
We know that otters can do harm, particularly in fish farms and where there are collections or wild fowl and the like. The provisos to Clauses 3 and 4 are intended to secure that where an otter is doing damage it can be dealt with and will be dealt with only where the recipient of the damage can satisfy a court of law that it is essential to kill the otter.
Baroness EMMET of AMBERLEY: My Lords, these two clauses have set my mind at rest about the preservation of fish farms and so on. I should like to thank the noble Earl for having included this so clearly.
The Earl of CRANBROOK: My Lords, I am obliged to the noble Baroness. That was the intention of the clauses. The five miles within which the otter may be killed is intended to cover rather less than the normal territory over which
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an otter ranges and feeds, so that one can be quite certain of catching it. I have only recently been brought into contact with otter hounds and otter hunters. About 18 months ago we started to prepare a conservation scheme to preserve the otter in Suffolk. It immediately became clear—indeed, we were so advised by our otter expert who had just completed a preliminary otter survey—that it was essential to get all interested parties together and that we must work with the otter hounds, the water authorities, riparian owners, fishermen, boatman and the like. Therefore, it fell to me to try to mug up on all the various interested parties.
It was then that I first realised this curious feeding habit of the otter of being continually on the move, sleeping every night in a fresh place and that it was only possible for an otter hunter to find it by finding the drag of the night before and following it until he came upon the otter. Until the hunters come upon the otter the otter is not disturbed or at risk. Of course, otters and nature do not arrange things quite so nicely that one invariably finds the drag first and then the otter. I presume that sometimes one can take the hounds clown to the river and come across the otter when its drag stretches away several miles below or above it.
The extent of the disturbance and danger will depend entirely upon whether and for how long the hounds pursue the otter once they have come upon it. As I have said, it has been the practice of the otter hounds to whip off in order to prevent killing it but by following it they do, of course, disturb it to a certain extent. Therefore, it seemed obvious that there should be a special Bill which contained a special clause—Clause 1(2)(d)—under which the Otter Committee and the Minister can decide whether the otter is pursued and, if it is pursued, for how long it should be pursued.
Almost all the national conservation bodies have asked that the otter should have legal protection but none of those who demand it seems to realise how otter hunting depends upon following the drag. All have asked that the otter should be placed on the Schedule to the Conservation of Wild creatures and Wild Plants Act—an Act which is totally inappropriate for dealing with the situation in which we find

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ourselves today. That Act can hardly control otter hunting. Under that Act it would be an offence to kill without reasonable excuse, exactly as under this Bill it would be an offence not to take "every reasonable precaution" to avoid killing. The phraseology is very similar and I do not quite know why I chose the second one instead of the first for the Bill. Under neither would it be an offence to follow the drag in the absence of the otter but under the Conservation of Wild Creatures and Wild Plants Act—but not under the Bill—it would not be an offence mercifully to kill an otter who was severely damaged.
Most people would define otter hunting as tracing a fleeing otter with a pack of hounds, the otter running or swimming in front of them, trying to get away as fast as it can. It is that which causes a disturbance; it is then that the otter is at risk and it is that which is defined as a "hunt" under Clause 5. That cannot be controlled by the Conservation of Wild Creatures and Wild Plants Act but, as I said earlier, it can be controlled by Clause 1(2)(d), and that is the key to the Bill. It was the necessity to be able to control that form of disturbance, or indeed any form of disturbance, the necessity to be able to prevent the unnecessary killing of an otter, which was the father and mother of this Bill.
Of all the beasts of the chase the otter is unique in so far as it leaves a scent behind it which is so strong that it can be followed on the next day and even on the day after. That cannot be done with the fox, the hare, or the deer. The track of none of them can be followed by hounds when they are far away in time as well as distance. That is secured by this Bill. There need be no disturbance, there need be no killing, and I believe that the otter hunters can continue to enjoy watching the stale drag being followed by their hounds without putting the otter at risk at all. This I feel is a Bill which I can commend to your Lordships, and I beg to move.
Moved, That the Bill be now read 2a.—(The Earl of Cranbrook.)
5.51 p.m.
Lord WELLS-PESTELL: My Lords, I rise to intervene at this stage to give your Lordships some indication of the Government's attitude to the proposals in this
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Bill. So far as can be ascertained from the Bill itself and from the Explanatory Memorandum, the aim of the Bill is to prevent the deliberate killing of otters with hounds except when this is necessary to prevent substantial damage to property. This would give statutory effect to the practice adopted by otter hunts in recent years of calling off the hounds before the otter is killed. It may be that the Bill goes, or is intended to do so, a good deal farther than this, but that is a matter that I propose to deal with a little later.
May I first deal with the relationship between this Bill and the Conservation of Wild Creatures and Wild Plants Act 1975. Under the 1975 Act it is an offence to kill, injure or take, or attempt to kill, injure or take a protected wild creature without reasonable excuse. Protected wild creatures are listed in Schedule I to the 1975 Act. While these include such familiar friends as the natterjack toad, the otter is not so listed. Nevertheless, an order can be made—and I want to emphasise this—to add any wild creature to Schedule I to the Act in the interests of proper conservation, provided that there is first a representation from the Nature Conservancy Council, who are the Government's advisers on such matters, that this should be done.
Before making such a representation the National Conservancy Council must consider that the creature has become so rare that its status is being endangered by an action which is designated as an offence under the Act. The effect of such an order, therefore, would be to prohibit—and I want to emphasise this—any attempt to kill, injure, or take an otter without reasonable excuse. Whether or not this would prevent all forms of otter hunt I am unable to say, but I understood the noble Earl to say that it would not. However, the fact remains—and I must remind him of this—that the decision would rest with the courts. Action would presumably be up to anybody who felt that the 1975 Act did in fact give this protection, and if the practice continued then it could be tested in the courts.
The Earl of CRANBROOK: My Lords, may I interrupt the noble Lord? It would certainly be an offence if an otter was killed with hounds, but otter hunting without killing would not be an offence. That is as I see it.
Lord WELLS-PESTELL: My Lords, as the noble Earl wishes to believe that, that would presumably be more correct, but I am not sure that I would agree with him there. I would say that if the otter was protected, then I question—and I should say the courts would have to decide this—whether it could be hunted. But I do not think that any useful purpose is going to be served at this stage by the noble Earl and I having a disagreement. We are used to having disagreements. We had them for some years on a county council. They were, if I may say so, always good natured.
In any event, your Lordships may feel that the protection of otters under the 1975 Act would go a long way to meeting the noble Earl's objectives. I have to make it perfectly clear that Ministers share the concern which has recently been expressed about the decline in the number of otters. My colleagues in the Department of the Environment have been seeking advice from the Nature Conservancy Council on action to conserve the otter and the need for protection of the otter under the 1975 Act.
Towards the end of last year the Nature Conservancy Council and the Society for the Promotion of Nature Conservation set up a joint Working Group to assess the current status of the otter and to determine whether measures are needed for its conservation and, if so, what form those measures should take. The Group is now completing its report with a view to publication at the end of May. I understand that they will be proposing a programme of measures designed in particular to safeguard the habitats of otters and to curb the effects of disturbance and pollution.
Again I want to say on behalf of the Government that we shall give careful consideration to the Group's recommendations and to the Nature Conservancy Council's views on them. While we have not yet received the Council's formal advice, I understand that the Council would generally welcome the range of measures proposed by the Group. Based on these, the Nature Conservancy Council are contemplating advising my right honourable friend the Secretary of State on the need for a variety of measures to be taken, including legislative protection of the otter. They are seriously considering whether it would be appropriate to
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use the provisions for area protection under the Conservation of Wild Creatures and Wild Plants Act 1975. As I think I said earlier, it is for the Nature Conservancy Council to advise the Secretary of State whether the otter should be protected under this Act. If any formal representation is received from the Nature Conservancy Council, my right honourable friend the Secretary of State at the Department of the Environment will be undertaking the consultations with local authorities and others concerned which are required under the 1975 Act before an order can be made.
Your Lordships may well ask how all this affects the Bill. The first point I would make is that the purpose of the two measures is very different indeed. The object of the 1975 Act is conservation, while the object of the proposals in this Bill, so far as the Government understand them, is to reduce unnecessary suffering. I do not think it goes beyond that; to reduce unnecessary suffering. It follows from that that the considerations applying to the two courses of action are very different. My second point is that there appears to be no inconsistency or conflict in adopting either or both courses of action. The regulation of hunting so as to eliminate unnecessary suffering might he followed or accompanied by scheduling the otter under the 1975 Act on conservation grounds.
I turn to the proposals in the Bill. It seems—I can only report what I have been told because, I am very happy to say, I have no personal or practical experience whatever of otter hunting, that the activity at least in this country has one characteristic which distinguishes it from other forms of hunting; that is to say, the otter may be hunted for some time without being aware of the fact, a point which the noble Earl made. Apparently this is possible because the hounds follow a scent for some time before meeting up with the otter. If my information is correct, this means that up to that point the animal will not have been made to suffer by or from the pursuit. That is not to say that otter hunting as it has recently been conducted—that is, in which every attempt is made to avoid the actual kill—involves no suffering.
When moving the Second Reading of his Bill, the noble Earl drew your

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Lordships' attention to the fact that the otter may be disturbed by fishermen. I suggest that it is terrified if it is aware of being chased by hounds, even though they may be called off, and that is a very different thing. Let me say honestly that as an individual I am intrigued to know how hounds can be called off at such close quarters. How does one do that? The Government would not feel able to approve a form of regulating hunting which preserved such an element and, let us make no mistake about it, the Bill that is before us would preserve such an element.
As we understand it—this was the sense of the remarks of the noble Earl when introducing the Bill—his intention is that the conditions should be so drawn as to require that the hounds be called off the moment they come up to the otter. Is that realistic? Is it really possible? What does one say to hounds in such circumstances? Let us face the implications of all this. There has been talk about scents; that they can follow yesterday's scent but not today's. How does one determine which is yesterday's scent and which is today's? I certainly do not know.
In so far as the intention of the Bill is to eliminate any suffering on the part of otters, I can say without reservation that this is a principle which has the Government's support. Such reservations as we have stern from practical difficulties which we believe would arise from the provisions as at present drafted. As to whether what we understand to be the noble Earl's intentions could in practice be achieved, I have indicated that the character of otter hunting would appear to make this at least a theoretical possibility. But let us not forget that we are talking about a theoretical possibility and that there is a great deal of difference, a vast distance, between theory and practice. If, as I say, it would appear to be at least a theoretical possibility, the result would be almost indistinguishable from the total abolition of otter hunting so far as the suffering inflicted on the animal by way of sport was concerned. We believe it would be difficult to object to such a result; that is, if it could be achieved in practice. It would certainly accord with the Government's policy of eliminating unnecessary suffering wherever reasonable and possible.
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In its present form, however, we are of the opinion that the Bill could not achieve that object. Accordingly, our attitude to the Bill at this stage, on our understanding of what its purpose is intended to be, must be one of neutrality. It is a matter for your Lordships to decide what should happen. But let me again be perfectly frank and say that the Government could not accept a measure of this kind on the Statute Book in its present form.
I understand that the noble Earl is ready to accept Amendments which would rectify the Bill's deficiencies and, if it is the wish of your Lordships that further progress with the Bill should be attempted, I can assure the House and the noble Earl that we should be happy to discuss the matter with him; that is, if your Lordships think it right to proceed in this way. In the course of such discussions, the matter we particularly wish to explore would be whether it is really practicable to devise mandatory conditions which would eliminate any element of suffering.
That is what it will turn on; whether it is feasible, possible and practicable to devise mandatory conditions which would eliminate any element of suffering. The question is whether it is possible to draft such conditions and whether it would really be practicable in that they could be apparent and observed; and then, of course, whether the provisions in the Bill would be satisfactory in the event of a deadlock between the Secretary of State and the otter committee. The noble Earl has set out clearly the appointment of an otter committee and the fact that, whatever else it might decide, four things would have to be mandatory. But what would be the position of the Secretary of State in relation to any recommendations of that otter committee?
The Government support the elimination of any suffering caused by the sport of otter hunting and would not object to the Bill if it could be amended to achieve that object. I have pointed out that we see very real and practical difficulties in doing that. We should not be prepared to contemplate Government approval for conditions which did not entirely eliminate the element of suffering, and I would ask with the greatest possible respect whether hunting an otter can be held at any time not to include an element

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of suffering. One must surely go with the other. We reserve the right to take action—as I am sure many noble Lords would wish the Government to do—under the 1975 Act, if appropriate, whether or not this Bill reaches the Statute Book.
6.10 p.m.
Lord CRAIGTON: My Lords, my noble friend has based his Bill on his view, which I quote, that
"…the effect on otters of hunting is comparatively negligible",
that the otter is beginning to recover its former status in certain areas and, basing his figures and graphs to some extent on the authority of hunt records, he points out with truth that many hunts are continuing to enjoy this sport.
There are other opinions. The Hon. Vincent Weir made observations between 1967 and 1973 in North Norfolk. Those observations showed that it took about four months for otters, once they had been hunted—not necessarily killed—to return to their former territory. So, in taking figures from the hunts, it is clear that the huntsmen who know this behaviour of the otter are not going back to the former territory but are going to where they hope or, with their great skill, know the otter is. For that reason, we believe that many of the hunt records of kills and otters in the area are abnormally high. I believe that nearly every other authority in the country is of the opinion that the otter is both scarce and, in many areas, endangered. I am glad that the noble Lord, Lord Wells-Pestell, and his colleagues share our concern.
I should like briefly to quote the names of some of the authorities I have for saying what I have. They include the Otter Trust which said in a letter to me,
"All the scientists who have studied otter populations in this country—Chanin, Mason, McDonald, Weir, West, Erlinge and Green—have come to the same conclusion; i.e. that unless the otter is totally protected by law it will soon become extinct in most of England and Wales."
They say that this view is endorsed by a large number of field naturalists who are helping with the present otter survey, of which Dr Chanin is the co-ordinator.
In addition to that, at a recent conference in Berne, the common otter was placed in Appendix I of the Washington Con-
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vention on International Trade in Endangered Species of Wild Fauna and Flora. It is now, therefore, internationally recognised as being in need of complete protection. Trade in otters is now controlled and the otter will be added to the Red Data book of endangered species. Furthermore, only four days ago--last Monday—the status of the otter was raised at the Survival Services Commission meeting of the International Union for the Conservation of Nature, at Morges. The meeting expressed concern about the status of the otter in the whole of Western Europe and instructed that a telegram should be dispatched to the Department of the Environment—where I hope it has been received—urging Her Majesty's Government to give the otter immediate legal protection, including a ban on hunting, trapping and shooting.
These are powerful and authoritative opinions and they will, as the noble Lord, Lord Wells-Pestell, said, shortly be reinforced when we see the recently completed report of the Joint Otter Group of the Nature Conservancy Council, the Society for the Promotion of Nature Conservation, the Mammal Society and the Institute of Terrestrial Ecology. I am very glad to hear from the noble Lord, Lord Wells-Pestell, that he is considering measures that may do something about this very difficult problem.
The weight of evidence will surely be that the otter is an endangered species. It suffers many dangers and difficulties in attempting to survive in this country and, before one considers the merits of a Bill to permit hounds to hunt but not to kill otters, let me state briefly what these difficulties and dangers are. With so elusive a creature as the otter, a particular difficulty is that it is probably true to say that in many cases one cannot know for certain that the otter is seriously endangered in any area until it is too late. One only finds out when the damage is done.
What are the main dangers? My noble friend mentioned some in introducing the Bill. The first is disturbance in any form, whether chased by a hunt as legalised by this Bill or disturbed by fishermen, canoeists, sailors or even ramblers. There is killing, which this Bill attempts to prevent except in certain circumstances. In this connection, my noble friend men-

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tioned fish farming. There is also killing and trapping by gamekeepers and even fishermen in the not mistaken but much exaggerated belief that otters do damage to game fish. In fact, there would seldom be more than one otter to every six or even ten miles of river and, as everyone knows, the otter's main food is eels and coarse fish. Again, there is the destruction of habitat, often by the water authorities and with the best of intentions. They should leave one side of the bank for the otter so that the otters, if they are there at all, may try to live in peace. Finally, there is pollution. Undoubtedly, pollution did damage but the situation is now better and if the fish can live the otter can live there too.
Encompassed by all these dangers as the otter is, do we really need a Bill that legalises one of those dangers—disturbance by hounds—and attempts to prevent one other—killing by hounds? use the word "attempts" deliberately. The Friends of the Earth have made one point to me in opposing the Bill: hunters cannot guarantee calling off hounds to avoid a kill. The noble Lord Lord WellsPestell, made this point very clear. The only time that I ever came up to otter hounds was when I was a young man and I was fishing. Hounds were all running along the river sniffing. It was a most attractive sight. They put up a rabbit and bang! the whole lot were away over the field and though they were shouted at nobody could stop them. They drifited back, one after another, after a time.
In addition, if an otter is killed, what will be said? Any excuse will be possible —"I thought it was a mink, I thought it was a coypu". Both those creatures inhabit the same banks as the otter. I am totally opposed to legalising disturbance at this time, but do we have to approve a Bill just because it also tries to prevent the killing of the otter by hounds?
As the noble Lord, Lord Wells-Pestell, said, otters could be protected now under the Conservation of Wild Creatures and Wild Plants Act. There has been a great deal of misunderstanding about that Act as also about this Bill and the otter itself. I want to comment very briefly on what the noble Lord said and to thank him for his explanation about this Bill. Many of us in the conservation world have not
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been clear. The noble Lord said that if the Nature Conservancy Council is satisfied that the otter needs protection an Order can be made. That is something that we all wanted to hear. He will agree with me that that order can be made either in a particular area or in relation to a whole area. If it is a particular area, it will be a little difficult because the otter moves about so much. It can be asked: against what dangers can the otter be protected and what known dangers remain? The noble Lord mentioned the dangers against which the otter can be protected—killing, which is the one referred to in this Bill, maiming, taking or attempting to do so. But a very wide field, such as disturbance, which this Bill seeks to perpetuate, pollution and habitat destruction will still remain.
So I oppose the Bill because the prevention of killing by hounds can be met by existing legislation, and because in legalising one form of disturbance it is an anti-conservation measure. I beg the Nature Conservancy Council—and the Minister has gone a long way towards answering me—to ask the Minister to add the otter to the Schedule to the Act, even though we know that the protection is only limited, and even though we know (and my noble friend will agree with me) that the other answer is also the establishment of recognised and controlled otter havens with, if possible, supporting legislation, and I would hope to see that. If necessary, I intend to divide the House, and I ask your Lordships not to vote for enshrining in law the disturbance by hounds, whether drag or hunting, of this rare and beautiful creature.
6.21 p.m.
Lord AMULREE: My Lords, I should like to give some support to the Bill at present before the House because I think that it does something to protect the otter which is not being done at present. Although, as the noble Lords, Lord WellsPestell and Lord Craigton, said, there are things that could possibly be done, they are not being done now, whereas if the Bill became law it would do something to start the ball rolling to protect this very attractive and totally harmless animal which, so far as I know, causes no trouble or damage at all; or at least very little.
I do not propose to go into the matters which have been so well put forward by

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the noble Earl who introduced the Bill, but one suggestion I should like to make is that, if your Lordships give the Bill a Second Reading, when the Minister receives reports from the otter committee (which the Bill would make possible) these should be published so that people can know what is going on.
With those few words, I should like to support the Bill which, as I say, proposes to do something for the unfortunate otter which is not being done at the present time. Before I sit down, I should like to explain to your Lordships that I might have to leave the House before the debate is concluded, and I hope that your Lordships will excuse me if it should be necessary for me to leave.
6.23 p.m.
Lord DENHAM: My Lords, the Party to which I belong has never believed in expressing a view, as a Party, on matters of this kind but has always preferred to leave them to the individual judgment and conscience of its members. I should therefore like to begin by making two things absolutely clear. First, that, if there should be a Division at the end of this debate, my noble friends are entirely free to vote as they think best. And, secondly, although I am speaking from this Dispatch Box, what I am going to say is my view and my view alone. Here I should like to declare a lack of interest in that, although I have been otter hunting a very long time ago, I have not been recently, and I do not intend to go. But by what I say I do not mean that I express the same disapproval of it as has come from other quarters of this House.
My Lords, a primary reason behind this Bill is the undoubted fact that otters are now in need of conservation, the question of the morality of otter hunting must arise, as indeed it has already. It has always been an unwritten law of the countryside that no animal should be killed for purposes of sport alone. But where it is necessary for a particular animal to be killed, either because it is a source of food, which of course does not apply to the otter, or because it is a pest, then it is quite acceptable for that animal to be killed in the course of a field sport, providing that no more suffering takes place than would be involved in other methods of killing, and provided that
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suffering is kept to the absolute minimum necessary. The Scott Henderson Committee endorsed this unwritten rule in paragraph 11 of their report (Cmnd. 8266).
As your Lordships have heard, there are now large stretches of waterways where otters are very few in numbers, and cannot be regarded as a pest, and in these places it would clearly be wrong for them to be killed by otter hunting or by any other means. But there are still places where otters, or more usually a particular otter, can he a pest, and where such otters have to be killed, I believe (and I must again emphasise that this is a personal view) that they are more likely to be killed selectively and humanely under the auspices of the Master of Otter Hounds Association. This is the distinction that my noble friend Lord Cranbrook seeks to make in his Bill.
At this stage I should like to answer a question that was asked by the noble Lord, Lord Wells-Pestell, and was mentioned also by my noble friend Lord Craigton. The question was: Is it possible, after hunting the drag, when hounds come up with the otter, to call off hounds at that point? My information is that it is. My noble friend Lord Craigton quoted an example of when he saw otter hounds killing a rabbit. I note in parenthesis that he was fishing at the time. When hounds come up with an otter, the instinctive reaction of the otter is to go into the water, and when it goes into the water at that point it has an advantage over hounds. A rabbit does not go into the water and hounds cannot be called off when they are chasing a rabbit on the land, but I am told that they could certainly be called off at the point when the otter goes into the water.
My Lords, like all controlling bodies of field sports, the Master of Otter Hounds Association has very firm rules which it enforces among its members. As a matter of deliberate policy, they have one positive written rule, rather than a number of negative ones. "Otter Hunting", its rule book begins:
"is the hunting of the otter in its wild and natural state with a pack of hounds. No pack of hounds of which the Master or representative is a member of this Association shall be allowed to hunt an otter in any way which is inconsistent with this precept".
Rightly or wrongly, the Association felt that if its rule book consisted of "don'ts",

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it would be less easy to control what happened, whereas any wrong action that takes place can be condemned as an offence against the Association's one positive rule. Over the years the Association had issued directives to its members, specifying individual practices, such as "the stickle", "tailing of otters", and "owering of the water in mill pools", which, among others, would certainly be regarded as a breach of the rule. The Report of the Scott Henderson Committee, published in 1951, takes particular note of this, and concluded in paragraph 313:
"We think that these practices are now things of the past".
After reading my noble friend's Bill, the Master of Otter Hounds Association issued another such directive, bringing the main provisions of the Bill into effect in advance, so as to cover the 1977 season, which started officially on 1st April. This directive reads:

"1. No otters shall be killed except at the request of the riparian owners when they are doing proved damage. If for this reason any otter is killed the organs will be sent to the Monks Wood Experimental Station.

2. Hunting shall be conducted on a basis agreed with the Governing Bodies of the recognised Naturalists Organisations.

3. No hunting shall take place in rivers that do not afford the otter every opportunity to escape. Maximum care shall be taken to preserve breeding sites. No river shall be hunted so as to cause any risk to the breeding of otters; this must cover the number of hounds taken out and the use of terriers".

At the same time they said that when the report of the Working Party set up by the Nature Conservancy Council and the Society for the Promotion of Nature Conservancy is published they will review this directive in the light of it.
My Lords, other controlling bodies of field sports have ultimate sanctions which can be used as a last resort to enforce their rules, in particular the ability to keep offenders' hounds out of the stud book. This is not available to the Master of Otter Hounds Association, since the pure-bred otter hound is now comparatively rare and it is much more usual nowadays to use drafted fox-hounds. The absence of such sanctions has not in fact so far proved to be a disadvantage, but, none the less, I am told that the Master of Otter Hounds Association welcomes the fact that this Bill would give it the teeth which it at present lacks.
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My Lords, I am in the same difficulty as no doubt are the rest of your Lordships in trying to judge, as a layman, between the conflicting views of the naturalist advisers of my noble friend Lord Craigton and my noble friend Lord Cranbrook and his, over the effects caused by the disturbance of hunting on the breeding of otters. My noble friend Lord Craigton feels so strongly about this that he has told your Lordships that he intends to divide the House against the Second Reading of this Bill, and none of your Lordships will have the slightest doubt of the depth of conviction behind such an action; but I think it is allowable, and perhaps right, to question its wisdom. With this in view, I should like to put three points before your Lordships.
First, this Bill deals only with otter hunting. Otter hunting is by no means the only threat to the survival of the otter; and this is borne out by a Written Answer, which appears in yesterday'sHansard,given by the noble Baroness, Lady Stedman, to my noble friend Lord Cranbrook. In that Written Answer Lady Stedman concludes:
"However, the Nature Conservancy Council has reason to believe that substantial numbers of otters are killed in other circumstances." [Official Report,27/4/77, col. 682.]
An otter's pelt is worth, I am told, about£20. It can be shot and trapped comparatively easily, but it is very difficult to do either of those things humanely. If otter hunting, which is easy to control, were to stop, the other methods, which are not easy to control, might well increase dramatically.
The second point is that my noble friend's reason for asking your Lordships to vote against this Bill to control otter hunting is that he does not think it goes nearly far enough. He wants to ban otter hunting altogether; and the noble Lord, Lord Wells-Pestell, in a speech of remarkable neutrality, supported this view. That would not be the immediate effect of this Bill being defeated this afternoon. A vote against this Bill is not a vote against otter hunting, however much your Lordships may wish it were. The immediate effect of this Bill being defeated would be that otter hunting would continue, your Lordships having rejected the modest curbs being asked for by my noble friend Lord Cranbrook. If this Bill should be defeated this afternoon, I hope that the

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Master of Otter Hounds Association will still follow its precepts, but it would, quite frankly, he no thanks to your Lordships if it did.
Thirdly, and perhaps most important, we are awaiting the report of the Working Party set up by the Nature Conservancy Council and the Society for the Promotion of Nature Conservation. My Lords, 26 years ago the Scott Henderson Committee recommended—and I am quoting from their Recommendation 49:
"A thorough investigation should be conducted under the Nature Conservancy or some other suitable body into the natural history of the otter, and particularly into its feeding habits in various river conditions. The result of this inquiry should be taken into account in deciding whether or not otter-hunting should be permitted to continue".
Such an investigation has been very long in coming. It seems to me to be a very great pity, and indeed wrong, to come to a decision in principle on legislation such a short time before the publication of this long-awaited report, and I hope that, in view of this, my noble friend Lord Craigton will not divide the House this afternoon.
6.35 p.m.
The Earl of LISTOWEL: My Lords, I am sure we would all agree with the noble Earl, Lord Cranbrook, whose expertise as a naturalist and whose admirable work for conservation over many years, particularly in his own county, everyone recognises, that the otter should no longer, in normal circumstances, be killed by hounds. So far, no one could quarrel with him as a conservationist; but what I regret about the Bill is that it goes no further than this in protecting the otter and, in some respects to which I shall come in a moment, would, I fear, actually worsen its present position. I think it is generally agreed, even if the situation may he improving at the moment, that the otter population has been declining and that early measures are needed to prevent a further fall in its numbers.
Such conservation measures are long overdue, and in taking them we should merely be bringing this country into line with most of the countries in Western Europe. Almost every country in the Council of Europe—which, as your Lordships will remember, is a more widely
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representative organisation than the EEC —has passed conservation laws for the protection of otters. We are the only country in Western Europe, apart from Ireland, which has no protective legislation, not even—and I think this is the most shameful thing of all—a close season for otter hunting.
Lord DENHAM: My Lords, I hope the noble Earl realises that there is a close season, although not a legal one. There certainly is an extremely carefully kept close season for otter hunting.
The Earl of LISTOWEL: My Lords, I was referring to a legal close season, and I think the noble Lord, who knows a great deal more about otter hunting than I do, will agree that in fact otter hunting goes on, not everywhere, of course, but in some parts of the country, in April, May and June, when otters are breeding. As I say, we in this country are really in this lamentable position, but we must not exaggerate, of course, the effect of otter hunting on the position of the otter. Whatever legislation we may produce to protect the otter, we cannot stop the inroads of industry, urban sprawl and mechanised farming into their natural habitat on the banks of our waterways, and that is the principal threat to the otter. At the same time, we should certainly do everything possible to give the otter security in its natural conditions—a security which they are losing through the erosion of the countryside.
Our natural history, like our political and cultural history, is part of the history of Western Europe. We could show that we are good Europeans by preserving what is left to us of our natural environment for our own enjoyment and, indeed, for that of our continental neighbours. For a change, let us try to set a standard of conservation that is at least as high as theirs, and this opportunity may well come when we get the report of the Nature Conservancy Council, to which the noble Lord, Lord Wells-Pestell, referred and which he said, much to my satisfaction and, I am sure, to that of other noble Lords, will be with us in a month's time.
So we have recognised that the otter is now a rare animal, and we have recognised, further, that the otter needs special protection, because it was included

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last year in the Endangered Species (Import and Export) Act. This gives some measure of indirect protection to the otter by prohibiting the sale to or purchase from abroad of any species of otter, save under licence, and also by prohibiting the import or export of otter skins or furs. But, of course, it does nothing to stop the commercial exploitation of otters at home, and I believe that in Wales and Scotland, where otters are still fairly plentiful, the otter is shot for the value of its skin. Of course, this is probably due to inflation. I think that my information about the value of an otter skin is that it is considerably higher than the value put upon it by the noble Lord opposite. But, at any rate, I am afraid that there is a strong financial inducement for the trapping or shooting of the otter. This commercial exploitation could he prevented if the otter was added to the list of wild animals protected by the Conservation of Wild Creatures and Plants Act 1975 which prohibits the killing or taking of any endangered species save under licence.
This was the Act which gave the Nature Conservancy Council the duty of making representations to the Government if it considered that any wild species should be added to the protected list; and the status of the otter has been under consideration, as has been referred to by several noble Lords, by the Council. The report is on the way and I understand from what the noble Lord. Lord Wells-Pestell, has said that it will include recommendations about a variety of measures—and a number of measures will be required, no doubt—for the conservation of otters. I sincerely hope, for it is the most important measure of all, that at least the otter will be added to the protected list in the conservation Act; and as the Minister will have the power to designate areas, it does not necessarily mean that areas where the otter is still fairly plentiful will be included.
Surely—and I am afraid that this is where I differ from the last words of the noble Lord, Lord Denham—it would be most unwise to legislate in any form whatever until the report has been received and there has been plenty of time for all the proper consultations with the other bodies concerned and for both Houses of Parliament to consider this report with the utmost care. I cannot help
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thinking that it would be a fatal mistake to pass a Bill like that submitted to the House by the noble Earl tonight that might conflict with the recommendations of the report of the Nature Conservancy Council. It is all very well for the noble Lord opposite to reserve his position; but if the otter were to be included in the protected list then it could be no longer hunted, as is proposed in this Bill, and killed in order to stop damage to fisheries and other property. That would be prohibited. It might be permitted under licence but this would be quite a different mechanism. It would therefore not be possible to do this unless the noble Lord were first to introduce amending legislation to amend this Bill if it were passed by both Houses of Parliament and became an Act.
Another alternative, and possibly supplementary, method of protecting the otter would be a special Bill like the Badgers Act which was piloted so skilfully through this House in 1973 by the noble Earl, Lord Arran. But fresh legislation is very difficult and lengthy and it is not the easiest way of dealing with the problem. I am sure that both these alternatives and, of course, other measures as well affecting the otter should await consideration of the report of the Nature Conservancy Council.
May I turn for a moment to the provisions of the Bill, for this, I think, no speaker has yet dealt with and I shall not be going over ground that has been covered. The noble Earl is asking the House to regulate otter hunting by a code of rules which he wants to make enforceable in law. The first question is this. Are these rules, in fact, enforceable? I would ask your Lordships to treat the mandatory conditions set out in Clause 1(2) as a test case. Most important of these conditions—and this we were told by the noble Earl himself was the most important of these conditions for it would stop the accidental killing of otters—is in Clause 1(2)(b). This provides that:
"every reasonable precaution shall be taken to prevent an otter being killed".
So if an otter is accidentally killed by hounds and proceedings are taken against the hunt, the court must be satisfied that every reasonable precaution had been taken to prevent the accident.
The normal and obvious precaution would be to call off the hounds in good

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time before they have caught the otter. I am not going into the argument as to whether or not this is practical. Let us assume that it is practical. That is the assumption that I should like your Lordships to make. But how is the court to know whether the hounds were, in fact, called off in time to give the otter a fair chance of escape? The hunt followers would be unlikely to give evidence against the hunt and it would hardly be realistic to except a conservationist to go out with every hunt to see fair play for the otter.
I am glad that the noble Earl has not in the Bill suggested that our over-worked county police force should be used for this purpose. There is nothing in the Bill corresponding to Clause 10 of the Conservation of Wild Creatures and Plants Act 1975 which places the duty of enforcement squarely upon the police. There is no means of enforcing the provisions of the Bill. If the noble Earl has merely omitted to refer to enforcement, perhaps he might reply to this criticism when he answers the debate; but it seems to me that unless this criticism can be met the bottom falls out of the Bill.
My Lords, another important question which I think has not been asked this afternoon is this. Is this Bill really necessary? I think that every one agrees that we have too much legislation on the Statute Book and that we should not add to it unnecessarily. If it is now the normal practice, as the noble Earl tells us that it is, to allow the otter to escape, why is it necessary to legislate for the same purpose? May I draw your Lordships' attention to a directive issued this month by the Masters of Otter Hounds Association? The directive begins:
"No otter shall be killed except at the request of the riparian owners when they are doing proved damage".
Surely, this is exactly what the Bill sets out to do. I am sure that the noble Earl, Lord Cranbrook, will agree with that. I suggest that we ought at least to allow the masters of otter hunts to persuade their recalcitrant colleagues, if such there be, to conform to good hunt practice. Only if persuasion fails—and time will show—could there be any case for compulsion. It must be a cardinal principal with all of us that we do not take away the liberties of the subject by passing another law if it is possible to achieve
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the purpose of the law by agreement and persuasion. I therefore take the view that the necessity of this Bill—and I think the onus of proof is on the noble Earl opposite —has not been proved to the satisfaction of the House.
May I refer to one other clause in the Bill which is extremely important. It is part of the second purpose of the Bill which is the control of otters by hunting. Clause 4 permits an owner of land or water to invite a hunt on to his land if he alleges substantial damage to his property. So far as I can see, this clause would work in a way that would not give protection to many innocuous otters who have done no harm to anyone; for the landowner does not have to satisfy the court that damage has been done until after the hunt has taken place. It is only at that stage that he can be charged; and by that time the otter or otters could have been killed. If this clause were widely used there could be a great deal of damage. If protection is required, as it may be, for hatcheries, fisheries or fish farms, it could be given by licence on the application of the landowner—but that is not a procedure suggested in the Bill.
Clause 4 raises the wider question of otter control by hunting, which is what the noble Earl wants. There is some conflict of evidence about the damage done by otters, and we need to know more about the facts before we exempt the otter from protection on this ground. But on the assumption made in this Bill that the otter can be a pest, I still do not think that a pack of hounds is the best method of removing it. The hounds, even if they are successful, disturb and damage wild life on the banks of rivers or streams, especially when they are working during the nesting or breeding season, April, May and early June. This damage could be remedied or stopped by other methods—and humane methods —such as the use of the rifle.
My Lords, for the reasons which I have given, I cannot support a Bill which I find to be premature, unnecessary and unenforceable, and which offers far too little protection for the otter. I sincerely hope that the noble Lord may be persuaded at the end of this debate to withdraw this Bill. But certainly if there was a Division, I would find myself in the Lobby in opposition to the Bill.
6.52 p.m.
Viscount MASSEREENE and FERRARD: My Lords, may I start by answering two questions which the noble Lord, Lord Wells-Pestell, asked. He said: How can you tell the difference between a stale scent and a fresh scent? If you are hunting a line of an otter two days' old and you then come across a fresh line, in fact it is extremely easily told because hounds on a stale line have to puzzle it out. They give a little whimper and are not very keen. They take a long time. The moment they are on a fresh line, they hunt far more keenly, far faster and their cry—or "music" as it is called in hunting terms—is far greater.
The other question, which my noble friend Lord Denham answered very well, was about whipping hounds off. My noble friend Lord Craigton said that when he was fishing one day a rabbit got up and the otter hounds chased it. It was not possible to whip the hounds off. My Lords, if one had been on a horse—and I agree one does not hunt otters on a horse—one could have whipped the hounds off. An otter does not go off chasing across a field. It does into the water wherever it can, and hounds in water travel very slowly. They travel slower than a man can run on a bank. Therefore, provided the river is not very wide, you can stop them.
Having said that, reading the report from the Mammal Society, it is perfectly true there has been a great decrease in otters. They say there has been a fall of 40 per cent. from between 1957 and 1967. I do not think that you can equate the reason for that decrease with otter hunting. The decrease is largely due to disturbance by motorboats, trippers and pollution. The effects of pollution are lessening.
In the part of the world I know well, the decrease is attributable to trapping and shooting for the pelt. I have been otter hunting, but the only otter I have ever seen killed was a trapped otter. It had been in a gin trap and it had only three legs. Therefore the killing was an act of mercy. If we take the figures of otters killed by otter hounds in the past five years, it amounts to only 41. In the past two years it has been only five a year. Therefore, I do not think that we can attribute this great decrease in otters to hunting.
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If there are not too many hounds, otter hunts serve a good purpose. if you did not have one or two otter hunts—and you can count them on your fingers, they are very few and far between—it would be very difficult for naturalists to assess the number of otters in the country. It is impossible to assess the numbers with any degree of accuracy. In my part of the world, the West Coast of Scotland, where I have a home, a few years ago I got up some hounds, about five couple, to try to take a census of otters. It is only in that way that you find the holts. We never killed an otter apart from the trapped otter.
Therefore, provided that otter hunting takes place in accordance with this Bill, the number of hounds is restricted, and terriers are not used, then it is satisfactory. If terriers are not used, one cannot bolt the otter out of the holt. Otter hunts can be beneficial from the point of view of naturalists making a census of otters. Under the Conservation of Wild Creatures and Plants Act 1975 it might be wise to designate certain areas where otters are rare and not to allow any hunting there unless naturalists wish to find out if there are any holts. A pack of three or four couple of hounds—or perhaps two couple would do—could be used.
An otter pelt was worth about£25 last year, but with inflation it will probably now be worth a lot more. Otters on the whole do very little damage. They chiefly take eels: they do take fish, though usually coarse fish. If they take a trout or a small salmon, it is usually a weak or diseased one. So on the whole otters do a reasonable amount of good. Of course they will sometimes take poultry, and I believe it has been known that they have taken lambs, but I have never come across that.
Regarding the Bill, I should be loath to see all otter hunting cease for the reasons which I have given: that you cannot really make a proper census of otters, my Lords, if you do not have one or two hunts. So far as I can see, the hunt does not cause great alarm to the otter. If it is hunted on the old drag, which is probably two nights old, it is a very difficult thing to do. You must have very good hounds, and it is very interesting for people to watch hounds puzzling out the line. The otter does not know it is being

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hunted, and if hounds actually come up near the holt the otter may remain in the holt. It cannot be got out if terriers are not used, and if it leaves its holt it goes straight into the water. You can whip hounds off if they are under control as they should be and if you do not have too large a pack.
I rather agree with the noble Earl, Lord Listowel, that this Bill probably does not represent very good law and it may be difficult to put it into law. But, perhaps, if it were wisely amended, it might be adequate. Having said that, my Lords, am not against the Bill. It is reasonably harmless so far as the otter is concerned. Certainly it will not serve to decrease the otter population. Perhaps it might cause some alarm sometimes to one or two otters but no more alarm than a motor boat going up a river. I have seen otters swimming and diving in front of a motor boat and I am sure they are just as much alarmed by a motor boat as they would be by three, four or five couple of hounds. I should be sorry if this Bill does not get a Second Reading, as I say, because I think it could be amended so as to make sense in law.
7.2 p.m.
Lord AYLESTONE: My Lords, in speaking to people who are interested in wild life conservation, I find that one of the difficulties about this Bill is its Title. Had it been entitled, "Otters (Prohibition of Killing by Hounds) Bill" it would have got a very much better response. But people seem to assume, quite wrongly, that the Bill encourages otter hunting when in fact if does nothing of the sort. I support the noble Earl over this Bill, realising that it does not abolish otter hunting or make it illegal in all circumstances, but is designed to prevent the indiscriminate killing of otters with hounds. It permits the destruction of otters should their numbers increase considerably, which is hardly likely to happen in the foreseeable future.
The noble Earl and myself did not agree when we sat on the Select Committee which was considering the Hare Coursing Bill, but despite that disagreement I would pay tribute to him as a naturalist and conservationist. He has already told us that on his own stretch of river for
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40 years he has not prevented otter hunting in any way. As for myself, I would always support a Bill of any description which conserves wildlife and I think this is a measure which contributes to that end. It will probably need amendment if it reaches a Committee stage. I would hope that if the Bill does go forward the noble Earl will be prepared to meet suggestions for Amendments, if they are made.
He has reminded us that the otter was disappearing from our waterways some 15 years or so ago, no doubt partly due to river pollution and the use of pesticides, and also perhaps because of otter hunting. We do not know. Otters have increased since that time. The hunts which are organised by the Otter Hounds Association have done valuable work in producing information on the habitats of otters, their customs, and so on, and we know of the activities of the Association. What we do not know about is the freelance hunting that may take place. That would be caught under this Bill, because such hunts would be outside the regulations which are set down in the Bill.
Generally speaking, otters, despite the fact that they are increasing in numbers, as we have been told, are not numerous. Many noble Lords who, like myself, have never been hunting will have by chance seen otters from a river bank. We know that their territory covers some five, six or seven miles and we know that they have disappeared completely from some rivers. They move very quickly. This afternoon an interesting discussion has taken place about the scent of otters, which I am told is technically called "the drag " That enables hounds to pick up the scent some days after the otter has actually been in that area. It strikes me as being not an unhealthy exercise for hounds or their followers to follow the drag of an otter which is not in the vicinity, but certainly I would hope that the otter is not caught and killed. We have heard a discussion as to whether or not dogs can be called off. I would not know about that.
An otter hound is an intelligent hound of the bloodhound breed, so far as I know, with perhaps a shaggy coat—that may be a fair way of describing it—as distinct from the bloodhound. But hounds are not always used in otter hunts.

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I happened to see an otter hunt on television a week or so ago, and it looked to me as though 57 varieties of dogs were joining in that particular hunt, so I doubt whether they could have been called off. I would be very concerned if an otter was frightened as a result of being chased and I have heard the argument put forward that no animal is frightened by being chased by a predator, in the way that we understand fright. Nevertheless, I find that very hard to accept.
If the Bill becomes law, it should end the indiscriminate hunting of otters and their killing by hounds. It should make their numbers controllable, if and when the danger to wildfowl sanctuaries, fish farms and so on, made it necessary. Under the Bill, the proposed Otter Committee will have as their objective the preservation of otters, and not their destruction. At the same time, as I have said, they will be concerned if at any time the otter should become a menace.
One or two points occur to me which might perhaps be better made at the Committee stage, but I would ask the noble Earl, when he replies, if he so wishes, to say why there should be a representative of the British Field Sports Society and not a representative of the Otter Hounds Association on the committee. Again, why should the Secretary of State wait 12 months before making an order by Statutory Instrument to make hunting illegal? Could we not operate more quickly, rather than waiting for 12 months, and so save the lives of a few more otters?
To my mind, this Bill is sensible. It does not go the whole way but it prevents the unnecessary killing of otters. It still enables those who need protection, such as people who control wildfowl sanctuaries and so on, to get such protection. They would have to obtain permission from the Otter Committee to do that. I should certainly like to see otters added to Schedule I to the Conservation of Wild Creatures and Wild Plants Act 1975. Although this question is now before the Nature Conservancy Council and we are waiting their report, reports take a long time, as does Government action; and I would settle for this Bill while we are awaiting further action. I am opposed to the killing of wild animals of any kind for
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the sake of killing, because it cannot be right. But should a Division take place I would support this Bill, using the argument that perhaps half a loaf is better than no bread.
7.10 p.m.
Lord DE CLIFFORD: My Lords, in rising to address your Lordships, I find myself once again in a situation where we are discussing an activity in which I personally would not take part, but which I do not find myself in a position to object to if other people wish to do so, and if it is reasonably well controlled. I have listened to the debate today, and I find myself in great sympathy with practically every argument for and every argument against this Bill. However, I find myself feeling that the decrease in the otter population cannot be blamed solely on otter hunting, and on the desctruction of otters for their pelts, and that it is perhaps due to the way in which human life has developed in this country. I think that pollution, and the use of pesticides, have probably been great instruments in the decrease of the otter.
A decrease in wildlife and in bird life frequently takes place. In past years, through no fault of anybody or anything, except the environment, there has been a decrease in wild birds. In my part of the world, the decrease in the number of small birds has been fantastic. But I am extremely pleased to see that this year they are starting to come back and breed again, though not in nearly the numbers that there were two or three years ago. I feel that, over those years, we may have witnessed another natural decrease in the population of a wild animal indigenous to this country. One thing which always rather surprises me is how well wild life, which is introduced into this country, prospers. We have the coypu, the mink and the grey squirrel, all of which are not natural inhabitants of this country but which have prospered, and continue to prosper, at colossal rates, whereas we are now having to consider legislation to protect badgers and otters.
I understand that for some time we have been promised a report by the Nature Conservancy Council, and that this report is now due in June. I think that the production of my noble friend's Bill might even have accelerated that report a little.

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But I would ask my noble friend to press on with this Bill, because if it gets lost we may find ourselves in a position where, having got the report, we again have a long period of nothing. I feel that my noble friend might be the light which is put to the blue paper, because while this Bill is going through it may encourage people to do something about a report which is soon to come.
One of the things which rather surprised me today was the vehemence with which the noble Lord, Lord Wells-Pestell, spoke on the subject of causing terror and so on. I feel that today he gave the greatest encouragement to the anti-hunting fraternity and—I trust not—practically committed his government against nearly all forms of hunting with dogs. I hope that we shall never see a Government interfering with the pursuits of people who live in the country, and enjoy their natural life with enthusiasm, always provided that one is not compelled to take part in an activity if one does not approve of it. I think that this Bill might be a first step towards helping in the preservation of the otter. It at least takes out of the environment one small section of the threat against the otter. I hope that the noble Earl will press on with the Bill, and if it is pressed to a Division I will vote for it.
Lord WELLS-PESTELL: My Lords, before the noble Lord sits down, I wonder whether he will allow me to say this. It is the responsibility of the Government spokesman to say what the Government feel is wrong, and one can do that at the same time as preserving Government neutrality. What I said very clearly was that the Government could not accept a Bill—I agree that it is for the House to decide—which maintained a situation where there was suffering imposed upon, in this case, the otter, and I was asking the question whether this was not so.
Lord DE CLIFFORD: My Lords, I thank the noble Lord for his intervention. I shall read his words tomorrow with the utmost care, because my recollection differs slightly from what he has just said.
7.17 p.m.
Lord WYNNE-JONES: My Lords, it is always a pleasure to take part in a debate where the noble Earl, Lord Cranbrook, gives us the benefit of a very wide know-
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ledge of natural history. He has done it once more today, and we must all be grateful to him. I have had some conversations with the noble Earl, and I promised him before this debate that I would not decide exactly how I would vote, or indeed exactly what I would say, until I had had the advantage of listening to him and hearing other people in the debate. By sheer good fortune I am last and, consequently, I have had the advantage of listening to everyone and it has been a very interesting debate.
The noble Earl is well known for his desire to conserve all forms of natural life. I myself, in dealing with a Bill in your Lordships' House, frequently had the advantage of his help and guidance, and I have no doubt at all that the noble Earl is absolutely correct in his whole approach to the problem of conservation. I think, however, that on this occasion he does not want to call it conservation. In fact, in an article that he wrote on the matter, he said that he did not want to call it conservation; that he was not concerned with the conservation of otters. He did not regard that as a problem. But he regarded the conservation of otter hunting—
The Earl of CRANBROOK: My Lords, may I interrupt the noble Lord? If he will look at Hansard tomorrow, he will find that I said I was concerned with animal welfare, not otter hunting.
Lord WYNNE-JONES: My Lords, I thank the noble Earl. I take his point and understand it, and I am sure that that is what he meant.
Lord DENHAM: My Lords, that is what he said.
Lord CRAIGTON: My Lords, if the noble Lord will forgive me, there was an article in the New Scientist of 10th March 1977 in which the noble Earl said:
"I do not want to blaspheme the Gods by pretending that this is necessary as a conservation measure. It is not. My reasons are purely emotional".
Lord WYNNE-JONES: My Lords, I thank the noble Lord for making perfectly clear what I was trying to say; I said it a little obliquely. The noble Earl has put before us a logically thought out scheme with regard to otter hunting.

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While listening to the debate I was struck by the fact that there is some confusion as to whether or not otter hunting is concerned with the killing of otters. The evidence presented by the noble Earl in a very interesting article in Country Life showed that the killing of otters by hunting has dwindled almost to zero. As my noble friend Lord Listowel pointed out, if this is so what exactly is the point of a Bill which regulates otter hunting in order to prevent otters being killed, since they are scarcely being killed by otter hunting? It seems that there is something a little strange here.
One or two noble Lords suggested that otter hunting is important in order to control otters, but evidently it is not doing so at present. Otter hunting is not illegal; it occurs. Only five otters were killed last year and the same number were killed the year before. In other words, there seems to be something a little strange about the need for the Bill. I find it difficult to understand exactly why one wants a Bill in order to make certain that otter hunting does not kill otters when otter hunting at the moment is not doing so. It seems to be a Bill to deal with a matter that is of no great significance.
If one looks at the situation one finds other inconsistencies. I mention these, because I was worried to hear various statements made in defence of the Bill which seemed to me to be entirely contradictory. For example, it is said that otter hunting is something which the otter knows nothing about. Again I have been a little rough in my paraphrasing but the noble Earl stated in his article that for most of the time the otter does not know that he is being hunted. On the other hand, we are told by other people that the otter is an extremely shy animal. that it never moves about in daylight if it can help it but makes most of its movements during the night and that it does its best to keep away from people. Yet, surprisingly enough, it does not know when a pack of hounds is after it. One would have thought that a shy animal, an animal extremely disturbed by human beings and very ready to take fright and run away, would notice if a pack of hounds was after it. I speak with no knowledge, for I have never seen an otter, but I
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should have thought that an otter is just the kind of creature that would be gravely disturbed by hunting.
Viscount MASSEREENE and FERRARD: But, my Lords, with the otter you are hunting a drag two days old when the otter is asleep in his holt and does not know anything about it. If you whip off the hounds before you come to the day's fresh scent, the otter will not know anything about it. The great joy that otter hunters have is to puzzle out this extremely difficult two days' drag. It is a very interesting procedure. I do not do it, but I know one or two people who do, and the point is to breed hounds which can do it.
Lord WYNNE-JONES: My Lords, I have read the noble Earl's article and I am quite aware of that. If the otter never knows anything about the hunt and if, as has just been repeated, you are following a drag which was two days ago, then whatever is otter hunting all about? It seems to me that you are living in a strange Alice in Wonderland atmosphere: that you are chasing not what is over there but something which was there two days ago in the opposite direction. Does one need a Bill to regulate such an imaginary procedure? Because we are doing something which the otter does not know about—and which, in fact, we do not know about because the drag was two days ago—do we therefore need an elaborate Bill, and do we have to spend our time considering it in order to decide how to regulate otter hunting? It would be much better to have a Bill to regulate Punch and Judy shows. What has been worrying me this afternoon during the debate is that we are entering a world of pure fantasy in which we are chasing imaginary animals over fictitious fields near non-existent rivers.
In the first place, one has to try to decide what is the purpose of otter hunting, whether or not it does any harm to the otter, whether we need a Bill for the control of otters and whether it is going to be beneficial to our fishing industry. However, we have skated over every question of that kind this afternoon. We have gone miles away from the real issues. This is why I feel that what was said by my noble friend Lord Listowel is so true: that we are faced with a Bill which asks

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for action to be taken, although we do not know what the effect of that action is going to be. All we are told is that we shall no longer kill otters. But we do not kill them now. If your Lordships' House is going to spend its time discussing the Bill at great length, I think that it will be wasting its time.
If one wants to ensure that otters are conserved—I do and I think all noble Lords do—then surely we should try to make certain that the otter is included in the Schedule to the Conservation of Wild Creatures and Wild Plants Act. That is the step which should be taken. You do not conserve otters by having a Bill which is labelled "Otter Hunting Regulation Bill". I should have great difficulty in trying to explain to any international assembly that we are playing our part in controlling the trade in otter skins and conserving otters by passing a Bill called the "Otter Hunting Regulation Bill". We must keep a sense of proportion.
If we pass the Bill, we shall be doing absolutely nothing at all to help the otter population; I doubt whether we shall be doing anything to save a fish; I doubt whether we shall be doing anything which is of any use at all, except setting up a body which would be called the Otter Committee. According to this Bill, that Otter Committee would draw up a set of conditions as to the duration of a hunt and the condition as to the number and size of the dogs that may be employed. But there is also another set of conditions drawn up, called the deposited rules. These are drawn up by a different body and it is said that where one is at variance with the other the conditions drawn up by the Otter Committee are to be decisive and overrule the deposited rules. Therefore why do we have deposited rules?
The Earl of CRANBROOK: My Lords, will the noble Lord allow me to intervene for a moment? I have been sitting very quietly and have not yet interrupted anybody at all, but if the noble Lord were to read the Bill he would find that the deposited rules are the rules of the Master of Otter Hounds Association. They are to be deposited and, if approved, will be one of the conditions—but only if approved. So it is not really quite so silly as it may sound to the noble Lord.
Lord WYNNE-JONES: My Lords, I could only take what was written in the Bill as I had it before me. It says:
"For the purposes of this section the expression deposited rules' means the Rules of the Master of Otter Hounds Association for the time being in force and as deposited with the Secretary of State…".
It also says:
"If there be any conflict between the deposited rules and the conditions determined by the otter committee the conditions shall prevail".
That is what I quoted. It seems to me that there are to be two sets of rules and there is apparently an umpire who goes on the field and he has to decide which set of rules he will follow. I think that with this Bill we have landed ourselves in a position where we are considering something which can do no good, which would merely clutter up legislation and would waste our time.
Lord FORBES: My Lords, I should like to intervene for a short time in order to make one point. Wildlife is part of our heritage and it is not for us to destroy that heritage. It is for us to hand down wildlife to our children, to our grandchildren and to future generations. I do not feel that this Bill goes far enough to ensure that my children, my grandchildren and their children will be certain to enjoy seeing otters in their natural conditions, as I have done. I shall vote against this Bill because in my opinion otters should be added to Schedule I to the Conservation of Wild Creatures and Wild Plants Act 1975.
7.33 p.m.
The Earl of CRANBROOK: My Lords, I will deal first with the last interjection. If it is true that the otter generally is so rare as to need to be put into Schedule I to the wild creatures Act, I can see no harm in it. To my mind it would not in any way affect the necessity for this Bill. I think the two are complementary and do not pull in opposite directions. The fundamental point is that it depends on how far otters are being killed by pelt hunters and the like. I tried to find out in every way I could just how many were killed. I wrote to the Hudson's Bay Company, to the Fur Trade Association and to the largest dealers and I could find no evidence that many otters were killed. But it is the only way of stopping

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the killing, and if the NCC advises the Minister that it should be stopped in that way I can see no objection whatsoever.
The difficulty then is that otter hunting as at present conducted could still continue. All that the 1975 Act would do would be to prevent the killing of otters "without reasonable excuse". If anybody killed without reasonable excuse he would be committing an offence, but that is all that it stops. It is almost exactly the same wording as I have used in my Bill—"must take all reasonable precautions to prevent them being killed". I would not mind which phrase any noble Lord chose to put into the Bill during the proceedings at the Committee stage: there would be no way of controlling, as this Bill does, the pursuit of an otter once it is found. That would not be illegal under the 1975 Act, although it might be held by the courts that if an otter was then killed there was no reasonable excuse. But it could not be controlled if the hunters were able to conduct a prolonged chase of the otter without killing it. I do not like the thought of a prolonged chase. I would prefer to leave it to the Secretary of State to decide, but my own feeling is that I should like to see hounds immediately stopped, directly an otter was found, because then there would be no disturbance and no chance of killing.
The noble Viscount, Lord Massereene and Ferrard, replied to the question raised by the noble Earl, Lord Listowel, as to whether it was possible to call the hounds off at that moment. I would not have included that in the Bill had I not made every possible inquiry to see whether it was possible. Everyone I asked told me that, so far as otter hunting was concerned, it was quite feasible and quite practicable and quite easy to call the hounds off immediately.
The example I was given was that in an earlier generation, when the huntsman interfered very much more often with the hounds, trying as hard as he could to kill, it was customary to have somebody walking ahead of the hounds as they were following drag down the side of the river, and if the otter was put up the man in front would see it and the hounds could be hurried on to get closer to it immediately, before they got to the place where they could follow the fresh scent. I was told by a master of hounds that that was no
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longer possible but it could certainly be used to whip up hounds immediately if it was necessary.
The noble Lord, Lord Wynne-Jones, made fun of people who enjoyed watching hounds puzzle out the drag. I have never watched hounds puzzle out the drag, but I have many times watched hounds work at sheepdog trials. I have tried to train my own sheepdog to bring sheep in off the hill and the like, and it is fascinating to watch hounds work.
As I see it, if the principles of this Bill are carried out it would be possible for the Minister to confine otter hunting entirely to following drag, which the noble Lord, Lord Wynne-Jones, thinks would not be very amusing. If it were not very amusing nobody would do it and that would be the end of that sport. If they did find it amusing they would continue with it and it would go on, but the otter would not be disturbed or interfered with and a lot of people would have what they look upon as an enjoyable day, as I have had enjoyable days watching sheepdog trials. If you do not like it you need not do it. It would very rapidly die if people did not like it. But in neither case would the otter suffer in any way.
If I may criticise my noble friend Lord Craigton—I am going to be very rude to him—I regret that he made a prepared speech and did not make any attempt to answer some of the points which I made. I do not think that our outlooks differ; he does not want to see otters killed, he does not want to see otters disturbed; I do not want to see otters killed, I do not want to see otters disturbed. Our outlook is entirely the same in that respect. I am not satisfied that merely putting the otter on the Schedule to the 1975 Act is enough. I think this Bill is needed as well. You can go on hunting otters, you can go on chasing otters under the 1975 Act. Under this Bill that can be prevented.
Lord CRAIGTON: My Lords, that is where the noble Earl and I disagree.
The Earl of CRANBROOK: Well, my Lords, may I know where we disagree? Let me ask the noble Lord a question, if it is within the Standing Orders of this House. I think that under the 1975 Act people can continue chasing otters. Does the noble Lord agree?
Lord CRAIGTON: Yes, my Lords, I do agree.
The Earl of CRANBROOK: My Bill would stop that.
Lord CRAIGTON: My Lords, the point is that the noble Earl's Bill enshrines in legislation further disturbance of the otter, and that is anti-conservation.
The Earl of CRANBROOK: My Lords, I think that is sheer poppycock. My Bill is deliberately drawn up in order to enable the Secretary of State to say that the hounds shall be called off immediately an otter is found. It is true that it will jump in the river and go away. I do not think that is disturbance that is in any way comparable. It would be once a year at the very most, and in the great number of cases the hounds never come up to an otter; but no hunt hunts the same stretch of river more than once a year, and there is a constant coming and going of boats in rivers.
My Lords, the noble Viscount, Lord Massereene, dealt with the two points that were raised. I entirely agree with the noble Viscount when he says that otter hounds actually chasing an otter disturb it and it probably does not go back for three or four months. I have asked otter hunters and they tell me exactly the same thing. That is the reason why this Bill prevents them from being chased.
Most of the rest of the comments were Committee stage comments. It was suggested that there should be a close season. If anybody should wish to move that there should be a close season and it seems to be a reasonable one on any advice I can take, one would naturally accept that. The noble Lord, Lord Aylestone, made the point that this not only would prevent otter hunting by otter packs; it would prevent otter hunting by freelances. I had a good deal of evidence, particularly from Wales, that quite a number of people went out with dogs, and whether recognised packs or not, that would be brought within the ambit of this Bill; that is why I phrased it in that way. They discover where an otter is in a holt; they put a terrier down; a net at the mouth of the holt, and they catch it and knock it on the head and sell the pelt.
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The noble Lord, Lord de Clifford, asked me to press on quickly. If, as I hope, your Lordships give this Bill a Second Reading, I would not want to press on quickly. Now that the Working Party is about to report, I would certainly want to see what that Working Party said; whether parts of this Bill were nonsense as some people seem to suggest; whether additions should be made to it; whether things should be taken out of it. I would not want it to go forward and then find that the Working Party made a recommendation on something which none of us had thought of until that report. I believe that we are so close together, all of us; I think we all want to prevent interference. We all want to prevent disturbance, we all want to prevent otters being killed.
I would ask the noble Lord not to press this to a Division tonight. I think Amendments could be made to the Bill. I think, for instance, it would probably be better—it has been suggested to me—that the Ministry of Agriculture should advise whether or not otters were doing so much damage that they ought to be killed. I think the proper course for the noble Lord, if I may venture to suggest it to him, is to let this go through tonight, let us see what comes out of the report of the Working Party, and amend the Bill as appears necessary to your Lordships. If we fail to produce a Bill of which your Lordships can approve, the time to chuck it out, I venture to suggest, is on Third Reading and not on Second Reading. It is very unusual to strike out a Bill on Second Reading. I would hope that we could amend it in a way which would make it completely agreeable to all of us, in order that we could consider the principle on Third Reading.
If I can just sum up, when we get down to it I do not believe there is anything on which we differ. I believe this Bill could be a useful addition to the 1975 Act. If it is decided to put the otter on the Schedule, I think we ought to try to see whether we can make the two work together.
7.48 p.m.
On Question, Whether the Bill shall be now read 2a?
Their Lordships divided: Contents, 29; Not-Contents, 24.

CONTENTS

Alexander of Tunis, E.

Emmet of Amberlev, U.

Northchurch, B.

Amherst of Hackney, L.

Falkland, V.

O'Neill of the Maine, L.

Amory, V.

Gainford, L.

Piatt, L.

Aylestone, L.

Hylton-Foster, B.

Rankeillour, L.

Barrington, V.

Kimberley, E.

Romney, E.

Cathcart, E.

Lindsey and Abingdon, E.

Ruthvenof Freeland, Ly. [Teller.]

Cranbrook, E. [Teller.]

Massereene and Ferrard, V.

Spens, L.

de Clifford, L.

Morris, L.

Strathclyde. L.

Denham, L.

Mottistone, I.

Trefgarne, L.

Drumalbyn, L.

Newall, L.

NOT-CONTENTS

Amherst, E.

Glenamara, L.

Phillips, B.

Avebury, L.

Greenwood of Rossendale, L.

Segal, L.

Brockway, L.

Houghton of Sowerby, L.

Stedman, B.

Collison, L.

Kirkhill, L.

Stewart of Alvechurch, B.

Colville of Culross, V.

Listowel, E.

Strabolgi, L.

Craigton, L. [Teller.]

Llevvelyn-Davies of Hastoe, B.

Wallace of Coslany, L.

Davies of Leek, L.

Melchett, L.

Wells-Pestell, L.

Forbes, L. [Teller.]

Oram, L.

Wynne-Jones, L.

Resolved in the affirmative, and Motion for Second Reading agreed to accordingly: read 2a, and committed to a Committee of the Whole House.

LIGHTER THAN AIR TRANSPORT
7.55 p.m.
Lord GAINFORD Lord GAINFORD rose to ask Her Majesty's Government what is their policy towards the research and development of lighter than air transport. The noble Lord said: My Lords, lighter than air transport embraces two forms—balloons and airships. The use of balloons in this country is very limited. A free balloon can present a serious hazard to air traffic control, hence balloons can be used only in certain areas. In some overseas countries where there is less concentration of air traffic they can serve a useful function in scientific research and surveying. If that helps our overseas trade at all, so much the better. But, alas! in Britain they can provide only a fascinating, challenging but very expensive sport.
I turn to airships. I understand that an airship is being constructed at Cardington —a famous place in aviation and airship history—which it is hoped will he the first of a number to form an export order to Venezuela, which is very encouraging. This airship will he of the blimp type and will have similar characteristics to the Goodyear airship which has paid several visits to this country and which will come here this year. I am one of those who have been fortunate enough to have the
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experience of flying in it and I certainly recommend it as a means of leisurely air travel. The Goodyear company is planning further developments, in particular with a view to a cargo-carrying airship. The Goodyear Company has also sent me some interesting details of its projects, and I understand that other countries are also interested in considering the use of airships for various purposes. Therefore, I ask this Question because I believe that this country should not be left behind.
Questions have recently been asked in your Lordships' House about the use of airships for marine patrol work, and it is for that purpose that Britain's research should begin. Shortly before the Easter Recess a Statement was made in another place, and repeated in your Lordships' House, about the new early warning system and how the Nimrod aircraft will be used for this. That Statement caused lively discussion.
Early last month I was privileged to be a member of a Parliamentary team visiting the Royal Air Force station at Kinloss. The highlight of the programme which was laid on for us was a five and a half hour flight in a Nimrod aircraft on patrol over the North Sea. We were able to see for ourselves the careful watch maintained on shipping and the oil rigs. Afterwards, I wrote letters of thanks and appreciation, but I should like to take this opportunity of expressing verbally how impressed I was by the versatility of the Nimrod aircraft and the skill of the crews who fly in them. It made me realise how the use of airships for marine patrol work could free these aircraft for far more important

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work. Airships would be far less expensive: they would need far less fuel and could stay aloft far longer.
In the discussion arising from recent Questions in your Lordships' House, comment was made about the problem of airships in a high wind. I remember that at least one supplementary question asked if there had been any noticeable change in the North Sea climate since World War I when blimps were used to a great extent on patrol work and managed to stay aloft in a variety of weather conditions. However, whatever effect high winds may have, there is one form of weather which is still dreaded on land, sea and air, in spite of the wonder of modern navigational aids; that is fog. Here the airship could overcome this hazard. Shakespeare's famous quotation:
"The evil that men do lives after them,
The good is oft interred with their bones"
could be parodied a little in reference to airships. Their disasters are so readily remembered and their successes are forgotten. The R.101 and the Hindenburg are vividly seared into history. But how many recall the grand old lady of the early 1930s, the Graf Zeppelin? I believe that that airship made 140 successful journeys across the North Atlantic. Even when it was foggy, with the aid of navigational equipment that must seem primitive nowadays, she could gently feel her way down to a safe mooring at the mast at Lakehurst. The USA had a number of airships used on patrol work in World War II doing coastguard work and also helping in the escort of convoys.
If we decide to construct airships for marine work, it will involve flying close to the sea surface. It is natural, therefore, that sailors should he among the crews with their experience of the sea and weather. There is also the possibility of reviving the shipbuilding companies in order to help in their construction. Here we come to the matter of design. Apart from the machine being assembled at Cardington, the future of British airships is confined to the drawing board, but if a word of encouragement be given by Her Majesty's Government some very powerful talent that is now lying dormant would be revealed.
Perhaps it would be possible to use the Concorde design and development team
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for the initial programme. They have done an excellent engineering job on the aircraft; with airships being simpler they should be able to manage development easily and we should not have any risk of losing such valuable people down the brain-drain. I have suggested the use of airships on a number of occasions in debates in your Lordships' House. I have suggested their use for goods transport, passenger transport and the use of such areas as the old dock areas of London as an airship port. These ideas, I admit, may have seemed a little far fetched.
To start constructing small airships for marine patrol work could be the start of a project thatcould lead to large and greater developments. The Wright brothers did not create a jumbo-jet, but the large and fast airliners which are now almost taken for granted today are the result of research that sprang from a very small machine taking the air. To quote myself in a debate about four years ago, I said that your Lordships' House is not a House of dreamers but it is a very good place for dreams to be aired. Bring up any subject in your Lordships' House, and there will be some experts who can give advice and constructive criticism as well as support or opposition.
I am most grateful to those who are to speak after me. I am sorry that we have had to wait so long. We have had a very interesting programme already today. I have tried to be as brief as possible. I have put down this Question because I believe that an investment by this country in lighter than air transport could be one of the factors in breaking the vicious circle of this country's financial problems. I look forward to hearing what other noble Lords have to say, and particularly the answer that the noble Lord, Lord Winterbottom, will give.
8.4 p.m.
The Earl of KIMBERLEY: My Lords, I am sure that all noble Lords, such as are here, are grateful to the noble Lord, Lord Gainford, for airing this subject this evening in your Lordships' House. I also shall try to be brief. Since the oil crisis of 1973 the growth in the number of passengers to and from London by air has now again resumed, and in fact the figures for last year show that there was an increase of 8 million passengers since 1973. If this trend increases—and I can

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see no reason why it should not—by the mid-1980s Heathrow and Gatwick will probably be totally inadequate. The wide bodied jets, I agree, have helped to transport the passengers, and they have, through their wide bodies, reduced aircraft movements.
There are at the moment sufficient runways, and provided these runways can remain environmentally acceptable, and provided the passenger handling facilities can still remain acceptable, well and good. But with the increase that can be expected future requirements are going to be very large. Stanstead would do very well. It could take up to, I believe, 16 million more passengers if it had terminal improvements and links, either by road or rail, with the city. But then we are going to get great opposition on environmental grounds.
If we are going to assume that the only way to carry passengers by air is by conventional means, these problems that we shall have to resolve will be extremely expensive and will have a very large amount of opposition against them. As the noble Lord, Lord Gainford, said, let us consider a new type of aircraft which can operate much closer to and from the city centre, which would and could remove the expense of rail links to existing terminals, and would remove the environmental opposition simultaneously.
The capabilities that this aircraft must have are that it must have vertical take off and landing capability; it must be sufficiently quiet to operate from the city centre so that it will nullify any opposition to noise. There is already in existence, or nearly in existence—and I am not talking about the Venezuela blimp—an aircraft of this type; it is now under development. It is the thermo-skyship. It combines all the virtues of the helicopter and the Harrier, and all forms of other displacement aircraft. It is shaped like a fat flying saucer. I believe the official word is lenticular. If there is room it can land anywhere like a helicopter, and be controlled at low speeds by vector thrust just like the Harrier. It remains in the air through its helium like any normal airship, and its lift is increased or decreased by a varying of the air temperature inside it like a hot air balloon. It also can be lifted to improve its altitude through steam which is generated by the power plant.
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The thermo-skyship is presently being developed by a tiny company which is called, for historic reasons, Mercantile Airship Transportation Limited—MAST for short, in spite of its not having to use an out-dated mooring mast associated with older airships. When not in flight it sits on the ground. MAST, this little company, is at present negotiating with appropriate sections of industry, and if these negotiations succeed an experimental prototype could be available next year and could appear at Farnborough if the funds are available. When I say funds, these funds are minute compared to the research and development funds for the conventional aircraft of today.
If the funds are produced, the prototype, I can promise, will become a reality. Sub-contractors have been organised and factory space is available. But at the moment MAST has not all of the money and until such time as all the funds are available, like many other things, alas! it will not come to being. However, last March, MAST presented its case to the Ministry of Defence because, I believe, there are many senior officers who realise the potential of the skyship. There are a number of military roles for skyships such as troop reinforcements and, as the noble Lord. Lord Gainford, has mentioned, fishery protection, the servicing of oil rigs, and the protection of oil rigs. I believe that the Army are waiting to see whether the prototype will do the job. I am sure it will, and provided it does there is no earthly reason why a skyship should not be ready for the Army by the mid-1980s.
The skyship which would be produced for the Army could also he used on short haul runs to the Continent and, inter-Britain, to Glasgow, Edinburgh, Belfast and so on, and would thereby hive off many thousands of passengers from London and Gatwick Airports. If Her Majesty's Government gave this project their support, the objective could be achieved sooner rather than later, and certainly before astronomical sums are spent on further airport development and improved transport links.
There are numerous sites by the Thames, as the noble Lord, Lord Gainford, has pointed out several times in your Lordships' House, which could be used as

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skyship terminals. The flying time intercity from London to Paris, Brussels and Amsterdam, for example, would be two or three hours and the fare would be far more economical than it is today. From city centre to city centre it would take no longer than it takes now, considering the need to get to the existing airports, and it might in many instances take considerably less.
To digress briefly, the skyships' advantages over the conventional aircraft are threefold: fuel conservation, noise restriction and its vertical take-off and landing. We must remember that the skyship has three methods of lift: one through helium, one through the difference in air temperature and one through steam generation. The skyship can hover and it does not, because of its vectored thrust, have to depend on a low forward air speed at which the aerodynamic controls in a conventional airship do not work that well. It will be able to take off and land in any weather, short of a hurricane, and it is not susceptible to wind direction change during or after landing and, when on the ground, because it is heavier than air, it just sits there. It does not need ballast due to the altitude control being used through the varying of the temperature and, therefore, payload is improved. It will also have a central protruding hole for easy access for loading and unloading, therefore making for rapid turn-round time in any conditions.
It is suggested that the first thermal skyship will be called the TS26, which will be in the helicopter bracket and could be compared more than favourably with the Sikorsky S61M. It will carry 5,000 lbs. of payload with fuel for 250 miles, will operate at about half the cost of a helicopter and will cost to build only a fraction over half that of a helicopter. If any noble Lord would like further comparative figures and equivalents, comparing the helicopter with the skyship, I have them with me and would be happy to provide them after the debate.
The skyship is designed to keep costs down through simple construction methods. It complements the aeroplane and does not replace it. But it has a worldwide application and enormous export potential. I appeal to Lord Winterbottom to take this project up with the Secretary of State for Industry and to
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push very hard for Her Majesty's Government to show serious interest in this development without further delay. The company concerned is ready, willing and able to give details, facts and figures to the Secretary of State. Let Britain lead the way in this unique form of transportation and, once we are in the lead, let us remain there. Do not let us spoil the skyship for a ha'pennyworth of tar.
8.15 p.m.
Lord DAVIES of LEEK: My Lords, we have had a rather busy day and, because the hour is late, I shall be brief. I am grateful to the noble Lord, Lord Gainford, for asking this Question and to the noble Earl, Lord Kimberley, for his remarks because he has great expertise in this matter. I had the privilege of raising this issue over a year ago in your Lordships' House and, before that, on other occasions. I received not particularly encouraging answers from the Government, although they did not condemn completely and one was left with the impression that an interest might be taken.
It should now he realised that great strides forward have been made since I and others first mentioned the firm that is already attending to an order for five airships for Venezuala. The reality of the airship is sometimes forgotten, and when people consider accidents that occurred in years gone by, they should remember they are nothing compared with some of the accidents that can and do happen with, for example, jumbo-jets.
I will speak first about the airship and then come to the thermo-skyship. I intend to be very brief, so allowing my noble friend Lord Winterbottom ample time in which to reply. Although this issue has been raised before and has been brought to the attention of the Government, I trust that people will not think of these machines as flying sausages in the sky. The theory applying to, and the aerodynamics of, the airship have advanced beyond recognition over the years and I can see a great future for them in transport. From my point of view, the beauty of these machines is the comforting reality of the simiplicity of design and the lack of decibels, the noise that is driving people mad in cities all over the world. Most of the world is going neurotic with all the

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decibels of sound and, what with cacophonic pop music and the noise of aeroplanes overhead, it is becoming a very funny world.
I believe that we can provide speed and comfort in transport with the airship. Some of these machines can lift 500 tons and move that sort of weight at 100 miles an hour over our cities without destroying beautiful villages and cities in the way the juggernauts do. Surely that is worth some money. I am anxious not to reiterate what other noble Lords have said because I do not want to eat into the precious time which I hope Lord Winterbottom will use to give us a good answer.
The great need today is for Britain once again to take some initiative, and here is an avenue for technological progress. We have been pioneers in this field in the past and I sincerely hope that we shall be pioneers once again. I hope opportunity will be provided on another occasion for a full debate to take place on this subject and on that occasion I hope that noble Lords in all parts of the House will impress on the Government the need for expert attention to be given to this matter.
I am interested in the thermo skyship. It is a project different from the lighterthan-air machine, but I have heard that its development has reached the point when, rather than being a possibility it can be a reality. The Government should look into that as well as into the other types of airships that are being developed. Having taken up three minutes of the Minister's precious time, and anxious myself to bring what has been a hard day to an end, I resume my seat in the hope that for once we shall receive a rather better answer than we have had in the past. If not, we can always raise the subject again.
8.18 p.m.
Earl ALEXANDER of TUNIS: My Lords, I will do my best to follow the example of the noble Lord, Lord Davies of Leek, and be brief. I wish at the outset to thank the noble Lord, Lord Gainford, for bringing this subject to the attention of the House. Our discussion happily coincides with an order for airships, as Lord Davies said, although the figure I have is 22 airships at a total value of
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£13 million; that is what I read in my newspapers. This achievement by a firm called Aerospace Developments must come as a surprise to the more orthodox thinking people in aviation circles.
Any interest that I might have had to declare has sadly lapsed. A few years ago the firm Manchester Liners, a subsidiary of Furness Withy, formed a company called Cargo Airships, which was formed to carry out a feasibility study on airships in the context of containers and their transportation. That feasibility study involved a full-time aeronautical engineer and various others helping him and they researched the market for airships, their type and size, length, profile, power plants and so on.
The results of this study showed that the airship was eminently suitable for containers and not so suitable for passengers. It was economical and would be a potential money earner. Unfortunately, the terms of reference of the study did not include the building of the airship and, unlike the airship mentioned by the noble Earl, Lord Kimberley, this one is still on the drawing board. The board of directors of Manchester Liners decided, quite rightly, not to put any more funds into the study. This was quite a few years ago and one can only conclude that we were rather too far ahead of our time. I therefore congratulate Aerospace Development and the firm mentioned by the noble Earl, Lord Kimberley, with no ill feeling whatsoever. I believe it is a marvellous achievement.
The safety argument has been brought up many times, and I can only reiterate what the noble Lord, Lord Davies of Leek, said. The present casualties have increased tenfold as compared with the casualties of the Hindenburg who, I believe, numbered 35 and of the R.101, who numbered 48 or thereabouts.
Very briefly, I feel that it is worth while spending a couple of minutes on the achievement of the airship. In 1919, two weeks after the Atlantic was flown for the first time, no less than 30 crew members of the R.34, together with a stowaway, went to America and back. In 1927, as the noble Lord, Lord Gainford, said, the Graf Zeppelin was on a scheduled flight to South America and flew around the world in great comfort for the passengers. In 1930, the R.100, designed by

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Sir Barnes Wallis and Neville Shute, flew to Canada and back, also in great comfort. However, with the loss of these rigid airships, Great Britain decided not to take any further part in the airship "race", if one can call it that. In the 1940s, when the United States lost two rigids, they also gave up. Goodyear was the only company to continue flying airships and, so far as I know, they have never had a fatality. I have had the opportunity of flying in airships both in this country and in the United States, and all I can say is that it was very comfortable, very quiet, seat belts were not required and the only pollution that I think the airship is guilty of is that it casts a big shadow.
In conclusion, I should like to see the Government give the airship a fair chance and to see them respond to the lead given by the Venezuelan Government in reviving an industry which I believe could offer jobs and be very useful in the export field.
8.24 p.m.
Lord TREFGARNE: My Lords, one of the great strengths of your Lordships' House, in my view, is our ability to produce an expert or an enthusiast on almost any subject under the sun. Tonight we have shown that capacity yet again. The noble Lord, Lord Gainford, has displayed both those qualities and we are grateful to him for it.
I must confess that I come to this subject with a good deal of disbelief and scepticism—or at least I did. However, some of this evening's speeches, and particularly that of the noble Earl, Lord Kimberley, caused me to think again. I must confess that the thermal skyship that he described is not something that I have heard much about or studied in any depth. I shall certainly take care to do so. However, considering the basic difficulties of airship design and operation, I believe we need to take a considerable amount of care. I shall come back to the skyship in a moment.
I was also particularly interested in the remarks of the noble Lord, Lord Davies of Leek. I believe that he should take a little care, though. He made two points of which I made a note. One related to accidents. He told us that the number of accidents was very small. I am afraid
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that I have not the figures in front of me, but I believe that if we compared like with like and made a calculation on the number of fatalities per 1,000 passenger miles or some suitable unit of that nature, we might find that the airship is not really such a safe means of transportation as the jet aircraft of today.
Lord DAVIES of LEEK: My Lords, the noble Lord will appreciate that we are no longer filling these airships with hydrogen. There is helium and the thermo-skyship does not have that problem at all. That is just for the Record.
Lord TREFGARNE: My Lords, I take that point, but I thought that the noble Lord was making an historical point and suggesting that the record was as good as that of the modern jet aircraft of today. I doubt whether that is true. I shall come to the question of hydrogen and helium in a moment.
The noble Lord, Lord Davies of Leek, also talked about the thoughts of my noble friend Lord Alexander, who was talking about Manchester Liners and their feasibility study of large, cargo-carrying airships. I believe that the economic viability of those large-scale projects has not yet been established. Indeed, as my noble friend told us, Manchester Liners, who certainly went into the matter in considerable depth, decided not to proceed, though they certainly could have done had they so chosen.
I believe that this subject was exhaustively investigated in the years between the wars and was then found to be significantly deficient. The long series of failures and tragic disasters is deeply etched on the minds of many of your Lordships, and who among us has not seen that dramatic sequence of film showing the Hindenburg as it came into the mast at Newark and was destroyed? Of course I must agree that the advance in technology since those days may enable us to overcome some of the difficulties experienced by the early pioneers. But I believe that a great many of the drawbacks that were apparent then were problems of principle rather than of detail and cannot easily be swept aside even with the help of modern technology. I should like to remind your Lordships of some of the

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more obvious difficulties which I believe still remain in principle.
First, to take up the point of the noble Lord, Lord Davies of Leek, it is now agreed by even the most ardent advocate that hydrogen is not an acceptable gas. It is of course still used in some of the smaller, unmanned balloons which are used for meteorological research, but I do not believe that anybody suggests that it is a possibility for any other purpose. So we are left with helium. Since the Second World War, it has become possible to synthesise this gas, so that we are no longer dependent upon what was previously the only world source of supply; that is, the United States. However, helium is heavier that hydrogen and is therefore less efficient as a lifting agent. On the other hand, it is the only presently available possibility.
Another problem is the basic control system of the airship. Those of your Lordships who have some scientific training will remember that a gas subjected to heat, for example, from the rays of the sun, expands. It is indeed the case that, as an airship warms up in the sun's rays, it rises quite rapidly. Gas is then vented overboard to restore equilibrium. Alternatively, if it is desired to rise intentionally, ballast can be jettisoned to achieve the same effect. It can easily be understood that the venting and jettisoning process cannot be continued indefinitely because either the gas or the ballast will soon be exhausted and the airship will no longer be able to be controlled.
My Lords, one of the uses for airships that has been suggested this evening is the possibility of maritime patrol in the North Sea, and as I think the noble Earl, Lord Kimberley, said, those operations are conducted close to the surface of the water. In that situation, the problem of keeping the airship in equilibrium at a low altitude is particularly critical: the problems of loss of ballast or gas are particularly critical. Another problem—and this again applies to the North Sea—is the need to protect the airship from the accretion of ice. This was a major problem with piston-engined aircraft before and just after the Second World War. However, modern jet aircraft by and large fly above the levels at which icing is encountered, but airships cannot, or would not, normally fly that high, and indeed in
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the past a number have been lost from this difficulty. The great aerodynamic surfaces of airships make the problems of ice prevention and removal for all practical purposes insoluble.
Yet another difficulty is the limitation imposed on the operation of airships in high winds. There were many accidents, both minor and major, from this cause while they enjoyed their heyday before the war. Again, somebody has suggested that these airships could be used for supplying drilling rigs in the North Sea. I believe that that would be a major problem, bearing in mind the climatic conditions of that area.
Finally, even if these difficulties can be overcome or ignored, we must ask ourselves whether the construction and operation of these airships is likely to be economically viable. In that connection, I would recall the order that was mentioned by several noble Lords, for a number of airships for operation in Venezuela. My understanding was that it was an order for one airship, with an option on a further 20. It was not exactly an order for 22, as I think somebody mentioned, but I would stand open to correction on that. In any event, those airships are not, I gather, designed for carrying cargo, but for carrying advertising slogans, which is of course a very different thing.
But we have to ask ourselves, my Lords, whether the operation and construction of these ships can overcome the basically adverse economic problems. Of course. I agree that that depends on many factors, not least of which is the operating revenue to be expected. But I am advised that the costs of construction, particularly of the larger freighter airships which we have considered, are likely to be very high when related to the productivity of the machine. I would concede that the direct operating costs may well be attractive, but I believe that the standing charges relating to the high initial investment would render these airships uneconomic, particularly remembering that they could operate only during comparatively calm weather.
I have touched on the point, as indeed have many noble Lords, on the use of airships for patrolling the North Sea, and I have to concede that that is the least impractical, I believe, of the tasks proposed. As the noble Earl, Lord Alexander of Tunis, mentioned, the American

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authorities have used airships for this purpose for a number of years, and I believe still do so. It might therefore be desirable to conduct some tests in the North Sea, perhaps with an airship on loan from the United States authorities, but before we embark upon that we should remember that the climatic conditions of the area where these airships operate in the United States are considerably more favourable than those of the North Sea or the Western Approaches. However, as I have said, it may be that the RAF or the Royal Navy could borrow such an airship for some trials.
Undoubtedly, there are some areas where additional research and development would be justified. As from tomorrow, we have a new British Aerospace Corporation, for tomorrow indeed is vesting day, and maybe it would be appropriate for the new Corporation to conduct some limited research into this matter and perhaps to advise the public generally, and particularly the various companies (enthusiastic, small companies, by and large) which are involved in these matters. One of the great attractions of nationalisation to noble Lords sitting on the Government side of the House was that the research and development possibilities opened by virtue of nationalisation would be very great, and here perhaps is a way to prove the point. In conclusion, I should like to thank the noble Lord, Lord Gainford, for raising this matter and invite the noble Lord, Lord Winterbottom, to tell us how the Government view the situation.
8.35 p.m.
Lord WINTERBOTTOM: My Lords, I too, am grateful to the noble Lord, Lord Gainford, for raising this Question because it provides a useful opportunity to clarify the Government's position on the development of airships. Since the mid-1960s there has been a growing interest in the use of airships for a variety of tasks in the developed and developing countries. The United Kingdom companies working in the field are among the world leaders, and I have been most impressed with the enthusiasm and hard work that has gone into their projects. It is perhaps natural that the claims made for the airship are somewhat overstated, but they are nevertheless worthy of con-
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sideration. In particular, while it is doubtful whether the airship could compete with established ground transport or with large cargo aircraft for carrying general cargo in the developed countries, its potential in the developing countries, where transport facilities are often nonexistent, is impressive. This is not to say that they will not have a role to play in the developed regions like Western Europe. Indeed, they are thought to have a decided advantage on the movement of large indivisible loads, and there will no doubt be other uses, perhaps in the tourist trade; but first there are a number of problems that have to be overcome.
The basic problems which brought the first great age of the rigid airships to such a spectacular and premature end were those of safety and controllability. The safety problem caused by the use, in Europe, of highly inflammable and, in certain cases, violently explosive hydrogen gas as a lifting agent has now been greatly eased with the general availability of helium, a welcome spin-off of the American space programme. In addition to this great advance, the effectiveness of which has been shown by the excellent safety record of the small helium-filled non-rigid airships operated by the United States Navy for so many years, there have been major advances in materials for the manufacture of gas bags and envelopes, in propulsion units, and in our ability to understand the type of stresses imposed on this kind of craft.
Over the past year or so the Civil Aviation Authority has put in a great deal of work on preparing draft airworthiness regulations to cover not only the small non-rigid airships currently being developed both here and abroad, but also the massive rigid and semi-rigid airships which have been proposed. It is essential that if such craft are to become a common feature in the transport scene, they should conform to the standards of safety and structural integrity we demand of modern aircraft. The size of some of the airships being proposed, with maximum dimensions in excess of 1,000 feet and lifting weights approaching 1,000 tons, could in themselves pose considerable risks to other air transport, particularly at night. The risks of collision in the busy airspace of Western Europe must be seriously considered, and the regulations needed to safeguard against

791
such a possibility may greatly reduce their usefulness.
There are also the technical problems, such as the operation of vehicles of this size near the ground, and the control of lift as the weight of the ship changes during loading and unloading; problems relating to those mentioned by the noble Lord, Lord Trefgarne. I believe that a number of companies have done some work on these problems, but the need exists for such techniques to be thoroughly proved, and it would appear prudent to approach these large airships by stages. Such an approach, building on previous knowledge, reduces the risk of a major incident which could, by its accompanying adverse publicity, set back the use of airships for years.
The problems I have mentioned are only some of those which must be solved if the credibility problem facing airships and their manufacturers is to be overcome. The Government are ready to consider providing financial support for airships, but it would be wrong to speculate with public money, particularly when the private sector has not yet shown any great enthusiasm for the product or any willingness to provide money for its development. Therefore, as I am sure Parliament would demand in cases where public moneys are involved, very strict criteria must be applied before the Government could agree to invest in any project. and the need for restraint in public expenditure has greatly added to the stringency with which these criteria must be applied. The Department of Industry has had meetings with a number of the airship companies at which the criteria applying to "launching aid" has been explained. To date, however, these companies have not submitted a case in sufficient detail for a decision either way to be made. In any case, my Lords, I doubt that "launching aid" under the Civil Aviation Act 1949 is the most appropriate way to help in such cases. The NRDC powers to help with finance are, we believe, much more appropriate to this sort of development, and currently the NRDC are considering several requests for aid.
In reply to the point made by the noble Earl, Lord Kimberley, in the case of the thermo-skyship I understand that the NRDC are currently considering a request
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for financial aid from the company, and a decision is expected shortly. These projects relate to the manufacture of prototype airships, and not to research as such. While such applications would of course be considered, the pressure on the funds available is very great, and it would pose the problem of discriminating against many other potentially fruitful areas. The Government, while perhaps unable to offer direct financial aid, stand ready to help in a number of other ways. In particular, the services of the British Overseas Trade Board and of the Ministry of Defence's "Defence Sales" organisation, et cetera., can, in principle, be made available. In addition, it is possible that facilities at the Government's research establishments could be offered.
Finally, my Lords, I should like to offer my best wishes to all those who are so enthusiastically trying to re-establish a market for the airship. We will do what we can to help, but unless they—that is, the companies—can break down the "credibility barrier" which exists, it is difficult to see a long-term future for such craft. Nevertheless, the Government heartily commend those people, and their efforts, to potential users and backers. Perhaps I may say to my noble friend Lord Davies that that may not be a good answer, but it is a better answer than some we have already had.

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