Sitting of 10 January 1977

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

    Laker Skytrain
    Mr. Tebbitasked the Secretary of State for Trade what is his intention towards the Laker Skytrain service following the loss of his appeal against the High Court finding that he acted outside his powers.
    Mr. Neubertasked the Secretary of State for Trade what action he now proposes in relation to the Laker Airways Skytrain project.
    Mr. Rostasked the Secretary of State for Trade if he will now support the introduction of the transatlantic Skytrain by Laker Airways Ltd.
    The Under-Secretary of State for Trade (Mr. Clinton Davis): Before I answer, may I offer to the House the apologies of my right hon. Friend the Secretary of State for Trade for his absence this afternoon? He is presiding over a joint Anglo-Iranian ministerial commission in Iran. I hope that the House will accept his apologies.
    My Department was given leave to appeal to the House of Lords and my right hon. Friend is considering whether to do so.
    Mr. Tebbit: Is the hon. Gentleman aware that the Skytrain issue is not the only matter in which the Government have been caught acting unlawfully? Is he aware that Mr. Justice Mocatta's judgment was that the whole of the single designated policy for airlines on long-haul routes is unlawful, and that that is
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    the policy on which the Minister is renegotiating the Bermuda Agreement? Will he get himself straightened out?
    Mr. Davis: The hon. Gentleman, in his rather curious characteristic way, has highlighted some of the difficult issues here. The judgment of the Court of Appeal clearly has far-reaching consequences—far wider than the issue of Sky-train, as the hon. Gentleman acknowledged. Therefore, it is right that the transcript of the judgment—which was received by Ministers only on 22nd December—should be fully considered so that all the implications can be weighed up. That is only reasonable.
    Mr. Neubert: Does not the Minister agree that last Friday's announcement of President-elect Carter's expansionist measures gives ground for believing that there will be the expansion of North Atlantic air traffic which was a previous precondition of his approval? As Laker Airways could mount this operation with a one-way fare of £65 at 30 days' notice, is not that a reason for giving the go-ahead now?
    Mr. Davis: The hon. Gentleman is inviting my right hon. Friend and me simply to bypass the important constitutional implications of the judgment, and that we are unable to do. As to the wider issue of President-elect Carter's economic policies, I do not know that he made his statement on the basis of the Skytrain issue.
    Mr. McCrindle: Is it still the Minister's guess that if the Skytrain service were to proceed it is almost certain that Pan-American Airways, TWA and British Airways would seek to introduce a similar service?
    Mr. Davis: That is a hypothetical question.
    Mr. Nott: With the modesty that becomes a newcomer to the trade scene, and hoping that I last slightly longer than did my predecessor, my hon. Friend the Member for Glasgow, Cathcart (Mr. Taylor), may I make two comments? I do not think that there is any need to wait for the transcript of the court's decision. The facts are well known and appear in The Times Law Reports. The Government must make an early decision whether to take the matter to the House

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    of Lords, to bring forward legislation to correct the abuse of ministerial powers or to reconsider the whole question. These are, as the Minister says—
    Mr. Speaker: Order. I am always very kind to a maiden speaker, but this is Question Time.
    Mr. Nott: I apologise, Mr. Speaker. I was carried away with my new responsibility. The abuse of power by Ministers is a very serious matter. When will the Government come forward with their decision?
    Mr. Davis: May I first congratulate the hon. Gentleman on his appointment? He has already exceeded the stay in office of his predecessor, and I hope that he will have many happy years in Opposition.
    As to when the decision will be taken, I give the House the assurance that the matter is being carefully and expeditiously considered by Ministers, and I hope that my right hon. Friend will be in a position very shortly to inform the House of his decision.

    Industrial Investment (European Community Countries)
    Mr. Martenasked the Secretary of State for Trade how much industrial investment has been made by the eight Common Market countries in the United Kingdom since 1973; and how much United Kingdom investment has been made in the eight Common Market countries in the same period.
    The Under-Secretary of State for Trade (Mr. Michael Meacher): In 1973 and 1974 EEC net direct investment in the United Kingdom, excluding oil and insurance, totalled £177 million, of which £53 million was in manufacturing industry. In the same period United Kingdom net direct investment in the EEC, excluding oil, totalled £886 million, of which £440 million was in manufacturing industry. Similar information for 1975 will become available later this year, and for 1976 in 1978.
    Mr. Marten: On a quick calculation, does not that mean that Britain has invested in the Community five times as much as the Community has invested in this country? Does not that mean that, apart from our appalling EEC trade
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    deficit, we are also putting into the EEC employment which might well have been put into this country to help to reduce unemployment?
    Mr. Meacher: The hon. Gentleman is right in his quick arithmetic. The differential is of the order of five to one. I must point out that there was a significant adverse differential in investment flows before 1973. It was then of the order of four to one, but it is true that it has become somewhat worse. As for the effect on employment in the United Kingdom, no doubt there has been some impact on jobs but much of the investment has been in areas which will not affect employment to the same degree—notably distribution, finance, mining, construction and transport. I wish to make the point strongly that the issue is whether if we blocked investment to the EEC it would necessarily take place in the United Kingdom.
    Mr. Jay: Does my hon. Friend think that the figures he has given demonstrate one of the benefits to this country of Common Market membership?
    Mr. Meacher: In the short term they certainly do not, but it is only fair to say that it was expected that there would be disadvantages in the short term. The question is whether the long-term benefits actually materialise.
    Mr. Parkinson: Is the Minister aware that many of my right hon. and hon. Friends think it is a tribute to the good sense of British business men that they are seeking to invest in one of the major and fastest-growing trading areas in the world? Will he confirm that dividends on overseas investments have played an important part in invisible exports, which have gone a long way to propping up Britain's financial situation?
    Mr. Meacher: It is true that the proportionate rate of return on investments in the EEC by British companies is higher than the rate of return on investments in the United Kingdom. I emphasise that while that is true there have been substantial reverse flows of disinvestment, which mean that the effect on the reserves has been positive. In terms of jobs, employment and growth, it is much more questionable where the balance of advantage lies, and we must examine these matters closely in future.
    Mr. Skinner: Does my hon. Friend recall that during the referendum campaign some Ministers, and one notably, forecast that if we remained inside the Common Market there would be a substantial loss of jobs which would arise primarily from the massive investment that would take place inside the Common Market? As my hon. Friend was closely allied with the campaign to get across the message about the loss of jobs, will he tell me whether it was his calculator that was used to find out how many jobs would be lost?
    Mr. Meacher: It is true that it was calculated during the campaign that there would be a net loss of jobs as a result of the flow of investment. To some extent this is less than the figures indicated because of the type of investment, but no doubt that has been the net effect in the short term. We now look for the longer-term effects, which may seek to balance that situation.
    Mr. Dykes: Is the Minister aware that he is giving a completely misleading series of answers to these questions and, therefore, acting irresponsibly when manufacturers and industrialists will be considering relative investment decisions? Will he give the unemployment figures in the other major economies of the EEC—for example, Italy, France and Germany? Will he tell us how much was invested in this country in £ sterling in 1973 by countries other than members of the EEC?
    Mr. Meacher: I have been asked a series of detailed questions that I cannot possibly answer straight away. The hon. Gentleman is wrong to neglect the concern that the Government and most reasonable and thinking people have in this country about the balance effects in terms of growth and employment.

    Anti-Dumping Procedures
    Mr. Tim Rentonasked the Secretary of State for Trade if he will bring forward proposals to announce measures laying the burden for disproving a dumping charge on the importer of the goods.
    Mr. Wyn Robertsasked the Secretary of State for Trade when he will announce further measures to improve anti-dumping procedures.
    Mr. Meacher: Our procedures have been improved. My officials and Customs and Excise are currently studying whether importers should be asked to give information on the prices of goods in the country of origin.
    Mr. Renton: Will the Minister give us more specific details about how procedures have been improved? Is it not a fact that a great many people are now dissatisfied with the way in which dumping allegations are handled in this country? It seems that we go round this course every time we have Questions on these matters. It seems that all we get from the Minister is jaw, with no specific action. If the onus were placed on the importer to disprove dumping, would not that be fair, quick and beneficial to many sectors of British industry?
    Mr. Meacher: The truth of the matter is that we carry out anti-dumping investigations quickly and efficiently in the light of the Customs Duties (Dumping and Subsidies) Act 1969. I have looked at the debates that took place on that measure and it seems that the Opposition were relatively sleepy. They suggested no major amendments to the procedures that were implemented in the Act. It is wrong now to castigate the Government for acting in accordance with legislation that the Opposition at that time wholly accepted.
    We have introduced anti-dumping provisions in approximately 17 cases over the past two years. That is a greater number than in any previous two years, including any period when the hon. Gentleman's party formed the Government. As for improvements in procedure, in the past few months we have for the first time introduced loss of jobs as a material injury criterion. That is an important change. We have also used provisional charges to duty in more cases. We are considering further changes. I do not wish to be explicit about them but they concern non-GATT signatories and State-trading countries.
    Mr. Powell: On what date will responsibility for anti-dumping measures pass from Her Majesty's Government and the House to the EEC?
    Mr. Meacher: As the right hon. Gentleman well knows, it will pass on 1st July of this year. However, we have

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    recently enlarged our own Anti-Dumping Unit so that it includes 26 officials. We shall be keeping it in operation and using it to press those in Brussels to ensure that they take the same firm attitude as we do on anti-dumping.
    Mr. Madden: Will my hon. Friend explain why his Department seems so reluctant to impose provisional duties when a prima facie case of dumping appears to have been made? When will his Department reply to the complaint about the dumping of Eastern European clothing that was made in March 1976 by the Clothing Manufacturers' Federation, a reply to which the federation is still waiting?
    Mr. Meacher: We have introduced a provisional charge to duty on Brazilian men's footwear. In October we made a similar provisional charge to duty on Spanish stainless steel as well as in respect of Eastern European alarm clocks. I recognise that the latter is not the most significant of industries, but it is important to employers and employees in that industry. I am glad to tell my hon. Friend that we have now reached provisional conclusions on the application by the Clothing Manufacturers' Federation, which we shall be discussing this week with the federation.
    Mr. Roberts: Will the hon. Gentleman confirm that evidence of dumping has to be supplied by the industry concerned before the Government can investigate? Does he not think that the Government should have independent investigative powers?
    Mr. Meacher: We depend on information which industry has and which only industry can supply. That applies to the specific cases I have mentioned. There is expertise in Whitehall to work out whether there is justification for anti-dumping provisions. We are only too willing to discuss these matters with any industry and to assist it, especially in the use of posts overseas to gather necessary information.

    Stansted Airport
    Mr. Newensasked the Secretary of State for Trade if he will make a statement on the future development of Stansted Airport.
    Mr. Clinton Davis: Our consultations on airports policy, which includes Stansted, should be completed within the next few months. I cannot anticipate what decisions the Government will reach after they have considered all the submissions made in the course of the consultations, about Stansted or any other airport.
    Mr. Newens: Although the majority of people will probably not object in principle to a modest expansion of the traffic at Stansted, surely it is unreasonable, particularly in the light of the Roskill Report and the implications for urban growth, to permit unlimited expansion. Therefore, will my hon. Friend say quite clearly whether he is prepared to accept the principle of placing a ceiling on development, which I believe would be a good planning principle for applications concerning not only Stansted but all the London airports?
    Mr. Davis: My hon. Friend knows very well that the consultation documents which have been issued by my Department have set out a whole variety of options which may be considered. In these circumstances, it would not be right for me to prejudge the report which will be made to the House in due course when all the submissions have been considered. As my hon. Friend knows, I have invited him to lead a delegation to see me and my hon. Friend the Under-Secretary of State for the Environment so that all the submissions on Stansted that he wants to represent can be put forward.
    Mr. Ian Stewart: Will the Under-Secretary of State accept that what the hon. Member for Harlow (Mr. Newens) has said applies equally to Luton and that the whole question of the smaller airports in the Home Counties needs to be reconsidered in the light of the great population increase in recent years and the unexpected increase in air traffic? These airports would not have been situated where they are had those developments been expected. Therefore, will the Government recognise that airport policy needs to be settled on a regional basis and not by building up the smaller local airports?
    Mr. Davis: What I have said in answer to my hon. Friend the Member for Harlow (Mr. Newens) applies equally

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    to all the other airports which are the subject of the consultations which are going on. The Government have, for the first time in the history of this country, been trying to devise a national airports strategy. That needs to be approached carefully and profoundly, and that we are doing.

    Insurance Brokers
    Mr. McCrindleasked the Secretary of State for Trade if he is now able to indicate his intentions with regard to the document recently submitted to him by the British Insurance Brokers' Council.
    Mr. Clinton Davis: I have already said that I welcome the BIBC's proposals. Wide consultation will, however, be necessary. I hope to make a fuller statement later this month.
    Mr. McCrindle: I thank the hon. Gentleman for that reply. Does he agree that, if a practical system of control can be evolved by the industry, that would be preferable to a system of control by a Government Department?
    Mr. Davis: As the hon. Gentleman knows from views which I have expressed before, I see no reason why a system of self-regulation, properly administered in accordance with approved criteria which are found to be practical, should not be at least as effective as any Government licensing system. It is for that reason that my right hon. Friend the Secretary of State for the Environment invited the brokers' organisations to put forward proposals, but I cannot say that the alternative has been totally ruled out.

    British Tourist Authority (Chairman)
    Mr. Adleyasked the Secretary of State for Trade when he expects to announce the appointment of the next Chairman of the British Tourist Authority.
    Mr. Meacher: Before Sir Alexander Glen's present term of office expires.
    Mr. Adley: Is the hon. Gentleman aware that most people think that Sir Alexander has been an outstandingly successful Chairman of the BTA? Many people hope that the Government will appoint to this important job a man of equally high calibre. Can the hon.
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    Gentleman give an assurance that he will not do a Cable and Wireless on the tourist industry and appoint a party hack to this job rather than a man with some experience in the relevant industry?
    Mr. Meacher: I am grateful to the hon. Gentleman for his generous comment about Sir Alexander Glen, which I entirely support and endorse. As to his snide comment about the person whom the Government will appoint to this position, I can assure the hon. Member that we shall engage in the normal consultations which take place and that we shall appoint someone who is of equally high calibre and who, I am sure, will perform well the considerable and difficult duties of the BTA under its new constitution.
    Mr. Lipton: Would it not be a good idea to appoint the hon. Member for Christchurch and Lymington (Mr. Adley) to this job? We would get much more work done in the House if we got rid of him.
    Mr. Meacher: The hon. Gentleman has ruled himself out of consideration by his comment about the appointment of a party hack.
    Mr. Anthony Grant: Is the hon. Gentleman aware that, as one who was instrumental in reappointing Sir Alexander, I pay tribute to the enthusiasm that he and his team have applied to their task? On the question of the appointment of another chairman, has not the time come to have a new look at the whole structure of the tourist industry, and possibly the Government's responsibility for it, with a view to giving to this vital sector of the economy the priority that it enjoys in other countries?
    Mr. Meacher: The industry already has considerable priority, particularly in view of the enormous foreign exchange earnings which it wins—a net surplus probably well in excess of the £¼ billion which it earned last year. We are changing the constitution of the BTA by means of the devolution Bill, but I shall take into account any recommendations which the hon. Gentleman makes about structural changes.

    Multi-Fibre Arrangement
    Mr. Fletcher-Cookeasked the Secretary of State for Trade what progress is being made in the negotiations for renewal

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    of the Multi-Fibre Arrangement, and if he will make a statement.
    Mr. Meacher: The first round of discussions about the future of the Multi-Fibre Arrangement took place in the GATT Textiles Committee in Geneva in December. There will be a further round of discussions at the end of February.
    Mr. Fletcher-Cooke: Can the hon. Gentleman give any report, if only an interim report, on how the negotiations are going, particularly as regards spreading the load more fairly by shifting it from the United Kingdom on to other developed countries, especially European countries? Does the hon. Gentleman agree that the renegotiation is regarded by the textile industry as its last chance of survival and that if it is not taken it will face total despair?
    Mr. Meacher: Shifting the burden on to other European countries is already being increasingly achieved under the burden-sharing arrangement of the original MFA, which is still in operation.
    On the question of the renegotiation of the MFA, our main aims are protection against cumulative disruption from low-cost imports, which is the greatest weakness of the current MFA, and seeking to achieve a lowering of quota growth rates in particular circumstances. Both those and other matters were raised by the European Community negotiator and a renegotiating mandate, which will have to go to the Council of Ministers, will be drawn up ready for the meeting in February. Therefore, it will fall to all member States to put in their views.
    Mr. Madden: Does my hon. Friend accept that the British textile industry wants the Government to adopt and maintain an extremely tough attitude in these negotiations? Does he also accept that any built-in increase in percentage terms, as we have endured in recent years, would be wholly unacceptable to the British textile industry? Is there not a need for a built-in regulator to take account of countries such as ours which have high import penetrations at times of economic recession?
    Mr. Meacher: I am aware, and the Government are aware, of the great importance of these negotiations to the textile industry. It is because we are
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    aware of the effect of the growth rate of 6 per cent. each year under the existing MFA at a time of recession that we have put the emphasis in the negotiations on a lowering of the quota growth rates in particular circumstances. I assure my hon. Friend that we shall place great emphasis on securing these objectives.

    USSR (Credit)
    Mr. Blakerasked the Secretary of State for Trade how much of the credit of £950 million for the Union of Soviet Socialist Republics has now been taken up.
    Mr. Meacher: The total value of contracts placed to date under the agreement is approximately £54 million. Other deals now in negotiation will add substantially to this figure when the related commercial and financial agreements are signed.
    Mr. Blaker: Does the Secretary of State for Trade agree with the recent statement by the Foreign Secretary that a danger is involved in the transfer of resources from the West to the Soviet Union in that it may enable the Soviet Union to fulfil its objectives in the Third World and produce goods to be sold back to the West at dumped prices?
    Mr. Meacher: We will take effective measures where the evidence is given to us by industry that there is dumping by a State-trading country such as the Soviet Union. In relation to the transfer of resources, there is a COCOM embargo which has been in operation for a long time. We strictly adhere to it. But as regards items in which there is no security or technological content, it is wholly in the interests of a Western country such as this one to get the advantages of trade with the Soviet Union, and we intend to use the rest of the credit under this agreement if we can.
    Mr. Costain: Does not the hon. Gentleman appreciate that by giving the Soviet Union credit at lower interest rates than those which can be obtained by British industry for its own development we are giving it an unnecessary advantage? Does not this operate against the employment situation in this country?
    Mr. Meacher: This question has been raised in each of the last three Question Times of the Department of Trade, and

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    I give the Opposition credit for their perseverance though not for their ideologtcal myopia. Their attitude on the issue is not held by British industry. We did not originate the terms of this agreement. We were following the competition which had already been set by France, Italy and Japan. If British industry is to have a competitive edge in the Soviet Union, we have no alternative but to follow our competition down that road, although no further.
    Mr. Nott: No ideological question is involved. What is the purpose of financing Russian industry—which is, in effect, what this means—by giving it credit at about 7 per cent. interest through money which costs the Government nearly 15 per cent. to borrow? That money is then used to manufacture textile goods which come back to this country and destroy jobs in the North-West and throughout the North of England. No ideological question is involved. This is purely a practical matter.
    Mr. Meacher: If our exporters are to gain a proper share in major contracts, there is no alternative but to supply competitive credit and interest rates in line with what the Soviet Union has been offered. We took great care to find out just what the Soviet Union was being offered. The figures are confidential, but I assure the House that we have in no sense improved on them and have no intention of doing so. The effect of following the Opposition's suggestions would be to lose the trade in these important contracts to other countries, and the Russians would still have their machinery with which they would be able to export to our markets.

    Paper Imports (EFTA Countries)
    Mr. Ovendenasked the Secretary of State for Trade if he will introduce a licensing system in respect of individual imports of paper products entering the United Kingdom from the United Kingdom's former EFTA partners under the duty-free quota system.
    Mr. Meacher: I see no reason for doing so.
    Mr. Ovenden: Would not my hon. Friend agree that a system which decides whether to impose duties solely by reference to the amount of imports during the year perhaps leads to a rush to
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    import early in the year and an artificial level of imports during the year as a whole? Is it possible to have a system which determines whether a particular batch of imports is necessary or unnecessary in deciding whether to impose duties?
    Mr. Meacher: The EEC-EFTA agreement as it affects paper and board products states clearly that there are to be no new quantitative restrictions between the Community and EFTA countries. I understand my hon. Friend to be recommending that we should examine the question of the allocation of the quotas. I am prepared to do so, although I must point out that we would have to state clearly in such a declaration exactly the criteria by which we allocated quotas and that for practical reasons that would be difficult and would also involve administrative costs. I will, however, look at the suggestion.

    SUITS (Inquiry Report)
    Mr. Canavanasked the Secretary of State for Trade whether he has completed his study of the Stock Exchange inquiry report on the company SUITS; and if he will make a statement.
    Mr. Clinton Davis: At this stage I have nothing to add to the answers which my right hon. and learned Friend the Lord Advocate and I gave on 6th December last.
    Mr. Canavan: Will my hon. Friend pay particular attention to the prima facie evidence of breaches of Sections 27 and 33 of the Companies Act 1967? Will he also undertake to examine the books of some of the shady outfits where Sir Hugh Fraser is supposed to have squandered his money, such as London gambling clubs and the Scottish National Party?
    Mr. Davis: I assure my hon. Friend that both the Lord Advocate and I will pay consideration to all relevant matters.

    European Community Countries
    Mr. Skinnerasked the Secretary of State for Trade what, at the latest date, are the figures for trade, both imports and exports, with EEC countries.
    Mr. Meacher: In the first three quarters of 1976, United Kingdom

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    exports to the rest of the EEC were valued at £6,091 million on a balance of payments basis. The value of United Kingdom imports from the Community in the same period was £7,584 million.
    Mr. Skinner: Is it not fair to say that the current deficit is about £2,300 million per annum, which is even worse when taking into account the fact that no benefits have arisen out of the so-called devaluation of the pound? Does not my hon. Friend agree that, far from the 55 million people of the United Kingdom benefiting from our membership of the Common Market, the only people who have benefited have been those like the former Prime Minister, who got a £40,000 bouquet, and Roy Jenkins, who is new on £1,000 a week?
    Mr. Meacher: My hon. Friend is about right in the size of the deficit, which is running at slightly over £2 billion a year. He is not entirely right in saying that there has been no improvement or that there is no prospect of some improvement. In the first three quarters of last year, our exports to the other EEC countries rose faster than their exports to us Consequently our deficit with them reduced by about £300 million while our deficit with the rest of the world worsened by about £500 million. The question is how we can improve the situation further. That depends on the industrial strategy, on accelerated investment and on other matters which are really the responsibility of the Department of Industry.
    Mr. Adley: Is not the reason why other countries of the EEC are doing well and we are doing badly simply a matter of productivity and taxation? When will the Government stop blaming the rest of the world for our faults, reduce company taxation and reintroduce incentives to people to work harder?
    Mr. Meacher: When the Conservative Government reduced taxation in 1971, 1972 and 1973, the deficit with the rest of the EEC rose even faster than it has done in the last two years. Our productivity is very comparable at present with the productivity of other EEC countries, but it is only in the last trade cycle that we have equalled their growth rate in productivity. In previous cycles, we were significantly below.
    Mr. Heffer: Is it not clear that the country was misled in the referendum campaign by hon. Members on both sides of the House who said that if we remained in the EEC there would be jobs for the boys, higher investment and greater opportunities for all? Has not that claim proved to have been an absolute lie, with our people not better off but worse off because of our continued membership?
    Mr. Meacher: I am sure that every hon. Member will draw his own conclusions in the light of the facts to which my hon. Friend has referred.

    Import Substitution
    Mr. Rookerasked the Secretary of State for Trade if he will make a statement regarding his policy on import substitution.
    Mr. Meacher: It is a major objective of the industrial strategy, and of our agricultural and energy policies, to ensure that no opportunity is lost for the development of competitive domestic production.
    Mr. Rooker: Will my hon. Friend accept that that is not a satisfactory answer? When will the Government introduce a positive policy of import substitution and not rely on the present industrial strategy, which is not working because it takes no account of manufactured and semi-manufactured goods?
    Mr. Meacher: My hon. Friend should not be so dismissive about our industrial strategy. There are nearly 40 sector working parties covering 45 per cent. of our manufactured output. It is for the industry and the unions to come to decisions which they will implement—in other words, it is a matter for them rather than for the Government. They are now looking at objectives in terms of the share of domestic and overseas markets in the next three to five years. This is a policy of deliberate import substitution.
    Mr. John Garrett: Does not my hon. Friend agree that import substitution is as important an aspect of trading policy as export promotion? Therefore, why does the Department of Trade consistently emphasise export promotion while at the same time systematically ignoring import substitution?
    Mr. Meacher: I agree with my hon. Friend, and that is why we have now set in hand this large exercise in industrial strategy. Although it will not have an effect in the immediate future, I expect that it will have an effect in the medium term.

    Textiles (Anti-Dumping Procedures)
    Mr. Shersbyasked the Secretary of State for Trade if he will make a statement on the progress he has made to date in preventing the dumping of textiles into the United Kingdom.
    Mr. Meacher: Anti-dumping duties have been imposed on ladies' rubberised raincoats from Hong Kong and on polyester fibre from Romania. Anti-dumping investigations are proceeding in cases on suits from Eastern European countries and on PVC-coated fabrics from Hungary and East Germany.
    Mr. Shersby: Is the Minister aware that, as a result of competition from Hong Kong, a major section of the British shirt industry loses money on almost every shirt it produces? What does the hon. Gentleman intend to do about the situation, since it is obvious that we cannot allow it to continue any longer?
    Mr. Meacher: I appreciate the severe difficulties that exist over the importation of shirts from Hong Kong. However, the hon. Gentleman's Question relates to the dumping of textiles. I do not think he is suggesting that these items are dumped. The subject of quotas is governed by the recent bilateral agreement entered into by the EEC in Hong Kong.
    Mr. Tim Renton: Is the Minister also aware that the anti-dumping requirement that it is necessary to prove that a shirt sold here is cheaper than a similar item sold in Hong Kong is made even more difficult by the problem of comparability? Since we do not wear the same type of shirts as those worn by people in Hong Kong, how does the hon. Gentleman intend to tackle the problem?
    Mr. Meacher: If we do not wear the same types of shirts as do people in Hong Kong, the problem does not arise because we do not import such items.

    Foreign Trade Policy
    Mr. Formanasked the Secretary of State for Trade if he will set out the broad lines of the Government's foreign trade policy.
    Mr. Meacher: Our general policy is to work for a balanced expansion of world trade.
    Mr. Forman: If that is a succinct summary of the Government's foreign trade policy, why has our country's trade been in substantial deficit on current account ever since February 1974, and what do the Government intend to do to remedy the situation beyond what has already been done?
    Mr. Meacher: The United Kingdom was, of course, in substantial deficit on current account well before February 1974. The last time we were in substantial surplus was as a result of the policies of the previous Labour Government. As regards action by which we hope that we shall be able to secure a surplus, I am sure that the hon. Gentleman will have seen the forecast of perhaps the chief independent economic forecasting agency in the United Kingdom, the National Institute of Economic and Social Research, suggesting that this year we might have a surplus—possibly the forecast was slightly optimistic—of nearly £5 billion.
    Mr. Emery: May I wish you a happy new year, Mr. Speaker? May I ask the Minister whether, in examining the Government's foreign trade policy, he will look at the incorrect gearing of credits to the amount of credit taken up, as was so evident from his reply relating to the credit outstanding to the Soviet Union. It surely must be wrong that 72 per cent. of that credit is still outstanding when the money allocated could be used to give credits for other foreign trade deals in other parts of the world.
    Mr. Meacher: We had assurances last year from Mr. Gromyko, which were endorsed by Academician Kirillin and also by the Deputy Trade Minister, Mr. Komarov, on my recent Moscow visit, that the Russians fully intend to take up the credits in the near future.
    Mr. Jay: Is my hon. Friend aware that our present visible trade deficit with the EEC accounts for the whole of our current trade deficit with the rest of the world?
    Mr. Meacher: Yes.

    Export Guarantees
    Mr. Frank Allaunasked the Secretary of State for Trade if he will make it his policy to assist British exporting firms by relaxing the terms of the three main forms of export guarantee, as suggested to him in correspondence by the hon. Member for Salford, East (Mr. Allaun).
    Mr. Meacher: I assume that my hon. Friend is referring to his letter of 15th December in which he raised problems faced by exporting firms which are unable to recover time-expired tender and performance bonds. He will by now have received my hon. Friend's letter of 6th January. I have asked ECGD to make further inquiries into these problems and to discuss them with the companies concerned.
    Mr. Allaun: I thank my hon. Friend for that reply. Why should ECGD performance guarantees be confined to contracts amounting to over £1 million when most contracts are for a smaller sum? Secondly, will the Minister examine the evidence in many countries that British bank guarantees can be called upon long after the expiry date? Is he aware that that situation is causing serious difficulty at the Sir James Farmer Norton & Co. Ltd. engineering firm, and that other firms have had difficulties in obtaining guarantees?
    Mr. Meacher: I understand that the commercial bond market can satisfactorily handle bonds below £1 million in value. We have had no sustained pressure to reduce the ceiling. Up to June 1975 the ceiling was £20 million, the figure then dropped to £2 million, and in November 1976 it went down to £1 million. I do not think there is any pressure to reduce it further. The banks have indicated that they can handle these matters satisfactorily. I appreciate that there is a problem because of the reluctance of clearing banks to regard bonds as expired unless they are physically returned to them. There is some doubt about the ability of overseas beneficiaries
    1040
    to make calls on the bonds if the figure has expired. I believe that the unfair calling cover introduced in November last year is relevant, and it is now available for all contracts regardless of size. We intend to discuss the matter with the firm mentioned by my hon. Friend.
    Mr. Hal Miller: Will the Minister say what has happened to the promised review of the cost escalation cover provided by the ECGD, and in particular regarding the £2 million limit and the impossibility of aggregating several large units within that figure, although the contract price may be over £2 million, as in the case of the contract providing for the supply of turbines to Ontario?
    Mr. Meacher: Cost escalation cover is a different matter from the tendering of performance bonds.

    Trade Delegations (Nigeria)
    Mr. Hooleyasked the Secretary of State for Trade how many trade delegations visited Nigeria in 1975 and 1976.
    Mr. Meacher>: There were nine trade missions to Nigeria in 1975 and nine in 1976 officially sponsored by the British Overseas Trade Board.
    Mr. Hooley: Is my hon. Friend aware that the information he has given is very welcome? Is he also aware that Nigeria is now the largest and most rapidly expanding African trading partner of this country? Will he take note of this matter and abandon the Department's morbid obsession with expanding trade with South Africa?
    Mr. Meacher: My hon. Friend is right in his comment since £700 million of trade is carried out with Nigeria as against over £600 million with South Africa. Trade missions are assisted by the BOTB, but without any direction from the Government. This merely reflects the wishes of industry in choice of market. I take note of my hon. Friend's comments.

    Trade Balance (European Community Countries)
    Mr. Hugh Jenkinsasked the Secretary of State for Trade to what extent the United Kingdom's membership of the EEC is responsible for the worsening of the United Kingdom balance with other EEC countries since entry.
    Mr. Meacher: It is not possible to identify separately the effects of our entry to the Community from other major influences on the pattern of our trade, except that there has been some switching of our sources of supply, particularly in regard to foodstuffs, after entry to the EEC in 1973.
    Mr. Jenkins: May I also, Mr. Speaker, wish you a happy new year? Since the switch of resources mentioned in an earlier question by my right hon. Friend the Member for Battersea, North (Mr. Jay) seems to have played a part in maintaining a £2 billion deficit over a period of three years, and as there is no immediate sign of radical improvement, what advice is the Secretary of State for Trade tendering to his Cabinet colleagues concerning our continued membership of the EEC?
    Mr. Meacher: I believe that I have missed out up to now, Mr. Speaker, and may I also wish you a very happy new year?
    I have sought to indicate that there has been a significant improvement in the trade balance account. In 1976 it reduced by £300 million at the same time as our deficit with the rest of the world increased by nearly £500 million. Ultimately protection against increased imports requires exactly the same economic conditions as increased exports, namely, better productivity, salesmanship and improved delivery. I am glad to see that in these other respects a recent survey published in The Times indicated that there is a real improvement.
    Mr. Marten: As the shift in resources has been about 7 per cent. or 8 per cent. in our trade, and as the larger part of that shift has been in food—which is putting up the price of food in this country—would it not be a very good thing to shift some of that back to food elsewhere than the Common Market?
    Mr. Meacher: Ultimately that is a matter for my right hon. Friend the Minister of Agriculture, Fisheries and Food. I think I should leave it to him.
    Mr. Shersby: What steps is the Minister taking, in consultation with the Secretary of State for Industry, to improve the delivery of British motor cars to the
    1042
    Community? In particular, what steps is he taking to improve the availability of servicing and spares facilities?
    Mr. Meacher: All the British car firms—not only Leyland but also the three American multinationals—are rationalising their motor vehicle plans to take in the EEC, and they are certainly extending their distribution network. There have, however, been substantial imports from the European subsidiaries of these companies which account for about one-quarter of our total car imports. But, of course, there are also counterpart exports by the British companies to the EEC.
    Mr. Adley: The Minister said earlier that we were merely following the French, Gemans and Italians in financing credits to the Soviet Union. Does he not think that it might be advantageous, rather than to follow our EEC partners, once in a while to do something new such as, for instance, offering low-interest loans to other East European countries such as Hungary and Poland to buy British aircraft rather than leave these massive loans in the hands of the Russians and not have them taken up?
    Mr. Meaeher: That is a remarkable suggestion coming from a member of a party that has shown continuing and consistent opposition to COMECON trade. I can assure the hon. Gentleman that we offer exactly the same conditions of credit and interest rates to our exporters to COMECON countries—where in 1975 we had a surplus of £100 million, and probably nearly £50 million last year—as we offer to exporters to other areas of the world.
    Sir Bernard Braine: In answer to earlier questions, the Minister gave the impression that the Government's arrangements for helping to promote trade and identify markets are all very satisfactory. Does he recall that the Select Committee on Overseas Development, in its report last year on the small area of the Caribbean, indicated that the present institutional arrangements for promoting British trade and investment, identifying markets and co-ordinating aid were totally inadequate? The Select Committee made a recommendation that a new trade development agency should be created. If that is true of the

    1043
    Caribbean, is it not also likely to be true of other regions? What are the Government doing to improve their own performance?
    Mr. Meacher: The proof of the pudding is in the eating. An improvement in our balance of payments position to a degree reflects the adequacy of existing institutional arrangements. However, I am prepared to look at the proposal for a new trade agency. I am not being unfair when I say that this has been thought of before, and I know that there are practical difficulties about it. However, we shall certainly look at it.
    Mr. Nott: The Minister indicated that we have exactly the same terms on our COMECON trade as we have in respect of other countries. I understood him to say earlier that the rate of interest on the Russian credit was confidential. Can he please say whether it is confidential or whether it is the same as our terms of other trade?
    Mr. Meacher: The question referred to COMECON, and there the conditions are exactly the same. With regard to the Anglo-Soviet credit agreement of February 1975, it is true that there are special terms in respect of that which merely reflect the competition.

  INDUSTRY

    British Aerospace
    Mr. Tery Walkerasked the Secretary of State for Industry when he proposes further appointments to the board of the Aircraft Corporation; and if he will consider appointing someone from the South-West of England.
    The Under-Secretary of State for Industry (Mr. Les Huckfield): May I wish you a happy new year, Mr. Speaker, and tell the House that my right hon. Friend expects to announce further appointments to the Organising Committee for British Aerospace in due course. I will keep in mind what my hon. Friend has asked.
    Mr. Walker: In thanking my hon. Friend for that reply, may I ask whether he does not agree that further appointments to the board are needed, because we very much hope that vesting day will not be long delayed? The interests of
    1044
    the workers in the Bristol area would be protected by someone being appointed from the South-West. The workers feel that because of the undue delay over the Bill their interests are being neglected.
    Mr. Huckfield: I wholeheartedly endorse all that my hon. Friend has said about getting the Bill through Parliament as soon as possible and getting the board set up. I am sure the workers in the industry will endorse that as well. In the meantime, I would say that members of the Organising Committee have so far been appointed on the basis of their personal suitability rather than because they represent particular interests or places.
    Mr. Emery: I assure the Minister that there is no political motive when I endorse the Question and say that we in the South-West would be delighted to see an appointment made from that area. With regard to the Organising Committee, is it the intention of the Minister's Department to make statements to the House about the way in which it is proceeding? Can we be assured that the functional aspects of management will be properly analysed and appointments will be made to ensure that full managerial efficiency is obtained?
    Mr. Huckfield: With regard to the first part of the hon. Gentleman's question, I refer him to what I said to my hon. Friend. With regard to the Organising Committee, I think I am right in saying that the hon. Gentleman was not here on that late evening of 1st December when we had a full debate on these matters.
    Mr. Hooley: Will my hon. Friend impress upon the Organising Committee the importance of getting on with producing the HS146?
    Mr. Huckfield: We are very much aware of the urgency of what my hon. Friend says. I am sure that all my right hon. and hon. Friends will endorse once again what has been said about the need to get the Bill through and to get the board set up to set about creating a new, prosperous future for the British aircraft industry.
    Mr. Adley: While doing my best to ensure that we do not run out of Questions, may I refer the Minister to the fact that the British Aircraft Corporation

    1045
    has already sold BAC aircraft to one East European country? Will he give serious consideration to reallocating part of the funds of the Russian loan and, in consort with the Department of Trade, consider the possibility of financing further sales of British aircraft to countries, be they in Eastern Europe or elsewhere, that may well be attracted to the aircraft by the availability of long-term low-interest credits?
    Mr. Huckfield: Although I congratulate the hon. Gentleman on his expertise in keeping Question Time going, we do not need it. If he wants an answer to that question, why does he not put down a Question?

MERIDEN MOTOR CYCLE CO-OPERATIVE
Mr. Hal Miller(by Private Notice) asked the Secretary of State for Industry whether he has received a request from Meriden Motor Cycle Co-operative for additional funds over and above the £4·9 million originally made available by the Government, and whether he will make a statement.
The Secretary of State for Industry (Mr. Eric G. Varley): On 15th December last the Meriden Co-operative asked me to provide a further £1 million to enable it to purchase from Norton Villiers Triumph Ltd. the latter's marketing organisation and other marketing assets and to provide working capital for that organisation. Whilst the application in the form in which it was presented has been turned down by the Government, we are exploring other possibilities.
Mr. Miller: Will the Secretary of State come clean and make plain to the House what the Government's policy is? Is it the policy that he announced originally, that there was to be no more money to be made available—as, incidentally, his predecessor announced before him—or is he trying to make a success of the Meriden Co-operative and clear the obstacles of the marketing arrangement out of the way?
Mr. Varley: As I have said already in reply to the hon. Gentleman's original Question, we are exploring the possibilities of seeing whether there is any help
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which can be given to the Meriden Co-operative. There is no doubt that it has substantial achievements to its credit. But its long-term future success depends on the market and its long-term viability.
A meeting took place this morning and, at my request, my right hon. Friends the Chancellor of the Duchy of Lancaster and the Minister of State, the right hon. Member for Swansea, West (Mr. Williams), are to undertake an in-depth study of the possibilities of keeping the co-operative in being. I hope that that examination will be undertaken as a matter of urgency. When conclusions have been reached, they will be reported to the House.
Mr. Robinson: Is my right hon. Friend aware that all Government supporters welcome very much the constructive spirit in which Mr. Jack Jones and I were received this morning by the Government and the readiness of the Government to look again at the situation in the light of the new information being made available and the variants of the proposals which can be put to the Government? We are confident that we can make the co-operative stand up and that it deserves the Government support for which we have asked. The alternative is more men on the dole, more unemployment benefit and a greater cost to the Government. We shall argue it to my right hon. and hon. Friend on both grounds.
Mr. Varley: I know that my hon. Friend the Member for Coventry, North-West (Mr. Robinson) has been closely associated with the co-operative since its inception and has advised it over that period. As he will know, the application from the co-operative did not come in until 15th December. It wanted an answer very quickly. The application was put before us in the nature of interim assistance. What the Government really want to know is how the future is to go, how the co-operative sees the future and especially whether the motor cycle that it makes will find its way into the markets of the world.
Mr. Pardoe: Does the right hon. Gentleman accept that, when his Department made its original commitment to the Meriden Co-operative, it must have been obvious that further public investment would be required if it were to be a success? That being the case, what

1047
conditions were laid down for that further public investment to become available, and which of those conditions has not been met by the co-operative?
Finally, will the right hon. Gentleman accept that within his Department there have always been powerful voices which wanted this experiment in new forms of ownership to fail, both for itself and because it was the personal brain child of his predecessor? Will the Secretary of State make it clear today that he is not part of the "Get Benn" brigade?
Mr. Varley: When the Meriden Co-operative was set up, my predecessor made it clear on behalf of the Government that the assistance then was on a once-for-all basis. It was not given on the basis of an understanding that further assistance would be required. It is true that some of the original expectations of the co-operative have not come to fruition. We want to know how the co-operative itself—it is responsible—sees the future. If we can help in any way, we are prepared to do so. But we must bear in mind the criteria that we laid down some months ago for assistance not only to co-operatives but to all companies.
Mr. Rooker: Will my right hon. Friend assure the House that the investigation which is to be undertaken by the Chancellor of the Duchy of Lancaster will include allegations that Mr. Dennis Poore and his cohort stole and removed from the old factories detailed design projects which had been paid for by the old companies and that these were sold and bought at a knock-down price from the receiver, which had the effect of taking away future prospects for new projects and products from the co-operative?
Mr. Varley: I have not heard allegations of that kind, and it would not be appropriate for me to comment on what my hon. Friend said. The discussions and the examination which are to take place will be thorough-going, and no doubt Mr. Poore will be asked to take part in those discussions.
Mr. Lawrence: What did the right hon. Gentleman understand by the term "interim assistance"?
Mr. Varley: I thought that I had already made that clear. The co-opera-
1048
tives request was for assistance of an interim nature to enable it to draw up long-term plans. But we are concerned not only with the interim assistance but also with the long-term plans of the cooperative. We are interested in seeing an ongoing operation in that factory. That is what the examination which is to be conducted by my right hon. Friends the Chancellor of the Duchy of Lancaster and the Minister of State will be about.
Mrs. Wise: Will my right hon. Friend accept that most Government supporters believe that the Meriden Co-operative has proved that it deserves this additional assistance by the tenacious fight that it has put up already? Will this study also consider the cost of not providing assistance, both financially and in terms of the principle involved?
Mr. Varley: All factors will be taken into account. I have already paid tribute to the substantial achievements of the co-operative, the total flexibility amongst the work force, and the rest of it. The future of the co-operative depends on whether it can manufacture and sell motor cycles. There are substantial stocks of motor cycles, and that is the crucial issue which is not underestimated by my hon. Friend.
Mr. Biffen: Is the Secretary of State aware that it was with pleasure that I heard him say that the future of the co-operative depended on its success in the market? Is he aware, further, that that pleasure was tinged with apprehension on my learning that the Chancellor of the Duchy of Lancaster was to be involved in these further studies, as we all recollect the last time that the Department of Industry was subject to the footloose activities of the Chancellor of the Duchy in respect of Chrysler?
May I put two specific matters to the right hon. Gentleman? What were the factors which led the Department to reject the request for financial aid that was made on 15th December? Secondly, can he give us an undertaking that the in-depth study which will now be conducted will include taking the advice and judgment of the Industrial Development Advisory Board and making its recommendations known to the House?
Mr. Varley: The Industrial Development Advisory Board has been consulted

1049
about the assistance to the co-operative. The Board was not consulted about the interim assistance for which the co-operative applied, and it was turned down on the basis of Government authority. But I can tell the hon. Gentleman that over past months, when the co-operative asked us whether we would defer payment of interest on the Government loan, that was put to the IDAB and it approved the offer that we made to the co-operative at that time.
As for the hon. Gentleman's other questions, I must make it plain that my right hon. Friend the Chancellor of the Duchy of Lancaster is looking at the co-operative and conducting this study at my request.
Mr. Whitehead: Will my right hon. Friend accept that the long-term plans of the co-operative—and we all applaud what it has done thus far—could never have been satisfied by this one-off assistance in view of the industrial and organisational innovation that was needed? Will he accept also that the co-operative is considering a wide range of diversified production and that all Government supporters and those who sent us here would not forgive this Government if the Meriden Co-operative were killed?
Mr. Varley: No one on the Treasury Bench wants to kill the Meriden Co-operative. I make that absolutely plain to my hon. Friend.
In view of his question, I ought perhaps to tell the House what the assistance amounts to so far. As the House knows, the Government provided £4·2 million at 10 per cent. interest, with interest relief for the first year, to be repaid over 10 years from June 1980, and a grant of £750,000. The Government have also provided NVT, through the ECGD, with export credit facilities of up to £6 million to enable that company to finance purchases of Meriden motor cycles. In addition, over the last few weeks we have offered to defer payment of interest. We have also told the co-operative that, if it will help, we will subordinate that £4·2 million loan to all other creditors. That substantial assistance has been given already.
Mr. Kenneth Clarke: Would the Secretary of State clarify the reference he
1050
made just now to the Industrial Development Advisory Board, and in particular would he make it clear that, following the in-depth study, the views of the Board will be sought on any further assistance which may be recommended by the Chancellor of the Duchy of Lancaster and the Minister of State? Also, would he ensure that the views of the Board are given to the House so that the decision can be properly evaluated?
Mr. Varley: I shall have to judge that at the time. If it were proposed that further assistance should be made to the Meriden Co-operative, it is the view of the Government that this proposal should go to the IDAB. As the House will recall, the original proposal for assistance went to the Board, and the Board advised that assistance should not be given. However, at the end of the day it is for the Government to decide whether assistance should be given. It is a matter for Ministers, who are answerable to the House, to say whether such assistance should be approved.
Mr. Skinner: Would my right hon. Friend accept that if the police forces throughout the country bought Meriden bikes instead of German BMWs, and if many other authorities who have bought German bikes had bought from Meriden instead, the situation would be much better?
What criterion has my right hon. Friend laid down with regard to the surplus of motor bikes? This criterion does not apply to the manner in which other grants are made by his Department, because there was a case where £5 million was given to Lonrho to manufacture bedding and blankets for Brentford Nylons although there was a surplus of bedding and blankets at the time. My right hon. Friend's Department did not appear to take that into account.
Mr. Varley: We took all the factors into account. My hon. Friend may remember that when assistance was given to Lonrho to purchase Brentford Nylons, this had the support not only of the IDAB but of all the trade unions involved, including the Transport and General Workers' Union.
On my hon. Friend's first question about the procurement policy of police authorities, I must tell him that this is a matter for them. However, I think that

1051
as far as is practicable all public corporations and local authorities should go in for a policy of "Buy British".
Several Hon. Membersrose—
Mr. Speaker: Order. I am afraid that we cannot pursue the matter further now.

STATE OPENING OF PARLIAMENT (TELEVISION)
Mr. Speaker: I wish to make a statement.
I said on 22nd December last that I would, after consideration, make a further statement to the House about televising the State Opening of Parliament.
As the House knows, the ceremony was televised on three previous occasions, namely in 1966, 1970 and 1974. In 1966 consultation took place through the usual channels, and the matter was considered by the Services Committee: following this, the House was informed by way of a Written Answer. In 1970 the procedure was similar, the announcement appearing in a Written Answer on 29th May. In 1974, since the House was in dissolution at the material time, authority was given by Mr. Speaker following consultation through the usual channels.
I have considered the submission by the hon. Member for Totnes (Mr. Mawby) that, as regards the televising of the ceremony in 1976, the situation had been changed by the debate which took place on 24th February 1975. I can find nothing to substantiate this view. The motion upon which the debate took place was
"That this House authorises an experiment in the public broadcasting of its proceedings by television, to be held in accordance with conditions approved by the Select Committee on House of Commons Services."
As the House knows, the motion was defeated by 275 votes to 263, and accordingly no experiment took place. My judgment is that this left the situation exactly where it had been in 1966, 1970 and 1974, on which occasions—with the agreement of the House—televising of the State Opening was permitted, the decision in each case having been taken ad hoc, and in no way on an experimental basis. I cannot accept that a decision of the House on the limited issue of experi-
1052
mental broadcasting in any way fettered the freedom of the House—given the agreement of all concerned—to authorise televising the State Opening ceremony on any individual future occasion.
On this basis the sole point for consideration is whether, on any future occasion on which the House is sitting when a decision of this kind needs to be taken, the earlier arrangements for consultation and notification to the House should be followed, or whether something more formal is needed—for example, a resolution by the House on a motion tabled by the Government. I regard this as a matter for discussion through the usual channels.
Mr. Mawby: I am very grateful for the close consideration which you have given to the point of order which I raised, Mr. Speaker. I do not propose to say any more about it and I will rely on the sense of the usual channels should this ever happen again.
Mr. Speaker: I am obliged to the hon. Gentleman.

EUROPEAN COMMUNITY (MEETINGS OF COUNCIL OF MINISTERS)
The Minister of State, Foreign and Commonwealth Office (Dr. David Owen): With your permission, Mr. Speaker, I will make a statement about business to be taken in the Council of Ministers of the European Community during January. The monthly forecast for January was deposited on 22nd December.
As the House knows, the United Kingdom assumed the presidency of the Council of Ministers on 1st January for six months. My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs, in his capacity as Chairman of the Council of Ministers, will go to Luxembourg on 12th January for the ministerial question day at which he will be answering questions put to the Council by the European Assembly.
As is traditional for an incoming Chairman of the Council, he will make a statement about the United Kingdom's general approach to the presidency and the text of the statement will be made available that day in the Vote Office.

1053
At present two meetings of the Council of Ministers are proposed for January. Foreign Ministers will meet on 18th and Agriculture Ministers on 24th and 25th January. A final decision on whether to hold a Finance Council in January has yet to be taken. At the Foreign Affairs Council Ministers will discuss the common fisheries policy, the first annual report of the Regional Development Fund, relations with Iran and the Community's position with regard to issues involved in the North-South dialogue. It may be necessary to have a further meeting on fish later in the month.
Agriculture Ministers will consider proposals for potato and interim sheep-meat régimes, and for increased financial limits under the farm structure directives. They will also resume discussion on measures for achieving a better balance between supply and demand in the milk sector.
Mr. Hurd: I thank the Minister for that statement. Will he look ahead a little and give the probable dates for summit meetings of the European Council in London during the rest of the year?
He mentioned a number of forthcoming meetings this month. We are very anxious about the common fisheries policy and the internal position in the Community. As we understand it, it was agreed before Christmas that for one month only—January—there would be no new conservation measures by any member States, and that the British and other EEC fishing fleets would be held in theory to last year's catches. Will the Minister give an assurance that there will be no extension beyond 31st January of that highly unsatisfactory and uncertain interim arrangement?
The Minister has not said anything today about the JET project. In view of the rather alarming remarks attributed to Dr. Brunner before Christmas about the future of this project, what is being done to break the deadlock?
Dr. Owen: It is not yet possible to give any definite dates for the summit meetings. I shall let the House know as soon as any dates are firmly and finally fixed.
It is not possible to give the hon. Gentleman a categoric assurance that the
1054
interim arrangement for fisheries will not be extended beyond 31st January. Clearly, it is in our interests to reach an agreement, but one factor is whether it is possible to take unilateral conservation measures. We have preserved the right to do so, but we should have to go through certain processes and we might not be able to complete them prior to 31st January if there is no agreement. I bear in mind the point that the hon. Member makes, and I do not claim that the situation is totally satisfactory.
On the question of the JET project, no meeting has been fixed for the Research Council. There is a difference of opinion at the moment and there needs to be some bilateral diplomacy and general discussion before this matter is once more brought before the Council of Ministers. This is a very serious situation.
Mr. Powell: I intend no disrespect to the Foreign Secretary, but is it not unsatisfactory that crucial negotiations on the common fisheries policy should be conducted on behalf of the Foreign Office in the Foreign Ministers' Council rather than by the right hon. Gentleman who is primarily and in detail responsible to this House on the subject? Would it not be possible at any rate for him to be closely associated with the important meetings in January?
Dr. Owen: The right hon. Gentleman has a point of substance. There is a difficulty here in that one can make a distinction between external and internal régimes. There is no doubt that the external factor in relation to third countries, such as the Soviet Union, and for East-West relations is important with a very high Foreign Office content. My right hon. Friend is deeply involved in this.
There are aspects of the internal régime which are the responsibility of my right hon. Friend. In the detailed negotiations in December my right hon. Friend the Minister of Agriculture and myself were together during all the main negotiations. There is extremely close contact on the whole issue. Even my right hon. Friend the Secretary of State for Scotland is involved. So these are complex issues which cross ministerial responsibilities.
Mr. John Ellis: Is my right hon. Friend aware that in his statement he made no reference to any negotiations,

1055
outstanding or in prospect, about direct elections? These are supposed to come about by 1978, but the constituencies, their size and the method to be used, like everything else, are as yet undecided. Can my right hon. Friend deny that there is any prospect of our completing the necessary work for all this to happen by 1978? Does he not agree that on the whole that would be a thoroughly good thing.
Dr. Owen: I cannot make the denial that my hon. Friend seeks. We face a difficult problem over timing. In order to achieve the date of May or June 1978 a whole range of procedures will have to be gone through, quite apart from the legislation which must be passed by the House. Timing is a major factor. We face the problem of timing over devolution and the constitutional issues associated with it. We shall be discussing these shortly. We made a clear statement in the Queen's Speech about our intentions on direct elections and we intend to follow that through.
Mr. Blaker: What is the position regarding the request by COMECON for an agreement with the Community? Does the Minister expect this subject to be discussed again in the near future by the Council of Ministers?
Dr. Owen: Yes, I am sure that it will come up. The Community has replied to the COMECON countries and we await with interest their response to the Community's reply.
Mr. Hooley: On the North-South dialogue, is my right hon. Friend aware that Saudi Arabia's decision to raise oil prices by only 5 per cent. was clearly in anticipation of some quid pro quo in respect of the attitude of the Western nations on overseas aid and development? Does he agree that the recent decision on this subject by my right hon. Friend the Chancellor of the Exchequer was disastrous and will he press for a more liberal attitude by the Community as a whole on this?
Dr. Owen: We shall have discussions on the CIEC conference. The whole question of the Ministerial meeting and when it will take place is to be decided. The two co-chairmen are to meet and to have consultations with the participating countries. I certainly share the feelings of
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importance that my hon. Friend attaches to these issues.
Mr. Scott-Hopkins: When the Agriculture Ministers meet at the end of the month will they consider the European price review? If not, when will these considerations take place and when is it expected that a result will be announced to the House? An early decision is important in view of the conditions which have prevailed.
The Minister said that the Research Council was not meeting. Is it not urgent that it should meet at the earliest possible moment to consider JET because of the risk that the existing team will be dispersed and if there is delay it will be too late to do anything about that?
Dr. Owen: It is a question of judgment. There is no point in having another meeting at which no decisions are taken. We have to see whether we can forge a better consensus than already exists.
We await proposals from the Commission on agricultural prices. The whole price review has to be settled by a statutory date. I do not expect this subject to be a major feature of the agriculture decisions taken in January.
Mr. Christopher Price: Does the fact that my right hon. Friend has not mentioned Greek-Turkish relations and Cyprus mean that this subject has taken a lower place in his list of priorities? Does he agree that in the next six months, when we as a guarantor Power hold the chairmanship of the Council, we shall have a unique opportunity to take an initiative to solve this problem?
Dr. Owen: The fact that I have not mentioned the subject does not mean that I have changed its priority. I look forward to our discussions this month and we shall continue to look wherever we can for a settlement of this difficult issue.
Mr. Michael Marshall: What do the Government propose to do to ensure that the agreements that they have reached on anti-dumping, particularly in the matter of special steels, will in no sense be watered down and be ground lost when harmonisation becomes a fact of life towards the end of the year?
Dr. Owen: These are important factors and I shall draw the attention of the relevant Ministers to them.
Mr. Spearing: Since the cost of New Zealand cheese and butter in New Zealand is about one-third or a half of what it is in this country, the discussions about the sheep-meat regime are important in terms of the prices of mutton and lamb in this country. Will my right hon. Friend assure us that it is the Government's intention to resist the imposition of levies on imports of mutton and lamb?
Dr. Owen: It is the Government's intention to continue to safeguard producers' returns and to prevent rapid and unnecessary rises in prices for consumers. We intend also to ensure continued access for frozen imported supplies from third countries, and that includes New Zealand.
Mr. Rees-Davies: Further to the Minister's replies on Cyprus, does he not agree that the Government have a unique opportunity of raising this issue now with the new regime in the United States and also, together with our partners in the EEC, to apply the sort of gentle pressure which is necessary to effect some sort of real solution not only in Cyprus but in the Aegean countries? Is he aware of the benefit which would flow from an initiative by the Government on this matter at present?
Dr. Owen: I agree with everything that the hon. and learned Gentleman said except perhaps the emphasis he placed on the last part of the question. It is not a question of an initiative from the British Government, but in the context of holding the presidency of the Council we can influence debate there. I welcome the hon. and learned Gentleman's acceptance of the fact that this needs to be done in co-operation and full consultation with the United States.
Mr. James Johnson: In the forthcoming fisheries discussions in Luxembourg and elsewhere will the Minister never forget the deep-seated malaise which is affecting the Humberside distant-water fleet? Will he impress upon Mr. Gundelach that, whatever happens in the EEC in regard to the North Sea and elsewhere, we must have distant-water agreements, for example with Norway, with a minimum of 95,000 tons, with the Soviet Union and with Denmark in terms of the Greenland waters that it administers inside the EEC?
Dr. Owen: I share and well understand my hon. Friend's concern. I intend, if I catch your eye, Mr. Speaker, to talk a little about fishing and fishery policy generally in the forthcoming debate. There can be no misunderstanding, in Brussels or throughout the Community, that failure to reach a settlement in the Community's discussions with Iceland aimed at helping British fishermen will be serious for this country.
Mr. Marten: Is the Minister aware that in 1976 there were 54 meetings of the Council of Ministers in the Community but that there were only 11 oral statements made to this House thereafter? I do not know whether that was because there were disagreements or no results arising from the other 43 meetings, but may I ask him and his colleagues to make a New Year Resolution to keep this House much better informed about what they are doing on behalf of this House in the Community? Is the Minister aware that we are being kept in the dark?
Dr. Owen: I recognise that there is a legitimate concern that this House should be kept as fully informed as possible on all of these matters—particularly meetings of the Council of Ministers—that take place in a European context. We have tried to come forward with something whenever there has been a relevant issue. There are problems over parliamentary time. We shall bear in mind the figures which the hon. Member put before the House.

RENT (AGRICULTURE) ACT
Mr. Rossi: May I thank you, Mr. Speaker, for allowing me to raise this point of order relating to two questions which I feel are of some importance to the House and beyond.
The first is a constitutional question concerning whether an Act of Parliament is valid in law if it is published in a form which does not comply in a material respect with what was passed or intended by either House. The second is a procedural question concerning how the Clerk of the Parliaments should deal with the correction of material errors in a Bill as distinct from minor printing errors which have become apparent after passage through both Houses but before Royal Assent or publication.

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The Act giving rise to these two questions is the Rent (Agriculture) Act 1976 which received the Royal Assent on 22nd November last and which was published during the recess without effect being given to a Lords amendment with which the House agreed, namely, Lords Amendment No. 45. This amendment goes to the heart of the Act, namely, Section 28, which imposes upon local authorities an obligation to rehouse the occupant of a tied cottage who has given up his work on a farm and where the farmer is able to prove that he must make the accommodation available to an incoming farm worker in the interests of agricultural efficiency. The amendment sought to impose a time limit of three months within which a local authority has to come to a decision on a rehousing application made in such circumstances.
There was no disagreement between the two Houses on the need for a time limit. This issue was first raised in Committee of this House where, with the support of my hon. Friends and the hon. Member for Cardigan (Mr. Howells), we sought to impose a six-week time limit. This was defeated along with a linked amendment, with the Chairman using his casting vote. We understood that the Government would give further consideration to the matter in another place.
On Report in the Lords the Government acceded to an Opposition proposition that there be this three-month time limit. Thus, the principle of a time limit was clearly agreed by both Government and Opposition, and the amendment was carried in correct form by the House of Lords. Then, unhappily, a printing error occurred. When the amendment was inserted into the House of Lords' Bill it differed from the amendment as agreed by that House. Let me say at once that I attach no blame at all to the authorities in the Lords. They were acting under extremely difficult circumstances and under pressure from the Government to process this and a number of other Bills before Prorogation.
The Third Reading of the Bill in the Lords was completed at 6.15 p.m. on Monday 15th November and that House's Bill had to be completed and checked by 7.30 that same evening for transmission to our House. When the authorities of the Commons received the Lords'
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Bill they had to prepare their amendments from it, which they did correctly, putting before us what they had received from the Lords. However, Lords Amendment No. 45 read so that it required us to leave out words from line 3 to line 7 on page 24 of the Bill before inserting the provision relating to the time limit. To have been correct the amendment should have required the deletion of words only down to line 4.
This House passed the amendment in its incorrect form and the result was gibberish. The consequences, on the face of it, are that we have had an amendment passed in one form by the Lords and in another by the Commons in so far as the technical wording is concerned, although the substantive intention of both Houses was quite clear. This House became party to the error because we were not given time properly to scrutinise and consider the amendments. Hon. Members will recall that we were not notified until late on the evening of Tuesday 16th November that the Lords amendments would be before us for consideration the next day. It was not until 2.55 p.m. the next day that the amendments—129 of them—were available in print for our consideration.
The Government's proposals as to which amendments the House should agree or disagree appeared on the Order Paper as starred amendments. Moreover, these proceedings were subject to the guillotine and Lords Amendment No. 45 was never reached for discussion. Hence, the amendment was neither read in detail by any hon. Member nor was it debated, with the consequence that it was passed on the Government's recommendation without proper consideration. I therefore submit that the Government must face in full the responsibility for the difficulties in which we find ourselves.
This is not the end of the saga because I believe—and this relates to matters of procedure—that possibly the matter could have been cured earlier than now, after the Act has received the Royal Assent. The error came to my attention on 16th December, not because I am in the habit of reading Acts after they are passed—I am only too glad to see the back of them—but because I was concerned in making a commentary on the Act. That required me, because the Act was not

1061
then published, to compare the Bill with the amendments. When I reached the appropriate point in the Bill I discovered that Lords Amendment No. 45 was complete nonsense.
On 16th December I wrote to the Under-Secretary of State at the Department of the Environment, the hon. Member for Durham, North-West (Mr. Armstrong), who was the Minister in charge of the Act during its passage through this House, asking whether a correction could be made before publication of the Act. I also spoke to the hon. Member and expressed the view that if this could not be done for technical reasons, perhaps publication should be delayed until the matter had been referred back to both Houses for correction.
However, this course of action did not recommend itself to the Government. I subsequently received a letter from the Minister stating that it had been decided to publish without giving effect to the amendment either as passed by the Lords or as passed by the Commons because the two amendments did not agree with one another. The Minister suggested that he would write to local authorities requesting them to comply with the time limits envisaged by the amendments and expressing every confidence that the local authorities would act as though the time limits were incorporated in the Act.
With respect, I did not find that reply satisfactory since a ministerial request has no binding effect upon local authorities, and in any case there remained, as the Minister admitted in his letter to me, wide questions concerning the rectification of errors in Bills between the conclusion of proceedings in Parliament and their appearance as printed Acts.
I therefore referred to our "Bible"—"Erskine May"—to see whether I could discover the Government's authority for proceeding with the publication of the Act in a form containing words excluded by this House and omitting words required to be inserted by both Houses.
The relevant passage is on page 570 of the current edition and I draw hon. Members' attention to the following paragraph:
"Although a departure from the usage of Parliament, during the progress of a bill, will not vitiate a statute, informalities in the final agreement of both Houses have been treated
1062
as if they would affect its validity. No decision of a court of law upon this question has ever been obtained, but doubts have arisen there; and in two cases Parliament has thought it advisable to correct, by law, irregularities of this description. If a bill should receive the Royal Assent without the amendments made by one House having been communicated to the other and agreed to, serious doubts naturally arise concerning the effect of this omission; since the assent of the Queen, Lords, and Commons is essential to the validity of an Act, except where the provisions of the Parliament Acts 1911 and 1949 are enforced in relation thereto. It is necessary to consider whether the Royal Assent will cure all prior irregularities, in the same way as the passing of a bill in the Lords would preclude inquiry as to informalities in any previous stage; whether the endorsement on the bill, recording the assent of Queen, Lords, and Commons, is conclusive evidence of that fact; or, whether the Journals of either House should be permitted to contradict it. The following instances may be regarded as precedents where informalities have been noticed."
In fact, "Erskine May" goes on to refer to the Cotton Factories Regulation Bill 1829 which was passed by the Commons and agreed to by the Lords, but with an amendment passed only by that House. The Bill did not return to the Commons for their approval and received the Royal Assent. The amendment was subsequently agreed to by the Commons, but, in order to remove any doubt, an Act was passed to validate the original Act.
From the passage to which I have referred, it would seem that the 1976 Act is invalid and a nullity in law.
Mr. John Ellis: Rubbish.
Mr. Rossi: First, there is the statement in "Erskine May" that
"informalities in the final agreement of both Houses have been treated as if they would affect"
the validity of an Act. Clearly the wording of the Lords amendment and the Commons approval of it indicate a disagreement on what should be deleted from the Bill—whether it should be the words down to line 4 or to line 7.
Alternatively, it might be said, in the words of the paragraph, that an amendment passed by one House has not been communicated to the other if a different form of wording from that considered and passed by another place was presented to this House. On both counts, there are serious questions whether, according to "Erskine May", the Act is valid.
Mr. John Ellis: Rubbish.
Mr. Rossi: I have not relied solely on my own interpretation of "Erskine May", but have consulted the Public Bill Offices of the Lords and Commons and the Clerk of the Parliaments with whom the ultimate responsibility for publication rests. The hon. Member who keeps calling "Rubbish" from a sedentary position clearly does not understand the legal implications of this matter.
There is a difficult constitutional and procedural position in regard to this Act. The Clerk of the Parliaments was kind enough to reply to a letter which I sent to him in the recess and I have his agreement to my reading the material paragraphs to the House. He says:
"I agree with you that this is a serious matter and I enclose a paper which sets out the difficulties which confront the Clerk of the Parliaments whenever a mistake is discovered after Royal Assent. You will see that there is really no action that I can take to rectify the mistake which is not open to question and I am driven to the conclusion that the proper open and honest thing to do in all such cases is for the mistake to be put right by a confirming bill as, you rightly point out, Erskine May indicates.
Accordingly I have no objection whatsoever to your raising the matter in the House, indeed I would welcome your doing so."
I shall not read the memorandum attached to the letter because I appreciate that the House wishes to move to other business. However, I think that it would be in the interests of hon. Members for them to know the problems which confront the Clerk of Parliaments in this situation and the choices open to him, under which he could be questioned and subject to criticism. I shall therefore place the memorandum in the Library so that hon. Members may read it if they wish.
We are left, subject to any findings by a court of law to the contrary, with an Act which, in the light of existing precedents, is a nullity in law. The difficulties for private citizens, farmers and farm workers, are obvious. Has the law been changed or not? Are the occupants of tied cottages protected tenants or not? May they still be evicted under existing law?
The Government must clearly quickly introduce new legislation to validate the Act and to put it in a correct form.
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Another question to be resolved is how the House authorities are to proceed if a similar situation should arise again. Do they have the authority to make corrections in Bills beyond mere printing errors? If so, what limit is there on their power to make substantive alterations to a text which has, strictly speaking, not been approved by either or both Houses? It could give rise to the most dangerous precedents if we said that there was a blanket authority for the officials of either House to put into a Bill whatever they wished because they believed that the intention of Parliament was not clear.
Such problems were considered by the Renton Committee which produced a report in May 1975 on the preparation of legislation. The Committee recommended the establishment of a Joint Select Committee of both Houses to deal with errors in drafting. The Government have done nothing to implement those recommendations, which could have provided a solution to the dilemma created in the mind of the Clerk of the Parliaments in this instance.
I regret that this instance is not the only difficulty which I have discovered in my researches on this matter. I have discovered a similar difficulty with the Children Act 1975. A starred Government amendment was replaced on the Order Paper by another Government amendment. The second amendment was passed, but the first amendment was gummed into the House Bill and the Act received the Royal Assent with the wrong amendment included in it. On the basis of the precedents to which I have referred, it seems that the Children Act may be a nullity in law and that all actions taken under it have been illegal. There may be a need not only for a validating Act but for an Act of idemnity for those who have operated the legislation and its provisions in good faith.
I apologise to you, Mr. Speaker, and to the House for having detained hon. Members for so long, but I believe that I have raised a matter of considerable importance. I do not know how you can deal with the matter after there has been Royal Assent. Perhaps you will tell me that it is outside your power. However, I am grateful that the Leader of the House is here. He has heard what I have said and it lies within his power to put the matter right.
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): Further to that point of order, Mr. Speaker.
I accept that the hon. Member for Hornsey (Mr. Rossi) has raised a most important point of order. Certainly we should consider what action must be taken to put these matters right. The Government share the hon. Gentleman's concern that this amendment was not incorporated in the Act. This is a matter not for you, Mr. Speaker, or for the Government, but for the authorities in another place.
We are as anxious as the hon. Member for Hornsey that effect should be given to Parliament's intention as passed in both Houses. We are prepared to discuss through the usual channels the possibility of having a short amending Bill to achieve this result. I am sure that is the proper way to put this matter right. We shall proceed to deal with it as speedily as we can to meet the substantial argument put forward by the hon. Gentleman.
In the meantime, I think that it is proper for me to remind the House—the hon. Gentleman referred to this matter in his remarks—that the Department of the Environment has asked local housing authorities, in the guidance that the Department has given them on the Act, to observe as a matter of administrative practice the time limits which the amendment would have required. I appreciate that it is only by an amending Bill that we can rectify the matter fully.
Regarding the hon. Gentleman's remarks about the recommendations of the Renton Committee, which have not been debated—indeed, the Government are still considering their attitude on certain aspects of those proposals—we shall obviously have to discuss those matters in the House. Although the Committee touched on the matters raised by the hon. Gentleman, I hope that, as I have dealt with the substantial immediate point of order, the House will excuse me if I do not say anything further on the other matters. I think that I should probably be out of order on a point of order if I were to attempt to deal with them.
Several Hon. Membersrose——
Mr. Speaker: Order. I had notice from the hon. Member for Hornsey (Mr. Rossi)
1066
this morning that he was proposing to raise this point of order and, indeed, I had a very good idea of the substance of what he was going to say.
In view of what the Lord President said, perhaps it would help the House if I give my considered reply now and see where we go from there.
The hon. Member for Hornsey will see from "Erskine May", page 569—the hon. Gentleman quoted from page 570—that the task of preparing Acts for publication after the Royal Assent falls entirely upon the authorities in another place. References in that passage to the Public Bill Office and the Clerk of Public Bills have no relation whatever to the similarly designated office and officer in this House. For that reason, I rule that this is not a matter upon which I have power to take any action.
Mr. Skinner: Further to that point of order, Mr. Speaker. I think that you will agree that, notwithstanding the fact that you have no power in these matters, in a matter of this kind, where there has been a serious administrative muddle, it is necessary for us to take cognisance of the lessons which need to be learned from that administrative muddle.
Would it not be worth while recording the best possible answer to this problem and to recurring problems? Is it not a fact that we have spent countless unnecessary hours in this place, including the necessary time which will have to be spent on this new amendment, because we have a House of Lords which is not doing its job of inserting the commas, crossing the "t's" and dotting the "i's", but has set out with the sole purpose of trying to strangle the elected legislative assembly?
Sir David Renton: Further to that point of order, Mr. Speaker. I think that the Lord President of the Council would wish me to correct him. The right hon. Gentleman said that the report of the Committee on the preparation of legislation had not been debated in this House. In fact, it was quite fully debated for four or five hours fairly late one evening in October 1975 and was given a general welcome by both sides. A few weeks later it was also debated in another place even more fully and was given an even more enthusiastic welcome.

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If the Government had made more progress in asking Parliament to implement those recommendations, the difficulty which has arisen on this occasion would not have arisen, or at least there would be an easy way of rectifying it.
Mr. John Ellis: Further to that point of order, Mr. Speaker. The hon. Member for Hornsey (Mr. Rossi) in his submissions twice said that the Act was therefore invalid. The point which I should like to make for your consideration, Mr. Speaker, or for anybody else's consideration, is that we passed certain legislation after hours of well-thought-out debate.
Mr. Lawrence: You were not there.
Mr. Ellis: I was on the Committee. I resent cheap gibes when a Committee has been considering this matter. We spent many hours on this important legislation. The principles contained in the Bill which we debated, and which it was the will of the House should be incorporated, are in no way challenged.
If there has been an administrative error, it must be put right as speedily as possible. To use this point to challenge the whole concept of the legislation must, in all fairness, be wrong. I agree that we should put right an administrative wrong. I hope that the action that we take will be to put into effect legislation which gives security of tenure to farm workers.
Several Hon. Membersrose——
Mr. Speaker: Order. I do not think that the House wishes to go on with this discussion. We have had a clear statement that there will be an amending Bill, so there will be opportunity for discussion later.

BILLS PRESENTED

  LICENSING (AMENDMENT)
  Sir Bernard Braine, supported by Mr. A. J. Beith, Mr. Hugh Dykes, Mr. Ron Lewis, Mr. Patrick MacCormack, Mr. Frank Hooley, Mr. David Weitzman, Mr. Michael Neubert, Mr. Andrew Bowden,
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  Mr. Ivan Lawrence, and Mr. Nigel Spearing, presented a Bill to amend section 186 of the Licensing Act 1964: And the same was read the First time; and ordered to be read a Second time upon Friday 28th January and to be printed. [Bill 37.]

  LOTTERIES (AMENDMENT)
  Mr. R. Graham Page presented a Bill to amend the meaning of date in the Lotteries and Amusements Act 1976: And the same was read the First time; and ordered to be read a Second time upon Friday 28th January and to be printed. [Bill 38.]
  LOCAL GOVERNMENT FINANCE
  Mr. R. Graham Page presented a Bill to amend the law relating to and to make further provision for financing local government; and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time upon Friday 22nd April and to be printed. [Bill 39.]
  CORPORAL PUNISHMENT
  Mr. R. Graham Page presented a Bill to permit a sentence of corporal punishment upon a person convicted of an offence involving bodily harm to another or malicious damage to property; and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time upon Friday 29th April and to be printed. [Bill 40.]
  UNETHICAL EXPERIMENTS
  Mrs. Joyce Butler, supported by Mr. Christopher Price, Mr. Arthur Latham, and Mr. Douglas Jay, presented a Bill to protect patients and others from being subjected to medical experiments upon them without their consent; and to prohibit experiments in the case of certain other persons, and to provide for penalties; and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time upon Friday 18th February and to be printed. [Bill 41.]

  EUROPEAN COMMUNITIES (DEVELOPMENTS)
  4.27 p.m.
  The Minister of State, Foreign and Commonwealth Office (Dr. David Owen): I beg to move,
  That this House takes note of the Report on Developments in the European Communities, May-November 1976 (Command Paper No. 6695).
  The White Paper, Cmnd. 6695, published in December, covers developments in the European Community from May to November. It has been a period of considerable activity with achievements as well as setbacks. The most significant from a constitutional point of view was the signature on 20th September of the agreement on direct elections. A Select Committee has considered this matter, the Government are looking at the Committee's recommendations, and the Queen's Speech promised legislation.
  I do not intend superficially to cover all the various aspects of the White Paper or, indeed, to look into the future development of the European Community. As I have already told the House, my right hon. Friend will be making a wide-ranging speech in Luxembourg, and a copy of his speech will be available in the Vote Office. I intend to make a more detailed speech and to single out three sectors of major importance where, over the past six months, there has been some disagreement and which are likely to remain subjects of major concern in the Council of Ministers—namely, fishing policy, agricultural policy and energy policy.
  The common fisheries policy is rightly causing great concern in Britain. It will continue to do so, in my view, throughout 1977 and maybe beyond, for I see no quick or easy solution for resolving the deep national differences that exist on this subject.
  The common fisheries policy was agreed in 1970 on the same day as Britain's formal negotiations for entry began. It would have been far better for the Community of the Nine if this basic issue had been dealt with as part of the enlargement negotiations. It is a simple fact that it suits the interests of the original Six much better than those of the new members, particularly Britain and Ireland, and its existence was a
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  powerful factor in the Norwegian referendum decision to reject entry.
  Yet, despite this unfortunate history, the common fisheries policy is part of Community law and our Community obligations. The then Government accepted it in 1972, in full knowledge of its implications, at the time we joined. We felt in 1974 that it could not be renegotiated in isolation prior to a decision being taken about 200-mile limits, and Britain cannot now act as though it does not exist or can be torn up with impunity, as some recent comments seem to advocate. We have to seek its reform as intelligently, firmly and ably as we can, and this we are doing. It must be reformed in the spirit of achieving a Community solution.
  In some British criticism, there is a tendency to forget that the other eight countries also have legitimate interests and concerns which have to be squared, too. National posturing will not achieve anything. The overriding issue for the Community is to protect and conserve fish, for failure to do so will ensure that stocks are decimated and the future of the whole industry put at risk. Within this general priority, a Community fishing policy must have regard to the livelihood of those men and women in Community countries who over the years have developed fishing as the very basis of their coastal existence.
  The common fisheries policy contains provision for equal access by the boats of all member States, but we need to be clear about what it should entail. Taken literally, it involves an equality of treatment such as is imposed on no other Community activity. No other Community resource is subject to a régime of equal access in the way provided for fish. The Community does not require German coal or French farm land or our own North Sea oil and gas to be open territory for anyone in the Community. Though there are provisions in the Treaty of Accession which reserve areas between six and 12 miles around our coasts for our own fishermen, these derogations lapse at the end of 1982, and all Community fishermen would then be able to fish up to our shores unless the provisions were renewed.
  Furthermore, I do not think that anybody believes in absolute equality or freedom of access as the basis for a

  1071
  rational modern fisheries policy. The whole history of international fisheries relations over the past 20 years is the history of successive restrictions, dictated by force of circumstances and the imperatives of conservation, on the right of all comers to fish freely wherever they liked.
  The requirements of conservation, and rational economic and social development are the principles upon which a new Community fisheries policy should be based. Even since 1970 we have seen all over the world these principles applied with greater force as fears have grown about over-fishing. This is what lies behind the new dimension to fishing policy which the common fisheries policy must now reflect—namely, the extension of fishing limits to 200 miles.
  The special position of the coastal State must now be recognised within the common fisheries policy. The coastal State has not only a unique interest in the successful conservation and management of the fish stocks around its shores but it has geared a substantial part of its industry to fishing close to its own ports. This is reflected in ship size, design, manning and fishing practice. It is wrong for a coastal fishing community to have its own industry destroyed by large vessels, sometimes using industrial fishing methods, coming in from other parts of the Community. It causes problems enough when vessels come in from other regions of one's own country. Most countries have over the years adopted informal and formal agreements between their own fishing communities about over-fishing around their own coastline.
  A revised common fisheries policy must also take account of the fact that Britain is contributing over half of the stocks of fish within the area of sea covered by the extension of the 200-mile limit of the Community coastal States, and has furthermore had to suffer a major cut-back in its fishing in third country waters, particularly off Iceland.
  Britain and Ireland seek, as part of a revised common fisheries policy, the establishment of coastal bands around the coasts of all member States. We have made this clear in the Community, and in the discussions over interim arrangements we are not prepared for our position to be prejudiced on this point. We
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  need the belts to give us the fish. Coastal belts also offer a more certain system of stock management. We shall need quotas, too, and a proper system for recording and reporting catches. We cannot afford a system of quotas alone, which as history has shown in the NEAFC, depend essentially upon voluntary compliance.
  We believe that a quota system must involve licensing of ships for specific days in the fishing grounds and the systematic recording of catches. This would offer some prospect of better control, and we are prepared to co-operate fully in any such scheme. So it is not a question of coastal belts or quotas. We feel that both are necessary and will need to be backed up with a proper enforcement system.
  A Community conservation system must furthermore provide the minimum opportunity for the objective recommendations of the scientists to be evaded or ignored. Conservation regulations must not deal in "paper fish", must be capable of sensible enforcement and be designed so that they cannot be broken with impunity, and that means that they must allow for decisions to be taken swiftly when necessary.
  Our own conservation record is good, and we are determined that this should not put us at a disadvantage in relation to others who have been less conscientious. The effective control of third country fishing within our fisheries limits again means that we must have a conservation and enforcement policy which can be made to stick not just with our Community partners but with countries which may not have the same interest as the Community in fully respecting quota levels.
  Over the past six months, progress has been made to adapt the common fisheries policy to the new situation. All member countries have extended or will shortly extend their fisheries limits in the North Atlantic and North Sea. The Community has opened fisheries negotiations with a number of third countries, including Norway and the Faroes, which are particularly important to us. In the case of the Eastern European States, whose fishing was at a level well above that justified by reciprocity or which could

  1073
  be tolerated by the fish stocks, the Community has agreed a substantial reduction in some fishing, such as for mackerel off our coasts, over the next few months.
  Here, with the Community acting as one, we are more likely to achieve success than would Britain acting alone. As yet, sadly, the Community negotiations with Iceland have not achieved anything for Britain, and I do not believe that anyone in the Commission or the Community is in any doubt that no agreement with Iceland at the end of the month will pose very serious problems.
  Over the next few months we shall be working both in the Community and within the framework of the new Fishery Limits Act to forge agreements over both external and internal fishing regimes and, with the powers in the Fishery Limits Act, to bring about effective control of third country fishing in our waters. We are determined to make progress, but in a way that does not put our fishing industry at risk. We do not seek a national solution, because that will be only a recipe for conflict. We recognise the virtue of the Community showing a united front in the negotiations which lie ahead with the Soviet Union and others.
  Interim arrangements for the internal regime—to replace the one-month "standstill" agreed at the Council in December—are only a step towards a long-term Community regime. Negotiating a settled long-term Community fishing policy may take time, and it would be wrong to become prematurely committed to a scheme which may not work. We shall press ahead, trying to reach agreement as fast as possible. But we have to be certain that it will be fair to our fishermen, fair to the Community's fishermen, and ensure that we can all continue to rely on a fish as a basic food. That is the broad outline of our policy over the next few months.
  Mr. Douglas Jay: Is it still the Government's firm intention, as we have so often been assured, to insist on at least a 50-mile exclusive zone for the British fishing industry?
  Dr. Owen: That is our position, but we have entered into negotiations, as we have done patiently hitherto, wishing to hear other people's points of view. As I have argued, it is our view that one cannot protect fishing or conserve fish
  1074
  and carry out the necessary enforcement without a coastal belt regime. My right hon. Friend is an old and experienced negotiator in international negotiations, and he knows that if one enters into negotiations on the basis that one does not intend even to listen to the other person's argument and that one will not change one's view one jot, one will not secure agreement. That is not the position which we are trying to adopt.
  Mr. Jay: Would not my right hon. Friend also agree that it is not a good form of negotiation to give away one's requirements before the negotiation begins?
  Dr. Owen: We have certainly not given way at all. The last time that I addressed the House I was attacked for accepting a situation which I agreed was less than satisfactory—a short-term arrangement for one month—but that was purely and simply because I was not prepared to put my name and that of the Government to an interim regime which I thought would have prejudiced the future and been unsatisfactory.
  I think that we are in for long and difficult negotiations. It would be absurd to pretend that we shall come away with a satisfactory settlement in the next few months. What is at issue here is a long-term settled Community fishing policy—a matter of great seriousness. If we take steps and accept aspects of the regime at this stage without having actually seen the practical consequences of some of these things, we shall be storing up trouble for the future.
  That is not to say that we shall not have to accept things in the interim that are less than satisfactory. That is what we shall probably have to do. So long as it does not prejudice the long term and our right to introduce conservation measures on a non-discriminatory basis, we must enter these negotiations in a spirit of trying to forge an agreement in the Community.
  Mr. James Johnson: Does the Minister accept that one headache, which is causing intense anxiety among fishermen, particularly skippers, is that we are not actually negotiating for ourselves, that there is a third party? I understand how this has come about and we have faith in Mr. Gundelach, but it is a talking point and

  1075
  is bothering the fishing community that we are not speaking for ourselves.
  Dr. Owen: I agree with and can understand what my hon. Friend says. This is a new situation to some extent in which people have to accept that negotiations are being conducted on behalf of nine countries and not bilaterally. But, more than most, my hon. Friend has seen the consequences of pursuing a fishing policy on a purely bilateral basis. Whatever one may think of the history of the last year or so of negotiations with Iceland on a purely bilateral basis, they have not been strikingly successful.
  I know that there is a difficult problem with Iceland but there are considerable problems in negotiating a fishing reduction with other third party countries. A substantial reduction is now being sought by the Community. I have no hesitation in saying that I think that it will be far easier to achieve that substantial reduction of fishing if we are negotiating on behalf of nine countries with the full force and strength of the Common Market behind us.
  Mr. Bryan Gould: Would my right hon. Friend not agree that the Icelanders and the Norwegians, who are not encumbered with Common Market membership, have found it easier than we have to arrive at a satisfactory settlement?
  Dr. Owen: There are problems which they still have to settle. The Norwegians have a strong interest in reciprocity arrangements with the Community, so detailed negotiations are still going on. They have something to offer us; equally, we have something to offer them. As for the Icelanders, I think that there is a reciprocal arrangement with the Community which is worth while for them, both as regards fish but also as to the extent of their overall arrangements.
  However, I recognise the concern. I try to put the issues squarely before the House. I must give a warning against thinking that we shall reach a long-term agreement on fishing policy quickly. If we are to introduce a new system of quotas, for instance, we want to be certain that it will work and we want to
  1076
  see some of these quota figures for fish established historically by producing fish. We have already seen some considerable technical arguments about the level of quotas fixed by the Community. Doubts have been expressed on those, particularly by the Norwegians.
  Mr. Leslie Spriggs (St. Helens): There appears to have been a lack of consultation with those who know the industry and the various fishing grounds around our shores and the shores of other countries. Has the Minister of State negotiated with or consulted the fishermen, particularly the skippers, who have the necessary knowledge and expertise, before concluding any agreement with our Common Market partners?
  Dr. Owen: I can assure my hon. Friend that the Government have been in the closest possible contact with the industry. The Minister of Agriculture has had many discussions and has a close relationship with the industry. Because of his own constituency, my right hon. Friend the Foreign Secretary has a detailed knowledge of the fishing industry and has made sure that there are close contacts. My hon. Friend the Under-Secretary of State has had contacts also with the industry. I myself represent a constituency with a fairly sizeable interest in the fishing industry.
  I should now like to turn to the other questions. The second of these is agricultural policy.
  Over the period covered by the White Paper, a good deal of attention has focused on the level of the green pound and indeed on the whole green currency system. As this is a question which is likely to recur over the next few months, I thought it would be helpful if I devoted a little time to setting the issues briefly in their historical context and explaining the Government's views on them.
  If market rates of exchange were used for converting CAP support prices, expressed in units of account, into the currencies of member States, these support prices would float up and down as the value of currencies on the foreign exchange markets changed. That is clearly unsatisfactory, and to prevent it, fixed rates of exchange known as green rates were introduced for the conversion of common prices.

  1077
  Because the green rates differ from market rates, the real level of common support prices varies from member State to member State. It is therefore necessary to apply "monetary compensatory amounts" as import subsidies and export levies for depreciating currencies like ours, and as export subsidies and import levies for appreciating currencies in order to prevent agricultural products from being attracted to the countries with higher support prices. British consumers gain because we are large food importers through import subsidies and therefore lower prices because of the fall of sterling whereas German exports—German farmers—gain from export subsidies because of the increased value of the deutschemark.
  It should be stressed that Britain is gaining wholly legitimately from this aspect of the CAP. Britain entered the Community knowing that it would lose on the CAP in many areas. We did this with our eyes open but I find something bizarre to say the least in the attitude of those who argue that we should throw away this legitimate advantage either because of a misplaced sense of guilt, feeling that this is somehow unfair on other members of the Community, or because they have failed to appreciate how valuable as a counter-inflation measure this import subsidy is for a country like ours whose currency fell very rapidly.
  It is open to the Government to devalue the green pound and in October we were under strong pressure to do so. Quite rightly, we resisted. As my right hon. Friend the Minister of Agriculture, Fisheries and Food has argued with his colleagues in Brussels, the best thing for the Community would be the continuing improvement in sterling which would in itself reduce MCA expenditure. To a certain extent this has already begun to happen. Sterling reached its lowest rate against the unit of account on 28th October at 1·18. At this rate the application of MCAs would have given us a 47·5 per cent. import subsidy but in fact the level never rose above 45 per cent. Sterling since then has strengthened and is now fairly stable at about 1·25ua giving a current application of MCA at 38·5 per cent.
  In deciding on the right level for the green pound, the Government have naturally to take into account overally policy
  1078
  considerations. It would be tragic to prejudice our counter-inflation policy by an adjustment of the green pound which raised consumer prices in a way that affected wage claims and added to inflation. A steady or appreciating pound in turn helps to contain or reduce sterling MCAs. Premature devaluation of the green pound would be counter-productive both for the counter-inflation policy and for the value of sterling. This cannot be in the Community's interests, and it certainly is not in ours. At present therefore the Government conclude that the balance of interests comes down against any change in the rate.
  In taking this view, we do not however ignore the vital economic rôle that agriculture plays within the United Kingdom economy.
  Mr. Russell Johnston: The Minister referred to a misplaced sense of guilt. If the rôles of Britain and Germany were reversed and we were subsidising the Germans to the extent that they are now subsidising us, is he saying that the Government would regard that situation with complacency?
  Mr. Nigel Spearing: With a £2,000 million deficit, yes.
  Dr. Owen: When there is a national interest that can legitimately be pressed it is our responsibility to do so. I have a record of commitment to the European Community that I think cannot be questioned, but I do not see it as my job—both as a proponent and a strong advocate of Britain's full membership of the Community—to give up a national advantage which has been legitimately negotiated.
  There are many aspects of the common agricultural policy that I have to defend, but on the specific point raised by the hon. Gentleman, German farmers who export farm products to the rest of the Community do quite well because of the appreciation of the deutschemark. They gain as well through a different mechanism of MCAs.
  It is a question of swings and roundabouts. We lose on one thing and gain on another. Some of my hon. Friends are always taking time to expose that part on which we lose, but my view is that when we have a legitimate gain we should hold on to it.

  1079
  I was going on to explain that there are aspects of the green pound rate that if held on to could damage our agriculture. There is a balance of interest which I shall go on to describe. I think it will help the House if I put the other aspect as well.
  We cannot ignore the vital economic rôle that agriculture plays within the United Kingdom economy. It contributes directly to growth in the gross domestic product, provides employment and makes a crucial contribution to the balance of payments and the expansion projected in the Government's White Paper "Food From Our Own Resources" which will save imports worth about £750 million. This expansion programme continues to be the basis of our agricultural policy.
  I do not believe that there is contradiction here between resisting any change in the green pound and being concerned about the level of returns and profitability in British agriculture. As far as the farmer is concerned, devaluation of the green pound is only one of a large number of factors affecting his returns this year. For example, they will be affected by the level of CAP support prices generally, the level of market prices, and two further transitional steps this year.
  Equally, we must get the green pound and MCAs into perspective when looking at the CAP as a whole. Those who claim—as the hon. Gentleman seemed to imply—that we are unfairly burdening the Community budget overlook the fact that at present levels MCA expenditure is far less than the expenditure on milk. If the CAP really kept the balance of supply and demand right and did not allow for surpluses year in, year out, there might be more in the criticism of the green pound rate. I realise that we cannot prevent some surpluses, but the size of some of the surpluses and the increasing price of surplus commodities arc extremely hard to justify.
  Moreover, United Kingdom MCAs are not just subsidies for British consumers—a point which is often forgotten. They are paid to Community exporters and they help the Community generally by holding up the level of total Community consumption thereby reducing the cost of surplus disposal.
  1080
  A fall of consumption as a result of revaluation of the green pound could mean an increase in the Community's surpluses of some agricultural products, with consequent costs to FEOGA which could off-set to a significant extent any savings of MCAs. It is not in the interests of the Community as a whole to save money on one account merely to spend it on another. I am asking for a balance in this argument. It is a difficult question of judgment.
  Because of the chain effect of a devaluation of the green pound, it is closely linked with the whole question of agricultural support prices. If these prices can be restrained and reduced in real terms, this could achieve very significant savings for the Community budget as well as helping all countries to hold down inflation. It would moreover make it much easier for the United Kingdom to consider changing the green rate.
  Mr. J. Enoch Powell: Before the right hon. Gentleman leaves the subject of green currencies will he refer to the special and illogical case where there is a different green pound with a variety of currency for other purposes, as between the Irish Republic and the United Kingdom, and where, in addition, there is a land frontier over which practical control is not possible? I realise that this is very much a matter for Her Majesty's Government in the United Kingdom. Will the right hon. Gentleman undertake that the measures which have hitherto been used to redress the local effect of that practice in Northern Ireland will be continued and adjusted to future variations between the two green pound rates?
  Dr. Owen: I well understand the right hon. Gentleman's concern. This is a technical point, although it carries with it considerable social implications. It is a narrow point in the sense that it does not involve a large number of people and a large cost, but it is serious in its implications in Northern Ireland. My right hon. Friend the Secretary of State for Northern Ireland has constantly given this matter the closest attention. I think that the right hon. Gentleman is concerned about the future overall attitude to this aspect that will be taken by the Commission and the Community as a whole. We have explained the

  1081
  technical difficulties that arise for us and the need to take compensatory action in the way we have. I think it is fair to say that although there is criticism there is also some measure of understanding of the problem.
  Over the next few months when these problems are discussed in the Agriculture Council I hope that we shall get a better acceptance of the difficulties on the whole question of agricultural policy. In general, given that there are problems with other members of the Community, the EEC has shown a high level of understanding of our difficulties with the green rate, and I hope that we shall be able to resolve any difficulties that are peculiar to Northern Ireland.
  Another sector which is taking on an ever-increasing significance to which we attach great importance and where we have consistently sought to move the Community forward, is energy. This is a complex subject, involving vast investments and crucial national interests. We have only to look at the range of conflicting opinions and interests which exists within a single country when it tries to work out a coherent and balanced energy policy to see why those problems, when multiplied by nine, are bound to call for much patience and continuous effort. Yet occasionally events provide the sort of stimulus which can push groups and countries to see beyond their immediate interest to the benefits which can flow from acting together.
  The climactic events of 1973–74 should have provided—and belatedly did provide—such a stimulus, but it was not until the Rome European Council in December 1975 that Heads of Government provided the clear instruction that was needed to translate the Community's acknowledged need to reduce its dependence on imported energy to some kind of action.
  We welcomed the Commission's proposals made in January last year, which included one particular mechanism—the minimum safeguard price—which would work to protect and encourage investment in all forms of energy. It can be argued that we of all the Community countries least need common policies since the reduction of our dependence on imported energy is daily taking care of itself. Such an attitude would have been
  1082
  both shortsighted and lacking in Community spirit, and we took the first opportunity provided—at the meeting of the Energy Council in March—to state our view that the package prepared by the Commission was a good one. I deeply regret that not all our partners felt able to do the same.
  The MSP for oil deserves a word of explanation. This device is a safety net set well below the height from which oil prices might fall. If it is never triggered, we should be neither surprised nor dismayed. But the fact that it is there would provide a confidence-building mechanism, likely to be cost free, which would enable the Community to show the same sort of mutual support in energy which it seemed willing enough to show in other sectors before our accession.
  Because oil is the "balancing source" of fuel in which nations calculate their energy accounts, MSP would cover all sectors of energy—not just oil—and investors would know that, whatever happened to the world price of oil, their investments in the North Sea, in nuclear power, in coal wherever it was found, in renewable energy of any kind and in gas would not, within limits, be threatened by a sudden and unforeseeable collapse in the world price of oil.
  We attach importance to MSP. Seven of our EEC partners are committed to it in the International Energy Agency. The Community as a whole should in our view be capable of this fairly undemanding gesture of common interest. If our partners are worried that they are being asked to underwrite investments without any assurance that they will have access to the fruits of that investment, I am puzzled by their concern.
  We signed the treaties and we know and respect our obligations under them. We do not discriminate against our partners in the award of licences, contracts in the offshore industry or in any other way. If they are worried about access to North Sea oil, they have only to explain what their worries are and I feel confident that we can reassure them. But I would also remind them that the United Kingdom has made by far the greatest investment in energy within the Community—namely, 51 per cent. of the Community's investment in oil, 33 per cent. for coal, 26 per cent. for natural gas and 27 per cent. of the whole of

  1083
  the Community's energy investment. It does not seem unreasonable to look for Community underpinning for investments, which will go far towards reducing the dependence of the Community as a whole on imported energy.
  Clearly 1976 has not been all stagnation. Among other things, there has been useful work done on a more rational use of energy. The Energy Council at its last meeting in December took a first decision, which we certainly welcome, on measures to be adopted in the event of supply difficulties. But some degree of disappointment is natural when progress is slow in an area where our own approach, we believe, is positive and constructive.
  Our disappointment does not mean that we shall abandon our positive attitude. On the contrary: my right hon. Friend the Secretary of State for Energy has now taken over the presidency of the Energy Council and intends immediately to explore with his colleagues the best way forward. We realise that there are political and economic constraints which make energy a complex and controversial subject. It is precisely because of these difficulties and constraints that my right hon. Friend wishes to develop a proper and complete understanding of others' views in the hope that the next six months will produce some worthwhile progress in this vital sector.
  There are many other aspects of Community work with which I could have dealt today, but time is short and others will wish to speak. Members will wish to raise many detailed issues in the debate and my hon. Friend the Under-Secretary will seek to answer them when he replies.
  The presidency of the Council of Ministers over the next six months offers no golden key to the solution of the many difficult problems facing the Community, much less to those of particular concern to the United Kingdom. However, it offers us responsibilities, a great deal of work and a challenge that we shall do our best to meet.
  One of my personal hopes is that the period of the United Kingdom presidency will stimulate a greater interest and understanding of the Community within this country. The build-up to the referendum in June 1975 saw a massive
  1084
  campaign, some of it very slanted, concerning the pros and cons of British membership. It was perhaps inevitable that it should develop into a polarised and somewhat simplistic debate between the two sides.
  The development of the Community is the most complex and detailed political task that any of its nine countries in all their long history have ever attempted. We need, especially in Britain, a better understanding among public opinion at large about the real nature of the Community, of which we are now an indissoluble part.
  Mr. Spearing: It is just coming through.
  Dr. Owen: Some hon. Members may laugh and make that sort of comment. I have constantly stressed the complexities of the issues that are involved in every speech I have made on the Community in the House and outside during the 10 years that I have been a Member.
  The period of the United Kingdom chairmanship of the Council of Ministers will see a considerable number of meetings involving the Community and the Nine at all levels taking place in the United Kingdom. United Kingdom Ministers will be involved more closely than ever before in the workings of the Community, speaking for the Council both within Community institutions and in negotiations with third countries. I hope that this experience will bring an understanding of the Community in which the British people have freely and firmly decided that their future lies.
  5.4 p.m.
  Mr. John Davies (Knutsford): I think that the whole House welcomes the opportunity that is afforded by these debates to consider the general progress, or absence of it, that takes place in the Community institutions. We are grateful to the Government, who instituted the whole system of six-monthly reports and debates, for such occasions but it is a pity—the presence of so few Members today is a relevant commentary—that we should perforce be obliged to have the debate on an occasion when such a large number of those who are deeply involved in Community affairs are quite unable to be present. Their absence unfortunately emasculates the force of these debates. That is the result

  1085
  of the debate being taken at such a time. I hope that in future the Government will find means of ensuring on such occasions that there is a full turn-out of all those who take a deep interest in these matters.
  It seems that this is an opportunity as much to consider future strategy as to look at past performance. We have before us Cmnd. Paper No. 6695, which outlines past performance but perhaps it is a launching platform for discussing the future. On this occasion it is undoubted that our consideration of the future is much coloured by the peculiar coincidences that from 1st January the presidencies of the Council and of a new Commission will be held by Britain. Further, we should not forget a former colleague of ours in the EEC—namely, Mr. Basil de Ferranti, who is now President of the Economic and Social Committee. All those factors give a somewhat higher line to our consideration of these matters.
  I am sure that the Minister of State is correct in saying that there is no overwhelming national advantage in holding the presidencies. Indeed, there might at times appear to be some disadvantages. It appears that the period of presidency gives an opportunity to introduce something of a national flavour to the way in which the institutions are run. I remember that during the time that the Danish Minister was President of the Foreign Affairs Council it proved possible to improve considerably the handling of business, the production of agendas and related matters. I hope that during the course of our occupation of these appointments it will be possible for us to bring our own talents to bear on the expeditious handling of business and the endeavour to foreshorten some of the lengthy consideration that the Council gives to matters that often are not of a particularly contentious nature.
  It would be impossible to conceal the fact that the Opposition are far from content with the way in which the Government have performed over past years in relation to the Community. We have been disappointed on many occasions with the way in which they have handled matters. My intention, however, will not be to dwell on a whole series of criticisms. I shall try to offer some con-
  1086
  structive proposals for the future handling of our problems.
  The White Paper as it stands is inescapably a very bitty document. Perhaps that is the nature of the thing. It is largely an inconclusive document. That is the characteristic of a document that describes something which the Minister of State has characterised as a somewhat stagnant experience. I believe that the document speaks of that experience. Unfortunately, it can only reinforce the belief that the necessary drive has not been forthcoming either from the United Kingdom or from others to secure a more satisfactory out-turn. I do not ascribe all the blame for that to the United Kingdom. It is not my intention to do so, but I think that the United Kingdom has shown a lack of single-minded purpose. Such an approach would have driven things forward rather faster than has been the case.
  I shall not try to comment paragraph by paragraph on all that is contained within Cmnd. Paper No. 6695. I shall try to select various matters for particular mention, especially the three selected by the Minister of State. Before doing so I shall talk about a matter that is at the beginning of the White Paper and that appears to be of great importance—namely, political co-operation.
  If progress in other matters may have been disappointing, progress on political co-operation has been intensely so. All we have as a result of the work done to date are some vague generalisations appearing in the document about the outcome of various discussions. They seem to belie the capability of the Community to use its undoubted prestige and importance in world affairs to secure solutions to extremely difficult problems worldwide and to help its members to secure such solutions.
  I have in mind, for example, Cyprus. It seems inconceivable that the only comment that can be made in a White Paper is that
  "the Nine continue to support the United Nations Secretary General in his efforts to promote a peaceful solution in Cyprus."
  Surely a Community that has intimate relations with the three principal parties involved could have done more than merely intimate its support for the United

  1087
  Nations Secretary General. It has a considerable influence to bear and that influence has not been mobilised. I strongly press on the Government the need to try to use the political co-operation machinery to help in these solutions. After all, the Government have a responsibility in relation to Cyprus which many of us feel has not been exercised with the necessary effectiveness.
  I come to the question of Rhodesia. Again, there is a vague comment in the White Paper that
  "On 18 October the Foreign Ministers of the Nine issued a statement on Rhodesia welcoming Her Majesty's Government's convening of a conference",
  and so on. The interests of the Community are closely bound up with the future of southern Africa. It is not simply a question of giving a word of encouragement and help to a member country.
  Western Europe has a deep-seated interest in the preservation in southern Africa of responsible forms of government which recognise their enormous strategic importance to many other parts of the world, not least to the European Community. The Minister of State talked about our energy position. The strategic importance of the Cape route is more critical to other Western European countries than it is to Britain. I do not believe that they can consider their future with any equanimity if a hostile force were to be in charge in southern Africa.
  May I say in parenthesis that our own happy position in this regard can, to a large extent, be credited to the Conservative Government, who, despite a good deal of adverse comment then and subsequently, made it their first purpose to ensure that the potential riches of the North Sea were explored and brought into production. It is in some sense a bitter experience to note the almost window-dressing nature of the agreements entered into by the Government with the explorers and producers in the North Sea to maintain the claims they have made. I refer, for example, to the agreement with the Shell and Esso companies last week which, on the whole, smacks of nothing but window dressing.
  In addition, there is the extraordinary importance to us and to other Western European countries of the essential minerals of Southern Africa. It is not
  1088
  just a question of making broad and vague statements of support. The specific interests of the Community are involved in these issues and the purpose of the political co-operation machinery is to mobilise the force of the Community to help. We feel that it has been poorly mobilised and we therefore strongly urge the Government to use much more effectively the political co-operation machinery to help to solve some of these intractable problems.
  I need not mention the question of the Middle East because the situation is so well known to us all. Thank goodness, the situation seems more hopeful than it has seemed for some time and it appears that the climate is such that it might be possible, after all these years, to procure a settlement.
  I believe that the procedure set up under the so-called Davignon arrangements is inadequate to match the purpose and capacity of the Community.
  Mr. Spriggs: The right hon. Gentleman has said that the Cape route was more important to some of our Common Market partners than it was to us. If that is so, may I ask what part he played in Europe in this connection while he was in office?
  Mr. Davies: The political co-operation machinery is reserved for Foreign Ministers. I was not a Foreign Minister, so I was not the person to play a part. I gave every possible support to the then Foreign Secretary to try to achieve something from the arrangements, but this is a preserve of the Foreign Ministers of the Community.
  I repeat that more formal, organised and structured arrangements than the existing informal arrangements under the Davignon procedure are necessary if we are to make the political co-operation machinery effective. Therefore, I suggest to the Minister, in a purely constructive tone, that he and his right hon. Friend might give thought to what advice they could offer the Community about providing a more permanent, organised, administrative back-up to the political co-operation machinery than has been procured hitherto.
  I turn to the question of agriculture. It was clear from what the Minister said that his primary concern—and I understand it—was to try to ensure that the

  1089
  mechanism of the Community supported the drive towards the restraint of inflation which the Government have undertaken in recent years. However, we believe that the purposes which the Government have been serving are not necessarily in our long-term interests. Despite what the Minister has said, we do not think that the aims and objectives embodied in the White Paper "Food from Our Own Resources" have been evidenced by the policies pursued in the Community.
  It is not right, or even fair, to say that the green pound considerations are just one factor among many other factors which affect the agriculture industry. Of course, that is right. But it is the relationship between these factors which matters. The Minister is well aware of the immensely troubled situation through which the pig-meat industry is going clue entirely to adherence to the green pound situation. Therefore, it is not fair to talk in such a balanced way when the balances in certain parts of the industry are totally adverse.
  It is not right for the Government to compound what has always seemed to me one abuse of the common agricultural policy provisions—excessive milk production—with another, which is to climb on the bandwagon of the MCAs, which, I assure the Minister, were not conceived for the purpose of maintaining price equality within the framework of the CAP at any price. The MCAs were devised to provide for what were considered likely to be marginal differences flowing from the green rate of exchange, not to accommodate differences of about 40 per cent. or more, as has been the case recently.
  The utilisation of an abuse of a mechanism in this form in order to support the Government's policies on inflation has made it much more difficult to handle just as serious an abuse, namely, the use of the intervention mechanism by the dairy producers of the Community simply to enable dairy products to go directly into intervention without contemplating that they would ever reach the market. I draw the Minister's attention to the fact that today, despite all the agonising problems which have arisen in the last year on the subject of surplus dairy production, the stock of skimmed milk powder is at about the same level as it was at the worst time last year.
  1090
  The Government have not handled the problem properly. To have shown a more reasonable attitude to the purposes of the MCA system would have allowed a more reasonable attitude to be adopted to the regulation of the dairy products arrangements throughout the Community. Therefore, the policy which has been followed has not been conducive to the best arrangements within the framework of the CAP. For a long time we have expressed in the House objections to the preservation of anomalies in the CAP which we would all like to see removed. The Government's method of handling the whole of the representative rate system in the CAP has, unfortunately, preserved rather than dispelled some of the anomalies.
  Dr. Owen: I do not wish to disrupt the right hon. Gentleman's argument, but, accepting, which I do not, his argument that the MCA system is an anomaly—and certainly there are many other anomalies in the CAP—surely the worst way of getting the anomalies changed is to give up the one card which we have, which is the green card, before we have substantive discussions on some of the other major considerations of the CAP. I do not accept that we have not been able to get anything done about the other anomalies in the past six months or so. Even if we accept the right hon. Gentleman's argument as a basis for negotiation, the position is one of more substance than he has indicated.
  Mr. Davies: I think that it is a question of the posture of the Government. I think that they put themselves in a hopeless position, in trying to bring effectively home the dangers involved in the pure abuse of the intervention system by others, by attaching themselves to a pure abuse of the currency system of the United Kingdom. I would add to that the fact that the effect is now specifically to damage the Government's own purpose as explained in the White Paper on the agricultural industry. The Minister of State spoke of an economy of £750 million in the import programme, but how little we have advanced to that objective since the publication of the White Paper. Many of my right hon. and hon. Friends feel, indeed, that we have specifically moved backwards from it. It is a most serious problem.

  1091
  I turn now to the question of fisheries, with which the Minister dealt at some length. I was conscious of his feeling when he made his statement that my own reaction was provocative. I know him to be a reasonable and sincere supporter of the objectives in this matter, and I re-examined the whole question very carefully to see whether I was wrong in being as sharp as I felt at the time. But I do not withdraw anything.
  Looking back, I do not welcome any more than he does the fact that the Community saw fit in 1970 to enter into an agreement which just ante-dated our application for membership, but when we were negotiating in 1971–72, the circumstances within the fishing industry which apply now—such as the whole question of a 200-mile exclusive zone—were hardly even considered. The problems of the fisheries were considered very much within the framework of the inshore areas.
  I do not really believe that the provisions of Articles 100 to 103 of the Treaty of Accession were anything but a reasonable approach to the problems of fisheries, given that, not with our will, the common fisheries policy had been entered into by the Six. They provided just the things that the right hon. Gentleman has talked about—for a move by the Community into a proper conservation policy, and for derogation from the provisions of the fisheries policy over a period of 1982, provided that, before then, we could make a case and, if it were judged correct, for that derogation to be prolonged or amended. In the circumstances, I do not think that the kind of provisions embodied in the Treaty were either negligent or in any way inadmissible in the situation we were then in.
  One must look at what happened afterwards. Subsequently, and since this Government came to power, there has been a rapid move to the concept of much larger exclusive zones, and there has also been the whole question of the Law of the Sea Conference itself. We were all disappointed by the results of that conference in that the move generally to a 200-mile limit is being done individually as pressure has increased for such action.
  I do not think that the right hon. Gentleman's argument that in 1975 it was not sufficiently clear what the situation
  1092
  would be to justify incorporating the fisheries question in the re-negotiations is very convincing. Rather it seems to have been the case that the Government were extraordinarily blind to the fisheries question as well as to the fact that the whole of the worldwide concept of the problem was advancing rapidly. I think that their reaction then was both tardy and inadequate, giving rise to the circumstances we saw in the latter months of 1976, when, in an extraordinarily hurried way, this major and complex problem was endeavoured to be regulated largely with partners in Europe who were not brought to the degree of urgency of mind that they should have been and that we were in ourselves. The result was a hurried scramble and a whole series of rather inexpert and ineffective arrangements.
  I believe that the impression that the Government have given in this matter is one of unpreparedness and extemporisation. That is also evident in the wholly provisional arrangements entered into in what one might call a crisis in early 1977. Now the right hon. Gentleman speaks with a major degree of uncertainty about what form this provisional interim agreement will have to be modified into in the next month or two. He is right in his belief that we shall not settle the problem in the next few weeks.
  Our concern is that the impression that the Government have given is one of dilatoriness to a point when we find ourselves confronted with a lot of crisis measures which do not seem to reflect the reality of the problem. We do not expect the right hon. Gentleman today to outline precisely his negotiating procedure with the Community—we know how difficult that would be—but we think that he needs to give us a much greater degree of reassurance that the Government have taken these issues properly on board and will really struggle for an adequate exclusive zone which allows both the issues of conservation and the issues of our own industry to be fully respected.
  Another question dealt with by the right hon. Gentleman was energy. Here again I was not wholly content with his explanation. He said that the Government had sought to move the Community forward. I do not think that that is the impression that the Government have

  1093
  managed to give. Indeed, they have managed to give the impression that, having got themselves hooked on a prestige issue of their own making at the time of the ministerial North-South dialogue, they felt obliged to continue to attach themselves to it in spite of good reasons to the contrary.
  The right hon. Gentleman made a point of the minimum selling price concept. Indeed, he said that it was likely to be cost-free, which seems to me to be another way of saying that it is absolutely useless. In present circumstances it is absolutely useless and should not have been used as a pretext by which we have held up progress towards an organised and effective energy policy in the Community in the last six months
  or so.
  The issue is not minimum price. Let me assure the right hon. Gentleman that the floor price of oil is not the cogent issue. The cogent issue within the Community and more widely in the question of energy is that of the overwhelming demand for investment. It is an immense problem. It can be quantified if one looks at even the rather restrained estimates of investment in energy in the Community as a whole over the next decade, because we are then talking about 200 billion or more units of account in the energy industries at 1974 values. That is the size of investment that the Community has to contemplate.
  This investment is, of course, very heavily weighted on the electricity generating and transmission side. The second great priority is in hydrocarbon development, but the first priority is generation and transmission, which hits us as much as the rest of the Community. It will demand a quarter of the total industrial investment in the Community in the next decade.
  This is a very great problem. It occurs at a time when the natural apparatus of the industries concerned to finance themselves has greatly diminished. The traditional pattern of the hydrocarbon industry worldwide for many years lay in financing 90 per cent. of its own investment from its own retentions. The present position is that marginally less than 70 per cent. of operations in the Community can be financed from its own retentions.
  1094
  The electricity industry is in an even less happy position. The ability of the electricity industry to finance its own investment amounts to a figure of 30 per cent. within the Community. The rest of the operations have to be financed externally. This is a key problem in the Community and we must devise methods to tackle the matter energetically. The money cannot all be procured by external borrowing on the financial markets. The size of figures involved can be generated only by industry working to profit and to high retentions. This issue must be subjected to the most intense consideration by the Community in the coming period. It is excessively unwise to become involved with minimum selling price and all it encompasses.
  I turn to the subject of external trade, which is of great importance. I note the hope expressed in the White Paper that the Tokyo round will be concluded by the end of 1977. I doubt whether that is true, but one can only hope.
  The key issue involves the safeguarding arrangements. In the way matters have developed in the last decade we have come to realise that Article 19 of GATT as originally envisaged does not provide safeguards for countries such as the United Kingdom and others in the West against the dangers of dumped imports. We are all conscious of the difficult negotiations now being conducted by the Community with Japan on certain topics. Two of the most difficult areas of negotiation at present relate to textiles and shipbuilding.
  In regard to textiles the Multi-Fibre Arrangement within the framework of worldwide trade agreements contains an essential flaw. It assumes that the developed countries can accept a greater degree of imports on a regular basis irrespective of movements in the market. That is a fundamental error in approach. When markets are in grave recession, it is not possible to accept automatic increases in the extent of import trade. This must be handled by an orderly re-arrangement both of the Multi-Fibre Arrangement and of GATT.
  I have a word of criticism for the Government on the subject of shipbuilding. I remember as long ago as July 1975 raising this matter with the Under-Secretary of State for Industry. I put to the Minister the distressing state of

  1095
  the industry, but on that occasion he virtually laughed off the whole matter. The reply I then received took no account of the serious issues involved. Therefore, I now ask the Minister of State urgently to pursue the problems involved.
  The Opposition are profoundly concerned about the Government's attitude to the subject of direct elections. The Government have declared themselves firmly on the subject and have made clear that they propose to introduce legislation early in the Session. But when will that be? By the terms of the agreement of 20th September, the failure of the Government to bring forward legislation in good time may well vitiate the total system of direct elections throughout the Community. I can think of no other matter that will do greater damage to the Government's posture in the Community. Lack of action on this score will cause tremendous disappointment in many countries. I enjoin the Minister to use all his endeavours to prevent this matter going by default.
  Mr. Hugh Dykes: Will not my right hon. Friend go further and say that the hint of the prospect given in today's Business Statement—namely, that because of the heavy legislative programme doubt may be cast on the introduction of a Bill to bring in direct elections—would be quite intolerable to the Opposition?
  Mr. Davies: Such a concept would be disastrous to our position in the Community. My hon. Friend will know that the decision reached by the French constitutional council at the end of December further underlines the need for us not to be lacking in effort in this regard.
  Mr. Neil Marten: Since my right hon. Friend is making his contribution from the Opposition Front Bench, I should like to put one important point to him. Since clearly direct elections will be very expensive, will he, on behalf of the Conservative Party, of which he and I are members, give an assurance that, as we refused money from the Government following the Houghton Committe proposals, we shall not now agree to take any State money—indeed, money from any State in the Community
  1096
  or indeed from anywhere else—for the purpose of forwarding direct elections? In other words, if we fight at all, we shall fight on our own.
  Mr. Davies: I assure my hon. Friend, whose sincerity I respect, that if we can so arrange the system that these matters are dealt with in time, the funds to fight these elections will be available.
  What I have said in these remarks has been intended to be helpful and creative. Since so many of the people who will chair Council meetings in the next six months will be people who have declared their total opposition to the Community as a concept, it will be even more necessary for the Government to use all their power to show that they mean to stand by their commitment to Europe. They must show that they mean to pursue the policies in which Europe is engaged to finality and to success.
  5.38 p.m.
  Mr. Bryan Gould: A few days ago we celebrated, if that is the right word, four years of Common Market membership. At the time of this anniversary it can only be said that our perennial economic crisis seems worse than ever.
  We all remember the remarkable unanimity at the time of the Common Market debates on the subject of our economic future following Common Market membership. We were told almost ad nauseam that our economic well being depended on our accession to the Community. However, nobody who then took the view that membership was the key to our economic survival now breathes a word about the impact of Common Market membership in terms of our economic difficulties. It is almost as though that aspect is regarded as unimportant.
  Those weighty organs of opinion which proclaimed the enormous advantages of Common Market membership are now strangely silent. The irony is that the nearest thing we have had to an admission that things have not gone according to plan was made perhaps unwittingly by the right hon. Member for Sidcup (Mr. Heath), who led us down the road signposted "Common Market membership", and tells us when we are there that we have reached the end of the road.

  1097
  There were those who warned that EEC membership might be an unequal bargain for us, that it was hard to imagine any arrangement more inimical to our interests. When those few muffled voices were heard—no doubt muffled by wads of pound notes and acres of news print—how easily dismissed they were as extremists by that self-defining establishment that simply labels as extremist any view not in accordance with its own.
  Even we hardly dared forecast the economic disaster that has befallen us. Even we did not imagine that our trade deficit would be quite so horrific, or that the impact and damage to our economy as a whole and to our currency, investment and employment, would be quite so severe. One useful example of how far reality of Common Market membership has outstripped even pessimistic predictions is to be found in a very good speech made in Cardiff in 1971 by my right hon. Friend the Prime Minister. At that time he was an anti-Marketeer. He addressed himself to the view advanced by pro-Marketeers that Common Market membership would mean an increase in our exports of £300 million.
  My right hon. Friend said "Ah, but that must be offset by the penetration of our own market by Common Market imports and also by the loss of our markets in the Commonwealth and EFTA." The Prime Minister said that far from having a £300 million surplus the surplus might well only be £50 million. That was the forecast given in 1971 by a self-confessed anti-Marketeer at that time. That modest prediction is absolutely dwarfed by the reality of the £2,300 million deficit last year.
  There are those who play around with these statistics and say that other aspects of our trading deficit have increased by a greater proportion and so on, almost as though these are figures which mean very little and can be magicked away, or that they do not mean the draining away of the industrial life blood of this country.
  By coincidence we happen to have had a report from the CBI in the past few days which called for increased production in exports of £2,500 million. It says that that would mean an additional 400,000 jobs. I believe that is an underestimate, but at least it gives us some idea of the dimension of the loss of investment and employment that we have
  1098
  suffered as a result of the trade deficit. We have suffered the deficit largely because of the distortion in our trade pattern. We pay more for our food—that is now quite incontestable. It can no longer be concealed even by the most fervent pro-Marketeer.
  There is a very good summary in an excellent paper produced by the TUC with regard to the CAP which shows that virtually all major food stuffs are now more expensive within the Common Market than outside. Certainly it is overwhelmingly true of dairy products; it is very much true of meat products; and it is even now true of grain products as well.
  There is always the ludicrous argument that the green pound is subsidising our food imports. The frequency with which that canard appears shows how ill-served we are by the Press on this sort of issue. By comparison with the increased prices that we have had to pay and the increased prices that we shall have to pay as we proceed through the transitional phase and as further price increases are agreed in Brussels, the subsidy that we receive from the green pound is rather in the nature of a 2p-off offer which no self-respecting housewife would fall for, and nor should we.
  There are those who say that we ought to maintain the pristine purity of our Common Market faith and that in that interest we should suspend all critical judgment. Sir Henry Plumb, the President of the NFU, seems to be one of those people. He says that those who criticise the CAP must be disregarded for the very good reason that they do not like the CAP and actually want to reform it. Sir Henry Plumb seems to have this curious idea that simply by labelling people, one somehow discredits their motives and invalidates their views.
  This very morning we had Press reports that the Dairy Trade Federation was urging that we should stop further imports of New Zealand butter and cheese. Presumably what it wants is a situation where, like beef, we are simply forbidden to import cheap products from abroad outside the Common Market.
  Never mind that New Zealand produces at less than half the price. Never mind that as prices have moved up in Common Market terms so consumption has

  1099
  reduced. Never mind that this self-same increase in price has meant that Common Market countries have increased their exports to us from 35 per cent. of our imports in 1971 to 74 per cent. in 1975. Never mind that EEC levies have trebled the cost of New Zealand butter to £1,020 per ton of which the New Zealand producer gets only half.
  Our trade deficit is not just a matter of higher payments for food. It is also accounted for by a staggering deficit on manufactured goods. The two items are related because higher food prices strip us of our one competitive advantage. They put up our industrial costs and reduce our competitiveness. These increased costs again go some way to explaining the staggering deficit on trade in manufactures with Germany of £930 million last year. The Department of Employment estimates that that represents 200,000 jobs in British manufacturing industry.
  It is also worth making the point that the deficit which the EEC as a whole has suffered in its trade with Japan represents just 1 per cent. of the EEC total import bill. Yet that is thought to be sufficient justification for asking the Japanese voluntarily to restrict their imports to the EEC. Our deficit with the EEC, as a proportion of our total import bill, is 7 per cent.—proportionately seven times greater. Yet we are expected to accept that without protest and some people would say that we should not even notice it.
  This has all happened even though we have had a forced devaluation of our currency of enormous proportions. How many of those optimists warned us that this would be necessary? We have had to devalue in order to maintain the competitiveness of our manufactures and even with that staggering deflation we have not succeeded in doing that. Our export prices for manufactures are less competitive now than they were in 1973, and, as opposed to most of our Common Market competitors, less competitive than in 1974 and 1975. Yet that very devaluation, which had been forced on us by industrial free trade, has at the same time made the price of the CAP an even more crippling one.
  It is argued that only because of the fortuitous and humiliating green pound
  1100
  we have so far not suffered as much damage as we might have done. Let us have no illusions that the CAP is now so expensive, and so damaging to our interests, that we simply cannot afford it. If we were to allow prices to rise, as would be required by a devaluation of the green pound and by the completion of the transitional phase and all the expense of a further round of price increases, that would virtually bankrupt this country and certainly impoverish our people. The extraordinary thing about the humiliating and terrifying trap in which we find ourselves is that we continue to enmesh ourselves further with indifference, complacency and sometimes even a fair simulation of enjoyment.
  The Foreign Secretary, writing in the Socialist Commentary, said that the economic effects of Common Market membership have been neutral. That was despite all the facts. By far the most fatuous example that I have recently seen of that sort of self-deception was a report in the Evening Standard on Wednesday. It contained an article trying to explain why we should not be too worried about the high level of car imports and reported the view that French, German and Italian car imports should not be counted as imports at all because we were all in the Common Market together. What a nice idea!
  These imports put people out of work, close factories, reduce investment, unbalance our trade, slash our standard of living, devalue our currency and reduce us to the status of an international beggar. But these minor considerations must be disregarded and should not be allowed to disturb the warm glow of virtue and self-righteousness which so many people enjoy at the thought that at last we are members of the Common Market.
  It is time that we faced the facts. In my view, our failure and unwillingness to do that are our greatest national failing at present. It is time that we recognised that the great British Establishment—all those moderate men from the political parties, The Times leader writers, the captains of industry, the leading academics and civil servants who all persuaded the British people that it was important that we should join the

  1101
  Common Market and who all congratulated each other on how right they were—were wrong.
  The fact is that that great moderate British majority, on this issue as on others in the past, has been fundamentally, resoundingly and immoderately wrong. All those who did not bother to do their own thinking because they were confident that so many eminent people could not possibly be wrong, who did not bother to do their own sums and who did not look at the small print but simply felt in their bones that it was right to join the Common Market, should recognise that bones are not what we were provided to think with and that what we have joined is not some marvellous, idealistic, brave new world but a world of national cut-throat competition in which we have for too long been content to give up our best cards as part of the continuing price of joining the game.
  The next six months during the term of our presidency will be crucial. We must at least set about the task of repairing the damage that we have suffered. I think that there are welcome signs that attitudes are changing. I think especially of the rôle played by my right hon. Friend the Minister of Agriculture, Fisheries and Food. But even amongst the media there are the first glimmerings of comprehension that perhaps our economic problems have something to do with this much-vaunted membership of the Common Market.
  We must now appreciate that protestations that we are good Europeans will not in themselves protect our interests and that they can be protected only if we pursue them ourselves with resolution and determination. We must judge every proposal emanating from Brussels not according to whether it advances or retards some personal vision of the future of Europe, but according to how it affects the interests of those whom we are elected to represent.
  5.53 p.m.
  Mr. Neil Marten: We have just heard a very powerful speech from the hon. Member for Southampton, Test (Mr. Gould), and I disagree with practically no word of what he said. In a way, I propose to follow in much the same vein but also to try to look ahead to see how the situation can be improved.
  1102
  It might be as well at the outset if I place on record that the total number of Back Benchers in the Chamber at the moment is nine, which is not really a great credit to the subject that we are debating.
  It may be thought by some right hon. and hon. Members who have heard me speak before on this subject that I am biased about the Community. [Interruption.] I much enjoy the shouts of dissent from my colleagues. I am glad that they do not think I am biased about it.
  Mr. John Davies: My hon. Friend is biased and prejudiced.
  Mr. Marten: In that case, I shall take not my own views on the Community but those of others who are very pro-Market, who have lived in it and with it, and, to satisfy my right hon. Friend that it is not my own views that I am expressing let me express one or two of those other views in order to put matters in a fair, objective and unbiased perspective.
  Before anyone suggests that we should be worse off outside the Community, may I remind my right hon. and hon. Friends that my right hon. Friend the Member for Sidcup (Mr. Heath) put his signature to our party's manifesto in 1970 in which he said that we
  "can negotiate with the EEC … confident in the knowledge that we can stand on our own if the price is too high."
  The price is already too high, as the hon. Member for Test pointed out. Therefore, I turn to the first part of that sentence, and I am confident in the knowledge that we can stand on our own if we are not in the Community any longer.
  But, for the critics, I call in aid first the President-in-office of the Council of Ministers from July to December. He has been more connected with the Community over the years than most people. In his opening speech he said:
  "the motto 'completion, enlargement and strengthening' has been replaced by the motto 'stagnation, decline and illusion' … The Community apparatus … seems to he sterile and ineffectual. … These signs of disintegration are produced day by day … The realities which at one time were to have formed the basis for our European solidarity now seem to be the cause of differences, of our growing apart and the parting of our ways … the Community structure has reached an

  1103
  advanced stage of erosion, and one may well wonder how long it will be before the European Treaties and everything that has been achieved on the basis of them will simply be a valuable historical curiosity … the Community is suffering from a political anaemia clear for all to see."
  So, although my right hon. Friend the Member for Knutsford (Mr. Davies) may think that I am sometimes biased, all I say is that I agree with that great expert on the situation in the Community.
  Then I turn to experts in this country. I have before me the publication called "Facts". It is published by the European Movement. Its view of the Community is as follows:
  "Talk of economic and monetary union … is little more than a sick joke … no progress to reform the Common Agricultural Policy has yet been made. Neither do we appear to have learnt the lesson of the 1973 oil crisis, and still lack any coherent common energy policy. The Community has no common industrial or transport policies, whilst a common foreign policy, still outside Community competence, is little more than a dream … the Community has ground to a halt."
  Those are the views of British Marketeers.
  The hon. Member for Test categorised a number of people who were in favour of the Common Market, including The Times. I notice that on 4th January, in an article entitled "Brussels backstage", Mr. Michael Hornsby wrote under the heading "Bout of depression":
  "Small wonder then, that last month's summit meeting in The Hague should have ended on a note of helplessness and scepticism about the EEC's ability to provide any constructive, collective answers to the difficulties besetting its members."
  So we have the great authority of the correspondent of The Times.
  Finally, I quote about the Council of the European Council and the shambles in which that operates. Speaking in the European Assembly, my hon. Friend the Member for Saffron Walden (Sir P. Kirk) said:
  "We may have said harsh things about the Council of Ministers before, but we would much rather have them than a European Council which not only does nothing, but prevents anybody else from doing anything too."
  That is the view of the Leader of the Conservative delegation to the Assembly about the European Council—the so-called summit meeting. Without giving
  1104
  my own impressions of the Common Market, I think that I have produced enough evidence to show that it is not exactly in the best of health.
  But one touching little incident happened in the Scrutiny Committee just before Christmas. We met on the Wednesday before Christmas and had a long list of documents that we had to consider. Suddenly there was whisked before us an additional document called "Trichinae in pigmeat imported from third countries". When we inquired what that word meant, we discovered that it meant ringworm. We asked why ringworm should be rushed in front of us like this when we had been told previously that there was no hurry for it as the instrument would not be coming in until later in 1977. A brief from our adviser said:
  "This was explained to the Ministry of Agriculture, Fisheries and Food when it telephoned last week to inquire when the Committee were likely to consider the instrument. When asked why a matter which the Commission had had under study since 1972 had suddenly become much more urgent than had been forecast, the Ministry of Agriculture explanation was that the Dutch, who import a lot of pigmeat from outside the Community, 'wanted to get something out of their 6-months Presidency'."
  Weeping considerable tears, the Scrutiny Committee, after deep thought, said that Christmas was coming and pigmeat and ringworm were important, so in order that the Dutch could get something out of their six months' presidency this regulation should go through. So we let it through. I mention this because it illustrates the pathetic state of the six months of presidency of the Community by the Dutch.
  I cannot see how or why there should be any improvement in the state of affairs in the Common Market. Is there any reason why it should not get worse? The Community has a tragic history in the past year in the way in which it has gone downhill.
  There are some people, including the past President, Mr. van der Stoel, who believe that all the problems will be solved by direct elections to the European Parliament. I believe that people who think like that include a number of my right hon. and hon. Friends. They really believe that direct elections will make some difference. I do not agree. I think that they are merely clinging to direct

  1105
  elections like someone clings to a raft to save himself from drowning when he is in very rough seas. That is what direct elections are all about.
  If one looks at it, one sees that, despite all the efforts of my colleagues who attend the European Parliament from time to time, it is an ineffective Assembly which has no power. It is a powerless body. If it is directly elected, will this increase its powers? If so, what powers will it have? If it is to have legislative powers—the Tindemans Report and the summit communique of 1974 referred to an increase in legislative powers—surely this Westminster Parliament will become inferior and the European Parliament will be superior. I do not think that that is at all acceptable to the people of this country, and it is certainly not acceptable to the French people. My right hon. Friend the Member for Knutsford referred to the judgment of the French constitutional council which made this position quite clear when it put out a warning that any move towards a federal Europe, or a loss of power by the French Parliament, would be opposed. Exactly the same would happen in this country. I know that my right hon. and hon. Friends on the Front Bench would oppose any move towards a federal Europe.
  If the European Parliament is to have no extra powers—and this is the soft soap which is sold to us—why send 81 highly-paid people, complete with their researchers and secretaries, to sit on what is a toothless and powerless Assembly? Then there is the cost of it—the salaries, expenses and so forth. My concern is that my own party, which is so keen on direct elections, will spend a lot of money out of its hard-collected funds on direct elections because we rejected the idea of any public money being allocated for political activities as recommended by the Houghton Committee. Public money in this case includes money from the EEC, to which we have already contributed. Therefore, unless we as a party intend to operate double standards, we must accept that there will be no acceptance of any public money from the Community for direct elections if they ever come about.
  I want now to look ahead. The problems of fishing have been mentioned, and I shall not go through that again. On the common agricultural policy I will make some comment, because both Front
  1106
  Benches have talked about reforming the CAP. In fact, nothing substantial has ben achieved at all in two or three years. The Prime Minister, in answering questions put by my right hon. Friend the Member for Down, South (Mr. Powell), said something to the effect that the CAP was the price we had to pay to get into the Common Market. Of course, my party said that once we got into the Common Market we could ensure that the CAP was changed. But the fact is that there have been only very insignificant, if any, worthwhile changes made. I asked the Prime Minister about this myself, and he told me that the difficulty was that there were so many vested interests that it was very hard to get any worthwhile change. He is quite right, and this is why we have the CAP as it stands. That is why I commend the Government for using this card of the green pound in order to get a change in the CAP.
  The Financial Times in its second leading article today referred to the "grotesque defects" in the CAP, and it is my view, which I have expressed inside and outside this House, that the CAP is an absurd system. There is nothing to justify butter, which costs 45p a pound at present, going up to 72p a pound at the end of this year, except the system. There is no reason why it should go up except that this is the CAP system.
  Skimmed milk is another example. We have had an awful mountain of skimmed milk, which the Intervention Board of the Common Market buys in at over £500 a tonne in this country and sells back to the farmers at £100 a tonne. This is an astonishing system. It is a system which builds up a surplus of this and that—of wine, butter and skimmed milk—and then sells it at cut prices to people outside the Common Market. If we were outside, we could buy all these surpluses cheaper than we can buy them inside. That demolishes the argument that by being in the Common Market we have security of supplies of food. If we were outside, the Common Market would be very willing to sell to us. The argument that the surpluses are there for security of supplies does not stand up to scrutiny.
  The President of the National Farmers' Union, Sir Henry Plumb, said on 3rd January at an Oxford farmers' meeting that any attempt to scuttle the CAP

  1107
  would signal the break-up of the European Community. He said that those who attacked the CAP were well aware of the fact that without the CAP the EEC could not survive. Sir Henry added:
  "Make no mistake that the end of the CAP will certainly mean the break-up of the Community."
  Does the Community really hang on a system which is as crazy as the CAP? It is a pathetic system and the sooner it is changed into something else the better.
  Now is the time to consider the future, because clearly we cannot go on like this. The sooner the Common Market, its members and supporters recognise that the Community still consists of nine independent sovereign countries, the better. There will always be an attempt by people to move the Common Market into a federal State, to make it one unitary State. But within the Common Market there are certainly two countries which would always veto that move. One of them, I am proud to say, is my own country, and the second is my second country, France. Neither of those countries would accept any move toward a federal State.
  We must, therefore, recognise that it will not come about, and, recognising that, we must accept that the Common Market will never make very much progress. The only way it could ever work would be as a federal State, and that it will never become. We must think, therefore, of how the Common Market will develop, because it cannot go on as it is. It must aim at achieving maximum co-operation with all countries, particularly in Europe—and I include Scandinavia in that—and even with countries outside Europe.
  Its trading policy should move much more towards a free trade area concept rather than the concept of a closed circle sitting behind a tariff wall. We should stop the Common Market's supranational law-making machinery making farcical laws which only bring it into disrespect when it seeks to harmonise water, tachographs, honey and a list of much more peculiar items than that.
  A very good example of what I mean is the attempt by the EEC to have a passport union. It would mean that all our passports from, I believe, 1978 would
  1108
  have "EEC" stamped on the front of them. I hope the Government realise that to put those letters on the front of all passports will be extremely offensive to the 8 million people who voted "No" in the referendum and who wanted nothing to do with the Community. I would not think that those who voted "Yes" in the referendum—I think that if it was held again their number would be a lot smaller—would object to not having "EEC" stamped on the front of their passports.
  The Nordic Union has a passport union, but each country uses its own passport without stamping "Nordic Union" on the front. The Common Market could do the same, but the reason for this move is purely cosmetic. The Government should consider the offence it might cause to those who opposed entry.
  Let me turn now to the Scrutiny Committee, of which I am a member, and the way in which it deals with Common Market matters. The Committee does a good job. Usually the tributes are paid to the chairman of the Committee, who is my right hon. Friend the Member for Bournemouth, West (Sir J. Eden). I gather that he has just got married and is having his wedding reception at about this moment. I express my congratulations and best wishes to him.
  The Committee which my right hon. Friend chairs receives about 20 or 30 documents each week. We let a lot of them through because they are unimportant, but we recommend that many of them should be debated because they are important and because we think that the House of Commons should have the chance to express a view about them. At the last count, 77 of the documents that we had recommend for debate had not been debated. When we debate them our debates are usually a mere farce. They are held late at night and they are usually too short. There has been a tendency recently to hold them on Fridays, when hon. Members with country constituencies like to be away in them.
  I raised the question of statements earlier today. In 1976 there were 54 meetings of the Council of Ministers. Ministers ought to make a statement to the House after these meetings to tell us what they have done and what is going on, but oral statements were made on only 11 occasions last year. I do not

  1109
  know whether Ministers are embarrassed by the failures of their meetings and, therefore, do not want the House to find out or to stand at the Dispatch Box and face the House. I hope that in the new year they will tell us more about their meetings.
  Recently we had an interesting debate on the value added tax harmonisation structure. Many important points were raised and many of the answers that we were seeking were not given. The House expressed itself almost wholly against the exemption ceiling for VAT being pegged at £5,000. The Minister has since had the negotiations, but he has not told us what he has agreed or what is happening. I have tabled a Question for Written Answer for Wednesday, so I hope to get the information then. That is the wrong way to treat the House of Commons.
  We are here handing over power to the Executive, and Parliament must always fight against that. Parliament must fight the Executive when it thinks that the Executive is doing wrong. The House should question from time to time the cost of all the regulations which pour out of Brussels. We should ask how many more bureaucrats are needed to administer the minutiae which the bureaucrats of Brussels have cooked up in order to keep the bureaucrats here in jobs.
  I believe that the country is becoming more and more disillusioned about the Common Market. A Gallup poll was published last September, although I did not see it reported in the newspapers. It asked people whether, if they were told that the Common Market was to be scrapped, they would be very sorry, indifferent or relieved. The results were that of those asked 25 per cent. said that they would be very sorry and 65 per cent. said that they would be indifferent or relieved. That latter figure breaks down into 30 per cent. who would be indifferent or could not care less and 35 per cent. who would be relieved that the Common Market was to be scrapped. Only 11 per cent. of those asked did not know. I give those figures in support of the theme of my speech, which is that there is a general feeling of growing disillusionment in this country with the Common Market.
  Let me summarise, therefore, by saying that Parliament must begin to think about what will happen. If the Common
  1110
  Market is to disintegrate, as the Dutch Foreign Minister and others, but not I, say it might, we should have a policy to cover such an eventuality. As the Government's pamphlet during the referendum stated,
  "The British Parliament in Westminster retains the final right to repeal the Act which took us into the Market on January 1, 1973. Thus our continued membership will depend on the continuing assent of Parliament."
  That means that we always have the right to come out.
  I am not suggesting that we do that at this moment, but we should take seriously the trend of events in the Common Market. As the hon. Member for Test said, we should not just brush it aside. The time has come for us to take the future of the Common Market very seriously, to consider where it is going and how we on both sides should approach the problem.
  6.19 p.m.
  Mr. Russell Johnston: As I think they say in psychic circles, I have a strong sense of déjàvu. I am not sure whether someone has by accident placed me on a magic carpet, put its gears in reverse and whisked me back to 1972 or perhaps to the referendum debate. Nothing appears to have changed. I do not intend to spend too much time rebutting the almost theological arguments which now come from Banbury and Southampton and which doubtless in due course will come from Battersea. It is not particularly fruitful to go over again and again the arguments which have been well rehearsed in the past.
  Mr. Spearing: Can the hon. Gentleman explain why he says that nothing has changed when my hon. Friend the Member for Southampton, Test (Mr. Gould) has shown that there is a £2,000 million deficit? The big difference between debates in the past and those held now is that most of the arguments of the anti-Marketeers are shown to be correct while the prognostications of the pro-Marketeers are shown to be wrong.
  Mr. Johnston: I entirely rebut that contention. I do not believe that the size of our deficit is due to our membership of the Community. The fact is that not only would it take too long to rebut all of those arguments but I know full well that even if I rebutted them with total

  1111
  lucidity it would have absolutely no effect upon those who propound them. It would be a wasted exercise.
  I agree with the right hon. Member for Knutsford (Mr. Davies) that it is rather strange and regrettable that this House should be discussing developments in the EEC on the first day of the plenary session in Luxembourg, especially when we consider how much has been written and said about the need to have a connection between the European Parliament, or Assembly, and this place. It was an extraordinary decision on the part of the managers of Government business. Equally, I agree with the hon. Member for Banbury (Mr. Marten) that it is depressing that at the outset of the debate there were only 18 Members present, which figure has now dropped. This is, perhaps, a sad reflection on the degree of importance which hon. Members place on this question.
  I shall be in Luxembourg tomorrow to hear the Foreign Secretary, who, we hear, is to make a wide-ranging speech. I earnestly hope that he will have something to say. I fear that he will be like the king in the Hans Christian Andersen story who, although he tried to pretend that he was richly apparelled turned out to be very naked indeed. We have been in the Community for four years. The nature of our behaviour as a country—and I speak both pre- and post-referendum—leads me to ask the question: Why did we join the Community?
  I am not posing that question in the sense that it would be posed by the hon. Member for Banbury. Surely the purpose of joining the Community, the reason why people voted to do so, was that there was an acceptance by the majority that there were matters which could not be effectively dealt with on a national basis and, therefore, would be more appropriately and effectively dealt with on a wider basis within the Community.
  Already one notices that the hon. Member for Kingston upon Hull, East (Mr. Prescott), who leads the Labour movement in the European Parliament, although a convinced anti-Marketeer, is using the Parliament in the proper way, to attack, for example, the power of multinational companies. This is something which cannot he done effectively
  1112
  on a national basis. It shows that, even though the hon. Member may theologically continue in his opposition, in practice he is using the machinery available to him to do what can be done.
  I agree with the hon. Member for Banbury that the EEC must move towards supranationalism or it moves not at all. It is not right to suggest that supranationalism inevitably means federalism tomorrow, European union tomorrow or a commitment to any particular constitutional model. It means going out to tackle problems which are incapable of national solution and accepting that the Community is an effective vehicle for doing this. In other words, European union should be looked upon not as an end but as a means, a means of dealing with problems. We shall move towards it at the pace which the problems dictate.
  It is sad that the Labour Party, which prides itself on being a party of reform, should so lack a vision of any kind about the sort of Community it wishes to see. When the Foreign Secretary speaks in Luxembourg tomorrow, he must give us a glimpse of a vision, of aims, hopes and ideals and of what is intended for the future. If he does not do so, the British presidency will be a grave disappointment.
  One important question in terms of the Government's approach concerns their attitude to and relationship with the Commission and the kind of influence they exert on their partners in the Community with regard to the Commission. The Commission was established by the treaties as the source of initiative and change of harmonisation and administration in the Community. Yet it is most marked that in recent years the Commission has come under increasing pressure only to produce initiatives which have been agreed in advance. Consequently the individual member nations not only use the power of their veto in the Council but seek to pre-empt the Commission's capacity for initiative. It the Government stifle this, there is nothing left in terms of the motor to drive the Community forward. I hope that the Foreign Secretary will seek to change attitudes in this respect.
  Before leaving the subject of the Commission, it would be only right to pay tribute to George Thomson and Sir

  1113
  Christopher Soames, who contributed greatly to the work of the Commission during the period they served on it.
  I conclude what is of necessity a brief speech by referring to certain specific aspects of evolving policy. It has already been remarked that the Under-Secretary, in introducing the debate, made no reference to direct elections. I thought in passing strange that he did not do so. I share the concern of the right hon. Member for Knutsford about whether we can meet the deadline of May 1978. Again, it is extraordinary that the Labour Party should be dragging its feet over the democratisation of the Community. It would be appalling if we, alone of all the Nine, were the cause of delaying direct elections—we of whom so much was expected in terms of democratic input following our entry.
  I shall not take this opportunity to dilate on the subject of proportional representation, much as I am tempted to do so. Apart from preventing bizarre and dangerous results, proportional representation would also obviate the prolonged Boundary Commission arguments into which we are likely to be plunged and which, even if the legislation is brought forward much more expeditiously than seems likely, will be the cause of delay.
  The Minister made no reference to the interface, which I believe exists, between devolution on the one hand and the Community on the other. I suppose that this is basically because the Government pretend that there is no connection between these two things. However, there is and will be such a connection. When we establish Assemblies in Scotland and Wales we shall, in EEC parlance, be creating subordinate public bodies which have rights under the treaty. They even have the right to bring the British Government before the courts if they feel that the Government have transgressed the treaty in any way. Such subordinate public bodies have a right of audience with the Commission and the right to put their case. The Government have not given this matter sufficient attention so far.
  Thirdly, the Minister made no reference to regional funds and regional policy and the fact that the whole subject is to be reviewed this year. I hope that the Government will reconsider their attitude on regional policy. If we are to have a genuine European regional policy, the
  1114
  intent of which is to shift resources from the richer to the poorer parts of the Community—which is the objective for which George Thomson worked so hard—it must be done on an EEC basis and not on a predetermined share-out by percentages or on the basis that only national Governments may approve where and on what the money may be spent.
  What is the Government's attitude to what is referred to in the appalling jargon of the Community as global additionality—the question of ensuring that money from the regional fund is used as additional expenditure for regional purposes rather than as a substitute for money which we would otherwise have spent ourselves? We cannot have an effective social regional policy if Governments use regional funds as a means of balancing their budgets. What is the Government's attitude to the size of the fund in future? There are arguments for and against increasing it with the guidelines as they are.
  I shall not, because of the lack of time, refer to foreign policy, but I agree basically with what the right hon. Member for Knutsford said about Cyprus and Southern Africa.
  The Minister referred to energy policy, the green pound and fishing. Clearly it is not possible for me to deal with those subjects in the same detail, but it surely must have required enormous gall for the Minister blandly to say that the Government have consistently sought to move the Community forward on a common energy policy. This Government alone endeavoured to scuttle the possibility of tackling the energy crisis on a Community basis and neglected the exposed position of the Netherlands.
  The Minister referred to the green pound. Although I agree that there is an element of swings and roundabouts, with advantages here and debits there, throughout the Community, the variations are now so wide that, as Commissioner Lardinois emphasised before he gave up his responsibility for agriculture, the CAP is at risk.
  On fishing, I still believe that it is possible to achieve within the Community an exclusive zone, maybe on the basis of what is being referred to as the "Prescott compromise"—the interesting proposals worked out by the Labour

  1115
  Group in the European Parliament. The arguments must be based not on nationalism but on fairness to fishermen and protection of stocks. Both arguments are soundly based. The interests of the country off whose shores fish breed in their protection is obviously far greater than the interests of any group of countries.
  Nationalism continues to bedevil the Community. If our presidency, brief as it is, can demonstrate that we are beginning to turn away from nationalism and to think in Community terms with a clear sense of a future within the Community, that will be a great advance. Sadly, the Community needs a stimulus. We could provide it, and I very much hope that we shall.
  6.34 p.m.
  Mr. James Johnson: I was pleasantly surprised when the Minister of State started his speech by referring to fisheries rather than to foreign policy or to other aspects of the Community. I do not know what significance can be attached to that fact, but it shows that the subject is obviously in the minds of the Minister, his colleagues and the Government.
  The Minister spoke with his usual courtesy, and I believe that he will show fundamental common sense in this matter. I could find little with which to quibble in the substance of what he said or in how he said it.
  However, the right hon. Member for Knutsford (Mr. Davies) made a fair point when he referred to the uncertainty in the fishing industry. After questions today, I spoke about a miasma of doubt, suspicion and uncertainty which is bedevilling not only the deep water fleet in my constituency but the inshore men as well.
  The Minister referred to banding. How wide will these coastal bands be? This is the $64,000 question which is worrying people both north of the Tweed, where we take well over 50 per cent. of our total catch—basically by the inshore men, because there are now only four deep sea vessels in Aberdeen—and south of the river. The uncertainty, doubt and suspicion are justified when one bears in mind the third party negotiations.
  1116
  We are a maritime nation whose fleets have kept order all over the world in the past. Now we are having our future settled by a third party. It taxes the imagination and boggles the minds of many of my constituents to think that their future may be decided by Mr. Gundelach. The Danes may be eminently able and thoughtful people, they may be knowledgeable about Icelandic affairs, being so close to Iceland and administering the waters around Greenland, but it is difficult for people who are less sophisticated than hon. Members to accept that a Dane may decide the future of this country's industry.
  No one should call fishermen who react in this way chauvinists. This is a new situation for them, and we must sympathise with men who are so baffled and bewildered that they talk about taking boats across to the Continent and blocking European fishing ports.
  We must end the uncertainty which surrounds our fishing industry. The Minister used impeccable arguments about the protection and conservation of fish. No one objects to that, but it is sensible to ask who is entitled to catch the fish which are conserved. It is certainly not the Soviet Union, which can bring a 4,000-ton vessel off our North-East Coast and suck up hundreds of tons of fish. This will be the position until 1982 unless we change it.
  The most important point made today was that no other aspect of EEC policy demands open access. No Belgian fisherman can farm in East Yorkshire just for the say-so. Open access to our waters puzzles many of my constituents. They think that that is just not on.
  We all accept that the coastal State is in a special position. I suggest that Britain is in a unique position. The Chairman of the White Fish Authority, Charles Meek, is also of that opinion. The United Kingdom has at least 60 per cent. of the total wealth of fish in EEC waters round its shores. The United Kingdom is the biggest fishing State west of the Soviet Union. We must have recognition—it is not a monopoly—of our unique position. People in coastal villages throughout the islands of Scotland and elsewhere—this includes Ireland—have a 100 per cent. stake in catching fish and living on the proceeds.

  1117
  The argument put to me, as a Member of Parliament representing a constituency with fishing interests, is that we must pay attention to Iceland because it is so dependent on its catch. But many parts of the United Kingdom have a harvest of the sea and a hinterland which is bare, whether glaciated or scoriaceous lava, such as in Iceland or Norway, and which provides no living. I do not accept the argument that Iceland deserves all this sympathy and our people do not.
  No one has denied that we pay more attention than any other fishing nation to the conservation of stocks. In that sense we are disciplined. The Danes, for example, catch well over 100,000 tons of herring in the North Sea, and the Soviet Union catches well over 600,000 tons of fish in our waters each year. If one asks who is entitled to the lion's share, it is the United Kingdom. In that sense our fishermen must be looked upon as special. If Iceland can put forward that argument, so can we.
  I come back to the question of coastal bands. In December we said that coastal bands were vital. The Fishing News, on 17th December, consequent upon what was said in this Chamber by the Secretary of State for Foreign Affairs, stated:
  "As Common Market Foreign Ministers this week seemed to be failing to agree even temporary rules for operating inside the Community's 200 miles, Foreign Secretary Anthony Crosland threatened that Britain would impose her own system of control. This statement was also backed by Ireland's Foreign Minister, Dr. Garret Fitzgerald. Both Britain and Ireland rejected EEC proposals on fish catch quotas. These did nothing to take into account the special needs of fishing communities in Scotland and the north-east of England, said Mr. Crosland."
  Is that still the position? Is our position as it was in the third week in December still the same in the second week in the new year? This is an important matter, because upon all this hinges or depends an enforcement policy. It is useless to talk about banding and a 50-mile exclusive zone, quotas or licences, unless we can enforce them. To be fair, the Minister said that he would wish and intended to "make it stick." Can we do that? We have begun well with our 200-mile limit. The Fish Trader, formerly the Fish Trades Gazette, in its 8th January edition, carried the headline
  "Britain shows its 200 mile muscle power."
  1118
  To be fair to the Government and to do justice to the Royal Navy, there is no doubt that the limit is being observed by fishing nations. I am not sure whether there have been any offences of poaching within that limit.
  Enforcement is important, but we must have third country agreements. It is vital that we settle the Icelandic situation. Apparently they work so hard in the Icelandic Parliament that they are on holiday until the 24th of this month. Therefore, they will not even begin thinking or talking about the situation until after the 24th. We should do our best. I think that we may get agreement on 30,000 or 40,000 tons. Our people in Hull—this applies equally to the Grimsby and Fleetwood distant-water fleets—will require an agreement with Norway for at least 95,000 tons. We should get an agreement for 30,000 or 40,000 tons with the USSR in the White Sea. We should get a generous quota within Greenland's waters where the Icelanders have been fishing. The Icelanders must be told that, not being an EEC State, they must keep out. We should have a generous quota because Denmark, being a sister State in the EEC, administers those waters.
  It is not impossible to get a long-term Community policy on fishing in the waters which I have mentioned. If our fishermen are not to be allowed to fish in those waters, it is hypocritical for Ministers to say that we are being fair to our fishermen.
  If we take too long in achieving a Community policy on this matter, the patient—the fishing industry—could die. Unless we get something settled regarding distant water fishing within the next few weeks, the patient will slowly fade away. That is the terrible thought, miasma, suspicion, doubt and uncertainty which is plaguing the minds of people on Humberside.
  6.49 p.m.
  Sir Brandon Rhys Williams: I should like to join in the tributes paid by the hon. Member for Inverness (Mr. Johnston) to the two outgoing British members of the European Commission. Sir Christopher Soames in external relations and George Thompson in his achievements on regional policy made notable contributions to the work of the Community during their term of

  1119
  office. They have provided us with a foundation on which we have a duty to build for the future. I hope that we shall do so. I am sure too that hon. Members on both sides will wish to send messages of good will to our two former colleagues in this House who have gone out to take their places and are just starting their tour of duty.
  There is so much in the White Paper that the Minister cannot be blamed for failing to touch on all the subjects it refers to, but I am sorry that he gave us nothing of the Government's thinking on economic and monetary co-operation, which indeed is only touched on in three paragraphs of the White Paper. But surely this is the most significant unresolved problem now facing the nine member States.
  This afternoon we have heard economic and monetary union referred to as a sick joke. The failure of the Werner initiative certainly created difficulties for the Community which some people feel are almost insurmountable; but I believe that the seven months from May to November last year, which are the subject of the White Paper, may in retrospect be seen to have been the turning point on this important topic. The period included the dramatic change in the exchange rate of the pound in relation to the principal world currencies. It also saw the recommendations from the Dutch Finance Minister, Mr. Duisenberg, which were a ray of hope in this field and which must be taken extremely seriously, even though the Dutch tour of duty has now come to an end.
  In the European Parliament I have the perhaps unenviable duty of acting as rapporteur on the subject of economic and monetary union. It has proved a rather unrewarding function since we joined the Community in 1973, but I hope that I may be known for my persistence and optimism, which I am trying to apply in this field as in others.
  In order to clarify our minds on whether we want economic and monetary union, perhaps we should ask ourselves the simple question: Have we, as a great trading nation, anything to gain from economic and monetary disunion? It must be obvious that, if we could make some progress towards the harmony and
  1120
  order which existed in the great days of British economic expansion up to 1913, it would give the British people a great new opportunity. Nothing is to be gained from the uncertainty and dislocation of the currency markets that we have seen in recent months.
  One of the reasons for the failure of initiatives in the direction of economic and monetary union is the preoccupation of central bankers with exchange rates. Of course, it is very disturbing for trade and day-to-day banking when there are sudden movements in exchange rates, for whatever reason; but if we are really concerned about bringing together the Western European economies we must not think only of exchange rate movements from day to day. We have to tackle a much wider and in some ways much more significant and difficult range of comparisons, including, for instance, interest rates. The fact that a German manufacturer can raise money in Frankfurt at perhaps one-third of the rate that a British manufacturer has to pay if he raises money in London for an equivalent project must create serious difficulties for British industry, quite apart from comparisons between the pound and the deutschemark in the markets from day to day.
  We need to look also at the impact of taxation. Tax rates on companies and individuals engaged in industry and commerce have a tremendous influence. It is no good imagining that we shall be able to work fruitfully towards economic and monetary union while there is no progress at all on the harmonisation of tax rates.
  Wage rates are important, too. We have recently read of the British Government saying, almost with satisfaction, it seems, that British wage rates are the lowest, or among the lowest, in the Community. I do not take any pride in that, but the fact that there are these sharp differences in wage costs between one Community country and another shows that economic monetary union has still a long way to go.
  We have much to gain if we can increase the rate of activity in the parts of the Community which are not as active as they could be or should be; so perhaps I should add activity rates to the list of different rates on which we have to try to make progress in coming years.

  1121
  The gamble which has failed, and had obviously failed by the end of last year, was the idea of monetary union by quiet agreement and backstairs pressure from national central banks. We have all read about the clandestine meetings of central bankers in Basle and the way they exchange secret confidences from day to day or even minute to minute through the telephone and Telex in order to make their beneficent influence felt in the money markets. But, as I have said, the central bankers are preoccupied with day-to-day movements in exchange rates, some of them, unfortunately, do not take a longer view of the whole economic prospect or the economic effects of the agreements which they reach behind closed doors.
  In 1973, at the time of Britain's entry, agreement was reached on the setting up of a European Fund for Monetary Co-operation. I felt that this was a serious and useful initiative but it posed a threat to the national central banks—the threat of a gradual emergence of a Community central bank with powers which might in some respects be overriding. This was something on which the central bankers could unite. They did not like it. So no progress has been made on the setting up of the European fund in spite of the unanimous agreement of the Governments involved. It has no funds. It has no staff. As far as I know it has no premises, apart from a back room in the Bank for International Settlements in Basle, which, of course, is not even in the Community.
  If the bankers are now ready to recognise that their attempts to achieve clandestine monetary union have failed, perhaps they might be humble enough to agree to some progress being made in the direction on which we began in 1973. I particularly commend to the Government and to the House a recommendation, which I hope also to be able to advocate in my capacity as rapporteur in the European Parliament, namely, that we should work towards a new European monetary constitution.
  I do not want anything too alarming or too formal in the first instance, but there are two ways in which we could make useful progress. First, we could establish a set of workable rules and guidelines for member States and close trading partners outside the Community, such as Switzerland, Sweden, Norway
  1122
  and Austria, extending perhaps to the countries which are seeking accession and possibly even to countries in Eastern Europe and the Middle East. These workable rules might well be on lines similar to the guidelines for floating which have been worked out by experts in the International Monetary Fund. I welcome the idea of target zones for exchange rates provided that they do not impose unmanageable or unacceptable restraints on the development of national economies.
  Second, we need to move towards the setting up of an institution with limited but real powers. Looking back to the success of the European Payments Union, we must recognise that it depended on the setting up of a central institution which worked more or less automatically but certainly to the benefit of all concerned for a number of years. It did not dictate to Governments. It simply operated a clearing house in a way which had been agreed beforehand and which member States of the union could take into account in their predictions and calculations.
  I believe that the European Fund for Monetary Co-operation could do much the same. Of course the circumstances are different and in many ways more difficult, but the need for co-operation is as great as it was, or greater. I hope we shall find that where there is a will there is a way. It is disappointing that the British Government seem to be resting on the basis that the Werner proposals have been abandoned and that it would not be worth while restarting such an initiative.
  There have indeed been great changes since the late 1960s which gave rise to the Werner plan. At that time Bretton Woods was still in existence, and the gold exchange standard did not appear likely to be shaken in the foreseeable future. We had no inkling of the coming Nixon shock; the American economy seemed to be setting a responsible or relatively acceptable guideline for all the other Western economies and progress to economic and monetary union was not inconceivable on the lines proposed by Mr. Werner.
  I have had the benefit of long discussions with Mr. Werner in recent weeks. He himself now recognises that circumstances have changed so much that to try

  1123
  to revive anything on the lines of his report would be futile and unlikely to achieve any success. But there is room for new approaches to economic and monetary union. The Duisenberg recommendations to the Council of Ministers seem an admirable point of departure.
  At the beginning of this year the British have a particular responsibility in this field in the Community. We can look back with satisfaction to the part played by Britain in the setting up of the International Monetary Fund at the end of the war. On a world scale, Lord Keynes and the British delegation were able by their thinking and their knowledge of the world economic picture to make the fundamental recommendations which led to the setting up of the IMF as a thoroughly useful and lasting world organisation.
  Although London has had its vicissitudes as a financial centre since then, we still have a tremendous corpus of experts in the Bank of England, the Treasury and the City who can make a conclusive contribution to fresh thinking on the way in which the European Community countries and their closest trading allies could set up a civilised framework for handling their economic and monetary affairs, from day to day, from month to month and from year to year. I hope that the opportunity will not be lost, while we have a new British President of the Commission and British Chairmen of the Councils of Ministers dealing with financial and monetary matters, of reviving and redirecting the concept of the approach to economic and monetary co-operation.
  This country has so much to gain from the establishment of an orderly European monetary constitution that the opportunity must not be lost. I trust that the Chancellor, when he acts as President of the Council, and Mr. Jenkins, in his continuing responsibilities as head of the new Commission, will realise what responsibilities they have and what opportunities lie ahead—and that they will rise to them.
  7.4 p.m.
  Mr. Nigel Spearing: I shall refer in a few minutes to what the hon. Member for Kensington (Sir B. Rhys Williams) has said about economic and monetary union. I think he will agree that there is a difference of substance and not just of degree between an inter-
  1124
  national organisation like the IMF and a movement towards an economic and monetary union within the EEC.
  The hon. Member for Inverness (Mr. Johnston) talked about the Labour Party spurning democracy in respect of direct elections to the EEC. He and his party should pay greater attention to the essence of democracy, apart from the vote. Democracy is not just the ability to vote for someone. Its quality depends greatly on the relationship between an Executive and its citizens. Relations between them, in terms of accountability, information and control, are as much a matter of democracy as voting is.
  The point that the hon. Gentleman forgets is that with direct elections to a European Assembly, whatever its powers now or in future, there is a great risk of a European Executive emerging. Many of us would not think that that was necessarily a very democratic move, in the best sense of that word.
  There is, therefore, a great distinction between the British Executive, Her Majesty's Government, which this House supports or not and which it creates or destroys at its will, and an Executive which is accountable to a European Assembly, or Parliament as they call it, which is itself accountable to the people of this country, irrespective of what may happen in this House and what Her Majesty's Government may say or do.
  I agree with the hon. Gentleman that there is a feeling that many things cannot be dealt with nationally but require international co-operation. He claimed that the EEC was an effective vehicle for such an international approach. He instanced some of the work being done in that respect by my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott).
  However, the EEC is not an effective vehicle for that sort of procedure, as has already been demonstrated. For instance, its internal constitution relies, to use the hon. Member's own phrase, on a "supranational" Commission for its motor power. The hon. Gentleman complained that in the last few months of the reign of the last Commission, before "King" Jenkins takes over, it did not initiate enough and was becoming a mere handmaiden of the Council of Ministers,

  1125
  working out the details of what the Council had agreed.
  The hon. Gentleman deplored that trend, but I would think that it was a wholly worthwhile activity and that the more the Commission engaged in it the more it would be a truly international organisation rather than a supranational one, with which many of us disagree but for which the hon. Member for Inverness and nearly every other Opposition hon. Member voted at the time of the referendum.
  At that time, there was a financial imbalance between the two sides of the argument of about 12 to one. The hon. Member for Banbury (Mr. Marten) led the campaign against our membership, and I think he did very well. We do not want to go over old ground, but it is important to note that when the hon. Member for Banbury asked the right hon. Member for Knutsford (Mr. Davies) whether the Conservative Party would provide funds for possible direct elections from its own resources and not get State funds, either in this country or in the EEC, his right hon. Friend did not give a specific answer. He merely said that the funds would be found.
  It certainly does not look as if those funds will come from Houghton money in this country, but I hope that at some future date both the Conservative Party and the Liberal Party will make it clear that such money will not come from sources within the EEC but outside this country. I hope that at some stage the parties which want direct elections will make that clear.
  I found the approach of the right hon. Member for Knutsford disappointing. He deplored the fact that the EEC had said nothing about Rhodesia and the problem that faces us there. It is, of course, an international matter for which the United Nations is the right forum. I have no doubt that the EEC supports us in the United Nations on these matters—I certainly hope that France does. This is not a question with which the EEC should tamper.
  The right hon. Gentleman is thinking of the EEC as an authoritative body that overrides individual national sovereignty in a way that many of us do not accept. We are all for co-operation, but we do not wish to see the uniformity of foreign
  1126
  policy that the right hon. Gentleman would wish to see because that would give rise to the fear of a nation super-State which is so often denied on the one hand and which on the other hand the European Movement wishes on us.
  I shall not comment on fishery matters except to remark on the attitude of the right hon. Gentleman. He attempted to justify his support of the fisheries policy at the time of the original negotiation by the Government of which he was a member by saying that at the time it looked all right and that it was the other aspects that came afterwards that made it difficult. Perhaps he does not realise what he is saying. If he believes that, he is saying that what may be agreed within the EEC as perfectly reasonable one year may within the space of three years become almost intolerable through change of circumstance about which we can do little.
  That is typical of the nature of the EEC. If, after entering into an agreement of that sort, outside world circumstances change, we find ourselves in a virtually intolerable position, as happened with fisheries. That happened because of the nature of the EEC. Perhaps our Foreign Office did not notice when it made the agreement. Perhaps it could not see ahead to the Law of the Sea Conference out of which arose the 200-mile limit complication. By pooling our sovereignty in the greatest pool of sovereignty—the seas around our coast—if outside circumstances change we find ourselves in this intolerable position. If that can happen with fisheries, it can happen with other matters on which we think we are all right but later find that we are not. Many of us foresaw these difficulties arising. We were not against the EEC because we were not internationalists or because we were not idealists. We were against the EEC because we foresaw some of these problems.
  The hon. Member for Kensington hitched his wagon to the economic and monetary union star. He said that we were not getting there very fast. I gathered from his tone of voice that he thought it a pity we were not getting there more quickly. Some of us were against economic and monetary union—and we still are—because it assumes so much about the welfare of mankind. It

  1127
  assumes that the bigger the market area, the greater the uniformity of terms for the borrowing of capital—a point the hon. Gentleman very properly made. It assumes that the more uniform the conditions, the greater the heartbeat of economic activity and, therefore, the better for all the people within that particular economic unit.
  That is the theory behind economic and monetary union, but things do not always happen like that. By speeding up the economic metabolism so that there is free competition and free movement of labour, capital and goods, economnc and social changes come quickly, and the part of the economy that operates at greater efficiency begins to knock out the parts that are less efficient. That is the essence of the system, and that is why what my hon. Friend the Member for Southampton, Test (Mr. Gould) said about our £2,000 million annual deficit with the EEC is so important.
  I hope and pray that the industrial imbalance is a passing phase, but I fear that it is not. Given the present economic arrangements, if a product can be produced more efficiently and at less cost in Germany or France those countries have every right to export it here. That is the pass into which the Conservatives voted us. From next summer we shall not even be able to determine our own anti-dumping legislation.
  To follow the logic of the argument of the hon. Member for Kensington in advocating economic and monetary union, if British industry cannot compete, British industry will begin to disappear, as it is already disappearing. At the end of last week Sir Frank Catherwood said that with great investment in British industry we should do as well in industry in the Common Market as we do in agriculture. He was referring to the efficiency of British agriculture in comparison with that of other members of the EEC. I should like to think he was right, but I see no evidence of it. All the evidence I see is the other way. The nature of the EEC is such that we shall have to import more and more manufactured goods from the EEC—from Germany in particular—and we shall be in a continually decreasing competitive position.
  1128
  I agree that there are other reasons which make us more susceptible to that, apart from going into the EEC. I do not understand why the Foreign Secretary, writing in Socialist Commentary, says that his guess is that the arguments for and against going into the EEC are now economically neutral. I hope that the Minister in replying to the debate will say whether that is also the Government's view. If so, they must justify—as the hon. Member for Inverness said he could, although he did not—the other reasons for this sudden change in the economic balance of trade with our co-called partners. I say "so-called partners" because I wish to see partnership between nations, but the EEC method of partnership is not partnership. It says "If you are economically weak, stand there. We shall bash you between the eyes and give you a bloody nose and a black eye. With the regional fund we shall help you up, and then we shall knock you down again".
  Sir B. Rhys Williams: Perhaps I should have made clear that in my concept of economic and monetary union we cannot hurry at once to the adoption of a single currency. What we have to do is operate a multi-currency system in a civilised way. That would be possible and, I hope, fruitful. Will the hon. Gentleman consider the comparison between the standard of living of the people of North America—which is, broadly speaking, an economic and monetary union—and South America, which is balkanised and broken up, with autonomous Governments each pursuing its own way of inflation and despair?
  Mr. Spearing: I am glad that the hon. Gentleman has explained his position. He has vividly illustrated two schools of thought. Many people believe that the economic rate of exploitation of the earth's resources and the economic systems of man depend largely on mechanistic economic structures.
  There are many other reasons for the prosperity of North America compared with South America. It is not merely a matter of a customs union, one currency, one banking system, one system of credit and perhaps one language. There are many other reasons, of which historical, social and human factors are perhaps more important than economic reasons.

  1129
  Surely it is a good example of the way in which certain economic theories have overridden many other things that are so important in social life and in politics.
  My right hon. Friend the Minister of State talked about the understanding of the British people. He did not like the way in which my hon. Friends and I laughed when, towards the end of his speech, he said that the British public are now just about understanding what the EEC is about. He said something of that sort and we laughed. My right hon. Friend took exception to that. He says that it is a complex and technical matter and that the British people are just beginning to understand it.
  Certainly it is complex and technical. The reason why many of these debates are not particularly well attended is that very often, in dealing with documents like that with which we shall be presented within an hour or so, it is necessary to go into them deeply, examining the technicalities in detail, or not at all. They can be dealt with in a detailed manner or in great generality. It is one of the great difficulties in dealing with the EEC. We deal with EEC documents either with a broad brush or in technical detail.
  I am sorry that my right hon. Friend does not do more about promoting understanding. In the past two or three months I have been asking him about the access that the British public have to EEC documents. It is difficult enough for Members. We know that complaints have been made in debate after debate on EEC matters. I have been asking my right hon. Friend whether the British public have the sort of access to documents that Members have through the yellow parliamentary slips. It is clear from his replies and from his letter sent to me today that they have not. We now have ministerial help in saying that citizens of this country and organisations which have a proper economic interest—for example, employers' associations, manufacturing associations, trade unions, trade councils and chambers of commerce—do not have the access or ease of indexing EEC documents that is available to Members.
  I asked my right hon. Friend why the yellow EEC slips that are available to Members are not available on a wider basis. He replied that the yellow slip
  1130
  "lists all EEC documents whether received from the Government or any other source (e.g. the European Parliament whose papers are received direct). It is obviously not suitable for wider publication in its present form."
  Why not? Surely an admirable way of proceeding would be through the London Gazette, by supplement to the London Gazette or in some other form, letting any interested party know that an EEC proposal, regulation, report, document or minute is in existence. I am not asking for them to be reprinted, but surely the public should know that they are in existence. I believe that the legal term is "on guard". Unless such a document exists and is properly published at regular intervals, there is no other way that anyone other than a Member may know what is happening.
  My right hon. Friend then wrote:
  "so the real questions seem to be:

  (a) should a similar sort of index of EEC documents available to the public be published?

  (b) are there adequate arrangements for the public to have access to the documents listed on the House of Commons form?"

  My right hon. Friend suggests that in his view there are more or less adequate arrangements for the public to have access to the documents, although that is qualified. He writes:
  "The second question is the more important, so I will concentrate on that."
  Although he asks the question
  "Should a similar sort of index of EEC documents available to the public be published?"
  he never answers it.
  I hope that in replying tonight my hon. Friend the Under-Secretary of State will give some indication. I hope he will return to this subject at some other time. Her Majesty's Government should make it plain that a similar sort of index of EEC documents should be available to the public if the parliamentary yellow sheet is not to be available.
  My hon. Friend knows that the Government are devoted to open government. My right hon. Friend said that he wants the British public to understand what the EEC is about. If that is so, let us at least know what documents are in existence. For four years now the country has not known of the documents that have been coming from Brussels. As I understand it, no list has been published. My right hon. Friend has said that he

  1131
  will not publish a list from now on. That is not good enough. That is the type of reply that we have had from Tory Governments in the past. It is not the reply that we expect from a Labour Government. It is something that reflects badly on the attitude of the Executive as well as badly on the EEC itself.
  7.25 p.m.
  Mr. Michael Marshall: One of the problems of those who have sat through the debate, as the hon. Member for Inverness (Mr. Johnston) said, is the déjà vu nature of many of the contributions, as typified by what we have heard from the hon. Member for Newham, South (Mr. Spearing). A number of the arguments that he is using are based on the "I told you so" theme. Perhaps some of the pro-Marketeers whose arguments are based on the fact that they are tending to be dissatisfied with progress and the inability to use the machinery effectively, find themselves slightly uneasy bed-fellows when joining in some of the criticisms advanced by the hon. Member for Newham, South.
  It is important that we consider these matters in perspective. I am rather unhappy when I hear speeches such as the one made by the hon. Member for Southampton, Test (Mr. Gould). In a powerful speech he put forward what I consider to be a thoroughly slanted case. The point that he touched on so much, namely, the loss of jobs arising from the trade imbalance, would have been considered in a much more sensible light had he spoken about the money that Britain is now able to draw from loans within the Common Market.
  As is said in paragraph 64, in terms of loans from the European Investment Bank and ECSC loans, the steel industry alone received £300 million in 1976. That is the sum that the British Steel Corporation received. Let us consider that sort of funding, much of it directed towards retraining, housing schemes and many of the implications of problems that have arisen from the closure review and redundancies within the BSC. If that had been brought into the argument, we should have had a more balanced debate.
  As matters stand we are prone to hear, from a number of Labour Members the arguments that we always hear from them, except that they are being brought
  1132
  up to date. There are blemishes, which they are undoubtedly right to draw to our attention, but I plead for some balance. That is why I support my right hon. Friend the Member for Knutsford (Mr. Davies). I believe that my right hon. Friend gave a thoroughly constructive view of the way in which the Government should tackle matters in future. Even my hon. Friend the Member for Banbury (Mr. Marten), whose views I do not entirely share, showed some restraint in that he did not go so far as to argue in favour of coming out of the Market. He seemed to be addressing his mind to the problems.
  I am glad to see that the hon. Member for Inverness is in his place. I largely support the thesis that he was putting forward, namely, that we are in the Common Market and that we must try to find a common way of tackling the problems. That brings me to the argument that I wish to advance, which I hope is constructive. I seek to urge on the Government various ways in which they should use the industrial side of the Common Market more effectively. In a brief speech I shall single out three main areas where I think the Government have not gone as far as they should.
  I know that the Under-Secretary of State takes a keen interest in industrial matters. I hope that he will address his mind to these considerations. If he cannot answer now, perhaps he will undertake to reply at a later date.
  The first aspect that I stress is that there seems at present to be a grey area in respect of the way in which legislation, especially as it affects industry, is coming before the European Parliament and, in effect, before the House. I refer to the rôle of the consultative committees. My right hon. Friend the Member for Knutsford referred earlier to the work of the Economic and Social Committee. I join with him in saluting the work of Basil de Ferranti and others on that widely based body. It consists of people from trade unions such as David Basnett and Jack Jones, as well as people from the Consumers Association. It is a body which has weight, yet I believe that the work it does and the way in which it affects legislation is not well known in the House. That is what I understand from my friends in industry. Surely its work should be more widely known.

  1133
  It is the Government who appoint people to the committee, as they appoint people to the Coal and Steel Consultative Committee. I should like to know the Government's thinking about the work of the consultative committees and the way in which they approach the question of replacements, strengthening committees, and so on. In passing, I pay tribute to those hon. Members who consider EEC legislation, because it is all part and parcel of the same package, but I single out these committees, because by the time that we in the House hear about matters the die is cast and it is too late. Therefore, the pre-screening activities are important and we should hear more about them.
  Secondly, I should like a clear indicafrom the Government of the overall policies they are evolving on such matters as loans. I mentioned earlier the work which the European Investment Bank and the ECSC had done in providing over £300 million for the BSC. A good part of that money originally was borrowed without coverage on exchange risk, and I understand that funds currently drawn are covered by the Treasury for exchange risk. However, this highlights our difficulty arising from the fact that Government thinking has never been clear.
  Those of us who have worked in Committee on Bills proposing increased borrowing powers for the BSC are only too well aware that it is impossible to get an answer from the Government on whether they have a policy on these matters. If we are to go on borrowing substantial sums of money from the European Coal and Steel Community, it is important that we understand whether we are allowing slippage into our own national books to the extent that we have to cover for exchange risk. That is one aspect with which I hope the Minister will deal.
  The third and final point about industry and the way to make the EEC a more effective industrial co-operative concerns the need for co-ordination in Government thinking to bring together the various streams of thought which are crucial to industry. I have in mind the work on anti-dumping which is going on in the Department of Trade. The Minister will know of the work being done on the question, in particular, of special steels. Earlier today I raised the matter during
  1134
  questions on the statement on EEC business.
  There seems a hiatus which the Government must consider carefully. As we move from a period in which we have been responsible for our own anti-dumping applications to harmonisation of these matters, it is crucial that we do not lose the advantage that we have gained. There must be close co-ordination among the related Departments. The Department of Industry has a clear rôle here.
  Paragraph 57 of the White Paper shows that one of the most important matters which the Commission has considered is the proposals
  "designed to alleviate the effects of future recessions in the steel industry".
  The work which is going on in this area is crucial and must be considered in relation to such matters as anti-dumping. This is a facet which the hon. Member for Test would have done well to consider in dealing with the problem of redundancies. If we can achieve a concerted approach to the problem, substantial advantages are to be gained for Western industrial countries such as our own.
  The three streams in which co-ordination is important are trade, the Department of Industry and loans. The Government's attitude and the thinking of the Department of Industry are crucial to our industrial drawing down, so to speak, from the EEC. Those are the areas of worry. There are many others, but I intend to be brief. I want to get a feeling from the Government that they are making an attempt to bring the various interests together. Many of us feel that there is no clear-cut co-ordination. The fact that we missed the energy bus so badly does not auger well for those of us who take a particular interest in industrial matters.
  I hope that the Under-Secretary of State, with his industrial background, who has come relatively recently to his new responsibilities, will show that he is taking a keen interest in these matters. I look forward to what he has to say. I hope that my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins), with his experience of the European Parliament, will add weight, as I am sure he will, to the arguments on matters which worry people in industry

  1135
  who feel that we are by no means utilising the positive benefits open to us through membership of the EEC.
  7.36 p.m.
  Dr. Alan Glyn: As the last Back-Bench speaker, I should like to add my congratulations to the two Commissioners and to say a word about our fellow Members of Parliament who have worked very hard in Europe and, at the same time, have been called upon to perform their duties in the House and in their constituencies. A word of tribute to them is well deserved.
  I congratulate the Government on the White Paper. It is brief and sets out most of the things that we want to know. I was interested to note that the first paragraph made it clear that it covered not only the EEC but the European Coal and Steel Community and the European Atomic Energy Community. Is it not time that we gave careful consideration to what extent, if any, of these independent organisations could be streamlined into the one organisation? I appreciate that with an organisation such as the Western European Union or NATO that is impossible because the member States are not identical, but there is a case for a certain degree of harmonisation between these international organisations. At present there is an overlapping of work and of cost of administration.
  Paragraph 39 of the White Paper deals with animal health. Most of us continually receive complaints in our constituencies about the transit of animals at home and overseas. I believe that the reason for the complaints is the lack of supervision on this side and on the other side of the Channel. If the supervision could be improved, the causes of many of the complaints would be removed. I am prejudiced because I am against the export of any livestock on the hoof except for the purposes of breeding, racing or for other prescribed purposes.
  My hon. Friend the Member for Kensington (Sir B. Rhys Williams) went into great detail about the possibility of monetary union. There is a large pool of resources in the Community and I hope that in the long run it will be of benefit to the pound. Plainly it is in the
  1136
  interests of most of our partners to ensure that we do not allow our currency to deterioriate too much.
  Paragraph 67 of the White Paper refers to transport. This is a thorny problem and I am glad that the Government have been able to achieve a deferment on the question of drivers' hours and conditions of work. However, the Council of Ministers will have to consider carefully the rules and regulations as they apply to this country, because our traditions are not the same as those of other European countries. There is a great deal of work to be done in ensuring that the directives are practical for the roads of this country.
  On the question of social affairs, reciprocal arrangements for medical treatment between ourselves and our partners in Europe are an excellent principle. I have been considering this question recently. There are difficulties involving responsibility for treatment under the National Health Service and the problems arising from the fact that other countries in Europe do not have the same rules and regulations. For example, in West Germany there is no free treatment for the self-employed. There is here a great area in which we shall have to thrash out some form of common policy. In particular, it will be difficult to create equality of payment in the reciprocal arrangements. I have always pressed for reciprocity in health treatment, but I know that it will take a great deal of work to formulate the details.
  All of us want to see some pushing forward of a European energy policy, so long as the situation never arises in which this country's interests could be jeopardised by actions in other countries. However, I foresee the day when, with our North Sea oil fully developed, we shall be more donors than recipients.
  I feel strongly on the subject of direct elections to the European Parliament. It is important that the European Parliament should not be completely cut off from our Parliament here. I do not know that it would not be better for Members of the European Parliament to be able to have a voice either in this House or in another place, perhaps with limited voting rights as well as speaking rights. I do not want to see the European Parliament completely divorced

  1137
  from this Parliament, because the result of that could be that we became a subservient and secondary form of legislative chamber.
  A great deal of work has to be done now before the direct election system can reach the statute book. There are many possibilities. For example, perhaps members of the European Parliament could be titular members of the other place and allowed to speak in this Chamber also. All these matters could affect us here very considerably. More important, they could affect the powers of this, our own Parliament. We shall have to examine this situation very carefully and ensure that when the final draft is put forward we have some compromise whereby the link between Europe and this Parliament is not severed and—far more important—our responsibility here is not severed.
  We all want to see the powers of the Commission reduced and the powers of members of the European Parliament increased. That means that we must have a powerful European Parliament. I have consistently advocated membership of the Common Market and a European Parliament.
  Let us make sure that we continue to play our part in Europe, as I am sure we have done already, at the same time ensuring that we do not allow this Parliament to become divorced from Europe under two sets of rules and two sets of standards. Let us try a typical British compromise in order to ensure that, in the links between this Parliament and the European Parliament, we here are not subservient to a European Parliament.
  7.44 p.m.
  Mr. Ronald Bell: I share the anxiety of my hon. Friend the Member for Windsor and Maidenhead (Dr. Glyn) that this Parliament should not become subsidiary to the European Parliament. But perhaps that is a matter that we may debate more fully if we ever reach the issue of direct elections to the European Parliament. I appreciate that my hon. Friend is in no way out of place in referring to the matter today, but we shall have a lot of time, when and if we come to the legislation, to deal with the subject.
  1138
  I shall be brief, as becomes one who has not been present during most of the debate. But in a way that leads in exactly to what I want to say. I had assumed, wrongly, that this debate would run right up to 10 o'clock. Whilst I regretted that I should miss the early part of the debate, I thought that I should be here for most of it. But that is not so. Both sides of the Chamber are virtually empty. Nor is that unique. It happens over and over again when we debate these European matters, and it is all very relevant to the arguments that have been exchanged today.
  The Select Committee on European Secondary Legislation, of which I am a member, examines and reports on about 800 of these instruments every year. The procedure is not perhaps useless, but it is certainly nugatory in result. This debate has not attracted any considerable attendance in the Chamber. When we report that an instrument requires X debate in the House, eventually it is put on for debate—unfortunately, in the middle of the night as a rule. But whether it be in the middle of the night or in the middle that is to say, nothing.
  of the day, the result is much the same;
  We act here rather like the Public Accounts Committee does in relation to financial matters: we are looking at things restrospectively. One of my reasons for opposing entry into the EEC was that I could not envisage any way in which we could have effective parliamentary control over what the EEC did. My hon. Friend the Member for Windsor and Maidenhead is worried about the possible future predominance of the European Assembly, and it is a proper worry. But I do not see any sign of such predominance at the moment.
  The European Assembly is a useless body. Indeed—and I say this with all respect to my hon. Friend, who is a member of it—it is worse than useless. The whole purpose of a Parliament is to find out what the Executive intends to do and to stop it. The European Assembly, having found out how much the Commission or the Council of Ministers proposes should be spent, sets about increasing it. As far as I know, the only effect that it has exercised upon the Community budget in the last two years has been to propose increases in expenditure, not reductions.

  1139
  What is the good of a brake that acts as an accelerator?
  A constant complaint that we have voiced as a Select Committee—I am sure that my right hon. Friend the Member for Knutsford (Mr. Davies) will have mentioned it—is about the absurd proliferation of detail in the legislation that comes from Brussels. That proliferation of detail continues quite unchecked by anyone. I do not know whether the changes mentioned in the White Paper, which may fructify in the new Commission and the new presidency of the Council of Ministers, will have the dampening effect which Ministers usually promise us when they give evidence. I do not think that we have heard a Minister giving evidence before the Select Committee who has not agreed with us about the fussiness of Community legislation. But we have been in the Community for three years now and I notice no decline in the fussiness or in the volume of legislation from the Community and no increase in our control over it.
  We visited some of the other member-States of the Community to see how they control what the Community does. We found that the only country which exercise any parliamentary control over the activities of the Community is Denmark. Denmark is able to act in that way because it has had a minority Government. Parliament says to the Danish Government "Either you do what we say, or we shall not support you". That systems appears to work—to such an extent that even the Danish Minister in Brussels has to telephone in the middle of the night to the chairman of a parliamentary committee to obtain an extension of his ministerial remit. That is the only country in which there is parliamentary control over what happens in Brussels.
  Mr. Russell Johnston: Is it not more accurate to say that the scrutiny committee in Denmark exercises control because that Parliament is elected proportionally rather than that these things happen because of the current accident of a minority Government?
  Mr. Bell: I would not grudge the hon. Gentleman his commercial. However, it has not much relevance. The only relevance I can see is that when one employs a system of proportional
  1140
  representation, one has the election of minority Governments and one has to cope with the kind of deal that is found in Denmark. However, that is an almost accidental effect. Indeed, if the Labour Government in the United Kingdom loses any more by-elections, we may find a similar situation occurring here. We, too, may face the prospect of a Minister having to telephone from Brussels to obtain instructions from the British Parliament.
  I apologise for coming in at this stage of the debate, but I had no idea that it was so near its conclusion. I may have started some new thoughts, but I wanted to emphasise the dominant theme, namely, that we have no effective control whatever in these matters. We discuss these matters with Ministers in this country, but when they go away to Brussels we lose sight of the objective. We are given assurances that drafts will come before us but again that process is not satisfactory.
  We as Members of Parliament intervene at a particular point in the consideration of these matters and we express a point of view in the House, but the House has no machinery for adopting our point of view. Therefore, we have these debates, the House moves on to the next business, and things go on just as before. The fears that we expressed before we joined the Community have come to pass.
  Unless my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) is able to reassure me otherwise, I must still maintain that the British Parliament has no effective control over what happens in these EEC matters. I hope that my hon. Friend will not try to argue that all these matters can be handled in Strasbourg or Luxembourg, because I assure him that that will not happen for a very long time. In the meantime a whole corpus of law and regulations is being built up in Britain with no parliamentary control whatever.
  7.53 p.m.
  Mr. James Scott-Hopkins: It is normally one's happy task at the conclusion of a debate to express the view that the debate has been worth while and has truly justified the giving of Government time. I cannot say that about this debate. It has been one of the worst debates I have ever had the misfortune to sit through. There have been excellent

  1141
  individual speeches from both sides of the House, and I do not detract from their merit, but there has been little in the way of theme and no coherence of thought by the Government.
  It was not a good idea to have this debate on the day the House returned from the Chistmas Recess. I appreciate, as was emphasised by my hon. and learned Friend the Member for Beaconsfield (Mr. Bell), that the EEC is not an exciting subject. I hoped to see a great deal more in the way of attendance at this debate considering that we had a whole day's debate before us. These are matters which hon. Members are always crying out to debate. They instance the iniquities of the EEC and advance individual issues that they wish to deal with, and then when the occasion arises we see the present sparse attendance.
  It is the Government's fault. We all know that 30 British Members of Parliament are now in Luxembourg, and many of them would otherwise have taken part in this debate. They are torn between their duties at the European Parliament and the possibility of being present for this debate. I hope that the Government will not repeat this process, although they constantly do so. It is not a new thing that Her Majesty's Government have chosen to debate EEC matters at a time when the European Parliament is sitting, and it is most inconvenient for hon. Members who have duties in both Parliaments.
  I wish to mention the main issue mentioned by the Minister of State when opening the debate—namely, the situation in regard to fishing in Community waters. Reference has been made to this matter by hon. Members on both sides of the House. I should like the Minister to give the House his own timetable for the conclusion of negotiations within the European pool as well as outside it. An error was made by the hon. Member for Kingston upon Hull, West (Mr. Johnson) in talking about foreign trawlers fishing within Community waters as from 1st January. I understand that most third country fishermen—this certainly applies to the East Germans and Poles—were excluded as from that date and that the operations of Russian trawlers within the 200-mile limit have also been reduced until the end of January. I gather that if the negotiations are not
  1142
  successful with the European Commission those fishermen eventually will be excluded from those waters. We surely must get clear exactly who is allowed to fish within the Community pool.
  I know that many fishermen in the United Kingdom are disturbed about the fact that fishermen from Community countries will be able to fish without discrimination within the United Kingdom's 200-mile band and will be able to use the same catch quotas as operated over the last years. If that is the case, the situation is most unsatisfactory.
  The Minister said that his first objective was to conserve fish, and nobody will quarrel with that aim. However, there is a second equally important objective—that is, to preserve as large a part of our fishing fleet as is reasonable so as to give a good level of income to the men who are engaged in fishing, whether they be inshore or deep-sea fishermen. Within the bounds of equity, we must ensure that our fishermen enjoy the best possible standard of living in undertaking their difficult and arduous task.
  The hon. Member for Kingston upon Hull, West mentioned the difficulties of supervision and enforcement of the eventual band. I understood the Minister to say that he intended to go for a 50-mile band, but whether he will succeed in that aim is arguable. One cannot properly supervise or enforce a pure quota system no matter how hard one tries, even if one operates with a large number of ships that are able to stop trawlers and examine catches.
  Even if we had a mass of ships that were able to stop and examine various trawlers and freezer trawlers, I do not believe that we could do it properly with a quota system. We must introduce a licensing system for boats, skippers and the gear that the trawlermen use, as well as licensing of the areas and the time within which the foreign fishermen are allowed to go into those areas. That is what has to be done if one is to have an efficient agreement that will work to any effect.
  This is not the time to go into the details of the problems that exist with respect to industrial fishing and herring fishing. I would stress that it is essential for our industry that we should have a reciprocal arrangement with Norway and with our Danish friends.

  1143
  One wishes Mr. Gundelach the best of good fortune in his new post and in the negotiations that he will be conducting on our behalf with Iceland. I hope that he can get some trawlers back into Icelandic waters as well as get a catch of a reasonable size permitted and agreed between Iceland, the Community and ourselves.
  My right hon. Friend the Member for Knutsford (Mr. Davies) mentioned the importance of political co-operation between the Community countries. There is no doubt that the past six months have seen an improvement in this regard, although a much smaller and slower one than was hoped for. Quite clearly, one of the reasons why things have gone slowly has been the attitude of the Government. They have been represented at the European summit meetings as well as the Council of the Foreign Ministers and all the other Councils. Particularly with regard to the Foreign Ministers, I do not believe that sufficient progress has been made which should have been made if the Government and Labour Members had been prepared to put more will and determination into getting the Communities to work together in the political sphere. There is a huge mess of important issues that I shall not go over now because time does not allow.
  My right hon. Friend the Member for Knutsford was quite right in asking that the Community should indeed take a stand concerning Rhodesia. One hopes that it will take a stand. I do not agree with the hon. Member for Newham, South (Mr. Spearing). It is something which should be done by the Community. A Community view would give greater strength to the negotiations that we are trying to carry out with the parties concerned in the Rhodesian problem. That is exactly what we asked for, and what happened with regard to the dispute over Cyprus and the issue of Greece and Turkey.
  I ask the Minister to say something further about the negotiations with the Greek Ministers for the entry of Greece into the Community. Are they advancing at all? What timetable does the Minister have in mind?
  Presumably during the six months when the Foreign Secretary will have the chair- 1144
  manship of the Council, he will be taking the initiative to get the negotiations going or to keep them going perhaps even at an accelerated rate. But the House should be given an idea of what is in the Minister's mind.
  While talking about Greece, one must also mention that there is a great danger that with the various agreements and association agreements we have made and are making in the Mediterranean, our other associate member there—Turkey—is feeling hard done by. I hope that during the chairmanship of the Council in the next six months the Foreign Secretary will take especial pains to see that our Turkish friends do not feel that they are receiving, as they have been, a bad deal compared with that being given to their neighbours. It is an extremely sensitive area and I do not want to enter into the internal policies now. This is a great task to which I believe that the Foreign Secretary should turn his mind. If he succeeds—there is no reason why he should not—it would benefit not only this country but also the whole of the Community.
  I was interested in the extremely destructive speech made by the hon. Member for Southampton, Test (Mr. Gould). There was not a word in it of any constructive value. I never thought there would be. Nor was there in the speeches of my hon. Friend the Member for Banbury (Mr. Marten) and the hon. Member for Newham, South. I have heard it all before. [Interruption.] I am not disputing that the hon. Member for Newham, South has a right to say what he did.
  Mr. Spearing: I hope that I concluded on a constructive note when I asked my right hon. Friend to publish the full documentation of the EEC so that the British people should know. I would have hoped that the hon. Gentleman would join me at least in that matter.
  Mr. Scott-Hopkins: I would certainly withdraw my comment that there was nothing constructive, but what is constructive in asking for publication of documents that most people interested in them already have and are able to get hold of?
  Mr. Marten: I hope that my hon. Friend will exonerate me. I made a very

  1145
  constructive speech. But I had to preface it with quotations from those who know far better than myself about these things. I had to lay the foundation for why the Community was disintegrating and why we ought to look ahead to see where the future of the Community was going. That was my constructive point, but perhaps my hon. Friend was out of the Chamber at the time.
  Mr. Scott-Hopkins: I was not out of the Chamber at the time.
  Mr. Gould rose——
  Mr. Scott-Hopkins: Two hon. Gentlemen have already intervened. When I have answered them I shall be delighted to give way to the hon. Gentleman. I listened to what my hon. Friend said. It had a certain kind of déjà vu which was mentioned by the hon. Member for Inverness (Mr. Johnston). I am not sure what was constructive in my hon. Friend's speech, but I shall read it with interest tomorrow morning and we shall undoubtedly compare notes tomorrow afternoon when I have had time to digest it.
  Mr. Deputy Speaker (Sir Myer Galpern): It is unfair that hon. Gentlemen should try to assess the value of their contributions to the debate. We should leave that to posterity.
  Mr. Gould: I am reluctant to intervene in that case, Mr. Deputy Speaker, but I do not wish that silence should be held to imply acceptance of guilt. In fact, I pressed members of the Government to protect our own national interests with much more vigour than they have done. I believe that that is a constructive suggestion.
  Mr. Scott-Hopkins: We are rapidly becoming involved in semantics. I very much doubt whether one could say it was constructive to press the Government to do something which they ought to be doing anyway. What was interesting was that the hon. Gentleman blamed the Community for our balance of payments deficit and said that it was the fault of the Community that we as a country were doing so badly both industrially and agriculturally. The hon. Gentleman ignored all the help that we have got from the EEC in the form of loans, as mentioned by my hon. Friend the Mem-
  1146
  ber for Arundel (Mr. Marshall), such as the £375 million loan from the Coal and Steel Community in the past six months. All that was ignored.
  The hon. Gentleman also ignored the appalling record of his own Government over the past six months. In agriculture they have not fulfilled the promise made in their statement contained in the document "Food from Our Own Resources". There has been little increase in production. They have done nothing to help the farmers. It is a sad and sorry story.
  With regard to industrial investment, can the hon. Gentleman really put his hand on his heart with pride and say that his colleagues on the Front Bench have done everything they should to encourage industrial investment by their policies over the past six months? No, of course he cannot. It is fair to say that 99·9 per cent. of the difficulties which he mentioned are due to the Treasury Bench and their policies over the past two and a half years.
  My hon. Friend the Member for Banbury referred in his interesting speech to a topic about which we did not hear a great deal in the debate when he spoke of direct elections to the European Parliament. It seems to me that, for reasons best known to themselves, the Government are dragging their feet in this respect. Whether they are frightened about what might happen in the Labour Party when they publish the necessary Bill, I do not know. But I remember asking the Minister of State the week before we rose for the Christmas Recess why he was being so coy about announcing when the Bill was to be printed and published. So far, we have had no further news about it. The right hon. Gentleman said that the Government would fulfil their commitment. I presume that he meant their commitment to use their best endeavours to see that the necessary action was taken by May or June of next year. However, the right hon. Gentleman knows that, unless the Bill is printed and laid on the Table by the second week of February and receives its Second Reading during February, there is very little chance of the necessary machinery being put into effect to achieve the desired timetable.
  This Government have paid lip service to the idea of Europe, and Ministers

  1147
  have given an undertaking. It would be monstrous if they continued deliberately to drag their feet, thereby encouraging the dissidents on both sides of the House, with the result that we were the only country to delay this legislation. As my hon. Friend the Member for Knutsford pointed out, it would need only one country to fail to carry out its pledge for the whole idea to be vitiated. Then we should have to start again and no one knows exactly what the procedure or result would be.
  There is no reason why this legislation should be delayed. For months now, the Leader of the House has known exactly what is needed. I am certain that the parliamentary draftsmen have already drafted the legislation and that it has been in existence for weeks if not months. There is no reason why it should not be lying on the Table in a short time, and I hope that the Minister will tell us that that is what is to happen.
  It would be wrong if I did not mention some of the fears which a number of my hon. Friends have about the European Parliament. My hon. Friend the Member for Banbury seems to be terrified lest it should get additional powers. By that, I presume that he means powers to initiate legislation. Those powers may come in due course, but there is no question of that happening in the immediate future. However, the European Parliament must accrue to itself some increased ability to supervise what the Commission and the Council do. It is the Council and the Commission that the European Parliament can supervise and examine in detail before the Council gets its hands on proposed legislation and the Commission's proposals in draft form. I should have thought that every hon. Member would accept that and want to see that power improved.
  Government supporters talk about being democratically elected, and I should have thought that proposals along these lines would appeal to them especially. It would result in scrutiny by a directly-elected Parliament. It would closely scrutinise proposed legislation before it went into Cabinet or Cabinet committee as it does here, and it would scrutinise it again when it came back from Ministers. That is what is needed,
  1148
  and it is what the European Parliament inevitably will have to do, especially when it is directly elected.
  Mr. Marten: My hon. Friend said that the directly-elected European Parliament would supervise the Commission and the Council of Ministers. I do not think that people will object if it supervises the Commission, but it is highly dangerous if it is proposed that the directly-elected Parliament should begin to supervise the Council of Ministers. Did he really mean that? If he did not, will he explain exactly what he meant?
  Mr. Scott-Hopkins: I was, of course, saying that it would supervise legislation before it became law. As my hon. Friend knows, legislation comes from the Commission in draft form to the Parliament. The Parliament discusses it and looks at it in detail. It discusses in detail the proposed expenditure. The Parliament then sends it to the Council of Ministers. If there is a dispute and the Council of Ministers is not able to agree with the Commission's proposals and the Parliamentary's amendments, there is a consultation procedure. At the end of the day the Council of Ministers has the final word, but at least the Parliament has two opportunities to discuss proposed legislation, the last opportunity being to discuss it with the Ministers directly concerned.
  I should have thought that that principle would be accepted by hon. Members on both sides of the House, whether they are for or against direct elections. Direct elections will improve the political viability of the Community. Certainly they will improve the democratic methods by which the Community is controlled. I hope that there will be no more dragging of feet in this respect and that the Government will do their utmost and lay the necessary legislation on the Table for Second Reading within the coming few weeks.
  I turn now to the energy side of the report. As my right hon. Friend the Member for Knutsford said, it was the Government's fault entirely that negotiations about a common energy policy broke down, and it is odd that the Minister should say that best endeavours were being used and pretend that it was not entirely the fault of his own Government that the negotiations broke down.

  1149
  I want to question the Minister further about the research centre at Culham. It seems to me essential that the groundwork should be done as quickly as possible on this research centre for JET. I accept that it is no good having another refusal. Therefore, the quicker that the diplomacy is started and pressed to a conclusion, the better. If there is further delay, the danger is that the teams will be dispersed, and even if a decision favourable to us is taken it will be too late. It would be tragic if that happened, and I hope that the Minister will do all that he can to expedite the matter.
  This is perhaps a most unfortunately timed debate without a specific theme running through it. Everyone knows that there are problems in the Community. One hon. Member talked about the difficulties in agriculture. There are surpluses here and shortages there. MCAs bedevil the whole issue. Our farmers are not expanding as they should be. Competition against them in the pig industry especially is appalling. If something is not done quickly, we shall have no pig industry at all.
  There are difficulties in the industrial sector as well. As my hon. Friend the Member for Arundel said, the consultation procedures need looking at again. This applies not only to the Economic and Social Committee and the fact that we should know more about how and where the Government appoint people, but to a mass of other consultative committees as well.
  With all the drawbacks and partial failures of the EEC, there are enormous advantages as well. Now that we have the presidency for six months we must do everything within our power to galvanise the Community into taking the next step forward, as Roy Jenkins said. Nothing can stand still—it either withers or it goes forward. It is up to right hon. and hon. Gentlemen on the Government side to see that the Community, which is important to the welfare of our people, goes forward and does not die.
  8.21 p.m.
  The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. John Tomlinson): I must say at the outset that I was surprised by the opening comments of the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) about the
  1150
  quality of this debate. Inevitably, these six-monthly debates on the progress of the Community are lacking in cohesion and do not have a continuing theme because of the number of different issues covered. Nevertheless, it has been a very useful and informed debate on a wide range of subjects. Some contributions have been more informed and useful than others, but, despite the relatively small number of hon. Members participating, I think that it has been very useful indeed. I think that the clash with the plenary session of the European Parliament is unfortunate. Sometimes such clashes are inevitable, but I hope that the views expressed in the House today will be taken into account, and that in future such clashes may be minimised.
  The right hon. Member for Knutsford (Mr. Davies), in opening for the Opposition, was excessively critical about what he regards as a lack of progress in political co-operation. He argued that there should be a more formal and structured back-up for the machinery of political co-operation. The question of a permanent political secretariat has been raised a number of times over the last few years. The British Government would prefer to have the experience of running the presidency in the next six months before deciding whether they think a permanent secretariat would help matters.
  The right hon. Member for Knutsford raised specific points about Cyprus and Rhodesia. I assure the House that in the period of the British presidency the Government will take their responsibilities very seriously indeed. In political co-operation the Government will seek to develop and strengthen the process of political co-operation among the Nine, by which the nine member States increasingly speak with one voice on major foreign policy issues. The report stresses how important this has been in relation to members of the Community voting and speaking in the United Nations.
  As the Heads of State and Government of the member States said after the European Council meeting in the Hague in November, this form of co-operation must lead to the search for a common external policy. Regular consultation will continue during the term of the United Kingdom presidency over a wide range of foreign policy issues, including those mentioned in Paragraphs 2 to 5 of the

  1151
  White Paper. I am confident that we shall register further progress during our presidency and successive presidencies.
  Other points raised by the right hon. Member for Knutsford included the problems facing the textile industry arising out of the section of the report dealing with external trade. The Government are fully aware of the difficult situation of the British textile industry. The agreements concluded under the existing GATT Multi-Fibre Arrangement provided a considerable measure of protection for the industry, but the Government recognise that import penetration has continued to rise nevertheless. This factor has added to the industry's difficulties. The present arrangement expires at the end of this year and negotiations are already under way in the GATT Textiles Committee in Geneva for a successor agreement. The Community, and not the United Kingdom, is the signatory to the arrangement, and the British Government hope that the Community will secure changes in the agreement which will benefit our industry.
  My hon. Friend the Member for Southampton, Test (Mr. Gould) made an entertaining rather than illuminating speech. It was entertaining because of its style of presentation, but it was not enlightening because I have heard it all before. It belaboured the question of the trade deficit which, it is alleged, our membership of the EEC has created. I do not accept the economic arguments which he put forward. Just as my hon. Friend portrayed these arguments as being a fact, other people present them in a totally different way, and I accept the alternative hypothesis.
  My hon. Friend the Member for Test quoted a report in Socialist Commentary of a speech by the Secretary of State at a fringe meeting of the Labour Party Conference. In this speech my right hon. Friend said that it was not his exclusive opinion that the economic balance of the Community was neutral. Having consulted the opinions of a whole range of economists, he concluded that the economic balance was neutral, and I accept that.
  A number of hon. Members, including the hon. Member for Banbury (Mr. Marten) discussed agriculture, and in particular the problems which we face in
  1152
  this respect. In relation to the CAP and the green pound I must state clearly what we want by way of reform. Our central aim is to secure the best use of resources so that the CAP provides effective support for the efficient producer without imposing excessive burdens on consumers or taxpayers.
  Substantial progress has been made so far in improving the operation of the CAP, and progress is continuing. We obtained significant changes in the renegotiations and we have made further progress, for example, in restructuring the cereals support arrangements. The Council of Ministers has agreed on further work in other areas, including the dairy sector where proposals for restoring the balance of the market were considered last year, and they will be reviewed at further meetings of the Agriculture Ministers. On beef the Commission will submit a report on the respective merits of intervention and the premium system. Some progress has been made and there is no doubt of our serious intentions and the recognition by the Government of the need to protect our vital interests.
  Mr. Marten: If one accepts that certain things have been done—earlier the Minister referred to fringe meetings and now I refer to fringe matters on the CAP—one is entitled to ask what the Government's intentions are in respect of further and fundamental amendments which will make a real difference to the CAP.
  Mr. Tomlinson: I have said as clearly as I can what our objectives are and what the progress so far has been. I can assure the hon. Gentleman that progress that we make in the future will more than match the progress we have made in the past.
  The hon. Gentleman was critical of the scrutiny procedures, and he was supported in this by the hon. and learned Member for Beaconsfield (Mr. Bell). The Government are aware of the concern which exists about the unsatisfactory nature of arrangements for debate on documents reported by the Committee. The problem is one of parliamentary time which, as we know, is not unlimited. I hope that greater use will be made in future of the procedure for taking debates in Standing Committee. This will in some

  1153
  ways relieve the pressure on the time of the House.
  As for the making of statements after meetings of the Council of Ministers, the government have made it clear that where appropriate this will be done, but that it must depend on two factors. The first is the importance of the subject discussed in the Council. The second is the availability of parliamentary time.
  The hon. Member for Banbury raised what he regarded as the offensive practice of stamping "EEC" on passports, which will be done if we come to some arrangement on uniform passports. The issue of passports in the uniform style is intended by member States to emphasise their own membership of the Communities and the fact that each bearer of the uniform passport is a national of a State belonging to the Communities. The possession of a uniform passport should heighten the awareness of the citizen of his status in belonging to the Communities.
  Mr. Marten: Surely the Minister has now admitted that this is purely a cosmetic exercise. In the Nordic Union passports are not stamped "NU". Each State simply uses its own national passport. Does not the Minister agree that this is therefore a cosmetic exercise?
  Mr. Tomlinson: The hon. Member is entitled to put his own interpretation on to this proposal.
  My hon. Friend the Member for Kingston upon Hull, West (Mr. Johnson) made an interesting and informed speech, based on his experience as a representative of a fishing port, about the problems confronting the fishing industry. On the question of coastal belts, as has been made clear repeatedly in this House, the Government stand by the statement by my right hon. Friend who is now the Secretary of State for Prices and Consumer Protection on 4th May following the Council meeting.
  The Commission's proposals are unacceptable in that they do not match up to the requirements set out in the 4th May statement. We have not altered our view in any way, and the stand-still arrangement for this month does not in any way compromise that objective. My hon. Friend called upon the Government to end the uncertainty. I wish that that
  1154
  was as easy to do as it is to say. We could end the uncertainty by coming to unsatisfactory arrangements, but it is the Government's responsibility to make sure that any agreement we reach recognises that this country contributes over half the fish stocks to the extended Community waters and that we have suffered a serious cutback in third country waters.
  On Iceland, my hon. Friend the Minister of State, Foreign and Commonwealth Office told the House on 21st December that in reporting on the consultation with Iceland Mr. Gundelach had said that he deeply regretted that it had not been possible to reach agreement with the Icelandic Government but that he hoped for and would continue to try to secure a positive decision by Iceland. It is impossible to forecast whether the Icelanders will be prepared to agree to arrangements which will permit our fishing to resume, but the talks with Iceland have not broken down. They are to continue later this month in the hope that we shall reach an agreement.
  There has been no question of the EEC letting us down over Iceland. The Icelanders have never been easy to negotiate with. We are confident that the Commission will be able to bring home to Iceland the consequences of failing to reach a reasonable understanding with the Community. Failure to achieve this so far has been disappointing, but I do not think the negotiations could have been handled more successfully in any other way or by any other person than the Commissioner now responsible.
  I turn now to the interesting contribution of the hon. Member for Kensington (Sir B. Rhys Williams), who was particularly concerned to discuss economic and monetary union. It now seems to be accepted that the aim of economic and monetary union on the basis of fixed exchange rates by 1980 is quite unrealiseable. Progress on the economic front is clearly essential to progress in the Community generally. For this to be possible a substantial measure of economic convergence must be achieved.
  The Dutch proposals, referred to in paragraph 51 of the White Paper, are still very much on the table. They are being closely examined here and in other Community countries and could well offer the most satisfactory way forward in the

  1155
  exchange rate area. Given the wide divergence of economic performance which still exists among Member States and all the difficult questions about how the arrangements Dr. Duisenberg proposes would operate, it would be unrealistic to look for rapid progress.
  I say to my hon. Friend the Member for Newham, South (Mr. Spearing) that in my view the economic balance is neutral. He was picking out in his speech exactly the same point as did my hon. Friend the Member for Test.
  I refer now to the question of the problem of public access to EEC documents. My hon. Friend the Member for Newham, South was being slightly unfair to my right hon. Friend when, talking about the letter he received from him, he said "All he says" and referred to a short part of what he later acknowledged to be a lengthy four-page letter. The existing arrangements for public access to EEC documents are not as foolproof as one would like them to be were money no object. However, they do not seem to work too badly in practice. Neither the European Communities Office nor the Foreign and Commonwealth Office has any evidence of any serious public dissatisfaction.
  To embark on the publication of individual proposals in addition to the existing Community publications would be an expensive business, whoever bore the cost. I do not think that there is a case for establishing any new expensive commitments although there are one or two less ambitious ideas which we intend to pursue.
  Mr. Spearing: My hon. Friend is putting up a suggestion which I did not make. I was not asking for additional printing. I was asking that the existing yellow slip system be made available to the public. My reference to the Minister of State's letter and to "All he says" referred to the fact that he dismissed that suggestion without saying why it was not possible or why he considered that it was undesirable.
  Mr. Tomlinson: I am grateful to my hon. Friend for that clarification. I am sure that he will be pursuing that point directly after the debate.
  The hon. Member for Arundel (Mr. Marshall), who has apologised for his in-
  1156
  ability be present to hear my reply, raised three areas where he said we had not gone as far as possible. The first two concerned the rôle of the consultative committees, the overall policy on loans and Government thinking on the question of exchange rate guarantees. I am sure that he will understand if I give an undertaking to reply to him in writing.
  The hon. Member's third point concerned co-ordination in Government thinking. I can assure him that there is regular and systematic contact between Ministers and Government Departments engaged in the work of the European Community. This takes place as a matter of course.
  In a wide-ranging speech the hon. Member for Windsor and Maidenhead (Dr. Glyn) raised a point about the link between European parliamentarians and Westminster. The Select Committee came to no firm conclusions on this matter and suggested that experience should dictate how far this relationship should develop. In a matter so closely concerning the House I am sure that this course of action is wise. In so far as legislation might be required, it will be principally a matter for my right hon. Friend the Home Secretary, who will certainly take note of the hon. Member's concern.
  The hon. Member for Derbyshire, West referred to the question of designation in relation to fishing policy. The Government have designated a number of countries as being entitled to fish within the area by which British fishing limits have been extended. There will be no change in the arrangements which currently apply out to 12 miles.
  The designated States are Community Member States and, for three months in the first instance, Norway, the Faroes, the USSR, Poland, East Germany, Finland, Sweden, Spain and Portugal. The designation of these countries, and the exclusion of all others, is in accordance with our Community obligations and the decisions taken by the Council. The common fisheries policy requires us to give other member States access to our waters beyond the six to 12-mile band which is reserved until 1982 for our fishermen under the Treaty of Accession.
  The Council agreed with Norway and the Faroes that fishing by each side in

  1157
  the waters of the other should continue as in the past, for the next two or three months pending discussion of longer-term arrangements. For the other countries on the above list the Community has decided to grant for the first three months of 1977 an autonomous quota equivalent to their average catch between 1965 and 1974 minus 15 per cent. The quota will be reviewed at the end of this period in the light of progress in the negotiations with the countries concerned.
  The Community has decided to eliminate fishing by Bulgaria, Cuba, Romania and Japan. Fishing by these countries was on a small scale and had started only recently.
  The hon. Member for Derbyshire, West also asked about the Government's view on the Greek accession. We give our full support to the Greek application for Community membership and look forward to carrying the negotiations forward during the United Kingdom's tenure of the presidency.
  Mr. Marten: My hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) mentioned Turkey, in which I am interested, and the need to ensure that the Turks are not disadvantaged. Will the Minister answer that point?
  Mr. Tomlinson: At the EEC/Turkey Council of Association meeting on 20th December, we reached agreement with Turkey on a number of issues. The Community made clear that it is fully conscious of the interests of Turkey and the need to ensure that policy towards Turkey is as even-handed as possible.
  Mr. Scott-Hopkins: The agreement signed at the last Council meeting does not cover the point on which there is disagreement. The Turks feel that they are being treated worse than countries such as Egypt and Israel on such matters as agriculture and the terms for industrial credit. The Turks feel that they have not been equal terms.
  Mr. Tomlinson: We have had extensive discussions in the Community on problems relating to Turkey. There may be differences of view within the Community, but there can be no doubt that everyone is fully apprised of the interests of Turkey and conscious of the necessity of recognising those interests.
  1158
  The hon. Member for Derbyshire, West also referred to the Joint European Torus. The Government's view has been made clear in the House on many occasions; we believe that it is essential that an early decision on the siting should be reached so that the JET can go ahead as a Community project. It is essential that the JET should be sited where it has the best chance of success and we believe the best site to be Culham. The team there designed the experiment and the necessary background and experience of fusion work exists there. We are continuing to press the claims of Culham, but I must make clear that we shall not block agreement if there is a strong consensus in support of another suitable site.
  Under our presidency, consultations between the European countries which are anxious to provide a site for JET will continue. On 21st December my hon. Friend the Under-Secretary of State for Energy pointed out that we believe that the EEC will show the necessary determination and resolve to make sure that JET is established as soon as possible.
  A number of hon. Members have referred to direct elections to the European Parliament, and they have had responses from Ministers on a number of occasions. The House is well aware that the direct elections instrument was signed by the Foreign Ministers of the Nine on 20th September last year. Member Governments are now in the course of preparing the necessary legislation to enable them to comply with their expressed intention of holding direct elections in May or June next year. The Queen's speech contained a commitment to the introduction of a Bill in this Session, but it is not possible at this stage, as has been explained, to state precisely when the Government will be able to introduce this legislation.
  Many points have been made in the debate on a wide variety of topics and I have tried to reply to as many of them as possible. I think that these six-monthly debates should be taken very seriously by the House. There have been many interesting contributions, and the Government will bear in mind all that has been said. Needless to say, I cannot agree with all the views which have been expressed, however elegant the expression of those views might have been. My only regret is that these debates still produce

  1159
  evidence of a vocal minority who, having been in the forefront of demands for a referendum on the question of continued British membership of the EEC, still refuse to accept the clear and overwhelming verdict of the British people.
  I have no doubt that from time to time it is useful for the House to have the chance to consider the whole range of British relations with the EEC. That is particularly true today as we embark on the six months of United Kingdom chairmanship of the Council of Ministers. Six months is not a very long time in the history of the Community, and we are not setting out with ideas of initiating radical changes; we should be bound for disappointment if we were. But we are determined to run the business of the Council as efficiently as we can and to help to establish an order of priorities in the many problems facing the Community.
  Let us all hope that the events during our presidency—those for which we are responsible and those for which responsibility lies elsewhere—are such that our next debate, six months hence, can take place in a more certain international economic atmosphere and against a background of greater progress than we have experienced in the six months which we have reviewed today.
  Question put and agreed to.
  Resolved,
  That this House takes note of the Report on Developments in the European Communities, May-November 1976 (Command Paper No. 6695).

  EUROPEAN COMMUNITIES (BANKING)
  8.48 p.m.
  The Minister of State, Treasury (Mr. Denzil Davies): I beg to move,
  That this House takes note of Commission Documents Nos. R/3592/74, R/1820/75, R/2146/75 and S/349/76 on Banking and the European Export Bank.
  These documents deal with two quite separate subjects. The first three relate to the draft directive on the co-ordination of laws governing the commencement and carrying on of the business of credit institutions. Document S/349, on the other hand, contains a proposal that a European Export Bank should be established. I shall deal with these two subjects in turn, beginning with the draft banking directive.
  Document R/3592 is the original Commission proposal for a banking directive. That proposal is amended by Documents R/1820 and R/2146 and a number of detailed amendments have been agreed in discussion in Brussels. The main lines of the draft directive remain, however, as in Document R/3592.
  An essential point about this draft Community instrument is that the Commission has proposed a framework. The directive lays down some broad principles and a few detailed requirements. But member States are left largely free to interpret and add to those requirements as they judge best. If it is accepted that there is a case for a Community legal instrument in this area, I am sure that a framework directive on these lines is the right way to go about it. Great differences exist between member States' systems of banking authorisation and supervision, and it would be very difficult to reach agreement on any more ambitious set of proposals at present.
  The draft directive has been under discussion in Brussels for about 18 months now. There are still a number of questions on it to be resolved, but there is a reasonable chance that after discussions it will be ready for adoption during the first six months of this year, while the United Kingdom is in the chair. It will come fully into force—that is, we shall have to comply fully with its requirements—two years from the date when it is adopted by the Council of Ministers.

  1161
  The draft directive deals with credit institutions, which it defines as institutions which take deposits or other repayable moneys from the public and grant credit on their own account. It is concerned with member States' controls over the commencement of business by credit institutions, and with the continuing supervision of credit institutions. I shall analyse briefly what the draft directive has to say on these subjects.
  As regards the commencement of business by credit institutions, the draft directive enunciates the general principle:
  "Member States shall require credit institutions to obtain authorisation before commencing their activities".
  It lays down certain broad criteria for authorising and for withdrawing authorisation from a credit institution. It allows member States to subject to authorisation the branches of a credit institution established in another member State—for example, the London branch of a French bank.
  The second main strand in the directive concerns the prudential supervision of banks and other credit institutions once they are in existence—that is, checks and controls on their liquidity and the adequacy of their capital. Here the draft directive is even less specific than in the provisions dealing with the commencement of business, and the final text of Article 6 of the draft directive, which deals with prudential ratios, will, I understand, be less specific than the corresponding article in the document we have before us. The Contact Committee, or Advisory Committee, which Article 11 sets up, is to look at capital adequacy and liquidity ratios and see whether any further harmonisation in this area is desirable or, indeed, possible. The authorities responsible for supervising credit institutions in the different member States of the Community are to co-operate closely.
  There are a few miscellaneous pro visions dealing, for example, with exceptions to the directive and the treatment of branches of third country banks.
  When adopted, this directive will have two significant effects upon our approach to the regulation of credit institutions. The first is that the directive will commit all member States to establish a prior authorisation system for credit institutions. In the United Kingdom we do not have any basic authorisation require-
  1162
  ment We have a system of prudential controls over some specialised types of credit institution such as building societies.
  We also have a series of statutory "recognitions" which banks and other credit institutions must acquire in order to carry out certain specific functions. Exchange control authorisation is the most obvious example, and for many years the Bank of England has operated a system of prudential supervision over banks, though its supervisory role has not been derived from specific statutory authority. But we have never had the kind of law that the draft directive envisages and requires, under which all institutions have to obtain a licence or some other form of authorisation in order to engage in the basic business of taking deposits and giving credit.
  Hon. Members will remember, however, that in August last year the Government published a White Paper on the licensing and supervision of deposit-taking institutions. The White Paper said that the Government intended to introduce legislation which would set up a system of prior authorisation for deposit-taking institutions. We propose that there should be two forms of what the directive calls "authorisation": licences and banking recognitions. Licences will be awarded to institutions which meet the requirements to be laid down in legislation. Institutions will be recognised as banks if, in addition, they are of sufficient reputation and status and provide a sufficiently wide range of banking services to justify the title "bank".
  All of these institutions, licensed as well as recognised, will then be supervised by the Bank of England. In addition we intend the legislation to provide for controls over banking names and advertising and to establish a deposit protection fund, though these are not questions directly relevant to the draft directive. At the moment the Bank of England and the Treasury are holding consultations with bodies interested in our proposed legislation.
  The legislation which we intend to introduce will allow us to meet our obligations under the draft directive. The Government have no objection to the basic requirement of the directive that all

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  member States should have a prior authorisation system for credit institutions. The draft directive is not of course the only reason why we have decided to introduce such a system ourselves. There have been difficulties in what have become known as secondary banks or fringe banks in the last few years. These difficulties have also suggested that we needed to extend the existing informal system of banking supervision.
  The draft directive will also affect international co-operation in banking supervision. Banking is increasingly an international business. Increasingly, therefore, it can only be effectively supervised through international co-operation between the authorities of different countries. Such co-operation already exists. Those responsible for banking supervision in the Bank of England have frequent contacts with their opposite numbers in other countries both within and without the European Community.
  We can expect the directive to take this process of international co-operation further. The draft directive proposes that an advisory committee should be established. This committee will institutionalise contact and co-operation between those who are responsible in finance ministries, central banks and other supervisory authorities for the supervision and regulation of credit institutions. Informal contacts will of course continue. It should provide a useful forum for discussion in which all member States can learn from one another's experience. The draft directive represents a modest but satisfactory proposal of which I recommend the House to take note.
  I turn now to Document S/349, which contains the Commission's proposal for the establishment of a European Export Bank. The proposal is in the form of a communication from the Commission for a Council regulation setting up a statutory framework for such a bank. The objective of the Commission's proposal is to improve the chances of success of companies in member countries which wish to collaborate in bidding for contracts for very large projects in countries outside the Community. The bank would provide two main facilities—credit insurance and credit finance—for exporters engaged on such projects. The bank would be able to raise funds by borrowing
  1164
  on international capital markets, and, subject to certain conditions, on member States' own markets, on the basis of a Community guarantee which would be fixed annually in the Community budget.
  The budget would also provide the initial costs of setting up the European Export Bank, meeting any operating deficits, and providing an initial capital of 100 million units of account. The bank would supply credit at market rates or, within the limits of international obligations, on terms comparable with those granted to exporters in third countries. It would work closely with the banking sector, which would be responsible for at least a part of the finance for each project.
  Talks have been going on for many years over harmonisation in the field of export credits, but progress has been extremely slow and there is little prospect of early success. At the same time, the number and size of very large export projects has been growing over the past few years and is likely to continue to do so. It is also likely that exporters within the Community will increasingly wish to collaborate on these very large projects if they are to secure business against American and Japanese competition. American and Japanese companies do not face the same problems of co-operating on these large projects as do Community firms.
  A European Export Bank would be one way of trying to deal with these problems within the Community and to improve the competitive ability of firms in the Community. The Commission's proposals have some advantages. The first is the provision of a single point of contact for financing and insurance, which could simplify the administrative problems which firms face over the negotiation of large multinational operations—that is, those involving two or more member countries—compared with companies in Japan and the United States of America. The amount of business coming to undertakings in member States could, therefore, increase as a consequence of the expanded and centralised facilities thus made available.
  Secondly, the European Export Bank's access to independent sources of borrowings could relieve member States from a part of the financial burden of financing

  1165
  particular pieces of large export business. Finally, the bank could also facilitate the financing of a multinational credit deal in a single currency.
  The Government therefore believe that the Commission has usefully identified ways in which the Community's export capability could be improved. There are, however, many unresolved technical problems to be overcome before a bank can be set up and fully functioning, and we are not confident that these problems can be left, as the Commission suggests, to the management of the bank once it has been set up.
  For example, the Commission mentions, but does not discuss in detail the relationship between the bank and national credit insurance agencies; the relationship between the bank and commercial banking systems; the mechanism for providing bank guarantees and for providing interest rate support should this prove necessary. These and many other basic questions will require thorough discussion before the bank can be set up and, indeed, before we can reach a final judgment on whether a bank should be set up.
  There is a further important point that cannot be overlooked. Competition among exporting nations over export credit terms—which can considerably reduce the value of the exports to the countries concerned—is always likely to be mutually damaging. The United Kingdom firmly supports continuing efforts to avoid such self-defeating competition and any escalation towards a credit war. Any action to enable Community exporters to compete more effectively should not add further impetus to destructive competition over credit terms.
  To summarise, the Government's view is that the Commission's proposal rightly draws attention to a potentially serious problem. We think that the Community's capacity to compete for these large export projects could be improved and that the European Export Bank may well be one way of doing so which could benefit the United Kingdom. However, it would be foolish to commit ourselves to the Commission's proposal until it has been expertly scrutinised. Therefore, we shall press for the proposal to be referred to an appropriate specialist group.
  1166
  The study which we are recommending would include an analysis to establish the extent of the shortcomings of the present arrangements for coping with large-scale projects. This would reveal whether these arrangements could be adapted either as an alternative to the proposed bank or to complement the bank.
  With regard to the timetable, as I have said this proposal is only a communication from the Commission at the moment. The Commission is consulting the European Assembly about the proposal. Three sub-committees of the Assembly—the Development Committee, the Economic and Social Committee and the Budgetary Committee—are to report to the External Economic Relations Committee. The Development Committee and the Economic and Social Committee have reported. The Development Committee was not in favour of the Commission's proposals as they stand. The Economic and Social Committee agreed with the setting up of a European Export Bank. The Budgetary Committee has not yet reported. Once it does, the Commission propose that its proposal be discussed by the Assembly. It is not possible to say at this stage how matters will proceed thereafter. To set up such a bank, a regulation would be required, and if a draft regulation is eventually forthcoming from the Commission to the Council, the Scrutiny Committee would have further opportunity of considering that draft regulation.
  I therefore recommend to the House this draft proposal of the Commission to set up a European Export Bank as being at least a step that identifies a problem, but further discussions will have to take place before anything concrete can be considered and discussed.
  9.5 p.m.
  Mr. Hugh Dykes: I must first express appreciation to the Minister of State for giving an explanation of the Government's attitude towards these documents, but once again I must take a moment or two to consider the documents in the wider context of the whole argument about effective scrutiny in this House. I hope that you will not regard me as being out of order, Mr. Deputy Speaker, if I take that course.
  I shall not dwell at length on these matters. There has been a full day's debate on the six-monthly report, and that

  1167
  included a section on scrutiny procedures. However, once again a fundamental disadvantage is facing the House in the way in which the Government accede to suggestions made by the Scrutiny Committee for consideration of documents and, in the wider sense, in the way in which the Government do not give the House time to consider them properly.
  We are now dealing with two radically different subjects. One, as the Minister of State rightly said, is in the form of a draft framework directive. It is fairly gentle and mild. There are many aspects of it which we need not find contentious and upon which we can fairly easily agree. It is a fairly conventional draft directive. The House has already scrutinised a large number of such directives.
  The second document concerns a quite different subject and is a quite different form of document. It is a proposal from the Commission that is communicated to the Council for a Council regulation. As you will recall, Mr. Deputy Speaker, the Scrutiny Committee has not dealt numerically with so very many regulations, there being far more directives needing consequential United Kingdom legislation, which the second subject, the formulation of an export bank, would not need, since it requires only a direct council decision. However, for understandable reasons the House has said that we should deal with this sort of directive properly and as thoroughly as we can.
  Although there is theoretically slightly longer time this evening, if necessary, to deal with these subjects, we should have had only one and a half hours if the debate had begun at 10 o'clock. That means that there would have been 45 minutes for each of these major subjects if the time had been divided equally. Although the subject appears to be fairly mild and relatively uncontentious, that does not apply to all parts of it. It has the most far-reaching consequences for the country and for people involved in the industry. To give the House, theoretically, such a short time to consider these matters is absurd. I emphasise that on this occasion it is theoretical as there could be more time if necessary.
  We have had a full day's debate, and the Minister of State has made the usual bland promises about considering scrutiny procedures and the way in which
  1168
  these documents are considered. However, we shall have to see what happens. The impatience and indignation in the House will increase, including that among pro-Marketeers who are keen on our continued membership of the Community as well as the obvious personalities on both sides of the House who take the opposite view, if we do not tackle the problem properly.
  I am sure that more and more Members want to see more time devoted to these matters by way of proper EEC Supply Days, and more use made of the committee procedure, which for the moment seems to have been abandoned. I do not think that the EEC Statutory Instruments Committee has met since the early summer. Will the Minister go to the Leader of the House as soon as he can this week to ask him to take a more positive view? Perhaps it was churlish and uncharitable of us, but my hon. Friends and I grumbled on 23rd December about the cavalier way in which the Leader of the House treats the House on EEC matters. His insouciance and could-not-care-less attitude is becoming intolerable.
  If the Minister of State catches your eye, Mr. Deputy Speaker, I hope he will respond to the points that I have just made. Undoubtedly he will say that it is not his province, but I hope he will take these matters seriously and will emphasise the misgivings and anxieties that apply with equal force to those who are Keen on our continued adherence to the European Economic Community as well as to those who oppose our membership. I must apologise to the Minister for inflicting these remarks on him, but, despite what was said in the previous debate, it was necessary to do it.
  I thank the Minister of State for his clear analysis of the proposals in the banking directive. The Opposition feel that this is, in broad outline, a useful document which was becoming inevitable not only from the point of view of its essential elements in the creation of a common market in all sorts of financial and economic activities, banking being one of the biggest, but from the point of view of the troubles that we have had in this country and which other countries with stricter banking control regimes have had. We had trouble with the secondary banks and so on in the previous period

  1169
  of major expansion of banking assets when all sorts of financial intermediaries developed.
  I hope that these matters can be dealt with effectively not only by means of directive but by the kind of thinking foreseen in the White Paper Command 6584 published last August. That White Paper is very much a domestic legislation document and does not refer to anything in the EEC context. Although that may be acceptable and understandable in the sense that all the banking proposals in the Community were at an earlier stage, I hope that it does not represent an attempt by the Government to give the impression that all they are doing arises from their own domestic internal propensities. An EEC obligation arises from the directive which will have to be taken into account. Perhaps the Minister will say whether conventional hire-purchase institutions, in so far as such institutions remain independent after recent difficulties, will be fully covered in the outline directive.
  I could make other points about the draft directive but in the interests of time I shall not do so. Therefore, I go on to make one or two comments about the European Export Bank—[Interruption.] If the Government use lack of time as an excuse, they will perhaps get away with it with some hon. Members but, I hope, not with all hon. Members. Here we have a Treasury Minister answering points on a banking directive who is obliged to comment on a trade matter. It is far more than a financial matter. [Interruption.] The hon. Member for Feltham and Heston (Mr. Kerr) has just arrived for the debate; it is nice to see him.
  There are Treasury and financial aspects to the directive, but the European Export Bank, as an institution, would primarily be under the jurisdiction of the Department of Trade and it would link up in due course, presumably, with the activities of the ECGD. These matters, therefore, are clearly delineated in a departmental function not belonging to the Minister of State. I say that merely to emphasise the problems of overlap and the fact that the House is confronted with an important draft document which probably it does not have time to consider properly.
  1170
  This is an important matter. That is why the Minister of State rightly referred to the committees of the European Parliament considering it and that is why, when the proposal was made some time ago, there were among industry spokesmen in this country and elsewhere and in the British Banking Association substantial anxieties about the proposal itself and some aspects of it which did not appear to be well thought through by the Commission. It was as if Members of the European Parliament, from all countries, had the impression that the Commission had had an official sitting in a cupboard for six months, with food being pushed through the door occasionally, and coming up with this wonderful idea. If there is a gap in the services provided by the private institutions, I hope that they will be encouraged by governmental and Community authorities to fill it.
  I am reassured by the fact that the Minister of State has said that the Government need more evidence and more analysis and that they therefore support the idea of an expert working group to go into the matter in more detail. Perhaps the hon. Gentleman can tell us the sort of timetable that he would envisage after such an examination had taken place.
  Can the hon. Gentleman fill in some of the other details that he did not have time to deal with in opening? He referred, for example, to the permanent capital, 100 million units of account, which has been taken out of the 1976–77 Community budget and will presumably appear in the next one. It may seem to some people to be a large amount to be arbitrarily decided upon as permanent capital as opposed to any loan debt which may be raised through the open market or other intermediaries. Others, however, may think that it is a tiny amount and needs to he bigger in view of the turnkey type of contract between various member States, that with such contracts it will not be long before it is exhausted and that a large amount of loan debt will have to be raised in the open market.
  I expect that the security and guarantee power of an instrument issued by an institution like the EEB, with a full guarantee bestowed on it by the Community, would have as blue chip and first-class a status of acceptability and

  1171
  recognition in the major international money markets as any such instrument issued by an equivalent American or Japanese institution, for example. With the power that such an institution would have virtually overnight as a result of its constitutional existence, it could provide such unfair competition with the conventional banking sectors of the member States as to undermine their activities. Yet there is a vague reference in the draft regulation to the effect that the EEB will nevertheless work with private banks in informing a syndicated amount of money if financing is needed and will, indeed, work on syndicated insurance coverage as well. The hon. Gentleman has said that there is to be a study, but can he give us some preliminary details?
  There are many other points to which I could refer, but I shall conclude because other hon. Members may wish to speak, including the hon. Member for Feltham and Heston, who knows so much about the subject and no doubt hopes to catch your eye, Mr. Deputy Speaker. But the great point about such documents as these and their consideration in the House is the lack of time and that we do not have enough expertise. Indeed, the Minister had to make the amazing confession about the banking directive that its final form will be different from that which the House is considering. That is not good enough, although the proposals themselves are useful at least in taking the Community further forward to the creation of a common commercial and financial market. We welcome the proposals from that point of view, but we need more information both now and on later occasions.
  9.18 p.m.
  Mr. Ian Wrigglesworth: I shall not go too far with the hon. Member for Harrow, East (Mr. Dykes) in his comments, although I agree that the adequacy of the House's methods of discussing these matters and, indeed, some of our own domestic matters, including the White Paper, leaves a lot to be desired. I also agree that these far-reaching documents, particularly the supervisory document, in which I am particularly interested, will have a profound effect on our banking industry. The House knows my interest in banking as a former employee of the National Giro,
  1172
  that very European institution which we established here in 1968 and which is now thriving as part of the Post Office.
  I do not wish to deal with the export bank directive. I simply wish to refer to the document on supervision of the banking system, which I welcome as providing a framework which acknowledges and will help, I am sure, the growth of international banking, and acknowledges and, I think, will help the interdependence of banks one on another. The directive is also welcome because it has helped to push along the proposals for supervision of banking in this country, proposals that were necessary and have been for many years in the view of some of us.
  There has been a dreadful confusion and lack of coherence and clarity. The banking services in this country have come under the Exchange Control Act 1947, the Companies Act 1948, the Protection of Depositors Act 1963, the Companies Act 1967, and the Income and Corporation Taxes Act 1970. I could go on to mention other pieces of legislation which have had an impact on banking over the years and which various Government Departments have been responsible for supervising.
  The directive is also welcome because it has helped to put on the timetable for consideration by this House proposals to deal with the failures which have occurred in banking in recent years and which have shocked the banking community, the City, depositors, and those who use such institutions. I need mention only a few names to remind the House of the massive impact in the City during the 1970 to 1975 period of the failure of institutions such as Mercantile Credit, Vavasseur, UDT, Cedar Holdings, First National Finance Corporation, Cornhill Consolidated, and London and County Securities. Those happenings led people to believe in supervision by statute rather than by self-regulation.
  The White Paper "Licensing and Supervision of Deposit-taking Institutions", Cmnd. 6584, published in August last year, said in paragraph 2:
  "Furthermore, the customs and conventions of a self-regulatory system are likely to command more willing and effective support in this field than formal rules imposed by law."
  I hope that that referred to the last stand of the self-regulators. The White

  1173
  Paper then went on to lay down statutory proposals that will govern banking in future.
  The report on the London and County Securities case pointed to the need for supervision of a kind outlined in the White Paper. The report said that up to the time of the collapse of that company the Bank of England did not greatly concern itself with secondary banks, but commented on the fact that since the collapse of that company the Bank of England had taken action by calling for detailed returns.
  The report emphasised that the Department of Trade was responsible for monitoring accounts of the deposit-taking institutions under the Protection of Depositors Act. I made clear that up to the time of the London and Counties Securities crash the responsibility had not been seen to rest with the Bank of England, and no institution had taken to itself the responsibility for supervising such bodies.
  The report on the London and County Securities case went on to refer to the lesson involving the use of names. The report quotes a leading article in The Accountant as long ago as 1921:
  "Yet another point that comes well to the front as a result of this failure is the imperative necessity of limiting the use of the word 'bank' to concerns that conduct a bona fide banking business, and rely upon banking as at least the main source of their profits."
  The report drew attention to that lesson and pointed to the need for greater control of names and description of banks.
  Any system of supervision in the banking industry needs to do three things. First, it needs to protect the system itself. Secondly, it needs to protect the shareholders of the institutions. Thirdly, it needs to protect the customers—the depositors in those institutions.
  Generally speaking, in other countries the Government or central institution takes upon itself the responsibility for protecting the system. In some countries, notably the United States, there is a body like the Securities and Exchange Commission which protects the interests of shareholders. Again, in some countries, and as outlined in the White Paper in this country shortly, there is a system of deposit insurance to protect the interests of the customers.
  1174
  It is vital that we keep clear in our minds these three separate functions, because it is not the rôle of a body like the Deposit Insurance Corporation or the Bank of England, carrying out the function of a deposit insurance corporation, to protect the interest of the system. The main reason for introducing the deposit insurance scheme which, I am pleased to say, the Government have proposed is solely to protect the interests of the depositors and not to protect the interests of the system. That must be done by other supervisory means, many of which are outlined in this document.
  However, let me deal primarily not with the deposit insurance scheme, which is not included in the directive, but with some of the things that are included about which I am rather concerned and which are in some instances covered in the White Paper as well. I am rather troubled by the term "credit institutions". As hon. Members will know, we have a Consumer Credit Act on the statute book in this country. The term "credit institutions" could be very misleading and confusing. The White Paper is about the licensing and supervision of deposit-taking institutions. Because the term "banking" and other similar banking terms have so much meaning, it is important that there should be no confusion about the terms used in directives of this sort, or in laws, so that we are clear about exactly what we mean.
  In the directive the term "credit institutions" refers to banks, but it does not purely refer to money-lending institutions, which it might be seen to do by some people in this country. That could give rise to confusion. I hope that the Minister will look a tthis because, as he will know, under Article 5 of the directive all banking institutions in the Community licensed under their country's statutes will be able to use the home name if they are operating in other Community countries.
  That needs careful attention so that there is no confusion in the minds of either the customer or other users of the banking service and to ensure that the statutes protect all the people using those services. We must ensure that no bogus company or organisation comes along and calls itself by some name which could imply that it is covered by this directive or by our banking regulations when it is not.

  1175
  I would say a word about the prudential regulations covered in the directive. The document is wise in not laying down rigid prudential ratios, either liquidity or asset ratios, because it is clear to me that what are needed are fairly clear guide lines but not rigid rules.
  I spent some time during last summer looking at the system of supervision in the United States. After talking to supervisory bodies over there it seemed clear to me that one cannot get a clear picture of what is going on in banking simply by the three-monthly or six-monthly returns which come in and give all the facts and figures. What may be a prudential asset ratio or prudential liquidity ratio for one institution, depending on its size and management, may not be for another.
  So we want guidelines but not rigid definitions which could have a damaging effect and could bring about the sort of collapses in some circumstances which the directive is intent on avoiding. If one needs evidence of that, one need only look in the United States, where there is a fairly rigid system of banking supervision, at banks like the Franklyn National or the US National Bank of San Diego, both of which collapsed despite examiners being in regularly and despite regular returns being sent to supervisory agencies by those banks.
  Mr. Dykes: In that context does the hon. Gentleman agree that one of the most important ratios might be the old advances to deposits ratio which was used with the conventional clearers' banks 10 years ago, providing one knew exactly where the advances were going?
  Mr. Wrigglesworth: I think that the second point is the most important. It is the quality of the assets in which one is really interested. One needs to take into account both those ratios but also the competence, the prudence and the honesty of the people operating the bank. One needs to make an assessment of that and not simply upon facts and figures being sent in on a regular return.
  That brings me to the domestic position of the Bank of England in operating this directive and the proposals in the White Paper. I hope that the Bank of England will be able to shoulder the new burden being put upon it. But
  1176
  the supervision of probably double the number of institutions which it has had to supervise in a very loose way up until now will need a fairly substantial programme of recruitment and training of examiners and the introduction of a new system for the handling of returns coming from the banks so that a proper examination can be made of their assets and liquidity.
  The directive says that the assets and liquidity checks should take place every three months. There will be a considerable amount of paper flowing into the Bank of England's banking supervision department, and examiners will have to go out into the banking world to ensure that all is in order. That will require a substantial build-up of resources. I should like to be assured that that will happen and that the Bank of England will be able to cope with its new responsibilities.
  The job of supervision on a Community level will be undertaken by this Contact Committee which will work alongside the Commission. Can my hon. Friend say exactly what that means? It will comprise two members from each of the supervisory authorities in the member States. It will be bound by the professional secrecy to which members are bound in any banking organisation. But what about the accountability of the Contact Committee if this proposal goes ahead in the way envisaged in the years to come? To whom will it be accountable? To whom will it be responsible?
  One can see it doing a useful job in bringing together the information from all the individual supervisory agencies in the member countries. But if it is to be coming forward with proposals and discussing reports from the individual countries, how is the elected member to have any access to it? In what way will the Contact Committee, proposals that it is discussing and work that it is doing, be accountable to elected Members of this Parliament and others in Europe and the European Parliament?
  I notice that one of the Papers included an amendment which related specifically to National Giro. I was rather surprised when I read the first draft of the directive to see that national giros in member countries were excluded from the supervisory system envisaged. However, a later amendment deleted that, and as a result

  1177
  national giros are now included. I am not sure why the change of mind took place, or why our own National Giro is excluded from our White Paper when apparently giros in other European countries are not excluded from the directives. This appears to be an anomaly.
  The House has not had a great deal of time to look at these proposals and there are many details into which I should like to go, but I cannot do so because of the time. I end by asking the Minister whether there will be a debate on the White Paper dealing with our supervisory system, which includes the scheme for a deposit insurance system for banking customers which, as I understand it, is unique, or at least fairly unusual, in the European context. There has been a certain reaction from the banks and we should like to have a lot more facts about the organisation and running of the scheme than those outlined in the White Paper.
  When do the Government envisage the legislation outlined in the White Paper being introduced? I realise the difficulties with the parliamentary timetable, but some of us hope that it will be introduced into the Lords this Session. If so, it is even more important that we should have an opportunity to debate the White Paper before the legislation is introduced.
  9.37 p.m.
  Mr. Ian Stewart: I welcome the opportunity to take part in this debate about the Commission documents, brief though it is. I shall not follow the argument of the hon. Member for Thornaby (Mr. Wrigglesworth), not because I do not want to discuss the interesting points he raised, flowing from the White Paper, but because I hope we shall have an opportunity to debate that before long and I think it is better to devote the short time at our disposal tonight to the documents and the proposals from the Community.
  I declare an interest in that I have been a banker since 1960, and in relation to the draft directives on banking from the EEC I was a member of the subcommittee of the Accepting Houses Committee which considered the original 1973 directive, as well as the one which forms the basis of our discussion this evening.
  1178
  I pay tribute to the Bank of England, to the British banking system as a whole and to Mr. Robin Hutton, of DG15 in Brussels, for the considerable contribution he made in getting proposals for a European banking directive into a working position. Obviously the original directive would not have worked among the original six members of the Community, and with the addition of three more members, each with its own banking system, it became clear that the original directive was impossible. The form of the second directive owes a great deal to British initiative and participation in the discussions.
  I am thankful that the scope of the directive has been reduced. Inevitably, it is a patchy affair dealing with one or two areas which can be dealt with at the outset. Prior authorisation is a considerable need, not only in this country but throughout the EEC. Whether or not we had the directive, we would have had to go for a tidier system than before. I agree with the hon. Member for Thornaby that, because we have so many different pieces of legislation affecting banking or semi-banking operations, it was very difficult for the public, let alone the banking system itself, to know where an individual company stood.
  I am sure that the confusion was part of the cause of some of the failures of recent years, because those fringe banks were thought to be regulated by Board of Trade requirements, Companies Acts and so on. However, when it came to the point, there was very little secure control over their activities. On the other hand the control exercised by the Bank of England, not only since the Herstatt collapse and not only in the foreign exchange market, has been extremely effective. If it can be extended to a wider group of institutions it will have a great benefit for our banking system, quite apart from our need to conform to Community practice.
  It will be difficult for the bank to administer and it will be quite an expensive operation, but I think that the bank is the right supervisory authority in this case. Each country has to choose its own best method. In some countries there is a difference between the central bank and the supervising authority. Some

  1179
  countries have a separate banking commission, and some split the responsibilities between the two. Given the circumstances in this country, however, it is entirely right that the Bank of England should be entrusted with this duty.
  I am possibly the only hon. Member who has had to go along to one of those three-monthly meetings to discuss the affairs of a bank which is being regulated by the Bank of England. It is a very thorough process. It is not just a question of filling in a whole lot of forms and allowing them to be chewed up by a computer in Threadneedle Street. The figures are looked at and the ratios which come out are examined. The bank takes a great deal of interest in the way in which the business is operated, in any changes in the business, in the amount of money which is being loaned in different directions, in the amount of payments in foreign exchange and in overseas trade, in internal borrowing, and so on. If this sort of system could be applied more widely, it would give a much sounder base both for our banking system and for the system in other Community countries.
  The question of supervision has been one of the factors which has held up progress on the second directive. There were other countries—possibly the Netherlands is the most significant example—where there has been dispute about how the supervision should be carried through. But I was glad to gather from the Minister's remarks this evening that the directive seems to be making progress, because I feel that it will be in the interest of the City of London in particular and the country generally for the directive to come into force and for us to comply with it.
  Let me deal now with the contact committees. I, too, wonder, although perhaps from a slightly different standpoint, about the way in which this will work. As I understand it, there is already a contact committee of the Group of Ten which was set up under Mr. Blundell at the Bank of England shortly after the Herstatt problem. Although, because it is a G10 institution, it has a slightly different constitution, it would nevertheless seem to overlap considerably with the contact committee, fulfilling a similar purpose but representing the countries of
  1180
  the Community. It would be helpful if the Minister could say more about how it will work.
  The Commission documents seem to indicate that the committee will have some responsibility for carrying out or encouraging harmonisation of supervising techniques and perhaps even the ratios which are used. I have a hazy idea of how this could work. No doubt it will be to some extent empirical and will decide what to do when it has to do it. But within the Community it is proper that a banking directive should be in force. We should have a means of communication between supervisory authorities, and if that is what the contact committee is due to be it will be a useful weapon in the armoury.
  The curious thing about banking in the Community is that although it is very little harmonised it is closely integrated. The two things are not the same. European banking has an identity of its own even though it is pursued in detail in different ways in most of the member States. There are identifiable characteristics in European banking, in the attitude to lending, in the operation of the money market, in the co-operation between bankers and banks in one country and another, and in the degree of welcome we give to branches of banks in one country and another, all of which effectively marks out European banking from American and Far Eastern banking, which are the other great centres of banking.
  It is useful that in these documents we have the suggestion that the status of branches which are part of a parent banking company as a whole should be extended, wherever possible, to embrace subsidiaries. It is often a purely technical question whether a banking arm of a major international bank in another country is an incorporated subsidiary or a branch of the parent. It might be worth considering whether some different category, such as a guaranteed subsidiary. might be established to enable companies which are incorporated for this purpose to operate with the advantages of branches but also on the same footing and with the same responsibilities as branches.
  After the Herstatt problems the Bank of England took an initiative, the first time it had been done internationally, in requiring the shareholders and parents of banks

  1181
  in overseas control and operating in the City of London to give a written commitment to back the operations of their investments or subsidiaries. Given such a backing, if this was standardised throughout the Community, some form of guaranteed subsidiary could take over the same sort of rôle as is envisaged for branches in the documents that are before us. Ido not think that the technical difference between the two ought to hinder the normal operations of banking from one member State to another.
  It would be useful if we could have more comment from the Minister about how he envisages further steps in the development of banking directives. Last year Mr. Ortoli, in his annual presidential address, raised the question of deposit insurance, and I am glad to see that we are taking an initiative in advance of any requirement from the EEC to do this. There are a great number of other areas in which the original banking directive laid down what must now be regarded as longer-term measures. If the Minister can tell us what others may be in the relatively near end of the pipeline, it might be of great interest.
  It would be wrong, on the first day of term and in such a thinly-attended House, to make too much of one political aspect which I must mention. I hope that since the Minister of State is a reasonable man he will take serious note of what I say. There are two serious handicaps to British banking at the moment, both being in the hands of the Government and the Labour Party. The first is the threat of nationalisation.
  I was in Zurich during the week of the Labour Party Conference and a number of international bankers said "Of course, we will regret it if there is a fundamental change of this kind in the British banking system. It is not something which we think will enable the City to work as flexibly and energetically as it has done. But you must also recognise that we are competing in an international industry and we shall be able to compete on your home ground if you damage the creditworthiness of your own institutions by bringing them willy-nilly into public control." When the Labour Party Conference passed by a margin of more than six to one a resolution in favour of nationalisation, that had a measurable
  1182
  effect on the confidence of bankers in our system.
  My second point arises from the fact that banking is now a truly international activity. One of the greatest disadvantages of the City of London is the ease with which other countries are able to poach expert personnel because of the grotesque rates of personal taxation which bank managers and executives have to bear and their after-tax remuneration compared with rates in other countries with which we are competing. I have tried to make those two points in a fairly low key because I hope that in that way the Government may give them some attention.
  It would be serious if the Government were to continue to give what amounts to almost positive encouragement to people employed in any international industry, banking or oil—another area on which we depend so much—to leave this country. The result would be that, with the greater movement which is now possible within the EEC, people would be encouraged to leave employment in this country and work elsewhere in the Community where terms and conditions might be the same but where their own remuneration might be so much more advantageous.
  Mr. Speaker: Order. In case the House feels that the hon. Member for Hitchin (Mr. Stewart) is in order by broadening the scope of the debate to include taxation and so on, I must remind him and the House that he is going beyond the scope of the debate.
  Mr. Stewart: I accept your comments, Mr. Speaker, and shall return to the central point. I was endeavouring to make the general point that these directives and papers relate to the integration of banking within the Community and that, therefore, the degree to which people move between banks in member States will be eased by these directives and other developments. That is relevant to our banking system and the people working in it, although I agree that it is in a wider context.
  I give the European Export Bank a provisional welcome. Any institution which may profit the export effort of this country or of any other member State must be welcomed. My welcome is provisional because there are still many unanswered questions about the bank.

  1183
  I do not wish to repeat the interesting comments made in the debate in another place on 2nd September, but Lord Cobbold and Lord O'Brien, who both have long experience as Governors of the Bank of England, made important speeches and expressed fundamental doubts. The first doubt was to what extent harmonisation of credit guarantee provision from one country to another could be catalysed or assisted by the setting up of such an institution. Secondly, they asked what would be the position of the European Export Bank in obtaining funds with which to finance jumbo projects.
  One has seen the great advantages of the Japanese Mitti and the Exim Bank in America. The greatest export competition met by European consortia is not only in risk insurance but in the length of time and the rate of interest at which they can borrow.
  Unless the EEB can match this, it will find it difficult to provide equivalent services. If the bank is to provide preferential terms, it will presumably not be able to do so by borrowing on the open market without subsidy. It will be fundamental to see not only how the bank obtains the funds but how it can offer terms which are clearly attractive to exporters without the subsidies or preferential rates for exporters which are available in EEC countries, Japan and America at present.
  One technical point deserves a mention. There has been a suggestion that the EEB might be administratively linked with the European Investment Bank. When I was last in Luxembourg, I got the impression that there was a reluctance that the EEB should be attached to or identified with the European Investment Bank. There are good reasons for this reluctance.
  The European Investment Bank has endeavoured to provide funds not only for Community countries but for infra-
  1184
  structure investment in outside countries, particularly in the developing world. If the European Export Bank were competing aggressively for exports to those countries for the commercial advantage of EEC countries, this might be thought to conflict with the more neutral posture of the Investment Bank. I say this merely to put on record a point which has not been taken into account in the papers relating to this matter or in the debate in another place.
  The European Community is often at its best when it is initiating rather than harmonising. For that reason, the initiation of a European Export Bank is in principle to be encouraged. I do not believe that it will be expensive in time, money or effort to set it up to see how it would work. It will be a matter of trial and error to some extent.
  Until such a vehicle is available, I doubt whether anybody will have the remotest idea how many projects will be suitable or capable of being financed through it. I should like to know whether the Minister has any information regarding any assessments which have been made. It may be that some projects have foundered because there has not been such a vehicle or that some projects have gone ahead with greater difficulty than if the EEB had been in existence.
  Anything that the Government can do, after due consideration has been given to the subject, to encourage this proposal should have the support of the House. Even if there is not a need now for an EEB, if we find that there is a need for it in five years' time and nobody has done anything about it, it will then be too late to start. Therefore, I hope that the Government will add their support to the proposal for a European Export Bank in the hope that it may be set up as soon as reasonably practicable and given a chance to work. I believe that it could be of considerable benefit to this country as well as to other member States in the longer term.
  9.57 p.m.
  Mr. Stan Thorne: I cannot declare an interest in banking as such, as did the hon. Member for Hitchin (Mr. Stewart), except in the usual credit facilities which one sometimes obtains from a bank.
  I want to deal with one or two of the questions which arise for one who knows very little about banking but who is aware that the public generally—my constituents, for example—in looking at these documents would have difficulty in understanding their implications for them and for Britain as a whole.
  The Minister referred to a figure of £100 million as the commencing capital of the European Export Bank. Presumably that would be derived from Community funds. It obviously would have to come from somewhere. Therefore, my first question is: what is the cost of the initial investment to the British taxpayer?
  In "The general analysis" of document S/349/76 reference is made to improving
  "the coherence of the export credit facilities available to Community exporters in this field of multi-national projects."
  That suggests to me that the EEB will make facilities available to multinationals in certain circumstances and will clearly charge for that service. I assume that it will be in business not for fun but to make a profit in the exercise of these facilities. Therefore a second question emerges, which I am sure the Minister will be able to answer: should the EEB make profits, has it been determined for what purpose those profits will be used? I should like clarification of the kind of multinational projects which are envisaged.
  Since we are talking about exports, it seems that they would cross national boundaries, and one wonders what types of goods and services are involved. I should like to hear from the Minister about that.
  The document refers also to consultations, but it does not say—perhaps this is my ignorance emerging—with whom those consultations took place. For example, who in the United Kingdom took part in the original discussions about the
  1186
  establishment of the European Export Bank? I assume that it was not the Minister himself. Perhaps it was not a Minister at all. They may have been people associated with banking. It would be interesting to know.
  I note that a board of 10 directors will be established, with an equal number of reserves. Again, we do not have much information about what sort of people will be eligible for the board of directors. I do not imagine that my hon. Friend the Member for Bolsover (Mr. Skinner), for example, would be invited to participate, but, clearly, multinational interests will be very much involved. It would be of value, therefore, to know what interests will be reflected on the board of directors. Will the directors be purely experts in banking or in some way associated with multinational companies, as many bankers are, either overtly or covertly?
  The Minister also referred to American and Japanese exports and the need to compete with them, saying that the European Export Bank would provide services in this regard through its ability to make credit facilities available. Should I conclude from this that no American multinational companies operating in Europe will be entitled to obtain facilities from the European Export Bank? If they are, in what way are we assisting those in the EEC who are competing with American and Japanese exporters? This also ought to be clarified.
  Paragraph 21 of the document states that
  "The European Export Bank should establish an independent operational standing."
  I am probably showing yet again my lack of erudition in these matters, but what exactly does "independent operational standing" mean? The document goes on to state that the European Export Bank should be
  "open to approach both by firms engaged in multinational projects of Community interest and by the commercial bankers who are acting for such firms".
  What does "Community interest" mean in this context? Is it the basic purpose of the European Export Bank to assist multinational companies to compete in a manner more favourable to them? If so, when we use the phrase "Community interest" are we not really talking about purely sectional multinational finance corporation interests?

  1187
  The concept of Community interest conveys to me the idea of a mechanism whereby, on the establishment of this European Export Bank, the community in Preston, for example, part of which I represent, will in some way gain from the operation of the bank. It might gain, as it would very much like to gain at this moment, by being able to approach the bank for assistance in maintaining Preston Docks. However—before you rule me out of order, Mr. Speaker—I shall not pursue that now.
  Another point arises with regard to the commercial banks, which are linked with the Bank of England—a publicly-owned body, although one sometimes wonders about that—which in turn will be linked with the EEB. The hon. Member for Hitchin mentioned the Labour Party Conference decision about public ownership of financial institutions. If one were mischievous, one might view the emergence of the EEB as an attempt to avoid some of the implications of that decision.
  How will the establishment of a European Export Bank affect British financial institutions and their public accountability, which at the moment is small? If any British Government took on board Labor Party Conference decisions—that would be a new and interesting departure—would they be prevented by our involvement with the EEB from carrying them out?
  What provision will be written into the final EEB directive to protect the British public from the financing by the Bank of a multinational project inimical to their interests? For example, what provision would protect my hon. Friend the Member for Bolsover if a multinational company in the EEC, supported by the EEB, pursued a project in the mining industry? In what way could he question that?
  Mr. Dennis Skinner: I would find a way.
  Mr. Thorne: I am sure my hon. Friend would find a way, Mr. Speaker permitting. I am much more interested in those who do not have my hon. Friend's knack in raising such matters.
  I agree with the hon. Member for Harrow, East (Mr. Dykes) that we are yet again discussing a proposal which has
  1188
  already been adopted by the Council, even if it is in only an embryonic stage. Only after such proposals are adopted are we allowed to discuss their merits and demerits. I hope that the Minister will give me some of the assurances I seek.
  10.9 p.m.
  Mr. Denzil Davies: The hon. Member for Harrow, East (Mr. Dykes) reiterated the ritualistic criticism of the Government on the grounds that we do not devote enough time to EEC documents. The Government do their best within the constraints of other parliamentary business and of the EEC itself.
  One problem is the fundamental difficulty of fitting the EEC system into the British framework of parliamentary democracy. Some of us drew attention to this problem in the debates on the European Communities Act. We put forward amendments to set the matter right. If they had been accepted they might have strengthened our hand, but Opposition Members were not interested then in amending the Treaty of Accession in that regard. There is a fundamental difficulty here. I do not have direct experience of other European Parliaments, but I think that we do as well as, and probably better than, most of the Parliaments of other European countries in this regard, although there is always room for improvement.
  The banking directive is a directive, and our own banking legislation that will follow will go through all the usual stages in the House—Second Reading, Committee, Third Reading and so on. There is no question of there not being enough time for debate. Our legislation will frame out in detail what the directive requires in general terms.
  The hon. Member for Harrow, East is right in saying that the final form of the directive when it emerges from the Council of Ministers may be different and that we shall not have an opportunity to debate it further. Again, that arises because of the structure of the EEC in that the Council of Ministers passes legislation and there is no opportunity for any parliamentary institution to debate that legislation. It is a novel procedure, but there we are; we are in the EEC, and that is the set-up.
  The hon. Gentleman said that the proposal for a European Export Bank was

  1189
  in the form of a regulation, and my hon. Friend the Member for Preston, South (Mr. Thorne) seemed to imply that everything was cut and dried and decided. The proposal is not a regulation. Those of us who for hours debated the European Communities Act have the word "regulation" engraved on our hearts. We know what a regulation is. A regulation becomes law. This is not a regulation. It is a proposal which will go through various stages before it appears as a draft regulation.
  The hon. Member for Harrow, East asked why the banking White Paper did not refer to the EEC obligation. I do not know whether he seeks an answer to that question. We made clear that, EEC or not, we needed a legal system of supervision of banks, that the old system—still in existence to some extent—was not thought to be in tune with modern conditions, and that some statutory back-up was required. The EEC is relevant only in the sense that the banking legislation will conform with the EEC directive.
  The hon. Gentleman asked whether finance houses would be within the directive. The answer is that the directive deals with credit institutions. Credit institutions are defined as institutions which take deposits or other repayable moneys from the public and grant credit on their own account. If a finance house falls within that definition, it comes within the directive. That is not meant to be an evasive answer. Some finance houses do not have deposits whereas others do. If they do, they will come within the legislation.
  The hon. Gentleman asked what kind of timetable we envisaged for the European Export Bank and whether more details would be forthcoming. As to the timetable, I tried at the end of my opening speech to indicate what was happening. I said that the proposal had gone to the relevant committees of the European Assembly. No doubt the Assembly will want to debate the proposals. The Commission will have the initiative and, if it feels like doing so, will make further proposals. The proposals will go through various stages up to the Council of Ministers. I cannot give any more details on the timetable. Until the Assembly debates the matter
  1190
  and the Commission reacts to the Assembly's debate, we do not know.
  My hon. Friend the Member for Thornaby (Mr. Wrigglesworth) asked why the term "credit institution" is used, whereas our White Paper refers to "deposit-taking institutions". He asked why the same language was not used and why we did not refer to "banks". I accept to some extent what he says. These terms could be thought to be confusing. The difficulty is that, whatever word is used, without a definition we shall not be able to cover the multitude of organisations with which we are concerned. We are concerned with organisations that take deposits and grant credit. This is how they have been defined in the directive, and it is the definition that will be taken account of in other legislation when it comes. I believe that many debates are now taking place in the United States as to whether certain mechanical transfers of money are deposits within the meaning of certain American legislation. We must get the definition right. We are concerned with the taking of deposits and the granting of credit.
  It has been asked whether the Bank of England will be able to cope and whether it will have the necessary resources. It will be known that the Bank of England is building up its staff because the obligations placed upon it will be greater in future than they have been in the past.
  My hon. Friend and the hon. Member for Hitchin (Mr. Stewart) asked about the Contact Committee. Perhaps the hon. Member for Hitchin answered his own question very well when he asked whether it was a means of communication between the authorities of different member States. That is what it is. It is a committee to enable the authorities in different countries to get together to discuss their problems. It is not an executive committee. It has no power to do anything. It will merely advise the Commission on certain problems that might have arisen. It will then be for the Commission to take the initiative if it wants to amend the directive or to bring forward a new proposal. In that case it would have to go to the Council, and the whole matter would have to be debated through the institutions of the Council. There is no question of the committee doing anything. There is no

  1191
  question of its being accountable. It merely advises the Commission and the Commission takes the initiative, the accountability starting at that point.
  My hon. Friend the Member for Thornaby asked about the Giro. He asked why it was excluded and then included. There have been a number of debates between member States as to whether the Giro should be included or excluded. The Giro is now basically included but it is our intention to exclude it, as we shall exclude the National Savings Bank, the building societies and various other bodies.
  My hon. Friend asked when legislation in respect of the banks will be introduced. It will be introduced as soon as the parliamentary timetable enables us to do so. We are actively engaged in consultation with various banking organisations and others and we shall endeavour to introduce legislation as speedily as possible.
  The hon. Member for Hitchin asked about the Contact Committee, and I think that I have dealt with the points he raised. He also asked about the Export Bank. He asked how it can obtain its funds and about the assessments that have been made of the feasibilty of having a bank and the need for a bank. The British Government are not convinced at present that the bank is necessarily the best way of dealing with the problem. We are not against it, but, on the other hand, we want to see a far greater analysis and assessment of whether multinational projects are inconvenienced because we do not have a European Export Bank similar to the American Export-Import Bank and the Japanese organisation. We want to know more about it.
  We see no sense in setting up a bureaucratic body to do something unless we are convinced that it can do the job properly or that there is a special need for it. That is why we shall press for a proper analysis before the Bank is set up.
  My hon. Friend the Member for Preston, South asked a number of interesting and searching questions about the directive. He asked about the cost of setting up the bank. He picked up the figure of 100 million units of account. That figure has now disappeared from the budget. That indicates that the proposal
  1192
  is indeed a proposal. At the end of the day the bank will have to have some capital. Proportional contributions will be made by all the member States. Reservations have been expressed about the cost of setting up such a project. There are some member States that are not entirely happy about this aspect of the proposal. These are matters that will be discussed.
  My hon. Friend asked where the profits would go if there were profits. The answer is that I do not know. I shall endeavour to make inquiries into that matter. I do not know how this sort of organisation would operate in relation to profit.
  Mr. Dykes: That is an important point. Perhaps the Minister will bear in mind that the original draft order suggested that any deficits, at least in the early years of operation, would be met automatically out of the Community budget and that in due course the aim would be to break even and create a small profit.
  Mr. Davies: Any deficits would be met out of the Community budget. The corollary of that would be that profits would go back into the Community budget. I hesitate to make a statement in case that may not be the position. However, I shall look into the matter and let my hon. Friend know the result.
  My hon. Friend referred to multinational projects and then talked about multinational companies. We are not concerned with multinational companies, although such companies might be engaged in multinational projects. A British company operating in my hon. Friend's constituency could get a large contract from, say, the Middle East or some other part of the world and might wish to contract out part of the work to a French or German company because it did not have the necessary expertise. The trouble is that when one has to bring in companies in other European countries problems arise of currency, of credit insurance and of lending money at different rates of interest to the importer.
  Mr. Thorne: I wonder whether my hon. Friend would consider the situation that might arise if we had an aerospace board which was building a multi-role combat aircraft financed partly in France and partly in Germany. If difficulties arose, would the British Government,

  1193
  through the aerospace board, go to the Export Bank for credit facilities?
  Mr. Davies: My hon. Friend has asked me a detailed question about a proposal which is in a not very definite form. I am sure he does not expect me to give an answer to questions of that kind. However, I stress that we are not concerned simply with giving assistance to multinational companies. My hon. Friend posed an interesting question about an American multinational company in Europe which might want to use the facilities. I do not know the answer, but I suspect that it could use the facilities, in the same way as a British multinational company in the United States could use the facilities of the American Export-Import Bank.
  We are concerned to see whether British and European industry is disadvantaged in competing with the Americans and Japanese for large contracts in many parts of the world. I should have thought that to solve that problem, if there were one, would be in the interests of the constituents of my hon. Friend and of most people in this country.
  Mr. Dykes: As the question of the hon. Member for Preston, South (Mr. Thorne) is so important, as there are many other questions relating to this proposal, and as the Minister has said twice that much further examination is needed the result of which the Government will consider in due course, but bearing in mind that it is ultimately to be a regulation, will the hon. Gentleman undertake to ensure that the House has a second opportunity to consider these matters? For him to say that he cannot answer questions such as that put by his hon. Friend defeats the whole purpose of scrutiny.
  Mr. Davies: It does not defeat the whole purpose of scrutiny. This is what scrutiny is about. The hon. Gentleman knows that I cannot give any assurances about the business of the House. However, I have made it clear that this is not a regulation. If a bank is to be set up, it will have to be set up by draft regulation. A draft regulation will have to come from the Commission. It may be in exactly the same form as this proposal or it may be different, but there will be a draft regulation which will go by carrier
  1194
  pigeon or by some other means to the Scrutiny Committee.
  Mr. Nicholas Ridley: By Cable and Wireless.
  Mr. Davies: Possibly, if it is still operating at that time. It will go to the Chairman of the Scrutiny Committee, and that Committee will consider it. How it decides to follow it up will be a matter for the Scrutiny Committee. I stress that this is a proposal, not a regulation, and a regulation will have to be made in due course if it is intended to set up the bank.
  My hon. Friend the Member for Preston, South asked whether this proposal will hinder or have anything to do with bank nationalisation. It has nothing to do with internal domestic banking matters in this country in any way, shape or form. This is a proposal to set up something completely different. If there is a problem—and we are not convinced that there is—we shall participate in the discussion to try to set it up.
  Mr. Ridley: Perhaps the Minister would like to go further and tell his hon. Friend the Member for Preston, South (Mr. Thorne) flatly that the Government have decided absolutely firmly against bank nationalisation. It would help his hon. Friend if he were to say that in the clearest possible terms.
  Mr. Davies: My hon. Friend studies these matters very closely, as closely as the hon. Gentleman, and he knows very well what the Prime Minister has said on this subject. He knows what the Labour Party Conference has said on it, and he knows the constitution of the Labour Party. I shall not attempt to educate my hon. Friend in any of these matters.
  My hon. Friend asked who had been consulted by the Commission. I have extracted a page from my brief which I hope will give him the answer. Apparently consultations have taken place with the Banking Federation, with the Permanent Conference of Chambers of Commerce and Industry, with something called UNICE—I shall not attempt to give the name in French—with the European Investment Bank and with various other credit guarantee and financial organisations. There has been consultation, therefore, with such organisations, and the matter will be debated in the Assembly

  1195
  and will be considered again when the proposals come back. There will be sufficient consultation at all levels.
  Question put and agreed to.
  Resolved,
  That this House takes note of Commission Documents Nos. R/3592/74, R/1820/75, R/2146/75 and S/349/76 on Banking and the European Export Bank.

  BREAD PRICES
  10.25 p.m.
  Mrs. Sally Oppenheim: I beg to move,
  That an humble Address be presented to Her Majesty, praying that the Bread Prices (No. 2) Order 1976 (S.I., 1976, No. 2128), dated 13th December 1976, a copy of which was laid before this House on 13th December, be annulled.
  I make it clear at once that our purpose is not to vote against the order but to give an opportunity to debate it and the Secretary of State's handling of the whole matter, and also to refer to the previous order which this one revokes. Our overwhelming concern is the price of bread to consumers immediately, in the medium term and in the longer term, the health and viability of the industry that must serve them, and the jobs within that industry, and unreservedly to condemn the action of the trade union which is now carrying out what I understand, as far as I am able to make out, to be an unofficial strike which is driving bread prices higher than they otherwise would be.
  I am most concerned that the Secretary of State did not condemn that action in stronger terms in his statement today. Perhaps he will do so in this debate. Two unions are involved, one of which is striking and one of which is not.
  Mr. Dennis Skinner: Whose side is the hon. Lady on?
  Mrs. Oppenheim: If the hon. Gentleman wants to intervene, I give him the opportunity.
  Mr. Skinner: I have been watching developments closely in this matter during the recess. I noticed, as the hon. Lady probably did, the editorial in one of the Tory newspapers which condemned to some extent the attempts which she had been making on the matter. I wonder at what point in the recess she changed her mind, and which union she supports and which one she does not.
  Mrs. Oppenheim: I do not support the action of the union which is striking. I shall return to the question of the other union, the Bakers Union, which is not striking, when I deal with the representations that it has made to the Secretary of State. Then I hope that I shall be able to answer the hon. Gentleman.

  1197
  One of the aspects of the Secretary of State's handling of the matter which we condemn is that he appears to have blundered into an industry which is delicately balanced, for a number of reasons which he appreciates, rather like a bull in a china shop. In many respects the baking industry has unique problems. It is a high-turnover, low-profit industry in which the profit on a single loaf is minimal and the profit on the sale of a standard loaf is minimal. The industry has been subjected to the rigours of the Price Code perhaps more than any other industry, so much so that three of the main category I companies now need to be in the safety net becaus their profitability has been eroded to such an extent. But they are still subject to the rigours of maximum price regulation and to the distortion of competition which will continue as long as the factors of intervention and distortion exist.
  However, the Secretary of State, nothing daunted and no doubt desperate to appear to be doing something about prices, froze bread prices about a month before Christmas. That was an unprecedented action for the baking industry. It had negotiated a pay increase in good faith and the Price Commission had granted it a price increase. For the first time, however, the Secretary of State froze a price increase which had been granted by the Price Commission. The Minister then said to the bread industry, somewhat disingenuously, "You do not need to freeze your prices, but the retailers do." That was the start of the trouble. That was another counter-distortion on top of the distortions I have already mentioned.
  As a result of that action, the Secretary of State was faced after Christmas with the task of unfreezing the price that he had frozen for a month, with the effect not only of unfreezing the price but of removing part of the bread subsidy.
  How was our hero going to explain away this tight corner and the fact that, having frozen the price, he had to unfreeze it a month later? Then he discovered, as if by a flashing revelation of some sort, the benefits of competition and free enterprise. I am certainly not opposed to the principle of competition and free enterprise. I wholeheartedly congratulate the Secretary of State on his conversion, if it is a genuine one, even if his new-found faith does not extend
  1198
  to the abolition of the Price Code and the maximum price regulations themselves.
  I only wish that that blinding revelation had been accompanied by an attitude of honesty which one wished would have ensued. But the Secretary of State did not take advantage of his conversion to the principles of free enterprise and competition to tell people honestly what this would mean in the short term because of the situation in which the bread industry found itself.
  The right hon. Gentleman did not say that 70 per cent. of consumers in the short term, because the industry was short on capacity for discounting, would actually be paying higher prices because the discounts given to the 30 per cent. of bread sales which take place in supermarkets would be given only at the expense of higher prices in medium-size and smaller shops. He did not say that all this would sort itself out when the industry returned to full profitability and when control or concessions through the free competition that he had suddenly recognised could do the work that they were supposed to do.
  The right hon. Gentleman did not do that. He told himself, by implications that were rash and misleading—both in his original statement and in statements that ensued—that a return to free competition in the bread industry would immediately result in significant reductions in the price of bread on a widespread basis. Clearly, this was not to be the case.
  The right hon. Gentleman modified his original statement a few days later. Now he talks about the need for the industry to settle down before competition can operate effectively. That was in his Press statement today. At the end of that statement the right hon. Gentleman said:
  "In my initial statement I said it would take some time for the scheme to settle down."
  I have searched his initial statement, and I can see no reference or quotation to that effect. No doubt the right hon. Gentleman will want to clarify that point. He may not have used those exact words.
  Following the bungling and blustering of his first statement, and his replies at Question Time, the right hon. Gentleman seems to have toned down his attitude, and this is to be welcomed. It is true that he denied that he was responsible for the

  1199
  statement which went out on most of the news media that the price of bread was likely to be reduced by about 8½p. The right hon. Gentleman said:
  "I do not believe that it is my job to deny something I have never said."—[Official Report, 20th December 1976; Vol. 923, c. 17.]
  That is correct. But would the Minister have said that if all the newspapers had been saying that the price of bread would go up by 8½p? I doubt it very much.
  Why did not the right hon. Gentleman make clear in his statement, or in subsequent statements, that the reduction in bread prices could not be more than 1p. and this would not reduce the price of bread but would merely prevent an increase? Nor did the right hon. Gentleman make clear that this would apply to only a minority of consumers in the short term.
  Again, in his statement the right hon. Gentleman said that bread prices in some instances were lower than they were before Christmas. No doubt the Secretary of State has the benefit of Civil Service advice and information. He has already been reported as saying that he is not very keen on being associated with the shopping basket, and, therefore, it is quite clear that he does not obtain this evidence for himself. So I thougt that I would do the job for him, and I went out. I went out in London and in Gloucester, and I studied the price of bread not only in the big supermarkets but in smaller supermarkets and in small corner shops.
  There is no doubt that the right hon. Gentleman is right in saying that the union's action is artificially keeping up some bread prices. That is undoubtedly true. But in no instance did I find that bread prices were lower than they were before Christmas. What I found was an enormous spread of prices. In some cases the price was 3p or 4p more in shops which were not being affected by the strike at all. This was obviously the result of the lack of capacity in the industry to give the kind of discounts that the right hon. Gentleman suggested would be given.
  The right hon. Gentlemans' handling of the issue has been deplorable from start to finish. We know that he likes to specialise in this kind of gimmickry, and we know that he was desperate to find a solution and to appear to be doing some- 1200
  thing about prices. But it does not explain away the misleading impression that he allowed to endure right up to Christmas and after that. As a result of his action, consumers have been confused, deceived and disappointed at a time when they have to wrestle with higher and higher prices and cannot withstand this kind of deception.
  The ham-handed and arrogant way in which the right hon. Gentleman has carried out the consultations with the industries concerned and with the two major unions concerned has not done his reputation any good and certainly has added to the confusion which resulted from his original statement.
  I am not sure whether, out of all this, the Secretary of State would like us to think that perhaps he is naive, that perhaps he is not at all concerned or interested or did not know about the representations which were being made, or that he did not realise that the price of bread would not come down to the extent that he had allowed to be bruited about by the news media without contradiction. I therefore refer to the representation made by the Bakers Union, and I emphasise that that is not the union which is taking strike action. That must be made clear. Therefore, it cannot be condemned merely for making a representation to the Secretary of State.
  The representation was not an unreason able one. The bakers expressed their concern that, as a result of the situation in the bread industry today and the lack of profitability in the industry today, the action which the Secretary of State had taken could result in smaller shops and some medium-sized supermarkets not selling bread any more.
  In his statement today, the Secretary of State said, I thought quite reasonably, that the smaller shop provided a special service and was patronised for that special service. He added that it had its own viability niche in that consumers were prepared to pay a little more in such shops because they found them more convenient or because they could not get into town. That is fair enough. But what the right hon. Gentleman had not taken account of in the representation which the union made to him is that smaller shops have already been bludgeoned over and over again by the

  1201
  controls that his Government have introduced and by the interventions which his Department has instigated in the case of smaller shops.
  The Under-Secretary will remember all our debates on the maximum price orders and the fact that he sensibly accepted our advice and removed some of the onerous rules and regulations from smaller shop keepers which otherwise they would have had to observe with regard to the display of maximum price notices. But I do not think that the Secretary of State considered this sympathetically enough or handled the representations that were made to him in as reasonable a way as he might have done.
  Then we heard the right hon. Gentleman claiming all these great immediate benefits. Of course, long-term benefits will ensue as soon as the industry is allowed to return to full profitability. Benefits will ensue to the consumer because the benefits of competition can then be pursued properly and the consumer can benefit to the full. However, when the right hon. Gentleman said that he thought that bread was being sold cheaper and that discounts could be a penny or even more, was he ignoring the representations that the Federation of Bakers had made to him in memorandum after memorandum? I quote from one, in which it said:
  "The claim that bread can be cheaper by the concession of high discounts is a confidence trick if made in the knowledge of the average level of manufacturers' current profits (½p per 28 oz. unit at August 1976) which are quite incapable of financing any general increase in discounts."
  The Federation went on to say that, if the Government withdrew the subsidies at the same time as the discount control, they must expect retail prices to increase and not decrease.
  The Secretary of State for Prices and Consumer Protection (Mr. Roy Hattersley): The hon. Lady has now argued against controls and in favour of controls in the industry. Will she say, in a sentence, whether she believes in more or fewer controls?
  Mrs. Oppenheim: I have not argued in favour of controls. I have said that the Secretary of State, in purporting to remove controls, gave people to understand that the immediate effect of this would
  1202
  be far greater than it could be in the circumstances.
  Mr. Hattersley: Would the hon. Lady tell us, in a sentence, whether she believes in more or fewer controls?
  Mrs. Oppenheim: I believe very much in fewer controls in the interests of lower prices to consumers, and a healthy and more viable industry.
  In representations by members of the retail trade—those who would benefit most at the time—they said:
  "Hattersley has got it wrong—large bread price reductions arc not on."
  In saying that he had got it wrong, they were referring to the pronouncements by the Secretary of State about the likely price reduction taking place, not the removal of controls.
  I suggest that the Secretary of State, knowing all the facts, went out of his way, no doubt in order to justify his existence as a Minister, to allow this gimmicky impression to be created. It was an impression which was not sustained by the events which followed. Of course, the fact which he attempts to hide is that he is powerless to prevent price increases, whatever else he may pretend. He has to preside, as Prices Secretary, over a period in which grocery prices are at an all-time high and are likely to go even higher. The Price Code and gimmicks cannot prevent this. The ill-fated Price Check Scheme is another gimmick. I read in the Grocer of 1st January that the prices of processed foods rose by 19 per cent. at the end of the Price Check Scheme.
  The Secretary of State is faced with a double irony or phasing out food subsidies at a time when prices are rising faster than when those subsidies were introduced for electoral purposes. At the time I warned the Government that this would happen. The reality of price increases, when it hits the consumer, is all the harder because food subsidies do not cure inflation. All that they do is disguise it in the short term.
  If food subsidies had never been introduced and if the Price Code in its present form had been phased out, food prices would almost certainly be lower than they are, industry would have invested, and free enterprise and competition would have benefited consumers to the full. No

  1203
  amount of manipulation, counter-manipulation or rosy forecasts from the right hon. Gentleman can protect consumers from the fact that they have suffered and will continue to suffer from the highest rate of inflation for the longest period of time ever seen in this country. In this respect, and in the light of the record, the Government are ultimately culpable, and no Minister has any right to pretend that he can safeguard consumers or that he cares about the level of prices in the family budget.
  10.44 p.m.
  The Secretary of State for Prices and Consumer Protection (Mr. Roy Hattersley): This debate provides me with a welcome opportunity to discuss the Government's decision to relax the rules which we had previously imposed on the baking industry, and the bread distributing industry. I make it absolutely clear to the uninitiated Members of this House whose only information about this industry is derived from what the hon. Member for Gloucester (Mrs. Oppenheim) has said that what the Government did six weeks ago was to relax the level of controls which had been previously imposed. The records I have been able to examine show that they were imposed without a word of criticism or complaint by the hon. Lady.
  I begin by putting into perspective not only the hon. Lady's speech but other wild speeches by uninformed sources, and by making it clear that some of the predictions that were made before Christmas have been proved wrong.
  There has not been a price war in the baking industry, nor will there be. There has not been a bread famine, nor is there likely to be. While I am denying the more preposterous suggestions let me deal with the claim that there was a freeze for a month, that the Government, as represented by me, then had to find a way of extricating themselves from it, and therefore invented the scheme that we are discussing tonight. That claim is demonstrably wrong by the most superficial reading of the evidence.
  I announced both schemes—the initial month-long freeze, and tonight's scheme—simultaneously. If the hon. Lady had read any Press cuttings other than her own she would have been bound to know that.
  1204
  The Government no longer control the wholesale price of bread. There is no longer a legal maximum above which retailers cannot negotiate discounts on their purchases from bakers. The Government are no longer keeping the price of bread at the wholesale stage artificially high. Anybody who believes that my decisions on these three particulars are wrong ought to say so, and to say so now.
  The hon. Lady announced in the Daily Telegraph that while she was moving the Prayer she would not ask her Friends to vote for it. Anyone who votes for it tonight is voting for more restrictions on the industry. That, I gather from the answer I got from the hon. Lady, is something that she is anxious to avoid.
  I believe that we have created a freer market in bread, and I have no doubt that the freer market that we have created will benefit the industry and the consumer. I have no doubt that in spite of the difficulties which I shall go on to describe, it has already created benefits.
  The hon. Lady has assiduously searched London and Gloucester for examples of bread being sold below the price at which it was sold before Christmas. I do not know how many branches of Sainsburys there are in the city she represents, but there are a large number in the capital. Sainsbury announced this evening that at 17p the standard loaf is 1 p below the price it would have been under the scheme in operation before Christmas. The hon. Lady must understand these things. I can give her some other examples if she wants them. The Financial Times of 7th January gave a long list of examples, and if the hon. Lady's examination of the Press had gone a little wider she might have found some of these examples for herself.
  Some of the benefits that the new system might have provided have been denied the consumer by the action of the United Road Transport Union. I have been critical of that union publicly today and I am glad that the hon. Lady now joins me in my criticism. She may recall the last Question Time before Christmas, when she was overt and positive in support of the action the union took. Like my hon. Friend the Member for Bolsover (Mr. Skinner) I at least welcome her conversion in that respect.
  Mrs. Sally Oppenheim: Will the right hon. Gentleman give examples of the way in which I was overt and positive at Question Time in support of strike action? He has made the allegation; let him now produce the evidence.
  Mr. Hattersley: What I said, and I now repeat it, is that before Christmas the hon. Lady gave her support to the union and the action that it was taking. Before the debate is over I shall bring to her attention exactly what she said on that occasion.
  I agree that because of the action taken by the union the price of bread in some shops is higher than it should be and higher than it need be. I propose to turn to the union and its decision in a moment.
  There is, however, much evidence, again fully reported in a number of newspapers, that despite a reduction in the bread subsidy and the other ½p which has been allowed under the Price Code as an addition to the maximum price of bread, bread is cheaper in some shops than it was before Christmas. If the hon. Lady wants evidence I urge her to look at the more serious newspapers, particuularly the Financial Times of 7th January. There is still scope for reduction in many shops. But the actual price that is to be charged by specific retailers in specific shops next week, next month or next year is something that I cannot predict and and something that I never attempted to predict. The actual price charged in specific shops will depend on how far the competitive conditions which I have created are allowed to work. My hope is that the most efficient retailers will insist on striking the best possible bargain they can for their customers.
  These are early days. I said on 14th December that the new scheme would take some time to settle down. I have no doubt that when it has settled down it will be clear to almost everybody that it has done so to the benefit of the industry and particularly| to the benefit of the consumers whom the industry serves.
  The hon. Lady dealt at length with the processes that went into the making of the order which now governs the price of bread and the Government regulation thereof. I must, therefore, spend two moments giving the history and pointing
  1206
  out some of the things which the House may not know. Between 1974 and last December the Government limited the size of discounts negotiated between bakers and retailers. We did so to ensure that the bread subsidy passed from the baker through the retailer to the consumer. I have no doubt that that policy was right at the time. But there is equally no doubt that by December 1976 the net effect of that policy was to prevent some retailers from negotiating wholesale discounts as large as their competitive strength would have allowed them to obtain. In fact and in effect, the Government's action was keeping the retail price high.
  Conservative Members who believe that we should have continued to keep to that policy ought to say so, and positively. The whole matter came to a head in the autumn of 1976, when some retailers actually challenged the Government's legal right to stipulate a maximum discount on certain types of bread. The Federation of Bakers asked to see me to consider the ambiguity of its position, and offered an ingenious solution. It said that I should propose to the House of Commons a new Bill which stipulated by law the maximum possible wholesale discount that retailers were allowed to obtain when negotiating with bakers—something which I am sure many hon. Members would call wholesale price maintenance. I was not prepared to propose that law to the House and I very much doubt whether the House would have supported me if I had done so.
  If anyone thinks that that is what I should have done—those who are rallying to the support of the Federation of Bakers—they had better make it clear that their solution is a law limiting the discount which can be obtained on the wholesale price of bread. That was not a policy which I or the Government as a whole supported.
  My policy did two things. I knew that it would always be criticised by various vested interests in the industry. My task was to attempt to balance the interests of the baker, the retailer and the consumer. My task, in my judgment, was also to open the way for a complete relaxation of all Government control over the baking industry. Let me make my position clear. It seems that there are some industries which benefit from

  1207
  Government intervention, some which positively ask for it, and some which need it although they do not realise that fact. They ought to be provided with Government aid and there ought to be occasional Government intervention. But there are other industries which prosper best when the Government do not interfere with what they do. That is what I hope can soon be the situation in the baking, industry.
  What I did had three main elements. First, I established, as a safeguard, a statutory maximum price system for bread which could be applied irrespective of whether there was a subsidy. Secondly, I removed the limit on the discounts which had previously inhibited the negotiating position between the bakers and the retailers. Thirdly, I insisted that during this interim phase any larger discount negotiated by retailers must in some way be reflected in lower prices and therefore a greater benefit for the consumer.
  The relationship which I sought between the size of the discount and the retail price had two main purposes—to ensure that the market forces which I wanted to bring into the industry operated on behalf of the consumers and, to a degree, to restrain the fears of the negotiating strength of the supermarkets.
  Since it is necessary to talk about these matters frankly, would the hon. Member for Gloucester like me to give way so that she can describe what she is laughing at?
  The bakers were obsessed by the negotiating strength of the supermarkets. As I have said before, my initial instinct was to remove discount control completely, leaving competitive forces within the industry as the sole determinant, with different prices at different shops controlled only by the overall maximum price which is, in general, higher than the price generally charged.
  The plant bakers, as they are called—the Federation of Bakers—insisted that if I removed all controls, the result would be massive closures and extensive redundancies. It is on the record that the Scottish bakers predicted that even with my limited scheme of modified relaxation, many supermarkets would give away bread as a loss leader. These were
  1208
  exaggerated fears, but for all their exaggeration, it would not have been right to sweep them aside.
  Had we abandoned all forms of control at a stroke—if I may borrow that phrase—the concern of the small shopkeepers and the agitation of the union would have been no less. Indeed, on a rational examination of the evidence, we may conclude that fears about the future of small shops and the aggressive response of the union would have been greater than it has been over the partial removal. If present evidence is anything to go by, many retailers would have flinched from the consequences of competition as soon as the going got rough.
  It was my duty to steer a course between the claim of the bakers and the union that the total abandonment of controls would bring bankruptcies and redundancies and the suggestion of the retailers that the present level of intervention was keeping up the price of bread. We therefore introduced a policy of relaxing controls, and we must try to keep the results in proper perspective.
  The hon. Member for Gloucester continues to insist that my Department, another Minister, or I suggested that a massive reduction in the price of bread would be the certain outcome of the new scheme. I have told the hon. Lady before that when I appeared on radio in the afternoon of the day on which the initial announcement was made, I made clear that the idea being floated by some newspapers of an 8p or 10p reduction in the price of a loaf was nonsense.
  We aimed for a little reduction—some mitigation of the increase in prices—and this is what we have, to a degree, got and what we would have got to a larger extent but for the opposition of the union.
  The policy has been in operation for six days. I repeat that in many shops, after those six days, the price of bread is higher than it need or ought to be. Further reductions are now being prevented by the action of the distribution union. The union has acted in that way because of what I believe to be a misunderstanding of the real interests of the industry. But, whatever else the United Road Transport Union has done, it has demonstrated my original contention that under my scheme, if competition is

  1209
  allowed to work, the price of bread will go down.
  It is also clear that the interests of the industry as a whole—the owners, the workers, and all who are involved in it—are best served in the long term by producing bread at maximum efficiency and at minimum price.
  All over Britain there are examples of retailing companies which are anxious to sell cheaper bread. Many shops will either absorb the subsidy reduction or cut the price from the pre-Christmas level despite the subsidy reduction. There is no doubt that the long-term interests of the industry—that includes particularly those who bake and those who distribute bread—are best served by allowing that process to continue.
  I also believe that the best interests of the small shops are similarly served. Certainly my scheme places some price competition on some small shops; but small shops, by their nature, have other advantages. They benefit from the personal service that they provide. They often have the added attraction of convenience, avoiding the trip to the town that the supermarket involves.
  Small shops have that kind of important role to perform within the community. They will be damaged and their reputation will be damaged only if anyone—the union which claims to represent their interests, or the hon. Member for Gloucester—talks as if small shops can succeed only if their prices are kept artificially high and the consumer is prevented from enjoying the benefit of the competition which the larger shops can provide.
  My scheme seeks to offer the consumer a choice between service and convenience on the one hand, and price and negotiating power, on the other. My scheme provides for a clear relaxation of the level of Government intervention in the baking industry. That is something that the hon. Member for Gloucester has either not understood or not thought it right to point out.
  Mrs. Sally Oppenheim: What the tight hon. Gentleman keeps describing as his scheme was already in existence before his right hon. Friend imposed the limit on discounts.
  Mr. Hattersley: The hon. Lady's misunderstanding is even more profound than I had imagined. The scheme which will be operated, if the hon. Lady has neither the courage to vote on the Prayer tonight nor the troops with which to carry it, will be the scheme which I announced and about which I have been the subject of a good deal of personal attack by the hon. Lady. After the extraordinary personal speech made by the hon. Lady 20 minutes ago, that she should say that the entire thing is nothing to do with me or was invented somewhere else is a volte-face almost as great as the movement from support of the union when the going was easy to opposition to the union when the public obviously turned against it.
  Mr. Skinner: Before we get the roles mixed up and intertwined too much, may I ask my right hon. Friend whether, as a member of a party which believes in control as against competition, he appreciates that what concerns some of the people involved in the baking industry, the small shopkeepers, and some of the consumers who have not got the kind of choice which he described earlier in his rather sweeping statement is that, if the supermarkets were to collar the market almost completely, many small shops would be driven out of the business of selling bread and many people involved in delivering bread for sale to consumers in rural areas, some of whom are housebound and do not have any choice, would be thrown out of work? Would it not be as well if he made a statement now indicating that, if an attempt were being made along those lines, the supermarkets would not be allowed to increase their prices above a certain limit?
  Mr. Hattersley: There are two points to be made in relation to what my hon. Friend says. First, he makes a point with which I am in general agreement. Certainly, the small shop, as such, has an important role to play. But I do not think that the small shop ought to pretend that its role is simply a matter of price competition. It is a matter of providing a service which the supermarkets cannot and do not provide. But if the supermarkets behave in such a way as intentionally and successfully to squeeze the small shop out of business, I have, as I

  1211
  made clear earlier, retained the maximum price power, which I should not hesitate to apply.
  As my hon. Friend knows—which is why he asked the question—it is not I but the Conservative Party which objects to maximum price orders and resents my willingness as well as my ability sometimes to say that the price may not exceed a certain figure. Were supermarkets to behave in the way that my hon. Friend describes, I should not hesitate to use my maximum price powers.
  What we have done up to now, which I think is generally regarded as the right thing to do, is to provide more choice and provide the prospect of a reduction in the price of bread in some shops within the community. I have had a great deal of criticism from the hon. Lady for what I have done, but I have heard neither from her nor from anyone else an alternative scheme which meets the needs of the community or, for that matter, the needs of the industry any better. I have no doubt that when my scheme has had some opportunity to shake itself down and work its way through, the advantages will be very considerable. I do not urge the House to vote against the hon. Lady's motion, since I understand that she does not intend to vote for its herself. I simply ask the House to note the irresponsibility which which she has conducted this entire debate.
  11.8 p.m.
  Mr. Nicholas Ridley: The House has had some fascinating material put before it tonight. I shall start with two questions on the order itself—the order which the right hon. Gentleman has christened "my scheme". I think that we should continue to use those immortal words, and I shall devote my remarks to analysing what he calls "my scheme".
  First, I have a question about Areas 1, 2, 3, 4 and 5. Area 4 includes the islands of Canna, Eigg, Muck, Rhum and Skye, and I note that the loaf tends to be about 3p more expensive in maximum price in Area 4 than it is in Area 1. Do the Government intend to introduce a Bread Charges Equalisation Bill in line with the Water Charges Equalisation Act, to afford the deprived citizens in Eigg, Muck, Canna and Rhum the same maxi-
  1212
  mum price for bread as is afforded to inner London?
  Secondly, why is it necessary to have Table 2 giving the maximum discount that may be made? All the Minister need do is say what the maximum price is, and, if anyone wants to undercut the maximum, he may sell bread at any price he likes. It is a nonsense of bureaucratic bumbledom to say tht if someone offers a discount of 100 per cent. on the price of a loaf he may reduce the maximum price from 21p by 20p, which means that he can sell it for 1p. If the reduction is 100 per cent., it would be ridiculous to charge 1p, because 100 per cent. means the whole lot, not just 20p. Why is it necessary to have maximum prices in relation to discounts which people may voluntarily offer? Those are just two small questions.
  Now I come to "my scheme". "My scheme" is competition. It is that the bakers and the wholesalers and retailers should pitch the price of bread at that level which is determined by supply and demand, according to the scale of the operations in big shops or little shops, supermarkets or corner shops. "My scheme" in fact existed in this country for about 1,000 years before the right hon. Gentleman ever assumed his office.
  It is the most extraordinary revelation that the right hon. Gentleman's predecessor's scheme of price control has been shown to be keeping the price of bread way up, causing excess profits, excess returns to delivery drivers and no doubt excessive livings for bureaucrats who thrive on this situation. All the right hon. Gentleman has done is realise that controls are a farce and try to take credit for the fact that the market at this time has turned down and supermarkets are prepared to sell bread at 17p for a 28 oz. loaf, or conceivably even less.
  It was a wonderful revelation to me, driving along in my car, to hear the right hon. Gentleman say on the radio at 1 o'clock: "My conviction is that the price of bread will be determined by market forces and competition." That is what he said, is it not?
  Mr. Hattersley indicated assent.
  Mr. Ridley: Then what is he doing in his job? He is redundant. He does not believe in price control, and his job is price control. He would do very well to

  1213
  follow Mr. Roy Jenkins and the hon. Member for Ashfield (Mr. Marquand) and others of his friend's persuasion, who have realised that the Government are a farce and price control is a farce, and get out. The right hon. Gentleman has no further point. He has admitted that the job he is doing is totally futile, pointless and unnecessary.
  His hon. Friend the Member for Bolsover (Mr. Skinner) asked just now: "Don't you believe in price control any more?". The right hon. Gentleman did not give him a straight answer, but I will tell him. No, he does not. The right hon. Gentleman has abandoned it in relation to bread, because he has allowed the market to take the price down.
  Then there is all that silly stuff the right hon. Gentleman talked about whether the supermarkets would lower the price of bread in order to drive out the corner shops and then raise it again and make a killing. Who ever drove out a corner shop by dropping the price of bread? Corner shops sell everything. If the supermarkets are fool enough to lose so much money that the corner shops stop selling bread, it will not be long before they regain their senses, and then bread will return to the market everywhere.
  The reason that corner shops survive is the one the Secretary of State gave—that it is more convenient to go to the corner shop than to take a bus to town at greater expense than the saving which can be made in the supermarket. So we do not need the maximum price at all, because prices have now fallen way below it. We do not need the right hon. Gentleman's help for the corner shops, for the bakers, or for the delivery drivers. All he is doing is interfering and floundering about. He would do far better to quit all price control of bread.
  Let me remind the right hon. Gentleman once more that "my scheme", as he so patronisingly describes it, is the scheme of market prices and competition, which has always been the only way in which prices are held down.
  This little vignette of a debate about prices is the ultimate answer to all those who have said throughout history that competition does not work. Here is the arch-Socialist admitting that competition is what controls the price of bread. I
  1214
  know it is unpleasant for Labour Members to have to learn this. I do not think that the hon. Member for Bolsolver agrees. He said "Is not the Secretary of State a member of my party, which believes in price control?" Does the hon. Member for Bolsover still believe in price control?
  Mr. Skinner: Yes.
  Mr. Ridley: The price is 21p in Area 1, 24½p in Area 4—Canna, Eigg, Muck and Rum—and 17p in the supermarket. What is the point of price control? That is a question that the hon. Member must answer. It is no use saying he believes in price control when the evidence before his eyes damns the whole concept of price control as being irrelevant, bureaucratic and futile.
  Mr. Skinner: In the purist sense it presents some difficulty for me, but I ran into difficulties the moment I came into this building six years ago. I found that, except on rare occasions, I was never given the opportunity of voting on what was my purist view, just as the hon. Member for Chippenham and Tewkesbury (Mr. Ridley) forgot what he believed when he accepted the Common Market. On the face of it, the Common Market was about the free movement of labour and capital and the free market forces theory, yet superimposed above it, below it, and taking it over, was the common agricultural policy, which had built into it a superstructure of controls from beginning to end. That is the dilemma that he had to face. It is a dilemma that I have faced many times.
  Mr. Ridley: I hesitate to follow the hon. Gentleman into the Common Market, which was debated earlier today. It is extraordinary that, having sought to intervene to answer my question, he could find no other point to make than one about a different subject.
  Mr. Skinner: It is the same subject.
  Mr. Ridley: I hope that he now understands that market forces control prices—not the right hon. Gentleman the Secretary of State.
  The right hon. Gentleman made an appeal—in which he was joined by my hon. Friend—that the transport drivers should desist from their action. He suggested that the action was misguided in

  1215
  that it would not lead to a healthier industry if the price was held up, that the drivers should accept that true wealth would come from a slimmed-down efficient industry and the falling of prices was part of the mechanism by which that would be achieved. That was inconsistent with what he said earlier about not wanting to remove all price control because that would cause such falls in prices that many small bakers would go out of business and some transport drivers would lose their jobs. He was equivocating a little in his advice to the union to desist, but I do not criticise what he said.
  It is a curious twist of fate that a Socialist Minister should blame the unions for trying to hold up prices. We always understood that the alliance of the Labour Party and the unions believed that it was the bosses and the capitalists who held up prices, but I am glad to see that that bogy is now laid as well, and that it is recognised that it is the restrictive actions of unions that are often the cause of price rises.
  The social contract is designed to enable the Government to deal with inflation, to work with the unions and to hold prices. Would not this be a wonderful opportunity for the Government to invoke the social contract, to go to the union and say "In the name of the social contract, will you ask your drivers to desist from this industrial action so that there will be a reduction in the price of bread?" Is not this a perfect situation, fitting entirely into that noble concept of the social contract and the compact between the Government and the unions?
  I can think of no better example than for the Government to invoke their side of the social contract and to ask the TUC to intervene in the way it likes doing. The right hon. Gentleman does not seem to like what I am saying. He does not seem to be enthusiastic in his reception of my remarks. If I have it wrong, and that is not what the social contract is about, what is the right hon. Gentleman going to do about the drivers?
  It is no good the right hon. Gentleman saying "I believe in intervention and in telling everyone else what to do", but, when these union drivers keep up the price of bread, saying coyly "I am not come to do anything about it because
  1216
  I do not want to." What sort of Minister is he? He does not believe in price control; he does not believe in interfering with the unions; he does not want to do anything about it. I suggest that his heart is not in his job. He is not meeting with the approval of the Opposition, his hon. Friends, or anyone else. He would do better to take advantage of the free movement of labour and get himself a junior job in the Commission in Brussels. At least there he would be with his friends, and at least he would not be doing as much harm as he is doing here.
  11.21 p.m.
  Mr. Michael Neubert: At a first, scientific, dispassionate glance one might find it hard to discover what the fuss is about. The price of bread represents just over 1 per cent. of the average family budget, and the effect of a penny or two on the price of a loaf is hardly likely to be of much importance to the average family. Nor can one see much political significance in the immediate technical price of a loaf, because a loaf represents only one-half of 1 per cent. of the food price index and only 11 parts of a thousand in the retail price index. So it seems a minor matter, to say the least.
  But it is clear that our daily bread has a meaning well beyond itself. It seems that the Secretary of State believes that if he intervenes in bread prices he will somehow convince people that he is intervening effectively in food prices. If people believe that—and I do not believe that our punch-drunk public will—they are doomed to disappointment. It is clear for a number of reasons that food prices generally will go up substantially this year. As my hon. Friend the Member for Gloucester (Mrs. Oppenheim) pointed out, last year they went up by about 25 per cent. The British public is reeling from the impact of food prices. This dispute about bread prices is, therefore, likely to prove academic very quickly.
  The Secretary of State made sweeping assertions, on the basis of six days' experience of his scheme. He cannot at this point have deduced anything with conviction as to the results, however. But there is a significant way of testing the right hon. Gentleman's intentions towards food prices by comparing bread with potatoes, which are an equally fundamental part of the family diet. Indeed. potatoes are a more important staple.

  1217
  Whereas, for example, the average person eats, per week, 30 oz. of bread—just over a standard loaf—he eats 44 oz. of potatoes. The order proposes a maximum price of 21p for the standard loaf, which works out at about 12p a pound for bread, yet, in recent months, certainly in the last 18 months, potato prices have gone well past that without any intervention by the Minister. Time and again his hon. Friends have questioned him about what he was going to do about the price of potatoes, but he has felt powerless to intervene. He has reviewed and investigated and referred, but has found nothing to justify his interfering in the price of potatoes. So the poor public has had to endure, for good reasons which the Opposition accept, a much higher price for potatoes.
  Therefore, let us try to nut the question of the price of bread in perspective. At 17p. for a standard loaf of 28 oz., the consumer is getting bread at a lower price than, in many shops and on many occasions in the recent past, it has been possible to obtain potatoes. But that is neither here nor there. We know that this is a political ploy on the part of the Secretary of State to establish himself as a force in the consumer market, to give the impression like his predecessor, that he is doing something about prices. Yet that, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said, is largely an illusion. The right hon. Gentleman cannot control the increase in food prices. If his predecessor had been able to control the price of food, it would not have increased by about 70 per cent. in the three years or so that the Labour Government have been in office.
  Food prices have increased and they will continue to increase, but the subject of this debate is to what extent the Government are to blame. The Secretary of State may be very ironic, not to say sarcastic, about the reason for the Opposition proposing this motion. He knows that unless the order was opposed it could not be debated. On his edict, the order would be passed without the House having a chance to express a view.
  The Government have only themselves to blame for the reaction of the union to this move by the Minister. The question of the members of the union striking arose because they felt that their income was at risk—and so it was. Here I disagree
  1218
  slightly with my hon. Friend the Member for Cirencester and Tewkesbury. Like him, I should like to see a free market, but there must be a market in labour as well as in the price of products. For this reason, the competition is not entirely free.
  From the average deliveryman's point of view, his income is inhibited by pay policy. We should consider this matter in the wider context of pay policy and the Government's general performance. In a situation in which the deliveryman has his income inhibited by pay policy and in which his standard of living is eroded by rapid inflation, he is being asked to forgo a substantial element of his income by sacrificing commission on the sales of bread.
  Though I condemn, with everyone else, the action of the drivers—it is monstrous and insupportable that the community should be held to ransom in this way and that the terms of trade should be determined by deliverymen to uphold their own income—I can understand that it is a reasonable point of view to them. Therefore, if the right hon. Gentleman is to introduce a freer market, as he wishes to do, he should endeavour to do it in all aspects of life, because there is a price for labour just as there is a price for anything else, and it is an important element in the price of bread.
  Time inhibits my developing my case. What we are talking about is an increase in the price of a loaf when the profit on a loaf to the plant bakers is about ½p.
  If the Secretary of State says that he is in some magical way reducing the price of bread—he will do it in certain instances, but by no means in all—he is doing it in one of two ways. He is doing it either at the expense of the profitability of an already perilously unprofitable industry—½p a loaf is scarcely profiteering—or at the expense of the income of the drivers. In either of these two ways, he is failing to reduce the cost of bread. Therefore, this is a sleight of hand which will deceive nobody. It certainly will not deceive the House, nor, in the longer term, will it deceive the public.
  11.29 p.m.
  The Under-Secretary of State for Prices and Consumer Protection (Mr. Robert Maclennan): The hon. Member for Romford (Mr. Neubert) has left me with

  1219
  barely a minute to reply to the debate. That is unfortunate, because the Opposition have raised a number of serious points, though I regret that they have done more to reveal their misunderstanding and, I suspect, their unwillingness even to attempt to read the order and understand what the Government have been doing in respect of the price of bread. They have not resolved their internal—
  It being half-past Eleven o'clock, Mr. DEPUTY SPEAKER put the Question forthwith, pursuant to Standing Order No. 4 (Statutory Instruments, &c., (Procedure).
  Question negatived.

  SECONDARY EDUCATION (CHESHIRE)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Snape.]
  11.30 p.m.
  Mr. Alastair Goodlad: I am grateful to you, Mr. Deputy Speaker, for giving me the opportunity of raising once again the difficulties experienced by my constituents Master Richard Wilkinson and Miss Rebecca McMillan in obtaining access to the schools of their choice, and to the Under-Secretary of State for once more attending to reply to the debate at a very late hour. I am extremely grateful for the very close personal interest that the hon. Lady has shown in the matter.
  When the House debated this matter on 20th December 1976 the Under-Secretary of State was good enough to express her sympathy for the predicament of the two children. She gave an undertaking that her right hon. Friend the Secretary of State would write to the Cheshire Education Authority asking it to re-examine the cases with great care and to reconsider them in view of all the circumstances and the substantial points that I then raised, and to say whether it would exceptionally be able to accommodate the children. I am most grateful to the Secretary of State for causing such a letter to be sent. Perhaps I may be permitted to quote briefly from it. It states:
  "Although the Secretary of State decided that she could not regard the Authority's actions
  1220
  in these cases as unreasonable she is nevertheless deeply concerned about the burden which will be placed on the families of these children if they are unable to attend the same schools as their siblings because they live outside the school's present catchment areas.
  I am sure you have already considered carefully the difficulties facing those families—in the case of Richard Wilkinson the many conflicting calls of the various schools to which his brothers and sisters go; and in the case of Rebecca McMillan the demands of her mother's responsible job and the length of the journey from Mouldsworth to Tarporley. You are aware, too, that this is likely to be the last of only a few years in which children such as Rebecca have had to go from Mouldsworth to Tarporley, instead of Helsby.
  The decision is for you and your colleagues. We cannot force you to admit these children to the schols of their parents' choice. But at Mrs. Williams' request I ask you earnestly to look once more at all the circumstances of the two cases and to consider whether you can agree, exceptionally, to their admissions".
  So wrote the Secretary of State. Following the debate on 20th December I again contacted the chairman of the education authority and gave him a copy of the official record of the debate. I received the following reply:
  "Thank you for your letter of the 30th December, in relation to Master Richard Wilkinson and Miss Rebecca McMillan.
  The basis of the refusal of the Admissions Sub-Committee (of the Education Committee) was contained in their resolution which precludes the transfer of children to another type of school, if they live within the catchment area of a Comprehensive school.
  The purpose of this resolution was to give the maximum support to comprehensive schools in their formative years and indeed, in following years, and this could not be achieved if the children in the higher ability strata were allowed to opt for Grammar Schools. We would expect the Minister to support us in this approach, since it is her Act which makes it incumbent upon us to reorganise on comprehensive lines.
  The argument that there is no room at the school, while not being the prime reason for refusal is, nonetheless, a valid one, and were we to make an exception for one child. it would be reasonable to make the same facility available not only to those children whose parents had appealed (some 24 in number) but to all children in Cheshire, and this would, surely, have produced a quite impossible situation resulting in considerable extra expense to the Authority.
  In view of the foregoing, I am not prepared to re-consider the matter."
  So wrote the chairman of the education authority.
  That letter came as a great disappointment to myself and the families concerned, as I am sure it will have done to

  1221
  the Under-Secretary of State and her right hon. Friend. The House will be interested and surprised to learn from Mr. Maynard's letter that:
  "The basis of the refusal of the Admissions Sub-Committee (of the Education Committee) was contained in their resolution which precludes the transfer of children to another type of school, if they live within the catchment area of a comprehensive school."
  I take that to mean that even if the Education Committee had accepted the statement, for example, of the headmaster of the Nantwich and Acton School, to which Richard wishes to go, that there is and was plenty of room—surely he, if anyone, should know—nonetheless Richard Wilkinson would not have been allowed to go there. I had understood from the letter of 6th December received by Mrs. Wilkinson from the Department of Education and Science that
  "we have regarded the fullness of the school as the most important factor in our consideration even though the Authority may have mentioned other factors in their discussions with you."
  I am extremely anxious to dispel any notion that may exist that the parents of these children are acting in anything other than completely good faith—that, for example, they are trying, as it were, to sneak a grammar school education for their children on spurious grounds. As I have said before, Helsby School and Nantwich and Acton Grammar School are due to go comprehensive in the immediate future. Christleton School, at which Richard Wilkinson has a sibling, is undeniably full. Rebecca McMillan, who the House will remember was admitted by the education authority to have been "lost in the system", has already been informed that the council would sympathetically regard a request for her to attend St. Nicholas's High School, Hartford, on denominational grounds. She wishes, however, to go to Helsby for the reasons described.
  The question arises where we can go from here. Section 76 of the Education Act 1944 reads:
  "In the exercise and performance of all powers and duties conferred and imposed on them by this Act the Minister and local education authorities shall have regard to the general principle that, so far as is compatible with the provision of efficient instruction and training and the avoidance of unreasonable public expenditure, pupils are to be educated in accordance with the wishes of their parents."
  1222
  The wishes of the parents have been made perfectly clear and I do not think they can be said to be incompatible with the provision of efficient instruction or the avoidance of unreasonable public expenditure.
  In her speech of 20th December the hon. Lady, in disavowing the intention of her right hon. Friend at this stage of utilising the powers conferred on her by Section 68 of the 1944 Education Act, referred to Section 37. She noted in passing that no school attendance order was yet in existence in respect of the children who were the subject of this debate, but that the matter could arise. Although it is a matter for the parents, I think it right to tell the House that circumstances are likely to arise in respect of Richard Wilkinson where an attendance order may come into existence. I hope that the House will agree—perhaps the hon. Lady will confirm this—that if as a consequence of that attendance order, Section 37 were to be invoked, with the result that the wishes of the Wilkinsons were complied with, it would be extremely unfair if Rebecca McMillan did not also have the opportunity of attending the school of her choice. In other words, I do not think it should be a point of prejudice against her that she is currently attending school, in contrast to Richard Wilkinson who is not.
  I remind the House, and I am sure that I have no need to remind the hon. Lady, that in the event of an attendance order being issued, the onus of proof as to what is reasonable is on the local authority rather than the Secretary of State.
  Section 37 (2) of the 1944 Education Act reads:
  "If, after such a notice has been served upon a parent by a local education authority, the parent fails to satisfy the authority in accordance with the requirements of the notice that the child to whom the notice relates is receiving efficient full-time education suitable to his age, ability, and aptitude, then, if in the opinion of the authority it is expedient that he should attend school, the authority shall serve upon the parent an order in the prescribed form (hereinafter referred to as a 'school attendance order') requiring him to cause the child to become a registered pupil at a school named in the order:
  Provided that before serving such an order upon a parent the authority shall, where practicable, afford him an opportunity of selecting the school to be named in the order, and if a school is selected by him. that school shall,

  1223
  unless the Minister otherwise directs, be the school named in the order."
  Subsection (3) reads:
  "If the local education authority are of opinion that the school selected by the parent as the school to be named in a school attendance order is unsuitable to the age, ability or aptitude of the child with respect to whom the order is made, or that the attendance of the child at the school so selected would involve unreasonable expense to the authority, the authority may, after giving to the parent notice of their intention to do so, apply to the Minister for a direction determining what school is to be named in the order."
  Subsection (4) reads:
  "If at any time while a school attendance order is in force with respect to any child the parent of the child makes application to the local education authority by whom the order was made requesting that another school be substituted for that named in the order, or requesting that the order be revoked on the ground that arrangements have been made for the child to receive efficient full-time education suitable to his age, ability, and aptitude otherwise than at school, the authority shall amend or revoke the order in compliance with the request unless they are of opinion that the proposed change of school is unreasonable or inexpedient in the interests of the child, or that no satisfactory arrangements have been made for the education of the child otherwise than at school, as the case may be; and if a parent is aggrieved by a refusal of the authority to comply with any such request, he may refer the question to the Minister, who shall give such direction thereon as he thinks fit."
  It seems unthinkable, given the wording of the section and the view that the Government have already expressed in the debate on 20th December, as well as in the right hon. Lady's letter to Mr. Maynard, that the Minister can possibly do other than direct the children to attend the schools of their choice.
  In her speech on the 20th December the hon. Lady referred to the nature of the law at present and the possibility of future legislation. In the absence of the appropriate legislation I very much hope that the Government will continue their efforts to achieve an agreement with the Cheshire County Council without the necessity of lengthy procedures under Sections 37 or 68 and that the education committee will in turn help to avoid such a lengthy rigmarole.
  While it is not a matter for me, I cannot agree with the right hon. Lady that the circumstances of the cases under discussion preclude her from intervening under Section 68. I base that view on a
  1224
  reading of Lord Wilberforce's judgment in the House of Lords Appeal of the Secretary of State for Education and Science against the Tameside Metropolitan Borough Council—Times Law Reports, 21st October 1976—which time does not permit me to develop.
  As a Conservative MP, I am naturally conscious of the irony of trying to assist a Labour Government in putting into effect their express wish of allowing two of my constituents to go to grammar schools against the wishes of a Conservative-controlled education authority. I have deliberately kept the political temperature of my remarks as low as possible in the hope that by diffusing light on the situation rather than generating heat we can reach a swift and amicable solution. Whether or not the situation would have arisen but for the Government's Circular 4/74 and the 1976 Education Act I do not wish to speculate.
  No doubt these cases raise issues of contemporary constitutional significance. That is a matter which we can debate more appropriately and at greater length if and when the Government bring forward amending legislation. These cases are, however, of crucial importance to two families in my constituency, and if lengthy procedures under Section 68 and Section 37 can be avoided the only ones to lose will be the lawyers and the only ones to gain will be the children.
  As my hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) said in a speech to the Conservative National Advisory Committee on Education on 19th June 1976:
  "It is the task of the administrative system to adapt itself to the needs of the children and not the other way around."
  What my hon. Friend might have said is that he deplores, as I do, individual children being used as political footballs.
  The Chairman of the Cheshire Education Committee mentioned in his letter that the parents of 24 children had appealed to the Committee against their school allocations. I regard that as a modest number indeed in a county the size of Cheshire, and one which every effort should have been made to accommodate.
  I am not prepared to believe that the education committee of the Cheshire County Council is deliberately acting in

  1225
  these two cases to embarrass the Government. If we, as individuals, disapprove—as we do—of the Government's policy of compulsory universal comprehensivisation our most appropriate course, in my view, is to condemn the policy by our words and where possible our actions but to mitigate rather than exacerbate what we see as its undesirable effect by our actions where we are in a position to do so.
  It seems to me that the Cheshire Education Committee has it within its power to mitigate what some of its members may view as the quite regrettable consequence of Government policy. There is still time for the committee to do so.
  If the peg on which the education authority is hanging its hat is a desire to support the Government to the letter in their policy of comprehensivisation, and the Government have specifically disavowed their desire for such support in these particular cases, as they have, the peg has surely fallen out of the wall.
  The Cheshire Education Committee meets only every other month, and the matter has now been debated twice by the House of Commons since the committee's last meeting. Therefore, it has not had an opportunity to look at this matter afresh. I hope that Mr. Maynard, the chairman, for whom I have the warmest personal regard and respect, despite our disagreement over this matter hitherto, will persuade the committee to look at these two cases sympathetically at its next meeting later this month. Anything further that the hon. Lady can do to help in reaching a favourable conclusion will be received with the same measure of gratitude as that which she has done already.
  11.45 p.m.
  The Under-Secretary of State for Education and Science (Miss Margaret Jackson): The two cases which the hon. Member has referred to the Department in recent months relate to Richard Wilkinson and Rebecca McMillan, both of whom were allocated places at Tarporley High School but requested places at alternative schools within the county. As I made clear in my reply to the hon. Member for Northwich (Mr. Goodlad) in the Consolidated Fund Bill debate on 20th December 1976, I have
  1226
  been as anxious as he is that these cases should be resolved satisfactorily.
  I am sure that I do not need to remind the hon. Member for Northwich, but I should like to remind the House, that the powers of the Secretary of State to intervene in cases of this nature are severely limited. My right hon. Friend the Secretary of State considered very carefully the reasons put forward by the parents of Richard Wilkinson and Rebecca McMillan for requesting particular schools and the authority's case for refusing the parents' requests. However, since the authority claimed that both Nantwich and Acton Grammar School, requested by Richard Wilkinson, and Helsby Girls Grammar School, requested by Rebecca McMillan, were already full with children who live within the schools' catchment areas, she was forced to the conclusion that, in the terms of Section 68 of the 1944 Education Act, she was unable to issue a direction against the Cheshire Education Authority.
  Despite this, as the hon. Member has said, I wrote to the Cheshire authority about these cases stressing the burden which will be placed on the families of these children if they are unable to attend the same schools as their siblings because they live outside the schools' present catchment areas. I also made it clear, as I did in my recent reply to the hon. Member for Northwich, that the decision whether to admit the children to the schools of their parents' choice is one for the authority: we cannot force it to do so because in terms of Section 68 of the 1944 Education Act the authority was not acting in a manner which we could properly regard as unreasonable. My right hon. Friend can intervene only if she is satisfied, and properly satisfied, that an authority has acted or proposes to act unreasonably in the exercise of a power or the discharge of a duty conferred upon it by the Education Act. It is not open to the Secretary of State simply to substitute her judgment for that of an authority exercising its statutory discretion in the administration of the local education service, even if many people might regard the authority's decision as highly unsatisfactory. Nevertheless, my letter urged the authority to look once more at all the circumstances of these two cases and to consider

  1227
  whether it could agree exceptionally to the admission of these two children to the schools of their choice.
  I have just received from the Cheshire authority the reply to my letter. The rather curt reply is in similar terms to the one received by the hon. Member for Northwich, which he has just quoted. I must emphasise that the reason for my hon. Friend's decision not to intervene on behalf of these families was that the authority could justify the claim that to admit these pupils to the schools of their choice would lead to extra expense in teaching and running costs. The authority itself may have reached its decision for different reasons which my right hon. Friend did not regard as relevant or important.
  Nevertheless, the hon. Member questions whether, in the circumstances, my right hon. Friend could not after all have used the powers conferred upon her by Section 68 of the Education Act 1944 to direct the Cheshire authority to grant school places of the parents' choice to Richard Wilkinson and Rebecca McMillan. In answer to this point, I can only say that my right hon. Friend has examined these cases most carefully and, with the benefit of legal advice, has concluded that there were no grounds for intervention.
  In cases of this kind, Section 68 of the Act must be read alongside Section 37, in that intervention is precluded when an authority can justifiably maintain that the school selected by the parent is either unsuitable to the age, ability or aptitude of the child—a matter not at issue in these cases—or that the attendance of the child at the school so selected would involve unreasonable expense to the authority. This is a term which, to put it mildly, is not widely understood, but it is this second factor on which my right hon. Friend based her decision not to intervene in these cases. This is the kind of criterion on which we must base judgments of this kind.
  The hon. Member referred to Lord Wilberforce's judgment in the Tameside case. I have read it too, but I must tell the hon. Member that I do not see any-
  1228
  thing in it which will assist us in this matter.
  The hon. Member states his hope that, should these cases require the issue of a school attendance order, my right hon. Friend will direct the authority to name the school of the parents' choice in that order. In response to this, I must emphasise that the school to be named in any school attendance order is a matter which will be decided in the light of the circumstances, if and when the authority seeks such a direction. It would be quite wrong for me to say anything now which would at any stage prejudice such a decision. I hope the hon. Member will forgive me if I do not go into that aspect of the case.
  I am sure that I need not say how unhappy I am that the Cheshire authority has decided not to make an exception to its normal policies and procedures in these cases. My letter to the authority was directed not to maintaining that it had acted in any way unreasonably in the terms of the Education Act; it was merely to say that I would have hoped that the authority would reach a different decision, more in line with our policy of granting parental wishes in matters of school admissions wherever that is possible. But, now that the Cheshire authority has decided that it cannot do this in these cases, I am afraid that it is not open to me to take the matter any further. I have made our views clear to Cheshire, but the final decision is for that authority, as the elected local authority.
  However, I agree with the hon. Member that it is very sad that a Conservative local authority should reject the representations of a Conservative Member and a Labour Minister, and refuse—as, indeed, the chairman's letters to the hon. Member and to me indicate—even to reconsider the cases as we asked. The authority insists that it is unable to allow parental choice to be exercised in this way, despite the emphasis placed on parental choice over and over again by hon. Members on both sides of this House. I echo the hon. Member's hope that the Cheshire authority, when it has the opportunity as an education committee to meet and consider these cases, will reconsider them, as it has so far refused to do, and will reach a decision

  1229
  that will give more satisfaction to the hon. Member, to me, and, most important of all, to the families of the children concerned.
  Question put and agreed to.
  Adjourned accordingly at seven minutes to Twelve o'clock.

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EUROPEAN COMMUNITY
  EEC Printed Papers (Demand Forms)
  EEC Printed Papers (Demand Forms)
  Treaty of Rome
  Treaty of Rome
  Visas and Entry Permits
  Visas and Entry Permits
FOREIGN AND COMMONWEALTH AFFAIRS
  Embassies and High Commissions (Costs)
  Embassies and High Commissions (Costs)
  Entry Certificates
  Entry Certificates
NORTHERN IRELAND
  Fishing Industry
  Fishing Industry
  Terrorism (Prevention)
  Terrorism (Prevention)
SCOTLAND
  Boundary Commission
  Boundary Commission
  General Elections
  General Elections
  Hill Livestock (Compensatory Allowances)
  Hill Livestock (Compensatory Allowances)
WALES
  Welsh Development Agency
  Welsh Development Agency
  Roads
  Roads
  Fishery Byelaws
  Fishery Byelaws
ENVIRONMENT
  Tied Cottages (Abolition)
  Tied Cottages (Abolition)
  Rate Equalisation
  Rate Equalisation
  Rate Support Grant
  Rate Support Grant
  Homeless Persons
  Homeless Persons
  Rates
  Rates
  Civil Servants (Office Buildings)
  Civil Servants (Office Buildings)
  Water Pipes
  Water Pipes
  Cesspit Charges
  Cesspit Charges
  "Housing: Needs and Action"
  "Housing: Needs and Action"
  Central Ordnance Depot, Bicester (Railway)
  Central Ordnance Depot, Bicester (Railway)
  Property Services Agency
  Property Services Agency
  Gipsies
  Gipsies
  Fluoridation
  Fluoridation
  Litter Act
  Litter Act
  Public Inquiries
  Public Inquiries
  Owner-Occupiers (Incomes)
  Owner-Occupiers (Incomes)
  Improvement Grants
  Improvement Grants
  Thames Water Authority (Equalisation Charge)
  Thames Water Authority (Equalisation Charge)
  Army Base, Aldershot (Football and Hockey Pitches)
  Army Base, Aldershot (Football and Hockey Pitches)
  FINANCIAL INSTITUTIONS (INQUIRY)
  FINANCIAL INSTITUTIONS (INQUIRY)
TRANSPORT
  London Transport Executive
  London Transport Executive
  Statistics
  Statistics
  Road Construction Units
  Road Construction Units
  M42 (Solihull)
  M42 (Solihull)
  Road Lighting (Advisory Committee)
  Road Lighting (Advisory Committee)
  Vehicle Excise Duties
  Vehicle Excise Duties
  Supplementary Grants
  Supplementary Grants
  Kidney Donor Cards
  Kidney Donor Cards
  Subsidies
  Subsidies
  Road Inquiries
  Road Inquiries
  Lead Pollution
  Lead Pollution
  Vehicle Axle Weights
  Vehicle Axle Weights
NATIONAL FINANCE
  Yachts and Motor Cruisers
  Yachts and Motor Cruisers
  Income Tax
  Income Tax
  Consumer Durables
  Consumer Durables
  Inland Revenue (Registration of Ownership)
  Inland Revenue (Registration of Ownership)
  Regional Employment Premium
  Regional Employment Premium
  Capital Gains Tax
  Capital Gains Tax
  Tourism (European Community Countries)
  Tourism (European Community Countries)
  Low Incomes
  Low Incomes
  Double Taxation (Brazil)
  Double Taxation (Brazil)
  Export Prices
  Export Prices
  Sterling Balances
  Sterling Balances
  Export-led Growth
  Export-led Growth
  General Election Scrutineers (Pay)
  General Election Scrutineers (Pay)
  Double Taxation (United States of America)
  Double Taxation (United States of America)
  Banking Industry (Nationalisation)
  Banking Industry (Nationalisation)
  Public Supplies Contracts (Draft EEC Directive)
  Public Supplies Contracts (Draft EEC Directive)
  Foreign Manufactures (Purchase)
  Foreign Manufactures (Purchase)
  Parliamentary Questions
  Parliamentary Questions
  Nationalised Industry (Foreign Currency)
  Nationalised Industry (Foreign Currency)
  Community Land Act (Expenditure)
  Community Land Act (Expenditure)
  British Petroleum
  British Petroleum
  Child Tax Allowances
  Child Tax Allowances
  Factory Building (Development Commission Programme)
  Factory Building (Development Commission Programme)
  Multinational Companies
  Multinational Companies
  Money Supply (Christmas)
  Money Supply (Christmas)
  Tourism Expenditure
  Tourism Expenditure
  Machinery Imports and Exports
  Machinery Imports and Exports
  Exports (Unfulfilled Orders)
  Exports (Unfulfilled Orders)
SOCIAL SERVICES
  Residential Care
  Residential Care
  Self-Employed Persons (National Insurance Contributions)
  Self-Employed Persons (National Insurance Contributions)
  Chaseley Home, Eastbourne
  Chaseley Home, Eastbourne
  Unemployment Benefit
  Unemployment Benefit
  Invalid Vehicles
  Invalid Vehicles
  Parliamentary Questions
  Parliamentary Questions
  Retinitis Pigmentosa
  Retinitis Pigmentosa
  Windscale Employees (Medical Records)
  Windscale Employees (Medical Records)
  Smoking
  Smoking
  Fluoridation
  Fluoridation
  Training Opportunities Scheme
  Training Opportunities Scheme
  Centenarians
  Centenarians
  Animal Fats
  Animal Fats
  Mental Patients
  Mental Patients
  Community Health Councils (National Association)
  Community Health Councils (National Association)
  Consultants (Hammersmith Hospital)
  Consultants (Hammersmith Hospital)
  Whooping Cough Vaccine
  Whooping Cough Vaccine
  Occupational Pensions
  Occupational Pensions