Sitting of 18 July 1977

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
MR. SPEAKER (LEAVE OF ABSENCE)
Mr. Speaker: I have to inform the House that the University of Wales proposes to do me the honour of conferring on me an honorary degree of Doctor of Laws on Friday 22nd July. I therefore ask for the indulgence of the House and for leave of absence to enable me to attend the university for that purpose. [HON. MEMBERS: "Hear, hear."] I am obliged to the House. I hope that all hon. Members will get one.
ORAL ANSWERS TO QUESTIONS
ORAL ANSWERS TO QUESTIONS
  INDUSTRY

    Consett Number One
    Mr. David Watkinsasked the Secretary of State for Industry what progress has been made in his consideration of developing an industrial site at the situation known as Number One, Consett.
    The Under-Secretary of State for Industry (Mr. Bob Cryer): I am glad to say we are proceeding at once to acquire some 90 acres at Consett Number One. Site development work will start as soon as we have possession of the land. The Government have already announced their intention to build two advance factories
    1118
    at Consett, and these will be built at Number One.
    Mr. Watkins: Is my hon. Friend aware that in that area, where unemployment is consistently double the national average and there are ominous signs for die future, this development is very much to be welcomed? Will he give an assurance that all possible steps will be taken to eliminate any possible inconvenience to people living adjacent to the site?
    Mr. Cryer: Yes, we are fully aware of and understand the fears of local residents that their amenity will suffer. Due care and extensive landscaping will be undertaken by the English Industrial Estates Corporation. I assure my hon. Friend that everything will be done to render the development as inoffensive as possible to neighbouring residents. In special development areas, advance factories are now available for up to five years free of rent as an inducement to provide the employment that my hon. Friend is talking about.
    Mr. Radice: Will my hon. Friend say what steps his Department is taking to implement the NEB Report on investment prospects in the Northern Region?
    Mr. Cryer: There is a Question on that subject later on the Order Paper, and I suggest that my hon. Friend waits until then.

    National Enterprise Board
    Mr. Dykesasked the Secretary of State for Industry if he will make a statement on the recent announcement of board changes at the National Enterprise Board; and whether he expects such changes to produce any split in operational policies.
    Mr. Neubertasked the Secretary of State for Industry when he last met the Chairman of the National Enterprise Board.
    The Secretary of State for Industry (Mr. Eric G. Varley): I last met the Chairman of the National Enterprise Board on 6th July. I have nothing more to add, as far as board changes at the NEB are concerned, to the reply my hon. Friend gave the hon. Member for Christchurch and Lymington (Mr. Adley) on 7th July. Operational policies are primarily a matter for the Board.
    Mr. Dykes: Does the right hon. Gentleman agree that the NEB has been completely swamped by its involvement in British Leyland and the excessive political interference which has bedevilled the NEB's activities since it started? Does he feel that the rest of the work that the NEB is doing is worth while? How many new projects is it likely to take on in the next six months and what is its central strategy, apart from trying to rescue the Government and British Leyland at the same time?
    Mr. Varley: I do not agree that the NEB's work or involvement with British Leyland has swamped its other activities. In 18 months it has made a very good start. As for political interference, the NEB has full operational freedom in accordance with the guidelines which have been fully debated in the House.
    Mr. Neubert: In view of the Chancellor of the Exchequer's undertaking last Friday to contain wage settlements in the public sector, what influence will the NEB have in this field, and has the Secretary of State issued directions on how this might be exercised?
    Mr. Varley: I have not issued directions to the NEB as regards wages policy, but the NEB and other public corporations will understand the Government's views on this matter.
    Mr. James Lamond: Does my right hon. Friend recall that the report on the NEB's first 18 months of operation contained many success stories, including that of Ferranti, in my constituency? Is he aware that the activity of the NEB saved a great many jobs?
    Mr. Varley: That is certainly true. I do not think that it has gone unnoticed by those who work for Ferranti or many of the other companies where the NEB has been involved, such as ICL, Twin-lock, Sinclair Radionics and others.
    Mr. Norman Lamont: Has the Secretary of State studied the evidence of the Treasury to the Wilson Committee suggesting that there is no shortage of finance for British industry but that the trouble is the hostile attitude in this country towards British industry? Does not that remove one of the main arguments for the NEB? Should not Mr. Murphy therefore be given a rather more limited task of making no more invest-
    1120
    ments and simply to see whether he can sell off at a profit investments that it already has?
    Mr. VarleyI do not agree. I have not yet studied the evidence of the Treasury to the NEB. It is the Government's view that the NEB will have not only a continuing but an expanding rôle.

    Secretary of State (Engagements)
    Mr. Greville Jannerasked the Secretary of State for Industry what are his official engagements for 18th July.
    Mr. Varley: Apart from my responsibilities to this House, I shall be meeting a delegation of trade unionists and chairing a number of meetings with my officials.
    Mr. Janner: When my right hon. Friend meets the trade unionists and officials, will he discuss the great problem that still exists in the staple traditional industries of the Midlands, including the footwear industry, which is suffering greatly in the recession? Can he offer any help to this industry?
    Mr. Varley: I shall not be taking the opportunity of discussing the footwear industry with the particular delegation of trade unionists who will be coming here today. However, I can tell my hon. and learned Friend that the very valuable report of the Footwear Industry Study Steering Group, whose findings are now before us, is being urgently considered within the Department. If at all possible, I shall make a statement about that industry before the recess.
    Mr. Speaker: Order. I may as well tell the House that on these shot-in-thedark Questions I propose to call only one hon. Member from each side for a supplementary question.
    Mr. Michael McNair-Wilson: Will any of the trade unionists that the Secretary of State will be meeting come from British Aerospace? If so, will he say whether he has any plans to put before them as regards ways of either the French Government or the British Government buying the remaining unsold Concordes with a view to leasing them out—or, indeed, will he tell us of any other initiatives that he has to ensure that these aircraft are sold, thereby reducing the likely number of redundancies at Weybridge and Filton?
    Mr. Varley: The trade unionists coming today will not be discussing Concorde or specifically the aircraft industry. There is a Question later on the Order Paper about that industry.

    Power Plant
    Mr. Kenneth Clarkeasked the Secretary of State for Industry whether he will make a statement about the future of the power plant manufacturing industry.
    Mr. Whiteheadasked the Secretary of State for Industry if he will make a further statement of Government policy with regard to recent mergers in the power generating industry, in the light of the CPRS Report.
    Mr. Varley: As the House knows, the Government accepted the recommendation of the Central Policy Review Staff, supported by the National Enterprise Board, that it would be in the long-term interests of the country and of those employed in the industry if restructuring took place. It has not at this stage proved possible to find an acceptable basis for restructuring, but we shall continue to discuss with the companies the possibility of bringing it about.
    Mr. Clarke: The right hon. Gentleman has not touched on the announcement to be made at 3.30 p.m. on Drax B. What is his personal position on this matter? Does he accept that there is some sympathy for him on this side of the House in that once again he has argued the logic of his industrial strategy against his right hon. and hon. Friends' wish to spend public money merely in response to political lobbies and he has lost again? Does he not think that his view on the power plant manufacturing industry and that of the CPRS, the NEB and the CEGB has been rejected in favour of the advice of the NUM and the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) and that the best thing that he could do would be to resign and argue his case properly?
    Mr. Varley: I do not want lectures from the hon. Gentleman about whether or not I should resign. I think that he misunderstands the position. The objective was always to bring about voluntary restructuring. We have no powers to bring about restructuring. The hon.
    1122
    Gentleman knows that full well. It is true that the objective was supported by the CPRS, the NEB and the CEGB and, incidentally, by all those who have been engaged in these discussions. Unfortunately, at this stage it has not proved to be possible. However, I hope that at some stage in the future we can get back to discussions.
    Mr. Whitehead: Is it not the case, however, that the proposed merger between Reyrolle Parsons and Clarke Chapman, if it goes ahead, will drive a coach and horses through the recommendations in the CPRS Report? Is it not the case that this is already increasing the hostility between the two separated parts of the boilermaking industry? Is my right hon. Friend aware, for example, that one of them is actually advising its foreign associates to come in and take work in Britain from the other half? Is this not to the detriment of British industry when we should be sharing out the work among British firms?
    Mr. Varley: I think that the companies put out a statement which said that the merger between Reyrolle Parsons and Clarke Chapman was quite independent of the restructuring of the power plant industry. My understanding is that the talks about a merger in the boiler-making side of the industry are still in progress and that the NEB is taking part in them.
    Mr. Nelson: Will the right hon. Gentleman at least ensure, as a matter of good competitive industrial policy, that he uses his influence to ensure that, if GEC makes a bid or produces a tender, the terms of that tender will be published?
    Mr. Varley: I am afraid that questions about particular power stations and power station orders must be put to my right hon. Friend the Secretary of State for Energy. I understand that he will be making a statement at 3.30 p.m. today.
    Mr. Mike Thomas: Will my right hon. Friend accept that a merger on the lines of the boilermakers merger as proposed was never available on the turbo-generating side? That is tragic and is regretted by the Parsons work force and management. Has my right hon. Friend any news of proposals to develop a joint research company and a turnkey project

    1123
    company with NEB assistance? Is he aware that the position taken by the Opposition Front Bench spokesmen on this issue has been specifically disowned by the hon. Members for Newcastle upon Tyne, North (Sir W. Elliott) and Tyne-mouth (Mr. Trotter)?
    Mr. Varley: On the first part of my hon. Friend's question, I cannot give him any information about the possibility of turnkey projects and the other assistance that was recommended in the CPRS Report. I very much regret that it has not been possible to get restructuring at this stage. What we are talking about is not a single power station order. We are talking about getting an industry that is capable of being internationally competitive, having to find about two-thirds of its work from abroad.
    Sir K. Joseph: Has not the Secretary of State, however, by his own arguments, which he is explicitly repeating now, accepted that it is bad for the people of this country and bad for industrial strategy that an order should go to the company that makes most noise rather than to the company that produces the best price for the job?
    Mr. Varley: The right hon. Gentleman is one of the last persons to give me instructions about placing power station orders. Although it is not a specific matter for me, and no doubt the right hon. Gentleman will take the opportunity of raising it with my right hon. Friend, he will know that in November 1971 the Government of the day, of which he was a member, authorised the advance of Ince B power station by single tender to Reyrolle Parsons, because at that time—
    Mr. Tom King: By agreement with GEC.
    Mr. Speaker: Order.
    Mr. Varley: I was only referring, Mr. Speaker, to the right hon. Gentleman's Government. I do not think that the hon. Member for Bridgwater (Mr. King) was a member of that Government. Perhaps he will keep quiet for a minute or two. I do not know whether the hon. Gentleman is involved, but the right hon. Gentleman's Government decided at the time that they would place an order with Reyrolle Parsons for Ince B.
    1124
    If that is the decision that will be taken today, it is entirely in line with the decision to which the right hon. Gentleman was a party.
    Mr. Skinner: Will my right hon. Friend confirm that the CPRS Report was not included in the Labour Party manifesto? Will he also acknowledge that the Opposition are constantly wanting to get rid of jobs? The Opposition have a fixation about that matter, especially when it is with regard to steelworkers, British Leyland workers, Chrysler workers and, indeed, engineering workers, and obviously miners, which would be the case if Drax B were not announced very quickly. In view of that, does not my right hon. Friend think that the Opposition are being hypocritical, because when they were in power they saved Rolls-Royce, using the same criteria?
    Mr. Speaker: Order. The Minister is not responsible for the Opposition.
    Mr. Varley: I happen to think that the CPRS Report was a good report. The analysis that it made was very firm and sensible. What it is talking about in the report is trying to achieve an internationally competitive industry. As to supporting the mining industry, I think that the Government's desire to see a second coal-fired power station at Drax in Yorkshire was first announced by my right hon. Friend the Member for Barnsley (Mr. Mason) in 1969.
    Sir W. Elliott: Will the right hon. Gentleman accept that the management and work force of C. A. Parsons have not been opposed to a restructuring of the industry? Will he further accept that the comments made by myself and by my hon. Friend the Member for Tynemouth (Mr. Trotter) during this long period in which there has been grave indecision, which has affected very heavily the lives of many families in Newcastle upon Tyne, have been criticism of the slowness in the decision being taken?
    Mr. Varley: That rather conflicts with what has been said from the Opposition Front Bench, and it rather confirms the statement of my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Thomas). There has been no undue delay in reaching a decision. In fact, Sir James Woodeson said when he came to see me

    1125
    on 31st March this year that irrespective of a single power station order there would be some redundancies at C. A. Parsons in Newcastle. However, I am not concerned particularly about the workers in one section of this industry. I am concerned about all workers in the industry just as much as I am about the 9,500 workers who work for GEC.

    Steel
    Mr. Hardyasked the Secretary of State for Industry at what proportion of capacity the steel industry is currently operating; and if he expects the position to improve by the end of 1977.
    The Under-Secretary of State for Industry (Mr. Les Huckfield): The United Kingdom steel industry operated at about 69 per cent. of capacity in June. It now seems unlikely that there will be any significant improvement in demand before the end of this year.
    Mr. Hardy: While we all hope that the industry will improve, may I ask whether my hon. Friend is aware that recent statistics show that the Yorkshire and Humberside Region has been more severely affected by the reduction in steel production than any other region, despite the fact that the region contains some of the Corporation's most successful undertakings? Will my hon. Friend advise the Corporation to build upon success rather than to be content with a lesser level of achievement?
    Mr. Huckfield: I am conscious of what my hon. Friend says about Yorkshire, particularly in view of the representations which he and many of my hon. Friends have made. I can assure him that if he has a look at the investment performance and projections of the British Steel Corporation he will see that the Corporation intends to build on success.
    Mr. Michael Marshall: Does the hon. Gentleman agree with the Chairman of the British Steel Corporation, who said in a recent speech that the level of losses at which the Corporation was currently running was unacceptable? If the Minister agrees with this, may I ask what he is doing to try to remove that part of the loss which stems from ministerial delay,
    1126
    as demonstrated over Port Talbot and currently Redcar?
    Mr. Huckfield: The hon. Gentleman will recognise that there is a specific Question on the Order Paper about this. I hope that he will also recognise, if he has read that speech in full, that what the chairman was saying was that we have to continue to try to be a low-cost, efficient steel producer. That is what the investment programme of the British Steel Corporation aims at.
    Mr. John Ellis: Will my hon. Friend look at the position whereby in Scunthorpe we can produce massive quantities of steel at competitive prices yet are short of blast capacity to make iron? Should not plans to improve the blast capacity be made now to take advantage of the upturn when it comes? Will my hon. Friend give British Steel a prod to see that such plans come forward to him for his approval?
    Mr. Huckfield: I am aware of what my hon. Friend has said because he has made sincere and detailed representations concerning Scunthorpe. At present, however, we have received no representations from British Steel concerning Scunthorpe.

    Confederation of Shipbuilding and Engineering Unions
    Mr. Mike Thomasasked the Secretary of State for Industry when he last met representatives of the Confederation of Shipbuilding and Engineering Unions.
    Mr. Varley: I met representatives of the CSEU on 1st July.
    Mr. Thomas: I hope that my right hon. Friend will not misunderstand me if I raise with him the problem—which I am sure was raised with him by the CSEU—of the three shipyards on the north of the Tyne and the current work load there. Is he aware that there are 8,000 employees who depend on new shipbuilding orders? Is he able to give some idea of the work that his Department is doing to bring orders to those yards and to use the intervention scheme as well as the other measures which he has brought forward to help the situation?
    Mr. Varley: We are doing everything we can to help the British shipbuilding

    1127
    industry on Tyneside and other areas where the industry exists. The intervention fund is being used to good effect and has already saved thousands of jobs.
    Mr. Biffen: Can the right hon. Gentleman give an undertaking that British Shipbuilders will be allowed to go about its business and make its own economic judgments free from the kind of grubby regional lobbying that has disfigured the ordering of the Drax B power station?
    Mr. Varley: The Board of British Shipbuilders has operational freedom, and I hope that it will be able to pursue its overall objectives within the terms of the legislation which has been passed by this House. It has already made a good start. I am afraid that, here again, the industry faces severe problems. It is a question of getting work from overseas.

    Industrial and Regional Development Grants
    Mr. MacGregorasked the Secretary of State for Industry whether he is satisfied that the present Government schemes for industrial and regional development grants enable the United Kingdom to obtain maximum benefits from membership of the European Economic Community.
    The Minister of State, Department of Industry (Mr. Alan Williams): Yes, Sir.
    Mr. MacGregor: Is the right hon. Gentleman aware that some companies—I know of at least two in Norfolk—are unable to get EEC grants, for which they would otherwise be eligible, because they are currently excluded from all British Government schemes? Can he say whether any consideration is being given to a national back-up scheme to overcome this problem?
    Mr. Williams: I am aware of the problem. The hon. Member will know that two of the Section 8 schemes—the red meat and the poultry schemes—have made this possible for certain affected sectors of the industry in his area. I am sure that he will also have seen the statement on 15th July by the Minister of Agriculture which forecast such a proposal.
    Mr. Blenkinsop: While I welcome the grants and loans which have come from the EEC under these schemes, particularly to the North-East, may I ask my right hon. Friend to give an assurance that such assistance does not simply result in a cut-back of Government grants which would otherwise be available?
    Mr. Williams: As my hon. Friend is aware, many of the items we have been able to announce in the past three programmes have been financed from the funds we received from the EEC. My hon. Friend will also note that there is to be a debate later today which is of considerable significance because of the possible impact on regional policy.
    Mr. Ridsdale: Why cannot the industrial grants be channelled into North-East Essex, where at present there is an unemployment rate of 10 per cent.? Does the Minister realise that some industry is being tempted away from the area, yet Harwich is one of the most prosperous ports in the country?
    Mr. Williams: I suspect that the hon. Gentleman is guilty of what his hon. Friend the Member for Oswestry (Mr. Biffen) called "grubby regional lobbying". May I say how amusing it is for Labour Members to note that while every Tory is against public expenditure in general they all want more of it in their own constituencies.
    Mr. Kenneth Clarke: Will there he a quick decision one way or the other on the Commission's proposals to give some regional industrial aid outside the national quotas and outside the constraints set by national schemes? In particular, may we have a quick decision on the Commission's proposals to give special aid to shipbuilding and steelmaking areas and to areas dependent on industries affected by Community policy decisions, such as the fishing industry?
    Mr. Williams: The non-quota proposals raise a great many points. I hope to be able to outline them to the House during today's debate. I would like to hear from hon. Members in that context. The House will be aware that these are proposals which have to be discussed and considered by Ministers. The aim is to reach a decision by the end of the year.

    Yorkshire and Humberside
    Mr. Edwin Wainwrightasked the Secretary of State for Industry if he will list the financial assistance provided through his Department to the Yorkshire and Humberside Region during each of the past three years; and if he will give comparable figures; per 1,000 of the population of the financial aid given to Scotland, Wales, and the North-West and North-East Regions, respectively.
    Mr. Cryer: I regret that the information for regional preferential expenditure is only separately available for the Yorkshire and Humberside intermediate area. I shall arrange for the figures for regional preferential expenditure and for expenditure under Section 8 of the 1972 Industry Act to be published in the Official Report.
    Mr. Wainwright: Is my hon. Friend afraid to get the figures out early? Is he quite sure that Yorkshire is getting fair play from the Government? [Interruption.] I am not talking about Drax now. Is not my hon. Friend aware of the huge majority of people in Yorkshire who think that the Government are being too complacent about the large pockets of unemployment and the low wages in West Yorkshire? When will he do something about this?
    Mr. Cryer: I do not want to take up time by reading out the figures, but when my hon. Friend reads them in the Official Report he will see that, for example, regional preferential expenditure between 1973–74 and 1975–76 more than doubled. He will also find that Yorkshire and Humberside has received the largest amount of assistance, at £8·3 million under Section 8 and a total of £40·9 million under the accelerated pro-

    ESTIMATED REGIONAL PREFERENTIAL EXPENDITURE

    1973–74

    1974–75

    1975–76

    Yorkshire and Humberside Intermediate Area:

    Total expenditure

    £ 9·6 m.

    £16·4 m.

    £23·0 m.

    Per 1,000 of population

    £2,064

    £3,527

    £4,947

    Northern Development Area:

    Total expenditure

    £58·3 m

    £75·1 m.

    £121·2 m.

    Per 1,000 of population

    £17,289

    £22,272

    £35,943

    North West Region:

    Total expenditure

    £31·8 m.

    £61·0 m.

    £71·3 m.

    Per 1,000 of population

    £4,849

    £9,302

    £10,872

    Scotland:

    Total expenditure

    £64·6 m.

    £83·0 m.

    *£124·4 m.

    Per 1,000 of population

    £12,408

    £15,943

    £23,895

    1130
    jects and industry schemes combined, in 1976–77. The Government are conscious of the difficulties, which my hon. Friend represents very well, and they are trying their best to ensure that such difficulties as the level of unemployment are reduced. I am sure my hon. Friend will bear in mind that Government powers are limited and that it is, by and large, a question of persuading industrialists to move to these areas and offering suitable inducements. In some cases this works. Where this does not work, the Government are pressing ahead as hard as they can.
    Mr. Madden: Will my hon. Friend, in consultation with his right hon. and hon. Friends at the Department of the Environment, ensure that Yorkshire and Humberside receives its fair share of grants from the EEC Regional Fund and that special factors such as migration, industrial dereliction and so on are borne in mind when the grants are awarded rather than concentrating solely on unemployment statistics?
    Mr. Cryer: My hon. Friend has a point. The EEC regional grants are applicable wherever Government grant aid is also available. For the Yorkshire and Humberside Region there is no incompatibility here. I shall hear my hon. Friend's remarks in mind.
    Mr. Budgen: Does the Minister agree that, if we get out of the EEC Regional Fund more than we put in, we shall lose on other deals in the EEC and that we are unlikely to be a net gainer from any of these schemes?
    Mr. Cryer: I am sure that the hon. Gentleman will be trying to catch your eye, Mr. Speaker, and take part in the debate later on, so that this sort of argument can be adduced further.
    Following is the information:

    ESTIMATED REGIONAL PREFERENTIAL EXPENDITURE—continued

    1973·74

    1974·75

    1975·76

    Wales:

    Total expenditure

    £48.4 m.

    £57.3 m.

    *£64.4 m.

    Per 1,000 of population

    £17,504

    £20,723

    £23,291

    Note: The figures Regional Development Grants, Regional Financial Assistance, the Investment Grant Differential, Local Employment Act residual expenditure and expenditure on land and factories.

    * The figures do not include expenditure by the offices for Scotland and Wales to which certain responsibilities for regional incentives were transferred during the course of the financial year.

    OFFERS OF ASSISTANCE UNDER SECTION 8 OF THE INDUSTRY ACT 1972

    1974–75

    Industry Schemes 1975–76

    1976–77

    Accelerated Projects Schemes 1975–76 and 1976–77

    Totals

    No.

    Value (£m.)

    No.

    Value (£m.)

    No.

    Value (£m.)

    No.

    Value (£m.)

    No.

    Value (£m.)

    Yorkshireand Humber Side Region

    105

    5·9

    81

    4·9

    110

    8·3

    11

    21·8

    307

    40·9

    North West Region

    8

    0·2

    6

    0·5

    42

    2·3

    13

    7·8

    69

    10·8

    Northern Region

    7

    0·1

    2

    0·3

    25

    3·2

    5

    3·1

    39

    6·7

    Scotland

    10

    0·9

    6

    0·1

    55

    6·2

    6

    2·1

    77

    9·3

    Wales

    Nil

    Nil

    1

    *

    14

    0·4

    2

    2·2

    17

    2·6

    * Negligible.

    British Leyland
    Mr. Michael Marshallasked the Secretary of State for Industry what will be the total amount of the next tranche of funds which the National Enterprise Board will make available to British Leyland.
    The Minister of State, Department of Industry (Mr. Gerald Kaufman): My right hon. Friend is considering recommendations put to him by the National Enterprise Board and hopes to be able to make a statement to the House soon.
    Mr. Marshall: Does the Minister agree that, following the departure of Lord Ryder, there is now an opportunity to get away from the personal identification of the NEB and British Leyland in all the terms that we have debated in the House? Will he further consider the suggestion I put to him last time that he should place in the Library a copy of the report from British Leyland to the NEB, if necessary taking out vital statistics which are commercially confidential?
    Mr. Kaufman: The hon. Gentleman's introductory words seemed to bear very little relevance to the Question. My right hon. Friend and I have made quite clear to the House that we shall make available to it all possible information, taking account of the need to maintain and pro-
    1132
    tect the commercial confidentiality of British Leyland.
    Mr. George Rodgers: Has the NEB sought consent to proceed with the development of an assembly hall and foundry at British Leyland Bus and Truck Division at Leyland in Lancashire?
    Mr. Kaufman: If my hon. Friend will contain himself a little longer, he may hear something to his advantage.
    Mr. Richard Page: Is the Minister satisfied that the purchases of components and machine tools by British Leyland are on the open market and are at arm's length, or are any other purchases being promoted by the NEB?
    Mr. Kaufman: British Leyland's purchases of machine tools are conducted on the basis of its commercial judgment. At the same time, I certainly lose no opportunity of making clear to British Leyland the desirability of its buying British whenever possible.
    Mr. Skinner: Will my hon. Friend make sure that when the next tranche of funds goes to the NEB the signature is clearly identified?
    Mr. Kaufman: Perhaps my hon. Friend would provide me with some of his address labels.
    Mr. Hal Miller: Will the Minister tell the House whether any progress has been

    1133
    made with consideration of the way in which British Leyland is to be financed in the future, whether directly by Votes from this House or through NEB financing under its general allocation of Vote?
    Mr. Kaufman: This matter is being very carefully considered at present. It is recognised that there are arguments on both sides. The hon. Gentleman has advanced an argument which has a good deal of cogency. When we make our statement to the House, that will be one of the matters covered.

    Cable and Wireless Ltd.
    Mr. Gowasked the Secretary of State for Industry what further discussions he has had with the directors of Cable and Wireless Limited about the level of their remuneration.
    Mr. Les Huckfield: None, Sir.
    Mr. Gow: Bearing in mind the increasing anomalies between the remuneration of the board of directors of Cable and Wireless Ltd. and of the senior executives, does not the Minister think, particularly following the resignation of the managing director, that he ought to give his urgent attention to the extraordinary situation which exists at Cable and Wireless?
    Mr. Huckfield: As I have already said to the hon. Gentleman on 25th April and 13th June, the Government will prob. ably be giving their attention to these matters after the end of this month.

    Wearside
    Mr. Willeyasked the Secretary of State for Industry what progress the National Enterprise Board has made in Wearside, pursuant to its report on the areas affected by the Plessey closures.
    Mr. Alan Williams: As my right hon. Friend told the House on 27th June, the NEB is making vigorous efforts to pursue the recommendations of its report, not only in Wearside but also in the North-East and North-West generally.
    Mr. Willey: Is ray right hon. Friend aware that the immediate and present problem is that of implementing the Posner Report and that we expect his Department to use its good offices to see that we get a satisfactory reply from the Post
    1134
    Office? If it can help in any way, we would expect the NEB to play its part in producing a formula which will be acceptable to the whole of the telecommunications industry. Does my right hon. Friend accept that this is absolutely urgent and essential in Sunderland, with the highest unemployment in Britain, where we may lose these 350 jobs?
    Mr. Williams: I fully appreciate the concern of my right hon. Friend. He will be aware that in another part of the area I have managed to negotiate another 400 jobs, and it was a great disappointment to me that I could not do the same for his constituency. As to the point for further consideration made in the Posner Report, the Post Office did not feel able, on all advice, to go ahead with it.
    Mr. Grylls: Will the Minister tell us what magic the NEB has that makes it possible for it to run these factories profitably when Plessey cannot?
    Mr. Williams: The hon. Gentleman seems to have a rather peculiar idea of the role of the NEB. I know that he has to some extent, almost mischievously, in relation to the tanning industry made interventions which could have reacted very badly for a tannery that is about to be closed in the Millom area. He should look again at his own activity.
    Mr. Heller: Is my right hon. Friend aware that, while we on Merseyside welcome the report as far as it goes, nevertheless we are rather disappointed with it because it does not indicate how to solve the problem of the 1,000 redundancies which are likely to occur? Some of them have already taken place. Will my right hon. Friend have another look at this in order to get the NEB to be more positive in intervening on Merseyside to provide work on a wider scale for people in an area with the worst unemployment in the whole of the British Isles?
    Mr. Williams: My hon. Friend will be aware that I had very detailed discussions with the firm in order to save as many jobs as we possibly could. As a result of the initiative taken by the Prime Minister, the NEB carried out its investigations and made recommendations. In fairness, it should be said that the Government responded immediately by

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    increasing the incentive to special development areas, which would help Merseyside and the Northern Region, for example, and by increasing the expenditure in the construction industry. But, frankly, when there is no demand for the product of a factory it is very difficult to see how one can save the jobs. The need is for alternative industry to come into the area.

    Small Businesses
    Mr. Luceasked the Secretary of State for Industry what further measures he intends to take to encourage small businesses to expand.
    Mr. Cryer: The need for special measures to encourage the expansion of small businesses is kept under constant review. We are actively considering the extension nationwide of the pilot counselling service for small firms in the South-West, and we have announced our intention to introduce a manufacturing advisory service.
    Mr. Luce: If the Minister is aware that the removal of the existing battery of legislative and tax obstacles to small businesses would do much to create wealth and thereby to create employment, what on earth is he waiting for? Does he realise that a whole mass of small business men feel that they are waiting for Godot?
    Mr. Cryer: We expect from the Opposition the sort of uninformed and prejudiced comment that came from the hon. Gentleman. He ignores the fact that the Chancellor of the Exchequer has recently announced that the preferential rate of corporation tax, specifically designed for small firms, has been raised from a level of profits of £30,000 to £40,000—and that marginal relief has been raised to £65,000. Small firms also qualify for the very generous tax allowances for investment in plant and machinery, which have been described by the CBI—an organisation with which I am sure the hon. Member has some sympathy—as the most generous tax relief system in Western Europe. Small firms also qualify for the wide range of regional preferential expenditure, which in 197576 amounted to £669 million. I should have thought that this was positive encouragement to industry to invest.
    Mr. Clemitson: Does my hon. Friend agree that co-operative and common ownership firms have a particularly important part to play in the small-to-medium size sector? What progress is being made with the setting up, or plans for the setting up, of the Co-operative Development Agency?
    Mr. Cryer: The Co-operative Development Agency is currently being considered by a working party which my right hon. Friend chaired in the first instance. We very much hope that a report from the working party will be available for publication this summer. I cannot give an absolute assurance, but that is the time scale at which we are aiming, so that the co-operative and trade union movement can consider the report and engage in debate on it. We hope that this will result in a further development of the sort of activity that my hon. Friend has in mind.
    Mr. Richard Wainwright: In view of the pressing needs of small businesses, to which the Minister has referred, and his encouragingly larger work load in this specific respect, will he press his colleagues to have a Minister appointed solely to concentrate on the needs and requirements of small businesses?
    Mr. Cryer: Because of my self-effacing nature, I hesitate to draw attention yet again to the fact that I have specific responsibility for small firms. Many organisations representing small firms make their representations to me, and we endeavour to ensure, whenever items of legislation arise, that full consultations are entered into. Certainly the Department of Industry—myself in particular—is open to representations from the small firms sector and welcomes them.

    Manufacturing
    Mr. Arnoldasked the Secretary of State for Industry whether he is satisfied with the prospects for manufacturing industry in the light of the recent CBI forecast.
    Mr. Tim Rentonasked the Secretary of State for Industry whether, in view of the Confederation of British Industry's most recent forecasts, he is satisfied with the prospects for United Kingdom manufacturing industry.
    Mr. Alan Williams: I am satisfied that manufacturing industry has good prospects of achieving a sustained and soundly based expansion. In this context, my right hon. Friend has by Written Answer to a Question by my hon. Friend the Member for Kingston upon Hull, West (Mr. Johnson) given details today of a new product and process development scheme for which £20 million has been initially allocated. The Government also propose to allocate additional sums of £40 million for the ferrous foundry industry scheme and £10 million for the machine tool industry scheme.
    Mr. Arnold: Is it not the case that both employment and investment in manufacturing industry continue to show a long-term decline? How can this situation be rectified until a greater share of GNP goes to profits, not just over one year but over a succeeding number of years?
    Mr. Williams: As I have indicated before, it is strange that Conservative Members profess to be the people who understand investment since they never managed to attain the level of investment that we attained in our last year in office. Contrary to what the hon. Gentleman is saying, the forecasts both from the CBI and from our own surveys are of a very substantial increase in investment in the next 12 months and that possibly for the first time investment will reach the 1970 level yet again during 1978.
    Mr. Renton: Will the Minister pause for a moment and say whether it is really part of Government industrial strategy that private manufacturing investment in this country is likely to increase at a time when profits are still being held down by legislation but wage costs are not? Is that part of the Government's industrial strategy or, like the social contract, is that strategy about to be blown apart by a wage explosion?
    Mr. Williams: Again, I would draw the hon. Gentleman's attention to his rather short memory. It was we who relaxed the controls on prices to enable investment to be taken into account in the pricing policy of firms. I would further draw his attention to the fact that, although Conservative Members vote
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    against measures under Section 8 of the Industry Act, as a result of the use of those measures we have generated £640 million worth of investment under the accelerated projects scheme, £160 million already under the ferrous foundry scheme and £45 million under the machine tool scheme. We seem to understand a little more about industry than do Conservative Members.
    Mr. John Garrett: Is my hon. Friend aware that the fastest declining sector of British manufacturing industry is the footwear industry, where many thousands of jobs hang upon his Department's decision about whether or not to give it funds that were proposed under the scheme of assistance?
    Mr. Williams: Indeed. I am in the middle of a period of consultation with the relevant unions. I am having the final consultations with them this week on the possible implementation of the footwear study report. I can assure my hon. Friend, and many other hon. Gentleman who have an interest in this industry, that the Government are determined to retain a viable industry.
    Mr. Biffen: So that the House may appreciate the reality of the participation by the CBI in the Government's industrial strategy, may I ask the Minister to indicate whether he has had any view whatever from the CBI on the investment represented by the Drax B power station?
    Mr. Williams: I cannot indicate that on this Question. The hon. Gentleman will have a chance to raise that matter on the statement that is to be made later. I would say that at least the CBI takes a slightly more positive view towards Government policy than do Conservative Members.

    West Yorkshire
    Mr. Maddenasked the Secretary of State for Industry what action is being taken to secure industrial development in West Yorkshire, especially in those areas where the operation of the wool textile scheme has created redundancies.
    Mr. Cryer: In addition to the financial incentives to industrial investment on offer because West Yorkshire is an intermediate

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    area, the construction of 36 advance factories has been approved since November 1974.
    Mr. Madden: Is my hon. Friend aware that the Yorkshire and Humberside Economic Planning Council's strategy review for the region calls upon the Government to undertake a coherent strategy for West Yorkshire? Does he believe that the Department's present strategy for West Yorkshire, especially Calderdale and Kirk-lees, constitutes a coherent policy?
    Mr. Cryer: Yes, I do. The Department is expressing concern about the position in Yorkshire and Humberside. As I have indicated in previous answers, we have made positive attempts to remedy the serious unemployment that occurs in pockets within the West Yorkshire area.
    As a West Yorkshire MP representing Keighley, I know only too well the sort of problem that my hon. Friend has outlined. He knows that following his representations I went to the area and discussed the question of the particular problems associated with the narrow Pennine valleys. The Department of Industry, through the English Industrial Estates Corporation, in conjunction with Calderdale, is to embark on a study of converting old factories into modern ones. I am sure that that is the sort of industrial regeneration that will have beneficial effects for the future.

    Nationalisation
    Mr. Adleyasked the Secretary of State for Industry if he has any specific plans for further nationalisation of industry.
    Mr. Kaufman: The Government's policy towards public ownership is set out in their White Paper on the regeneration of British industry.
    Mr. Adley: Will the Minister answer the Question "Yes" or "No"?
    Mr. Kaufman: I have answered the Question. The hon. Gentleman cannot understand the answer.
    Mr. Kenneth Clarke: From the Minister's reply, do I understand that the recent report of the home policy sub-committee of the National Executive of the Labour Party is totally rejected by the present Administration? Does the Minister think that if it comes to a battle with the present
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    members of the National Executive the Government are likely to lose again?
    Mr. Kaufman: If the hon. Gentleman wants to put a question about the home policy committee of the Labour Party, he should address it to Mr. Ron Hayward, who will be able to give him whatever necessary information that he feels is available. As for the Government's policies, the Department of Industry has put before the House, and received its acceptance of, the legislation which brought the aircraft and shipbuilding industries into public ownership, greatly to the benefit of those industries and not at all to the credit of the Conservative Party.
    Mr. Heffer: Perhaps my hon. Friend can advise the hon. Member for Rushcliffe (Mr. Clarke) to have a word with me. Does my hon. Friend understand that at the next General Election the Labour Party will fight its policies on the basis of an extension of public ownership according to the policy and programme carried by Labour's conference?
    Mr. Kaufman: Far be it from me to differ with a member of the Labour Party National Executive on the question of the authority of the Labour Party National Executive. My understanding, however, is that our party will fight and win the next General Election on the basis of the manifesto agreed through the usual procedure—that is, a joint committee of the Cabinet and the National Executive.

    Post Office (Legislation)
    Mr. Ridleyasked the Secretary of State for Industry whether his intended legislation concerning striking in the Post Office will extend to permitting refusal to deliver the mail of individual customers.
    Mr. Kaufman: The scope of the proposals will be settled in the light of consultations with the Post Office, the unions and the Post Office Users National Council.
    Mr. Ridley: Is the Minister aware that it would be scandalous to allow the Post Office workers to continue to discriminate against individual customers' mail? If it is his intention to alter the terms of this in the legislation, will he also include a provision to make it quite clear that

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    the individual customer has the right to go and pick up his own mail if it is caught up in a trade dispute?
    Mr. Kaufman: I cannot remember whether at the time the right hon. Member for Sidcup (Mr. Heath) had yet sacked the hon. Gentleman from his Administration, but the hon. Gentleman, if not a member of that Administration, was certainly a Back Bench supporter of the Administration which in the Industrial Relations Act restored the right to strike to workers in the gas, water and electricity industries. We want to do the same for the Post Office workers.
    Mr. Tebbit: Do the Government have any policy towards the selective withholding of mail from individual customers in pursuit of industrial disputes?
    Mr. Kaufman: The Government believe that people have the right to have their mail delivered when it is posted. That is something, of course, which did not happen during he 1971 strike when the law was violated and the Conservative Party did nothing about it. It was something that did not happen during the 1973 postal boycott, when the law was again broken and the Conservative Party did nothing about it. We want to make the position clear for everyone to understand.
    Sir K. Joseph: Will the Minister answer the supplementary question of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), and not go on about things that he did not ask? Assuming that the Government give the right to strike to Post Office workers, will the Government allow individuals to pick up their own mail if their mail is held up by a strike?
    Mr. Kaufman: The right hon. Member for Leeds, North-East (Sir K. Joseph) would do well to await the form of the legislation when it has been considered and discussed with all the relevant parties. I might point out that the other day my right hon. Friend wrote to the Director-General of the Confederation of British Industry making clear what I have made clear today, namely, the need to protect the security of the mail.
    Mr. Ridley: On a point of order, Mr. Speaker. In view of the extremely evasive and unsatisfactory nature of the hon.
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    Gentleman's replies, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest possible opportunity.

    Investment
    Mr. Canavanasked the Secretary of State for Industry what estimates he has made of the amount of investment in British industry in the first six months of 1977.
    Mr. Alan Williams: Investment by manufacturing industry in the first quarter of 1977 was £414 million and by all index of production industries £756 million, both expressed at 1970 prices, seasonally adjusted. Provisional figures for the second quarter of manufacturing industry will be available on 25th August and for the other industries in early October.
    Mr. Canavan: Does my right hon. Friend remember how, almost a year ago, the Cabinet accepted an NEDC prediction that investment in manufacturing industry would increase by over 20 per cent. in 1977? As there has been a continuing investment strike in the private sector, the result is that we have no hope of reaching that target. As the measures announced on Friday by my right hon. Friend the Chancellor of the Exchequer amount to only £70 million of additional investment for industry, will the Government take immediate steps to increase the budget and investment powers of the NEB and of the Scottish and Welsh Development Agencies?
    Mr. Williams: It is wrong to talk of an investment strike in this context. The recession worldwide has been slower in turning than most authorities thought. As I have indicated previously, by the fourth quarter of last year investment was up 5 per cent. on the first quarter. This year, on our own Department's assessment, the increase in investment will be between 6 per cent. and 10 per cent., and there will be an additional 20 per cent. next year. According to the CBI, whose assessments run from the middle of this year to the middle of next year, the increase will be of the order of between 10 per cent. and 15 per cent. We are, therefore, seeing a reflection domestically by industry of the rather slow recovery internationally in the world economy.
    Mr. Tebbit: Will the Minister accept, even if his hon. Friend does not, that the 20 per cent. increase in investment was no doubt predicated on the assumption that the Government would keep inflation down to 10 per cent. this year? It is understandable in those circumstances that the investment has not taken place. Will the Minister turn his attention to cases of lack of investment which affect even such established bodies as the British Rail Pension Fund, which now finds it necessary to put money into Louis XIV commodes and French impressionist paintings? What sort of hope is that for the NEB's investment policy?
    Mr. Williams: The level of investment throughout Western Europe has been lower, and it will respond with confidence only when there is confidence in the future pattern of world demand. Opposition hon. Members have shown no enthusiasm for any success in negotiating a further stage of the pay agreement, and they have given no support to the Government's efforts for reducing inflation.
    Mr. loan Evans: Will my right hon. Friend look at the suggestion of my hon. Friend the Member for West Stirlingshire (Mr. Canavan) and ensure that, now that the proceeds are flowing from offshore oil, he will look at the possibility of the National Enterprise Board and the Scottish and Welsh Development Agencies making more investment in manufacturing industry?
    Mr. Williams: The National Enterprise Board and the Scottish and Welsh Development Agencies already have powers to encourage such investment. Certainly at present the NEB has assured the Department that funds are no constraint upon its activities.
    Mr. David Price: Will the Minister bear in mind that I warned the Government at the time of the publication of the Treasury's scenario 2, accepted by the NEDO Council, that this was putting hope beyond expectation? In an Adjournment debate before Christmas I raised the matter and the Treasury Minister agreed with my revised figures. Therefore, it is hardly surprising that the scenario 2 target has not been reached because it was wrong from the beginning.
    Mr. Williams: I am sorry that I missed the hon. Member's momentous analysis of the economic situation. There are one or two factors involved which go slightly wider than those that he has suggested.

    DIRECTOR OF PUBLIC PROSECUTIONS
    Mr. Canavanasked the Attorney-General when he next expects to meet the Director of Public Prosecutions.
    The Attorney-General (Mr. S. C. Silkin): Soon.
    Mr. Canavan: Will my right hon. and learned Friend discuss with the Director of Public Prosecutions whether he should be given powers to prosecute the Grunwick director who, on 21st June, drove his bus into the factory in such a reckless manner as to endanger the lives of pickets, policemen and Members of Parliament, in addition to powers to prosecute Grunwick for failing to submit financial returns under the Companies Act?
    The Attorney-General: As I informed my hon. Friend in a Written Answer to an earlier Question, the matter is one for the police. It would be wrong for me or the Director to intervene. The second part of my hon. Friend's supplementary question concerns a matter which is one for the Department of Trade. Again, it would be wrong for either of us to intervene.
    Mr. Adley: Will the right hon. and learned Gentleman discuss with the DPP the position of people who skip bail and seek so-called asylum in East European Communist countries? Perhaps the Director could reach an arrangement whereby, if such people promise not to come back, he will drop all charges against them.
    The Attorney-General: I have quite enough to discuss with the Director without going into those matters.
    Mr. Watkinson: Does my right hon. and learned Friend agree that there is a great deal of public ignorance about the role of the office of the Director of Public Prosecutions? Will he confirm that this office will be a subject matter of the Royal Commission's inquiry? Will my right hon. and learned Friend also say whether he

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    thinks that it would be useful if he could define his own relationship with the Director, especially on matters of prosecution?
    The Attorney-General: The powers of the Director and no doubt those of the Law Officers in these matters will be an aspect to which the new Royal Commission will be giving its attention. Another aspect will be the procedures operated by prosecuting solicitors, chief constables and the Director in relation to prosecutions.

    JUDGES
    Mr. Liptonasked the Attorney-General how many judges of the High Court and the Court of Appeal have been removed from their offices since 1945 under Section 12 of the Supreme Court of Judicature (Consolidation) Act 1925.
    The Attorney-General: None, Sir.
    Mr. Lipton: Before this section of the Act is allowed to become obsolete, would not now be a good opportunity to exercise it in the case of Sir Philip Wien for his disgraceful summing-up in the Court of Appeal recently—
    Mr. Speaker: Order. The hon. Gentleman knows that, to criticise a judge, it must be when we are discussing the substantive motion which, I understand, is placed on the Order Paper.
    Mr. Lipton: There is already a motion on the Order Paper to which—
    Mr. Speaker: Yes, but we are not discussing it at the moment.
    Mr. Skinner: My hon. Friend is trying to.
    Mr. Lipton: I am not attempting to discuss the motion—
    Mr. Skinner: I thought that my hon. Friend was.
    Mr. Lipton: All I am asking the Attorney-General is that he should bring this section of the Act into life again before it becomes completely obsolete in the case of Sir Philip Wien, for reasons which are well known to this House but which you, Mr. Speaker, will not allow me to elaborate.
    The Attorney-General: I have nothing to add, Mr. Speaker, to what you have already said.
    Mr. Carlisle: Does not the Attorney-General agree that a lot of emotional nonsense has been talked about this case? Does not he accept that, whatever the decision, the intention of judges in the High Court to show a degree of leniency to a man of 18 and of previous good character is one which in principle many of his own Back Benchers have regularly asked of the Court of Appeal?
    The Attorney-General: I am not sure about the extent to which the rules should not apply on both sides. For my own part, I rarely criticise a judge on the ground of his leniency.

    SEXUAL ASSAULT CHARGES (SENTENCES)
    Mr. Molloyasked the Attorney-General whether his noble Friend will convene a sentencing conference to discuss the question of sentences in cases of violent sexual assaults.
    The Attorney-General: Sentencing conferences, at which sentences in cases of violent assaults of all kinds, including violent sexual assaults, may be diccussed, are already convened from time to time for judges, magistrates and others concerned with sentencing policy. In July 1975 a working party to review the scope and content of training of the judiciary and the methods whereby it is provided was set up jointly by my noble Friend the Lord Chancellor, my right hon. Friend the Home Secretary and the Lord Chief Justice. The working party issued a consultative paper in June 1976 and it is hoped to have its final report by the end of this year. The desirability of making changes in the present arrangements for sentencing conferences will be considered in the light of the working party's recommendations.
    Mr. Molloy: Is my right hon. and learned Friend aware that a vast amount of public concern has been expressed about recent cases of violent sexual attacks and the fact that appeal courts have made the most asinine comments, which we cannot discuss because Mr. Speaker will not allow us, and that these

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    have exacerbated the position? Can my right hon. and learned Friend say whether these were unanimous decisions of the Court of Appeal or whether any member of the court dissented? Does he not agree that this House and the public have a right to know? Therefore, in view of the grave dissatisfaction—[HON. MEMBERS:
    "Too long."] My question is not too long for the woman whom the accused man attempted to rape. In view of the grave dissatisfaction amongst the public generally, ought not my right hon. and learned Friend to consult the Lord Chancellor to ensure that an emergency conference on this very disgraceful business is set up very swiftly?
    The Attorney-General: My hon. Friend asked a number of questions which, unfortunately, I cannot answer. I am sure he will understand why. On his last point, I am sure that my right hon. and noble Friend the Lord Chancellor will note what he said.
    Mr. Geoffrey Finsberg: Does the right hon. and learned Gentleman accept that there is a lot of disquiet about the matter which the hon. Member for Ealing, North (Mr. Molloy) raised, leaving aside the emotional claptrap which he spoke? As a mater of urgency, will the right hon. and learned Gentleman try to arrange for an early special sentencing conference?
    The Attorney-General: Anyone who reads newspapers or listens to what is said in this House must be aware that there has been a good deal of disquiet. Whether some special sentencing conference is the answer to it is a different matter. As I have said, I shall bring these matters to the attention of my right hon. and noble Friend.
    Mr. John Mendelson: On a point of order, Mr. Speaker. In view of the fact that the hon. and learned Member for Runcorn (Mr. Carlisle), under the disguise of reproving other people for making a comment which you, Mr. Speaker, ruled out of order, was permitted to give his own opinion and to use vituperative language against those citizens who take a different view from his own, ought not those of us who take a different view from that of the hon. and learned Gentleman to be given the same opportunity?
    Mr. Speaker: The hon. Member for Penistone (Mr. Mendelson) could not have heard his hon. Friend the Member for Ealing, North (Mr. Molloy), who asked the following Question.
    Later—
    Mr. Ashley: On a point of order, Mr. Speaker. Would you clarify your ruling on an earlier matter which occurred during Question Time? Tomorrow I have a Ten Minute Bill asking for the right of the prosecution to appeal in cases of rape and sexual offences. This afternoon you have told my hon. Friend the Member for Lambeth, Central (Mr. Lipton) that we cannot criticise judges in this House. That is a fairly well-known rule, yet you appeared to allow the hon. and learned Member for Runcorn (Mr. Carlisle) to make criticisms about this case. You did not allow my hon. Friends the Members for Lambeth, Central and Ealing, North (Mr. Molloy) to attack. One hon. Member was allowed to attack and two others were not. I should be grateful if, before tomorrow when I propose to do some attacking of my own, you would clarify the rules of order.
    Mr. Speaker: Obviously I am always anxious that the House should not feel that I have been unfair. The position is that the hon. Member for Lambeth, Central (Mr. Lipton) referred to the judge and used the word "disgraceful". While the House obviously is free to discuss the judgment, comments on judges themselves are not in order, except on a substantive motion. I have tried—I try hard enough, goodness knows—to hold the balance fairly between both sides.
    Mr. Lipton: Further to that point of order, Mr. Speaker. The matter is already the subject of a motion. All I complain about is the fact that we have had no time given for discussing the motion. I take whatever opportunity I can of reminding the powers-that-be that this motion exists, and until it is discussed I shall continue to take umbrage.
    Mr. John Mendelson: Further to the point of order, Mr. Speaker. I raised a point of order earlier but I did not proceed with it because you asked us not to waste the time of the House during Questions. It was quite clear when the hon. and learned Member for Runcorn (Mr. Carlisle) made his submission that

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    it was a biased and one-sided submission. It was also more than other Members were allowed to make. The hon. and learned Member's submission was made in defence of the judge. There is more than one way of referring to a judge's decision and a particular case in detail. The hon. and learned Member's praising it is just as much a reference as a criticism would be. Hon. Members on this side of the House should be given some rights and an opportunity of showing that there are strong feelings against the judge's decision. The hon. and learned Member has been allowed to whitewash it, but we are not allowed to criticise it.
    Mr. Speaker: The hon. Member for Penistone (Mr. Mendelson) should bear in mind that the hon. and learned Member for Runcorn (Mr. Carlisle) was referring to the decision. Immediately afterwards the hon. Member for Ealing, North (Mr. Molloy) referred to it also, in directly opposite terms. What I said is in the memory of the House—I objected to the word
    "disgraceful" being applied directly to the judge. Any Speaker would have done the same. I do not want to appear to be unhelpful. I hope that the matter can rest there.
    Mr. Christopher Price: Further to that point of order, Mr. Speaker. You said that any comments on the judge were out of order. You will remember the debate in 1972 surrounding Mr. Justice Donaldson when the comments which described him as a wonderful judge were in order. The comments criticising him were ruled out of order. There are many precedents of this kind, of which this is the most recent. I ask you to take the point that this presents us with very great difficulty. One can say what wonderful people judges are but one can never say what terrible people they are. If derogatory comments are ruled out of order, all comments, even commendations, should also be ruled out of order.
    Mr. English: Further to that point of order Mr. Speaker. The present procedure of the House puts you in difficulty. Could you discuss this matter with the Front Benches and consider the possibility of treating any motion relating to a judge in the same way as motions of confidence or no confidence in Governments are treated? If a motion of no
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    confidence in a Government is put down, it is customary for it to be discussed. The problem with motions relating to judges is that they are not discussed. It is fairly clear that this was a case in which the judicial decision showed incompetence in that there was a lack of knowledge of the registrar of the court in the belief that something was correct which turned out to be incorrect. That must be incompetence on somebody's part, though on whose part I do not know. The matter should he discussed in this House because this House, together with the other place, is the only body capable of dismissing a judge.
    Mr. Speaker: The hon. Member for Nottingham, West (Mr. English) is an expert on our procedures. He knows that this is a matter for the Leader of the House, but I am sure that all those responsible will have listened to him with care. I am grateful that the hon. Member for Lewisham, West (Mr. Price) should have reminded me that my rulings were the same as those of my predecessors. Of course, I shall consider the matter further.

DRAX B POWER STATION
The Secretary of State for Energy (Mr. Anthony Wedgwood Benn): If I may, with permission, Mr. Speaker, make a statement, the Secretary of State for Industry has informed the House that it has not at this stage proved possible to find an acceptable basis for restructuring the power plant industry. At the same time, the Government recognise that the current lack of home orders, together with the relative lack of export opportunities in present economic circumstances, has led to a pressing short-term need for work in sections of the industry. To help with these short-term problems the Government have now decided that it would be right for the Central Electricity Generating Board to place an order for Drax B coal-fired power station and that the order for turbo-generators should be negotiated with C. A. Parsons.
The CEGB had not planned to place an order for the station before 1979 and the Government have agreed in principle to the payment of compensation to the Board in respect of costs incurred in bringing forward the order.

1151
The Government further anticipate that, following the thermal reactor decision, an order will be placed for a nuclear station. The power plant industry will also benefit from ongoing repair and maintenance programmes. The Government believe that the order for Drax B, in addition to benefiting the power plant industry, is a further mark of confidence in the United Kingdom coal industry.
Mr. Tom King: Is the right hon. Gentleman aware that we know that his announcement has been taken in the teeth of the advice of the CPRS, the National Enterprise Board, the CEGB, the Secretary of State for Industry and the Department of Industry and that the Central Policy Review Staff's Report itself said that the ordering of Drax alone would only defer redundancies for two years and that jobs saved in one place would be jobs lost elsewhere? Since the Government's own CPRS Report is now being circulated by our competitors to our overseas customers, saying that there is no future for the British industry unless it is rationalised, and the Government have now decided, far from rationalising, actually to buttress that fragmentation, what hope is there for British companies in the export market?
Will legislation be needed to enable compensation to be paid? Will that compensation include such differences of price as might exist if the General Electric Company decided to quote also for this order? Has he noted the fact that at Question Time this afternoon the Secretary of State for Industry confirmed his support for the CPRS Report, which we strongly endorse, and his right hon. Friend's statement that rationalisation is essential for maintaining an internationally competitive industry? We only regret that through political expediency the Government have just thrown away their best card for achieving that.
Mr. Benn: Discussions have begun with the CEGB and I cannot in detail answer the question about compensation arrangements, because the discussions are in progress. The hon. Member will recall, however, that the previous Government, which he supported, gave an order for a power station at Ince B, with compensation, to Parsons, without a competitive tender. Therefore—[Interruption.] The hon. Gentleman can get up
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again if he wishes, but I want to make it clear that in circumstances not very dissimilar from those which now confront the Government, the previous Government excluded competition and arranged that the CEGB would have compensation to advance the order for Ince B.
The hon. Gentleman also does less than justice to the efforts made by my right hon. Friend the Secretary of State for Industry in seeking to bring about the restructuring of the industry in line with the recommendations of the CPRS and others whose advice was sought on the matter. In the course of many months of meetings, in which my right hon. Friend took a leading part, every possible effort was made to arrive at a restructuring arrangement. In announcing what I have announced today my starting point has been that it was not possible for my right hon. Friend to achieve that objective.
However, I want to make it absolutely clear—as I am sure he has done himself—that the Government believe that the longterm interests of this industry require a firm home ordering programme available to an industry able to compete effectively abroad as well. The problem facing the Government was that, in the absence of a capacity to bring that about, we thought it absolutely wrong to allow an important part of that industry—that at Parsons—to go out of existence and thus pre-empt the possibility of realising a long-term solution.
Mr. Mike Thomas: Is my right hon. Friend aware that no one, except apparently some Conservative Members, takes any joy from the failure of the restructuring talks and that we in Newcastle hope that they will proceed to fruition in due course and on an acceptable basis—perhaps one similar to the boilermakers? Is he aware of the relief on Tyneside and in Scotland that his decision will bring, that it will save at least 1,000 jobs in the short term and will provide a base for getting export work and that what the hon. Member for Bridgwater (Mr. King) suggested would have achieved the opposite and led to a firm in my constituency going out of existence? Will my right hon. Friend ask the CEGB to do what it can to get the work for this order on the shop floor as quickly as possible? We have had to wait a long time for this decision and the work is urgently needed.
Mr. Benn: On the latter point, I have met the CEGB for a preliminary discussion. There are a number of points that it wishes to discuss further with me. My hon. Friend will appreciate that the most important thing is that my statement today should have been made. However, I would not want the frustration of that intent to lead to difficulties. In fairness to other hon. Members representing GEC workers in their constituencies, he will also be aware that this decision was a difficult one for the Government, and that all those concerned, particularly on the trade union side, have shown great understanding of the difficulties facing the Government.
Mr. Hugh Fraser: Is the right hon. Gentleman aware that trade union representatives from GEC felt that they were entirely misled by the Secretary of State when he saw them on Tuesday? Second, is he aware that the House has been misled by his Under-Secretary of State who announced, in reply to a Question from me, that this matter would go out normally to open tender? Third, is he aware that the harm done to our repute in the world, when decisions are taken purely on grounds of political muscle rather than true economic grounds, will considerably damage our overseas trade and is already being exploited overseas by Brown Boveri?
Mr. Benn: It is inconceivable that the GEC workers who came to see me could have been misled, because I began by saying to them that all that I could do was listen to their representations and be sure that those representations were properly reflected. That was clearly understood and there was no doubt in their minds that that was the position.
As for competitive tendering, we gave consideration to that proposal. The view was that in the event of competitive tendering being agreed for this order, the figures submitted would in effect be meaningless because so much would be at stake for the companies concerned, and the outcome might well be a monopoly in which the CEGB could lose out later as the successful company recouped for its uneconomic bid. If the right hon. Gentleman thinks that other countries, in planning their industrial restructuring, do not take account of the same sort of factors as we are taking into account,
1154
he must be very naive about the policies of our major industrial competitors.
Mr. Grimond: Is the right hon. Gentleman satisfied that this decision will help the restructuring of the industry which he says is Government policy? Who is obstructing the restructuring which the Government wish to bring about?
Mr. Benn: I would put it to the right hon. Gentleman like this: if no order had been placed, the future of a large, highly-qualified and well-respected section of the British turbo-generator industry might have been blanked out completely. As I made clear, after my right hon. Friend has been unable to get the agreement that we wished, at least our decision makes a restructuring possible later—as is still our intent.
I am afraid that I cannot describe the negotiations in detail except to say that the differences which existed about how this might be done were important differences of principle among the parties. Had they been other than that, my right hon. Friend would clearly have been able to suceed. There were serious problems which could not be resolved in the time scale necessary to keep this important part of the industry in being.
Mr. Buchan: Does my right hon. Friend accept that, despite the criticism of the Opposition, his statement will be widely welcomed by thousands of workers not only in the turbo-generating industry but in the boilermaking industry? Is my right hon. Friend aware that—whatever nit-picking may be indulged in by the Opposition—his decision is entirely in line with the spirit of the report of the Central Policy Review Staff? Does he further realise that his decision will be widely welcomed by the coal mining industry, and that for all those reasons we from Scotland particularly want to congratulate him?
Can my right hon. Friend give an assurance that, since one of the reasons for bringing forward the order was to save the future of the boilermaking industry, that part of the order will go to Babcock and Wilcox in Scotland?
Mr. Benn: It is expected that the bulk of the boiler work will go to Babcock and Wilcox. In addition to meeting the GEC workers on Tuesday, I visited Renfrew and, although at that time I was unable

1155
to anticipate the decision, I realised that there was real anxiety among the boilermakers—as well as in the turbo-generating industry—about the prospects of the industry. We, as a major energy producer, must necessarily wish to see the industry play an important long-term part in exporting equipment and in allowing us to use the energy that we shall be producing.
Sir David Renton: Has the Secretary of State given formal statutory directive to the CEGB under the Electricity Act on the ground that this is a matter of national interest? If not, what legal power does the Secretary of State claim for the decision that he has made against the advice of the CEGB?
Mr. Benn: I have not given a statutory directive. I have requested the CEGB to advance Drax B.
Mr. Palmer: Will my right hon. Friend say whether the consent of the CEGB to the placing of the order depends on the negotiation of terms for compensation which will be satisfactory to the CEGB?
Mr. Benn: I have had a number of discussions of various considerations with the CEGB—as my hon. Friend knows. One of them was the basis for a restructuring of the industry which the Government hope will be possible. More recently we have been discussing and negotiating with the Board the circumstances that now confront us. These discussions are not yet complete.
Mr. Skeet: Has the right hon. Gentleman considered the implications of his statement on consumers, and is he aware that the decision will cost Eastern Electricity Board consumers £9 a head? Is he also aware that once there is a more efficient station such as Drax B, a number of older stations will have to be closed, with the result that less coal will be used?
Mr. Benn: Drax B will take some time to build and the implications for the older power stations will not come into effect for six to seven years, or however long Drax B takes to build. Now that the decision has been taken, I advise the hon. Gentleman not to bandy about the wild figures that have been used in the course of this controversy because when
1156
we examined the figures with great care, many of those used in the propaganda arguments turned out to be incorrect. Some of those figures came from respectable sources, and we should look at them again.
Mr. Joseph Dean: My right hon. Friend referred obliquely to the GEC work force. Should he not reflect further and see whether he can give them some assurance about the future, bearing in mind that during the last Labour Government—when my right hon. Friend was Minister for Technology—those workers reluctantly co-operated in carrying out a massive reorganisation? There were massive redundancies in an attempt to secure their future which was almost guaranteed by the Government of the day. Is my right hon. Friend aware that they now take a dim view of this?
Does my right hon. Friend realise that I am concerned about workers on both sides and not about one particular company? Will he give some reassurance, because those workers who were here last Tuesday are here again today and want to see my right hon. Friend about their future?
Mr. Benn: I met a large number of those workers, together with my hon. Friend the Member for Leeds, West (Mr. Dean), in my office last week. My hon. Friend can confirm that in that meeting I undertook only to convey their views, and that reference was made to earlier mergers involving GEC from which we all, including me, learned important lessons.
In my statement, I drew attention to the thermal reactor choice that will shortly be made, and the nuclear orders that would flow from that, and to refurbishing and the other possibilities that exist. I found that GEC workers, while expressing their own concern, did not want to see their future being at the expense of a large chunk of the industry in which they work. This is a difficult matter for all concerned.
Mr. David Price: In view of the Chancellor of the Exchequer's statement on Friday, are we to take it that if C. A. Parsons, under stage 3 or post-stage 3, settles for higher wage increases than GEC, the right hon. Gentleman will

1157
reverse the decision that he has just announced?
Mr. Benn: No.
Mr. George Grant: Will the Secretary of State accept bat this statement will be warmly welcomed in the Northern Region and that it is good news in the area of the highest regional unemployment in the country where clouds have been hanging over much of its basic industry? Is my right hon. Friend aware that his statement will do a power of good for the morale of the mining industry, because while it is one thing for the Government to talk about the expansion of coal production the statement was a practical expression of where the market will be?
Mr. Benn: I agree with what my hon. Friend said about the Northern Region and, as the dust settles, I hope that people will recognise that the first proposals for Drax B came from the CEGB in November 1969 and that all we have been discussing is the timing. I hope that those who are concerned with energy policy will recognise that in the United States and the Soviet Union coal production will be boosted to 1 billion tonnes because coal has an important part in meeting future energy demands. That means not just digging the coal but burning it in such efficient new power stations as Drax B. These factors should be taken fully into account by the House.
Sir W. Elliott: Does the right hon. Gentleman accept that the management and work force of C. A. Parsons are not, and have not been, against a restructured industry? Does he also accept that negotiations must have suffered a considerable setback through the vote of the executive of the Confederation of Shipbuilding and Engineering Unions at Scarborough to insist on NEB control of any new company?
Mr. Benn: I have already said that it it not for me to comment on the long and detailed discussions undertaken by the Secretary of State for Industry. However, I repeat that the issues raised here were not small or mean but important ones of principle which made it difficult and, within the time scale, impossible to reach an arrangement for restructuring along the lines that the Government
1158
wished and in accordance with the general recommendations of the CPRS.
These industrial problems are extraordinarily difficult. Both GEC and the workers concerned were also looking at the proposals in the light of experience. Nobody could have tried harder than the Secretary of State for Industry to reach an agreement but it was not possible, in the Government's view, to let an important part of the industry go out of existence because it was impossible to get the restructuring carried through in time.
Mr. Blenkinsop: While I strongly welcome the difficult decision that my right hon. Friend and others have had to take, would my right hon. Friend agree that one important element in the decision was the danger of erecting a complete private monopoly in the industry that might have had damaging effects for the future?
Mr. Benn: That point was one of the issues raised in discussions about the possible implications. It was not the only or primary problem, but it was a problem. The House, which takes an interest in these matters, should recognise that after so much effort it was only a point of real substance that frustrated the realisation of the Government's objective.
Mr. Biffen: Is the right lion. Gentleman aware that many people outside the House will be wholly unconvinced by his praying in aid the example of Ince B? Is he also aware that the ordering of stations ahead of time and the placing of contracts with selected, regionally favoured companies is all part of the industrial malaise from which we have suffered in the past generation? May I ask the right hon. Gentleman a specific question arising from an earlier supplementary question? He said that one consideration that he had borne in mind when taking a decision on tendering was his anxiety to avoid eventually having a monopoly in the industry. Are we to understand that the restructuring will mean that there will be at least two turbo-generating companies in the United Kingdom?
Mr. Benn: On the latter question, I was making a quite separate point and I am sorry if I did not make it clearly. I said that competitive tendering leading to a monopoly, which would have been the outcome here, would mean that

1159
tendering was not competitive. The figures would not be real.
I reject absolutely the theory that this country suffers from an industrial malaise. What is and has been wrong over a very long period is that this country has lost substantial and important parts of its manufacturing capacity which, because they were not present, has put us in the position of having to import what could have been made at home. Every other industrial country has recognised that where there is a short-term dip in demand, it is sensible to expand or, in some cases, to maintain capacity so that industries can make their contribution to the upturn when it comes. I do not accept that the decision that I have announced on behalf of the Government represents part of a malaise. It was a difficult decision, but the right one in the circumstances.
Mr. Kelley: Is my right hon. Friend aware that electricity consumers should be greatly obliged to him for his decision? Many millions of pounds were spent on the original design of Drax B in order to preserve a situation for the second phase development and this capital investment has been lying dormant with the people who consume electricity having to pay loan charges on the investment. Is he aware that we now hope that the second phase development will be brought into operation as quickly as possible?
Mr. Benn: It is true that the new Drax B coal-fired station will be the most efficient for the consumer and that using coal from Selby will be a very good bargain for consumers. It is an indigenous fuel that is not subject to the uncertainties of imported fuel and, from the longterm view of consumers, the decision makes sense.
Mr. Nelson: Does the right hon. Gentleman realise that some of the worst examples of the industrial malaise recognised by my hon. Friend the Member for Oswestry (Mr. Biffen) have taken place in public sector industries, very often at the instigation of the Government? Does he not feel that the decision will be greeted with incredulity in this country and abroad by people who feel that a Government who are borrowing so much cannot possibly afford to sponsor projects in advance of time?
1160
Will he at least ensure that if GEC decides to tender, the terms of its tender will be made public?
Mr. Benn: I do not know how the hon. Gentleman assesses foreign opinion, but for many years I have been reading accounts of other industrialised countries advancing and assisting their industries in order to put them in the position of being able to compete with British industry. If the hon. Gentleman thinks that Governments should never engage in investment in energy industries and that the only investment should be that which market forces provide, he should realise that with that approach we should now have no nuclear energy industry of any sort because every penny for that, from the beginning until now, has come from public resources and I am continually urged by hon. Members opposite to expand investment in nuclear capacity. Their criticisms are reserved for the expansion of coal-fired capacity—for no very good reason.
Mr. Andrew F. Bennett: Can my right hon. Friend confirm that when he met the shop stewards of GEC last week, they pointed out that there were 27,000 employees at Trafford Park 10 years ago and that now there are fewer than 7,000? Is he aware that these 7,000 workers will be bitterly disappointed with the decision? Can he at least tell us what progress is being made with the CEGB about bringing forward the refurbishing of existing power stations that might give these employees some work?
Mr. Benn: I have discussed my hon. Friend's latter point with the CEGB. It was a factor that I especially drew to its attention at the meeting at the end of last week following the Government's decision. I do not dispute what my hon. Friend says about the feeling among GEC workers, except to say that the progressive contraction of manufacturing industry, of which Trafford Park is a vivid example, has been brought about, in part, by mergers that were not agreed by the workers concerned. That has been a big factor in the development of Government thinking, and we have tried to carry the workers of the industry with us. My right hon. Friend the Secretary of State for Industry resolutely tried to do this.
Mr. Budgen: Does the right hon. Gentleman agree that the Ince B and Drax B decisions point to the proposition that all Governments will, to a greater or lesser extent, interfere in nationalised industries and that the only way to stop this tendency is to adopt a policy of rapid denationalisation?
Mr. Benn: Looking back at the record of the Government whom we succeeded—who managed to drive every nationalised industry into severe losses that had to be paid for later by the consumer—I do not think that that bit of advice from that source is likely to be particularly credible to us or to anyone hearing it. The policy pursued by the last Conservative Government was very damaging to nationalised industries.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. I propose to call those hon. Members who have been seeking to catch my eye since the Secretary of State finished his statement.
Mr. Dalyell: Will my right hon. Friend accept that many of us think that he has done not only the right thing but the only thing? Following some of the comments from the Front and Back Benches opposite, will my right hon. Friend confront the Opposition with some of the letters and pleas that he has received from subsidiary and sub-contracting industries to make it clear that it was not only C. A. Parsons that was at stake but a great deal of expertise in related industries all round this country? May I also ask my right hon. Friend a question that I do not expect him to answer? Is he aware that I recently asked the Prime Minister—quite seriously—whether the time had not come to abolish the CPRS? Will he reflect on this matter?
Mr. Benn: My hon. Friend will have to pursue his latter point with the Prime Minister. The Government were right to seek a restructuring of the industry. I am sine that the decision, taken in the absence of such a restructuring, to maintain this important capacity was right. I am sure that, on reflection, most people observing this matter at home and abroad will believe that the decision was right. I certainly do, particularly as all the work done by my right hon. Friend the Secretary of State for Industry in the intervening period, far from being wasted, has
1162
formed the basis of the further discussions that will no doubt take place.
Mr. Whitehead: May I put to my right hon. Friend the reservations of my constituents who work in a section of the turbo-generating industry that is in neither the North-East nor Scotland and who accept the political considerations that made him bring forward the Drax B order? There has been a great deal of humbug about this from hon. Members opposite. Is my right hon. Friend aware that my constituents want to know whether the bringing forward of the Drax order has made it more or less likely that the necessary restructuring of the industry —not necessarily on the lines of the CPRS Report—will take place because their jobs depend on that in the next decade?
Mr. Benn: If the Government had decided not to give the order to C. A. Parsons, the question of restructuring would have been pre-empted by a major contraction of a major part of the industry that, I understand, all concerned with the restructuring proposals thought would have a massive and important part to play in the industry. Therefore, we prevented by our decision the foreclosing of a very important option for the future.
Mr. Gerry Fowler: Will my right hon. Friend accept that many of us on this side of the House who are not opposed to public ownership are concerned at the failure to achieve restructuring, with a substantial NEB stake, with the result that we have again the uncompetitive placing of contracts in what purports to be a competitive situation? I say that on behalf of consumers as well as on behalf of GEC workers.
Mr. Benn: I note what my hon. Friend said, but he will recall over the years the method of placing contracts by the CEGB. It tended in earlier years to be a rotation of orders among the different consortia, and in the case of Ince B it was an allocated contract. My hon. Friend will find that what we have done is not so very different from what has been done in the past, given that we are doing it against the background of a slump, when the demand for equipment is below what we know and believe it will be when there is a recovery in home and export

1163
demand. We did not want to see that capacity go out of existence.
Mr. English: The Government have demonstrated by this decision their good will towards the unfortunate employees of an inefficient company—
Mr. Mike Thomas: Untrue, untrue.
Mr. English: Will my right hon. Friend speculate on why, since they have made this decision, the Government recently concentrated all their public expenditure cuts on capital projects and so made a very different and rather more cruel decision in relation to the construction industry?
Mr. Benn: I absolutely disagree with what my hon. Friend the Member for Nottingham, West (Mr. English) has just said about the quality, design, workmanship and skill of Parsons workers. He talked about unfortunate workers of an inefficient company. That was a reference to a company which has a distinguished record at home and abroad in producing turbo-generators. He was absolutely wrong in saying that.
The position facing the Government was that in the absence of a capacity for restructuring we would in the future either have been observing and contemplating the withdrawal of this large section of the industry or considering its retention to permit discussions to continue. That was the basis upon which the decision was taken.
Mr. Hardy: I welcome the decision, but will my right hon. Friend accept that there is much greater concern on the Labour Benches for the efficient use of our energy resources than appears to exist on the Opposition Benches? Is my right hon. Friend aware that the coal to which he referred, which will be mined in Selby in Yorkshire, is of high quality? It is, therefore, essential that the highest possible level of thermal efficiency should be achieved at the new power station. Is my right hon. Friend confident that there will be a significant advance in this area and that that will make a contribution to the future prosperity of the industries which will create Drax?
Mr. Benn: I cannot go beyond saying that the Drax B station, burning Selby
1164
coal, will be a very good technical bargain and a bargain for the consumer, because it will use coal in the most efficient way. The coal being an indigenous fuel, it will meet some serious and unchallenged long-term energy policy requirements.
Mr. Skinner: Will my right hon. Friend confirm that the long-term security of all the workers either at GEC or at Parsons can be met only on the basis of a publicly-owned industry and not according to the whims of either Arnold Weinstock or anybody at Parsons? Will he also confirm that in the 1950s and 1960s, failure to order power stations contributed to the massive closure of pits throughout Great Britain and that, as a result of that, it is important to ensure that there are no further delays?
Mr. Benn: The question of the organisation of the turbo-generator industry is one for my right hon. Friend the Secretary of State for Industry. Any integrated energy or fuel policy which this country needs would give a very high place to modern coal-fired capacity, given the enormous resources of coal that we have and the fact that they are indigenous fuels which we should use in efficient power stations. Drax B will be such a station. Although this matter was raised with me by a number of trade unions with which I discussed it, it is in the first instance for my right hon. Friend the Secretary of State for Industry to deal with it.

BUSINESS OF THE HOUSE
.Ordered,
That, at this day's sitting, the Business of Supply may be proceeded with, though opposed, after Ten o'clock and that, notwithstanding the provisions of Standing Order No. 3(1)(b), Mr. Speaker shall put any question necessary to dispose of proceedings on the Motion relating to Energy, the Motion relating to the Community Budget and the Motion relating to the European Regional Development Fund not later than two and a half hours after each has been entered upon; and that notwithstanding the provisions of Standing Order No. 4 Mr. Speaker shall put any question necessary to dispose of proceedings on the Motion relating to the Police (Amendment) (No. 2) Regulations 1977 at half past Eleven o'clock or one and a half hours after it has been entered upon, whichever is the later.—[Mr. Snape.]

STATUTORY INSTRUMENTS, &c.
Mr. Speaker: With the leave of the House I shall put the Question on all three motions together.
Ordered,
That the draft Weights and Measures Act 1963 (Sugar) (Amendment) Order 1977 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Weights and Measures Act 1963 (Cocoa and Chocolate Products) Order 1977 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Weights and Measures Act 1963 (Cheese) Order 1977 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Foot.]

ORDERS OF THE DAY
  SUPPLY
  [28TH ALLOTTED DAY]—considered.

  EUROPEAN COMMUNITY (ENERGY)
  4.16 p.m.
  The Under-Secretary of State for Energy (Dr. John A. Cunningham): I beg to move,
  That this House takes note of Commission Documents Nos. R/1284/77, R/1292/77, R/1294/77, R/1325/77 and R/1417/77 on Energy.
  Hon. Members will have noted that of the five Commission documents on energy which we are to debate this afternoon three related to energy conservation. I believe that this indicates the level of concern felt within the Community over patterns of increasing energy consumption in Europe. As Minister in the Department of Energy with special responsibility for energy conservation, I should like to thank the Select Committee on European Secondary Legislation for its assessment of the importance of this major area of energy policy.
  The saving and the more efficient use of energy are indeed essential components of both a national and Community energy policy. Without them, we cannot hope to reduce our dependence upon imported energy, particularly oil. That is an important objective now and wilt become more so in the future given the longer-term perspective of declining world oil production.
  Energy conservation is of international concern. President Carter's statement of 20th April about energy policy placed heavy emphasis on the need for energy conservation. At the Downing Street Summit in May world leaders named energy conservation as one of the seven most urgent tasks facing the Western industrialised economies. At the Council of Energy Ministers on 29th March Ministers considered a Commission document on an intensification of the Community's programme for energy saving—Document R /479/77—which the House will recall

  1167
  debating on 17th May. The Council stressed the importance of energy saving and urged the Commission to develop its proposals further.
  The Energy Council on 14th June had preliminary discussions on these three further Commission documents which deal with energy saving. These are R/1284/77, R/1292/77 and R/1294/77. They have been remitted to officials for detailed examination. The House will appreciate, therefore, that the Commission's proposals are still at an early stage of consideration and I welcome the opportunity afforded by this debate to hear the views of the House.
  Mr. Tam Dalyell: There was some doubt at the Energy Committee of the European Assembly when this was discussed about the timetable envisaged. Does my hon. Friend have in his notes any idea of what the Committee would like the timetable to be?
  Dr. Cunningham: I cannot answer that specific question. I can tell my hon. Friend—I shall say a little more about this later—that I emphasise the point that I have just made: that we are in the very early stages of discussion of these documents, and I shall be spelling out our view of them in a moment or two. I conclude from that, as he no doubt will, that it will be some time before final conclusions are reached.
  Let me take each document in turn. R/1284/77 on a Community action programme for the rational use of energy, comprises a draft directive and three draft recommendations based on the work of various specialist groups in which British experts have played a part and which relate to the performance, maintenance and regulation of heat generators and the insulation of the distribution system in new buildings—in other words, pipe-lagging and such work.
  There are considerable problems concerning mandatory measures at this stage in the area covered by the draft directive. It would present administrative and technical problems of harmonisation with existing practices and statutes. The Commission's proposal would, however, be acceptable to us if it were presented as a recommendation rather than a direc-
  1168
  tive. The draft recommendations concern the control of the use of heat in new buildings the rational use of energy in industrial concerns, and the setting up of advisory bodies on combined heat and power and district heating..
  We welcome the impetus given to the strengthening of national programmes embodied in the recommendations, which also appear to be generally supported by other member States. We hope very much that they will be submitted to the next meeting of the Energy Council and be approved by it.
  The second document—R /1292 /77—proposes a draft directive on energy savings from the modernisation of existing buildings—except industrial buildings—with the aim of reducing total final consumption of energy by 5 per cent. Effective implementation of the measures would require member States to set standards and provide financial incentives in cases where the return on modernisation schemes might not attract private investors. The main aim of the measures proposed is to reduce energy consumption for space heating.
  We welcome the objectives of the draft directive, particularly its dual aim of energy savings and job creation. However, again, consideration of its implications is at a very early stage. The proposal would involve significant new public expenditure commitments, and we therefore consider it essential that the United Kingdom should be able to exercise full control over both the speed and degree of implementation of any such measures. As for the Commission's estimates for the job creation potential, our first impression is that they are overoptimistic.
  Generally, our view is that further progress in the area of this draft directive must be based on what member States consider feasible and realistic. This apart, it is premature to form any view on the way that the measure should eventually be expressed. Hitherto, measures on energy conservation adopted by the Council of Ministers have been in the form of recommendations rather than directives, and member States still have to consider whether these proposals would be appropriate in a directive form.
  Document R/1294/77, from the Commission proposes two new regulations, one

  1169
  covering projects on energy saving and the other on alternative energy sources. Both topics are of major consequence to Europe and to us in the United Kingdom. The effect of these proposed regulations would be to enable the Commission, using Community funds, to assist in the demonstration of new technological advances with the aim of promoting more general use of the latest energy-saving processes and equipment throughout the Community.
  We in the United Kingdom are well aware of the risk elements which may inhibit the introduction of new technologies. In considering these two draft regulations with our European partners we recognise that demonstrations, following naturally from research and development work, with support from public funds can be worth while. What is not so clear is which projects really need and merit such support, what is the most efficient way to arrange any such support, and to what extent it should be on a national or a Community basis.
  These draft regulations were on the agenda of the Energy Council on 14th June. We agreed then that the proposals deserved careful further study. We need to find the best way to achieve the goal that is, by general consent, worth achieving. We shall particularly need to give further thought to the financial commitment which may be involved. As they stand, the regulations specify no financial limit, and even though the Commission indicates the level of support it envisages, we shall have to consider what budgetary control procedures would be necessary.
  Another important area needing further investigation is how projects will be selected and by whom. For example, should we aim to ensure that projects attract Community funds only if they are potentially suitable for application generally in the Community? How best can one manage those projects where, as might well be sensible in some cases, there is a mixture of national and Community financial support as well? These are just some of the questions which require close examination.
  Document R/1325/77 gives the Commission's first ideas on fostering the development and protection of energy investment in the Community. After an
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  initial airing, the June Energy Council remitted it to officials for further examination, and again this is still only at a very preliminary stage. The Government have in general an open mind towards the ideas set out in the paper, but we shall wish to have a lot more work done on them. We therefore welcome this early opportunity to hear the views of the House.
  Mr. T. H. H. Skeet: Will the Minister give the current position of the minimum selling price? Have the Government abandoned it, or has it been abandoned in Europe?
  Dr. Cunningham: The hon. Member is anticipating my next remarks. He is probably aware that that is just what 1 am about to come to. Let me stress to him, however, that we have not abandoned our position on the MSP.
  The paper discusses a number of possible methods of support—for example, investment loans, loan guarantees and long-term contracts—and concludes that there will be a continuing requirement for loan finance for energy projects in the Community. It is proposed that loans and loan guarantees should be made to individual projects and that the Commission should be asked to identify such projects. It is also proposed that member States should endorse principles governing long-term contracts.
  The question of loans will have to be examined in the general context of Community loans, particularly in the context of the further examination being given by Finance Ministers to the Commission's recent wide-ranging proposals for a new Community loan instrument to finance priority Community structural investments on a substantial scale. We shall certainly consider the need for a new initiative of this sort for energy investment.
  We do not yet know how big a share of the funding the Commission envisages for energy. The Commission has agreed to provide more detailed proposals for study by Finance Ministers. These will have to be considered in the context of the Community's overall borrowing policy. Our experience in the United Kingdom up to now is that there is little evidence that investment in energy production is hampered by lack of funds. We must also, of course, bear in mind in this context that the European Investment

  1171
  Bank has decided to expand its activities in energy and its governors will be reviewing the size of its capital next year.
  On loan guarantees, we recognise that there could be a stronger case for introducing Community guarantees of loans made under existing Community and national instruments. Again, however, we have not seen any evidence yet that an extension of loan guarantees is necessary. We would anyway need to have a clearer idea of the technical nature of the risks they could reasonably be expected to cover and of the feasibility of assessing and underwriting those risks. We would foresee great difficulties arising in this area of assessing and underwriting risks and, at the very least, we would agree with the Commission's suggestion that the risks taken in guaranteeing loans would have to be limited. The idea of fostering long-term contracts also needs clarification. We need to know much more about the respective obligations proposed for Governments on the one hand and the commercial parties on the other.
  We need to bear in mind the commercial realities, because these may vary from sector to sector. For example, in the gas sector the nature of the business makes long-term contracts between the producers and the distribution organisation—in our case, the British Gas Corporation—more or less a commercial necessity. On the other hand, in the case of oil we understand that by and large in present circumstances oil-producing companies are not particularly interested in looking for long-term deals. It would probably be difficult to try to move against what is the prevailing commercial wind in pressing that idea.
  As for North Sea oil, there is no shortage of funds for investment and longterm contracts are not required to induce and support investment. In contrast, however, the commercial situation in the coal sector, at a time when the market is depressed, means that the idea could perhaps represent a promising avenue of possible support. These are our initial thoughts on the proposals and we shall need to obtain more information on them and hear hon. Members' views before we come to firm conclusions.
  Mr. Peter Rost: The Under-Secretary of State has been non-committal and has not said very much. Will he help the debate to move forward by at least giving an assurance that the Government are committed to the EEC's recommendation that there should be a 15 per cent. energy saving target by 1985 and that the Government will implement proposals that will ensure that that applies to this country, too?
  Dr. Cunningham: I was being careful to give the assurance that we were being non-committal in respect of these documents. As for our commitment to energy conservation—
  Mr. Ronald Brown: Before my hon. Friend leaves that point—
  Dr. Cunningham: Perhaps I may complete my answer to the point raised by the hon. Member for Derbyshire, South-East (Mr. Rost). I shall give way to my hon. Friend shortly. As for our commitment to EEC energy conservation measures, I assure the hon. Gentleman that this is an area in which we have been keen to make progress. I attended the Energy Council to make that point. We committed ourselves to further work by a new committee within the Community. We look forward to progress in that area. It is one of the areas within Community policy in the energy sphere in which we think that there are opportunities to make significant progress rather more quickly than in other areas.
  Mr. Ronald Brown: Am I to understand from what my hon. Friend has continued to say that this country was not consulted on the draft directive in all the months that it has taken to bring it to fruition? Am I to understand that the United Kingdom was not in any way consulted so that its views could be known?
  Dr. Cunningham: That is not what am saying, as I think my hon. Friend well knows. I was saying that we need to be convinced that the two subjects covered by the proposed directives are suitable to be dealt with in the form of a directive rather than as recommendations. We are not alone within the Community in taking that view. Discussions are at a preliminary stage. We shall have to see

  1173
  what views emerge from discussions between officials and at further Council meetings.
  There is no reason to suppose that we are not willing to make progress along generally accepted lines. We need to give careful consideration to the subject before we accept directives. My comments represent our initial thoughts 'm all these proposals. We shall need to give further careful consideration to them and to obtain more information about them.
  The final document—R/1417/77— is a purely descriptive report by the Commission of the energy situation in the Community during 1976. It also gives its view on the outlook for the current year. By its nature it contains no specific proposals for action. It may be that some will find that some of its assessments of the short-term energy supply and demand situation are open to question.
  I draw attention to the view expressed in the document that energy consumption will again rise this year. We need to ask ourselves how much of that increase will really be a function of heightened economic activity and how much will be energy waste. What will be the real level of energy efficiency? Although the document does not propose specific measures, it serves as yet another warning and underlines once again the crucial importance of the energy-saving issues posed by some of the other documents that I have discussed.
  4.36 p.m.
  Mr. Tom King: The Under-Secretary of State has presented these documents in a competent manner. The hon. Gentleman will forgive me when I say that I have heard more exciting speeches in my time in the House. If I may say so without being unkind, it is the first time that I have been persuaded that there might be some merit in the Congress system of writing notes into the record. He has competently explained what is in documents that we already have.
  Although we do not in any sense regret the presence of the Under-Secretary of State, we have some important European documents before us and the absence of the Secretary of State and the Minister of State is to be regretted. The Secretary of State did me the courtesy of explaining why he would not be able to be present.
  1174
  I know why the right hon. Gentleman is not here but I am slightly surprised at his choice of priorities. However, the fact is that he is not here. It is a European debate, and whenever such debates emerge one wonders whether the right hon. Gentleman is all that keen to be present. On the other hand, the Minister of State could not possibly be accused of holding the same views. I think that it was my hon. Friend the Member for Ross and Cromarty (Mr. Gray) who suggested that the Secretary of State and the Minister of State might be paired for the debate. I am not sure whether the Under-Secretary of State will choose to confirm that in his reply.
  Dr. John A. Cunningham: Perhaps I might intervene in the hon. Gentleman's rather acid introduction and confirm, as he has somewhat reluctantly stated, that my right hon. Friend the Secretary of State did him the courtesy of seeing him and explaining in some detail why he would not be able to be present for this debate. My right hon. Friend also wrote to the right hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond). My right hon. Friend is looking after this country's oil interests, those interests which were so woefully neglected by the previous Conservative Government.
  Mr. King: I do not want to pursue this matter. Unfortunately, the Minister is on rather weak ground. The debate should have started at half-past three, but because a statement had to be made it did not begin until a quarter past four. As the statement was more important, the Secretary of State was here at half-past three and stayed in the Chamber for 45 minutes. He did not ask to see me to explain why he could not be here for the debate. We met about another matter, and his absence during this debate was mentioned in passing. If the hon. Gentleman thinks that this is an acid introduction, I must warn him that I shall start laying the vitriol when I come to comment on what I consider to be more important measures. I assure him that this is a positively benign beginning.
  Whatever one's feelings about Europe, there must be some concern at the way in which energy policy is presented to the House and proceeds through the various stages within the European framework and within the House. The least

  1175
  controversial document is the one to which the Under-Secretary of State referred at the end of his remarks. That is the statistical and forecasting document on energy. It is an accurate record of what happened in 1976 and a forecast of what they expect to happen in 1977.
  Forecasts are normally produced in advance of the period about which they are made. This document did not emerge until the middle of June and we are now two-thirds of the way through the year to which it refers. I assume that it relates to a calendar year and not some new European year about which I have not heard. It is odd that we should be debating forecasts when we are already two-thirds of the way through the year.
  My hon. Friend the Member for Derbyshire, South-East (Mr. Rost), whom I welcome to the Front Bench, will be talking about two particular papers on subjects in which he has taken a great interest over the years. They concern energy saving and the rational use of energy. I shall, therefore, say little about those subjects except to make one point to the hon. Member for Rother Valley (Mr. Hardy), who also takes an interest in these subjects. He must have been as surprised as I was to hear the Secretary of State say that Drax B will burn coal in the most efficient way that it can be burnt. The hon. Member knows as I do that that is palpable nonsense. The Secretary of State meant to say that it would he burnt as efficiently as it could be burnt in a power station of that type. That is different.
  Mr. Peter Hardy: The hon. Member could be a little fairer to my right hon. Friend. The Government are encouraging the National Coal Board and others who might be interested in a more efficient use of energy, as we can see by the fluidised-bed combustion experiment taking place not far from my constituency. The hon. Member will be the first to admit that we are some years away from the application of that developing technology on a commercial scale.
  Mr. King: I believe that we shall have a statement shortly on the Plowden Report. That report shows our position as bottom of the league in thermal efficiency in power stations in Europe. I accept that there are reasons for that.
  1176
  This is a technical and complex subject. But it is a matter of concern when the Secretary of State says that Drax B will burn coal in the most efficient way that it can be burnt, because it is not true. The hon. Member for Rother Valley has made a fair point about fluidised-bed research but I was not thinking about that. There are more efficient ways of burning coal than in conventional power stations. We must recognise that if we are to go for the more rational use of energy. We should keep it in mind.
  I recognise that the documents are further rather tentative and hesitant steps towards a cohesive European energy policy. I recognise that they are, perhaps, the beginnings of the European response to President Carter's initiatives in the United States.
  I wonder whether a Community energy policy is necessary in some areas. I wonder whether it is imperative to have a Community initiative. The snag about Community initiatives is that they can involve considerable delay. They can be taken as excuses for not proceeding with national programmes that may not need Community rationalisation and equalisation. Energy saving is an example.
  I shall remove my acid hat and say something kind about the Under-Secretary of State. Part of his job is to promote a greater understanding about the importance of energy saving. From Press releases and cuttings, I know that he moves around the country trying to persuade industry and others of the importance of energy saving. But we still have a long way to go.
  The gains in some areas are staggering. One can find companies which are alert to the importance of energy saving which say that the first 10 per cent. of the saving can be made almost without effort. They have only to look at their programmes for a short time and they can save 10 per cent. Some companies find that the saving of the next 10 per cent. is almost as easy. It is depressing to think that the majority of British industry is wasting up to 20 per cent. of its energy as we speak now. I shall not go through the many examples of firms that are successful in saving energy. A firm in my constituency worked continuously throughout the period of three-day week without having to close down because it managed to save

  1177
  60 per cent. of the power that it normally used.
  The documents may delay our national efforts. We know that the pay-back in energy saving is one of the most impressive features of it. Not much in the way of financial inducement should be required. Perhaps financial inducement could be used as a further publicity weapon for a short-term programme. It is interesting that President Carter's proposals contain a taper on tax allowances. The allowances start at a high level for improvements but they taper off the more energy that is saved.
  It is interesting to note that the proposals in the documents are close to those which some of my hon. Friends tabled as amendments to the Finance Bill last Thursday but which were not selected. We believe in the importance of giving further encouragement and publicity in support of energy conservation. Whether the European method is the best way to go about it is something that we shall consider when listening to the debate.
  The biggest disadvantage of a European initiative is the delay that it involves. Those listening to the Under-Secretary of State and those who have read the documents will have noticed the types of phrases that are used. They include such words as "needing further study", "the Council of Ministers has been meeting for some time", "We reserve our position" and so on. The Government are obviously not sure how effective some of the measures would be. Balls are being thrown backwards and forwards between officials. One has the nasty feeling that they are being bogged down and that nothing will come out of the proposals.
  The other main issues involved are those of nuclear safety and the protection of energy investment. The need for a nuclear safety code is outlined. Some of the proposals would achieve widespread agreement, but I am not sure that there is particular benefit in having a European as opposed to an international nuclear safety code. Clearly, there have to be international codes as well. This is an area in which we can claim a proud record. Our standards are as high as anywhere in Europe.
  On the question of protection of energy investment, we again have a position of our own. We have different problems from those of other countries in Europe
  1178
  in our energy situation and supply. Support from Europe for the British coal industry is an important factor, and I hope that the Under-Secretary of State will confirm the details of the latest loan or grant from Europe in support of our industry, announced at the end of last week. This latest move is further confirmation of We amount of money that Europe is putting into the British coal industry.
  In studying the further implications of some of these proposals, one sees the statement, which the hon. Gentleman repeated today, that there was agreement with the Community that the risks involved in guaranteeing loans should be limited. That is not a world shattering matter on which to reach agreement. If that is the extent of the agreement reached so far, it shows just how difficult it is to make effective progress.
  As I have said, my hon. Friend the Member for Derbyshire, South-East will be talking particularly about the rational use of energy and energy saving, in which he has taken so much interest. This is the second occasion this Session that we have been able to debate European energy matters, and we hope that our debates and these documents will help create a feeling of the importance of the collaboration with Europe on energy problems and will impart some much-needed impetus to a move forward both in Europe and in our own direct national interest. I hope that we can look to Ministers to play their part in this process so that we can get the sense of urgency that Europe should start to show if it is to respond in the way that it should to the initiative of the President of the United States.
  4.53 p.m.
  Mr. Tom Ellis: I have been interested in energy matters since 1958 when I worked in the coal industry—a time when small hills of coal began to appear in our coal fields. Their appearance aroused my particular interest in energy supply and demand. But it seems to me that most people, both in this country and in Europe, gave scarcely a passing thought to such problems until 1973, when we all had the fright of our lives. I thought then, with the increase in the OPEC oil prices, that we could at last seriously get to grips with what had clearly been a certain trend for a long

  1179
  time. Unfortunately, that mood of 1973 quickly vanished.
  I believe that one of the reasons why it vanished so quickly was that the politicians took no part in leading discussion of energy problems. Indeed, sometimes they seem deliberately to have avoided taking part in such discussion. I have been staggered by the complacency shown by leading politicians in our countries.
  When my right hon. Friend the Secretary of State for Energy went to Brussels at the beginning of the year on assuming the presidency of the Council of Energy Ministers, I tackled him about this apparently complacent attitude on the part of his Department. He dismissed my accusation and pointed to the money that we were sinking into North Sea oil. All that was quite correct, but it did not answer my point. The real issue then and now is that what should be done outside the North Sea is scarcely being tackled. Indeed, the whole question of the rational use of energy has hardly been tackled either in the Community or in this country.
  The hon. Member for Bridgwater (Mr. King) was right to say that these proposals from the Community are innocuous. Indeed the Community's proposals a year ago consisted of five recommendations which were nothing more than exhortations to people to be careful and sparing in the use of energy. It is depressing that there should be this apparent apathy among politicians and that it has been so prevalent for so long.
  Mr. Ronald Brown: My hon. Friend should take heart at the fact that he was able to get a reply from the Secretary of State. When I asked my right hon. Friend in Paris why he was preventing cheap coal from coming into the country for the benefit of the housewife, he promised to write to me. The Minister of State a few weeks ago told me that I would get a letter. I am still waiting. My hon. Friend should, therefore, be honoured to have received a reply.
  Mr. Ellis: I shall not enter into the argument between my hon. Friend the Member for Hackney, South and Shore-ditch (Mr. Brown) and my right hon. Friend the Secretary of State. I hope that as a result of his intervention my hon.
  1180
  Friend will get a reply sooner rather than later.
  Because of this apparent complacency on the part of the politicians, the vacuum created has been filled largely by citizens' action groups. We see the unusual spectacle of thousands of people marching in demonstrations to do with nuclear power. One of the tragic consequences of their filling the vacuum with such protests is that all kinds of accusations and statements are made which are nonsense and, therefore, rational discussion of the problems flies out of the window.
  For example, there is the statement that a handful of plutonium scattered in the atmosphere will destroy mankind, but plutonium is about one tenth as toxic as, say, lead arsonic. This situation has come about largely because of the failure to assess what is actually happening with actuarial certainty. Demand for energy has an actuarial certainty about it so that we can be fairly precise, unless, of course, there were a catyclism that would render the whole thing academic.
  Following all the complacency that has been shown about long-term developments, I am grateful to President Carter for having firmly put the whole subject at the top of the agenda. It is surprising that such an initiative should have come from the President of a country so greatly blessed with enormous reserves of coal, oil and uranium. Yet it is Mr. Carter who has begun seriously to tackle the job that we in our countries have failed to tackle for the past 20 years and certainly since 1973.
  The hon. Member for Bridgwater was a little critical of the approach on a Community basis, and I think that he was right. It is not easy for the Community as such to start introducing policies for the rational use of energy and going into little details when situations differ from country to country. Yet it is important that on a major issue of principle the Community should try to find and develop a Community policy. It is in this sense that we should look at policies emanating from the Community, considering how effective they can be on a Community basis in tackling major issues of principle.
  I want to speak particularly about the breeder reactor. The attack on the breeder reactor is coming from the heart of the American Establishment itself—I

  1181
  suspect that it comes from Mr. Carter himself. He has been logical about it and his sincerity has been matched by his actions. He has halted America's plutonium reprocessing and is re-assessing breeder research in the United States, and so on. While one may say that he can afford to take this action because of America's own resources of energy, there is nevertheless a logical consistency in his proposals.
  As a result of Mr. Carter's concern about the proliferation of atomic weapons, we in the Community are rapidly approaching a major issue that ought to be decided quickly. It has been decided in some countries but, apparently, not yet in the United Kingdom.
  I read recently a statement by my right hon. Friend the Secretary of State for Energy at a conference organised last December by the British Council of Churches. He was speaking about the difficulty of balancing the conflicting demands for oil, coal, gas, nuclear power, the breeder reactor and so on. It seemed to me that my right hon. Friend had still not grasped that the major issue was whether "to breed or not to
  breed". That must be decided clearly in principle, and it has already been decided in some countries. I regret that my right hon. Friend does not seem to have grasped that.
  I suppose that every sensible man will accept President Carter's approach in regard to plutonium since atomic weapons can be made comparatively easily from plutonium. The President's anxiety is therefore clearly valid and sensible. However, President Carter's approach has immediate consequences for this country and the rest of the Community in regard to our supplies of natural uranium and the fact that our low-enriched uranium supplies are in serious jeopardy. I recently read a report in the Financial Times stating that the two-year stockpile of low-enriched uranium had been halved because of the reluctance of other countries, such as Canada and the United States, to supply us with the essential ingredients for what we call conventional nuclear reactors, such as the AGR and the light water reactor. We should make clear to the American Administration that we are facing a very serious position.
  1182
  The remarkable thing is that, while the President's attack on the breeder reactor is logical, one hears entirely different sentiments expressed by the United States Congress. It is important for Europeans to know what is likely to happen in American energy policy in the next 10, 20 or 30 years.
  Mr. Jim Marshall: I have been listening to my hon. Friend's argument with a great deal of interest. He appears to be putting forward two contradictory points of view. He has spoken in glowing terms about President Carter's energy policy, and he will be aware that that policy has been formulated to meet an expected shortfall in the supply of oil in 1985, giving a time period of six or seven years. How does my hon. Friend expect the breeder reactor to affect that shortfall in any circumstances?
  Mr. Ellis: The shortfall in terms of immediate demand is one thing entirely. I am speaking about the long-term actuarial certainty of demand during the next 20 or 30 years. I am not discussing the short-term prospects for the energy situation in the United States or the Community. I am putting forward an important point that has not been tackled by people in this country and some of the other Community countries, although it has been tackled by others.
  If we are to decide on a long-term basis how to meet our future energy demands, we have to say one of two things: either we must be assured of supplies of uranium, from whatever source, or, if we cannot obtain guarantees of supply, we have to say that it is a case of
  "Needs must when the devil drives."
  and we shall have to accept the plutonium economy. This is a major issue which must be decided by a great deal of public debate. The matter should already have been decided, because we could have foreseen some time ago what was happening.
  I wish to comment on the rate at which we should proceed to carry on with building conventional nuclear power stations, building more and more AGRs and LWRs, or go hook, line and sinker towards the fast-breeder reactor. I do not think that anyone can tell us how much uranium there is in the world.

  1183
  Even the experts differ. The fact that Canada is still not supplying us is ostensibly on the grounds of concern about proliferation, but it is possibly because of Canada's fears that its supplies are not so enormous, being enough for 24 years ahead. There is also the problem of Australia.
  We must try to adopt a responsible attitude. We should not rely on adequate supplies of uranium being forthcoming. If uranium supplies are not available, we shall clearly be driven by the devil and be committed to the breeder reactor. Chancellor Helmut Schmidt has said categorically that the German Government are determined to go ahead with this type of reactor.
  The real issue facing us is how to introduce safeguards to ensure that there is no proliferation of nuclear weapons as a result of the proliferation of breeder nuclear power stations. There is a serious practical difficulty here which we have not so far been tackling satisfactorily. I am not sure that the non-proliferation treaty is working as well in its efforts to prevent the spread of nuclear weapons as one would have hoped when the treaty was first signed a few years ago.
  Many things need to be done, even in the straightforward technical aspects of the inspection system that is used. I understand that the total number of inspectors is limited to a total of only 50. The inspectors go as a team to assess on a kind of accountancy basis how much fissile material is present and how much should be present. The inspectors do not do anything to stop fissile material from being diverted.
  Since it is possible to make a bomb within a matter of days, given a supply of plutonium, this makes the whole nonproliferation treaty a lot of eye-wash. We should give great thought to improving the safeguard agreement in the non-proliferation treaty so as to meet the dangers in the supply of low-enriched uranium and the proliferation from breeder reactors.
  I base my arguments on the likely shortfall in 1985 in the generating capacity of nuclear power stations. It is essential for the Community countries to get together about the rational use of energy and statistical material. I take
  1184
  the point of the hon. Member for Bridgwater that we are discussing statistics in the Commission document that are already half a year old. I put a question to my right hon. Friend the Secretary of State 12 months ago about the statistical staff in his Department and asked whether the staff was adequate to provide a sound statistical basis for future forecasts. My right hon. Friend assured me that the number of staff was ample for these purposes, yet the Commission says that it is far from satisfied with the provision of statistical material from this country.
  We should not proceed on the basis of that sort of statistical information. We need a fully thought-through and intellectually honest position in regard to the breeder reactor, for it seems that we are now inevitably committed to that type of reactor.
  5.9 p.m.
  Mr. J. Grimond: The Secretary of State was kind enough to tell me, too, that he would not be here during the debate, and I am grateful to him for letting me know. I also ask to be excused if I have to leave the Chamber rather early in a debate because there is a vital meeting of what is called the "Liberal Shadow Cabinet". No doubt that will determine the futures of all hon. Members, although I understand that the Government's trousers are held up not only by the Liberal belt but by the Ulster Unionist braces. Therefore, whatever we decide may not matter all that much. However, I apologise in advance for my early departure.
  I agree with a great deal of what was said by the hon. Member for Wrexham (Mr. Ellis). I only add that it would be a great pity if the fashionable views of the extreme dangers of a plutonium economy obscured the very important questions that the hon. Gentleman raised. Admittedly the dangers exist and they are serious, but we must look to the future, when oil begins to run down. If the question of what is to succeed oil is to be rationally discussed, we must not exaggerate the dangers that are there.
  We must also make clear the fact that even when oil runs down, although energy may be very expensive to get, there is no reason why there should be an absolute physical shortage of energy. There are

  1185
  masses of coal. The difficulty is the expense of getting it. Further, of course, there may be, as the hon. Gentleman said, possibly a rise in demand.
  I want to make one or two comments chiefly about energy conservation. The first is, I hope, a friendly word to the Commission in Brussels. I speak as someone who was from the start in favour of us going into the EEC. I am still very keen that we should play our full part in it. However, I am somewhat alarmed by much of the stuff that comes from Brussels. One of the great needs of most Western European countries is to reduce the amount of duplicated government, to reduce the weight of paper that comes out and to reduce the number of bureaucrats who write what appears on it. Much as I have criticised our Government for pouring out the stuff, they are now put in the shade by Brussels.
  Many of these regulations that we regularly read are simply duplications of what national Governments already know, and some of them are, to use a homely phrase, simply teaching one's grandmother to suck eggs. Therefore, I hope that the people in Brussels will direct their minds to such subjects that really need European consideration and not simply add to our burdens by unnecessary directives.
  I much agree with the Opposition Front Bench spokesman that although there is no doubt a need for a European energy policy, a great deal of what appears in these documents can better be dealt with by national Governments or, if it is on a wider basis, it may well need something even wider than Europe. Here again, Brussels should look at the way in which it is going.
  Mr. Nigel Forman: In most cases the proposals are contained in what are called directives, which precisely leave matters to national Governments to implement in the best way they see fit.
  Mr. Grimond: That comes under the heading of teaching one's grandmother to suck eggs. National Governments, for whom I have no great respect, have been dealing with things such as double glazing for a number of years. There is no need for a directive on the subject. I say that in passing in a friendly spirit and I
  1186
  am not directing it at our magnificent Government. Also the needs and methods of conservation vary from country to country.
  However, by far the simplest way of saving fuel is making people pay for it. Once they have to put their hands in their pockets and pay the bill, they begin to save fuel. Most of the wasters of fuel are public authorities.
  One can go around this place turning out lights and one can see cars standing about waiting to take Ministers to important luncheon engagements and so on. So long as one does not have to pay for the fuel, one uses all the fuel that one wants and more. It is putting one's hand in one's pocket that makes one thing about double glazing and turning out lights. That also applies to big companies. Much could be done by them, particularly by way of example, if the top people had to pay for the fuel that they consume.
  However, as has been said, there is beyond this a need for a great deal of fuel saving in British industry. I am the last person to say that all the emphasis on fuel conservation is unimportant, but I believe that the first thing to impress upon people is that the example should start from the top, and the top organisations are the public authorities. They are some of the worst wasters of fuel in Western Europe.
  Dr. John A. Cunningham: I hesitate to delay the right hon. Gentleman's attendance at the meeting of the "Liberal Shadow Cabinet". It must be a nice situation when every Liberal Member is a member of the "Liberal Shadow Cabinet". However, I really cannot let the right hon. Gentleman's last point about an example from public authorities go by. It is a fact that the Property Services Agency of the Department of the Environment has given an outstanding example of energy conservation measures in the United Kingdom. We heartily recommend people in other public sectors, in which, as the right hon. Gentleman rightly says, much energy is used, to look closely at the record of the PSA and to learn from it. It has saved millions of pounds of public money by getting ahead with a very aggressive energy conservation policy, and the right hon. Gentleman ought to recognise that.
  Mr. Grimond: I do not underestimate what has been done lately. However, it is a curious commentary on the public services that if they could save millions of pounds, why did they not save it long ago? If the Minister goes into most public offices, not only of central Government but of local authorities, he will not see conspicuous efforts to save energy. In most of them the heating is far above what most people would dream of having in their own homes.
  I move on to two particular matters. I understand that as one drills for oil under the North Sea, before one reaches the oil one goes through many seams of coal. I am told that there are vast reserves of coal under the sea. So far the technology has not been invented that will enable the extraction of coal beyond a certain distance from the shore. However, no doubt this will come, although no doubt it will be exceptionally expensive. This seems to be an area in which there is some need for international experiment and research.
  Again, I do not understimate the importance of research into wave power, wind power and so on. However, I am advised that this is unlikely to make more than a peripheral, though useful, contribution to our energy supplies, at least within the foreseeable future. However, if the vast reserves of coal can be used in some way, they would make a great difference to Europe.
  The other matter to which I want to refer and which I see arising in my constituency is the waste of energy through flaring. I know that the Government are worried about this matter and are trying to persuade the oil companies to find a use for the gas that they are now flaring off. I want to encourage them in this matter, and I hope that they will bring all the pressure that they can upon the electricity and gas boards and so on to make use of the gas now wholly wasted. We used to be told that it was not worth doing anything about it, that it was technically difficult, and that it was expensive. I understand that that is now all being called into question and that, at least for local purposes, we should be able to make use of much of the energy that is flared off into the air.
  I doubt whether Commission documents of this sort will have any public
  1188
  impact, but I wholly agree with the Government that it is necessary to have some public impact. The only sort of impact that I believe would be made on the public would be either to ensure that the public authorities are deeply concerned and continue their programmes of conservation, or to have a total disaster such as that which occurred in New York recently. Although the New York disaster is not exactly germane to the matters that we are discussing, it is a very serious warning about what can happen to a big conurbation if we get our energy policies wrong.
  5.18 p.m.
  Mr. Tam Dalyell: Before the right hon. Member for Orkney and Shetland (Mr. Grimond) hastens off to the meeting that is to determine all our futures—so we are told—I should like to put two points to him. It is very easy to attack the Community for the amount of paper that is produced. However, the right hon. Gentleman and I know very well, although it is not a strictly fair comparison, that there are still markedly more people in the Scottish Office at St. Andrew's House than there are in Brussels. There are comparisons and comparisons.
  The second thing that I want to say to the right hon. Gentleman is a little more serious. Before saying that there are too many people doing too much in Brussels, let us take the example with which the right hon. Gentleman and I were concerned, in rather separate ways, of uranium mining in Orkney. I think that the right hon. Gentleman will agree that the story, briefly, is that some EEC money was allocated by the Commission for uranium prospecting in Orkney. It is unnecessary to go into the details but, briefly, this gave rise to a good deal of dissatisfaction in Orkney, and when the Commission was actually challenged about this it admitted that it had the services of half a geologist to supervise precisely what was going on.
  In some ways one could argue that if European money is to be put into this kind of project, the whole set-up is not too fat but, in fact, is too slim. Brussels will often, and more and more, get the blame for things going wrong when they are perhaps not as well supervised as some of us would imagine they should be. Having given that example, if the right hon.

  1189
  Member for Orkney and Shetland (Mr. Grimond) wishes to intervene I shall give way.
  Mr. Grimond: The uranium mining in Orkney was not stopped by the Commission. The South of Scotland Electricity Board, the Government and the local authorities have handled the matter not too badly. I am not suggesting that Europe should do nothing. What I am suggesting is that there should be a larger and broader policy.
  Mr. Dalyell: That brings me to a point on which in this context we are in some agreement. I wish to repeat a question I put to Mr. Longo and Madame Nadane when they came before the Energy Committee of the European Parliament. I asked them simply whether they were quite sure that this programme of energy-saving was the most suitable project for European as opposed to national action. On that occasion there were two people who were doing most of the questioning. There was myself, from Edinburgh, and an Italian Communist called Mr. Rubinickt, from Bologna. Edinburgh can be covered in snow when Bologna is sweltering. The conditions are different. One accepts the easy reply of the Commission—that there are many things that it has to do and that it has to take into account the different conditions in various Community States. I believe that that response is a slightly easy one and that we ought to ask whether, because the conditions in certain areas are so different a different approach is not needed. This may be an area better left to national Governments.
  This brings me to a point made by the Under-Secretary. Like him, I am concerned about these measures ever becoming mandatory. Harmonisation is very difficult in any area. Let me give one example. I do not want to be frivolous, because this is not a frivolous subject. Document PE 49.445 says on page 9, recommendation 16:
  "As regards the provision of domestic hot water in new buildings, the temperature of the hot water should not exceed 60".
  Let us reflect on that for a moment. There are many of us who shave in an old-fashioned way, not with electric razors. At 7 o'clock or 8 o'clock in the morning we want hot water to do our shaving. Some of us like hot water that is a little
  1190
  over 60 degrees. At 60 degrees it is a bit uncomfortable. Is the Commission really to say that at all times hot water should not exceed 60 degrees? What bothers me is that this is the kind of regulation that conflicts with common sense.
  Mr. Rost: It is 60 degrees Centigrade.
  Mr. Dalyell: I know.
  Mr. Forman: The hon. Gentleman could not put water of that temperature on his face.
  Mr. Dalyell: I think that 65 degrees Centigrade or 70 degrees Centigrade would be more like it.
  Mr. Neil Macfarlane: The hon. Member must have a thick skin.
  Mr. Dalyell: I thought that you, Mr. Deputy Speaker, knowing your shaving habits as I must do, would not care for 60 degrees. Anyhow, the Under-Secretary has great knowledge of these matters and will no doubt clear up my shaving difficulties.
  Dr. John A. Cunningham: I use an electric razor.
  Mr. Dalyell: I thought so. My hon. Friend is a technological man.
  Item 20 says:
  "Undertakings employing more than 100 persons are invited to appoint an energy manager to draw up and implement energy savings programmes and communicate the results obtained to the public bodies each year."
  If such an appointment is to be made in these firms, we ought to be clear about the job specification.
  I should like a British Government comment on what is contained on page 2 of the Commission document. It is said:
  "The estimated investment needed to implement such measures for the whole of the Community may be put at about 120 to 130,000 million e.u.a. for the planned period. It is estimated that this investment corresponds to some 300 to 350,000 jobs a year, and that the resulting direct or indirect creation of jobs amounts to some 700,000 jobs a year."
  I ask the Under-Secretary whether it is the view of the Government that this order of jobs could be claimed. Is it realistic? This is a major programme.
  The Under-Secretary raised the question of how projects should be selected and by whom. It is important to know

  1191
  the extent to which national Governments would be consulted and at what stage. Any consultation that did not take in national Governments at the earliest stage would be unrealistic. I take my hon. Friend's point that in this area we do not seem to be hampered by a lack of funds but that there is a problem of the control procedures on finance, which may be touched on in the ensuing debate on the budget.
  Since other hon. Members wish to speak I shall not go into the subject of the budget now. I shall simply say that the European Investment Bank will be reviewing its capital policies next year. There is something about which I am not clear. We all know that the Chancellor, like other Finance Ministers, is a formal governor of the European Investment Bank, and many of us have had talks with Sir Raymond Bell and other officials. The general question is whether the Government are satisfied that, if the European Investment Bank is to have more interest in providing funds—for example, for steel-dependent areas, though not necessarily in steel industry areas—we can be sure that its policy will be harmonised in some sensible way with the criteria and desires of national Governments. There is a problem here, especially if it is an issue of fostering long-term contracts.
  My general feeling is that there are other issues to which the Commission would do better to turn its collective mind. Instead of going into this matter of energy saving, is it not more important that there should be some European policy on the vexed question of refining capacity. I have seen my hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing), who is an Under-Secretary of State at the Scottish Office, in the Chamber recently. Many of my constituents work at Grangemouth. There is acute worry there because they are working at about 60 per cent. of capacity. If there are to be other refineries at Nigg, or elsewhere on the European mainland, what are we to say to the trade unions and managers at places like Grangemouth?
  Any excess energy that the Commission has might be better devoted to the question of refinery capacity policy rather than
  1192
  messing around with things that are possibly better done by national Governments. Secondly, I shall not go into the issue of JET, but it seems that the whole future process in this respect would he a much better area for Community activity than is encompassed in the documents we are now discussing.
  Thirdly, without suggesting that this is the debate in which to resurrect the issue of the Channel Tunnel, some of us would like to see a careful assessment of the energy-saving aspects of the project. Various assertions are made about the energy-saving potentialities of a Channel Tunnel. There ought to be some assessment, because otherwise we are arguing in the dark.
  Fourthly, I raise a recondite issue of which I have not given the Under-Secretary of State any warning. I am not sure that it lends itself to a quick answer in Parliament and therefore I ask him to write to me on it. I refer to what has come to be known as the Plombat affair. Other hon. Members have mentioned the safety of the carriage of nuclear materials. My hon. Friend the Under-Secretary of State can be said to represent Windscale in his constituency, and I know that he has given his mind to this issue.
  This is neither the time nor the occasion on which to go into the events of 1968. although one might ask how it is that Au Point, Der Speigel, the Sunday Times and
  a number of other serious newspapers and magazines have been able, in some detail and unchallenged, to go over the events relating to the ship that disappeared with 200 tons of uranium oxide, when the Commission has said time and again that it did not know what had happened. I put that as a side question.
  The question that bothers me much more, and which Governments now have to look at, is how it came about that in the respective States of the Community it apparently was not reported to senior Ministers that this event had happened. This raises a number of highly sensitive issues, such as what precisely Ministers are told and what they are not told. It is quite clear that Mr. Emilio Colombo, who was then the Prime Minister of Italy, was not told, in his capacity as a senior Italian Minister, anything about the events of the disappearance of the "Scheersberg" containing the uranium oxide It is also

  1193
  clear—I take it absolutely on trust because my right hon. Friend the Secretary of State said so to the Energy Committee in Paris—that in a previous incarnation, in 1968, he was told nothing about it, albeit that Britain was not then a member of the Community but was a member of Euratom.
  The question to which some of us really want an answer is why it is that the political heads of Departments were not told about a very sensitive and important issue. Uranium oxide is dangerous when it vanishes. One cannot say whether it found its way to Dimowa, but it is quite clear that people do not pinch these things just for fun. If it was important in 1968, it is all the more important in 1978, when there could be a theft of plutonium.
  What steps are being taken by the countries of Western Europe to make sure that never again can there be a repeat of the Plombat affair and that never again shall secret services, which know the facts, fail to report what has happened to the political heads of Departments or the political heads of Governments? It is intolerable that this information should be kept within the secret services without the responsible Ministers being told.
  My final question is of a very general nature, but I think it is legitimate. My hon. Friends have now had six months' experience, between January and June, of the presidency of the Council of Ministers. Some of us doubt more and more the effectiveness of this merry-go-round of having six months in the chair and then passing it to someone else. Is it really a very sensible way to carry on, particularly in regard to technical matters and the discussion of these highly complex and complicated problems?
  Although the presidency of the Council of Ministers of Foreign Affairs probably has to revolve, I ask the Government to reflect whether some other way could not be found for ensuring a more stable long-term presidency of the technical departments. If the Community is to be enlarged so that we have 12 member States, the presidency will then be for six months every six years. That does not seem to me to be a rational way of conducting European business.
  Mr. Deputy Speaker (Mr. Oscar Murton): I remind the House that this is a very short debate. I understand that only 30 minutes are left before the winding-up speeches are due to begin. It is in hon. Members' own hands.
  5.35 p.m.
  Mr. T. H. H. Skeet: The right hon. Member for Orkney and Shetland (Mr. Grimond) referred a few minutes ago to the plethora of paper which comes to us. I do not mind the quantity, provided that it is leading us in the right direction, but more often than not it leads us into diverse channels and we get into a labyrinth of problems and cannot find our way out.
  I shall concentrate on Document No. R/1417/77, which deals with energy. The picture has been portrayed in a Written Answer of 5th July 1977, at c. 527–8. It indicates which nations throughout Europe have what energy. It is rather instructive to note that Britain and Germany are favoured with coal. The reserves elsewhere are equivalent to only about six times Britain's annual production.
  Britain is also distinctly favoured with oil and has eight times the reserves of the rest of the European Community. The Netherlands and Britain are favoured with natural gas. British reserves alone are in excess of the combined reserves of all the Community countries, excluding the Netherlands.
  France is virtually the only beneficiary of uranium. Little has been located so far elsewhere in the EEC.
  This information leads to a second table, which is consequential. It appears in the Official Report of 30th June 1977, at c. 317–8. Who imports most? Obviously, it is those countries that have little energy of their own. Luxembourg and Denmark have to import 99 per cent. of their total energy requirements. Ireland imports 85 per cent. and Belgium 85 per cent. Then come the major countries of Western Europe—Italy, 79 per cent., France, 74 per cent., and Western Germany, 55 per cent.
  It is quite clear from these figures that the countries in Europe with a scarcity of energy—the documents before the

  1195
  House are trying to determine exactly where they stand—will go for distinctive policies of their own. It is not surprising that the French, having virtually no energy of their own, except a little gas and a little coal, should go for a big nuclear programme. That is perfectly right.
  Looking at the figures for overall energy demand in 1985, we find that the share of nuclear power for France is to be 18 per cent., compared with 10 per cent. for Western Germany, roughly 10·5 per cent. for Belgium, and only 5 per cent. for the United Kingdom. Obviously, we have to make absolutely certain that in the United Kingdom we are not on the wrong path in this respect.
  Among our Community partners France and Germany are opting for a nuclear future. Britain is marking time on its nuclear option, with several possible consequences, and I hope that the Government will weigh them up. What will he the price of electricity in the EEC of the 1980s? Owing to the relative cheapness of nuclear power, both France and Germany may have a competitive edge in exports, and this could he of serious consequence for the United Kingdom if we were to keep entirely to coal without wing ahead more on the nuclear front. It could result in our eventually becoming disfavoured on a cost basis.
  Britain has been lulled into a false sense of security by its energy options. This may mark an error due to ignoring the long lead times required to catch up should coal not fulfil its targets and alternative European sources should not measure up to expectations.
  I am of the belief that the alternative energy options available to us will contribute no more than 35 million to 40 million tons of coal equivalent, or 8 per cent. of our total needs, by 2000 AD. If coal were to let us down, and because of the long lead times required to get our nuclear stations going, we might find ourselves in a very difficult position.
  A third possible consequence is that Britain's oil may not turn out to be an entirely British reserve to be utilised according to our wishes. For its part BNOC has mortgaged a significant part of its potential production to support its recent loan. Ministers have not told us very much about that. When the energy
  1196
  crunch comes, it could indeed be regarded as a Community resource to which all of our European partners would have access provided they are prepared to pay a fair market price.
  The fourth point is that even in a United Kingdom dimension do the figures add up? I should like the Minister to consider the scenario for AD 2000. That is not very far away. Let us assume that the approximate energy demand of the United Kingdom in 1975—coal, oil, gas, hydro and nuclear—came to 320 million tons coal equivalent. if we look at the scenario for AD 2000 the Department has forecast an energy demand of 525 million tons coal equivalent. On many occasions the miners have told us that they will contribute 150 million tons. Oil will rise to 175 million tons. Gas will remain fairly stable at 60 million tons. Hydro or alternative sources work out at 35 million tons and nuclear works out at 50 million tons. That brings the total not to 525 million tons but to only 470 million tons. Anyone who says that the United Kingdom can do without a nuclear future is just plain daft.
  The hon. Member for Wrexham (Mr. Ellis), in an excellent speech, talked about the possibility of the fast breeder reactor. We are, of course, talking about the conservation of uranium. It should be remembered that if one ton of uranium goes into a thermal reactor it has a heat equivalent of 20,000 tons of coal. But if one ton goes into a fast breeder reactor, it has a heat equivalent of 2 million tons of coal. Therefore, if we could move to that stage it would be advantageous.
  Mr. Arthur Palmer: I sympathise with the hon. Gentleman's view about the need for a nuclear future. But he should not overlook Britain's contribution to the nuclear present. When the AGRs are fully in and when we build the two new thermal nuclear stations that are proposed, we shall probably be getting 25 per cent. of our energy from nuclear sources. That is as good as any European contribution.
  Mr. Skeet: I was talking about total energy, which works it out at about 5 per cent. I agree that with regard to electricity we are high up in the list but we have not been told what the next programme will be. I assume that an intermediate one will be AGRs. I hope

  1197
  that the Minister will keep his eye on the longer-term future owing to the long lead times and bring in the CFR 1, which is absolutely essential on the breeder front.
  I mention one other matter which is of essential importance. We are going through a period of temporary glut and the price stability may remain for at least a year, if not longer. But the prospects of the seventies will change materially in the eighties. The key to world demand rests on two States—Saudi Arabia and the United States—with the prospect of the USSR playing a demoniacal political game in the background.
  I would just mention one or two facts about this. President Carter has indicated what he wants to do. He wants to cut back American imports to 6 million barrels a day. In 1976, United States imports were 7·3 million barrels a day and the trend in the most recent publication indicates that United States imports will be 10 million barrels a day in 1980 and 11·8 million barrels a day in 1985. This will be serious for the Western world because if the American import bill goes up and if the production in the Western world, particularly in Saudi Arabia, does not keep pace with it, it could lead to a wild escalation of prices.
  Let us look at the other side of the question, the supply side. There is no incentive for Saudi Arabia to produce another barrel of oil, because it is sitting pretty as it is. Fortunately, it has acted as a very responsible nation up to date. The population is small. Its reserves of oil are vast, probably 177 billion barrels compared with only 17 billion barrels in the North Sea and 31 billion barrels in the United States. The reserve production ratio of Saudi Arabia is 49 years at current rates of extraction, declining to about 16 by 1990.
  Saudi Arabia has a small population, vast reserves and a balance of payments surplus. It could reduce production by 50 per cent. and still run a balance of payments surplus. It could thus stabilise output at a certain level without any detrimental effects on economic development, military commitments and aid programme. One has only to look at current production to find that Saudi Arabia is
  1198
  producing 9·3 million barrels a day. It has been indicated that this ceiling has been lifted temporarily from 8½million barrels a day to about 10 million barrels a day. We come to the rather interesting conclusion that with American imports going up very considerably, with the lack of success of the Carter programme, with the possibility of the Soviet Union entering the market to buy more oil and with the possibility of a ceiling being placed too low, this could mean a disaster for the West.
  Let us look at three major areas, the United States, Western Europe and Japan. Japan has to import more than 90 per cent. of its oil requirements. Oil consumption in Western Europe is 13·5 million barrels a day, of which imports amount to 11·6 million barrels. This is very heavy stuff. I draw a conclusion from this which was supported by the Workshop on Alternative Energy Strategies in the Financial Times on 17th May 1977. If Saudi Arabia decides to hold its production at 9 million barrels a day, there could be an oil crisis in the early 1980s and prices will escalate. If Saudi Arabia ceilings at 20 million barrels a day, the crisis will be deferred until 1990.
  I would have thought that the Commission would be wiser to concentrate on the major issues which must determine the actions of Government. It should say that the general philosophy is not ideal for all the countries of Western Europe collectively, but individually they must have their own particular allowance. Personally I feel that in this country the nuclear future is essential, exactly the same as has been recognised in the United States which has no shortage of oil capacity or natural gas and in Iran which is one of the major suppliers to the United Kingdom. Many countries in the Western world are going nuclear as well.
  But when the crunch comes we in the United Kingdom will not be spared. We are members of the Community of Nine and we shall be asked to make our contribution from the supplies that we have in exactly the same way as the Dutch have been asked to contribute some of their natural gas. If that be the case, I hope that the Government's response will point us in the right direction to a solution that will be favourably received.

  1199
  If, on the other hand, it affords no guidance but simply gives us a history, it may be useful for this House to inform our European partners that it is to their discredit and certainly to ours.
  Mr. Forman: Is not my hon. Friend being a little unfair to the European Commission in that the whole purpose of one of the documents before us—R/1292/77 on energy savings from the modernisation of existing buildings in the Community —is to make what it is claimed would be a 5 per cent. reduction in the total final consumption of energy as a contribution towards the 15 per cent. saving which it is hoped to see in the Community by 1985? This is a very good example of a measure—
  Mr. Deputy Speaker: Order. The hon. Member for Carshalton (Mr. Forman) must not make a speech.
  Mr. Skeet: When we consider what the energy demand will be once Western Europe is through the recession, it is clear that energy savings alone will not do it. It is true that they will make a contribution. But the Minister made a speech the other day in which he asked whether we should look to savings or to new sources of energy. I suggest that he has enough coal and nuclear energy to which he must look first. Savings will not do it and if he rests on savings he will be let down.
  But I listened to your advice, Mr. Deputy Speaker, and I resume my seat on that note because I know that other hon. Members wish to speak in this debate.
  5.51 p.m.
  Mr. Peter Hardy: I am growing accustomed to trying to make brief speeches on energy matters immediately after contributions by the hon. Member for Bedford (Mr. Skeet). This is not the first time in the past few years that I have been called immediately after him, especially when he has been in the mood to provide us with a surfeit of information. On this occasion, I agree with one of his arguments—
  Mr. Skeet: Good.
  Mr. Hardy: It is relatively rare for me to do so. But he was right to point out that, if American oil consumption is not
  1200
  restrained or if its sources do not vary, America and the other oil-consuming nations will face serious problems in the 1980s. No one will dispute that, and most people will welcome the view advocated by the hon. Member for Bedford, which some of us have been expressing for the past five or seven years.
  I wish to speak principally on matters which are perhaps of more mundane interest. I also want to direct one or two questions to the Minister, although I must say that I welcomed the speech by my hon. Friend the Member for Wrexham (Mr. Ellis), and that I go some way along the road to accepting that we cannot disregard the development and growing contribution of nuclear technology. However, the hon. Member for Bedford seemed very conveniently to ignore the grave anxiety, public disquiet and sometimes public disorder associated with nuclear energy. That has given some politicians outside Britain cause for hesitation.
  I am especially concerned to ask the Minister whether we are quite sure that Britain is seizing the opportunities for financial support which our membership of the Common Market offers. I make no comment about the merits or demerits of our being in the Community. But, so long as we are members, we should take advantage of all that is going. It would be useful if my hon. Friend could give some information to assure us that the flow of money is favourable in this area.
  In that regard, I hope that my hon. Friend will tell us whether the Drax proposal will qualify for some of the support from EEC funds. This should be said. If it does, I hope that it is welcomed in Yorkshire.
  There is another area where I believe there is available support. It is that of coking plants. I am told that grants are available for investmennt in coking plants, provided that they are not linked directly to coal mines. If that is a qualification, it is an absurd one which should be challenged.
  We are very anxious about this in South Yorkshire. There is one coking plant which needs to be replaced. It is served by three collieries. In its existing form it causes a great deal of increasingly unacceptable pollution. National Smokeless Fuels is willing to replace it, but it

  1201
  may be discouraged if there is this restricting limitation on the support available. I hope that my hon. Friend will recognise that this is a serious matter in the area and that it is important to three of our collieries. I hope that he will be able to reassure us about it—if not tonight, in the very near future. It is necessary in my area from the point of view of the Government being open and clearly willing to inform the public.
  It is because of my concern about the need for open Government that I refer to document R/1292/77. We have already heard about the need for conservation. I am not sure that the Government have been adequately informative about the need for conservation and the means whereby the ordinary citizen can contribute.
  For example, the Government express doubts about the cost effectiveness of double glazing and perhaps of cavity wall insulation, too. The Minister should realise that scores of thousands of people —perhaps millions—are interested. They lack the means of informing themselves properly. At present the detailed information which they could well do with is not always available. Very often, this means that they are at the mercy of the commercial undertakings. The commercial undertakings are providing a valuable service, but the Department should be very much more informative and should give reliable advice so that people can work out for themselves whether it is worth their while going in for these home improvements.
  Dr. John A. Cunningham: My hon. Friend is being a little less than fair. The Department of Energy produces a wide range of technical information for the general public, especially in the domestic sector. I mention one of the great number of documents which we have produced which is on loft insulation. Another is called "Compare your home heating costs", in which we did a comprehensive and objective review for the first time and made it available to the public. It was an outstanding success and 500,000 copies were taken up. I do not think that his charge that we have ignored the real need to provide the public with information stands examination.
  Mr. Hardy: I am well aware that my hon. Friend personally has made a con-
  1202
  siderable contribution in this area. However, the explanatory document contains the sentence,
  "There are also doubts about the cost effectiveness of the measures proposed, particularly double glazing."
  I accept that that may not be entirely applicable to the domestic market. But the Department should continue to pour out advice. A great many subjects receive a bigger tonnage of newsprint than valuable advice of that kind which can be provided by the Department.
  If the Department's studies are soon completed, I hope that it will allow the extension of housing improvement grants to the means by which energy can be conserved. That would be highly desirable, as well as helpful in the creation of employment.
  We need basically also to question the Community about its attitude to coal. I am aware that it is giving a great deal of support to the means by which we can produce more coal or maintain our current levels of production. But the Community is in danger of encouraging people to produce coal and then not providing the same degree of encouragement and support in order that they consume it. That may mean that the existing high stocks of coal do not disappear at the rate which is desirable in the interests of the Community.
  We have now only two major coal-producing countries in the Community—West Germany and ourselves. But, although the coal industry of Europe has shrunk drastically in the past 10 or 15 years, we are in danger of seeing excessive production from the Community's pits. That would not be desirable. I accept that cheaper coal is available in other parts of the world but I would hate to see Europe a captive of a strip mine prison.
  We need to have a capacity within Europe to survive the price increases that we may face one day from producers in other continents. It is essential that the National Coal Board should enter or seek to enter more vigorously the coal market of the EEC. The classic reply to suggestions of this kind is that the West Germans, who have a substantial export market within the Community, are exporting prime coking coal and we are not in a position to compete to that extent. But not all the coal they are

  1203
  exporting to ourselves and other member States is prime coking coal, and I believe that we should compete rather more vigorously. That would enable us to reduce our stocks of coal.
  Conservatives have been very critical of the miners and the mining industry in Britain over the last few years. They claim that the miners have not maintained the growth in productivity that they have proudly achieved virtually since nationalisation. But the miners know that there are huge stocks of coal, and as long as they know that they are not likely to be quite so keen to mine a little more and make the stocks larger. The existence of the stocks has been a profound disincentive.
  Nuclear power may be a cheap alternative but it would be a grave mistake to think that it can make up the difference of the excessive imports of oil or coal. It is very stupid to believe that we could allow increased natural gas consumption or nuclear power to take up the slack if there were growth in Europe in the next 10 years. That would be a prodigal act. It would be prodigal on the ground that reserves of natural gas are much too short and the existing proposals for investment in termal reactors, of whatever kind, could be outrageously expensive.
  It is only a couple of years since we had a debate on an energy document front Europe that suggested such a mammoth nuclear investment programme that there would have been very little money left for anything else. Many of us drew the attention of the Government to the fact that Europe had to invest in other things as well as nuclear power. I am not arguing against nuclear power, but I want to maintain a balance in the energy field. I want to see proper conservation combined with an adequate desire and determination to ensure that we maintain the proper balance of energy supplies.
  6.4 p.m.
  Mr. John Cockcroft: Listening to this debate I am struck by the uncertainty of economic forecasting in general and in the fuel industries in particular. Over the last two or three decades one is reminded how very often we have been told by the pundits that we have too much fuel, then a few years later we are
  1204
  told we have too little. So often the unexpected happens in history.
  No one would have guessed in the early thirties—and my family has not been unconnected with this—that nuclear energy would result from the Second World War and the atom bomb. No one could have guessed 10 years or 15 years ago that the advent of North Sea oil and gas would have transformed the economic prospects of this country.
  Although I was and remain a dedicated European, I am not sure that it is right to try to have a Community policy on a subject as esoteric and uncertain as the one we are developing—the need to conserve existing reserves. We can assume that these reserves are finite, but new developments, such as the discovery of new resources, could happen so easily.
  These initiatives calling for self-sufficiency, coming partly from America, which is self-sufficient, in theory are commendable, and, as I have said, Britain's prospects could be transformed in the long run. But these directives and recommendations from the European Commission concerning fuel, and in the wider context, raise considerable problems for national Governments. Some of these subjects would be better left to individual member States.
  These documents are unnecessarily complex, very difficult to understand and there is not sufficient debate on them in the House. Often our debates on these matters take place late at night with only a handful of hon. Members present, although I must admit that this is not the case today. But the fuel question needs a great deal of thought and discussion and, if there is to be an EEC policy on this matter, we should be sunre that we do not rush into it.
  I was a member of the Select Committee on the Nationalised Industries which looked at British Rail. One of the arguments put forward for electrification Schemes—including those for Bedford, Liverpool Street and places further north, Crewe to Edinburgh via Weaver Junction, affecting my constituents in Nantwich—was that these wee good on the grounds of pollution and the saving of imported fuels. Hon. Members on the Committee were swayed by these arguments, but maybe in 10 years' time the

  1205
  same Committee will have a different recommendation, because fashions change and very few things last for ever.
  6.8 p.m.
  Mr. Peter Rost: We welcome this debate today. I am only sorry that it is so short that we have not had the benefit of contributions from a number of hon. Members who might otherwise have spoken. I am sorry there was not time to hear from my hon. Friend the Member for Carshalton (Mr. Forman), who has made a special study of energy conservation matters, and my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn), who has contributed a great deal to deliberations on EEC energy policy on behalf of the British delegation. Unfortunately, this is one of the pressures under which we have to operate in such a frustrating manner in this House.
  Although this has been a short debate it has been useful. These documents are regarded as an important initiative from the EEC, which is now showing that it has teeth, and is prepared to propose policies on a wide range of energy conservation matters in the hope that member countries will take them into account.
  It is particularly significant that the documents we are discussing tonight show that the Community is prepared to appreciate the genuine importance of the energy conservation problems facing us —the need to try to reduce import dependence and the need to provide the incentive for longer term self-sufficiency within Europe. By stimulating substitution of energy in the longer term a most useful effort can and must be made to supplement our energy availability by using what we have less wastefully. I regard as realistic, attainable and desirable the Community target of a 15 per cent. reduction in energy consumption by 1985. I hope that the Under-Secretary will give the same commitment on behalf of this country—that the Government are also committed to a genuine attempt to achieve that target.
  My hon. Friend the Member for Bedford (Mr. Skeet), in, as always, a valuable and interesting speech, rightly referred to the long lead times in energy policy which will inevitably create problems in filling the gap, particularly when the oil begins to become scarcer. The energy
  1206
  policy that the Community must develop will have to include a greater acceptance of less wasteful use. That means accepting that the provision of our energy in future will absorb a higher proportion in real terms of our gross domestic product than we have been used to in the past. Therefore, value for money is vital.
  Economic pricing of energy will provide the most important stimulus—the right hon. Member for Orkney and Shetland (Mr. Grimond), in a valuable speech, emphasised that point—but realistic pricing will not be enough. We also need incentives or, at least, the removal of existing disincentives. Conservation should not have to mean doing without. It should not mean hardship or a restraint on economic growth. Quite the opposite. Investment in more rational use of energy can benefit the standard of living and can be cost-effective by leading to more efficient industrial processes and far less pollution. The policy of providing better value for money can often be achieved through investing in energy conservation rather than by concentrating our resources on energy investment and the provision of additional supplies. It is a pity that we have not been set a better example so far in this country.
  I hope that the Under-Secretary will not take my remarks personally. In the Select Committee on Science and Technology, of which I am also a member, he has made valuable contributions to this policy. Unfortunately, since he has taken up his present position, although his determination may remain, he seems to have found it difficult to persuade his colleagues that a national energy policy should have a higher priority. It has not had that priority yet.
  It is a pity that there is still too much complacency in the Government about various aspects of policy outlined in these documents. I regard it as a sad reflection on the Government's policy over the last three years that the EEC has to give us guidelines and should be able to show that we are well down the league table in implementing these policies.
  One table in these documents compares energy conservation in this country with that in the Community, and shows that in two important areas we are doing very badly. The first is thermal insulation and better heating

  1207
  systems in domestic buildings. That is particularly serious because we are so far behind the rest of the Community in any case. Second, we are bottom of the European league in the application of combined heat and power in industry and the public utilities.
  These are serious inadequacies. Table A in the Document 1284 shows that only we and Italy have so far not provided incentives for higher standards of insulation for existing buildings—no tax reliefs or grants. The Minister knows that we have a long way to go. We already have lower standards than the rest of the Community in this area.
  Dr. John A. Cunningham: I hope that the hon. Gentleman will be a little more specific. He knows that in the industrial sector we give 100 per cent. tax allowances for those who insulate existing buildings and that finance is available in the public housing sector for the insulation of council houses under the Job Creation Programme. It is Tory local authorities which will not get on with the job.
  Mr. Rost: The Minister is fighting a rearguard action in trying to defend an indefensible position. I specified domestic buildings. I am aware that when it comes to industrial buildings, like the rest of the Community, we provide the necessary tax incentives.
  This is a serious matter which is causing hardship to those who find it increasingly difficult to pay heating bills and are given no incentive to insulate. The paper which recommends savings on existing buildings says that not enough has yet been done. It does not refer to this country in particular, but it makes it clear that only we and Italy are not providing incentives.
  It is all very well for the Government to say that they are not sure whether this would be cost-effective. Plenty of reports prove that it would. The Building Research Establishment report has confirmed it. The Select Committee on Science and Technology in its recommendations presented to the House two years ago, and still not debated, has confirmed that just such investment would be cost-effective.
  If the Government are serious about an energy conservation programme, why
  1208
  is VAT still applied to do-it-yourself insulation materials? Why is there not a comprehensive improvement scheme for roof and wall insulation? Why are there no tax allowances for domestic expenditure on insulation and heating systems, as the Community recommends and as other countries have. Why are building regulations still of too low a standard? Why are new buildings being constructed with inadequate insulation standards?
  If the Government are using as a pretext the excuse that this would involve public expenditure, it is quite clear that they must look at the priorities. Only this afternoon we had an announcement that the Government will spend £600 million to build a power station that we do not need and that will burn fuel at 35 per cent. thermal efficiency. The money for that, it could be argued, could be employed in other directions that would produce a better return in energy. It could pay for the insulation of 600.000 homes for old-age pensioners or provide a number of fluidised-bed combustion combined heat and power stations. There are all sorts of ways in which the priorities could be thought out again.
  In this country we are also lagging behind in the production of combined heat and power. It has been recognised world-wide that combined heat and power electricity generation achieves by far the greatest fuel savings. We are all aware of the problem, but why is this happening elsewhere and not here? Why is the United Kingdom, as the Plowden Committee pointed out and as statistics show, bottom of the European league in electrical power generation thermal efficiency? Why is the amount of combined heat and power produced in our electricity generating system so much lower than that in other European countries? Why is combined heat and power generation developing more rapidly elsewhere?
  The EEC paper containing the recommendations and proposals that EEC member States should try to do more to promote more rational use of energy by combined heat and power generation is the most important of these documents. I hope that the Minister will tell us whether he agrees that the recommendations are most important. The Government should try to remove the legal, administrative and price barriers that inhibit combined heat and power generation development.

  1209
  That is what is really holding us up. The Government should do more to promote combined heat and power production.
  We know that the, electricity industry is unenthusiastic, but that is not surprising because it has now 30 per cent. to 40 per cent. over-capacity. Therefore, the electricity industry is not keen to see industry generally generating more of its own power. This is not the right approach if we are to use our energy more rationally. We must take a serious look at this and catch up with what is happening elsewhere.
  Mr. Palmer: Does the hon. Gentleman agree that the real difficulty is that the electricity authorities and the generating boards have a statutory duty, first and foremost, to produce cheap electricity and that no Government have been prepared to change that?
  Mr. Rost: I am well aware of that, and that is exactly what I mean when I say that statutory and legal restraints must be removed.
  One could go into these important papers and their recommendations in further detail. Unfortunately, we have no time to delve into them tonight. However, there are a number of questions that I want to put to the Minister. We have had three years of complacency from this Government, with some action but a lot more talk. The EEC is showing us that we are not as good as we thought we were in terms of our policies on energy conservation.
  Are the Government committed to the EEC objective of a 15 per cent. saving in energy by more rational energy use by 1985? If so, and if the Government welcome these initiatives, are they prepared to outline constructive programmes for action as recommended in these documents? Is the Secretary of State prepared to suppress his anti-EEC obsession enough to co-operate with the EEC and to implement more rational energy use policies? Even more important, are the Government prepared to give a positive lead to the Community instead of dragging their feet on these proposals?
  We have much good will to repair in the EEC and the fanatical prejudice of Ministers against anything that comes out of the Community does not help to maintain good will. The Minister should
  1210
  answer clearly and say that he and the Government are now committed to playing their part in the Community proposals for a more rational use of energy.
  Even a Government now struggling in their last dying days and gasping to keep themselves in office for a little while longer should do at least one thing. The least that they can do for the British people and our Community partners is to commit themselves to a future energy programme somewhat more enthusiastically, to show a little less procrastination and a little more positive action. Otherwise the Government and the Secretary of State will deservedly have as their epitaph "three wasted years of wasted energy", and future generations will pay for that dearly.
  6.28 p.m.
  The Under-Secretary of State for Energy (Mr. Alex Eadie): I congratulate the hon. Member for Derbyshire, South-East (Mr. Rost) on speaking for the first time from the Opposition Front Bench. However, he was toiling a little in speaking about the cost of energy, because I remember that during the Standing Committee on the Coal Industry Bill his main criticism was that gas was too cheap, and he argued on that basis. I do not think that the hon. Gentleman carried the majority of the House or even most of his hon. Friends with him. Nevertheless, I congratulate the hon. Gentleman, although I wish that he had been less political and had concentrated on the issue of conservation, to which we all know he has devoted much work and time and to which he has made contributions in the House.
  I am sure that hon. Members will agree that we have had a worthwhile and interesting debate this afternoon. We have covered a wide area of important energy issues. This is not surprising, given the range of subjects in the five Commission documents—from energy conservation, which must be one of the key elements, along with nuclear energy and coal in our own total energy strategy, to far-reaching proposals by the Commission for new loans in the energy sector. These latter are just one part of the larger initiative for new Commission loan operations which are to be considered by EEC Finance Ministers.

  1211
  I should like to emphasise once again the importance which the Government attach to energy conservation and the efficient use of energy. We are pursuing these twin aims effectively here in the United Kingdom, with our partner States of the EEC, and also in the wider forum of the International Energy Agency. The United Kingdom has made and will continue to make a positive contribution to international co-operation in these fields. We welcome the further impetus to the Community conservation programme which is proposed in its latest documents.
  I should also like to say a few words about the document on investment development and protection. The Commission indicates that investment in the energy sector over the next 10 years could well represent about as much as a quarter of all industrial investment in the Community. Clearly, the questions dealt with in the document are important. We find the Commission's paper a useful basis for consideration, but a lot of further work needs to be done on the paper that the Commission has described as
  "first reflections", and I repeat that the Government have reached no firm conclusions on them.
  One of the threads running through the debate was whether the documents should be mandatory or permissive. The significance of the debate is that we wanted to listen to what hon. Members had to say, because their views on the documents are important. It is important that we get hon. Members' views on complicated issues such as conservation, and a number of approaches have been articulated in the debate. I shall try to take up the most important issues and I hope that no hon. Member will consider it a discourtesy if I do not refer to some aspects of his speech.
  A reference has been made to President Carter's energy message. We must get this in perspective. President Carter presented his proposals for energy policy to the Unted States Congress on 20th April. Its main aims are to halve the annual increase in energy demand by 1985 from 4 to 5 per cent. to less than 2 per cent. per annum and to reduce oil imports from nearly 10 million barrels a day to nearly 6 million barrels a day by 1985. The hon. Member for Bedford
  1212
  (Mr. Skeet) mentioned this. The proposals are of two complementary kinds —conservation and supply. In general, the proposals for conservation are more positive and detailed than are those for expanding production and developing resources.
  President Carter underlined the considerable importance that he attaches to conservation during the Heads of Government meeting on 7th and 8th May. America is a democracy and a speech is no more than a speech. Giving legislative effect to the President's proposals is another matter.
  The hon. Member for Bridgwater (Mr. King) knows that we went over this matter thoroughly in our discussions on the Coal Industry Bill recently. The hon. Member for Ross and Cromarty (Mr. Gray) made the point that I am making. The speech has great significance, but we shall have to await its legislative implementation.
  Mr. Tom Ellis: This is the point that I was making. It is one thing for the President to try to persuade Western European countries not to develop a fast breeder reactor, assuring them of supplies of uranium, but it would be a different matter if Congress prevented him from supplying uranium.
  Mr. Eadie: My hon. Friend was one of those who dealt with this question. Some people have given the impression that the President's proposals have been given legislative effect. We welcome the proposals, but they are only proposals. I shall come to the fast breeder reactor later. This subject played an important part in the debate, though it is not mentioned in detail in the documents.
  The big question now is how far President Carter's proposals can be expected to survive the United States legislative process. He mounted a massive campaign to sell his ideas both to the American public and to Congress, but they have already met substantial opposition. For instance, the proposals to tax gasoline would not, even if fully implemented, bring the price up to European levels. Even so, the proposals seem unlikely to survive scrutiny by Congress. Proposals to give rebates to purchasers of small cars have also met opposition in committee. On the other hand, the proposals to increase prices of crude oil to roughly world levels seem more likely to survive.

  1213
  I could deal with the President's proposals in more detail, but we must be realistic and consider the position as it is.
  I am grateful to the hon. Member for Bridgwater for referring to nuclear power, because this gives me the opportunity to make a correction on behalf of my right hon. Friend the Minister of State who, in a debate last month, was asked whether exercise of the return of waste option under the proposed Japanese reprocessing contract would lead to the transport of highly active waste in liquid form. I can tell the House that I am advised that, under the proposed contracts BNFL has the option to return any waste in a form suitable for safe transportation. This would not lead to its transport in liquid form.
  The hon. Member for Bridgwater also asked about the ECSC loans—not grants —of up to £53 million that were announced recently. These are to be made available to the NCB in tranches and related to specific projects. It is not possible yet to say which projects are to be supported.
  The right hon. Member for Orkney and Shetland (Mr. Grimond) referred to energy conservation and seemed to suggest that price levels would have a greater impact than conservation policies. Not all hon. Members share this view and to pursue solely price policies would be an excuse to do nothing about conservation.
  The right hon. Gentleman said that there had to be conservation policies, and, with other hon. Members, said that we should not be tied to a national identity and specific energy conservation policies or directives but we should have an overall policy or a European policy that applied to every country with the conditions and traditions that every country considered appropriate.
  The right hon. Gentleman mentioned gas flaring. The object of our gas flaring policy is to ensure, by means of the consents required under licence, that all possible measures are taken to eliminate or to minimise the wastage of associated gas by flaring. I know that the right hon. Gentleman is very knowledgeable about this subject in the sense that he has a near interest in it.
  This is the only tenable and sensible policy that we can and should adopt
  1214
  against a background of world shortage of fuel resources. Each application for consent to flare is considered in detail and on its merits. But long-term consents are being issued only in cases where the amounts of gas are too small to justify delivery on shore or any other practical means of utilisation.
  Consents for the shorter term may be issued in certain circumstances, for example, until the gas transmission facilities are completed. But this is a detailed matter and I should like to write to the hon. Member about it.
  I told my hon. Friend the Member for Wrexham (Mr. Ellis) that I should like to come back to some of his comments about the fast reactor and President Carter. The hon. Gentleman asked what was the policy of the United Kingdom. I have said in the House before that we are considering the next stage in the development of the fast reactor—whether to have a full-scale demonstration reactor. We are conducting a thorough review of policy, taking into account the prospects for international collaboration as well as the issues raised in the Report of the Royal Commission on Environmental Pollution and by President Carter's recent statement.
  No decision has been reached. It is within the recollection of the House that the recently published White Paper setting out our acceptance of the bulk of the recommendations of the Royal Commission included recognition of the importance of its proposal that there should be a special procedure ensuring full public consultation on major questions of nuclear development. We are considering the best way of achieving that.
  My hon. Friend also commented on the statement by President Carter. President Carter made a major statement on nuclear policy on 7th April this year. One of the main features of the statement was a decision to restructure the United States breeder reactor programme to give greater priority to alternative designs of the breeder and to defer the date when breeder reactors are put into commercial use in the United States.
  I understand that President Carter's proposals are currently being considered by Congress and that the outcome of its deliberations is unclear. But there are two comments that I want to make in

  1215
  response to my hon. Friend. First, despite the cut-back in the American programme, the United States Government still intend to spend an enormous sum of money—about $500 million—on the fast reactor this year. This is a much greater amount than we are spending in this country. Secondly, unlike the United States, we do not enjoy large indigenous reserves of depleted uranium. Our circumstances are rather different. We must take this into account in our policy review.
  I was also asked about JET. The Prime Minister told the House on 30th June that the European Council had decided to remit the question of choice of the site of JET to Foreign Ministers with a view to reaching a final conclusion before the end of July. When the Foreign Ministers meet on 26th July my right hon. Friend intends to continue to press the claim for Culham. I mention this issue because it was raised by my hon. Friend the Member for West Lothian (Mr. Dalyell). I shall write to him about the three other specific points that he raised. In the course of the debate—
  It being two and a half hours after the commencement of proceedings on the motion, Mr. DEPUTY SPEAKER put the Question, pursuant to the Order of the House this day.
  Question agreed to.
  Resolved,
  That this House takes note of Commission Documents Nos. R/1284/77, R/1292/77, R/1294/77, R/1325/77 and R/1417/77 on Energy.

  EUROPEAN COMMUNITY (BUDGET)
  6.46 p.m.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move,
  That this House takes note of Commission Document No. R/1541/77 relating to the EEC 1978 Preliminary Draft General Budget, together with R/1013/77, R/851/77, R/1226/77, R/480/77 and R/848/77.
  The documents are fairly modest in size. I do not propose to read through them all this evening unless I am pressed. I thank the Scrutiny Committee for its report and for the way in which it received the evidence which I gave to it two weeks ago. I propose briefly to concentrate on the preliminary draft budget, which is summarised in Volume 7.
  I shall say a word, first, about the timetable which was referred to by the Scrutiny Committee in its report and by me in my evidence to the Committee. There are advantages and disadvantages in bringing forward the timetable—in other words, in having the preliminary draft budget earlier in the year than had previously been the case The advantage is that the Scrutiny Committee and the House then have an opportunity to consider it before I or any other Minister has to go to Brussels to the Budget Council. In this case it is this coming Wednesday that I shall be attending the Council of Ministers meeting on the budget. It is a considerable advantage to allow the House an opportunity to discuss the budget and put forward suggestions on the line that the Government should take.
  On the other hand, one is bound to recognise that there are disadvantages in that estimates are much further away from the year in question. In the case of agriculture, for example, it is then necessary for a rectifying letter to be sent by the Commission, probably in about September or October of this year. Nevertheless, I agree with the Scrutiny Committee's report that the advantages outweigh the disadvantages. It is important that the House and the Scrutiny Committee should have the opportunity to consider the matter, and I hope that hon. Members will consider it helpful, in spite of the disadvantages which I have described.
  Mr. John Roper: My right hon. Friend was referring only to Volume 7 which deals with the Commision's budget. Will there be another opportunity for the House to debate the Parliament's budget, particularly as next year we may assume that, being directly elected, it may wish to pay its Members' salaries?
  Mr. Barnett: As my hon. Friend knows, I am happy to discuss almost anything at any time. It is not for me to say what should be discussed in this brief debate. I hope that it will be possible for the House to have an opportunity of discussing other aspects of the Community budget.
  Mr. Neil Marten: The explanatory memorandum with which we have been issued specifically refers to the budget for the European Parliament for 1977–78. If I am able to catch the eye of Mr. Deputy Speaker, I shall certainly refer to that matter.
  Mr. Barnett: I should not like to prevent the hon. Gentleman from speaking about any subject under the sun. That tends to be discussed in the European budget as well. I think that it almost came into the last debate on energy. If I am allowed to reply to the debate, I shall deal with the points that hon. Members intend to raise in relation to the Parliament's budget. The main issues certainly seem to be the questions of the own resources system, the unit of account and the rôles of the Parliament and the Council.
  Perhaps I can deal briefly first with the own resources system. It will apply to the original six members from 1st January 1978. However, the United Kingdom and the other two new members are still operating under the transitional arrangements of the Treaty of Accession and we do not come fully under the own resources system until January 1980. Included witht the own-resources system would be value added tax with up to a maximum of 1 per cent. on a harmonised base, which has been agreed in the sixth directive, although reservations have been entered by both the Belgian and Danish Governments.
  I turn to the problem area, which I hope will not develop into too much of a problem, concerning the unit of
  1218
  account. The preliminary draft budget is presented by the Commission in European units of account. Budgets were previously based on budget units of account which were in turn based on the last declared pre-Smithsonian parity on a gold base. Now, I think sensibly, but with one reservation which I shall express in a moment—
  Mrs. Gwyneth Dunwoody: I should hope so.
  Mr. Barnett: I can tell my hon. Friend that it is a very strong reservation. The unit of account is now based on the value of a basket of Community currencies. It will be clear to the House just what that means from day to day within the Community.
  I agreed at a Budget Council meeting originally that I would be prepared for this country to accept a European unit of account for 1978 and 1979 subject to the very strong reservation that the interpretation of Article 131 of the Treaty of Accession should be such as to ensure that movement towards such a unit of account would not involve this country in any additional expenditure.
  Mrs. Dunwoody: I apologise for interrupting my right hon. Friend so soon, but I take it that he will be dealing with the glib way in which many people—certainly those in the Press—are seeking to suggest that the difference between the ordinary unit of account and the European unit of account can be absorbed without difficulty. My right hon. Friend's remarks seem to indicate that that is not the case for the United Kingdom.
  Mr. Barnett: I have this strong reservation on the move to the European unit of account by the United Kingdom because the whole purpose of the Treaty of Accession was to smooth the path until we came under the own-resources system. I am happy to note that the Commission has agreed with our interpretation of Article 131. It is fortunate that that is so, because if we were simply to accept the view of some other member States about Article 131 and the move to the new unit of account it could cost this country up to about £500 million gross over the two years in question. That is precisely why I have expressed such a strong reservation. We do not accept

  1219
  such a proposition. I hope that that approach will be acceptable to the House.
  I come now to the rôle of the Parliament in relation to the rôle of the Council of Ministers. There are a number of issues on which differences of opinion exist between the European Parliament and the Council, but two are closely related. They are the most important and they concern the question of commitment and payment appropriations, and the maximum rate for them. The Commission has proposed an extension of the system of commitment and payment appropriations, and this has been welcomed by the Scrutiny Committee as a sensible move. It is a sensible move in my view because it gives a clear indication of the expenditure in a given year rather than including in the Budget large sums of money which are unlikely to be spent in that particular year. Basically, therefore, I agree with the move to a greater use of commitment and payment appropriations.
  The Council, however, has concluded that the application of separate payment and commitment appropriations should be as laid down in the financial regulation, but the European Parliament wants the matter to be decided in the context of the budget. Let me explain briefly what the consequences of that would be. At the moment, the matter is unresolved between the Council and the European Parliament. The difference relates to the problem of the maximum rate which limits any increases in non-obligatory expenditure in the Community—that is, largely expenditure outside agricultural expenditure.
  The Commission and the Council agree that the maximum rate should apply to both commitment and payment appropriations, but the Parliament wants it to apply only to payment appropriations. If the Parliament were to have its way, that could mean that it would be able to write very large sums of money into the budget for commitment appropriations, which would then commit the Council in the future to large sums of payment appropriations. I should not like to provide for that kind of situation. Like the rest of the Council and the Commission, I would prefer that the maximum rate, which is designed specifically to limit
  1220
  increases in expenditure on the non-obligatory side of the budget, should apply to both commitment and payment appropriations. That is the line I shall be taking at the Budget Council meeting on Wednesday.
  Mr. Tam Dalyell: Will my right hon. Friend say whether that is the unanimous opinion of the Council?
  Mr. Barnett: My understanding is that it is the general opinion of the Council. I know of no member State that agrees with the Parliament on this issue.
  Mr. Marten: The right hon. Gentleman keeps referring to "the Parliament". If he could refer to "the Assembly" nstead, that would distinguish the body in Europe from our Parliament here. We want to be quite clear which organisation we are talking about.
  Mr. Barnett: I should be astonished if the hon. Member for Banbury (Mr. Marten) was not aware of the organisation of which I am speaking. I understand his point, but I think he knows which Parliament I was talking about.
  I turn, therefore, to the size of the budget. It is the preliminary draft budget, not the final outcome of what will be the budget in 1978. The Commission proposes a budget of 11,850 million European units of account.
  For the reasons I gave in evidence to the Scrutiny Committee, it is difficult to make a straight comparison with 1977. First, it is not a comparison of like with like. We are talking about a Commission proposal whereas there is a need to compare outturn with outturn or, at least, what the eventual budget turns out to be. Secondly, this is a budget proposal whereas our White Paper is based on estimated expenditure. That difference is very important from our point of view. A budget proposal in the European sense means that it does not necessarily follow that that amount of money will be the amount spent in the year. It means that it will overlap years. Therefore, in that context too there is not a fair comparison.
  Many items of non-obligatory expenditure—that is, non-agricultural expenditure —have not been agreed as policy. For example the Regional Fund, which I gather is to be debated in the next debate,

  1221
  is still under review within the Community but the Commission has put in an estimate of expenditure for next year. It has estimated that there will be a large increase in Regional Fund expenditure when clearly we do not know at this stage what will be the expenditure within the European budget on the Regional Fund for next year.
  That applies to a number of other areas of the budget. It stems in a large measure from the difference of approach between the Council and the Commission. The Commission is in favour of putting items into the budget even though there is no agreed policy, on the assumption that there will eventually be an agreed policy and that an allocation will need to be made. The Council believes, as I certainly believe, that we should not allocate token funds of that sort—in this instance they are not so much token funds—to the budget when there is no policy for those funds.
  For all those reasons—not least because in the major part of the budget, which is the obligatory expenditure on the guarantee section of the agricultural expenditure, there is much uncertainty—we are dealing with estimates rather than actual policy. It is not reasonable to make a direct comparison with previous years. We are making estimates in a provisional draft budget. On that basis, bearing in mind all the qualifications and provided that we have, as I believe we should, the correct interpretation of Article 131, our approximate gross contribution would be about £1,100 million. Against that there are receipts, which, like expenditure, are difficult to estimate in these years. Provisionally the receipts might be about £400 million to £500 million, on top of which there would be the benefit from monetary compensatory adjustments of about £300 million.
  Mr. Dalyell: Is it the unanimous view of the Council that it. is against writing in moneys for which there is no clear policy? The reason why I ask the question will be obvious to my right hon. Friend. Those of us who take his view are told from time to time that we are being anti-communautaire.
  Mr. Barnett: If it is thought that if my hon. Friend takes my view he is being anti-communautaire, that puts me in great difficulty. I do not consider that my
  1222
  view is anti-communautaire. However, it is difficult enough speaking for one Government and my hon. Friend has asked me to speak for all nine. I am pretty sure that my view is the view of most members of the Council, but I have not heard it specifically expressed by every member so it is possible that one or two may have some reservations. There may be some agreement with the Commission, but in the main my view is the view of the Council. In that case it cannot be anti-communautaire. My hon. Friend and I can be happy with that spirit.
  I deal briefly with the other main area of concern—namely, agriculture. It is the largest area of budget expenditure. The guarantee and guidance sections together, depending on the method of calculation, amount to between 68 per cent. and 73 per cent. of the budget. As I have always told the House and the Scrutiny Committee, the money put into this area of expenditure is an estimate. That is bound to be so because it is dependent upon the policy that is fixed by the Agriculture Council. The reason why the proportion is so large is well known to the House—namely, price support, which tends to build up surpluses in certain areas of agricultural expenditure.
  As is well known, the major area is milk. For example, milk alone represents almost 30 per cent. of the whole budget and a rather higher percentage of the agricultural section of the budget. I hope I carry everyone with me when I say that the overriding need is to reduce the surpluses. I hope that it will be possible to do so in the near future.
  We are not discussing the agricultural policy, although I should have no wish to prevent such discussion even if I had power to do so. We are discussing an estimate which goes into the budget. We may change that estimate, as some have suggested might be done, but that does not have the remotest effect on the fixed agricultural policy. If we write in smaller figures for an estimate while retaining an open-ended policy, we should have to find the money from supplementary estimates later.
  Mr. Marten: Surely it is the balance between the guarantee and guidance sections that is so worrying. Surely it is the

  1223
  budget or the estimates which are the supreme weapon to achieve a balance between the two sections. It should serve to give more to the guidance section so as to get a restructuring of agriculture in the Common Market.
  Mr. Barnett: I was coming to that. I agree with the hon. Gentleman in the sense that it is true that we need to put greater emphasis on the guidance section so as to do something about the structure of agriculture in the Community. However, if we are not careful there is a considerable danger that increasing guidance section expenditure while doing nothing about the guarantee expenditure would be to replace national budgetary expenditure in some member States. That would operate at our expense. There would be a much smaller proportion of our own budget for agriculture while leaving the guarantee section to grow again at our expense. As a major importer, we must be careful about the balance between the guarantee and guidance sections.
  Although it is important to do more on the guidance front to do something about the structure of agriculture in the Community, that does not mean that we can leave the guarantee section as open-ended as at present. If we put in a smaller figure as an estimate for the guarantee section, one of the problems is that in a way we are avoiding that which the Scrutiny Committee sensibly pointed out—namely, the guarantee section having such a high proportion of the budget. If we put in a smaller figure, we fail to highlight the problems of the guarantee section having that high proportion. If we reduced the estimate and made it seem as if the expenditure was smaller, that would not be helpful to those who want to see changes in the guarantee section.
  There are at least two improvements that I know the Scrutiny Committee will welcome. The first is that on this occasion the Commission has not included provisional appropriations in the guarantee section to cover possible additions for next year. It is not sensible to do so because we do not know what the policy will be for next year. I hope that there will be an improvement in policy that will avoid some of the worst aspects of guarantee section expenditure.
  1224
  Secondly, the Commission has not assumed on this occasion that there will be cuts in MCAs, which it wanted to do last year. Although that is helpful from our point of view, I believe that it is a misunderstanding to suggest that we do not want cuts in MCAs only because they are helpful to us. I believe that MCAs are of benefit to the Community generally. That is because, if one simply reduced our MCAs by a devaluation of the green pound, one would increase the price to the consumer, increase the money paid to the producer and depress consumption. That would lead to increased surpluses. It is not right to say that MCAs at the present level help only the United Kingdom. They help the Community generally.
  Mrs. Dunwoody: Will my right hon. Friend comment briefly on the suggestion that MCAs should be put into a part of the budget which is more easily identifiable?
  Mr. Barnett: I am not sure about that. I note that it is the view of my hon. Friend the Member for Crewe (Mrs. Dunwoody).
  Mrs. Dunwoody: It is not my view. It is a proposal.
  Mr. Barnett: I am not in favour of putting MCAs in a separate part of the budget. That is because if one separated them they would appear smaller than they are. It would be misleading to suggest that they do not form part of the agriculture budget. As always, I am happy to be in agreement with my hon. Friend the Member for Crewe.
  I hope that that brief survey will be helpful to the House. I welcome the Scrutiny Committee's report. I shall be happy to listen to hon. Member's views on the preliminary draft budget. With the leave of the House, I shall be pleased to reply to any questions that are raised.
  7.12 p.m.
  Mr. Michael Shaw: We thank the Chief Secretary for the way in which he opened our short discussion. I assume that he will be winding up the debate and replying to our questions. He and I have met before about the draft budget—or, as he rightly says, the preliminary draft budget—when he was kind

  1225
  enough to see us in the Budget Committee of the Assembly. I hope that by using the word "Assembly" I have pleased my hon. Friend the Member for Banbury (Mr. Marten).
  In several ways this is a Community budget which could be a turning point in the history of the Community's fiscal policy. It is the first budget that has been presented to us by the new British Commissioner, our ex-colleague Commissioner Tugendhat, who has been well received in his new job and for the work that he has already done.
  For the first time, Community expenditure will be fully financed by our own resources. For the first time, the figures used in the budgetary documents will be expressed in European units of account. For the first time, a new financial regulation will be in force which amends the old financial regulation of 1973.
  If we are to fulfil this, the procedural difficulties will be considerable. They will demand more discussion and agreement between the institutions than before. The details covering the working of VAT, the setting up of the EUA and the financial regulation have still to be agreed, and yet the whole basis upon which the budget has been drawn has been on the assumption that such agreement will be reached. It is significant that as these changes are being made, so we are moving towards the direct election of Members of Parliament to the European Assembly. After they have been elected, they will be responsible directly to their electors for the proper discharge of the budget.
  Mrs. Dunwoody: They have had a long time to do it.
  Mr. Shaw: We have to aim for changes. We certainly have to aim for changes in the budgetary procedure over the years. I believe that the changes in the Assembly will come about. It would be a pity if these technical complexities were to so attract our attention that the policies in the budget became overlooked.
  I must comment on one technicality. When I was appointed rapporteur for the regulation adopting the EUA, my first move was to contact the Treasury to confirm that the Commission had given in writing its own interpretation of Article 131 and that it was exactly in agreement with the interpretation placed upon it by the British Government. I was told that
  1226
  it was. I therefore went ahead with the processing of that document in the knowledge that it would cause no additional financial burden to this country. I took that view particularly since Article 131 specifies that its interpretation and calculation shall be by the Commission. There was no contrary view expressed by any other country. It is strange that this matter should now be brought forward, perhaps as a bargaining counter, within the Council. I fully support the Chief Secretary in his view and in the stand that he makes.
  Today we are examining the preliminary draft budget It has been drawn up by the Commission but it is subject to a number of changes. It is subject to changes by the Council, by the Assembly and by the Commission itself. As the Assembly's general rapporteur for the 1978 budget, perhaps I might say a word about our approach.
  Mr. Hugh Dykes: I apologise for interrupting my hon. Friend. He has used the word "Assembly". I understand that that is at the request of my hon. Friend the Member for Banbury (Mr. Marten). Is it not reasonable to stick to the word Parliament "because that was the collective decision of the Parliament?
  Mr. Shaw: I am happy to mix my phraseology to suit everybody. I used the word "Assembly" hoping that everyone, including my hon. Friend the Member for Banbury, would understand what I meant. I shall mix the words and hope to please everyone.
  As has been so often explained, the size of the European budget is so small compared with the Community's GDP and compared with the total of national budgets that it cannot play any part in influencing the fiscal policy of Europe as a whole. None the less, we regard it as our duty to see that proper control and economy exist in all that we propose and do. The main task as a Community is to create European policies based on a growing need and belief that in many vital areas we must act as a Community. We must act together and not as nine individual countries.
  The lesson from that is that the Community budget must be concerned with the efficient implementation of these policies. Thus, the message that I am stressing in

  1227
  the Assembly—or Parliament—is that the annual budgetary process should not concern the Budget Committee alone. It needs the full participation of nearly all the specialist committees and, indeed, of the whole Assembly itself. It is these committees that are responsible for evaluating the necessity and value of the policies, the cash needs for which are disclosed in the budget.
  Mrs. Dunwoody: I am in complete agreement that the committees must have responsibility for the budget in their own work, but, since one cannot tell from the budget document what are appropriations, what are commitments which have been paid, and what are commitments which have not been paid, can the hon. Gentleman tell us how, for example, the Social Committee, of which I am vice-chairman, can compare like with like and decide what is actually happening in the budget?
  Mr. Shaw: That must be largely a matter for the proceedings of each committee itself. I have arranged for the chairman of the Budget Committee to write to each specialist committee asking it to appoint, early, a rapporteur to look into its own sector of the budget so that we we as a Budget Committee can discuss with each specialist committee, through its rapporteur, the details of the part of the budget that affects it. I hope that someone will have been or will shortly be appointed as rapporteur for the hon. Lady's committee, so that we may get a full and considered report of the matters that affect both the budget and her committee.
  Mrs. Dunwoody: I take the point and I hope that we shall soon have a rapporteur. But can the hon. Gentleman say exactly how any committee can report on a document in which at least two columns after the appropriations are left blank?
  Mr. Roper: On a point of order, Mr. Deputy Speaker. How appropriate is it for the House to discuss the proceedings and activities of an Assembly or Parliament which meets on the other side of the Channel? I thought that the House was considering how it should consider the budget of the European Community?
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I understood that the hon. Member for Scarborough (Mr. Shaw) was relating his argument to the budget of the Community.
  Mr. Shaw: Perhaps it would be in the interests of both yourself, Mr. Deputy Speaker, and of the House if I proceeded with my speech. The point has been made on the matter raised by the hon. Member for Crewe (Mrs. Dunwoody). I will talk over the matter with her in greater detail afterwards, if I may. I want to re-emphasise that it is only by the participation of the committees that we can balance the claims for cash presented to us so that the Assembly can honourably and conscientiously fulfil its duty as part of the Community budgetary authority.
  As the Chief Secretary said, the largest element in the prelimary draft budget is, as always, agriculture. The Commission indicates that expenditure relating to agriculture will equal some 69 per cent. of the 1978 budget as opposed to 74 per cent. this year. But, again as the right hon. Gentleman has said, these figures are of necessity at this stage only guesswork. After the harvest there will come an amending letter; after the 1978 price review will come a supplementary budget. Experience indicates that on both occasions the agricultural costs will go up.
  Furthermore, the relative share of agricultural expenditure is likely to increase, because the Council of Ministers tends to cut back on new initiatives outside the agricultural sector—indeed, in the very areas where we are seeking to act as a Community and for the benefit of the Community.
  I want to make a point which I do not think has often been made in this connection. The expenditure on the EAGGF within the general budget accounts for about three-quarters of the total general budget of the Community. In 1976, support for agriculture in the guarantee section was about 6,000 MUAs, yet the total of each individual nation's and Community expenditure was some 17,000 MUAs. In other words, in spite of the size of the proportion of the Community budget, the expenditure we are making in this sector is still comparatively small when compared with the whole amount spent throughout the Community.

  1229
  This could lead Ito another factor which should be looked into—that the money spent through this budget might be pushed in a direction different from the help that is being given to the industry by the individual countries. I think that this is a matter on which we should have much more information than we have.
  I turn now to other sectors that we feel are so important to building a Community policy. We have had considerable debate today about energy policy, although the Under-Secretary of State said in reply that there were certain aspects that had not been touched upon. Nevertheless, they appear in some size in the budget. These policies, so far as they can be, are spelt out in a considerable amount of explanatory matter, in Volume 4 particularly and in Volume 7. If the Council of Ministers decides to change the content of the budget before it passes it on to us as the draft budget instead of the preliminary draft budget, I would ask that a full explanation be given for the reasons for any changes that are made, just as explanations are given in the first place by the Commission for the putting in of the items. Should the items be altered or taken out, I hope that the Council, as it has not always done in the past, will give a full explanation so that the specialist committees will be able to assess and weigh up the pros and cons of the arguments and which way they should lend their support.
  There is a similar situation with regard to research and investment. There is a large section of the budget in which the details are set out. I am glad that they have been set out in a new way which has saved 140 pages in the budget, although, looking at the size of the budget, one would never think that that had happened.
  I want to lay particular stress on two further aspects—the Social and Regional Funds. Both of these funds are due for review, and it comes at a very important time, because they concern the well being and development of the poorer and more difficult parts of our Community. They concern help in renewing employment and retraining, in bringing new work and new jobs, and in bringing new structures to areas of the Community that require help.
  Perhaps the figures that have been put in in this respect are guesses. Perhaps
  1230
  no finalisation of programmes has been made. Even if the Council has made no final decision with regard to policies in this direction, however, it would not be right for the figures not to be included in the budget. To remove them entirely, in spite of what the Chief Secretary says, would be unwise. Indeed, it would be wrong. Clearly, considerable thought must have been given to these matters. There must already be a fairly shrewd idea of the amount of money that the Council and the Commission are prepared to spend in these fields.
  Now that we have an own resources budget, having to forecast income for next year, it is right that we should equally forecast the likely expenditure that is to be set against that income. In most things in this budget the right hon. Gentleman and I are in agreement, but I take issue with him on the matter of the non-inclusion of items if the policy has not been fixed. We have to include figures where we can be reasonably certain that the amounts will be spent and reasonably certain as to the size of those amounts, otherwise we are saying that we shall exclude the figures now so that we can dress up the budget to look as though we have been very highly disciplined in the settlement of the budget this year. Not until later, by means of the supplementary budgets, which tend not to have the same publicity as the original budget, will the sums required to pursue those policies then come before the Parliament and Council and be duly passed. If that happens to any great degree, the complication may arise of the rate of VAT, which may have to be altered.
  I am speaking rather longer than I had intended, but I have been interrupted several times. I wish to deal with two further points. The first is the Audit Court. For the first time, provision is made on the budget for the setting up of the Audit Court. The law for this has now been passed and ratified. Provision has been made, even if only by way of token entry, for the setting up of the court. This will have a greater status than the Audit Board which preceded it, and will be able to employ the resources that it will properly need for the effective audit of the Community's finances. Incidentally, the names of the proposed members of the court have been sent in, except in the case of two countries, of

  1231
  which the United Kingdom is one. Will the right hon. Gentleman say what is holding up our own nomination?
  Mr. Nicholas Ridley: The next General Election.
  Mr. Shaw: Clearly, the quicker we can get the new court established, the better. Several suggestions are going around Europe as to the real reasons for the delay, but it is not for me to speculate, nor would it be helpful.
  We have in the Assembly a control sub-committee which has been set up as a sort of Public Accounts Committee. I have little doubt that that sub-committee will develop into a full committee. It is already beginning to establish its rôle as a watchdog of Community finance. I have always felt that it could never fully do so until the Audit Court had become established and a close link had been forged with it. As a member of that subcommittee, I am therefore doubly anxious for the early establishment of the court
  I turn now to the receipts side of the budget. On a number of grounds—political, accounting and budgetary—I am not very happy about the VAT rate of 0·77 per cent. which is suggested by the Commission for 1977–78. The Commission suggests that this would drop to 0·61 per cent. in a normal year. The higher percentage arises from the time lag in the first year, which reduces the income from what it would have been in subsequent years because the basis of assessments is usually a three-month period. If the basis of assessment was dated on 31st January, the first two months of that quarter would be excluded from the first year, so the revenue available would be that much the less.
  The sum of money is not affected, but the assessment and the presentation in the budget are important. I have contacted the Commission on this matter, and members of the Commission themselves have certain reservations. For example, at least one country has altered the period over which it assesses and collects its VAT. This immediately upsets the pattern. We have arranged to have further discussions on this point, and I hope that we can resolve the outstanding difficulties in a manner acceptable not only to ourselves but also to the Council
  1232
  when it comes to consider the matter. I hope that in the end it will be possible that the form that we agree will allow the use of the same percentage—namely, 0·61 per cent.—as would have been used in a normal year.
  The last point I wish to make is about commitment appropriations and payment appropriations. In discussing the various figures and, in particular, the proposed maximum rate of increase for non-compulsory expenditure and the margin of manoeuvre available to the Parliament, the House will notice the increasing use of commitment appropriations. In order to cater for multi-annual programmes and yet do away with the undesirable carry-forward procedure, ceilings of commitment can be laid down in any one year that will involve a programme of payments covering several years. No longer will it be necessary to put the whole cost of a project in the first year as a payment provision.
  However, the Assembly differs from the Commission in one respect. In looking at the budget and its increases, the Commission—and, it seems the Council—works on the amounts to be committed rather than on the amounts to be paid. There is a difference in character between the two types of appropriation. That is why we in the European Parliament have sought to refer to commitment authorisations rather than commitment appropriations. The budget is, after all, concerned with the estimated revenue coming in, balanced on the other side by the payment appropriation going out. I believe that that is the crux of any budget. We must rest on the supreme importance of the payment appropriation.
  However, this is also a matter that has to be conciliated upon, and there are many other matters too. With good will on all sides, I hope that all these various matters will be reviewed and that a certain measure of compromise will result, but I believe that the new financial regulation is a regulation that has a real meaning and real help to the present and immediate future of the Parliament and that it reflects the changes that have taken place since 1973, when the existing financial regulation came into being.
  I welcome the opportunity for this early debate. It comes before the preliminary draft budget has been examined

  1233
  by the Council and before the representatives of the European Assembly have met the Council in Brussels. That meeting is to take place on. Wednesday this week. This is, therefore, a well-timed debate and I hope that it proves to have been useful.
  7.40 p.m.
  Mrs. Gwyneth Dunwoody: I, too, welcome this debate, because if there is one thing that is constantly clouded in an air of mystery it is the amounts of money that are spent not only by the Common Market but by all its institutions. This House should take more time to debate the amounts of money that are being spent not only by us but by other people.
  I shall not pretend to be able to follow even the small Volume 7 of the preliminary draft general budget with the expertise of either my right hon. Friend the Chief Secretary or the hon. Member for Scarborough (Mr. Shaw), because if nothing else, having studied the section which particularly concerns the Social Fund, I know that it is exceedingly difficult to try to sort out from the figures listed in the budget documents exactly what the real and political implications may be.
  However, I say to my right hon. Friend and to the hon. Member for Scarborough that it is about time that someone explained in very simple terms to the British public that we really shall be net contributors to the overall finances of the EEC, not only this year but to an increasing extent in the coming years. Indeed, our net contribution this year alone, as far as I can see, will be £553 million, and it will rise within three years to £1,000 million, after receipts. That is calculating the contribution before the change to the European unit of account.
  I was grateful to my right hon. Friend for his comments about the European unit of account, because if there is one thing that is extraordinarily misleading it is the suggestion that is emanating from certain Continental sources that the differences between the calculations in the European unit of account and the present unit of account are so small as to be positively minimal. My right hon. Friend has already made clear that the British will be faced with a very considerable burden, which I really dc not think they can
  1234
  accept in any form whatsoever. Indeed, the comparison of both the IMF and the unit of account parities used in the 1977 budget and the EUA parities used for the 1978 appropriations makes it clear that yet again this nation, which we are eternally being told is one of the poorest of the EEC, will be called upon to make an even greater sacrifice at a time when it desperately needs its own resources to do many of the things that we think are tremendously important here in Britain.
  If one looks at the amounts about which we are talking for the extra costs, one finds that it would possibly be open to us to give the equivalent of about £2·per child for each child receiving benefit in this country for the sort of amounts of money that the Common Market is asking us to contribute.
  Mr. Dykes: Will not the hon. Lady, however, also take the point made by the Chief Secretary that the agricultural pound and its relationship to the real £ sterling means that we get an additional amount, which reduces our net contribution to a couple of hundred million pounds in the current period? That is a permanent thing, according to the Chief Secretary a few moments ago.
  Mrs. Dunwoody: I am delighted to follow the Chief Secretary, whom I always believe absolutely because I know him to be a man of great worth and intelligence. I am happy to come to precisely the question of the agricultural funds because if there is one thing that two years in the Agriculture Committee of the European Parliament have taught me it is that there is an astonishing capacity on the part of the European agricultural lobby to persuade the Commission to give open-ended financial commitments.
  One point that the hon. Member for Scarborough did not make strongly enough is that the 68 per cent. that we are told the agricultural funds at present represent is totally unrealistic. I leave aside the fact that at present there are plans going through in the Agriculture Committee which will result in an increased expenditure in improving things, such as the milk programme and negative taxes for the British consumer in many fields, such as isoglucose, and the changes envisaged in imported products. I leave

  1235
  aside all that and say to the hon. Gentleman that, even if one ignores those political decisions, there are still open-ended commitments on citrus fruits and on any kind of agricultural produce that appears to be under any attack from imported agricultural produce.
  There is even a fantastic suggestion under consideration that, because Cyprus sherry is imported into Great Britain, those who make Marsala, which bears no relation to Cyprus sherry, should be compensated for importing it into the United Kingdom. That is the level of political decision-making in the agricultural sector of the Community.
  It is no use our saying "Look how clever we are. We have cut down the amount of money we intend to spend on agriculture and we have increased the amount of money that we intend to spend on the Social Funds" if we do not spell out exactly what that means. In the Social Committee we were very concerned to find out what the budget commitment actually meant in real terms. The Social Fund is supposed to be used for those sectors of Community policy which I should have thought were among the most vital—for the retraining of workers who are unemployed, for the amounts of money spent to deal with youth unemployment and for changes in the structural development of the textile industry and the steel industry. We were told that one of the encouraging things about the budget was that it represented an 11 per cent. increase in the Social Fund.
  However, when we tried to look at those commitments in terms which would make clear where the improvements would come and how the Commission envisages spending those funds in the coming budget year, it became very obvious that that increase might be in the areas in which it is certainly desperately needed but where there are already large sums of money outstanding.
  In other words, the whole accounting procedures of the Commission, particularly in relation to the Social Fund but in fact in relation to all sorts of other policies, are so complex that it is quite impossible for the average committee member to work out how much money has actually been spent in the last year,
  1236
  how much money remains to be spent in the Social Fund and how much money will be an increasing amount available to the Social Fund in the year 1978.
  I do not pretend in any way to be an economist, but it seems quite impossible to suggest that we are improving the economic controls of the Community when, even after presenting everyone with vast volumes the size of that which I have in my hand, individual Members of not only this House but, it seems, of every other Parliament in the Community find it virtually impossible to sort out what is actually happening.
  When I questioned Commission officials I was horrified to learn—I have figures only in documents with French title headings—that in fact the appropriations in this budget for actions in favour of the agricultural sector, but more particularly of the textile sector, are actually less than they would have been in normal circumstances and that the increase will be used up in other ways.
  It seems to me that in a Community that is totally committed to spending two-thirds of its budget on agriculture, and which eternally says that it is deeply concerned about the industrial sector, about regional policy and about social policy but still is not capable of producing changes that would make more money available to those sectors, one has a right to doubt both the sincerity and the commitment of such a budget.
  I say to my right hon. Friend that I am deeply worried about the constant propaganda that comes from the Commission suggesting that the monetary compensatory amounts are so large and that the Commission is being so open-handed to the British people who are benefiting from the largesse provided by the Community as a whole. There is no explanation of the cost to the British people. If there is one interesting fact in this budget, particularly in Volume 7, it is the amount of money, even now, being entered into the budget for the storage of surplus food. Although my right hon. Friend said that he did not wish to discuss the common agricultural policy, the budget makes it clear that the political implications of this policy can and will be translated into considerable expense for the ordinary taxpayer.
  The agricultural policy is not only expected to require vast amounts of

  1237
  money for the storage of surplus food. There is the positive entering of money in large amounts in the budget in such a manner that it is obvious that there is to be little structural change in the agricultural policy in the coming year.
  While we are on the subject, I am deeply concerned by the section in the budget relating to the financial assistance to be given to countries outside the Community. It is obvious, when we look at the figures, that what is intended is that Greece will get a small amount, Portugal will get virtually a derisory amount of assistance and Cyprus will get so little as to be hardly anything at all but the Maghreb countries will get a considerable amount of money from the Common Market, presumably on the basis of the agreements negotiated for them as financial protocols. This is a political question.
  If we are to discuss the enlargement of the Community, there seems to be no excuse for saying "Yes, we would like to see the Mediterranean end of the Community extended but we do not want to do it too soon because the agricultural products of those countries would cause considerable difficulty to existing agricultural producers in the Community." Yet those who use those arguments are also saying "Never mind, we are giving considerable political and economic assistanca to Portugal and Greece to help them, even before they are fully involved in negotiating entry to the Common Market."
  If we look at the figures, it becomes painfully obvious that nothing of the kind is happening. Portugal is desperately in need of our support. It has a democratic system of government which needs our support in every way. Yet the countries of the Maghreb, already getting considerable assistance from other sources, are to be given far more money in total than any of the other nation States. This is a clear indication of the level of political decision-making inside the Community.
  Mr. Roper: I have been trying to follow what my hen. Friend has been saying about Portugal and the Maghreb countries. My reading of page 646 of the budget suggests that there are to be about 410 million E.U.A. for Portugal and only
  1238
  339 million for all three Maghreb countries. Perhaps I have missed a page.
  Mrs. Dunwoody: My hon. Friend will see that the Maghreb countries are receiving in total 172 million units of account whereas individual countries such as Greece, Cyprus and Portugal are getting nothing like that amount of support. Whichever way we look at it, that is not a commitment to a political support system. I am afraid that I cannot accept my hon. Friend's interpretation of the figures.
  What I find very depressing about the debates in which I take part in the European Assembly is the singular lack of reality. Tory Members have said, and will no doubt say again, that all this will be changed by direct elections. The hon. Member for Scarborough welcomed the development of "own resources" as a positive step forward. I believe that it is anything but that. A system which says that anything up to 1 per cent. can be added to VAT to develop a common system is capable of being expanded in such a way that the British people will find themselves committed to even greater expenditure, over which they will have no control.
  If the hon. Member tells me that directly-elected Members will take it upon themselves to play a far greater rôle, all I can say is that, if we develop an assembly of highly-paid positively-removed "Euro-smoothies "who have no idea what the average person has to do in terms of budgetary control in this country, we shall not raise the level of debate, particularly in economic terms, to a greater degree of reality. All that we shall do is to remove it even further from the realms of understanding.
  Those who live on the inflated rates to be found in some European institutions will not be good judges of what is an acceptable level of payment for agricultural produce or any other revenue-raising policy. I hope that the hon. Gentleman will not suggest that after direct elections—when the European Assembly finds itself in even more expensive premises based in Brussels, about which it appears already to be giving commitments—the Assembly will be better representing the British housewife than he or I are doing at present. I do not believe that that will be so.
  Mr. Michael Shaw: Would not the hon. Lady accept that it is possible that she and I might stand as candidates and might become Members of a directly-elected Parliament? Does she believe—I do not—that we shall be any less assiduous in looking after the interests of our constituents than we are now?
  Mrs. Dunwoody: The hon. Gentleman is kind enough to suggest that he should join me. I would welcome his joining me on almost any occasion in almost any place, but I can assure him that I shall not be seeking election to the European Assembly, for one simple reason. I sit in this House as the representative of the people of Crewe. I go backwards and forwards to learn their views and to represent them here. There is no doubt in my mind that that task will be beyond any elected Member when he has a population in his constituency 10 times the size of my present constituency. I have no doubt that if I find the debates of the European Assembly unrealistic now I shall find them positively surrealistic after direct elections. The one thing that frightens me about the budget is that it is the forerunner of a system which we shall soon find totally unsupportable.
  8.0 p.m.
  Mr. Neil Marten: I agree the general tenet of what the hon. Member for Crewe (Mrs. Dunwoody) has been saying. The debate has made us dig into the finances of the Community, and the more one digs, the more disturbing it is, particularly in the light of the economic stringency that we have in this country and that I support for obvious reasons. The more one digs into these great big volumes, the more profligate the EEC is seen to be.
  The Minister has a Council of Ministers meeting on Wednesday. May we have his assurance that on this occasion he will make a statement to the House on Thursday and not on Friday? It would be very convenient for hon. Members if he would do so. Perhaps he will deal with that when he replies to the debate.
  I welcome the debate, but I am afraid that it is too short for this vast subject. The very shortness of the debate results in a number of hon. Members not being present, their feeling being, Mr. Deputy Speaker. that there is little or no chance of being called in a debate lasting only two and a half hours.
  1240
  I agree with the idea of having three EEC debates on one day—indeed, I proposed it to the Scrutiny Committee and to the Leader of the House—but I do not think that we should be taking together with other subjects such a major subject as the budget. I think that the budget should be given a rather longer time than has been allocated.
  I should like to cast a critical eye over the Assembly. I call it the Assembly because that is the word used in the Treaty of Rome, and it is also the word used in the European Assembly Elections Bill, which has been before the House for Second Reading. I think that we ought to pass a very critical eye over the affairs of the Assembly in terms of its budget as direct elections have been proposed. They are not yet with us, of course, and I hope that they will not be with us, but I think that we should look at the Assembly at this crucial time.
  I agree with the hon. Lady that it is very confusing to look at the figures in these budgets, particularly this year, when they are in units of account and European units of account. It is extremely difficult to compare one year with another. I hope that the House will therefore forgive me if I make any technical errors.
  As far as I can understand it, the estimate for the Assembly in 1978 is 86 million European units of account. The Library worked out for me that that sum for 190 Members of the European Assembly—MEAs—is equivalent to £55 million. The cost of our own House of Commons is £15 million for 635 Members and £20 million if we include the House of Lords. There are three times as many Members in the House of Commons as in the European Assembly.
  I should like to draw attention to the rise in expenditure on the Assembly. For the first year of the enlarged Community, 1973, the cost was 25 million units of account. For 1977–78 the cost has risen to 70 million units of account. That is almost three times as much as in 1973. These figures are in units of account, not in European units of account.
  One does not know what the increase will be if we have a directly elected Assembly, and I am greatly worried about the way in which these things are

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  done. Speaking in the Assembly on 16th June, Lord Bruce of Donington said:
  "There is, I believe, a convention established —I do not know how long it will last—for the budget of Parliament to be more or less assented to by the Council on the basis that Parliament will not unduly query the Council's budget either, and with this comfortable arrangement the passage of any budget of Parliament is satisfactorily assured."
  If Lord Bruce of Donington is right in what he says, I regard that as a highly dangerous situation. Indeed, it places on us in this House a much greater duty to look with a toothcomb at the sort of thing that is going on. That is what I propose to do in the short time for which I wish to speak.
  My first point refers to the Members of the European Assembly. I shall not particularise, because I do not know the facts relating to individuals, but one picks up various stories, in addition to which we have a magnificent Press which gives guidance on these matters. I should like to know who exercises control over the money spent by the MEAs. We pay our share in this country, and it is the British taxpayers' money that is in part paying for the MEAs' expenses.
  On 3rd July, the Sunday Times had an article on this very question. It worried me when I read it. That is why I am raising it in the House today, so that perhaps we can cl2ar it up. It is a touchy subject, I imagine. The article states that
  "One MP who previously sat in the Europarliament claims it is possible to make £9,000 a year on expenses. Yet most MPs claim there is little or nothing in it for them."
  There is laughter from those Members who have attended. I do not know who is right, but, according to the article, this MP who has attended says that it is possible to make £9,000 on expenses. If that is so, it is enough to alert one to the whole question.
  Mr. John Prescott: The hon. Gentleman rightly says that this is a very sensitive subject. A number of people are quoted in the same article. The Member referred to in the quotation did not mention the period of time and did not have the guts to be named in the article. I would even challenge the statement and say that it is not possible to make that money. A Member has to stay in a hotel and, with the
  1242
  differential between what is received and what is spent, it would not be possible to make anywhere near that sort of money. A number of hon. Members made statements to the reporter and he did not carry them all in his article, being more concerned with sensational comments.
  I point out that the expenses paid to Members of the European Assembly for secretarial work are subject to a contract with a secretary and that the money is paid by the Assembly directly to the secretary and not to the Member. This House might care to look at that procedure. In addition, Members of the European Assembly have money made available to them for research. It is a pity that this House does not provide us with money for research, which would make us more effective in this country.
  Mr. Marten: The hon. Gentleman has made some interesting points about the House of Commons. I note what he says about the statement in the article that it is possible to make £9,000. I think that all Members of the Assembly who have attended would say that is not so, but the article goes on to state:
  "one Labour Member says that he has made no more than between £2,000 and £3,000 over two years."
  That is quite a lot of money to make out of expenses, and I feel that the subject
  requires examination.
  Dealing with travel expenses, the article states:
  "In April, a month after he joined the British delegation to Europe, Lord Brimelow attended a meeting in London of all the European Socialist MPs. For the two days he was paid an attendance allowed of £106"—
  this is in London—
  "although his only outlay, he says, was on bus fares to and from Lancaster House. 'This was obviously a bit extravagant,' he says."
  I would not question Lord Brimelow, with his long record of public service—
  Mrs. Dunwoody: With the greatest respect, there is one thing that I find vaguely irritating. Many of us take part in debates in the European Assembly. They are of some importance, but they are never reported anywhere in Britain. The sort of remarks that the hon. Gentleman is making may indeed be perfectly justifiable. Many of us are only too happy to

  1243
  deal with our problems about expenses. However, I hope that the hon. Gentleman will accept that those of us who use our expenses for expenses are not making money. I would say that very plainly. The hon. Gentleman may question anything that he likes, but I hope that he will not continue along this line, because there are justifiable defences.
  Mr. Marten: I absolutely accept that. But what I am doing—this is my duty as a Member of Parliament—is to question the control of this money. In order to question it one has to build up a case, and the only case that one can build up is from quotations from a variety of Members of Parliament and respectable people like Lord Brimelow, who was given £106 for two bus fares. That is the sort of nonsense that one expects from the European Community.
  The article goes on:
  "Twenty-six MPs and 10 Peers leave for Luxembourg tomorrow for their monthly stint at the European Parliament. If they choose to fly tourist, their return fare will cost £80. But their allowance for travel expenses will be at least £200."
  Is that true or not? These are the sorts of things—
  Mr. Prescott: That is one of the difficulties with which Members are faced. A point that could have been made is that the tax position of Members of the Assembly is not yet established. We are pressing hard to get a decision about that. What is paid for travel journeys is determined for all the European Members. One of the difficulties with British Members is that sterling has constantly declined, thus affecting sterling payments, which has led to a discrimination between the actual fare paid and the amount paid in sterling. Some steps have been taken to correct this, but that has left us with this kind of anomaly.
  Mr. Marten: I am glad to have that confirmed. I suggest that the right way for people to travel is by some form of warrant so that no money changes hands. Each MEA could get a bunch of warrants just as we do. There should be close liaison between the fees office in Brussels and the Fees Office here so that someone coming from Liverpool does not get a
  1244
  mileage allowance from Liverpool to Brussels when in fact he comes down on a House of Commons travel warrant.
  It is rather like coming down by car from one's constituency. The Fees Office naturally checks one's accounts to see that one is not coming down—
  Mr. Prescott: There is very tight control.
  Mr. Marten: I hope that the Fees Office would do that so that one does not get a return ticket and then travel by car one way. I should be appalled if we were told that such a suggestion was even vaguely right.
  Mr. Dykes: Is my hon. Friend suggesting that hon. Members of this House who are also Members of the European Parliament may pass through the House of Commons on a journey to Europe and actually make a double claim?
  Mr. Marten: I was asked not to go on quoting this article, but that question is raised in the article. I shall pass it to my hon. Friend. For the sake of Members of the European Assembly, it is right that this should be looked into. I put it no higher than that. I am glad that the Chief Secretary nods agreement.
  I turn to trips overseas, which are necessary in any Parliament. I should like to know what the procedure is. When a Select Committee of this House is going overseas, there is very tight budget control. The expenditure has to be forecast and has to go before the Chairman of the appropriate Expenditure Committee. There is fairly tight control. I wonder whether Assembly visits overseas are as tightly controlled as we would wish. It is British taxpayers' money. One comes back to this point all the time.
  The budget does not really deal with the directly elected MEAs. It is therefore difficult to forecast what the increased expenditure will be. But the numbers are going up from 190 to 410 directed elected Members, if that ever comes to pass. However, a couple of guesses have been made on various hypotheses, the best of which puts the increase at an extra £12 million. Therefore, the total cost of running the European Assembly will jump from £55 million to £67 million a year. That is quite a lot compared with the running of this House of Commons.

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  The secretarial allowances have already been dealt with, but I should like to know whether the secretarial allowances are taxable in the ordinary way. Is the money coming from Brussels taxable in the same way as the pay that secretaries in the United Kingdom receive?
  The other point that I should like to raise relates to payments to political parties. I can find very little reference to this in the budget. If payments are made to political parties, I should like to know what control there is over the expenditure once the payment has been made. Are the accounts audited and published? I think that the public ought to know.
  Money paid to political parties is something of which I disapprove strongly. I hope that the sort of sums paid to political parties in the European Community will never come to pass in this country.
  Mr. Prescott: The hon. Member's party receives money.
  Mr. MartenIndeed, the Conservative Party does. I should like to see the accounts properly published so that we can all see exactly what has happened. It is vital to keep on the straight and narrow so far as one can.
  I noticed that last week, or the week before, a group of Conservative agents were taken to Brussels. I understand that the trip was paid for out of some money left over from the referendum by the European Movement.
  Mrs. Elaine Kellett-Bowman: It was freely subscribed.
  Mr. Marten: Does my hon. Friend wish to explain?
  Mrs. Kellett-Bowman: If persons wish to subscribe to a movement in which they believe, is my hon. Friend saying that they should not do so? Is my hon. Friend saying that there is something wrong in people wishing to subscribe after tax income to something like the European Movement?
  Mr. Marten: lf my hon. Friend will read Hansard tomorrow, she will discover that I said nothing of the sort.
  Mrs. Kellett-Bowman: You have now.
  Mr. Marten: My hon. Friend is putting into my mouth words that I have
  1246
  not spoken. I recommend that she reads Hansard tomorrow.
  With regard to European Assembly staff, I understand from the budget that 60 per cent. of permanent posts cover language services—translators and interpreters. The number of days worked in 1976 was 10,684 interpreter work days. That is very expensive and is a very great number of days spent on languages. Most right hon. and hon. Members are Community minded. I am certainly surrounded by them. As they are so Community minded, I am absolutely certain that they would like to overcome this wasteful expenditure on interpreters and translators.
  Since I myself am European minded but hate the Treaty of Rome and all that jazz, I think that the time has come for the Community to move to one language. I believe that that language should be French. French is by far the most spoken language in the Community. It is a most attractive language and it would be a very good example of British Communeautaire if we were to approve French as the language for the European Community. I am sure that M. Debré and M. Chirac would thoroughly approve.
  Mrs. Kellett-Bowman: Will my hon. Friend give way?
  Mr. Marten: Not just now. I shall do so in a moment.
  If that were so, those hoping to run as candidates in direct elections would have to pass a little test of colloquial French. If they did so, they could then get on to the candidates' list in Central Office. I understand that masses of people are queuing up there to become candidates for the European Assembly. It would cut down the numbers if candidates were required to have the qualification of speaking French. So I think that there would be a massive saving of money if everyone over there spoke French.
  Mrs. Kellett-Bowman: Will my hon. Friend accept that he is rather out of date when it comes to new members seeking to join the Community? For example, whereas the older generation of Greeks speak French, the newer, modern, "with-it" Greeks speak English.
  Mr. Marten: Bless them for that! All I say is that they should be made to

  1247
  speak French, like everyone else. is the most beautiful language—
  Mrs. Kellett-Bowman: So is English.
  Mr. Marten: I agree, but French is the language which is largely spoken in the centre and heartland of Europe, which I am sure all my hon. Friends who are in favour of the Community think of as Europe, and France personifies Europe.
  Mrs. Dunwoody: Is the hon. Gentleman not aware that there is now an EEC directive suggesting that the children of immigrant workers should be taught in the languages of their mother countries and that the only people who are not to be given this privilege are the Irish in Britain who, for some reason, are to be deprived of the right to learn Erse?
  Mr. Marten: That may be so and I am sorry to hear about it. But I recall the draft directive to which the hon. Lady referred. I deplored it thoroughly. As one who is interested in race relations, I believe that people who come here from the Commonwealth to take up residence should want to be integrated as much as possible.
  All this duplication, triplication and whatever the word is for sixfold printing, having every document published in six different languages, means that in 1976 the number of duplicated, offset-printed and typographic pages produced by the Assembly, amounted to 83,436,321. That number could have been divided by six. I ask right hon. and hon. Members to imagine what a saving of money there would have been if each document had been in French only.
  Ten per cent. of the staff employed at the European Assembly are employed because of the lack of a single seat for the Assembly. Sometimes the Assembly sits in Luxembourg and sometimes in Strasbourg. According to the Assembly's report on this budget, 10 per cent. of the staff are required for that purpose.
  This is the sort of nonsense which must be sorted out. It is the longest running farce in Europe, and the people responsible for it are sitting round me now. I say that because they have done nothing about it. They have not blocked it or had a "demo" about it. They go on and on from one place to another. I hope that they realise how very foolish
  1248
  they look in the eyes of those of us who sit outside the Community.
  Then there are visitors to the European Assembly, sometimes to Strasbourg and sometimes to Luxembourg. In 1976, there were 21,627 visitors to the Assembly. I dread to think what the cost was. But it is a good propaganda exercise, of course.
  Then there is the matter of Press cuttings on direct elections. It is said with pride that 16,000 articles on direct elections have been collected. I cannot imagine what is done with them. It is a beautiful piece of bureaucracy. But it is bureaucracy gone totally mad.
  What evaluation is made of the work of the staff at the European Assembly? I have been there. They can be seen all working very hard. But what is the worth of what they achieve?
  Then there are the expenses of the propaganda for direct elections. May we know what they amount to and how the money is being used in various countries?
  There is a nice little item in Chapter 15 under Item 1490. It is fascinating to learn that 145,000 units of account are to be spent on a creche, day nurseries, holiday camps, domestic help, etc. British taxpayers, hard pressed as they are, are paying for a proportion of that—
  Mrs. Kellett-Bowman: Lady Members asked for one here.
  Mr. Marten: British taxpayers are paying a proportion of that. There would be an outcry if the British Parliament put into its Budget expenses for domestic help and holiday camps. It is a ghastly thought to have to go on holiday with some of my colleagues, anyhow, but it would be unthinkable for the Government to subsidise the cost of doing so.
  Then I look at the Commissioners and their pay. A Commissioner who is married and has two children is now getting net, after paying tax, about £42,000 a year. After he has done five years and retires, he get "redundancy" pay for three years amounting to £23,000 a year. That is quite an expenditure which ought to be looked at. After all that, he gets a pension of £12,000 a year when he reaches the age of 65.
  The European Community, especially the Assembly part of it, is becoming rather a sick joke in the eyes of the average British person. What does the

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  Assembly achieve? I know that people work hard. They produce many reports. I admire what they do. But what does it all achieve?
  When it is directly elected, if it is—God forbid—with all those additional people there, what will it achieve? There will be a great deal more cost, but I doubt whether it will achieve very much. It has become and will continue to he, as the article in The Sunday Times describes it, a bit of a "gravy train".
  I am appalled by what is contained in the budget, and I can only suggest that the British Inland Revenue together with a Select Committee of this House looks at the whole position, otherwise its name will get worse and worse as the years go on.
  Several Hon. Members Several Hon. Members rose—
  Mr. Deputy Speaker: I draw attention to the fact that we have had one hour and 40 minutes' debate, with only four speeches. We have to end this debate at 16 minutes past nine. I ask for the co-operation of right hon. and hon. Members.
  8.27 p.m.
  Mr. John Roper: I shall not take up what I consider to be the rather squalid attack made by the hon. Member for Banbury (Mr. Marten) upon hon. Members of this House and their behaviour in the European Parliament. However, I intend to turn later to one or two remarks about the Parliament itself.
  When we come to consider the budget of the Community, the first feature of it that one notices is that, despite some of the remarks made earlier, it is a remarkably small one. We hear talk about very substantial expenses—they are substantial and perhaps too high in certain areas—but overall the budget represents only 2·3 per cent. of the total national Budgets of the nine members of the Community.
  We have to consider two specific items in the budget which will occur in the coming year and which are of special importance. The first is that on 1st January 1978 the Community will go over to a system of own resources—that is, if the reserves which have been placed by the Belgian and Danish Governments are
  1250
  withdrawn and there is a satisfactory system for VAT collection throughout the Community. I hope that my right hon. Friend the Chief Secretary will comment on those reserves, because obviously this is an important matter which could block the move to own resources.
  The second matter which is of considerable importance is the proposal that the budget should be based on the European unit of account. We should understand the problem that exists for the Community as a whole before we consider the problem for this country in particular. For the Community as a whole, the fact is that by the end of the year all that will be left of the IMF unit of account will be—rather like the Cheshire cat—just a grin. It will have totally disappeared and it will not have provided a satisfactory basis for continuity of Community accounting.
  The regulation that will be required to introduce the European unit of account will need unanimous approval by the Council of Ministers. I am glad that my right hon. Friend will be able to exercise his influence to ensure that it goes in the right direction.
  There is a paradoxical situation in the explanatory memorandum from the Treasury which shows, on page 3 of Annexe A, that the budget itself can be adopted by a qualified majority—by 41 weighted votes out of 58. That means that one would require 18 votes to block it. The United Kingdom, and even the United Kingdom and Ireland—Irish interests are not dissimilar from our own here—will make up only 13 votes. We could have a situation where the Council of Ministers adopted by qualified majority a budget in the European unit of account when the Council of Ministers had not agreed unanimously to the regulation introducing that unit of account. Perhaps the Minister will explain how this paradox could be resolved, either when he replies or when he returns from Wednesday's Council.
  I am pleased that after a transitional period of two to three years we have moved to a position in which there is a distinction between appropriations for payment and appropriations for commitment. The final stage of introduction of this system is an important advance.

  1251
  My hon. Friend the Member for Crewe (Mrs. Dunwoody), when discussing the budget and in particular what might be called the enormous telephone directory that we have received of some 700 pages, said how difficult it was to get through this document. Once again I pay tribute to the helpful explanatory memorandum from the Treasury, because it sets out very clearly the difference between the commitment appropriation and the payment appropriation for 1977 and 1978. There is possible confusion in this— in the Social Fund where there would appear to be an increase from payment appropriation from 141 million European units of account to 536 million European units of account between 1977 and 1978. This is not an increase of 400 per cent. as would appear at first sight. It is simply that the Community will pay its bills more rapidly in future and that in 1978 we shall have a once-for-all payment.
  It is worth saying that the figures written in for commitment appropriation relating to the Regional Development Fund have increased from 398 million European units of account in 1977 to 750 million European units of account in 1978. At this stage, that is only what is to be in the budget. The Council of Ministers has not yet agreed on this figure, but I very much hope that this will be finally agreed.
  These are the sort of areas where we want to see the development of Community spending, and similarly in industrial and energy policies where there has been an increase from 93 million European units of account to 250 million European units of account, an increase of 300 per cent. This also has not yet been agreed, and I hope that it will be.
  In reading the report, I rather like the new word which has appeared for MCAs. MCAs are now referred to as "agrimonetary expenditure". This is not a word that is on everybody's lips, but it is a bit clearer than MCAs.
  The hon. Member for Banbury made a number of remarks about the European Parliament. I leave aside his references to Members' expenditure. It was interesting to see in different parts of the budget that the lowest increase of 4·36 per cent. is attributed to the European Parliament.
  1252
  That suggests reasonably good housekeeping, though no doubt there could be improvements. But in making comparisons between the costs of this House and those of the European Parliament one must take into account the totally different situations—the fact that Members have to travel much greater distances, by air rather than by train, and the fact that there have to be translations.
  Whatever the hon. Member for Banbury may say about the French—I agree with much of what he said—for most people it is difficult to debate in a foreign language. An effective Assembly with effective committees must have translations. I know from the Council of Europe, where there is not total availability of translation, the difficulties faced by Members whose language is not spoken in the Assembly. They are inhibited from intervening in debates.
  Mrs. Kellett-Bowman: Would not the hon. Gentleman agree that there are already sufficient languages in the Community and that we must ask anyone else who wishes to join the Community to accept one of the existing languages? Otherwise, the expense of translation will be prohibitive.
  Mr. Roper: That is an interesting point, but it goes against my argument that people should be able to take part in debates in their own language. That does not necessarily mean a translation of all languages into one's own, but one should be able to speak one's own language and have it translated into a limited number of languages. The solution will be found in some such arrangement. Although younger Greeks are fluent in English, it would be unfair to restrict membership of an Assembly to those fluent enough in a foreign language to be able to take part.
  Page 20 of the document refers to the Community's powers to borrow. The President of the Commission has for some time proposed that the Community should have greater powers so that it can develop some of its programmes. I hope that that will be agreed soon as it will add flexibility in regional, social and industrial matters.
  My hon. Friend the Member for Crewe mentioned commitments outside the Community, quoting from page 646. It is true that in the reference to budgetary

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  amounts alone there is a discrepancy between the figure of 60 million units of account for Portugal and 172 million for the Maghreb countries, but if one totals the amounts granted in the budget and the amounts in the European Investment Bank, the interest on which is subsidised by the Community, one sees a dramatic change, as there is provision in this period for 350 million units of account in loans to Portugal and only 167 million in loans to the Maghreb.
  We have had a discussion which might have been relevant to this debate about what happens in committees in the European Parliament. Although tonight's debate has been useful, it might have been more so if there had been a Committee of this House consisting of Members of the European Parliament and other hon. Members interested in European matters. I hope that in due course the Select Committee on Procedure will recommend something of the sort.
  8.40 p.m.
  Mr. Hugh Dykes: I agree with the last suggestion of the hon. Member for Farnworth (Mr. Roper), depending on how it was precisely worked out.
  This debate has strayed from the initial examination of the budget as presented by the Chief Secretary into a detailed analysis of some particularities of the European Parliament. I do not feel that it is appropriate in the short time available to carry out a detailed examination of how the European Parliament functions—whether in its expenditure, the expenses of individual Members or its operational characteristics—in a debate on the Community budget. That would be out of place because this fascinating and interesting subject needs a lot of time to itself. Therefore, one can touch only fleetingly on one or two details.
  I should not like in any way to follow the inference of my hon. Friend the Member for Banbury (Mr. Marten) in casting not aspersions in a particular and personal way on individual Members but a general slur on the way in which expenses may be paid in the European Parliament. I agree with my hon. Friend's anxiety, but for a different reason. The main faults are partly the way in which the system of expenses payment is con-
  1254
  structed but mainly, as in all these matters, a reflection on the poor relative economic position of this country compared with the leading members of the Community. It is all very well to quote individual figures and expenses and to say that they seem lavish, sizeable and considerable. They seem so only in British terms; in Continental terms they are reasonable. The dilemma is that one cannot differentiate and have lower payments for relatively poorer nations and higher ones for the better-off.
  Mr. Marten: I should like to make it absolutely clear that in quoting from the article in The Sunday Times I was saying only that there was enough in that article to make people anxious and that the matter therefore needs to be cleared up —nothing more and nothing less.
  Mr. Dykes: Obviously, my hon. Friend the Member for Banbury was agreeing with that article, but his idea of issuing warrants and instruments to enable journeys to be made seems to be the rational way of developing this. The problem will become even more alarming after direct elections, when salaries will start to be paid and there will be the important relationship between salaries and expenses. I hope that the House and other European Parliaments will apply a searchlight to that.
  I should like to say something about the budget, but I do not have time to go into details. Incidentally, two and a half hours is an unsatisfactory time for such a debate because there is a tendency for some hon. Members—who have already spoken previously—to speak for too long.
  The budget represents a groping and faltering step in the right direction through the onset, for the first time, of own resources. That is not the same as the creation of an autonomous Community budget in the intrinsic sense of that adjective. I hope that the budget will develop as soon as possible not only in size but along the lines of autonomous decision-making and decisions on spending under the various heads.
  As for the procedures for the budget in the European Parliament, the way in which they are scrutinised by national Parliaments is unsatisfactory. It is a Byzantine and mysterious process within the European Parliament. My hon.

  1255
  Friend the Member for Scarborough (Mr. Shaw) has done the House a great service in explaining some of the mysteries. However, the discrepancies in assessments, and the fact that the final budget is different from the preliminary draft produce enormous obfuscation and an opportunity for deliberate obfuscation by the Council of Ministers. I hope that parliamentarians, national and European —and perhaps, to a lesser extent, even the Commission—will work hard together to overcome this central problem.
  The development of the budget is an urgent and pressing matter and, therefore, it is related directly to the paradoxical and rather illogical argument about the contribution. The hon. Member for Crewe (Mrs. Dunwoody) complained about the net contribution made by the United Kingdom. However, we shall perpetually be complaining about the contributions of various member States, and if the United Kingdom remains one of the laggard economies in the Community we in particular shall complain about the contribution.
  However, since our contribution to the Community budget by definition replaces current or future items of national expenditure, this is not really a contribution in the sense of a direct financial burden. It is a payment into a common budget for, I hope, the common good. The way that it is distributed is partly connected and partly separate, but even that can be decided at a political level in a satisfactory way if the member States' economies do what they should have done—and what they always did up to the time of the oil crisis at the end of 1973—namely, by and large and with some detailed exceptions in performance, move together.
  Economic convergence and development of the Community budget go hand in hand. This is not a strategic budget in the national sense of a budget with deficits, surpluses or coming into balance as a result of deliberative economic management performance. It is a passive receipts and payments budget whose original political aim was to prop up the inefficient farmers of Germany and France. That motivation is declining fast, although agricultural expenditure remains high at about 70 per cent.
  1256
  I hope that the budget will transform itself from an artificial passive budget into an autonomous budget that is more dynamic in its deliberative effects and that it will be decided more collectively with the European Parliament having a more direct say over the whole of the budget. At present, the European Parliament has a direct say in less than 10 per cent. of the budget. It should become a positive instrument for the good of all the citizens of the Community.
  Lest my hon. Friend the Member for Banbury be alarmed, I should stress that this has nothing to do with federalism. It is a real long-term expression of the Community in practical terms, developing common funds to counter such problems as unemployment and doing things for the common good that national Governments cannot do.
  8.47 p.m.
  Mr. Tam Dalyell: Owing to the amount of time available, my speech is necessarily "itsy-bitsy", so I shall put seven brief points to my right hon. Friend who will choose to reply to some, all, or none, according to taste.
  The first is that many of us on the Budget Committee are worried about what will happen if there is a bumper harvest. Commissioner Spinelli, from his knowledge of Italy and the Commission, and others outlined the acute problems that such a harvest would render and, since it looks as though there will be a bumper harvest from Italy to Scotland, can my right hon. Friend say what contingency financial plans have been prepared?
  The second matter concerns the Treasury. Ministers will know from long correspondence with Director-General Schuster that there is a real problem in energy financing matters in the Community in relation to energy expenditure by national Governments. The Treasury has taken the view that if more funds are put into certain common research projects, much less will be available for institutions in Britain doing similar work. This is a long story and I do not expect an off-the-cuff answer, but there are real problems here and I hope that Treasury Ministers will look at them and the role that they have.

  1257
  This is a matter that could well be discussed on 20th July. It is a question of priorities and I hope that Britain will be particularly sympathetic to the Community's feeling that, if there are any cuts, energy should be protected.
  The third point was raised by the hon. Member for Scarborough (Mr. Shaw) who, like me, is vice-chairman of the sub-committee on control. I agree with what the hon. Gentleman said about the audit court, but we want some philosophy established on the question of confidential documents because this is a grey area. The Chief Secretary knows what happened on the malt issue and that should not be repeated.
  There must be clearly established guidelines about the availability of documents. I am not persuaded of the value of a massive handover of secret documents, but there are occasions when some rules should apply as they do with our Public Accounts Committee. Have Treasury Ministers any view on these delicate issues?
  Fourthly, there is the worry about Article 131. I have sympathy with my right hon. Friend's point of view. But is there not a danger that, as with JET, if we are not careful we shall slip into a system of generalised blackmail and tit for tat? That would be very unhealthy for the development of the Community?
  Fifthly, many of our problems arise from the fact that the pound sterling is undervalued. More and more of us believe that a proper rate for the pound, without any damage to British export potential, would be ․1·90 or even․2. There are many people in Brussels who think that the fact that the pound is undervalued is the source of many of our current problems.
  Sixthly—this I regard as an important question—my right hon. Friend—I would comment on his personal assiduity in coming to the European Parliament—has now had six months' experience as President of the Council of Ministers. I understand why the Foreign Ministers should be appointed by rotation, but I would ask whether, on reflection, he thinks that this revolving presidency for six months every so many years—it will be six months every six years, presumably, if
  1258
  Greece, Portugal and Spain accede—is a sensible way of conducting the necessarily highly complex, delicate financial affairs of the Community. It hardly seems that six months is a suitable period to get together not only Ministers but a whole set of different officials.
  Can one run an efficient policy on this basis? Has not the time come to inject some ingredient of permanency into this revolving presidency, particularly in relation to financial affairs?
  Lastly, come enlargement, will there be the same automaticity in the various organs of the Community, particularly the financial organs, which has hitherto been taken for granted? Should the position not be made plain to any of my fellow Scots who think that a separate Scotland hived off from the United Kingdom would automatically be entitled to representation as Scots on the Council of Ministers, the Commission and on all the organs of the Commission? That would be unacceptable if for no other reason than that it would be unworkable.
  8.53 p.m.
  Mr. John H. Osborn: It was my intention to speak in the earlier debate on energy. I shall now take the opportunity in this debate of dealing with two points. I have been interested in regional policy and energy. On the budget, the Chief Secretary outlined the global picture and my hon. Friend the Member for Scarborough (Mr. Shaw) outlined the work which is going on in the committees of the European Parliament. My hon. Friend is rapporteur for the budget, and there are rapporteurs in the committees who will look at the various issues. That work is going on now. That is why the timing of this debate is so important. It is right that there should be this debate in the House of Commons now.
  I regret that agriculture still dominates the budget. Either 60 per cent. or 69 per cent. is devoted to agriculture. Bearing in mind, however, that the Community budget is so small, should we not reconsider this proportion? Energy research, which might include industry and transport, is only 4 per cent. of the overall budget. The Regional Development Fund is still only 6 per cent. of the overall budget, although there has been an 88 per cent. increase.

  1259
  The increase which we are concerned with, in thousand million units of account, is from 10·2 to 12·4 on appropriation of commitment, a 21 per cent. rise. The increase in the appropriation as to payment is from 9·58 to 11·85, a 23 per cent. increase. These increases are considerable.
  Over the next decade, energy and agriculture will be subjects of vital importance both for the Community and for the world as a whole. We had a valuable debate on energy earlier tonight, and before that there was a debate on British energy policy. When I was in Strasbourg I was able to see these matters from the European viewpoint and I could see the impact of the British approach on the problems which are dealt with there. It is possible in that way to see how the views we hold here fit in with the views of our German and French counterparts.
  In our earlier debate, this afternoon we discussed five draft proposals on energy, covering financial aid to demonstrate energy-saving projects, new sources of energy, modernisation of existing buildings, the performance, maintenance and insulation of heat generators, and the general view of energy in the Community. Whatever we do in the Community, particularly in relation to energy, must coincide with the international approach and particularly that of the OECD and IAE.
  Our discussions earlier were perhaps related to the cost of energy. Constituents saw me at the weekend complaining that electricity had gone up by 60 per cent. and gas by 30 per cent. over the last three years. Some of my constituents have put in control mechanisms, insulation and double glazing to cut down their energy bills. Too many people do not realise, however, that the world faces an energy crisis and that over-dependence on oil could create difficulties for us in five, 10 or 15 years hence. There is a need, therefore, to look elsewhere for energy. The problem is that the demand for oil threatens to outstrip supply. North Sea oil is a product that we might want to sell to the rest of the Community and assist our balance of payments.
  The Community is an economic entity. In energy and agriculture it wants to be less dependent on outside sources of supply and to avoid the vagaries of the
  1260
  market. [Interruption] If you will interrupt me and tell me when I should sit down, Mr. Deputy Speaker, in order that the Minister can make his winding-up speech, I shall be happy to do so.
  Mr. Deputy Speaker: That is not a matter over which I have any control.
  Mr. Osborn: I understood, Mr. Deputy Speaker, that I could speak for another six minutes without preventing the Chief Secretary from replying.
  Mr. Deputy Speaker: As a postscript, I suggest that the hon. Gentleman addresses himself to the budget.
  Mr. Osborn: I shall certainly take your advice, Mr. Deputy Speaker. In fact, the budget has items of expenditure on research and energy. Earlier today we were debating underground gasification and expenditure on geothermal energy. There have been debates on the various research organisations' work on hydrogen as an energy carrier. One or two items have been excluded, perhaps, such as wave power and tidal sources of energy. However, the implications are that there are many items of expenditure in energy, industry and research that are better handled as part of a Community budget, not as additions to national expenditure.
  Obviously, if I wanted to criticise I should refer to Articles 321, 322, 323 and 324 dealing with hydrocarbon exploration and the exploitation of uranium deposits: and there is the need to consider the stocking of coal in power stations. Those are matters that are probably better dealt with as Community items. They should not fall on the budget of any one nation.
  There has been considerable discussion today on whether it is possible to cut out the flaring of gases. There is an item in the energy and research budget for their processing, refrigeration and compression of liquid petroleum gases which might be of use to the Community.
  The real issue is that Governments feel that they should have under their own control expenditure in these sectors. I very much hope that Treasury Ministers who will be speaking at the Council of Ministers—we must bear in mind that

  1261
  already there are threats that the Commission's proposals for research will be cut—will bear in mind that collective expenditure and the avoidance of duplication could be much more economical in the long run.
  In these areas of Community expenditure we must bear in mind that regional development is of value. Although certain countries can afford to contribute to less fortunate regions in their own lands, it is better to look at the Community as a whole and ensure employment and a reasonable standard of living in those areas. Such development should be considered on a Community basis rather than on a national basis. Therefore, I hope that when considering the budget we shall try to concentrate on the small items that will give us a return in the long run, such as ensuring our foodstuffs, energy for our industry and energy to help with our food supplies, energy being a great factor in agriculture. We must ensure that our collective institutions are financed, even at the expense of national institutions, providing that national institutions work for the Community on a contract basis
  I regret that in research terms the Commission looks only at the expenditure by the Community institutions and not at overall expenditure by national Governments as well. I very much hope that we can use the debate to focus attention upon the small items of expenditure and endeavour to draw a fair comparison with the expenditure of the other eight member States. If we do so, we have these issues in perspective.
  9.5 p.m.
  Mr. Nicholas Ridley: I am sure that the House would like to express its pleasure that my hon. Friend the Member for Scarborough (Mr. Shaw) is the rapporteur of the Budget Committee. I am sure that we can feel that our money is in safe hands because of the trouble and care that he takes.
  A theme of this short debate has been that hon. Members feel that the proportion of the budget which goes to agriculture guarantees is far too great. I do not think that anyone would dissent from that, nor that nearly 8,000 MEUAs is a large sum of money. I cannot agree with the Chief Secretary that the MCAs do
  1262
  nothing but good, not only to this country but to the whole Community. It is clear that there are no pig farmers in either Heywood or Royton. That must be taken as certain. He will find that there are various other livestock producers who are not as happy about MCAs as he.
  He may argue that cheap food is a useful political plank for the Labour Party. I have never understood why members of the Labour Party are so in favour of cheap food while cheap television tubes or footwear do not seem to please them. I have never understood that ideological difficulty. We should all like to see pressure for the reform of the agriculture policy.
  Another thing that has emerged from the debate is the devastation upon Community affairs that the Government's disastrous handling of the British economy has caused over the last four years, particularly the fall in the value of the pound. As my hon. Friend the Member for Banbury (Mr. Marten) said, those who attend the Assembly are able to secure a profit on their expenses because the money with which they are reimbursed is worth more than the money that the Chancellor of the Exchequer inherited in 1974. I agree that that needs to be examined, but it is not a major problem. My hon. Friend said he wished to look at that with a fine tooth comb. That would be a physical feat.
  I turn to the question of MCAs and the green pound. The fall in the value of our pound has caused the problem. The difficulty of getting the green pound down again bedevils the whole of the Community as well as the British farming community. It is clear that the CAP was not designed to have people such as the Chancellor of the Exchequer causing wide swings in currency values. That has made the system almost unworkable.
  A third area that has been affected is that of the value of the European unit of account. We welcome that there are now 1·5357 EUAs to the pound but we wonder how soon it will get out of line again. The hon. Member for East Lothian (Mr. Dalyell) thinks that it might go up. If that is so, it will put the relationship out of line again. We shall have continual change and the problem of the value of different currencies. The value of our budget contribution has been affected.

  1263
  There seem to be so many figures. The hon. Member for Crewe (Mrs. Dunwoody) said that there was an air of mystery about the figures. Indeed there is. I take the figures from the House of Lords Select Committee, which is more likely to be right on a matter such as this. Their lordships have nearly always succeeded in getting at the truth, and I am sure that they have on this occasion.
  In the year for which this preliminary draft budget is intended, we are to contribute £1,092 million and are likely to get back £530 million, meaning a net contribution of £562 million. This is becoming quite a hefty sum and the right hon. Gentleman must control it as hard as he can. We shall support him in his efforts to get that figure under control.
  Moreover, if it had been indexed, as it were, and had taken into account the fall in the value of our currency, it would be another £200 million—I may be wrong in my figures, but it is difficult to get at them—totalling nearly £760 million. By 1980 indexation will apply when Article 131 runs out—that is, if we get away with it even until then. The right hon. Gentleman is stacking up a nice little problem for the next Conservative Chief Secretary, both on present figures and on present forecasts.
  This is a situation with which we all ought to be concerned. We must be concerned not only with the Community budget but about the fact that our share of it has become disproportionately large. That in part relates to matters which several of my hon. Friends have raised and partly to the fact that agriculture plays such a great part, which brings us back to the need to look at the common agricultural policy again. The only solution to the problems caused by the changing value of currencies, particularly the fall in the value of the pound, is to move towards economic and monetary union.
  I ask the Chief Secretary to look at the cost of the collection of value added tax by national authorities. To my surprise, we are to spend 649 million European units of account to pay back national tax authorities for collecting just 1 per cent. of VAT. I suppose that for us the figure will be about 40 million EUAs. I cannot believe that to pay out
  1264
  1 per cent. of our VAT is really going to cost 40 million EUAs. It seems an unnecessary sort of subsidy. Will the right hon. Gentleman cast his steely eye on that part of the budget?
  The hon. Member for Farnworth (Mr. Roper) said much with which I agree. He suggested that we should move towards allowing the Community to borrow more. At the moment it can only borrow 1,000 million EUAs. But we have to ensure that it can develop a proper budgetary process and begin to influence economic affairs. One would like to see most urgently the harmonisation of national taxes so that we did not have to pay the beastly taxes that this Government have put upon us. It would be nicer to have Community taxes than Barnett's taxes.
  Finally, we have to get back towards the freedom of movement of capital. It is steps such as these that will make the Community budget a real budget and move towards a solution of the many problems that bedevil the Community and its economic progress.
  9.14 p.m.
  Mr. Joel Barnett: The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) has one simple philosophy. When he does not know what he is talking about —which was very obvious from his speech—he has a party political "go". That is crystal clear. That will be the reaction of anyone who reads his speech in Hansard I see one of his hon. Friends nodding. I have only two minutes in which to reply, but in passing let me assure the hon. Gentleman that my electors are perfectly happy to have cheap pigmeat and any other kind of cheap food that we are able to provide for them.
  In two minutes I shall not be able to reply to the many excellent contributions to the debate, including speeches by my hon. Friends the Members for Farnworth (Mr. Roper), Crewe (Mrs. Dunwoody) and West Lothian (Mr. Dalyell). As I shall be unable to answer many of the questions that have been raised in the time available, I assure all hon. Members that I have taken very careful note of the points made and I shall bear them very carefully in mind when I represent this country in Brussels on Wednesday.

  1265
  Many hon. Members have spoken about the European unit of account. My hon. Friend the Member for Farnworth was right in his analysis of the situation, but, despite the fact that the budgets can be adopted by a qualified majority, the fact remains that the financial regulation to change the unit of account to the European unit of account requires unanimity. Since I am opposed to it, that might be difficult.
  The point made by the hon. Member for Banbury (Mr. Marten) was very effectively answered by many hon. Members on both sides. I assure him that a directly elected member of the European Parliament will pay United Kingdom taxes on his salary whatever its size.
  It being two and a half hours after the commencement of proceedings on the motion, Mr. DEPUTY SPEAKER put the Question, pursuant to the Order of the House this day.
  Question agreed to
  Resolved
  That this House takes note of Commission Document No. R/1541/77 relating to the EEC 1978 Preliminary Draft General Budget, together with R/1013/77, R/851/77, R/1226/77, R/480/77 and R/848/77.

  EUROPEAN COMMUNITY (REGIONAL DEVELOPMENT FUND)
  9.16 p.m.
  The Minister of State, Department of Industry (Mr. Alan Williams): I beg to move,
  That this House takes note of Commission Documents Nos. R/1611/76, R/1334/77 and R/1613/77 on the European Regional Development Fund.
  There are three documents before the House. Two of them are retrospective: the Scrutiny Committee's report on the first annual report of the European Regional Development Fund, and the second annual report of that fund. Perhaps more importantly, the third document is the Commission communication concerning the guidelines for Community regional policies. As this looks ahead to proposals that will apply in the next phase of EEC regional policy on the basis of this third document, I think it reasonable to say that we may possibly be at a watershed in terms of the policy of the EEC. The first three-year period of the fund expires at the end of this year. The Commission is considering what changes should be recommended, and member Governments will have to consider those changes. The reports look back on what has been done, and the Commission's proposals raise many interesting and somewhat controversial issues.
  I was in Brussels on Thursday last week to discuss certain aspects of regional policy with some of the Commissioners, and I shall be having further discussions with Commissioner Giolitti, the Regional Commissioner and Commissioner Vouel, the Competition Commissioner, in the next two weeks. It is, therefore, appropriate that we should have this debate today so that I have this opportunity of hearing the views of hon. Members on both sides and that I should be able to take these into account and relay them to the Commissioners when I meet them in the next 10 days or so.
  It is useful to look backwards first to the two annual reports to put the discussion in perspective. The fund began operating in 1975, and I am sure that all hon. Members will commend the Commission on the efficiency with which it has operated the fund during that period. The

  1267
  fund operates through national Governments, and assistance must be coordinated with the national Governments' regional aid programme. Aid can be given, in somewhat different conditions, for infrastructure and industrial projects. To be eligible, industrial projects must fall within the framework of regional development programme projects of member States and must receive national aid. All applications have to be submitted by member Governments. Inevitably, as with our own Section 8 scheme, there is a difference between the rate of payment and the rate of commitments, because the commitments are for projects spread over several years, but at present our own commitments under the fund take up almost all our share of the quotas. There is a small amount still in hand, but we have half of this year left.
  Payments from the fund are on a quota basis, and the United Kingdom's share is 28 per cent., which inevitably makes us net beneficiaries. With these additional funds in 1975 we were able to take the additional funds into account in devising advance factory programmes, for example. The announcement on 27th June of extra assistance to special development areas was able to take account of the receipts that we know are coming from industrial projects.
  Hon. Members may wish to know that applications for fund assistance have been made in many instances for Government advance factories, so that so far the commitment of the fund in this respect amounts amounts to £5·8 million in England, £2·8 million in Scotland, £3·3 million in Wales and £1·2 million in Northern Ireland These are all commitments relating to advance factories.
  Mrs. Winifred Ewing: Would the Minister care to comment on the principle of additionality?
  Mr. Williams: I think that the hon. Lady must let me get a little way into my speech.
  Mrs. Elaine Kellett-Bowman: Is the Minister aware that, if local authorities and those best acquainted with regional problems could have their say, advance factories would be very low on their list of priorities? They
  1268
  would prefer the elimination of bottlenecks to these advance factories, many of which are unoccupied.
  Mr. Williams: That is not necessarily the information that we receive from local authorities. It may be so, in the hon. Lady's experience, in relation to particular local authorities. I can only tell her that local authorities in general are eager to be participants in any advance factory programme.
  Concerning additionality, the system that we operate, as the hon. Member for Moray and Nairn (Mrs. Ewing) is aware, is retrospective. This applies in most of the member States. What happens is that, because of the way in which the scheme works, there are projects on the industrial side that have been approved for assistance under our system of regional aid and subsequently are approved by the Commission. They have already received the incentive that has led to the investment. The investment is committed. Therefore, the additional funds that are now available from the Common Market are added to our resources for regional industrial development, and such things as extra advance factory programmes are financed out of these additional funds and․
  Mrs. Kellett-Bowman: Will the Minister give way?
  Mr. Williams: I shall give way in a moment. Perhaps the hon. Lady will let me finish a sentence. On the infrastructure side, as hon. Members will be aware, the system operates somewhat differently. I shall come to the question of infrastructure shortly.
  Mrs. Kellett-Bowman: On the Minister's own admission, the incentive has already been given, in his estimation, by our own regional development programmes. Therefore, on his admission, there is no additional incentive by reason of the European Regional Development Fund. Will he admit that that is so? The money goes direct into the coffers of the Treasury and offsets the budget deficit rather than giving additional help to the regions, because the right hon. Gentleman's Government have prohibited local authorities from making any additional investment by reason of the fact that they have regional aid.
  Mr. Williams: The hon. Lady is confusing two different circumstances.
  Mrs. Kellett-Bowman: The hon. Lady is not.
  Mr. Williams: The hon. Lady might care to listen, and others might care to listen if she gives them the opportunity.
  The fact is that the regions are not deprived of extra assistance. If the hon. Lady follows the logic of what she is saying on the industrial front, she will realise that if the investment is already committed the regions are not losing any investment.
  Mrs. Kellett-Bowman: They are gaining nothing.
  Mr. Williams: Of course they are. They are gaining the finance that the Government use to build extra advance factories, for example, over and above those that are already in the programme. [Interruption]
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. If the hon. Member for Lancaster (Mrs. Kellett-Bowman) is hoping to catch my eye in due course, perhaps she will restrain herself until that moment comes.
  Mr. Williams: Therefore, on the industrial front the region has the benefit of the investment that originally gave rise to the funds from the EEC, and, secondly, it has the benefits of the projects that the Government are additionally able to finance from the fact that these EEC funds are available. There is, therefore, additional benefit to the regions.
  On the infrastructure side, again the benefit is felt by individual local authorities, because what happens here is that the local authority receives the finance and is able to use that against its own borrowing requirement. However, Opposition Members are continually lecturing the Government about the need to keep within public expenditure programmes. As the finance that comes from the EEC counts against that same public expenditure ceiling, inevitably we must take this into account, and therefore, while it saves the local authority in terms of its borrowing requirement, it cannot become extra infrastructure in our total programme.
  Mrs. Winifred Ewing: Is the Minister saying that our practice in the United Kingdom is the same as the practice in other member States?
  Mr. Williams: It certainly is, on the industrial side. If the hon. Lady would care to look at the practices of other countries, she would find that none of them gives the finance to the project which has given rise to the EEC grant.
  Mr. Kenneth Clarke: Would not the Minister agree that some other countries, notably Italy, make a far more convincing demonstration of the additional benefit that European regional aid gives to their depressed regions? Although the right hon. Gentleman has given a clear exposition of the case, will he accept that it does not carry great weight within Europe and that some people feel that if the Government had given a more convincing demonstration of their acceptance of the principle of additionality, we might have had some further development of European regional policy?
  Mr. Williams: I cannot accept that proposition at all. We can clearly point to projects which have arisen over and above original programmes as a result of the Government's policy in relation to industrial projects.
  Mr. John Evans: Will my right hon. Friend accept that Italy has a rather strange record of public expenditure in many areas? Will he take it from me that there is some suspicion about Italian public expenditure? Will he also accept that the most centralised country of all, France, will not publicly disclose where the regional allocation funds from the Community are going?
  Mr. Williams: I am grateful to my hon. Friend. I am sure that if hon. Members would look at the practices elsewhere they would find that our practices are not out of step with those prevailing within the rest of the EEC.
  Let me now turn to infrastructure and demonstrate some of the benefits we have received. The fund has provided £10·6 million towards the £90 million Kielder reservoir in the North of England. In Wales there has been redevelopment of the site of the Dupont steelworks at Briton Ferry by West Glamorgan County

  1271
  Council. There has also been an allocation of £1¾Q million for infrastructure projects in the Ebbw Vale area. A contribution of £1·2 million has been made towards the construction of the £10 million Hoscar sewage treatment works in the North-West. A contribution of over £3 million has been made towards the new marine terminal for handling iron ore and coal at Hunterston. In Northern Ireland there has been a contribution of £2·7 million towards the cost of connecting the new Kilroot power station to the national grid.
  In addition, there have been various individual industrial projects and service industry projects which have been supported. Obviously all hon. Members, regardless of their views on the Government's role, will welcome the supplement which we receive from the Regional Fund. I was pleased that earlier this year the Regional Policy Committee was able to visit the United Kingdom to see some of the areas which are the recipients of these benefits. It is of paramount importance that those now trying to frame policy in the EEC, not only those in the Regional Committee but those dealing with competition, should understand the basic fact that our problem is substantially different from the regional problems of many other parts of the Common Market and that, as a result, our policies have to be tailored to deal with that situation.
  Our problem is that we are the oldest industrialised country, which is now restructuring its industry․
  Mrs. Kellett-Bowman: Will the Minister give way on this point of dereliction?
  Mr. Williams: I am not on the point of dereliction.
  Mrs. Kellett-Bowman: You are.
  Mr. Williams: The point of considerable importance to the regions is that regeneration depends very much on our ability to regenerate the traditional industies—[Interruption] I wish that the hon. Member for Lancaster (Mrs. Kellett-Bowman) would let me finish a sentence. She does not need to bounce up and down. I have noticed that she wishes to intervene, and I shall let her do so presently.
  1272
  I would like to get beyond a comma. A full stop makes a pleasant interlude every now and then.
  It is important to us that we retain our ability to provide the regional development grant for replacement investment as well as for original investment. This will be of considerable significance in the future in relation to the competition directorate and, taken in conjunction with the document before us, it gives a very worrying view of how regional policy could develop if certain thoughts within the Commission were allowed to become paramount.
  Mrs. Kellett-Bowman: I am grateful to the Minister for giving way. Although he may not have realised it, he was referring to the very considerable problem of dereliction which afflicts certain parts of the country, particularly my own area in the North-West. Is he aware that when we raised this crucial problem of industrial dereliction in the European Parliament his own colleague from the North-West, the hon. Member for Newton (Mr. Evans), voted against our attempts to get assistance for dereliction from the European Parliament?
  Mr. Williams: The hon. Lady should watch the antics of some of her hon. Friends in this House. Only a week ago they were trooping into the Division Lobby against assistance under Section 8 of the Industry Act 1972. An individual speech and an individual vote against a particular policy which the hon. Lady supports is very little compared with some of the irresponsible antics indulged in by the Conservative Front Bench and by some of her colleagues.
  The important point to bear in mind in approaching the new phase is that all member Governments have already indicated that they want the fund to continue. The Commission has put forward its policy proposals, and it is these which are, I suggest, of particular importance to the House.
  Until now the fund has not acted as an expression of Community regional policy, because there is no Community regional policy as such. The policy document can perhaps be seen as the first step in this direction, and we need to be generous and recognise it as a first tentative step. It is a comprehensive survey

  1273
  and contains some interesting innovations. Obviously we shall want to give it careful consideration, but there are certain features of it that I feel I should spell out to the House.
  First, let us look at the suggestion that there should be a biennial report prepared by the Commission on the economic and social development of the Community's regions, on the basis of which the Council would set priority objectives for regional development, to be followed at Community level, and the Council would then fix guidelines for both Community and national regional policies.
  I am sure that it was put forward in the belief that it would bring about more quickly a degree of equalisation in the development of the various regions. Frankly, I am not convinced that the method is soundly based. The problems of the regions throughout the EEC are highly diverse, and in our own country they are very long-lasting by the nature of the industries which are already in those regions. The restructuring of basic traditional industries is necessary, and this can be achieved only over a longterm period.
  I can see value, certainly, in the exchange of experience and information between member Governments and the Commission, but I am convinced that it would be over-optimistic to expect successful results from an untested, complicated and rather mechanical form of Community policy-making. There is no Community experience to back up the belief that its approach to regional policy would be better than the approach which successive Governments have pursued in this country.
  I suggest to the House that it would be rash in the extereme to subordinate our own judgment, based on a great deal of experience of the particular problems of our regions, to that of the Council, in which our colleagues, although they may have long experience of the problems of their own member countries, have had experience of problems which are largely different from ours. In passing, I point out that the Council has never yet devoted as much as half an hour to the problems of specific regions.
  I am also convinced that the proposal is unrealistic for other reasons. Let us compare the expenditure on regional
  1274
  assistance from United Kingdom sources with expenditure from Community sources. The net benefit to the United Kingdom from the first three years of operation of the fund is about £60 million, or £20 million a year. That is what the Community contributes to this country over and above our own share of expenditure. Our estimated net expediture on regional aid to industry in 1977‣78 is over £380 million. In addition, we spend at least as much—in some cases it is difficult to break the figures down—on infrastructure developments in the regions. Therefore, we are comparing a national rate of expenditure of about £800 million a year with receipts from the fund of £20 million a year.
  There is no doubt, on any assessment of the scale of expenditure on regional policy, that the responsibility for regional policy rests now, and must continue to rest, with national Governments. It would not be sensible to give a power to make the decision on how we deal with the problem to those who are not meeting the costs.
  Sir Anthony Meyer: There is an enormous difference between sums that come from the Community and the sums which the Government devote. But is it not a fact that every £1 that the Government pay to regional aid is £l which has to be imposed on every industry within the United Kingdom, whereas every £1 that we get from the Community is a net benefit?
  Mr. Williams: I appreciate the point that the hon. Gentleman is trying constructively to make, but I would point out that it is only this limited sum which is a net benefit. We make compensatory payments into the budget which offset any other receipts we have from the fund.
  Mr. John Evans Mr. John Evans rose․
  Mr. Tam Dalyell Mr. Tam Dalyell (West Lothian) rose․
  Mr. Williams: I shall allow my hon. Friend the Member for West Lothian (Mr. Dalyell) to intervene in a moment.
  Mr. John Evans: My hon. Friend's comment that the Council had not spent half an hour discussing regional policy is a condemnation of the Council and not of the Commission. Does he not

  1275
  also accept that the Commission's proposal to collate the statistics which apply throughout the nine member countries, in order to see what each is trying to do with regard to regional policy, is a worthwhile exercise? Does he not also agree that the power will rest within the Council and not within the Commission? If necessary, the power of veto still applies and the Council can veto any proposal.
  Finally, does my hon. Friend accept that some of us are not all that happy with some aspects of the British Government's regional policy, particularly the policy which gives enormous handouts to oil companies to go and prospect for oil in the North Sea? Perhaps that policy is wrong also.
  Mr. Dalyell Mr. Dalyell rose․
  Mr. Williams: It would be technically appropriate for me to interject at least half a sentence. Points of interjection on points of interjection are not normally accepted by the Chair. Having interrupted, my hon. Friend the Member for West Lothian is now welcome to make his comments.
  Mr. Dalyell: I seek clarification on the half-hour point. Was my hon. Friend's argument that the Council had not spent half an hour discussing regional policy, or was it that the Council had not spent half an hour on a particular region such as Wales or Scotland? If that is the situation, I do not see why the Council as a Council should discuss specific cases. General policy, yes, but specific cases, no.
  Mr. Williams: My hon. Friend is absolutely correct in his interpretation. That was what I was going to say in response to my hon. Friend the Member for Newton (Mr. Evans). I said that the Council had not dealt with the problem of specific regions. I am particularly pleased that we had the visit from the EEC earlier this year, because in devising regional policy it is essential that certain typical regions—so far as it is possible to devise a typical region—should be considered in depth before policy decisions are arrived at.
  My hon. Friend the Member for Newton said that at the end of the day the Council would take the decision. That
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  is absolutely correct. No one is criticising—
  Mrs. Kellett-Bowman Mrs. Kellett-Bowman rose․
  Mr. Williams: I have explained to the hon. Lady that it is helpful to allow the odd sentence to slip through before there is an interjection. I am still trying to deal with the previous two interjections. The hon. Lady has interjected three times now, not counting the various sedentary squawks that we have had to deal with during the debate. I am happy to conduct the debate in a reasonable manner. I have been speaking for 25 minutes, and I have hardly been allowed to develop a single argument. I am still dealing with only the first section of the proposal from the Commission.
  I come next to one of the matters to which my hon. Friend the Member for Newton referred—statistics. I agree with my hon. Friend that it is a very good suggestion that we should have a better statistical base in the EEC. The Government want to co-operate in any way possible. But the fact that this is needed in itself suggests that we should be cautious of solutions which so far have been devised within the Commission and which clearly, therefore, do not have an adequate statistical base. For that reason, we shall co-operate in the development of adequate statistics. But we do not want to be landed with policies and priorities which are not based on a full analysis of the problems. We believe that the development of a communal regional policy must be more pragmatic.
  The third matter concerns the greater co-ordination of regional aid. Here again we accept the need to avoid distortions of competition. We have to be careful, to the extent that the treaty was drawn up 20 years ago and that regional policy has become of much greater significance in the EEC—not just because of our membership but because of the economic developments in the EEC—than it was when the treaty was first drawn up. Therefore, I hope that those exercising control of the competition policy will bear this in mind. The June statement of the European Council echoed the call in March of the Council
  "to encourage high levels of investment in member States."
  We certainly proclaim that regional aids are a very effective way to assist in

  1277
  encouraging new investment and that it is greatly needed, especially at present when unemployment is running at unprecedented rates here and in Western Europe. There is a further proposal for a regional impact assessment. This is another innovation which is very interesting, and I am sure that it will gain the support of the House. The suggestion is that an assessment should be included in major Community policy proposals indicating the effect of the proposals on the regions. Therefore, this would apply even where the subjects under discussion were apparently and superficially completely separate from the regional issue. It would be sensible to go ahead with this, and we intend to encourage the Commission in its basic proposals.
  There are certain amendments to fund regulations. Many of these are detailed, but some are important changes. First, the sums allocated to the fund in future will not be specified in the regulations but will be separate items in the Community budget. I shall not go into the details of the changes in units of account and European units of account, both of which are involved in these calculations. However, the net effect is that the fund allocations will rise from about £200 million this year to about £430 million in 1978. The United Kingdom has a 28 per cent. quota and, therefore, our receipts will increase from £56 million to about £120 million, though these are gross and not net figures.
  In conjunction with this, the Commission put forward a proposition for a non-quota element. This is extremely important, and it is very difficult to assess how it should operate. I put forward a few thoughts on this because it is very important in the context of expanding the EEC when more Mediterranean countries, with their greater demands on the Community budget, become members.
  At present the moneys allocated are on the basis of quotas, and these are specified in the fund regulations. The proposal is that the bulk should be paid on existing quotas but that there should be a 13 per cent. element of non-quota allocation available for distribution at the discretion of the Community. It may be that certain projects for which this would be used would be highly advantageous, but on the other hand it raises a difficult
  1278
  question in so far as this non-quota element does not reflect the priorities that are reflected by the quotas and, therefore, it undermines the regional priorities of the Regional Fund. In so far as it is decided that the non-quota element shall be allocated virtually in conformity with existing quotas, it becomes irrelevant and unnecessary. We remain to be convinced that a non-quota scheme is either practicable or necessary.
  I was interested by the suggestion that it could be used for an interest rebate scheme, but there are technical problems in relation to this. I do not want to prejudge the issue, and I shall welcome the views of hon. Members on the various propositions in the document.
  The document is basically one for consideration and further analysis by member States. There is ample opportunity for the views of hon. Members expressed here tonight to be included in the representations that the Government will make. I welcome further guidance from the House about the way in which hon. Members wish to see further discussions develop.
  9.47 p.m.
  Mr. Kenneth Clarke: The Minister of State gave a very careful and matter-of-fact description of the history of the Regional Fund and his first thoughts about the proposals for developing the fund that have been put forward by the Commission. But his review was cautious and guarded. He invited comments from hon. Members, but his own comments were heavily tinged with scepticism.
  I have had a certain sense of disappointment in listening to the Minister. I am disappointed with the development of regional policy in the EEC so far. If the Minister's guarded and sceptical approach is carried through in the Community, we shall be further disappointed about the rate of development in the foreseeable future.
  When we joined the EEC and then confirmed our membership in the referendum a great deal was made of the benefits expected to accrue to us from regional policy. I was not alone when campaigning during the referendum in making a considerable point about the advantages of this once we confirmed our membership. Although we have had a new

  1279
  regional policy since 1975, the rate of progress and the benefits so far have not been overwhelming.
  The first Commissioner in charge of this field of policy was an excellent British Commissioner, now Lord Thomson of Monifieth. The policy he initiated in 1975 comprised a modest three-year budget for the Regional Fund and a general policy which consisted only of hints of what might develop in the long term. Looking back briefly over the documents and reports of the first two years of its operation since 1975, one cannot expect a great deal because of the general economic atmosphere, which has not been conducive to rapid development of regional policy. The Community was plunged into a deep recession and a major symptom of that throughout Europe was the great increase in the level of unemployment—more than 5 million individuals in the Community as a whole.
  In some ways over the last two or three years the most rapid increases in unemployment have taken place in the developed areas. As a result, there has been less pressure to give regional aid to under-developed areas in some countries and where there has been pressure in areas in need of assistance, national Governments at a time of recession are only too anxious to demonstrate to their own electors what they are doing for them rather than to see a rapid development of Community policy.
  If there is a revival of the European economy, we may expect the traditional disparities in unemployment levels between regions—to reappear fairly quickly, in this country and elsewhere. With the changes that the recession may have caused, there may be new areas with new pools of lasting unemployment that need special attention. I shall only touch on the disparities in growth that have persevered throughout the recession between individual member countries. But once we have a revival of the economy, the problems of great disparities in economic activity between different regions will remain to be tackled on a serious scale.
  In deciding how we go forward in European regional policy, one has to decide the basic question whether we are satisfied that this regional problem should be tackled increasingly at Community
  1280
  level and not just at national level, and whether it should be tackled in an increasingly supranational way or appended to the individual national policies. Although we have been a member of the Community for some time, the problem is unresolved. It certainly is unresolved in the Minister's mind. Whenever the debate moves into the area of supranationality, he is obviously a considerable sceptic.
  Mr. Alan Williams indicated assent?
  Mr. Clarke: The Minister nods in approval. He is clearly not satisfied that there is great scope for tackling this problem on a Community level much beyond the present position. There will be a great variety of opinions among my right hon. and hon. Friends as well, hut my personal opinion on that key question, which determines one's approach, is that this area should be tackled increasingly at Community level and that there is considerable scope and advantage to everyone in a silghtly more supranational element.
  The problem of disparities between the regions is a Community-wide problem. The Minister is tight to point out that the causes may be very different in different places. Many of the other member countries have predominantly agricultural areas where there is a decline in employment on the land, no tradition of industrial activity and a need for such activity. The pattern in this country is of declining or temporarily depressed industrial areas where necessary changes have to be made from traditional industries.
  I shall consider and re-read the Minister's attempt to distinguish our problems totally from those of any other member country, but I am not sure whether our problems are so drastically different from those of parts of industrial Belgium, Holland or Germany. Although the causes of regional disparities may be very different in different parts of the Community, one can say that the symtoms of different regions are very much the same. What the member countries all have in common, from Greenland to the Mezzogiorno, with Clydeside on the way, is pockets of territory with persistently high unemployment, lower rates of increase of earnings compared with surrounding areas, inadequate levels of investment in new industries and a great need for resources to be applied to the

  1281
  problems to reduce disparities with surrounding areas.
  Mr. John Evans: Does the hon. Gentleman agree that the three major recipients of Community aid are Italy, Ireland and the United Kingdom? Surely he will not attempt to compare the problems of rural deprivation in Southern Italy and the West of Ireland with the problems of Clydeside, Merseyside, Tyneside and the industrial regions of the United Kingdom, which have a specific and different problem.
  Mr. Clarke: The hon. Gentleman has chosen two countries where, I accept—Italy in the Mezzogiorno and Ireland as a whole—problems are entirely different. But I cited others. Although the causes of disparities in regional economic activity may be different in individual countries, the effects are basically the same and we can identify our depressed regions with other areas where there is persistently higher unemployment, a slower rate of increase in earnings and a need to bring those areas in line with the level of economic activity in the rest of the Community, if possible.
  The problems are the same throughout the Community and this is one of those matters where it may be more beneficial to use the greater resources that can be applied by the Community as a whole. However, there must be more to it than that. Uppermost in my mind—with my views on the development of Europe—is that it is essential that there should be some reduction in the disparities between economic activities in different regions of Europe and a reduction in the disparity in economic activity between different member countries before we can make worthwhile progress with economic and monetary integration —and I regard that as desirable.
  Even if one does not share that aim, there is an advantage to be had by all member countries if by co-ordinating their approach to the common problems of regional disparities they can stop the competition in inducements and subsidies to investment that tend to take place between member countries if they all continue to tackle the matter individually. The Minister talked about the competition policy of the EEC and the importance of regional policy to it. In a supposedly free and open market where
  1282
  we are trying to remove barriers to competition, there is understandably a tendency for member countries to compete with each other in the levels of subsidy and inducements to investment which is totally inimical to free competition and is mutually harmful. That will continue if member countries keep bidding themselves up in an attempt to induce the transfer of mobile employment from one depressed area to another in a different member country. If one could stop competition in inducements in a supranational way, that might also make Governments less vulnerable to the political lobbying that leads to the support of such investment projects as the one announced earlier today, although that was in a non-regional context. Selective regional assistance has also been used by this Government, and no doubt by governments of other member States, to support projects for political rather than economic reasons.
  Although I am not over all as alarmed or sceptical as the Minister about the idea of tackling the problem at Community level or even looking at a degree of supranational activity, which was always the intention professed by the Government at the time of our entry to the EEC, I concede that there are dangers. One of the main dangers is that, if one builds up great Community activity alongside national activity, there are great dangers of public expenditure being driven up to intolerable levels by the duplication of effort. If European regional policy were to be developed and built on top of the present expenditures, of individual national Governments, the massive public spending that would result would probably mean a disproportionate amount of resources being devoted to regional policy—an amount unacceptable to all members, including us, at a time when all member countries are concerned about levels of public spending and the need to keep it under restraint.
  I realise that this gives rise to the point raised by the hon. Member for Moray and Nairn (Mrs. Ewing) about additionality which has greatly vexed the Community, because if we carry on increasing the size of the regional fund the principle of additionality could lead to massive increases in public expenditure. If one deals with this problem at

  1283
  a Community level, or even a supranational level, the amount of resources channelled through the European Regional Fund must ultimately mean a corresponding reduction in resources expended by national Governments.
  The one point of the idea of additionality that ought to survive is that, if we are to have a European regional policy developed, it should more clearly be seen to be providing funds to the depressed areas of this country. The Minister does not argue that we are not deriving considerable benefits from the Regional Fund, even though it is operating on a disappointingly small scale. If we develop a European regional policy, it is important that its application to European funds is clearly identified. Where its benefits in new industrial development are going to parts of this country, there is no reason for the population of those parts not to be given a direct appreciation of the benefits that the fund is bringing.
  Mr. Dalyell: What the hon. Gentleman says will be read widely in the Commission and elsewhere in Brussels. When he spoke of what happened earlier today, was he referring to the decision on the Drax B power station? If so, is he aware that many people believe that this was the right decision on technical grounds and that it is unfair to say that it was taken on political grounds?
  Mr. Clarke: I do not accept that I was being unfair, but there are more appropriate debates in which we could discuss this matter.
  Mr. Dalyell: The hon. Gentleman should withdraw what he said.
  Mr. Clarke: I shall not withdraw. I do not share the hon. Gentleman's opinion that it was the right decision on technical grounds. Whether technically right or wrong, it was arrived at because of crude political lobbying that overrode all technical considerations. However, Drax is not strictly a regional matter and I shall not allow myself to be drawn into debating those other instances in which regional funds have been applied for reasons that had little to do with economic policy or industrial strategy.
  1284
  Having given my reactions and views on how I should like to see the European regional policy develop—and my views are different from those of the Minister —I should like to review what is happening and proposals for developments. Since 1975 the problems, as opposed to the smooth advances, have turned largely on the problem of additionality and whether the British Government and others could satisfy the Community that the money being spent from the European Regional Fund was a bonus being spent as additional aid over and above national measures and not used simply as a substitute for expenditure by the Governments themselves.
  My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) and the hon. Member for Moray and Nairn have expressed doubts about whether the British Government have been using the money as additional aid over and above their own effort. There is a reasonable suspicion on the part of the Germans and others that the British Government are using taxpayers' money from other member countries and spending it on regional development projects on which they intended to embark in any case.
  Mr. John Evans: The hon. Gentleman is making a fair point that I hope to develop later. Is he aware that the previous Commissioner with responsibility for regional policy, the present Lord Thomson, is on the record as saying that the British Government's attitude to additionality was in accordance with the common wishes, principles and proposals that had been outlined?
  Mr. Clarke: I do not have that reference and I look forward to hearing it if the hon. Gentleman can turn it up. I have read the speeches of Lord Thomson when he was a Commissioner, and there have been times when he has expressed considerable doubt about whether the British and other Governments were accepting the principle of additionality which they had adhered to in theory but which seemed difficult to identify in practice.
  Mrs. Kellett-Bowman: Will my hon. Friend accept that the observations of the hon. Member for Newton (Mr. Evans) are misleading in that Lord Thomson has

  1285
  always alluded to the fact that the British Government were within the letter of the law but that other nations and the Commission were convinced that they were outside the spirit of it?
  Mr. Clarke: I am obliged to my hon. Friend, because what she has said has always been the thought at the back of my mind and has been my understanding of the position. Perhaps the hon. Member for Newton (Mr. Evans) will provide Lord Thomson's words rather than his interpretation of them.
  It may be that the Government have complied, but there has been considerable scepticism on the subject. The Italian Government, who have a 40 per cent. quota and are therefore under a heavy duty to identify what they are doing, gave convincing evidence that their expenditure in Southern Italy was clearly additional to resources that would otherwise have gone to that area. The Danish Government followed suit over Greenland and elsewhere, but in Britain the position is less clear.
  All applications are made by member Governments. In every member country infrastructure grants are paid over directly to the public and local authorities, as the Minister has described. In the case of infrastructure grants, there seems to be some clear and welcome addition to the resources which the local authorities would otherwise have, although they have been somewhat affected by the cash limits which my hon. Friend referred to which have been applied by local authorities.
  When it comes to investment by private companies, all applications are made by the United Kingdom Government and all the proceeds received from the fund have gone to the United Kingdom Government. The Minister of State has put forward the Government's consistent line that this has been taken into account in assessing national expenditure on regional policy.
  The British Government, as a bookkeeping exercise, have always identified their advance factory building programme as the area to which these extra resources are going. I believe that has been queried in Europe, and I am not sure whether the matter has been made clear.
  1286
  There are doubts even though the Minister has consistently put forward the case that he has put forward today. Those doubts have inhibited the development of regional policy in Europe. If the British Government, which had a great deal to gain from the development of regional policy, had been clearer in applying the principle of additionality, we might have seen a more rapid development of the Regional Fund. When looking at this matter from a selfish national viewpoint, the Regional Fund and policy seem to be one part of the Community's activities from which we are bound to, be net beneficiaries. There would be a little less to fear in this country than in some others from its rapid development.
  Mr. John Evans: The hon. Gentleman will see in Document 1611/76, at page 23, paragraph 57, that Commissioner Thomson in his annual report on the European Regional Development Fund deals with the question of additionality and makes it clear that the United Kingdom has stated that its receipts from the fund will enable it to go ahead with a greater level of regional investment than otherwise would have been possible. Will the hon. Gentleman also accept that, as chairman of the Regional Policy Committee of the European Assembly, Commissioner Thomson made a statement accepting the British Government's position in front of that committee in answer to questions from the hon. Member for Lancaster (Mrs. Kellett-Bowman) on two or three occasions?
  Mr. Clarke: I cannot easily find the reference. I shall look at it in Hansard tomorrow. I hear what the hon. Gentleman says. If the British Government had been in breach of their obligations, no doubt further steps would have been taken by the Commission.
  It seems to me that the application of the principle of additionality by the British Government was not of the clearest. We were intended to be the second major beneficiary under the national quota system. We would have benefited if the Government had made the point clearer.
  Mrs. Kellett-Bowman: My hon. Friend will see from paragraph 57, that Commissioner Thomson said only that the United Kingdom had "stated", not that he accepted that fact. I was present when

  1287
  these points were raised in the Regional Policy Committee. The Commissioner is a very polite man but he has not yet expressed his conviction that the British Government accept the spirit of this law. He merely accepts that these are the statements that they made.
  Mr. Speaker: The hon. Members for Newton (Mr. Evans) and Lancaster (Mrs. Kellet-Bowman) are among six hon. Members who have indicated their desire to speak in this short debate. I am beginning to get worried that if there are too many interruptions somebody will not be called.
  Mr. Clarke: I am obliged to my hon. Friend for giving me a second chance to find the reference, and I see that she is quite right. The document states that:
  "All member States have declared themselves in favour of the principle involved and have already taken certain steps to implement it. These are described briefly and the Commission is looking forward to further developments in the course of 1976 which it will follow closely."
  However, that does not seem to me to indicate a raptured endorsement of the Government's adoption of the principle of additionality. I am not saying that a Conservative Government would have gone much further. I am only saying that one of the consequences of the attitude of the last couple of years is that we have not seen much development of the Regional Fund.
  I turn now to the part of the debate dealing with proposals for the extenson of the fund and the development of the policy. An increase of 88 per cent. is proposed in the budget for the disposal of funds through the Regional Fund. That is a greater increase than in any other area of Community policy. The Minister of State gave his reaction to the proposed increase in the non-quota area. He did not give any indication of the Government's official reaction to the proposed increase in the overall size of the fund. Since the Minister seemed sceptical about everything he commented upon, I hope that his silence on this matter indicated that in the Council of Ministers the British Government will not be totally averse to an increase of resources for the regional policy.
  The EEC budget is not a budget as we understand it. It is more of a bid for political resources put up for decision by
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  the Council of Ministers. It is not a firm guarantee that the money will be expended. The Ministers will decide in that respect. I welcome the fact that the Commissioners are directing their attention to expansion on the industrial front rather than agriculture.
  An important part of the increase is that concerned with non-quota aid. It is proposed that 13 per cent. should be outside the existing national quotas and should be applied to particular areas by the Council on proposals from the Commission. There are certain areas where this could help in this country. Specific aid could be channelled to industries such as steel and shipbuilding. Other suitable candidates would be areas which were affected by policy changes in the Community, and that seems to me to include areas dependent on the fishing industry.
  My first reaction is to be totally hostile to some parts of what is proposed. The Commission is looking at the possibilities of a system for taking shares in the risk capital of companies through existing national regional development bodies. I do not expect any Conservative to be enthusiastic about projects of that kind.
  The Minister seemed sceptical overall, not so much about increased Community expenditure but at the suggestion that there would be more Commission and Council control and less national control of what was going on. This is all a bit of a long-term bid. I doubt whether the Commission is expecting this part of the budget to be adopted straight away, and no doubt it is experiencing considerable difficulty in getting the non-quota part of the budget accepted.
  I am disappointed however that the Minister turned this increased Community control down out of hand, and for the reasons I gave earlier I would not be totally adverse to the idea so long as there seemed to be considerable advantage in dealing with the problem at Community level. Let me underline my two reservations, however. First, I do not think that there is any way in which the British Government can consider such increased expenditure without contemplating it against a background of some corresponding reduction in expenditure on regional policy at home. One cannot allow the European regional budget to double while maintaining the same

  1289
  regional effort at national level without inevitably incurring greatly increased expenditure. Therefore, any increase in the resources channelled through the Community's regional policy must imply a hard look at our own national expenditure in an attempt to find a corresponding reduction.
  I am also worried at the way in which non-quota assistance might be handled in these circumstances. That might lead not only to increasing expenditure but to some increase in bureaucracy and administration. I am not clear whether applications for non-quota aid will still be submitted through member States. Those are applications for aid in areas that fall within whatever priorities have been chosen by the Council. I think that it is right to continue to channel applications for aid from the European Regional Fund through member States. Member Governments should make the applications. My principal reason for saying that is that if it were otherwise we would be bound to develop a huge bureaucracy in Brussels administering various applications for aid in respect of projects pouring in from different member countries.
  It is said that the EEC is a bureaucratic giant in its present form, but only 40 people or thereabouts are employed in the administration of the entire regional policy at Brussels. In this respect, as in one or two others, Brussels is something of a model in how to avoid bureaucracy and excessive administration compared with many Departments of State in this country. I trust that application through member Governments will be continued in any expansion, even for non-quota aid, the member Governments providing the initial sifting.
  Subject to that, surely the whole idea of expanding the budget and having a non-quota system is worth some reasonable and friendly discussion. The whole quota basis of dividing up the proceeds of the regional policy derives from a rather basic piece of horse trading when the fund was set up. The whole quota system is a difficulty that tends to inhibit development of the policy.
  What do I think about the regional policy itself? I speak of the policy as opposed to the fund. The Minister referred to moves towards co-ordination and monitoring. What have we had so
  1290
  far? The so-called "regional programme" from 1975 has not amounted to a row of beans. Each country has had to submit a regional development programme before the end of 1977. The one submitted by our Government is a general description of the United Kingdom's regional policy, which is not worth reading by anyone who has read the journals or followed the subject in this country.
  Mr. Alan Williams: Will the hon. Gentleman take it from me that we have been assured by the Commission that it is one of the best programmes submitted by any of the national Governments?
  Mr. Clarke: I accept the right hon. Gentleman's assurance. However, that underlines the case that the regional development programme has not taken us very far. I accept that others have been even more sketchy.
  We have had the Regional Policy Committee of the EEC for some time. A number of senior officials and experts sit on it. It is supposed to compare and co-ordinate regional policies and define Community objectives. The committee does not seem to have gone very far either. It seems that there is some point in having a more effective monitoring system, a system not exactly in line with what is proposed by the Commission but something in that direction with some priorities and guidelines being proposed from the Council on proposals from the Commission.
  My personal reason for being interested in that approach, although the Minister of State has clearly rejected it, is that it seems that it would minimise competition in lobbying for subsidies and the susceptibility of national Governments to parochial regional lobbies or firm political lobbies in favour of projects that, if favoured by one national Government, could be expensive for other industries under other national Governments.
  The Minister rejected this concept. His response to the idea of guidelines for national policy was rather to imply that they would inhibit the growth of United Kingdom regional policy. He pointed to the massive expenditure by United Kingdom Governments on regional aid that might be inhibited by European guidelines. However, we have had no indication as yet about the form of the guidelines that would be laid down by the

  1291
  Council. I do not expect guidelines to operate in the way that the right hon. Gentleman anticipates.
  I should not be surprised if guidelines coming from the Council tried to curb excessive expenditure by United Kingdom Governments on regional policy where there was suspicion that some United Kingdom assistance for investment smacked of being an internal subsidy for investment producing unfair competition for other member States. Those are my first reactions, and I look forward to hearing the reaction of hon. Members in considering where we should go from here.
  As we continue to discuss these matters, we shall come across many important problems in respect of regional policy. As the Minister said, we are now at something of a watershed. I find it astonishing how little discussion seems to have taken place within the Council and within the European Community on these
  1292
  problems. It is worth bearing in mind that Britain has had the Presidency of the Community for the past six months. It is astonishing that during our Presidency no meetings have been held of the Council of Ministers to discuss industrial policy. It is important to the United Kingdom to get the industrial side of the Community moving more quickly.
  I was told in an answer on 11th July that progress in European industrial policy in a number of areas was carried forward at official level. I have no idea whether we shall ever hear what progress was carried forward. I am glad, however, that the Minister had meetings this week with the European Commission to consider taking industrial policy matters further. I hope that the Government's scepticism will grow into downright lack of interest. If we can only agree to a further development and expansion of European regional policy, this country will, in my opinion, be a beneficiary.
  10.20 p.m.
  Mr. John Evans: I welcome the opportunity to participate in the debate. As chairman of the Regional Planning and Transport Committee of the European Assembly, I am entitled to draw attention to the unsatisfactory way in which the House debates important European legislation. The two Front Benches have taken over one hour of a two-and-a-half hour debate. The document is dated 23rd June 1976. We have not debated regional policy for over 12 months. The House should find more time to discuss such important matters.
  Mr. Alan Williams: My hon. Friend will recognise that I was interrupted at least 10 times in my speech. I was asked about details which took time to explain. He will recognise that the impact of these proposals, if they go forward in their present form, is so profound that I felt it right to take time to explain to the House.
  Mr. Speaker: The two Front Benches took 44 minutes. I hope that no one else will imitate them.
  Mr. Evans: I am not criticising either my hon. Friend the Minister or the Opposition Front Bench. I criticise the management team for allowing so little time for important debates on European matters. The Scrutiny Committee does a tremendous job but the amount of time that it can give to a number of documents limits its action, so that it can give them only a cursory examination. It then recommends that they be debated on the Floor of the House.
  We have had three short two-and-a-half-hour debates—on energy policy, the Community budget and now the development of the Community regional policy. One cannot help but recognise the futility of the exercise. Back benchers must ask themselves what they are supposed to be doing. Are we supposed to be influencing Ministers and arming them with views to express in the Council of Ministers and the Assembly, or are we making speeches that we hope will be read by our constituents? I am sure we are doing the latter, whereas we should be doing the former. Only time will tell whether we influence Ministers.
  Regional policy is one of the most important subjects for debate. President Jenkins said in February:
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  "We must see regional policy not just as a matter of renewing and spending a tiny Regional Fund, but as one of the main dimensions of Community economic policy as a whole."
  If the Government and the Opposition Front Bench believe that regional policy is one of the main dimensions of Community policy, more than two and a half hours should be given for debate.
  The European Assembly could teach the House in that respect. The Assembly has specialised committees which consider in depth the proposals which come from the Commission on a wide variety of subjects. The Commissioner responsible and his director-general visit these committees, and we can participate in the formulation of policy.
  The House of Commons could look at the question of appointing specialist committees to cover the same general areas as are covered by the European Assembly specialist committees so that we could discuss Commission documents in depth. My committee will begin consideration of the document on regional policy in December, and we shall spend about 10 times as long on that consideration as the House is spending on it in this debate. I am sure that most hon. Members appreciate that this is of considerable importance to the development of Community regional policy but that under the present system there is no way in which we can influence the attitude of the House of Commons in this respect.
  But we can at least impress upon Ministers that we are determined to ensure that Mr. Jenkins' aims are taken seriously and that we believe that regional policy must become the main plank of the Community's economic policies. What is important about Mr. Jenkins' statement is that, whilst in the past we may have had funds but not a regional policy, this latest document of policy, slender though it is —and one must accept political reality, just as the Commissioner responsible must do so—is the embryo of a regional policy which, given political will, determination and influence, could develop into a policy with profound implications for the future.
  With this in mind, we should have had more time to consider the important point made by the Commission about the necessity of ensuring co-ordination of Community funds which have a regional

  1295
  impact. In the past, various funds of the Community have not been used in the best interests of the regions of the Community, but if we can get the co-ordination that is needed we can get a much bigger impact.
  My hon. Friend mentioned the regional impact certificate. This again could have significance. I have a classic case in my constituency. When the Commission decided that the Community should be self-sufficient in cane sugar, 1,000 beet sugar workers on Merseyside stood to lose their employment. If we had then had a regional impact certificate based on that decision to become self-sufficient in cane sugar, there might have been second thoughts. It is nonsense on the one hand to grant aid from the Community to Merseyside but on the other hand to take decisions resulting in over 1,000 workers losing their jobs. It is, therefore, important that the Government should inform the House of their reaction to certain important innovations that the Commission is proposing and which will give a new dimension to effective Community regional policy.
  Do the Government accept that from 1978 the Regional Development Fund will be budgeted annually? Because it is non-compensatory expenditure, the Assembly will have greater say over it. I am sure that we all recognise the significance of that development in that the Assembly will, not by stealth but by natural progression, acquire further powers.
  Do the Government also accept the principle of fixing the amount of money available annually? While next year's sum of 750 million units of account is an increase, do the Government share the opinion of many of us that it is chicken-feed, especially compared with the amount of money available for agriculture? Do the Government intend to fight in the Council of Ministers to increase that sum substantially?
  While it is proposed that the national quotas should remain the same—28 per cent. in our case—there is the new proposal that the Commission should have 13 per cent. of the total for Community projects. My hon. Friend attacked this concept, but will he not recognise that it has been welcomed almost unanimously
  1296
  in the European Assembly because the idea behind it deals with the problem of additionality? If the Commission were in a position to look at various significantly important regional problems in certain areas, it could fund direct 100 per cent. Does my right hon. Friend recognise that this is the first step on that road? I agree that it is complex and controversial, but nevertheless it is part and parcel of an answer to the European Assembly.
  One other important amendment is proposed to the present Article 4(1) (b), which provides that assistance to infrastructure is confined to those infrastructures directly linked with industrial, handicraft or service activities. The Commission proposes removing this restriction and allowing assistance to infrastructures which contribute to the development of the region in which they are allocated.
  As I understand it, this would mean that Community funds could be used for the clearance of derelict industrial land in certain areas. I am sure that the Commission will appreciate that this is something of considerable potential significance to areas such as the North-West of England which have vast areas of industrial dereliction. Does my right hon. Friend appreciate and support this point? Will the Government back this in the Council of Ministers? Again, this is something for which we have called constantly within the Regional Development Committee of the European Assembly.
  I also ask for my right hon. Friend's views on the rather controversial issue of the raising of funds for regional development on the international market. As I understand it, this has had a rather lukewarm reception, but the proposal is that, because of the considerable budget difficulties that we are likely to have over the next few years, this is an area in which considerable sums for regional development could result. Although certain Governments, as I understand it, are watering this down, will my right hon. Friend appreciate the political significance of tapping this new source, which could have a tremendous impact on the regions?
  I turn briefly to the question of additionality. This is something that we have

  1297
  long discussed, in both the Parliament and the Regional Policy Committee of the European Assembly. I want to make my point clear. Certainly Commissioner Thomson made clear that the British Government were acting within the guidelines laid down, but in this respect may we be informed that the Government accept the new Article 18, which is designed to ensure that member States clearly identify receipts from the fund in their national budgets?
  I stress this to my right hon. Friend. I recognise that the problem is complex and that it is easy to make political capital at the expense of the Government concerning this matter. My right hon. Friend has cleared the point about constraints on public expenditure, but will he appreciate that it is essential that we make clear to the citizens of the more prosperous countries within the Community that the money that they are putting their hands into their pockets to provide is being used quite clearly to assist in the problems of certain regions of the EEC? Ultimately, if we cannot prove that conclusively to those citizens, they will say to their politicians "We shall not agree to any increase in the European Regional Development Fund."
  I accept that this is a complex and difficult problem and that as far as possible the British Government have clearly demonstrated that they have used the additional resources to provide better facilities, but the Minister must accept that there is some dubiety and some doubt in the minds of some of our colleagues. We must clear that up completely, otherwise we shall never win the argument about increasing the fund.
  As regards the distribution within the United Kingdom, I should like to point out that in the past three years the Northern Region of England has received in excess of 100 million units of account, Scotland has received in excess of 81 million units of account, Northern Ireland has received in excess of 52 million units of account, Wales has received in excess of 45 million units of account and the North-West Region of England has received just over 30 million units of account. That is not a fair distribution within the United Kingdom. The North-West of England has considerable problems. We have a greater population than any of those other regions, and I put it as
  1298
  strongly as I can that after 1978 the North-West must receive a fairer share of the Regional Fund.
  Mr. Alan Williams: Is my hon. Friend referring to infrastructure funds or to industry funds? If he bears in mind the point I made originally, he will remember that the Industry Fund allocation is purely nominal and goes into the kitty for use in other ways. The figures are not very meaningful.
  Mr. Evans: I am talking of global figures in all the accounts. I am pointing to the disparity between the North-West's allocation and the amount allocated to the other regions. This is a view which is shared by all hon. Members representing the area, irrespective of party.
  I ask my right hon. Friend to appreciate that there is considerable concern, not only in the United Kingdom but throughout the regions of the Community, over the lack of consultation which takes place with regional bodies. This is a complex problem. Might I suggest that he has discussions with the regional authorities in the United Kingdom about next year's allocations? If we get an elected Assembly in Wales and Scotland, there will be no way in which he will be unable to discuss with those two bodies the allocation of funds from the Community to those countries. If there are to be discussions, I hope that my right hon. Friend will ensure that they will be equitable and will be held in advance of the applications to Brussels. There is strong feeling about this throughout the Community countries. On many occasions I have spoken to delegates from various countries who have made this point to me.
  We are embarked on a new procedure. The regional policy is in an embryo stage. We can talk about economic and monetary union and about common defence, foreign transport and energy policies, but unless we tackle this problem of eradicating difficulties within the regions all the rest is so much eye-wash. The people of the regions want to improve the quality of their life. They want to get rid of dereliction and to beat unemployment. Unless we can work on these matters, all the rest will fade into insignificance. The dreams of so many will become nonsense. The regional policy, as Roy Jenkins said in February, should be the cornerstone of the Community's economic policy.

  1299
  Unless we get a worthwhile European regional policy, the whole thing will collapse like a pack of cards.
  Mr. Speaker: I must correct a statement I made earlier. The two Front Benches took 64 minutes, not 44 minutes. I appeal to hon. Members who catch my eye to remember that it will be difficult to enable everyone who wants to speak to take part in the debate unless there are shorter speeches.
  10.38 p.m.
  Mrs. Winifred Ewing: It is a pleasure to follow the hon. Member for Newton (Mr. Evans), who is the chairman of the European Regional Committee, on which I too serve. I have a great admiration for the work that the hon. Gentleman does. In Commissioner Jenkins' opening speech he said that we had to have a Community with a human face. There seems little doubt that it is the regional policy which, if anything, will give the Community that human face.
  The United Kingdom delegation comprises both pro- and anti-Marketeers. I am in a rather special position because of my Scottish connections. We have a wide range of opinion on the delegation which is unique, because most of the other delegations are made up of those who support the Community. There is talk of greater centralisation in the Community and of economic and monetary union. It is rather like the Australian emu, the bird that runs in circles and never gets off the ground because it is too heavy to fly. If we are really to look at the Community with a view to its harmonisation in our terms, we have to look to the regional policy of the Community as a counter-reaction to its natural centralisation tendencies.
  At the height of the Roman "common market," Jesus of Nazareth, according to the reports in the New Testament, said:
  "To him that hath, there shall be added; from him that bath not, there shall be taken away even the little that he hath."
  That may be quite a good summary of the problem facing the Community, because, to change the metaphor to ragtime, the rich get richer and the poor get poorer. The gap between the average per capita income of people in Ireland, the United Kingdom and Italy and that of the other member States has been
  1300
  divorcing them from the rest of the Community over recent years, according to the Delmotte Report, which is accepted as being full of veracity. This trend in Europe is not really assisted by the free movement of men and markets. It speeds up the trend. This is the great problem for the Community.
  My party went on record at an early date, before Britain agreed to stay in the Community, as warning that the efficient enterprises of the Hamburg-London-Paris axis would expand while the less efficient and less sophisticated industrial enterprises on the periphery would fall and go into still greater decline. This causes certain problems, because the people in the areas which are declining are aware, perhaps because of the Community's interest in them, of their decline and are aware of the greater expansion elsewhere. There is a resentment which builds up from this.
  As a result of some of the measures that we are up against, member States find themselves in conflict with the treaty law, as did Belgium when she tried to assist certain of her regions. Others find that, while there is nothing in conflict with the treaty, the sheer fact of the existence of the Community has certain consequences. For example, if France decided that she would like to encourage a certain industry to come, that industry, because of the existence of the Community, would have other choices open to it down the road a few hundred miles away in other populous areas. We have a new situation to some extent because of the existence of the Community.
  Then, of course, some of the policies work against the underdeveloped areas. A large share of the FEOGA grant payments has gone to the farmers in the cereal and dairy produce sector. The inequalities are therefore more exposed to publicity in a democratic sense. If there is an awareness of an attempt to be just to the 250 million people, and injustice is still staring them in the face and getting worse, a vacuum can sometimes arise, such as we have seen in Italy, where there is great discontent on certain matters and a possibility of Communism and Fascism holding greater sway.
  The British Government, along with the Governments of all the member

  1301
  States, have the responsibility of putting forward the carefully researched applications. There are many regions in my part of the world—for example, the Highland Region—which are very much on the ball in regard to making applications and researching them very ably.
  It is said that instead of considering the applications the British Government sifts them according to the existing United Kingdom regional objectives. The West of Scotland suffers from a great deal of urban deprivation. It is the most urban deprived area in Britain, perhaps one of the most deprived in Europe. England also has areas of this kind. It is natural for the United Kingdom Government to set as their first priority the curing of, or the attempt to cure, these problems.
  Areas like the Highland Region feel that they have put forward perfectly reasonable projects within the criteria that are laid down, yet they do not seem to meet with much success. We must face the fact that the United Kingdom Government administer the fund according to their own existing political objectives. One may say that that is fair enough, but it might not be in accordance with the greater ideal of the Regional Fund of the Community. It is saying that rather than look at the number of applications or what a particular member State may put forward, we should consider the actual question of need.
  It is well known that with regard to applications local authorities cannot deal directly with the Community. They must have their application approved by the member State. I would take an example which is perhaps not so extreme. Let us imagine that the United Kingdom Government decided that a certain region, or part of a region, were to be abandoned to the sheep and the summer visitors. There would be very little that the local people, or the elected representatives of the local people, could do because they cannot deal directly with those who administer the fund. They must always pass through the sifting process of the member State.
  I am not attacking the Government. There is nothing unique about the United Kingdom. This is the system which obtains. Across the board, however, among all Members of the European Parliament, there is a growing desire that
  1302
  local authorities should be able to deal directly with their causes, applications and projects.
  No one can suggest that the United Kingdom's record of making applications places us in the top 10. Ireland, France, the Netherlands and Italy have beaten us into the ground by the skill with which they have put forward projects. It is, therefore, galling to a region which goes to the immense trouble and expense of researching very good causes to find that other member States are more prepared to put projects forward. If one puts forward a lot of projects, one feels that the Regional Fund will at least have a choice. But if one puts forward a few projects one feels that whatever the Government sift through will be accepted. I therefore believe that we are under-using our application strength.
  I shall not delay the House with regard to additionality. I have already referred to this and the Minister has replied fully. However, it is my experience from going to the European Parliament that the British Government are looked upon as regarding this not as an addition but as a replacement.
  I refer right hon. and hon. Members to the Highland Region's excellent paper, which it supplied to me, the Commission and the Regional Committee. It says that, to a local authority, the aid from the fund is advantageous only in reducing the local authority's liability for loan charges, not in creating extra projects and extra work. That is a severe blow to the interests in the Community. It is certainly a source of antagonism towards it from the civil servants engaged in the Highland Region, who are very well informed about which regions of the United Kingdom have put forward projects, and they are able to give chapter and verse of the projects put forward. I should like the Minister to give me some indication of the number of applications made by the Grampian and Highland Regions which have been turned down. I should like that information, because I have found it impossible to acquire it otherwise.
  I want next to make a point on a subject which is of burning concern to my regions—I have two; I am rich in that way, having two counties. They have pointed out that Big Brother, in the shape

  1303
  of the EEC, decided to ask national Governments to submit programmes for their own regional aid plans and that the British Government submitted to the EEC a draft regional development programme. It is interesting to note that this document has not had much publicity. It is as though the Government would like to keep it very quiet.
  Mr. Dalyell: Secret.
  Mrs. Ewing: It is not a secret entirely, because it has been published in the Trade and Industry, published by the Department of Industry. Anyone who writes for a copy can get one. It is a lengthy document. It is important. Perhaps I might be allowed to quote briefly from it; I cannot quote more than a few lines, because time is short. It says:
  "regional development in the United Kingdom is concerned primarily with the attraction of new modern industry into the traditionally industrial areas, rather than with fully co-ordinated programmes directed to the industrialisation of particular rural areas."
  Similarly, the section dealing with Scotland places emphasis on the special problems of Strathclyde and the need for industrial regeneration in other central areas such as Dundee and parts of Fife It says, very generously, that the Highlands are not entirely ignored but that it is plain that they will have to wait on all the other priorities. That may be fair. It may be unfair. But I can tell the House how the highly sophisticated Highland Region faces grave peripheral problems of unemployment, depopulation and, possibly, the total destruction of the fishing industry round its shores.
  The new Regional Fund is due to end at the end of this year and it is, therfore, very important in this debate that those of us taking part should put forward our suggestions for improvements now. Probably October is about the realistic month for improvement suggestions to be too late, in our experience of the workings of the EEC. So any suggestions will have to be taken on board by the Minster tonight. That is the problem for us, unless we are to reconvene early in October, and I have heard rumours that we are not coming back until the end of October. This is possibly the last chance that we have to ask our Government to
  1304
  put forward formal suggestions for improvement and to fight for them.
  I urge the Minister to take note of some suggestions. The emphasis on manufacturing leads to a bias in favour of urban or semi-urban areas. If we accept that infrastructure should be supported in rural areas, of whatever category, I suggest that a limit of 30 per cent is too low. Perhaps we should consider a possible increase to 50 per cent. or even 60 per cent.
  The artificial requirement that infrastructures should be granted aid when it is to help more than one industry has no realism when applied to Scotland and, presumably, to other parts of the United Kingdom. Take oil, for example. People who have benefited from having oil have only that one industry. Maybe they are very glad to have it, but it is unrealistic to require that there should be more than one industry.
  Then there is the small project rule. There is to be an upward limit of a certain amount of money, or of 10 jobs. But 10 male jobs on the Isle of Barra, in the village of Dallas in my constituency, or even in Lossiemouth—a town with a population of 8,000—are very important and worth having. They may save a shop or a local garage. This is a matter of considerable importance, and the small project attitude is something that the Government should consider if we are looking at the question of the Regional Fund helping the peripheral areas.
  When there is an influx of people into an area that is doing well, there is also an inflow of problems. This has been the case with the oil boom. A situation has developed in which local trades cannot get apprentices in local skills because of the opportunities created by the new industry. For areas like Scotland, the rules of the EEC Fund do not make any sense.
  One of the problems is that some of the member States tend to have one Minister to deal with this whole field. I am not necessarily saying that this is good or bad, but we have a problem in channelling the best information to get the most out of the fund because we have not just one Minister but many Ministers responsible over a wide range of subjects. That does not help us to be as efficient as Italy or Ireland.

  1305
  I agree with the hon. Member for Newton, who is chairman of the Regional Committee, in his remarks about the size of the fund. The fact that the fund for the common agricultural policy is so large has discredited the Community in the eyes of many people, and I doubt whether this fund will work at the end of the day. Had the Regional Fund been a big spender, the man in the street would have felt so much more that this was something to do with him. Farmers in Scotland do not like it. The French farmers may like it because they are the inefficient ones. It is not a success story. Without change, it will mean the disintegration of the Community. Admittedly, the fund works in a different way, but it is a drop in the bucket compared to what successive British Governments have spent, without being able to solve Scotland's Regional problems. Without a total reappraisal of the fund, the Community deserves to disintegrate.
  The Prime Minister reappraised it recently in the light of food prices. People who say that that is due to world prices should consider Norway's experience and the growing animosity of the man in the street. The pro-Marketeers said many misleading things during the referendum campaign about fishing, prices and so on.
  There is good motivation in the Community. To have a human face, however, it needs a different and bigger Regional Fund. It is extraordinary that the Community should allow the regional death of towns around the coasts of Scotland and Ireland. These communities are simply asking for what any maritime nation would consider a normal proportion of the sea. Thy Community cannot have a human face while it talks about the Regional Fund and yet countenances regional death.
  11.3 p.m.
  Mrs. Elaine Kellett-Bowman: I was particularly interested by two comments of the hon. Member for Newton (Mr. Evans), who said that we have not been able to discuss regional matters in this Parliament. He will note that this debate, being on a Supply Day, has been arranged by the Opposition. I was even more fascinated by his statement that he committee of which he is chairman will be considering these
  1306
  policy guidelines in September. As I pointed out to him with some feeling at the last meeting of the Regional Policy Committee, that will be action after the horse has bolted and the decisions have been taken. I tried to get that across to the hon. Gentleman so that we could bring the matter forward when it really counted, before decisions are made. I was also interested in what the hon. Gentleman said about industrial dereliction, because he voted against those proposals when I made them in the European Parliament.
  Although I shall be criticising some aspects of the Regional Fund, particularly the way in which the Government manipulate it for their own political ends, it can be a success story if we have the will. I see no reason why we should not, because on this depends not only the future of the Community but the future and the cohesion of the United Kingdom, by which I lay great store.
  That the fund got off the ground at all and then kept up to schedule in the face of almost overwhelming odds is due to the driving force of George Thomson, who is now, alas, a Member of another place. I say "alas" not because he does not deserve that honour but because our House is the poorer for his absence. With his tiny team of only 44 "A" grade staff —which was referred to by my hon. Friend the Member for Rushcliffe (Mr. Clarke)—and a total complement, including secretaries, of only 130, he managed to pay out the whole amount due to be expended by the Regional Fund in the first year of 1975 to within a matter of pence.
  Unfortunately, the fund as envisaged by the Commission and by the Regional Policy Committee—of which I was not then a member—was a very different animal from the one that emerged after the so-called Wilson renegotiation.
  Mr. John Evans: Will the hon. Lady give way?
  Mr. Speaker: Order. The hon. Member is not fair. There are other hon. Members who wish to speak in the debate.
  Mrs. Kellett-Bowman: The hon. Member for Newton has had his chance. The original proposals passed by the European Parliament in 1973 were for a Regional

  1307
  Fund based on impartial criteria—namely, a low per capita product, a high rate of unemployment, a high rate of outward migration—from which my area of the North-West has suffered devastatingly and which has led to an unbalanced population structure—a high percentage of workers engaged in agriculture or a declining industry such as textiles or shipbuilding. Unfortunately, these sensible criteria fell victim to the Wilson renegotiation and the Government obtained carte blanche to decide which regions should benefit and to what extent. All applications had to be channelled through the Government, who, unfortunately, sent aid to politically sensitive areas such as Scotland and the North-East.
  Nobody in his or her right senses—not even the hon. Member for Moray and Nairn (Mrs. Ewing) could have believed that the whole of Scotland, including Aberdeen with its vast oil activity, should be a development area, but so it was until the Grimsby by-election persuaded the Government to downgrade Aberdeen and to upgrade Grimsby to full development area status—although the problems of the intermediate areas in the North-West were worse than those of Grimsby. Unfortunately, I am still alive and there was no by-election in Lancaster or there might even have been a change there to development area status.
  The net result has been that, whereas for every unemployed person in Scotland there has been a regional development grant of £97, and £128 for every unemployed person in Northern England, the grant in the North-West has been only £33. I forbore to mention Wales in deference to you, Mr. Speaker.
  Another undesirable feature of the present application of fund rules is that there is no guarantee that the money handed over by the fund will, in fact, provide the additional help to the regions which is so badly needed and for which the fund was created. The fund should be, as Lord Thompson said, a bonus over and above national expenditure to help to overcome the regional imbalances which are getting worse. However, in the case of the United Kingdom—and in the United Kingdom alone—the money from the fund simply goes straight into the botomless pit of our Budget deficit, and
  1308
  that is extremely disheartening for the regions.
  The problem is that, under the fund regulations as at present constituted, it is permissible to use the money to reimburse national spending provided that overall national spending is increased by that amount. The snag is that it is impossible to prove how much the Government would have spent had there been no fund, so that the United Kingdom Government are now able to use the cash simply to finance our own Budget deficit. All our partners know and bitterly resent that.
  Local authorities are particularly frustrated by the Government's reduction of aid to any project by the precise amount of the Regional Fund money which has been allocated to it. They arc also frustrated by the Government's absolute prohibition of a local authority undertaking any additional work as a result of regional aid being given to a project in its area. The only tiny benefit that local authorities receive—the Minister did his best to blow it up into a gigantic benefit—is that they are saved interest on the amount of money that notionally comes to them from the fund. What a puny reward for the amount of effort that goes into making applications to the fund, and what a gigantic con trick perpetrated by the Government on every development area.
  The case is even worse for an intermediate area such as my own which has a substantial tourist interest. Grants for aiding tourism can be given only to projects eligible for national aid. This is a point that we discussed with the Minister not long ago. Unfortunately, under our national rules such aid is not available for tourist projects in intermediate areas. They are therefore doubly disadvantaged. They get no national aid and no Community aid.
  Yet the Government cynically put forward such projects, raising hopes locally, in the certain knowledge that the Commission will be obliged to turn them down under the existing rules. Then Ministers, some of whom do not particularly like the EEC, can blame the Community. They reckon that they have done their part; others think otherwise.
  I hope that paragraph 29 on page 19 of the second report of the Regional Fund indicates that the rules will soon be

  1309
  changed, because it is high time that the Government changed their rules or that the rules of the EEC were changed to accommodate the chicanery of the Government that we have to endure.
  Many hopes have been pinned on the revision of the fund rules that is taking place. I was astounded to hear that we shall be discussing this matter in the Regional Committee in September. My colleagues and I are great believers in getting in what is known in the North-West as the "first blow". We therefore produced a booklet some months ago indicating the ways in which we thought that the fund should be reformed.
  I am happy that the Commissioner has taken on board some of our points and has accepted our view—this is vital—that one of the cheapest and most effective forms of regional policy in this country is our system of industrial development certificates. He is bringing forward ideas for Community-wide regional IDCs and taking that strategy further by proposing congestion taxes. He has also taken on board our idea of introducing an ex-quota sum into the fund so that, if there is something that a regional authority believes is of vital importance, it will not be stymied by the Government and prevented from bringing it forward. In the past, although the Commission could say "No" if it disagreed with a proposal, it could not make positive proposals of its own. With a 13 per cent, ex-quota sum—though we should have preferred 20 per cent—projects of vital importance to a region will be able to be brought forward.
  If local authorities had been consulted, they would not have asked for the vast advance factory building programme that has sprouted up all over the country with no industries to fill those factories. The councils would have gone for eliminating the bottlenecks.
  That brings me to the problem of industrial links. In my region we had a problem with the building of the Brier-field link road. We were able to obtain assistance for building an advance factory and the servicing of the site, but the requirement for a direct link with industry held up the project because we could not get a road to the site. That problem has now been resolved, but it is ludicrous that it should have occurred at all.
  1310
  There are points that the Government should be taking on board. They should know the desperate longing of the regions. The regions do not want always to be the recipients of handouts, but they want to be given a hand so that they can stand on their own feet. These are the things that intermediate areas such as mine want desperately. We want to make our contribution, but unless we have some assistance we cannot do so. We bitterly resent the Government's collaring the cash and not giving us the benefits. We ask them to have a change of heart and give us greater help to help ourselves.
  11.15 p.m.
  Mr. Tam Dalyell: Can we establish a question of fact on an issue which has been running through this debate? Various hon. Members have asserted that we are under-using our application strength. Are we? It is about time that some facts and figures were given on this topic.
  Mr. Alan Williams: Perhaps I can enlighten my hon. Friend. Our total entitlement is about £150 million for the whole period. We have already received or had committed to us £137 million. There is no problem in finding sufficient applications.
  Mr. Dalyell: So we ought to get that hare out of the way. It is simply not true that we have been under-using our application strength.
  Mrs. Winifred Ewing: I think that the hon. Member for West Lothian (Mr. Dalyell) is referring to a point that I made. I am grateful to the Minister for answering it. However, Italy and Ireland have submitted a greater percentage of applications than we have and, therefore, the fund has had a wider choice of applicants. We have received our entitlement but on the basis of fewer applications than some of the other member States.
  Mr. Alan Williams: The hon. Lady is probably accurate. The result depends on the method adopted by individual Governments. We try to work according to a well-established set of priorities, and we try to make our applications conform to those priorties.
  Mr. Dalyell: I turn, then, to the question of the local authorities. The Central Region seems to have been very successful

  1311
  in its direct approach proposals. I am surpised that the Highland Region has found difficulties. In his meetings with Mr. Giolliti, will the Minister raise the question of help for the steel areas? Viscount Davignon has appeared before the Budget Committee to explain that the Commission has now devoted, as a priority, considerable sums to steel areas, though not necessarily to the steel industry itself. What is the Government's view on that? How do they see the role of the European Investment Bank, which is apparently to produce matching funds? I ask this because my right hon. Friend the Chancellor of the Exchequer and other Finance Ministers are governors of the Bank. To what extent will the Bank's policy be integrated with that of the British Government and the policies of other nation-States?
  Mr. Alan Williams: Already the steel industry has received just over £8 million from the fund. We are major recipients of funds from the EIB. Because of the peculiarities of the requirements of foreign exchange protection, nearly all of this support goes to the public sector and, therefore, to the nationalised industries.
  Mr. Dalyell: In spite of all the criticisms that are made about using European funds for national objectives, my view is that it would be silly not to do that. At least we should integrate those policies, or two separate organisations would be trying to do the same job.
  I turn now to the speech of the hon. Member for Rushcliffe (Mr. Clarke). I take part of his argument that there is a feeling in Europe that not sufficient credit has been paid for what is being done. Therefore, while I agree with my hon. Friends that the two policies must be integrated to avoid people tumbling over each other doing the same thing, where European money is being used we should make the effort, acknowledge it and use it not just for chores but for some fairly attractive political objectives. We must be careful to give credit where it is due. As my hon. Friend the Member for Newton (Mr. Evans) said, one notices that the French give no credit at all for getting considerable European funds. On the other hand, the Germans and the Benelux countries take a different approach.
  Mr. Michael Marshall: Does the hon. Gentleman agree that the loans now coming to the British steel industry are being fitted into the Davignon arrangement, so that money is increasingly geared to get some sort of agreement on rationalisation within the European steel industry? Does he agree that that approach has some promising overtones given the threat from external sources such as Japan?
  Mr. Dalyell: It is very promising that considerable sums are allocated not only to the steel industry but to the steel areas. One gets the impression that a real effort is being made to help those areas. It is perhaps on that basis that the objectives should be sifted.
  This is my third bite at the cherry and I shall restrict myself to one other question which I put to the Chief Secretary and the Under-Secretary of State for Energy after his experience of the Presidency of the Council of Ministers in another area. Do my right hon. and hon. Friends feel that it is sensible to have a revolving Presidency? Now that there is the prospect of Twelve instead of Nine—if the hon. Member for Moray and Nairn (Mrs. Ewing) had her way it would be Thirteen—can we accept any automaticity as hitherto in the membership of the Commission, the Council of Ministers and the various organs of the Community? Given enlargement, do we not have to think once again whether in the technical sectors the institutions are right and whether the revolving Presidency is a sane way of getting rational policy?
  11.22 p.m.
  Mr. John Corrie: As one sits here one contemplates the differences between this place, the Mother of Parliaments, and the European Assembly. Although this place may have been in being much longer, it could certainly learn a lesson or two from its younger sister in Europe with its timed speeches and different working hours.
  There have been many grumbles in the EEC about the CAP, but the problem can be solved only by structural changes. We cannot buy ourselves out of the problem in the agricultural sector. We cannot continue spending 68 per cent. of the Community budget on the agricultural sector and about 6 per cent. or 7

  1313
  per cent. on the Regional Development Fund. Thousands of small, inefficient units must disappear in the agricultural sector if we are to make it plausible. That will cause further major problems in the rural areas. Added to that, as the hon. Member for Moray and Nairn (Mrs. Ewing) said, the fishing industry is in ruins. There has been severe over-fishing by all nations, including Britain. Unlike the hon. Lady, I do not think that EEC policy alone can save it.
  All these factors mean immense changes within rural areas and in areas of industrial dereliction. Sadly, it appears that it is easier to build on green field sites than to return to areas in which industry has been previously. The Regional Development Fund will undoubtedly play a major part in the rebuilding of Europe in the coming years. In the past three years Great Britain has done especially well from the fund.
  In one or two respects, however, I cannot agree with the Minister. I cannot agree that advance factories are the answer to areas of dereliction and unemployment. I pass one factory daily which was built six months ago. It is slowly being demolished brick by brick and pane by pane. It has never had anyone in it. Only last week the Secretary of State for Scotland said that in the past three years 50 per cent. of the advance factories built in Scotland had been unoccupied for some time and that 25 per cent. of them are unoccupied at present and have never been occupied. I suggest that we look at the sites, find the jobs and build the factories afterwards.
  Another matter that worries me is that because the money is paid into the national Exchequer no credit is given to the European fund although many jobs and schemes are paid for or helped out by European money. No credit is given to the European fund although, the money has come from Europe and the fund. I do not want to go back into the problem of additionality, which has been covered already.
  My local authority suggests to me that any money that it gets from the Regional Development Fund is taken off its rate support grant. Is that right? If that is the situation, I wonder how it will fit in with document R/ 1334/77, which states on page 46:
  1314
  "Member states shall repay to the Com-mission the amount of the Fund's assistance that has been paid in relation to a national aid that has been repaid by the investor".
  Does that mean that money will have to go back to Europe, or is my local authority wrong? A number of problems must be examined. There is no point in spending money from the Regional Fund on projects that would be built anyway. That is why additionality is so important.
  More co-ordination between the Regional Fund, the Social Fund and FEOGA is needed. It is pointless to pour out money to prop up inefficient farming when at the same time the regional policy tries to persuade the same people to move to different jobs in the same area.
  I have a particular interest in the Regional Fund. I am rapporteur of the committee examining the coastal regions of the Community and their problems. I am also a member of the fisheries subcommittee which is run by the hon. Member for Durham (Mr. Hughes). He does the job well. Our job is to report back on the problems of these areas. Britain has the longest coastline of the Community. There are hundreds of islands, Britain also has the largest fishing industry. We stand to gain most.
  The problems break down into four categories. First, there are areas that are running down because of the collapse of industry in them, particularly the fishing industry. Secondly, there are areas which have never had industry, such as the outer isles where jobs must be created. Thirdly, there are the most difficult areas where short-term, high-employment industries have moved in and then ceased, such as oil rig construction. An example is Ardyne, which had 3,600 workers last month and now has only 300 and there is no prospect of further work. Fourthly, there are areas of natural beauty that should not be spoilt by industrialisation. Creeping pollution is the problem in such areas. Compensation should be paid to those who live in them.
  All these areas face increasing problems. Families that are born and bred in these areas want to stay; that is their right. Help must be given to them to do so. The help that is given in areas requiring job creation must be labour-intensive rather than capital-intensive

  1315
  industrial development. Transport structures must also be assisted.
  There should be more contact between the regions and the Commission so that a region can press its case if a border line decision has to be made at national level. There must be some playback on how the fund is working, how the money is being spent and whether it is doing the job that it is supposed to do. Perhaps the Government should look at that. There should be more publicity about what is coming out of the Fund and on every project that received money from it.
  It is also to be hoped that in future it will be possible to return to the Commission's 1973 concept— that the criteria of eligibility for assistance should be laid down on a Community-wide basis and not necessarily reflect only national priorities. Most of us in the House are Europeans first and nationalists second.
  11.29 p.m.
  Mr. Michael McGuire: I came into the Chamber part way through the speech of my hon. Friend the Member for Newton (Mr. Evans), who is chairman of the European committee which deals with regional affairs. He was arguing a point which, like all North-West hon. Members, he made before he was a Member of the European Parliament—that the North-West Region has, by whatever measuring stick one uses, been treated badly under the regional aid policy as adopted by the United Kingdom Parliament. Judging by the documents before us, the imbalance and unfairness towards the North-West are not changing. I feel it in my bones, although I have not the analytical competence to prove it conclusively.
  One can see mirrored in the documents the same imbalance in the total that the United Kingdom receives and disburses as was originally perpetrated. Yet the North-West has a population about the same as Scotland and Wales together, being a region of 7 million people. It has been and continues to be badly treated. Is there any way in which the Government intend to get this situation rectified so that the North-West gets its fair whack?
  I have had the impression for a long time as a Back Bencher that we are at the stage where one has to be a Phila-
  1316
  delphia lawyer, an economist and an accountant and everything else in order to be able to digest, or even briefly glance through with some understanding, the multitude of documents from Brussels. Perhaps we need to have regard not so much to reforming the European Parliament but to making its Regional Affairs Committee a more refined body so that it can respond more accurately to the sensitive needs of regions within regions, such as we have in the North-West. How we can do it I do not know.
  I think that we in this House must reform our own procedures. I do not think that 635 Members dealing with everything and anything are equipped properly to digest these detailed matters. In that sense we give a big advantage to Members, like my hon. Friend the Member for Newton, who sit in the European Parliament in that they can study these specialised subjects in more depth, although I know that in doing so they are having to neglect, although they do not want to, some other subjects in which they were once engaged as Back Benchers.
  We have to look at this as a House of Commons problem and find out how best we can deal with the whole question of the legislation and all the paper we are getting from Brussels, thereby making ourselves more usefully employed. We are kidding the public if we give the impression that we can absorb, interpret and then speak our minds about all these things, making a useful contribution to the thought about them. A Committee is now sitting under the chairmanship of my hon. and learned Friend the Member for Warrington (Sir T. Williams) considering how we can more usefully do our job, and we must take the subject on board because the job is getting more complex all the time.
  I return to my point about the Regional Affairs Committee of the European Parliament disbursing regional aid within regions—in this case, of the United Kingdom. As I have said, the imbalance and unfairness to the North-West are continuing. Do the Government accept that reading of the situation? Perhaps they think that we are being treated as fairly as we could be. Document R/1613/77 states on page 29:
  "The Northern Region of England received most from Fund assistance in 1976••In 1975 the North was in third place."

  1317
  There is also a breakdown in the document showing the various regions of the country, and there we find that the Northern Region, Northern Ireland, Scotland and Wales got about 90 per cent. of the share. I repeat that the population of the North-West Region is approximately that of Scotland and Wales combined. If those other four regions receive, as they do, about 88 per cent. of the total, the North-West must do very badly, and I do not see any sign of our doing better in the months to come.
  Unemployment on Merseyside, part of which is in my constituency, is twice the national average, and in my constituency itself it is slightly more than three times the national average. What tool do the Government use to isolate the problems within the North-West? I think that the hon. Lady the Member for Lancaster (Mrs. Kellett-Bowman) will agree with me that not all the picture of the North-West is black and that there are areas where unemployment is less than the national average. But in others it is three times as much. I do not think that the Government have a tool sufficiently sensitive to respond to the needs of the regions.
  I think that the hon. Lady the Member for Moray and Nairn (Mrs. Ewing) demonstrated that we still largely battle for our own corners irrespective of whether by any measuring stick a region can justify special help. We are continuing with a system that is a bad system. I know that it will be said that the hon. Member for Ince is indulging in these tactics as much as anyone else, but I am trying to point out that we are dealing with sensitive problems and that the instruments that we use must be equally sensitive. The European Parliament is in exactly that position with national bargaining, with each Member making the best case he can for his own country instead of his own region, as in this House.
  I am not saying that the neglect of the North-West is the fault of my right hon. Friend the Minister. I believe that the fault lies with Parliament generally. It lies in having these competing interests, which in the European Parliament are nationalistic in tendency rather than regionalistic. Thus the North-West and other areas with above-average
  1318
  unemployment have done very badly. I refer especially to Merseyside. It is a distressed region.
  From leading delegations to him and from conversation that I have had with him, I know that my right hon. Friend has demonstrated a sense of urgency, which has been lacking in the past, but the proof of the pudding is in the eating and our position is worsening. I hope my right hon. Friend can assure me that he has taken on board our special problems and that the Government have an instrument to give us some relief quickly.
  We shall otherwise continue the charade of discussing regional policy, whether in the European Parliament or in the Mother of Parliaments, as we call this place. Incidentally, tonight I met a delegation from Iceland who reminded us that our Parliament is 340 years behind that of Iceland. I hope that our Parliament can do the job that I believe it should do, and that is to make regional policy far more sensitive to the needs of the regions. Within the regions there are extra-special problems, and I am not convinced that our Government have yet come to grips with them.
  11.40 p.m.
  Mr. Richard Page: In the couple of minutes at my disposal I should like to make two points.
  Whatever hon. Members' feelings are towards the Common Market, I think that there must be agreement that the European Regional Development Fund operates and gives tremendous opportunity to overcome a lot of longstanding regional problems. If it can provide aid for our regions and overcome the traditional areas of poverty and deprivation, it can act like a crutch and after a period it can be thrown away, the outside aid can be withdrawn and the region, then firm on its own economic two feet, can achieve some self-sufficiency.
  The official handout says that the fund is
  "to correct the major regional imbalances within the Community."
  As the Member for a northern constituency, I cannot really complain. We have had a very fair share of the cake from the Regional Fund. I understand that it is running at an even higher proportion this year. Obviously, I must commend it and hope that it continues.

  1319
  That is the theory of the scheme. However, I share the suspicions of my hon. Friends that this aid is not, as it should be, subsidiary extra support to regional aid but is being used instead of Government support which should be put into the regions.
  I am also very curious to know whether we are really achieving these strides towards regional self-sufficiency or whether in many cases the fund is merely providing temporary work, in very similar vein to our own job creation schemes. When the support is removed, will the region be left, hopefully with a better environment and some improvements in its infrastructure but with no lasting increase in job prospects? That is the point that concerns me.
  I wanted to develop that point a little more, but I must move on quickly to talk about the relationship of the regions with the European Regional Development Fund. I believe that we must develop a very firm line here, and it must be agreed with the direction and administration of the fund. If that is not done, I can foresee that the fund—it has the potential in this case—could link up directly the regions to the Community centre. The fund could create a linking of the regions with the EEC centre, if that were allowed, over the heads of central Government. We should consider now whether any such development is desirable or whether we should keep the controls firmly in the hands of the Ministers responsible.
  Possibly I am being just a little dramatic and this sort of development may not occur. It may also take a slightly different form, with the projection of the present two Commission information offices, in Cardiff and Edinburgh, which would bring an expansion of information offices into the regions. With co-ordination and a little natural communication, a network of Commission offices could soon be operative. In turn this would ensure co-ordination of Community policies, with the European Regional Development Fund being very much viewed as the linchpin, to make it go one way or the other.
  1320
  The Minister mentioned impact groups. These should be carefully tied down, because we could be losing control of our regional funds to the EEC.
  I have been very brief because I know that the Minister is waiting to make one or two comments. On these points I do not want to be considered to be critical of the EEC fund. It has tremendous potential for the nation and I want to see it succeed. If by early action we can ensure that it is more effective, so much the better for our country.
  Mr. Alan Williams: I have less than two minutes in which to respond to the debate. It has been helpful to me to hear the views of hon. Members. At the outset I gave my views on the areas of controversy. The hon. Member for Workington (Mr. Page) touched on a key point when he asked whether we want to lose control of our regional policy. Before we rush too quickly along the supranational course advocated by the Opposition Front Bench, I would point out that 43 per cent. of our population is in assisted areas. It is, therefore, a matter of considerable politicial importance if the economic welfare of those areas is to be determined other than in this House.
  My hon. Friend the Member for West Lothian (Mr. Dalyell) asked about the problems of the revolving Presidency. I know that he would not expect me to answer that now. If he expects me to do so, he will be disappointed. I will certainly try to follow up the matter in correspondence. My hon. Friend the Member for Newton (Mr. Evans) raised the question of derelict land. As I am sure he is aware—
  It being two and a half hour after the commencement of proceedings on the motion MR. DEPUTY SPEAKER put the Question, pursuant to the Order of the House this day
  Question agreed to
  Resolved
  That this House takes note of Commission Documents Nos. R/1611/76, R/1334/77 and R/1613/77 on the European Regional Development Fund.

  POLICE (PAY AND ALLOWANCES)
  11.46 p.m.
  Mr. Michael Alison: I beg to move,
  That an humble Address be presented to Her Majesty, praying that the Police (Amendment) (No. 2) Regulations 1977 (S.I., 1977, No. 1006), dated 11th June 1977, a copy of which was laid before this House on 20th June, be annulled.
  The Opposition are glad of the opportunity afforded by the familiar device of a Prayer to discuss police pay in the context of the Police (Amendment) (No. 2) Regulations 1977. The regulations imposed—I use the word advisedly—a stage 2 settlement on the federated ranks of the police service against the wishes of the Police Federation and its members. As such, it is in my view the end of an extremely sorry chapter in the saga of relations between the Government and the police service. I do not think that at any time since the police strike of 1918 has police confidence in its sponsoring Government Department, the Home Office, or morale generally in the service sunk so low.
  It was not of the Opposition's choosing that we should be debating these regulations at close to midnight at this stage in the parliamentary Session. On two earlier occasions recently we pressed for a debate but the Governmen declined at the last moment and took the business off the Order Paper. The reason was that on those earlier occasions the Grunwick picketing violence was at its zenith and thus the almost intolerable strain placed on police officers was only too painfully manifest in the television reporting of the scenes in North London which millions of viewers saw.
  The risk to police life and limb, placing their work on a par with other hazardous occupations such as mining or seafaring, was horribly exemplified by the murderous attack on that young police constable who, I believe, was at one time within an inch of losing his life. The Government realised what a debate on this imposed pay settlement would have looked like at the height of the Grunwick picketing as police officers were being borne on stretchers to ambulances.
  The first point to be made is that the police have had no pay increase since
  1322
  September 1975. Second, since then the index of retail prices has risen by about 30 per cent., so that police pay has dropped by that amount in real terms since the last pay rise. Third, police officers in some parts of the country are drawing family income supplement—the bottom end "safety net" for low wage occupations. Fourth, even the 1975 pay settlement failed to bring the average police constable's pay up to the Willink Royal Commission standard—that is, 104 per cent. of average adult non-manual male earnings.
  Now, two years later, police pay must have sunk to about 70 per cent. of that average. What a way to pay the police force in a period of growing violence and criminality not seen in these islands for at least 200 years. In elaboration of this appalling slippage in police pay, I understand that the distinguished economist who advises the Police Federation has reported to it that a study of
  "the Police Force Statistics return for 1975–76"—
  a technical document—
  "reveals that for 41 police authorities in England and Wales the total salary and wage bill was £280·24 million for an average daily strength of 82,360. This gives a weekly average of £65.26."
  That was at the time of the 1975 settlement. I hope that the Under-Secretary's Home Office review body, in considering the future pattern of negotiations for police pay—and particularly the settlement due on 1st September this year—will note that at least one distinguished economist reckons that the weekly average for the police at the time of their last settlement was only £65.26. At the same time the comparable average for adult non-manual male workers, the group with which the police are meant to be compared, was £10 a week more. That was in 1975. By September 1977 the comparable average is likely to be at least £30 more than the £65 the police were getting at their last settlement. This shows the shocking extent to which the police have fallen behind in comparability terms since their last settlement.
  Yet the regulations that we are looking at tonight are utterly barren of any glimmer of recognition that the police, faced with quite exceptional strains, have faced quite exceptional slippage. I do not imagine that there is any group of people

  1323
  dependent upon the public service recognising their relativity—because they have no trade union to fight for them—which has suffered slippage to the extent to which the police have suffered in relative terms since 1975, yet no mention is made of this in the regulations and no concession is made to their claim for a stage 1 increase. There is nothing specific about fringe benefits. It is, indeed, the end of a very sorry chapter.
  But it is not the end of the story, and it is ironic—I think that my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) will agree with me on this—that the negative and unhelpful attitude which the Government have displayed in this imposed stage 2 settlement will leave a great vacuum of legitimate discontent and of unsettled dues to be carried over into the new era of collective bargaining which the Chancellor ushered in with his statement last Friday. Indeed, I believe that the Government may before long rue the day that led them to hold down the police service so fiercely in stages 1 and 2, leaving this yawning gap between the actual position and real merit as we move into this freer area of collective bargaining.
  The hon. Lady will know that the 12-months rule, as it applies in connection with the existing regulations, expires in September this year. It therefore behoves the Minister, since the application of the regulations will expire before the House meets again in the autumn, to take away some of the sour and bitter taste which the regulations will leave in the mouths of the police service by spelling out, first, what undertakings Ministers —from the Prime Minister, in his exchanges with the Police Federation in Downing Street, downwards—have given in the context of the discussions which have led up to the regulations we are discussing tonight. What undertakings have they given about a better deal after September? What are these undertakings in terms of possible fringe benefits and in terms of a better pay deal than the 5 per cent. they are getting under the regulations?
  What silver lining can the hon. Lady, with her golden tongue, impart tonight to these leaden regulations with which we are faced? I hope that she will produce a silver lining, because the regula-
  1324
  tions standing on their own simply will not do.
  Secondly, can the hon. Lady commit the Home Office and the present Home Secretary to the view that, in the context of the unprecedented strain now placed on the police service and the profound loss of morale and confidence resulting from its slippage in the earnings league, police pay must be considered as one of the cases representing, in the Chancellor's own words on Friday, "the most serious difficulties" which alone can be tackled by above-average settlements in the next 12 months?
  The hon. Lady should bear in mind that according to the professional economic advice available to the Police Federation, and no doubt to her own Department, police pay would need to increase this coming September by 26·5 per cent. to re-establish the relativity with average adult non-manual male earnings which the September 1975 settlement represented. The figure will be much higher by mid-1978. If we take the mid-term of the 12 months starting September 1977, I imagine that it would have to increase by well over 30 per cent. in order to get back to the relative position of September 1975.
  It will not do to expect the police service to help keep down the average level of settlement in the public sector to single figures, because it is in an exposed and vulnerable position and must be among those who have what the Chancellor called
  "the most serious difficulties"
  Thirdly, where and how does the hon. Lady envisage that negotiations for the next pay date—lst September 1977—will take place and in what forum? Will it be directly between the Home Office and the Police Federation? Will the review body which the Home Secretary has decided to set up, and of which the Secretary of State for Scotland gave us notice earlier this week, have produced its recommendations about the negotiating forum by September? If not, how and in what way will the hon. Lady's Department negotiate the 1st September pay claim with the federation?
  We all know that a new economic era was ushered in by the collapse of the social contract and the return to free collective bargaining as announced by

  1325
  the Chancellor on Friday. We now know the details. It is certainly likely to usher in a new era of industrial wage negotiations, and it is extremely unlikely that it will be free of dispute. It certainly will not do for the Government—I hope that the hon. Lady will note this—to use the police service, as they have done in the post, as the fall guy in their attempt to keep public sector settlements down. There will be too many police officers falling in the streets in the coming months, as there have been in the past, for this to be a realistic policy.
  The police must be paid properly, otherwise the police service will be unable to maintain the thin blue line between the law-abiding citizen and the violent mobs of which we have only too unpleasant testimony and evidence in the Grunwick dispute. I hope that the hon. Lady will therefore do something to encourage the service and the public about the way that the police should be treated in future.
  11.59 a.m.
  Mr. James Dempsey: I understand from the Order Paper that we are discussing the application of the present stage 2 pay policy to police officers. That is why the hon. Member for Barkston Ash (Mr. Alison) referred to the 5 per cent. and to the allowance of £208.
  What I would ask: my hon. Friend the Minister to look at now is the future. We hear a great deal today about the thoughts of great people, especially of great men. I wonder whether we can have any thoughts from my hon. Friend about what is to happen to police conditions of service now that we are about to embark upon an orderly advance to free collective bargaining.
  I should like to draw attention to the fact that the pay of a police officer completing his first year of service is exactly £2,276. That is about £45 a week gross; it cannot be more than £30 a week take-home. How anyone can survive on that at present is beyond me. Even an officer who has fulfilled his years of incremental increases and has now reached the ceiling of his earnings after 15 years receives only £3,194. That is about £64 a week gross, not take-home. When all deductions are made, it will probably be slightly more than £40.
  1326
  That is no way to encourage people to join our police, and I should like to know from my hon. Friend what her views are on the possibility of raising police rates of pay substantially after this stage of the pay policy comes to an end on 31st July. There are several ways in which she can help.
  I am surprised that it should take anyone 15 years to reach the maximum of his salary. Even the period that it takes a teacher to reach the maximum has been reduced. Here is one area in which my hon. Friend could lend her weight, which would be of considerable assistance to police officers.
  Anther aspect which irritates me is that of overtime rates—the "special" rate, as it is known. The special rate is a "phoney" for underpaying people who work additional time. The special rate for a police officer works out at about one and one-third times his normal hourly rate. If he worked anywhere else he would get time and a half, and on a Saturday it would be double time. In certain industries, if he worked on a Sunday it would be treble time. In my view, there is adequate room for my hon. Friend to apply her mind in that direction without getting involved too deeply in whatever arrangement is made after 31st July.
  My right hon. Friend the Chancellor of the Exchequer said that he did not want earnings to rise above 10 per cent. If it is to be 10 per cent., I hope that my hon. Friend will give some thought to all the fringe benefits that exist. I do not know how to compare other people's work with that of a police officer, but I know that a friend of mine, who happens to be a joiner, earns as much as £136 per week when he is working overtime. He does not work a night shift. He does not work on Saturday night and on Sunday night, as the policeman does, yet he can take home that sort of figure, and quite within the pay policy. If it can be within the pay policy for a joiner, it should be within the pay policy to give a police officer decent, reasonable trade union overtime rates. I ask my hon. Friend to look in this direction with a view to helping in the struggle for better conditions of service and increased pay for our police officers.
  I have had some association with the police. For years I was a convener.

  1327
  That is why I am speaking in this debate. I know many of the conditions to which they must submit themselves. I know the nature of their work. I know their irregular hours. I have seen the contribution they make to safeguard the lives of people and property in our society.
  In this life we get only what we pay for. If we pay for the right men and women, we shall have the right police force to preserve law and order and to submit themselves to inconvenience. We should remember that on Christmas Day, or on New Year's Day in Scotland, and at the time of the West of Scotland annual holidays which are taking place now, every place is closed down except the police stations. The police do not enjoy these statutory holidays with their wives and kiddies. They do not go away to celebrate and enjoy the holiday that they have earned after working a year.
  Surely we should bear these things in mind. The police are ordinary men and women with families and parents, and we should ensure that their advantages are such that we may look forward with great confidence to their services to our community. I have no greater feeling of security than when I see a policeman coming down the street. If we want law and order, we must ensure that these men and women, giving such exemplary service at irregular times, are well and truly and satisfactorily rewarded for doing so.
  12.7 a.m.
  Mr. Ivor Stanbrook: I warmly support the sentiments expressed by the hon. Member for Coatbridge and Airdrie (Mr. Dempsey). These are reflected in the hearts and minds of all people in this country.
  In these regulations the Government are not doing justice to the police. The 5 per cent. increase is grossly inadequate. This is a question not of the cost of living but of law and order. Law and order is very much under attack today—the crime rate is rising, and there is disorder and lawlessness on the streets. It is time the Government considered these aspects rather than the cost of living.
  My hon. Friend the Member for Barkston Ash (Mr. Alison) referred to the report of the Willink Commission, which suggested that police pay should be 4 per cent. above average industrial earn-
  1328
  ings. If Governments since then had adhered to that recommendation we would not have had the difficulties that we face today. We would not have had recruitment problems, or such a rise in crime, and the police would have been far more contented.
  Unfortunately, because we do not pay the police enough we have had considerable recruitment difficulties, and we do not have as much choice of the right men for the purposes we require. The rate that we now pay them is only 70 per cent. of average industrial earnings, instead of the 104 per cent. that we should be paying. Is it any wonder that we are nearly 5,000 short of establishment in London, and that that figure is rising. I understand that figures reported only this week show a further drop.
  Outside Grunwick the other day 4,000 Metropolitan policemen—one-fifth of the total—were on duty to deal with something which should not have occurred in a proper law-abiding society if the Government were determined to maintain law and order and not to give encouragement, as some Labour Members have done, to the lawless elements involved in that affair. We have never needed good policemen so badly. That is why these regulations are fearfully inadequate.
  But the position is even worse than my hon. Friend said. Overtime has made a great difference to police officers, at least in London. It is a matter for wonder that people who work long hours in order to earn more money should not get credit for doing so. It is to our shame that police officers are working 10 or 20 hours extra a week to earn a living wage. Any London police officer knows that if overtime were removed it would make a great difference to his take-home pay and to meeting his weekly budget.
  Mr. Joseph Harper (Comptroller of Her Majesty's Household): That applies to any industry, not just the police.
  Mr. Stanbrook: But the position of the police is fundamental to law and order and far more important than that of any other section of the community, except perhaps the Armed Forces. We have to have ordered priorities. The fact that the police are happy to work overtime to increase their salaries is a matter of shame to us, because of their special position.

  1329
  Instead, as the Government claim, of ensuring that expenditure on police emoluments is not cut, they have made a cut by means of overtime. There is now a new system of control of overtime for Metropolitan Police officers. In a Written Answer on 7th July this year, the Home Secretary said:
  "The Commissioner has recently decided to introduce a new system for the control of overtime worked in the Metropolitan Police. The effect of this will be to maintain the total financial provision for overtime in the force at the same level in 1977–78 as it was in 1976–77. While it is not possible to say precisely what effect these new controls will have on the number of hours overtime worked by individual officers, I understand that, on average, any effect could be small. The Commissioner does not intend that the new procedures should inhibit the operational needs of the force in any way."—[Official Report 7th July 1977; Vol. 934, c. 628.]
  He may not intend it—he is a new man, and I hope that he is learning rapidly—but that is what the new arrangements will mean. There will be an inhibition of operational needs as a result of limiting cash payments for overtime to the level of last year, if only because of the fall in the value of money.
  One has to go to Regulation No. 25 of the main regulations—the Police Regulations 1971—to see why it will not be possible to limit cash payments in this way without creating great injustice to police officers and inhibiting police work. After all, when a police officer is engaged upon an investigation and his normal hours have been passed he would not be expected to give up work and to return home saying that his day was done. An officer is not specifically ordered or told to continue his work on an investigation. Of course not. We expect him to continue, and that is the normal thing. Being the men that they are, the police carry on investigating and working on their duties. For that reason it is simply impossible to lay down precisely how much overtime will be done by a police officer. As a result of that, the regulation that concerns overtime, regulation 25, is fairly flexible and clear. It says:
  "where a member of a police force…remains on duty after his tour of duty ends…. he shall be granted…in respect of each unit of time during which he so remains on duty after his tour of duty ends…an equal period of time off."
  A unit of time is 15 minutes. The significance of that regulation is that while
  1330
  every policeman is entitled to time off in respect of overtime, that time will be given only where the exigencies of the service, in the opinion of the chief officer, permit. The regulation continues:
  "If…time off is not granted within such time (not exceeding 3 months) after that week as the chief officer of the police may fix, the member…shall be granted for each unit of overtime worked during that week for which time off has not been granted an allowance of a twenty-fourth of a day's pay"
  In other words, the position is that where a policeman remains on duty after his normal hours he will be granted time off if the exigencies of the service permit. However, if time off is not granted within three months the police officer will be paid cash in lieu. Therefore, if the Commissioner of Police for the Metropolis really intends to limit the amount of money that is paid in respect of overtime he will have a difficult operation to conduct. He will have to adjust the time off within each three-month period to reduce the balance of time for which there will be cash payments to the level required. The Commissioner will then have to predetermine, somehow, how much overtime will be worked. Anyone who says that operational requirements will not be affected does not know anything of police work.
  That is the situation. Quite clearly the spirit of the regulations will be broken by the new controls that have been announced by the Home Secretary. I tabled a Question to the Home Secretary on that point. I asked:
  "in view of the fact that certain divisional commanders of the Metropolitan Police have imposed limits on cash payments for overtime worked by the Criminal Investigation Department officers to a fixed proportion of that paid in 1976 to all officers in the same division, if he will take steps to insist on observance by divisional commanders of the letter and spirit of Police Regulations covering this subject."
  The right hon. Gentleman replied.
  "Arrangements for the control of overtime in the Metropolitan Police, and their administration by divisional commanders, are matters for the Commissioner of Police of the Metropolis."—[0fficial Report, 15th July 1977; Vol. 935, c. 277–8.]
  Apparently the Home Secretary had not read the regulations to see the difficulties that will arise operationally. I have been told that a divisional commander at Tower Hill has calculated how much money was spend on overtime last year

  1331
  and the proportion of that which was paid to the CID—which was 11 per cent. —and has said that of the money now available 11 per cent. will be available for the CID.
  What nonsense is this? What better way could there be of interrupting, disorganising and confusing police work? It will be impossible to apply these rules from day to day. No chief of police or divisional commander will be able to say that a policeman may do one hour's overtime because the time off that he may be granted has been allowed for within the next three months, and that sufficient cash will be left to pay for the rest of his overtime. The chiefs will say that the work must be done. They will send the men out and the result will be a thoroughly dissatisfied police service and greater confusion and dissatisfaction than ever.
  In the end, it will mean that individual officers will be paid far less than at present. The estimate of one London division is that its officers will suffer by £11 a week because of this arbitrary limit of cash payments on overtime. Officers will be reluctant to do overtime, and their take home pay will be considerably reduced.
  If the Government wish to avoid that they should look at the regulations and the control of overtime again and say that while the police must adhere to any incomes policy, separate regulations will be introduced and will not apply to overtime that is properly and legitimately worked in the interests of the people.
  12.22 a.m.
  Mr. Eldon Griffiths (Bury St. Edmunds): I congratulate my hon. Friends on their valuable contributions to the night shift. My hon. Friend the Member for Barkston Ash (Mr. Alison) put the case for the police service eloquently and effectively. I endorse every word that he uttered and I hope that the Minister will take his remarks seriously. I also thank my hon. Friend the Member for Orpington (Mr. Stanbrook) for having raised so wisely the problem of overtime in the Metropolitan Police, which is having a serious and damaging effect on the morale of the CID.
  1332
  The House knows my interest. Over the weekend, the miners made clear their views about the next stage of the incomes policy. Today, the doctors have done so. This debate is the first opportunity for the view of the police service to be heard.
  It is all the more sad and disgraceful that the Government have deliberately organised the debate so that the House will be virtually empty—once again, there is no member of the Liberal Party in the Chamber—and the vast majority of the Press will have no opportunity of recording it for the benefit of the public and the police service. It is another example of the shabby way in which the Government have dealt with police business in the past two years.
  I am sure that the majority of hon. Members agree with me that the first social service that a Government owe to the people is the maintenance of law and order. We are not doing very well. Law and order in this country is at risk as seldom before, and the police are not winning the battle. I do not say that they are losing it, but they are barely holding their own.
  Perhaps I can put it in simple terms —in terms of some things that have gone up and of others that have gone down. The crime rate has gone up massively. Violence has gone up alarmingly. Political and industrial unrest have gone up, and are likely still further to increase. Simultaneously, police recruiting is down. Police cadet numbers are down. Police overtime is down. Police pay is disgracefully down. The only thing in the police service that I know to have gone up is the numbers who are leaving the service.
  There was one sad example tonight of a police constable with 11 years service in this House. He has resigned the service not because he wishes to do so; he loves his job with the police. He has gone to be an electrician, because in that way he will get more pay. He is not alone. All over the country hundreds of well-trained and dedicated men are now voting with their feet. They are leaving the service at a time when crime and violence and unrest are rising against us.
  The order introduces the first pay increase that the police have had since September 1975. That fact alone is a disgrace. I wonder whether there is

  1333
  another occupation that has had no increase since September 1975 and that would have stood for it as the police have. Any other group—the face or surface workers in the coal mining industry, the transport workers, the power workers—faced with the fact of no pay increase since that date, would have been on the streets. If the police had followed the example of other more violent groups and had been hammering at the doors of this place the Government might have met their just demands.
  The police, however, have been handicapped and exploited because of their sense of responsibility. They have not been prepared to use the same industrial muscle as other groups have used to get their own way. I had never imagined that the police service of this country would vote, as it did, to take the power to strike. That decision was taken at the Police Federation conference, and the decision was almost unanimous. It was taken with great reluctance, because no police officer that I know wishes to take strike action. The fact that the decision was taken is a measure of the Government's failure to deal with the just demands of the police service, that most loyal and dedicated body of police officers in the world, who have been driven down the road to industrial action.
  This settlement has been imposed, and that, too, is quite wrong. When the Prime Minister was adviser to the Police Federation, a post that I have the honour to fill today, he warned on one occasion, when a Conservative Home Secretary saw fit to impose a relatively minor settlement in respect of police widows' pensions, that if it could happen in that small field it might come that a Home Secretary would seek to impose an entire pay settlement on the service. That warning was prophetic, although at the time it was uttered no one in the police service and no one in the Government imagined that it would ever come true.
  How sad it is, how ironical it is and how disgraceful it is that it should be the Administration of the same right hon. Gentleman, the present Prime Minister, that has now imposed this settlement. In effect, it has stuffed down the throat of the police service a settlement that its lawfully and democratically elected statutory body rejected as wholly inadequate. The settlement fails, because it is
  1334
  imposed. I must tell the House that it is not acceptable, for the classic reason that it is far too little and it has come far too late. It is too little by any measure.
  I put before the hon. Lady three specifics. The first concerns the measure of inflation. I shall not weary the House by quoting Professor Nevin's figures, but clearly the police service has fallen far behind. While most of the others have been able to keep pace with inflation, the police service has found itself falling further and further behind.
  Secondly, the settlement is not acceptable in terms of the measure of comparability with settlements that have been received by others. The police service was excluded from phase 1. It did not get the £6 award that was available for all other workers. In phase 2 the police were awarded the £2·50 or the 5 per cent., depending on rank. Since phase 2 the Home Secretary has claimed again and again—indeed, he has boasted —that there are to be no exceptions. In fact, there have been exceptions. The seamen were made an exception because they threatened to strike. The Windscale power workers were an exception because they went on strike.
  Under phase 2 the police could and should have been given the fringe benefits that hour after hour and week after week were negotiated between the federation and the Government, which at the end of the day the Government refused to provide. It was stupid and insensitive on the part of the Home Office to fail to uphold that package of fringe benefits, which could have brought about a settlement within phase 2.
  Above all, the settlement is too little and too late by the real measure of what our police service is worth. In any settlement we must have regard to the relevance and importance of the occupation. When I see some of the facts as provided by Professor Nevin I am bound to say that the police have had a shabby deal. Between 1960 and 1975, when policy strength in England and Wales increased by 47 per cent., the number of indictable offences known to the police increased by more than 180 per cent. That is a measure of the increasing work load that the police have had to bear. For every 100 vehicles on the roads in Britain in 1960 there were 185 by 1975.

  1335
  Again, that is an illustration of the increasing work load on the police.
  In the six years between 1969 and 1975 the number of crimes of violence against the person in England and Wales increased by no less than 88 per cent. It is not, therefore, surprising that over the decade 1965–75, when the number of fatal accidents in British industry fell by 40 per cent., the number of claims by police officers in respect of criminal injuries inflicted on them when on duty increased more than 15 times. That illustrates conclusively that the police have not had in their salary anything like recognition of the added work load.
  As my hon. Friend said in his admirable speech, the real test of the order is whether the Under-Secretary of State will be able to look forward and at least partially make amends for the shabby treatment that has been meted out over the past two years. I hold her to that for two specific reasons. First, the Home Secretary, at the Scarborough conference of the Police Federation, was asked by its chairman "Are the police a special case or are they not?" The Home Secretary categorically replied that in his view the police were a special case. I ask the Under-Secretary of State to say how those words are to be translated by the Government into facts, figures and money under phase 3 of the incomes policy.
  Secondly, the Prime Minister, at a meeting at No. 10, which I attended with representatives of the federation, said that in his view the police should return to the Willink formula. The hon. Lady no doubt has access to the record of that interview with the Prime Minister. Is it now the intention to honour the Prime Minister's undertaking that, one way or another, the route must be found to return the police service to the levels of the Willink formula?
  I shall put numbers on that formula Simply to return to the levels of the 1975 settlement—the minimum that must be achieved in a September settlement—it will be necessary to add about 26 per cent. to the present pay of the police. That is based on the relation between the police pay and the average weekly earnings of adult male non-manual workers.
  In addition to that, to deal with the way in which the police have fallen
  1336
  behind it will be necessary to take account of the new earnings increase in the projected phase 3. If that is to be 10 per cent., as suggested by the Chancellor, an additional 10 per cent. on top of the 26 per cent. will be required. If the settlement turns out to be 15 per cent. or higher, the necessary movement in police pay will be about 40 per cent.
  On top of that, to deal with the problem of prices the best advice that I can get is that a further increase of 6.5 per cent. will be needed. So, simply to return to the levels of the 1975 settlement, an increase of not less than 40 per cent. will be required..
  That is only the beginning. It is not a matter of returning to the 1975 position; it is a matter of returning to the Willink formula. Unfortunately, the 1975 settlement represents a substantial erosion of the Willink formula. I should be happy to provide the figures. Broadly speaking, there was an erosion of about 9 pet cent. between the Willink settlement of 1960 and the 1975 settlement. For a sergeant at his maximum, there was an erosion of about 6 per cent.; for an inspector at his maximum, there was an erosion of about 7 per cent. Those are the amounts by which the allegedly generous settlement of 1975 itself eroded and degenerated the settlement of Willink in 1960..
  I have to say to the hon. Lady that it will be by no means sufficient for the Government to come forward in September and suggest a return to the 1975 settlement. What the Federation is looking for—rightly, in my view—is, first, a return to the Willink formula; which will throw out figures substantially higher than 40 per cent. It may be that in order to achieve this there will need to be two bites at the cherry. It may be that in September the Government will come forward and there will be negotiations, and that a return involving the substantial figures that I have mentioned—close on 40 per cent.—will be acceptable on the understanding that the first bite of the cherry is the 1975 settlement and the second bite, lying ahead, is a return to Willink early in the new year..
  But if the hon. Lady's officials imagine for a moment that the 1975 formula will suffice they will have to think again. The best possible way in which to make this order acceptable to the police service is

  1337
  an early return to 1975, a forward commitment to Willink, and an understanding that in the future the police service will be properly rewarded for the four things that set it apart from virtually every other occupation in this country..
  The first of these principles is the constant commitment of the police constable to his duty—a 24-hour responsibility; the second is the unique danger that he, as a civilian under discipline, must accept; the third is the need for a career structure with adequate differentials; the fourth is the anti-social hours of police work itself. These four principles will need to be recognised, and recognised generously, in any future settlement the police service is to do its vital job.
  l do not envy the hon. Lady her task in having to reply to the debate. I have no doubt that she will do it competently and fluently. But I say this to her personally; the police service today is in turmoil. The police are our only effective guardian against a breakdown of law and order. A very heavy responsibility lies on the Government for having damaged police morale, and I hope that tonight the hon. Lady will try to undo some of that damage in the interests of all our citizens.
  12.43 a.m.
  The Under-Secretary of State for the Home Department (Dr. Shirley Summer-skill): This is the fourth time in a matter of weeks in which the House has had occasion to discuss police pay. It was the subject of a debate on 16th May. A few days later, on 19th May, my right hon. Friend the Home Secretary made his statement about his intention to make the regulations awarding a pay increase to the federated ranks of the police in line with phase 2 of the Government's pay policy. Then, as recently as last Tuesday, the House debated the prevention of crime—a subject which naturally gave rise to further discussion of police pay.
  If the House is devoting more time to the police, that is to be welcomed. No topic is of greater importance to the well-being of our society. One general point does, however, bear constant repetition, and I should like to start with it. The police in this country perform a uniquely difficult job, and they perform it to a standard that is unparalleled anywhere else. Whatever our differences with the
  1338
  Police Federations, we shall not lose sight of that. I want, therefore, to emphasise right away that the Government are wholehearted in their support for the police.
  The hon. Member for Barkston Ash (Mr. Alison) mentioned the Grunwick dispute, That dispute has been made much more difficult than it need have been by the activities of extremists of one kind or another, who have exploited a genuine industrial dispute in order to achieve their own ends. We deplore that and applaud the work of the police in containing the very difficult situation that has developed at Grunwick.
  Before I turn to the regulations I am able to say something more about a review of the negotiating machinery for police pay. My right hon. Friend the Secretary of State for Scotland told the House on 12th July that the Home Secretary, the Secretary of State for Northern Ireland and he had decided to set up a review of the police negotiating machinery, and he announced the terms of reference. I am pleased to be able to inform the House that distinguished Lord of Appeal, Lord Edmund-Davies, has accepted an invitation from the Secretaries of State to chair the review. The other members of the review will be appointed as soon as possible and I hope that the review body will be able to start work quickly. If the agreed machinery can be introduced quickly in the light of the review body's recommendations, as we hope, it will then be for that body to look at pay.
  Mr. Eldon Griffiths: The hon. Lady has announced that Lord Edmund-Davies is to be the chairman and I hope that she will be able to announce the names of the other members quickly. I am interested in her suggestion that when it emerges the new machinery will be able to deal with pay. However, if it is not available before September, and that seems most unlikely, how does the hon. Lady propose that the pay settlement in September should be dealt with? Is it to be done directly with her Department? Let me say to her quite bluntly that there is no way in which the Police Federation is going back to the Police Council.
  Dr. Summerskill: As the body has only just been set up, I cannot anticipate how quickly it will be able to report. Naturally, we would urge it to report as quickly

  1339
  as possible, I cannot say exactly when that will be, but I hope that it will take the point that the hon. Member has made.
  I turn now to the regulations. The decision made by my right hon. Friend to make and lay these regulations was taken only after long and careful consideration. But the House will recall that the Police Federations for England and Wales and Northern Ireland withdrew from the negotiating body, the Police Council. After careful consideration in consultation with the official side of the council, an offer was made to the federations. This reflected the most that could be offered under phase 2 of pay policy and also offered improvements in certain fringe benefits when pay policy permitted. As I say, that offer represented the limit under phase 2, and its rejection brought about an impasse.
  As my right hon. Friend explained to the House on 19th May, members of the police had received no increase in pay since September 1975. My right hon. Friends the Secretaries of State considered that something had to be done to get the money already offered into the pockets of the police and their families. The process of consultation has therefore been completed and the regulations brought into effect with as much speed as practicable.
  The regulations were, of course, made without the concurrence of the Police Federations, but the Home Secretary is required by Section 4(4) of the Police Act 1969 to take into consideration any recommendation made by the Police Council and to furnish members of the council with a draft of each set of regulations. This was done before the announcement was made in the House on 19th May. A recommendation made by the Police Federation was accepted by my right hon. Friend and a revised draft was then circulated. There were no further recommendations of substance made and the regulations were made on 11th June, coming into operation on 27th June. I have made it clear that a better offer to the police for the current year just could not be made under phase 2.
  Hon. Members have naturally asked me about the next round. It is far too soon to say a great deal about the settlement in the next round, which will be due
  1340
  as from 1st September, but I should like to give some indication of our approach.
  There will be some scope for flexibility in negotiations in the next round. My right hon. Friends the Secretaries of State are as anxious as anyone to ensure a settlement that rewards members of the police service fairly for the demanding and responsible work that they carry out with the skill and devotion to which hon. Members have rightly paid tribute. I assure the House that the case for police pay put by the federation will be carefully and sympathetically considered.
  I must emphasise, however, that the police, like everyone else, are affected by the economic circumstances of the country. They will benefit if the rate of inflation is brought down. They cannot be left outside the pay policy on which the Government's efforts to tackle inflation depend. The negotiations on the next round of police pay must, of course, be conducted on the basis of the pay policy on which my right hon. Friend the Chancellor of the Exchequer has so recently made his statement.
  I have listened very carefully to the proposals of the hon. Member for Bury St. Edmunds (Mr. Griffiths), but tonight I cannot give any specific undertakings. However, I should like to make one or two points against the background of the Chancellor's statement.
  My right hon. Friend the Home Secretary accepts that in relation to the cost of living police pay has fallen below the level of September 1975. He also accepts that the increase in crime has increased the work load on the police and, in consequence, the stress to which they are subject. This stress is exacerbated by the increasing violence in society, bringing with it an increased risk of injury, or worse, to police officers.
  One of the problems that the discussions of recent months have highlighted has been the fact that there has been no agreement about the current level of police pay. A survey conducted by the then Joint Secretaries of the Police Council showed police earnings in March 1976 at a level which the Police Federation subsequently would not accept. The figures were, of course, averages and it was therefore inevitable that some individual police officers would be earning less than the average figure. Of perhaps

  1341
  more importance in the context was the fact that throughout the Police Federation left out of account in its calculations the value of the house or rent allowance to which every police officer is entitled. I am afraid that my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey), who is obviously extremely concerned with the pay figures of individual policemen, did not mention that aspect in his speech.
  Hon. Members who have seen the cost of mortgages rise, rates rise, and the cost of maintenance of property rise, will appreciate how valuable an asset a free house really is; and this is a benefit that the police receive effectively tax-free. I hope, therefore, that the federation will feel able to take this properly into account in future discussions on pay. The Government consider—and I am sure the House would agree—that any fair assessment of earnings must include the value of housing.
  The Police Council has set up a working group to establish the current level of police pay and a new earnings survey is being, conducted. It will be some weeks before the considered views of that working group are available. The Police Federation is unfortunately not participating in its work, but I understand that the federation itself is preparing a case on pay, and we await the results.
  With regard to the points raised by the hon. Member for Orpington (Mr. Stanbrook) about overtime in the Metropolitan Police, my right hon. Friend the Home Secretary has not issued any directive that overtime in the Metropolitian Police should be reduced. The Commissioner has recently decided, as a matter of good judgment, to introduce a new and more effective system for the control of overtime in the force. The financial provisions for overtime in the force as a whole this year are the same as those made last year and there is certainly no intention that these new controls should in any way interfere with the operational needs of the force.
  If the money currently set aside in the force's estimates to cover overtime proves insufficient to meet these needs, because of the number of special events in London
  1342
  this year, or for any other reason, it will be increased. A fair pay settlement can be achieved only by negotiations conducted in a cool and rational spirit. For my part, I very much hope that a settlement can be achieved which will be satisfactory to all sides. Those who, like my right hon. Friends, are well aware of the need for a police force with high morale and confidence in their role in maintaining law and order, know the great importance of reaching an agreed settlement.
  Mr. Alison: In the context of the background to the forthcoming negotiations, will the Minister clear up a couple of points? Can she reassure us that the fringe benefit offer that was associated with the pay offer that has now come into the regulations—obviously fringe benefits cannot come into the regulations—will be carried forward automatically as a standing offer in the next round of pay negotiations? Can she reaffirm the Government's support, as the Prime Minister said, for the Willink formula of 104 per cent. relativity as to average adult male non-manual earnings?
  Dr. Summerskill: The fringe benefit were part of the stage 2 negotiations, which, as the House knows, did not reach a satisfactory conclusion. Consequently, we have these regulations. I cannot anticipate stage 3 beyond what I have said this evening. It would be wrong, so soon after the Chancellor's statement, to make any dogmatic statements about what stage 3 will hold. I hope that hon. Members will study what I have said. The matters to which the hon. Member for Barkston Ash has referred will obviously be considered during negotiations on stage 3.
  A fair settlement is essential if we are to maintain law and order. Sorry though my right hon. Friend was that agreement could not be reached on phase 2 increases, implemented by these regulations, he thought it imperative that the police should receive the increases that pay policy permits. I am sure that even those who consider this to be insufficient would not wish to prevent the regulations being carried tonight. Then the House, the police and the Government, can look forward to stage 3.
  Question put and negatived

  INDUSTRIAL DEVELOPMENT CERTIFICATES
  Motion made, and Question proposed,
  That this House do now adjourn.—[Mr.Frank R. White]
  1.0 a.m.
  Mr. Hugh Fraser: I wish to explain how the refusal of an industrial development certificate will increase national unemployment and add several million pounds to our balance of payments deficit.
  I raise the matter of the loss of at least 300 jobs caused by the refusal of the Secretary of State for Industry to grant an industrial development certificate to the French firm of Manitou to build its rough terrain fork-lift equipment in the town of Stafford.
  With national unemployment running at around 1½million and rising, it is a serious matter. The loss of jobs is not just a local loss; it is a national loss. Having been refused Stafford, Manitou manufacture remains in France. With the sales of Manitou equipment booming in this country—it is now major in the agricultural as well as the constructional field, with sales likely to top the £8 million mark this year—not only have jobs been lost; our balance of payments will be worsened by about £4 million, and knowledge of the Government's idiotic decision will adversely affect potential EEC investment in this country.
  I have never believed in the industrial development certificate. Statistics of IDCs granted—and about 1,000 were granted last year, as opposed to nearly 1,800 in 1973—simply do not reveal the number of investments frustrated or abandoned because of them. Of these figures, of course, the Government keep no record.
  Of all the controls on industry imposed by post-war British Governments, the industrial development certificate is the most arbitrary, the most centralised, and the clearest epitome of the principle of the "gentlemen in Whitehall knowing best".
  It is a veto imposed by central Government on local county or district planners and local aspirations, on local industry and on local work forces. It is a veto set to defy business judgment,
  1344
  the forces of supply and demand, and the whole harmonious process by which new industries grow and develop through a myriad of individual commercial judgments. It attempts to apply and applies macro-economic considerations to what must be micro-economic decisions.
  If ever there were a dead hand, it is that of the IDC. It is a principle that has frozen development, cost real jobs, and littered the country with unused advance factories, empty because too few want them, and costing the taxpayers millions of pounds. There are now over 80 such advance factories unlet or abandoned in the development areas, and yet the Government have announced plans to build a further 100.
  Not only hell but most of Whitehall is paved with good intentions. When IDCs were introduced, with the Town and Country Planning Act 1947, they were hailed as instruments to bring jobs to the depressed areas. It has not worked that way. The depressed areas remain depressed. All that has happened is that dynamism has been denied to the strong, and by that denial there has been no national spill-over of investment into the less fortunate areas, while with few exceptions the depressed areas still remain clusters of declining industries, unenlivened by major new investment.
  In my own constituency of Stafford and Stone, and in Whitehall, I have fought both particular and general battles to get the dead hand of the IDC lifted. A few years back the Government—I think a Conservative Government—did something to ease the problem. The limit of factory space that was free of the veto was first lifted to, I think, 10,000 sq. ft. and it is now 15,000 sq. ft. It took months of meetings and persuasion.
  Of two major cases of denial of IDCs to manufacturers in my constituency, we won one by advising a scientific instrument firm simply to threaten that it would go overseas. The Minister—I think Conservative—climbed down and an IDC was granted, and 400 or so jobs were gained for the people of the Stafford area. The other case, the topic of this evening's debate, was lost. The French firm of Manitou refused to accept an alternative site, Government grants, and inducements in a fringe or intermediate development area. The Minister refused to climb down. Manitou refused to budge. As I

  1345
  have said, it remains manufacturing in France.
  At this point I should like to quote a few lines from the letter that the Secretary of State for Industry sent to me on 20th December 1976. He said:
  "I have looked into this case carefully."
  —that is, the Manitou case—
  "You will know, of course, that the main purpose of the IDC control as an instrument of our regional policy is to encourage mobile industrial developments to locate in the assisted areas. In this case it was decided that the project must be regarded as mobile and capable of being located in an Assisted Area. The IDC for Stafford was refused accordingly."
  I draw attention especially to the words in the last sentence that I have quoted from the Secretary of State's letter, that
  "the project must be regarded as mobile and capable of being located in an assisted area."
  For pure Whitehallese, that sentence just about takes the bun. Without respect to 19,400 Ministers and civil servants employed by the Department, it is crappy, political, macro-economic nonsense.
  Are component manufacturers mobile? Are lines of communications mobile? Are skilled work forces mobile? Is worker accommodation mobile? Are traditions of good labour relations mobile? Mobile! The only sort of mobility that would be relevant would be for the Minister and some of his acolytes to resign.
  Already Manitou aims to sell 1,500 or so units of its 34,000 world production into the United Kingdom. Already engines from Bradford, electrical systems from British CAV and many components are being exported to France for re-import into this country. Some 60 per cent. of machinnes are British made. If Manitou had been allowed into Stafford adjacent to the Black Country, 85 per cent. of components would have been British.
  Indeed, the potential gain—or now loss —in jobs nationwide might have been considerably greater than the 300 Stafford jobs that I have mentioned. In addition, of course, are all the temporary jobs lost to construction workers in the building of a new £500,000 factory which Manitou was prepared to undertake itself.
  What, then, can be done? In his letter to me of December 1976 the Minister said that if Manitou apply again for an IDC in 1978 it will be carefully considered. In Stafford dstrict at the last June count we had 1,397 people registered as un-
  1346
  employed. By the autumn that figure will inevitably be higher. Having perpetuated such an error, the least the Minister can do is to write to Manitou this very week and say that any new application will be immediately and favourably considered. This week he has been eating humble pie by the pound. He may as well eat it now by the kilo. If he does not, the Secretary of State and his ministerial colleagues will brand themselves as political and doctrinaire bureaucrats, indifferent to unemployment and hostile to local enterprise. Fortunately, the present Government will not be much longer in office.
  My own appeal to the incoming Government is to abolish the whole IDC rigmarole. Of course, there must be a policy to help depressed areas, but, it is not that enshrined in the IDC doctrine. Faced by rising unemployment, faced by the need of more investment from within the EEC and from multinational companies, driven by the need for more wealth creation in a freer society, let the IDCs be the first faggots to light a bonfire of unnecessary and literally counter-productive Socialist controls smothering every personal, local and national initiative.
  1.8 a.m.
  The Under-Secretary of State for Industry (Mr. Bob Cryer): In the midst of the invective that I have heard from the right hon. Member for Stafford and Stone (Mr. Fraser), I must say that I am grateful to him for raising this subject so that we can clarify the position on what has become a somewhat confused issue.
  The right hon. Gentleman not only raised a number of misleading notions tonight; I noticed that on 24th May the Stoke Sentinel headed an article
  "Frightening away 350 new jobs".
  The right hon. Gentleman has repeated that sort of claim. Before I take up the specific case and answer the points that have been made, I should say something about IDC control generally, because it is important and the right hon. Gentleman criticised it on a number of counts.
  First, it is important to maintain those instruments of our regional policy—both financial incentives and the IDC control—which will help industrial development in the assisted areas. The right hon. Gentleman himself said that there must be a policy to help depressed areas. That is

  1347
  right. The IDC control is one of those policies that were retained by successive Conservative Governments as well as Labour Governments.
  Secondly, the IDC control helps us to identify projects that have a genuine choice of location and to encourage their location in the assisted areas. Of course, we recognise that many projects for which IDCs are sought will have clear ties to existing locations; for example, source of supplies, customers' locations, and staff immobility. We accept this. We also take full account of the needs and resources of the location sought by the company concerned, especially if it is in one of the areas of high unemployment outside the assisted areas.
  There will be occasions when, in striking a balance between all these factors, it is clear that a project can be considered to be mobile and should be encouraged to locate in the assisted areas. This is the purpose of the control, and in such cases the IDC will be refused even though it may cause disappointment in the alternative areas which have been considered. I should emphasise that the IDC control does not provide any power to direct a project to a particular location—only to withhold approval of the provision of new industrial floor space for it. It is a flexible system—far from the system of Whitehall domination which the right hon. Gentleman suggested—and it may be possible for a firm to acquire existing industrial premises in the area of its choice or to operate within the IDC exemption limit, which was raised by the present Government above the previous limit in May last year because we wanted to see a more flexible application of the policy.
  I turn to the specific case raised by the right hon. Gentleman and deal with the applications by Manitou (Site Lift) Limited. These events started more than two and a half years ago, and, in commenting on these applications, one of my difficulties is that the Department deals with applications for industrial development certificates on a confidential basis with the companies concerned. It would be wrong to discuss the case on the basis of information that the Department had received from the company in confidence. However, a certain amount of information
  1348
  has been well publicised by the company and provided to other parties interested in the project. Therefore, I can comment on a number of items.
  First, when the application was started, the level of unemployment in the Stafford travel-to-work area was 2 per cent. That was half the percentage in assisted areas generally and less than that of the West Midlands area generally, with 2·3 per cent., and a national average of 2·7 per cent.
  I repeat what my right hon. Friend the Secretary of State said when he wrote to the right hon. Member last December, namely, that the IDC was refused because Manitou's project was considered to be mobile and capable of being located in an assisted area. The right hon. Gentleman poured some scorn on this, but "mobile" clearly means that it is not fixed to a specific area, as coal mining, shipbuilding or an industry with a particular geographical or transport centre would be. On the other hand, without prejudging the matter, my right hon. Friend gave an assurance that any proposals made to the Department by the company in the future would receive most careful consideration.
  Mr. Hugh Fraser: Would the Minister, therefore, accept an immediate proposal by Manitou, if it came in?
  Mr. Cryer: I am not sure what the right hon. Gentleman means by "immediate". If the company wrote to the Department —and I shall come to the contacts that we have had—we would give the matter careful consideration.
  When an application for an IDC is refused, we are always ready to reconsider it in the light of any additional information which the applicant submits. This was made clear to Manitou when officials of the Department met the company in February 1975 to discuss why the application had been refused, and these reasons were given to the company in writing also. However, the company did not press the matter then, and there was also no approach from the company following the correspondence with the right hon. Gentleman at the end of last year.
  However, following the refusal of the IDC for Stafford in February 1975, far from Manitou refusing to budge, the company investigated the possibilities of an

  1349
  assisted area location in the North-West, and it applied for and received an industrial development certificate for the project. But I regret that, in the event, the company subsequently decided not to proceed, and more recent Press reports indicate that the company has decided instead to expand its import, distribution marketing operations.
  The fact that Manitou is a foreign-owned firm did not, of course, affect the decisions on thir IDC applications. Productive investment by both foreign and British-owned firms is considered important if we are to improve our industrial efficiency. However, it is a part of our regional policy tht foreign firms considering new investment in Britain should, where possible, be guided to the assisted areas and encouraged to locate there; such propjects are less likely to have ties to particular parts of the country. This policy was successfully followed in the case of Manitou, for the proposal to assemble fork-lift trucks in Britain was a completely new project, with no tics to existing operations, and the company did —following the initial refusal—decide to locate the project in Winsford in an intermediate area.
  Indeed, the company found a site, with assistance from the regional office, and the IDC was granted within six months of the original application for Stafford. The Department contacted the company this year, but there has been no positive response.
  Mr. Hugh Fraser: Perhaps I could help here. I was under the impression that the company, having been refused at Stafford, was helped to the Winsford area, was then rejected, and left the country.
  Mr. Cryer: The IDC was granted for Winsford in Cheshire, and we made it quite clear when we issued the IDC that there were no further difficulties as far as we were concerned. The decision to abandon it was taken because of the economic climate and not because of IDC refusal at Stafford or the assistance to go to Winsford.
  A recent article in the Stafford Sentinel, which suggests that 300 or more jobs were lost to Stafford and subsequently went to Ancenis, near Nantes, in France, is quite incorrect. The number of jobs projected in Stafford was fewer than 70, and at Winsford it was below 90.
  Mr. Hugh Fraser: As the Minister knows, there is a five-acre site in Stafford, and within two years the company expected employment to grow from 70 to 300.
  Mr. Cryer: We were told that the number of jobs was 70, and that was the number given in the application. We have to take account of the actual basis of the application. We realise that this number is not always accurate, but the figure given for Stafford was 70 and for Winsford 90. The company may have had more grandiose ideas for the future, but the application that we received was for 70 jobs. When considering the failure of the company to take up the position—for whatever reason—it would seem wiser to concentrate on the projected number of jobs available and not on future projections.
  There is little more I can say on this particular case except to emphasise what the company was told in February 1975 and the hon. Member was told in December 1976, that any further proposals put to us by the company in future will receive the most careful consideration. This is still the position.
  However, in the time left at my disposal, it would be appropriate, I think, to say a little more about the industrial development certificate control and general industrial and regional policy. Between January 1974 and May 1977, 852 IDCs have been granted in the West Midlands and only 16 applications refused —none in 1976 and 1977, to date. The equivalent figures for Staffordshire are 173 and seven. Most of the projects for which IDCs were refused were considered to be mobile to the assisted areas; the rest were for private speculative developments for which IDCs are not normally granted except when they come within the arrangements announced in February 1976 for the replacement of empty obsolete factories in urban areas.
  The right hon. Gentleman talked of empty advance factories littering the countryside in the assisted areas and of there being no inducements, but it is our experience that industrialists would rather go to a site with an advance factory than to one without. We do not have Draconian powers to force them. We could only ask Manitou to go to Winsford. Although some advance

  1351
  factories are standing empty we are constantly dealing with inquiries. In the Northern Region, a very depressed area, where unemployment is much greater than in staffordshire, more people are now employed in advance factories than in the shipbuilding and mining industries put together. Delegations from the assisted areas often seek further advance factory building.
  As I have said the IDC exemption limits below which the control does not operate were raised in May 1976—removing many smaller developments, in an attempt to make the policy as flexible as possible. I can assure the right hon. Member that the control will continue to be operated flexibly and with under-
  1352
  standing, taking full account of the contribution of a project to industrial efficiency and of the need to encourage industrial investment both inside and outside the assisted areas.
  Some discrepancies arose in this case, but every encouragement was given to Manitou to establish a project in this country. Our information differs from that of the right hon. Gentleman; Manitou's decision not to establish was not connected with the refusal of IDC permission. If the company wished to make a fresh approach to the Department we should certainly give it careful consideration.
  Question put and agreed to
  Adjourned accordingly at twenty-three minutes past One o'clock.

HOUSE OF COMMONS
  Questions
  Questions
  Members'Secretaries (Accommodation)
  Members'Secretaries (Accommodation)
  Social Services and Employment Sub-Committee
  Social Services and Employment Sub-Committee
TRADE
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TRANSPORT
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ENVIRONMENT
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PRICES AND CONSUMER PROTECTION
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AGRICULTURE, FISHERIES AND FOOD
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SCOTLAND
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EMPLOYMENT
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DEFENCE
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SOCIAL SERVICES
  Medical Profession (Merrison Report)
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OVERSEAS DEVELOPMENT
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  Zaire
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HOME DEPARTMENT
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  Grunwick Processing Laboratories Limited
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FOREIGN AND COMMONWEALTH AFFAIRS
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EDUCATION AND SCIENCE
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  Demyelinating Diseases Unit
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NATIONAL FINANCE
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  Prices, Taxation and National Insurance
  Double Taxation Agreements
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  Vehicle Excise
  Vehicle Excise
  Unfair Dismissal (Litigation Fees)
  Unfair Dismissal (Litigation Fees)
  Investment Income Surcharge
  Investment Income Surcharge
  National Savings
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  Association of Biochemists
  Association of Biochemists
  Age Allowance
  Age Allowance
  Beer, Wine and Spirits
  Beer, Wine and Spirits
  Cigarettes
  Cigarettes
  Teachers' Salaries
  Teachers' Salaries
  Personal Incomes
  Personal Incomes
  Income Tax
  Income Tax
NORTHERN IRELAND
  Prisoners
  Prisoners
  Cattle Trade
  Cattle Trade
  Electorates
  Electorates
  Departmental Questionnaires
  Departmental Questionnaires
  Devolution
  Devolution

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

OLD PALACE YARD: TRAFFIC RESTRICTIONS
Lord AMULREE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are sure that the GLC enforces the Greater London (Restriction of Commercial Vehicles) Traffic Order 1975 in relation to the passage of heavy lorries past Old Palace Yard, the number of which seems to have increased during the past few months.
Lord WELLS-PESTELL: My Lords, the enforcement of this order in respect of the road past Old Palace Yard is a matter for the Commissioner of Police
2
of the Metropolis. The Commissioner assures my right honourable friend that he devotes as much enforcement effort in this area as manpower resources and other police commitments permit.
Lord AMULREE: My Lords, I should like to thank the noble Lord, Lord Wells-Pestell, for his reply, which is satisfactory as far as it goes. However, can the noble Lord tell me whether the police ever do a series of spot checks, especially upon heavy lorries coming from Europe and abroad in general?
Lord WELLS-PESTELL: My Lords, I think that the police do rather better than that, in the sense that there are a regular number of police on duty in the areas concerned. The evidence available shows that there have been fewer contraventions in recent months than in the previous periods. The difficulty that the police have as regards foreign lorries is, first of all, the language problem because the lorry drivers are often not aware that they are contravening one of our regulations. Secondly, when they are told, they are unable to understand it. Thirdly, if proceedings are contemplated, there is the difficulty of summoning a person who is non-resident in your Lordships' country.
Lord REIGATE: My Lords, is not some instruction given to drivers of vehicles arriving in this country as to the type of restrictions which they have to obey?
Lord WELLS-PESTELL: My Lords, there should be. We really have no way of telling whether it is given, but it is certainly required of them.
Lord AMULREE: My Lords, I should like to ask one further question. Does the problem concerning lorries arriving with goods arise as regards coaches bringing tourists here? The number of coaches seems to have diminished in the past few weeks.
Lord WELLS-PESTELL: My Lords, I was aware when I saw the Question of the noble Lord, Lord Amulree, that he had asked a Question about coaches some time ago. I have looked into the matter and I find that, under the Traffic Management Order 1975, coaches are exempt, as are all passenger carrying vehicles. Therefore, they are not subject to the order.

POSTAL SERVICE: LONDON/PARIS
2.38 p.m.
Lord BOYD-CARPENTER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in order to facilitate business within the EEC, they will take any steps which are necessary to secure the provision of an adequate, punctual and speedy postal service between London and Paris.
Lord WINTERBOTTOM: My Lords, that is a matter for the Post Office and the noble Lord, Lord Boyd-Carpenter, should write to the chairman of the Corporation on it.
Lord BOYD-CARPENTER: My Lords, yes; but is the noble Lord, Lord Winterbottom, aware that properly stamped and correctly addressed correspondence between London and Paris
4
is now taking between 12 and 13 days for delivery? Is the noble Lord aware of the fact that that is twice the time that postage took before the French Revolution? In the light of that, if the Post Office is unable or unwilling to provide a proper and punctual service, is it not up to Her Majesty's Government to suspend its monopoly and let somebody else have a try?
Lord WINTERBOTTOM: My Lords, the Post Office tell me that the service has been affected by labour disagreements, almost all of them on the other side of the Channel.
Lord CAMPBELL of CROY: My Lords, will the Government take any steps necessary to secure an adequate, speedy and successful postal service between London and London?
Lord BRUCE of DONINGTON: My Lords, is my noble friend Lord Winter-bottom aware that, if he compares the performance of the British Post Office with that of any other leading Continental or trans-Atlantic country, he will find that, in terms of time, our British postal services are roughly twice as efficient as those of our nearest competitor?
Lord WINTERBOTTOM: My Lords, I am most grateful to my noble friend Lord Bruce of Donington, who has stated the facts.
Lord GLENKINGLAS: My Lords, though I agree that the position as represented by the noble Lord, Lord Bruce of Donington, was accurate a few years ago, will the noble Lord, Lord Winterbottom, bear in mind, in view of the question of my noble friend Lord Campbell of Croy, that it is now regularly taking five days for a ninepenny letter to get from one address in London to another? If that is so, then 12 days to Paris may, I suppose, he regarded as rather quick.
Lord BRUCE of DONINGTON: My Lords, I should like to ask a further question which arises from the supplementary that has just been addressed to my noble friend. May I inform him—
Several noble Lords: No!
Lord BRUCE of DONINGTON: My Lords, may I ask the noble Lord whether he is aware that the figures that I provided to the House were for 1976 and that they were published in the national Press a fortnight ago?
Earl ALEXANDER of TUNIS: My Lords, will the Minister reconsider the two-tier postal system, as the first-class system is taking just as long as the second-class?
Lord WINTERBOTTOM: That is an entirely different question.

AGRICULTURE/HORTICULTURE CAREER STRUCTURE
2.41 p.m.
Baroness VICKERS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what encouragement is given to school-leavers to take up careers in agriculture and horticulture and what are the arrangements for their training.
Lord WALLACE of COSLANY: My Lords, the Careers Service aims to present the widest possible range of careers to children. Careers programmes in schools commonly include talks, films, and visits to places of employment in agriculture and horticulture. Excellent booklets and wall charts are available in the school libraries. Boys and girls who are suitable for, and interested in, agriculture or horticulture are encouraged to take advantage of available opportunities. Training is by way of apprenticeship under conditions administered and supervised by the Agricultural Training Board or by full-time and sandwich courses leading to the Ordinary or Higher National Diploma, National Certificate or degree courses in agriculture.
Baroness VICKERS: My Lords, I thank the noble Lord for that reply. How many vacancies are there in these two industries, and what is the number of young people who have recently gone into them? In view of the fact that the Government are shortly to print a new version of Food from our own Resources,
6
will the noble Lord include a special chapter in it pointing out the advisability for young people to take up this career?
Lord WALLACE of COSLANY: My Lords, perhaps I could first reply to the latter question asked by the noble Baroness. Most certainly I shall ensure that the information is passed on to the responsible Department, which of course is not the Department of Employment. I cannot readily, without notice, give the number of vacancies. However, I would draw the attention of the noble Baroness, Lady Vickers, and noble Lords to the fact that there is an increasingly wide choice of careers in the world of agriculture. In 1977–78 over 500 non-advanced and advanced courses which are run by the Department of Education and Science are listed, compared with 272 in 1967–68 when the first edition of the booklet was published.
Lord LEATHERLAND: My Lords, does not my noble friend think that more young people would go in for agriculture if the pay was better?
Lord WALLACE of COSLANY: My Lords, it entirely depends into what section of agriculture a young person goes and on the qualifications of the person concerned. There are some well-paid posts for well-qualified people, but the rate of wages for agricultural workers generally is a matter for negotiation by the responsible unions. Of course, it has been said in the past that one reason for the drift from the land is low pay, but I do not think that that necessarily applies today.
The Earl of ONSLOW: My Lords, as the Government are encouraging ICI to increase its fertiliser costs, how can that not reduce the pay to agricultural workers and thus make their jobs less attractive to school-leavers?
Lord WALLACE of COSLANY: My Lords, with due respect to the noble Earl, that is an entirely different question.
Lord MACKIE of BENSHIE: My Lords, does the noble Lord appreciate that we employ the smallest percentage of people in Europe on the land, aid that in farming we receive the lowest return in Europe? Does he agree that in Germany 1 million more people are employed on the

7
land and that from less arable land they produce much more of their food than we produce for ourselves here? Does the Minister agree that there is some relationship between the return to farming generally, the small number of people employed in it and the increasing use of so-called labour-saving weedkillers in this country, the long-term results of which we know nothing about? Does he not perhaps agree that some revaluation of the Green Pound might make more jobs available for school-leavers?
Lord WALLACE of COSLANY: My Lords, having done a certain amount of backaching weeding this weekend, I am all in favour of an efficient weedkiller. Many of the noble Lord's questions do not come within the province of the Department for which I am answering, which is the Department of Employment. I would suggest that, taken by and large, British agriculture is far more efficient than that of many other countries, even in Europe.
Baroness EMMET of AMBERLEY: My Lords, as well as encouraging young people to go in for agriculture, would the noble Lord encourage them to go in for aquaculture? And what facilities are available for that?
Lord WALLACE of COSLANY: My Lords, I would entirely agree with the noble Baroness.

DUMBARTON COUNCIL: HOUSING FINANCE POLICY
2.47 p.m.
Lord CAMPBELL of CROY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they propose to take upon the report of the Commission for Local Authority Accounts on the failure of Dumbarton District Council, as constituted before the last council elections, to pursue a responsible housing finance policy.
The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill): My Lords,
8
my right honourable friend the Secretary of State for Scotland has received the findings and recommendations of the Commission for Local Authority Accounts in Scotland on the subject of Dumbarton District Council housing rents. In this case the Commission recommended to my right honourable friend that he should not make a order under Section 104 of the Local Government (Scotland) Act 1973. My right honourable friend has accepted the recommendation of the Commission.
Lord CAMPBELL of CROY: My Lords, I thank the noble Lord for that reply. Is not the most glaring case in the country of rent irresponsibility by a council confirmed by this report? An intolerable burden has been placed on ratepayers because the council's conduct disqualified them from receiving substantial subsidy. As 10 individual councillors have been held responsible and seven of them are no longer on the council, will the Government ensure that the ratepayers are not financially penalised and that an opportunity is provided for these shortcomings to be redeemed?
Lord KIRKHILL: My Lords, I do not dissent from the earlier part of the noble Lord's remarks. I tend to agree that an error of judgment was made by the councillors to whom he referred. I cannot respond with confidence to the second part of his question. I do not think that, under Section 104 of the Local Government (Scotland) Act 1973, there is provision for the Secretary of State to take the kind of action which the noble Lord suggests.
Lord GLENKINGLAS: My Lords, will the noble Lord bear in mind that what my noble friend has described as an error of judgment has been going on in that area for the last 20 years, and it has been done quite deliberately for perfectly obvious reasons? I hope that the Secretary of State can take some action.
Lord KIRKHILL: My Lords, I can advise your Lordships' House that, as from 1st April 1977, the beginnings of a new rent structure have been under way in that particular district.
Lord STRATHCLYDE: My Lords, will the noble Lord ensure that something is

9
done to remedy the injustice which has been done to the ratepayers of this part of the country through no fault of their own, except, I suppose, that they elected the wrong people to represent them?
Lord CAMPBELL of CROY: They will soon put that right, my Lords.
Lord KIRKHILL: My Lords, I can only stand on the reply I gave to the noble Lord, Lord Campbell of Croy: no part of Section 104 is capable of being interpreted as the noble Lord might wish.

POWER PLANT INDUSTRY
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m. my noble friend Lord Strabolgi will repeat a Statement on the Power Plant Industry.

PRICE COMMISSION BILL
2.51 p.m.
Report received.
The Earl of MANSFIELD The Earl of MANSFIELD moved manuscript Amendment No. 1A:
After Clause 4, insert the following new clause:
Twelve month rule
"In the event that no resolution in effect continuing the twelve month interval between major pay increases is passed at the Trades Union Congress in September 1977, the provisions in section 4(2)(b) and section 5(2)(a) of this Act and all other provisions in this Act directly consequent upon them shall be in abeyance until such a resolution has been passed at a subsequent meeting, or until an order or document to such effect has been laid before Parliament by command of Her Majesty".
The noble Earl said: My Lords, I appreciate that it is not considered wholly desirable to have manuscript Amendments at this stage of a Bill's passage, and in many ways this Amendment would have been better tabled on Third Reading, after a reasonable period for pause and reflection in which we may all take stock of the events of the last few days. But as it has been agreed that Report and Third Reading should be taken on the same day—in other words today—and as it was thought desirable that this arrangement should be adhered
10
to and not disturbed, this is the only way in which the developments which have taken place can be ventilated in your Lordships' House before the Bill goes back to the other place.
There most certainly have been developments, and it would appear that they crowd upon each other too fast for the Government and certainly far too fast for the Bill; I say that against the background of the Government's Social Contract which, as I understand it, has always been the cornerstone of their efforts to contain inflation. The fact of the matter is that these efforts have not entirely been crowned with success. Each year prominent members of the Cabinet confidently go on record as forecasting a rate of inflation in single figures or thereabouts in the not too distant future, but the rate of inflation remains obstinately in the teens and one rather supposes that it is likely to do so for some period in the future.
The causes of the continuing failure to brine down inflation are outside the scope of the Bill and this debate, but in the ruins of the Social Contract much of the justification for the provisions of the Bill deserve even greater scrutiny than perhaps they did before. Both the miners and the railway workers have now gone on record to state what they regard as proper wage settlements in their respective cases during the next round, and it is safe to say that a forecast that wage settlements or increases will be of the order of a maximum of 10 per cent. would be optimistic rather than realistic.
I say all this because companies and undertakings which will have the duty of trying to make bargains with the unions over pay will now not only have to do so without a meaningful set of guidelines but they will still have to operate within the terms of this Bill. To take one example, Clause 17 of the Bill purports to extend the operation of Section 1 of the Remuneration, Charges and Grants Act 1975, and that section is of course dependent on pay limits set out in a White Paper. In his Statement in the other place last Friday this point was reinforced by the Chancellor of the Exchequer when he said:
"It is necessary to continue the provisions in relation to employers in the Remuneration, Charges and Grants Act 1975 to the extent needed to support and enforce the TUC guidance on

11
the 12 month rule. An order will be required under that Act to achieve all these purposes ".—[Official Report (Commons), 15/7/77; col. 990].
Previously, of course, Section 1 was always dependent on pay limits which were set out in a White Paper, so unless we are to have a White Paper and unless, as I understand it, that White Paper deals with limits, Section 1 cannot be renewed. Therefore I ask the Government to tell the House, and more importantly to tell those outside who are trying to rethink their lives and how they propose to run them, how they propose to deal with the situation. If a White Paper containing what I might call the 12 month rule is produced, that will scarcely suffice in my estimation; if any reference is made to 10 per cent. as a maximum, that, I suggest, will be greeted with cries of derision by those trade unions which have already voted at their conferences to obtain much more for their members if they can do so. One is therefore faced with that immediate question in relation to this Bill and this clause within it.
I come to the question of sanctions, where there seems to have been a great deal of confusion, and I wish to give the Government an opportunity to deal with the matter today if the noble Lord, Lord Oram, is in a position to do so. When I talk about sanctions I refer, of course, to firms which, probably through no desire of their own, are compelled, if that is the right word, to give in to demands which are outside the policy either as regards the size of a settlement or its frequency.
It is not difficult to envisage what I might call a Scylla and Charybdis situation. A firm will be squeezed between the Scylla of a powerful union which wishes, in terms of a perfectly properly conducted meeting or conference, to press for a wage claim which it considers is desirable and deserved, and the Charybdis, the whirlpool of the possible sanctions which will be imposed against a company or undertaking by the Government if it gives in to the wage demand which has been put forward by the union concerned.
What is Government policy likely to be in such a situation? If I may say so, the Chancellor of the Exchequer was extremely vague. He said in effect that the Government would take into account
12
such bargains or wage settlements which are outside whatever policy is left; the Government would take that into account in public purchasing policy and the placing of contracts, and in the consideration of industrial assistance.
The newspapers, on which one places as much or as little reliance according to one's political position and inclination, have taken this to be twofold so far as possible Government action is concerned. First, it is said that if a company has "sinned" the Price Commission will be instructed to refuse to allow the company to claw back whatever it has paid out by way of the unjustified increase by curtailing its next price increase which will come about after the wage settlement. If that is so—and a great many respected commentators, at least in the Sunday Press, were saying that it was—it makes a nonsence of the often-repeated assurances, which we have been given in this House and in the other place, that the Price Commission will be a wholly independent body in that it will not take orders from the Secretary of State, except where enjoined to do so by Statute, its chairman will be like Caesar's wife, it will try to do justice as between the company and the consumer, and will be independent in terms of the public interest. If, as I say, a company is to be punished in this way, it will make nonsense of all the assurances we have been given until now, and it will be a matter which we shall want to consider very carefully in the short time the Bill remains in this House.
On the other hand, it may be that nothing so sinister is to be read into it, and that the Government will invoke no sanction other than in the two matters to which the Chancellor referred directly: public purchasing policy and the placing of contracts, and the consideration of industrial assistance. As many companies are quite outside that field in both limbs, it is difficult to see that any meaningful sanction at all is placed in their way, if they take the easy way out.
I appreciate that all kinds of points regarding drafting and semantics might be hurled at the Amendment—though the noble Lord shakes his head, and for that I am obliged, if not grateful. In the Amendment we have tried to give the Government an opportunity of stating—I was going to say the "form", but that

13
is much too frivolous a word. We are concerned with the idea with regard to the Bill. The noble Lord knows very well, and those Members of your Lordships' House who have read the Bill will divine, that Clauses 4 and 5 place sanctions against firms whose activities in the form of a price increase, or margins, are being investigated. We have tried to say to the Government—not altogether successfully, I feel—that the one thing about which many firms are anxious is the freeze which will be the inevitable outcome of such a notification, or investigation, by the Commission.
In one sense we are all in agreement that if there is no norm, or no 10 per cent. maximum to be imposed, the only way in which there will not be galloping inflation will be by the 12 months' rule. Members of the Government have repeated their commitment to it fairly recently. At the same time, I believe it is realised, at any rate at the moment, even by the Government, that one cannot just pay lip-service. I have here a quotation of what the Chancellor said at a union conference on 24th April:
"It is no good relying just on vague expressions of good will to deal with the pay policy problem. We tried that 10 years ago with the famous solemn and binding declaration. It melted away like butter in the sun".
The Prime Minister himself said on 18th May this year:
"I beg all trade unionists, let us not have productivity agreements that are just cosmetic. That will merely disguise the true increase. They will only give the Government a fig leaf, which I do not want. I do not want to deceive people".
That last sentence must be the most famous under-statement of the year.
The Amendment proposes that unless and until the Trades Union Congress, which is the means by which the whole trade union movement expresses its intentions for a coming period, comes down and reinforces what the Government tell us should be done, the penal provisions included in Clauses 4 and 5 of the Bill will not come into effect. I shall be interested in what the Government have to say, and in what our Liberal colleagues have to say. They have gone on record, quite rightly, as saying that they are as determined as any other Party that there should be a meaningful prices, but also an incomes, policy for this country.
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I suggest that at the moment the incomes policy is in ruins, and it would be useful to know their reaction to it.
3.7 p.m.
Lord ORAM: My Lords, it has been said that a week is a long time in politics, and the noble Earl, Lord Mansfield, was quite right to point to last week as having been a little unusually long in terms of negotiations about pay policy, and so on. But I think that it will become clear that important, indeed dramatic, though some of the developments of last week were, the effect on the Bill now before your Lordships' House is much less dramatic than might appear at first blush. The noble Earl quite understandably, prefaced his moving of the Amendment with a number of observations about economic policy in general, referring to the history of the Social Contract. On that point I would urge him to consider his own dictum that the causes of inflation over the past two years have been outside the parameters of the Bill and, indeed, to a large extent, outside the operations of the Social Contract.
I would say that any fair assessment of the past two years must acknowledge that restraint on the part of the trade union movement in fulfilment of its part of the Social Contract has been commendable. As we well know, there have been factors causing inflation outside trade union demands, but there can be no doubt that the Social Contract has made a major contribution to the economic situation over the past two years. It is true that the events of last week begin to point to a change of emphasis and a change of direction, and that, as the Statement of my right honourable friend the Chancellor of the Exchequer made clear, we now see ourselves moving into a new phase, which we characterise in the phrase, "the ordered return to collective bargaining". But, although I make no complaint that the noble Earl introduced these general considerations into his speech, I would remind him and your Lordships that in two days' time we are to have a major economic debate, and I would suggest that we can turn our thoughts to the particular provisions of the Amendments before us and leave more general economic considerations to that debate, to which I am sure we are all looking forward with eagerness.

15
The noble Earl, Lord Mansfield, then went on, taking as his starting point Clause 17 and the reference therein to the Remuneration, Charges and Grants Act. He pointed out, quite rightly, that that refers to pay limits; and he wondered what was the Government's position in respect to this. He was asking about the White Paper, in particular. He quoted (and I shall therefore not need to do so) the significant phrase from the Chancellor of the Exchequer's Statement on Friday, indicating that an order will be necessary. I can go on to indicate, in direct answer to the noble Earl, that a White Paper will be issued and an order will be made, and that this will be done within the next two weeks, before we go into Recess. That information, of course, could have been understood from the statement that the noble Earl read out, but I have now put it more certainly on the record; and it seems to me, if I may say so, to a large extent to invalidate at least the opening phrases of the Amendment that we are now considering.
My Lords, the Amendment and the speech from the noble Earl to which we have listened link the "freeze" power which is provided in the Bill almost exclusively to the immediate pay situation. I shook my head when the noble Earl thought that I might be going into technical drafting matters. I do not propose to do that, but there is one small slip that I think he would wish me to point out. I believe that the reference in the Amendment to Section 5(2)(a) should in fact be to Section 5(3)(a), but that is an understandable slip. As I was saying, the Amendment links the freeze powers of the Bill to the immediate pay situation; but the Government have made it clear many times in another place—and I recall that I tried to do so at the Committee stage last week—that this freeze power contained in Clause 4(2)(b) and Clause 5(3)(a) is an important part of the permanent investigatory powers, which have a long-term purpose connected with competition policy as well as the shorter-term role in counter-inflation policy. The power must be seen as having the two purposes, and I would say that the first, long-term purpose connected with competition policy is, in this context, the more significant. For that reason alone, the Amendment cannot
16
be accepted by the Government. The removal of the freeze powers would completely undermine the effectiveness of investigation because, again as we were saying last week, there would not even be a roll-back power which would be available after investigations in order to cut back unjustified price increases.
The noble Earl went on to deal with the question of the pay sanction, and I hope now to make that position clear in response to his inquiries. The position of companies which breach the guidelines for the next 12 months which were announced last week was, as I have said, clearly stated in the announcement from which the noble Earl quoted and which I also mentioned. A White Paper will be published very shortly, and, by means of an order under Section 1 of the Remuneration, Charges and Grants Act, will enable the continuation of the 12 month interval between pay settlements to be supported by sanctions against companies which breach the 12 month rule. The sanction in the price controls will be the disallowance of the full cost of the relevant settlement in calculations made of the margin controls in the Price Code, and this sanction—and this is a point in which I think the noble Earl was particularly interested—will not be used to support other aspects of the Statement on pay policy. Nor will it involve the use of the freeze power in the Bill, which will continue to be governed by the requirement on the Price Commission to have regard to the criteria in Clause 2. Therefore, my Lords, the Amendment is unnecessary because the 12 month rule will, as I have said, be promulgated in a White Paper which will be laid before both Houses in a draft order under the Remuneration, Charges and Grants Act. It will be debated before the end of the month. Of course, in reference to the opening words of the Amendment, it is clear that that will be well before the TUC meets in September.
Surely we all recognise that we are in a very delicate situation economically, and I think that we are all anxious—the CBI and the TUC have made it clear—not to have a wage explosion. This means that we shall all have to play our part in avoiding such a wage explosion. As I have indicated in respect to the 12 month rule, the CBI has made its position clear;

17
the TUC has made its position clear; and the Government have made their position clear, as I have spelt out several times already this afternoon. I would urge that, in facing this delicate economic situation, all of us should play our part to avoid a wage explosion.
Baroness SEEAR: My Lords, as the noble Earl has said, we on these Benches have always been, and still are, strongly in favour of a policy to exercise control over both pay and prices. Therefore, we attach the greatest importance to the continuation of the 12 month rule. This was why I raised the issue of the 12 month rule after the Statement had been read last Friday by the noble Lord the Leader of the House. I received a reply in writing—a very courteous reply, if I may say so—from the noble Lord, Lord Oram, confirming, as he has again confirmed today, that the 12 month rule stands.
Of course, if you are going to have a return to something like free collective bargaining—and we understand that the Tory Front Bench wants a return to free collective bargaining—and are at the same time going to have some control exercised by Government over excessive pay claims and, particularly in this case, over abuse of the 12 months' rule, it follows inevitably that employers entering into negotiation are in the front line. That is the position in which, I believe, they choose to put themselves if they favour a return to free collective bargaining. They will have to stand to the problems which arise when they are caught, as they see themselves caught, between the pressures of the trade unions pushing to breach the 12 months' rule (if, and in so far as, they do so) and the absolute necessity of the Government maintaining the control of prices.
There is no way out of this. Therefore, we warmly welcome the Minister's reaffirmation that the 12 months' rule holds. If employers in negotiation are unable to resist the pressures of trade unions—and in collective bargaining it is part of their role to do this, part of what they are paid to do as managers in resisting excessive wage claims—it inevitably follows that some sanctions will have to be exercised through the price control system.
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Even if this were not so, in our view the Amendment as it stands is inappropriate. It is not the right way in which it should be worded to require that a statement should come from the TUC over which this House has no direct jurisdiction in any way. What we want, and what I understand we have got from the Government, is affirmation that the Government will enforce the 12 months' rule. We want to see the Government strong in their determination to ensure that there are effective controls over pay increases. One instrument here is, and must remain, that of setting price controls. May I say that we go along with the Minister in saying that the power to investigate is part, not of establishing the pay policy alone, although this is important, but part of getting a more effective competition policy, and it must be maintained for those reasons. It also stands to reason in this extremely delicate situation, in which so much depends on the public recognising the importance of not having a wage explosion, that it must be seen that there are to be, where necessary, controls of prices. We cannot support this Amendment.
3.23 p.m.
Lord LEE of NEWTON: It seems to me that the Opposition have not quite made up their mind whether we are again debating their Amendment of last week or anticipating the debate of Wednesday next. We debated this principle last week and I ventured to ask whether the Opposition do or do not want an incomes policy. The noble Lord who is now sitting on the Front Bench opposite told us that, on balance, he preferred an incomes policy. I was reading of where his right honourable Leader was sneering at the effects that the incomes policy had had over the last two years. They must make up their minds. People like me are in the clear. I want an incomes policy. I have wanted one for over 30 years. I believe that it is a retrograde step to go away from one. Will somebody opposite get up and say that?
I listened to the noble Earl, Lord Mansfield, who first based himself on his fears which were acute because of what the miners had said, what the T. & G. had said and what the engineers had said. All those fears would be at once assuaged, he said, if the TUC tell

19
us not to take any notice of them. The noble Earl should know that the TUC has no executive powers over its components. Therefore, to say that one would be satisfied with a declaration from the TUC is either very naive or very hypocritical. One cannot have it both ways.
The noble Earl said that he was afraid that the employers were going to be squeezed between militant trade unions and the Government which would penalise them. I do not want to go too far back, but years ago when we had the Prices and Incomes Board (which the Tories obliterated) we used to take care of this. We had the early warning system and when employers told us that they were to ask for increases in their prices, if they referred to foodstuffs or products of that kind the matter went to the Ministry of Agriculture who did an absolutely first-class job in assisting the employers either to modernise their structure in order that they could diminish the amount of increase that they were claiming, or to wipe out the need for the increase at all.
Had not the Party opposite been so keen to wipe out Mr. Aubrey Jones and his board, that position could have maintained until now and this dilemma in which the noble Earl finds himself would not occur at all. I understand his apprehension—I share it—on the 12 months' rule. I was pleased to hear my noble friend say what he said. But one fine day all of us, either in this House or in the other place, will have to get around to the fact that the time factor is not the important one in this respect. Productivity is the important factor. We reached the stage not long ago where we were paying ourselves 30 per cent. increases while the GNP was falling. If we do not have the 12 months' factor (which I accept as a minimum) Heaven only knows where we would finish. We must begin to bend our minds to a different proposition of the time factor. If you are in an inflationary situation in which Governments dare not expand the economy, how can you possibly say that in 12 months from now we can all go for another x per cent. and we shall be all right?
I am pleased to hear that the time factor will stay, that the 12 months' rule will maintain; but I do not think it is the
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kind of assurance which the nation would want to hear. At this moment I am still a seeker after knowledge. I want to know whether the Tory Front Bench in another place is right or the Tory Front Bench in this House is right. They cannot both be right. I should like it if the noble Earl were to grant me the privilege of letting me know which attitude in the end the Tory Party is going to take. I should be grateful.
Lord BOYD-CARPENTER: I should like also to ask a question, but to ask it more appropriately of the Minister responsible. I am bound to say that I am inclined to agree with Lord Oram's criticisms of the exact terminology of the Amendment which we are debating, but he has such an agreeable "Box-side", almost bedside, manner that I think perhaps he did lull some of us into not concentrating on what seems to me to be the most important practical point behind this Amendment. That point, it seems to me, is the position in which private employers now stand in view of the fact that the right honourable gentleman the Chancellor of the Exchequer virtually said last Friday that wage control goes and price control—and, for that matter, dividend control—remains.
We have been told—indeed the Chancellor of the Exchequer told us on Friday—of the dire and terrible penalties which would be inflicted on employers who give way to wage demands which were in excess of the guidelines which the Government have indicated. The noble Baroness on the Liberal Benches seemed to think that on the whole it would be a rather wholesome discipline for employers to be exposed to this situation. With respect, the matter cannot be brushed off as easily or as lightly as that. There are industries, especially of a capital intensive nature, where a continuous process is required or where grave loss is suffered from stopping plant, in which, particularly in view of the limited number of men employed in relation to the capital employed, it is obviously in the ultimate interests of the company and its shareholders to go quite a long way in response to wage demands. It is not all that easy without some help from the Government to deal with the situation in which the management of such a company—particularly a continuous process, high capital

21
intensive industry with a limited amount of labour—is placed when it has to choose between a total addition to the wage bill which, though it will outrage the Government's guidelines, will be comparatively small in relation to the turnover of the company and the appalling loss which a halt to its productive process, and the putting of all its expensive capital equipment into silence, will produce.
We have heard of the penalties which the Government will impose. I should like to ask the noble Lord what help they will give to a company which, having a high sense of public duty and fully accepting what the noble Lord himself has said as to the delicacy and difficulty of the situation, despite its own economic interests, and despite the interests of its shareholders, none the less resists such a claim? This thought is tied up with and lies behind the phraseology of this Amendment. As things stand, we have the penalties spelt out, either by the Chancellor or under the Bill before us. We have not heard what help is to be given. We have heard a great deal about the stick, but not even a nuance of mousse of carrot has been dangled in front of us.
If the Government are, as I hope, to have the support of the private industrial sector on this, from the point of view of the future of our nation's economy, gravest of national issues, they must first take account of the very different circumstances of different types of industry. They must recognise that labour intensive industry and capital intensive industry are in a totally different position in respect of these matters. They must show some understanding, particularly of the needs of the capital-intensive section, and give some indication that if, contrary to the apparent interests of their shareholders, the management of such a company stands firm, the Government will see to it that, at the end, the company does not suffer for it.
3.33 p.m.
Lord KALDOR: My Lords, I wish to question some of the remarks that the noble Lord has made. On the train a short while ago I read the Chancellor's Statement to the House last Friday. It would not be correct to say that a company which breaks the rules of guidelines is threatened with dire and terrible
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punishment. I believe that those were the words that the noble Lord used. On the contrary, I thought that the measures were rather mild. They mean that a company which does not follow the guidelines but gives a wage increase in excess of them, may be put at a disadvantage in the award of Government contracts. That is about as far as the Statement went. That was very far short of the demands of many people, particularly the Liberal Party, that the company which does this should have the excess payments taken out of its profits, either through price control or some other instrument. The Government were rather mild.
When one takes the other part of the question—concerning the help which the Government give to firms which try to follow the guidelines—the Chancellor made it clear that it would not be possible for the Government to give positive help other than ensuring that a company will be favourably treated in Government contracts, and so on. It was said that the employers' organisations were discussing the possibility of providing such help. I do not think that it would be right to say that dire or terrible punishments are proposed: nor would I agree that capital-intensive industry is under greater danger here than a labour-intensive one. It is precisely the capital-intensive industry which provides little labour and, therefore, can afford to pay high wages without much disadvantage to itself. It is the labour-intensive industries who face the threat of going out of business.
Lord BOYD-CARPENTER: My Lords, would the noble Lord allow me to speak? I must have failed to make myself clear, because I agree with him on that point. It is the capital-intensive industry which, because it can so easily afford to pay increased wages, is under the greatest temptation, in the interests of its own prosperity, to accept excessive wage claims.
3.36 p.m.
Lord MOTTISTONE: My Lords, if I may suggest it, we are drifting a little from the Bill. The purpose of this Amendment is to modify, if not remove the effects of the freeze in the event of there being no declared policy which is capable of implementation, either on the

23
part of the Trades Union Congress—and I know that there are objections and the noble Lord, Lord Lee of Newton, made this point earlier—being called upon to exercise authority because its position is not one which enables it to do that easily, or on the part of the Government. We were promised a White Paper last Friday, if one is to believe the newspapers, and we did not get one. I forget whether there was any public statement to this effect. We received a Statement from the Chancellor.
The Statement from the Chancellor said many things, but it did not have the authority of a White Paper document or even the laying of a draft order, and so it seems therefore that one needs to have another look. The game has changed since the Committee stage last Monday and Tuesday; we have a new picture. Whereas last Monday and Tuesday we were arguing in relation to this subject of the price freeze for four months or three months, depending on which clause applies, under conditions in which there might have been some pay restraint—whether imposed by the TUC, as it has been in the past couple of years, or by the Government is of no import—we now have a picture in which this price freeze is liable to be imposed when there is not a corresponding restraint on pay.
To put it simply, this is unfair; but of course that is by the way. In this environment, perhaps fairness is not the issue which would claim your Lordships' greatest consideration. But, apart from that, we argued very strongly on Monday last about why the question of a freeze can be so damaging to companies and, indeed, can in its turn lead to the smaller companies for sure, and probably some of the bigger companies as well, going out of business because of the increases in costs which may come their way during the course of the four months. I admit that then and, I think, now the main increase in cost to which we are addressing our thoughts is that caused by costs of overseas raw materials.
In that area we are particularly worried, because the experience of the past two or three years has from time to time shown that there can be a cost increase of an order which would wipe out the possible price increase of which somebody had
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given notification which would lead to an investigation in the short period of four months. It is that situation against which we ought to be safeguarding companies which would find themselves in such difficulties that they caused the very situation we want to avoid—increased unemployment—due to the necessity to reduce their activities considerably because of the effects of this four month period.
Your Lordships will have seen last week that, after I think three years, the Monopolies Commission reported on the bread industry. They found that the low profits of the industry were caused entirely by Government interference and not by a misuse of power by the three big bread-making concerns of this country. That bears out the fact that any increases people are going to apply during the immediate future in any competitive industry are not going to be applied because people are going to misuse their powers, but because the market requires it of them. Therefore, if people apply for a price increase and need to have it in order to make their business competitive, they are applying for purely business reasons and not because they are wicked, cruel, unkind or any of those other things. So it seems quite unreasonable for there to be built into this Bill the ability to freeze prices—because people will be asking for increases only because they need them and not because they want to take advantage of the situation, or something of that nature.
For that reason, it seems to me that we need to consider very carefully what we are dealing with in this Amendment. We are dealing with the fact, as I suspect it to be, that the Government's reason for putting in a price freeze was as a bargaining counter to ensure that they got a viable, meaningful and enforceable form of pay restraint. Indeed, in another place the Secretary of State said as much, although in other words. But they have not got a viable, enforceable pay restraint as things stand at the moment.
I was delighted that the noble Lord, Lord Oram, said there would be a White Paper before Parliament went into Recess. That may be what we are seeking: if so, well and good. In that case the Amendment, as phrased, is more than covered. There will be every reason for saying that this Amendment should be agreed

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to by your Lordships because it says that if there is a viable document which takes care of the situation within the Amendment, then there will be no need to put these things into abeyance.
I personally have doubts about the wisdom of that because, as I tried to indicate, I believe this price freeze section is misconceived in the first place; but if it is purely a bargaining counter, let us treat it as such—in which case, though there may well be all sorts of technical faults in my noble friend's Amendment, for heavens sake! let us treat it as a bargaining counter, put it in the Bill and, if the Government come up with a White Paper, that will be jolly good and the effects of this Amendment will not be realised. I would say to my noble friends that if they felt it right to press this Amendment I should be happy to support them.

POWER PLANT INDUSTRY
3.44 p.m.
Lord STRABOLGI: My Lords, with the leave of the House I should like to repeat a Statement at present being made in another place by my right honourable friend the Secretary of State for Energy. The Statement is as follows:
"The Secretary of State for Industry has informed the House that it has not at this stage proved possible to find an acceptable basis for restructuring the power plant industry. At the same time the Government recognise that the current lack of home orders, together with the relative lack of export opportunities in present economic circumstances, has led to a pressing short-term need for work in sections of the industry. To help with these short-term problems the Government have now decided that it would be right for the Central Electricity Generating Board to place an order for Drax 'B' coal-fired power station and that the order for turbo-generators should be negotiated with C. A. Parsons.
"The Central Electricity Generating Board had not planned to place an order for the station before 1979 and the Government have agreed in principle to the payment of compensation to the Board in respect of costs incurred in bringing forward the order.
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"The Government further anticipate that, as soon as possible following the thermal reactor decision, an order will be placed for a nuclear station. The power plant industry will also benefit from ongoing repair and maintenance programmes.
"The Government believe that the order for Drax 'B', in addition to benefiting the power plant industry, is a further mark of confidence in the United Kingdom coal industry."
My Lords, that concludes the Statement.
3.46 p.m.
Lord CAMPBELL of CROY: My Lords, we are grateful to the noble Lord for repeating the Statement being made in another place. The Secretary of State for Industry, Mr. Varley, has, at Question Time in another place earlier this after-noon, fully supported the main recommendation of the report of the CPRS, the "think tank", that rationalisation of this sector of the industry is essential if it is to remain competitive in the world market—and it is a world market.
That report was published and has been widely read by competitors all over the world. As the CPRS recommended that there should in the meantime be no orders placed until that rationalisation had been decided upon, there must be grave doubts about the decision announced today. It is contrary to the known views of the Central Electricity Generating Board, the National Enterprise Board, which was recently set up by the Government, and the Department of Industry itself.
I should like to ask the noble Lord this first question: When do the Government expect the rationalisation or, as the Statement calls it, the restructuring, to be started? Do the Government agree with the suggestion of the CPRS that the placing of an order could lead to a dangerous postponement of the changes that are needed? The decision has clearly been taken as one of immediate expediency in order to save some jobs now, but there is a danger that it could well jeopardise many more jobs in the industry in the longer term.
My second question to the noble Lord is this: is the Drax "B" power station still open to competitive tender?—because there is a limit to the extent that Ministers

27
can intervene in these matters. As the noble Lord will have surmised, we on this Bench have more than a suspicion that the Government have not handled this matter at all well or with any great wisdom.
3.48 p.m.
Lord AVEBURY: My Lords, is the noble Lord aware that we are pleased that the Government have accepted the recommendation which, on behalf of our Party, I made in the debate on 22nd December last, that an order should be placed during the course of this year for a 1,320 megawatt power station?—not for the reasons given by the Government, of short-term expediency, but because the CPRS report, to which the noble Lord has just referred, shows that even if there is no growth in demand for electricity at all, the programmes to replace existing plant would require ordering at the rate of 2,000 megawatts a year. If that is so, would not the noble Lord agree that an order for a nuclear station in 1977 on top of Drax "B" would more than allow for the retirement of existing plant? Moreover, would the noble Lord not agree that if the CEGB is going to be compensated for bringing forward the order for a nuclear plant, it is likely to be extremely expensive, whereas the order for Drax "B" can be offset by the decline in projected unemployment in the North-East?
Baroness WARD of NORTH TYNESIDE: My Lords—
3.50 p.m.
Lord STRABOLGI: My Lords, I wonder whether I might answer the two noble Lords who spoke for the Opposition and the Liberal Party, before the noble Baroness intervenes. Yes, I agree with the noble Lord, Lord Avebury, about the question of unemployment. I am grateful to him also for what he said. With regard to the questions of the noble Lord, Lord Campbell of Croy—and I appreciate the moderate way in which he posed these—he asked me first about the Secretary of State for Industry. It is quite correct that my right honourable friend the Secretary of State for Industry informed the House at Question Time that the Government accepted the recommendation of the Central Policy Review
28
Staff, supported by the National Enterprise Board, that it would be in the long-term interests of the country and those employed in the industry if restructuring took place. The Government have certainly not abandoned this objective, but although considerable progress has been made it has not at this stage proved possible to find an acceptable basis for restructuring.
The noble Lord also asked whether the Drax "B" was still open to competitive tendering. Because of the present short-term need for work at C. A. Parsons, the Government decided that a turbo-generator order should be placed with them. I may say that I think we had an excellent precedent for this, since the previous Administration thought it right not to go for competitive tendering in very similar circumstances over the Ince power station order, which they placed in 1972 with Parsons.
Baroness WARD of NORTH TYNESIDE: My Lords, I should be very unwise if I got myself involved in this controversy. But I am bound to say, when my noble friend Lord Campbell of Croy says what the opinion is on this side of the House, that that does not mean that I am going to support him. I am entirely entitled to have my own opinion. I do not in the least like the policy of Her Majesty's Government in many directions, but I am very grateful to know that for once the North-East coast is being considered suitable, and I should like to congratulate whichever Ministers in another place took the decision. We shall be very grateful. We have a higher level of unemployment in my part of the world, and it was my policy when I was in another place to try to support my part of the world, if possible. So I am delighted on this occasion to be able to support my part of the world.
Therefore, if my noble friend Lord Campbell of Croy does not mind, perhaps he will not get up and say that the whole opinion—even if I am only one person—on our side of the House is against what the Government have done. On this occasion, we in the North-East are very glad, and we in the North-East will continue to be glad, because it is very rarely that we get a decision which supports us. I just wanted to put that on the record. I shall not argue the technical details, but that is that.
Lord STRABOLGI: My Lords, I do not want to come between the noble Baroness and her own Front Bench. I have always had the greatest admiration for the common sense of the noble Baroness, and for the way she speaks up for her part of the world, and that admiration increased today. The noble Baroness is quite right and, if I may, I should like very briefly to state the reasons why the Government have made this decision. First, the Government have no power to compel a merger of two private firms, and no agreement could be reached. Secondly, the Government then acted to save jobs, in the same way as I said the previous Administration acted—which was absolutely right, in our opinion—over the Ince contract. Indeed, nearly 3,000 jobs will be saved at the main contractors only, to say nothing of the sub-contractors. Thirdly—and this is very important—Drax "B" is a coal-burning station and, in our view, this makes good fuel policy, especially in connection with the new Selby coalfield.
Lord HARMAR-NICHOLLS: My Lords, is the noble Lord aware that, while it is easy to understand both the Party political and the compassionate reasons for the decision which he has just announced, it is blatantly against the economics as stated by people who understand these matters? I should like to ask the noble Lord whether he has an understanding—I will not say "approval", because one does not want him to be in a position to say that—with the International Monetary Fund, because he may remember that the facilities which we negotiated some time ago to get us over a great crisis were to be in three instalments, which was obviously to take into account any deviation from sound economics in future Government policies. Does he have the kind of clearance which will make it certain that both the Party political reasons and the compassionate reasons that have been announced do not interfere with the fundamental economic strength of this country to overcome the problems that are facing it?
Lord STRABOLGI: My Lords, it is our policy to have a steady ordering programme, and we anticipate that beyond Drax a nuclear order will be placed as soon as possible following the thermal reactor decision. The question of orders
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beyond this is one that we shall, of course, continue to discuss with the Central Electricity Generating Board.
Lord CARRINGTON: My Lords, would it be right to sum up the Government's position in these words, that they have decided to spend £600 million in ordering a power station which is not necessary and which the Central Electricty Generating Board do not want, in order to bolster up an industry which their own advisers have said should be restructured, and that their decision may in consequence ruin that industry?
Lord STRABOLGI: No, my Lords, it would not be so at all. But I think that this is a debating point, and we should be getting into the field of debate if I answered it in any detail.
Lord WYNNE-JONES: My Lords, neglecting the political arguments that have been put forward from the other side, and agreeing with the attitude, if not the arguments, put forward by the noble Baroness, Lady Ward, may I ask Her Majesty's Government whether they appreciate that what has now been done is something which keeps a very excellent firm in existence and, furthermore, enables a very important trained force in the North-East to continue in employment? Would Her Majesty's Government say whether any progress is likely to be made towards a co-ordination of the turbo-generator building industry, whether the firm of GEC is likely to show any more consideration in the future than it has shown in the past to the firm of Reyrolle Parsons, and whether there is any likelihood of our getting a unified industry in this field?
Lord STRABOLGI: My Lords, I am very grateful for what my noble friend has said, with his unrivalled experience and knowledge in this field. It is the Government's purpose to create a viable power plant industry, but we have, of course, given this order to Parsons. My noble friend asked about possible mergers. Of course, there are discussions under way about a possible merger between Babcock and Wilcox and Clarke Chapman, the boilermakers. I cannot say anything about this at this stage, but of course a Statement will be made later if it is found necessary to make one.
The Earl of ONSLOW: My Lords, may I ask the noble Lord whether I am right in understanding that the Government are spending £600 million to save 1,600 jobs? I am certainly not in any way advocating sacking people, or anything like that—I think that I am far too humane a person to do that—but it seems economic madness to do this, when it would be much better to get those people employed in making something else which would make a profit, as opposed to subsidising them to make a loss by producing something which is unnecessary and not wanted.
Lord KALDOR: My Lords, may I suggest that this last argument depends entirely upon the quite unfounded assumption that the people who would be displaced in the North-East would find alternative employment, either in the North-East or anywhere else. It would simply reduce the amount of employment. Therefore the interests of this industry cannot be regarded in isolation. There is a very heavy external cost to the nation as a whole which invalidates a great deal of the argument which the noble Lord, Lord Carrington, put forward.
Lord STRABOLGI: My Lords, on costs I can say that the Secretary of State for Energy said last January that the effect on prices of advancing Drax "B" would vary according to the rate of growth in electricity peak demand and other factors. With regard to Drax "B", however, there is no question of its not being built; it has been in the CEGB's programme since the late 1960s. It is not a question of whether the station should be built, but when.
Baroness PHILLIPS: My Lords, may I compliment the noble Baroness, Lady Ward of North Tyneside, on her loyalty to the North-East and say that she can take some comfort from the fact that this year they have had visits from the Queen, the President of the United States and Mohammed Ali. So they are on the map!
Lord CAMPBELL of CROY: My Lords, since the noble Lord has tried to draw a parallel between Drax and the Ince order, is he aware that that action
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was taken after consultations with the industry at a time when the industry, in happier days, was busy with heavier order books?
Lord STRABOLGI: My Lords, I should not have thought that one could call the years 1970 to 1974 very happy days.
Several noble Lords: They were better than these!
Lord STRABOLGI: But, my Lords, with regard to consultations, there were full consultations with the industry. Unfortunately, the companies concerned could not reach agreement.
Lord DOUGLASS of CLEVELAND: My Lords, it will be remembered that in the steel industry a decision was made, on similar grounds of efficiency, to close down the Shotton steelworks. I am wondering how much money is being spent in order to avoid the reactions which resulted from the closing down of the Shotton steelworks. Is there not a similar set of circumstances today where, in the interests of efficiency and size, the suggestion is to close down not a neighbourhood like Shotton but a large part of the North-East coast?
If a large part of the North-East coast were to be closed down, how much money would we spend upon trying to put that right from a social standpoint, and how would it affect some of the big international and multinational firms which are working very well there and which have a good relationship with the workers on the North-East coast? This good feeling would be soured by action of this kind. Therefore, is it not better to foresee the social consequences, which are tied to the economic consequences, for at the end of the day these would prove to be more disastrous than anybody in this House at present seems to be able to foresee?
Lord STRABOLGI: Yes, my Lords. I am very grateful to my noble friend Lord Douglass of Cleveland for stressing the importance of the social consequences. We are, after all, dealing with human beings.

PRICE COMMISSION BILL
4.5 p.m.
Debate on Amendment No. 1A, on Report, resumed.
Lord ORAM: My Lords, perhaps I should reply briefly to the points which have been made by the noble Lord, Lord Boyd-Carpenter, and the noble Lord, Lord Mottistone, on the Amendment which we are considering.
The Earl of MANSFIELD: My Lords, may I ask the noble Lord whether he has asked for the leave of the House to make a second intervention?
Lord ORAM: My Lords, I apologise if I have omitted to do so. If I have not the leave of the House I shall gladly sit down. I take it that I have that leave and I apologise to the House for any discourtesy. I was suggesting that the two speeches about which I needed to comment were those made by the noble Lord, Lord Boyd-Carpenter, and the noble Lord, Lord Mottistone. I acknowledge that the noble Baroness, Lady Seear, my noble friend Lord Lee of Newton and my noble friend Lord Kaldor made important contributions, but it seemed that they were not directed at me in particular.
The noble Lord, Lord Boyd-Carpenter, started by offering a neat summing up of the position as he saw it: pay control goes, price control remains. If I may say so, his summing up was neat but tinged with a degree of exaggeration which often make the interventions of the noble Lord so attractive. Pay control does not go. I agree that it is very different, in view of the events of last week, but, as I indicated, there is to be an order continuing pay control, in particular the 12 month rule. Indeed, firms will be in the same general position under the new White Paper as under the existing one. The only difference is that the current White Paper goes in detail into the level of wage settlements which are permitted, whereas the new one, as I indicated several times, will provide a sanction merely against breach of the 12 month rule. So it is not true simply to say that pay control goes.
Lord BOYD-CARPENTER: My Lords, surely what the noble Lord has said is that
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pay control in general in respect of the specific amount of increase permitted goes and that what remains is the 12 month rule itself—a diminishing asset.
Lord ORAM: My Lords, f did say that there are radical differences but, so far as the Amendment which we are now considering is concerned, the important feature is that the pay control which continues is sufficient to bring into effect the pay sanction that we were speaking of. Again, it is true when the noble Lord says that price control remains, but may I ask him to recognise that the kind of price control which we are bringing in through this Bill is—and in a year's time will be very much more so—a different kind of price control from that which has applied hitherto? These are important differences that I wish to comment upon regarding the noble Lord's rather over-simplified summing up of the present position.
The essential feature of price control is that the Price Commission will undertake investigations into carefully selected price increases. This is very different from the across-the-board controls through the Price Code. If the noble Lord studies Clause 2 (2) in particular, he will note that a series of criteria are there set out. These are designed exactly to take account of the different circumstances in the various kinds of firm to which he referred. The noble Lord instanced in particular a firm which is capital intensive and which might, for that reason, be all the more tempted, for the sake of a quiet life, to give way to an improper wage demand. I suggest that Clause 2 is designed very carefully and very specially to take account of the differing circumstances of different firms.
The noble Lord asked how the Government would help a firm to resist an improper wage demand, one which is out of time and in breach of the 12 month rule. If a firm properly resists such an improper demand, then it will know that no certificate will be issued by the Secretary of State for Employment. This firm will therefore not be referred for investigation to the Price Commission and its pricing policy will be unaffected. It will be for the firm to determine its pricing policy. On the other hand, the firm would know that if a competitor gave way to an improper wage demand the certificate

35
would be issued which would cause my right honourable friend the Secretary of State for Prices and Consumer Protection to require the Price Commission to investigate under the margin controls the affairs of the firm which improperly gave way to such a wage demand. In that way I think the Government would be behind a firm such as the noble Lord has instanced.
Lord DRUMALBYN: My Lords, I am obliged to the noble Lord for giving way. Is not the sanction on the competitor who gives way that he would be less able to compete because his prices would go up? Why should he have a still further sanction imposed upon him?
Lord ORAM: My Lords, the firm would come under scrutiny and it would suffer the penalty of having its margin reduced. The improper wage increase would not be allowed to the company in the calculation of the allowable price, so it would be under a disadvantage in that respect.
Lord HARMAR-HICHOLLS: My Lords, if while they are going through the procedures just outlined by the noble Lord—and we know that such procedures can be protracted—considerable losses are incurred (which was the point raised by my noble friend), can they claim any sort of compensation from any source?
4.12 p.m.
Lord ORAM: My Lords, we discussed this at Committee stage and interim price increases would be allowed even during the period of investigation—indeed more than one, if needed—so the losses would not occur. That is quite apart from the safeguards provided under Clause 9. I was about to reply to the noble Lord, Lord Mottistone—not to all his points, as he will recognise, but particularly to the point that he made, that things are different now as compared with a week ago. I entirely accept that and indeed I acknowledged it in my opening remarks. But he suggested that because they are different now we need to review the situation again. To some extent we are doing that now, but I would suggest that since I have already indicated that there will be an order needing the affirma-
36
tion of both Houses of Parliament, and that will come within the next two weeks, that will provide the opportunity to review the situation.
Then the noble Lord disappointed me because he recalled that I had said that the White Paper and an order would be before Parliament, and he said, "If that is so, jolly good show!"; and I thought he was then going to on say, "And that obviously makes it unnecessary to rely on the TUC meeting in September". But then, disappointingly and rather tamely, at the end the noble Lord said that nevertheless he proposed to support his noble friend's Amendment.
Lord MOTTISTONE: My Lords, if the noble Lord will allow me to interrupt on that point, the fact is that a White Paper was promised for last Friday, which would have been substantive. Because that did not come forward, is it not reasonable to have doubts about the solidity and firmness and all-embracing covering of any White Paper that might come out in a fortnight's time? Therefore it is important to have coverage in the Bill to make sure that we are dealing with the situation.
Lord ORAM: No, my Lords. The point is that in order to continue the powers existing at the moment under the legislation referred to in this Bill, an order is necessary. I can only give the noble Lord my undertaking that that order is on the way, and I can only ask him to accept that such is the position. I believe he will then find his opportunity to say what he wants to say more fully.
The Earl of MANSFIELD: My Lords, before the noble Lord sits down, he said quite a lot about sanctions for breaches of what he described as the "12 months' rule". Will the sanctions be brought against firms who also give wage settlements which are above the 10 per cent. maximum?
Lord ORAM: My Lords, the order to which I referred—and I made this clear in my opening remarks—will apply only to the 12 months' rule and not to other aspects of pay policy that were announced by my right honourable friend the Chancellor of the Exchequer.
The Earl of MANSFIELD: My Lords, the emperor's clothes grow more diaphanous by the second. I think we have had a useful debate. Most noble Lords realise that this Amendment was tabled in the light of swiftly changing circumstances. Certainly the drafting was not meant to be taken very seriously, particularly as I drafted it myself, and therefore it was used as a peg for one or two arguments to which hopefully it was thought the Government might reply.
It seems to me that what we are left with is the Government saying, "We think that the maximum level of settlements should be no more than 10 per cent. If a trade union or any other body of workers is able to use its industrial muscle and get a far larger settlement then we, the Government, do not propose to intervene. The company which gives it will not be helped to resist such a claim, but equally it will not be penalised for having given in." I hope this is a fair way of putting the Government's argument. They say, "What we, the Government, are adamant about is our 12 months' rule. In other words, if that rule is breached then we shall use both of the arms; that is to say the arm of general Government dissatisfaction which the Chancellor mentioned in his Statement in the other place last Friday and also, as the noble Lord, Lord Oram, has said, sanctions will be imposed against the company by means of the Price Commission. That was the matter which I wanted to find out. It then becomes plain and paramount that the Price Commission is going to be used as a political arm of the Government to help impose its policy upon companies. I think that is the situation to which we now come.
Lord ORAM: My Lords, I am grateful to the noble Earl for giving way. In that respect the situation is as it has been for the last two years.
The Earl of MANSFIELD: My Lords, if the noble Lord is saying that the Social Contract has really been a figment of the Government's imagination for the last two years, that is something which others have been saying all along, but I do not believe he means that.
Lord ORAM: No, my Lords, I do not. I must make this clear. As I understood
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it, the noble Earl was referring to the pay sanction provision and it is that which has existed these last two years in the same form as it will now exist. It has not had to be invoked, but no change is being effected by what we are now discussing.
The Earl of MANSFIELD: My Lords, the fact of the matter is that there will be no moral argument. As I understand the position, there will be the invocation of powers only if the 12 months' rule is breached. I see the noble Lord is, nodding his head. One asks what protection the company is to have, in so far as protection may be needed. I cannot say I was surprised. I was a little disappointed by the attitude of the noble Baroness, Lady Seear, who said—I trust I am being fair and reasonably accurate—that that is something which companies have to work out for themselves. The managers are there to manage and they will have to get on and do their best. That is a robust point of view, but I am not sure that industry will regard it as exactly helpful.
Then the noble Lord, Lord Lee of Newton, asked, "What is policy?" in regard to incomes policy. Of course, a question like that can be mentioned in a number of different ways. It is rather like asking somebody if he believes in heaven: most of us have our ideas of heaven but they do not usually coincide with the ideas of other people. It is not an easy question to ask and it is certainly not an easy question to answer. My grandmother, aged 90 at the end of the war, who had been deaf for 36 years, said that her idea of heaven was to go to a tropical island and die of a surfeit of pineapples. Apparently that was something that was pleasurable to an old lady at the end of the war. It may be that in the economic debate on Wednesday one might come back to the noble Lord's question, but I do not think it has really got very much to do with the Amendment or the debate this afternoon.
Lord LEE of NEWTON: My Lords, if the noble Earl will allow me to intervene, I was not referring to an old lady of 90. I was referring to the Leader of the Opposition.
The Earl of MANSFIELD: My Lords, we are both referring to desirable existences.

39
It is just that our ideas about them do not coincide. I think we should get on. We have had a good debate. In the circumstances, I am sure we shall all read, and our colleagues in the other place may well read with interest, what has been said on behalf of the Government this afternoon. In the meantime, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 5 [Proposals to investigate prices or margins]:
4.21 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 1:
Page 7, line 9, after ("margin") insert ("not being a net margin as provided for in regulations made under subsection (6) of this section").
The noble Lord said: My Lords, I trust that the discussion on this Amendment will be short because, as I said in Committee, the purpose behind it, which I then endeavoured to establish, is a tidying up operation. I hope it is helpful to the Government to tidy it up. It is certainly helpful to business to know where they stand. As the Government will be aware, there is more than one sort of margin which might be covered by the phrase which the Amendment seeks to correct. Taking into account what was said at Committee, and also what was in the note which the noble Lord, Lord Wallace, very kindly sent to me to clarify a point which he had made, I hope this Amendment will take care of what the Government wished to modify within my original Amendment. I beg to move.
Lord WALLACE of COSLANY: My Lords, I gave an undertaking in Committee that we would look at the general principle of the previous Amendment and the one which we have before us today. I would say that the problem with any attempt to specify in the Bill the margin to be investigated is that, to be successful, it would require an extensive definition of "margin". Such definition would be out of place in the main legislation. That is why we have left the problem of definition to regulations which will be made under Clause 5(6).
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We have, however, looked at the idea of including in the Bill a provision that will make clear that investigations are to be made into gross percentage margins, but we cannot do so without either including a somewhat lengthy definition or leaving the definitional problem to the regulations. This latter method would mean that we do not really solve the problem. I am afraid the present Amendment poses the same difficulties. We have concluded that the definition of "margin" has to be left in Clause 5(6) regulations.
However, I should like to give a very clear undertaking that investigations will relate to gross percentage margins. We will achieve this by suitably defining distributors' margins under the regulations. In this way we will meet the intention behind the Amendment. The regulations will make it immediately obvious to the distributive trade that any investigation will be into the gross and not the net margin. In the light of that undertaking I hope the noble Lord will feel able to withdraw his Amendment.
Lord MOTTISTONE: My Lords, I am slightly disappointed because I had rather hoped that the phraseology of the Amendment, to which the noble Lord's reply did not directly relate, took care of exactly what he was saying and underpinned his assurances. I entirely accept the noble Lord's assurances, and I am sure that people who are interested in this Amendment will read the Official Report and take comfort therefrom. The difficulty is that, quite apart from Governments changing—which, God help us, they may soon—Ministers change and even Ministries get swept away, while Acts of Parliament go on for ever. It is a little difficult to have a matter of importance like this left on an assurance within the record. But this is not an important enough point to take any punitive action against the Government and so, with your Lordships' permission, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 6 [Investigations]:
4.26 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 2:
Page 8, line 43, at end insert—
("(aa) to complete the investigation and to make available to the relevant person any evidence or information relied upon by the Commission during the investigation.
Provided that the Commission shall not make available such evidence or informaton as aforesaid if the provision thereof would be prejudicial to any legitimate commercial interest.")
The noble Lord said: My Lords, on behalf of my noble friends Lord Mansfield and Lord Mottistone, I rise to move Amendment No. 2, which is an Amendment to Clause 6. My noble friend Lord Mansfield spoke at length, as indeed did the noble Lord, Lord Oram, during the Committee stage to Amendments Nos. 20, 21 and 22, which were debated together at that time. The point which we are seeking to make al this moment, and one which we regard as of particular importance, is related to the provisions in the Bill for consultation between the Corn-mission and firms whose affairs are under investigation.
My noble friend Lord Mansfield was at pains to explain to your Lordships that under the Bill as drafted it was quite open for the Commission to produce reports, and indeed for the Secretary of State to take action upon them, with the most inadequate provisions, as we thought, for consultation with firms whose affairs were being looked at, and non-existent provision indeed for any rectification of defects which may only be apparent to the firm under investigation when the report appears, or indeed in the deliberations of the Commission before the report itself finally comes before the Secretary of State. We on this side of the House find this unacceptable.
The noble Lord, Lord Oram, in replying to the points we made at Committee stage, said, first of all, that firms were entitled to make representations to the Secretary of State between the publication of the report and action by the Secretary of State. We agree that that is possible, but we think that that provision is in no way adequate to meet the problem that we see before us. The noble Lord, Lord Oram, also said that there was a problem of time; he said there would be no time, if the Commission were to produce their reports promptly, for them to consult with firms to check the accuracy of the information upon which they were relying. The noble Lord also said that some consultation
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would in any event take place. So I am not at all persuaded by that point, and I hope your Lordships will not attach too much importance to it.
Finally, the noble Lord, Lord Oram, said that there were considerations of commercial confidentiality. I believe that the noble Lord had a point there. Under the Amendments we proposed at Committee there may have been some difficulty about the Commission revealing information that they had received from third parties. We have accordingly adjusted our Amendment on this occasion to have regard to that point which the noble Lord made.
My Lords, the problem is that firms feel that when the Commission are reaching conclusions which may be very disadvantageous commercially to firms, they should rely upon accurate information; that the Commission should not be reaching conclusions upon information produced perhaps by aggrieved third parties and which might never come to light unless the Commission have a statutory obligation to bring this information to the attention of firms under investigation. I beg to move.
Lord ORAM: My Lords, as the noble Lord, Lord Trefgarne, has explained, during the Committee stage we discussed similar Amendments to the one that he has just moved. I acknowledge that the noble Lord, Lord Trefgarne, obviously listened to, and no doubt has studied since the Committee stage, what I said in reply to the Amendment at that time. As he has explained, the present Amendment is similar in intention to those that we discussed a week ago. He has pointed out that he has carefully taken care of a main point that I raised on that occasion about the disclosure of commercial information where disclosure could damage a third party, and I acknowledge that his Amendment seeks to take care of that matter. However, he will recall, and he has said so this afternoon, that that was not the only point that I put before your Lordships in resisting the Amendment, as I am afraid I must continue to resist it today.
I undertook to look at the matter and I have done so. However, I made it clear during the Committee stage that I did not expect to be able to come back

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to the House with any suggestion about how the Bill could be improved in this respect. I am afraid that that is still the position. It is not the case that I do not recognise the real fear among noble Lords opposite that the Commission might inadvertently rely upon some erroneous fact with damaging results to the firm concerned; it is simply that in practice we feel that these fears are misplaced. Perhaps I may repeat two or three of the reasons why we have reached that conclusion.
First, there are the safeguards to protect the firm. Clause 6(8) requires the Commission to exclude from reports, so far as practicable, matters which could seriously and prejudicially affect the interest of a person or a firm. The Commission are permitted to include such matters only if they are necessary for the purposes of their report. Under Clause 6(9), the Secretary of State can, before he publishes the report, exclude any finding of fact, the publication of which would be against the public interest. The Commission are required under Clause 6(1)(c) to give a copy of their report to the firm concerned as soon as they give it to the Secretary of State. Therefore, as the noble Lord, Lord Trefgarne, acknowledged, the firm will be able to make representations to the Secretary of State about any possible errors before he takes action on the basis of the report. I have quoted the noble Lord, Lord Trefgarne, and I should also acknowledge that he indicated that that does not satisfy him. It is still the same argument, but I believe that it needs to be put on record.
I should, perhaps, rest my case more on another point which I remember stressing last week. The Commission, in practice, can be expected to check matters of fact with the firm concerned as they carry out their investigation. Although it is not laid down in the Bill, I believe that that is, in practice, the real safeguard against the inclusion of errors in their report. I accept that there can be two judgments as to whether the factors that I have mentioned are sufficient. Our judgment is very distinctly that the practical outcome of the Bill will avoid any difficulties such as those to which the noble Lord, Lord Trefgarne, has pointed. I believe that the various safeguards and other provisions built into the Bill are such that
44
certainly there is no need to introduce an Amendment of the kind proposed. Therefore, I assure the noble Lord, Lord Trefgarne, that, having given further thought to the matter since we discussed it a week ago, I have reached the same conclusion, and must ask him not to press the Amendment.
Lord MOTTISTONE: My Lords, I am most unhappy at the reply the noble Lord, Lord Oram, has given to my noble friend Lord Trefgarne. If one looks at the Official Report of the Committee stage, one sees that the noble Lord made great play of the commercial interest which we have endeavoured, as he admits, to remove. He has now produced some other points to draw to our attention, one of which is Clause 6(8) which, as I read it, refers strictly to individuals, and quite rightly so. It is most important that individuals should be protected in this way and the Government are to be commended for including Clause 6(8) in the Bill. However, that does not get around the question of the company.
The noble Lord, Lord Oram, then directed our attention to Clause 6(9), in which there is reference to the public interest. However, that is the other end of the scale. Between the individual and the public interest is the company. It is the company which is liable to be misrepresented. It seems to me that it is unreasonable to rely on either of those provisions. I suggest to the noble Lord that perhaps his argument is not as strong as he was trying to make it out to be, because he finished by saying that the third and most important matter is that, as regards the practical workings, the Commission will have to consult with the firm as the information is collected. That may well be so, but if it were satisfactory for what might be supposed to be the practical workings—I do not dissent that this might be so—then there are many other safeguards which have been built into the Bill by the Government and which, probably, would have been taken care of just as well by what would happen practically.
After all, when we pass Acts of Parliament we must always make a judgment. Indeed, it arose on my last Amendment. We must make a judgment about what might be promises from this Government or that Government, what might be practical

45
considerations and what is required in order to safeguard not just the individual but the individual organisation like a company, trade union, or some such body of people, against the irrational action of a public body like a Commission or even a Minister. One must be sure that what is rational today will be rational in the future. Therefore, provisions must be built into the Act, indeed, any Act, to provide protections.
The fact of the matter is that in this case the noble Lord, Lord Oram, although producing many arguments as to why he thinks the Bill or the possible practice of the Commission will provide the protections which we are seeking, has not actually said what is harmful in this particular proposed Amendment, to the principles of the Bill or what is inaccurate or bad wording. He has not said anything which, to my mind, makes this Amendment not a very sensible one. The Amendment provides an extra safeguard which is very reasonable for a company to expect. I, therefore, strongly support my noble friends in this Amendment.
Viscount SIMON: My Lords, during the Committee stage of the Bill, my noble friend Lady Seear and I expressed some doubts about the Government's attitude to Amendments which were then numbered 20, 21 and 22. I am a little disappointed at the Government's reaction. There is one point on which, perhaps, the noble Lord, Lord Oram, will be able to clarify the position when he comes to wind up. He referred to the fact that a copy of the Commision's report would be made available to the "relevant party" at the same time as it was sent to the Minister. However, it is not clear to me whether the report would, in fact, contain any statement of the facts or alleged facts upon which recommendations are based.
It seems to me that the report has merely reached a recommendation. Unless the facts are disclosed, there is no opportunity for the "relevant party" to make representations to the Secretary of State before action is taken. The noble Lord repeated what he said in Committee; that the Commission can be expected to check matters of fact as they go along. That seems to be a reasonable assumption. But it seems curious that there is no provision that they must disclose to the
46
"relevant party", not necessarily the name or the source of the information, but the fact that some information has been put before the Commission.
I wonder what noble Lords on the Benches behind the noble Lord, Lord Oram, apart from those in other quarters of the House, would say if it were proposed that any other quasi-judicial body should make recommendations for action based on facts which were not disclosed to the party concerned. It struck me at the time—and it still strikes me—that we have not provided an adequate opportunity for the party concerned to defend himself against allegations which, in certain circumstances, might even be malicious. Therefore, I hope that it is not too late—though it must be getting very late—to ask the noble Lord to have one more think about this.
4.42 p.m.
The Earl of MANSFIELD: My Lords, with respect, it is really missing the point to quote Clause 6(8) and to pray that in aid as being a reason for resisting this Amendment. That is not the point of the Amendment at all. May I say that, a fortiori, subsection (9) also misses the point? The object of this Amendment is really two-fold and it has taken into account in its redrafting such objections as the noble Lord ventilated to me on the last occasion the matter was debated.
First, the Amendment provides a check so that a firm which is the subject of an investigtaion can, as it were, point out errors of fact. I know that the noble Lord, Lord Oram, says that, in the normal course of events, the Commission will check the facts as they go along, but the trouble is that, with any organisation—whether it is governmental or nongovernmental—errors creep in. Any statutory investigation, whether it is carried out by a court of law or a body such as this, should, in the normal course of events, write in what I might describe as a "safeguards" clause to prevent errors of fact and injustices, if such can be written into the Bill without obvious disadvantage.
The other matter which I suggested to the noble Lord in Committee occurs in the event of representations being made by third parties which may or may not be known to the firm or undertaking

47
whose activities are under review. The noble Lord said that in such circumstances it might be very undesirable to let the company being investigated know too much about the reports which are being made and about their source; it might be a matter of company or commercial confidentiality. This Amendment has been redrafted with precisely that point in mind, and the discretion which is given to the Commission is really profound, if I may so describe it, because the Commission are allowed to be the judge in their own cause as to when they should withhold information under the terms of this Amendment, because they believe that to reveal it would not be in the public interest or in the interests of whoever gave the information.
I do not think that the noble Lord, Lord Oram, has put forward any convincingreason why this Amendment should be resisted. From first to last one of the unsatisfactory features of the Bill has been the lack of the Government's awareness that, unless we think about it, there will be injustices. I was very heartened by what the noble Viscount, Lord Simon, said. Unfortunately there is not time for the Government to think again. We are on the penultimate stage of the Bill, and the ultimate stage so far as Parliament is concerned, except for the consideration of Lords' Amendments, will be in an hour or two's time. It must be done now. I am not entirely sure what my noble friend Lord Trefgarne will decide to do because I have not spoken to him, but if I were him I should be strongly tempted to press the Amendment.
Lord ORAM: My Lords, perhaps I may address the House again in order to take up one or two points that have been raised. First, the noble Lord, Lord Mottistone, said that in Clause 6(8)(a) there is reference to "individual" and that later on there is reference to "the Secretary of State". He suggested that in between the individual and the Secretary of State there are some most important bodies and he instanced firms and trade unions.
Lord MOTTISTONE: My Lords, I apologise for interrupting the noble Lord, Lord Oram, but that is not so. I said that in subsection (9) there is a reference to
48
"public interest" and that between the individual within a firm and the public interest—I did not mention the Secretary of State in this context—there is the firm whose interests as a corporate body are not looked after in the Bill as it stands.
Lord ORAM: My Lords, I apologise for having misunderstood that point. However, it makes little difference to the point I am about to make. In subsection (8)(b) there is reference to a "particular person", and "person" comprehends the kind of bodies, firms and trade unions about which the noble Lord, Lord Mottistone, was a little anxious. So I think he will find that they are covered.
The noble Viscount, Lord Simon, asked me even at this late hour to think again because of the need for the facts to be presented. There is no need for me to think again because it is already firmly included in the Bill. He will see that Clause 6(5)(a) reads that a report must include:
"a statement of the findings of fact made by the Commission in the course of the investigation to which the report relates".
I see the noble Viscount nodding. I think that that meets the point he made.
There was one other point which I did not make in my opening remarks but which is important—in fact, I recall that I made it in Committee. The time-scale to which we hope the Price Commission will work does not afford time for too much exchange of documents, periods of correction and so on. I believe that all noble Lords are anxious that the matter should proceed as quickly as possible, and I urge that that is a practical consideration to be taken into account.
Baroness HORNSBY-SMITH: My Lords, may I take up the point about the time-scale? Surely that exercise will be a highly statistical one, with the Commission deciding between the cost of the product and the justifiable price at which it is sold. Therefore, it will involve a company in producing a vast amount of statistical evidence. Surely it would be much quicker if such a company knew the claims against it first and could come with the relevant evidence, instead of having to ask for time in order to amplify that it thought the charges are unjustified.
Lord ORAM: My Lords, I agree with the description of the noble Baroness, Lady Hornsby-Smith, about the kind of investigation that is involved here. Therefore, it is all the more important not to have a stage that will use up other time. The kind of point she had in mind will in practice be taken fully into account in the normal exchange of question and answer and consultation between the Commission and the firm whose affairs are being investigated.
I was about to make the point, in reply to the noble Earl, Lord Mansfield, that I had agreed that the Amendment sought to deal with the confidentiality point I made last week. I did not wish to rest on the question of drafting. The noble Lord, Lord Mottistone, said that I had not raised any drafting points, and I did not wish to do so, but as the point has been raised it is only right that I should point out that "legitimate commercial interest" would be too vague a phrase to insert in just that fashion and it would be necessary to have some such phrase as, "in the opinion of the Commission prejudicial to any legitimate commercial interest". As I say, I do not press my case on any drafting point and I make it only because the matter was raised. I rest my main case on the practicalities of the situation which I indicated both in. Committee and earlier when I dealt with the Amendment.
Lord TREFGARNE: My Lords, the practicalities of the situation are that there would be an injustice if we agreed to the proposals in the Bill. I cannot believe that it would be right to agree to such proposals if we felt they would lead to in-justice.
If, in order to ensure an element at least of cough justice—and even that seems to be missing as the Bill is drafted—we must somewhat extend the time the Commission may take to produce its report, so be it. The noble Lord, Lord Oram, spoke about confidentiality, and acknowledged that the Amendment went some way towards meeting that, although he complained about the words "legitimate commercial interest", saying they were too vague. He thought we should have written in words to the effect that "in the view of the Commission" a commercial interest was violated. I do not think that would be a good idea.
If we rely on the view of the Commission as to what constitutes or does not constitute a legitimate commercial interest, we should be giving it more power than would be appropriate. I use the word "power", but perhaps that is the wrong word to use. Certainly we should be imposing a burden on the Commission in asking it to consider what was or was not a legitimate commercial interest; that should be left to the courts when and if any dispute arises. The noble Lord, Lord Oram, has not persuaded me. The emphasis of his arguments have changed on this occasion from those he advanced in Committee and I believe it would be right for me to ask your Lordships to reach a view.
4.53 p.m.
On Question, Whether the said Amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 97; Not-Contents, 108.

CONTENTS

Alexander of Tunis, E.

Cullen of Ashbourne, L.

Halsbury, E.

Alport, L.

Daventry, V.

Hanworth, V.

Ampthill, L.

Davidson, V.

Harding of Petherton, L.

Auckland, L.

de Clifford, L.

Harmar-Nicholls, L.

Avon, E.

Denham, L. [Teller]

Hawke, L.

Barnby, L.

Derwent, L.

Home of the Hirsel, L.

Berkeley, B.

Digby, L.

Hornsby-Smith, B.

Blake, L.

Drumalbyn, L.

Hylton-Foster, B.

Boyd-Carpenter, L.

Ebbisham, L.

Ilchester, E.

Camoys, L.

Effingham, E.

Jessel, L.

Campbell of Croy, L.

Ellenborough, L.

Killearn, L.

Carr of Hadley, L.

Elliot of Harwood, B.

Kinnaird, L.

Carrington, L.

Exeter, M.

Kinnoull, E.

Clancarty, E.

Fraser of Kilmorack, L.

Long, V.

Clitheroe, L.

Glasgow, E.

Loudoun, C.

Clwyd, L.

Glenkinglas, L.

Lucas of Chilworth, L.

Cobham, V.

Gridley, L.

Lyell, L.

Cornwallis, L.

Hailsham of Saint Marylebone, L.

Macleod of Borve, B.

Mansfield, E.

O'Hagan, L.

Stamp, L.

Margadale, L.

Onslow, E.

Strathclyde, L.

Marley, L.

Rankeillour, L.

Strathspey, L.

Massereene and Ferrard, V.

Redesdale, L.

Teynham, L.

Merrivale, L.

Reigate, L.

Trefgarne, L.

Mersey, V.

Rochdale, V.

Trenchard, V.

Monck, V.

Romney, E.

Tweedsmuir, L.

Monk Bretton, L.

Sackville, L.

Vickers, B.

Montgomery of Alamein, V.

St. Aldwyn, E. [Teller]

Vivian, L.

Morris, L.

St. Davids, V.

Wakefield of Kendal, L.

Mottistone, L.

Sandys, L.

Ward of North Tyneside, B.

Mowbray and Stourton, L.

Sharples, B.

Ward of Witley, V.

Newall, L.

Sligo, M.

Westbury, L.

Northchurch, B.

Spens, L.

Young, B.

Nunburnholme, L.

NOT-CONTENTS

Airedale, L.

Gardiner, L.

Pannell, L.

Allen of Fallowfield, L.

Gladwyn, L.

Pargiter, L.

Amherst, E.

Gordon-Walker, L.

Peart, L. (L. Privy Seal.)

Ardwick, L.

Greene of Harrow Weald, L.

Peddie, L.

Avebury, L.

Greenwood of Rossendale, L.

Phillips, B.

Aylestone, L.

Gregson, L.

Pitt of Hampstead, L.

Bacon, B.

Grey, E.

Platt, L.

Balogh, L.

Hale, L.

Robson of Kiddington, B.

Banks, L.

Hamnett, L.

Rochester, L.

Beaumont of Whitley, L.

Hampton, L.

Rusholme, L.

Beswick, L.

Harris of Greenwich, L.

Sainsbury, L.

Birk, B.

Henderson, L.

Samuel, V.

Boston of Faversham, L.

Houghton of Sowerby, L.

Seear, B.

Brock way, L.

Hughes, L.

Segal, L.

Bruce of Donington, L.

Jacobson, L.

Shepherd, L.

Buckinghamshire, E.

Jacques, L.

Shinwell, L.

Burntwood, L.

Janner, L.

Snow, L.

Burton of Coventry, B.

Kaldor, L.

Soper, L.

Byers, L.

Kirkhill, L.

Stedman, B.

Campbell of Eskan, L.

Leatherland, L.

Stewart of Alvechurch, B.

Caradon, L.

Lee of Newton, L.

Stone, L.

Castle, L.

Listowel, E.

Stow Hill, L.

Champion, L.

Llewelyn-Davies, L.

Strabolgi, L. [Teller]

Collison, L.

Llewelyn-Davies of Hastoe, B. [Teller]

Swaythling, L.

Cooper of Stockton Heath, L.

Taylor of Mansfield, L.

Crook L.

Lloyd of Kilgerran, L.

Thomson of Monifieth, L.

Cudlipp, L.

Longford, E.

Wade, L.

Darling of Hillsborough, L.

McCarthy, L.

Wall, L.

Davies of Leek, L.

McCluskey, L.

Wallace of Coslany, L.

Delacourt-Smith of Alteryn, B.

Mackie of Benshie, L.

Wells-Pestell, L.

Diamond, L.

Maybray-King, L.

Wigoder, L.

Donaldson of Kingsbridge, L.

Morris of Grasmere, L.

Wilson of High Wray, L.

Douglass of Cleveland, L.

Morris of Kenwood, L.

Winterbottom, L.

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

Murray of Gravesend, L.

Wise, L.

Fisher of Camden, L.

Ogmore, L.

Wootton of Abinger, B.

Foot, L.

Oram, L.

Wynne-Jones, L.

Gaitskell, B.

Resolved in the negative, and Amendment disagreed to accordingly.

[Amendment No. 3 not moved.]
5.1 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 4:
Page 10, line 10, at end insert ("including an indication as to which of the matters listed in section 2(2) of this Act they have in particular had regard in making the recommendations.")
The noble Lord said: My Lords, I beg to move Amendment No. 4. This is the
52
Amendment which I moved at the Committee stage as Amendment No. 23. I thought at that time, and again when I read the official record, that the noble Lord who was replying for the Government was not taking up the terms of the Amendment as they were put, because most of the burden of his argument related to Clause 2(1), not Clause 2(2). I would agree with the noble Lord that if the Amendment had been written in terms including an indication of the matters listed in Clause 2(1), that would not have been sensible, because sub-

53
section (1) is a general introductory subsection, whereas subsection (2) contains many serious and different aspects which need to be taken into account by the Commission when they are conducting their investigation. It would be of very great interest to any firm being investigated to know the different matters which the Commission have felt are the most important matters for the purposes of the investigation and the subsequent report, so that, as I said in Committee, the firm can know where it went wrong and how it can avoid so doing in the future. Furthermore, the firm can also protect against certain matters, if it feels so emboldened, for which there is ample provision in the Bill.
The Amendment, does nothing but strengthen the Bill, as I felt before, and I thought that noble Lords opposite, having had an opportunity to consider the matter further, might be able to address their comments to the question of the items in subsection (2) rather than subsection (1), as they did when replying to me previously.
Lord ORAM: My Lords, as the noble Lord, Lord Mottistone, indicated, this Amendment has exactly the same wording as an Amendment which he moved last week. I rather felt that he was making a little too much of my references to Clause 2(1) as against Clause 2(2), and I had hoped, even last week, that I had indicated that there is a relationship between the two. I was addressing my remarks equally to both because, as I pointed out, they are linked. I am afraid that I have reached the same conclusion about the Amendment a week later because, in carrying out and preparing their reports, the Commission are required to have regard to the matters referred to in Clause 2. It is unnecessary to impose a further requirement on the Commission to specify which of the criteria have influenced their conclusions, although—and I believe I made this point last week—they will normally emerge from the Commission's reports because they have to give reasons for their recommendations. Therefore, in giving reasons they would need to indicate the criteria to which they had had particular reference.
Under the provisions of Clause 2(1), the Commission, while being required to have particular regard to the criteria, are also required to have regard to all matters
54
which appear to them to be relevant, with a view to restraining prices of goods and charges for services, so far as that appears to them to be consistent with the making of adequate profits by efficient suppliers of goods and services. That is a point which I recall quoting last week, and I believe it is important to quote it again. In my view, it would detract from the generality of this provision and upset the relationship between subsections (1) and (2) if the Commission were required to specify in all their reports which criteria had influenced their conclusions. I believe that the criteria would emerge from a reading of the report, as well as the reasons for the Commission's report, and therefore I see no necessity to write this into the Bill.
Lord MOTTISTONE: My Lords, this is not sufficiently important an event that I should do very much about it, but I must confess that I found that an unsatisfactory reply, and a rather sad one, evidencing a certain determination on the part of the Government not to try to help people who are being investigated. If, as the noble Lord, Lord Oram, says, in the event the report which comes out of an investigation will inevitably cover the points which I seek to have included by Statute, then jolly good show! But if that is to be the case, why could not this Amendment be included? If it is inevitable, let us help it along by having the Amendment. This situation gives one cause to think that perhaps there is a subtle reason against giving this kind of information to people. I find that hard to imagine, but one is made suspicious. I feel that it is an unsatisfactory situation; but on the other hand it is not a very important issue, and so I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 9 [Safeguard for basic profits]:
5.7 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 5:
Page 14, line 38 after ("fit") insert ("taking into account the matters listed in section 2(2) and in particular the need to ensure that companies are not handicapped financially by increases in any costs beyond their control,").
The noble Lord said: My Lords, bloody, but unbowed, I rise to move

55
Amendment No. 5, which is set down in the names of my noble friends Lord Mansfield and Lord Mottistone, as well as my own. On this side of the House we have been at pains to protect the legitimate interests of the producers and firms, at whose affairs the Commission may seek to look, and this Amendment is a further attempt to do just that. To us the Bill fails to provide for the cost increases which these days all too often affect companies, and for which the provisions, or the protections, of Clause 2 (2) really are inadequate. For example, firms can be affected by dramatic and almost instantaneous changes in currency values. We all know how last autumn the pound and the dollar reacted very sharply and very quickly. We know how often in the past, at least, oil prices have been raised, sometimes at very short notice, and very sharply; and we know how other commodity prices have changed very rapidly. We remember that sugar prices, for example, escalated very sharply at one stage a year or so ago. I remember there was a fairly short-lived but sharp increase in salt prices at one stage, and the rumour went about that there had been a strike in the salt mines in Siberia.
But, seriously, perhaps the most important change in costs, which may not happen overnight but which often happens at short notice, is the change in wage and salary costs. Unhappily, the Government have not included in this Bill, or indeed in any of the guidance documents which we have received so far, any statutory wage policy. While we on this side of the House have been twitted by various Members on other Benches as to whether we agree with this or that form of wage control, what we can say is that, with cost control or price control as draconian (which is the only word I can think of) as that contained in this Bill, then some form of protection against sharp changes in wage rates ought to be included in the Bill. It is for that purpose that we have tabled this Amendment, to which we invite your Lordships to agree. I beg to move.
Lord ORAM: My Lords, as the noble Lord has recalled, this is an Amendment which was dealt with at Committee stage. We dealt with it at some length, and I recall saying quite a bit about it. However,
56
I make no apology if this afternoon, as well, my remarks are somewhat lengthy (though I hope not too lengthy) because this is an important Amendment that noble Lords have brought forward. May I say that I was a little surprised to see it set down, since it was a matter upon which your Lordships' opinion was expressed in the Division Lobbies last time. While I have been in your Lordships' House I have noticed that the Party opposite has been frequently willing to use the majority to which it is accustomed to reverse a decision of another place, but I was not aware that it was anxious to reverse decisions of your Lordships' House, which is presumably what it is proposing to try to do now.
Lord DRUMALBYN: My Lords, if the noble Lord will forgive me, this is, after all, Report stage. What is happening is that the Committee may have reached one decision; the House might reach another.
Lord ORAM: My Lords, I was not in any way suggesting that noble Lords were out of order in bringing this forward, and I am glad to welcome to the Report stage the same people who were here at Committee stage. That is the nature of proceedings in your Lordships' House. But if I may deal, as I indicated, with the rather important question of substance raised by this Amendment, it gives me an opportunity to explain, in perhaps a different way, the points with which I had hoped to convince your Lordships last week. I explained on that occasion why the Government could not accept the Amendment, and I tried to set the Government's proposals for the Clause 9 safeguard regulations in their wider context, taking account of the many other checks and balances which are established by the Bill to limit the powers of the Price Commission and of the Secretary of State, and to prevent the imposition of unreasonable restrictions on companies. I explained that we needed to see the Amendment against the background of more general safeguards.
I do not want to go over the same ground, but I should like to make three important points. The first is the relationship between the criteria in Clause 2 of the Bill and the safeguard regulations under the Bill. Noble Lords opposite have noted that the Bill does not require the Secretary of

57
State to have regard to the Clause 2 criteria when he makes the safeguard regulations, and it is to fill this apparent gap, presumably, that they have tabled this Amendment. But these two parts of the Bill cannot be linked together in this way without changing the whole basis of the new system.
The Clause 2 criteria are a set of general principles which are meant to be applied with flexibility to individual cases according to the particular circumstances; and a study of the matters specified in Clause 2(2) shows that they can be applied to the circumstances of an individual firm or industry, but are quite inappropriate for devising across-the-board regulations applying to every sector of industry and commerce. For example—and here I quote from Clause 2(2)(a):
"the need to recover costs incurred in efficiently supplying goods and services …",
I suggest cannot be met by a blanket definition of costs which every supplier is entitled to pass on to his customers. It is relevant to a particular inquiry into a particular firm, but not across the board.
Moreover—and, if I may, I quote from Clause 2(2)(c)—a return on capital sufficient,
"to defray the cost of the capital (including compensation for the risk involved in producing the profits), and … to provide money for, and to encourage the promotion of, innovations and technical improvements …",
will of course depend upon the cost of the capital, the business risk and the investment needs of each firm or sector. Another important criterion is in paragraph (f), which refers to the need to safeguard consumers' interests by restricting prices or charges where competition cannot be promoted; for example, because certain suppliers control a substantial share of the relevant market. Whilst this criterion will be a helpful guide to the Price Commission in their individual investigations or examinations, I suggest it would provide no sort of basis on which to frame generally applicable regulations.
But, my Lords, even if it were possible to use the Clause 2 criteria to draw up safeguard regulations, the effect would be to negate the whole concept, which I have tried to explain several times, of a flexible system of price investigations based on judgments rather than rigid rules. The safeguard regulations, instead
58
of providing a floor beneath the criteria which protects firms' viabilities but allows the flexible element to operate, would almost entirely replace investigations and examinations. On the one hand, they would provide an entitlement to price increases irrespective of any Price Commission scrutiny; and, on the other hand, there would be a presumption that any price increase in excess of the safeguard entitlement should automatically be cut back, since the Secretary of State would have had regard to the Clause 2 criteria in drawing up the safeguard regulations. The whole point of changing from a rigid price code to a more flexible policy is that a detailed and universally applicable set of rules and regulations should not be the major determinant of pricing decisions in future.
My second point relates to the reference in the Amendment to costs beyond companies' control. In fact, of course, it is extremely difficult to decide, even in an individual case, whether a cost is really within a company's control. Many industries would be able to argue that almost all their costs—including labour and overheads such as rent and rates—are imposed on them by external forces over which they have little or no influence. On the other hand, there are some firms where one could argue that even their raw material costs are to some extent within their control, because they could change their manufacturing processes or stocking practices so as to use their materials more efficiently. If, as I have indicated, this question is difficult enough in the individual case, how many times more difficult it would be to translate it into generally applicable regulations.
Attempts to influence the form of the Clause 9 regulations by inserting additional words and concepts into that clause are, I suggest, inappropriate for enabling legislation of this kind—and we are dealing with enabling legislation. Such attempts are no more likely to help the cause espoused by noble Lords opposite than they are to make the Secretary of State's task any easier.
My Lords, my third point follows from that, but is also linked with the concern expressed by the noble Lord, Lord Mottistone, when this Amendment was debated last week. I replied to him then, but I will, if I may, comment again

59
on it. His argument was that industry needed figures on which to plan and the only figures to be thrown up by the new prices policy would be those in the safeguard regulations. I do not see how, on that basis, the noble Lord could defend his own Party's introduction of the Price Code some years ago. Even when the figures used in the Code had been amended to give greater satisfaction to most of industry than they did in 1973, industry could not plan for the future on the basis of those figures with absolute certainty because the Code could be changed, with very little notice, to impose however stringent a régime was desired by the Government of the day. Industry must, therefore, have looked behind the figures and relied on what it believed to be the intentions of the Government.
There is no reason why it should not do the same in the case of the safeguard regulations. The Government have made it clear that the figures in the safeguard regulations have the strictly limited purpose of acting as the floor for the new system and that they in no way represent a view of what is a reasonable profit for the average firm. The safeguard regulations will be relevant only to the small number of firms and the sectors which are investigated or examined; these firms and sectors will, in any case, have their pricing and profitability judged against the Clause 2 criteria and not against the safeguard regulations. Unlike the contents of the Price Code, the Clause 2 criteria are to be permanently enshrined in legislation. The noble Lord, Lord Mottistone, said that Acts of Parliament go on for ever. This is not literally true. I know what he meant and he will accept that these criteria will be, as I have said, permanently enshrined in legislation. They will, therefore, provide a better basis for planning ahead than any of the ad hoc expedients we have had in the field of price control over the last decade or more.
In conclusion, I should like to give three assurances. First, those companies which are worried about the prospect of large increases in costs while their prices are frozen have nothing to fear because the safeguard regulations will give them an entitlement to more than one interim price increase during an investigation if cost increases cause their profit margins to fall below safeguard level. The regulations
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will have a similar effect after investigations, in that price increases may be made at any time to restore profit margins to the safeguard level.
Secondly, the consultative period on the draft safeguard regulations ends today. I can undertake that all the representations made by industry and the points made in our debates on the safeguards will be taken fully into account by my right honourable friend before the regulations are made. Thirdly, the Government have always made it clear that the safeguard regulations will be subject to review in the light of experience. If experience shows that the safeguard levels can be raised without undermining the effectiveness of the general policy, this possibility will certainly be considered. I have given those three undertakings in the hope that, in addition to what I spelled out at some length last week, noble Lords, will consider that there is this distinction between the criteria, on the one hand, and the Clause 9 regulations, on the other, and that they will not feel it necessary to press this Amendment.
Lord DRUMALBYN: My Lords, the House will be obliged to the noble Lord for that very full explanation of what the Government are after in this provision. He spoke of this clause acting as a floor so far as profits were concerned. There is always the danger that what is put forward as a floor will come to be treated as a normal base. I think that this is what inspires the fear about this provision. At the same time I think that what the noble Lord has said should go some way to dispel that fear.
It all depends very much on the attitudes of the various groups of the Commission which may or may not be similar; each may take different views. I think that we should have been happier—or, at least, I should have been happier—if it had been possible to relate the floor to some more specific formula as to what would be expected from an efficient producer, which is one of the safeguards. I wonder whether that is not the reason why my noble friend Lord Mottistone has included the safeguards from Clause 2 in this Amendment.
My Lords, it seems to me that there is a great deal to be said for ensuring that the Secretary of State will have regard

61
to the safeguards where appropriate. But this is exactly what the Commission are doing in other cases. They are not going to have regard to all the safeguards, for not all will be necessarily appropriate to any particular case. If the noble Lord will look at them again, he will see that some of them will not be appropriate in particular cases. I think that it is just as easy, and just as difficult, to apply norms or minima of this kind to one firm as it is to a whole group of firms in an industry, having particular regard to the efficiency test.
To go to the opposite extreme, it might be that a minimum profit margin as specified in these regulations would not be appropriate for a firm, which was not, in fact, efficient. On the other hand, there is the opposite danger that firms which are efficient and an industry which is efficient may be held down to an unduly low minimum. One would expect to see—and I do not know whether the noble Lord can comment on this—wide differences in the rate of minimum profit to be provided under this clause. The different circumstances are allowed for in the clause. It seems extremely difficult to envisage any way in which the Secretary of State is going to be able to fix these minima in such a way as to ensure that companies—to quote the Amendment:
"are not handicapped financially by increases in any costs beyond their control".
This seems to be the main burden of this Amendment. It is absolutely essential to make it clear that the minima are constant minima and therefore the prices should be able to be altered in accordance. with the needs. I do not know whether this is what is intended. If the minima are to be constant, it has to be possible for the prices to move rapidly in certain cases.
The noble Lord said that even within the period of investigation it will be possible to vary the prices from time to time. It is not only the period of investigation; it is a question of which firms, or which groups of firms, are to be examined. From that point of view, the minimum profit will be very much one that will be looked to all the time. We have in our minds—I have, at any rate—that this will loom far too large in the minds of the Commission and, in the case of this particular clause, of the Secre-
62
tary of State. The Amendment will alleviate that situation, even if it does not wholly cure it.
5.32 p.m.
Lord MOTTISTONE: My Lords, it is unfortunate that the Government do not seem to have been able to absorb that we were trying to say at Committee stage and are still firmly putting forward the concept that the criteria in Clause 2(2) are only suitable for guidance for the Commission and are not suitable for guidance to the Secretary of State and his Department in pursuing a parallel action. The various criteria in Clause 2(2) are excellent, and I have heard nobody criticise them. In another place there were various efforts to improve them, but even that was not really worth pursuing to any great extent because they are a very good, basic set of criteria for a pricing policy.
All of them are not applicable to each and every case, and I am sure that the Government are as aware of that as anybody else is, because they are a total compendium of the likely factors which need to be taken into account when producing a pricing policy. The fact that they are suitable for the Commission on which to examine a pricing policy does not mean that they are not appropriate for the Secretary of State and his Department to use as guidelines for producing the safeguards. As I said in Committee, if the safeguards were more realistic—and this comes back to the point that I was making earlier on which the noble Lord, Lord Oram, was kind enough to comment—these criteria within the safeguards seem to be aimed at the below-average efficient firm to make sure that it is not too protected. This is a rational point of view, if that is all it is.
As I endeavoured to show, these figures, which are the only figures within the Bill and its subordinate regulations, are the only ones that people have on which to plan. The noble Lord, Lord Oram, reminded me of earlier pricing policies introduced by my right honourable friends from the Party which I have the honour to try to serve, but what we are talking about now is that any threatened price control, which may be implemented by a Price Commission, or by a Secretary of State, is inhibiting to people who want to plan in the long term.

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If one wants to build a new factory of any sizeable proportions, one has to start thinking about it 10 years ahead. In order to do that, one collects in all the facts from all over the world, including whether or not the business is liable to prosper in the interim. Ever since we forced ourselves into a position of having to have price control, we have introduced one method of discouraging people from planning for the future and from conducting the investment which all of us would like to do. It is therefore unreasonable to refer us back to 1973, when price regulations were beginning, saying that we should not have learned from the shortcomings of any form of regulation in the meantime. It would therefore be sensible if, in constructing their safeguard regulations, the Government were to look more widely than the present regulations indicate.
I will not spell out what is defective about the regulations because the regulations are not the subject of debate of this Amendment. In any case, the Secretary of State must be well aware of the deficiencies because many people have written to him to point them out. He has seen fit so far to ignore the most important shortcomings. As the safeguard regulations are still in draft form, and as the noble Lord, Lord Oram, tells us that today is the last day for submitting Amendments to them, perhaps we could end at this point in time with a strong plea to the Secretary of State to think much more widely than he has hitherto about what he is doing with the safeguard regulations and let him be guided by his own particular items within Clause 2(2) of this Bill when he comes to consider how he might amend his safeguard regulations. If we could be sure that that was happening there would be no need for an Amendment, but we cannot be sure because the Secretary of State has given us every indication that he is most unlikely to pay attention to the wise counsel which has been given him from outside.
The Earl of HALSBURY: My Lords, may I ask a question on this Amendment and the Bill as unamended? Will either the Minister in charge of the Bill or the sponsors of the Amendment say how it is proposed to cover the needs of a company
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for increased working capital in a period of rising prices to finance debtors and stocks? This is done in two ways: either out of the margin of profitability or by borrowing from the bank. At intervals, of course, what you borrow you have to repay, so you have to fund it with a rights issue in due course. Nothing is more exasperating than trying to run an industry with a Price Commissioner, or somebody like that, breathing down your neck and telling you that you have to do it one way, when your bankers are telling you that, to please them, you have to do it another. I should like to know whether this Amendment improves that state of affairs or leaves it unchanged. I do not see much reference to it in the Bill, except obliquely.
5.40 p.m.
Lord TREFGARNE: My Lords, I am not sure that I am in a position to clarify or answer the question advanced by the noble Earl on the Cross-Benches. Speaking off the cuff, the problem to which the noble Earl referred might possibly be amenable of some solution if this Amendment is agreed to, but certainly is not if the Amendment is not carried. I might have been wiser to consider this matter and answer the noble Earl in due course, but unhappily there will be no opportunity for that because there will be no further stage of this Bill after today.
If we look at the Bill, as presently drafted in Clause 9, we find that the regulations which the Secretary of State is to make shall be made only:
"by reference to such matters as he thinks fit",
and in this Amendment we seek quite simply to guide the mind and the hand of the Secretary of State so that some, at least, of the matters which he has to regard as "fit" are defined and laid down in the Bill. We strongly believe that firms which will be bound by the regulations, as indeed will be the Commission, ought to have some basic guidance, even if only of a somewhat general nature, as provided, for example, in Section 2(2). This is referred to in the Amendment, and the general provision that we have included aims to ensure that:
"companies are not handicapped financially by increases in any costs beyond their control".
I listened with care to what the noble Lord, Lord Oram, had to say. There was

65
nothing really very new from what he said at the previous stage when we considered this matter before. I really do not think I can allow this matter to be settled simply by the assurances that the noble Lord gave. He has claimed that the provisions of section 2(2) are to be enshrined, as he put it, in the Bill, and he was rather proud of that word. I would use another word. I would suggest "entombed" rather than "enshrined", but I hope the noble Lord will not take me amiss in saying that. I believe that it is essential to include this provision in the Bill because the safeguards which are provided, and on which the noble Lord invites us to rely, are really of a very general nature.
The other great point advanced by the noble Lord concerned the provision for interim price rises. As I believe my noble friend Lord Drumalbyn said, the effect of these regulations will dictate whether firms are to be subject to investigation; and, until they are declared to be so subject, the question of interim price rises does not apply. We would say that, by including this Amendment in the Bill, we should raise the threshold—if that is the right word—at which an investigation
would be initiated; and I believe that that would be highly desirable.
The noble Lord made another point relating to the position of consumers in a monopoly or near-monopoly situation. I pointed out, in relation to another Amendment at Committee Stage, that there is more than one sort of consumer. A good many consumers work in firms which will be subject to investigation and, if the rules are too rigid and the controls are too strong, those consumers will suffer—because, where profits are inadequate, employment drops or at least does not increase, and in the very worst situations a company may cease to trade and close down altogether.
For all those reasons, I believe that this Amendment should be included in the Bill and I hope that your Lordships will agree with me.
5.45 p.m.
On Question, Whether the said Amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 96; Not-Contents, 111.

CONTENTS

Alexander of Tunis, E.

Fraser of Kilmorack, L.

Mottistone, L.

Alport, L.

Gainford, L.

Mowbray and Stourton, L.

Amory, V.

Glasgow, E.

Nelson of Stafford, L.

Ampthill, L.

Gridley, L.

Newall, L.

Auckland, L.

Hailsham of Saint Marylebone,
L.

Northchurch, B.

Avon, E.

Halsbury, E.

Nunburnholme, L.

Barnby, L.

Hanworth, V.

O'Hagan, L.

Berkeley, B.

Harmar-Nicholls, L.

Onslow, E.

Birdwood, L.

Hawke, L.

Orr-Ewing, L.

Blake, L.

Home of the Hirsel, L.

Rankeillour, L.

Camoys, L.

Hornsby-Smith, B.

Redesdale, L.

Campbell of Croy, L.

Hylton-Foster, B.

Reigate, L.

Carr of Hadley, L.

Ilchester, E.

Rochdale, V.

Carrington, L.

Killearn, L.

Romney, E.

Cathcart, E.

Kinnaird, L.

St. Aldwyn, E. [Teller]

Clitheroe, L.

Kinnoull, E.

Sandford, L.

Cobham, V.

Lauderdale, E.

Sandys, L.

Cornwallis, L.

Long, V.

Sharples, B.

Cullen of Ashbourne, L.

Loudoun, C.

Spens, L.

Daventry, V.

Lucas of Chilworth, L.

Strathclyde, L.

Davidson, V.

Lyell, L.

Strathspey, L.

de Clifford, L.

Macleod of Borve, B.

Teviot, L.

De La Warr, E.

Mancroft, L.

Thorneycroft, L.

Denham, L. [Teller]

Mansfield, E.

Trefgarne, L.

Derwent, L.

Margadale, L.

Trenchard, V.

Digby, L.

Marley, L.

Tweedsmuir, L.

Drumalbyn, L.

Massereene and Ferrard, V.

Vickers, B.

Ebbisham, L.

Merrivale, L.

Vivian, L.

Effingham, E.

Mersey, V.

Wakefield of Kendal, L.

Ellenborough, L.

Monck, V.

Ward of North Tyneside, B.

Elliot of Harwood, B.

Monk Bretton, L.

Westbury, L.

Exeter, M.

Morris, L.

Young, B.

NOT-CONTENTS

Airedale, L.

Gaitskell, B.

Ogmore, L.

Allen of Fallowfield, L.

Gardiner, L.

Oram, L.

Amherst, E.

Gladwyn, L.

Pannell, L.

Ardwick, L.

Gordon-Walker, L.

Pargiter, L.

Avebury, L.

Greene of Harrow Weald, L.

Parry, L.

Aylestone, L.

Greenwood of Rossendale, L.

Peart, L. (L. Privy Seal.)

Bacon, B.

Gregson, L.

Peddie, L.

Balogh, L.

Grey, E.

Pitt of Hampstead, L.

Banks, L.

Hale, L.

Platt, L.

Beaumont of Whitley, L.

Hamnett, L.

Rochester, L.

Beswick, L.

Hampton, L.

Rusholme, L.

Birk, B.

Harris of Greenwich, L.

Sainsbury, L.

Blyton, L.

Henderson, L.

Samuel, V.

Boston of Faversham, L.

Houghton of Sowerby, L.

Seear, B.

Brockway, L.

Hughes, L.

Shepherd, L.

Bruce of Donington, L.

Jacobson, L.

Shinwell, L.

Buckinghamshire, E.

Jacques, L.

Simon, V,

Burntwood, L.

Janner, L.

Snow, L.

Burton of Coventry, B.

Kaldor, L.

Stedman, B.

Byers, L.

Kennet, L.

Stewart of Alvechurch, B.

Campbell of Eskan, L.

Kirkhill, L.

Stone, L.

Caradon, L.

Leatherland, L.

Stow Hill, L.

Castle, L.

Lee of Newton, L.

Strabolgi, L.

Champion, L.

Listowel, E.

Swaythling, L.

Chorley, L.

Llewelyn-Davies L.

Taylor of Mansfield, L.

Collison, L.

Llewelyn-Davies of Hastoe, B.

Thomson of Monifieth, L.

Cooper of Stockton Heath, L.

Lloyd of Kilgerran, L. [Teller]

Wade, L.

Crook, L.

Longford, E.

Wall, L.

Cudlipp, L.

McCarthy, L.

Wallace of Coslany, L.

Davies of Leek, L.

McCluskey, L.

Weidenfeld, L.

Delacourt-Smith of Alteryn, B.

Mackie of Benshie, L.

Wells-Pestell, L.

Diamond, L.

Mais, L.

Wigg, L.

Donaldson of Kingsbridge, L.

Maybray-King, L.

Wigoder, L.

Douglass of Cleveland, L.

Milner of Leeds, L.

Wilson of High Wray, L.

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

Morris of Kenwood, L.

Winterbottom, L. [Teller]

Fisher of Camden, L.

Murray of Gravesend, L.

Wootton of Abinger, B.

Foot, L.

Norwich, V.

Wynne-Jones, L.

On Question, Motion agreed to.

[Amendment No. 6 not moved.]
Clause 12 [Undertakings and orders in consequence of reports on examinations]:
5.53 p.m.
Lord REDESDALE Lord REDESDALE moved Amendment No. 7:
Page 17, leave out lines 33 to 36 and insert—
("( ) Such provisions as are authorised by the preceding provisions of subsection (4) shall not be included in such an order—

(a) in respect of goods which are exempted goods for the purpose of the Resale Prices Act 1964, and

(b) in respect of retail prices which are recommended by a manufacturer or supplier, the Secretary of State shall have the power to prohibit their use only where the recommended prices cannot be verified by the consumer, are not uniformly available to retailers, are not recommended by the manufacturers or suppliers, and are not fair and reasonable in relation to known and established retail margins.")

The noble Lord said: My Lords, this Amendment was moved in a different
68
form in the previous stage of this Bill. I am unashamedly rehearsing this Amendment again, and perhaps I may use the words of the Chancellor of the Exchequer who recently said that his fox had been shot, but its tail had been stuck on in a different part of its anatomy. What I aim to do here is to resurrect my fox and, at least, change its scent, and I hope that, on this occasion and in its new guise, it will smell slightly more sweet to the noble Lord opposite.
I shall be as brief as I can. I do not wish to weary your Lordships by going through my involvement and interest in this Bill. I should just like to remind your Lordships yet again of the consequences of removing double pricing. It has been shown by a number of pieces of research that double pricing does not confuse the consumer and, in fact, is found to be a help. Furthermore, research done by the BMRB showed, on two shopping baskets of identical items, that those which had been double priced were 3·5 per cent. cheaper than those which had a single price. There is another aspect to this.

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Double pricing slows down price increases. I hope the Government realise that, if double pricing is abandoned, we shall have price increases, because one will not be able to sell goods so economically. We shall all be the losers. Furthermore, there is no question of protection for consumers.
I have tried to re-run and re-jig this Amendment, and I genuinely hope that it will be more acceptable to the noble Lord. I have done this by moving it on to the next clause, and I have also provided that the Price Commission can investigate whatsoever they want. All I am aiming to do is to limit the Secretary of State's powers on this one point. I have tried very hard to produce something which is acceptable, because I feel that it is in all our interests that we should retain double pricing. My Lords, I beg to move.
Lord ORAM: My Lords, as the noble Lord, Lord Redesdale, reminded your Lordships, we dealt with this point on a similar Amendment which he moved at the Committee stage. He and I were a little at cross-purposes, in that I suggested that his Amendment then compelled us to rely purely on a voluntary agreement and I could see that that worried him. I am glad that he seems to have reflected on what I said and has recast his Amendment, moving it to Clause 12, presumably with a view to avoiding the difficulty to which I pointed. There is now a great deal of common ground between us on this problem and, at the Committee stage, the noble Lord himself recognised that there are abuses in this area which require correction. On the other hand, the Government have made it clear that no across-the-board attack will be made on recommended resale prices, and that orders will be made only in cases of abuse and where the Price Commission have so recommended. So I think that our two positions are not very far apart, but I am afraid that they are sufficiently so for me not to be able to accept the Amendment. I should perhaps explain the reasons.
The Amendment would mean that any manufacturer or retailer affected by an order could challenge the order in the courts on any one of four grounds, which are spelled out in the Amendment. For example, it would usually be possible to argue that the recommended price could
70
be verified by the consumer if he tried hard enough, for instance, by writing to the manufacturer. It would also be an extremely difficult task to impose on the courts a duty to decide whether a recommended price was fair and reasonable in relation to known and established retail margins. This is surely a task best left to the Price Commission in their reports, on which the Secretary of State should then be free to act by order subject to the normal Paliamentary control. I suggest that that is a more appropriate procedure than having recourse to the courts.
Another defect of the noble Lord's Amendment is the inclusion of the condition, on which the order-making power is dependent, that the recommended price shall not have been recommended by the manufacturers or suppliers. This would have the effect of preventing any order from being made, unless the retailer could be shown to have invented his own recommended price. Such a practice is already an offence under the Trade Descriptions Act, and the condition therefore means that the Bill would add nothing to existing legislation on recommended resale prices.
The reason for Clause 12(4) is that the abuse of recommended resale prices does not end with fictitious recommended prices. Above all, the Amendment requires the Secretary of State to satisfy himself—and, potentially, the courts—that all four conditions are met before he can make an order. If, therefore, an abuse arises because one, two or even three of the conditions are not met, it could not be corrected. It may not have been the noble Lord's intention that it should be all four, but my understanding is that this would be the effect of the Amendment as drafted.
I should like to suggest that the Amendment illustrates the difficulty of trying to impose detailed constraints on the powers of the Secretary of State in the main legislation. The Government believe that these constraints are unnecessary. Any sectors whose recommended prices are examined by the Price Commission under the new powers will have the opportunity to make their case the Commission, to study the Commission's published report—which must include the reasons for their recommendations—and make representations about it to the

71
Secretary of State before he makes an order. They can also press for the order to be annulled by either House of Parliament. These, I suggest, are proper and effective safeguards which I believe in practice would meet the fears which the noble Lord has in mind. I accept a good deal of his case, but I do not accept that it is necessary to have the Amendment in order to meet it.
6.2 p.m.
Lord DRUMALBYN: My Lords, may I make two observations about this matter. First, I find difficulty in understanding how recommended prices can be brought into this clause. A price is a figure at which goods are offered for sale. A recommended price is not a figure at which goods are offered for sale. Inasmuch as this paragraph states that:
"…f any kind are or may be for sale",
it is very difficult to see what is meant by "may be". A curious use of the word "may" is to be found here. Anybody who compares his price with the price of another person is comparing it with the price at which that other person is selling; it is not the price at which he may be selling. If the word "may" is intended to mean "is permitted to be sold", that is not what a recommended price is about.
Unfortunately, I was out of the Chamber when my noble friend moved this Amendment at the Committee stage. When I read this provision I was puzzled by it. Then I noticed in the Explanatory Memorandum at a previous stage of the Bill that the phrase "recommendation of prices" was used as one of the purposes. I find considerable difficulty in understanding how this provision could be related to recommended prices. Secondly, since recommended prices are legally permitted by the Resale Prices Act, if it is intended to deal with recommended prices in this Bill surely we should ensure that they are proper recommended prices and we should not prohibit them altogether in any sphere.
I am not certain what the Government have in mind. The noble Lord said, rather darkly, that there were other abuses besides excessively high recommended prices, and I should like to know what they are. If a recommended price is too high, it means one of two things. Either
72
it means that the manufacturer who recommends the price is allowing too high a margin on the price at which the goods would be sold on a normal mark-up basis in small shops—the result would be that there would be a very wide spread of prices where very large discounts could be obtained—or it means that the recommended price was always intended to be fictitious and bears no relation to prices. When I say "prices" I mean prices at which goods are offered for sale.
The way to deal with that matter would be to ensure that if one is to have recommended prices there should be proper indications of price. I believe that at an earlier stage my noble friend used the phrase "an anchor price". Perhaps "a bench-mark price" would be a better indication. There is no doubt that they are valuable guides even where the spread of prices is very considerable. In The Times of 9th July, I read a very interesting article which dealt with average discounts from recommended prices. They ranged very widely indeed—from 21 per cent. on carpets and 22 per cent. on consumer electronics to 1 per cent. on clothing and footwear. I wonder whether the noble Lord—certainly I shall give him permission to answer this point—could say why he thinks that it is necessary to deal with this matter only by prohibiting recommended prices either by a particular manufacturer or in certain areas—I do not know which he proposes—rather than by ensuring that any recommended price which is allowed by law is related to reality. Secondly, although it is very late in the day perhaps the noble Lord would give me an opinion, and the reason for his opinion, as to how and why this subsection deals with recommended prices, for I do not believe that it will be found to do so.
6.7 p.m.
Lord ORAM: My Lords, I am reluctant to ask for the leave of the House to answer these points, but I shall do my best. They are a little difficult to answer, Regarding the noble Lord's question about whether this power is appropriate, the answer is that if the noble Lord looks back to Clause 10, where the Secretary of State may direct the Commission to examine any question relating to prices or charges, he will find that the problem of recommended resale prices is one such area of inquiry that the Secretary of State might ask the

73
Price Commission to examine. Indeed, the Price Commission have been examining such problems. If it is a legitimate problem for them to be asked to look at, they make recommendations, and then it is legitimate for an order to be made or an undertaking to be given. It is that which is provided for in Clause 12, and that is where the subsection appears. As I see it, it is in order to give the Secretary of State order-making powers in relation to a particular matter.
If the noble Lord reads through Clause 12(4)(b), I believe that he will find there a description of what are recommended resale prices. I see that the noble Lord does not find such a description. When I read through Clause 12 I found this to be so, and I believe he will find this to be so, too. Therefore the Amendment moved by the noble Lord, Lord Redesdale, was appropriately centred here. With regard to the other question, I am not sure that I have the answer off the cuff. Would the noble Lord mind repeating it?
Lord DRUMALBYN: My Lords, one question is whether it is actually provided for here and may I say that the words,
"such goods may be sold by retail at a price higher than the price at which the seller indicates he will or may sell them"
do not seem to be a justification because the recommended price is not a price at which goods may be sold? It is simply an indication of a price at which it would be reasonable to sell them. The other point I was asking about was the whole question of how this is dealt with—by prohibition. The noble Lord has mentioned the possible negotiation—if one may put it that way—and that may be the right answer. All I was saying was that I did not think prohibition was the right answer for something that can legitimately be done.
Lord ORAM: My Lords, I think it would depend upon the recommendation by the Price Commission after it had made the examination at the request of the Secretary of State. If it recommended that a certain practice in this field was wrong and should be prohibited, then the Secretary of State would take that recommendation into account in deciding whether to make an order.
I hope that I may have given the correct answers. If the noble Lord will
74
look at what I have said, I shall certainly do so too and, if there is any difficulty, I am sure that we can resolve it by correspondence.
Lord REDESDALE: My Lords, I am grateful to my noble friend for so ably raising some points which I certainly had not got. One point which came out was that, in trying to re-jig my fox I might have overcooked it in its present amended form. Sadly, I really should have left it as it was before because I thought it was straightforward in trying to cover the three points and raise any abuses that might come up. Perhaps by trying too hard I have introduced elements which are wrong. I accept that point. However I do not accept that we have a satisfactory situation as it stands now.
I am grateful to the noble Lord for saying that we have a degree of common ground. At one point I was getting quite enthusiastic and I thought that we had even more common ground than we had, but I seemed to fall off the end of it! Sadly, it stems that the Government are not going to move on this point: I think that they are wrong and I should like to go on record as saying that they are wrong on this point and that it will increase prices. It is unfortunate. I can do no more now but beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
6.12 p.m.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 8:
After Clause 13, insert the following new clause:
Representations to the Secretary of State
. At all stages of the procedures described in sections 4, 5, 6, 10 and 11 of this Act, the relevant person may make representations to the Secretary of State regarding any matters thought by the relevant person to affect the initiation of or execution of any investigation or examination concerned.
The noble Lord said: This is a recasting of what was Amendment No. 17 at the Committee stage, when the noble Lord, Lord Wallace of Coslany, kindly said that he would look into the point and communicate with me, which he has done. Reading both his communication and the Official Report, it seemed to me that he was making two points: one was that

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Amendment No. 17 was on too narrow a basis and the other was that there was really no need for it because people always have a right to make representations to the Secretary of State, more or less at any time.
The problem is that within this Bill it is particularly important to draw to the attention of people who may be affected by it when it is particularly relevant for them to take advantage of their opportunity to make representations to the Secretary of State. I looked through the whole Bill and I find that in those clauses which might be said to be operative ones and which affect persons who will be involved in the various processes within the Bill—Clauses 7(3) and 12(1)—there is a specific invitation to the relevant person to make representations to the Secretary of State. In the what might be called the "executive clauses"—because the others tend to be informative rather than executive—which are the ones mentioned in my Amendment (to wit, Clauses 4, 5, 6, 10 and 11) there is no such guidance to the relevant person to take advantage of his right to make representations.
The other executive clause, if we may describe it as such because it is really more introductory of the safeguards—is Clause 9 where, in subsection (2), the Secretary of State is specifically invited to cause people to make representations to him. Therefore, it seems to me that, in this Bill where representations to the Secretary of State at certain points could be of great importance to companies, it is reasonable that they should have their arm jogged by a separate little clause in relation to those executive clauses for which this provision has not specifically been made.
I hope that this Amendment is sufficiently in accord with what the noble Lord, Lord Wallace of Coslany, was saying in Committee to be one which might commend itself to the Government so that the Government could improve their record by at last accepting an Amendment in good faith as being one which improves this Bill, in no way harms it, and is thoroughly to be desired. I beg to move.
Lord WALLACE of COSLANY: My Lords, I should very much like to be included in the noble Lord, Lord Mottistone's book of records but unfortunately
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one cannot quite do that. We have looked into the whole question and my reply is fairly lengthy but there are some important points, particularly towards the end of my remarks.
The Bill has been drafted to ensure that firms have the clear right to make representations to the Secretary of State at the most crucial point in an investigation and examination—that is, after a report has been delivered to the Secretary of State and before action is taken as a result. Indeed, we have carefully drafted the Bill to ensure that the order-making power cannot be used until firms have had a chance to make representations. The order-making power cannot be used for the first 14 days following receipt of a report on an investigation. It expires after 28 days. In the case of examinations, it cannot be used for 28 days following publication of a report; and it expires after three months.
At all other stages of investigations and examinations, firms are completely free to make representations to the Secretary of State. They do not need to be given any statutory right to this effect. The only point where they need such a right is when the order making power comes into play—and that is taken care of in the Bill. Nor does the Secretary of State need to have placed upon him a statutory duty to consider representations. Any representation would almost certainly relate to the criteria. Because the Secretary of State is bound by Clause 20 to have regard to the criteria when exercising his functions under the Bill, he is also bound to pay regard to representations which relate to the criteria. He would be failing in his duty to do otherwise.
We do not believe it necessary to provide for representations in the way proposed, since the point is met in practice. Moreover, I believe that the proposed Amendment could lead to unforeseen consequences. A requirement upon the Secretary of State to consider representations would not only mean that he had to consider the most fatuous representations; it could also lead to firms attempting to disrupt the system by bombarding the Secretary of State with representations—possibly at the last minute—which he would be forced to consider before exercising a particular function under the Bill. Furthermore, I believe that a

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statutory right to make representations to the Secretary of State during investigations and examinations will undermine the Commission's position. There is clearly a danger that firms will come to see the Secretary of State as the focal point of the investigatory system; with the Commission reduced to nothing more than a minor appendage to which firms pay little attention. I am quite happy that there are facilities for representations and they are provided for in the Bill. I hope that the noble Lord will accept the explanation, particularly the latter part of my remarks.
Lord MOTTISTONE: My Lords, I must start by apologising to your Lordships for not having said that I was, with your Lordships' leave, including Amendments Nos. 9 and 10 in my remarks. It is clear that the noble Lord, Lord Wallace, assumed that. The noble Lord said—and I take the earlier part of his remarks as a fair statement of fact—that people could in fact make representations at any time. But then in his closing remarks he said that if we made it statutory people would be inclined to take advantage of this and make fatuous complaints, and indeed perhaps deliberately try to upset the machinery of investigation in order to foil the whole purpose of the Bill, or words to that effect. I can see the point, but it seems a little at variance with the earlier statement, because if it is said—and when we read the Official Report we shall see that it is said quite clearly—that people can make representations at any time, there is nothing to stop them from making fatuous representations whether they are statutory or otherwise. I should have thought that there was not very much substance in whether or not they were statutory, if people are free to make representations at any time except when the actual terms of the machinery do not allow it. So that does not seem to be a very strong argument against my Amendment.
On the noble Lord's last point, I fully appreciate this; it does make sense. When the Bill comes into effect the Commission will be making various communications to the relevant persons under the terms of the Bill; they have to be notified when an investigation or examination is begun. May I leave with the Government the thought that there might
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be a standard covering letter for this which drew the attention of firms to their statutory and other rights and encouraged them to make representations to the Commission itself, or to the Secretary of State as the case may be. If this emanated from the Commission this could surely not be undermining the Commission's position, because they would be in the driving seat and giving this advice to firms. It seems to me that would be a reasonable way of meeting my point. I would not expect the noble Lord to say here and now whether he would agree, but perhaps he might bear that in mind for guidance to the Commission when it is carrying into execution the purposes of the Bill after it becomes an Act. With that, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 9 to 11 not moved.]
Then, Standing Orders No. 43 having been suspended (pursuant to Resolution):
Lord ORAM: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.— (Lord Oram.)
On Question, Bill read 3a, with the Amendment.
6.24 p.m.
Lord ORAM: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Oram.)
The Earl of MANSFIELD: My Lords, I had hoped that the noble Lord would say a few words on Third Reading, but he has chosen not to, and I shall, therefore, say them now. I do not think there is any question of order about this; it is merely a matter of convenience. I will not state at length, or really at all, the objections of noble Lords on these Benches to this Bill. We think it is a Bill which, as it has made its passage through the two Houses, has changed considerably so far as motivation is concerned. It started off as being, I will not say a panacea for inflation, but it was going to be a great help in the Government's attempt to contain inflation. The events of this afternoon, with the first Amendment

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which I moved and later withdrew, make it quite plain that in fact it is going to have little or no effect on inflation at all. We are told that in effect the only matter to which the Government are going to have regard, at least so far as this Bill is concerned, is what I might describe as the 12 months' rule; in other words, if a union is fortunate enough or strong enough to secure for its member a 60 per cent. increase in wages, that is something which so far as this Bill is concerned will play no part. On the other hand, if it seeks to have two bites of the cherry within 12 months, then the unfortunate firm which bows to such pressure will find that any resulting increase in prices which it wishes to make will be the subject of some kind of unwelcome investigation from the Price Commission.
This is really not the sum total of our objections to this Bill. What I tried to say on Second Reading was that we all concede that there are times when Governments have to intervene to some degree, as may be necessary, in private enterprise, or indeed in the public sector, in the interests of the consumer. That is something which should be done, as I suggest, in special areas, very specifically named areas, which should be set out with care and certainly not in a hotchpotch bureaucratic effort such as this Bill. What I think we have feared—and nothing that has been said during the progress of the Bill's passage through your Lordships' House has allayed these fears—is that this is really a collectivist, bureaucratic and indeed snooping attempt on the part of the Government to interfere particularly with private business in this country, in a way which I, for one, think will be seen to be increasingly unjustified in the future.
We have attempted to do two things. We have attempted to improve the Bill and to make provisions for fairness where we thought the Bill was deficient. As to the first, we have only been able to ask the Government in effect to think again in one Amendment, and it perhaps is the most important Amendment of the lot. It may well be that we were fortunate to impose it on the Government. What I would say—and I am looking at the noble Baroness, Lady Seear, when I say it—is this. Throughout the passage of this
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Bill in your Lordships' House it is right to say that neither the Liberals nor the Government have put down one Amendment; neither the Liberals nor the Government have seriously considered, in my opinion, any Amendment which has been put down by us. Is it the Liberal position, one asks, that they thought—and, for all I know, still continue to think—that this Bill is, and was, so perfect that it needed no Amendment in this revising Chamber at all; and a fortiori are she and her colleagues so satisfied that they think this is a Bill about which, in no way, shape or form, should the Government be asked to think again? That is the situation that we have reached in this House.
Do not let it be thought that I am complaining at the decisions to which the House has come, because I certainly am not. But it is something to which we shall all have to pay regard in the future: that our role as a revising Chamber, as a Chamber where reasoned Amendments are thought out and debated, is one which perhaps is not so safe for the future as some of us may have thought. My Lords, having made those remarks, may I thank the noble Lord, Lord Oram, and the noble Lord, Lord Wallace, for their unfailing courtesy in the way they have treated us. We hope that, when it receives the Royal Assent, this Bill will not do too much damage.
6.30 p.m.
Baroness SEEAR: My Lords, I know that there is a great deal more to discuss this evening and I do not intend to be drawn by the noble Earl, Lord Mansfield, into a long discussion as to what has been our policy as regards the Bill. However, I wish to make one or two comments. Unlike the noble Earl, we do not see the Bill as primarily an anti-inflation instrument. We see it as having some contribution to make in the area of inflation for reasons which I have given repeatedly during the debates which have taken place. First of all, through the 12 months' rule, it gives some measure of control over wage increases although it is very slight. I am astonished at the line which the noble Earl, Lord Mansfield, has taken over this matter. Was it really his wish that the Bill should include draconian measures against employers who gave way to wage increases in the general area, apart from the 12 months' rule? I had

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not understood that the Conservative Party had what would have amounted to a statutory incomes policy, but that is what the noble Earl this afternoon seemed to be asking for.
Another way in which the Bill can help with pay policy is the degree of assurance that it may give—I do not know how great that degree will be—to the rank and file trade unionists in this country who are still being asked to exercise restraint and on whose good sense the future of inflation really depends. They can believe that because of the Bill there is still some control over prices.
I ask the noble Earl, Lord Mansfield, to ask himself whether, if it had been possible for people who are against the whole of the Government's policy as regards attempting to control inflation, to go to the country and say: "Look, you are being asked to exercise restraint over pay and the Government have torn up all vestige of control over prices", this situation would not have been exploited to the full by the enemies of this country who do not wish to see inflation controlled? Surely this must be the case. It is for that reason, in the short term, that we have wanted to see the Bill go through.
The final reason is that we believe that the Bill is a first step towards an effective competition policy which we have needed for a long time. The noble Earl will know, because I have no doubt he read the proceedings in another place, that we have been instrumental in pushing the Government in the direction of saying that it is their intention that we should not continue with a Price Commission. We are the last to want to increase bureaucracy, but the Price Commission should be combined with an improved Monopolies and Mergers Commission. In this way we shall cut down bureaucracy. Indeed, as regards bureaucracy, the Bill which does not involve a code at the end of a year, is much less bureaucratic than the Act which it replaces with all the complexities and details of a code. Therefore, we say move on as fast as possible towards incorporating the Price Commission into the Monopolies Commission so that we can have an effective competition policy of the sort that other countries, more successful than ourselves, in the Free World developed many years before we shall.
Lord ORAM: My Lords, like the noble Baroness, Lady Seear, I do not propose to be drawn unduly by the concluding remarks of the noble Earl, Lord Mansfield, although I should like to take up one point that he made. He churned to have detected a change in the motivation concerning the Bill during the course of its passage through another place and ultimately here. I do not think that he is right in that view. From the outset it was made clear that the Bill had two purposes: the short-term purpose and the long-term. As regards the Amendments with which we have been dealing in this House, it is true that emphasis has been given by myself and others to the long-term purposes. I shall not weigh up the relative merits of the short term and the long term, but the introduction by the Bill of the investigatory powers and the replacement of the old system by this new system is a most important part of the new thinking and the new policy as regards this question.
In view of that, rather than accept what the noble Earl, Lord Mansfield, has said about the one Amendment that the Opposition carried, I would say that, because of the need for establishing the long-term purposes of the Bill, the Amendment which made the powers renewable year by year was probably the least desirable of the series of undesirable Amendments that we have been considering. I am very happy that as regards at least all the others the will of your Lordships' House has prevailed in a way in which we are not very often accustomed in this place.
My Lords, having made those remarks I should generally like to reciprocate the concluding sentence of the noble Earl, Lord Mansfield, and thank him and Lord Trefgarne, and I should also like to include Lord Mottistone, for the manner in which they have approached and dealt with the Bill, if not for the matters which they introduced into our discussions.
On Question, Bill passed, and returned to the Commons.

COAL INDUSTRY BILL
6.37 p.m.
Lord STRABOLGI: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Strabolgi.)
House in Committee accordingly.
[The LORD ALPORT in the Chair.]
Clauses 1 to 5 agreed to.
Clause 6 [Grants in connection with pit closures]:
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 1:
Page 4, line 23, after ("assist") insert ("in connection with postponing pit closures, the phasing of coal burning industries into areas having one or more pits of low economic colliery capacity,").
The noble Lord said: The Amendment is directed to Clause 6(1). Your Lordships will note that in the margin to Clause 6 it is said that Clause 6 deals with:
"Grants in connection with pit closures".
Those are wide words because the grants which the National Coal Board is authorised to make are
"in connection with pit closures".
When one reads the terms of subsection (1) one sees that the grants which, in the opinion of the Secretary of State, should be made are further to assist
"re-deployment of the manpower resources of the Board and the elimination of uneconomic colliery capacity "—
whatever those words may mean. I understand what is meant by "redeployment of manpower resources of the Board", but as noble Lords who have been acquainted with the coal industry will know, it is very difficult to define what is meant by "uneconomic colliery capacity". Therefore, Amendment No. 1, which I have the honour to move, amends subsection (1) so as to include powers for grants to be made:
"in connection with postponing pit closures, the phasing of coal burning industries into areas having one or more pits of low economic colliery capacity",
and then to continue with the words in the clause,
"in the re-deployment of the manpower resources of the Board and, the elimination of uneconomic colliery capacity".
In my view, the inclusion of a few words to indicate that the grants should be available to assist in the postponement of pit
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closures is in conformity with the words in the margin relating to the clause which state that the grants are in connection with pit closures.
As I said on Second Reading, the closure of pits is a very significant and emotive expression to someone like myself who from birth has been associated with Wales. Many of us from Wales take the view that many of the pits that have been closed because they are uneconomic should never have been closed at all. But in 1969 the Welsh Liberal Party produced an energy policy which said, "Postpone the closure of pits for 10 years and try to bring into the area coal-burning industries". That would therefore reduce the cost of transport of this rather poor coal from collieries of low economic colliery capacity and allow a phasing of those industries towards collieries which in those days were considered to be uneconomic.
I do not want to make any political point out of this, but, as noble Lords will know, many of these collieries were closed because at that time oil was very cheap and it was felt that a sacrifice should be made of the communities of the district by the closure of these pits. Therefore, I submit that it should be specifically stated in the Bill that grants are available to the Coal Board, with the approval of the Secretary of State, for postponing pit closures. I know, of course, that in many cases the National Coal Board and the Secretary of State for the time being have arranged for pit closures to be postponed. We have many examples of that. We have many examples of pits that have been said to be of uneconomic colliery capacity that should be closed and which, because of the representations that were made, were not closed and are now fully working.
Therefore, the object of my Amendment is merely to make it quite clear in the Bill that, subject to the approval of the Secretary of State, the Coal Board will have power to give a grant to enable the closure of pits of low economic colliery capacity to be postponed. Although we may have a postponement of the closure of pits, grants should be available to encourage industries of a coal-burning nature to come into the particular area, primarily in order to reduce the cost of transport of coal. As the Minister was

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good enough to point out in his reply to me on Second Reading, that has been done. The phasing of industry towards collieries of low economic capacity has been carried out in the past. I am simply suggesting that the practice of the past should be reflected in the words of the Bill.
With the leave of the Committee, I would ask the Committee to accept that the observations that I have made will relate to Amendments Nos. 2, 3, 4, 5, 21, 23, 24 and 25. However, in so far as those Amendments relate to different clauses I reserve the right to say a few words when those clauses are discussed. My basic theme is that there should be a reference in the Bill to the power of the Secretary of State to make grants to postpone pit closures and also to assist coal-burning industries to be brought into the areas where some geologists or experts in a back room have decided that the pits in those areas are of uneconomic colliery capacity.
It is very difficult to define what is meant by "uneconomic colliery capacity". In my view, and with my experience of what has happened in South Wales where communities have been destroyed by pit closures, it would be a social injustice not to include in the Bill some specific reference to the powers of the Coal Board and the Secretary of State to assist in this important social matter in relation to pit closures. I beg to move.
6.47 p.m.
Lord SHINWELL: I had expected the Committee to deal with this piece of legislation a little earlier and I apologise if I fail to remain throughout this stage of the Bill. I wholeheartedly support the proposition that has just been delivered by the noble Lord, Lord Lloyd of Kilgerran. I cannot understand why the specific language which he wishes to see incorporated in the Bill could not be accepted wholeheartedly by the Government without any objection.
The history of the coal industry is fascinating—there have been ups and downs, oscillations, fluctuations, frustrations, disappointments and sometimes, as now, exaggerated optimism of a fanciful character. I should like to illustrate the point which has just been made by the noble Lord and which I I
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support. I recall what happened when the noble Lord, Lord Robens, was Chairman of the National Coal Board. During that period, with no exaggeration we closed down about 200 pits, although I shall not attribute that entirely to the noble Lord, Lord Robens. In practically every instance we were advised that they were closed down for economic reasons. Those economic reasons have always appeared to be somewhat mystifying because they were not always clearly explained by the Chairman of the Coal Board, members of the Coal Board or even by the miners' leaders—and I say that advisedly because they were completely involved in the changes that occurred.
They all declared that it was impossible to proceed any further because the pits were no longer economic, by which I suppose they meant that they could not pay their way—they could not wash their faces. In point of fact, there was nothing in the nature of a discussion in depth—to use what is now a cliché—on the subject. We never discovered what was actually meant by the inability to undertake these operations in an economic fashion, unless it was to engage in the making of profit, which was not the intention of the legislation which I piloted through the House of Commons nearly 30 years ago. The intention was to create a viable industry.
It was never expected—and this point cannot be overlooked—by the Attlee Government which were responsible for the legislation, the members of the original Coal Board, their successors, or the miners' leaders in general, that the industry would become viable in the sense that every pit would be conducted in an economic fashion—that is to say, it would pay its way. To use an analogy, the mining industry is rather like a large store in the centre of London, not every counter of which pays. The ribbon counter may pay handsomely but the lingerie counter—and I mean lingerie in the general sense—may not pay at all. Nevertheless it is essential or customers cannot be attracted to the store. Why that cannot apply to the mining industry it is impossible for me to say.
I recall that many years ago, when as a junior Minister in the first Labour Government I was responsible for mines, we were confronted by what we regarded

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as a disastrous situation in the County of Lanark in Scotland. Practically all the pits there were regarded as uneconomic, the majority of them because they were flooded. It seemed impossible to dispose of the superfluous water in those pits and, as a result, many of them were closed down, until the Lanarkshire mining industry was regarded as reaching its demise. In fact some years later it was discovered that it was possible to reduce the flooding and some of the pits were restarted, and then became if not economic at any rate worth while operating, so providing employment for unemployed miners; and goodness knows! we had far too many unemployed miners in those days. We have nowadays far too many, if not unemployed miners, then those who could undertake work in the pits.
I suppose that from the standpoint of the National Coal Board—this applies to whichever board has been in operation since the legislation was first enacted—it was essential to provide a surplus; the pits were expected to pay their way, that if they could not provide a huge profit they should at any rate wash their faces. But that has never been the case. They have been provided with huge sums at the expense of the taxpayer, and much of it has been disposed of or set aside as of little consequence, to cover up the difficulties that have confronted the industry for many years.
The time has arrived when, in my judgment, no pit—I say "no pit" deliberately and advisedly—should be closed down on so-called economic grounds. If it is possible to produce coal at all from a pit it should be kept open; far better to keep the pits running, providing employment for miners. I appreciate that for geological reasons it may not be possible for certain pits to provide all the coal we would like, but there is no reason why men should not be employed in those pits rather than be on the dole or in receipt of social security. At least some coal would be produced.
I am open to correction, but I understand that the chairman of the NCB said recently that the target had not been achieved. Something should be said about this so-called target. I recall that in another place, when we had a discussion some years ago about the situation
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in the coal-mining industry, we set a target of 200 million tons. That was reduced to 180 million tons because, in the opinion of the experts, it would have been impossible to produce 200 million tons, and even if it were possible it would have been impossible to sell that quantity either at home or abroad. Later the figure was reduced to 140 million tons. When my noble friend Lord Lee of Newton was Minister of Fuel and Power he was confronted with the decision that the target should be reduced to 140 million tons, but that target was never achieved.
Wages have gone up, perhaps not as high as the miners would like but I do not want to enter into a discussion about wages; the miners, certainly the men working at the coal face, in my view deserve the highest possible wage that can be conceded. In spite of all the changes that have taken place, all the modern equipment that has been injected into the industry, all the money that has come from the pockets of the taxpayers and by way of the higher prices that people have had to pay for coal throughout the history of the nationalisation of this industry, the situation has been if not disastrous then precarious, and the target has never been reached. Indeed, only recently Dr. Ezra, the chairman of the NCB, declared that unless production was raised to at any rate the target level they would have to increase the price of coal again.
A great deal more could be said about it but I have merely outlined the matter to give perspective to my support for the Amendment. I hope the Minister will concede that we are simply asking that there should be specific language in this legislation, so that there shall be no doubt whatever, to the effect that before a pit is closed down on so-called economic grounds, provision shall be made, if at all possible, for financial aid to be given to enable it to continue in order to provide employment. Of course, if the geological situation becomes so precarious that it is not possible in the opinion of mining engineers to produce any coal at all, then that would be another matter; but so long as there is a possibility of producing coal, that pit should be kept open. This should apply particularly to those areas where coal-burning is done, where industries are available and need more coal.

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There must be sense in this request at this time, when there is so much talk about the need for more energy. We speak as if there were an energy crisis. Bearing that in mind, the language of the Bill should be specific and precise so that we may know exactly what to expect. If, after a thorough-going investigation, a pit must be closed down, that is another matter, but if there is any hope of getting coal at all in fairly liberal quantities, the pit should continue, and I urge the Minister to give this matter his fullest consideration.
Viscount LONG: We on these Benches support the noble Lord, Lord Lloyd of Kilgerran, in moving the Amendment and we appreciate greatly hearing the noble Lord, Lord Shinwell, who was Minister of Fuel and Power between 1945 and 1947, explaining his experiences of the coal industry. As Lord Lloyd said, we must in particular consider the small pits in. Wales, the hardest hit area, where communities have been built up, where the young people have grown up and trained in the vicinity of the small pits and have been hewing the coal. It would be a tragedy if, with unemployment as high as it is, the small pits were closed and there followed a redeployment of manpower which, in my view, would cost the NCB a great deal more than it would if that manpower were left where it is with new industry being brought into the area.
We are, of course, considering very small and isolated areas which, from the NCB's point of view, could probably be uneconomic. But, given the chance to go on hewing their coal, these miners could be an asset to their country again. That is why we support the Amendment, and we hope that the Minister will give consideration to it, because otherwise there could be great hardship for the small communities who for many years have lived and worked as miners. We support the Amendment on those grounds.
7 p.m.
Lord DAVIES of LEEK: I will be brief. Am I clear in understanding that the noble Lord, Lord Lloyd of Kilgerran, having made his preliminary speech on the need for the phasing of coal-burning industries that are adjacent to collieries of low economic capacity, is regarding that speech
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as covering Amendments Nos. 2, 3, 4 and 5, and the others? If that is so, he is saving the time of the Committee, and I will follow that example by making only a few brief remarks in support of the Amendment. According to Clause 6:
"The Secretary of State with the approval of the Treasury may",
—I emphasise that the word is "may"—
"out of money provided by Parliament, make to the Board such grants as in the opinion of the Secretary of State will further assist in the redeployment …".
The noble Lord, Lord Kilgerran, states in his Amendment after the word "assist":
"in connection with postponing pit closures, the phasing of coal burning industries into areas having one or more pits of low economic colliery capacity …".
To my mind, that is absolutely necessary, not only in parts of North Wales, but in parts of North Staffordshire, especially in regard to the small pits.
When my noble friend Lord Shinwell was Minister, I had the honour to have been on the Committee which sat in the Moses Room. We took over the public ownership of the mines, and my noble friend ultimately had the onerous burden of bringing the pits under national ownership. At that time there were many small collieries which, in the gusto and enthusiasm of public ownership, were closed down. I believe that that was a great mistake, because when those pits were closed down colliers were moved to various parts of Britain—up to Fife, down to Kent. When they were moved houses were built for them near the pits. In my own old constituency hundreds of houses were built and Welsh, Scots, and North-East miners came there from so-called worked out or uneconomic pits. The cost of the building involved, the sewerage system, the local government machinery required to provide these amenities, are increasing the burden of expenditure on the National Coal Board.
I believe the Amendment is very important. I do not want to make a long speech because I think the situation is obvious, and I sincerely hope that the Government will be able to direct assistance into the areas, as suggested by the noble Lord, and as strongly argued by my noble friend Lord Shinwell. I am not in any mood this evening to be obstreperous or to go into the Lobbies, and I hope to

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hear a favourable reply from my noble friend on the Front Bench.
7.4 p.m.
Lord WYNNE-JONES: I hope that my noble friend will forgive me for intervening for a few moments. I am in general support of the Amendment, but I think that it is important to realise that the coal industry cannot possibly be lumbered with uneconomic pits. It would be a mistake to insist that pits were kept open, but I think that the point of the Amendment is not to insist that pits are kept open, but to make an attempt to find out how they may be used. If I understood the noble Lord, Lord Lloyd of Kilgerran, correctly on this matter, he was referring in particular to small local industries that could be linked with a pit.
When I first went to Newcastle I found, oddly enough, that there was just such an industry there. It is an industry involved in the manufacture of sanitary ware, sold under the trade name "Adamsez", the firm being the firm of Adams, which is an old firm. I got to know the man who was running it. He took me over the works, and he pointed out to me the interesting fact that when the firm started they had china clay right on their doorstep. They also had a pit actually in Newcastle, and when the coal industry was nationalised they were allowed to keep the pit, provided that they did not sell the coal but used it purely for working their own place. I believe that that was allowed in several places. They were able to run an extremely profitable concern because they were not trying to undertake the elaborate business of mining coal and distributing it around the country. They were simply mining the coal which was in their own backyard, as it were, and which was being brought in to fire their furnaces.
If that kind of thing can be done around the country, in such places as my noble friend Lord Davies of Leek has mentioned, in Staffordshire and South Wales, it could be quite a valuable way of keeping men in employment and keeping the coal going. It might be quite unprofitable to sell that coal on the open market, but it might still be profitable for firms to use it within their own works. I ask my noble friend the Minister to look at this matter and to say whether he thinks
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there is any chance of the Government giving any help, although I should be completely against the attempt to run uneconomic pits on the open market, because that would merely put an unnecessary burden on the coal industry.
7.7 p.m.
Lord STRABOLGI: We are all crateful to the noble Lord, Lord Lloyd of Kilgerran, for putting down the Amendment. He touched on this matter on Second Reading, and I gave a brief reply then, but I am glad that he has put it down again because it has given rise to an interesting debate with some notable speeches from my noble friends Lord Shinwell, Lord Davies of Leek, Lord Wynne-Jones and others, as well as an intervention from the Opposition Front Bench by the noble Viscount. I say at once to my noble friend Lord Davies of Leek that I shall try to give a helpful answer; and I hope that he will find it helpful. But there are one or two points which I must make on the Amendment. The first point is that the closure of collieries is no longer the serious and distressing problem that it was in the late 1960s, and the second is that generous financial inducements already exist to attract industry to areas where coal mining can be expected to decline.
As has been rightly said in the debate, the number of pit closures were very great in the late 1960s, but today the number is very much lower. For example, in 1967/68, 50 collieries closed, in 1973/74 only 18 closed, and in 1976/77 only four closed. As my noble friend Lord Wynne-Jones said, it is broadly true that the National Coal Board now close only those collieries which are exhausted which have become grossly uneconomic, or which have run into serious geological difficulties. That is an important point that has not so far been mentioned.
In my humble submission, in the long run it does the industry no good to keep grossly uneconomic pits alive by direct or indirect subsidies. In any case, there is now an elaborate procedure of consultation with the unions. This has to be followed in every case before a colliery is closed. I think it would be fair to say that this ensures that no pit is closed when there is any sort of case at all for keeping it open. Under this recognised procedure, the National Union of Mine-

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workers can have an inspection of the pit carried out by their own mining engineer, and can appeal, if they wish, to Board level in London.
However, if the pit has to close the Board take great pains to ensure that all the younger men are offered jobs at other pits. The older men, who may be made redundant, receive generous treatment under the Redundant Mineworkers' Payments Scheme. Most of the special development areas were established with the possible decline of the coal industry in mind. Most generous financial inducements already exist under the Industry Act 1972, passed by the Conservative Administration, to attract firms to these areas. Manufacturing industry is offered development grants of 22 per cent. on new buildings, plant and machinery, and loans or interest relief grants to help with the provision of working capital. In addition, there are removal grants of up to 80 per cent. of the cost of moving plant, machinery and stocks. In addition, further Government factories have been built in these areas and are available rent-free for five years to suitable firms. But, even so, there is a limit to the amount of mobile industry available, however generous the grants.
The problem of colliery closures is no longer a serious one, since the number of collieries which close in any one year is now comparatively few. However, coal mining, as I have said, is an extractive industry, and inevitably mines will get worked out or will run into serious difficulties and have to close. The areas in which this is likely to happen are well known, and generous financial inducements already exist under the Industry Act 1972 to persuade firms to move into those areas. In these circumstances, I hope your Lordships will agree that the spirit of the Amendment which the noble Lord, Lord Lloyd of Kilgerran, has put down is already operating, and that no further legislative provision is necessary.
Lord SANDFORD: Before the noble Lord, Lord Lloyd, decides what his reaction to that is going to be, I wonder whether the noble Lord, Lord Strabolgi, could help me. He says that there are powers under the Act which he quoted to persuade industry into special development areas, but can he assure the Committee that the powers under that Act are
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as specific as those cited by the noble Lord, Lord Kilgerran, in his Amendment? Surely there is no reference in that Act to inducements to coal-burning industries as such to come into special development areas; and although the noble Lord, Lord Strabolgi, says that there is some association between the areas we are talking about, where pit closures go on, and special development areas, that is coincidental; it is not precisely so, surely?
Lord STRABOLGI: No. Of course, industry cannot be directed to move, but under the Industry Act 1972, as I am sure the noble Lord, Lord Sandford, is well aware, since he was a member of the Administration which enacted it, considerable financial inducements already exist to attract industry into the assisted areas. Most of the special development areas were established to take account of the possibility of colliery closures; and, as I said, grants are paid. On the other hand, it is really not very much help in the long-term if you induce a coal-burning industry to move into an area where a colliery has to close for geological reasons and the industry then cannot get any coal. The other point, of course, is that, since coal is priced on the basis of the average cost of the coalfield from which it comes, its sale does not require any special assistance. The problem with an uneconomic pit is not using up the coal but dealing with the financial losses and then, of course, with the redundancies. There is plenty of coal.
Lord SANDFORD: I merely want to get the point clear that there is no special power under the Act which the noble Lord quoted to attract coal-burning industries as such into these areas. That is the point. There is not, is there?
Lord STRABOLGI: No.
7.14 p.m.
Lord LLOYD of KILGERRAN: I am very grateful to the noble Lord at least for accepting the spirit of my Amendment; and I was particularly interested to hear the notable speech of the noble Lord, Lord Shinwell. As I see that the noble Lord, Lord Lee, is in his place, may I say at once how, in the days when he was Minister, as an active member of the Welsh Liberal Party, strongly supported his view that there should be a production

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of the order of 170 to 180 million tons of coal in the United Kingdom over a period of, I think, five years. We in Wales were astonished that when Mr. Marsh took over the figure was reduced to something of the order of 135 million tons as the limit of productivity for the years after 1970.
I understand from the noble Lord, Lord Strabolgi, on behalf of the Government, that his reasons for not including the specific words which I have suggested should be put into this Bill in regard to giving grants to postpone pit closures, and also for phasing and encouraging industry into the area, were threefold. First of all, he said the problem of the closure of collieries is now not so serious as it was in the 1960s. There are far fewer pits, I suppose he means, and therefore not so many will be closed. I should have thought that, again, the tragedies of closing pits would still be as great in the areas where they decide to close them down as they were in South Wales in the 1960s.
Then he said that there are generous financial inducements already in existence, particularly under the Industry Act 1972, to encourage industries into particular areas. I should like to thank the noble Lord, Lord Sandford, and to support what he said in that respect. He extracted from the Minister the statement that there is no specific reference in the Industry Act to encourage coal-burning industries into an area where there is the suggestion or the possibility of pits being of low economic colliery capacity, and likely to be closed.
Then the noble Lord the Minister referred to the elaborate procedure (to use his words) which now exists, in conjunction with the National Union of Mineworkers, in order to postpone closures of pits and to consider what should be done with the manpower that might be released as a result. I find myself in a difficulty. I always feel that the kind of Amendment that I have put forward, suggesting that there should be specific references to what grants should be available for pit closures and for the phasing of industries into areas where the pits may be of low economic colliery capacity, should not be the subject of a confrontation on a Division basis.
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If I may say so with the greatest respect, the noble Lord, Lord Strabolgi, when he replied to the point that I raised on Second Reading, did not quite understand the point I was making particularly in relation to Schedule 2. He told me very firmly that Schedule 2 to this Bill re-enacted the terms of some previous Bills and dealt with all the matters arising when a pit closure had been decided upon. My Amendment is directed to the period before it is finally and irrevocably decided that a pit should be closed.
I hope that the Government will appreciate what noble Lords have said on this matter, and I hope that the noble Lord will reconsider the position. In the circumstances, in view of his somewhat sympathetic reply, I do not propose to press the Amendment at this stage, but I may raise the matter at a later stage.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
Clause 7 agreed to.
Clause 8 [Regional grants]:
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 2:
Page 6, line 28, at end insert ("including activities for the phasing of coal burning industries into areas having one or more pits of low economic colliery capacity and generally for postponing pit closures.")
The noble Lord said: I beg to move Amendment No. 2. Clause 8 refers to regional grants. Subsection (1) of this clause is to give effect
"for the purpose of assisting or enabling the Board to pay due regard to the needs of the assisted areas when planning and carrying out colliery activities".
I hope that the Minister would agree that "colliery activities" would include in their scope those activities deciding to postpone the closure of collieries. If the Minister can assure me that "colliery activities" includes activities for postponement of closure of colliery activities, then I propose to withdraw this Amendment.
Lord STRABOLGI: I am happy to give the noble Lord that assurance.
Lord LLOYD of KILGERRAN: In those circumstances, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 3 and 4 not moved.]
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 5:
Page 7, line 10, leave out subsection (7).
The noble Lord said: I have some difficulty about subsection (7) of this clause. That subsection states:
"Section 9 of the Act of 1973 (grants by reference to contraction of the coal mining industry) shall cease to have effect".
I have looked at this clause in the Act of 1973 and I have had some difficulty in comprehending its scope. I should like to ask the Minister specifically why it is necessary to exclude the powers of Section 9 of the Act of 1973 which enables grants to be made by reference to the contraction of the coal mining industry. The words "contraction of the coal mining industry" appear to me to include pit closures or the elimination of pits of "uneconomic colliery capacity", to use the words of the Bill. I should like to ask, before deciding what action to take, why it is felt necessary to remove by this Bill Section 9 of the 1973 Act which specifically gives powers for grants by reference to the contraction of the coal mining industry.
Lord STRABOLGI: I am happy to give a short word of explanation. Subsection (7) states:
"Section 9 of the Act of 1973 … shall cease to have effect".
Section 9 of that Act is the section under which regional grants were payable between March 1973 and March 1976. It is now spent and may therefore be repealed—which will be under Part II of Schedule 5 to the Bill. It is very complicated with the various statutes involved, but I thought that it might be helpful if I were to throw some light on it.
Lord LLOYD of KILGERRAN: I am obliged to the noble Lord. As I understand it, the reason for eliminating Section 9 of the 1973 Act is that it is no longer considered by the Government necessary to have any clause in this Bill which will assist by way of grants in relation to the
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contraction of the coal mining industry after 1976 apart from the terms in the Bill in its present form. If my understanding of the Government's position is correct, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 8 agreed to.
Clause 9 [Activities relating to petroleum]:
7.25 p.m.
Lord LUCAS of CHILWORTH Lord LUCAS of CHILWORTH moved Amendment No. 6:
Page 7, line 14, after ("power") insert ("subject to the approval of the Secretary of State").
The noble Lord said: I beg to move the Amendment standing in the name of my noble friends and myself. Clause 9 moves us some way away from coal into the realms of the oil industry. There is no doubt that the National Coal Board have been engaged to some extent in oil activities, largely in concert with other groupings, subsidiary companies of theirs and others in the private sector. It is my understanding that such commercial arrangements are reasonably satisfactory. If, however, the noble Lord, Lord Strabolgi, can tell me that it is because of the unsatisfactory nature of these arrangements that the NCB now seek to enter the oil industry this may very well affect some of the things I have to say.
However, I do not believe that this is necessarily so. I believe that the National Coal Board have sought these powers and have been given them in the Bill in order that they can engage in what currently is a most attractive part of the energy business. Whatever anybody says, this clause gives absolute power to the National Coal Board to engage in non-coal activities. There are some qualifications, certainly; but in practice they are, I feel, quite meaningless. They are so loosely framed in the clause that it would be quite impossible to prove one way or another whether the Board were exceeding their powers or not. If the noble Lord opposite is going to say that the NCB have been engaged in these activities but there is some doubt under the 1946 Act as to how far they can go, that this regularises the position and removes the doubt, I would agree with him because it removes the doubt absolutely. It removes all the

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doubt; and off they can go into the oil and petro-chemical industry.
I ask why it is that the NCB want to go into it. Why, for example, do they need to go into that activity to gather experience in oil technology, oil refining and petro-chemical distribution? There is much expertise also in the State-owned sector of the oil industry through BNOC and there is a mass of expertise in the private sector. When we discussed BNOC, when we discussed the involvement of the State in oil activities in the Petroleum and Submarine Pipelines Act and the Energy Act, the BNOC were denied the complete and absolute freedom. Is it that the Government now see that such freedom can be given to a nationalised industry through the National Coal Board?
There is another factor. Is there today a good economic reason for the Board to engage in the making of petro-chemicals from coal? It could be argued one way or the other. If it were so, I suppose it is reasonable to say that the National Coal Board have the technology—certainly the technology in conversion is available. What is in some doubt is whether such conversions are, in current economic terms, worth while.
The total energy difficulties experienced in this country are easing with the provision of North Sea Oil; nevertheless, coal has re-emerged as an important energy source. I suggest that the NCB's prime target is in mining solid coal for solid coal uses. That we can come to using coal in liquified forms, we know; as to when that becomes an economic probablity, we do not know. It is at that time that the NCB might require these further powers.
Ever since that celebrated television programme on the oil industry was screened some years ago, that industry has had a most splendid attraction—almost a romance—for almost everybody. There is no doubt that the oil industry could be equally attractive to the NCB. In another place, and in your Lordships' House during Second Reading, the Ministers responsible have given certain assurances as to what the NCB intended to do. I am going to suggest that the NCB may have such intentions today, but tomorrow they could be different: a different Board
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chairman with a different kind of composition to the Board, may find that the success of his Board lies more in oil activities, and he might then proceed, using State money and State effort.
Once you start in the oil business as a sole entity, there is no going back. You have to go all the way along the line. It is extracted, refined, distributed and sold. There is no going back. As ICI found in 1969, when they were refining to provide petro-chemical feed stock for themselves, they ended up with a surplus of petrol. As will be recalled, that is practically the end product. How did they get rid of that end product? They opened their own petrol stations. They had 100 of them. Today they have 400. Indeed, they are now engaged in the purchase of refined petrol, its distribution and sale. There is no going back.
These are some of the powers we are going to give to the National Coal Board under Clause 9. I should like Clause 9 to be deleted. That is not practical politics nor a practical proposition. However, what is practical is that no nationalised industry should embark on virtually new fields without let or hindrance, without being accountable somewhere along the line. I suggest that accountability should be by the Secretary of State having to give approval. It has been said in another place that there are plenty of checks and counterbalances to see that the Board do not do this. That may well be so. If it is so, those checks and counterbalances are not inside Parliament. That is why I feel that it is necessary that should the Board engage in this, that or the other, the powers should be there with some minor qualification and Parliament must have some control as to where the Board go, what they do and how they do it.
The whole of the energy business, whether it is coal or oil, is far too important to be dealt with by different bodies who, for their own reasons, go different ways. There must be a pulling together regarding this energy source. The only way is through Parliament, and the only way that I can see is that the Board shall ask the approval of the Secretary of State. That is what Amendment No. 6 seeks to do. I hope that, without repeating what has been said in another place, I have given some of the reasons why I

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think that your Lordships should agree with us in this Amendment. I beg to move.
7.36 p.m.
Viscount LONG: I am most grateful to my noble friend for what he has said from his experience in the petroleum and motor industry. We assumed that we were starting with a Coal Bill and we are now, in no time at all, dealing with petroleum. It is dangerous that the Board, with no authority from anyone else, can go into the petroleum industry. Clause 9(3) says:
"The Board shall have power to do anything and to enter into any transaction (whether or not involving expenditure, borrowing or lending, or the acquisition of any property or rights) which in the opinion of the Board is calculated to facilitate the proper exercise of their powers under this section, or is incidental or conducive to the exercise of those powers".
During Second Reading, I said that this clause was too loosely worded and that the National Coal Board could do virtually what they wanted. It is obvious from the clause that they have the powers to do this. On page 4 of the Bill, Clause 5 (3) says:
"… but the Secretary of State may,…",
and further down, in Clause 6(1) it says:
"… the Secretary of State will further assist…".
Yet when it comes to the NCB wanting or having powers to go into the petroleum field, the Secretary of State's permission is not required. The Amendment quite rightly wants the Secretary of State to be informed.
The NCB is in need of £2,800 million. I understood that this Bill was for the pits, those that needed remodernising, refurbishing and so on. I am getting more suspicious and anxious that this money is to be diverted into other causes. I stand to be corrected, but I do not think it is right to allow the NCB authority or powers to go it alone into the petrol industry. Before we know where we are, we shall have petrol pumps manned by the unions which have unemployment in the mines, or petrol stations being taken over by the NCB, who do not have the necessary experience. This is extremely dangerous.
I am glad to see the way in which the Amendment is worded, to make sure that the Secretary of State is brought in,
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and to make sure that the NCB cannot, in a few years' time, walk into the petroleum business as such. I think that this Amendment should be looked at in that light.
7.40 p.m.
Lord LEE of NEWTON: I was very grateful to the noble Lord, Lord Lloyd; I came in just in time to hear him talking about my total in 1965 of 180 million tons of coal for 1970. In the event, that proved to be the right figure and the coal industry has been in trouble ever since. But in that White Paper, and indeed in the 1969 Act, which has been mentioned, I also wrote off £415 million of the Coal Board's capital debt, which was of great assistance to the Board. I also made arrangements for the National Coal Board to take shares in the North Sea and Irish Sea.
Noble Lords are getting very worried about the Coal Board going into the oil industry, but they are precisely eleven years too late. It has been in it all chat time. I read the other day that they sold a large number of shares to BNOC for a few hundred million pounds, and that goes to assist the public weal. I should not have thought that, on the whole, this was the kind of activity which was detrimental to the national interest. As a matter of fact, I recall that, when we made arrangements with certain American-owned firms which had practically a monopoly in the North Sea, we got very good terms for the Coal Board, because it did not put in any money until the presence of oil and gas was made clear. With all the problems of the oil industry and the fact that for every 10 holes you drill, on average, only one is a wet hole, I should not have thought that those were bad conditions for the British to enjoy.
I do not understand why the noble Lord, Lord Lucas, is so worried. In those days also, the Coal Board was the second biggest producer of bricks in Britain. It had a whole range of activities which were ancillary to its main objective. The noble Lord was telling us that ICI has gone into this business. Apparently, it has hundreds of petrol stations all over the country; and he applauds that. But a nationalised industry must not do anything of that kind. When an American oil company got a certain percentage of the British market, one of the things that we insisted upon was

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that it should build a refinery so that instead of having to pay for the crude, we got the by-products from the refinery. Indeed, one of the greatest miracles in the fuel industry came about when the gas industry, instead of carbonising coal, turned over to the by-products from the refineries which we had had installed. In that way, the gas industry expanded at the rate of 11 per cent. per annum instead of remaining an industry which was going out of existence.
Why are noble Lords afraid of this kind of thing? It beats me. The noble Lord mentioned ICI. I cannot think of any of the great industries in Britain which are now producing the identical products they were producing when they came into existence. If they had been, most of them would have gone out of existence. We owe their present existence in Britain to the fact that they were enterprising enough to change over to other things.
I go this far with the noble Lord: it would be wrong for an organisation like the National Coal Board to neglect its main reason for existence as a result of going into other things. None of us would want to encourage that kind of thing, especially if there were jolly good private firms doing well in the production of such commodities. I think that the noble Lord is barking up the wrong tree.
We are trying to get an energy industry composed of coal, gas, oil and nuclear power, and which is co-ordinated in the sense that we get the best and most economic products from each of them. I should have thought that that was a good thing from any point of view and, indeed, when Conservative Governments have been in power they have not tried to wreck that kind of development. I mentioned the 1965 White Paper which I had the honour to produce. It was the first White Paper which brought together all of the energy industries. We tried to make an estimate of what total product would be required in 1970—and, in the privacy of these four walls, I will tell the noble Lord that we got it right five years before it happened. So do not let us start imagining all kinds of things which are not going to happen. The Coal Board's main product will still be coal
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but in the course of getting that coal we shall see developments.
I have mentioned how the North Sea development came about and I am not ashamed of it at all. I take it that, when they are boring, they will come across various kinds of mineral and so on. Up to my day, there had never been an exhaustive survey in Britain of what we had under our soil. Mostly, we found other things when we were digging for coal. Despite the fact that the Coal Board has expended its capital on research into where coal lies and then goes into the very expensive job of sinking shafts, if it dares to come across a material other than coal, the noble Lord says that it must not touch it. Quite frankly, that is impossible in this day and age. My noble friend will probably say that the Coal Board is not looking at how it can expand into areas where private industry are doing well. They are not doing that at all; so let us please not try to restrict the Board when it is making a legitimate expansion into other parts of the energy programme.
Lord TAYLOR of MANSFIELD: I wonder whether we can just examine this clause for a moment or two. I think I heard the noble Lord, Lord Lucas, say that his chief preoccupation was not so much with the Amendment as with the fact that he would like to see Clause 9 disappear from the Bill altogether. Let us just look at it for a moment. It says this:
"The Board shall have power to carry on any activities consisting of—

(a) the acquisition and treatment of petroleum.

(b) the manufacture and sale of products of petroleum, or

(c) the treatment of products of petroleum for the purpose of rendering them saleable".

Why are those words put in? It also says that the Board will be able to occupy itself with those various activities if it appears to the Board,
"that those activities will or may ultimately provide an outlet for coal or products of coal, or may lead to the development of chemical processes or methods, or acquisition of commercial, industrial or technological experience or knowledge which may lead to new or improved uses of coal or products of coal".
I submit that those words in (a), (b) and (c) are there only to provide the Board with an opportunity for an outlet for the commodity which they produce. That is

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how I see it. I remember the Sankey Commission, and during all the years since then I have been very disappointed that not enough has been made out of what could be extracted from coal.
I hope that the Minister will not listen to the Amendment, at any rate with a view to accepting it. One of my disappointments has been that not sufficient use has been made of the potential that is in coal. In my humble submission, Clause 9 provides the National Coal Board with that opportunity. For that reason, I heartily, and without any reservation, support Clause 9.
Lord HUGHES: I should like to come in briefly on this Amendment, and it is rather surprising to myself to be entering into a debate on something in connection with the coal industry. I do so because it appears to me that as soon as we have a Bill dealing with a nationalised industry the Conservative Opposition always seem to look at it with, great suspicion, particularly if there is any suggestion that the industry may be embarking on a widening of its functions. I suggest that the noble Lord, Lord Lucas of Chilworth, and the noble Viscount, Lord Long, are completely wrong in their fears that this could enable the Coal Board to make a massive intervention in the oil industry. After all, they can do so on only a very limited basis, if they can do so without needing capital for the purpose. Since they need capital they must go to the Secretary of State, and Schedule I clearly lays down that he has to approve the borrowing of money either from other sources or from himself. So it is clear that Schedule 1 would enable any Secretary of State to prevent the Coal Board from embarking on any such enterprise, if he did not think they should do so. Any fears that the Coal Board could be opening up 400 petrol filling stations behind the back of the Secretary of State, are so fatuous as not to be worth contemplating for one moment.
Lord LEATHERLAND: I hesitate to intervene in this debate among experts. I do so only because nearly 13 years ago, when I first came to your Lordships' House, I raised the question of the production of oil from coal. It was explained to me on that occasion that, while research was proceeding, the expense of carrying out that conversion at that
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moment made it not a practical economic proposition. Nevertheless, we assume that research has continued, and that at some time the production of oil from coal may become a practical possibility. We know that considerable work has gone on with a kind of sister operation; that is, the underground gasification of coal. So I think we must look forward to the day when oil will be obtained from coal.
I want to make only one point, and that is the object of my having risen here tonight. It may be that, at some time in the future, this country will be faced with the threat of war, or with war itself; we hope not, but it may come. Where, then, are our oil resources? What will happen to the North Sea wells? Not one of them will be standing after 24 hours of war. What will happen to the tankers that are bringing oil from the Middle East? Not one of them will be on the surface of the waves after a week at war. If, therefore, we have beneath the soil of our own land the possibility of securing oil from our coal, then I think we should proceed—not on a huge scale at the moment, but certainly with active research and, perhaps, with some production in the obtaining of oil from coal.
If we were faced with a war, what weapons would we use? If we used planes, we would need oil. If we used ships, we would need oil. If we used tanks, we would need oil. But, as things stand at the moment, we would not be able to guarantee ourselves a single gallon of oil after a week of war. I have looked a long way ahead. I have perhaps been fanciful, but these things happen. None of us expected to have two wars in our lifetime, and yet we have had them. So I suggest that if we have the potential beneath our own soil, we should not waste it. We should be active, and see what use we can make of it.
7.55 p.m.
Lord SANDFORD: It looks as though I must spend a little time trying to persuade the Committee that we do not disagree with the noble Lord, Lord Leatherland, or the noble Lord, Lord Lee. We are not objecting to these powers being available to the National Coal Board. We agree that they should be, for the reasons which the noble Lords have been putting forward. I am afraid I must

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say that all the noble Lords who have spoken from the opposite side have been exaggerating the extent of what we are seeking to do. We are not objecting to these extensive powers being available to the National Coal Board, and noble Lords have only to look at the Amendment to see that that is so. We are not objecting to the National Coal Board using these powers and going into these fields, for the very good reasons which the noble Lord, Lord Leatherland, for instance, has just been putting before the Committee. All we are objecting to—and it is much more limited—is the National Coal Board having such wide powers, which they certainly need for all these reasons, and being able to exercise them, without the prior approval of the Secretary of State; and our Amendment is limited to that solely.
It is perfectly true, as the noble Lord, Lord Lee, said, that the National Coal Board started life by inheriting all kinds of activities, including brick-making. But they, very properly and sensibly, got rid of those and concentrated their attention on winning and getting the coal—more or less—because brick-making is a diversion and a distraction from their main purpose, which occupies the greater part of their talents, skills and manpower. But this is not to say that it may not now, as it has been in the past, be in the national interest, as well as in the National Coal Board's interest, for the National Coal Board to diversify again into various fields.
This is certainly the moment for them to be considering taking a stake in the petro-chemical industry. We are not objecting to that. We think that that is sensible. It is obviously sensible, in order to get the best possible use for the sake of the nation from this precious indigenous resource. We are not in disagreement on this point, whatever noble Lords might have expected. What my noble friend Lord Lucas is objecting to is the very limited point that they should be able to take a decision to use these very wide powers—and I think noble Lords will agree that they are wide, but we are not objecting to that—and to take a decision about the way in which they are to be used, solely on their own consideration.
Lord LEE of NEWTON: Will the noble Lord allow me to intervene? Does he realise that every year the capital programme of the National Coal Board has to be agreed with the Minister of Power? He has complete authority to refuse to agree to the expenditure of any amount of money for something with which he disagrees; in other words, he already has the power. They have to go to the Minister concerned to get the power to spend capital, and he can at any time refuse to give them that.
Lord SANDFORD: I entirely appreciate that. Nevertheless, this is a new feature in the Bill. Most Coal Industry Bills are just as the first Part of this one is—an extension of the Board's borrowing powers and the addition of one or two grants, which in this case amount to the fairly substantial sum of £325 million to £475 million, to do various things to a greater extent or additional to what they have been doing before. I agree there is that financial control. We are dealing here with something new and something wider, and we are agreeing, contrary to what noble Lords opposite might have expected, that this is a sensible and timely extension and diversification of the National Coal Board's powers.
Nevertheless, despite what the noble Lord, Lord Lee, said about financial control being there, we believe that in this case it would be more desirable for the National Coal Board, when they have initiated and worked out some scheme for the use of these powers, also to have to go, to the Secretary of State for approval of them before the Board pursue and implement them. It seems to us to be undesirable that these new and very extensive wide powers can be exercised without the approval of the Secretary of State, despite the financial control which he is able to exercise.
We believe that this Amendment is necessary because the petro-chemical sector is already covered by another nationalised body—the BNOC—and by several large private sector firms. This very limited Amendment is designed to avoid expensive duplication of effort in this sector by two nationalised industries and several large firms in the private sector. This is the only reason for the Amendment. In order to secure that objective it is well worth while having this minor Amendment. We

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are not in the least disagreeing with the existence of the powers, and we take entirely the point that this is a timely and good moment at which to introduce them.
Lord HUGHES: I wonder whether the noble Lord would be good enough to explain how he considers that the Coal Board can exercise these powers to use capital without the consent of the Secretary of State, and also how he envisages this being done on anything other than the most modest scale without the injection of capital by the Secretary of State. As my noble friend Lord Lee of Newton has just emphasised—and I thought that the noble Lord, Lord Sandford, accepted what he said—does not this mean that the Secretary of State's control is absolute?
Lord SANDFORD: I believe that the Secretary of State's control over borrowing and Parliamentary control of grants, both of which are provided for in the Bill, are appropriate. We have become used to the National Coal Board exercising their powers within the relatively circumscribed powers granted to them by the 1946 Act, as amended. Here we enter into an entirely new field, not one where the National Coal Board are opening up spheres of activity and aspects which they are pioneering. The Board are moving into areas which are already covered by another nationalised body and by the private sector. In those circumstances, we consider that it is necessary to have this sanction as well.
Lord HUGHES: It seems to me that in his reply the noble Lord has thrown away his entire case. He says that he accepts that the National Coal Board will be controlled financially in the field of coal in which they have been engaged ever since the Act was passed; yet the noble Lord envisages the possibility that the Board will have a blank cheque when it comes to this totally new field of activity. If financial control means anything, it must mean that control will be much stricter in the case of a new enterprise than in one which has been carried on for decades.
8.2 p.m.
Lord STRABOLGI: May I say a few words at this point. This very interesting debate has ranged far and wide over most of Clause 9. May I say at the outset that the powers which are being sought
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for the National Coal Board are rather more important and exciting than just running a few petrol filling stations, to which the noble Lord, Lord Lucas of Chilworth, seemed to think that they were consigned. We are in the second half of the 20th century and are moving towards the next century. We are on the eve of a very important technological age. I should like to spend just a few moments explaining to your Lordships how the Government view the relationship between coal and chemicals and to suggest that we raise our sights a little higher. I believe that the noble Lord, Lord Sandford, appreciates what we have in mind—and also my noble friend Lord Hughes, the noble Lord, Lord Lee of Newton, and my noble friend Lord Taylor of Mansfield.
Only 30 years ago, 75 per cent. of our production of organic chemicals was based upon coal and its by-products. Then came cheap oil and the rapid expansion of the petro-chemical industry, an industry which is very different in character from what it was even 30 years ago. We no longer have cheap oil, and it is certain that the next 30 years will see further changes in the petro-chemical industry as it adjusts to changes in the supply and price of its feedstocks, and continuing oil to coal price relativity favourable to coal will enable new opportunities for coal based chemicals to appear.
There is no sharp dividing line between chemicals made from coal or petroleum other than that of production cost. The purpose of Clause 9 of the Bill is to give the National Coal Board the chance to be ready to seize these opportunities as they arise, and not to move into fields, as I believe the noble Lord, Lord Sandford, implied, which have already been well covered by other industries, nationalised or otherwise. It is rather more exciting and imaginative than that. This nation is fortunate in its energy resources, but we know that our coal will long outlast our oil and natural gas. Therefore I submit that we owe it to ourselves, and to those who follow, to explore ways to extend the life of our reserves of oil and gas. We should be failing indeed if we neglected to set up the machinery by which a smooth transition can be made from one feedstock to another.
The Board believe that in the years to come there is an essential place for coal

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as an alternative to oil in certain refining processes and as a source for chemical feedstocks. They believe that in the United Kingdom at least the substitution of coal for oil in refineries will be a gradual development which might embrace a number of aspects—for example, the substitution of coal for oil for steam or power generation at refineries, the use of hydrogen from coal gasification to meet the demand for more hydrogen in refineries to produce lighter fractions; and there are many others. I understand that several oil companies are giving serious consideration to the future possibilities of using coal in oil refineries. In principle, the total projected United Kingdom demand would represent a significant fraction of the present total United Kingdom output of coal.
A partnership has now been formed between Coal Products and BSC Chemicals which will be the vehicle for future joint petro-chemical ventures which might also absorb activities with which the Board are already associated with BSC. Both BSC and the National Coal Board envisage co-operation between this joint partnership and oil and chemical companies in activities downstream of refining. The discussions they have already had with companies in the oil and chemical industries provide grounds for believing that co-operation will be forthcoming. Neither they nor their BSC partners are planning to set up in competition with the oil or chemical industries, nor to take over any small companies in this field. There are various others on the refining side. The National Coal Board have had talks with Conoco with whom they already have connections in the chemical field, although no firm arrangements have been entered into. I could go on for a very long time, but I do not wish to weary your Lordships. Nevertheless, this gives some indication of what the Government have in mind.
With regard to the rather narrow point which was raised very properly by the noble Lord, Lord Lucas of Chilworth, regarding petrol filling stations, at their request the Petroleum Industry Advisory Committee came to see officials of the Department subsequently. The chairman wrote to my honourable friend the Parliamentary Under-Secretary of
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State. The Petroleum Industry Advisory Committee asked for further clarification about the Board's policy and intent in the area of oil refining and wholesaling of petroleum fuels in view of its understanding that the National Coal Board was not seeking to enter conventional oil refining or such wholesaling. It is not quite clear where this understanding originated. In Committee my honourable friend said that the Board did not wish to enter the retail field, but he clearly indicated that products not needed for the Board's operations might be disposed of. I can only say that some of the products of refining would be used in operations which the National Coal Board and the BSC are planning. Others might be used in the National Coal Board's existing activities, or be sold to other people who would use them in their industrial operations; but any such sales by the National Coal Board of refined products would not be sales on the retail market and certainly the Board do not intend to go into the petrol filling station service industry.
If I may return to the Amendment, it would not extend Parliamentary control, as it does not make the Secretary of State's approval subject to Parliamentary endorsement. Under Section 7 of the Coal Industry Act 1971, the Secretary of State has power to direct the National Coal Board to discontinue or restrict any of their activities other than colliery activities. Also the Select Committee in another place on the nationalised industries will be able to review the whole range of the National Coal Board's activities.
With regard to finance the Government's agreement to the Board embarking on projects in the petro-chemical field is on the understanding that the Board's share of the necessary finance will be raised without recourse to public funds. Sources of funds will include borrowing raised on the market and profits from the activities of the existing Coal Products Limited and from the initial stages of the new operations themselves.
I am sorry to have spoken at some length but I wanted to explain the purpose of this clause to allay some of the fears of the petrol filling stations, and also to say that in my humble judgment and in the view of the Government the Amendment is not necessary.
8.11 p.m.
Lord LUCAS of CHILWORTH: I am most grateful to the noble Lord, Lord Strabolgi, for his explanations, which have left me somewhat unmoved. However, I should like to deal with one or two things raised by noble Lords. I want particularly to dispel the idea that we are primarily worried about a few petrol stations. We are arguing that the Coal Board can engage in those activities that stem from coal. There is no argument about that, and the noble Lord, Lord Lee of Newton, emphasised how they come about and how they got into the other business. What I have been saying is that this Clause gives an absolute power to engage in another end of the industry. The noble Lord, Lord Taylor of Mansfield, accused me of saying, "Let us get rid of the thing". I told your Lordships that I should have liked to see it out, but it was not a practical proposition; I felt we must look at these qualifications and so I tabled the Amendment.
I am staggered that the noble Lord, Lord Hughes, should say to my noble friend Lord Sandford that he had destroyed his own argument. I think the noble Lord, Lord Hughes, would probably agree that a nationalised industry is quite different from an industry in the private sector. There are no suspicions from Conservatives. There is a totally different viewpoint, which is not necessarily suspicion. Nationalised industries have no private shareholders; they are brought into existence by an Act of Parliament to do a specific job. I have been arguing that slid into a Coal Industry Bill is the ability to do another totally different and distinct job, and I want the Secretary of State to give approval for that long before the
finance comes along. Those are my replies to those who have argued against us.
The noble Lord, Lord Strabolgi, is quite right: we must be ready to seize any opportunity that is seizable by fair and proper means and under the control of Parliament. I am sufficiently sure that my arguments are, if I may put it this way, better than those which have been deployed against me, and I shall ask the Committee to prove whether I am wrong or whether the noble Lord opposite is wrong.
Lord HUGHES: Before the noble Lord concludes, does he imagine for one moment that any Minister would give approval to a project before he looked very thoroughly at the financial side and the amount of money which might be borrowed by the Board? If he thinks it works that way I can understand why he has put forward this Amendment, but as a former Minister I can assure him that it does not work that way.
Lord LUCAS of CHILWORTH: I do not want to delay the Committee by debating the functions. What I do know in hard commercial practical terms is that there come occasions when a project is embarked upon from which there is no retiring, and it might well be that a Minister could be put in a difficult position. Indeed, we have had almost that self-same position arising earlier this afternoon.
8.15 p.m.
On Question, Whether the said Amendment (No. 6) shall be agreed to?
Their Lordships divided: Contents, 55; Not-Contents, 43.

CONTENTS

Amory, V.

Harvey of Tasburgh, L.

Reay, L.

Berkeley, B.

Hewlett, L.

Redesdale, L.

Brougham and Vaux, L.

Home of the Hirsel, L.

Rochdale, V.

Camoys, L.

Hornsby-Smith, B.

Romney, E.

Carrington, L.

Kinnoull, E.

St. Aldwyn, E.

Cathcart, E.

Long, V.

Sandford, L.

Cobham, V.

Lucas of Chilworth [Teller]

Sandys, L.

Craigmyle, L.

Lyell, L.

Sharples, B.

Denham, L.

Macleod of Borve, B.

Strathclyde, L.

Digby, L.

Mansfield, E.

Swinfen, L.

Effingham, E.

Monck, V.

Teviot, L.

Elliot of Harwood, B.

Monk Bretton, L.

Trefgarne, L.

Elton, L.

Montgomery of Alamein, V.

Vickers, B.

Emmet of Amberley, B.

Mottistone, L.

Vivian, L.

Exeter, M.

Mowbray and Stourton, L. [Teller]

Wakefield of Kendal, L.

Fraser of Kilmorack, L.

Ward of North Tyneside, B.

Gainford, L.

O'Hagan

Westbury, L.

Glenkinglas, L.

Onslow, E.

Young, B.

Harmar-Nicholls, L.

Rankeillour, L.

NOT-CONTENTS

Bacon, B.

Kaldor, L.

Paget of Northampton, L.

Blyton, L.

Kirkhill, L.

Parry, L.

Burton of Coventry, B.

Leatherland, L.

Peart, L. (L. Privy Seal.)

Champion, L.

Lee of Newton, L.

Rochester, L.

Collison, L.

Llewelyn-Davies, L.

Segal, L.

Delacourt-Smith of Alteryn, B.

Llewelyn-Davies of Hastoe, B.

Shepherd, L.

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

Lloyd of Kilgerran, L.

Stewart of Alvechurch, B.

Gladwyn, L.

McCarthy, L.

Stone, L.

Greenwood of Rossendale, L.

McCluskey, L.

Strabolgi, L.

Gregson, L.

Mackie of Benshie, L.

Taylor of Mansfield, L.

Grey, E.

Milner of Leeds, L.

Thomson of Monifieth, L.

Hale, L.

Morris of Kenwood, L.

Wallace of Coslany, L. [Teller]

Houghton of Sowerby, L.

Murray of Gravesend, L.

Wells-Pestell, L.

Hughes, L.

Oram, L. [Teller]

Wilson of High Wray, L.

Janner, L.

On Question, Motion agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
[Amendments Nos. 7 to 9 not moved.]
Clause 9, as amended, agreed to.
Clause 10 [Activities relating to minerals other than coal or petroleum]:
[Amendment No. 10 not moved.]
8.23 p.m.
Lord SANDFORD Lord SANDFORD moved Amendment No. 11:
Page 8, line 6, after ("power") insert ("after notice to, and consultation with, the relevant owners and lessees of any minerals other than coal or petroleum").
The noble Lord said: I should like to speak to Amendments Nos. 11 and 12 together. We are now in Clause 10, which deals with the Board's activities in the field of minerals, and these two Amendments are designed to ensure—or to obtain from the noble Lord an assurance to the same effect—that the National Coal Board, when it does, in the searching for, and the exploration, working and getting of coal, come across other minerals, it will not proceed in the exercise of these powers without first of all consulting others who already have an interest in the minerals in question, and who have rights in them. I think that the Committee will agree that it is only reasonable that this should be so, and I hope that the noble Lord will be able easily to give us the assurance that we are asking for.
Baroness HORNSBY-SMITH: I should like to support my noble friend Lord Sandford in these two Amendments, which very much go together. In a recent
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Community analysis of the most serious unemployment there three industries were listed—shipbuilding, textiles and the construction industry. Today it is the hard-hit construction industry and the companies which serve it with which I am concerned in relation to Clause 10 of this Bill.
Already the Coal Board can quarry alternative minerals that it may find in the course of its coal mining and other processes which may arise out of the coal mining that it has undertaken in those specific areas. This clause goes very wide. I know that the noble Lord will say that they may or may not use these powers, but we are putting these rights into a Statute—not necessarily for Sir Derek Ezra, but perhaps for two chairmen hence, with an entirely differently constituted Board. With this clause, we are giving them power to indulge in, for example, all manner of surface quarrying, whether it be sand, gravel, limestone, granite or Portland stone, all of which are at this moment of time quarried and produced by companies nearly all of which have very capital intensive operations.
For many years, in the early years of representing the Chislehurst Division in another place, I included in my territory the great cement works on the south side of the river at Swanscombe and at Stone. I visited them many times, and I know how tremendously capital intensive those operations were. So, too, are others of these industries which excavate from the surface of the soil rather than mining deeply. No-one suggests that they are not efficient, no-one suggests that they are flat out to capacity, because the road construction programme is half what it was in 1968, building construction, mainly due to the cutback on public works, is down 25 per cent. and cast concrete products are down

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by 16 per cent. Is this really the time to tell hard-hit, efficient industries which no-one can criticise for not fulfilling their task that, according to this clause, at any time and anywhere beyond the confines of where it is currently mining for coal, the Coal Board is to have power to enter those industries? There are many companies involved in this wide network of surface excavation. I believe that they would be failing in their duty if, for the protection of their own companies and highly skilled and specialised workers they did not, as they have done, protest at these very wide ranging powers which are being given to the Coal Board. However, if they seek these further powers, it must mean that they wish to expand into new territories not exclusively centred on coal mining and poach into the products from the soil now being worked by a multitude—a very wide collection and variety of skilled companies, each tied to their specialty. The implications are wider than at first sight the clause implies.
However, with the power conferred in the clause the coal industry could go into a dozen other building, construction and ancillary industries. The companies likely to be affected have trained their workers and put vast sums of money into efficient industries. I believe that at this time, when they are so hard hit and when no one has suggested that they have not the capacity and equipment to expand when the building trade looks up, these companies should be allowed to get on with their job, as the coal-mining industry has a monopoly in theirs.
In a speech introducing the Bill on 5th July the noble Lord, Lord Strabolgi, used an interesting phrase. He said:
"It"—
meaning the Bill—
"will establish a framework of grants to assist the industry"—
the coal industry—
"in case it should be blown off course."
I believe that the powers under Clause 10 will not just blow a wide range of well-equipped and highly efficient companies off course. It could open the hatches and scupper them.
Lord LLOYD of KILGERRAN: I shall be brief. My noble friends who sit on these Benches have always maintained that when nationalised industries wish to extend the scope of their activities, the
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proposals for extending their scope should be very carefully scrutinised, especially to ensure that such expansion of activities will not be to the detriment of local private enterprise. As I said on Second Reading, I share the anxiety of owners and lessees of minerals other than coal and petroleum, as regards the width of the sections of these clauses. Like the noble Lord, Lord Sandford, I shall be interested to hear what the Minister has to say and the assurances that he may be able to give.
Lord STRABOLGI: I am glad that the noble Lord, Lord Sandford, and the noble Viscount, Lord Long, have tabled these Amendments, because they give me the opportunity to clear up some points and give some clarification. These Amendments seem to be based on a misunderstanding of the nature of the power that would be accorded to the National Coal Board. I listened carefully to what the noble Baroness, Lady Hornsby-Smith, had to say.
The clause would not give the Board any power to override the rights of other parties or to ignore other relevant legislation. It would not give the Board any power of compulsory acquisition. The clause would simply establish that it was within the scope of the Board's powers as a statutory corporation, for the Board to work and get minerals other than coal and petroleum discovered in the manner defined in the clause and to carry on related activities as defined there.
There are, of course, other Amendments on this point but I should like to confine myself to the matters raised in these two particular Amendments. It has already been made clear during the proceedings on the Bill that in order to work and get minerals under the clause, the Board must obtain the necessary mineral rights. These can be obtained only by negotiation and agreement. Although it is a nationalised industry, the Board will thus be in no different position from any other person, private or public, who discovers the minerals and wishes to obtain the rights to work them. Therefore, I hope that I have made it clear that Clause 10 does not in any way affect the existing rights of mineral owners or lessees and that in the light of that explanation the noble Lord, Lord Sandford, will feel able to withdraw the Amendment.
Lord SANDFORD: I am grateful to the noble Lord, Lord Strabolgi, for his remarks. There are many other Amendments to this clause which we shall need to consider. Indeed, we shall probably need to consider them all together. Therefore, although I express my gratitude to the noble Lord, Lord Strabolgi, nevertheless I should like to reserve my position because we may need to return to the matter at the Report stage. However, so far as the noble Lord's reassurances on these two Amendments go I think that, on the whole, I am reasonably satisfied.
Amendment, by leave, withdrawn.
[Amendments Nos. 12 and 13 not moved.]
Viscount LONG Viscount LONG moved Amendment No. 14:
Page 8, line 17, at end insert—
("Provided that the power to work and get minerals under this subsection shall not be exercised by means of open-cast operations otherwise than in association with working and getting coal.")
The noble Viscount said: I shall be as brief as possible as regards this Amendment. With the permission of the Committee, it might be convenient for me to talk also to Amendment No. 15. We are now dealing with the more delicate and technical part of the Bill.
Lord STRABOLGI: I hesitate to interrupt the noble Viscount, Lord Long, but it might also be convenient to deal with Amendment No. 22, which could be described as a horse from the same stable. In that way we might save some time.
Viscount LONG: Yes, I agree—anything to help the passage of the Bill in Committee. We are now dealing with the more technical side of the industry. We are trying to acknowledge in the Amendment the fact that there are two sides to mining—mining through the deep shafts and tunnelling; and opencast mining. We immediately become concerned with the aggregates industry—sand, rock and gravel. We believe that by means of the Amendment we should safeguard the aggregates industry as a whole. The powers that have been given by the Bill to the National Coal Board give rise to anxiety in other industries, such as the aggregates industry, as regards the problem that the National Coal Board could interfere with the bulk minerals industry.
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The industry recognises that there may be a case for the National Coal Board to exploit rare and more valuable minerals accessible only by underground mining or where surface minerals are worked in conjunction with the winning of coal to create tipping, space or for some other good reasons. At present, from the way in which we are dealing with the Amendment, I can see no case for giving the Board power to exploit bulk surface minerals discovered simply when searching for coal and not associated with the winning of it. In other words, we are trying to protect the aggregates industry from the Coal Board which has more powers and which could move in more quickly and interfere with this type of mineral industry.
I was also interested to hear during Second Reading from the noble Lord, Lord Strabolgi, who I admire and thank for his help during this Committee stage and on Second Reading, that the Board has a great store of mining expertise directed, under the Coal Industry Nationalisation Act 1946, solely to the gaining of coal. The existence of this expertise in mining is a praiseworthy asset to this country. However, it is not the same as expertise in quarrying. I tried to separate that earlier when I moved the Amendment. The National Coal Board does not itself quarry and its opencast coal work is very interesting. Although some years ago I worked on moving equipment from the National Coal Board, I did not know that the quarrying is sub-contracted out. On the other hand, the bulk mineral industry does not sub-contract; it employs its own experts and knows exactly what they do as regards costing and so on.
The bulk industry carries on quarrying which in 1975 produced 216 million tonnes of sand, gravel and crushed rock. That industry is not in a very happy state. The building industry and the road construction industry are not working to full capacity. Therefore, it would be too easy for the National Coal Board to move in on those firms and disturb their work. We should like the Coal Board to deal entirely with its own tunnelling and to leave the pits and quarries to the aggregate industry. I shall be interested to hear other noble Lords explain their theories and arguments about this, but my view is that the National Coal Board would be well advised to

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leave the quarrying of aggregates to the industry. That has been the case for a number of years now. The National Coal Board and private enterprise have been working side by side, and so they should. They could carry on with their good work, the one helping the other. I believe that the National Coal Board should leave this side of the work to the industry. I beg to move.
8.42 p.m.
Lord STRABOLGI: This Amendment is the same as that put down at the Report stage in another place and withdrawn following a further reassurance given by my honourable friend the Parliamentary Under-Secretary of State for Energy. I hope that what I have to say will be taken as a strengthening of that assurance already given and that it will prevent the need for the Amendment to be pressed further.
Both the Government and the National Coal Board recognise that the aggregates industry is going through a difficult period due to the fall in demand, that the industry is currently working well below capacity and that forecasts of demand over the next few years do not suggest any rapid recovery. Neither the Government nor the Board have any wish to aggravate the industry's difficulties as a result of the powers that would be given to the Board under Clause 10 of the Bill. In assessing the likelihood of this it should be borne in mind that the clause confers on the Board no proprietary rights of any sort and does nothing to override the normal planning processes in the course of which the existence of spare capacity in the aggregates industry can be taken into account. Moreover, assurances have already been given that the Board has no present plans to expand its operations in the field of bulk mineral extraction; that it is extremely unlikely that the powers would be used to a significant extent in this field; and that if, during the five years from the passing of the Bill, the Board plans to use the powers in this clause to embark on a project for extraction of bulk minerals not in association with the working and getting of coal, it will notify the Sand and Gravel Association and the British Quarrying and Slag Federation so that there can be discussion of any points of concern to those Associations.
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The Committee can take it as implicit in this assurance that, while demand for aggregates remains below recent levels of production and well within the capacity of the industry, the Board will not use the powers under Clause 10 to any significant extent in working surface aggregate minerals otherwise than in association with the working and getting of coal. This does not rule out individual cases where it may be in the national interest or commercially attractive to engage in such projects. But, under the procedure for notification to the industry during the next five years, the Board will, before deciding whether to go ahead, take into account any representations that the industry may wish to make.
What I have just said is a considered statement made in the light of further discussion between the representatives of the bulk minerals industry, the National Coal Board and the Department of Energy. I submit that it is a serious attempt by the Board and the Government to allay the concern of the industry. I hope that that will give your Lordships the assurance asked for.
Lord LUCAS of CHILWORTH: Why is it that when an industry with substantial investment and substantial opportunities puts forward an objection and has meetings with the Departments concerned, it is always thought that assurances are to be considered satisfactory? I remember that assurances were given during the debate on the Energy Bill and yet as a result of pressure the Bill was changed. If the Government are so sincere in their assurances to the industry, why cannot they demonstrate that sincerity by actually writing the words into the Bill?
As the noble Lord said, they will not use these powers for bulk mineral extraction to any appreciable extent, although he said that there may be some individual cases which may be in the national interest or there may be a great commercial attraction. On the one hand, the Minister offers assurances to the industry and, on the other hand, he virtually takes them back by saying, "except for". Surely this Amendment puts beyond any measure of doubt the fears expressed by the bulk mineral industry. It has currently an over-investment, an over-capacity and an employment problem. By this clause we add some doubts as to which way the

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industry could go because someone else may step in at some time.
It is accepted that by virtue of its contracting out arrangements for opencast mining the National Coal Board has no expertise and so far has demonstrated no great wish to do it because its commercial arrangements with its sub-contractors have been quite satisfactory. In 1982 there will be an upturn; there could be huge demand for sand, gravel and aggregates. By then five years will have elapsed and the NCB could go in, buy its expertise from a then seriously injured industry and go ahead.
If we wish to leave a sense of confidence in Government and NCB intentions in that industry, surely the better thing to do is to write it into the Bill. Although the noble Lord and his colleagues, his honourable friends and his right honourable friends in another place, are giving these assurances with the best will in the world, in five years' time they may not. A better offer than a repetition of the assurance could be asked for.
8.50 p.m.
Lord SANDFORD: We are grateful to the noble Lord, Lord Strabolgi, for that reassurance, but I must tell him that whereas on reflection I might find quite a little on the assurances he gave me on Amendments Nos. 11 and 12 to be satisfactory. I doubt whether I shall be able to do so in respect of these. It was helpful of course to hear him confirm that there are no overriding mineral rights, that these will have to be obtained, that if they belong to somebody else there will be no overriding of planning powers—I certainly did not expect there would be—and that there are no present plans.
That is reassuring so far as it goes, and I recognise that what he said about the undertaking from the National Coal Board to notify the industry was helpful; but we must remember that this is an industry which supplies all the sinews of the housing and construction industry, nothing to do with mining at all. I do not need to repeat to Lord Strabolgi, who has been in your Lordships' House long enough to know as well as I do—
Lord STRABOLGI: And a bit longer, too!
Lord SANDFORD:—that nothing he said by way of reassurance will bind his successors and still less bind the Board. Parliament has given them these powers, framed as they are, and the Board will exercise them and be absolutely right to do so. I am afraid there is no question but that the noble Lord's reassurance will have to be increased, if not precisely in the terms of Amendment No. 14, then in something like those terms if we are to be satisfied at the next stage of the Bill. I doubt very much whether any further reflection on what Lord Strabolgi said will induce me to change my mind, so I am anxious to be quite emphatic about it, Nevertheless, I will consider what he has said lest peradventure I can read more into it than I can now, but I very much doubt it and I am reasonably certain that we shall have to return to this matter later.
However, what I should greatly prefer is for the noble Lord to take what I am saying seriously and endeavour to draft an Amendment of his own, something along the lines of Amendment No. 14, incorporating as much of what he has given by way of assurance as would be appropriate in the Statute. He will agree that not much of it is and, in so far as it is not in the Statute, we do not find it satisfactory. Nevertheless, at this stage I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 15, 16 and 18 not moved.]
On Question, Whether Clause 10 shall stand part of the Bill?
Lord STRABOLGI: Perhaps I should say a little more on clause stand part in view of what the noble Lord, Lord Sandford, said in withdrawing the last Amendment. The assurance we have given goes rather further than the fact that we shall notify the quarrying interests; not only are we going to notify them, we shall consult with them, and I think when Lord Sandford reads Hansard tomorrow he will see that that was the wording I used.
I should also like to say in general about this clause that the Government have never made out that the enactment of Clause 10 would result in a big expansion of the Coal Board's activities. Rather,

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they have explained that the exploitation of other minerals is likely to be on a small scale in comparison with the Board's main operations. But—I make this point in reply to the noble Lord, Lord Lucas of Chilworth—if we are legislating for an indefinite period ahead, as we are, then if the Board is to be given a new power to work other minerals it is much more sensible that it should be comprehensive rather than that certain minerals should be the subject of exception or qualification.
So far as aggregates are concerned, the Government and the Board are not saying that the Board will not utilise the power under Clause 10 to excavate such minerals. What they are saying is that the power is unlikely to be utilised to a significant extent in this connection, but that there may be cases where the Board will find a project a commercially attractive and useful, though marginal—I stress the word "marginal"—addition to the revenues of the coal industry. A power can be useful and desirable without having to be exercised on a large scale. I do not think I can go further than that.
Lord SANDFORD: I am grateful to the noble Lord, Lord Strabolgi, for trying to help the Committee, but I should have thought that the kind of explanations and limitations he is expressing to describe the intentions of his Department and the Coal Board would have been well expressed in the terms of my Amendment, which would have limited the workings of the Coal Board to those minor operations which arise from time to time in small degree in the course of its efforts to get and win coal by opencast operations. That is why we drafted the Amendment as we did. I hope therefore that the noble Lord will look carefully at that form of words to see whether it does not express properly the assurances which he is giving. We should be very much happier with them, and so would the industry, if they were in the Bill, and I hope it will be possible to do that because I doubt whether anything less than that will satisfy us.
Lord HUGHES: Having been for many years engaged in the building industry, I can understand the fears that have been expressed by noble Lords opposite on behalf of the aggregate industry. I am wondering whether both the Opposition and my noble friend in looking at this
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issue might expand the suggested Amendments a little further because, as they stand, they would prevent the Coal Board from doing this in any circumstances, even in the minor circumstances suggested by my noble friend.
I am therefore wondering whether Amendments Nos. 14 and 15 could be amplified in such a way that, subject to Parliamentary approval, if they wanted to apply them in certain circumstances that could be done. On the other hand, if the Amendments were accepted as drafted nothing could be done by the Coal Board unless another Bill was introduced, and we have enough legislation without providing for such a measure in the future. Orders under the Negative Resolution procedure, on the other hand, might make provision for something of the sort to be done to meet the legitimate fears of the industry and yet open the door for the minor circumstances that my noble friend contemplates. Perhaps the matter might be looked at in that way.
Lord SANDFORD: I am grateful to the noble Lord, Lord Hughes; I hardly expected support and encouragement from that quarter. I hope the noble Lord. Lord Strabolgi, will take the point which Lord Hughes made.
Lord STRABOLGI: I certainly take the point.
Clause 10 agreed to.
Clause 11 [Overseas activities]:
8.58 p.m.
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 19:
Page 9, line 7, at end insert—
(" (c) marketing or otherwise dealing with industrial property and know how,
(d) activities relating to the monitoring of imported coal from third countries to the countries of the European Economic Community and otherwise assisting in maintaining and improving coal production and stocking capacity of the European Economic Community.")
The noble Lord said: This Amendment is in two distinct parts and I will, with the permission of the Committee, speak at the same time to Amendment No. 20. These are directed to the scope of Clause 11 which gives power to the NCB to operate outside the territory of Great Britain.

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Naturally, one would expect to have in a clause of this type certain limitations on the power of the Board to indulge in activities outside Great Britain. Under subsection (5), these limitations do not apply to two kinds of activity; that is, selling or supplying for export and supplying imported goods in Great Britain. The purpose of my Amendment is to introduce a new paragraph (c) to enable the NCB to undertake the
"…marketing or otherwise dealing with industrial property and know how".
without having to go to the Secretary of State for leave to deal with that matter.
As we heard at Second Reading, as and is well-known in technological circles, the National Coal Board has a large amount of expertise, know-how, patent rights and, I believe, trade mark rights. These rights are extremely valuable, and it would be expected therefore that the National Coal Board should, in the public interest, exploit its know-how and its technological expertise abroad where-ever it can. Thus, it would seem quite unnecessary that the National Coal Board should have to have the leave of the Secretary of State in order to undertake activities of this kind in relation to know-how and industrial property matters.
The second part of my Amendment No. 19 is intended to introduce a new paragraph (d); having regard to the Directives that have recently been issued and that are being considered in the context of the European Economic Community. The EEC Commission has issued Directives in which it expresses anxiety about the state of the coal industry in Europe. The Directives have also said that pit closures would seriously damage the strategy of the Commission in dealing with energy for the next 10 years or so, and one of the matters with which the Commission is concerned is the import into the Community countries of cheap coal from third countries. Therefore, the second part of Amendment No. 19 is concerned with proposing that the National Coal Board, in the course of its international activities, will not find it necessary to consult the Secretary of State in
"activities relating to the monitoring of imported coal from third countries to the countries of the European Economic Community …".
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and that the National Coal Board should not have to get the approval of the Secretary of State in
"… assisting in maintaining and improving coal production and stocking capacity of the European Economic Community".
It is not necessary for me to deal at any length with both these points, as I understand from the conversations I have had that the Amendments might he sympathetically received by the Government.
Lord STRABOLGI: I am certainly sympathetic to the spirit of the Amendments, but I hope that I will be able to persuade the noble Lord and the Committee that they are not necessary. The noble Lord, Lord Lloyd of Kilgerran, has proposed the addition of the new paragraphs (c) and (d) in Clause 11(5), presumably so that the Board will have power to undertake the activities set out in the new paragraphs without requiring the authority of the Secretary of State, or of the Treasury, where capital investment is involved, as is set out in subsection (4).
Subsection (5) is, in effect, the continuation of an arrangement which has existed right from the Coal Industry Nationalisation Act of 1946, in that the National Coal Board has all along been permitted to export and import without needing any other specific authority. We think it right to continue this in the present Bill because the exporting and importing (where necessary) of coal has always been considered to be part of the normal essential work of the National Coal Board in running the coal industry in this country. The activities described in the new paragraphs are not essential to the Board's job of running the coal industry in this country. They are more analogous to the other type of overseas activity, and thus we think it right that they should require the authority of the Secretary of State.
In presenting Clause 11, it is not the Government's intention to reduce the Board's existing powers, and I understand that it will be the aim of my right honourable friend, as soon as the Bill is given the Royal Assent, to give the National Coal Board written permission to continue to engage in the types of activity for which it now has powers under the National Coal Board (Overseas Activities) Order

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1975. Article 2(c) of that Order already authorises—
"holding and dealing with patents and other rights in respect of inventions, and rights in respect of designs, trade mark and copyright in any country"
and Article 2(i) covers—
"providing technical advice and services in relation to mining activities outside Great Britain".
It will also be the aim to cover such new powers as it may be agreed the Board should exercise. To the extent that they may not be completely covered in the existing powers, and will therefore not be automatically, as it were, included in the new authority, I can give the noble Lord an assurance that the activities which he has set out in his Amendment will be most carefully considered for inclusion. Prima facie, they seem to me eminently suitable for that, but it is not for me to commit my right honourable friend at this stage. Nevertheless, with that assurance, I very much hope that the noble Lord will now see fit not to press his Amendment.
Lord LLOYD of KILGERRAN: I am very grateful to the noble Lord for the assurances he has given and, in the circumstances, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendment No. 20 not moved.]
Clause 11 agreed to.
Clauses 12 to 16 agreed to.
Schedules 1 to 5 agreed to.
[Amendments Nos. 21 to 25 not moved.]
House resumed: Bill reported with an Amendment.

EEC BUDGET: 43rd REPORT OF ECC
9.7 p.m.
Lord COBBOLD Lord COBBOLD rose to move, That this House takes note of the Forty-third Report (H.L. 234) of the European Communities Committee on the Preliminary draft EEC Budget for 1978 (R/1541/77).
The noble Lord said: My Lords, I rise at this rather late and, I fear, somewhat inconvenient hour to your Lordships to move the Motion standing in my name
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and to introduce the report of the European Communities Committee on the Prelininary draft EEC Budget for 1978. The report has mainly been the responsibility of Sub-Committee A, but it has been greatly assisted by representatives of the sub-committees dealing respectively with agricultural and energy matters. Your Committee is most grateful to witnesses from Her Majesty's Treasury and from the Ministry of Agriculture, Fisheries and Food, who provided figures and information at extremely short notice owing to the timetable; to Lord Bruce of Donington and Mr. Michael Shaw; and to Sir Donald MacDougall. It is particularly indebted to its specialist adviser, Mr. Denton, and its clerk, who have burnt large quantities of midnight oil; and to secretaries who have had to deal, again at short notice, with the product.
The need to produce the report so quickly before the Council meeting on July 20th, the day after tomorrow, has also, I fear, meant that your Lordships have had little time to look at it. I must also repeat one other point which was made clear in last year's debate. The EEC draft Budget is not exactly a Budget as we in this country understand the term. It is more akin to an estimate of the likely financial consequences of Commission proposals, the final decisions on which are mostly taken in the Council of Ministers. In its final form, therefore, the Budget may vary considerably from the draft now being considered.
Nevertheless, the draft Budget presents a general picture of Community developments, and this year, in particular, it raises a number of important policy and technical issues. These include new proposals for the Regional Fund, for the Social Fund and for industrial, energy and research projects. At the technical level, they include adoption of the new "own resources" method of EEC financing and the change to the new European unit of account.
My Lords, as the House will remember, the 1977 Budget went further ahead with the system of distinguishing between "payment appropriations", dealing with payments expected to be made during the year, and "commitment appropriations", leading to expenditure likely to be incurred mainly in later years—a great

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improvement on earlier practice. The figures which I shall mention, and which are the general basis used in the report, relate to "payment appropriations"; that is to say, to expenditure envisaged during the year 1978. The total draft Budget estimate amounts to 11,850,000 European units of account, equivalent, at the assumed exchange rate of £1 equals 1·5 EUAs, to £7,700 million. This is an increase over 1977 of some 23 per cent. in money terms or, allowing for an overall inflation rate of some 8 per cent., an increase in real terms of some 15 per cent. "Commitment appropriations" show increases of some 22 per cent. in money terms and some 14 per cent. in real terms. I must repeat that these figures are all subject to modification by Council decisions and by unforeseen developments, particularly in agricultural expenditure.
As in earlier years, my Lords, agricultural expenditure takes the lion's share of the budget. At just under 70 per cent. of the total, it shows a slight reduction on the 1977 proportion, but this may be increased by later decisions. The report before your Lordships discusses at some length the problems raised in the field of agricultural expenditure. In particular, it underlines the impossibility of any exact estimates, bearing in mind in particular the open-ended commitment on intervention and the many uncertainties of crop yeilds, weather conditions, world price movements, et cetera. Estimation is the more difficult since the Budget timetable has been revised to bring forward these estimates earlier in the year, but your Committee agree that, on balance, this earlier timetable is an improvement, since it gives more time for debate in the European and national Parliaments and for general public comment.
The report also stresses the great difficulties in the way of any really effective control of agricultural expenditure under the present system. It suggests that ways should be considered of imposing some quantitative controls, making reference to the United Kingdom experience in this field and to the arguments for increasing the "guidance" side of agricultural expenditure so long as it is designed to reduce the "guarantee" side. Your Committee strongly recommend that the financial consequences of agri-
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cultural policy decisions should be given much more consideration than they are under the present system, where agriculture interests appear to dominate discussion and decision. There is a great need to integrate agricultural policy more closely with general budgetry policy.
The control of agricultural expenditure is bound up with the green money system which involves a very heavy burden of monetary compensatory amounts—amounting to some 8 per cent. of the total Budget. This complicated and difficult subject was dealt with fully in the report on green money which was recently before your Lordships and debated in this House. As the House will remember, the main conclusions in that report were that the system has been introduced as a temporary measure to deal with minor exchange fluctuations; that the present wide margins between green rates and market rates could not be justified as a permanent arrangement; but that the speed and degree of return to normality must take account of various interests in Member countries.
My Lords, proposals are made in the Budget for additional expenditure in the Regional Fund, the Social Fund, and for certain industrial energy and research projects. Both the Regional Fund and energy problems have been the subject of recent reports and debates in this House and your Committee greatly welcome these initiatives. They are, however, bound to point out that unless room can be found for them in future years by reducing agricultural costs, they will add to Budget totals which, although marginal in comparison with the aggregate of Community national Budgets, are already on the increase.
My Lords, turning to the two major technical changes in this draft Budget, the report notes the move towards the "own-resources" system for contributions to the Community Budget, by way of VAT contributions rather than direct allocations from national Budgets. This change will become fully effective in 1980 after transitional periods in 1978 and 1979. The second technical change is the decision to adopt the so-called "basket of currencies" as the basis for the budgetary unit of account. This has already been in use for other purposes and is a welcome move towards greater realism since it

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reflects average ruling rates of exchange instead of historical and out-of-date relations between currencies.
My Lords, the report deals, in paragraphs 9 to 12, with the effect on the United Kingdom of the draft Budget proposals and the various technical changes. So far as can at present be estimated, the gross United Kingdom contribution in 1978 would amount to £1,292 million which, provided that the Commission's interpretation of transitional arrangements is accepted, would be reduced by a repayment of £200 million in 1979 to a gross contribution of £1,092 million. Set against this are the estimated receipts of £530 million, leaving an estimated net contribution of £562 million. Although the basis of calculations and the gross figures differ markedly from the White Paper estimates published in February 1977, the estimated net contribution is not far different.
These figures for receipts and net contributions take no account of indirect benefits from monetary compensatory amounts under the green money system. Since the change of method in 1976, there are only small direct United Kingdom receipts of MCAs; but United Kingdom consumers, and, therefore, the United Kingdom economy generally, benefit indirectly because lower prices are paid for agricultural imports from other Member countries which receive direct MCA subsidies. Thus the green rates which still differ widely from market rates, although adjusted to some extent in April 1977, may be expected to continue to provide very considerable indirect offsets against the United Kingdom net contribution; although any estimate of their value is extremely difficult.
My Lords, the House will be aware that the interpretation placed by the Commission on the transitional arrangements as they affect the United Kingdom is at the moment in dispute. Certain Member States have argued that, as a result of the move to European units of account, different arrangements should apply which would involve a considerably higher United Kingdom contribution in 1978. Your Lordships may have noticed recent articles in the Press pointing out that this dispute is only a part of a more general conflict of views which has come out in various recent negotiations. However that may
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be, your Committee fully support Her Majesty's Government in their insistence on the Commission's interpretation.
My Lords, I turn to two other important matters which figured largely in evidence to the Commission: the control of expenditure and the relations, as they affect the Budget, between Commission, Council and European Parliament.
In their reports on the 1976 and 1977 Budget, the Committee gave particular attention to deficiencies in control, both pre-Budget and ex-post facto. In the report on the 1977 Budget, the Committee concluded that, though there were some welcome improvements, there remained much to be done before control procedures could be regarded as satisfactory.
The most important development, and one to which we attached great importance last year, has been the establishment of the Audit Court. Ratification is now complete and it only remains for members and staff to be appointed. This should provide a really effective audit body, completely independent and operating on similar lines to the Comptroller and Auditor General in the United Kingdom. It is most desirable that the final stages should be completed quickly. We have also been informed that the Audit Court will work closely with the Budget Committee of the European Parliament, which will thus have facilities similar to those enjoyed by the Public Accounts Committee here. Your Committee regard this as a most encouraging development, though control procedures in the Commission, both on administration and on expenditure generally, still need attention, and the particular difficulties of controlling agricultural expenditure, to which I referred earlier, will persist. The Committee also remain concerned about the procedures and time available for the proper scrutiny of supplementary Budgets.
Another suggestion made in the Committee's last report was that a Financial Commissioner should be appointed without other responsibilities and in a position similar to that of a Treasury Minister or senior Treasury official. While this idea has not been followed in full, the Committee note with pleasure that the new Commissioner in charge of the Budget has no responsibilities for a major spending directorate—halfway on the road, so to speak.
The Committee have been greatly assisted by evidence from the noble Lord, Lord Bruce of Donington, who was Rapporteur of the 1977 Budget in the European Parliament Budget Committee and Mr. Shaw, from the other place, who is Rapporteur for 1978, both of whom have devoted their time and abilities to these problems. In addition to evidence on many of the points on which I have touched, they laid particular stress on the importance and difficulty of ensuring a clear line of procedure on budgetary matters between European Parliament, Council and Commission. It was pointed out to us that disputes about the relative powers were only resolved last year by a special ad hoc compromise which leaves the relative roles undefined.
The report sets out various areas in which the position is unclear, including the distinction between obligatory and non-obligatory expenditure, the consequential powers of the Parliament to make modifications or amendments, and the interpretation of these powers with respect to payment and commitment appropriations. It is clearly desirable that these matters should be clarified.
The Committee summarise their views by calling particular attention to the domination of the Budget by open-ended and inadequately controlled agricultural expenditure, to the consequent desirability of a review of the Common Agricultural Policy, and, if Community expenditure is to be usefully expanded in other fields, to the necessity of a thorough reappraisal of Budget priorities. My Lords, I beg to move.
Moved, That this House takes note of the Forty-third Report (H.L. 234) of the European Communities Committee on the Preliminary draft EEC Budget for 1978 (R/1541/77).—(Lord Cobbold.)
9.24 p.m.
Lord LYELL: My Lords, the whole House is fortunate at this late hour to have the opportunity of discussing the EEC Budget proposals, which is due entirely to the noble Lord, Lord Cobbold. We are grateful to him for giving us this opportunity. Also, we have distinguished Europeans on all sides of the House, not forgetting the noble Lord, Lord
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McCarthy, who did so much to put political ideas into my mind at Oxford some 17 years ago,
The figure and the size of the Budget are at once confusing and detailed. There seems to be confusion when we examine the figures for the measurement against gross national product of the Member States. The figure which is given in the admirable report of the Select Committee under the chairmanship of the noble Lord, Lord Cobbold, seems to be 0·62 per cent. of the gross national product, whereas Commissioner Tugendhat in his speech introducing the draft Budget in Luxembourg 10 days ago mentioned the figure as 0·69 per cent. I wonder whether the noble and learned Lord, Lord McCluskey, might be able to enlighten us, if only briefly at this hour, because I did a considerable amount of research with what I believe are called "the bibles" as the noble Lord, Lord Bruce, would concur. I did not manage to reconcile the figures, but no doubt the noble and learned Lord, Lord McCluskey, will be able to assist us.
In further examination of these figures, we can see that the draft Budget is to rise by approximately 23·6 per cent.; that is the figure given to us by the noble Lord, Lord Cobbold, in terms of payment appropriations, which are probably the fairest and most precise yardstick. Those will be of the order of £7·7 billion in 1978. Our purpose, my Lords, must be to ask: What is going to happen to that vast sum, and is it being spent as wisely as we would wish?
There can be no doubt at all that the Common Agricultural Policy looms over any discussions of this Budget like a brooding or restless giant. It is, of course, this aspect of the Budget which is the one to which the public at large will pay the greatest attention. The CAP and all the support payments are expected to cover 69 per cent. of the budgeted total, as we heard. It was noticeable in debates held throughout the Community that every speaker drew attention to the importance of the CAP as it affects the consumers and indeed the housewives—adding that the longer the defects of the Common Agricultural Policy are allowed to continue, the more will the Community find it difficult to obtain support for all the projects that everyone desires and is prepared to assist.

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This psychological mountain that glowers over any mention of Community finance, and especially the Budget, is all the more important to many of us in the House tonight in that crops and livestock cannot simply be turned on or off like automobile production. All of us who have any connection with the land want to see some sensible reforms and, indeed, possible and practical reforms, of the CAP. Such changes will require complementary action on the part of the Governments of Member States and, of course, the situation in our own agricultural industry, especially in the pigmeat sector, bears adequate testimony for the need for many kinds of reforms both in Member States and in the Community as a whole.
We cannot remain gloomy for long when we consider the enormous opportunities available to us and indeed to the Community, when we see the amount of time and effort which has been spent on the European Regional Development Fund and also on the Social Fund. To me and, I would hope, to the younger Members of the House and of the Community, the priority which has been laid on these two Funds by speaker after speaker in the European Parliament in Luxembourg will mean that the Community is going to be able to make at least some attempt to tackle the twin problems of unemployment—particularly among the young—and the problem areas in Europe. Both major obstacles concern me and most of my fellow countrymen in Scotland, but of course the whole of the United Kingdom is helped by the Social and Regional Funds.
Commissioner Tugendhat, in his speech to the European Parliament, made a plea for a measure of support for those Funds and it was very encouraging to find his insistence on the need to stop wasteful expenditure and duplication by the EEC of Member States' own budgets. The Commissioner also stressed the importance of ensuring that contributions from Member States to the EEC Budget should lead to just a reasonable and tolerable rise in public spending throughout the Community. Nothing is more encouraging to us than to see a major European figure take such a firm line in regard to the duplication of public expenditure.
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Another noteworthy aspect of the speeches in Luxembourg was the reference to energy saving and the necessity to search for new sources. I think that could be more important than either the European Regional Development Fund or even the Social Fund. Certainly it is more volatile, as we have learned during the last four years. The House this evening seems more than usually occupied with energy: we have dealt with the Coal Bill and, before that, the aptly named Drax "B" project. But when the Commissioner and most of the other speakers on the Budget were debating in Luxembourg 10 days ago they shared our concern with investment into alternative sources of energy, and here the relevance of the EEC Budget is all the greater. Noble Lords who have a greater opportunity to travel abroad than I have, will agree with me when I suggest that our friends overseas are normally happy with our economic performance, but they add the rider that self-sufficiency in energy will be a greater blessing than any other attribute. When the Commissioner gives such powerful support for this view, I think that the Budget will be seen in a new light by all of us.
It is relevant to mention the regional fund again, since this fund has the potential to turn the Community, and especially an independent EEC Budget, into something akin to the development agencies which have a direct and a local effect upon a factory, a plant, a community or a town far away from Brussels and from the so-called golden triangle of the EEC. Further emphasis on the regional Fund will remove many of the criticisms of the Common Agricultural Policy, and I hope and believe that this emphasis will be added to by other speakers tonight. I am sure that, for this purpose, we consider the noble Lord, Lord Thomson of Monifieth, to be with us at least in spirit, because it is he who did so much to help the regional policy when he was in Brussels.
These two aspects of the Budget are certainly relevant, not only as an indication that the Community seeks to break free of the Common Agricultural Policy's stranglehold on the Budget, but also as a measure of a change in direction by the Commission, ably assisted by the European Parliament. At last, it seems that the Budget will commit Community funds

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to specific areas, instead of merely preventing financial disaster to some area of agriculture. Many of us who are involved in agriculture—and, certainly, for this purpose I note the presence of my noble neighbour, if I may so call him, Lord Mackie of Benshie—consider that our own Government's follies are quite as spectacular as the wine lakes, the butter surpluses and the beef gluts that are so much part of the United Kingdom's folklore about Europe.
One other admirable feature of the debate on the Budget in Luxembourg was the institution of a new and strengthened Audit Court, of which we have heard a considerable amount from the noble Lord, Lord Cobbold. This certainly has an odd ring to some of your Lordships. I do not know whether the noble Lord, Lord Bruce, is used to it by now, but to me it is somewhat sinister. But never mind. I am sure that it will be effective. The appointment of full-time and independent auditors who have legal powers to carry out a thorough investigation into Member States' finances, with the possibility of checking on the day-to-day financial management of Community funds and Member States' funds, as they affect the Community, will mean that the Budget is subject to the same kind of detailed scrutiny as we are lucky to enjoy in the United Kingdom.
As we have heard from the noble Lord, Lord Cobbold, we are due to contribute a net figure of £562 million to the Community Budget in 1978, and I think it important that we should discuss the Budget this evening. New emphasis on regional and social policy, together with the references to searching for new forms of energy, are of immediate importance and relevance to each of us. Of course, the Common Agricultural Policy takes up a large amount of the Budget each year, and will continue to do so. But it is intended by the Commission to reduce the proportion which is going to the Common Agricultural Policy and other associated support payments. I do not believe that this will harm agriculture in the Community, but rather that 1978 will be the start of the pre-eminence of those funds which the Community wishes to use for more immediate and local purposes. I think that all of us here tonight must be very grateful for the valuable work done
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by the noble Lord, Lord Cobbold, and his Committee, and for the opportunity to have a debate on this important subject this evening.
9.34 p.m.
Lord BRUCE of DONINGTON: My Lords, I should like to offer my congratulations to the Select Committee, and to the noble Lord, Lord Cobbold, in particular, for the detailed work that they have done, under very difficult conditions, on the mass of documents that comprise the Budget of the Commission of the European Communities. When I tell the House that the Budget for 1977, when completed last year, occupied no fewer than 4,000 pages, complete with supporting documents, and that those which the noble Lord, Lord Cobbold, has examined so far run into several hundred, some idea of its magnitude can be appreciated. I was very grateful, too, for the remarks which fell from the lips of the noble Lord, Lord Lyell, who put his finger on the essence of the significance of this Budget so far as the United Kingdom Parliament is concerned.
After the very long and comprehensive introduction to the EEC Budget which the noble Lord, Lord Cobbold, gave to the House, it is quite unnecessary for me to elaborate further upon it. The outline of the Budget is in the Select Committee's Report for all those who are unfortunate enough to be absent from the debate tonight to be able to appreciate. Therefore I shall not expatiate upon it. I accept very largely, with one exception to which I shall return, the very fair summary which has been given by the noble Lord, Lord Cobbold.
The noble Lord, Lord Lyell, raised the question of the United Kingdom contribution which, of course, is the nub of the matter, for £562 million net is going from this country, in cash, in the year 1978. As the noble Lord, Lord Lyell, said, we have to make quite sure that this money is well spent. I could not agree with him more. Indeed, this should be the function not only of this House but of another place, which is also considering this vitally important matter at approximately the same time. Very severe restrictions have been placed upon expenditure in this country, as a result of which a number of vital projects have had to be cut. There have been cuts in capital expenditure and in the public sector borrowing requirement,

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albeit the Treasury made an error of an estimated £2,600 million. These are matters of some significance. We are building neither the hospitals nor the houses that we might otherwise be able to build, nor are we making that extensive investment in the public sector which many of us, regardless of Party, consider to be desirable. Therefore the amount of £562 million is by no means chicken feed and we have to ensure that it will be well spent.
When one considers this sum of £562 million, immediately one must exclude from consideration any benefits that are received by the United Kingdom from the Regional Fund, the Social Fund and the Agricultural Fund, because those benefits have already been deducted in arriving at the net figure. The noble Lord, Lord Cobbold—in due course I shall come to the noble Lord, Lord Gladwyn, who is already audible—seemed to infer that there should be offset against this sum of £562 million, which passes in cash across the exchanges, the benefit which we receive indirectly by reason of lower food prices. I want to deal with that point and at the same time to deal with the already audible Lord Gladwyn.
Quite simply, the position is that the Monetary Compensatory Amounts are paid out in cash mainly to the Federal Republic of Germany, They do not come into our pockets. It is quite true that, very largely, the Federal Republic of Germany are paid this sum in order that their prices to us for the food we require may be lower than they would otherwise be. However, what the noble Lord, Lord Gladwyn, when he comes to have his little say on the subject—which he has already given audible notice of—has forgotten and what I regret to say the Select Committee have not taken into account, is that the total net food imports of the United Kingdom in 1976 were £3,566 million. and our net deficit with the EEC was £1,500 million. That left £2,000 million of net imports from the rest of the world, and when we say that the price of food was held down by MCAs paid to Germany, we should also take into account that the world prices of food which are much lower (in practically all commodities save one) than those in the EEC, were brought upwards to the EEC level and the consumer suffered on that account. It is no good the noble Lord,
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Lord Gladwyn, shaking his head because these are the facts and I am sorry to have to instruct him on them.
Lord MACKIE of BENSHIE: My Lords, would the noble Lord like to say how much he thinks that world prices are held down by the total amount of food produced because of CAP in Europe, remembering that Europe, and particularly the United Kingdom, is the largest importer of food in the world?
Lord BRUCE of DONINGTON: My Lords, I would immediately agree with the noble Lord that it is not possible to quantify the benefit that undoubtedly accrues. It is not possible to say how much this lower price which we should otherwise pay is in fact costing us, but one thing is quite certain—and the most eminent economists are already agreed upon it: there is this countervailing influence which means that over a wide area and over at least £2,000 million net of food imports in this country we are paying more because of the existence of the Common Agricultural Policy.
Lord MACKIE of BENSHIE: No, my Lords.
Lord BRUCE of DONINGTON: My Lords, the noble Lord will have an opportunity to develop his own point in his own way, but when he reads the debate in the other place he will find that, in any event, if the MCAs were tampered with in that respect there would be an extra Community cost falling upon this country by reason of the extra surpluses which would then arise, would have to be stored, and would in fact deteriorate. So what has happened to the £562 million? What benefit do we get from the £562 million? I have not the slightest doubt that there are many benefits of an intangible nature, and sometimes practical nature, that the United Kingdom receives as a result of being in the European Economic Community.
There can be no doubt, for example, that the conclusion of trade agreements between the Community as a whole, acting with all the muscle that nine united Powers can do, is undoubtedly more advantageous to the Community and to the individual countries than would otherwise be the case if we were negotiating

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separately. I have not the slightest doubt that when it comes to dealing with the secondary boycott, which has already been tackled by the United States of America, it will be much easier for us in the Community to deal as one body rather than as individual States. But the question we have to ask is, what benefit do we get from the £562 million we are paying out, excluding those funds to which we have already referred and which are already taken into account?
The total Budget expenditures in 1978, leaving out the items which are already taken into account for benefit, amounts to £1,162 million. They comprise the cost of administration, the expenditure of the Community on industry and on energy, the expenditure on research and investment, the expenditure on European schools, food aid, aid to non-associated countries, co-operation with non-member States. There are some provisional appropriations to provide for contingencies and there is the cost of the institutions themselves, the Council, the Commission and the Court of Justice, which amount to about £130 million a year. So expenditure outside those funds, from which we derive great benefit and which are taken into account and produced in the nett figure, amounts in total in 1978 to £1,162 million, to which we are contributing £562 million, or 48.32 per cent.
Further, in the event of it eventually being decided that the Commission and the United Kingdom are wrong in their assessment of the effect of Article 131 of the Treaty, that amount will be increased by 200 million to 762 million. I invite those noble Lords who follow and interest themselves in budgetary affairs to contemplate what benefits they apprehend as justifying the expenditure of £562 million in 1978 at a time when there are capital expenditure cuts. It was not only I who asked the question; the noble Lord, Lord Lyell, also asked it. We have to be satisfied that we are getting good value. The question I have to ask the Government, and indeed, with respect, the noble Lords of the Opposition, is what benefit they think we are getting. It may well be that the explanation is that this is a good investment for the future. So be it. If this be so, let it be said. But let it not be said that there are countervailing
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benefits at this moment of time, because there are none. If proof is needed all noble Lords have to do is to read through the report itself.
The noble Lord opposite posed a query, which I shall presume to answer, in connection with the gross domestic product. The figure on page 27 of Volume 7 of the Commission's Report is in fact 0·77 of the gross domestic product. The figures of 0·62 and 0·69, come I think he will find, from varying estimates as to the annual yield required from the VAT own resources levy, which in a full year would require 0·62 on the Commission's current estimate. This was the explanation which was given to me, and which I can get again from the documents.
Considering the items in the Budget on which the noble Lord has touched, let us come to one first-class scandal—the expenditure by the Community of over 2,700 million European units of account on intervention in the milk sector. Of that, 500 million units of account, or £325 million, is wasted every year in deterioration of stocks, because the stocks of milk powder and milk products in the Community are over one million at the present time, and these products deteriorate. These are not my figures; these are figures of the Commission. £325 million is wasted every year in sheer deterioration of stocks. The storage of these mountains, the storage of both wine and indeed of skimmed milk powder amounts to some £297 million per annum. Indeed, as the Commission has said, we are no longer producing for use, under the CAP; we are producing for intervention. These are not my words; these are the words of the Commission.
I could go on to touch upon other items which are of equal importance. I will mention only, one which should be dear to noble Lords. If they go through the Budget, they will find under Article 227 of the Budget an expenditure of 5 million units of account by the Commission on propaganda for direct elections—some £3,250,000. I thought that the election was to be to the European Parliament, and that the individual Parties in the various countries would put forward their own ideas. Now we find the Commission sticking its nose in, because, of course, it knows perfectly well that one of the debates which will take place—not only

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in the United Kingdom but in every country in the Community—is about the effectiveness of the Community efforts so far and the steps that can be taken in redress.
Therefore, the Commission will put itself immediately on the side of those who want to retain the present system. It will use 5 million units of account on propaganda, on the assumption that the Council agrees, which it has not yet done, and on the assumption that the European Assembly will agree, which it has not yet done. It will enter directly into the political arena. That is something that I do not think it should do. I do not know what the noble Lord, Lord Lyell, thinks about this, or whether there has been any consultation within the Opposition about this, but it is certainly one of those things that Parliament should take a look at before it remotely dreams of giving approval to it.
The Community Budget is very small in total. The total expenditure of the Community is smaller than the annual budget of a medium-sized multinational company. It is, in fact, less than the corporate power in Europe spends upon its advertising propaganda in order to get consumers to buy its products. However, it is significant for us—as the noble Lord, Lord Lyell, said, £562 million of net significance to us. We should be ill-advised if we let the Budget go from this Chamber without raising a profound question mark as regards the worth of the £562 million.
Lord LYELL: My Lords, before the noble Lord, Lord Bruce of Donington, concludes his remarks, I should like to raise one matter with him. He has waxed very eloquently and strongly about what I referred to as "gluts". He said that the biggest scandal was the 2,700 million units of account on milk. Can he tell us what that is, not necessarily in figures but in terms of milk production and milk products from the EEC?
Lord BRUCE of DONINGTON: My Lords, I do not have the actual amounts in front of me. However, at page 46 of volume 7 of the Commission's Budget there is reference to the appropriation of 2,715·9 million units of account which, I have a note, amounts to about £1,850 million. I have a further note that the
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deterioration cost for the stock is £325 million and the storage cost of £216 million is included within that sum. I am sorry, but I do not have the quantities.
9.52 p.m.
Lord MACKIE of BENSHIE: My Lords, I have no doubt that the House will excuse me if I address myself to the report. I should like to say how disappointed I am to see such a small number of noble Lords in the House, albeit that they are of very distinguished character. However, it is symptomatic of the regard that politicians have for this very important matter—namely, the EEC Budget and its implications—that it comes on at this time of night.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I think that that is perhaps an unworthy reflection. We do everything we can to get debates on at the right time. I think that the noble Lord, Lord Mackie of Benshie, and the House, understand that this is the end of the Summer term when everything is coming to the boil. It is extremely difficult to get these debates at an easier time, but that does not imply any disrespect for or ignorance of the maximum attention that the House gives to this matter. I should prefer that the noble Lord would not say that politicians did not think that the matter was important.
Lord MACKIE of BENSHIE: My Lords, I should be loath to disagree with the noble and charming Lady but earlier in the Session important debates on the scrutiny of EEC legislation also took place very late at night and with very small audiences. I mean no disrespect to the usual channels that are always charming, right and proper, when I say that perhaps the House, as a whole, does not appreciate the importance of the scrutiny done by the Lords Committees, which is recognised by the Press. I think that when one has distinguished people like an ex-Governor of the Bank of England chairing Committees, more attention might be paid by the House—not by the usual channels—to the hard work which is done in those Committees.
I should particularly like to say that Sub-Committee A, which is so distinguished it is not true, dealing with money and subjects which simple peasants like

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myself do not understand, is a prototype of what a committee should be. However, because of the importance of agriculture in the Budget, it asked that Sub-Committee D sit in on many of its discussions. That sort of co-operation is much appreciated by, and enormously sensible on the part of, the Scrutiny Committees in this House.
My noble friend Lord Gladwyn will deal with general matters of the Budget, but as agriculture takes up 70 per cent. of the Budget I want to comment on the Common Agricultural Policy. I have been given an opportunity because of the intervention by the noble Lord, Lord Bruce of Donington, which was detailed and audible but in my view almost entirely wrong. I must say that the noble Lord has a facility for having a clearer view of the trees while totally missing the wood.
This valuable and excellent report at paragraph 39 says:
"The Committee consider that a general review of the common agricultural policy is desirable, paying particular regard to the comments made under the three preceding paragraphs ".
That is entirely true, but I should like to make one or two general remarks about the question of production of food in the world, in Britain and in particular in Europe. The noble Lord, Lord Bruce of Donington, may or may not know—I doubt whether he does—that every year there are a large number of extra people in the world. Those large numbers of extra people consume an additional 35 million tonnes of cereals each year. That is rather an important fact. As a result of one or two good harvests recently, we are now in a slightly improved position as regards world reserves, and prices have fallen slightly in comparison with prices in the EEC. However, we do not yet have anywhere near the total reserves held mainly by the United States in the 1960s.
We have 200 million extra tonnes projected only for the harvest this year, and that is nothing when there are an extra 35 million tonnes required each year. For a county like Great Britain, which imports nearly half its total food consumption, to ignore the contribution which the Common Agricultural Policy has made to total world food production
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is absolute nonsense. When we talk about the enormous wine lakes, beef and butter mountains and in particular the dried milk mountain, which is approaching a hill, we should have regard to what the Common Agricultural Policy has done to aid the world production of food and in keeping down the price of food in this country during the period of the 1974 shortage, together with the extra money which it may be said we would pay in the world market today.
The one thing that I have learned in many years in agriculture is that there is no industry where a 5 per cent. surplus or a 5 per cent. deficit can lead to such a rise and fall in price which can amount to 50 per cent. When it comes to looking at a settled policy for agriculture in Britain or in Europe, we should not ignore the fact that of course it costs money to have a surplus but that surplus is something which we need in order to keep the supply of food stable. I shall not dwell for too long on that, but it had to be said.
I wish to say only one thing in support of the report, but I should also like to correct a general view of agricultural policy in the CAP. A number of people think that because deficiency payments worked reasonably well in this country, the whole of Europe should adopt that system. It is true that deficiency payments worked reasonably well in this country, but at various times they cost sums of money to which people in Britain objected. For example, at the end of the war we were paying nearly £500 million in food subsidies; that was approximately four times the value now at end of war prices and it makes the £562 million about which the noble Lord, Lord Bruce of Donington, was so concerned about, look like absolute sweeties in terms of an assured food supply today.
We should not be too concerned with the actual system. In my view the system of intervention prices is much simpler, and many people agree with me. What is wrong really is what is highlighted in another paragraph of the report, where it is said that decisions on agricultural prices are not reached as the result of debate between the representatives of agricultural interests on the one hand and those identified with relevant, but nevertheless legitimate, interests on the other; they are reached by the Council of Agricultural

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Ministers who are fighting for a specific section of the Community, and that I think is entirely wrong.
It is a curious alliance that the two countries upholding the present system are the United Kingdom and Germany. Germany uphold it because it suits them, because they are rich, earn a great deal of money, are able happily to support their quite large agricultural sector—they have 1 million more people on the land than we have—and because they earn a great deal of money they are quite happy to support them with high prices. On the other hand, the United Kingdom, the other great supporter of the present system, cannot afford to have its consumers in general pay more, or pay even the proper price, for agricultural products, and that is why we support it.
What we really need in Europe and in the EEC is a realisation that one cannot go beyond the law of supply and demand. If we have too much milk powder we must pay less for milk powder; in my view it is as simple as that. When we in this country got into trouble with deficiency payments we produced a system of standard quantities; in other words, we did not have
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open-ended guarantees. That is what we need in the Community. It is what they attempted to introduce with the co-responsibility payments—call the system what one likes—which suggested that milk producers should pay back the cost of marketing.
When we come to look at the reorganisation of the CAP we should look much more at the way in which it is operated rather than imagining that deficiency payments, for example, could effect a magical reform. The intervention system is simpler, but what we need is to ally the intervention system with the law of supply and demand. If we did that, I think that farmers in the Community as a whole would accept it. What they want is stability of prices. They do lot really demand the sort of high prices that the German milk producer has today. In looking at this policy we should remember two things: first, that basically supply and demand must come into it and, secondly, that in a hungry world the United Kingdom and Europe need to import food, and that therefore the more they produce at home the more likely they are to import food at reasonable prices.
10.4 p.m.
Lord McCARTHY: My Lords, I have very little to say tonight. I am taking part in the debate largely because the noble Lord, Lord Cobbold, made me believe that there would be some difficulty in maintaining the debate, but there seems to be no difficulty whatever. Indeed, it seems to be a very lively and well-informed debate, and I am greatly aware of the fact that I have very little to contribute to it. But I should like to make one or two points. First, I felt that participating in the work of Sub-Committee A on this matter was rather like being an external examiner deciding the fate of a candidate whose thesis was referred back for the third time. I should say that my recollections in this respect have nothing whatever to do with my recollections of the noble Lord, Lord Lyell. I thought that he read an excellent essay this evening.
But, for me, it was a little like that because we felt that we had to say, particularly bearing in mind the last time that the candidate was before us, that there certainly was some improvement. There now appeared to be a special Commissioner responsible for finance, and that was an improvement. He was not entirely a financial Commissioner, but he did have a special responsibility for finance. There now was an Audit Court, which is what we asked the candidate to attend to last time, and he had done so, and that must be an improvement. There were certain improvements. But basically it seemed to me that the Committee was saying that there were the same old problems, which were mentioned in previous reports of the Sub-Committee, and there was a feeling that the candidate appeared to be incapable of doing better, or at least, if he were capable of doing better, it was not going to be in the foreseeable future.
The two areas where defects were most serious, as I think has emerged in the debate, were: first, the question of the balance of expenditure in the European Budget, the balance of the expenditure pattern in the Budget, the over-concentration on expenditure on agricultural support in the agricultural element in the European Budget; and, secondly, the lack of control of expenditures in the Budget as a whole and, in particular, the defective methods of control in the
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largest single element in the Budget—agricultural expenditure.
These were the areas which we felt contained the most important defects in the way in which the present Budget is calculated, estimated and run, and I believe that, if we are to have a debate about the European Budget, these matters are far more important than any other transitory or passing defect in the way in which the Budget is calculated, or the impact of the Budget upon the economy of the United Kingdom in any one particular year. I consider that these features are far more important than the question as to how far, or in what way, we can accommodate the new unit of account, the fact that the administrative costs of the Community appear to be increasing at a relatively rapid rate, and all kinds of relatively marginal issues which will, I believe, be found well recorded in the report of the Committee. I consider that these two matters to which I have referred are far more important, though there are other matters which we shall be evaluating in the Budget, and in the proceedings of the Commission in respect of the Budget, in the next few years.
It seemed to me that one had to think about, and listen to, people who came before the Committee in order to see whether any of them, or, indeed, any members of the Committee, had any really significant and practical proposals for dealing with these two major defects. There were those optimists who said that these two major defects would be solved in the fullness of time; in particular, that they would all be solved when we had an elected basis for the European Parliament. I believe that the more one looks into that, the less likely it appears to be. There is no particular reason why a change in the basis of selection for the European Parliament will change the essential features of the way in which the EEC Budget is calculated and carried into effect.
There were those who did not appear before the Committee, but who appeared outside the Committee, who argued that there is nothing to be done about these two features of the Budget because they are essentially a part of the way in which the Community is run and that they

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relate to the primacy of the CAP in the essential way of the Community's management. There were the pessimists who would say that nothing whatever could be done. There were those who came before the Committee and who seemed to be arguing at one stage that, if there was greater readiness on the part of those who got most out of what might be called the non-agricultural aspects of the Community's Budget—for example, the Regional and Social Funds; and they included in particular the United Kingdom—to urge that a greater part of their national expenditure on these areas should be funded through the EEC Budget, then, irrespective of anything which might happen to the agricultural elements in the EEC Budget, the mere encouragement of more national expenditure spent through those aspects of the Budget would produce a realignment.
I think, again, that the more one looked into these proposals in the course of the Committee, the less there appeared to be in them. Therefore I am afraid one must say that we came back in the end to what noble Lords may feel are a spatch-cock of relatively mild and superficial proposals: the continuous scrutiny of the Budget; the review of its procedures, and proposals for the review of the ways in which we finance the agricultural section of the Budget—nothing particularly radical and nothing particularly likely to have a short-term effect.
I believe the Committee were particularly influenced by a speech of Mr. Tugendhat on the 2nd May which we actually quote in our report. Referring to the policy decisions in the Budget, he said:
"…the manner in which the Member States have chosen to reconcile their differences is one which will grossly distend the European Budget, and will therefore impose a severe burden upon the European taxpayers…".
He went on to say:
"Decisions on agricultural prices are not reached as a result of a debate between the representatives of agricultural interests on the one hand and those identified with other relevant but different interests, including those of taxpayers and consumers, on the other. On the contrary, the debate takes place almost exclusively between Agricultural Ministers, who understandably conceive their primary responsibility to be to support their different national farming lobbies".
Fortunately, when I sought to cross-examine Mr. Tugendhat on the precise
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significance of that phrase, it was, as one would expect it to be, as vague and as imprecise as was necessary. Nevertheless, though vague and imprecise, along those lines, it seems to us, is the way forward, and it is in that respect that I should like to recommend our report to the House.
10.13 p.m.
Viscount AMORY: My Lords, my intervention will be very brief. As the noble Lord, Lord Cobbold, has said, the figures are highly complicated, and if I were to venture to put in my oar in an attempt, either to embellish the report itself or to embellish the extremely lucid exposition given by the noble Lord, Lord Cobbold, it is certain that I should succeed only in causing the utmost confusion in your Lordships' minds. I will therefore, if I may, make only three brief observations. The first one is to emphasise what the report says: that tie present degree of financial control is still clearly inadequate and unsatisfactory; and it is not certain that that would be automatically improved as the European Parliament increases its activities. However, it must be hoped that, in the light of experience, some means will be found to establish some stronger methods of financial control, so that the Budget really becomes a more effective policy document—and there is no real reason why that should not happen, I think, as more and more experience is obtained of this very difficult problem of budgeting. But it will need, I am sure, a continuing effort of willpower on the part of all concerned to see that things do move in that direction.
Secondly, I should like to express my opinion, which I think the report does, too, that the present degree of openendedness of the CAP is going to prove unmanageable, and something will have to be done about that sooner or later, either by developing some system of limiting quantities by standard quantities or maximum quantities, or perhaps in the way that the noble Lord, Lord Mackie of Benshie, suggested, by ensuring that the supports for your guaranteed prices do not get too much out of line with market considerations. But in some way or another that will have to be done. Also, I should have thought that, if the

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best value for money is going to be obtained, in some way the present authority of the Agriculture Ministers must be brought a little more in subjection either to the Council itself or to the Council of Finance Ministers.
I should like to say to the noble Lord, Lord Bruce of Donington, that, in one respect, I regard him as a public benefactor. My hearing is not as good as it was and I must say that his clarion calls come over to me loud and clear. For that I thank him. I am not going to attempt to follow him in his wide-ranging criticism of our membership of the EEC. He seemed to be instituting a debate on whether it is worth while our joining. Before I answer that, from my point of view, in one sentence, I do not quite accept all the arithmetical computations that he quoted. I think that the equations are in some cases more complicated than he implied. As regards the question of whether it is worth our being in the EEC, my answer, without any question, is that our membership is absolutely essential and that, as we are members, we must accept the obligations of membership using our influence, in as democratic a way as we can, to get those obligations changed if and when we consider them unfair.
The third thing that I want to say is this. The noble Lord, Lord Cobbold, paid what I thought was a very well deserved tribute to those who helped and serviced our Committee. I am sure that that is right. On behalf of the members of that Sub-Committee, I want to express our gratitude to our chairman, the noble Lord, Lord Cobbold, himself, for the leadership he gave us. He showed a very quick mastery of the technical and complicated questions with the skill that we should have expected from him with his own wide experience. He led us through mists, through bogs and past rocks with a sang froid and sureness of touch for which, I am sure, your Lordships will be as grateful to him as were the members of his Sub-Committee.
10.18 p.m.
Lord GLADWYN: My Lords, I shall not add much to this interesting debate.
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I have never been an expert on budgetary matters although, naturally, I followed them in a general way and I voted in the Parliament of Europe when they came up for discussion. I have also read the report of the Select Committee and, as usual, it seems to be an admirably judicious mixture of appreciation and criticism based, no doubt, on a mountain of evidence which, I believe, will shortly be made available to us—and no doubt we shall have our work cut out to read it when it is available. We are lucky to have among us noble Lords who have the time, the energy and the expertise to investigate the whole working of the European Economic Community and to make constructive suggestions on how it might be improved; for that is what they consistently do.
Before I say a few words on the general subject, I should like to say one word in relation to the speech of the noble Lord, Lord Bruce of Donington, every word of which I heard with the utmost clarity in spite of the fact that, like the noble Viscount, Lord Amory, I am slightly deaf. Indeed, I could not fail to apprehend what he meant. As I understand it, he held out as a great spectre the sum of £562 million which, the report says, is, in its opinion, our net contribution to the Budget in 1978. He said that £562 million was a dreadful sum for this unfortunate country to be saddled with; that it was beyond our means and facilities to pay. And the assumption I drew from that was that we should be better outside the Community rather than paying this portentous sum. That is more or less what he seemed to indicate.
Lord BRUCE of DONTNGTON: My Lords, will the noble Lord give way? The noble Lord is aware, of course, that I said nothing of the kind. The noble Lord will be perfectly well aware that I said it was a sum of some significance. Not at any point did I say or imply that we ought to withdraw from the Community.
Lord GLADWYN: All right; so much the better, my Lords. I am glad to hear that. The inference I drew was the wrong inference. But the noble Lord certainly laid emphasis on the fact that it was a

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very large sum, perhaps beyond our means. My reading of the report is not exactly that. What it says is:
"The estimate of receipts, however, leaves out of account the benefit derived by the UK from monetary compensatory amounts. Since the change in 1976 under which payment of MCAs is made to Member States exporting agricultural products, rather than to importers, there are only small direct UK receipts of MCAs, but the United Kingdom benefits indirectly in the form of lower prices for agricultural imports from other Member States than would have had to be paid in the absence of the MCA system. The green rates … may be expected to continue to give rise to substantial economic benefits to the UK consumer".
The noble Lord, Lord Bruce of Donington, seemingly disputes that.
I should like to ask the noble Lord, Lord Cobbold, whether he continues to agree with the report of his own Committee that nevertheless the benefits we receive from the green pound are likely to be very considerable, and whether he could quantify them in some respect. Whatever sum he thinks should be made available to us by the green rate is obviously to be deducted, if he is right in so thinking, from the £562 million. Moreover, I suppose we might be expected—as I think the noble Lord, Lord Bruce of Donington, admitted—to contribute a considerable sum to the general upkeep of the Community to which, as the noble Lord has also admitted, it is very much in our interest to belong. Having made that sum, it seems a less formidable proposition that we should subscribe £562 million in 1978 than would otherwise be the case.
I do not, however, want to dispute the technicalities of that with the noble Lord. I would only ask him to take into consideration the arguments put forward on the agricultural front by my noble friend Lord Mackie of Benshie. Does he not think that we would derive some benefit from the CAP, or does he think it is purely a liability? Perhaps he does. When the noble Lord, Lord Cobbold, sums up I should like him to give some consideration to these arguments.
Now, my Lords, the Committee rightly say that this Budget is not a Budget as we know it. But then the Council of Ministers is not a Government, the Commission is not a civil service, and the Parliament is not a Parliament. The
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whole thing is an experiment in international relationships which is being worked out largely pragmatically, as they say, from day to day, month to month and year to year. The only guiding principle behind it is the Preamble to the Treaty of Rome which, among other specific objectives, says that the signatory countries are:
"determined to lay the foundations for an ever-closer union among the peoples of Europe".
That is the main phrase in the Preamble of the Treaty which we signed and to which presumably we adhere.
The Treaty was hence simply a framework on which the signatory countries could build. The present structure—I have no hesitation in admitting—does not resemble what the founding fathers imagined it would be 20 years from the date of signature. There is no doubt about that. But when you come to think of it, my Lords, it is remarkable that in those 20 years we have achieved not only a customs union but also, however defective, a Common Agricultural Policy, a Common Commercial Policy, a machine, however rudimentary, for harmonising foreign policy, a Regional and a Social Fund of some significance—and it may be of increasing significance as the years go by—a totally new and successful method of assisting the development of non-industrialised countries, a court which works and a common annual expenditure of nearly £8,000 million. It is appalling to think that quite a large section of our people actually want to break all this up and to revert to the "beggar my neighbour" nationalistic tactics of the 1930s, which resulted in mass unemployment and ultimately in World War II. It does indeed sometimes look as if the gods are determined on our destruction and are therefore driving us mad.
The Select Committee very rightly draw attention to the ways in which future Budgets could be improved—and I am sure they will be. Already the influx of our compatriots into the European Parliament, including the noble Lord, Lord Bruce of Donington, during the last four years has resulted in great improvements, notably, as has already been said, in the constitution of they Audit Court and in the way in which the whole business is co-ordinated and subjected to healthy criticism.

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As the Committee also point out, one of the chief continuing defects of the present system is, so to speak, compartmentalism—that is to say, the practice whereby, for instance, the Agricultural Ministers (each with a powerful farming lobby behind him) arrive at their necessarily expensive compromises without much effort apparently being made to consider the problem from the wider point of view of the whole Community. If the Community is ever to function as some kind of entity—and that, after all, is what we are committed to in the Preamble to the Treaty which we signed—surely some consideration must be given to the formulation of general economic and financial policies?
It seems to me that it is precisely here that a directly elected Parliament will have a most valuable role to play. For, by the force of things and irrespective of their various political tendencies, they will be obliged to look at the problems before them, including the Budget, from a European and not from a purely national point of view. Moreover, unlike the Ministers, they will from the outset have to take their decisions by some form of majority vote. That is not something to be feared. The Parliament will have no great powers: we know that. Even over the Budget these powers will be strictly limited. But the mere fact that it will inevitably be expressing itself in terms of democratic common sense will give it great influence. I think, as the great Scottish poet, Dunbar, said many centuries ago:
"The truth shall you deliver: it is no dread".
So, unless our economic nationalists, and those who for various reasons want to return to the 'thirties, succeed in torpedoing direct elections—which, in the present gloomy mood of the nation, they may very well do—we can, I think, regard it as certain that, by the end of the elected Parliament's first term in 1983, most, if not all, of the Select Committee's proposals will have been met and we shall all be much happier and richer as a result. Let us hope, in any case, that in only about 18 months from now the British Members of the new Parliament will be taking some part in the work of our Select Committee and in the work of the Select Committee in another place, and that the whole Community will be
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entering into a new phase of constructive endeavour, an example to the world, worthy of our collective European political genius.
10.28 p.m.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): My Lords, I should like to express our thanks for the work of the noble Lord, Lord Cobbold, and his Scrutiny Committee in examining the preliminary draft Budget so quickly; and, of course, especially to the noble Lord, Lord Cobbold, for drawing it to the attention of the House in a clear report and in his speech tonight. Indeed the report of the Committee is so comprehensive and lucid that it is quite unnecessary for me to try to engage in any exposition of the Budget. I can confine myself to a fairly brief statement of the Government's position on the issues which are raised. In particular, I do not propose to enter into the referendum argument which has suddenly sprung up and taken us all, including, I have no doubt, the participants themselves, by surprise.
It has been agreed that the experimental timetable adopted for the 1977 Budget, in part at the United Kingdom's request, should again be followed. That timetable has certain advantages and disadvantages, which are well known; but it is my impression that, on the whole, both the Committee and the House judge, as do the Government, that the advantages of having the timetable as it now is outweigh the disadvantages. Of course, tonight's debate, being held two days before the Budget Council meets, will enable me to draw to the Chief Secretary's attention the comments which have been made relating to the report itself.
I should like to look, as briefly as I can, at the several important developments which are heralded by the preliminary draft Budget. First, the Scrutiny Committee has rightly drawn attention to the possible and important effects of the introduction of the European unit of account on the application of Article 131 of the Treaty of Accession, and hence on the United Kingdom's contributions to the Budget in 1978 and 1979. Article 131 lays down a formula,

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as noble Lords will be aware, which is designed to limit the increase in the new Member States' percentage contributions to the Budget in the years between 1977 and 1980, when the full own resources arrangements apply to the United Kingdom and to the other new Member States.
It is the Commission's duty to carry out the necessary calculations, and the Commission's view, which Her Majesty's Government share, is that the purpose of Article 131 is to ensure a smooth progression in United Kingdom payments prior to payment on a full own resources basis, and that the smoothness of the progression has to be measured in national currency terms. But some Member States argue that Article 131 applies to the percentage contribution to the Budget in unit of account terms, and that the effects of any change in national currency terms are not relevant. This alternative approach, if it were adopted, could, according to the Commission's calculations, involve the United Kingdom in gross additional sterling payments of some £470 million over the two years 1978 and 1979. Such an approach is financially and politically unacceptable to the United Kingdom Government. We are in full agreement with the Scrutiny Committee's conclusion on this point, and I am happy to have in such strong terms the support that has been given to us tonight on this matter by the noble Lord, Lord Cobbold.
The United Kingdom Government have already made it clear, and repeat it, that they are not prepared to accept a solution which would so increase the United Kingdom's contribution and, in effect, overturn the transitional and safeguard arrangements which Article 131 is expressly designed to provide. A change in the unit of account would require an amendment of the Financial Regulation, which must be adopted unanimously. Without an amendment, there would be no legal basis for a Budget denominated in European units of account. Your Lordships will not expect me to speculate on the United Kingdom's approach or tactics at the Budget Council, but we certainly hope that a solution of this important issue—perhaps the most important issue arising out of the report itself—will be reached at that time.
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May I say a word about another important matter—the introduction of VAT own resources. It is envisaged that the system will be completed at the beginning of 1978 by the introduction of the Community rate of value added tax, subject to a I per cent. rate limit on a harmonised base in all Member States, to be paid directly into the Budget. As your Lordships will be aware—and we had a debate about this earlier in the year—agreement on the text and field of application of a harmonised VAT base for own resources, in the VAT Sixth Directive, was reached following the Fiscal Council on 22nd March. It has been cleared with the European Parliament, but the necessary implementing measures have still to be adopted. The Danish Government is maintaining a reserve on the Commission's proposal for implementing the Sixth Directive. The Belgians also have a reserve on a technical issue, concerning the burden on tradesmen imposed by the documentation which is needed to operate VAT own resources. We and many other Member States sympathise with the Belgian view, and with the modified system which they prefer, but the Commission have so far been unable to accept this and discussions are still continuing. So it is not yet certain that agreement will be reached in time for VAT own resources to be introduced from the beginning of 1978.
Mention was made by the noble Lord, Lord Cobbold, of the role of Parliament in the budgetary process. I agree with the Scrutiny Committee that clarification of the respective roles of the Council and the European Parliament in the Budget process is highly desirable, although it is not easy to achieve quickly. Important differences of view exist on the scope for commitments and payments and the application of the maximum rate.
I have to say a word about commitments and payments appropriations because this is an important matter. The Commission have proposed a further significant extension of the area of the Budget in which separate commitments and payments appropriations will be shown. Member States will have to consider at the Budget Council whether the extensions proposed by the Commission should be adopted. In general, the United Kingdom Government consider that the wider use of separate

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commitments and payments is useful, since it means that the Budget gives a clearer indication of likely expenditure in the year in question. However, we need to ensure that commitments appropriations do not build up into excessive expenditure when the time comes to make payment. So these differences between the Council and the European Parliament must be settled. I cannot say much more at this stage on that particular issue.
In relation to the maximum rate to which the report also draws attention, in drawing up the 1978 preliminary draft Budget the Commission have calculated the increase in non-obligatory expenditure relevant to the maximum rate by using the totals for commitments. This is in line with the Council's view, but the Assembly contends that the rate should be calculated by reference to payments. The significance of this question is that if the latter view were accepted, the Assembly could, by writing in large commitment appropriations, force the Council to accept large increases in the size of the Budget when the commitments are due for payment. Again this is a matter which is being considered, and it is not possible to anticipate the outcome of these considerations.
Let me turn from relatively technical matters to more general matters that arise from the report and which have been mentioned in the debate. First, in relation to the size of the Budget, I think it is important that the House should recall that the preliminary draft Budget is the work of the Commission, and the Commission include in the preliminary draft Budget all items for which, in their view, expenditure might be needed, including those for which no Council decision on policy exists. The Budget Council, on the other hand, usually takes the view that all items on which no Council agreement exists should be deleted unless agreement is likely in the near future, in which case Chapter 100 on provisional appropriations may be used. This tighter estimating approach implies supplementary Budgets later which have to go through the same procedures as the Budget itself. However, in the Government's view this is preferable to a Budget containing excess provision.
On the size of Budget, I ought to say that inevitably the final stages of the
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Budget as adopted will differ from the preliminary draft before us, but one cannot begin to guess by how much. The Commission's preliminary draft Budget total is 11,850 meuas, compared with the agreed Budget provision of 9,586 meuas for 1977. On the Commission's approach and on the hypothetical assumption that the preliminary draft Budget were not to be amended, the United Kingdom gross contribution would amount to some £1,290 million, or 16·6 per cent. of the Budget. But this is on the basis of full own resources payments which, for technical reasons, the Commission are asking that the three new Member States should pay in 1978, with a refund in the following year of the difference between these payments and the amounts due under Article 131. We estimate that the refund would be of the order of £200 million.
We do not favour the refund approach proposed by the Commission, and until the basis of our contribution to the 1978 Budget is settled we cannot with any precision estimate the size of our contribution. Of course, as has been said in the debate, to a considerable extent the United Kingdom contribution will be offset by receipts. But these, as again the debate tonight has made plain, are notoriously difficult to estimate, as the Scrutiny Committee recognises. If one had to make a guess at this stage I think it would be difficult to differ substantially from what the Committee said in its report in paragraph 12, on page 7.
On the basis of the figures I have just quoted the preliminary draft Budget is 23·6 per cent. up on last year. Of course, as I have said, the preliminary draft Budget figures tend to be larger than those eventually agreed. None the less, the increase is a large one and agriculture constitutes the largest absolute increase in the Budget, reflecting the impact of the price review in April. Large increases are also proposed for the Regional and Social Funds, for expenditure on industry to assist structural changes and on the development of energy independence. I shall have to say something—but I can keep it fairly brief—on the provision for agriculture.
Before saying that, I should like to say that our general approach—and I can

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summarise it very shortly—is in line with our approach to domestic expenditure. It will be to seek to restrain increases in expenditure so far as possible and to ensure that provision in the Budget represents a realistic assessment of the cost of carrying out agreed Community policies. Most other Member States face similar constraints and are likely to take a similar line. Along with the need for restraint we shall aim to ensure that when resources are allocated Budget priorities should reflect more general economic priorities, of the kind mentioned by the noble Lord, Lord Lyell. I need not perhaps go into those in any detail.
I can perhaps pass over the Regional Development Fund in one sentence, because we debated that matter in March and I do not feel that at this stage it can be carried any further forward. The report mentions the possibility of Community borrowing and again, with all respect, I cannot improve on what the report has said in paragraph 22, except to acid the piece of information that at the end of last month the European Council asked Finance Ministers to examine the borrowing proposals as soon as possible, and that will be done.
On the absolutely vital matter of agriculture: as has been said in this debate, agriculture accounts for about 70 per cent. of total expenditure proposed in the Preliminary Draft Budget and the Committee's report devotes a good deal of space to it. The reason for this preponderance of agricultural expenditure is well known, and indeed has been mentioned in the debate. It is, of course, that price support for agricultural commodities is the one area in which the EEC has taken over virtually all expenditure which would otherwise fall on national Governments. Whatever view one may take of the Common Agricultural Policy, it is certainly the case that the surpluses of milk products which are the major cause of the huge figure for agricultural expenditure cannot be the subject of admiration. The Government entirely accept that, whatever special reasons there may be for the big increase expected in 1978, the figure for agriculture is too large and should be reduced. Given that farm support prices and other elements of the CAP are fixed for a year at a time, it follows that the adoption of the Budget cannot really be an opportunity for a
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thorough review of the policy. This is principally a matter for the Agriculture Ministers of the Member States under the present system, particularly at their annual series of discussions in the spring to settle farm prices for the coming year.
Perhaps I should say just something about the recommendations in the Committee's report, some of which have been mentioned. One of the points that the Committee makes is that the institutional framework for agricultural policy decisions should be reformed to give proper weight to "non-agricultural interests". I hesitate to question this conclusion, especially since I see that the Budget Commissioner, Mr. Tugendhat, evidently takes the same view. The Government obviously agree that more weight should be given to the consequences for taxpayers and also for consumers when agricultural decisions are taken. But procedural changes may not in themselves be the answer. We have to face also the fact that to a large extent the other Member States may take a different view from ours of the respective claims of agriculture and the rest of the economy.
On the particular point of the open-ended commitment, the Committee rightly points out that, under the CAP as it stands at present, the financial commitment is open-ended and they recommend that it should be reformed by limiting the quantities of production to which the guarantees apply. Both the noble Viscount, Lord Amory, and the noble Lord, Lord Mackie of Benshie, have referred to that tonight. I can assure the House that the Government will give close attention to this recommendation. Perhaps I should mention that such a system does already apply to one commodity—namely, sugar—which nevertheless still constitutes a large and unpredictable charge on the Budget.
Without wishing to reject the idea of extending the system to other products, one important consideration should be mentioned. Quotas are fully effective only if they ultimately apply at the level of the individual farmer. They are complex and tend to fossilise production patterns in favour of the less efficient. They could therefore put United Kingdom farmers, who are regarded as among the most efficient in the Community, at a disadvantage. So, if the Community is

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to go down this road, it would have to find some way of overcoming that kind of problem.
Lord MACKIE of BENSHIE: My Lords, may I ask the noble and learned Lord whether he does not agree that standard quantities in relation to our own efficiency pattern system work quite well in this country?
Lord McCLUSKEY: My Lords, I have not suggested that they did not work. What I suggested was that, while they have advantages—and the fact that they work indicates that they have some advantages—they have a disadvantage in that they tend to protect the inefficient farmer, and in so far as we are more efficient we would tend to be disadvantaged.
Lord MACKIE of BENSHIE: My Lords, they do not apply to the individual farmer; they apply to the total amount produced.
Lord McCLUSKEY: Well, my Lords, at this late hour I do not propose to enter any further into that argument with the noble Lord.
I need not deal with the Committee's comments on MCA; they have not been gone into deeply in this debate. I should however, like to say to my noble friend Lord Bruce of Donington that I will not attempt to reply to the matters of underlying principle which he raised. I do not seek to underrate the value of discussing these matters, but in the context of this debate on this report, rather than on the policies which it seeks to provide for, I do not think the Government should elaborate a view. That can be done on a more suitable occasion when the issue is policy.
In conclusion, my Lords, I would thank the Scrutiny Committee for a thoughtful report, and thank noble Lords who have spoken for their contributions. I hope I have given, at not undue length, a sufficiently proper indication of the Government's attitude to the preliminary draft Budget, and to the Committee's report, to satisfy your Lordships. I am grateful to all who have taken part in this debate on a complex subject which has important implications for us all.
10.48 p.m.
Lord COBBOLD: My Lords, I will not detain your Lordships for many minutes. I should like to thank those who have spoken and made the debate very interesting. In particular, I would thank my colleagues on the Sub-Committee, Lord Amory and Lord McCarthy, for their interventions, and Lord Mackie, who was a sort of honorary member of the Committee. Lord Lyell made some very interesting and apposite observations. I will not enter the lists between the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Gladwyn. In reply to Lord Gladwyn, I would just say that I stand by what I said: that there should be a considerable offset from the MCA green rates arrangements against the net deficit. I know Lord Bruce and I have a little disagreement about that, and I am not going to risk quantifying those figures.
The noble and learned Lord, Lord McCluskey, kindly gave us some very interesting and helpful comments at the end. I would make one comment on one word he used, when he said that the "procedural" is not what is important. Of course, the Committee were not thinking at all in procedural terms about the Agricultural Council meeting; we were thinking in terms of the reality of integrating agricultural policy with budgetary policy. Finally, perhaps I might thank the noble Baroness, Lady Llewelyn-Davies, who represents the usual channels, for sitting through the debate. I hope that the noble Baroness has found it interesting. I assure her that, although we might have wished that the debate had been arranged at a more convenient moment, we fully appreciate the difficulties.

FARRIERS (REGISTRATION) (AMENDMENT) BILL [H.L.]
Returned from the Commons agreed to.
TOWN AND COUNTRY PLANNING (AMENDMENT) BILL
Returned from the Commons with the Amendments agreed to.
  IMMUNISATION STATISTICS
  IMMUNISATION STATISTICS
  SPINAL INJURY UNIT SITE
  SPINAL INJURY UNIT SITE
  EEC MEMBERSHIP AND COST OF LIVING
  EEC MEMBERSHIP AND COST OF LIVING
  ROYAL AIR FORCE: NIMROD MR AIRCRAFT
  ROYAL AIR FORCE: NIMROD MR AIRCRAFT