Sitting of 26 October 1977

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

    Royal High School, Edinburgh
    Mr. Gowasked the Secretary of State for Scotland whether he will make a further statement about the progress which has been made on the conversion of the Royal High School in Edinburgh for the proposed Scottish Assembly; what is the total expenditure incurred so far; and what further expenditure will be incurred before the work is completed.
    The Under-Secretary of State for Scotland (Mr. Harry Ewing): Work is proceeding to bring the buildings to the state described in my reply to my hon. Friend the Member for Kirkcaldy (Mr. Gourlay) on 7th April. The expenditure incurred to mid-October, including cost of purchase, was £17;31 million. The outstanding expenditure on these works is £690,000.
    Mr. Gow: Do not these figures show a substantial escalation in the cost of this building? What plans do the Government have for dealing with this ghastly exercise in nonsense if we do not have a Scottish Assembly?
    Mr. Ewing: The figures do not show a substantial escalation in the cost. If, in the event, the Royal High School is not required for the Assembly, this will be a matter for the Property Services Agency to consider at that time. The Government are committed to devolution, and we are confident of getting the necessary Bills on to the statute book.
    Mr. Reid: Is it not true that the fact that the Bill might just squeak through the House does not necessarily mean that the Assembly will be set up? Would it
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    not suit the Government if the Bill were stymied in another place or by a General Election? Or is it the intention of the Government to keep going until the Assembly is duly established?
    Mr. Ewing: The hon. Member is looking for ghosts which clearly do not exist. We are confident that the House will approve the Bill. The people of Scotland —because we are committed to a referendum—will themselves decide whether there will be a Scottish Assembly.
    Mr. Higgins: What precedent is there for expenditure of this kind on what is, after all, merely Government expectation?
    Mr. Ewing: The expenditure was approved by the House by the passing of the Appropriation Act following an announcement by the Lord President on 14th April 1976. The approval of the House of Commons is as good a precedent as any for a constitutional and democratic country.
    Mr. MacCormickasked the Secretary of State for Scotland when he next intends to visit the building formerly occupied by the Royal High School.
    Mr. Harry Ewing: My right hon. Friend has at present no plans to do so.
    Mr. MacCormick: If the Secretary of State changes his plans, might it not be an idea for him to take along the Tory spokesman on devolution? In view of the remarks made by that hon. Gentleman about the Scottish scene during the summer, he could do with visiting any school in Scotland. Might that not also help the Conservatives to make up their minds about their policy on devolution?
    Mr. Ewing: I do not know to which Conservative spokesman the hon. Gentleman was referring. If he meant the hon. Member for Edinburgh, North (Mr. Fletcher), I must say that I was extremely interested in the pronouncement made by the hon. Member for Edinburgh, North in North-East Scotland when he pleaded that no one could accuse him or the Conservative Party of being constructive about devolution.

    Scottish TUC
    Mr. Canavanasked the Secretary of State for Scotland when he next intends to meet the STUC.
    The Secretary of State for Scotland (Mr. Bruce Milan): I am meeting the STUC, together with the Convention of Scottish Local Authorities, on 28th October.
    Mr. Canavan: Will my right hon. Friend assure the STUC and the workers at the Scottish Timber Products factory at Cowie that the Government are still prepared to do everything possible to save the factory? Could we have a decision as soon as possible on this matter in view of the anxiety felt by workers and their families?
    Mr. Millan: I can give my hon. Friend that assurance in the terms for which he asks. A number of firms have shown an active interest in taking over that establishment, and we hope for a solution to the problem reasonably soon. Of course one can never be absolutely certain, but a lot of interest has been shown and we are working hard to find a solution.
    Mr. Teddy Taylor: Will the Secretary of State report on the endeavours of the STUC to seek a solution to the problem at Chrysler's? In view of the severe damage that has been done to the cause of attracting industry to the West of Scotland, will he strive to solve this dispute over what appears to be a trivial matter? Will he give an indication that the full resources of the Government are being made available to find a solution to this damaging dispute?
    Mr. Millan: I am taking a close interest in what is happening there. Certain discussions were held yesterday and today, and it would not help the House or the situation for me to go into the matter in any detail. I very much hope that some solution will be found to enable work to be continued at Linwood.
    Mr. Lambie: When the Secretary of State last met the STUC, did he discuss the future of the Scottish steel industry and especially the danger of the BSC's policy to the steelworks at Glengarnock in my constituency? Will he tell me what action he has taken on the future of the Glengarnock steelworks following representations from the STUC?
    Mr. Millan: The Minister of State has met the STUC in the last fortnight, and he discussed the steel industry generally in Scotland. It is known that there are very
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    serious problems affecting the steel industry, not just in Scotland but in the United Kingdom generally, and the Government are actively discussing a number of these matters with the Corporation.
    Mr. Henderson: Is the Minister aware that the House welcomes his interest in the difficult problems facing Chrysler, if only because he has special responsibilities since Chrysler is the only company which has concluded a planning agreement with the Government? Does that factor change the Government's status in regard to this company as opposed to the situation in other industrial disputes?
    Mr. Millan: In all industrial disputes, Ministers take the view that the best solution is one arrived at between the trade unions and the industry concerned without ministerial intervention. At the same time, in a case such as this Ministers are interested in doing anything that can be done to help. The Government will do whatever they think is possible. One should not, even in this difficult situation, be tempted to make hasty interventions, because at the end of the day what happens at Linwood will have to be determined by management and men there. When the dispute is settled, they will have to settle down to work amicably together. That is what I hope will happen.
    Mr. Buchan: Does my right hon. Friend accept that those of us who are involved in the Chrysler situation are pleased at the close attention he is giving to the matter, but will he study carefully the proposals put forward in the discussions by the STUC which seemed to some of us to create the groundwork for a successful return to work?
    Mr. Millan: My hon. Friend knows the close involvement of Mr. Milne, General Secretary of the STUC, in this matter in the last few days, and we have had informal contacts with him as well. We are well apprised of the present situation, and I very much hope that the number of initiatives now taking place will bring the desired result.

    Education
    Lord James Douglas-Hamiltonasked the Secretary of State for Scotland if he will make an up-to-date statement on the Government's policy to encourage

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    centres of excellence in Scotland; and what colleges of education he and the Scottish Office Ministers have visited during the Summer Adjournment.
    The Minister of State, Scottish Office (Mr. Gregor MacKenzie): I have nothing to add to the reply given to the hon. Member on 25th July. Neither my right hon. Friend nor the Under-Secretary of State has visited any colleges of education during the Summer Adjournment.
    Lord James Douglas-Hamilton: Is the Minister aware that 84 qualified applicants had to be turned away by Dunfermline College of Physical Education because it was over-subscribed for the year? Are we right in assuming that 15th December will be the day when the Government make their final decision on teacher training colleges in Scotland?
    Mr. MacKenzie: The hon. Gentleman, who has gone over this ground, as others have done, on previous occasions in the last few months, is well aware that my right hon. Friend the Secretary of State for Scotland has said that he will be making a statement on this matter in the next few months.
    Mr. Small: Will the Minister give attention to the phrase "centres of excellence" in the Question and devote his mind to courses which are technical in character, since such courses are required for providing better craftsmen in Scotland?
    Mr. MacKenzie: I appreciate the point made by my hon. Friend. There is a great need for additional skills in Scottish industry, and this point has been made by my right hon. Friends the Prime Minister and the Secretary of State for Scotland.
    Mr. Welsh: Does the Minister appreciate that his present policies are scaring young people away from a career in education? What figures can he give showing the number of teachers now in training? What effect is to be expected in Scottish education in three or four years' time? Has not the Minister achieved the worst of both worlds from the point of view of young unemployed teachers, and is he not creating an acute teacher training shortage for two or three years hence?
    Mr. MacKenzie: The hon. Gentleman must have heard, as I did, the arguments
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    on this subject in the Scottish Grand Committee and the projections that were made based on population figures. It is not true to say that young people are being scared away from the prospect of becoming teachers. Indeed, there are a number of young people who have a strong vocation in this respect.
    Mr. Robert Hughes: Is my right hon. Friend aware that there is great disappointment that no Minister has visited Aberdeen College of Education recently, and is he also aware that there have been five times as many applicants for places as were allowed for in the college? Is he further aware that this college feels that it has been given less than its due share, and that the population in the North of Scotland is increasing while the number of places allowed for in the college is reducing? Will he take an early opportunity to visit Aberdeen and discuss these difficult problems in detail?
    Mr. MacKenzie: My right hon. Friend the Secretary of State for Scotland and my hon. Friend the Under-Secretary of State have received deputations from staff and students in the past few months. Indeed, I cannot think of a subject on which we have had more representations and more advice than on this one. In reply to the specific point made by my hon. Friend, I believe that the college has been given a fair allocation of places.
    Mr. Alexander Fletcher: Why is the Secretary of State for Scotland dragging his feet on the request made in July by my hon. Friend the Member for Glasgow, Cathcart (Mr. Taylor) and myself for a meeting at which to discuss colleges of education? Is he aware that there has been almost 12 months' delay and dither in trying to resolve this matter and that this is causing great uncertainty and is sapping the morale of students and staff in the colleges of education?
    Mr. MacKenzie: I do not believe there has been any dithering at all. We have had the utmost consultation on an issue as important as this one.
    Mr. Alexander Fletcherasked the Secretary of State for Scotland if he will publish a Green Paper on education in Scotland.
    Mr. Gregor MacKenzie: I would refer the hon. Member to the reply given to

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    the hon. Member for Glasgow, Pollok (Mr. White) on 21st July. The reports of the Munn, Dunning and Pack Committees have now been published and my right hon. Friend has invited comments on their recommendations. I have no doubt that there will be a wide-ranging public discussion on the important questions considered by these Committees.
    Mr. Fletcher: Is the right hon. Gentleman aware that those rather academic reports are no substitute for Government views and policy? Does he not have any proposals to relax the rigidities of the school zoning system and the catchment areas to bring in some flexibility and to give parents freedom of choice for their children's education?
    Mr. MacKenzie: I do not think that the reports are of only academic interest. The people who prepared them are closely involved with Scottish education. The chairman of one of the committees was the headmaster of my children's school, and I know, therefore, that he is closely involved in day-to-day education.
    As for parental choice, this subject was at the top of the hon. Gentleman's list when he issued a Press statement on the matter. He gave it much higher priority then than he did in relation to the poorer areas of the country. That indicated to me the attitude of the Conservative Party on this issue.
    Mr. Buchanan: Is my right hon. Friend aware that the consultation processes are overloaded with the Pack Committee on truancy, the Munn Committee on the curriculum and the Dunning Committee on assessment? These are hardly minor academic subjects. But the most urgent problem for education is the setting up of the salaries negotiating machinery which was recommended in 1974 by my noble Friend Lord Houghton in his report. Will my right hon Friend make a statement on the current situation concerning these matters?
    Mr. MacKenzie: As my hon. Friend may recall, my hon. Friend the Under-Secretary indicated in an Adjournment debate on 4th May this year that it was a matter of great regret that parliamentary pressures had prevented us from bringing forward the necessary legislation to deal with the last point of his question. I cannot say yet when the opportunity will
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    arise to do so, but we regard this subject as a matter of considerable importance and urgency.
    Mrs. Bain: Does the right hon. Gentleman agree that the supplementary question asked by the hon. Member for Edinburgh, North (Mr. Fletcher) indicates why the newspaper reports have called the Conservative education committee in Scotland "nuts and bolts"? On a more fundamental matter, will the Minister indicate that he will reconsider yet again the previous decision not to renegotiate the number of pupils per class? This is a matter of vital importance to our schools, particularly in these days of composite classes.
    Mr. MacKenzie: On the first point, I do not always think only of the Conservative Party as nuts. There are a few other candidates on the Opposition side of the House for that title. The latter point has been borne in mind by my right hon. Friend in the negotiations.

    Fishing Industry
    Mr. Sproatasked the Secretary of State for Scotland when he next plans to meet representatives of the fishing industry.
    Mr. Millan: I met representatives of the fishing industry on Tuesday 18th October to discuss their views on the common fisheries policy. I also had several discussions with representatives of the industry yesterday in Luxembourg during the meeting of the Council of Ministers.
    Mr. Sproat: When the Secretary of State met the fishermen yesterday, did he say that there was no way in which the present EEC proposals were acceptable? Does he agree that it is totally unfair to expect the United Kingdom to contribute 60 per cent. to the EEC's pond and to get out of it only 21 per cent., as the rest of the EEC proposes? What contingency plans or proposals do the Government have for taking legal unilateral action in regard to conservation within the 50-mile limit?
    Mr. Robert Hughes: This is a Sproat to catch a mackerel.
    Mr. Millan: On the first point, I would point out to the hon. Gentleman that the industry is well aware of our view that

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    the present Commission proposals are highly unsatisfactory. We have not only made that clear to the industry but we have also made it clear to the Council of Ministers and the Commission. In regard to unilateral national conservation measures, I believe that we have taken such measures where needs have demanded them, and the Commission understands that we shall continue to take national conservation measures wherever we consider them to be necessary in the absence of effective action in the Community.
    Mr. James Johnson: Can my right hon. Friend confirm that the Minister of Agriculture, Fisheries and Food had a stormy passage in his meeting with fellow EEC Ministers last Monday and that he was so thwarted that at one stage he spoke of the United Kingdom going it alone? Will my right hon. Friend convey to him that in that event he will have the full support of every party in the House?
    Mr. Millan: Yes, I shall convey that view to my right hon. Friend the Minister of Agriculture, Fisheries and Food. Those who have seen the details of what my right hon. Friend said on Monday when discussing the internal régime will be able to confirm that it was a robust defence of United Kingdom interests.
    Mr. Watt: Is the Minister aware of what has been taking place on the West Coast throughout the summer? Does he appreciate that Danish and Faroese boats have been catching herring before they get within the 12-mile limit, with the result that there has been a disastrous herring season on the West Coast? Will the Government take conservation action by banning all industrial fishing within 50 miles until the EEC sorts out its policy?
    Mr. Millan: I have already dealt with conservation measures. On the subject of West Coast herring, we have had a Community decision on allocations which has been extremely favourable to the United Kingdom since rather more than 70 per cent. of the allocation will come to us, and that means to Scottish fishermen.
    Mr. Robert Hughes: Is my right hon. Friend aware that the lack of progress towards the adoption of a sensible fishing régime is causing tremendous con-
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    cern, but will he appreciate that we in no way hold him responsible for any lack of progress? Since information on proposals and counter-proposals by the Commission so often comes to us secondhand, and sometimes in a garbled fashion, will he publish in full the detailed Government proposals and various responses from the Commission so that what the Government are frying to do can be widely understood?
    Mr. Millan: On the first point, the industry has told me quite firmly that we should not be tempted, because of frustration at the delays caused, into agreeing an internal régime that is not satisfactory to United Kingdom interests. That is my view too. I want to reach a settlement on this matter as soon as we can do so because I want to end the uncertainty in the United Kingdom industry. But I am not willing to agree to a settlement simply for the sake of speed unless that settlement meets our essential interests. We have made this clear to the Community, and the industry supports us.
    On the second point, I shall consider whether there is any further information that can be made available in a convenient form. Some of these matters are detailed and complicated, but I shall take up my hon. Friend's suggestions and see whether we can put further information in the Library or in some other way make such information available to the House.
    Mr. Teddy Taylor: Does the Secretary of State accept that he has the full support of the Opposition in the robust stand he took in the recent negotiations? Can he say what further plans he has for limitations on industrial fishing and when the next meeting will take place?
    Mr. Millan: Certain aspects of the matters we discussed yesterday will come up in a fortnight's time at the meeting of Agriculture Ministers. The next full meeting to discuss fishery matters will be on 5th and 6th December. Industrial fishing is not a matter that can be dealt with in isolation. There are other problems relating to conservation. We have made absolutely clear, however, that where there is a conflict, as there very often is, between industrial fishing and fishing for human consumption, fishing for human consumption must have

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    priority. I think that that is well understood within the Community and is becoming increasingly accepted.

    Employment
    Mr. Hendersonasked the Secretary of State for Scotland if he will make a statement on the effectiveness of measures to reduce unemployment in Scotland.
    Mr. Millan: About 52,000 persons are currently benefiting from the various employment protection and creation measures introduced by the Government in Scotland. For the longer term, our policies to reduce inflation and to create a favourable climate for increased investment and industrial expansion are the key to the reduction of unemployment, which, despite the decrease announced yesterday, is still far too high.
    Mr. Henderson: Does the Secretary of State recall that he answered a Question from me on this very subject almost exactly a year ago, when he said that he was satisfied that the Government's policies would strengthen employment prospects in Scotland? Is he aware that since then unemployment has risen by 25,000? Are we going to wait another year and then find that unemployment has risen by another 25,000?
    Mr. Millan: I believed then and I believe now that the policies of the Government are the right ones to produce a long-term reduction in unemployment, which we all want to see.
    Dr. M. S. Miller: Does my right hon. Friend agree that the most immediate and effective method of making some impact on unemployment in Scotland is to build more houses to provide employment for people in the construction industry who have been unemployed for such a long time?
    Mr. Millan: There has been a falling off in the number of housing applications coming from local authorities, partly because in a number of areas local authorities feel that the general demand for houses is a good deal less than it was two or three years ago. This is another area in which reductions in population and in the birth rate eventually work their way through into demand for housing. There has been a good deal of increase also in matters such as local authority
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    rehabilitation. I agree that there are particularly serious problems facing the construction industry, and I am meeting representatives from the industry, employers and trade unions, at a joint meeting on Friday this week.
    Mr. Younger: Is the Secretary of State aware that if every small business in Scotland took on one more employee the unemployment problem would be largely solved? In view of that, will he now take action to remove from the backs of small businesses some of the extra cost impositions that his Government have placed on them?
    Mr. Millan: I agree that small firms are very important in this area of unemployment, which is why this Government introduced the small firms subsidy.
    Mr. Alexander Wilson: Does my tight hon. Friend agree that the Opposition do not seem to accept the community industry scheme, the job creation scheme, the "swap a job" scheme and the youth scheme that the Government have instituted? These schemes have had a tremendous effect in Scotland, to the extent that the unemployment figures are down. Will my right hon. Friend continue those schemes and initiate further schemes, with extra money to help to reduce unemployment in Scotland?
    Mr. Millan: We are always willing to look at ideas for improving these job creation and employment protection schemes. They have had a considerable impact so far, but, of course. I would not exclude further development if we felt that this was necessary and if there were effective ways of creating jobs. I believe that it would be a great mistake to undervalue the tremendous impact that these schemes have already had.
    Mrs. Bain: Has the Scottish Office made any estimate of the implications of emigration and the return to school on unemployment and youth unemployment respectively? If the Chancellor of the Exchequer this afternoon does not come up with a guarantee that Scottish oil revenues will be apportioned to the Scottish Development Agency for job creation, will the Secretary of State give a guarantee that he will resign?
    Mr. Millan: There might be circumstances in which I would give a guarantee on that, but as far as I am aware they

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    have not arisen so far. On the first part of the question, the latest figures we have on migration in Scotland have been very favourable. At least in this particular economic crisis we have not been suffering the very high rates of migration that we suffered in earlier economic crises.
    Dr. Bray: If the Chancellor of the Exchequer makes additional funds available to local authorities for their building programmes to help employment in the construction industry, will my right hon. Friend continue to see that extra priority goes to areas of need, in particular to the Strathclyde Region?
    Mr. Millan: In what we have been doing in recent years in local authority programmes and in other ways, we have had special regard to the particular needs of urban areas, particularly the deprived areas. The most spectacular example of that has been the Glasgow East End project, but it is deliberate Government policy in urban aid and in other ways to direct resources to areas with the most need, which certainly includes many areas in west-central Scotland.

    Economic Situation
    Mr. Teddy Taylorasked the Secretary of State for Scotland if he will now publish a White Paper on the Scottish economy.
    Mr. Millan: I have no plans to do so.
    Mr. Taylor: Does not the Secretary of State feel that such a paper is required, since Scotland's unemployment position in the United Kingdom has been getting worse whereas up to the end of 1975 it was improving? Is he not concerned that in spite of what he said about unemployment figures, the figure for Scotland, seasonally adjusted, has shown an increase, against the national trend? Is he aware of the publication today by the Fraser of Allender Institute indicating that unemployment in Scotland will rise to over 200,000 in the new year? Is he not greatly concerned about Scotland's worsening relative position?
    Mr. Millan: I do not accept that there is a worsening of the relative position. The position on relative unemployment has been fairly constant in the current year and is immeasurably better than it was when we took over in February
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    1974. If we were showing the kind of figures that the hon. Gentleman's Government showed, we would certainly have well passed the 200,000 figure that he mentioned in his question.
    Mr. Donald Stewart: Does the Secretary of State accept that an effective and quick way of assisting the Scottish economy would be to abolish the levy on the self-employed imposed by the Tory Government in 1973? Does he have any plans to do so?
    Mr. Millan: I do not think I can comment on that.
    Mr. Russell Johnston: Remembering the famous National Plan for Scotland, may I ask whether the Secretary of State is saying that we will never see its like again?
    Mr. Millan: No, I would not necessarily say that. Who can tell?
    Mr. Taylor: Does not the Secretary of State accept that Scotland's relative position has in fact worsened in comparison with the position under the last Government? Will he remind the House of what unemployment was when he took over as Secretary of State?
    Mr. Millan: The unemployment relative is 132 now. In the fourth quarter of 1973, when the hon. Gentleman's Government were in power, it was 166.

    Industrial Investment
    Mr. Crawfordasked the Secretary of State for Scotland if he is satisfied with the current level of industrial investment in Scotland in the light of current levels of interest rates.
    Mr. Gregor MacKenzie: Interest rates have reduced dramatically during the last year from 15 per cent. to 5 per cent. and this will give an important boost to investment in Scotland. There are now signs that Government policies to promote a recovery in investment are succeeding, and the latest surveys suggest that there will be an increase in Scottish investment over the remainder of this year and in 1978.
    Mr. Crawford: Will the Minister give us a categorical assurance in respect of the Scottish steel industry—one of the most important industries in Scotland—that the capital investment programme

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    proposed in the Beswick Report will be carried out on schedule? If he cannot give that assurance, will he give some hope to steelworkers in Lanarkshire and Ayrshire by resigning?
    Mr. MacKenzie: My right hon. Friend the Secretary of State was invited to resign a few moments ago. I can only give the same reply as he gave, which is that the more the hon. Gentleman and his hon. Friends ask my right hon. Friend and myself to resign, the happier and more secure we feel in our jobs. My right hon. Friend dealt with the question of the steel industry a few moments ago. We are concerned about the position in Lanarkshire, as in all parts of the country, and we are discussing it with the BSC.
    Dr. Bray: Investment in the steel industry has gone ahead and is going according to plan. Is my right hon. Friend aware that all new investment in Ravenscraig is working to design outputs? Is he further aware that to achieve the full advantage of the investment which has been made further investment will be needed, and that the proposals for that are coming forward? May I ask him and his right hon. Friend to give them sympathetic attention?
    Mr. MacKenzie: The question of investment is one for the BSC in conjunction with my right hon. Friend in the Department of Industry. We for our part will indicate to those concerned with this decision-making process our attitude to and interest in Scotland's steel.
    Mr. Gordon Wilson: Many badly-needed jobs could be obtained if the Scottish Development Agency were able to invest in the service industry side. Is the Minister aware that it is unable to do that at the moment under the terms of the legislation? Is he further aware that the SDA is charging fairly high rates of interest, in some cases up to 14½ per cent.? Since the Bank Rate has declined, should not the SDA rates of interest also come down?
    Mr. MacKenzie: The present mood of confidence is, I believe, very encouraging. In recent months there have been announcements of substantial investment from concerns such as Nairn Floors, Ferranti and Cummins Engines, and this is all of considerable importance. The
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    SDA has made dramatic and large investments in some companies, and these have been of considerable importance to small companies based in the North of Scotland.
    Mr. Robert Hughes: Does my right hon. Friend agree that we have seen a remarkable ideological conversion this afternoon on the part of the SNP? Did he note that two supplementary questions from SNP Members have looked to the Government—in one case through the British Steel Corporation and in the other through the SDA—as the instrument to solve Scotland's economic difficulties? Will my right hon. Friend ask the SNP whether it does not therefore feel ashamed at having opposed nationalisation and opposed the setting up of the SDA?
    Mr. MacKenzie: I do not go as far as my hon. Friend in suggesting that there has been a remarkable conversion today. What we have heard today has been said by only a couple of SNP Members. What we shall hear next week from someone else in that party will be a different story altogether. It is clear that the SNP Members do not speak with one voice at all times.
    Mr. Teddy Taylor: In his travels around Scotland, has the right hon. Gentleman found any industrialist or trade union leader who takes the view that industrial investment in Scotland would improve if the SNP policy of separatism were implemented? Does he not think that fears of separatism might have contributed over the last 18 months to a worsening in Scotland's relative employment position from a level of 119 to the current 132, according to the Government's own figures, in spite of what the Secretary of State said a few moments ago?
    Mr. MacKenzie: The hon. Gentleman cannot get away from the facts which my right hon. Friend the Secretary of State gave him a few minutes ago. These are that unemployment relatively now and current wage levels in Scotland are a great deal better than when he and his colleagues were in office a few years ago. Perhaps I may answer the hon. Gentleman's first point. I have met the CBI, the STUC, the Scottish Council (Development and Industry) and, with my right hon. Friend, probably more industrialists

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    in Scotland than anyone else, and I cannot find anyone who thinks that separatism would be to the advantage of Scottish owners of industry or Scottish workers in it. When my right hon. Friend and I visited America recently, we found that potential inward investors surveyed the prospect of separatism with a great deal of gloom.
    Mr. Speaker: Order. Perhaps now that we have finished with that Question we can have shorter questions and answers.

    Housing
    Mr. Buchananasked the Secretary of State for Scotland what representations he has received concerning the Green Paper "Scottish Housing, a Consultative Document", Command Paper No. 6852; and if he will make a statement.
    The Under-Secretary of State for Scotland (Mr. Hugh D. Brown): So far, 22 organisations and two individuals have submitted comments on the Green Paper on Scottish housing (Cmnd. 6852), and several other organisations which were unable to meet the target date of 1st October are expected to comment within the next few weeks. In addition, I have had discussions with representatives of the Convention of Scottish Local Authorities and of the Scottish Trades Union Congress; and I shall shortly be taking part in a number of housing conferences at which the Green Paper will be discussed.
    Some time will be needed to take stock of the comments, and I cannot yet make a comprehensive statement. My right hon. Friend will inform Parliament of the outcome of the consultations in due course.
    Mr. Buchanan: In case the preservation of desirable tenement houses in multi-ownership may not have been included in submissions, will my hon. Friend take positive steps to ensure that such houses as are in the Dennistoun part of my constituency and are adjacent to city centres are not allowed to deteriorate and decay?
    Mr. Brown: Yes. This is one of the fundamental aspects of the Green Paper, and it is certainly one to which we attach importance in Dennistoun. Dennistoun is
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    in two parts, although I had better not describe them in more detail. However, there are four housing action areas in the southern part. The streets that my hon. Friend and I know so well should be a matter for local initiative for rehabilitation and environmental improvement. I am satisfied that the money and resources are there. All we need is the effort.
    Mr. David Steel: Do the Government still have a target date for all houses in Scotland reaching a tolerable standard? If I am right in suspecting that the programme of house improvement has slowed down, will the Government give it a stimulus during the current year, both for its own sake and to reduce unemployment in the construction industry?
    Mr. Brown: I entirely agree. It is a matter for concern that there are still too many sub-tolerable houses in Scotland. The main problems are in the two major cities, but the authorities in Edinburgh and Glasgow are making substantial and considerable efforts. Sad to say, it is the country authorities that are lagging behind because of peculiar difficulties. I have had discussions with them, and we may be able to improve matters in any legislation that might be forthcoming from the Green Paper.
    Mr. McCartney: Is the Minister aware that, because of the division of responsibilities between regional and district authorities, there have been obstructions and delays involving two essential projects? Is he further aware that Strathclyde Regional Council and Clydebank District Council may be in conflict over the provision of new housing stock? Will he inquire into this?
    Mr. Brown: I am concerned about any delays arising out of difficulties between regional and district authorities, but I am not aware of any specific problem affecting Clydebank. Strathclyde Regional Council has been most helpful with its regional plan, but if there is any particular problems I shall be delighted to look into them.
    Mr. Welsh: Which political parties—in addition to the Scottish National Party—have made official representations about the Green Paper? What timetable exists for turning the Green Paper into a White Paper so that action may be taken?
    Mr. Brown: The Scottish National Party has submitted representations, but they are not very inspiring. However, I am not surprised about that. There have been representations from various bodies, including the Saltcoats Labour Party, various housing associations and local authorities. All the representations will be considered and we have extended the deadline to the end of next month. I repeat that the Scottish National Party did not strike me as having submitted anything imaginative.
    Mr. Younger: As a number of district housing authorities have submitted their own housing plans to the Minister, will the Government stop shilly-shallying and give permission for the sale of council houses to tenants who wish to buy?
    Mr. Brown: I watched the Tory Party Conference on television and noted the commitment given by the Tory Party about the sale of council houses. However, I am surprised that the hon. Member for Ayr (Mr. Younger) has raised this matter. He knows better than anyone else on his side that the sale of council houses is not a priority in solving Scotland's housing problems.

    Hospitals (Geriatric Beds)
    Mr. Russell Johnstonasked the Secretary of State for Scotland what proposals he has to increase the provision of geriatric beds in Scotland.
    Mr. Harry Ewing: The programme of major hospital building projects announced by my right hon. Friend on 2nd May 1977 will provide for approximately 450 additional geriatric beds in Scotland. The major programme also makes provision for some 1,000 geriatric beds to replace existing facilities. Health boards finance from their own capital resources smaller schemes which will also provide new and replacement beds.
    Mr. Johnston: Since financial circumstances are stretched, would it not be a good thing for the Secretary of State to encourage local authorities to expand home help services as a means of alleviating pressure on homes and geriatric provision, given that the Strathclyde survey last year showed that one could provide six home helps for two hours a day, seven days a week, for the cost of one geriatric bed?
    Mr. Ewing: In Scotland the pattern has traditionally been that we care for our old people in hospitals. That is why we have 15 hospital beds per thousand of the population in Scotland compared with 10 per thousand in England and Wales. This is a matter of balance between community back-up facilities and hospital facilities. I can assure the hon. Gentleman that we are constantly considering the matter.
    Miss Harvie Anderson: Will the Minister ask for a report on the situation at Mearnskirk Hospital, where good temporary accommodation is about to be affected? Is the Minister aware that if that accommodation were left standing it could, since staff are available, be immediately translated into geriatric accommodation?
    Mr. Ewing: In Scotland there are 147·7 hospital beds per thousand population. We are extremely near the target level, and in some areas, once the new capital building programme has been completed, we shall be in excess of that target. However, I take note of the right hon. Lady's proposition and I shall look at it, but I cannot hold out any great hopes or firm commitment.
    Mr. Alexander Wilson: If the Minister accepts the proposals to increase the provision of geriatric beds in Scotland, will he give priority to the ailing members and policies of the Liberal Party?
    Mr. Ewing: I take note of that.
    Mrs. Bain: How much do the Government plan to spend on day care facilities for geriatric patients?
    Mr. Ewing: We have asked area health boards—and we are getting a good response from them—to switch resources from the acute side of medicine, without necessarily running it down, and to give greater priority to long-stay geriatric and psycho-geriatric patients and mental deficiency hospitals. Those are top priority, and we have asked area health boards to take account of that policy.

    Regional Employment Premium
    Mr. Gordon Wilsonasked the Secretary of State for Scotland what surveys he has carried out to assess the

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    effects of withdrawal of regional employment premium on employment in Scotland.
    Mr. Gregor MacKenzie: It is not practicable to isolate precisely the effects of the withdrawal of REP, but the Government are confident that the employment-creating measures now in operation will have a greater effect in relieving the present high level of unemployment. Obviously, we keep the general employment situation in Scotland constantly under review.
    Mr. Wilson: Is the Minister aware that the Government must have been playing blind man's bluff with the Scottish economy? Does he realise that the figures have been isolated by the Scottish CBI, which estimates a loss of 10,000 jobs, and that the Cambridge Institute of Applied Economics estimates a loss of about 14,000 jobs? Considering that the figures are fairly close, was it not disastrous that the regional employment premium was removed? Will the Minister ask the Chancellor of the Exchequer to restore it forthwith?
    Mr. MacKenzie: We have all seen many estimates about this, but many of them are "guesstimates". We took the decision that we should employ this money in better ways on the temporary employment subsidy, the job creation programme and the sectoral schemes for industry. Scotland in now benefiting considerably from that.
    Mr. Craigen: Does the Minister know to what extent the temporary employment subsidy has been used by firms to offset the loss of regional employment premium? As for the number of unemployed young people, now that the Scottish Office has taken over special responsibilities for the Manpower Services Commission will the Government have urgent talks with those involved with apprenticeship schemes with a view to trying to prevent the decline in apprenticeship opportunities in the Clyde-side area?
    Mr. MacKenzie: We have taken over responsibility for the Manpower Services Commission in Scotland. I met the Careers Advisory Council on Monday and the matter was discussed then. The temporary employment subsidy is a matter for the Secretary of State for Employ-
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    ment, but there certainly have been cases in Scotland, when appropriate, in which this has been taken up.
    Mr. Younger: Have the Government learnt the lesson that the most objectionable thing about the withdrawal of REP was the lack of notice given to industry? Have they learnt that no business can run in that way, and will they see that it does not happen again?
    Mr. MacKenzie: The hon. Gentleman has a terrible nerve to ask questions about REP from his side of the House. If the Conservatives had had their way, there would have been no REP at all.

    Community Service
    Mr. David Steelasked the Secretary of State for Scotland if he will bring forward proposals to change the law to enable sentences of community service to be imposed by Scottish courts.
    Mr. Millan: As I said in my reply to the hon. Member for Edinburgh, Pent-lands (Mr. Rifkind) on 27th April 1977, an experiment in community service as a condition of a probation order is going ahead in four regions of Scotland without the need for legislative changes. I am now looking at the possibility of introducing community service in Scotland as a disposal in its own right.
    Mr. Steel: I welcome that answer. I am aware of the experiment, but does not the right hon. Gentleman agree that it is unfortunate that in Scotland, unlike in England, there is no statutory power for the courts to make community service part of the punishment in a sentence?
    Mr. Millan: I agree. We are doing what we can without legislative changes, but I look forward to the opportunity of putting the law on this matter beyond any possible doubt.

    Devolution
    Mr. Tim Rentonasked the Secretary of State for Scotland what further consultations he has had with industrial bodies in Scotland regarding the Government's new plans for Scottish devolution.
    Mr. Gregor MacKenzie: Industrial interests in Scotland have been fully consulted in the course of preparation of the Government's devolution proposals. No

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    requests for further consultation have been received recently.
    Mr. Renton: Did any Government Minister consult the Scottish CBI during the Summer Recess for its views on Scottish devolution? If my understanding that no Government Minister did so is correct, are the Government so blinded and prejudiced by preconceived ideas that they are not ready to seek the advice of any Scottish experts who are opposed to their views?
    Mr. MacKenzie: The hon. Gentleman has been totally misinformed. I met the Scottish CBI not many weeks ago. I am conscious that some of its members do not go all the way with us on devolution, but there are many industrialists in Scotland, including the members of the Scottish Council (Development and Industry), who are fully seized of the opportunities that devolution will bring.
    Scottish industrialists do not understand a word of the Opposition's proposals for devolution as reported in the Press, even after having met the official Opposition spokesman. Scottish industrialists, whether in the CBI or the Scottish Council, are not in favour of any form of separatism. They favour what is included in our proposals—the preservation of the industrial integrity of the United Kingdom.
    Mr. Alexander Wilson: Does my right hon. Friend accept that it is not so important to discuss devolution proposals with Scottish industrialists, who in the main have been found lacking as regards investing in Scottish industry, but that it is very important to discuss the problems of devolution with the Scottish people?
    Mr. MacKenzie: We have been doing exactly that. We have talked to the Scottish Trades Union Congress and many other people in Scotland. As has been indicated by Ministers who are concerned with this problem, we shall present the matter to the Scottish people.
    Mr. Crawford: May I suggest that the hon. Member for Mid-Sussex (Mr. Renton) should consult the hon. Member for Glasgow, Cathcart (Mr. Taylor) and ask him whether he consulted industrialists in Scotland before he wrote his October 1974 election address, in which he said that he wished for a Scottish Assembly with economic powers?
    Mr. MacKenzie: I do not know whose responsibility it is, but it is not mine.

    SCOTTISH COURTS
    Mr. Canavanasked the Lord Advocate when he next expects to make an official visit to a Scottish court.
    The Lord Advocate (Mr. Ronald King Murray): During the Summer Recess I visited the sheriff courts at Glasgow, Linlithgow, Perth and Elgin. I have plans for further official visits in the near future.
    Mr. Canavan: Before his next court visit, will my right hon. and learned Friend consider amending the existing court procedure which allows a Crown Counsel and a policeman to make unfounded allegations about an innocent witness without giving him the opportunity of defending himself or clearing his name? Is my right hon. and learned Friend aware that this anomaly in Scots law has caused considerable distress to my constituent Mr. Edward Topalian?
    The Lord Advocate: My hon. Friend has made some criticisms of present procedures which have to be taken in the context that it would be quite wrong to allow any artificial doctrines to interfere with the overriding public interest in criminal trials being fairly and properly conducted. If my hon. Friend has in mind the matter about which he wrote to me, I must tell him that this is now the subject of an appeal which has been lodged and is accordingly sub judice. I do not think that I should comment on it.
    Mr. Gordon Wilson: Will the right hon. and learned Gentleman visit the Dundee Sheriff Court and particularly the office of the Deputy Crown Agent, who has been there for several months, and indicate what action is likely to be taken on the intensive investigations carried out in Dundee under the supervision of the Deputy Crown Agent?
    The Lord Advocate: The Deputy Crown Agent is no longer in Dundee, and the report on the matter to which the hon. Gentleman refers is being considered by Crown Counsel. As the report runs to 18 volumes, its assessment will take some time.
    Mr. Teddy Taylorasked the Lord Advocate what progress he has made in easing the congestion in the courts in Glasgow.
    The Lord Advocate: On 18th August 1977 I made an official visit to Glasgow and talked with many of those concerned with the administration of the courts there. As a result of this, certain matters are currently being looked at. The staff of the Procurator-Fiscal at Glasgow is now at the full complement presently permitted.
    Mr. Taylor: Does the Lord Advocate agree, following his visit, that conditions in the Glasgow Sheriff Court are deplorable and that the staff and the buildings are unable to cope with the increase in crime that has taken place? Can he say whether the conditions in which the staff have to work are consistent with the Offices, Shops and Railway Premises Act? Is he not greatly concerned about the six-month delay in dealing with summary cases? Is he satisfied that the conditions for witnesses, both for the defence and for the prosecution, who have to sit together in appalling conditions are conducive to justice?
    The Lord Advocate: I should require notice of the hon. Gentleman's first question, though I do not think that it would be proper for him to put it to me. In regard to the general question of accommodation, I agree that this is a most important matter. As regards delays in the administration of justice in the Glasgow Sheriff Court and the district courts, although these are not subject to the same delays, the problem is caused by the shortage of courtroom accommodation. This is a matter for my right hon. Friend the Secretary of State for Scotland, and he is planning early additions to the accommodation.
    Mr. Lipton: Would it not help to ease congestion in the courts in Glasgow if there were less criminality in Cathcart?
    The Lord Advocate: If there were a lower rate of crime in the whole of Scotland, it would be to the public advantage.
    Lord James Douglas-Hamilton: Is the Lord Advocate aware of the considerable dissatisfaction of many procurators-fiscal in Glasgow with the overload of work that they are given and the inadequate accommodation in the sheriff court? Will he look at this matter in depth and sympathetically?
    The Lord Advocate: Yes.

    COMPENSATION IN CRIMINAL CASES
    Mr. Sproatasked the Lord Advocate what consultation he has had regarding the recommendations of the Dunpark Committee.
    The Lord Advocate: A wide range of bodies representing the legal profession, police, prisons, courts, universities and civic, social, consumer and commercial interests, as well as those individuals who gave evidence to the Committee, have been invited by the Scottish Home and Health Department on behalf of my right hon. Friend the Secretary of State for Scotland and myself to submit views on the Committee's recommendations by the end of January 1978.
    Mr. Sproat: Does the right hon. and learned Gentleman agree that the Committee's proposals to make the criminal compensate the victim are long overdue in Scotland? Is he aware of the widespread feeling that a disproportionate amount of attention has been paid to the problems of the criminal and not enough to the victim? Can he give an estimated date when the Dunpark Committee's proposals may become operative?
    The Lord Advocate: I am unable to give any precise date in reply to the last part of the hon. Gentleman's question. In regard to his broader observations, I agree that the recommendations help to strike a better balance between the victim and the convicted criminal. The proposed changes are broadly in line with those operating south of the border.

ECONOMIC SITUATION
3.30 p.m.
The Chancellor of the Exchequer (Mr. Denis Healey): With permission, Mr. Speaker, I wish to make a statement.
Since the House debated the economic situation in July, the improvement in our financial position has been greatly strengthened. Confidence in Britain's future has been powerfully reinforced both at home and abroad. As a result we are now in a position to take further measures to improve the outlook for employment and to bring the growth of output on to its intended path.
It is now clear that both in the United Kingdom and in the world as a whole the recovery in demand and activity is weaker than was expected in the summer. The latest meetings of the International Monetary Fund and of the Finance Council of the European Community have agreed that the industrialised world should take steps to stimulate demand and that Britain is in a position to join in this collective effort.
The Government have made it clear that they aim at a steady and sustained expansion and are determined to avoid the risk of over-heating the economy with the damaging consequences for growth, inflation and the balance of payments which we saw four years ago. For this reason the decisions I shall now announce are part of a programme for economic expansion spreading over 18 months. Our main objective must be a continuing fall in the level of unemployment. In framing measures to this end the Government have been guided by four main considerations. The measures should be quick-acting, they should reinforce the attack on inflation and assist the industrial strategy, they should be fully consistent with our financial commitments for the current year and they should run no risk of over-extending our finances in 1978–79 or of unnecessarily prejudicing the possibility of further measures in the next spring Budget.
Our basic economic strategy remains as I described it in my March Budget. I now see scope for measures within the framework of that strategy costing a little over £1 billion in the current year and £2 billion in the next financial year.

Income Tax
First, measures affecting the next financial year 1978–79. The House decided this summer to commit the Government to increasing personal tax allowances each spring in line with the rate of price increase over the previous calendar year unless they sought explicit permission to do otherwise.
I believe it is right that we should not seek to waive this requirement in the coming year. The Government therefore plan to raise tax thresholds for the next financial year as laid down in the Finance Act 1977. This is likely to require a 12 per cent. increase in personal allowances above the level set by the 1977 Finance Act, at a cost of around £1,200 million in a full year.

Public Expenditure
In the summer the Government announced very substantial increases in child benefits for the coming year, measures to implement the Holland Committee's proposals on manpower and training, and a major increase in the number of children eligible for free school meals; together these increases in public expenditure will cost some £475 million at 1977 Survey prices.
The Government recognise that exceptional difficulties are now faced by the construction industry. They have therefore decided to increase expenditure next year on construction by the central Government and local authorities by £400 million at Survey prices over and above the existing plans. The allocation of this additional amount between different programmes will be announced as soon as possible. The full effect of this decision will be to increase employment by some 30,000.
The Government have also decided on certain smaller increases in public expenditure programmes for next year. They are increasing the overseas aid programme by £20 million. They are increasing the law and order programme by £9 million to provide additional resources for police cadets, civilian support, police vehicles and equipment, and also for the prisons and the community service schemes. There will be additional provision in the social field to help the disabled by a further increase in mobility allowance next year

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and to ease the strain on hard-pressed health authorities. There will be provision to enable schools to take on some more teachers to meet the needs of children in deprived areas and for small additions to the budgets for science and the arts. Allowing for these decisions and the measures announced in the summer, public expenditure next year is being increased by £1 billion at 1977 Survey prices.
The Public Expenditure Survey will be completed and the usual White Paper published around the turn of the year. This will also incorporate any further adjustments in the expenditure figures, such as any changes resulting from discussions with the banks about the refinancing of export and shipbuilding credits.

Possible Furthur Measures Next Year
Beyond these decisions on income tax and public expenditure in 1978–79 I have left myself freedom to make further changes in the 1978 Budget according to developments in the economy, and particularly the prospect for inflation. If economic and financial circumstances permit, I intend to make some further reduction in the burden of personal taxation. For example, as I explained in my Budget Statement last March, there is a strong case for reducing the poverty flap by progressively raising the personal tax thresholds until they stand clear above the levels of the main social security benefits. There is also a strong case for introducing a reduced rate band of tax.
However, there can at this stage be no assurance that the economic situation will in fact permit a further net reduction in taxation, over and above the major reliefs which I am announcing this afternoon. The scope for any further move in this direction—and a reduced rate band of tax, in particular, could be very expensive—will depend crucially on the development of the economy between now and next April, and above all on the trend of pay settlements, measured against the Government's guidelines.

IMF Standby
I now turn to certain aspects of our overseas financial position. In our present circumstances it would clearly be wrong for us to take up any further drawings
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on our standby with the IMF. We shall therefore not take up at the end of November the 310 million special drawing rights which then become available. The Managing Director of the IMF has been informed of this decision. Our full drawing rights under the standby will, of course, remain intact. We intend to keep the standby in place until its expiry at the end of next year, and mid-term discussions with the IMF on our economic strategy will shortly be taking place as envisaged in our Letter of Intent.

Exchange Control
The change in our financial situation also makes possible some adjustments in exchange control. First, I am making certain changes intended to help maintain or increase the overseas earnings of the financial services sector. For this purpose I am relaxing somewhat the rules governing the amounts which insurance companies, banks and merchants are allowed to retain in foreign currency for the purpose of their businesses.
Secondly, I am further liberalising the rules permitting non-resident controlled manufacturing companies to borrow sterling for investment in their business in the United Kingdom.
Thirdly, I have decided to relate more closely to current money values the rules governing travel abroad, cash gifts and the basic allowances for emigrants. For example, the foreign currency facilities which can be obtained from authorised sources without reference to the Bank of England are being increased from £300 to £500 per journey for holiday travel and from £75 to £100 a day within a £3,000 maximum for business journeys. Details are contained in a Treasury Press notice which is being issued today.

Small Firms
As the House knows, my right hon. Friends the Chancellor of the Duchy of Lancaster and the Chief Secretary and my hon. Friend the Under-Secretary of State for Industry—the hon. Member for Keighley (Mr. Cryer)—have been studying the problems of small firms. This study is still continuing, but I am now able to announce its first conclusions—mainly but not exclusively for changes in taxation.
It is argued that the taxation of business transfers is an inhibition on the growth of small firms. The 30 per cent. business relief for capital transfer tax will therefore be increased to 50 per cent. and it will be extended to deferred charges on forestry. There will also be a relief of 20 per cent. for minority holdings in unquoted companies. These additional reliefs will be limited to transfers of up to £500,000. I have also decided to increase the threshold for liability to capital transfer tax from £15,000 to £25,000. These changes will apply to transfers after today. The total cost will be £10 million in the current year, £65 million next year and £100 million in a full year.
To encourage business men to retain their profits in the business, I have decided to increase the threshold for the apportionment of trading income of close companies to £25,000. This will cost up to £5 million next year and £20 million in a full year.
The Government will also be considering before next year's Finance Bill certain further tax changes which could be of substantial help to small firms.
Very briefly, there are two proposals to encourage new businesses—the possibility of carrying back losses in the early years of an unincorporated business to set against the owner's other income in earlier years; and allowing relief from capital gains tax where a loss is made on a loan to a business. Then there is the possibility of tax facilities to help farmers and perhaps other unincorporated businesses plan their investment programmes.
In addition, the Chancellor of the Duchy of Lancaster will be announcing a number of other measures costing about £500,000 for the current year and £2½ million next year, which will help smaller firms to increase investment and employment.
Further details of the improvements in the treatment of small firms are set out in a Press statement by my right hon. Friend the Chancellor of the Duchy of Lancaster: copies of that and other Press notices are available in the Vote Office.
I now turn to my fiscal proposals for the current year 1977–78.

Tax
We can now be confident of substantial headroom below the ceiling which I set for the PSBR this year. It is important that we should take advantage of this headroom by measures which are quick acting and which have a maximum effect in bringing unemployment down as soon as possible. The measures should also, if possible, reinforce our attack on inflation and our commitment to the industrial strategy. This points strongly to the speediest possible reduction in income tax.
I have therefore decided to bring forward the 12 per cent. increase in the main personal income tax allowances which I have just undertaken to make next April in accordance with the Finance Act 1977 and to implement it straight away. The Inland Revenue is making a major effort in order to make possible this further cut in income tax for the current year. I wish to place on record my appreciation to all the hard-pressed staff concerned.
In order to make room for the additional work the Government have decided to exempt from tax for the current year, 1977–78, only the increase in National Insurance pensions and in other social security benefits which will come into effect next month. The cost of this will be £40 million.
This further raising of tax thresholds means that the single personal allowance will be increased by £100 to £945; the married allowance will be increased by £160 to £1,455; there will be a consequential increase to £510 in the additional personal allowance; and there will be a similar percentage increase to new totals of £1,250 for the single age allowance and £1,975 for the married age allowance. These reliefs will have effect in the normal way from the beginning of the present fiscal year. The cost will be £940 million in the current year.
These further increases in personal allowances will take around 900,000 people out of tax altogether. This is in addition to the 1,200,000 people already taken out of tax by this year's Finance Act.
I hope that it will be possible for most wage earners to receive the benefit of these reliefs in their first pay packet after 22nd

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November, and for the remainder in their first pay packet after 6th December.
Thus, most people can expect to receive a tax rebate in their pay packet before Christmas of some £20 for a single person and £35 for a married man. Thereafter, the relief will be worth approximately 65p a week for a single person paying basic rate tax, and £1.05 for a married man.
Further details of these measures are included in Press notices being issued today.
These reliefs will represent a significant further addition to take-home pay in the current pay round. For a married man on average earnings they will be the equivalent of an addition of £1.74, or nearly 2¼ per cent., to his weekly gross pay. When we add in the effect of the tax reliefs in my spring Budget, this figure rises to the gross equivalent of some £5 per week, or nearly 61 per cent. This is, of course, in addition to the 10 per cent. average increase in gross earnings which is provided for under the Government's pay guidelines.
The overall total of some 16½ percent. contrasts with an increase in retail prices which is now well on course for single figures in the first half of next year. It therefore means some increase in living standards in the current pay round. I look to those responsible on both sides of the negotiating table to give full weight to these considerations in reaching settlements during the remainder of the round.

Help for Pensioners
I do not think it is right at a time when working people as a whole are receiving a cash rebate on this scale before Christmas to do nothing similar for those who have retired. The 2½ million pensioners who now pay tax will, of course, benefit from the measures I have already announced. However, the majority of pensioners do not pay tax. The Government have therefore decided to pay a special tax-free bonus of £10 to pensioners in the week beginning 5th December. The cost of £100 million will be met from the contingency reserve.
Procedure
The Government will introduce early in the next Session a Finance Bill and the necessary Resolutions to implement the proposed tax reliefs for the current financial year. The proposed reliefs for capital transfer tax and other changes affecting small firms will be provided for in the Finance Bill following the spring 1978 Budget.

The Economic Prospect
These measures will raise the public sector borrowing requirement to a figure now estimated at some £7½ billion in the current year and to about £7 billion in 1978–79. Both these figures are within the Government's ceiling. They are consistent with keeping growth of the monetary aggregates in the current year within our financial commitments and with a similarly firm control of monetary growth in 1978–79.
The measures are estimated to raise domestic output by about ½ percent. in the first quarter of 1978, rising to about 1 per cent. in the first quarter of 1979. On the conventional arithmetic, this could produce an increase in employment in these quarters of 30,000 and 170,000 respectively and lead to a reduction in unemployment, compared with what it would otherwise have been, of some 20,000 and 110,000 respectively.
But I have to say again that the prospects for the economy as a whole depend crucially on what happens to inflation. I am publishing today a further half-yearly economic forecast as provided under the Industry Act 1975. This forecast assumes an average earnings growth of 10 per cent. in the current pay round, consistent with the Government's guidelines. On this critical assumption, the growth of domestic output could strengthen significantly over the next 12 months to a figure in the region of 3½ per cent. Growth at this rate would be rather above the trend growth of productive potential.
As the House will know, the timing and scale of unemployment movements have proved extremely difficult to predict—witness the encouraging figures published yesterday. But growth at this rate, if we can sustain and build on it, will

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turn the trend of unemployment firmly downwards.
Within this overall rate of growth, there should be a considerable recovery in real take-home pay and personal consumption. The rate of price increases could continue to fall to a level by the end of next year not far above that of our main competitors.
By contrast, however, if pay settlements edge up towards, say, 15 per cent. and the rate of inflation moves back into double figures, we are likely to be faced not only with slower growth next year but also with less scope for fiscal relaxation. Thus we are now at a turning point. If we falter now we can lose the ground that we have gained in the last 12 months and find ourselves once more wrestling with high inflation, slow growth and rising unemployment.
I believe that the measures which I have announced this afternoon will help the British people to choose instead a better course—to build on the gains that they have already won and to achieve a sustained reduction in inflation together with a steady growth in jobs, in output and in living standards.
Sir G. Howe: The whole House will welcome the improvements in the basic financial indicators of which the Chancellor of the Exchequer spoke. The House will be prepared to give much credit for them to the stabilisation programme on which the Government embarked in the last year under the tutelage and guidance of the International Monetary Fund.
We have heard the Chancellor of the Exchequer deliver his twelfth Budget in a short time, speak yet again about the economy being at a turning point, and make optimistic predictions for inflation and unemployment next year. We certainly hope that he is right, but we shall be prepared to judge him by results rather than by his forecasts.
We welcome the extent to which the Chancellor feels able to move towards substantial cuts in direct taxation. That is because we, unlike members of the Labour Party, like cuts in direct personal taxes. We shall be watching with care to ensure that the Government's forecast borrowing requirements are in line with the requirements of the International Monetary Fund, because the conquest of
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inflation, which would be jeopardised by any wrong movement in that direction, remains far and away the most important contribution that the British economy can make towards restoring the health of the world economy. We shall have an opportunity to discuss these matters further in the days ahead.
We welcome the impact on the Chancellor of the Exchequer of the Chancellor of the Duchy of Lancaster, because it must have been his advice that led the Chancellor of the Exchequer now, so late in the day, to begin reversing the disastrous effect of capital transfer tax and other measures on small businesses.
We also welcome the Chancellor's decision to bring additional help to the construction industry. However, 30,000 new jobs represents one-tenth of the present rate of unemployment in that industry. The Chancellor has a long way to go to correct the mistakes which he made in choosing to prefer the bureaucracy to the building industry when making the cuts last year.
I turn to the distribution of the increases in expenditure. We are concerned that the increase in expenditure on overseas aid is more than twice the increase in expenditure on the police and law and order.
We welcome the extent to which the Chancellor of the Exchequer has been able to go in restoring the real value of tax thresholds, but he has still a substantial way to go towards restoring them to the levels of 1973. Many thousands of millions of pounds are needed to reduce the real rate of taxation to that level.
I hope that the Chancellor will take account of the need to begin lightening the burden of tax represented by the standard rate. It is still oppressively high on the skilled workers and managers upon whom the country's wealth and prosperity depends.
This is a Budget of repentance—repentance on a massive scale. It will do more to convince the House that the Government are preparing reluctantly to face their judgment at the hands of the people than that the high-tax Socialist Party has, in reality, changed its spots.
Mr. Healey: First, I thank the right hon. and learned Member for Surrey, East (Sir G. Howe) for welcoming the

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decisions I have announced, although I think that his welcome would have carried more conviction had he not looked so glum and miserable. The right hon. and learned Gentleman attributed the success of the Government in restoring our financial position to the stabilisation programme that we adopted last December. However, the right hon. and learned Gentleman attacked that programme violently at the time as being totally inadequate. The Leader of the Opposition went on attacking it and, in the United States this summer, she attacked the IMF for being far too lenient with us.
I know that the Chancellor of the Duchy of Lancaster will be grateful for the tribute that the right hon. and learned Gentleman paid to him. Without revealing Cabinet secrets, I can say that the credit for these measures should be shared equally between the Chancellor of the Duchy and my right hon. Friend the Chief Secretary to the Treasury.
I am a little confused, but I believe that I understand the general trend of the final paragraph of the right hon. and learned Gentleman's obituary. He seemed to be asking for bigger cuts in public expenditure and then complaining about the cuts. He seemed to be asking for bigger cuts in taxation and then worrying about whether the money supply could be kept under proper control.
The right hon. and learned Gentleman said that it was a Budget of repentance, but it is a Budget of reward for the sacrifices made by the people over the past few years. It seals the victory for this Government in liquidating the legacy that they found when taking office.
Mr. Pardoe: Does the Chancellor of the Exchequer recognise that his statement brings the Government halfway to sanity? Does he realise that this will be a matter of regret to the Conservative Opposition?
I give an unreserved welcome to his announcements, particularly that relating to small businesses. One cannot but marvel at the astonishing transformation in the attitude of Whitehall in the last six months to the problems of small businesses. The Chancellor of the Duchy of Lancaster has fully justified the trust we placed in him.
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May I ask the Chancellor of the Exchequer to say something about the external position of the British economy—particularly in relation to our exports—and about the Government's policy relating to the future exchange rate of the pound?
Mr. Healey: If anything were needed to complete my satisfaction over the improvement in the nation's economy it is the knowledge, on which I can now securely rest, that I have justified the trust of the hon. Member for Cornwall, North (Mr. Pardoe). As for the exchange rate, it is, as we have stated on many occasions, the Government's policy to maintain the stability of the pound approximately at its present level.
Mrs. Castle: Is the Chancellor telling us that, despite the measures of reflation which we welcome, he is still prepared only to increase child benefit next April by £300 million? If that is so, can be justify this neglect of the nation's children at a time when, in this year alone, he is spending over £2 billion on increasing the personal allowances for the single man and the childless couple?
Mr. Healey: I appreciate my right hon. Friend's strong feelings on the matter of child benefits, but she will be aware that last July we did a great deal to help children in poor families by the prolongation of the milk subsidy and by the large increase in the number of children eligible for free school meals. While there is a strong case for increasing child benefits when we can afford to do so, my right hon. Friend must accept—I know that she understands this—that only 15 per cent. of the total amount of money disbursed in child benefits goes to the poorest 20 per cent. of families. This is essentially a measure of help for people with children at every level of income. It is not a very effective measure for helping poor families.
Mr. Powell: The right hon. Gentleman has announced that in the current year he intends to transfer about £1,000 million from taxation to borrowing. Has he made any estimate of the purposes to which those resources would otherwise have been devoted?
Mr. Healey: One of my disappointments, and I hope that it is a disappointment for the whole House, is that there

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is at the moment an enormous amount of cash in businesses and, in the banking system, available to businesses. I hope that the right hon. Gentleman deplores as much as I do the failure of business so far to use this money in stimulating investment, and the failure of business to fulfil its declared intentions to increase investment, intentions published both by the CBI and in Government surveys earlier in the year. I can assure the right hon. Gentleman that there will be plenty of monetary room left in the economy for substantial and badly needed increases in investment after these measures.
Mr. Heffer: Is my right hon. Friend aware that his statement will be generally welcomed by all Labour Members? Is he further aware, however, that some of us will be marginally disappointed about the aid to the construction industry, which is not to come forward until April next year? Does my right hon. Friend appreciate that some of us had hoped that there would be a massive injection of aid for the construction industry? I ask him, even at this late stage, to think again on this point. We need assistance now, not next year.
Mr. Healey: I am grateful for my hon. Friend's earlier remarks. The measures I have announced will be welcomed in all sections of the movement which he and I have the honour to represent. I know that there will be disappointment in various parts of the country and the Labour movement that we have not been able to do more in certain areas. We allocated an extra £100 million for construction in the July measures, to be spent during the current financial year. It takes quite a long time for this type of authorisation to be reflected in actual disbursements of money for doing construction work. Some of that money has still to be fully allocated. One of the reasons why I have given this big increase in money for construction next year is to provide local authorities and Government Departments concerned with plenty of time to prepare plans so that it will be possible to start spending the money as soon as the next financial year begins.
Sir David Renton: How does the Chancellor justify the payment of £20 million on overseas aid at a time when
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our National Health Service is being kept short of funds and when, in those counties which were given insufficient help under the rate support grant, serious slashes in educational services are having to be made? Will the right hon. Gentleman bear in mind the needs of education and the health service in his future programme?
Mr. Healey: The education services will be receiving about £10 million under these measures, to spend next year. The Department of Health and Social Security will be getting £20 million to £25 million, much of which will be spent in the health service. I deplore the right hon. and learned Gentleman's remarks about the increase in overseas aid. We on the Labour Benches felt that it was one of the most unfortunate consequences of the situation in which we found ourselves last year that we had to make a substantial cut in the aid budget. I regret that the increase we are now announcing is not sufficient to make good that cut, but I believe that the great majority of British people will recognise that assistance from Britain to countries whose peoples are far worse off than we are is not only morally justified but has great political and economic value.
Mr. Cronin: Does my right hon Friend agree, after hearing the lugubrious and rather envious comments of the right hon. and learned Member for Surrey, East (Sir G. Howe), that to make a Budget Statement without hearing those comments is rather like playing Hamlet without the first grave digger? While congratulating my right hon. Friend on his excellent measures, may I ask him to consider what action can be taken to increase investment by large firms, bearing in mind that small firms represent a small part of the total amount of industry?
Mr. Healey: I must confess that listening to the right hon. and learned Member for Surrey, East (Sir G. Howe), and hearing him trumpet the call to arms for a General Election, I could not help feeling that his trumpet had an uncertain, wavering sound. As for the question of investment by large firms, some large firms have already announced, and begun to carry out, substantial investment programmes. Imperial Chemical Industries is a good example. The general level

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of investment is far too low. I referred to that in my Mansion House speech last week. I believe that as confidence, which is already at an all-time high in other parts of the world, seeps through into all areas of our own economy we shall find business men reflecting that confidence in increased investment, particularly since I think they are coming to recognise that the continuing flow of North Sea oil will enable this country to maintain a sustained pressure of demand for many years to come without being subject, as was often the case in the past, to a stop-go policy.
Mr. Crawford: While I suppose that we must be grateful for small mercies, may I ask whether the Chancellor is aware that his Budget does not contain nearly enough for Scotland? Is he further aware that yesterday's Scottish unemployment figures and the continuing social deprivation in Scotland show that Scotland has become the only country to have discovered oil in her waters and become poorer for it? Does the right hon. Gentleman realise that the use of Scottish oil to fuel this mini-Budget represents one of the biggest rip-offs of Scottish assets since the Darien scheme?
Mr. Healey: We are familiar with the hon. Member's views. All I can tell him is that the progressive improvement we can foresee in the economy will bring great benefits to the Scottish people, even though the consequences of that for the party he represents may be less exciting.
Mr. Cant: May I ask my right hon. Friend to what extent he has taken into account the further upsurge in the personal savings ratio? Apart from a lack of will on the part of capitalists to invest, there is this fatal reluctance of people to spend. Will the reflation of the economy be as great as he expects, or shall we have the experience of the Americans and the Germans following tax cuts, when people save money rather than spend it?
Mr. Healey: If I could predict the movement of the savings ratio, I would find my job easier than I do. Nobody fully understands why, throughout the world in the last few years, in spite of very high rates of inflation, people have chosen to save money rather than to
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spend it. It might well be because of high rates of inflation.
I think that the right hon. Member for Spelthorne (Mr. Atkins) is right in saying that the main reason for the present situation is the great uncertainty that exists. However, I believe that in this country, thanks to the prudent policies followed by the Government and the special advantages that we are likely to get from North Sea oil, the uncertainty will be a great deal less than it is in many other countries. We can probably expect the savings ratio to begin falling in the coming year, but my hon. Friend knows as well as I do that this is the most difficult and dangerous thing to predict.
Mr. Godber: Will the right hon. Gentleman expand a little on what he said about exchange control? I was glad to hear what he said on this subject, but will he go a little further, because I would relate that to what he said about overseas aid? If he can ease exchange control, that can be just as effective as, if not more effective than, the help that he is giving through overseas aid. I do not wish to denigrate the latter, but a more positive easement of exchange control can help businesses to invest overseas.
Mr. Healey: We on this side of the House believe that we should take every step to ensure that the benefits of North Sea oil lead to a big increase in investment in British industry and a strengthening of our own manufacturing base at home, rather than to the acquisition of assets abroad. Indeed, it could be argued that one reason for the relatively poor economic performance of this country throughout the twentieth century was the over-reliance on income from investment abroad in the nineteenth century. I do not think that this is the time for loosening controls on direct or portfolio investment overseas.
Mr. Urwin: Enthusiastically though the proposals enunciated by my right hon. Friend undoubtedly are being, and will be, received in the country, it is clearly impossible for him to satisfy the demands of all sections of the community in the allocation of resources, even in a mini-Budget. I welcome wholeheartedly what my right hon. Friend said about the construction industry, but I support

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the representation that has been made that £400 million is by no means adequate to take up the slack in unemployment in that industry.
Secondly, may I ask my right hon. Friend how he managed to resist what must have been a considerable temptation to allocate at least £100 million for industrial development in the Northern Region, if only to compensate for the withdrawal of the regional employment premium? How did he resist the further temptation to allocate £300 million to £400 million to establish a Northern Region Industrial Development Agency?
Mr. Healey: I share the desire of my hon. Friend to reduce unemployment in the construction industry, and I agree that it will remain far too high even when the £400 million that I have allocated for next year is spent, but, as he admitted, we have to try to judge between competing priorities. I think that the large amount of additional public expenditure that has been allocated to the construction industry is itself an indication of how seriously we take its problems.
I appreciate my hon. Friend's concern about the North-East Region. All I can say is that it will remain a constant preoccupation to improve the treatment of industry there. As I said on another occasion, with the Prime Minister's permission I hope to occupy this post for another two and a half years before my six-year stint is over, and during that period I might be able to do something about the problem.
Mr. Emery: Does the right hon. Gentleman realise that we are all delighted about the strength of sterling, as we should be, but will he realise that he must not go on braying against industry not investing as much as he wants bearing in mind that in many areas industry is under-utilising its existing equipment by 15 per cent. or 20 per cent. and will never invest while that is the case?
Secondly, will the right hon. Gentleman assure the House, and particularly his hon. Friends in the Tribune Group, that his success has been based on traditional Conservative economic policy and not on Socialist economic theory?
Mr. Healey: The hon. Gentleman must accept that in declaring their inten-
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tions both to the CBI and to the Department of Industry British firms predicted and promised very much higher investment in the current year than they have carried through. This is a shortfall against their own tests, and not against the tests of the Government.
One of the great weaknesses of business in this country is that far too many firms do not invest until they are working at capacity, with the result that their investment does not come on stream until their competitors have taken their markets. If they would only show the wisdom shown by, for example, the firm from Sweden that was described in the Financial Times yesterday, the economic history of this country would be very much happier.
Mr. Atkinson: Does my right hon. Friend agree that, generally, private investment is labour saving, whilst public investment is labour creative? If, according to his own calculations, the rise hi consumer demand is soaked up by the present unused capacity in manufacturing industry, will he be prepared to discuss the whole question of making further resources available for public investment in the manufacturing sector as a means of creating jobs?
Mr. Healey: I cannot agree with my hon. Friend that all private investment is labour saving and that all public investment is labour creative. If he were to talk to the steel workers in South Wales he would find that they have a very different view on that matter. Indeed, if he were to talk to some of his hon. Friends from the mining areas he would hear a different view. I believe that if we can strengthen our industrial performance we shall achieve much higher levels of investment and employment in industry, in the way that countries such as France and Japan have achieved in recent years.
Mr. David Mitchell: Is the right hon. Gentleman aware that we welcome his comments about, and the prominence that he has given to, small businesses? Has he any proposals to end the 2 per cent. National Insurance surcharge, to end the deferred liability for stock relief, to lower the rate of corporation tax on small businesses, and to take away the threat of a wealth tax that is hanging over their heads?
Mr. Healey: I think continually about all those matters. Indeed, I think of little else. The hon. Gentleman knows that business in Britain pays a far lower level of National Insurance surcharge than in any other country in the European Community. I do not think that to reduce the surcharge from its existing level would be consistent with wise economic policy.
Mrs. Wise: Will my right hon. Friend accept that all of us on this side of the House are pleased to know that the tax threshold will now be approximately similar to the level of supplementary benefit? This is a change which some of us have been advocating for some time, and we welcome it.
I call upon my right hon. Friend to resist the blandishments of Opposition Members to reduce the standard rate of tax or to make any other changes in the contribution which would benefit largely their friends. I also call on him to ensure that further progress is made in the restoration of public expenditure cuts and in increases in child benefits, and that we go ahead with the imposition of a wealth tax to pay for some of these necessary developments.
Mr. Healey: If I may say so without offence, I welcome the apparent ending of the alliance between my hon. Friend and the Opposition which led to certain changes in the last Finance Bill. I assure her that I am not likely to succumb to their blandishments when she is being so endearing towards me.
Mr. Biffen: Is the right hon. Gentleman aware that the campaign to reduce and eradicate inflation from our society will not have been assisted by his measures announced this afternoon, and, on account of the dangerous element of gamble with the monetary element in his total economy, can he confirm that the public sector borrowing requirement will still remain about 6 per cent. of the gross domestic product for the current year? Will he explain how he will protect himself from the monetary explosion which could come about if the exchange rate is rigged at its present level and there is a substantial inflow of foreign funds?
Mr. Healey: The House is familiar with the fact that the hon. Gentleman,
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whose views we all respect, is a monetarist in the national, international and strictest sense of the word. All that I can do is to recommend him to read the Nobel Lecture of the guru of his theology, Mr. Milton Friedman, and he will discover that his guru blew up the idol before which he has been genuflecting for so long. I suggest that he stops worshipping those smoking ruins.
Mr. Ashley: I congratulate my right hon. Friend on what he has said today, but is it not a pity that he was not able to do more for children, especially as he announced last July that he would be introducing child benefits which will not be paid until next April? His reply to my right hon. Friend the Member for Blackburn (Mrs. Castle) was quite unsatisfactory because the concessions announced today are to be paid immediately and others announced in July are being paid, but the payment of child benefit must wait. Therefore, will he reconsider his policies and undertake to consider the possibility of backdating child benefits to when they were announced last July?
Mr. Healey: I appreciate my hon. Friend's views on the question of child benefit, but he must accept that the very large increase in the married person allowance will be of immense benefit to all families with children. I have already explained that I believe that the increase in child benefits planned for next April—and it had to be announced last July so that it could be paid next April—is appropriate in all the circumstances.
Mr. David Howell: Will the right hon. Gentleman now answer the question of my hon. Friend the Member for Oswestry (Mr. Biffen)? If it is the policy to keep the exchange rate at about its present level, is it also the policy to allow the reserves to continue accumulating at their present enormous rate?
Mr. Healey: I read the literature as assiduously as no doubt the hon. Gentleman does—[HON. MEMBERS: "Answer."] I am answering, and if hon. Members opposite contain their impatience they may learn something to their advantage. There have been very large inflows of foreign currency into the reserves in the current year. Hon. Members will know

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from perusal of the monetary figures—the figures for the growth of money supply —that in nearly all months until last month it was possible to sterilise the effects of the inflows on the money supply by very large domestic sales of gilts. A potential conflict could arise between the exchange rate policy, interest rate policy and monetary policy. Of course I know that. If it arises, I shall take appropriate action. But I should be foolish in the extreme if I were to give any indication of what I regarded as appropriate policy in those circumstances and the hon. Member must know that.
Mr. Gould: If the inflow of hot money into London continues, will my right hon. Friend ensure, through physical controls if necessary, that the speculators' search for capital gain will not be permitted to push up the exchange rate to the prejudice of British industry?
Mr. Healey: Physical controls might have a role to play if this contradiction became an important and urgent one to deal with. But my hon. Friend must understand that physical controls have not proved very effective when used by other countries, such as Switzerland and Germany, in dealing with this problem. I think that one of the lessons learned by all people who hold my job is that there are fairly strict limits within which it is possible to withstand market pressures.
Mr. Nelson: I welcome much of the content and balance of the right hon. Gentleman's statement, but will he accept that many of us are deeply worried about the continuing level of the public sector borrowing requirement at £7 billion or £7½ billion next year? Does he accept that his Government, and indeed future Governments, have a long-term moral and economic responsibility to eradicate the public sector borrowing requirement and, hopefully, one day to return to contributing to a sinking fund?
Mr. Healey: I do not accept that view at all when the economy is working well below capacity. When the economy is working well below capacity, to seek to eliminate the public sector borrowing requirement would be to inflict needless social and economic damage on the people. The hon. Gentleman must know that the level of our public sector borrow-
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ing requirement this year is well below the level which I forecast a year ago and, as a percentage of GDP, very much further below the level of the public sector deficit—the general Government deficit—in Germany, a country to which no doubt the hon. Gentleman would always turn for advice.
Mr. Alexander W. Lyon: While welcoming that the relaxation in exchange control was much less radical than forecast—one recognises the danger of too much hot money coming into the country —may I ask whether it is possible by the extra allocation of gilts to use that money, by direct investment through the National Enterprise Board, for a much more purposive intention than anything that the hot speculators would use it for?
Mr. Healey: I wish that it were as simple as that, but I fear that it is not. There is a latent and potential contradiction between the three variables to which I have referred. I do not think that it has become acute, but it might, and then the Government would have to deal with the situation as they thought best. Public investment will not help the economy unless it produces a real return in terms of goods which are saleable at the price that they cost to produce. This is a central problem as much for public industry as for private industry. I believe that the appointment of Mr. Edwardes as the new Chairman of British Leyland may help to ensure that that problem, which is very acute in that company, which is under the control of the NEB, is finally resolved.
Mr. Higgins: Is the right hon. Gentleman aware that his remarks about physical controls could be open to serious misinterpretation? Will he spell out the point a little more clearly? He referred in his statement to an increase in living standards. Is not that a very misleading way to put the position? Is it not the case that, even after the tax reliefs he has announced, living standards will not be restored to their earlier level?
Mr. Healey: I have made it clear on many occasions that there is no way in which the British or any other people who use large quantities of oil can recover the fall in their living standards which was the consequence of the increase in the price of oil. This is as true of Britain as it is of the United States, Germany

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or any other country. But I expect a real improvement in the living standards in this country over the coming year, and I think that that improvement will help to ensure that the rate of inflation is kept down by reasonable pay settlements.
I made it clear that I do not believe that physical controls are a very effective answer to the problem to which I referred a moment ago. I referred to the experience of Germany and Switzerland in trying to operate such controls and finding mat their imperfections became more apparent as time passed.
Mr. Madden: I welcome the main features of the statement, but will the Chancellor tell us what is the Government's definition of full employment in percentage terms, and when he believes that that level of employment will be reached, bearing in mind the view of certain economists that we need 5 per cent. expansion between now and 1985 if unemployment is to fall below 1 million?
Mr. Healey: I wish that I could answer my hon. Friend's question but I honestly cannot. I do not think, for example, that any economist in this country had forecast that the employment figures for the last month, which were published yesterday, would show a seasonally corrected fall in the level of employment, a substantial increase in the number of job vacancies and a reduction in the amount of short-term working. I think that predicting employment in its relationship to movement of output all over the world has become extremely difficult. I believe that the measures which I have announced this afternoon, if they are accompanied by continuing moderation in wage settlements, will enable us to get unemployment moving regularly down in the coming year. As to what level and by what time, I do not believe that anyone can predict that.
Mr. Cormack: Is the Chancellor aware that his worthy efforts to boost police recruitment are unlikely to be very effective unless something is done to boost police pay, and that there is a very genuine and deep-seated anger in the police force at the moment, with which there is sympathy throughout the country?
Mr. Healey: I read an opinion poll on the police. I was rather surprised to find in the opinion poll that, when asked
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whether the police should be treated as a special case, a quarter of those asked said "No". [Interruption.] Three-quarters said "Yes", of course, but when people are asked a question of that nature it is not difficult to get a very large majority to say "Yes". But I put this question seriously to the Conservative Front Bench, and particularly to the right hon. Member for Penrith and The Border (Mr. Whitelaw), who spoke on this matter recently at the Conservative Party Conference. Does he think that the words he used and the terms in which he spoke were calculated to help this country to get inflation down in the coming year?
Mr. Bagier: Does my right hon. Friend not agree that it is rather nice to be mixed up in a squabble about how to distribute about £1 billion this year and £2 billion next year? Will he not agree that to a great extent the reason that he has this kitty to distribute is the restraint shown by the trade union movement over the last two years? Will he not agree that in some ways the £100 million to be given in the form of Christmas boxes to old-age pensioners is something that the trade unions have been able to provide? Will he not further agree that in some ways there is a moral to be learned by our trade union colleagues, in that because of their restraint over the last two years we hope it will be possible to continue to make progress in the next two years?
Is my right hon. Friend satisfied that the measures he has announced will be sufficient to eat into the difficulties in areas such as the North-East and Wear-side in particular, where there are particularly bad pockets of unemployment?
Mr. Healey: I agree very strongly with my hon. Friend's remarks—as would all my friends who are Finance Ministers in other countries with whom I have discussed the matter, and also my friends in international institutions such as the International Monetary Fund and the Organisation for Economic Co-operation and Development—concerning the cooperation between the British Government and the trade union movement, and the restraint shown by ordinary working people in pay negotiations. This applies not only to the last two years but also

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to the present time. It has made an essential contribution to getting inflation under control in this country and creating a basis for measures of the sort that I have announced this afternoon.
The House will be aware that this co-operation with the trade union movement has been steadfastly attacked and derided by the Conservative Party. When there is talk of the Government owing their success to Conservative policies, I am bound to remind the House that the two major elements in our success have been a relationship with the trade union movement—which the Conservative Party has never sought and can never achieve in its present posture—and control of the money supply, which was allowed to explode under the previous Government.
Mr. Lawson: Is the Chancellor aware that the contradiction which he acknowledged to exist in his financial policy is a very serious contradiction indeed, with grave inflationary consequences for the year ahead? Will he reconfirm his determination to keep the money supply in the current year at between 9 per cent. and 13 per cent., and will he tell the House what is his guideline for the money supply increase next year?
Mr. Healey: My answer to the hon. Gentleman's last question is "Certainly not". I shall do so at the appropriate time, when I have considered all aspects of the British economy in the coming year.
Mr. Ron Thomas: My right hon. Friend is no doubt aware that economists are predicting a level of unemployment of 2 million. In the light of that, many of us will be very disappointed with the employment creation effects of this afternoon's statement. In arriving at his figures, did my right hon. Friend take into account the dangerous penetration of finished and semi-finished manufactured imports into this country? Could I urge him, even at this late stage, to restore the cuts in public expenditure which have enabled Tory councils up and down the country, such as the Avon County Council, to slash education, health and social services?
Mr. Healey: Economists predict all sorts of things, as the House knows very well. I recall the research department
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of the Association of Supervisory, Technical and Managerial Staffs predicting that there would be 2 million unemployed last autumn. That prediction was absolutely wrong. I have not the slightest doubt that we shall not reach 2 million unemployed in the coming year, as the economists to whom my hon. Friend refers seem to believe. I believe that we can get unemployment firmly on to a downward path in the coming years.
We published some very interesting figures on imports during the recess. They show that British penetration of foreign markets has matched foreign penetration of British markets in the last few years. This is a two-way business. There is a very great increase in the volume of trade all over the world from which Britain is now deriving more benefit than other countries. This is the first year for many years in which we have actually increased our share of world trade. When we lose domestic markets to foreign imports, the reason is inadequacy of design, inadequacy of delivery or excessive cost, and all these are matters which the Government are deeply concerned to correct.
Mr. Tapsell: Is the right hon. Gentleman not aware that the sterling exchange rate is today more than 20 per cent. below the level at which he inherited it, and that this is one of the prime causes of domestic inflation at home?
Is he further aware that the German experience has not been that rising prices have adversely affected their export trade and that the whole contradiction in the economic policy he has put before the House this afternoon would be greatly relieved if he would allow sterling now to float freely?
Mr. Healey: I know that that is a view widely held by the hon. Gentleman's friends in the City, but it is not held by those who are engaged in trade and production in this country. It is with the protection of our manufacturing base that I think the House should be primarily concerned. The hon. Gentleman will be aware that the sterling rate has risen 10 per cent. in the last 12 months.
Mr. Spriggs: Will my right hon. Friend take a look at the ever-increasing cost to the worker by way of National Insurance contributions, taken from his wage

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packet before he ever sees his wages? Will my right hon. Friend also take his mind back to the fact that it was a Labour Chancellor of the Exchequer who abolished the tax allowances for National Insurance contributions? Will he now, even at this late stage, reconsider his statement today and include tax allowances for all National Insurance contributions paid?
Mr. Healey: I will consider any suggestion put to me. But as I said earlier, the level of social benefits paid for by National Insurance contributions in this country is still, regrettably, substantially lower than in other countries and the size of the contributions towards them is also considerably lower. I think it right that superannuation in particular should be properly funded. The scheme we are bringing in next year will be one of the most comprehensive that the world has seen and will be something for which this party and movement has fought for a long time. But it must be paid for, and it will be paid for.
Mr. Patrick McNair-Wilson: Will the right hon. Gentleman comment on the very gloomy state of the American economy and the predictions made for many European economies? Will he answer the question whether we can wholly isolate ourselves from this fall in demand? The steel industry in this country is already in the doldrums, and protectionism in the United States could do even more damage to our steel industry than we are seeing already.
Mr. Healey: I am deeply concerned by the question raised by the hon. Gentleman. I devoted to it a good deal of my speech at the Mansion House last week. I have also attended meetings of the IMF in Washington and of the Council of Finance Ministers of the EEC in Luxembourg in recent weeks, when the matter also formed a major element, as it did in the discussions which I had with my West German colleague when the Prime Minister and I visited Bonn last week. We are all agreed that it is necessary to stimulate demand, and that we have shaded risks in recent years too much against growth—a point made by Dr. Witteveen in his speech to the IMF. I may add that that speech disagreed strongly with the views of the hon. Member for Oswestry (Mr. Biffen), as the
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hon. Gentleman knows. We have agreed in the European Council to try to increase demand by 1 per cent. of Europe's GDP over the coming year, and the measures I have announced today represent the British contribution to that collective end.
Mr. Molloy: Is my right hon. Friend aware that much of what he has announced today should provide considerable encouragement to those trade union negotiators negotiating wage increases in the months ahead? But is he not also prepared to consider that much of what he has announced can be vitiated if there is any form of a race to increase prices? Does he not agree that he should point out to the Secretary of State for Prices and Consumer Protection, the CBI and all others concerned that they, too, have a contribution to make in holding down price increases to the absolute minimum?
Mr. Healey: I strongly support the last point made by my hon. Friend. It is important that both the House and the country should recognise that, as a result of the measures I announced in July and those I have announced today, a married man with two children on only two-thirds average earnings will be actually better off at the end of this year, even without a wage increase, than he was at the beginning of the round. A married man with two children on average earnings—about £80 a week—would need only just over 2 per cent. wage increase in order to maintain his living standard. So there is a strong incentive for pay negotiators to keep the increase in earnings to the limits set in the Government guidelines. If they do, I shall be able to give further tax reductions in the next Budget, and I think that the House and the country are aware that an increase in living standards generated by tax reductions is infinitely better for the economy, for employment and for trade than an increase in living standards generated by excessive wage increases.
Mr. Ogden: Does not my right hon. Friend agree that it has sometimes appeared that the Opposition are scraping the barrel very deeply in order to find any criticism at all of his statement today? Will he take up the point about overseas aid? If we were to take only one part of the £20 million to be made available, and use it for rural electrification in the Middle East, for example, that

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would bring more work to Merseyside and the Midlands.
Mr. Healey: I agree with the impression of my hon. Friend that the Opposition have been scraping the bottom of the barrel, although perhaps it has sometimes not reached as far as the bottom of their particular barrel. I agree that overseas aid, disbursed differently in different countries, according to the nature of the aid required, flows back to this country in ways which in turn provide additional work here.
Mr. Grylls: When the right hon. Gentleman talks about investment, will he bear in mind that the uniquely low rate of return of 2 per cent. on investment in British industry is almost the lowest in the developed world? Does he not agree that uncertainty is the key to this problem? What is he doing about it?
Mr. Healey: The rate of return has been falling all over the world in recent years per unit of capital, and our experience is not very different from that of other countries. The movement of investment seems to be worse in some other countries, such as West Germany, than it is here. There is all over the world an unexpected lag, in investment. It was not expected by the Governments of France, Germany, the Low Countries, the United States and Canada, and it is to some extent a baffling problem. I believe that it is to do with the uncertainty referred to by the hon. Gentleman, but I believe also that in this country we are beginning to remove some of those areas of uncertainty. As I said at the Mansion House, we are one of the few countries expected by international organisations to have a higher rate of growth next year than this, It looks as if our economy is going to improve significantly faster, while the performance of other economies which have previously been ahead of us is deteriorating. This is a matter that the House should consider and, I hope, welcome.
Mr. Greville Janner: Now that, happily, the financial state of the country is improving, will my right hon. Friend be able to give some hope to the hundreds of thousands of men who are suffering so much because they are unable to retire at 60, however ill they may be? Will he
1466
consider making some financial provision during the coming year to provide for voluntary retirement by men if they wish to retire and are unable to carry on at work in the way that we hope my right hon. Friend will be able to carry on for many years to come?
Mr. Healey: I do not think that there is any intention on this Front Bench to opt for voluntary retirement, but I will bear in mind what my hon. and learned Friend has said.
Mr. Crouch: Will the right hon Gentleman give his views on the level of wage demands to come, particularly as they might be affected by his statement today? Was it not his former policy to withhold tax concessions as a stick, as it were, to ensure that wage demands met the Government's requirements? Now he is changing his policy and offering a tax pay-out in order to encourage low wage demands. Does he think that he will be as successful as, or more successful, or less successful, than, in the past?
Mr. Healey: I do not know, but 1 believe that the improvement in real take-home pay generated by my measures in July and by my statement today is also having its effect on wage settlements—not always on wage demands, which are a different thing. The hon. Gentleman will have been impressed, as outside observers have been impressed, by the high proportion of settlements made so far within our guidelines—about 97 per cent. of those collected by the CBI data bank. I am certain that this is due to the growing realisation that the period of falling living standards is coming to an end and that an increase in living standards can now be rationally expected. I dare say that the House—although perhaps not so much the Front Bench opposite—was pleased to see that the last monthly index of consumer satisfaction and expectation, published in the Financial Times, was the best since 1970.
Mr. Skinner: Is the Chancellor aware that during the course of his speech the Leader of the Opposition looked decidedly chilly? Is that because he has been stealing her clothes? Does the Chancellor agree that this mini-Budget is, perhaps, too much influenced by the presence of the Liberals and that it should have been more adventurous?

1467
Will my right hon. Friend give a specific answer to the point made earlier in relation to the growth rates for this year and the next financial year when taking account of the proposition, which he put earlier, about the need for a 5 per cent. growth rate to keep unemployment below the 1 million mark over a long period of time?
Will the Chancellor tell the Treasury that if it wants to increase consumer purchasing power it should keep its nose out of every argument in the so-called free collective bargaining arena? If it must use sanctions, it should use them instead against firms which constantly put up prices to increase profits at a time when there has been massive wage restraint over a two-year period.
Mr. Healey: I assure my hon. Friend that I am not, never have been and never will be a transvestite. In relation to his last point, I must tell him that the Government are determined to use their influence in the public sector as an employer, and in many cases as paymaster; and in the private sector, where they are free to grant or withhold discretionary assistance to firms, to ensure as far as possible that our guidelines are adhered to. My hon. Friend the Member for Bolsover (Mr. Skinner) will be as happy as everyone else if we are successful in doing this, because if inflation takes off again next year the consequences for all the objectives and principles that he and I hold so dear will be disastrous.
Sir A. Meyer: Does the Chancellor realise that in his forthcoming and very welcome visit to North Wales he will be pressed very hard to explain how quickly his measures will have an effect on unemployment, particularly in Clwyd? This county now has the highest level of unemployment in Wales and the third highest in the United Kingdom, but previously its unemployment rate was very low.
Mr. Healey: Wherever I go, I am pressed on these matters.
Dr. Bray: Is my right hon. Friend aware that the House understands why he is not making further drawings on the IMF? Will he use his influence as Chairman of the Interim Committee of the IMF to explore whether the resources that are released can be used for the developing countries, which many of us on this
1468
side of the House feel should have high priority? Will he remind Conservatives that, if they are worried about excessive accumulations of reserves, it would be possible to make some repayments to the IMF at an earlier date than planned?
Mr. Healey: The latter possibility is always in my mind, but I have come to the conclusion that the time for doing so has not yet arrived.
On the question of the IMF, in certain areas of potential lending the IMF will very much welcome the fact that we are not drawing the November standby and do not plan to withdraw any further tranches. The IMF has been lending very heavily and successfully to developing countries. However, the difficulty is that the higher credit tranches have not so far been used by the developing countries, which find the conditions and requirements of the IMF which are imposed on their use unacceptable. I have persuaded the IMF that to prolong periods of adjustment beyond a single year has enabled the Jamaican Government, for example, to make a successful drawing recently. If the IMF shows more understanding of the circumstances of some of the developing countries, much more use can be made of the facilities which are available.
Mr. Stanbrook: If public expenditure is to be increased, no doubt the Chancellor will be assailed from many sides in support of special interests. Is it not a fact that, unless the police receive a substantial increase in their pay, law and order, which are essential in a civilised society, cannot be maintained?
Mr. Healey: I do not propose to enter into this matter, which is not my departmental responsibility. However, like all the members of the Cabinet, I am deeply concerned about it and I hope that we can find a solution that is satisfactory to both sides. I must point out that there is enormous regional variation in police recruitment, in wastage and in the nature of the tasks necessary for maintaining law and order. The problems in Manchester, London and Strathclyde, for example, are different in scale and definition from those in country areas. All these matters must be considered.
Mr. Hooley: Is the Chancellor aware that the restoration of 20 per cent. of

1469
the £100 million cut from overseas aid will be welcome as far as it goes? However, many of us feel that it is far too modest. Unless we and other countries pay greater attention to the interaction between the West and the Third world, we shall not get out of the general economic recession.
Mr. Healey: I agree with my hon. Friend that it is not enough, and I hope that maybe we shall be able to do more on a later occasion. We should all recognise that our very dramatic—indeed astonishing, as it was described by Dr. Witteveen—improvement has not been accompanied by an improvement in our real economy. The measures that I have announced today will help the improvement in our real economy to get under way. We have a long way to go before we can feel satisfied. That is why we have no intention of giving way to the rather unconvincing demands from the Conservatives for an early General Election.
Mr. Peter Bottomley: Will the Chancellor confirm that his mini-Budget represents a transfer of resources away from people with children? Can he deny that the increase in the married person's allowance will transfer resources to all those without children? When the Chancellor talks about investment, he should think about investing in the people who are bringing up the future generations rather than simply in terms of plant and machinery.
Mr. Healey: The hon. Member is talking bunkum. The increase in the marriage allowance goes to all families—with or without children. It is not in any sense a discrimination against families with children. The hon. Member should know better than to talk that kind of claptrap.
Mr. Litterick: Will the Chancellor tell the House whether, when drawing up his modest reflationary proposals, he took account of the deflationary effect of the fact that throughout the country Conservative-controlled local authorities are under-spending significantly on budgets which themselves were significantly lower than those of last year? This situation has led, for example, to the ludicrous and scandalous situation in Birmingham that half a dozen new nursery schools, which are fully equipped, are not being used because the Tory authority refuses to
1470
finance the staffing of them. Then there is the even more scandalous situation of the new wing of the Selly Oak Hospital, which is fully equipped but is not being used because the local authority will not fund the staffing of the hospital.
Mr. Healey: I am aware that in some local authorities, particularly those administered by the Conservatives, there is gross under-spending. We should use the opportunity provided by democracy and sweep the rascals out.
Mr. Peter Rees: Will the Chancellor explain why he has not proposed a cut in the basic rate of income tax—not even the 1 per cent. foreshadowed in April last year?
Mr. Healey: The reason why I am not doing so is contained in the admirable words that the first need is to reduce the burden of taxation on modest earnings and to restore a reasonable differential. That is from "The Right Approach" and will be recognised by the Conservatives. I believe that it is right to concentrate on increasing tax thresholds rather than reducing the basic rate.
Mr. Newens: I recognise that the increases in public expenditure will be welcomed, but does my right hon. Friend agree that they do not go far enough to restore the cuts which have been made or to maintain the standards of health, welfare, education and public transport, which, deplorably, are lower than they should be? In these circumstances will he recognise in future that priority should be given to the provision of more funds in the public sector, which must take precedence over any cuts in the standard rate of income tax?
Mr. Healey: My hon. Friend will know that public spending has risen very substantially in the last three and a half years, even after all the cuts which the Government have had to impose. Private spending has fallen substantially, largely as a result of the increase in oil prices and its effect on national wealth. I believe that we are right to restore the balance somewhat towards private spending, and that a balance of two for tax cuts and one for public expenditure is right on this occasion.
Mr. Wyn Roberts: The House recognises the beneficial effect of the right hon.

1471
Gentleman's measures on the employment situation, but does he not acknowledge that the effect is slight compared with the total unemployment figure of 1·5 million? Will he promise to consider any special measures that may be suggested to him for reducing unemployment in areas such as Wales, where even fast month the seasonally-adjusted figure increased rather than decreased?
Mr. Healey: As I said earlier, our main objective must be to reduce unemployment, and I believe that these measures will lead to a fall in unemployment. The hon. Gentleman must recognise that in the last year unemployment has risen all over the developed world. This is a difficult and intractable problem. The Government regard it as their main objective to bring down the rate of unemployment, and I believe that the measures announced this afternoon will be a useful start.
Mr. Flannery: My right hon. Friend mentioned the use of more unemployed teachers in deprived areas, but he did not put a figure to it. In view of the enthusiasm of Conservatives in topping up our cuts by Draconian cuts in their areas, will my right hon. Friend now put a figure to it so that the teachers will know that some of the vast pool of their talent will be employed?
Mr. Healey: My right hon. Friend the Secretary of State for Education and Science will be making a more detailed announcement on this matter in due course.
Mr. Michael Morris: Will the right hon. Gentleman explain why he never gives the pensioners a fair deal? Will he confirm that the £10 bonus should be £20 if it is to be merely equivalent to the figure in 1972 introduced by a Conservative Government?
Mr. Healey: The extravagant language used by the hon. Gentleman baffles belief. He must know as well as I do that under the Labour Government the real value of the old-age pension has been increased by over 15 per cent. at a time when the real value of the earnings of those at work unfortunately has had to fall. The present Government have done more for the pensioner than any Government in our history.
Mr. Stan Crowther: Will my right hon. Friend accept that although progressive local authorities welcome the extra money to be spent on the building industry they will be concerned about the absence of any assurance on local government expenditure in general in the next year? Is it not a fact that, because local government is a labour-intensive industry, a substantial increase in rate support grant could not restore the damage inflicted on services in recent years but would have an immediate impact on unemployment?
Mr. Healey: My right hon. Friend the Secretary of State for the Environment will be discussing the rate support grant with the appropriate local authority bodies in the very near future. An important point was made a little earlier to the effect that there is no guarantee that the money will be spent by councils.

ROYAL ASSENT
5.5 p.m.
Message to attend the Lords Commissioners:
The House went:—and, having returned:
Mr. Speaker Mr. Speaker(in the Clerk's place at the Table): I have to acquaint the House that the House has been to the House of Peers, where a Commission under the Great Seal was read, authorising the Royal Assent to the following Act:
Unfair Contract Terms Act 1977.

PROROGATION

  HER MAJESTY'S MOST GRACIOUS SPEECH
  Mr. Speaker: I have further to acquaint the House that the Lord High Chancellor, being one of the High Commissioners, delivered Her Majesty's Most Gracious Speech to both Houses of Parliament, in pursuance of Her Majesty's Command, as follows:
  My Lords and Members of the House of Commons:
  I was pleased to welcome Commonwealth leaders in London for the 1977 Commonwealth Heads of Government Meeting, for which My Government were

  1473
  the hosts. The intensive and friendly discussions there strengthened the Commonwealth relationship and contributed towards the solution of certain international problems.
  My Government played an active and constructive part in the activities of the European Communities, which included two meetings of the European Council, one in London, and held the Presidency of the Council of Ministers for the first six months of 1977.
  My Government have played a full and positive role in institutions to promote international development and efforts to create a more just and stable economic order, and in discussions on the problems of world unemployment and inflation; they were hosts to the Downing Street Conference of the leaders of the seven major industrialised countries.
  Legislation has been passed to enable the United Kingdom to ratify amendments to the Articles of Agreement of the International Monetary Fund and to assist United Kingdom trade and the provision of aid for the poorest countries. Special assistance has been given to southern African refugees.
  My Government have continued their efforts to promote a negotiated settlement in Rhodesia.
  My Government have been active, in co-operation with other Western members of the Security Council, in working for a settlement in Namibia which will bring the country to independence in a manner which will meet with international acceptance and will give the people a chance to select freely their own government.
  My Government have continued to attach importance to the development of detente, and of constructive political and economic relations, with the Soviet Union and the countries of Eastern Europe. They have continued to work for mutual and balanced force reductions in Central Europe. They are participating with the Governments of the United States and the Soviet Union in discussions aimed at the negotiation of a comprehensive test ban treaty.
  My Government were pleased to act as hosts at the ministerial meeting of the
  1474
  North Atlantic Council which was attended by Heads of Government in London in May, and which established new programmes of work in the political and defence fields
  Members of the House of Commons:
  I thank you for the provision which you have made for the honour and dignity of the Crown and for the public services.
  My Lords and Members of the House of Commons:
  My Government have given continuing priority to their policy of restraining price levels, and of the fullest possible co-operation to this end with both sides of industry. The second round of voluntary pay policy has been observed throughout the economy, and the way has been prepared for an orderly return to normal collective bargaining. Legislation has been passed to make new provision for the scrutiny and effective control of prices, and a new Price Commission has been appointed. Successful steps have been taken to restore confidence in the financial markets and improve the balance of payments.
  My Government remain deeply concerned about the continuing high level of unemployment, and have introduced additional employment and training measures to tackle this problem, including the youth opportunities programme.
  My Government have maintained their policy of strengthening industry through the development of the industrial strategy, through industrial assistance schemes, and through the work of the National Enterprise Board and the Scottish, Welsh and Northern Ireland Development Agencies.
  Legislation was enacted to bring into public ownership the aircraft and guided weapons, shipbuilding and marine engine building industries. British Shipbuilders has acquired by negotiation a major part of the ship-repairing industry.
  An Act has been passed to enlarge the Post Office Board so as to allow an experiment in industrial democracy.
  Legislation has been enacted to give the National Coal Board additional powers and provide the framework for

  1475
  the further development of the coal industry, and to make further provision for the financing of British Nuclear Fuels Limited and the Radiochemical Centre Limited. My Government are completing the award of licences, all involving majority State participation, under the fifth round of off shore petroleum licensing.
  Steps have been taken to ensure further safeguards in the management of nuclear waste, and full and public consideration of the problems relating to nuclear development; a public inquiry has been set up to examine the proposal for the construction of an oxide fuel reprocessing plant at Windscale.
  Legislation has been passed extending United Kingdom fishery limits to 200 miles; tribute is due to the hard work of the fishery protection units in enforcing the new limits
  A new and favourable Air Services Agreement with the United States of America has been signed.
  An Act has been passed to reform patent law and to make possible the United Kingdom's participation in certain international agreements, including the European Patent Convention.
  In Northern Ireland the Royal Ulster Constabulary, supported by My Armed Forces, has continued to enforce the law with impartiality and deserve the highest praise for its success in reducing the level of violence. My Government have maintained the aim of a just and lasting constitutional settlement, and they have taken measures to combat the economic and social problems in the Province, including new incentives for investment.
  My Government have published Green Papers discussing possible changes in the arrangements for financing local authorities.
  My Government have continued to develop a housing policy designed to deal more effectively with the most pressing needs and to broaden housing opportunities. Proposals have been published for a comprehensive housing policy for the longer term, and legislation has been enacted to place statutory responsibility for assisting the homeless on local housing authorities.
  My Ministers have announced new initiatives for the regeneration of inner urban areas, including the expansion and adaptation of the urban programme and the offer of partnership arrangements between central Government and selected local authorities.
  Proposals have been laid before you for strengthening the water industry and for the future of the British Waterways Board.
  My Government have reviewed the development programme of new towns in England and have established a new programme for their completion.
  My Government have published a White Paper setting out their proposals for the future development of transport policy to meet economic and social needs. An Act has been passed to provide continued financial support to the British Railways Board and the National Freight Corporation.
  Provision has been made for increases in social security benefits and war pensions. Legislation was enacted making a number of changes in the field of social security, including supplementary benefit. The new child benefit was brought into payment for all children, including the first.
  My Government have continued to promote and encourage voluntary effort and a sense of caring in the community and have launched and will sustain a good neighbour campaign aimed at involving the community in the care of its members. I hope that the community spirit fostered by the celebrations of My Jubilee will be strengthened and developed in the years to come.
  My Government have published a Green Paper setting out proposals on education it schools, with particular regard to the curriculum, standards of performance, the training and employment of teachers and the preparation of pupils for the needs of adult life.
  An Act has been passed to amend the criminal law, particularly in relation to conspiracy, and to improve its administration; and the process of reforming the law has been continued with the Administration of Justice Act and other measures.
  My Government welcome the passage of the Unfair Contract Terms Act, which marks an important advance in consumer protection. Grants have been made to maintain the provision of help to consumers.
  Among the Acts passed in relation to Scotland were measures concerned with the modernisation of the law of marriage and with the enforcement of planning procedures.
  My Lords and Members of the House of Commons:
  I pray that the blessings of Almighty God may attend you.
  Then a Commission for proroguing the Parliament was read; after which the Lord Chancellor said:
  My Lords and Members of the House of Commons:
  By virtue of Her Majesty's Commission which has now been read, we do, in Her Majesty's Name, and in obedience to Her Majesty's Commands, prorogue this Parliament to Thursday the third day of November, to be then here holden, and this Parliament is accordingly prorogued to Thursday the third day of this instant November.
  End of the Third Session (opened on 24th November 1976) of the Forty-seventh Parliament of the United Kingdom of Great Britain and Northern Ireland, in the Twenty-sixth Year of the Reign of Her Majesty Queen Elizabeth the Second.

NATIONAL FINANCE
  Developing Countries (Debts)
  Developing Countries (Debts)
  Personal Incomes
  Personal Incomes
  Income Tax
  Income Tax
  Houseboats
  Houseboats
  £ Sterling
  £ Sterling
  Levies and Import Duties
  Levies and Import Duties
  Public Service Employees
  Public Service Employees
  London Metal Exchange
  London Metal Exchange
  Expenditure
  Expenditure
  Civil Servants (Retirement)
  Civil Servants (Retirement)
  PAYE Cheques (Collection)
  PAYE Cheques (Collection)
  Official Cars
  Official Cars
  Uncollected Taxes
  Uncollected Taxes
  Tax Avoidance and Evasion
  Tax Avoidance and Evasion
  Mr. Tom Jackson (Salaries and Expenses)
  Mr. Tom Jackson (Salaries and Expenses)
  Small Businesses
  Small Businesses
  Value Added Tax
  Value Added Tax
  Capital Movements
  Capital Movements
  Exchange Control
  Exchange Control
  Estate Duty and Capital Transfer Tax
  Estate Duty and Capital Transfer Tax
  Wages Policy
  Wages Policy
  Medical Practitioners (Agency Services)
  Medical Practitioners (Agency Services)
  Insurance Benefits (Private Practice)
  Insurance Benefits (Private Practice)
  Tax Allowances
  Tax Allowances
  European Community Budget
  European Community Budget
  Luncheon Vouchers
  Luncheon Vouchers
  Deputy Chief Economic Adviser to the Treasury
  Deputy Chief Economic Adviser to the Treasury
  Mobility Allowance
  Mobility Allowance
  London Commodity Markets
  London Commodity Markets
  Economic Affairs
  Economic Affairs
  European Assembly (Members' Salaries)
  European Assembly (Members' Salaries)
NORTHERN IRELAND
  Secretary of State (Engagements)
  Secretary of State (Engagements)
  Prisoners
  Prisoners
  "Day Care and Education for the Under Fives"
  "Day Care and Education for the Under Fives"
  Terrorism (Prevention)
  Terrorism (Prevention)
  Cross-Border Schemes
  Cross-Border Schemes
  European Community Funds
  European Community Funds
  DEVOLUTION
  DEVOLUTION
HOUSE OF COMMONS
  Sittings
  Sittings
  Members' Salaries
  Members' Salaries
  Members (Retirement)
  Members (Retirement)
  Interview Rooms (Access)
  Interview Rooms (Access)
  Non-Parliamentary Publications
  Non-Parliamentary Publications
ENERGY
  Western Approaches (Oil Exploration)
  Western Approaches (Oil Exploration)
  Park Colliery Staffordshire
  Park Colliery Staffordshire
  Hydrography
  Hydrography
  Murchison Oilfield
  Murchison Oilfield
  Dragon Reactor, Winfrith
  Dragon Reactor, Winfrith
  Windscale (Inquiry)
  Windscale (Inquiry)
  Conservation (Petrol Consumption)
  Conservation (Petrol Consumption)
  Electricity Discount Scheme
  Electricity Discount Scheme
  Energy Commission
  Energy Commission
CIVIL SERVICE
  Travel Expenses
  Travel Expenses
  Ministry of Defence Police
  Ministry of Defence Police
  Civil Servants
  Civil Servants
  Peers
  Peers
  Computers
  Computers
  Ministerial Travel
  Ministerial Travel
  Disabled Persons
  Disabled Persons
DEFENCE
  Recruitment
  Recruitment
  Deaths and Accidents
  Deaths and Accidents
  Electoral Registration
  Electoral Registration
  Married Quarters
  Married Quarters
  Widows' Pensions
  Widows' Pensions
  Hydrography
  Hydrography
  Gibraltar (Civil and Public Services Association)
  Gibraltar (Civil and Public Services Association)
  Fox Armoured Car
  Fox Armoured Car
  Overseas Allowance
  Overseas Allowance
  Service Men's Correspondence (Members of Parliament)
  Service Men's Correspondence (Members of Parliament)
  Northern Ireland
  Northern Ireland
  Small Arms Ranges
  Small Arms Ranges
  Submarines (Flag Officer's Staff)
  Submarines (Flag Officer's Staff)
  Army Air Corps
  Army Air Corps
  Queen Elizabeth Military Hospital
  Queen Elizabeth Military Hospital
  Overseas Costs
  Overseas Costs
  Harrier Aircraft (Sidewinder Missile)
  Harrier Aircraft (Sidewinder Missile)
  Army Youth Teams
  Army Youth Teams
  Police
  Police
  BAOR
  BAOR
  NATO Budget
  NATO Budget
  INLAND REVENUE APPEALS
  INLAND REVENUE APPEALS
  LAW OF DILIGENCE
  LAW OF DILIGENCE
  JURORS
  JURORS
  OVERSEAS REPRESENTATION (CPRS STUDY)
  OVERSEAS REPRESENTATION (CPRS STUDY)
  INFORMATION
  INFORMATION
  BISHOP OF BIRMINGHAM
  BISHOP OF BIRMINGHAM
  BAOR
  BAOR
  MINISTERIAL ADVISERS
  MINISTERIAL ADVISERS
  SECRETARY OF STATE FOR SOCIAL SERVICES (SPEECH)
  SECRETARY OF STATE FOR SOCIAL SERVICES (SPEECH)
PRICES AND CONSUMER PROTECTION
  Banks (Profits)
  Banks (Profits)
  Manufacturers' Recommended Price
  Manufacturers' Recommended Price
  Potatoes and Cereals
  Potatoes and Cereals
  Fireworks
  Fireworks
  Beer
  Beer
  Credit Cards
  Credit Cards
  Charities
  Charities
  Coffee
  Coffee
  Bread
  Bread
  Inflatable Dinghies
  Inflatable Dinghies
  Hearing Aids
  Hearing Aids
  Commercial Competitions
  Commercial Competitions
SOCIAL SERVICES
  Health Warnings
  Health Warnings
  General Practitioners (Deputising Services)
  General Practitioners (Deputising Services)
  Officers (Social Security Benefits)
  Officers (Social Security Benefits)
  Brain Scanners
  Brain Scanners
  Pensioners and Disabled Persons (Concessions)
  Pensioners and Disabled Persons (Concessions)
  Unemployed Persons (Costs)
  Unemployed Persons (Costs)
  Benefits (Contribution Years)
  Benefits (Contribution Years)
  Mentally Handicapped Persons (Surrey)
  Mentally Handicapped Persons (Surrey)
  Fraud
  Fraud
  Special Investigators
  Special Investigators
  Football Grounds (Handicapped Persons)
  Football Grounds (Handicapped Persons)
  Disabled Housewives
  Disabled Housewives
  Hospital Patients (Relatives' Visits)
  Hospital Patients (Relatives' Visits)
SOCIAL SERVICES
  Leicestershire and Trent
  Leicestershire and Trent
  Community Health Councils
  Community Health Councils
  Foreign Nationals
  Foreign Nationals
  Disabled Persons (Local Authorities)
  Disabled Persons (Local Authorities)
  "The Way Forward"
  "The Way Forward"
  National Health Service Acts
  National Health Service Acts
  Consultative Documents
  Consultative Documents
  Kirklees (Pay Beds)
  Kirklees (Pay Beds)
  Immigrant Doctors
  Immigrant Doctors
  Health Authorities
  Health Authorities
  Invalid Tricycles
  Invalid Tricycles
  Hospital Consultative Committees
  Hospital Consultative Committees
  Drugs
  Drugs
  Childbirth
  Childbirth
  Mental Hospitals
  Mental Hospitals
  National Health Service
  National Health Service
  Kidney Machines
  Kidney Machines
  Death Grant
  Death Grant
  Jaundice
  Jaundice
  Children in Care (Deaths)
  Children in Care (Deaths)
  Service Personnel (Benefits)
  Service Personnel (Benefits)
  Allowances
  Allowances
  Disablement Benefits
  Disablement Benefits
  Invalid Vehicle Service
  Invalid Vehicle Service
  Hospital Kitchens (North-West Surrey)
  Hospital Kitchens (North-West Surrey)
  Industrial Disputes and Sickness
  Industrial Disputes and Sickness
  Acrylonitrile Monomer
  Acrylonitrile Monomer
  Hospital Consultants (Waiting Lists)
  Hospital Consultants (Waiting Lists)
  Health Authorities (Opinions)
  Health Authorities (Opinions)
  Vitamin Tablets (Revenue)
  Vitamin Tablets (Revenue)
  Blood Services (Revenue)
  Blood Services (Revenue)
  Cochlear Implants (Physicians)
  Cochlear Implants (Physicians)
  Central Middlesex Hospital
  Central Middlesex Hospital
  Hospital Practitioner
  Hospital Practitioner
  Benefits
  Benefits
  Hostels and Lodging Houses
  Hostels and Lodging Houses
  Children at Risk
  Children at Risk
  One-parent Families
  One-parent Families
  Oral Contraceptives
  Oral Contraceptives
  Dextropropoxyphene Hydrochloride and Carbamazepine
  Dextropropoxyphene Hydrochloride and Carbamazepine
  Antenatal Care
  Antenatal Care
  Handicapped Persons (Rehabilitation)
  Handicapped Persons (Rehabilitation)
  Drug Samples
  Drug Samples
  Handicapped Persons (Dental Care)
  Handicapped Persons (Dental Care)
  Medical Practitioners (Expenses)
  Medical Practitioners (Expenses)
  Greenwich and Bexley (Hospital Beds)
  Greenwich and Bexley (Hospital Beds)
  Immigrants (Tuberculosis)
  Immigrants (Tuberculosis)
  Artificial Limb Socket
  Artificial Limb Socket
  Personal Incomes
  Personal Incomes
  Maternity Services
  Maternity Services
  Bone Marrow Donors (Register)
  Bone Marrow Donors (Register)
  Chronically Sick and Disabled Persons Act
  Chronically Sick and Disabled Persons Act
  Mobility Allowance
  Mobility Allowance
  Wheelchairs (Repairs)
  Wheelchairs (Repairs)
  Mobility Allowance (Handicapped Children)
  Mobility Allowance (Handicapped Children)
  Retirement Pensioners (Heating Allowance)
  Retirement Pensioners (Heating Allowance)
  Pension Books (Information)
  Pension Books (Information)
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  Birth Rate
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HOME DEPARTMENT
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  Fines
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  Parliamentary Electorates
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  Terrorism Prevention
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  Police (Complaints)
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  Cable Television
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TRADE
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INDUSTRY
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OVERSEAS DEVELOPMENT
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EDUCATION AND SCIENCE
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TRANSPORT
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AGRICULTURE, FISHERIES AND FOOD
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SCOTLAND
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EMPLOYMENT
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  Ford Motor Company Ltd.
  Ford Motor Company Ltd.
  LAWYERS (GOVERNMENT SERVICE)
  LAWYERS (GOVERNMENT SERVICE)

Preamble
Reassembling after the Summer Recess, the House met at half-past two of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of St. Albans):
The LORD CHANCELLOR On the Woolsack.

LORD SCARMAN
The Right Honourable Sir Leslie George Scarman, Knight, OBE, a Lord Justice of Appeal, having been appointed a Lord of Appeal in Ordinary and thereby created a Baron for life, by the style and title of Baron Scarman, of Quatt in the County of Salop—Was, in his robes, introduced between the Lord Shackleton and the Lord Wilberforce.
The Duke of Portland—Sat first in Parliament after the death of his kinsman.
The Marquess of Linlithgow—Took the Oath.
The Earl Spencer—Sat first in Parliament after the death of his father.
The Viscount Oxfuird—Sat first in Parliament pursuant to the Peerage Act 1963.
The Lord Torphichen—Sat first in Parliament after the death of his father.

BUSINESS
2.41 p.m.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, my noble friend the Leader of the House will repeat later this afternoon a Statement being made in another place on the economic situation. For the convenience of the House, as soon as the Statement is begun in another place it will be announced on the television annunciators that the House will resume in five minutes. It is expected that this will be shortly after half-past three.
House adjourned during pleasure.
House resumed.

ECONOMIC MEASURES
3.37 p.m.
The LORD PRIVY SEAL (Lord Peart): My Lords, with the leave of the House, I will now repeat a Statement being made in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is as follows:
"Economic situation
"Since the House debated the economic situation in July, the improvement in our financial position has been greatly strengthened. Confidence in Britain's future has been powerfully reinforced both at home and abroad. As a result we are now in a position to take further measures to improve the outlook for employment and to bring the growth of output on to its intended path.
"It is now clear that both in the United Kingdom and in the world as a whole the recovery in demand and activity is weaker than was expected in the summer. The latest meetings of the International Monetary Fund and of the Finance Council of the European Community have agreed that the industrialised world should take steps to stimulate demand and that Britain is in a position to join in this collective effort.
"The Government have made it clear that they aim at a steady and sustained expansion and are determined to avoid the risk of over-heating the economy with the damaging consequences for growth, inflation and the balance of payments which we saw four years ago. For this reason the decisions I shall now announce are part of a programme for economic expansion spreading over 18 months. Our main objective must be a continuing fall in the level of unemployment. In framing measures to this end the Government have been guided by four main considerations. The measures should be quick-acting, they should reinforce the attack on inflation and assist the industrial strategy, they should be fully consistent with our financial commitments for the current year and they should run no risk of over-extending our finances in 1978–79 or of unnecessarily prejudicing the possibility of further measures in the next spring Budget.
"Our basic economic strategy remains as I described it in my March Budget. I now see scope for measures within the framework of that strategy costing a little over £1 billion in the current year and £2 billion in the next financial year.
Income Tax
"First, measures affecting the next financial year 1978–79. The House decided this summer to commit the Government to increasing personal tax allowances each spring in line with the rate of price increase over the previous calendar year unless they sought explicit permission to do otherwise. I believe it is right that we should not seek to waive this requirement in the coming year. The Government therefore plan to raise tax thresholds for the next financial year as laid down in the Finance Act 1977. This is likely to require a 12 per cent. increase in personal allowances above the level set by the 1977 Finance Act, at a cost of around £1,200 million in a full year.
Public Expenditure
"In the summer the Government announced very substantial increases in child benefits for the coming year, measures to implement the Holland Committee's proposals on manpower and training, and a major increase in the number of children eligible for free school meals; together these increases in public expenditure will cost some £475 million at 1977 Survey prices.
"The Government recognise that exceptional difficulties are now faced by the construction industry. They have therefore decided to increase expenditure next year on construction by the central Government and local authorities by £400 million at Survey prices over and above the existing plans. The allocation of this additional amount between different programmes will be announced as soon as possible. The full effect of this decision will be to increase employment by some 30,000.
"The Government have also decided on certain smaller increases in public expenditure programmes for next year. They are increasing the overseas aid programme by £20 million. They are increasing the law and order programme by £9 million to provide additional resources for police cadets,
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civilian support, police vehicles and equipment and also for the prisons and the community service schemes. There will be additional provision in the social field to help the disabled by a further increase in mobility allowance next year and to ease the strain on hard pressed health authorities. There will be provision to enable schools to take on some more teachers to meet the needs of children in deprived areas and for small additions to the budgets for science and the arts. Allowing for these decisions and the measures announced in the summer, public expenditure next year is being increased by £1 billion at 1977 Survey prices.
"The public expenditure survey will be completed and the usual White Paper published around the turn of the year. This will also incorporate any further adjustments in the expenditure figures, such as any changes resulting from discussions with the banks about the refinancing of export and shipbuilding credits.
"Beyond these decisions on income tax and public expenditure in 1978–79 I have left myself freedom to make further changes in the 1978 Budget according to developments in the economy and particularly the prospect for inflation. If economic and financial circumstances permit, I intend to make some further reduction in the burden of personal taxation. For example, as I explained in my Budget Statement last March, there is a strong case for reducing the poverty trap by progressively raising the personal tax thresholds until they stand clear above the levels of the main social security benefits. There is also a strong case for introducing a reduced rate band of tax.
"However, there can at this stage be no assurance that the economic situation will in fact permit a further net reduction in taxation over and above the major reliefs which I am announcing this afternoon. The scope for any further move in this direction—and a reduced rate band of tax, in particular, could be very expensive—will depend crucially on the development of the economy between now and next April, and above all on the trend of pay settlements, measured against the Government's guidelines.
IMF standby
"I now turn to certain aspects of our overseas financial position. In our present circumstances, it would clearly be wrong for us to take up any further drawings on our standby with the IMF. We will therefore not take up at the end of November the special drawing rights 310 million which then becomes available. The Managing Director of the IMF has been informed of this decision. Our full drawing rights under the standby will, of course, remain intact. We intend to keep the standby in place until its expiry at the end of next year, and mid-term discussions with the IMF on our economic strategy will shortly be taking place as envisaged in our Letter of Intent.
Exchange Control
"The change in our financial situation also makes possible some adjustments in exchange control. First, I am making certain changes intended to help maintain or increase the overseas earnings of the financial services sector. For this purpose, I am relaxing somewhat the rules governing the amounts which insurance companies, banks and merchants are allowed to retain in foreign currency for the purpose of their businesses.
"Secondly, I am further liberalising the rules permitting non-resident controlled manufacturing companies to borrow sterling for investment in their business in the United Kingdom.
"Thirdly, I have decided to relate more closely to current money values the rules governing travel abroad, cash gifts and the basic allowances for emigrants. For example, the foreign currency facilities which can be obtained from authorised sources without reference to the Bank of England are being increased from £300 to £500 per journey for holiday travel and from £75 to £100 a day within a £3,000 maximum for business journeys. Details are contained in a Treasury Press notice which is being issued today.
Small Firms
"As the House knows, my right honourable friends the Chancellor of the Duchy of Lancaster and the Chief Secretary and my honourable friend the Parliamentary Secretary, Department of Industry, have been studying the
1214
problems of small firms. This study is still continuing, but I am now able to announce its first conclusions—mainly but not exclusively for changes in taxation.
"It is argued that the taxation of business transfers is an inhibition on the growth of small firms. The 30 per cent. business relief for capital transfer tax will be increased to 50 per cent and it will be extended to deferred charges on forestry. There will also be a relief of 20 per cent. for minority holdings in unquoted companies. These additional reliefs will be limited to transfers of up to £½ million. I have also decided to increase the threshold for liability to capital transfer tax from £15,000 to £25,000. These changes will apply to transfers after today. The total cost will be £10 million in the current year, £65 million next year and £100 million in a full year.
"To encourage businessmen to retain their profits in the business, I have decided to increase the threshold for the apportionment of trading income of close companies to £25,000. This will cost up to £5 million next year and £20 million in a full year.
"The Government will also be considering before next year's Finance Bill certain further tax changes which could be of substantial help to small firms.
"Very briefly, there are two proposals to encourage new businesses—the possibility of carrying back losses in the early years of an unincorporated business to set against the owner's other income in earlier years; and allowing relief from capital gains tax where a loss is made on a loan to a business. Then there is the possibility of tax facilities to help farmers and perhaps other unincorporated businesses plan their investment programmes.
"In addition, the Chancellor of the Duchy of Lancaster will be announcing a number of other measures costing about £½ million for the current year and £2½ million next year, which will help smaller firms to increase investment and employment. Further details of the improvements in the treatment of small firms are set out in a Press statement by my right honourable friend the Chancellor of the Duchy of Lancaster:

1215
copies of that and other Press notices are available in the Vote Office.
"I now turn to my fiscal proposals for the current year 1977–78.
Tax
"We can now be confident of substantial head-room below the ceiling which I set for the public sector borrowing requirement this year. It is important that we should take advantage of this head-room by measures which are quick acting and which have a maximum effect in bringing unemployment down as soon as possible. The measures should also, if possible, reinforce our attack on inflation and our commitment to the industrial strategy. This points strongly to the speediest possible reduction in income tax.
"I have therefore decided to bring forward the 12 per cent. increase in the main personal income tax allowances which I have just undertaken to make next April in accordance with the Finance Act 1977, and to implement it straight away. The Inland Revenue are making a major effort in order to make possible this further cut in income tax for the current year. I wish to place on record my appreciation to all the hard-pressed staff concerned.
"In order to make room for the additional work the Government have decided to exempt from tax for the current year, 1977–78 only, the increase in National Insurance pensions and in other social security benefits which will come into effect next month. The cost will be £40 million.
"This further raising of tax thresholds means that the single personal allowance will be increased by £100 to £945; the married allowance will be increased by £160 to £1,455; there will be a consequential increase to £510 in the additional personal allowance; and there will be a similar percentage increase to new totals of £1,250 for the single age allowance and £1,975 for the married age allowance. These reliefs will have effect in the normal way from the beginning of the present fiscal year. The cost will be £940 million in the current year.
"These further increases in personal allowances will take around 900,000
1216
people out of tax. This is in addition to the 1·2 million people already taken out of tax by this year's Finance Act.
"I hope that it will be possible for most wage-earners to receive the benefit of these reliefs in their first pay packet after 22nd November, and for the remainder in their first pay packet after 6th December.
"Thus, most people can expect to receive a tax rebate in their pay packet before Christmas of some £20 for a single person, and £35 for a married man. Thereafter, the relief will be worth approximately 65p a week for a single person paying basic rate tax, and £1·05 for a married man.
"Further details of these measures are included in Press notices being issued today.
"These reliefs will represent a significant further addition to take-home pay in the current pay round. For a married man on average earnings they will be the equivalent of an addition of £1·74, or nearly 2¼ per cent., to his weekly gross pay. When we add in the effect of the tax reliefs in my spring Budget, this figure rises to the gross equivalent of some £5 per week, or nearly 6½ per cent. This is, of course, in addition to the 10 per cent. average increase in gross earnings which is provided for under the Government's pay guidelines. The overall total of some 16½ per cent. contrasts with an increase in retail prices which is now well on course for single figures in the first half of next year. It means some increase in living standards in the current pay round. I look to those responsible on both sides of the negotiating table to give full weight to these considerations in reaching settlements during the remainder of the round.
Help for pensioners
"I do not think it is right at a time when working people as a whole are receiving a cash rebate on this scale before Christmas to do nothing similar for those who have retired. The 2½ million pensioners who now pay tax will, of course, benefit from the measures I have already announced. However, the majority of pensioners do not pay tax. The Government have therefore decided to pay a special tax-free bonus

1217
of £10 to pensioners in the week beginning 5th December. The cost of £100 million will be met from the contingency reserve.
Procedure
"The Government will introduce early in the next Session a Finance Bill and the necessary Resolutions to implement the proposed tax reliefs for the current financial year. The proposed reliefs for capital transfer tax and other changes affecting small firms will be provided for in the Finance Bill following the spring 1978 Budget.
The Economic Prospect
"These measures will raise the public sector borrowing requirement to a figure now estimated at some £7½ billion in the current year and to about £7 billion in 1978–79. Both these figures are within the Government's ceiling. They are consistent with keeping growth of the monetary aggregates in the current year within our financial commitments, and with a similarly firm control of monetary growth in 1978–79.
"The measures are estimated to raise domestic output by about ½ per cent. in the first quarter of 1978, rising to about 1 per cent. in the first quarter of 1979. On the conventional arithmetic, this could produce an increase in employment in these quarters of 30,000 and 170,000, and lead to a reduction in unemployment, compared with what it would otherwise have been, of some 20,000 and 110,000 respectively. But I have to say again that the prospects for the economy as a whole depend crucially on what happens to inflation. I am publishing today a further half-yearly economic forecast, as provided under the Industry Act 1975. This forecast assumes an average earnings growth of 10 per cent. in the current pay round, consistent with the Government's guidelines. On this critical assumption, the growth of domestic output could strengthen significantly over the next 12 months to a figure in the region of 3 per cent. Growth at this rate would be rather above the trend growth of productive potential. As the House will know, the timing and scale of unemployment movements has proved extremely difficult to predict—witness the encouraging figures published yesterday. But growth at this rate, if we can
1218
sustain and build on it, will turn the trend of unemployment firmly downwards.
"Within this overall rate of growth, there should be a considerable recovery in real take-home pay and personal consumption. The rate of price increases could continue to fall to a level, by the end of next year, not far above that of our main competitors.
"By contrast, however, if pay settlements edge up towards, say, 15 per cent., and the rate of inflation moves back into double figures, we are likely to be faced not only with slower growth next year, but also with less scope for fiscal relaxation. Thus, we are now at a turning point. If we falter now, we can lose the ground we have gained in the last 12 months and find ourselves once more wrestling with high inflation, slow growth, and rising unemployment. I believe the measures which I have announced this afternoon will help the British people to choose instead a better course—to build on the gains they have already won, and to achieve a sustained reduction in inflation together with a steady growth in jobs, in output, and in living standards."
My Lords, that concludes the Statement.
3.59 p.m.
Lord CARR of HADLEY: My Lords, may we first thank the noble Lord the Leader of the House for repeating the Chancellor's Statement to us. I am sure that he and the whole House will understand that it would be difficult, and indeed foolish, to try to comment in any depth on the proposals we have heard, and perhaps one day of our debate on the Address, in a week or two's time, may give us the opportunity to do that. But may I make some preliminary comments, and ask one or two questions.
First, may I say how warmly we welcome from these Benches the improvement in Britain's financial position which has made this relaxation possible. At the same time, I think we are entitled to remind the Government that this financial improvement, which is so welcome, is entirely due to the fact that, at long last, over the last year, and on the orders of

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the IMF, the Government have been pursuing policies and taking the actions which we from these Benches, in both Houses, have been pressing on the Government now for a number of years. Had those actions been taken earlier, the sufferings of this country and the loss of the standard of living in this country could have been much less than they have been.
According to a report in The Times of 5th October, Mr. Healey told a meeting at the Labour Party Conference that if one's object is to increase employment opportunities quickly then that is where income tax scores very high, especially if done in certain ways. My Lords, we agree very strongly. Therefore, we welcome very strongly the income tax reductions announced today. But why, must we also ask, not much sooner? And if indeed there is, as we believe there is, this close relation between a very high level of income tax and a very high level of unemployment, why is it that Mr. Healey is still content to have a level of income tax, even after these reductions, which is very much higher indeed than was the case when he became Chancellor nearly four years ago?
I have a second, more specific, question about income tax, about which I am not quite clear. I do not understand how the Chancellor can estimate in October what in fact will be the cost of the indexation of the allowances required under the 1977 Finance Act by next April. I think the noble Lord told us that there is a 12 per cent. increase, and that the Chancellor was going to bring it forward now. May I ask this; Is 12 per cent. the degree of indexation which is required at October, and might there therefore be a further addition required next April; or is 12 per cent. some projection of what is likely to be the figure next April? If it is the latter, does the Chancellor undertake to make good if, when next April comes, the 12 per cent. in fact appears to be insufficient to index the allowances, as I believe Parliament decided earlier this year?
Turning to the other measures, may I say that I welcome the extra help for the construction industry. It always seemed to me peculiarly lacking in economic effect and peculiarly damaging
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to impose all the constrictions and reductions on the construction industry which Government policy has imposed over the last year or two. Coming to overseas affairs, we certainly welcome the relaxation in the exchange control regulations which were mentioned. Whether they go far enough will, I think, be a matter which we shall have to consider more deeply. We certainly welcome the help, immediate and, still more, projected, for small firms and new enterprises; and particularly we welcome the proposed changes in the capital transfer tax. But we warned the Chancellor and the Government of these ill-effects on small businesses and new enterprises when he introduced that tax in 1974. Indeed, I was at the time the "shadow Chancellor" in another place, and I spent a lot of time warning him and urging on him the need to make the changes which now, nearly four years later, he is at last making—and, again, we cannot repair the damage which has been done by his ill-considered policies in the meanwhile. We also welcome, of course, the tax-free bonus to pensioners, which is another little repentance. There has been a return to good Conservative policy in this respect, and we certainly welcome it.
In the social field, I think that, so far as one can judge as such, the measures are welcome, but I really must sound some warning—of course, they must be looked at rather more closely—and say this. We on these Benches believe strongly that, now that we are at last painfully reducing both the size of the public sector borrowing requirement and the burden of direct taxation, it would be utter folly to add to public expenditure to an extent which would need a reversal of either or both of these policies; and if the increased public expenditure projected for next year should require either an increase in the public sector borrowing requirement again or in direct taxation, I must warn the Government that we shall attack them very strongly from this side.
My Lords, as I said at the beginning, these measures require further thought and further debate. May I repeat that we welcome much that appears to be contained in them because they are made possible by the very welcome improvement in our financial position. But, although the financial position of our country has

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improved, the underlying industrial position—in other words, the position of the real economy—is still extremely worrying, and our balance of payments would still be extremely worrying were it not for the very welcome and valuable contribution from North Sea oil. Until the Government really address themselves to that position I do not believe this country will be moving out of its difficulties, and least of all will it be on the verge of any golden era. You cannot have a successful business or country if the financial position is unsound, but you can have a sound financial position and still have an unsuccessful economy or business. So I hope that the Government will follow up these measures with really concentrated thought on what is needed to release the impetus of efficiency and output in this country.
4.7 p.m.
Baroness SEEAR: My Lords, we on these Benches should also like to thank the noble Lord the Leader of the House for the Statement which he has given us this afternoon, and, certainly, to congratulate him on the main points that are in it. We of course welcome the taxation reductions. They are not unexpected, but very welcome when they come. We have long believed that the level of tax was far too high, and this preliminary curtailment of tax is something which we are very glad to see. We must regret (though we can understand the reason) that it has not been possible at this stage to introduce a lower first tax band. We still consider that to move from a position of no tax to 35 per cent.—to the full standard rate—is very regrettable indeed. It is a great discouragement to people, and it keeps the poverty trap where it has always been. We hope that the Government will give high priority to finding ways in which there can be a lower level at which the first band of tax begins. We fully understand that part of the difficulty is that the Inland Revenue have to make constant adjustments to match the Government's constant new thoughts on how to deal with the economy, and that that is very hard on them. Indeed, we should like to convey to them how readily we realise the strain put on the Inland Revenue by bringing about these changes; but we hope that any reluctance on their part will not mean that we cannot
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move towards a reduction in the level of the first band of tax as soon as possible.
We would congratulate the Government on getting what appears to be just about the right balance as to the amount of extra purchasing power which is being released and the encouragement for employment which that brings about, and on having resisted the temptation, which must have been strong, to go for a bigger reduction at this time. That would have been extremely popular but also extremely dangerous.
The hope that we can go for a 3½ per cent. growth rate is a hope that we welcome, but with some trepidation. We in this country have not, over any period of time, sustained a 3½ per cent. growth rate and, before the Government move into further reductions, even in the spring, we would urge that they monitor extremely closely both the degree of growth which we are in fact getting and, of course, as the Leader of the House has said, the extent of pay increases. We could easily get into the position which arose when the Conservative Government went for a 5 per cent. growth rate and failed to monitor adequately—presumably this was the reason why they did not take corrective action soon enough—that that growth rate was not being achieved. That contributed to our moving back into a high inflation situation.
There is in the present situation a real danger that this may happen with an expectation of a 3½ per cent. growth which we may not get and a tax reduction which, with the 10 per cent., even if it is kept to 10 per cent., means 16½ per cent. against a hoped-for 3½ per cent. growth rate. Can we be assured that there will be the closest watch put on all these indicators so that we know whether we can afford to have greater relaxation later? While these relaxations mean an increase in employment, any return to inflation will be incomparably worse for the employment situation and not to be compared with any small improvement which the present policy may achieve.
We would also welcome the help being given to the small firms. As I think is well known, this has been one of the major concerns which we from these Benches have been pressing hard on the Government. While other Parties may

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say that concern for the small firms has always been a high priority, neither of the two Parties which has been in Government has succeeded in doing very much for the small firm in the past. We are glad that this message has got over and that steps are being taken, partly because the percentage of small firms in this country is already far too low in comparison with our competitors and also because the small firm is an instrument whereby unemployment is very effectively mopped up. On that we would agree; and more power to the Government's elbow to do all they can for the improvement of the position of the small firms!
The help to the construction industry is welcomed. We wish that it could come sooner. Perhaps I did not quite get this point clear, but I understood the noble Lord the Leader of the House to say that this would not have much effect until after Christmas. Is it not possible that it could be of more immediate assistance to the construction industry? Is it too much to ask that Governments of any complexion should stop treating the construction industry, a very vital industry in this country, as an instrument for dealing with the country's economic problems? The ducks and drakes that have been played with the construction industry make it extremely difficult for that industry to meet the policies when Governments return and wish them to get under way again. May I give, inevitably from me but sincerely, a word of warning that is already coming from the construction industry: When the recovery starts there will be a shortage of skilled trades. May I ask the Government now, as a matter of urgency, to ask the Training Services Agency in the Manpower Services Commission what they are doing to ensure that the skilled men are there when the recovery in the construction industry starts? This needs to be done yesterday!
Lord ORR-EWING: My Lords—
Lord PEART: My Lords, it is traditional to reply first to the Opposition, and also to our Liberal colleagues. May I say to the noble Lord that I am grateful for his praise. No doubt he found it difficult to criticise. Many of the points I have put forward on behalf of the Chancellor will, I think, be welcomed not only by the
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Tory Party and the Liberal Party but by the British people. That is important. I think we are at a turning point and I am not going to be pessimistic. I was asked about the 12 per cent. Is it a projection of the retail price rise over the 12 months to December 1977? This is the indexation span specified by the 1977 Finance Act. I would only say to the noble Lord, Lord Carr, that Tory Governments were never very successful. I can go back four years when they failed to deal with pressing problems and it was a Labour Government who had to come back and do things. There is no question about this. I do not apologise for what we announced today. The fact is that noble Lords opposite know that they cannot criticise seriously.
I am grateful for the words of the noble Baroness who spoke for the Liberal Party. I agree with her on many issues. I think she is right and fair to raise the matter of the small firms. I myself have always thought that the small firms should have careful help, especially in development areas. I know the contribution they make and how often they grow and provide employment. Many of us have read the Bolton Report; but we have acted. Here is an example where we are not doctrinal in any way but just anxious to get the economy going. I know that we have the support of the Liberal Party on this. I take note of what the noble Baroness said about the construction industry, and whether the start could be advanced. I will convey the strong views that she has put to my right honourable friend the Chancellor of the Exchequer. If something can be done, I will try to have an announcement made when we debate the gracious Speech. We will have an economic debate there; and no doubt noble Lords will be able to further the points they have raised today. If I do not cover every question, I will also try to answer them in that debate.
Lord ORR-EWING: My Lords, could the noble Lord the Leader of the House clarify one or two points? Toward the end of the Statement the Chancellor said that all this amelioration of our very heavy taxation depended on an average earnings growth of 10 per cent. He will also remember that the guideline that the Government have given is that there should be a basic wage increase in industry plus

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a productivity deal, quite understandably, to encourage us to become more productive in industry when productivity is at a very low ebb. It was suggested that a 6 per cent. basic plus a productivity deal would be acceptable. Now he is saying that this is a gross earnings increase—that was the phrase, I believe, in the last page of the Statement—10 per cent. in earnings. Is this a misunderstanding? Perhaps he could clarify this. This would mean, with a productivity bonus on top of 10 per cent. basic, earnings increases nearer to an average 15 per cent. This will make it very difficult for the Chancellor to honour his obligations.
Secondly, does he think it is right, while giving £9 million to improve law and order at a very crucial moment in this country when the police forces are in desperate need of reinforcement, encouragement and better pay, to give £20 million—more than twice as much—to overseas development? Is this really the right priority? Ought he not to look at this again and perhaps reverse those figures? Lastly, why is it when we were told solemnly from the Government Benches of both Houses that as soon as the economy permitted they would honour their obligations to NATO and to the President of the United States by increasing defence expenditure by 3 per cent. in real terms, nothing is said in this Budget? The noble Lord has assured us that this is not a doctrinal Budget. Is it not aimed more at votes in a forthcoming General Election?
Lord PEART: My Lords, I do not think so. It is a sensible Budget to meet problems which are there and it has been welcomed in parts by the Leaders of the Front Benches. There is no doubt about the praise for this and what we are doing. The Tories naturally argue that it would have been done by them in any case. But we have done it. On the one point about the 10 per cent., I am not sure about that. I have tried to verify it but what I have said is, I think, the correct position. The noble Lord raised questions about police expenditure. This is in addition to what has already been given previously. It is something positive and I think it will be very welcome.
On NATO, I think I should leave that to the debate. It is not mentioned in the Chancellor's Statement. I understand the views of the Opposition on this. They
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I feel strongly about it. No doubt we shall be able to discuss it in the debate on the gracious Speech.
Lord BALOGH: My Lords, does my noble friend not think that relaxation of exchange control on the basis of hot money flows is rather hazardous, as was shown in 1951–55 and 1959–61 et cetera? When shall we learn that we should distinguish between real improvement and seeming improvement?
Lord PEART: My Lords, I agree that there is improvement. I am not as learned on economic matters as the noble Lord. I believe that the policy and strategy of the Government in this Statement is the right one for this country. It may be true that we have to be careful about exchange control, as the noble Lord mentioned.
Lord HARMAR-NICHOLLS: My Lords, is the noble Lord aware that the sluggishness in industrial development at the moment is less due to the supply of funds than it is to do with the general feeling that employment regulations make it almost impossible for management to manage? He mentioned in the Statement that the Chancellor of the Duchy and the Treasury were looking into these matters together. Have they the power to look into this question as to how much employment regulations are the cause of quite a bit of the unemployment that we are facing?
Lord PEART: My Lords, I would not necessarily accept that, but I will look at the point and have a word on this matter with my right honourable friend the Chancellor of the Duchy.
Lord JACQUES: My Lords, may I ask whether the measures which have been outlined will have any substantial effect on the number of civil servants?
Lord PEART: My Lords, I would say, No. The cuts in Civil Service expenditure which we announced last year will still be made. As I have always said from this Box, the Government attach great importance to keeping a tight control on the costs of administration.
Viscount ECCLES: My Lords, the noble Lord mentioned the small increase

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for the arts. May I ask him two questions on that? First, will he recognise that there are certain national institutions which are in great financial difficulty at the moment, and if there is to be a small increase they should share it? Secondly, on the £400 million building grants, will any of that go to arts and libraries? That not only would promote building labour employment, but would give employment to artists who are out of work.
Lord PEART: My Lords, I am not sure about the second part of that question. I was under the impression that it would affect the construction of any building including schools and hospitals. Indeed, if they are essential buildings in the field of the arts, I see no reason why they should not be included. Again, I will certainly raise this issue with the Chancellor; it is an important point and I think it will apply. Mention was made of whether national institutions would be able to share. I will be quite frank; I am not sure. I will look into it.

UNFAIR CONTRACT TERMS BILL
Returned from the Commons with their Amendments to the Lords Amendment not insisted on.
4.23 p.m.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, I beg to move that the House do now adjourn until five o'clock for the Royal Commission.
Moved accordingly, and, on Question, Motion agreed to.
House adjourned during pleasure.

  IMMIGRATION AND UK CITIZENSHIP
  IMMIGRATION AND UK CITIZENSHIP
  BELIZE
  BELIZE
  HOUSING: UNDER-SPENDING
  HOUSING: UNDER-SPENDING
  CHIROPODISTS' FEES
  CHIROPODISTS' FEES
  THE PRISON SERVICE: TEXTILE PURCHASES
  THE PRISON SERVICE: TEXTILE PURCHASES
  THE NHS: TEXTILE PURCHASES
  THE NHS: TEXTILE PURCHASES
  TRANSPORT POLICY
  TRANSPORT POLICY
  ROYAL COMMISSION
  ROYAL COMMISSION
  PROROGATION: HER MAJESTY'S SPEECH
  PROROGATION: HER MAJESTY'S SPEECH