Sitting of 10 April 1978

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

    British Steel Corporation
    Mr. Neubertasked the Secretary of State for Industry when he next expects to meet the chairman of the British Steel Corporation.
    Mr. Richard Pageasked the Secretary of State for Industry when he next expects to have a meeting with the chairman of the British Steel Corporation.
    Mr. Nelsonasked the Secretary of State for Industry when he next expects to have a meeting with the chairman of the British Steel Corporation.
    Mr. Michael Marshallasked the Secretary of State for Industry when he next expects to meet the chairman of the British Steel Corporation.
    The Secretary of State for Industry (Mr. Eric G. Varley): I keep in frequent contact with the chairman, whom I last met on 5th April. There is no firm date for the next meeting.
    Mr. Neubert: Is it not its poor productivity performance, which is particular to us and is not due to the world recession, which puts the British steel industry at an extra disadvantage as compared with those countries which have an excellent record of reducing manning levels? Will the right hon. Gentleman give support to the proposed incentive scheme offering more pay for more output?
    Mr. Valley: I do not think that the hon. Gentleman would want to give the impression that the problems of the British Steel Corporation are unique to
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    the Corporation. There are major world factors. Along with my colleagues, I am giving support to the productivity changes in the Corporation and to the incentive proposals.
    Several Hon. Members—
    Mr. Speaker: I shall call first those hon. Members whose Questions are being answered.
    Mr. Page: When the right hon. Gentleman next speaks to the chairman of the BSC, will he impress on him the necessity to invest in winners and profit earners, such as the plant at Workington, and ensure that the investment in the new coking ovens there should be carried out as soon as possible? Will he recognise that, while there are surpluses in coke at the moment, with other plant closing down it is essential that these plants at Workington start up immediately? Will he therefore tell us whether the investment is to go in and, if so, when?
    Mr. Varley: I have not attended to this matter personally, but I have asked for these factors to be drawn to the hon. Gentleman's attention. For example, I understand that the existing coke ovens will remain in operation. The Corporation has told its work force that the scheme to rebuild the coke ovens at Workington is to be deferred at the moment but will be reviewed in mid-1979.
    Mr. Nelson: Following the thoughtful and welcome White Paper last week on the nationalised industries and the change in his relationship with the chairman of the board of the Corporation, does the right hon. Gentleman expect the Government—and, if so, when—to bring forward an announcement of a financial target for British Steel? Does not he agree that it is sadly wrong that the Corporation should not have a financial target, bearing in mind that nearly all the other nationalised industries have such targets statutorily applying to them?
    Mr. Varley: The relationship between the Corporation and the Government is a good one. I have paid tribute to the work that Sir Charles Villiers and the management have done over the last few weeks. There is a particular problem over a financial target for British Steel. I made it plain in my statement to Parliament on the publication of the White

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    Paper that we would be looking at the possibilities of capital reconstruction when the market situation became more certain, and in any event I shall be laying legislative proposals before Parliament very shortly.
    Mr. Marshall: When will the right hon. Gentleman and Sir Charles Villiers agree the text of the Government's reply to the various reports on steel by the Select Committee on Nationalised Industries? Does the right hon. Gentleman recognise, after his perhaps rather ill-tempered start, that there are many recommendations that he himself has described as useful and which require urgent decision and debate, particularly such matters as manning agreements?
    Mr. Varley: I never lose my temper. On the basis of the Select Committee's report, we are working on our reply over the next few weeks. I expect that that reply will be published in the usual form, that is, as a White Paper. It will be published and laid before Parliament in time for debate on the legislation I have just referred to.
    Mr. Roy Hughes: Will my right hon. Friend confirm that the Government are fully committed to saving the British steel industry whereas the Conservative Party, with its persistent sniping, seems quite happy for it to go to the wall? Will he note the response of the work-people to the Government's lead—for example, at Llanwern, which is breaking all records at present? Will he consider visiting that plant in the near future in order to show his appreciation to the workpeople involved?
    Mr. Varley: I join with my hon. Friend in saying that the measures announced by the Government have saved the British steel industry. If we had not taken the action we took, the position would be much more serious. We have to get ahead with the modernisation of British Steel and make sure that we have a substantial steel industry capable of meeting the needs of British manufacturing industry.
    Mr. Hardy: Will my right hon. Friend remind Conservative Members who take an excessively critical view of many sectors of British industry, particularly the public sector, that the British steel industry today is affected by world
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    developments? Will he confirm that the British steel industry is operating nearer to capacity than the steel industries in Europe, and perhaps even the steel industry in Japan?
    Mr. Varley: I think that that is broadly correct. In fact, most steel industries throughout the world of comparable size to British Steel, whether privately owned or publicly owned, are in some difficulty. We shall ensure that the British steel industry remains substantial, and we want to get it back to viability and profitability as quickly as possible.
    Mr. Patrick McNair-Wilson: Is the Secretary of State aware that the chairman of the British Steel Corporation has written to me saying that he is prepared to consider the sale of complete steel plants in closure areas? Will he, when he next meets the chairman, ask him to enlarge upon this scheme? Will he give his Government's full backing to this policy and make sure that no restrictions are placed in the way of these plants if they are sold to private enterprise?
    Mr. Varley: I do not know of any proposals and I do not know of the correspondence between the hon. Gentleman and the chairman of the British Steel Corporation. Any requirement to dispose of assets would have to come through the Government, and we should want to look at it extremely carefully.
    Mr. Hooley: Has my right hon. Friend discussed with the chairman of BSC the impact on the steel plant making industry of the cut in the investment programme, especially as it may affect Sheffield?
    Mr. Varley: I have not discussed the investment programme with the steel plant manufacturers, but my hon. Friend will be aware that substantial investment will take place over the next two years—in the region of £1,000 million. I know that that will be broadly welcomed by the steel plant makers, but if they want to make representation to the Government we shall be pleased to receive it.
    Mr. Norman Lamont: Is the Secretary of State aware that we welcome the slimmed-down investment programme in this halfway stage to a sensible policy? But is it not the case, as the Select Committee pointed out, that if action had been taken earlier we should have been able

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    to afford more modernisation and more investment, and that there would have been a greater degree of job security?
    Mr. Varley: That is one section of the report of the Select Committee with which I do not agree. It is implied in some quarters that the Government, on internal financial forecasts for the British Steel Corporation, could have taken action within one or two months of the last financial year. To have eliminated the forecast at that time would have resulted in action which would have been unacceptable, I think, to the majority of those who work in the steel industry and, I suspect, to the majority of hon. Members.

    European Community (Council of Ministers)
    Mr. Dykesasked the Secretary of State for Industry when he now intends to meet his opposite number in the EEC Council of Industry Ministers.
    The Under-Secretary of State for Industry (Mr. Les Huckfield): There are no current proposals for the Ministers of Industry of the member States to assemble in Council. When industrial matters arise which require collective ministerial consideration, they can be treated by the Council of Ministers (Foreign Affairs) with the participation of other interested Ministers.
    Mr. Dykes: Now that the Summit Meeting has launched the beginnings of a concerted economic plan for the whole of the EEC, would it not be right for all the Industry Ministers in all the member States to get together to see what they can do with their own national industries, and what can be done by British industry to contribute to a faster growth in Europe, as the only means eventually by which to try to get unemployment down?
    Mr. Huckfield: That can be considered as and when the need arises, but I am sure that the hon. Gentleman realises that most industrial policy matters are currently carried out by Commission working groups. We are involved in a large number of those. The need certainly has not arisen yet.
    Mr. Kenneth Clarke: Does not the Minister think that the time has now come to have a Council of Industry Ministers to consider, among other
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    matters, the competition taking place between member Governments to give subsidies to textiles, shipbuilding, assisted areas and so on? Does he not agree that member Governments, including the British, are tending to give subsidies to industry in a way which might simply put workers out of jobs in other member countries? Would it not be better to develop a Community approach in order to sort out troubled market areas?
    Mr. Huckfield: I hope that the hon. Gentleman realises that our schemes of assistance have to be considered by the Commission. Our schemes of assistance are certainly not the only ones in member States, because many other States carry them out. I hope that the hon. Gentleman will accept, however, that on 19th-20th December the Council of Ministers agreed a package on steel. A draft directive on shipbuilding assistance has already been agreed, and we are already involved in many other discussions.

    National Enterprise Board
    Mr. Tim Rentonasked the Secretary of State for Industry when he next expects to meet the chairman of the National Enterprise Board.
    Mr. Rookerasked the Secretary of State for Industry when he next plans to meet the chairman of the National Enterprise Board.
    The Minister of State, Department of Industry (Mr. Gerald Kaufman): I expect to meet the chairman very shortly. We are in frequent touch.
    Mr. Renton: Anticipating the Minister's next meeting with the chairman of the NEB, will the hon. Gentleman tell the House what is the NEB's current investment policy, since it does not appear to have one? How many of the 22 companies in which the NEB invested last year are now making the adequate return on capital to which the NEB is statutorily committed?
    Mr. Kaufman: All these matters are open for debate later in the day. When I meet the chairman of the NEB I shall be able to discuss with him the NEB investment in a company in which the hon. Member for Mid-Sussex (Mr. Renton) has a constituency interest, Thwaites and Reed, which looks after Big Ben. I

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    am glad that the NEB is helping to keep the hon. Gentleman on time.
    Mr. Rooker: Will my hon. Friend have a word with the chairman of the NEB when he next meets him about the recent appointment of Mr. John Williams of Lucas Industries to the NEB to oversee British Leyland, although this man is on public record as being opposed to public enterprise? Will he also draw the attention of the chairman to the fact that, contary to paragraph 11.11 in the NEB's report to this House on British Leyland, it is not the Government who authorise money to British Leyland but this House?
    Mr. Kaufman: My hon. Friend is perfectly right about that. I hope that all hon. Members will realise the importance of voting the extra £300 million to British industry when we debate this matter later today.
    Mr. Rooker: What about the first part of my supplementary question?
    Mr. Speaker: Order. This subject will be debated later today.
    Later—
    Mr. Renton: On a point of order, Mr. Speaker. In answer to my Question No. 4 the Minister of State made great play of the fact that the National Enterprise Board was giving assistance to a firm called Thwaites and Reed which, he said, was in my constituency and which is, among other things, clockmaker and mender of Big Ben. I have checked with the NEB, but both of its information officers are in the House of Commons. Thwaites and Reed tells me that its only office and factory in Sussex is at St. Leonards-on-Sea, about 25 miles from my constituency. I have come to realise that the Minister relies more—
    Mr. Speaker: Order. I ask the hon. Gentleman to make the point of order on which he is asking me to rule.
    Mr. Renton: I should like you, Mr. Speaker, to ask the Minister of State to withdraw his comment about the factory being in my constituency, because it is not. I ask him to give me an answer to my question.
    Mr. Speaker: The hon. Member knows that, if I tried to tell Ministers to withdraw answers, or, indeed, the Opposition
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    to withdraw questions, I should be in even greater difficulty than I am at present.

    Private Companies (Subsidies)
    Mr. Hugh Jenkinsasked the Secretary of State for Industry to what extent he has subsidised private companies with public money since 1974 to date.
    The Under-Secretary of State for Industry (Mr. Bob Cryer): Including an estimated expenditure of £397 million for 1977–78, the subsidies, current grants and capital grants paid to undertakings in those parts of the private sector for which my Department is responsible are forecast to total £1,849 million, at 1977 survey prices, for the years 1974–75 to 1977–78 inclusive.
    Mr. Jenkins: Is not that a huge sum of public money? Will my hon. Friend give further details of this in the Official Report, so that hon. Members can put down Questions in individual cases and discover what is happening to this money and whether any of it is wrongly disappearing into private pockets?
    Mr. Cryer: My hon. Friend is quite right in saying that it is a huge sum for support to industry under the Industry Act 1972. My hon. Friend will no doubt recall that during the period of office of the Conservative Government the sums were in no way published. It was not until the advent of the Labour Government that the sums payable under the Act were published in Trade and Industry. But I will take note of what my hon. Friend has said and see what information I can publish in the Official Report.
    Mr. Adley: Will the Minister tell us how much tax is being paid by all these private companies to subsidise public expenditure? Will he also publish this figure?
    Mr. Cryer: The hon. Gentleman has raised an interesting point. He will know that there are 100 per cent. tax allowances on investment in plant and machinery, and the Government have generously given stock appreciation relief, so that the tax incentives to investment and to encourage industry cost several billion pounds a year to the Revenue.
    Mr. Robert Hughes: Does my hon. Friend recall that the White Paper entitled "The Challenge of North Sea Oil"

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    gave the Government's strategy on investment in industry through the NEB? Will my hon. Friend say how this can be achieved without compulsory planning agreements so that public money is not wasted in the way he has just announced?
    Mr. Cryer: Certainly the progress with planning agreements has been extremely disappointing. In view of the very encouraging way in which the Government have treated private industry, it seems reasonable for the Government to expect a degree of co-operation towards planning agreements so that a greater degree of planned investment can take place in this country.
    Mr. Norman Lamont: Is it not the case that nearly all wealth in this country is created by the private sector and hardly any at all by the public sector, and that these so-called handouts are simply transfers from companies back to themselves? If the Under-Secretary were really serious about the health of industry, would he not point out that industry, quite apart from PAYE contributions, rates, national insurance contributions and corporation tax, is paying three times what it receives in so-called handouts?
    Mr. Cryer: I am most interested in what the hon. Gentleman has said. When he and his party next talk about four years of Socialism, perhaps they will bear in mind the remarks that he has just made—that, in fact, the majority contribution which he claims is from the private side of industry. When the hon. Gentleman complains about such matters as a lack of investment or the level of unemployment, perhaps he will bear his remarks in mind.

    Inner Cities (Partnership Committees)
    Mr. Silvesterasked the Secretary of State for Industry what measures he is proposing to the seven partnership committees as his Department's contribution to the rejuvenation of the inner cities.
    Mr. Cryer: My Department is participating fully in the partnerships' initial task of drawing up programmes for action which will include proposals designed to strengthen the economies of the inner cities. It is too early to say what agreed proposals will be put forward by the different partnerships. The partnership authorities will benefit from
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    the measures announced in the White Paper on inner city policy and from the powers which will be available to them under the Inner Urban Areas Bill.
    Mr. Silvester: Is there not a danger of conflict with regard to the increasing number of powers overlaying different geographical areas? Will the Minister consider particularly the conflict between the inner cities and the special development areas?
    Mr. Cryer: There is no conflict here. In fact, as the hon. Gentleman knows, the regional assistance is in addition to inner city assistance. But these matters will no doubt be debated on the Inner Urban Areas Bill, when the position can be clarified further.
    Mr. Litterick: Will my hon. Friend consider seriously amending the Co-operative Development Agency Bill which is now before the House so that his Department can dispose of funds which could be used directly by his Department for use by workers' co-operatives in the inner city areas?
    Mr. Cryer: That is a matter of detail for consideration in Committee. No doubt we shall be considering many such amendments because I know that my hon. Friends are very much concerned and welcome the implementation of Labour's promise to establish a Co-operative Development Agency.
    Mr. Michael Latham: Will anything actually come out of these committees, or, like their predecessors, will they just be talking shops?
    Mr. Cryer: I take it that the hon. Gentleman is talking about the partnership committees. The local authority members of the partnership committees, in addition to the Government members, are convinced that the partnership committees are drawing up useful and worthwhile programmes. Of course, the test of the committees will be seen in action. In my experience, all the members of the committees are determined to ensure that the action results in regeneration of the inner cities.

    Investment
    Mr. Knoxasked the Secretary of State for Industry what was the level of investment in manufacturing industry

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    during the most recent 12-month period for which figures are available.
    Mr. Canavanasked the Secretary of State for Industry whether he will now take additional steps to increase investment in industry.
    Mr. Molloyasked the Secretary of State for Industry how much Government money has been committed from 1974 to the present date under industry schemes and how much investment it has generated.
    Mr. Cryer: Total investment by manufacturing industry in 1977 is estimated to have been £1,761 million at 1970 prices. It represents an increase of 8 per cent. over 1976. This is a welcome increase, but we intend to maintain our active support for industrial investment, in particular our wide range of selective assistance. By the beginning of March this year, a total of £247 million of assistance had been offered by my Department since 1st April 1974 through industry schemes operated under Section 8 of the Industry Act 1972. The total industrial investment associated with this assistance amounts to £1,528 million. Since 1st April 1974 to 31st October 1977, £276 million has been offered under Section 7 of the Industry Act 1972 to assist 2,894 projects with a total project cost of £2,865 million.
    Mr. Knox: As investment in manufacturing industry is substantially lower in real terms now than it was in 1974 when the Government came to power, what is the Minister doing to restore confidence in manufacturing industry and to increase demand for its products, without which the higher level of investment will not take place?
    Mr. Cryer: The level of investment in 1977—at 1970 prices—was £1,761 million compared with £1,730 million in the last full year of the Conservative Government. Therefore, the level of investment has actually increased under this Government compared with the last year of the Conservative Government.
    Mr. Canavan: Will my hon. Friend increase investment in the public sector? Will he utterly reject the disastrous industrial policies of the political con men in the Conservative and Scottish National Parties who are trying to fool the people
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    of Garscadden with promises of more jobs, yet they themselves voted to destroy thousands of jobs in the West of Scotland by voting against public ownership and public investment in the aircraft and shipbuilding industries?
    Mr. Cryer: Public investment in industry is an important element in maintaining the competitive position of this country's manufacturing and service industries. There will be a test later today to see whether hon. Members are prepared to vote money for investment in the public sector of British manufacturing industry.
    Mr. Molloy: Is my hon. Friend aware that his original answer is very disappointing for the Tory Party? What is important is that this is encouraging for the gradually increasing momentum in overcoming inflation and all the economic ills that are afflicting us. While this sort of programme and progress is welcome to Labour Members, it is always bound to be disappointing to the Conservative Party.
    Mr. Cryer: I am grateful for the accurate remarks of my hon. Friend. He is quite right in saying that the economy is improving under this Government. Of course, many difficulties remain, but the reduction in the level of inflation and the improvement in the balance of payments situation is important and is reflected in the higher level of investment under this Government.
    Mr. Ridsdale: In order to expand investment in manufacturing industry, will the Minister ensure that there is no prejudice against sources from abroad? Will he underline the wise words of the Minister of State on his return from Japan, that we would do all we could to encourage investment in this country, from whatever source it might come?
    Mr. Cryer: The policy of the Government is to encourage inward investment, as the hon. Gentleman says, from whatever source it may come.
    Mr. Tebbit: South Africa?
    Mr. Kilroy-Silk: Will my hon. Friend accept that when handouts of public money are given to private industry the public has a right to know not only the total amount but the actual firms to which that money is given? Will he also accept that when public money is invested

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    in private industry we ought to take an equity stake in those companies?
    Mr. Cryer: As I remarked earlier, under the Industry Act 1972, which was introduced by the Conservative Government, the money was given in secrecy to companies. The Conservatives were the people who held the cloak of secrecy over the publication of figures. In July 1974 this Government determined to move towards a more open position. In fact, the figures over £10,000 and £25,000 in certain categories are now published after payment in the weekly publication Trade and Industry.
    Mr. Richard Wainwright: Is the Minister able to confirm that the Government accept that, in order to achieve a higher level of investment in manufacturing industry, everything that can reasonably be done to improve the rate of return on capital ought to be encouraged?
    Mr. Cryer: As I remarked before—perhaps the hon. Gentleman did not hear my remarks—this Government have made generous tax concessions for investment in plant and machinery. We also give generous concessions in stock appreciation relief, in addition to the actual cash grants which we give under national schemes of regional assistance. This is an encouraging framework for investment in new products and jobs in industry in this country.
    Mr. Watkinson: Is my hon. Friend aware that when the chairman of the National Enterprise Board gave evidence to the Public Accounts Committee he pointed out that there was a gap in the private sector of investable funds for smaller firms? Can he ensure that more funds will be made available to the NEB to regenerate that particular aspect of our industry? Can he say whether he himself has any plans to encourage investment in smaller industries?
    Mr. Cryer: My hon. Friend will be aware that tonight there is the possibility of a vote, which I am sure my hon. Friends will be keen enthusiastically to support as that will give further financial assistance to the NEB. We are currently having a look at the provision of financial assistance to small firms. As my hon. Friend knows, the Secretary of State for Employment announced on 15th March that the Department will shortly be extending the small firms subsidy for 26 weeks,
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    cash assistance. Therefore, an examination is under way as well as specific action which is being undertaken by the Government.
    Mr. Kenneth Clarke: Will the Minister undertake to study again the supplementary question of my hon. Friend the Member for Leek (Mr. Knox), who showed that in real terms the figures are very disappointing and that they underline the failure of a policy which heavily over-relies on the direct investment of taxpayers' money by the Government? Does he not agree that what is needed to revive investment in British industry is better levels of profitability, better market prospects and confidence? None of those has been provided at any stage by this Government.
    Mr. Cryer: I am not all that surprised at the propaganda from the hon. Member for Rushcliffe (Mr. Clarke), but if he finds the current figures disappointing he must have been even more disappointed at the record under his own Government, because in 1972 the figures were lower and in 1973 the figures of investment were extremely low. It ill behoves him to make these churlish remarks. Could not the Opposition, for a change, instead of conducting a continual propaganda campaign against the achievements of the Government and the country, try to assess the position of the country objectively and recognise the real achievements of this Government?

    Industrial Strategy
    Mr. Norman Lamontasked the Secretary of State for Industry whether he is satisfied with the progress of the Government's industrial strategy.
    Mr. Varley: Yes, Sir. We now wish to see the valuable work which sector working parties are doing translated this year into effective action at company level.
    Mr. Lamont: Is the Secretary of State aware that we noted with interest his speech last week in the course of which he said that the central aim of the Government's industrial strategy was to improve productivity? Since our average rate of increase in 1974, 1975 and 1976 was zero and only three countries in the entire OECD world did worse, how can he say that he is satisfied?
    Mr. Varley: I am not satisfied with the level of productivity. Nor am I satisfied yet with the work to reverse the relative decline which has occurred in our manufacturing industry. However, the sector working parties and the industrial strategy have made a good start. They have the continued support of the Confederation of British Industry and the Trades Union Congress, and I think that the hon. Member for Kingston upon Thames (Mr. Lamont) should support them as well.
    Mr. Madden: Does my right hon. Friend agree that Spillers dealt a blow to the Government's industrial strategy on Friday by announcing 8,000 redundancies? Does he not also agree that it is entirely in character with this company, which has been promoting its financial situation, that over recent years it has found it possible to donate £5,000 a year to British United Industrialists, a rabid anti-Labour organisation? Does he not agree, further, that this company—[HON. MEMBERS: "Too long."]—blackmailed the Government into accepting the position by saying that, if they did not do so, it would make 13,000 workers redundant instead of 8,000? Will my right hon. Friend issue a directive to the NEB to require Spillers French to maintain competition and employment in this important sector of industry?
    Mr. Speaker: Order. This is not fair to other hon. Members. There is a Private Notice Question on the subject later.
    Mr. Varley: I do not have departmental responsibility for the baking industry. I understand that a Private Notice Question is to be answered later today. But I can tell my hon. Friend—and I think that I reflect the views of my right hon. Friend who has responsibility for this company—that we were most disappointed at the way in which Spillers went about its activities, and I know that further consideration is being given to the matter.
    Mr. Tebbit: Since the industrial strategy has resulted in more unemployment and lower living standards, why is the Secretary of State so cocksure that he has it right and that every other country has got it wrong?
    Mr. Varley: I am not at all cocksure that this Government have it right, or anything of the kind. I am saying that the industrial strategy is designed to reverse
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    the relative decline in British industry—a decline which went on at a greater pace under the Conservative Government than it has under this Government. To single out the intolerable unemployment figures here and to suggest that they are unique is again a misrepresentation.
    Mr. Bryan Davies: What does my right hon. Friend think of the industrial strategy of a company like Thorn Electrical Industries, which engages in the closest possible consultation with its work force and with Members of Parliament with constituency interests when a threat from Japan materialises but which announces in the most abrupt way, without any consultation, the closure of a major factory and a threat to a large number of other jobs?
    Mr. Varley: I think that all companies which are in difficulty should consult the Government about how they propose to deal with those problems. That goes for Spillers, for Thorn and for any other company. My right hon. Friends and I deplore any arbitrary action which results in the sort of dislocation and hardship which have been created in this case.

    British Shipbuilders
    Mr. John Evansasked the Secretary of State for Industry when he next intends to meet the chairman of British Shipbuilders.
    Mr. Trotterasked the Secretary of State for Industry when he next intends to have a meeting with the chairman of British Shipbuilders Ltd.
    Mr. Kaufman: My right hon. Friend meets the chairman from time to time, but there are no plans for a meeting at present.
    Mr. Evans: When my hon. Friend next meets the chairman, will he take up with him the case of Western Ship Repairers on Merseyside, which is faced with closure? Will he suggest to the chairman of British Shipbuilders that Western Ship Repairers should be taken into public ownership, as was intended in the original Bill?
    Mr. Kaufman: This is a matter which really should be taken up with the Tory Party and the House of Lords. If Western Ship Repairers had been nationalised with the shipbuilding companies a year ago

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    when the Bill went through, British Shipbuilders would have been in a position to rescue that company from its problems. The trouble now is that the rot has set in so deep that it is very difficult to find a way out.
    Mr. Arnold: When the Secretary of State next meets the chairman of British Shipbuilders, will he ask him why British Shipbuilders is now seeking to move into the manufacture of medium-speed diesel engines?
    Mr. Kaufman: This is a matter which has been discussed very closely. British Shipbuilders intends at present to undertake work on medium-speed diesel engines in connection with the Polish order. It is work which would not have come to this country without the Polish order and which does not take work away from a single British worker. As for diversification, we fought this through during the passage of the Aircraft and Shipbuilding Industries Act, and Parliament decided that this publicly owned industry should have the power to diversify.
    Mr. Blenkinsop: Will my hon. Friend recognise the important improvements in labour relations which are now being shown on Tyneside and see that there is as much publicity given to those improvements as there was before when we suffered severe setbacks?
    Mr. Kaufman: My hon. Friend is quite right, and we hope that these very favourable indications will be noted. It is extremely important that we should do whatever we can to maintain employment in the shipyards on Tyneside.

    Shipbuilding
    Mr. Arnoldasked the Secretary of State for Industry whether he will make a further statement on the Government's proposal for support for the British shipbuilding industry.
    Mr. Les Huckfield: Proposals for an extension of the Shipbuilding Intervention Fund are currently under consideration, and my right hon. Friend expects to make a statement as soon as the necessary consultations have been completed.
    Mr. Arnold: Is it not the case that most major world shipbuilders are now
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    engaged in a competitive subsidy race which, if allowed to continue, can only result in the prolongation of over-capacity in world shipping? How can the Government justify the use of taxpayers' money to subsidise overseas ship owners to compete with the British merchant fleet?
    Mr. Huckfield: I hope that the hon. Gentleman realises that if British Shipbuilders did not build the ships some other country would, and they would still compete against our own ship owners. But I am glad that the hon. Member has recognised that Belgium has a home credits scheme, that Denmark has a temporary interest subsidy, that France has a construction subsidy, that Germany subsidises ship owners, that Ireland helps construction losses and that many other Governments do much the same. The most significant feature is that this country did not contribute to the over-capacity.
    Mr. Heffer: Will my hon. Friend ask the Minister of State to reconsider his answer about Western Ship Repairers in view of the fact that this will lead to a further increase in unemployment on Merseyside, which is already a very serious problem? Will he ask my hon. Friend, before he meets me and a delegation on Thursday morning, to consider further the idea of again pressing British Shipbuilders to take over this company, since it was promised at an earlier stage that this would be done if it could be done?
    Mr. Huckfield: My hon. Friend is right to press his case, and I understand that he is seeing my hon. Friend the Minister of State very shortly. But I hope also that he and his hon. Friends will press their case inside the House and outside it, because I would hope that if we had in the Act the nationalisation of ship repairers we would not have been in this position.

    European Regional Development Fund
    Mr. Kenneth Clarkeasked the Secretary of State for Industry whether he intends to have further discussions with the European Commission on the future of the European Regional Development Fund.
    The Minister of State, Department of Industry (Mr. Alan Williams): Discussions are still continuing at official level in order to resolve outstanding questions concerning the allocation and administration of the fund for the period 1978 to 1980.
    Mr. Clarke: Does not the Minister agree that this fund would have been developed very much further to the great advantage of the British regions if the British Government had adopted a Community approach to this problem and, for example, ceased to insist that all payments should be made to the Government and not to the industries concerned? Will he say what steps are being taken to speed up the present discussions and whether the Government intend to support the proposal that some of the funds should be outside the national quota system, with direct payments by the Commission to industrialists who want to make the investments?
    Mr. Williams: I do not accept the hon. Gentleman's interpretation. Before we allow a non-quota section to be set up, which would be outside the control of individual Governments, it is extremely important that we should ensure precisely for what purpose the money will be used and by what criteria it will be allocated.
    Mr. Hoyle: Does my right hon. Friend agree that it is not much use having regional funds if our industry is undermined by foreign imports? What talks did he have in Japan with Japanese industrialists? Did he have talks about the GEC-Hitachi talks and the Rank-Toshiba merger talks, in view of the crisis in the electrical consumer industry?
    Mr. Williams: My hon. Friend will appreciate that it is not the practice of the Department to reveal details of discussions with individual firms. I am sure that he will understand the circumstances. However, I took every opportunity to emphasise to the Ministry of International Trade and Industry, to business men and to the Japanese equivalent of the CBI the importance that we place on the Japanese recognising that trade has to be a two-way system and that if they want continued access to our markets they have to ensure that we get extra access to theirs.
    Mr. Dykes: Will the right hon. Gentleman reconsider his rather negative answer
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    to my hon. Friend the Member for Rushcliffe (Mr. Clarke)? Should not the fund be much larger to enable it to make a significant impact in co-ordinated European terms to the less developed areas of all the countries, including Britain, and should not companies and local authorities be allowed to apply direct?
    Mr. Williams: I do not wish to be offensive, but the hon. Gentleman seems to misunderstand. The fund's total size has already been decided, and within the fund will be incorporated the non-quota section. Even if we had agreed to a non-quota system at this stage, the sum would not be any larger. As I have said, the total sum has been agreed. There is still the critical question of sovereignty in regional policy, and regional policy has for far too many years dominated the thinking of British Governments. I shall not surrender power over regional policy, and I want to be sure that the House controls the regional development fund.

    Merseyside (Investment)
    Mr. Kilroy-Silkasked the Secretary of State for Industry what further plans he has to increase industrial investment on Merseyside.
    Mr. Alan Williams: Industrial investment on Merseyside qualifies for assistance at the highest level in Great Britain since it was made a special development area in 1974.
    Mr. Kilroy-Silk: Does my right hon. Friend accept that Merseyside's already extremely narrow industrial base is being further eroded by announcements of closures and redundancies and that urgent action is desperately needed? Does he also accept that he should take into consideration the establishment of a Merseyside development agency, review regional policy and take on a major promotional campaign to point out the important features that Merseyside has to offer to industrialists, both in Britain and abroad seeking a location?
    Mr. Williams: I understand entirely the strength of genuine feeling of my hon. Friend and his colleagues on this issue. It is important to bear in mind that the problem of Merseyside is not that we have been incapable of getting new jobs there. The difficulty has been our inability to save the jobs already on Merseyside. It

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    may come as a surprise to many when I say that last year 30 new firms established themselves on Merseyside. In the past two years we have let 37 factories. Vauxhall has been expanded by 2,000 jobs. At present YKK is expanding, and the Co-operative Bank is going into the area with 600 jobs. If only we were not losing industries in the area, the record would be satisfactory. The loss is substantially due to the world recession.
    Mr. Heffer: Does my right hon. Friend agree that, despite all the tremendous and excellent efforts made by the Government to create employment on Merseyside, there is deep anger among workers on Merseyside, as expressed at the conference yesterday that was held by the trades council, during which it was decided to take a number of steps to bring the position to the Government's attention? Is it not clear that the private enterprise set-up has failed the nation and that we need to extend the publicly owned industries into Merseyside through the National Enterprise Board to set up the development and creation of new jobs?
    Mr. Williams: As my hon. Friend is aware, we have only recently given extra powers to the NEB. It is entirely up to the board to decide how it wishes to allocate its resources. As hon. Members are aware, the board, under its guidelines, must take into account the unemployment needs and problems of regions. I am sure that the points that my hon. Friend and his colleagues have been making will be noted by the board.

    British Leyland
    Mr. Ronald Atkinsasked the Secretary of State for Industry what is the total of Government assistance that has been paid to the commercial vehicle manufacturing division of British Leyland.
    Mr. Les Huckfield: The public funding of British Leyland has not been allocated by the Government or the NEB to particular operating groups in the way suggested by the hon. Gentleman. It is intended to meet a proportion of the company's overall funding requirements. My right hon. Friend is, of course, required to approve particular investment project costs over £25 million and has already approved two relating to commercial
    968
    vehicle manufacture: the new assembly hall and the new engineering centre, both at Leyland.
    Mr. Atkins: Does my hon. Friend agree that the trading position as regards commercial vehicles is relatively prosperous? However, how long will that situation remain if Japanese cars assembled in Ireland are to be dumped in this country? What action will my hon. Friend take, together with his colleagues in the Department of Trade, to prevent that from happening? Will he take a leaf out of the Japanese book of trading tricks so that we may defend ourselves?
    Mr. Huckfield: My hon. Friend is right. The truck and bus group has made a substantial contribution to making British Leyland Britain's largest net exporter. As regards Japanese cars and light vehicles, I can assure my hon. Friend that the understanding we have with the Japanese is that for cars and light vans their exports to us will stay the same as those for last year, and that no direct commercial vehicle imports will come into Britain. We are watching the situation closely.
    Mr. Hal Miller: Should not the truck and bus group be treated separately? If it is successful, does it need further public investment? Could it not secure investment from the private sector?
    Mr. Huckfield: The hon. Gentleman seems to be suggesting that we should hive off or sell off one of the more successful parts of British Leyland. I am wondering whether that is now the policy of the whole of his party. I remind him that the truck and bus division will be successful, because we have just approved an assembly hall costing £32 million, an engineering centre costing £34 million, a parts division costing £17 million and investment in Bathgate and Albion costing £50 million. These are all investments with public money.

    British Steel Corporation
    Mr. Gowasked the Secretary of State for Industry what is his latest estimate of the prospective loss of the British Steel Corporation for the current financial year.
    Mr. Kaufman: On 16th January my right hon. Friend exceptionally announced

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    an estimated loss for 1977–78 of £520 million, including a £50 million allowance for contingencies, which has fortunately proved not to be required. Present indications are that the outturn for the year will be a loss of around £440 million, but I would prefer to await the audited results before giving the House a firm figure.
    Mr. Gow: Could not the new prospective loss of £440 million be reduced if the steel mills that are unprofitable and the steel mills that are grievously over-manned—some of which are in Labour marginal seats—received the sort of surgery that true efficiency requires?
    Mr. Kaufman: If we chucked workers out of work overnight, as the hon. Gentleman wants in so many sectors of industry, we could reduce a great deal of losses. We could also destroy industrial relations stability in the British Steel Corporation. We could wreck the Corporation. However, that is a consequence of everything that the hon. Gentleman proposes in the House.
    Mr. Michael Marshall: Does the hon. Gentleman recognise that both he and his right hon. Friend the Secretary of State tend to rely very much on historical figures when talking about losses? Is it not the case that action could have been taken earlier last summer if his Department's reporting systems were more effective, instead of which his right hon. Friend constantly says that he could not take action earlier in the year and that, in effect, he has to wait for the year ending?
    Mr. Kaufman: One day we will get it into the hon. Gentleman's head that if we had taken hasty and arbitrary action to chuck workers out of work because of a prospective loss forecast four weeks into a financial year he and his hon. Friends would have been the first to criticise us—or maybe they would not, as they love unemployment so much.
    Mr. Rostasked the Secretary of State for Industry when he expects to announce his proposals for improving the productivity, competitiveness and profitability of the British Steel Corporation.
    Mr. Kaufman: I would refer the hon. Member to my right hon. Friend's statement of 22nd March.
    Mr. Rost: As the Minister has failed to answer questions on and refuses to claim any responsibility for the shameful bankruptcy and rundown of the steel industry, will he now at least admit that the industry's problems are due to its inability to compete in world markets against private enterprise industries abroad? Will he also admit that nationalisation in 1967 has done nothing to solve the problems but a great deal to aggravate them?
    Mr. Kaufman: Changing the odd date and figure, the hon. Gentleman's remarks could apply exactly to Rolls-Royce, for whose nationalisation he voted.
    Mr. Rost: That is no answer.

    CIVIL LAWSUITS (SOURCE FUNDS)
    Mr. Leeasked the Attorney-General if he is satisfied with the effectiveness of the law relating to the disclosure of source funds provided for the conduct of civil lawsuits where the person or persons providing such funds have no recognisable interest in the lawsuits concerned, in the light of the comments recently made by the Honourable Mr. Justice Pain; and if he will make a statement.
    The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson): Yes, Sir. The Law Commission recommended in 1966 that criminal and tortious sanctions against the giving of financial or other assistance by persons who have no interest in the subject matter of proceedings should be abolished. That recommendation was implemented in the Criminal Law Act 1967, and my right hon. Friends have no proposals for further changes in the law.
    Mr. Lee: My hon, and learned Friend will realise that this Question alludes to the activities of Messrs. Lewis and McCormick in Newham, North-East. Does he agree that the learned judge's remarks in one of those cases, which were couched in forceful terms, pointed to a very unsatisfactory state of affairs whereby all kinds of people, for questionable motives, shell out money to promote or maintain actions and that the persons concerned have their identities still undisclosed? The learned judge was most anxious that the identities of the persons concerned should be disclosed.

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    Ought not we to do something about them?
    Mr. Davidson: I am well aware of Mr. Justice Pain's remarks, and I do not think that I can add anything to them. My hon. Friend will appreciate that there is no law which prevents those who have provided the funds from disclosing their identities. Equally, there is no obvious reason why they should not do so or wish to do so. If they do not wish or choose to do so, one is at least entitled to speculate what their motives are for so refusing.
    Mr. Adley: Did the hon, and learned Gentleman hear the Prime Minister the other day deprecating the expulsion from trade unions of people for their political views? Is he aware that people who are expelled from trade unions face the possibility of action against one of the most powerful and wealthy organisations in this country and that, for instance, the ASTMS is trying to expel me for my political views? What are people in my position supposed to do when they cannot cope with the cost of such actions?
    Mr. Davidson: With respect to the hon. Gentleman, I never regard him as one of the world's greatest authorities on trade unions. In any event, I cannot see what possible connection his supplementary question has with Mr. Justice Pain's remarks.

    DIRECTOR OF PUBLIC PROSECUTIONS
    Mr. Christopher Priceasked the Attorney-General when he next intends to meet the Director of Public Prosecutions.
    The Attorney-General (Mr. S. C. Silkin): Quite soon.
    Mr. Price: In spite of the fact that the Royal Commission has been appointed to look into a new system of public prosecution in Britain, is there anything that my right hon, and learned Friend can do in the meantime to tidy up the chaotic system of public prosecution in Britain so that, if the Royal Commission makes some radical recommendations, there is something for it to build on when that time comes?
    The Attorney-General: My hon. Friend will be aware that, for the major part, the prosecution system is not within my control or responsibility. I am responsible for the Director of Public Prosecutions, and a major part of the prosecution system consists of the prosecuting solicitors and the police authorities. I entirely agree with what lies behind my hon. Friend's supplementary question. I think that our system is highly piecemeal. It requires to be rationalised. The Director, together with myself and the Home Office, is doing his best to try to effect improvements before the report of the Royal Commission, and I hope that we shall be able to do so.
    Mr. Lawrence: When the Attorney-General meets the Director of Public Prosecutions, will he discuss with him the question whether his office is adequately staffed? Might it not make a substantial contribution to the reduction of crime at the present time, when the serious crime rate is alarmingly growing, if decisions were taken which would enable the Director's Department to initiate prosecutions more speedily than it is able to do at present?
    The Attorney-General: I am grateful to the hon. Member for making the first of those two points. Indeed, when I see the Director, which is fairly frequently, the subject that he mentioned is often under discussion. The Director is endeavouring to improve matters. He has already had some success, but he knows that, if he needs my help in achieving further success in staffing, I am willing to help him as much as I can.
    Mr. Skinner: Will my right hon, and learned Friend confirm that, in our anxiety to see that law and order matters are dealt with properly, the Poulson matters should be finalised? Has the Director of Public Prosecutions anything further to add upon the investigation with relation to Mr. Williams, who disappeared, and in respect of other matters, such as Lonrho? Can he tell us what stage has been reached there in respect of any prosecution and in any of the other related City scandals which have taken place over the last five years?
    The Attorney-General: I made a statement to the House some considerable time ago on the Poulson matter. I have

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    nothing to add so far as concerns any person who was not embraced by that statement.
    The Lonrho matter is still under investigation. On the last occasion of Attorney-General's Questions my hon. Friend asked me about certain other matters, and I have written to him telling him what the position is about those.
    Mr. Biggs-Davison: Will the Attorney-General discuss with the DPP, who is also the Director of Public Prosecutions for Northern Ireland, with a view to representations in Dublin, the failure to extradite convicted prisoners who escape from gaol in Northern Ireland—a distinct matter from the protection given by Irish courts to wanted criminals asserting political motives?
    The Attorney-General: I do not think that this matter arises out of this Question and it is not really a matter for me. But the hon. Gentleman's point has certainly been noted.
    Mr. Watkinson: Has my right hon, and learned Friend discussed the case of Liddle Towers with the Director of Public Prosecutions recently? If he is successful in his application for opening the inquest on this case, and if new evidence is brought forward, will it be open to the DPP to consider the decision not to bring prosecutions?
    The Attorney-General: I have not discussed the matter with the Director since the Director made his original decision that there was not sufficient evidence to justify prosecutions. It would be foolish for me to speculate about what would happen if there were a resumed inquest.

    CONTEMPT OF COURT
    Mr. Rymanasked the Attorney-General when he expects to bring forward legislation to implement the recommendations of the Phillimore Committee on Contempt of Court, Command Paper No. 5794.
    The Attorney-General: Not before the Government have had an opportunity to consider public and parliamentary reactions to the Green Paper on contempt of court which was published as a Command Paper on 22nd March.
    Mr. Ryman: Bearing in mind that the original report was published as long ago as December 1974 and that three and a half years elapsed before the Government thought fit to publish a discussion paper, is my right hon, and learned Friend aware that the continuing delay in reforming this difficult and technical branch of the law is causing real difficulties to journalists and newspapers?
    The Attorney-General: I agree with my hon. Friend that it is a difficult branch of the law. Because it is a difficult branch of the law and raises some difficult and sensitive quesetions, the Government considered very carefully before they decided that the right course was to isolate the particularly difficult issues by means of a Green Paper and nut them to the public and Parliament for discussion. It is part of the Government's process of open government. Less than three and a half weeks have elapsed since that Green Paper was published. We are hoping that we shall have the views of the House and of the public.
    Mr. Percival: Can the Attorney-General do a little bit better than that? To call this open government makes words rather meaningless. The report was published in December 1974 and it has taken three years for a discussion paper to come out of it. I err on the side of conservatism because it is more than three years. How long will it be before something else happens? The Attorney-General has said that we must await parliamentary and public reaction. How long shall we have to wait for a chance to see what parliamentary reaction is? I see that the Leader of the House has arrived. Can he tell us through the Attorney-General when Parliament will have a chance to express an opinion about it? Can he offer hope of speedier action than is suggested by his answers so far?
    The Attorney-General: The hon, and learned Gentleman always errs on the side of conservatism. I shall await with great interest his contribution to the debate which has been opened by my noble Friend the Lord Chancellor in his Green Paper. The Leader of the House has heard what the hon, and learned Member has said and he will no doubt take note of it in relation to the possibility of a debate.

SPILLERS FRENCH (BAKERY CLOSURES)
Mr. Radice (by Private Notice)asked the Minister of Agriculture, Fisheries and Food whether he will make a statement about the Spillers French announcement on Friday, 7th April on the closure of a number of bakeries involving about 8,000 redundancies.
The Minister of Agriculture, Fisheries and Food (Mr. John Silkin): Spillers Limited announced last Friday that it had decided to withdraw from bread baking. We understand that over the last six years its losses on bread making have amounted to £28 million. Spillers has decided that the only way in which it can continue as a sound and viable group is to give up bread baking altogether. The company is selling 13 bakeries to Rank Hovis McDougall and Associated British Foods. This will ensure that the jobs of 5,100 employees are maintained. But the closure of the remaining 23 bakeries means the loss of 6,370 full-time and 1,620 part-time jobs.
In order to complete this transfer the companies concerned needed to know whether a reference to the Monopolies and Mergers Commission would be made. Immediately before Easter, therefore, Spillers approached the Government in strict confidence, through the Bank of England, on this question.
After following the statutory procedures and in the light of the advice of the Office of Fair Trading, my right hon. Friend the Secretary of State for Prices and Consumer Protection decided, on the information before him, not to make such a reference. This decision took account of discussions between the Ministers concerned and the major baking companies in the course of which various points were clarified and a number of assurances given.
In particular RHM and ABF have given assurances that they will keep open the bakeries transferred to them for at least a year. They have said that they are taking over all the Spillers bakeries for which they can see a profitable future. They also expect, subject to agreement with the unions on working procedures, to recruit the equivalent of over 2,000 additional employees at their existing
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bakeries, including those in Liverpool, Glasgow and the North-East.
The companies have said that the closures will not endanger bread supplies. ABF and RHM have stated that they do not expect to pre-notify a further price increase before late 1978.
It is clearly a matter for serious concern that the measures now taken involve sudden large-scale redundancies in a single firm. The Government greatly regret that they have not had more notice of the closures. But, having regard to the substatial over-capacity in the baking industry and Spillers' financial difficulties, Ministers concluded in the circumstances that the reorganisation proposed is probably the least unattractive of all the unattractive courses of action available.
Mr. Radice: I thank my right hon. Friend for that statement. Can he tell the House why Spillers gave such short notice of its withdrawal from the baking industry and the making of so many production workers redundant, including 700 in my constituency? Is my right hon. Friend aware of the impact of decisions such as these on areas with high unemployment? Will the Government see whether anything can be done to save any of the jobs?
Mr. Silkin: I sympathise with my hon. Friend and his constituents. I know that Birtley will have about 700 redundancies. My hon. Friend asked what could be done at present. The Secretary of State for Employment asked the Employment Services Agency to go into this at once and approached the other bakeries involved to see what can be done.
Spillers took the view that consultation with the unions could not have taken place without open debate. Spillers felt that this would lead to a loss of orders and would jeopardise its sources of finance and the whole deal, with even more adverse effects upon employment. I should have thought that if ever we needed justification for our belief in industrial democracy, we do not need it now.
Several hon. Members Several hon. Members rose—
Mr. Speaker: This is a Private Notice Question but I propose, exceptionally, to call four supplementary questions from

977
each side—apart from the Front Benches—because of the interest that I know exists in this matter.
Mr. Fell: I wonder whether the Minister is aware of the statement which was made by the Secretary of State for Scotland on Friday in which he claimed that this came as a complete surprise to the Government? The right hon. Gentleman has now told us that the Government knew about this before Easter. What is the matter with the Government's liaison, apart from anything else? Can the Minister bring whatever pressure is possible to bear on Spillers to see that my constituents—about 750 of them—receive proper compensation for the loss of their jobs? Many of these workers have been in their jobs for over 20 years.
Will the Minister persuade the Secretary of State for Prices and Consumer Protection who is sitting next to him, to look again at a reference of the new set-up—which is almost a complete monopoly of baking and milling—to the Monopolies and Mergers Commission?
Does the right hon. Gentleman realise that I shall support the three bakeries unions at their meeting in Manchester later this week in whatever reasonable propositions they put forward to persuade the company that has now gone out of the bakery business to pay proper compensation to my constituents?
Mr. Silkin: Taking the first point, about my right hon. Friend's statement on, I think, Friday, I did not read him to say that at all. As I read what he had stated, what he said was that he deplored the lack of consultation with the unions. The fact is, in any event, that the Government were informed, as I pointed out in my statement, a couple of days before Easter. That really did not give very much time to come to any basis of restructuring.
However, I must tell the hon. Gentleman that I myself, last August—and I repeated it at the turn of the year—knowing that there were difficulties of overcapacity and of dropping demand in this industry, asked the Bakers Federation whether it would wish the Government to assist it in any way, with advice or in any other way in restructuring. I am still waiting for a response to that.
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[Interruption.] I am the responsible Minister.
As to the question of redundancies and compensation, I think that the whole House would agree that proper redundancy payments must be made in this case, of course.
Mr. Cledwyn Hughes: In view of the substantial production capacity of Spillers, can my right hon. Friend give us an assurance that there will not be a shortage of bread in any part of the country as a result of this?
Mr. Silkin: Certainly there will not be a shortage of bread as a result of this, and I hope that there will not be a shortage of bread for any other reason. The fact is that even now the industry is still working slightly above capacity—although, it is true, only slightly.
Mr. Peyton: Does not the right hon. Gentleman think it a little odd that he should be answering this Question when the fingerprints of his right hon. Friend the Secretary of State for Prices and Consumer Protection are to be seen all over this miserable affair?
Secondly, may I ask the right hon. Gentleman to make the effort to recall the clear warning given by the Monopolies and Mergers Commission in July last year that the unprofitability of the bread baking industry was due largely to statutory price control and to other forms of official intervention?
Thirdly, may I ask the right hon. Gentleman whether he agrees that the inevitable consequence of all that, and particularly of his right hon. Friend's contribution to it, was bound to be the inability to invest, which would lead in turn to less competition, fewer jobs and higher prices?
Finally, does the right hon. Gentleman agree with the estimates made by the union leader responsible that this miserable development could well lead to an increase in the price of bread by up to 8p a loaf?
Mr. Silkin: Taking the last point first, I do not agree with it, and I do not agree with it for many reasons—one of them being that, in fact, as the balance of supply and demand will be much nearer, the unit costs of production, inevitably, will go down.

979
Secondly, Spillers will now have a very large amount of flour, for which previously there was an outlet within its own bakeries, which it will have to sell to other bakers. This and the fact that most supermarkets are now dealing only with two of the three bakers concerned lead me to assume that there will be no increase in bread prices. Indeed, the bakers themselves have said that they do not see it at least before the end of this year. Therefore, concerning this matter, I do not think that there is any difficulty.
Concerning the first point, I have noticed that my right hon. Friend the Secretary of State for Prices and Consumer Protection is very well able to look after himself and is capable of doing so. I have not the slightest doubt that had this Question been asked of him, he would have answered it. But the Question was asked of me.
As far as the other question is concerned, I do not blame the right hon. Member for Yeovil (Mr. Peyton). After all, he was not a member of his own Cabinet at that time. But the Price Code to which the Price Commission referred was the code introduced by the right hon. Gentleman's Government. If the right hon. Gentleman had listened to the statement—I hope that he did so—he would have realised that Spillers, in fact, said that it had been losing money for over the past six years. That takes us back to 1972 and well within the time of the right hon. Gentleman's Government.
The truth of the matter, as I say, is the fact that bread demand has dropped by 36 per cent, since the 1950s and, secondly, that there is over-capacity in the industry.
Mr. Peyton: Will the right hon. Gentleman at least recollect that he and his hon. Friends have been responsible for the last three years? Their performances as historians are not good. Their performance in office is very much worse.
Mr. Silkin: I should like someone to tell the right hon. Gentleman that the Price Code has been relaxed in those three years.
Mr. Ashley: Is my right hon. Friend aware that the arrogant and contemptuous action by Spillers Ltd, without any consultation, negotiation or discussion with
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the trade unions, workers or Member of Parliament involved in sacking 8,000 workers, including hundreds in my constituency, should not be tolerated by a Labour Government, because it will embitter industrial relations throughout Britain? Therefore, what we on the Labour Benches want is, first, a recognition either that the jobs will be preserved or that alternatives will be found and, secondly, a full debate to uncover the secret negotiations that have been conducted by the company, certain Ministers of the present Government, the Monopolies and Mergers Commission and the Bank of England? I believe that these discussions should have been held in public and that the facts must be made known.
Mr. Silkin: As I told my hon. Friend the Member for Chester-le-Street (Mr. Radice) in my statement, the position concerning Spillers was that it believed, rightly or wrongly—I take no point on this at all—that if it had held a longer period of consultations, that would have meant the collapse of the whole of the Spillers' organisation, with a corresponding loss of employment of, perhaps, three times the amount. I make no comment on it, except to say that this was Spillers' view.
Concerning the discussions, my right hon. Friend the Secretary of State for Prices and Consumer Protection was the chairman of the Ministers who met the various groups. As I have told the House—and I have told the House absolutely frankly and clearly what happened—the aim was to get the proper assurances from the other companies that would be taking over some of the factories, and thus at least to safeguard some jobs, and, secondly, to raise this very question—which my right hon. Friend did raise—about consultation with the unions. I have told the House what Spillers' view was. Clearly, it is a matter for the House to make up its own mind whether this was right or wrong.
Miss Fookes: As the Plymouth bakery will not be one of those saved, will the Minister undertake to liaise with his right hon. Friend the Secretary of State for Employment and to have a statement made to the House in due course about the practical measures that will be taken to try to alleviate the unemployment caused?
Mr. Silkin: As I told the hon. Lady and the House earlier, my right hon. Friend has already set in motion the introduction of the Employment Services Agency, with all that that entails, into the bakeries concerned. I shall pass on to him what the hon. Lady has said.
Mr. Heffer: Is my right hon. Friend not aware that in Liverpool, for example, the district secretary of the bakers' union discovered this redundancy and closure while visiting another factory which had nothing to do with the company? The trade unions were never informed. Also, the 90-day notice which is supposed to be given under the law has not been given. These workers will be thrown on the streets within a few days. I cannot understand why this matter was not sent to the Monopolies Commission and I do not accept the excuses put forward by my right hon. Friends. Is it not time for the Government to think again and intervene again in this matter before it is too late? We cannot afford another 600 workers unemployed on Merseyside. It is just not good enough. It is time that the Government began to act positively in this direction.
Mr. Silkin: On the question about a reference to the Monopolies Commission, that is a very difficult decision which had to be made. My right hon. Friends who formed the group of Ministers concerned came to the conclusion that it was better to safeguard employment and indeed to get some back—
Mr. Heffer: What—in Liverpool?
Mr. Silkin: If my hon. Friend reads my statement when it appears in Hansard, he will see that I made special reference to Liverpool—
Mr. Heffer: How many of them?
Mr. Silkin: That I cannot tell my hon. Friend at the moment.
Mr. Heffer: Exactly.
Mr. Silkin: I am simply giving the reason why no reference was made to the Monopolies Commission. It was in an endeavour to obtain the necessary degree of employment. As for the 90-day notice under the Employment Protection Act, that Act was designed among other things to give that sort of notice. We did not want the old days back again. I understand
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that. However, whether there was a breach of that or not is a question of law. Obviously, Spillers took its own legal advice and came to its own conclusion. It is not for me to intervene on that matter, because it is a matter of law.
Mr. Grist: Does the right hon. Gentleman realise the bitter effect that this closure will have in my constituency in Cardiff, coming as it does, on top of the closure of the East Moors steelworks? Will he comment on the likely difference between the compensation paid to redundant steelworkers and that paid to those made redundant by Spillers?
Mr. Silkin: I should not very much like to comment on it, beyond saying that in my experience Government and nationalised industries are very good employers.
Mr. Ryman: Can my right hon. Friend say more clearly why a deliberate decision was taken not to refer this matter to the Monopolies Commission, bearing in mind the overall criterion for referring such matters—the public interest?
Mr. Silkin: I hope that my hon, and learned Friend heard me say that this was a very difficult question. But my right hon. Friends were determined to safeguard as much employment as possible. That was the basic element in the whole of their decision, and that seems to me to be absolutely right.
Mr. Pardoe: Does the right hon. Gentleman accept that this decision was due mainly to the reduction in bread sales brought about by a change in national taste and exacerbated by recent industrial action? Will he also note that, as a result of that reduction in bread sales, Spillers has become a lame duck and that the Conservative Party, through its Front Bench today, is supporting the sustenance of lame ducks?
Mr. Silkin: I thought that the view of the Opposition was to attack the Government whenever they acted properly, as they have on this occasion, in my view. But I take the hon. Gentleman's point. As I said, there has been a 36 per cent, reduction in the demand for bread since the 1950s. That has led to a great deal of over-capacity and perhaps, as it were, to over-competition. So in that respect the hon. Gentleman is perfectly correct.

EUROPEAN COUNCIL (COPENHAGEN MEETING)
The Prime Minister (Mr. James Callaghan): With permission, I should like to report to the House on the meeting of the European Council in Copenhagen which I attended at the end of last week with my right hon. Friend the Foreign and Commonwealth Secretary.
The Council expressed to the people of Italy its distress at the cruel abduction of Signor Aldo Moro in Italy. There was agreement on the need for close co-operation among the Nine in countering terrorism and to reach conclusions on the proposals put forward by President Giscard with the aim of improving judicial co-operation among the member countries.
The nine Foreign Ministers, meeting separately for part of the time, reviewed a number of current international problems, including the current position in the Middle East. The Council deplored all recent acts of violence in this area and the events in Southern Lebanon and expressed support for the new United Nations Force and for the integrity of the Lebanon. The Council emphasised that the momentum of the peace process in the Middle East should be maintained with a settlement based on Security Council Resolution 242 in all its parts and on all fronts.
A statement was issued by the Council supporting efforts of the five members of the Security Council to bring about a peaceful solution in Namibia. My right hon. Friend the Foreign and Commonwealth Secretary gave an account of recent developments in Rhodesia and the Council expressed their continuing support for a satisfactory solution based on the principles of the Anglo-American plan.
On Community affairs, the Council agreed that the legislative procedures in the member States were sufficiently advanced to select the dates of 7th to 10th June 1979 for the first direct elections to the European Assembly. Each member State will choose its customary day of the week. For Britain that would be Thursday 7th June 1979. The Council adopted a declaration on democracy reaffirming the link between membership of the Community and the observance of democratic
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principles, which is valid for both present and future member States.
Following the "Amoco Cadiz" disaster on the French coast, the Council called on member States to adopt common attitudes in preventing pollution of the sea and in particular to co-ordinate action on compulsory shipping lanes and on effective control over vessels which do not meet the minimum standards for the operation of ships.
It was agreed that a European foundation should be established, in Paris, to promote cultural and other contacts within the Community.
The main focus of our discussions, however, was the unemployment of both human and material resources within the Community. The growth rate of the Community during 1977 was 1·9 per cent, and it was agreed that we should develop a common strategy designed to reverse this unsatisfactory situation. The strategy should cover five broad areas—economic and monetary affairs, employment, energy, trade and relations with the developing world—similar to those I recently suggested to President Carter, as areas in which the industrial world needs to take collective action. It is the Council's view that agreement in these fields would be an important contribution to world economic recovery, higher economic growth and the creation of new jobs. The Council laid stress on the need to prevent inflation as part of the same objective.
It was decided to aim for a Community growth rate of 4½ per cent, by the middle of 1979 and to define the margin of manoeuvre that would be open to member States as a result of co-ordinating their actions. The possibilities should be known when the Council next meets in Bremen in July. It was agreed to recommend a doubling of the capital of the European Investment Bank.
An improvement in the general employment situation would be a key objective of such a common overall strategy. The Council agreed to examine whether work-sharing measures should have a supplementary part to play in alleviating the present grave employment problems.
There was a discussion on the European aspects of what are called "industries in distress" and agreement to set up tripartite committees on a European

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basis made up of Governments, employers and trade unions to overcome the serious problems of structural overcapacity and to restore the industries to world competitiveness.
Work is being set in hand on these matters and on the imbalances of current account surpluses and deficits which lead to currency instability, as well as on measures to reduce demand and increase supplies of energy in the Community. It was also recognised that there is a need to reach a successful conclusion on the present multilateral trade negotiations and for an increase in capital flows to the developing countries.
It is intended that conclusions on these matters should be reported to the next European Council in Bremen early in July. This meeting will be followed by an economic summit between the United States, Canada, Japan, Germany, France, Italy and the United Kingdom in Bonn on 16th and 17th July. It will thus be possible to present a European dimension to the wider summit. I am glad to say that the agreed statement announcing the wider summit also recognises the need for concerted and mutually supportive action in the main areas I have mentioned, and the participants agree to develop their policies so as to take account of this, both in preparing for the July meeting and in any action they take meanwhile. The Budget to be introduced by my right hon. Friend the Chancellor of the Exchequer tomorrow will take this into account.
This recognition of common purpose must now be reflected in the work that will take place and must lead to concrete action in the coming months and at the July summits. The discussions so far held with Heads of Government within and outside the Community have now to be made effective by policy measures which taken together will offer the best chance of bringing about a change in the direction of the world economy and an improvement in world confidence.
Mrs. Thatcher: The Prime Minister has made a very long statement and it would neither be possible nor desirable for me to comment on each and every point, especially as much of it will be the subject of debate later in the week. I shall confine myself, therefore, to my usual few points.
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First, is the Prime Minister aware that we welcome any strong action by Governments which will bring terrorists to justice and which will prevent further violent acts of the kind which we are seeing far too often in Europe, that we welcome the setting of the date for the direct elections, and that we welcome the declaration of democracy which makes it clear that there is no room in Europe for any one-party State?
Secondly, as there appears to have been a great deal of discussion on international currency and exchange rates and a good deal of confusion—indeed, contradiction—in the reports, it would be helpful if the Prime Minister could clear up some of that confusion and, in particular, if he could say whether there is any change in the Government's policy of allowing exchange rates to float either against all currencies or specifically against those of our Community partners.
Thirdly, will the Prime Minister say whether there has been any change in the very firm view taken at the Downing Street Summit—I am aware that it was of a different composition—against trade protection? He will remember that at the Downing Street Summit there was a communiqué which said that protection would foster unemployment, increase inflation and undermine the welfare of our peoples. Is that still his view about a country which exports as much as we do?
The Prime Minister: I am obliged to the right hon. Lady about what she had to say on the question of terrorism and its suppression. The Bill concerned with the suppression of terrorism, which is now going through Parliament, will, I hope, be of assistance in this matter.
As regards exchange rates, as I think that the House is aware through Press briefing, the President of the Commission and others have put forward proposals. Copenhagen is a rather ill-omened place for such proposals, I seem to recall. However, we should examine everything and anything that is put forward that would lessen the turbulence in the exchange markets. I should be very happy to do that, but we must be clear that lessening the turbulence in the exchange markets does not of itself either promote or reduce unemployment. Present Government policies continue to exist. Ideas are always being bruited about and they should be

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examined, but there is no more to it than that at present.
As regards trade protection, I found a growing concern among a number of Heads of Government about this matter, to some extent caused by the previous point that the right hon. Lady raised—the turbulence in the markets either forcing up some currencies or forcing down others—and to some extent because of the transfer of technology from the advanced industrial world to the developing countries. It would be profoundly politically dangerous if we were to use protection as a defence against that consequence, but it is throwing up new problems for the middle 1980s. Studies are beginning on that.
For the meantime the right hon. Lady knows my view—I have expressed it often enough—that a country such as our own which exports so much of its products must be extremely careful in any measures of protection that it would be asked to consider.
Mr. Gould: Can my right hon. Friend confirm that we are not likely, either as a move towards economic and monetary union or otherwise, to re-enter the currency snake? Will he also agree that any efforts to re-establish stability in world currency markets should be made in conjunction with the United States, Canada and Japan?
The Prime Minister: I am not aware of any proposition to the effect that we should re-enter the currency snake. I have expressed my view to President Carter that, if at all possible, it is far better that we should regulate the currency markets on a world basis including the dollar rather than excluding it from our consideration.
Mr. Powell: In the context of countering terrorism, was any progress made in reducing the role of the Irish regime as a base for the conduct of terrorist operations in the United Kingdom?
The Prime Minister: I had discussions with the Prime Minister of the Republic of Ireland in the margins, but we did not discuss it in the terms that the right hon. Gentleman has put this afternoon. I think that the sensitivities of the matter are well known. It is the task of the British Government to ensure that terrorism in the North of Ireland is put down and at the
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same time to maintain good relations with the Republic of Ireland, which is co-operating with us in doing so.
Mr. Roper: Did my right hon. Friend and his colleagues on the European Council review the state of progress of the Community's negotiations with Japan over trade matters, and, if so, were they satisfied with the state of negotiations?
The Prime Minister: No, we were not satisfied with the state of negotiations. The Japanese surplus looks like being extremely large again during the current year. That in itself is bound to make for greater problems in securing some stability in the currency markets. The Commission has therefore been asked to take the matter up again with the Japanese and a further report will be made to the next European Council at the beginning of July.
Mr. Thorpe: Does the Prime Minister agree that the Community is the only world trading Power which has its own internal world exchange rate difficulties? Therefore, was consideration given to pooling part of the reserves of the Nine, possibly in the European Monetary Fund, to act as an exchange stabilisation fund? Was any consideration given to producing a new unit of account which would be a parallel European currency which could be used on a voluntary basis? Was there a determination to harmonise the rate of coverage of VAT? Does not the Prime Minister agree that all of these would produce a degree of stability which would produce investment which would bring in new jobs?
The Prime Minister: It is clear that the exchange rate difficulties in Europe spring from the fact that we have nine sovereign countries. However, to obliterate exchange rate difficulties does not necessarily mean that there would be an equal rate of growth throughout all parts of the area concerned. If it were so, the Lehigh Valley in the United States would be prospering as much as Texas. Therefore, we have to be extremely careful in trying to find a solution to these problems. I cannot say that there were any discussions at Heads of Government level about the proposals that the right hon. Gentleman put forward, though I am sure that discussions are going on—and rightly going on—about these matters, because

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we wish to overcome them, if that is possible without hampering our own economic progress.
Mr. MacFarquhar: In view of what my right hon. Friend said about difficulties with Japan, would he consider suggesting to the next summit at Bremen that, in addition to the now regular confrontations between trade Ministers and trade commissioners and their Japanese equivalents, it would be advisable for European Heads of Government to meet regularly with the Japanese Prime Minister in order to extend the range of contacts and, perhaps, avoid these confrontations?
The Prime Minister: I have been in communication with Mr. Fukuda, the Japanese Prime Minister, to explain to him the thoughts I have had about trying to get a collective agreement on a number of issues which, whilst individually not very attractive to the countries which would be asked to undertake them, taken together might create a greater atmosphere of confidence. We shall be meeting Mr. Fukuda when the summit meets in Bonn on 15th and 16th July, but discussions will go on before then, too.
Mr. Fletcher-Cooke: Reverting to the question of European solidarity against terrorism, is the Prime Minister aware that in the European Parliament the Irish delegation was equally solid with all others in a unanimous vote that all members of the European Community should ratify the anti-terrorist and anti-hijacking conventions? In his conversation with the Prime Minister of the Republic of Ireland, did the right hon. Gentleman remind him of this and ask him what proposals the Prime Minister of Eire had for ratifying this convention, Eire being the only member of the Community that has not so far done so?
The Prime Minister: I did not raise this matter with the Prime Minister of the Republic. I think he is aware of our position on this matter and he will know what force of international opinion is playing upon the Republic, but it is for him to take a decision.
Mr. John Mendelson: When the Prime Minister and Heads of Government discussed the problem of terrorism, were they made aware that at about the same time the International Air Pilots Association
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was publishing a very firm declaration requesting action against hijacking and that it decided in principle that if such action were not to be taken by Governments in the near future, the pilots would themselves take action and pronounce a boycott against countries which did not take action against hijackers or allowed them to organise their terrorist activities within their territory? Have the Heads of Government any attitudes in the near future to take on this important problem?
The Prime Minister: That matter was not discussed, although I read of it in the public prints. This will be taken account of by those who have still to take action on the ratification of the Act concerned.
Mr. Dykes: Is the Prime Minister aware that his new-found enthusiasm for EEC economic solidarity is much to be welcomed in all quarters? Since he had to concede last Thursday that the real rate of unemployment in this country is much higher than in the other European member States, pro rata, what specific anti-unemployment proposals did he make in the context of those economic discussions?
The Prime Minister: The comparisons that are constantly being made across the Floor of the House always neglect the fact that the increase in unemployment since 1973, which is the measuring rod that I take, has been as great—or greater—in some other countries as it has been in this country. But I think that we are all agreed that the tendencies in all the countries are the same. Some are at a different stage in the process, but the tendencies are the same and the prospects for unemployment in the 1980s will cause all countries the greatest concern.
It was for this reason that we discussed the possibilities, or asked our colleagues to discuss them, of, among other things, work-sharing and the creation of jobs in other ways. I hope that there will be a more detailed report in July.
Mr. Alan Lee Williams: I warmly welcome the Prime Minister's statement about the foundation of the European cultural organisation. Will he say something more about this and agree to place in the Library further details of this organisation?
The Prime Minister: Yes, I shall consider what can be placed in the Library. The details have to be worked out. It was a proposition that came from Prime Minister Tindemans' report some time ago. I am glad that it has been adopted. There can be no harm, whatever view we may take about the Community, in getting to know the other people of Europe better.
Mr. Marten: Is the Prime Minister aware that since July 1975 there have been nine summit meetings and that each communiqué that I have read has mentioned unemployment and growth? Yet precisely nothing seems to have happened. Does it not illustrate the ineffectiveness of this type of co-operation, welcome as it is?
Secondly, on Rhodesia, noting that our partners in the Community support the Anglo-American initiative, can the Prime Minister say why it is that he never takes up in that circle of friends the question of sanctions busting by our partners in the Community? I know that the matter is taken up in the United Nations. Why is it not taken up in the Common Market itself?
The Prime Minister: The hon. Gentleman has a point, though I would not say that those discussions are ineffective. It illustrates both the common nature of the problem that surrounds the Western world at present and the difficulty of finding a solution, because all the countries concerned want to find a solution if they can. I do not know that we have yet found a solution. I am not ready to sit back and do nothing about these issues. That is why in my own way I have been trying to put forward a collective plan for concerted international action. I hope that it can succeed. However, it illustrates—the hon. Gentleman is quite right—the profound difficulty into which the Western world has fallen, in particular since 1973.
On sanctions busting in Rhodesia, I have not always said so, but I have raised the matter, more particularly when I was Foreign Secretary, at the Council of Foreign Ministers and brought a number of illustrations to the attention of the Council of Foreign Ministers. Action was taken after that. I shall bring the hon. Gentleman's question to the notice of my right hon. Friend.
Mr. Skinner: When my right hon. Friend went to Copenhagen did he tell them that since we have been writhing with this European cobra we have paid, in total, £3,000 million in relation to subscription, trade deficits and so on? Did he point out that unemployment has doubled in this country—and, for that matter, in many others inside the Common Market—since 1973? Did he also remind them of the terrible inflation that this country has suffered partly through being in the Common Market? Did he deal with those matters?
Does he understand that the British people are yearning for him to raise the question of the Common Market once again, not in terms of whether it can solve the unemployment problem collectively but in terms of whether he is big enough to say that the matter has not been finally settled?
The Prime Minister: Some of my hon. Friend's questions were raised by me. For example, the United Kingdom will, I think, this year be the second largest net contributor to the Community after Germany. This, in my view, is not a satisfactory position, because the common agricultural policy is neither in the interests of Europe as a whole nor in the interest of Britain, and there should be reforms. It seems to me that the balance is all wrong when so much of the funds of the Community are devoted to supporting agricultural surpluses that are not needed at a time when there is such great unemployment throughout the Community
On inflation, with respect to my hon. Friend, that is more due to the levels of the money supply in the early years of the 1970s than it is to our entry into the Community. However, he need have no doubt that, within the general ambit of the decision of the British people. I shall pursue British interests on all these matters as forcefully as possible, as I find all my colleagues do.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: If the hon. Members who have been standing are brief, I hope to call them all.
Mr. Biffen: In respect of currency exchange, is the right hon. Gentleman aware that there is nothing so turbulent

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as a Government forlornly trying to defend a fixed rate which has parted from market reality? Will he remind the President of the Commission that the House is sufficiently jealous of its ability to decide what are the appropriate patterns of taxation for this country and to hold the Government accountable for the control of money supply that it will not lightly trade in either of those for some scheme of economic and monetary union?
The Prime Minister: I do not think that that is a complete analysis of the situation. Of course, it is axiomatic that one cannot defend a fixed rate if it is unreal. The hon. Gentleman seems to be neglecting the great force of the market today, especially in the Eurodollar area, in which the currencies sweeping across the market can create conditions against the level of a currency which are totally unrelated to what should be a competitive value. I hope that the hon. Gentleman will not be so wooed by market forces that he will say that we should stand helpless in the face of these gales. If so, I totally disagree with him.
Mr. Faulds: Will my right hon. Friend contemplate whether it is not time that he and others of his colleagues among the leaders of the Nine adopted the sensible and responsible attitude of Chancellor Schmidt in declaring that the Palestinian people have the right to self-determination?
The Prime Minister: The British Government's view of this matter and the view of the Nine is well known. It would be as well to stand by the formula that is now being worked out in the Middle East and with the United States on the position of the Palestinians in determining their own future. I do not think that we should go out individually and severally on this matter. The combined efforts of all the Nine are more likely to yield better results than if each of us states his own personal position.
Mr. Gow: As the Prime Minister of the Irish Republic was present at the conference in Copenhagen and as the issue of terrorism was on the agenda, and as terrorism is being mounted against the United Kingdom from the Republic, is it not inconceivable that the
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Prime Minister can tell the right hon. Member for Down, South (Mr. Powell) that the issue of terrorism from the Republic was not even discussed by the Irish Prime Minister with the English Prime Minister?
The Prime Minister: That is not what I said. Nor is it what I meant. I think that the House is well aware of the nature of our relations with the Republic of Ireland, and those relations will not be helped, in a situation in which the Republic is as opposed to terrorism as we are, if people such as the hon. Gentleman try to stir up trouble between the two countries.
Mr. Watkinson: Can my right hon. Friend clarify the 4½ per cent. growth rate? Is it the intention that member countries should aim for that growth rate individually or will it be an average growth rate? If that be the case, does it not imply that certain countries will have to grow much faster than others? Can my right hon. Friend say what is the attitude of the West German Chancellor to these matters, as that is pivotal to the growth of Europe?
The Prime Minister: This would be an average growth rate to be aimed at. As the House will see from the figures I gave, it would mean a large increase, considering that the average growth rate in the Community was only 1·9 per cent. during last year. [HON. MEMBERS: "What was ours?"] Ours was lower. I invite the House to await the Budget tomorrow. Let us see what it contains. I shall be as interested as anyone else.
As for the future growth rate of 4½ per cent., this is an average for the Community as a whole. It clearly implies some countries going ahead faster than the average and some slower. The West German Chancellor is quite clear about this point. He wishes the German economy to grow as fast as it can. What he is perhaps more sceptical about than some others is how far it can be persuaded to grow. That is one of the areas in which there will have to be discussion between now an the summit in July.
Mr. Alan Clark: Is the Prime Minister aware that his somewhat qualified comments on protectionism have been noted? Does he not agree that there is a case at least for protecting

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the livelihood of Her Majesty's subjects against imports from areas which are themselves, in one form or another, highly protectionist and take very little from us in exports?
The Prime Minister: There should be no ideology about this. It should be a matter of practical, cold, hard calculation. That is what Her Majesty's Government will apply to every case that comes in front of them. In the matter of the textile industry, for example, it was possible through the Multi-Fibre Arrangement, with our other Community colleagues, to reach an agreement that has been of great value to this country—I would guess probably better than we could have achieved if we had negotiated individually. We should take each case on its merits.
Mr. Christopher Price: Is my right hon. Friend satisfied that all obstacles to direct elections are now removed? Did the Prime Minister of Luxembourg repeat his suggestion that he might not complete the final formalities until he had received a guarantee that Luxembourg would remain the seat of the Assembly in perpetuity? Does not my right hon. Friend think that it is rather silly for the European Assembly to build spec-built parliaments all over Europe which give it a reputation for extravagance and not first decide where its seat should properly be, which is in Brussels?
The Prime Minister: The Prime Minister of Luxembourg did not raise this matter. As for the legal position regarding the date, all the proper decisions have not yet been taken. The Bill has still to complete its progress through the House. Then it will be necessary to ratify the decision under Article 10 of the Council Act. That will require another action by the House. Other countries have to do the same. I believe that only Denmark and Ireland have so far completed all the procedures.
The decision taken on Saturday was a political decision in the sense that we thought that the progress that had been made justified fixing a date in the middle of 1979. But the legal procedures have still to be completed.
Mr. Ridsdale: As the Japanese position will be extremely important at the summit, may I press on the Prime Minister
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the need for more intensive private diplomacy and not so much public diplomacy? Does he realise the danger that so many people are trying to make political capital out of the matter and making the Japanese the scapegoat for some of our ills?
The Prime Minister: Yes, Sir, but the hon. Gentleman and I live in a rather old-fashioned world. Nowadays it seems to be important that everything should be publicly known at the earliest possible opportunity, no matter what the consequences may be for any discussions that have taken place.
Mr. Madden: Does my right hon. Friend agree that the European textile industry needs further attention, bearing in mind that only last week a Common Market agency forecast 1·7 million redundant European textile workers by 1985? If the Common Market is unwilling or unable to protect the British textile industry against grossly unfair imports, is there not a need for Britain to act and to impose selective import controls to protect this vital industry?
The Prime Minister: As I am sure my hon. Friend will know, because he is a great expert on this matter and follows it very closely, there is no evidence for his proposition. Indeed, the evidence is to the contrary, that we got a very good deal out of the last round of the negotiations. I find no complacency on the part of my colleagues, the Heads of Government, about these issues. It is a question of the right way to tackle them. In the case of a number of industries about which we are deeply concerned at present—steel, shipbuilding, textiles, clothing, footwear and others—the same problems are being repeated throughout Europe. I can see every advantage in having discussions and consultation and maybe decisions taken on a common basis if it will help us all.
Mr. Ioan Evans: In view of the high unemployment in all the Common Market countries, the fact that this was the main item on the agenda will be welcome. Will the Common Market leaders be making positive proposals to the summit conference in July for dealing with structural unemployment? What machinery will be set up to monitor the increase in economic growth that is proposed?
The Prime Minister: The Economic Council has been asked to take this matter into account, together with the tripartite committee that already exists among trade unions, Government and employers, to report to us in July. A further conference of all three groups will be held in September. But I believe that it we are to get movement on this and on economic growth, we must get movement on the other factors that I have outlined as well. We shall not get anything done individually. There must be a collective decision for united action. I do not know whether it will succeed, but I think that it is the best prospect that we have.

NATIONAL ENTERPRISE BOARD (CAPITAL REQUIREMENTS)
4.27 p.m.
The Secretary of State for Industry (Mr. Eric G. Varley): I beg to move,
That the draft National Enterprise Board (Financial Limit) Order 1978, which was laid before this House on 3rd April, be approved.
The order is to increase the National Enterprise Board's financial limit from its present level of £700 million to the level of £1,000 million provided for under Section 8 of the Industry Act 1975.
I understand that it will be for the convenience of the House if we discuss at the same time the other motion in my name:
That this House authorises the National Enteprise Board on the direction of the Secretary of State, given under section 3 of the Industry Act 1975, to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972 (as amended by section 22 of, and Part 1 of Schedule 4 to the Industry Act 1975, and section 1 of the Industry (Amendments) Act 1976) sums to British Leyland Limited or any of its subsidiaries not exceeding in the aggregate £150 million, being sums in addition to the £30 million previously paid by the National Enterprise Board to British Leyland Limited under that section 8.
These measures are necessary in order that the National Enterprise Board may meet the capital requirements of British Leyland and the other companies for which it is responsible, as well as undertake its wider statutory purposes. In its votes today, the House will be directly influencing the livelihoods of hundreds of thousands of the electorate and their families. The total number employed in companies in which the NEB has a stake is over 330,000. I am very pleased that the right hon. Member for Lowestoft (Mr. Prior) will be taking part in the debate as the Opposition spokesman on employment matters. Additionally, about 90 Members of Parliament have a direct constituency interest in the votes tonight.
We clearly cannot debate the Board's finances without devoting the major part of our time and attention to the largest NEB company, British Leyland. I shall have something to say about the other NEB interests later in my speech.
British Leyland is enormously important to this country. At the end of 1977 there were over 170,000 employed in that company, of whom 130,000 worked for

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British Leyland Cars. This is simply the direct employment in the United Kingdom. If we add the number of people dependent on British Leyland in the components and supplying industries, we have at the very least twice as many. If we also include the numbers of people whose jobs depend on the spending power of Leyland workers, the number is bigger still.
Even more important, perhaps, is the concentration of jobs at stake in particular areas, particularly the West Midlands and the South Midlands. The collapse of British Leyland or British Leyland Cars would make the Midlands an industrial wasteland. But British Leyland also makes a substantial—
Mr. Eddie Loyden: Will my right hon. Friend give way?
Mr. Varley: I am sure that I am coming to the point which my hon. Friend wishes to raise, and I think I had better get on. I was saying that British Leyland makes a substantial contribution also to the economies of Scotland and Wales. It has about 10,000 employees in Scotland and over 5,000 in Wales.
Last year, British Leyland's exports totalled over £850 million, which makes it the largest net exporter in the whole of United Kingdom manufacturing industry in recent years. What is more, although British Leyland has only about one-quarter of the United Kingdom car market, it still provides over half the total number of cars produced for export in the whole of the United Kingdom and in terms of value the proportion is even higher. Its contribution to import saving is more considerable. British Leyland Cars expects to sell over 400,000 vehicles in the domestic market this year.
The strategy summarised in the National Enterprise Board's report to the House is the result of the fresh look which Mr. Michael Edwardes and his team have been giving to the prospects for the company over the next few years. Neither the chairman of the National Enterprise Board nor I gave Mr. Edwardes a special remit or terms of reference except in one respect. We told him that the plan had to be realistic.
The detailed targets that the company has set itself for 1978 are achievable, but the prospects for the period beyond need
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to be looked at, of course, with caution. The National Enterprise Board has, however, decided that, if the company can recover its position over the next couple of years and return to health in the 1980s, there should be no problem about finance in the years following the plan period.
The Government's objective remains unchanged. British Leyland should become a viable manufacturer independent of public funds in the 1980s.
I shall now detail the financial proposals. During the period since we rescued British Leyland up to the end of last month the company has borrowed a total of £150 million of the £1,000 million envisaged by the Ryder plan. The poor performance in the cars business in 1977 has meant that the company has failed to generate significant funds of its own for new investment, and the required level of expenditure on new plant, facilities and models which is needed to put British Leyland on a viable footing can be met only by the provision of public investment on the scale envisaged by the Ryder plan. The Government's view is that there is no point in this situation in making do with half measures.
In the period from last March to late March 1978, British Leyland received only £50 million from public funds. The National Enterprise Board decided last October, quite rightly, that it should not make available even the remaining £50 of the £100 million approved last July until the new board of British Leyland had put forward its own corporate plan. These sums are clearly inadequate to sustain the investment needed by any company with ambitions to remain a substantial volume car producer.
Even the provision of £450 million, which the National Enterprise Board has determined, after careful consideration, is the sum required for 1978, means that some desired programmes have had to be cut back—for example, the foundry modernisation programme. In deciding to make this money available in equity form, the Government have accepted the National Enterprise Board's view that there is an immediate need to strengthen the balance sheet by establishing a more satisfactory debt-equity ratio.
Clearly, Government backing in the form of a major equity injection will make it easier for British Leyland to meet

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its additional requirements from the banks rather than from the public purse, and it is highly desirable that British Leyland should be in a position, where it can, to look increasingly to private sources for those of its financial requirements which cannot be met by funds generated internally.
Mr. Ian Lloyd: The right hon. Gentleman has said that so far about £50 million has been invested by the taxpayer to sustain the investment of British Leyland. One matter which troubles the House and, I am sure, troubles the country is the question of what proportion of this money has actually been invested by British Leyland in new capital projects as opposed to being used by the company to support and sustain its wage bill. I am sure that our attitude towards all these future proposals will be very much conditioned by what the Secretary of State has to say about that.
Mr. Varley: Not all the £150 million has been used for capital investment. That has been made clear on previous occasions. I do not have the actual breakdown of the figures with me, but I can arrange for the hon. Gentleman to receive the figures in due course. I want to come on to that point because I agree that it is crucial. The provision of further loan money now, whether from private or public sector sources—this is the essential point of putting the £450 million in equity form—would merely have added to the interest payments burden at a time when only modest profit can be expected during the next two or three years.
Mr. Norman Lamont: The Secretary of State has talked about British Leyland becoming independent of the taxpayer. The target rate of return in the Edwardes plan is 10 per cent. For the period 1968 to 1973–74, according to the statistics—not my statistics but the statistics in the Ryder plan—that was the rate of return which British Leyland earned just before it had to go to the Government and be rescued. Is the Secretary of State confident that the rate of return in the Edwardes plan is sufficient to return the company to viability and independence of the taxpayer?
Mr. Varley: In the early years of the plan the rate of return will not be satisfactory by normal standards. We have made no secret of that, and I do not think that British Leyland or the NEB has made any secret of it. One can never be absolutely certain about the future either, but the figure contained in the proposals—that the real rate of return at the termination of the plan in the 1980s will be about 10 per cent.—is, I think, broadly correct. But it depends on all kinds of factors which, I am sure, the hon. Gentleman fully understands.
Mr. Michael Grylls: Will the right hon. Gentleman give way?
Mr. Varley: No, I want to get on. I want to deal further with the point that has been raised. That is the reason why I put the financial duty on the National Enterprise Board in respect of the Board's investment in British Leyland. As I have said, this is the form of the target rate of return on capital employed in British Leyland at 10 per cent. by 1981. In the years prior to 1981, the Board is to maintain progress towards that objective.
I am very conscious that this target is modest in comparison with previous expectations, but it is consistent with the whole approach—the approach which, I think, the board of British Leyland has been taking—and it has to be utterly realistic, setting realistic and achievable objectives for the company.
The Government have come to the conclusion that the Ryder plan concept of linking funding decisions not only to overall performance but to specific progress in industrial relations and productivity has been unhelpful—
Mr. J. W. Rooker: My right hon. Friend can say that again.
Mr. Varley: —and it has led to considerable uncertainty about the availability of future funds whenever there has been an industrial dispute. In fact, world-wide dealer and consumer confidence alike have been damaged, and the NEB and the Government have come to the conclusion that the annual funding decisions will be determined by overall assessment of performance against the plan's targets and the company's prospects.

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Obviously, since the question of productivity and the state of industrial relations have a direct bearing on performance, these will be two important factors which will have to be taken into account in the determination of future funding. The Government therefore intend that in future years funding decisions should be made annually on the basis of a report each November, beginning this November.
There is one other thing I wish to say about British Leyland before turning to other aspects of the National Enterprise Board's activities, and I know that the Opposition are keen on looking at other aspects of the NEB's activities. The view is held in some quarters that the solution to British Leyland's problems is to hive off the most profitable parts of the company to private enterprise. It makes it even harder to believe that the hon. Members concerned really want to see British Leyland's success when ideas of that kind are put forward.
It has been suggested that the old special products division of British Leyland, now Special Products Industries, should be separated from the company. SP Industries has in recent years expanded into a company with a turnover of £200 million a year, making a very useful contribution to British Leyland's profits. If hon. Members think that the hiving off of Special Products Industries would make it earlier for British Leyland to increase its private sector borrowing facilities, we have only to consult people in the City, who would tell us that it would make it much more difficult.
In my judgment, the only purpose that this talk of hiving off achieves is to demoralise the new management and also to demoralise the work force of British Leyland. It is seen by them simply as the first stage of a carving-up exercise for the company. The same argument applies even more strongly to the suggestion that British Leyland should, for example, hive off Rover production.
I want to make it absolutely clear that none of the British Leyland profitable activities—Special Products Industries, Rover/Jaguar Cars and Bus and Truck—is for sale. It is as well that I should make that clear right at the beginning of the debate.
Mr. Alan Clark: Surely those who are in favour of hiving them off simply have the interests of those concerned at heart. If they are hived off, they at least will be saved. If they are left any longer with this dinosaur, they will probably sink into the mud with it.
Mr. Varley: That view is not shared by the present realistic board of British Leyland or by the NEB, consisting of senior industrialists and senior trade union leaders.
As the House knows, the statutory purposes of the NEB, which were agreed by the House, are to promote industrial efficiency and international competitiveness, and to provide and safeguard productive employment. These are formidable tasks, and in pursuing them over the last two and a half years the NEB has gone a considerable way towards fulfilling the role for which it was established.
The NEB is required, under the guidelines, to see the prospect of an adequate return on its investment within a reasonable period. The duty is to ensure a return of 15 per cent. to 20 per cent. on capital in 1981 and to make steady progress towards this target in the meantime. I have now determined a financial duty in respect of British Leyland which is similar in form to its general duty. I intend to determine a duty for Rolls-Royce within the next few months, when discussions on the company's plans are concluded.
By the end of 1977, the NEB and its subsidiaries had a turnover of £3,500 million and had exports worth nearly £1,200 million during the year. Employment in the companies in which the NEB has a stake, as I have told the House, is over 330,000. Apart from its subsidiaries, the NEB has minority shareholdings in an increasing numbers of companies whose expansion is being financed through funds provided by the NEB.
During 1977 the NEB invested £200 million in 22 companies, and now has shareholdings in 39 companies. Members will have seen the NEB's preliminary results for 1977. The NEB will submit its annual report and accounts to Parliament early in May.
The House will, I hope, have noted with satisfaction the announcement made by the chairman of the NEB last week

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that Rolls-Royce made a pre-tax profit of £20 million last year. That is very good news, particularly following the company's loss of £23 million in the previous year. It is particularly impressive at a time when the level of activity in the aerospace and aero engine industry world-wide has been depressed.
These encouraging results from Rolls-Royce give the lie to the Press reports earlier this year which suggested that the company had made substantial losses in 1977. As the results have shown, those reports are completely without foundation. Fortunately, these rumours—which could have had a damaging effect on consumer confidence but did not have this damaging effect—did not stop the company from successfully concluding a major deal with Pan American World Airlines, announced only the other day. It is no exaggeration to say that this contract is the most significant order which Rolls-Royce has obtained for its RB211 engines in recent years, and the immediate prospects for the company's civil business, of which the RB211 is the mainstay, look promising, as long as the company remains competitive.
At the end of 1977 we received the Rolls-Royce corporate plan. That was made available to the NEB and, together with the NEB's own recommendations, we are considering the whole future of Rolls-Royce and its future technical and commercial strategy. We expect to receive proposals quite soon for a major new development programme which is currently being considered by the NEB.
Mr. Grylls: Naturally, we are delighted with the Rolls-Royce success story in recent weeks, but what contribution has the NEB made to achieve this deal? Would not Rolls-Royce have done it perfectly well off its own bat? What role has the NEB had to play?
Mr. Varley: The NEB has been of assistance to Rolls-Royce. That, I think, has been publicly acknowledged. If not, I am sure that the chairman and board of Rolls-Royce would acknowledge it. The relationship which exists between Rolls-Royce and the NEB is extremely satisfactory and harmonious. Therefore, it would be a mistake for the hon. Gentleman to suggest that the NEB has not been involved.
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In fact, the company has come a long way since it was brought into public ownership in the early 1970s. We have shown our faith in its potential by supporting it—it has gone through extremely difficult times—particularly through our commitment to the successful development of the RB211 engines. Recent events have justified this faith. We are confident that Rolls-Royce can continue as one of the world's leading suppliers of aero engines, and we shall do all we can to make this possible.
Another aspect of the NEB's activities is the increasing involvement that I hope it will have in regional activities. The NEB's regional boards in Newcastle and Liverpool were recently established to make available to the North and North-West regions the fullest possible assistance for industrial development. There is no limit, within the NEB's total budget, to the funds available for regional purposes. The regional boards have been in operation for only a relatively short time, but both boards contain members with wide experience of all aspects of industry, and I am confident that they will make a real contribution to their regions in support of industry.
The record of achievement of the NEB in a relatively short time since its inception has been remarkable. As I have already said, we are very fortunate in getting senior trade union leaders and industrialists as members of the Board. By the very nature of things, this has been a period of preparation. The NEB has only a small central organisation, but it has first-rate managers with a wide range of industrial experience. This team has been working carefully to lay solid foundations for the future.
Mr. Tim Renton: Of the 22 new companies in which the NEB invested last year, how many are at or close to achieving the rate of return on capital employed of 15 per cent. to 20 per cent. that the Secretary of State outlined as a target for the NEB in 1981?
Mr. Varley: I cannot give the hon. Gentleman exact figures, but I shall see what further information can be provided on that front. I have not the figures to hand, but the general objective is that which I have already stated to the House.

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The NEB's main task at present is to work by agreement to create partnerships with both existing companies and any new companies in which it invests. There are no easy solutions to our industrial problems, but there are solutions. I believe that the NEB can create the framework within which its current companies have a better chance of flourishing. I believe that it is possible to identify a number of real opportunities for British manufacturers, given the necessary backing, to succeed in world markets.
I see the role of the NEB in the coming years as follows. First, it is to ensure the success of its original major subsidiaries. These NEB subsidiaries represent a significant stake in three vitally important British industries—motor vehicles, aero engines and machine tools. The first priority, therefore, is to help these companies to succeed and to ensure a strong British capability in these industrial sectors.
The three original major engineering subsidiaries—British Leyland, Rolls-Royce and Herbert—are large and extremely complex companies operating in difficult circumstances in fiercely competitive world markets. They did not come to the NEB in the best of health. In fact, they all failed under private ownership. The NEB's role is based not on detailed interference with the management of the companies but on regular consideration of this overall strategy, the direction to be taken and the risks to be faced over the coming years.
The second task of the NEB is to expand the national strategy in a number of growth industries. Over the last two years detailed studies, in part based on the sector working party reports of the National Economic Development Office and a number of manufacturing sectors, have been undertaken. Resources are being concentrated on investment opportunities in a number of key areas. These investments will create partnerships with succuessful firms and expanding industries which can offer a good return for Britain, secure growth and long-term employment.
One sector is computers and electronics, particularly micro-electronics. With the major stake that NEB already has in Ferranti—in itself a success story, both for its own management and for the NEB—as well as the stake that it has in ICL and Data Recording Instruments, the NEB
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already payes a crucial role in this vital sector of the economy. Data Recording Instruments is, for example, the only United Kingdom-owned computer peripheral manufacturer of any significance. With the NEB's support, we are currently undertaking a major investment programme. The practical effect of not proceeding with the programme would have been to exclude the United Kingdom from the world peripheral markets.
Again, the creation of its new company—INSAC—has greatly strengthened the position of the United Kingdom computer software industry. Five of the most successful and profitable companies in the industry which will influence the development of manufacturing in the coming decade have now joined with the NEB in this venture. The same approach is adopted in laying the foundations for growth areas, as can be seen, for example, in the investment which has taken place in Sinclair Radionics. It is now producing and selling about 4,000 sets a month and is operating profitably. It has ambitious plans for future development.
In fact, I was heartened to read last week in The Daily Mail what was said by a finance director of a small manufacturer in the North-West in which the NEB had just invested. He said that he and others
"had picked the National Enterprise Board because of their muscle in electronics and their support for family concerns".
The NEB's third priority is to stimulate growth of exports by encouraging overseas marketing ventures. There is no doubt in my mind that this can be done. Britain has been suffering because it has not been able to get the investment packages that are necessary for overseas marketing in order to compete successfully in world markets. The NEB has recognised this and intends to create, where appropriate, substantial marketing organisations. An example of this is the new company—United Medical Enterprises—created in collaboration and in partnership with three large City organisations to encourage the export of British medical equipment and supplies. The total capital is about £8 million. It has been in existence for only one month, but I am sure that hon. Members will welcome that involvement. There is no doubt in my judgment that there is substantial potential business in that area.

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There is, however, one further theme underlying the NEB's current activity and its planning for the future. It aims to provide the capital needed by successful small manufacturers, particularly in the regions. In a rapidly changing world, we need a spread of companies. Above all, we need to back the creation of employment opportunities, particularly in the regions.
Mr. Nick Budgen: Will the Secretary of State explain why the Government cannot keep to a more modest objective for the NEB, such as the resuscitation of what are said to be temporarily ailing industries or firms, and sell off successful firms such as Ferranti and avoid going into other objectives for the NEB?
Mr. Varley: I do not know whether the hon. Gentleman was in the House earlier when this question was raised. I made it plain that none of the NEB's profitable companies, particularly those making up British Leyland, is for sale. I do not think that that would be the way to go about it. That is not recommended by the NEB, which consists of senior industrialists and senior trade unionists. It is not recommended by the board of British Leyland. That would serve only to demoralise existing management and create unnecessary fears.
The NEB is confident that it can achieve a target yield of 15 per cent. to 20 per cent. by 1981. In doing so, there is every hope that it can make an important contribution to sustaining the economic future of the country, improving competitiveness and providing employment. The work which the NEB is doing on British Leyland, Rolls-Royce, Herbert and the other 30 companies which look to it for financial and professional resources needs to be done in order to improve its overall performance.
All these activities have a continuing role within the framework of the NEB. To carry them out—that is, not only to proceed with the work but to finish that work, and particularly to carry through the work which Parliament has charged the NEB with fulfilling—we must allow that body to have the financial resources that are needed. Inevitably British Leyland presents the heaviest demand on the NEB's purse. It is clearly right that we
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should consider the NEB's statutory financial limit at this particular time.
But the House should be clear what the consequences would be for British Leyland and other NEB companies if the affirmative order to increase the NEB's financial limit were not approved. If British Leyland is to continue in business with a prospect of viability in the 1980s—
Sir Keith Joseph: The right hon. Gentleman is talking too fast. I cannot follow him. Will he speak less quickly?
Mr. Varley: I am sorry, but I have a lot to say.
Sir K. Joseph: On a point of order, Mr. Deputy Speaker. The Secretary of State read the last passage too fast. Could not the right hon. Gentleman go back a page or two and read it again?
Mr. Varley: I have a great deal to say, and I do not want to take up too much of the time of the House. In the remaining section of my speech, I shall speak slowly and deliberately for the benefit of the right hon. Member for Leeds, North-East (Sir K. Joseph).
The House should be clear what would follow if the House did not agree to increase the financial limits of the National Enterprise Board. Of course the sums for which we are asking in respect of British Leyland are very large, and the proposals come to us only after a very thorough consideration of the company's prospects first by the new board of British Leyland, headed by Mr. Michael Edwardes, and then by the National Enterprise Board. The Government have decided that it is right to endorse those conclusions of the British Leyland board and the NEB.
Mr. Loyden: I am glad that my right hon. Friend has now returned to what he was saying in his opening remarks about the consequences to British Leyland's position if Government resources were not made available. However, is my right hon. Friend aware that the plan which he is now recommending includes the closure of a factory in my constituency which has been supported by the NEB which has been given the task of creating employment opportunities in the area? Is my

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right hon. Friend aware, further, that it is my firm opinion that the Government's decision to back the Edwardes plan has triggered off a number of decisions by major companies to close factories or to declare redundancies resulting in the loss of 15,000 jobs—[Interruption.] This is not a laughing matter.
Mr. Deputy Speaker (Mr. Oscar Murton): Order. I hope that the hon. Member for Liverpool, Garston (Mr. Loyden) has completed his intervention.
Mr. Loyden: I am asking my right hon. Friend whether he is aware that the Government's decision has been responsible for triggering off these decisions in private enterprise and that even at this late stage further thought should be given to the closing of the No. 2 plant at Speke.
Mr. Varley: I know that my hon. Friend feels very strongly about this matter. He has discussed it with me on more than one occasion, and not only have I made my views known to my hon. Friend and to the House but they have been made known by my right hon. Friend the Prime Minister on behalf of the whole Government.
British Leyland has the backing of the NEB and of the Government in the way that it is proceeding to operate. I very much regret the difficulties in the constituency of my hon. Friend the Member for Liverpool, Garston (Mr. Loyden), and we shall do all we can to overcome them. However, I cannot hold out any hope that there will be a reversal of the decision about Speke. So that I do not mislead my hon. Friend or the House, I must make that plain today.
We are asking for very large sums in respect of British Leyland. We make no secret about that. The Government have decided that it is right to endorse the plan which has been put to us. If we cannot provide the assurance for the National Enterprise Board and for British Leyland, the prospects for British Leyland are at risk and the consequences will be very serious. We need to do all we can to restore confidence in British Leyland, and we cannot do that by means of drip feeding. I have made it plain already that what we practised two years ago was incorrect. I do not think that it helped one little bit.
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A vote against this much-needed investment would be a vote against our one nationally owned major vehicle assembler and it would be interpreted in some quarters as a vote of no confidence in this country's largest export earner—[Interruption.] Certainly it has been our largest export earner in the last few years. It would be a vote which could deprive several hundred thousands of workers of their jobs. It is essential to restore confidence in British Leyland, and I think that a good start has been made.
Mr. Hal Miller: Will the right hon. Gentleman give way on a point about finance?
Mr. Varley: No. I have given way many times already. I shall not give way to the hon. Member.
Mr. Miller Mr. Miller rose—
Hon. Members: Give way.
Mr. Deputy Speaker: If the Secretary of State does not wish to give way, he cannot be pressed to do so.
Mr. Varley: I reckon that I have given way a great many times already, and I have given a great deal of information.
Mr. Miller: We want some facts.
Mr. Varley: There has been quite a success over the last few months. The market share of British Leyland last month reached 31 per cent., whereas in January it was only 21 per cent. That is a considerable achievement. No one would claim that we are yet out of the wood, but the management and the workers in Leyland are taking a realistic view about matters.
I ask the House to support and to have confidence in British Leyland and in the approach which has been made by the new management. I have no doubt that a vote in this House in support of these proposals will help to restore consumer confidence in British Leyland both at home and abroad. It is my view that the trade unions in British Leyland are now making a realistic assessment of the position. That was demonstrated at a conference only a few months ago. I think there is widespread agreement that British Leyland has an excellent and effective mamangement and we need to back it.

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I have no hesitation in asking the House to approve both these orders.
5.6 p.m.
Sir Keith Joseph: There is an element of subterfuge about the bringing of these two orders before the House, and the Secretary of State has made a disingenuous speech. He has tried without actually telling any untruth—although I shall have to go through his speech carefully later—to say that without the additional money for the National Enterprise Board some part of the additional money proposed for British Leyland will not be available. That is plainly untrue. In fact, can the Secretary of State deny that out of its existing resources the NEB has already lent to British Leyland £275 million of the £300 million which the plan approved by the Government proposes should be made available to British Leyland by the NEB by way of equity?
The intention of the NEB is to convert that £275 million loan into a £275 million equity and to add a further £25 million equity to bring up the total contribution at this stage to British Leyland to £300 million. No extra order to raise the funds of the NEB from £700 million to £1,000 million is needed to achieve that. The money, all but £25 million, has already been transferred to British Leyland.
So the Secretary of State is charged with disingenuousness in failing to make that clear, and it reveals the furtiveness of this whole approach. Under the guise of helping British Leyland, we are asked to pass an immense additional burden on to the taxpayer for the NEB at a time when the NEB has produced only a preliminary statement of its 1977 results. The final results for 1977 are due in about four of five weeks.
When the Government seek such vast additional sums from the taxpayer, it at least behoves them to lay before the taxpayer and his representatives in this House some decent record of achievement, some decent programme of intentions such as Government supporters would rightly expect any bank or stockbroker in the City to lay before the investing public when seeking money.
Mr. Geoffrey Robinson: I am sure that the right
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hon. Gentleman does not wish us to think him disingenuous. Will he therefore be very clear about one matter? If the whole of the money for British Leyland was being advanced under Section 8 of the Industry Act, would the Tories vote for it?
Sir K. Joseph: We have enough difficult questions to deal with without attempting to answer hypothetical ones. I shall try to deal with each of the questions in turn. But the first crucial matter to make clear is that the Secretary of State has fallen below even his standards in his presentation—[HON. MEMBERS: "Oh."] Yes, even his standards, because I thought in several cases during the steel controversy that he was less than frank with the House. So I repeat that he has fallen below even his standards in presenting the case for these two quite separate and distinct orders which are linked only for the purposes of easing the passage of additional money to the NEB from the taxpayer under the camouflage of an urgent need for Leyland which to a large extent has been met already.
I shall turn to the subject of Leyland and at a later stage turn to the NEB. We all want British Leyland to succeed.
Mr. Rooker: All of you?
Sir K. Joseph: We want the company to succeed. That does not mean that it is right in the interests of the taxpayer, whom we also represent, to go beyond a certain point with finance for British Leyland if British Leyland fails to play its part, as it has already failed, in providing its own contribution towards the funds needed for investment and working capital.
We were sceptical about the Ryder plan. We were much criticised for being sceptical, but the Ryder plan has been torn up and our scepticism has been shown to be correct.
In recent years I have not hidden my attitude to subsidies for industry. I am a learner, and I have learned a bit from recent years. I hope that hon. Members on both sides of the House have learned. There is plently to learn from the Leyland story and the NEB story. I believe that subsidies to industry do more harm than

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good except in the rarest cases and that they should be provided for as short a time as possible.
The Secretary of State spoke about large sums, but never once did he say from where these sums are to come. It was as if the Government have a private mine. Well, they do—it is the taxpayer. However, if the money comes from the taxpayer's pocket, the taxpayer has less to spend elsewhere. For every job that is visibly saved there is probably more than half a job, if not a whole job, invisibly lost, or unidentifiably lost, somewhere else. No one can contradict that. Not even the Secretary of State will claim to have money to give to one place without taking it from somewhere else, either by borrowing, printing or taxing.
We regard it as disingenuous to speak of the money as if it could benefit British Leyland, and, heaven help us, the NEB without disadvantaging others. It is always possible that it is sensible to transfer money from taxpayers for certain purposes. We do not deny that. However, we do not believe that the right hon. Gentleman has made out a case in terms of the NEB.
We are asked to approve large sums of money. One of the main differences from the Ryder plan is that on this occasion large sums are to be made available without the regular monitoring that was part of the Ryder plan. One or two Labour Members expressed great satisfaction at the end of the regular monitoring. I am sure that monitoring was highly inconvenient and had many disadvantages. However, there are disadvantages when monitoring is dropped. The disadvantages lie with the taxpayer.
The taxpayer is now being asked to find £450 million this year and £400 million next year. I accept that we are not concerned with the latter sum at present. The taxpayer is being asked to find large sums without being able to check during the spending of the money and before the next slice is released the degree to which the NEB or British Leyland, as the case may be, is living up to its intentions.
Mr. Rooker: Es once a year not enough?
Sir K. Joseph: It was not considered enough in the Ryder plan, which the Government approved. The right hon.
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Gentleman has openly confessed that the Government took a wrong decision about monitoring. They backed monitoring for the progress of industrial relations and productivity. They did so for a certain while and now they have dropped it. They are entitled to do so, but it follows from their change of policy that the taxpayer is asked to bear an even larger risk than otherwise.
We recognise that British Leyland is like a great ship aground. The Government have set themselves, with the taxpayers' money, to enable it to float again. British Leyland may in the event be providing us with an experience that will discourage future Governments from embarking on such rescues. We shall soon see, because it is made clear in the NEB report on British Leyland's plan that it believes
"The main problem facing the company"—
—that is, British Leyland—is really British Leyland Cars. The NEB
"believes that British Leyland is right to give the highest priority to a programme of short term actions designed to produce success in 1978 and 1979."
Therefore, we shall soon see whether the plans of the Government and NEB will be proved successful.
We want British Leyland to succeed. Who, with any sense, could conceivably want it not to succeed? It would be inconceivable for anyone to want it not to succeed. As I have said, we want it to succeed, but that leaves in our minds a number of doubts. We have towards British Leyland great good will and considerable anxieties. Our anxieties are not ours alone. They are anxieties that are shared by many voting for all parties in all parts of the country. They are anxieties that are shared by many industries and many regions. There is anxiety that vast sums are to go to one firm in one industry in a limited number of regions. Therefore, we do not have to apologise for having anxieties coupled with our good will.
Our anxieties can be dispelled only by British Leyland. However, much we may admire Mr. Michael Edwardes—I shall come to him with admiration shortly—a few good speeches—he has made some first-class speeches—and a few months of good performance—and there have been some months of good performance—are not sufficient in themselves to

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end all our anxieties. We all share the same purpose—that the company should be profitably competitive. That implies that success must be achieved in design, quality and productivity.
What are our anxieties? I shall rehearse them relatively briefly. There are some who seem to be making war on parts of the company. One of our anxieties is whether this massive funding will weaken or strengthen the hand of that small minority.
Mr. Tom Litterick: Who are these people?
Sir K. Joseph: It is relevant to say that the modest and perhaps realistic targets for improved productivity in the Leyland plan are not nearly ambitious enough. The assertion of modesty in connection with a rise from five cars per employee per year to eight cars per employee per year by 1980 has to be seen against the unpalatable fact that productivity is not static at either end of the bracket. As we improve our productivity, those devils, our rivals, in other countries will probably improve their productivity, too. The danger is that we shall not close the gap unless management starts off and trade unions start off with ambitious plans to improve productivity.
It is relevant to observe that new and formidable makers of volume cars will be coming, on to the international scene. It is relevant to warn of increasing overseas competition. It is relevant to consider the dismaying record of British Leyland. At page 13 of the NEB report it is stated:
"Despite the disappointing performance in the recent past, it is premature to conclude that the company has no future."
That is the NEB's view. I do not adopt that point of view. That is the attitude that the NEB is adopting. It is not a wildly enthusiastic assessment. That is relevant to our anxieties. It is relevant even to doubt the lasting effect of "Super-deal", which has accompanied the rise in share of market to which the right hon. Gentleman referred at the end of his remarks. We hope that it does not merely mean that some sales have been brought forward because of the large discount that has been offered during recent weeks.
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In terms of our anxieties it is relevant to consider the cost of the rescue. There are the jobs that are threatened elsewhere. There is the burden on the taxpayer and the effect on tomorrow's Budget.
But our anxieties focus upon one feature above all, because there is one feature of the British Leyland-NEB plan which summarises the net effect of all the individual proposals. That anxiety is connected with the retained earnings which British Leyland has pledged itself to find as its contribution towards extra finance.
The House will perhaps need reminding that of the £2 billion covered by what is now the Edwardes plan, no less than £850 million is to be found by British Leyland from retained earnings between January 1978 and the end of December 1981. That is over £200 million per annum.
There are two questions. First, can this be done? I believe that it certainly can be done. The second question is will it be done. The records from the past of similar pledges to contribute from retained earnings have not been fulfilled. That does not mean that under the new management the new pledges will not be fulfilled. We fervently hope that they will be fulfilled. If they are to be fulfilled, designs have to be right, quality has to be right and productivity has to be right. If these are not right and the retained earnings do not make the contribution proposed, either the taxpayer will have to stump up more money or somewhere along the route there will have to be changes. These add up to big anxieties.
There was one question to which the Secretary of State could have given an answer, had he chosen, which would have eased our anxieties to some extent. I hope that the Minister of State in winding up the debate will give us a clear answer. The NEB and British Leyland have both talked of their intention to secure manning agreements for new machinery before the machinery is ordered. Could we have an answer from the Minister of State whether that intention has been and is being fulfilled? Have manning agreements to produce the productivity necessary to yield the retained earnings on the assumptions for

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sales started to be made at satisfactory levels?
Against these anxieties I come to the plus points, because obviously we would not be here today if there were not some assets. The evidence that we have in favour of the British Leyland plan to dispel those anxieties is that there have been several months of better performance. That is enormously to be welcomed. We only hope that it is not a flash in the pan. We welcome it. We hope that it is the prelude to sustain better and better performance.
The even bigger asset now in our minds is the change of management, not because the previous managers were in any way to be blamed but because the NEB had invited to take the chairmanship a part-time non-executive chairman, and the change to a full-time chairman and chief executive is one which in principle is to be welcomed, particularly as the man filling the job, Michael Edwardes, for whom we have respect, is a man with a proven record. He seems to us to have made an excellent start. We hope and believe that the large majority of people who work in British Leyland are 100 per cent. with him and share his purposes and hopes. We want to believe that this man can manage this Herculean task. As he himself said, it is a gamble, an act of faith.
We regret that there is only one opportunity in the running of this financial plan to monitor the performance. Monitoring seems to us very important, however inconvenient it may be, as a check on taxpayers' funds. It was precisely to reduce the call upon the taxpayers' risk funds that I, for one, thought that it might be sensible to reduce the call upon the taxpayer by shifting some of the needs of investment money on to the shoulders of the private sector. The Secretary of State was very fierce about the possibility of letting any of the profitable parts of British Leyland finance themselves. He does not have to read sinister motives into such a proposal. He is taking a very inconsiderate attitude to the taxpayer. We would have hoped that he would try to reduce the call on the taxpayer as much as possible.
The House will perhaps be interested to know that nearly a third of the total finance for the four years is for investment
1020
and increases in working capital for those parts of the business which are not cars at all. I am talking not about Rovers but about buses and trucks and special products which are not cars in that sense I am not going so far as to say that it would necessarily have been sensible to let that third of the finance come not from the taxpayer or from retained earnings but from the private sector through various alternative arrangements which could have been made. But I think that it would have been right for the Government and the NEB to consider this proposal to reduce the risk on the taxpayer I hope that the Secretary of State will not omit consideration of that if it becomes suitable.
Mr. Rooker: How can the right hon. Gentleman, on the one hand, say that he and the House have great confidence in Michael Edwardes and, on the other hand, say or imply that he wishes to be looking over the man's shoulder every working day of the year to make sure that he is up to the job? Why is not once a year sufficient? It was sufficient and successful for shareholders when Mr. Edwardes was in private industry with Chloride. Why cannot that be accepted now?
Sir K. Joseph: I think that Mr. Michael Edwardes would well understand our anxiety. He has to face putting right a tangled inheritance from years past. [Interruption.] I do not normally ask for your protection, Mr. Deputy Speaker, but the hon. Gentleman is suggesting that I am offering my advice to Michael Edwardes. That I should not presume to do. It may be that what we have witnessed in recent weeks—the improvement in performance—may—I am not making a charge—have had something to do with putting on a good show so that the next stage of finance will be available. I do not assert that. It is a possibility within human nature. If we remove that sanction, we make Michael Edwardes' job harder. It may be that Michael Edwardes has on balance asked that things should be this way. I expect that he has so asked. But I still regret, in the interests of the taxpayer, first, that the money is so big—I have pointed to a way by which it might have been reduced—and, secondly, that, being so big, it is scarcely to be monitored.

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We want to give Michael Edwardes and those throughout British Leyland who share his purposes every chance of success, so I shall advise my hon. Friends not to stand in the way of the Section 8 order for direct money for British Leyland. I ought to add that I think that both the NEB and British Leyland emphasise that the calibre of management to support Michael Edwardes will need to be improved, and we understand and welcome the upgrading that must be occurring.
Now I turn to the National Enterprise Board order. I repeat—and I do not believe that anybody in this House or the Secretary of State can in any way contradict it—that it is utterly unconnected with the need for extra money for British Leyland. The National Enterprise Board, I repeat, has already provided £275 million of the £300 million proposed by way of loan. It will be converted into equity, and the NEB will add £25 million additional equity to bring it up to the £300 million. When it has done all that, as I understand it, it will still have over £60 million headroom below the £700 million ceiling which already exists.
If the National Enterprise Board wants more money to carry out commitments made to or by its subsidiaries, it will have that £60 million headroom. It also has the possibility of selling some of its subsidiaries. I believe that I have seen in the newspapers a proposal that Ferranti should be returned to the market. I think that has already been announced. There are other possibilities no doubt.
The NEB, in our minds, remains as a final financial standby in rare cases. We did not like the Bennery period of NEB. We did not like the Bennery proposals for the NEB that emanated from the Tribune group. We are not particularly keen on the Nebbery proposals. They are a far cry from Bennery—although nearly a synonym—but they come from the same stable. That stable is the State punting with the taxpayers' money. On this side of the House we do not like the State punting with the taxpayers' money. We do not want to put the National Enterprise Board in funds to offer, perhaps more or perhaps less discriminatingly, support to the private sector. Perhaps it is more discriminating than done by the market, but it might be less discriminating.
1022
There are plenty of agencies offering investors' funds to business. There is no evidence that in this capacity there is any need for the NEB.
We do not criticise business men who go to the NEB for funds. If they suspect that the NEB is a softer touch it is sensible for them to go to it. In my remarks about the NEB I hope that I am not damaging my friendship with its chairman, for whom I have both liking and respect. One can have a liking and respect for a man and disagree with some of his opinions.
If the NEB needs more money than it has, let it put itself in funds. If it needs more, let the Government make out a proper case. It is not a proper case for the Secretary of State to make a few airy pronouncements about his judgment. It is his judgment, but it is not his money. It is his judgment on the taxpayers' money. It is not enough for the Secretary of State to make a few airy pronouncements on the basis of a preliminary report of the NEB and then ask for £300 million extra—a sum which has probably never been provided by the stock market to one company at one go.
Mr. John Garrett: Has the right hon. Gentleman considered the specific case of Sinclair Radionics, a company which has considerable technical potential and which is of great value to the country? That company would have gone to the wall without assistance from the National Enterprise Board.
Sir K. Joseph: I do not sit in instant judgment, but I observe that there are many businesses which are seeking profitable businesses in which to invest. The NEB is now one of them. I do not wish to comment on Sinclair Radionics, but a stronger case needs to be made out before £300 million of taxpayers' money is provided.
It is shameful that the Secretary of State and the Government should use British Leyland and its needs as a camouflage for this different and separate order for the NEB. I ask the House to realise that if the NEB order is passed and the funds are raised from £700 million to £1 billion we shall lose in the House all power to control a second huge instalment from the NEB to British Leyland at the end of this year. That is

1023
because if NEB chooses it can hold in reserve enough money for a large part of the second proposed instalment for British Leyland without coming back to the House. That means that the limited power of monitoring which we hoped to retain will be lost if the NEB order is passed.
Finally, I come to a point about the NEB, on which the Secretary of State laid great emphasis. What a ridiculous, almost farcical position it is that the Labour Government and the trade union leaders together impose upon business, enterprise and the entrepreneurs of the country curb upon curb, discouragement upon discouragement, obstacle upon obstacle, high taxation and an avalanche of controls, regulations, Luddism and lack of understanding of how enterprise works. They impose all this upon them and when, by this blanket discouragement, they reduce the inherent, marvellously dynamic capacity of private enterprise, within a framework of humane laws, to create jobs and prosperity and higher living standards, they then come and ask for the NEB to make it all good by intervention on the side. What an absurd paradox it is that instead of the Labour Government and trade union leaders recognising that the rising unemployment and the static standard of living come precisely from discouragement by them of the process of job and wealth creation that the private sector, left to itself within a proper framework of laws, could carry out, instead of beginning to remove those discouragements they create the National Enterprise Board "investing from the hip" to make good the lack of enterprise. "Investing from the hip" was a phrase that came from an excellent speech by Mr. Ronald Grierson, a former chief executive of the IRC, which was a creation of the previous Labour Government.
We have to make two decisions this evening. On Section 8 I suggest to my hon. Friends that on balance we allow our hopes for British Leyland and our faith in Michael Edwardes and all who agree with him within British Leyland to outweigh our anxieties for the taxpayer. We want British Leyland to succeed and we back the Michael Edwardes-British Leyland effort. We should not, therefore, stand in the way of the proposed order.
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However, on the NEB, which has already provided the bulk of the money for British Leyland and can provide the residue, I hope that my hon. Friends will vote against extending the funds, not for British Leyland, but for generally buying into British business.
5.38 p.m.
Mr. Geoffrey Robinson: I am grateful for the opportunity of taking part in the debate. I shall be brief because I know that many other hon. Members wish to take part. I shall direct my remarks to the question of British Leyland. I hope to be a little more decisive, direct and forthright than the right hon. Member for Leeds, North-East (Sir K. Joseph). May I inoffensively put to the right hon. Member that watching him perform from this side of the House one gets the impression that he is being tortured on the rack rather than speaking with the authority that the Dispatch Box should confer upon him? This pattern of tortured indecision bodes ill for the Opposition if, in the unlikely event of their coming to power, they persevere with the right hon. Gentleman's policies.
Since we last debated British Leyland a great deal has happened. Nearly everything that has happened has been for the good, ever since the chairman of the NEB, seeing that a strategy was in ruins and that a major national British asset faced destruction if a plan was persevered with, had the courage to make decisive and fundamental changes in the direction, the organisational structure and management of that company.
That could not have been easy. Those of us who have been in that situation at such difficult times known what is involved. That tribute should be put on the record.
The benefits have come quickly. They have come more quickly than I should have believed possible. Since then we have seen the redundant old top board scrapped. We have seen the meddlesome tentacular head office disbanded. We have also seen the ineffective, inefficient unrequired post office that the international department then was disbanded. Most critically—and this must have been the most difficult point, also—we have seen the car activities divided on a coherent and, from a product point of

1025
view, logical basis. We now have the volume cars and specialist cars decisively and critically split. We have also seen new line management, which was previously weak, being recruited. We are seeing what was also very necessary to the company—decision-making being pushed down the line to the factories and to the line managers, who must have it. All that Mr. Edwardes has achieved quickly, decisively and with commendable business acumen.
The benefits have come through very quickly. The market share has shot up. It has gone up to 31 per cent. That may well be unsustainable. I would not disagree with those who obviously would argue that going in a matter of a few months from the dangerous precipice of 20 per cent.—the share could not have been allowed to go any lower than that—to 31 per cent. is probably too sharp a rebound. Not only do we notice improvements in the market share—critical an indicator though that is—but those of us in the Midland factories in the Cowley area see a growing resurgence of confidence among working people in the new management and in the new organisational structure that has been imposed.
As the Secretary of State said, it is a whole question of confidence. Confidence in British Leyland has not been helped at all by the ineffective irresponsible and at times incomprehensible speech that we have heard this afternoon from the right hon. Member for Leeds, North-East. Confidence in British Leyland can be got back. The management must realise that its initiatory role is also the prime one, because it is management's role to get the confidence of the men back. That confidence will be got back only by integrity and competence on a sustained basis by management. It can be got, but it will not be easily won, and it will have to be deserved by performance.
Next, there is the role of Government in the question of confidence, and that is a crucial role. I believe that the single most significant part of the Secretary of State's speech was on the question of the funding and the conditionality of it. It is not the monitoring that is in question at all. Everyone agrees that we have to monitor. It is the day-to-day linking of
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the availability of the funds to specific instances of management decision or particular decisions in particular factories that makes for no sense.
Indeed, I think that the most significant paragraph of the NEB's report, which deserves a good deal of reading on the Opposition Benches, is paragraph 11.12, on page 12, from which I should like to quote:
"The new Board of British Leyland argues that it must have an assured level of funds in the form of equity if it is to manage the company efficiently and if it is to concentrate on the tasks essential to restore it to commerial and financial health. It believes that the funding of the business is a means to an end and that it is not an end in itself, as is implied by the arrangements under which future funding is conditional upon, and regarded as, a reward for good behaviour."
I could not have put it better myself.
Listening to the right hon. Member for Leeds, North-East, one would have thought that he was trying to run a prep school and not a major British industry, with prefects monitoring daily behaviour. It may be one way of running a Shadow Cabinet. Looking at the composition of the Shadow Cabinet, it may be that some right hon. Members of the Opposition, particularly the right hon. Member for Worcester (Mr. Walker), agree with me that it is appropriate to the present Shadow Cabinet. But that is no way to run a major industry such as British Leyland.
I am pleased to see that the NEB agrees with that. I am also pleased to see that the Government have finally discarded a policy that was psychologically unproductive and was, from a practical point of view, also incapable of implementation.
Therefore, after two and a half years of going down the right track we find ourselves a long way behind. There is no doubt that those two and a half years have cost us far more than the two and a half years that they have lasted. We must realise then that we are starting from a long way back. We are, indeed—and I think that this is probably the one point on which I agree with the right hon. Member for Leeds, North-East—shooting at a moving target. None of us must try to pretend that this will be easy to handle. We are in for a long and difficult haul. I say this with

1027
particular reference to the hon. Member for Surrey, North-West (Mr. Grylls). I am pleased to welcome him back to the Chamber from his excursion to Alice in Wonderland in his Sunday Telegraph article of yesterday.
Pulling this company back, getting it to be remotely profitable and generating the sort of cash flow that is required, is not something that we shall be able to see done in three years. I believe that we have to adopt a different approach to this. I do not believe that we should make the funding any more conditional on a 10 per cent. rate of return on assets, which, of course, will be far bigger than the assets to which the hon. Member for Kingston upon Thames (Mr. Lamont) referred during an intervention in my right hon. Friend's speech. Much bigger returns will be required by British Leyland to earn 10 per cent. on assets that will be increased by perhaps up to £2,000 million which will be invested over the next four to five years.
The approach that the Government should adopt, and that we as a nation and the Opposition should support the Government in adopting, is the policy that the French Government have shown for the last 27 years—I have dug out the figures to make the point—towards Renault. Since 1950 Renault—which I think most people would agree is now one of the best managed and most successful motor companies in Europe—has made £44 million profit in total. I would have expected the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) to throw his hands up in the air in dismay at the prospect and to declaim "What an awful investment." But, in fact, that investment made by the French people in their nationalised motor industry has been an extraordinarily good one for them. In those 27 years employment in Renault has increased by 120 per cent. It now employs 70,000 people more than British Leyland employs. In that period exports have increased by 2,000 per cent. That may be a meaningless figure, given the low base, but Renault is now exporting nearly 1 million cars a year, which makes the point. Renault's turnover is £3·5 billion—more than the whole of the NEB.
Those are very substantial national benefits, benefits that have been achieved because a Government have had a sustained purpose. I believe that the
1028
British Government, if they can find the will, the courage, the vision and the self-confidence to back this team and this management, and if we could count on an iota of support from the Opposition, could do for British Leyland what the French have done for Renault. We should set our sights no higher and no lower than that.
5.46 p.m.
Mr. Peter Walker: I think that all of us, on both sides of the House, can agree that the hon. Member for Coventry, North-West (Mr. Robinson) is perhaps almost the only Member of the House who speaks with considerable practical experience of the motor car industry both at home and abroad. Therefore, his observations upon both British Leyland and Renault will be listened to in the House with considerable interest. I very much agree with the hon. Member about the vital importance to this country of British Leyland succeeding.
I think that this debate has been one of the most interesting debates from a political viewpoint that the House has seen for some time. It has been interesting from both sides of the House.
I found the speech of the Secretary of State for Industry interesting because he spoke with some justified pride as to the new team that has taken over British Leyland, and as to what he called the practical nature of the board that is now in charge. This is a long way from the sort of basic original dreams of nationalisation and all that. What the Secretary of State was saying was "I have succeeded in getting a team that is highly commercial, that intends to run this business efficiently and well, and I am giving it full backing."
I found that very refreshing, because the Secretary of State in his job, like myself in the same job, has made his mistakes. He enthusiastically supported the Ryder Report. This shows the difficulty of a politician such as the right hon. Gentleman, or myself, or any other politician, in making judgments on these great commercial issues. We all think that we know. We look at a few figures and facts and compare them with someone else's, and say that this should be done and that should be done. That is why I found the comments of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) interesting in terms of his lust

1029
for monitoring. My difficulty is to know who does the monitoring. Even my right hon. Friend, who has considerable commercial experience and ability, would agree, I think, that he is not a terribly good bloke to monitor the motor industry.
Sir K. Joseph indicated assent.
Mr. Walker: I admire all those splendid civil servants who work for the Secretary of State. They are men of great ability and integrity. But I do not think that they possess the immense ability to monitor commercial concerns.
What we in this House must face is that if we have a mixed economy, the only way in which we shall succeed is in finding chaps like Michael Edwardes, who surround themselves with some talented, able men who understand the world of commerce, and, if we think they have a good team, backing them. We have backed some losers. Occasionally we shall back some winners. What is desperate in regard to the present position is that we should back British Leyland in the attempts that it is making.
As regards the argument that if one backs one firm, one does not have the ability and money to back another, if we do not back British Leyland and if it does not succeed, such will be the increase in public expenditure for unemployment benefit and social security benefits, such will be the loss to the balance of payments, that we shall not be providing an immediate benefit available for other firms which could, perhaps, make better use of the money.
Therefore, in this debate my right hon. Friend was rather reluctant—understandably, because of the views that he has held over the years, which I respect, if I do not agree with them all—to say that we support giving a fairly substantial sum of money under the first order to British Leyland. But in his last remarks he made clear that the Opposition have decided that in their view British Leyland will be backed. My right hon. Friend the Leader of the Opposition has said that publicly now on a couple of occasions. The Shadow Secretary of State for Employment, my right hon. Friend the Member for Lowestoft (Mr. Prior), who is, I believe, to wind up the debate, has made this clear in speeches in the Midlands.
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If that is clear on both sides of the House, I hope that we shall as a united House go on backing this scheme to see that it succeeds. There is immense commercial advantage if we have that certainty. There is first the advantage of recruiting top management. It is difficult to get the best men in the world to help with the company's management if there is some political uncertainty about its prospects in the immediate future.
That is important for overseas confidence. British Leyland exports £2½ million-worth of goods a day already—and that is after an immense loss of confidence abroad which will take some time to restore. There will not be much confidence abroad if there is any suggestion that a change of Government will mean a change of investment plans.
I very much favour the equity system. I think that my right hon. Friend the Member for Leeds, North-East would agree that a unique advantage of British Leyland in its present form, apart from the calibre of the new management—it now has one of the highest calibre boards in the country—is the insistence on keeping a private equity in that company. It may be minute, but it gives the board the right to tell the Government, "We will not do that under your direction, even though, politically, you think that it is right. We have all the safeguards of outside shareholders and the Companies Acts to protect their interests".
I hope that the Government, having kept a quotation for this company, having kept a private sector element—albeit small will, when industrial relations improve, as they must in the tolerably near future, ensure that further equity is given to those employed in British Leyland.
It would not be a bad thing, as the article in the Sunday Telegraph said, to have some direct stake for the whole team who will embark on the revival of this national company. It would give them some feeling that if they co-operate and collaborate in all the difficult decisions, they, too, will obtain some capital reward as the years go by.
I rejoice that in this debate the Labour Party has left aside its political attitudes towards nationalised industries. It has recognised that it has the best commercial board that it could find. I hope that

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Ministers will give it the equity and let it get on with the job. If it fails, we shall all enjoy attending the public hanging of Michael Edwardes by denunciation, his removal from the board and his place being taken by another.
But if I still held the Secretary of State's office, I would find it difficult to find a board of higher calibre than the present one. It is desperate for the next Conservative Government that British Leyland should succeed during its period of office. I am glad that my right hon. Friend has agreed to support the order. I hope that we shall make it clear publicly and internationally that Michael Edwardes and his team have the support of the whole country.
5.53 p.m.
Mr. Tom Litterick: This is a strange occasion for the House, since the Conservative Party is apparently bending all its energies to convincing the British people that it is actually backing a nationalised industry. We should remind ourselves that, in this, the Conservatives are not running to form. Nor does this attitude conform to the propaganda that they manufacture daily in the country through their faithful servitors in the Press. Hardly a day passes without publicly owned industries being attacked, usually in the reporting of speeches by Conservative Members, who have a dogmatic and lasting hostility to public enterprise. Mercifully, the British people are all too familiar with this approach. Therefore, they will be able to judge the speeches of Conservative Members today in sophisticated terms.
For example, in Birmingham they will know that the various speeches made in pretence of supporting British Leyland are election speeches, designed to convince people that a vote for the Tory Party is tantamount to a vote for their jobs, when we all know from hints dropped already that they might carve up British Leyland should they win another election. That is a danger to which the people in the West Midlands are alive.
It is also remarkable, when one thinks back, to reflect on the Tories in their other incarnation as shareholders and people who work for shareholders through merchant banks. They were unwilling to support British Leyland when it needed financial support. The House
1032
and the country will remember vividly Stokes' cri de coeur, and how British Leyland was valued by the very people who are now suggested as arbiters of success. They valued British Leyland at less than the value of the empty Centre Point in the middle of London. No one in the private enterprise sector then would provide a halfpenny of support for the then dying private enterprise British Leyland. Through an elected Labour Government, the British people decided that British Leyland, in their interests, must not be allowed to die.
The House should bear in mind that British Leyland is the only truly British motor vehicle manufacturer. That is not a chauvinistic point. So long as that remains true, there is still a chance that the British people will retain some real democratic control of one of their major industries. Ultimately, British Leyland should be used as the means of creating a truly national British motor vehicle corporation, incorporating all the existing motor manufacturers in this country which are currently owned by foreign-based multinationals. However, that is a task to which I am sure my right hon. Friend will look forward happily when fulfilling a future Labour Party election programme.
It should also be remembered that British Leyland is the only net exporter of motor vehicles in the British economy. The other three major manufacturers—Ford, Vauxhall and Chrysler—despite the public involvement in Chrysler, are all net importers. In the case of Chrysler, that is a continuing scandal. I had hoped to put a Question to Ministers on that earlier today, but apparently I missed it.
Those three companies make no positive contribution to the British balance of payments. That has nothing to do with the quality of the British worker or the state of the British capital market. It is simply the result of calculated decisions by those in charge of the three corporations to run a balance of trade deficit in Britain. They are concerned not about British interests but about the interests of General Motors, of Chrysler and Chrysler-Mitsubishi, and of the Ford Motor Company.
Mr. Hal Miller: Would the hon. Gentleman look again at his figures about the balance of trade of the

1033
multinational car companies in this country? Would he be fair to General Motors and take into account the Bedford truck? Would he look again at the figures of Chrysler exports to Iran, and would he re-examine the Ford figures? He could not then sustain his present argument.
Mr. Litterick: Yes I could, with total confidence, because I am not relying on the information that the hon. Member has. I have gone into the detail of those figures. Many a car on British roads masquerading as a Ford, for example, was not made anywhere in Britain. A number of cars masquerading under various exotic names do not come from where they seem to come from. Even British Leyland, of course, actually imports cars, but—I repeat with all the confidence in the world—it is the only one of the four major car manufacturers in Britain which is actually a net exporter.
The situation is getting worse, not better, because we do not exercise control through our trade policy or through the planning agreements which we on this side have advocated to control the activities of the motor manufacturers. Therefore, the order making additional funds available to British Leyland is to be commended.
I am glad, too, that the Secretary of State has at least assured the House that the Government will stop pointing the gun at British Leyland's labour force and will cease the ludicrous practice of threatening workers at Leyland that investment funds will be cut off if they do not behave themselves—to use the usual Daily Telegraph terms—that is, if they do not become quiet, submissive employees. That was always a lunatic policy and it was inevitable that it would cause more disruption than anything else in the company, and it did. I am glad to hear that that policy is being abandoned—at least by the Labour Government.
The right hon. Member for Leeds, North-East (Sir K. Joseph) was still clearly hankering after something of the sort, the idea being that workers will work effectively only if they are threatened. Last week the correspondent of The Times, who I understand has no great sympathy for the Labour Party, talked of much whip cracking on the assembly lines, in the context of the
1034
Edwardes plan. I promise the correspondent of The Times and the Tory Party that, if there is any damn whip cracking, there will be disruption and the Tories will be the authors of it if they try it. Workers, who are, after all, human beings, do not make a positive response if they have whips cracked over their heads. British workers, in particular, do not respond positively to such an expression of contempt.
We are aware of the consistent and unrelenting hostility which has been expressed by the Conservative Party ever since British Leyland was rescued by the State, at a time when the Labour Party was in power. We understand that it is the intention of the Tories, if they get the chance, to break up British Leyland and throw the good parts of that organisation to the highest bidder and the rest to the wolves, which means throwing thousands who work at British Leyland and tens of thousands who are dependent on supplying British Leyland with parts out of work, as the Tories would have happily allowed to happen in 1973–74 if they had had the chance. They would have allowed the organisation to fall apart.
The right hon. Member for Leeds, North-East, who was a prominent member of the previous Tory Administration, is wholly committed to the concept that the market must be allowed to have its way. The market having its way in this case would have meant the devastation of an organisation and other organisations employing more than 600,000 people, with catastrophic consequences for a number of communities and for the Exchequer.
A number of speeches, particularly the speech of the right hon. Member for Leeds, North-East, have illustrated the Tory fixation with the idea that an organisation does not become more efficient unless someone is being made unemployed. This monomaniac notion should be dispelled from Ministers' minds. There is no necessary correspondence between making people unemployed and an organisation becoming more efficient.
One of the shortcomings of the so-called Edwardes plan is that its assumptions about the size of the market in which British Leyland will be able to operate are very modest. Therefore, the consequential effects of the changes in

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technology that are involved in this so-called plan mean that people will be made unemployed.
On different market assumptions that would not be so. In short, the assumptions are far too modest. They assume the inevitability of a contraction in the labour force instead of asserting the possibility of expanding the market itself. The potential market is not confined to the existing markets, which are all too dependent on the highly developed durable consumer goods market of Western Europe. The markets are in the rest of the world, and British Leyland has ample experience of marketing in the rest of the world. I therefore suggest that possibly one of the fatal weaknesses of the so-called Edwardes plan is that it is far too modest in concept and will inevitably result in unemployment on a significant scale, which will damage the West Midlands economy even if the plan proceeds. To that extent I remain a critic of the Edwardes plan.
There has been much talk of the fact, as the right hon. Member for Leeds, North-East said, that British Leyland did not need the funds. There was certainly a very large shortfall in investment fund spending last year and that has resulted in a considerable disruption in other British industries, particularly the machine tool industry, but it has been widespread. The investment programme should be enlarged and accelerated. The market on which the plan is based should be revised and should be seen as a bigger potential market than that in which British Leyland is to work. If the investment programme is not put through in its entirety, the West Midlands economy will be severely damaged. Time is of the essence. Many of the things that need to be done take a considerable time to take effect, but if action is not taken speedily on this order the West Midlands economy will be severely damaged.
6.5 p.m.
Mr. Andrew MacKay: The hon. Member for Birmingham, Selly Oak (Mr. Litterick) was quite right in saying that British Leyland is one of our biggest exporters. I could not understand his argument, however, that we should introduce import controls. Would not that lead to a tariff war? I am convinced that British Leyland does not want import controls providing that
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competition from abroad is fair and is not subsidised.
Another point that worried me about the hon. Member's speech was that he had what he thought was a great idea to the effect that there should be one British national motor company. I believe that that would be a disastrous mistake. There would be no competition. It would be bad for such a company in the long run, and it would be extremely damaging to British consumers. I am sure that in replying the Minister will not adopt that argument.
We start from a position from which many of us would not like to start. A large number of mistakes have been made in British Leyland's immediate past. The 1968 merger was entirely unproductive and has proved again that a big organisation is not always beautiful. Secondly, the Ryder plan was, rightly, criticised on this side of the House. We are naturally delighted that today the Secretary of State admitted that the plan was hastily conceived. We made many mistakes in swallowing that plan hook, line and sinker.
There are two logical choices for Leyland. The first is that no Government money is made available. The second is that we back British Leyland financially to the hilt. It is totally unacceptable in logic to give British Leyland a little money and then say "Let us see how we go from here" and then possibly make available a little more money. That would be the worse of both worlds. It would bankrupt the company in the end and would waste a sizeable sum of taxpayers' money. I do not believe that the House wants either.
It is important that the nation gives Michael Edwardes and the Leyland organisation the money they require. I only wish that the Secretary of State had been a little more straightforward when he asked us to approve the sum of £150 million, which the Tories will certainly approve, and then suggested that some or all of £300 million will be required to go to Leyland Cars. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) has proved the contrary to be the case. The Minister did the cause of British Leyland no good, and I regret that.
I want to give some extra reasons why it is important for us to back British

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Leyland in these difficult times. Hon. Members opposite sometimes say to me "You are two-faced because of your constituency interests. You are prepared to back British Leyland and to vote money for that cause because you come from Birmingham, which you represent and where you have a business interest, but you are not prepared to back other companies which have run into difficulties."
My answer to that charge is this. I I believe that there is a future for car manufacturing. Cars will be manufactured and sold for many decades to come. I want Britain to play a part in the manufacturing of cars. It is, on the other hand, fruitless to waste the taxpayers' money by giving—through the National Enterprise Board or by other means—great subsidies and thereby helping steel, shipbuilding and other dying industries if one is throwing good money after bad.
The second reason why I felt it important that we should help British Leyland was that the economic effects—here I agree with the hon. Member for Selly Oak—on the West Midlands and in the city of Birmingham would be considerable. This is not just for those who work at Leyland. It would also be very considerable for those who work in the component industry and the suppliers of labour.
I want to kill one myth, namely, that if Leyland went under the component manufacturers would find a ready market elsewhere. Only last week I was informed by a very senior director of a very important supplier and a household name in the Midlands that if Leyland went under only 10 per cent. of the production which goes to Leyland at present could be put elsewhere. That would have disastrous effects on this country as well as on Leyland. We have already heard that Leyland is a major exporter. Obviously the money that we receive from the sale of Leyland vehicles is of great benefit to our balance of payments.
There is an equally important side to this matter. Let us say that Leyland goes under and then some people say "The cars that are sold in this country—Ford, Vauxhall and Chrysler—will take up the slack." That is not the case. The majority of that slack would be taken up by Japanese
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and Common Market competitors, thereby making our balance of payments considerably worse and increasing the share of the market of the foreign manufacturers.
It is important that we give this money, because Leyland Cars is desperately in need of new models. I make no apology for mentioning the models. I would say to the management of Leyland that if, as is now happening, the Government and the taxpayers are giving money to help Leyland, it has to be prepared for a certain amount of public debate about the products involved. I know that there are disadvantages. A company in private hands can develop its model range without criticism in this place and without comment—not always constructive criticism—in every pub and bar in the country.
But it is apparent to everybody that the Marina, Allegro and Maxi and the Dolomite range are long in the tooth. It is apparent to every observer that this is an area in which there will be growth. The medium-size saloon for family and company use is where the important market will be in future. That is why I was so very pleased to see in the Edwardes plan that the money for the time being is to be retained and the new model will be in that area.
We talk about £450 million and other vast sums of money which we as individuals cannot even contemplate. Let us try to put it into perspective. It costs approximately £125 million to £130 million to produce and develop a new engine. It costs approximately £80,000 to produce and develop a new body. That shows that, although the sum of £450 million is vast and fantastic, at least we know where some of the money is going.
The second area to which the money must go is in improving the production speed and the quality control in the specialist car area where Leyland has immediate winners with the Rover, Jaguar, Land Rover and Range Rover modes. However, unfortunately, delivery is poor and the standard of reliability has let the company down in both home and overseas markets. I was delighted to see this as a major plank in the Edwardes plan.
One area to which the money should not go—it is important that the Minister and

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the NEB should ensure that it does not go to this area—is in developing the components side of the Leyland enterprise. We have perfectly good component manufacturers in this country who can supply, at the right price and with efficiency, Leyland cars. Let us not allow money to go to an area which is already well covered and which could well put people out of work in certain of the component manufacturing areas.
I suspect that certainly in my year in this House and probably for longer rarely has one man's name been mentioned so often in a debate except when he has been an international statesman, a politician or a criminal. Michael Edwards is not one of those three, but never has one person's name been mentioned so often in the course of a debate. I shall not dwell on it except to say that I find his plan to be excellent. I believe that he is very much on the right lines in reducing overmanning, which has to happen, no matter how unpalatable. Overmanning has to be considerably reduced in order to increase production.
Also—I speak advisedly, knowing that the hon. Member for Liverpool, Garston (Mr. Loyden) is present—it was right to close the Speke No. 2 plant. The industrial policy of not allowing expansion in the West Midlands and giving IDCs primarily to development areas has proved not to work in this case, because the standard of workmanship and of industrial relations has not been sufficiently high. It was a dreadful mistake for Leyland to go to Speke in the first place.
I believe that the morale in management is much improved in Leyland. I only wish that the same improvement and the same optimism had been shown on the shop floor. I see some improvement, but I was disturbed when I learned on Friday that by a two to one majority it had been decided not to accept the incentive productivity wage scheme. This is very regrettable. I hope that those people who voted against the scheme have some very good alternatives, because I believe that at this crucial time for Leyland they might be jeopardising their own jobs and the future of that company.
I conclude by stating one other fact. I do not accept the Secretary of State's argument that nothing in Leyland should be sold off. However, there is a big
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difference between specialist cars which are, rightly, part of the Car Division and special products. I do not accept the argument of selling off Rover and Jaguar or any other part of the Car Division. We must be vehicle manufacturers completely, with bus and truck as well. I believe, however, that in the fullness of time the Leyland board and the NEB must consider selling off parts of the Special Products area. First, they are nothing to do with the manufacturing of vehicles.
Mr. Robin Corbett: As I have a Special Products plant of British Leyland in my constituency, I should like the hon. Member to be more specific and tell the House which bits of that division he would advocate selling and why and when.
Mr. MacKay: I am delighted to have that intervention from the hon. Member for Hemel Hempstead (Mr. Corbett). I shall expand on that matter. First, I believe that it will be up to the NEB and the Leyland board to decide which parts are profitable. Most parts are profitable. Most parts have no particular connection with Leyland. If they were separated and sold, that would affect neither the employment in the constituency nor the profitability of the plant concerned. The money obtained would go to finance the new models and to giving the other money which I have explained is required.
Whilst we in the House are prepared to grant money through the NEB to Leyland, it is important that Leyland also plays its part and sells off as and when it is convenient. By "convenient" I do not think we should just say "Special Products is going in the next few months and is up for offers." The sale has to be commercially organised. Parts of the company should be sold off as and when there is the right buyer at the right time. I do not believe that in the long term the manufacture of cars at Leyland would be affected. It would be a great advantage.
Mrs. Audrey Wise: Will the hon. Member give similar advice to other industrial conglomerates, namely, that they should sell off their more profitable sections, or is that the sort of advice that is reserved for publicly owned enterprises?
Mr. MacKay: If they need money. They do in the private sector. As a Member of Parliament, I shall not give advice to people who have not come to us for aid.
There are other very profitable sectors of Leyland, such as Jaguar, in the city that the hon. Lady represents, such as Triumph, Rover, MG, Leyland trucks and commercial vehicles. We are not suggesting that we should sell off only what is profitable and keep in the State what is unprofitable. We are suggesting that we should get back to vehicle manufacturing as the prime base of the Leyland enterprise and sell off such enterprises as the manufacture of freezers, trailers and a thousand and one incidental items.
My conclusion is that in due course, when Leyland is back on its feet financially, we must make sure that a certain amount of the equity is put back into the market and sold to the private investor, and—just as important, as my right hon. Friend the Member for Worcester (Mr. Walker) said—that it is offered to employees of Leyland so that they can feel that they have a greater part in the company. I can foresee at the very least a BP position, with the Government having a minority but substantial interest in Leyland.
I believe that with the degree of support that Leyland has had today from both sides of the House we can see a rosy picture. It will be a long hard struggle, but we must be realistic. I think that if we follow the line set out in this debate, Leyland has more than an even chance of succeeding, and—by God!—it must succeed.
6.21 p.m.
Mr. Eddie Loyden: I do not want to follow the line taken by the hon. Member for Birmingham, Stechford (Mr. MacKay), but I want to make at least one point about his contribution. The House will understand if I later confine myself to the problems that beset Merseyside as a result of the National Enterprise Board's decision.
My main opposition to the whole statement that has been made, and the decisions that have been taken and supported by the Government, concerns the closure of the No. 2 plant at Speke. It is significant that those who want to act in a divisive way have supported the idea that
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that plant should be closed in the general interest of British Leyland. If the closure had been taking place in the hon. Gentleman's constituency, I wonder whether his views would have been consistent with those he has just expressed. I am certain that they would not.
I am concerned about the future of British Leyland as a whole, and in that sense I give qualified support to what the Government are saying about British Leyland's future. I am also concerned about the future of the National Enterprise Board and its activities. I want to give qualified support to the NEB and its future activities, but our experience is that the Board's activities have fallen far short of the Labour movement's expectations. On this issue, they have fallen far short of the expectations of the movement in the Merseyside area.
One of the Board's roles was to begin the process of refurbishing industries in areas of industrial decline and carrying out a job-creative programme in those areas The decision taken by Leyland, backed by the Government and with the involvement of the NEB, goes in a completely opposite direction.
It was reported today in The Daily Telegraph, I think with a great deal of justification, that Leyland's decision, with the involvement of the NEB and the Government, has resulted in the private sector in that area using that as a basis for decisions resulting in closures and redundancies that might well not have been made but for Leyland's decision. This suggests that the broader base of the economy will also be affected in this way. Labour hon. Members in particular should be concerned about the tendencies emerging from the decisions taken here and their effect on the Merseyside region. Since the Leyland decision, about 15,000 jobs have been threatened.
In the final analysis, it was not the production or performance of Leyland that was the major problem, as would be suggested by the Conservatives. It has been a question of producing cars that were unsaleable. That is true of the Speke No. 2 plant, tied exclusively to the production of the TR7.
There is no doubt in the mind of anyone who has followed the history of the TR7 that from day one it was a complete, abysmal and costly failure. It is

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obvious that when it became apparent that the TR7 was a costly and miserable failure the blame had to be pointed away from those responsible for making the decision about the production of the car and for the sort of market research that went into it to see whether the car was saleable in the United States and Canada, whether it was designed for that market and so on.
Anybody who has studied the history of the TR7 can come to only one conclusion, that the car was a failure from day one. It was not saleable on that market. Therefore, it would be in the interests of those who made the decision to bury as quickly as possibly the embarrassments that they would face over their decisions. Therefore, the whole question of fault is turned towards the workers at Speke No. 2 plant in particular.
It is interesting that in the New Statesman this week there are certain disclosures that would argue very forcefully against those who wanted to say that the performance at Speke was the main and almost exclusive reason for its closure. It is apparent from the disclosures in that journal that that is not so.
Although the Leyland management has offered to provide the figures that would prove conclusively that it was the case—and to be fair to the management, some figures have been produced—there has been no conclusive evidence that the reasons behind the closure of Speke No. 2 had anything to do with the question of performance.
What we are seeing in Leyland is the tendency for British industry now to start cutting back on its capacity. Where the Government back that sort of argument, as they are doing now, it follows that private enterprise will take advantage, as it is doing in Merseyside, to cut back capacity, in the realisation that the upturn in the economy that everyone has been hoping and praying for has not occurred.
Make no mistake about it: the decisions taken in that area will be extended into other sections of private enterprise and elsewhere, as we are already seeing with steel and other parts of the publicly owned industrial sector.
Therefore, the question of what is going on is vital to those in the Labour
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movement who believe, as I do, that the Government's whole economic strategy has been wrong for the past two or three years. Certainly the Government have not brought about the proper utilisation of the NEB. I did not envisage, and as far as I am aware no one else on the Labour Benches envisaged, that the NEB was brought into being for the purpose of recommending the cutting and slashing of 3,000 jobs in a publicly owned industry.
For us, it is not simply the future of Leyland that we are discussing, but the whole question of the Government's economic strategy. I give this warning to my Front Bench: if Ministers think that the fight for Leyland is over, they are sadly mistaken, because it will be for the Labour movement to take up the fight against unemployment generally in the area to which I belong and certainly in relation to Leyland. I shall support and join those forces that are resisting attempts to bring further unemployment to Merseyside with closures and redundancies. I shall identify myself clearly with those who are opposing that trend, since they are, in fact, defending the whole future of Merseyside in so doing.
If that decision is taken through, it will be no easy task. Let no one imagine that one can go ahead in a nice oily way to put through the decision for the closure of Speke. Yesterday on Merseyside there was a conference which made patently clear that there will be great resistance not only to the closure of Speke but to recent other happenings on Merseyside. For example, there is the recent decision to close the Spillers factory at Walton, in the constituency of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), threatening 8,000 more jobs. There will be spin-off effects from that for the Birkenhead docks, which now depend on the conveyance of Spillers' meal and grain, that factory being one of the main users of the dock facilities for those commodities.
Perhaps I have drifted somewhat from the subject of British Leyland, but it is imperative that we show that our concern is not just about British Leyland. What concerns us is the direction of the Government's economic strategy. For my area the present trend is tragic. My right hon. Friend the Secretary of State said that without the cash being available the

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Midlands will be made a wasteland. Let him go to Merseyside now. It is already beginning to be a wasteland, partly because of decisions taken by the Government, by the National Enterprise Board and by British Leyland regarding the closure of Speke No. 2 plant.
As I said earlier, the House should realise even at this late stage that if we do not wish to see a really worrying political situation develop in that area, the Government should think again about the closure of Speke No. 2 plant. There is no doubt that private enterprise is using it as a basis for arguing for closures and redundancies which will turn to nothing the Government's policies for special development areas. In fact, that has been made clear from the Opposition Benches. I hope that it will be noted that the Opposition have said that the Labour Government were wrong in the first place in sending Leyland to Merseyside and that their policy on industrial development certificates was wrong.
If it is said that the Government have been wrong, it is up to my Front Bench to think again about what their policy is doing for employment on Merseyside and, for that matter, throughout the whole United Kingdom. I hope that the Government will take seriously what is said in this debate and will realise that there will be full resistance to policies which put out of work people whom I represent by the closing of factories in my constituency and in other parts of Merseyside.
6.32 p.m.
Mr. Richard Wainwright: Fortunately for British industry and for the reputation of the House, the adversary approach which the right hon. Member for Leeds, North-East (Sir K. Joseph) sought to adopt at the beginning of the debate has not so far been followed on his own Benches, and, in so far as there have been controversial speeches, they have come from below the Gangway on the Government side. That leads me, at least, to feel that both Mr. Michael Edwardes and the National Enterprise Board are broadly probably on the right path at present.
Before coming to two or three of the matters which have proved somewhat controversial, I shall refer to two matters
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which seem to me to be constituted of sheer fact. First, it seems to me factual that the two matters before the House today—the motion for £150 million and the Statutory Instrument covering £300 million—stand or fall together, whether they be right or wrong. I cannot see any logic or common sense in attempting to divide the two, either from the point of view of British Leyland or from the point of view of the National Enterprise Board.
As regards British Leyland, it is clear from passages in the NEB's report on British Leyland's corporate plan that the £450 million is a carefully considered sum put forward very deliberately by the chairman and his new team at British Leyland. Obviously, it has been argued out in great detail, and in no sense is it a bidding figure put forward by the chairman with any thought that he would get something rather less.
It seems to me that this is a sum which involves the future service of Mr. Michael Edwardes and his team, and my reading of the NEB's report is that, putting it in the nicest possible way, without appearing to shove a gun at the head of the House, if the £450 million or any part of it is refused tonight, Mr. Michael Edwardes and some of his team will not remain much longer in their key positions. If I am wrong in reading that into the NEB's report, I shall be glad to be told soon.
Mr. Hal Miller: Is it the hon. Gentleman's reading of the papers that the NEB cannot make its funds available for British Leyland without having the additional funds put in? That is not my reading.
Mr. Wainwright: The hon. Gentleman might have waited a moment, because I said that I should first approach these matters from the point of view of British Leyland and its need for all the £450 million and I should then turn to the National Enterprise Board's position. I now come to that, having apparently excited no opposition to my point about British Leyland's absolute need for £450 million.
As regards the National Enterprise Board, I was astonished that the right hon. Member for Leeds, North-East, whom we all acknowledge to have considerable financial experience and acumen in what, to me at any rate, is big business, should suppose that a body such

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as the NEB, charged by the House with heavy and continuous responsibilities, would be willing to face the immediate future with £575 million out of its present limit of £700 million absolutely committed. I cannot imagine anyone being willing, as it were, to run for much longer a merchant banking enterprise of the size of the NEB with only £125 million up its sleeve, especially since it has responsibilities to, I think, 36 client companies with which it is already heavily involved.
Mr. Grylls: Thirty-nine.
Mr. Wainwright: The hon. Gentleman says that there are 39, and that strengthens my argument. Furthermore, all of us in the House expect the NEB to behave as an ongoing enterprise. Is it suggested that it should hang notices in its premises at Grosvenor Gardens saying "Business temporarily suspended owing to over-commitment to British Leyland"?
I say categorically that, on my reading of these matters, a margin of £125 million for an entity such as the National Enterprise Board would be intolerably small, and I suspect that it is in fact less than the NEB's total of present responsibilities and projects. I am willing to give way if that can be confirmed, since it is important that the House should know.
The Minister of State, Department of Industry (Mr. Gerald Kaufman): In fact, although he is very much on the right lines, the hon. Gentleman is understating the position. When he refers to £125 million over and above present expenditure, plus the commitments to British Leyland, he is not taking into account that the wholly owned subsidiaries of the NEB have approved borrowing facilities with banks at present unused amounting to £61 million.
If those facilities are utilised, they will count against the borrowing limit, and in all prudence the Board has to provide for those in case they are utilised. That means that the total is taken up to £636 million immediately, which leaves a balance of only £64 million, which is entirely insufficient to meet the forecast needs of the NEB group of companies, excluding British Leyland, for fixed and working capital over the next 12 months.
Mr. Wainwright: I am obliged to the Minister, and I shall therefore move on
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to the second matter of fact to which reference has been made.
Mr. Kenneth Clarke: Will the hon. Gentleman recognise that the commitments of the NEB and the companies with which it is involved include some which are eminently realisable? Among the companies owned by the NEB are some which have been successfully turned round and which could at a suitable moment be put back on the market. Is the Liberal Party as committed as is the Labour Party to the concept that the NEB will never denationalise any of the companies which it acquires? Is the Liberal Party totally opposed, for instance, to any prospect of Ferranti being put back into private hands?
Mr. Wainwright: The hon. Gentleman knows perfectly well that the condition of the Liberal Party's support of the NEB, from the moment when it first appeared in the Industry Bill in 1975, was that, as we said on many occasions, it must be regarded as an in-and-out organisation which is prepared to dispose of companies at the right time with as much care and relish as in acquiring companies. But the governing phrase must be "at the right time". I am very surprised that the representative of business speaking from the Conservative Front Bench should suggest that publicly owned assets—assets acquired on behalf of the taxpayer—should be in danger of being flogged off to meet a situation caused by this House grudging the NEB a proper margin within which to operate as a civilised concern.
The second matter of fact, which is of equal importance, concerns the suggestion of the right hon. Member for Leeds, North-East as to the peculiarly inept business in the Ryder plan of doling out Government money only as long as there was a good report on industrial relations. Most Opposition Members condemned that ineptitude at the time. The right hon. Gentleman for Leeds, North-East was implying repeatedly that monitoring on behalf of the public would now be only an annual performance. But in the NEB's report on the British Leyland corporate plan, which has been available at the Vote Office for some days, there are repeated references on page 12 to the NEB's intention—indeed, its pledge—to

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monitor British Leyland, and especially its capital expenditure, continuously.
I shall content myself with two short quotations from paragraph 11.13 on page 12. The first is that:
"the NEB will continue to monitor the company's performance against budget during the year".
A few lines later it is stated:
"Major programmes of capital expenditure will continue to require the approval of the NEB."
I make it clear on behalf of the Liberal Party that we have always, from the outset of the British Leyland affair, maintained that monitoring by the NEB was much more likely to be satisfactory than was monitoring by politicians or even by over-pressed civil servants with many quite different concerns on their minds.
I turn now to possibly more controversial aspects. There has been a good deal of talk today, which I found very facile, about flogging off parts of British Leyland in order to try to reduce the sum on which we are being asked to vote tonight. I look forward very much to a time—I cannot say when it will come—when British Leyland, or parts of it, will be eagerly sought after by the market. I believe, without prejudging the issue, that there may come a time when the corporate health of British Leyland and its workers will be so robust that it can perfectly well do one or two very good deals with the market, with some parts of British Leyland, on behalf of the taxpayer. But that is years and years away.
To start flogging off at this moment one or two jewels in the Special Products crown would seem to me to be an appallingly stupid provocation in regard to industrial relations, just when people everywhere, including Opposition Members, are commending Mr. Michael Edwardes for slowly bringing a rather better spirit into the whole enterprise. Incidentally, as hon. Members know, Mr. Edwardes is also trying, quite rightly, to interest the whole country in the future of British Leyland and induce us all to become customers of it. To suggest, therefore, that the process of disintegration has begun would be a height of folly which would never enter Mr Edwardes' mind or that of the team around him.
There is also the further possibility that to do anything such as this would
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be an absolute gift to those who stand at the gates of British Leyland factories selling Socialist Worker and also the publications of the International Socialists. I ask hon. Members to consider this. Any price which could be found on the market for any part of Special Products Industries could most easily at the present time be represented by the extreme Left wing in its newspapers as a free gift by the British Parliament to certain financial interests.
The dealings of this House with British Leyland and the rescue operation have never put any price tag on the separate parts of British Leyland. It was an overall deal in which the public acquired the shares of British Leyland. It would therefore be the easiest thing in the world for the scribes of extreme Left-wing newspapers to misrepresent any sale at the present time as an appalling piece of financial jobbery in the interest of a privileged few.
I and my Liberal colleagues regard the new British Leyland plan as a very welcome piece of realism. It is stressed that the question is sheer survival. That is a very welcome change from the grandiosity of the Ryder plan. It also suggests that short-term considerations must at all points have priority over longer-term dreams and visions. That must also be right at the present time. It is extremely realistic—even though it is perhaps disappointing—that Mr. Edwardes proposes and intends a big shift in capital spending away from the volume part of the business into vehicles and special products. We welcome particularly from the Liberal Bench the smaller management units and profit centres which Mr Edwardes is already installing.
I hope that this policy will be taken further and that the financial results each year of each of the profit centres will be published to hon. Members of this House, and through us to the whole country, so that the public, which pays for this business, will know year by year how each part of the business is proceeding.
We also welcome the much more discreet attitude of the present management team towards industrial relations. There can be no hope of solving these delicate problems on the shop floor if they become part—as they seemed at one time to be in danger of doing—of the yahoo politics

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and matters of facile exchange in this House.
I have only one critical comment of the slightest importance to offer. That concerns the danger, which some of my colleagues sense, that Mr. Edwardes' admirable efforts to convey an image of British Leyland as a great British company, selling British products, if not managed with extreme skill and delicacy, may hamper what we regard as a very desirable European trend in the vehicle industry. I refer to the trend towards industrial partnership with our Common Market colleagues. I am advised, for instance, that in the very tricky matter of creating an all-aluminium engine for at least one volume car there might well be a great deal to be said for the early development of a close partnership with Renault, which has already taken the decision to have a huge aluminium foundry and to create an aluminium engine of the size which could be very useful for British Leyland.
I hope that the British public will not be misled by any publicity campaign into thinking that in this present age there can ever be such a thing as a 100 per cent. British car, or that, if there were, it would be desirable or offered at the right price.
I now turn to the Statutory Instrument about the NEB for what I regard as absolutely essential funds if the British Leyland case is regarded as sound. It seems to me that in recent months the NEB has taken a turn very much for the better. It is no longer behaving as a self-generating organisation appearing to go its own way under very headstrong leadership. It is now an obedient, imaginative and well-tuned instrument of the policy of the Government for the time being with, I suspect, a sensible and close eye on any possible future Government.
If we now have a consensus NEB—as I pray we have—this cannot fail to be for the good of the country. There are always those hon. Members, such as the right hon. Member for Leeds, North-East, who say "But there are many eager merchant banks and other finance institutions desperately anxious to lay out their money in the same areas as the NEB." If there are, they have not shown much signs of activity in some very important areas. I can understand why.
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I make no criticism of the merchant banks and finance houses.
I take just one example, the leather tanning industry. I cannot conceive that any merchant banker in his senses, with plenty of other opportunities for deploying his money and skill, would have such a masochist complex as to try to reorganise the British leather tanning industry, which is bound to be a bed of nails—if that is not a self-contradiction—for some years to come and has already landed the NEB in the very painful task of agreeing to redundancy notices for many hundreds of hard-working people in Beverley and other parts of North Humberside.
It is simply because only a public corporation can hope, with luck and great skill, to be tolerated in a role like that that the NEB has a unique role. If the people of Beverley were told that financiers of the City of London had insisted upon 700 of them getting the sack, there would have been a series of sit-ins which would have lasted from now until the summer holidays. But a public corporation—doing it admittedly with great regret—is at least able to say with a perfectly honest countenance that it is doing this in the public interest That is one of the virtues of the NEB.
I am glad that with regard to its particular guideline on promoting employment Sir Leslie Murphy and his team are taking an overall view and are not assuming by a narrow interpretation that a positive duty to promote employment means that they must go running around the country collecting every lame duck that is about to give people the push. They take a much broader view, and I am quite sure that they are right.
The fact is that in the present industrial climate, and with all the depressing factors—many of them not under our control—in the rest of the world we need a public body with relatively modest resources of this kind available to fill the gaps which in a mixed economy are inevitably left by perfectly enterprising finance houses and other organs of private enterprise.
If the Conservative segment of the Opposition does not like this particular form of NEB, it is incumbent upon it to tell the House what it would put in its place. Indeed, before the end of this debate I hope that we shall hear from

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the Conservative Front Bench what its plans are for the NEB if it falls to the Conservative Party to decide these matters in future.
In our view, the NEB has taken some splendid steps forward in the last few months, especially in negotiating with the Secretary of State its right to sell off up to £1 million in any one case of shareholdings without anything more than his formal consent. In my part of industrial West Yorkshire that has considerably increased industrial confidence in the role of the NEB.
With those reasons in mind I shall tonight recommend my right hon. and hon. Friends to support the Government on both the Statutory Instrument and on the order.
6.55 p.m.
Mr. Arthur Blenkinsop: This has been a fascinating debate because we have been confronted from the Conservative Opposition by what amounts to an unholy compromise which they have reached. The right hon. Member for Leeds, North-East (Sir K. Joseph), in delivering his vigorous attack upon the Government—and apparently assuming a holier-than-thou attitude about the whole procedure—clearly had been grudgingly won over to agree to one of these Statutory Instruments on the understanding that he would be able to get support from Conservative Members on the other. There was the world of difference between the attitude exhibited by the right hon. Member for Leeds. North-East and the attitude of the right hon. Member for Worcester (Mr. Walker), who at any rate appeared to be putting a fairly rational case in his brief but vigorous intervention.
I wish—at any rate on this subject and on the work of the NEB—that at least there was greater understanding of its overall role. For example, the hon. Member for Birmingham, Stechford (Mr. MacKay)—I hope I did not misunderstand him—apparently had the impression that NEB funds were being used for the shipbuilding industry. He said that quite specifically. But, of course, NEB funds are not used for that purpose. That is quite clear.
As someone who comes from the North and North-East, I want to raise specifically
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matters that were referred to by my right hon. Friend about some new avenues of work for the NEB, namely, the setting up at the beginning of the year of the new regional board in the North which is comparable with the board that has been set up in the North-West. It is true that the establishment of that body has not been greeted with overwhelming excitement in the North-East. I believe that is for two major reasons. First, in the North we are concerned about the number of bodies which already exist which appear to be in danger of overlapping in some of their work. We are concerned lest this new board should merely be seen as yet another body added to the existing number. We in the North are very eager to do some rationalisation in that sense in order to secure a clear voice for the whole region comparable with the strong voice that we believe Scotland can now express through its development agency.
Secondly, our judgment about the effectiveness of the work of the regional NEB will very much depend upon its success. It has been in existence for only a short time—a matter of about three months—and it would be unfair to judge it by that very short period. But I hope that we shall have a continuing look at the way in which it finds it possible to generate new activity, because I feel that it should not regard it as its job simply to wait for people to come to it. Rather I hope that it will adopt a more aggressive line and seek to find new avenues to development in the Northern region.
We are concerned that we have a number of different bodies in the North. We have, for example, the departmental Ministries already with some independent rights of decision making, especially in terms of the Industry Act and the decision under the Act. We have the Industrial Estates Corporation. We have on an advisory basis the Northern Economic Planning Council, and we have promotional bodies such as the North of England Development Council. There is a danger that proliferation of bodies of this sort can lead not to clarity of decision and action but to some confusion.
We are eager to work out ways in which we can get a better combination—without necessarily further legislative action but administratively—to secure the

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greater clarity which we think will be very much to the benefit of the region. In the meantime, naturally we welcome any efforts which the NEB can carry through on its new regional basis. We welcome that it has as a body modest independent rights of action of its own for authorising projects within the £500,000 figure which possibly is not all that much today but which gives it some independent rights of action. We are deeply concerned lest the Conservative Party should succeed in trying to deny the NEB overall the necessary resources not only for the Leyland project but for the many other promising projects which it has helped stimulate and in some cases to rescue. We are deeply concerned in the North that they should have the full backing of this House.
7.0 p.m.
Mr. Hal Miller: As one who voted for the Ryder Report in the first place, I do not think that we should be too apologetic today when we come to another crossroads in the history of Leyland, and I do not think that we should put on the hair shirt too publicly.
I should like to take this opportunity to pay tribute to those who have tried to bring that plan to fruition and who have laid the groundwork on which the new team will be able to base its drive for success. It would be very remiss to let this occasion pass 'without paying such a tribute to those who have worked so hard and laid strong foundations the reward of which others are now about to reap.
But we have again been brought face to face with a situation in which this House has great difficulty in deciding how to disburse such large sums of public money coupled with retaining some accountability to our own constituents for the use of their taxes. I thought that that difficulty was illustrated in the remarks of the hon. Member for Colne Valley (Mr. Wainwright), who showed no concern for the proper husbandry of public money but appeared to be willing to go along with whatever was suggested, without any reservation.
Mr. Richard Wainwright Mr. Richard Wainwright rose—
Mr. Hal Miller: Apparently we are to have some clarification.
Mr. Wainwright: It may be that the hon. Member was asleep when I cited
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the meticulous arrangements that the NEB was making to monitor both the current operations and the capital expenditure of British Leyland.
Mr. Miller: I distinctly heard the hon. Member characterise the Conservative Party as the party of business. I was merely pointing out that we were a little more careful of the taxpayers' money than he appeared to be suggesting that his party was.
The difficulty to which we should be addressing ourselves is how Parliament is to arrange itself and constitute the body for the purpose to ensure that public money disbursed in this way is suitably monitored. Obviously across the Floor of this House we are in no position to discuss the various details of models or uses of expenditure or, indeed, the confidential nature of some of these uses. But we need to consider some means whereby we can exercise our responsibilities for public expenditure.
In the debate on the Eighth Report of the Public Accounts Committee I drew attention to this and I was disappointed not to have any reply on that occasion. I hope that we shall hear some comment about it later tonight. I also made it clear on that occasion that it was no longer realistic to expect the Leyland operation to continue on the basis of drip feed. That is one major reason why I support the proposal before the House for an injection of equity.
Before I leave the Ryder plan, I ought to remind the House that that was based on over-optimistic assumptions. It was characterised as a blue skies forecast. However, it takes a very considerable time for attitudes to change, and even the great new broom has not managed to change all the attitudes, as was evidenced by the refusal of the productivity scheme by the work force at the end of last week. So do not let us go overboard in this direction, because some people, including myself, may have been too optimistic about the previous scheme. It takes a long time for attitudes to change and for results to be achieved in that direction.
Moving on from Parliament, I must remind right hon. and hon. Members that there is a severe limit to public funds, and the £850 million which is being made available to Leyland in the next 12

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months and the funds which the Secretary of State has announced already for British Steel in round figures have effectively pre-empted one year of the gain from North Sea oil. There is therefore a real limit on the funds which can be made available.
It was for this reason that some of my right hon. and hon. Friends were encouraged to inquire whether some of the operations not directly connected with vehicle manufacture might not be able to satisfy their investment needs to the extent which they themselves would wish by being freed from the shackle of public investment and being allowed to seek their fortunes on the market. I cannot see how, for instance, the separation of commercial refrigeration or construction equipment would affect the morale of those working in the motor force. This is another respect with which I disagree with the hon. Member for Colne Valley.
I do not suggest that this could be done today, but it could and should be organised on such a basis that it ought to be possible, because there is a limit to the public funds which can be made available, and it may be that the growth of these companies is being inhibited unduly by the need to spread the limited amount of butter.
Moving on to British Leyland, it is difficult for the House to form an effective judgment when the detail before right hon. and hon. Members is necessarily scarce. We have no indication of how much of this money is to go for working capital and how much is for investment, and we are lacking various other information which an ordinary shareholder would expect in a prospectus from a company seeking to acquire additional finance.
Here is another area where I feel that we in Parliament are not living up to our responsibilities. But part of the lack of information which concerns me is that we do not know how much of this new investment may be going into competing with already existing industries. I have in mind components, for example. I know that this is a very real worry. Several large component makers have approached me in the past year, and there have been deputations to the NEB. I hope to be able to catch the ear of the
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Minister who is to reply so that we may have some information about whether any of this investment is to go into component manufacture and compete with existing firms. I shall resist any suggestion that part of any run-down in Leyland's work force should be mitigated by transferring workers to component manufacture. The only result of that would be to put people out of work in those factories with which they would be competing. That has been confirmed to me on a series of recent visits to our major component makers. We should like some assurance on that score.
We have not been able to identify from the figures before us the relative profitability of any of the operations. I would resent the perhaps facile assumption that all is well in Rover and Jaguar and that it is only Austin and Morris that are holding back the whole body corporate from success. That has not been proven to us. There is another area where adequate information has not been available.
The National Enterprise Board in its report has not considered adequately, as far as I can judge, British Leyland's position as a European car maker in the European car market. There is a serious danger of over-production of cars in Europe over the next five years. I am not convinced that British Leyland's production plans have been considered in that light. I, like the hon. Member for Colne Valley, would wish to go further and have some reassurance that there is a more positive move towards ensuring that British Leyland is an effective part of the European motor car industry. I do not believe that it will be able to survive long without having, as it were, at least two legs on which to stand.
One of the reasons for that is the colossal size of the investment that is now required to mount new technology. It is significant that Renault had to co-operate with Peugeot and Volvo to produce a new six-cylinder engine. It is likely that there will have to be further co-operative efforts of that sort, because the scale of investment that is now required is too much for any one company to find, even one backed with public funds. That does not appear to have been considered in the NEB report.
In speaking of the NEB report, I emphasise the remarks made by my right

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hon. Friend the Member for Leeds, North-East (Sir K. Joseph) on productivity. It is an issue that has been brought to my attention recently by the works committee at Longbridge, which is most concerned that the productivity aim is not ambitious enough. The European productivity, with which comparisons are constantly being made, will have made further advances on the basis of investment and new technology even during the period of the Edwardes plan. That factor has not been considered sufficiently in the report let alone answered.
There are many queries and we are being asked to make an act of faith. The unfortunate probability is that we shall be asked to renew it at regular intervals. For example, next year we have an additional £400 million to provide in one form or another. How are we to fulfil our duty to our constituents and satisfy ourselves on some of the major points that I, with others, have been trying to make this evening?
From the fairly close observation that I try to keep on the operation of the company and of those who work in it, and the contacts that I have with them, I believe that real progress has been made, although the extent of it is not yet immediately apparent. Progress has been made especially in participation. One of the worries of the works committee was that the new management might mean going backwards in that regard when it felt that advances had been made. I was happy to receive assurances on that score.
We now have to face that further funds are needed for the enterprise to continue. It must be observed that an equivalent amount of investment is being required from dealers, who will have to revamp the whole of their dealership structure. Many of them will be required to make a considerable investment both in stock and in capital equipment. The employees of the dealers are equivalent to those who work in Leyland's manufacturing assembly plants. The same thing may be said for the component suppliers.
Therefore, we can assure ourselves that public money is being used in some sense as a seed corn. It is promoting a great deal of additional private complementary investment to go along with it both at the beginning and end of the manufacturing process.
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It is fair to say that we have a duty to sustain the confidence of those involved in the whole chain from the supplier through the assembler through the dealer to the customer. We have a duty to sustain their confidence, and tonight we should show that we have an equal commitment.
7.16 p.m.
Mr. Peter Brooke: It is always a pleasure to follow my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) in debates on this subject. My hon. Friend's comments on the industry are always well informed. His frankness and candour in reminding the House of his support for the Ryder plan were commendable.
I have to declare an immediate interest as someone who has earned his living as a management consultant. Within the past five years my firm certainly served British Leyland, Ferranti and Rolls-Royce, and indirectly the National Enterprise Board, although I do not think that we are serving any of those clients at present.
Anyone taking part in the debate must do so in the profound hope that British Leyland will be restored to health. As many hon. Members, including my hon. Friends, have reminded us already, many jobs are at stake. For patriots the name British is attached to the company, and that is important, too. It should go without saying that British Leyland's best prospects of being restored to health depend on the company making things that world-wide consumers want and on the company selling them profitably at prices that world-wide consumers find attractive. Any other outcome is both temporary and agonising.
Labour Members may reasonably ask of us on the Opposition Benches our attitude to the manufacturing side of the public sector. My own view of when Governments should intervene in the private sector of industry coincides with that expressed recently by a distinguished industrialist speaking on this subject. I shall not give his name for the occasion was private, but his audience embraced both the private sector and the public sector. He said that Governments should intervene in industry when, and only when, the free market was either not

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achieving the results that were needed on objective criteria or was not achieving them fast enough. The Conservative Government's intervention in Rolls-Royce, given both the commercial and especially the defence clientele of that company, was a classic application of that theory. No doubt the present Government would argue that British Leyland is a similar case.
Before I leave the level of theory I add one other footnote, We hear a great deal from the Labour Benches about Government subsidies to the private sector. I hope that Labour Members will pause to remember when they contemplate the reverse—the consequences of the Government intervention in a free market—that in the majority of top public sector jobs we now have the private sector subsidising the public, with executives plucked from the private sector to chair Rolls-Royce, British Steel, British Airways, British Rail, the Post Office, Alfred Herbert and now British Leyland. They are either seconded directly by their companies or are able to take on the jobs at the relative pittances that the public sector offers because they have accumulated some degree of personal wealth in the private sectors before they cross over.
There are a number of reasons why Government intervention in industry should be as brief as possible. One of the most cogent is the commercial embarrassment having to do corporate planning under the searchlights of Parliament. The NEB statement, which forms one of the background papers to this debate, is a vivid illustration. It is concise, well-written and necessarily almost totally uninformative. The guts of the NEB's decision-making—indeed, the nature of the NEB's decisions beyond the reiterated statements of faith—have perforce to be omitted. We are asked to pass judgment blindly on facts that we cannot be permitted to see.
What follows, therefore, is inference from the visible elements of the iceberg to what lies below. The prime responsibility of the NEB, we are told in paragraph 1.1 of the statement, is "to promote" the company's "efficient management". In paragraph 1.2, we are given wider social and industrial objectives of the NEB. In neither paragraph does the word "profit" appear.
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At the last election the present Secretary of State for Energy, who caught the Moses mode rather earlier than some of his friends, prowled round the gates of the public sector and, as Joshua at Jericho arranged for the sun to be stopped in its tracks, so the Secretary of State for Energy assured the workers in the public sector that they had been liberated by a Labour Government from the laws of profit and loss.
The management and workers of Rolls-Royce, on the basis of last week's results—I quote Rolls-Royce as the NEB's other major foster child—have fortunately paid more attention and heed to Adam Smith than to the right hon. Gentleman. But it is devoutly to be hoped that, though the NEB cannot bring itself to mention the word "profit" in the first two paragraphs, and even in paragraph 11.15 can only bring itself to refer to a "financial duty" and to a return on capital, what it is opaquely talking about is a return to profitability. We must hope that Mr. Edwardes is not so pusillanimous in his language.
The next crucial paragraphs in the NEB's statement occur in section 4—"Organisation". In paragraph 4.1 the NEB states:
"The new management considered that British Leyland's poblems were in part due to the structure of the oganisation."
After expanding on that, it goes on in paragraph 4.2:
"These initial conclusions were the subject of detailed study by a special task force within the company. The outcome has been a decision to move during the course of the year to a new organisation with major consequences for Cars and for International."
The apparent implication of this, the apparent sequitur, is that new management made a study and the outcome is a new organisation. My information is that the task force was in being and that more than one firm of consultants had been employed prior to the new management's arrival. My further information is that the task force had taken the view—as one would expect from knowledge of how the 10 car companies in the world which are larger than British Leyland, with the limited exception of General Motors which is large enough to be an exception in the way that it manages itself to any general rule, organise themselves that car manufacturing operations are so integrated one part with another that true

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decentralisation to genuinely independent units—the small is beautiful syndrome—is impossible. It was at that point that new management arrived.
In paragraph 4.2 of the NEB's statement the word "outcome" is the mot juste since it remains an accurate description of a new development while delicately concealing that the conclusions of the study were somewhat at variance with the evidence in it. As the NEB statement also remarks in a happy choice of words, the consequences of the new organisation for Cars and for International are major. As the No. 11 in world markets and much the smallest of the majors, British Leyland is seeking to prove that the smallest, like General Motors the largest, can make themselves exceptions to the general rule of organisation in this industry.
In fact, as always, appearances somewhat belie reality. Whereas British Leyland cried out for centralisation when the scatter of companies was originally put together and never got that centralisation in any proper sense, so now such decentralisation as is occurring is going to be severely restricted.
The break-up of British Leyland International as a marketing entity, with the potential obligation on a dealer in, say, Austria, to communicate and correspond in future with half a dozen people in the United Kingdom as against a single one, is nicely balanced by the news that a senior executive has been expensively brought in from outside to co-ordinate—I ask the House to note the word "co-ordinate"—franchises.
Product strategy and advanced engineering—I quote from paragraph 4.5 —are likewise reserved powers rather than devolved ones. Anyone who knows Mr. Edwardes' prior reputation as a strong chief executive would scarcely have expected otherwise, but it is legitimate to raise two questions.
First, is competition between rival car companies the best way of deploying scarce economic and engineering resources? Secondly, when manufacturing has been British Leyland's historic Achilles heel and when the reorganisation which has been set in motion has seen such a haemorrhage of what manufacturing talent the company had, are the Government and the NEB confident that there
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is enough manufacturing ability left in the company to staff these new decentralised units?
In section 6 of the statement we are understandably given only the most outline concepts of product strategy. But the inevitable concentration on the short term, given the critical position in the market place, causes one to wonder how far product development will look forward to the 1980s instead of simply seeking to remedy the deficiencies and what the product strategists would call the "me-too-isms" of the 1970s.
At the end of the day the NEB's and the Government's case comes down to backing a single individual. Unlike aerospace where the NEB employs Mr. Lickley, lately a senior executive from the higher echelons of Hawker Siddeley, the NEB's ranks do not include senior motor industry experience. Its recruit from motoring journalism, Mr. Ensor, has left, and its recruit from the industry, Mr. Calver, has gone back to British Leyland.
The NEB acknowledges that its case is one of faith. I do not subscribe to the theory that individuals cannot transfer successfully from one industry to another. There are frequently cases for making such a transfer. But what we lack if we do that—and the NEB's paucity of motor industry experience compounds this—is the instinct that comes of long years in the industry—the sort of instinct that made the Mustang so immensely profitable a model not only because it was a superb product but because Ford's management had the courage to lay down a second production line on the basis of only two days' sales.
I am not troubled by the potential confusions in Mr. Edwardes' plan of organisation unless Mr. Edwardes becomes confused by them himself. The fact that some of the organisational ice is thin is irrelevant if Mr. Edwardes puts it out of bounds to skaters. What he is doing—and it is the sign of a leader anywhere—is sending out signals throughout his organisation of the style in which he intends to run the company. Like many of my hon. Friends, I like the style. I am more surprised that Government Members, who I thought found leadership an unfashionable concept, are so enthusiastic about putting all their chips on a

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leader. That is what the NEB and the Government are asking the House to do.
Of course, it is risky. That is why there will be notices saying that the ice is thin. But the NEB and the Government are lucky that their earlier interventions such as those involving Rolls-Royce and Ferranti have come right at the right time. If Governments should intervene in industry when they are needed, so they should disengage when they are no longer needed, There can be no happier way of backing British Leyland, risks and all—and I should like to see the House backing British Leyland—than from the handsome return that the Government could now receive from having backed Rolls-Royce earlier. The coincidental success of Rolls-Royce Motors is an admirable augury for this procedure.
7.31 p.m.
Mr. Eric Ogden: I shall take two points from the cogent speech by the hon. Member for the City of London and Westminster, South (Mr. Brooke). He criticised the Government for poaching the private sector in order to provide management for the public sector. I agree with him on that, to a degree. I do not agree with him in his criticism of whom they take and for the reasons that they take them. But somewhere along the line my colleagues in the trade union movement have failed to use the movement to provide alternative managers. I do not know whether that is because in recent years members from the union side have already gone into lower management.
Something that we on this side of the House can do is to encourage the trade unions to provide management skills so that each time someone has to be appointed either to high or middle management my right hon. and hon. Friends on the Front Bench are not criticised for going to the private sector to provide management in nationalised industry.
The hon. Member for City of London and Westminster, South was a little unfair when he seemed to suggest that only an engineer, preferably a motor engineer, should be in charge of British Leyland or that only a chemist should be in charge of Distillers.
Mr. Brooke: I did not intend to give that impression. I intended to say that
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one of the disadvantages about the present situation is that the NEB does not have that type of experience within its own ranks.
Mr. Ogden: I agree that within the ranks of the NEB there should be the whole range of experience. I am glad that the hon. Member confirmed that it is not necessary to have an engineer in charge of an engineering company.
I proposed to quote to the hon. Member the advice of Sir Arnold Weinstock, who said on one occasion that he knew little about electrical engineering and that his purpose as managing director of the group was to provide the organisation. Regardless of what the product was, he claimed that if he got the organisation right and was able to employ those in the higher ranks of management who had the skills, he would provide the product that people wanted, at the time that people wanted it, at the price that people were prepared to pay, and, incidentally, profit would flow automatically. That was the advice that I was offered by somebody who is more likely to be in political sympathy with the hon. Member than he is with me.
In party politics only seldom does the shadow spokesman on the environment become the Minister when his party is in office. The same applies to a Shadow Foreign Secretary becoming Foreign Secretary. In the present circumstances, it will be a long time before the hon. Member for Kingston upon Thames (Mr. Lamont), who is shadowing on the Opposition Front Bench, will take over on the Government Front Bench. This is another argument. The argument in political parties seems to be the same as that of Sir Arnold Weinstock. The subject and product seem to be less important than a manager's organising and managerial capabilities.
The hon. Member for City of London and Westminster, South said that intervention by the Government in industry should be as temporary as possible. Some of his colleagues are always complaining about Government intervention in industry. Some industrialists complain about Government interference publicly, but they are often first in the queue at Government Departments asking for grants and help of one kind or another. I make those remarks to show the hon.

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Member that I was listening to his speech, although I was making some last-minute notes as he was speaking.
The Government's proposal seems to have approval on both sides of the House, for different reasons. I support the proposal to provide more capital for the National Enterprise Board and, through it, more capital for British Leyland.
I ask the Minister to confirm that the North-West regional board of the NEB will receive a major share of the funds available for direct investment on Merseyside and the North-West. I am not asking this directly in the usual way, or during an Adjournment debate, or over the telephone to his office. The Minister will recall the Adjournment debate in March and the information that he gave. I ask for confirmation that the funds will not be limited to manufacturing industry alone but that they can and should be made available to service industries in the North-West.
The hon. Member for Bromsgrove and Redditch (Mr. Miller) called the Government proposal an act of faith, not, he hoped, an auto de fe. It is a calculated risk. Some time ago we heard Mr. Michael Edwardes saying that when he came back to the Government, if the Secretary of State asked him what proof he had that taxpayers' money would produce the result that he wanted, British Leyland would have to say that it could give no such guarantee. Michael Edwardes was asking the Government to take that calculated risk. Perhaps in 12 months' time he would be able to say that it would or would not work. Now we have to make a choice. We either do nothing and let British Leyland sink or we exercise an act of faith, take a calculated risk, and the money must be provided. Unless we provide the funds, there is no hope of survival or success.
Not only British Leyland is involved. Subsidiary companies and other areas are involved. We also have to make it clear that providing capital is no guarantee that the company, management, unions, engineers, dealers and anyone else involved will be able to do the job. We can only make it possible for them to try to do the job. It will be done only if there is real effort, co-ordination and determination to work out a way of providing the cars, the motor vehicles, and the components that people want to buy,
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not because there is an embargo on other cars coming into the country, but because British cars and vehicles are the ones people want to buy. We have to ensure that people can buy these products when they want them, not in six or 12 months' time. We have to ensure that they are the colour and quality that people want to buy. Only when we can produce the vehicles at the price and quality and with the delivery date that people require will British Leyland be a success. That same principle applies to any other industry. That success can be achieved only by those outside the House, not by those inside. We are taking a calculated risk.
Mr. Nick Budgen Mr. Nick Budgen (Wolverhampton, South-West) rose—
Mr. Deputy Speaker (Sir Myer Galpern): Mr. Budgen.
Mr. Ogden: rose—
Mr. Deputy Speaker: I am sorry. I thought that the hon. Gentleman was concluding his speech. It sounded like his peroration. Was he giving way for an intervention?
Mr. Ogden: Four Opposition Members were nodding their heads as I was speaking, Mr. Deputy Speaker, and that does not happen too often. I thought that one of them was trying to help me by interrupting, so I was giving way to him. I shall not be too long, Mr. Deputy Speaker.
I hope that the House will accept that the support that I have expressed for British Leyland is in spite of the decision of British Leyland management to put forward a proposal to close the Speke No. 2 plant. This has been raised in the House not only once by my hon. Friend the Member for Liverpool, Garston (Mr. Loyden) today, but on a score of occasions, and has been hammered home time and again.
At first, when this proposal was made public, it seemed to be—as all the inferences of anyone outside the House, from reading the statement, would be—that it was proposed to close British Leyland Speke No. 2 plant because of its bad record of industrial relations. It was only after two meetings of Merseyside Members of Parliament, first with Mr. Pat Lowry and later, at some ungodly hour in the morning, with British Leyland's manager, Michael Edwardes, that

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it was made quite clear that industrial relations, productivity and all the other things that have been mentioned in the report had nothing to do with the decision to announce the proposed closure of Speke No. 2.
That British Leyland plant is the second most modern motor plant in the United Kingdom, built and intended to produce 2,000 cars per week of three varieties—the TR7 hard top, the TR7 soft top and the Lynx—and now, because of factors outside the Leyland company management control, it was proposed to produce only 700 cars per week. A plant for a market of 2,000 cars a week now has a market of 700 per week. The economics are there for anyone to read and the 700 cars can be produced by spare plant in the Midlands.
That is the reason for the proposal to close Speke No. 2. It has not been accepted on Merseyside. We are told that there are products from parts of the British Leyland network for which people are waiting six months, 12 months and 18 months—and not only for buses or the Land Rover. There is surely some way, inside the British Leyland organisation, in which British Leyland can use the most modern plant on Merseyside and the second most modern car plant in Europe to provide the production for British Leyland vehicles for which people are waiting.
There is discussion with the unions, and it is not the job of Members of Parliament to do the job of either management or the trade unions. We can help. We can carry messages. We can try to get a better understanding. But it is not for us to do the one job or the other. We are middle men and, as usual, we get clobbered from both sides. Certainly it is time that a great deal more information was provided by British Leyland managers to their people on Merseyside.
There are parts of British Leyland that cannot produce what is wanted. We are simply saying that here we have a plant of skilled people which should be used for production that is wanted by other parts of BLMC, and which they are not able to provide.
Coming from Merseyside, perhaps I could make one or two other comments
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about the use of NEB money. NEB money is invested in Merseyside not only through British Leyland. Will my hon. Friend again put on record the help that has come to Merseyside and the North-West through the Government and NEB, but not only for Cammell Laird, Shotton, the Mersey Docks and Harbour Board, Tate and Lyle and GEC, and many other companies?
I make one specific request. I am told that the Laird Group, which was saved in 1966 by Government intervention, is now going forward into the production of a bus—public transport buses. I am not certain whether it is the Metropolitan, but I am told that the group has a new model on the market. Perhaps my hon. Friend will have a word with the management. It might be possible to use part of the facilities of Speke No. 2 to provide the plant and the production of Laird buses, under whichever title they happen to go.
As the beginning of my peroration—perhaps that will help Opposition Members; they must have patience—let me say that my hon. Friend the Member for Garston reported directly to the Government Front Bench the feelings expressed at a Merseyside meeting yesterday morning. It was a conference of trade unionists, members of the Labour Party, representatives of district officials, councillors and many people from a whole range of walks of life—all involved with old concerned about employment on Merseyside. A senior shop steward from British Leyland at Longbridge suggested that it was time that the Government began to use some of their money from North Sea oil to put into British Leyland. We had to remind him of the £230 million made available a fortnight ago and the latest investment of £800 million over the next four years.
In other words, the Government are getting the blame for what goes wrong and they are getting none of the credit for what is going right. It will be little comfort for the Opposition, but it was recognised by everyone at the meeting that if the Conservative Party ever gets into power our difficulties will be a great deal worse, both in the short term and in the long term.
What efforts are being made to get free, voluntary planning agreements between a particular company, a particular industry

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or a particular sector on Merseyside and in the North-West and the Government? I cite the example of my own union. In the coal industry there has been a complete agreement among the Government, the National Coal Board and the unions, about investment, productivity and production over the next few years. If that kind of thing could be done with GEC, Plessey and Lucas, we would have many fewer of the problems that we have at present. I again ask the Minister to use all his endeavours to achieve better co-ordination between Ministers and the North-West, and to make even more certain that the money to be provided through these grants and orders is not restricted to manufacturing industries. My belief is that the hope of ending unemployment in the North-West will depend more on using the service industries than it does on the manufacturing industries.
We have problems. There is no need to rehearse them again because, as my hon. Friend the Member for Garston has said on more than one occasion, we Merseyside Labour Members have beaten a regular track to ministerial doors and will continue to do so. However, with this aid, there is some hope. Without it, there is no hope. With the hon. Member for Kingston upon Thames—this is no personal reflection—and the Conservative Party behind him, there would never be any hope for Merseyside.
7.47 p.m.
Mr. Nick Budgen: I start by declaring an interest in that my brother is employed by British Leyland. I also declare an interest by saying that I have been amongst the first of my party to vote against the increasing subsidies that have been accorded to British Leyland.
Adapting a phrase, I believe that subsidies are twice cursed. They are cursed by he who takes and cursed by he who gives. For he who takes—namely, British Leyland—subsidies have caused British Leyland to avoid those harsh decisions that it ought to have taken. Subsidies have eroded the relationship between men and management. They have caused men to go for decisions not to their management but to Members of Parliament. They have caused men and management not to consider how they might better use their
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assets but to see how better they could lobby Parliament.
I believe that continual subsidies to British Leyland or to any other sector of the economy will be bad for those sectors that receive it and very bad for the country as a whole in giving those subsidies.
As my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) said, the subsidies have to be raised by taxation—and, God knows, there is a big enough cry for the reduction of taxation at present—or by borrowing—and, God knows, there is a big enough cry for lower interest rates so as to encourage more investment—or, worst of all, by printing money—and, God knows, we have a high enough rate of inflation and we have in prospect, as the editor of The Times says, a 15 per cent. rate of inflation next year.
Therefore, what are Opposition Members to do in thinking about these two matters and in supporting what Mr. Edwardes himself describes as an act of faith? Of course, the fact is that we know that as the custodians of taxpayers' money we are being asked to take a tremendous gamble. If it were not a tremendous gamble, the money could be raised in the City and from private investors. In my opinion, therefore, the position of the Tory Party is both illogical and necessary. It is illogical because we draw a distinction which in theory cannot properly be drawn between the NEB order and the Section 8 order.
I entirely agree with the analysis by my right hon. Friend the Member for Leeds, North-East of the unnecessary quality of the proposal to increase the funds for the NEB. It is plain that, first, it is based on a false philosophy. If there is a philosophy for the NEB, it should be based on the proposition that companies may temporarily fail and need support and should be given a crutch—but only for a short time. There should be no long-term or dramatic proposals for a continuing role for the NEB. So I wholly reject the Secretary of State's longterm philosophy.
But even if one concedes the NEB this short-term resuscitating role, the £300 million is unnecessary and the basis of the application must be that more money is wanted for other industries. Even if that is not so, some firms and industries in

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the NEB stable could be sold off. It is not for us to say which, and it is dangerous for politicians to be too precise about management decisions. But even Ferranti could be sold off. I agree with my right hon. Friend about that.
Illogically, my right hon. Friend takes a different view about the Section 8 application. One can describe British Leyland as a conglomerate or holding company like the NEB itself. It has its Special Products Division, its division dealing with buses and trucks, and Jaguar and Land Rover. It also has substantial capacity to manufacture components, and it has foundries. It is not for politicians to say how they should be disposed of, but money could be raised by hiving off parts of British Leyland.
I was therefore concerned about how to vote on the Section 8 order. Illogical though I regard it, I shall abstain. The very illogicality of our position shows what the position will be under the next Tory Administration. There is a danger of our being misrepresented. One misrepresentation favoured by the Prime Minister is that, if the Tory Party wins the next General Election, subsidies and support will be cut off, the West Midlands will be an industrial wasteland and its inhabitants will be put on the dole queue.
The subsidies and support given by the present Government are very high. Table 6 of "The Government's Expenditure Plans", Cmnd. 6721, Volume I, shows that, at 1976 survey prices, expenditure under this item is running at about £3 billion a year, or about 6 per cent. of Government expenditure. If that whole programme were cut back on the day of the General Election, the industrial West Midlands would indeed become a wasteland. That is not the intention. On the other side of the argument, some who broadly share my liberal economic views might fear that, after the vote tonight, the Tory Party would do nothing about cutting the subsidies and supports which are distorting our economy.
But the reality is different—an illogical compromise like that which we shall make tonight. Whether we like it or not, the subsidies have been given. British Leyland has been effectively nationalised and we have to deal with the situation as it is and not as we would wish it to be.
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Therefore, I hope that the message which goes out tonight is that the Tory Party may be acting illogically but also, as practical politicians should, that we shall be planning a phased, determined withdrawal from the public sector, and that we shall not cut off the subsidies overnight. Nor shall we say that it will be done immediately only to reverse our programme and adopt a different philosophy only six months later, when the barons of the TUC and the CBI line up at No. 10 Downing Street to put the pressure on.
The difficult, compassionate and honest answer is that we shall have to disengage slowly. British Leyland, Alfred Herbert and all the clients of the NEB are drug addicts and they have had a great deal of the drug of the taxpayers' money. One cannot take the drug from the addict immediately, but in his interests and the interests of those pushing the drug the thing must be stopped, firmly and slowly.
The Under-Secretary of State for Industry (Mr. Les Huckfield): The hon. Gentleman is making a coherent and logical exposition and I am sure that we are all following it with fascination. What then, in the end, having taken away the drugs and proposed to remove the source of the drugs, would he do with the NEB?
Mr. Budgen: I hope that it will be a very small concern. I hope that it will exist, because there will always be people in my party who believe in its limited and temporary resuscitating role. I am a reluctant supporter even of that role, but my party, like the Minister's party, is a coalition and there will always be those who vehemently disagree with my perhaps over-purist view of the economy. Therefore, I dare say that the NEB will exist for some time. I want to ensure that it has a very limited and declining role.
I want it to be known throughout the West Midlands that the Tory Party understands that component manufacturers, dealers, a whole host of persons, have contractual relationships with Albert Herbert, with British Leyland, with other clients of the Government. Plainly, others who are in contractual relationship with or who work for those enterprises must taken account of a changed climate. There can be no question of immediately turning the West Midlands—in the dramatic phrase of the Prime Minister—into an industrial wasteland Equally, there can

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be no question of doing nothing. We shall have to conduct a skilled, phased and sometimes illogical withdrawal. This is the beginning of it.
8.1 p.m.
Mr. Michael Grylls: So much has been said about Leyland during the debate that I shall say very little about it but concentrate, instead, on the National Enterprise Board.
I believe that there is, rightly, an aura of optimism about Leyland. Mr. Edwardes is to be congratulated on having been largely responsible for getting that aura going and inducing a feeling of optimism within the organisation. I believe that if he continues to make the right decisions, British Leyland can succeed into the 1980s.
Our role today as Members of Parliament is difficult, because there is relatively little that we can do. We have two choices. Either we turn the tap on of more taxpayers' money for British Leyland or we can decide not to turn it on. That is a very clear choice for us. We Tories believe, having supported Mr. Edwardes in his plan so far, that the time will come when he will need more money.
It is right to record that the Ryder plan is firmly dead and buried. Ryder is dead, long live Edwardes.
Today we are asked to vote £300 million of taxpayers' money to the National Enterprise Board. £150 million of it under Section 8 of the Industry Act. There are only two Members on the Labour Back Benches. That, perhaps, is an indication of the arrogance with which Government Members treat the House and their constituents whom they are supposed to be here to represent. There is supposed to be scrutiny in the granting of these vast sums of money.
Mr. Ioan Evans: Although the Opposition are mounting a massive campaign, there are only half a dozen Opposition Members present. Perhaps that should be put on the record.
Mr. Grylls: That is a 300 per cent. improvement on the attendance of Labour Members. I will not dwell on this matter. I will merely say that it is odd that more Members are not present in the House for this very important debate.
When one talks, as I have talked, about the Ryder plan being dead and buried and
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our now having the Edwardes plan, it is necessary to recognise that this is a complete U-turn by the Government. This has not been made quite as clear as it might have been during the debate. In 1975, when the then Prime Minister, the right hon. Member for Huyton (Sir H. Wilson), introduced the matter of the NEB, he said:
"I would like to make it clear from the outset that following the initial injection of equity capital in 1975, the release of further stages of Government funding will be determined in the light of the contribution being made to the improvements in the performance of British Leyland by better industrial relations and higher productivity. This is a condition to which the Government attach great importance."—[Official Report, 24th Apil, 1975; Vol. 890, c. 1746.]
That was the basis of what the Government then put to the House about the Ryder plan, what was popularly called thereafter "the benchmark approach". As each benchmark was apparently reached, further sums of money were to be released. We were very sceptical about that, as indeed we were about the whole Ryder plan, because we did not believe that it was right or possible to turn investment on and off like a tap. Equally, we were in the difficulty that we believed that taxpayers' money should be controlled.
We now have a totally new scheme which was announced by the Secretary of State for Industry just before Easter—that a large sum of money will be injected and that a pistol will be levelled at us. It is in fact a pistol which is being levelled at the House tonight; it is being said to us "Either you agree to this large sum of money or you are not backing Mr. Edwardes." It puts us in a very difficult position.
I want to make my position quite clear. I believe, with the vast majority of hon. Members who have spoken, that Mr. Edwardes has made a promising start. However, it will be difficult to bring about a permanent improvement in British Leyland's market share. Paragraph 6.6 of the report of the National Enterprise Board says that the market will not be easily won back. We rejoice that British Leyland has had one good set of figures for a six-month period. However, that is not getting back to the market level which was visualised in the Ryder Report and which Mr. Edwardes himself rightly recognises will have to be achieved.

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The total number of vehicles produced by British Leyland in 1976 and 1977 was 780,000. In those two years British Leyland achieved the lowest production figures over a period of 10 years. The figures for 1977 were exactly the same as those for 1976. In 1977, 250,000 vehicles were lost through bad industrial relations, strikes, stoppages, and the total failure to maintain continuity of production.
It may be that the corner has been turned by a miracle worker, and we are all sitting here today hoping that that is the case. We are all sitting here hoping as an act of faith that Mr. Edwardes will be able to increase productivity from the dismal figure of five vehicles per man year as compared with 30 in Europe and nearly 45 in Japan. There is a long way to go and the target set in the NEB report is on the low side.
It may be said "As you believe that Mr. Edwardes has made a good start, do you not think that he should have the money?" As I said earlier, this is the position in which we find ourselves. It is too soon to make a judgment on Mr. Edwardes after three months. He has produced a plan and a structure. He has had one set of figures. Based on the figures that the Secretary of State quoted today it is not proved that we have to vote this money at present.
On 3rd April the Secretary of State made this announcement:
"In future the financial provision will be looked at annually, starting next November, the light of progress made and of future prospects." [Official Report, 3rd April 1978; Vol. 947, c. 3.]
That was an eminently reasonable position for the Secretary of State to have set out. If we had waited until November we would have had one year of the Edwardes regime. I should be happy to come here then, see what had happened to production and productivity, see whether in the year there had been very few strikes and, therefore, very few vehicles lost, and then made the act of faith. Tonight it is too soon to make the act of faith. It is unfair on Mr. Edwardes tonight and almost irresponsible for us as Members of Parliament to believe that we can do it. If we do so, we shall be mesmerised by what has happened over a few months only.
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I want now to refer briefly to what my hon. Friend the Member for Kingston upon Thames (Mr. Lamont) said about the rate of return on Leyland. On 3rd April the Secretary of State, in the same Written Answer to which I have referred, set the return for British Leyland as 10 per cent. return on capital to be earned by 1981. Something odd has happened, because in the 1975 scheme of arrangement the figure of 19·6 per cent. was set for 1981. Why has this target suddenly been lowered? The scheme of arrangement was a legal document signed in the High Court. It was a legal document on which the independent shareholders, of whom there are 100,000 still left, had to decide whether to take up the offer or hang on to their shares. One hundred thousand of them decided to hang on to their shares. That was very creditable of them. However, they did so on the basis of this document signed in the High Court. This afternoon, three years later, the Secretary of State said casually words to the effect that it will be not 19·6 per cent. but 10 per cent. The House of Commons appears to take it, and I think that it is very odd.
Unfortunately, the Secretary of State is not here, but his hon. Friend will no doubt take the message to him that this is something that he should study carefully because this scheme of arrangement is a legal document, and it and other matters in it refer to outside independent shareholders. The Minister is getting anxious. He is looking down the Chamber in the hope that help might be coming to him. He is lucky because he is surrounded by help and advice that can come to him easily. The independent shareholders who decided their future on the basis of a document do not have such advice. I hope that when the Minister winds up the debate he will give some real answers about the position of the independent shareholders. Not only is there a question of the rate of return but the actual monitoring referred to in the Prime Minister's statement of 24th April 1975, which I have read out, is in the scheme of arrangement, and therefore again those shareholders went into the scheme believing that it would be on a benchmark approach.
Thirdly, the point about the independent shareholders is that at that time there was on expected increase in the

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capital during the first part of the Ryder plan, so they will have their shares even further diluted. The House of Commons is always proud to look after minorities, and this is a sizeable minority, consisting as it does of 100,000 people. I hope that we shall have some sensible, answers from the Minister this evening about exactly how the Government see the position.
The Government may say that the NEB is proposing to buy out the shareholders. That would be a pity because, as my right hon. Friend the Member for Worcester (Mr. Walker) said in his excellent speech at the beginning of the debate, it is important that they should be independent shareholders still and that the company should be quoted on the Stock Exchange. It is a 11 right for us in the Chamber tonight to say that, but we in this House have a duty to look after these people from the point of view of their financial position. They are mostly small shareholders, not large ones, and they put their savings into the company. I hope that the point that I have raised will be answered.
I come now to the question of the National Enterprise Board itself. As my right hon. Friend the Member for Leeds, North-East said, there is no argument whatsoever for increasing the borrowing limit from £700 million to £1,000 million. If one reads the NEB's report one is given the impression—and I am sure that this is not intended—that the only choice is to have £700 million or £1,000 million, and that if there is to be a change, it has to go in one jump to £1,000 million. That is not the position. Under the 1975 Act it could be increased by any figure between £700 million and a maximum of £1,000 million. The Secretary of State earlier this afternoon said—though we knew it because we have the order here—that the figure was to be increased to £1,000 million, but he gave no reason for doing that, and my right hon. Friend was right to pin him hard on this.
We are all accustomed to using these ridiculous figures of hundreds of millions and thousands of millions of pounds, and it is so easy for Ministers to come here and say that the borrowing limit is now £700 million and we shall make it £1,000 million. They will say, "That gives us lots of leeway, that is easy, and
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it is good, and we do not have to come back to the House of Commons again".
The way in which the Secretary of State dealt with this matter this afternoon was nothing short of scandalous. Apart from any other matter to which I shall come, for the right hon. Gentleman to come here and say "I shall have the higher figure. That will sort it all out and give the NEB the absolute maximum to be able to get on with the job" is extraordinary. We have been given no explanation at all of why that should be done.
I think that if a body such as the NEB asks for an extra £300 million borrowing limit, we in the House of Commons are entitled to look with a rather cool eye at what the Board has been doing over the last few years. It is not a cheap Board, with half a dozen people, a man and a dog and a girl secretary. It is a rather extravagant organisation. It has cost £1·7 million this year simply to run and administer. It has pleasant offices in Grosvenor Gardens. They are all beautifully done up. The Board cost £1·4 million in the first year, and £1·7 million in the second year. What will it cost next year? We should be neglectful if we did not look at what it was doing.
We have discussed what it has been trying to do for British Leyland. Earlier I tried to ask the Secretary of State what the Board had done for Rolls-Royce, but he did not answer my question. He simply said that those concerned all got on rather well together. The NEB gave the Rolls-Royce board advice and gave nice lunches and that sort of thing. It probably even gave dinners in the evening. The NEB then came along and discussed matters with the Government, and there was a marvellous three-tier system. It is the most wonderful jobs-for-the-boys outfit that one has ever seen in all one's life. It is all quite extraordinary. The right hon. Gentleman did not actually say what the NEB had done for Rolls-Royce.
I thought the right hon. Gentleman might have said that the NEB got the order for the RB211 engine for Pan Am, but he would not. Apparently, it was Sir Kenneth Keith who got that order. If Sir Kenneth Keith is able to get orders of that sort with his assistants, why do we want the NEB? Why do we need Grosvenor—Gardens—this wonderful

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address? What has the NEB done? What has it done for British Leyland as the other star in this debate?
If one looks at the number of reports from the NEB on Leyland over the last few months to try to see what it has done to help British Leyland, one sees that the Board has done nothing. I believe that the wrong decision for British Leyland would probably have been taken without the NEB and the right decisions would have been taken, if they are the right decisions now, and exactly the same applies to Rolls-Royce. The intervention of this extravagant bureaucratic layer between the company and the Government is absolutely unnecessary.
One has to see what else the NEB has been doing, because it cannot exist on giving lunches and dinners to Rolls-Royce and British Leyland. It has done one or two other things, and the Secretary of State did at least tell us that. It has gone into 39 different companies. Its productivity is not bad. If British Leyland's productivity was as good as that of the NEB in nationalising various things, British Leyland would not be doing badly. On 3rd April, in the trailer to the NEB's report, the Board reported that it was in 33 companies. Now it is apparently in 39 companies. I think that a better name for it would be the Nationalising Enterprise Board, rather than the National Enterprise Board, because that is just what it has been doing.
Let us look at the Barrow Hepburn deal, a very strange one. It was mentioned by the hon. Member for Colne Valley (Mr. Wainwright), and I shall come back to it in a moment. The Board took over the tanning interests of the Barrow Hepburn group, all of which were losing money and which were a total disaster area. The Board paid about £11 million into Barrow Hepburn for taking over these interests, many of which should have been closed down.
When the hon. Gentleman says that these difficult decisions could be taken—I think he said this—only within a public sector corporation, I find that impossible to understand, because what he is saying, if one reduces it ad absurdum, is that if there are too many corner sweetshops in a certain part of London not making money the situation can be
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improved only if the NEB or some other body buys up two or three sweetshops and pays them to go into retirement. It cannot be done by the market, according to the hon. Member for Colne Valley This is the most ludicrous situation and he should know—and if he does not I shall tell him now—that within the tanning industry there was already a natural contraction of excess capacity.
What happened was that the NEB kept open many of these tanneries for longer than they should have been—for about a year—and even now this one has been forced to close down. But in doing this the Board got into some pretty odd company, because if we are to analyse what the NEB has been up to over these years I think we should see what happened with Barrow Hepburn.
There was a quote a few weeks ago of serious irregularities of the Barrow Hepburn group among some of its subsidiaries. The Daily Express said on 23rd March:
"One result of the discovery is that the proposed dividend 2·299p a share is being deferred. The news is sufficient to lop 12p off the Barrow Hepburn shares."
The writer says:
"This is an embarrassing blow to the NEB's investment reputation. Only a month ago it bought a million shares in Barrow and Hepburn at 45p each."
So there is already a paper loss of £110,000 and a possible loss of dividends totalling another £23,000. That is one of the commanding heights to which the NEB has been reaching out.
Let us look at the United Medical Enterprises. This organisation was backed by two City banks, which were not prepared, probably rightly, to put any more money into it. The NEB did so. Strangely enough, the United Medical Enterprises owns the British Nursing Association, the biggest supplier of nurses in the country, and a very successful organisation. It is an extraordinary thing for the NEB to go into. We do not know quite what will happen to it.
The NEB went into Twaites and Reed, a massive company at St. Leonard's on Sea with 12 employees altogether. That was highly unsuccessful. It lost £300,000 when it was taken over, and is still, I believe, losing large sums of money. Nobody else in the clock-making business wanted this company. Why

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should the NEB be landed with it? It seemed quite extraordinary.
Fairey Marine, building £80,000 gin palaces in Cowes and Fairey Marine marinas and so on, was taken oyer. That was quite unnecessary, because there was a perfectly good offer for the Fairey group through the receiver from Trafalgar House, but the NEB, through ambition or something else, came along and gobbled it up over the head of Trafalgar House.
We had another loss—Hivent Ltd., in Washington New Town on the Tyne and Wear, into which the NEB put £54,000 some few weeks ago. That company has already gone bust. This is the sort of thing that the NEB is doing and it is costing £7 million a year.
I want always to be fair. Having been moderately critical of the NEB's activities so far, let me say this in its defence. There is a theory called the gap theory, which sounds like an army manoeuvre from the First World War. The investment gap theory is that only the NEB can go into certain areas because the market will not respond to them. My right hon. Friend the Member for Leeds, North-East referred to this in his speech. However, there is no hard evidence. We cannot prove that there is no gap occasionally in the investment scene. But equally I do not believe that the NEB has succeeded in proving that there is anything much of a gap.
I rest on two pieces of evidence. One is that the Treasury in its evidence to the Wilson Committee talked about this gap theory and the fact that there were certain areas of investment in which the City and financial institutions were not playing their proper part, but came to no conclusion and left it to the NEB. The big five joint stock banks also said that there was no real evidence.
There is a plurality of financial institutions throughout the country from the banks of the FFI and all sorts of other bodies with plenty of money for successful ventures, for ventures that are likely to go well.
I believe that the parliamentary control of the NEB is highly unsatisfactory. During 1977, while the NEB had been spending all this money, Parliament, through the PAC, spent six hours studying the NEB. I do not blame the Public
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Accounts Committee because it has the whole area of public expenditure to look at. Only six hours was spent during the whole of that year in studying the NEB.
I believe that until we come into power again, while the NEB is still in being, there is a strong case for having a special Sub-Committee of the PAC that can permanently monitor and keep an eye on what the NEB is doing.
I would like to raise, too, the question why the Comptroller and Auditor General is not allowed in to look at the NEB's books. He goes into every other area, but by some strange quirk he does not go into this. The PAC has commented on this. I hope that something can be done about it.
Mr. LesHuckfield: Talking about parliamentary accountability, may I remind the hon. Gentleman of the occasion when we had a whole day's debate in this place about the NEB when the hon. Gentleman failed to turn up? May I also press him to the logical conclusion of what he is saying? He has been going through all the industries and the things in which he thinks the NEB need not be involved. Is he saying that he would like to do away with the NEB?
Mr. Grylls: The hon. Gentleman must not anticipate me, but I shall not keep him hanging on the end of a string for more than a few minutes longer. I shall be as quick as I can. I intend to deal with that perfectly openly.
The Minister knows that this one-day debate was arranged at very short notice on a Friday. I had commitments in my own constituency on that Friday, but—and this was commented on at the time—having debates in Private Members' time on a Friday morning or afternoon is not the way to deal with massive sums of public expenditure. The Minister knows that perfectly well. It was not a very successful intervention.
I hope that when the Minister of State winds up the debate he will tell us what is to happen to the dividend on the public dividend capital of £120 million sunk into the NEB at present. When will there be a dividend on that? It is a very strange body that does not pay a dividend on the money in it already and then asks for another £300 million of taxpayers' money and does not even apologise for

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not paying a dividend or explain why. It certainly does not say whether it will pay a dividend in future. I do not know whether the Minister of State has any information for us. I hope that he will be able to include that in his speech.
The Liberal Party's role in this matter is very odd. Only the other day the Liberal Party was doing a review of the first year of the Lib-Lab pact and said that during this year one of the benefits that it had brought was that there had been no more nationalisation. It said that 12 months had passed without any nationalisation. No nationalisation my foot!
Twenty-two companies—nearly two a month—were taken into the NEB during the last year. Now it is asking for another £300 million. How many more companies will it take in during 1978? What has the Liberal Party been doing about it?
I warned the hon. Member for Colne Valley that I would say this, but I believe he has had to go. I believe that the Liberal Party should say why in a pusillanimous way it is allowing this creeping nationalisation through the NEB to go on week after week when nobody appears to notice it.
I can only assume that the Liberals agree with the Prime Minister when he says that nationalisation is never off the agenda. It certainly appears to be very firmly on the agenda at present. Let me make my position quite clear. I want nothing more to do with it, nor does the taxpayer. The taxpayer understands the problems of Leyland and of Rolls-Royce. I do not believe that the hard-pressed taxpayers could understand, if they knew—as perhaps they will know as a result of this debate—why their money is being frittered away in many useless companies, or if the companies are not useless they are companies which could well remain within the private sector, which shows no need for the NEB to come along.
I believe that we were quite right, as the Opposition, to say in "The Right Approach" that we would abolish the NEB. I believe that we were quite right to say in the campaign guide that we would abolish the NEB and stop it going on its expensive shopping spree around British industry. The NEB is an instrument of nationalisation. When the Conservative
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Party comes into power. I believe that it will be stopped in its tracks.
As for the NEB's self-appointed role of looking after a number of lame ducks, if one examines which we do not have time to do in such a debate—what is done for any of these lame ducks in the National Enterprise Board's stable we see that it has totally failed even to justify that role Therefore, it will be absolutely right for one of the first actions of a Conservative Government to be to tell the NEB to stop spending money in this way, to take over no more companies, and as soon as it can to return those companies that it holds today to the market whence they came. The remaining difficult ones may have to remain for a time within the Department of Industry, operating under the constraints of the 1972 Conservative Industry Act, which gave any Government all the power they needed to do a rescue operation if in the last resort that had to be.
There is no need for this expensive body. I hope that as soon as possible it will be put to sleep.
8.29 p.m.
Mr. Ian Lloyd: I think that it is a long time since the House heard any comments of that great veteran President of the United States, President Truman, who I think will go down in history if only for one saying—"The buck stops here." I could not help thinking, as we debate the subject of British Leyland, that wherever the buck was stopping it was not here. In fact, it was moving around almost at the speed of one of those little solid black objects that ice hockey players use. It is moving so fast that we can hardly define where the responsibility stops.
We have heard a great deal this evening about confidence. The word has been shifted around the House. I think that the hon. Member for Coventry, North-West (Mr. Robinson) criticised my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) for showing insufficient confidence in British Leyland. The National Enterprise Board has a remarkable statement on page 7 of its report:
"Both British Leyland and the NEB believe that lack of confidence, engendered to a substantial measure by the public attention to the company's problems, has been a very large

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factor in the recent decline. The company's weaknesses have been exaggerated and its strengths largely ignored."
That seems to me a rather strange statement, because if anything it is passing the buck of confidence to the public and laying British Leyland's position to a substantial degree on lack of public confidence.
But is that really the case? Is it the public confidence that has caused the present situation, or is the lack of public confidence a consequence of the complex state of affairs that the public now understand by the term "British Leyland"? Is it in fact the result of a lack of public confidence in the general management, the manning procedures, the productivity, the situation which has developed at Speke, which most people in my constituency, whenever we have discussed it, have found astonishing? Is not this lack of confidence a direct result of decisions taken not only by the board of British Leyland but by the British Leyland work force—from the board right down to the bottom of the worker hierarchy?
The report said that some disputes in the company had been outside the company's control and some of them within the company's control. I wonder what precisely the NEB meant by disputes outside the company's control. It is a vast company, employing tens of thousands of people. The astonishing figures for strike performance last year are as follows: 14 million man-hours were lost in the whole of 1977; 192,000 vehicles were lost in the same period.
If we do some simple sums, taking with overheads the average engineering man-hour at £5 an hour, we find that we are talking of vast sums of money—about £70 million. The cheapest vehicle that British Leyland makes is the Mini, at £2,000. A total of 192,000 vehicles at that lowest figure means that one is talking about vast sums—hundreds of millions of pounds. Yet the report asks us to blame the British public for a lack of confidence in British Leyland. It seems to me that it has stood the whole matter on its head. If they have no confidence in this organisation, the British public certainty had a great deal of evidence and many unfortunate situations on which to base that lack of confidence.
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One Labour Member suggested that we should turn to the example of France and Renault. I have heard this argument put elsewhere, not least in British Leyland. We were told that because Renault now employs 70,000 people more and has over a period of about 25 years produced £44 million of profit, this is an answer and that the French Government's attitude to Renault is an example that should be followed by the British Government in relation to British Leyland.
I do not believe that that follows at all. The answer for France and Britain is exactly the same. It is to be found in the form of a question: what return would the nation have achieved from an investment of these sums in all the alternative possibilities of capital investment across the whole spectrum of industrial investment in France or the United Kingdom? The answer is that we do not know, simply because those questions are very seldom asked, and one is always asked to assume that the investment takes place and there will therefore be beneficial consequences, or it does not and there will be disaster.
The hon. Gentleman turned then to the subject of labour relations and suggested that we should not endeavour to achieve beneficial results in British Leyland by—I think that this was his phrase—threats and whip cracking. But how can British Leyland be extracted from the situation in which it finds itself? The NEB report has been modestly frank on the question of the world market. In my view, it certainly cannot be extracted by threats and whip cracking. It can be extracted only by a general and voluntary understanding throughout the organisation of the nature of the challenge confronting it.
One of the surprising features of the NEB document is that, although it gives the productivity increases in vehicles per man-hour which the National Enterprise Board hopes British Leyland will achieve, nowhere does it set out the appalling comparisons between productivity per man-hour in British Leyland and in Ford for instance, to go no further than the confines of the United Kingdom. Certainly, when one crosses the Channel or turns to what is happening in the United States or Japan, one sees productivity figures which leave no room either for

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threats or whip cracking or for any overconfidence on the part of Mr. Michael Edwardes—who, I am sure, does not have it—or anyone else throughout the British Leyland work force.
It was my good fortune some months ago to visit the Datsun plant in Tokyo, and I saw there the completely automated production line, using Kawasaki units, with completely automated welding units operated by microprocessors, and hardly a man in sight. When I asked the individual who was showing us round whether he and his colleagues believed that they achieved the same productivity levels as were achieved in Detroit, he laughed and said "We are well beyond the productivity levels of Detroit." Moreover, not only is Datsun beyond those levels but it is increasing its rate of productivity at about 10 per cent. or 15 per cent. per annum.
One hon. Member on the Government Benches said earlier that we were in a moving situation. He was perfectly right. But why have the Japanese, with the rising value of their yen, nevertheless managed to continue to increase their balance of trade positively and managed to continue to export? The answer is that the productivity represented by the yen, however much more expensive it may be to buy, continues to rise. I believe that the same situation prevails in the West German motor car industry.
That is what our employees, our managers, our shop stewards and our trade union leaders are up against. When will they realise it?
I turn now to the question of monitoring. Naturally, the House is reluctant, if I may so put it, to breathe down Mr. Edwardes' neck. We feel that that would be a mistake, and we go back to all the philosophy which lay behind the original nationalisation Acts, when we said that once we had nationalised an industry we should leave it to management to get on with the job. So we ask ourselves these questions. Who monitors this organisation? Who monitors British Leyland? Why do we monitor? How often do we monitor?
I believe that if British Leyland is to join the vast non-monitored sector of public capital investment in this country, we shall be heading for a disaster. Private
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capital inevitably involves—it must involve—private monitoring, but that is no guarantee of its success. Public capital must involve public monitoring, and that is no guarantee of its success. But if there is no monitoring in either case, it seems to me we are entering a strange situation. At least for private capital the individual who chooses not to monitor is risking only his own resources, but in the case of public capital it is not open to the individuals who make the resources available to decide to monitor or not to monitor. We have to do it for them.
In this situation, in my view, there is no real equity capital but there is a grey sector which lies unhappily and inefficiently between the two. Monitoring is a function of scale. It is probably not necessary for £1,000, and it may not be necessary in certain cases even for £100,000, but when one is talking about £1,000 million of public money, realising that that money is found virtually entirely by the taxpayer or, if not by the taxpayer, it is borrowed on his behalf and has to be financed by him, it seems to me that for any hon. Member to argue that we should not monitor—and continuously monitor—the performance of British Leyland is to argue on a very strange basis. The public investor can do nothing about it.
Why do I argue thus? What are the sums? We are talking about £1,000 million of investors' money. There are 20 million taxpayers in this country. That is £50 per taxpayer if every taxpayer makes his contribution. If we were to speak simply of taxpayers with spare resources—the report of the Inland Revenue would give us the sort of figure which we should choose—we are talking about 2 million taxpayers, so that is £500 per taxpayer with investable resources. If only half of those were to make a different judgment and say that British Leyland was not for them, we should be talking about £1,000 per taxpayer able and willing to invest in British Leyland.
That is for the total sum. If we are talking only about the sum being asked for next year, the £450 million, we are talking about £22·50 per taxpayer, or £450 per taxpayer able and willing to make such an investment. That does not permit of a non-monitoring situation. It does not permit of the NEB talking, as it has done here, of the desirability of letting

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British Leyland get on with the job and then looking at it once a year to see what has happened before deciding whether to give more money and to come back to Parliament.
No major public company in the private sector could possibly expect to get away with a degree of non-surveillance similar to that which the NEB now asks for British Leyland. One has only to cross the Atlantic to see the situation which exists in the United States where major public companies such as du Pont and General Motors and all the major motor car companies are reviewed quarterly and publish quarterly profit and loss accounts, which are very closely monitored by the whole of the investing system in the United States and elsewhere. I see no reason whatsoever why the imposition of such a requirement on British Leyland should in any way inhibit its capacity to recover and to equal the performance which it has to equal, that is, of its major competitors.
I now refer to the question of equity capital. This is one of the major misdescriptions of the year, because nothing that is being supplied to British Leyland by the NEB is equity capital. Equity capital involves a voluntary decision by the individual or the institution to make funds available. There is nothing voluntary about this. It is a compulsory levy on the taxpayer. We are told, therefore, that the British Leyland board must have—page 12 of the report—"an assured level of funds". It must be assured, and if it has that assured level, then, of course, it can succeed. Every firm in the world, given an assured level of capital on this sort of basis, could succeed. There is no reason why it should not. It is very nice to have an assured level of funds virtually guaranteeing thousands of pounds of capital for investment or for any other purpose, and the purpose is comparatively ill-defined in the report.
Let us, then, ask these questions. Because the market could not obtain the type of guarantee which it would require before it would begin to contemplate putting forward £100 million, never mind £1,000 million, it has not come forward. What are these guarantees? They are that the funds would be invested in productive equipment. There is very little to suggest, other than statements in the report, that it is to be invested in productive equipment.
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We are simply given global sums. We could ask for a guarantee that the rewards which British Leyland employees award themselves—and we have heard a great deal about this in recent months—should bear some intelligent relationship to the general overall economics of the company's performance.
Whatever the company did in Speke it bore no such relationship to the position in which that unit of British Leyland found itself. When the people there discovered that the car was not selling and that there was a waiting list for the vehicle in some places where its reputation still survived, did they say "Let us get down to it and make sure that the production line is reformed and that the vehicle is meeting the standards expected of a sports car"? No, they went on strike for two months, and on this basis the public is supposed to have confidence in British Leyland. I find it absolutely astonishing.
We should ask for the guarantee that there should be some return paid on the capital invested. I do not think that there is any guarantee in that document, or in any of the situations which we have been asked to discuss this evening, that there will be a return on the capital of any kind.
I ask the Minister: would the staff and directors of the NEB invest their personal funds in this new, revised British Leyland? Would the Secretary of State put up £10,000 of his own money in British Leyland? Would the directors of British Leyland put up some of their own personal funds in the new British Leyland? Would members of the Tribune group put some of their own money into British Leyland? Would trade union pension funds be prepared to put their money into British Leyland? The answer in every case is clearly "No". Yet the Government have the effrontery, despite all that, to say on behalf of the great British pub-tic. "We are going to put £1,000 million of your money into British Leyland—heigh-ho", when we know that by every test of the market, other than employment maintenance, it is a false prospectus.
If that is the test of confidence, I find it astonishing that we should be asked to make an investment on the basis of such a statement. Page 5 of the NEB report says:
"It is the hope of the management that the new organisation structure and the creation of

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new management teams will also contribute positively".
That is the hope. But no firm would go to the market on the basis of such a hope. On page 8 we are told in the context of the productivity crisis—and crisis it is throughout our motor car industry—that British Leyland
"has … adopted a cautious approach to the timing any extent of productivity improvements".
At this time, when the Japanese car makers are virtually striding through world markets and knocking us off one market after the other, British Leyland adopts a cautious approach. On this basis we are asked to vote £1,000 million and are told that the board of British Leyland understands the situation and that the NEB
"is pleased to see that it is giving this aspect of its performance a very great deal of attention".
How nice of the NEB.
I would not put £1 of my own money, let alone £10,000 or my share of the £1,000 million of public money, into British Leyland on the basis of such a prospectus. But we are told on pages 10 and 11, in an astonishing statement, that
"Cash provision in the form of equity is sought by the British Leyland Board in order to restore the strength of the balance sheet."
How extraordinary. The concept of risk-free capital is transformed to enable the British Leyland board to borrow from the market what it could not get from equity. In another astonishing statement in the report, we are told that the NEB
"will want to receive a commercial return on its major investment in the company."
But we are given no indication of what that return is likely to be in any positive or reassuring way.
At the end of this analysis, the question, which I have not liked to ask the British Leyland board, as it offers its stock option scheme, is whether British Leyland itself would take it up, if ever. Would the workers and managers of British Leyland themselves, with their own money, back an arrangement of this kind? The answer is "No". Surely Parliament and the public are entitled to know which segments of the NEB are succeeding and which segments are failing. The market would close down the
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failures. The Government will not close them down.
When the aircraft industry on the West Coast of the United States went through a critical period it was apparent that the Boeing aeroplane company was able to reduce its employment force by about 30,000 people in a short time. Some hon. Members would argue that that was a terrible thing. They would argue that it should not be allowed to happen in any circumstances. But the result was that the Boeing aeroplane company survived and recovered and is today without a doubt the world's strongest aircraft company, supplying about 93 per cent. of the civil airlines of the world.
Had there been an NEB in California at that time, what would have happened? Vast sums of public money would doubtless have been poured into Boeing and employment would have been kept at a very much higher level. All the incentives to reduce its work force and streamline its operations in order to place itself in a position from which it could recover would not have worked.
I come to the key question. Are we to improve the mobility of resources in the United Kingdom or are we not? If we go about it in this way, the answer is that we have no intention of improving the mobility of resources in the United Kingdom. If we fail to improve the mobility of industrial and economic resources in the United Kingdom, nothing that the Government can do will save us. As I see it, that is the essential argument which we have to consider tonight when we vote.
I may be asked for a specific example in the motor car industry where resources should now be invested. If one reads a small fraction of the energy papers that have been made available to hon. Members, the answer would be probably the development of electric propulsion vehicles. How much are we spending in that regard? Is it a matter of millions of pounds, or tens of thousands of pounds? It is certainly under £10 million. If we are talking in the order of putting up public money of £3 million or £4 million, I would suggest that in the energy situation in which we find ourselves this is the sort of area into which new investment should be going.
My conclusion is that no Government of either party can save British Leyland.

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No Government of either party, by coming to the taxpayer for hundreds of millions of pounds, can save British Leyland for more than two or three years at the very outside. British Leyland's salvation depends on its own employees. The House of Commons and the taxpayers must be given much more convincing and persuasive evidence that the employees of British Leyland realise that their destiny lies in their own hands.
I believe that, regrettably, the evidence which has reached the taxpayer over the last two or three years, if not longer, going right back to the end of the war, is that this realisation just does not exist. If there is a challenge to the management of British Leyland it is to bring that realisation directly and wholly home to the employees of British Leyland. Then the firm might survive. Then there might be a recovery.
If that happens, I would suggest in all humility that the amount of public money involved would be nowhere near £1,000 million. It would be seed corn capital which would be required for much more limited areas and for a much more limited time. Those concerned, who had sought, obtained and made effective their own recovery, would cheerfully leave the situation at where the House of Commons, Ministers, Shadow Ministers, the National Enterprise Board and other organisations of that kind would be constantly breathing down their necks. The remedy for that deplorable state of affairs lies entirely in their own hands.
8.55 p.m.
Mr. Ioan Evans: Opening the debate my right hon. Friend the Secretary of State said that in its vote today the House would be directly influencing the livelihood of hundreds of thousands of the electorate and their families and that the total employment in companies in which the National Enterprise Board had a stake was more than 330,000. Listening to Opposition Members addressing the House, one would not think that that was the case.
In British Leyland we have a company which has been taken over and supported by the NEB, and of all the actions that this Goveriment have taken one of the most important has been the setting up of the NEB.
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It is regrettable that the Opposition threaten the existence of the NEB. It is true that they have not been universal in their condemnation of it, because there seems to be some division about it. However, we know from "The Right Approach" that it is their intention to wind up the NEB, and it is important that the electorate should realise that that is the intention of the Conservative Party, bearing in mind especially that there are 13 principal subsidiaries, 17 associated companies and 330,000 people employed in British Leyland.
For a long time in this country we have experienced the problem of the failure of successive Governments to invest in manufacturing industry. When he was Prime Minister, the right hon. Member for Sidcup (Mr. Heath) spoke about the unacceptable face of capitalism. But, although he made appeal after appeal and although his Government made tax changes to try to attract investment into the private sector of industry, it was the Tory Government in their 13 years in office between 1951 and 1964 and again between 1970 and 1974 who failed to get investment. When they went into Opposition they became extremely doctrinaire, and we are told now that if ever they are returned to power they will embark upon a programme of denationalisation. However, when they have been in power they have not done so.
It must not be forgotten that the last Tory Government took Rolls-Royce into public ownership, with the support of the then Opposition. If market forces had been allowed to have their way the Rolls-Royce organisation—that tremendous name in British engineering—would have gone out of existence. Despite their dogma and doctrinaire theories, it was the Tory Government who took Rolls-Royce into public ownership, and of course their action has been justified. But if it had been a Labour Government who had taken over Rolls-Royce, the Conservatives would have been making the sort of speeches that they have made today about British Leyland.
The hon. Member for Havant and Waterloo (Mr. Lloyd) attacked British Leyland, despite its new management and despite a work force which is working well together. The motor agents are striving to persuade people in this country

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and elsewhere to buy British Leyland. We have all received a document from the Society of Motor Manufacturers and Traders showing the 10 top sellers in Britain today, and British cars occupy nine of the top 10 places. In the top five we see the Leyland Mini, the Morris Marina and the Austin Allegro.
Cannot we persuade the Opposition to put aside their doctrinaire theories and pay tribute to British Leyland? Whereas in January it had only 21 per cent, of the market in Britain, in February it achieved 31 per cent. That represented a 10 per cent, increase in one month. If only the Opposition would stop knocking the NEB and British Leyland, we might be able to get matters into a better perspective.
The need in the country is to get more investment into manufacturing industry, and I believe that the way to achieve that is through the NEB. That is the method we should adopt. The Opposition do not complain when Ministers say that £1,700 million has been given to private enterprise. That is public expenditure. If the Opposition deplore public expenditure going into the public sector, I cannot understand why they do not deplore it going into the private sector as well.
A large number of companies in the private sector are benefiting because of the Government's action. Are we then to say that we should not put public money into the public sector? Is the right hon. Member for Leeds, North-East (Sir K. Joseph) nodding in agreement? No, it seems that the right hon. Gentleman is shaking his head. At least the Opposition Front Bench is not with the Opposition Back Benchers. There is £1,000 million being given to the manufacturing sector of the public sector. That is fully justified. Equally, in the present economic circumstances it is fully justified for £1,700 million to go into the private sector. However, in the years ahead the Government must think about using the NEB to a greater extent. We must have planning agreements with the private sector.
Opposition Members talk about the money that is going into the NEB and control of it. The fact remains that there is far more public control of money going into the private sector. I
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hope that in future we shall not be talking only of channelling money into the NEB but channelling all the funds that go into the private sector.
The Conservative Party decided to maintain the name of Rolls-Royce. It put aside its doctrinal theories and took Rolls-Royce into public ownership. So, too, the Government have saved the names of Rover, Triumph, Austin, Jaguar and Morris. I believe that in the years ahead those names will play a major part in the export drive as well as supplying the home market.
I, too, believe that there are greater things to come from British Leyland. The company is exporting about £2½ million worth of its products every day. That is a major contribution to our national finances. It has rightly been said—the company has advertised the fact—that the benefit of British Leyland exports are equal to the benefits of North Sea oil. That should be said frequently in the Chamber. A great deal has been said about the benefits that we derive from North Sea oil, but the benefits from British Leyland exports are as great.
If the Conservative Front Bench is saying that if a Conservative Government were in power they would have allowed this major car-manufacturing industry to go out of business, it must remember that that is what would have happened to Rolls-Royce if the Conservative Government had not taken it over. Are Conservatives saying that they would have acted on their present theories and allowed British Leyland to go to the wall?
We must remember that there are about 7,000 companies supplying components to British Leyland. My right hon. Friend the Secretary of State talks about 330,000 employees in the NEB who would be affected, and mainly those in British Leyland. However, there are hundreds of thousands of employees outside British Leyland who would have been affected if the company had been allowed to go out of existence. My right hon. Friend is modest when he says that there are 90 Members of Parliament directly affected by the NEB. Surely there are many more hon. Members who are so affected. It is probable, for example, that I am not in the list of 90, but I would be affected if British Leyland were allowed to collapse.
Mr. Bruce George: As one of the 90, I reiterate that if British Leyland were allowed to collapse, Walsall would be decimated industrially. That is only one of the many arguments against such an event being allowed to take place. I totally applaud the Government's efforts to maintain this vital and viable industry.
Mr. Evans: I absolutely agree. However, my hon. Friend knows my locality as well as I do, and I must disagree with him if he confines his remarks to Walsall. When we talk of British Leyland, there are some who think that only the Midlands are involved. In my constituency there is a company in the private sector named Helliwelds, a partner in Tube Investments. It supplies exhaust tubes to British Leyland. I visited the company when there were changes taking place at British Leyland. I was told that if British Leyland collapsed, a large section of the work force of that private company would collapse with it. The probability is that if that company did not supply components to British Leyland it would not be a viable proposition for it to supply components to Vauxhalls, Fords, Chryslers or other motor manufacturers. If British Leyland had collapsed, it would have gone out of business.
Another firm in the private sector in my constituency that is in a similar position is A. B. Electronics. It supplies locks and electrical equipment to the car industry. Dunlop, for instance, supplies the foam filling for the seats. There is Cambrian Castings. I could go on.
I think that the Government are acting rightly. I hope that they will stand firm and expose the divisive attitude taken by the Opposition on this matter. I am sure that, if they were in power, they would not be so stupid as they pretend to be in discussion in the House of Commons. They are being doctrinaire because they want to show to the Conservative Party outside the House that they stand for something different. But, just as they were prepared to put the national interest first and to take Rolls-Royce into public ownership, so, too, at the end of the day I am convinced that they will realise that the National Enterprise Board has a real part to play in getting investment into manufacturing industry and that in the years ahead British Leyland will play an important part in the export drive
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get this country out of its economic difficulties.
9.6 p.m.
Mr. Tim Renton: The hon. Member for Aberdare (Mr. Evans) trotted out the old saw about the failure of successive Governments to invest in manufacturing industry. How much better it would have been if he had talked about the failure of successive Governments to create the conditions in which investment in manufacturing industry can take place. The hon. Gentleman should look at West Germany, Japan and the United States to see the industrial investment which has taken place there over the last 20 years. It has been not because there have been National Enterprise Boards in those countries but because they have had low tax rates, the possibilities for companies to make large and growing profits, stable employment conditions and little changing intervention from Government. Those are the conditions which cause investment manufacturing industry to take place, not NEBs.
I should like to talk about the order relating to the NEB and to remind the House of what the chairman of the NEB said recently when giving oral evidence to the Wilson Committee. As reported in The Times of 15th March, he said that the National Enterprise Board was not clever enough to beat the whole of manufacturing industry.
I fear that the NEB, from its record over the last two years, is trying to do precisely that. We have heard during the course of the afternoon, not from the Secretary of State who was suspiciously quiet about specific investments made recently by the NEB, but from various hon. Members, that the NEB has in recent months gone into tanning, electronics, hydraulic tube and pipe bending, engineering and medical equipment. Recently it overbid Trafalgar for the purchase of the diversified Fairey Engineering Division. It appears to be setting itself up, despite these words from the chairman of the NEB, as a conglomerate without any industrial logic behind it whatsoever.
Every business man in recent years has learned that life in the business world is very complicated and that it is possible to make the right business or

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investment decisions only when those involved in taking such decisions have some practical experience of what they are to invest in or to manufacture. This need for practical experience is certainly true of politicians. It is because many of us do not have it that we are such bad judges of industry. It is also true of business men themselves. It is particularly true of the NEB, because it is inevitable that, in its position, it is not offered the best investments. The triple-A companies which want to raise more money do not go to the NEB for it. They can get that money from the clearing banks, the merchant banks or the Stock Exchange. There is a host of places to which they can go for money.
The formation of this muddled conglomerate which the NEB appears to be becoming is such that the companies which go to it for help are inevitably those described by the chairman as
"companies in the poverty trap."
Why are they in the poverty trap? It is because they have had a bad profit record. As a result of that bad profit record or failure to design good new products, good management has left them. They do not have strong management teams. Yet it is precisely these companies, drawn from an infinite range of activities, for which the NEB is now setting out to provide finance.
No one can say that the record of the NEB over the last two years has been successful. Hivent, one of the companies in which it invested, is already in liquidation. British Tanners was formed by the NEB. The NEB is being sued because the other tanning companies do not believe that it is possible for British Tanners to make a profit. In this they feel that the NEB is in contradiction to its statutory obligation to seek a reasonable financial return on its investments.
Cambridge Instruments, another investment which NEB inherited, has just reported an increased loss. The result is that in the abbreviated accounts that were made available last week we find that the subsidiaries of the NEB apart from its main investments lost £1·1 million in the last year and that its other associated companies lost £1·9 million. That is no great encouragement to the House when it is asked to provide another £300 million
1102
for the NEB for the purpose of making other investments of this kind.
I hope that the Minister of State will now answer the question of mine that he failed to answer at Question Time today. What is the investment policy of the NEB? How, out of that policy, does he see any chance of the NEB reaching an overall return on its investment in the years ahead of 15 per cent, to 20 per cent.? That is the target that the chairman of the NEB set himself. I believe that this is a Herculean task for the chairman. For the reasons that I have mentioned, because so many of the companies are in financial difficulties, and because they are so widely spread over many diverse sectors, I do not believe that the NEB has a hope in hell of achieving this target.
I do not believe that the cleverest merchant bank or the best clearing bank in the world could achieve the return that has been set by the NEB chairman. In those circumstances I have no doubt that when we are asked in years to come to provide more money for the NEB, should this Socialist Government by any disaster still be in power, we shall be told that the expected rate of return has been substantially reduced once again.
My hon. Friend the Member for Surrey, North-West (Mr. Grylls) mentioned the degree to which the NEB is accountable to Parliament. The Chairman of the Public Accounts Committee has already expressed concern at this and at the fact that the Comptroller and Auditor General cannot look at the books of either British Leyland or Rolls-Royce, which are two of NEB's main subsidiaries. A further £850 million is now being requested by British Leyland. Once all that money is in British Leyland, £1,200 million will have been advanced by the taxpayer to British Leyland. Yet the House will have only a marginal degree of control over British Leyland. The National Enterprise Board falls between several Select Committees at present. There is no clear decision about which Select Committee is responsible for surveillance of the NEB.
I declare an interest in this respect. I hope that the House will agree that the NEB should be added to the remit of the Select Committee on Nationalised Industries. It is not within that Select Committee's remit at present. In the light of

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the larger sums that will be given to it if the Government win the vote tonight, I am sure that it should be.
As my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) said, the preliminary figures submitted by the NEB last week were disgraceful. They were not the type of figures on which any private company would have dared to seek even £500,000. In those figures there are a number of discrepancies from the figures that were reported in the annual report and accounts last year. I hope that the Minister of State will enlighten the House on this matter. I shall mention just one of those discrepancies.
In the profit and loss account, which appears on the first page of the NEB figures, the NEB and its subsidiaries are reported to be earning 7·5 per cent, return on capital employed this year, compared with 9·6 per cent, return last year. Excluding British Leyland and Rolls-Royce, the figure for NEB and its subsidiaries, in place of 7·5 per cent., becomes 11·5 per cent. The comparison with last year is even then better, because we are told that last year the figure was only 7·3 per cent. On the last figure, therefore, a 7·3 per cent, return has risen to 11·5 per cent. The obvious conclusion is that the NEB is doing rather well.
However, when one looks back at the NEB's report and accounts of last year, one sees on page 20 that the return on capital employed last year is very different. According to these figures, the 7·3 per cent, is actually 14·7 per cent., and the 9·6 per cent, of NEB and all its subsidiaries was 11·8 per cent, last year. On the first one of these I mentioned, the figure now quoted for 1976 is half the figure quoted in the NEB's annual report and accounts. The only explanation that there can be is that the NEB has decided to change the basis of its accounting. That is not generally considered a very prudent practice. If the change has taken place, at least the Government should have made it abundantly plain to us in the preliminary accounts that were made available last week.
In summary, I have no doubt that the Secretary of State has sought to throw dust in the eyes of the House of Commons. By concentrating upon British Leyland and technically linking the British Leyland motion with the order increasing
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the capital available to the NEB, he has sought to avoid a full discussion of the role of the NEB, or to imply that if we voted against the extension of capital for the NEB, we should be voting against further funds for British Leyland.
My right hon. Friend the Member for Leeds, North-East made that ruse abundantly obvious. The £300 million on which we are asked to vote tonight is for the NEB's pursuit of its own empire building. There is nothing necessarily in that sum for Leyland. We have been told nothing about new jobs being created in companies in which the NEB has invested. No justification has been advanced to show that the NEB in its new investments is doing a job that could not be done better, with no addition to staff, by other providers of risk capital.
It is no coincidence, perhaps, that "NEB" spells "Ben" in reverse. When one looks at that other great creation of the Secretary of State for Energy, the British National Oil Corporation, one must inevitably agree with the gentleman from Chevron who said that there was nothing that the BNOC was doing for the oil industry of this country that could not have been done more cheaply and more quickly for the State without the BNOC. Exactly the same is true of the NEB. Like the other madcap schemes of the Secretary of State for Energy, the NEB will end up by costing the taxpayer a great deal of money without creating any new jobs in manufacturing industry.
9.19 p.m.
Mr. Stan Thorne: As Opposition Members have had 81 of the last 92 minutes in this debate and as the Opposition Front-Bench spokesman wishes to begin his speech at 20 minutes past nine and it is now 19 minutes past nine, it would obviously be beneficial if I said nothing at all.
9.19 p.m.
Mr. James Prior: I should hate the hon. Member for Preston, South (Mr. Thorne) to feel that I was trying to keep him out of the debate. Actually, the debate does not have to end at 10 o'clock. If the hon. Gentleman had wished to make a few comments, although the House would not want to be long delayed, I am certain that it would have been very ready to listen to him for a

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little while. Therefore, I am quite prepared to give way to the hon. Member now, if that is in order, for him to make a few comments.
Mr. Speaker: Order. Everything happens in this place. The hon. Member for Preston, South (Mr. Thorne) obviously does not want only a few minutes.
Mr. Prior: In view of that, Mr. Speaker, I shall continue with my speech.
We have had a much quieter debate than one might have expected from some of the remarks over the past few days. It is a pity that, on such an important matter as we have been discussing, more hon. Members have not been present.
When my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) was speaking, I sensed a certain disappointment on the Government Benches. They were hoping that he would provide them with some ammunition that they could use, as they have been trying desperately to use it in the last few weeks, in constituencies like Oxford and those in the West Midlands. My right hon. Friend supplied them with no ammunition of any sort. I could go further and say that I agreed with almost every word he spoke—which is almost a record for this Parliament. My right hon. Friend made a very good opening speech and the efforts by Labour Members to put words into his mouth were not successful.
My hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) summed up matters very well when he said that we were dealing not only with a great British industry but with British Leyland and that any company bearing the name "British" is of exceptional concern to all of us. With the implications for employment that this company has, the issue has a special importance for everyone in the House. Incidentally, I have seen no Minister from the Department of Employment in the Chamber all day. That is something which should be noted. It is because of the implications for employment that I have been asked to reply. Those implications concern not just British Leyland, not just those who might be dependent on it, but, according to them, the car component companies in Britain, too. They would be in a serious position if anything happened to British Leyland. So we
1106
have to have regard to the whole car industry, particularly the car component industry.
The hon. Member for Coventry, North-West (Mr. Robinson) made a passing reference to the Ryder plan when he said that we had been going down the wrong track for two and a half years. He was right, but that was the Ryder plan. We voted against the plan and against the Financial Resolution. Everything that has happened in the two and a half years since justifies our decision.
I have been worried during the debate that there is a feeling in the House that the new plan published by the National Enterprise Board and put forward by Mr. Michael Edwardes in some very able speeches means that all our problems are behind us. That would be a false sense of optimism. We should certainly view the future with some fears and worries, although we must give British Leyland all possible confidence.
We should not underestimate the many people who have in the past few years become thoroughly disillusioned with the motor industry. Constituents in my area and elsewhere ask, "Why should we work hard and do our stuff for our family and our country when some people are prepared to go on strike at the drop of a hat, when management perhaps is not all that it should be? We are asked to bail them out time after time." That is the attitude that a great number of people in Britain are adopting and have adopted. We should take that into account and should not be frightened of saying so in the House, although at the end of the day our views may be very different from that.
My right hon. Friend the Member for Worcester (Mr. Walker), in an excellent speech, stressed the importance of continuity. Continuity as between changes in Government and between what we say now and what we may have to say in a year or two years' time is vital if we are to give to management, unions and employees in this and many other industries the confidence which is necessary. Hon. Members on both sides must accept that, if we are to get the investment which is needed in British industry, we shall have to develop over the next few years a degree of continuity and bipartisanship on matters of industrial policy which we have not had up till now.

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That may be difficult to secure, but we must aim to secure it, because the lifetime of one Government—four or five years, however long it may be, with all the worries about when an election may take place—is not sufficiently long for an industry which must plan its investment much further ahead. Five years is the minimum time for investment to be approved by the board room and to take effect. In many industries, such as the coal industry, the period may be 10 or 15 years.
Mr. Ogden: Is the right hon. Gentleman saying that, if the Secretary of State and the management of British Leyland and the unions involved—either through the National Enterprise Board or without it—are able to decide upon an agreed programme of investment, and if that plan can be approved by the Opposition, they will guarantee the investment?
Mr. Prior: I hope to come to that later in my speech. If I have not answered the question by the time I sit down, I hope that the hon. Gentleman will rise again.
I believe that the tough approach of the newly constituted British Leyland board is an excellent augury for the future. I go so far as to congratulate the Secretary of State and the Minister of State on adopting so many of the good standards of private enterprise in selecting people to sit on their boards, in paying some regard to the selection of companies, and in the help which they are prepared to give to various industries.
I think that the right hon. Gentleman is doing a good job now in many respects. I hope that that will help him as much as the praise that the Opposition lavish on me sometimes helps me. Who would have thought three or four years ago that the Minister of State would be adopting this tough and realistic approach to the problems of private enterprise and State enterprise? Stories are leaked from the Department of Industry to the effect that, although the Secretary of State is tough, his toughness is nothing compared with that of the Minister of State who stands behind the Secretary of State to ensure that he takes the right decisions. I admire the Minister of State for it. Long may he continue to do so.
Mr. Edwardes has said that he regards the placing of further money in British Leyland as very much an act of faith.
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That is the basis on which the House must agree to the £150 million which it is being asked to vote tonight. I hope that this will be faith backed by solid progress, because it is the duty of the House to have regard all the time to the way in which taxpayers' money is spent.
My hon. Friend the Member for Birmingham, Stechford (Mr. MacKay) drew attention to the need for new models. My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) talked about the over-production of cars and the need for further European integration. To that can be added the fact that there will have to be new outlets for the traditional skills as perhaps the passenger car side becomes—or, perhaps, remains—less profitable as time passes.
My hon. Friend the Member for City of London and Westminster, South raised some ominous points in what I thought was an excellent speech. He, with his experience, pointed out the commercial embarrassment of trying to carry out a corporate plan in public, and that really the plan put forward by the NEB on the subject of British Leyland concealed more than it revealed. We in this House are asked to pass judgment blindly on facts that we cannot be permitted to see. It is asking a great deal of this House to be put in that sort of position.
My hon. Friend the Member for Havant and Waterloo (Mr. Lloyd) pointed out that public monitoring is unsatisfactory, but what else can be done in these circumstances? He asked for quarterly accounting reports, and I believe that in this situation such reports would be entirely justified.
Having listened to my hon. Friend the Member for City of London and Westminster, South, and having heard a good many views outside the House, I think that we have to look at the position very soberly indeed. We have supported British Leyland. We shall do so tonight, and let there be no doubt about our support. It is not blind, unswerving support, but it is support of management and the labour force to give them the confidence that they need to get on with the job. My right hon. Friend the Member for Worcester pointed out that we shall not get good management unless we can show some continuity, and that continuity must be forthcoming if the management is to be recruited.

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The same applies for distributors and customers overseas. They have to know that the change of Government that they and all of us expect will not lead to a change in British Leyland's future, provided that British Leyland achieves the targets that it has set itself and that we in this House and the National Enterprise Board approve. I think that it is immensely important for the country and for people in export markets to realise that there will be continuity and a future for British Leyland that goes beyond the lifetime of this Government. It is of some significance that the real question that is being asked is not what the present Government are doing about British Leyland but what the next Government will do about the company.
What has to be done if this confidence is to be provided? First, we have to get productivity up. But productivity in itself is not enough, because it will be no use producing more cars of a type, quality and styling that we cannot sell. Therefore, we have to get the investment into the new models, and we have to make certain that that investment is used efficiently.
The great difference between this country and almost any other country is that in recent years we have simply not kept our production lines going. I should like to quote from a note that I was sent on British Leyland. It says:
"Productivity needs to be substantially increased. A report prepared by a sub-committee of the Cars Council appears to suggest that even after making allowance for different levels of investment productivity compares badly with British Leyland's European competitors (productivity of between 45 per cent, to 65 per cent, of European levels)."
We all know that European levels come nowhere near Japanese levels, let alone what the South Koreans and other countries will do in the next few years. The great difference, as I see it, has been the inability over the past few years to keep production lines running the whole time. I might return to that in a minute.
Having dealt with productivity and investment, which I think are the keys to the future, I come to the whole problem of industrial relations. Whether we blame unions or management, whomever we blame, the outcome of industrial relations at British Leyland over the past few years has been absolutely shocking. I would
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say, particularly to Labour Members and particularly to the hon. Member for Liverpool, Garston (Mr. Loyden) that I believe that hon. Members have a part to play in bringing about an improvement in industrial relations. That is particularly true perhaps on Merseyside. I believe that the remarks of the hon. Member for Garston, however strongly he may feel about the Speke No. 2 works, will do nothing to help industrial relations in British Leyland.
Although it is a tough and hard policy to close down any factory and reduce the number of people employed, we are now concerned about trying to save the jobs of literally hundreds of thousands of people who will lose jobs if we do not get this company right again.
Labour Members, with the influence that they can bring to bear on the problems of the trade unions and the problems of industrial relations, have a very important and responsible part to play. I do not believe that over the last few years they have done anything like enough to try to control the activities of the extremists in these factories, who are still and have always been a very small proportion of the total work force.
Mr. Loyden: Is the right hon. Gentleman aware that the point raised this afternoon was not only in relation to Leyland, although obviously that played a major part in my motivation, but concerned the whole effect that this decision has had, in my view, upon Merseyside? If at this stage workers on Merseyside are seeing a cut-back in capacity of one of the major car-producing industries in the country, followed by cut-backs in private enterprise, there ought to be little surprise when that is met with the hostility with which it is being met at the moment on Merseyside.
Mr. Prior: The hon. Gentleman has once more got his timing wrong. We have had a number of problems in the past few years on Merseyside, and the problem with Speke is a culmination of the troubles. It is no good one saying that because of the problem of Speke there may be more trouble in private enterprise. If Labour Members of Parliament in the Merseyside area had been more careful in trying to promote good industrial relations, I believe that there

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would be a much better position there now than there is.
Mr. Eric S. Heffer: Does the right hon. Gentleman know that he is, as usual, talking absolute and utter rubbish? [HON. MEMBERS: "Oh."] I shall repeat it. The right hon. Gentleman is talking absolute and utter rubbish. Over the years Labour Members from Merseyside have played a positive role in industrial relations on Merseyside. They have played a much more positive role than Conservative Members have ever played or will play, first, because the Conservatives know nothing about it. The right hon. Gentleman has talked about industrial relations on Merseyside. We have not had a strike, for example, in the docks for four years. We have hardly had a strike in 99 per cent, of industry on Merseyside. The right hon. Gentleman should be ashamed of the statement that he has made today.
Mr. Prior: That is the sort of reaction from the hon. Gentleman which is entirely predictable. If he had heard his hon. Friend the Member for Garston, he would have better understood what I meant. Perhaps he will read his hon. Friend's speech tomorrow morning and see exactly why I made those remarks. [An HON. MEMBER: "Will it be printed?"] He probably will not read it tomorrow morning, but I should like him to read it because I am as concerned as he is about the state of employment on Merseyside and I want to see it put right, but statements such as those made by his hon. Friend in the Chamber today do nothing whatever to help. There is a great deal which could be done to help, because there is some jolly good labour on Merseyside, as I know as well as the hon. Gentleman himself does.
I believe also that the more we can have a self-imposed silence on the industrial relations problems of British Leyland, the more likely will it be that we shall get some sense into the situation. I must say that my heart sank when I heard on the news on Friday night that the new pay scheme had been turned down. I do not believe that the new pay scheme is of vital consequence to the future productivity or production of British Leyland, but once more the impression was given by the media that this was a great defeat for management. I believe that
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that is a totally false impression to have given, and I greatly hope that the media will now leave British Leyland alone to get on with its job.
Mr. Heffer: That goes for the Opposition, too.
Mr. Prior: Also, if I may say so, I believe that what we have to seek is not a scheme which is piece-work and not a scheme which is measured day-work. I think that one trade union official said that we had to let the donkey see the carrot, and I believe that that is right if we are to have some success in British Leyland's industrial relations.
I endorse what was said by my right hon. Friend the Member for Worcester. I believe that a share ownership scheme for the employees of British Leyland could have a beneficial effect on their attitudes towards greater productivity.
I turn briefly to the Opposition attitude to the National Enterprise Board. I can put it quite simply. We believe that there is a case for some form of casualty clearing station—a board which deals with companies which for the time being run into trouble but which, once they are restored to health, should be restored again to private enterprise. None of us on this side believes that there is a place for a National Enterprise Board which is seeking to invest in profitable British industry.
That is amply borne out by some comments in the Financial Times on Friday in an article by Mr. Anthony Moreton who discussed the attitude of the National Enterprise Board. In that article he quoted some words of members of the NEB in the regions, and one of them was a comment by Mr. Gerald Connolly, the NEB's North-East director, to this effect:
"Many companies are not so much a pressure vessel for generating profits as a colander. We are looking for the former."
It is not the job of the National Enterprise Board, with taxpayers' money, to be seeking to invest in successful industry. Nor do I believe that at the moment there is any difficulty in finding private resources in place of the NEB's resources. In this connection I quote from the same article in the Financial Times the words of Mr. Arthur Ward of the NEB:
"This is why we have had such difficulty in finding a home for our resources."

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At present the National Enterprise Board has a home for its resources. That home is British Leyland and Rolls-Royce.
I understand the attitude and the zeal of those who work in the NEB to try to enlarge their scope of operations, and I have a high regard for Sir Leslie Murphy, who, I think, is doing a first-class job as a public servant trying to interpret the wishes of Parliament. All I am telling him is that the wishes of Parliament will be changed with regard to his role in the not too distant future.
It is not the duty of the National Enterprise Board to support every lame duck, as the hon. Member for Garston seemed to suggest it was. In so far as firms are profitable, they have no need for cash. In so far as they are not profitable, the NEB and the Government have to decide whether they should be supported. But each time cash is invested there is less for private enterprise, more has to be paid by the taxpayer, and, of course, there is less also for British Leyland, Rolls-Royce and the rest.
I come now to the specific order before us. We are asked to pass an order increasing the National Enterprise Board's cash by £300 million. We are being asked to do this about a month before the NEB publishes its annual report and without any proper prospectus. I cannot conceive of any other company in Britain being able to raise vast sums of money from the public, let alone the taxpayer, without any of the necessary information being given.
Why have we got this order tonight when everyone knows that the NEB's annual report will be published in about a month's time? There is no immediate need for cash. There is £64 million in the control of the NEB at the moment—that is enough at least for six months, even if it has to go on investing in other companies in the way that it is. If the NEB were confined, as we would wish to confine it, to what is necessary for British Leyland, or Rolls-Royce, or other firms that come into the category I have mentioned, there would be no need for that extra cash for some time to come.
Of course, the Government have sought to mix the two things up together. We know the reason for that. They have sought to brand us as being against British Leyland. That is the sole purpose
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of the Government's activities in putting these two orders together tonight. I have read reports in the Oxford and West Midlands newspapers, and it is clear that the Government hope that, by branding us as being against British Leyland, they will gain some short-term party political advantage. They are willing to damage British Leyland in the short term because they think that there is party political advantage in so doing. Yet at the same time they put their hands on their hearts and say that they want Leyland to have long-term confidence for the future. The Government cannot have it both ways. We shall seek to surb the activities of the NEB. The case for its use of public funds on profitable ventures has not been made out.
There is, however, at this moment a case, as I have said, for strongly supporting British Leyland. I have reiterated what my right hon. Friend said—that we believe that we have to give this confidence to British Leyland. We believe that it is right to do so. We have confidence in what Mr. Edwardes is seeking to do and we shall support British Leyland in every possible way. I hope that I shall not have to read in the Oxford or West Midlands newspapers more of the tripe that has been dished out in recent months by Labour Members.
In view of what has been said today, I urge my right hon, and hon. Friends to give a fair wind to British Leyland by not dividing the House. I also ask them to show their views of the activities of the National Enterprise Board by voting in the Lobby tonight against the motion relating to it.
9.49 p.m.
The Minister of State, Department of Industry (Mr. Gerald Kaufman): If it would not offend my hon. Friend the Member for Liverpool, Walton (Mr. Heifer), I would say that the right hon. Member for Lowestoft (Mr. Prior) has wound up the debate for the Conservative Opposition by showing us the acceptable face of Toryism. Certainly his speech was much different from those made by some of his hon. Friends earlier in the debate. That has been demonstrated in the way in which they have approached the problems of the National Enterprise Board.
The hon. Member for Surrey, North-West (Mr. Grylls), echoing "The Right

1115
Approach", said that the NEB should be abolished. But then, of course, the hon. Member for Surrey, North-West still carries the snow of Selsdon on his boots. The right hon. Member for Lowestoft now says that the role of the NEB should be confined to that of a casualty clearing station. But he has changed his attitude. It is not long ago that he said, in one of these many Labour papers which seem to proliferate up and down the country completely unknown to Labour Members of Parliament—it was, in fact, in the Birmingham Post—about the NEB:
"We are committed to holding the firms now owned by the NEB until any hope of recovery is abandoned. But what we must always look for is the prospect of long-term commercial success."
That does not sound to me very much like a casualty clearing station. We shall be coming fairly soon to the question of curing the patient.
The fact is that, little more than two years after it was set up, the NEB is now accepted as an indispensable feature of the industrial landscape. I suspect that even some Conservative Members believe that if the NEB did not exist it would be necessary to invent it. It is carrying out a varied range of activities. Some of them were envisaged when the Board was originally planned. What is significant is that others have been added as the Board has gathered momentum and discovered for itself an even wider role than we originally envisaged.
The NEB acts as an industrial consultant, examining problems and recommending solutions, even when it is not itself involved in either the problem or the solution. Both the private and public industry are increasingly coming to us in the Department and asking for the NEB's services in this way.
The NEB acts as an industrial doctor, seeking to cure the ills of companies—often small companies—which have management or cash problems but which have potential worth exploiting if these problems can be cured. Sometimes they cannot be cured, and critics of the Board in the debate today have seized on these. But it would be a very strange doctor who accepted patients only if they offered him a written guarantee that they would recover.
The Board has an increasingly important regional role. When the Industry Act 1975 was passing through this House, we
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promised that there would be NEB offices in the North-West and the North-East. Now, on its own initiative, the NEB has set up boards in these regions, with power to invest on their own initiative, and they have begun to use their power. The only criticisms of those activities that we have heard today have been from my hon. Friends in the North-West and the North-East, who want the boards to be even more active.
The Board has begun to act not only as an industrial broker but as the link partner in industrial consortia. Overseas Governments, looking to Britain for investment and specialised services, see the participation of the NEB as meaning stability and reliability. Large companies in Britain know it, and welcome and, indeed, seek out the NEB as a partner.
The most successful of these consortia has been the United Medical Services, where the NEB's partners are Commercial Union Assurance, London Trust and Orion Bank. They have just won a contract to provide services for two hospitals in Saudi Arabia at a value of £31 million.
The NEB is playing its part in the industrial strategy. It is intervening actively in a number of growth sectors. My right hon. Friend referred to its work in the computer and electronics sector.
More and more small businesses are looking to the NEB for advice and finance When the institutions turn their backs the NEB is ready to listen. Many of its most interesting and challenging investments have been in small businesses making unglamorous but useful products—spark erosion machinery, mixer valves, packaging equipment, corrugated paper machinery. Sometimes these companies are little known. Sometimes they have famous names. Without the intervention of the NEB, Twinlock products would have disappeared from the nation's offices.
The NEB investment which has particularly captured imaginations is in Sinclair Radionics. This company is enterprising and imaginative not only in its products but in their superb design. When the company got into difficulties, nobody would listen—except the NEB. Today, Sinclair Radionics, as an NEB subsidiary, is turning out 4,000 a month of its unique pocket television sets. They are a vogue on the United States market and the toys of Arab oil sheikhs. Sinclair Radionics

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is fighting back for Britain in an industrial field which larger and wealthier countries had abandoned to the Japanese without a fight. Without the NEB, Sinclair Radionics would have gone under. Today it is back in profit. That is a remarkable example of what Conservative Members decry as the dead hand of State intervention.
As it gathers momentum, the NEB is now more actively intervening to acquire larger and more important companies such as the Fairey group. I am not surprised that Opposition Members are very critical of these activities, but their ritual denunciations are more tan outweighed by the applause of the workers, who are more and more looking to the NEB as a guardian of their interests. I was bombarded with letters from workers at Fairey asking for the NEB to take it over. I know that I was not the only hon. Member, because several Tory hon. Members passed on such letters to me. I was pleased to be able to send them a favourable response.
But the biggest NEB job is still to act as a holding company for the major rescue cases. We have been absolutely impartial. When we came into office we stumbled on the doorstep over a foundling left to us by the Tory Government—the nationalised Rolls-Royce. We put it under the capable guardianship of the NEB, and last week Rolls-Royce was able to announce not only a profit but one of the most important orders that its outstanding technical qualities, its independent initiative and enterprise, have ever won—the Pan Am deal.
The right hon. Member for Leeds, North-East (Sir K. Joseph) has a nerve when he accuses us of punting with the taxpayers' money, when he was a member of the Cabinet that set the trend—Rolls-Royce, £87½ million just to buy the assets Upper Clyde Shipbuilders and Cammell Laird; Norton-Villiers-Triumph, nearly £5 million; ICL, with £40 million of taxpayers' money committed there—and often with minimal information to Parliament.
The right hon. Gentleman said that on the matter we are discussing today the Government should have put much more information before the House. Coming from him, that is astounding. The
1118
House was asked to nationalise Rolls-Royce with no notice whatever, other than the announcement of the company's failure and the Government's intentions, all made on the same day. As for information, the House was provided with none. We had to make do with an oral statement, and on that flimsy basis Parliament nationalised Rolls-Royce in 17 hours flat.
We had a chorus from the Opposition today, with one refrain: if money is needed for Leyland, sell off its Special Products division. [HON. MEMBERS: "Who said that?"] Every Conservative Member who spoke said it—the right hon. Member for Leeds. North-East, the hon. Members for Rushcliffe (Mr. Clarke) and Bromsgrove and Redditch (Mr. Miller)—and many other hon. Members.
The hon. Member for Birmingham, Stechford (Mr. MacKay) said that Special Products had nothing to do with vehicles and that was why it should be sold off. That is very interesting. Special Products includes Coventry Climax industrial trucks, Aveling Barford trucks. Aveling Marshall tractors and Barford forklift trucks. Even the Scorpion tank has a Jaguar engine. In any case, if Leyland were made to sell off its assets to fund investment, a forced sale would mean buyers snapping up valuable property at bargain prices, and that would be cheating the taxpayer.
This is a very strange time for the Tory Party to seek to deny further finance for the NEB, because, apart from Leyland, Rolls-Royce will make the biggest call on the NEB for funding in the coming months. It is typically irresponsible of the Tories to seek to trip up Rolls-Royce at its moment of triumph. I warn them that if they succeed tonight in voting down the order they will be sabotaging one of the nation's greatest assets.
Then there is Leyland itself. We have heard a great deal from the Tory Opposition today about Mr. Michael Edwardes. They tell us that he is a fine fellow, a sterling chap. We are told that he always says the most sensible things. But the true Tory line on Michael Edwardes is that he should be given every possible assistance short of actual help. The Tories are voting against the order tonight when Mr. Edwardes himself has made it clear that for the good of Leyland there should be no vote at all. This

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is what Mr. Edwardes told the Foreign Press Association last month:
"If Parliament will give us real support—I do not just mean Government support or a narrow vote or something; I mean real support from all political parties—I believe this will have a tremendous effect on morale and good will and relations between management and workforce.
Divisions can start at the level of Parliament.
Given that support, it would be entirely up to management and the workforce to ' get it right ', and there would be no excuses. Without that support, the finger could be pointed at Parliament ".
That is what Mr. Edwardes said.
The finger is pointed not at Parliament but at the reckless and irresponsible Tory Opposition. And where is the Scottish National Party tonight? It has boasted in Garscadden about how it cares about jobs. But when jobs in Albion Motors across the road from Garscadden are at stake the SNP does not come to the Chamber and does not speak up. The SNP boasts about it devotion to jobs. But there are 8,000 jobs at stake at Rolls-Royce Hillington in Kilbride and the Tories are seeking to vote them down tonight. Where have the Scottish Nationals been?
As for the Tories, not only are they disregarding Mr. Edwardes' words, they are disregarding their own words.
Mr. Prior: Does the Minister think that he is doing a service to the future confidence and ability of British Leyland to survive by saying words which he knows are totally untrue about the Tory Party's attitude?
Mr. Kaufman: The right hon. Gentleman was on record at the time of the Ladywood by-election as being in support of Leyland. He said:
"We are committed to finding a way to success for British Leyland".
As the hon. Member for Colne Valley (Mr. Wainwright) pointed out, that success depends on passing the order and the resolution as a package. That is what Mr. Edwardes has said. That is what the National Enterprise Board has said. The Tories say weasel words in favour of Leyland, yet they vote against it. They are even disregarding the words of their own leader. The right hon. Lady the Leader of the Opposition said this about British Leyland:
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"I do not think it is up to politicians to say what can be done. It is for the management to say how they are going about it. It is then up to the Government to decide how much money they want to put in."
That is what the Leader of the Opposition said when she was grubbing votes in Cowley, Oxford. But tonight her hon. Friends are voting against that and against the judgment of the NEB. They are voting against the judgment of Mr. Michael Edwardes. By voting against this order the Tories are voting against a future for Leyland just as surely as if they voted against the resolution. They will be driving Britain out of the volume car market.
Last week the right hon. Lady said:
"We must not settle for a future in which the nation of Lord Nuffield drives Japanese or German cars".
Yet the right hon. Lady and her Friends are voting against this order and are voting for the people only to have Japanese or German cars.
Mr. Norman Lamont: Will the Minister of State answer the point which has been made that the NEB has now got within its resources the £300 million that it needs for British Leyland and that it is quite unnecessary to have the financial limits extended, except that the Government wish to extend the marauding activities of the NEB?
Mr. Kaufman: The hon. Gentleman is quite wrong about that. If the NEB were to do what the hon. Gentleman has said, it would not be able to fund Rolls-Royce, which is the most important call upon it, together with its other continuing commitments.
Sir K. Joseph: But that was not the case put by the Secretary of State or the Government. The Government are seeking, under the guise of Leyland, to gain from the taxpayer £300 million without making any case for it. This is not a Leyland case at all.
Mr. Kaufman: The right hon. Gentleman is trying to get out of it because he knows what he is doing to Rolls-Royce and he is dodging it by attacking the NEB. We are voting for Leyland. We are voting for Rolls-Royce. We are voting for jobs. We shall beat the Conservative Opposition.
Question put:—
The House divided: Ayes 279, Noes 252.

Division No. 164]

AYES

[10.05 p.m.

Abse, Leo

Ewing, Harry (Stirling)

MacFarquhar, Roderick

Allaun, Frank

Faulds, Andrew

McGuire, Michael (Ince)

Anderson, Donald

Fernyhough, Rt Hon E.

MacKenzie, Rt Hon Gregor

Archer, Rt Hon Peter

Flannery, Martin

Mackintosh, John P.

Armstrong, Ernest

Fletcher, L. R. (Ilkeston)

Maclennan, Robert

Ashley, Jack

Fletcher, Ted (Darlington)

McMillan, Tom (Glasgow C)

Ashton, Joe

Foot, Rt Hon Michael

McNamara, Kevin

Atkins, Ronald (Preston N)

Ford, Ben

Madden, Max

Atkinson, Norman

Forrester, John

Magee, Bryan

Bain, Mrs Margaret

Fowler, Gerald (The Wrekin)

Mahon, Simon

Barnett, Guy (Greenwich)

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

Mallalieu, J. P. W.

Barnett, Rt Hon Joel (Heywood)

Freeson, Rt Hon Reginald

Marks, Kenneth

Bates, Alf

Freud, Clement

Marshall, Dr Edmund (Goole)

Bean, R. E.

Garrett, John (Norwich S)

Marshall, Jim (Leicester S)

Beith, A. J.

Garrett, W. E. (Wallsend)

Maynard, Miss Joan

Benn, Rt Hon Anthony Wedgwood

George, Bruce

Meacher, Michael

Bennett, Andrew (Stockport N)

Gilbert, Dr John

Mellish, Rt Hon Robert

Bidwell, Sydney

Ginsburg, David

Mendelson, John

Bishop, Rt Hon Edward

Golding, John

Mikardo, Ian

Blenkinsop, Arthur

Gould, Bryan

Millan, Rt Hon Bruce

Boardman, H.

Gourlay, Harry

Miller, Dr M. S. (E Kilbride)

Booth, Rt Hon Albert

Graham, Ted

Mitchell, Austin

Boothroyd, Miss Betty

Grant, George (Morpeth)

Molloy, William

Bottomley, Rt Hon Arthur

Grant, John (Islington C)

Moonman, Eric

Boyden, James (Bish Auck)

Grocott, Bruce

Morris, Alfred (Wythenshawe)

Bradley, Tom

Hardy, Peter

Morris, Charles R. (Openshaw)

Bray, Dr Jeremy

Harrison, Rt Hon Walter

Morris, Rt Hon J. (Aberavon)

Brown, Hugh D. (Provan)

Hart, Rt Hon Judith

Moyle, Roland

Brown, Robert C. (Newcastle W)

Hattersley, Rt Hon Roy

Mulley, Rt Hon Frederick

Buchan, Norman

Hayman, Mrs Helene

Murray, Rt Hon Ronald King

Buchanan, Richard

Healey, Rt Hon Denis

Newens, Stanley

Butler, Mrs Joyce (Wood Green)

Heffer, Eric S.

Noble, Mike

Callaghan, Rt Hon J. (Cardiff SE)

Hooley. Frank

Oakes, Gordon

Callaghan, Jim (Middleton & P)

Hooson, Emlyn

Ogden, Eric

Campbell, Ian

Horam, John

O'Halloran, Michael

Canavan, Dennis

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

Orbach, Maurice

Cant, R. B.

Howells, Geraint (Cardigan)

Orme, Rt Hon Stanley

Carmichael, Neil

Hoyle, Doug (Nelson)

Ovenden, John

Carter, Ray

Huckfield, Les

Padley, Walter

Carter-Jones, Lewis

Hughes, Rt Hon C. (Anglesey)

Palmer, Arthur

Cartwright, John

Hughes, Robert (Aberdeen N)

Park, George

Castle, Rt Hon Barbara

Hughes, Roy (Newport)

Parker, John

Clemitson, Ivor

Hunter, Adam

Parry, Robert

Cocks, Rt Hon Michael (Bristol S)

Irving, Rt Hon Sir A. (Edge Hill)

Pavitt, Laurie

Cohen, Stanley

Irving, Rt Hon S. (Dartford)

Pendry, Tom

Coleman, Donald

Jackson, Colin (Brighouse)

Penhaligon, David

Conlan, Bernard

Jackson, Miss Margaret (Lincoln)

Perry, Ernest

Corbett, Robin

Janner, Greville

Price, C. (Lewisham W)

Cowans, Harry

Jay, Rt Hon Douglas

Price, William (Rugby)

Cox, Thomas (Tooting)

Jeger, Mrs Lena

Radice, Giles

Craigen, Jim (Maryhill)

Jenkins, Hugh (Putney)

Rees, Rt Hon Merlyn (Leeds S)

Crawshaw, Richard

Johnson, James (Hull West)

Richardson, Miss Jo

Cronin, John

Johnson, Walter (Derby S)

Roberts, Albert (Normanton)

Crowther, Stan (Rotherham)

Jones, Alec (Rhondda)

Roberts, Gwilym (Cannock)

Cryer, Bob

Jones, Barry (East Flint)

Robinson, Geoffrey

Cunningham, Dr J. (Whiten)

Jones, Dan (Burnley)

Roderick, Caerwyn

Davidson, Arthur

Judd, Frank

Rodgers, George (Chorley)

Davies, Bryan (Enfield N)

Kaufman, Gerald

Roqers, Rt Hon William (Stockton)

Davies, Denzil (Llanelli)

Kelley, Richard

Rooker, J. W.

Davies, Ifor (Gower)

Kerr, Russell

Roper, John

Davis, Clinton (Hackney C)

Kilroy-Silk, Robert

Rose, Paul B.

Deakins, Eric

Kinnock, Neil

Ross, Stephen (Isle of Wight)

Dean, Joseph (Leeds West)

Lambie, David

Ross, Rt Hon W. (Kilmarnock)

Dell, Rl Hon Edmund

Lamborn, Harry

Rowlands, Ted

Dempsey, James

Lamond, James

Ryman, John

Doig, Peter

Leadbitter, Ted

Sandelson, Neville

Dormand, J. D.

Lee, John

Sedgemore, Brian

Douglas-Mann, Bruce

Lestor, Miss Joan (Eton & Slough)

Selby, Harry

Duffy, A. E. P.

Lever, Rt Hon Harold

Shaw, Arnold (Ilford South)

Dunn, James A.

Lewis, Ron (Carlisle)

Sheldon, Rt Hon Robert

Dunnett, Jack

Litterick, Tom

Shore, Rt Hon Peter

Eadie, Alex

Lomas, Kenneth

Short, Mrs Renée (Wolv NE)

Edge, Geoff

Loyden, Eddie

Silkin, Rt Hon John (Deptford)

Ellis, John (Brigg & Scun)

Luard, Evan

Silkin, Rt Hon S. C. (Dulwich)

English, Michael

Lyons, Edward (Badlord W)

Silverman, Julius

Ennals, Rt Hon David

Mabon, Rt Hon Dr J. Dickson

Skinner, Dennis

Evans, Fred (Caerphilly)

McCartney, Hugh

Smith, John (N Lanarkshire)

Evans, Ioan (Aberdare)

McDonald, Dr Oonagh

Snape, Peter

Evans, John (Newton)

McElhone, Frank

Spearing, Nigel

Spriggs, Leslie

Torney, Tom

Whitlock, William

Stallard, A. W.

Tuck, Raphael

Williams, Rt Hon Alan (Swansea W)

Steel, Rt Hon David

Varley, Rt Hon Eric G.

Williams, Alan Lee (Hornch'ch)

Stewart, Rt Hon M. (Fulham)

Wainwright, Edwin (Dearne V)

Williams, Rt Hon Shirley (Hertford)

Stoddart, David

Wainwright, Richard (Colne V)

Wilson, Rt Hon Sir Harold (Huyton)

Stott, Roger

Walker, Harold (Doncaster)

Wilson, William (Coventry SE)

Strang, Gavin

Walker, Terry (Kingswood)

Wise, Mrs Audrey

Strauss, Rt Hon G. R.

Ward, Michael

Woodall, Alec

Summerskill, Hon Dr Shirley

Watklns, David

Woof, Robert

Swain, Thomas

Watkinson, John

Wrigglesworth, Ian

Thomas, Jeffrey (Abertillery)

Weetch, Ken

Young, David (Bolton E)

Thomas, Mike (Newcastle E)

Weitzman, David

Thomas, Ron (Bristol NW)

Wellbeloved, James

TELLERS FOR THE AYES:

Thorne, Stan (Preston South)

White, Frank R. (Bury)

Mr. James Hamilton and

Tierney, Sydney

White, James (Pollok)

Mr. Joseph Harper.

Tinn, James

NOES

Adley, Robert

Fookes, Miss Janet

Lloyd, Ian

Aitken, Jonathan

Forman, Nigel

Loveridge, John

Alison, Michael

Fowler, Norman (Sutton C'f'd)

Luce, Richard

Arnold, Tom

Fox, Marcus

McAdden, Sir Stephen

Atkins, Rt Hon H. (Spelthorne)

Fraser, Rt Hon H. (Stafford & St)

McCrindle, Robert

Atkinson, David (Bournemouth, East)

Fry, Peter

McCusker, H.

Awdry, Daniel

Gardiner, George (Reigate)

Macfarlane, Neil

Baker, Kenneth

Gardner, Edward (S Fylde)

MacGregor, John

Banks, Robert

Gilmour, Rt Hon Ian (Chesham)

MacKay, Andrew (Stechford)

Bendall, Vivian (Ilford North)

Gilmour, Sir John (East Fife)

Macmillan, Rt Hon M. (Farnham)

Bennett, Dr Reginald (Fareham)

Glyn. Dr Alan

McNair-Wilson, M. (Newbury)

Benyon, W.

Goodhart, Philip

McNair-Wilson, P. (New Forest)

Biffen, John

Goodhew, Victor

Madel, David

Biggs-Davison, John

Goodlad, Alastair

Marshall, Michael (Arundel)

Body, Richard

Gorst, John

Marten, Neil

Boscawen, Hon Robert

Gow, Ian (Eastbourne)

Mates, Michael

Bottomley, Peter

Gower, Sir Raymond (Barry)

Mather, Carol

Bowden, A. (Brighton, Kemptown)

Grant, Anthony (Harrow C)

Maude, Angus

Boyson, Dr Rhodes (Brent)

Gray, Hamlsh

Maudling, Rt Hon Reginald

Braine, Sir Bernard

Griffiths, Eldon

Mawby, Ray

Brittan, Leon

Grist, Ian

Maxwell-Hyslop, Robin

Brocklebank-Fowler, c.

Grylls, Michael

Mayhew, Patrick

Brooke, Peter

Hall-Davis, A. G. F.

Meyer, Sir Anthony

Brotherton, Michael

Hamilton, Michael (Salisbury)

Miller, Hal (Bromsgrove)

Brown, Sir Edward (Bath)

Hampson, Dr Keith

Mills, Peter

Bryan, Sir Paul

Hannam, John

Miscampbell, Norman

Buchanan-Smith, Alick

Harrison, Col Sir Harwood (Eye)

Mitchell, David (Basingstoke)

Buck, Antony

Harvie Anderson, Rt Hon Miss

Moate, Roger

Budgen, Nick

Haselhurst, Alan

Molyneaux, James

Bulmer, Esmond

Hastings, Stephen

Monro, Hector

Burden, F. A.

Havers, Rt Hon Sir Michael

Montgomery, Fergus

Butler, Adam (Bosworth)

Hayhoe, Barney

Moore, John (Croydon C)

Carson, John

Heath, Rt Hon Edward

More, Jasper (Ludlow)

Chalker, Mrs Lynda

Heseltine, Michael

Morgan, Geraint

Churchill, W S.

Hicks, Robert

Morgan-Giles, Rear-Admiral

Clark, Alan (Plymouth, Sutton)

Higgins, Terence L.

Morris, Michael (Northampton S)

Clark, William (Croydon S)

Hodgson, Robin

Morrison, Hon Peter (Chester)

Clarke, Kenneth (Rushcliffe)

Holland, Philip

Mudd, David

Clegg, Walter

Hordern, Peter

Neave, Airey

Cockcroft, John

Howe, Rt Hon Sir Geoffrey

Nelson, Anthony

Cooke, Robert (Bristol W)

Howell, David (Guildford)

Neubert, Michael

Cope, John

Hunt, David (Wirral)

Newton, Tony

Cormack, Patrick

Hunt, John (Ravensbourne)

Nott, John

Costain, A. P.

Hurd, Douglas

Onslow, Cranley

Craig, Rt Hon W. (Belfast E)

Hutchison, Michael Clark

Oppenheim, Mrs Sally

Crouch, David

Irving, Charles (Cheltenham)

Page, John (Harrow West)

Crowder, F. P.

James, David

Page, Rt Hon R. Graham (Crosby)

Dean, Paul (N Somerset)

Johnson Smith, G. (E Grinstead)

Page, Richard (Workington)

Dodsworth, Geoffrey

Jones, Arthur (Daventry)

Parkinson, Cecil

Douglas-Hamilton, Lord James

Jopling, Michael

Pattle, Geoffrey

Drayson, Burnaby

Joseph, Rt Hon Sir Keith

Percival, Ian

du Cann, Rt Hon Edward

Kaberry, Sir Donald

Peyton, Rt Hon John

Durant, Tony

Kimball, Marcus

Pink, R. Bonner

Dykes, Hugh

King, Evelyn (South Dorset)

Powell, Rt Hon J. Enoch

Eden, Rt Hon Sir John

King, Tom (Bridgwater)

Prentice, Rt Hon Reg

Edwards, Nicholas (Pembroke)

Kitson, Sir Timothy

Price, David (Eastleigh)

Elliott, Sir William

Knight, Mrs Jill

Prior, Rt Hon James

Emery, Peter

Knox, David

Pym, Rt Hon Francis

Eyre, Reginald

Lamont, Norman

Raison, Timothy

Fairbairn, Nicholas

Langford-Holt, Sir John

Rathbone, Tim

Fairgrieve, Russell

Latham, Michael (Melton)

Rees, Peter (Dover & Deal)

Farr, John

Lawrence, Ivan

Rees-Davies, W. R.

Fell, Anthony

Finsberg, Geoffrey

Lawson, Nigel

Renton, Rt Hon Sir D. (Hunts)

Fisher, Sir Nigel

Lester, Jim (Beeston)

Renton, Tim (Mid-Sussex)

Fletcher, Alex (Edinburgh N)

Lewis, Kenneth (Rutland)

Rhodes, James R

1124

1125

Ridley, Han Nicholas

Smith, Timothy John (Ashfield)

van Straubenzee, W. R.

Ridsdale, Julian

Speed, Keith

Vaughan, Dr Gerard

Rifkind, Malcolm

Spence, John

Viggers, Peter

Roberts, Wyn (Conway)

Spicer, Michael (S Worcester)

Wakeham, John

Ross, William (Londonderry)

Sproat, Iain

Walder, David (Clitheroe)

Rossi, Hugh (Hornsey)

Stainton, Keith

Walker, Rt Kon P. (Worcester)

Rost, Peter (SE Derbyshire)

Stanbrook, Ivor

Wall, Patrick

Royle, Sir Anthony

Stanley, John

Walters, Dennis

Sainsbury, Tim

Steen, Anthony (Wavertree)

Weatherill, Bernard

St. John-Stevas, Norman

Stewart, Ian (Hitchin)

Wells, John

Scott, Nicholas

Stokes, John

Whitelaw, Rt Hon William

Shaw, Giles (Pudsey)

Stradling Thomas, J.

Wiggin, Jerry

Shelton, William (Streatham)

Tapsell, Peter

Winterton, Nicholas

Shepherd, Colin

Taylor, R. (Croydon NW)

Wood, Rt Hon Richard

Shersby, Michael

Tebbitt, Norman

Young, Sir G. (Ealing, Acton)

Silvester, Fred

Temple Morris, Peter

Younger, Hon George

Sims, Roger

Thatcher, Rt Hon Margaret

Sinclair, Sir George

Thomas, Rt Hon P. (Hendon S)

TELLERS FOR THE NOES:

Skeet, T. H. H.

Townsend, Cyril D.

Mr, Spencer Le Marchant and

Smith, Dudley (Warwick)

Trotter, Neville

Mr. Anthony Berry

Question accordingly agreed to.
Resolved.
That the draft National Enterprise Board (Financial Limit) Order 1978, which was laid before this House on 3rd April, be approved.

BRITISH LEYLAND LIMITED (FINANCIAL ASSISTANCE)
Resolved,
That this House authorises the National Enterprise Board on the direction of the Secretary of State, given under section 3 of the Industry Act 1975, to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972 (as amended by section 22 of, and Part 1 of Schedule 4 to, the Industry Act 1975, and section 1 of the Industry (Amendment) Act 1976) sums to British Leyland Limited or any of its subsidiaries not exceeding in the aggregate £150 million, being sums in addition to the £30 million previously paid by the National Enterprise Board to British Leyland Limited under that section 8.—[Mr. Varley.]

EUROPEAN COMMUNITY (FARM STRUCTURE)
10.23 p.m.
The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Gavin Strang): I beg to move,
That this House takes note of Commission Documents Nos. R/3069/77 and R/3121/77 on Farm Structure.
I must first congratulate the Scrutiny Committee and its Chairman, the right hon. Member for Bournemouth, West (Sir J. Eden) on their excellent report. Taken together the two documents that are the subject of this motion constitute a formidable quantity of paper. The Scrutiny Committee has done the House a service in dealing with all this material so concisely and in giving the House the benefit of its penetrating conclusions.
The Committee's report sets out the main points of the Commission's report on the application of the socio-structural directives in 1975, which it also summarises, so I need not detain the House with a dissertation on this subject. I should, however, indicate that we entirely agree with the conclusion of the Scrutiny Committee's report that there is insufficient experience of the operation of the directives to form a basis for proposing major changes in them. In addition, we endorse the report's criticism of the Commission's explanation of the reasons why directive 72/160 has failed to promote structural improvement.
As the Scrutiny Committee's report says, the broader factors are what govern the propensity of farmers to give up their land. We discovered, while operating our own farm structure schemes, that Government incentives in this direction are unlikely to be cost-effective and in the United Kingdom they had very little effect at all. Like the Scrutiny Committee, we are also against any measures to curtail aid to efficient dairy producers.
So far as the analysis of the Commission's actual proposals is concerned, here again I can only agree with the general conclusions of the Scrutiny Committee's report. As we see it, a number of points of principle arise. One of the most important of these is the increase in expenditure under the FEOGA guidance section
1128
which is involved, bearing in mind, as we have already noted, the lack of experience so far in the Community as a whole of the operation of the present provisions. There is also the further differentiation of FEOGA aid in favour of certain regions of the Community, which we consider highlights the need to ensure that Community money is spent in a cost-effective way.
We agree with the Scrutiny Committee that the reduction in the minimum area qualifying in less-favoured and mountain areas in Italy for the LFAD compensatory allowances could hinder improvements in farm structure. So also could tie concession proposed for parts of Italy and Ireland under which FEOGA reimbursement would be payable under directive 160, even if the land released by the annuitants went to farmers with no prospect of reaching the comparable income.
This concession also seems to cut across the Commission's proposal to strengthen incentives under this directive where land is released to farmers with development plans. The special premium linked to rental values which is proposed would, moreover, as is indicated in the Scrutiny Committee's report, cause substantial administrative problems and give rise to anomalies in United Kingdom conditions.
For instance, the premium actually received by a farmer could vary from £50 per hectare to over £500 per hectare in the same region of the United Kingdom. There would, furthermore, be a tendency for the lowest payments to be made in areas of poor land, where farm structure is in general also poor. In any event, as I have said, our experience leads us to doubt the effectiveness of incentives of this kind, and I am glad that the report goes along with this conclusion.
The proposed Commission drainage initiative in less-favoured areas in the West of Ireland raises both the question of the regional differentiation of rates of FEOGA reimbursement and that of possible impacts on Northern Ireland. We should not, of course, wish to oppose cost-effective measures to accelerate drainage programmes in Ireland, but the programmes will need careful scrutiny. We shall also wish to pursue the question of what seems to us to be the illogicality of excluding from the special aids analogous areas in Northern Ireland, especially in view of the possibility of

1129
fruitful cross-border co-operation in certain catchment areas.
The Commission's proposal to amend directive 72/159 is of little interest to this country and, indeed, we see no justification for any changes in the ground rules of that directive. The House will, I am sure, be glad to know that our EEC capital grant scheme, the farm and horticulture development scheme, is now very much a going concern following the changes we made in June 1976 and the ADAS advisory effort that has been put in. There are, however, some detailed changes we should like to see in the directives and we shall be pursuing these as the opportunity offers. We do not, however, agree with the NFU and COPA that in general the Commission's proposals are inadequate. I am glad to see that the Committee's report takes the point that as the proposals stand they are costly and that, as has been observed, they have no very sound basis in experience.
In conclusion, I should like to affirm that our general stance at present is to seek to ensure that Community funds are disbursed in a cost-effective way, to resist measures that do not make sense in United Kingdom conditions or in terms of the basic objectives of the Community's socio-structural policy, and to secure improvements on detailed aspects of the directives. Subject to the view that the House may express tonight, both on the Commission's proposals and on the Commission's second report, we shall continue to pursue these objectives.
10.30 p.m.
Mr. Robert Hicks: We are grateful to the Minister for explaining the Government's attitude to these documents.
On the surface, this debate may appear somewhat detailed—relating as it does to proposed amendments to farm structures, less-favoured area programmes, drainage schemes and various matters connected with farm modernisation—but in fact it raises questions of substance on the future operation of the Community's agricultural policy, particularly with regard to the cost-effectiveness of the measures, reviewed in the Commission's report, which are designed to stimulate agricultural reform.
1130
The Community's farm policy has been subjected over the years to various pressures and criticisms. As with most political subjects, we have all tended to take the favourable aspects for granted and to concentrate our attention on those facets which give cause for concern. In this context, that concern manifests itself in the real worry about the disposal of structural farm surpluses and—equally important—a consideration of how we are to prevent a further spreading of the problem of surpluses to other farm commodities in the not-too-distant future. It is in the light of the prevailing and potentially more worrying situation that we should consider these documents.
The Commission's proposals highlight the Community's dilemma. The suggestions in these directives have not only agricultural but political and regional implications. Some aspects of fundamental reform should be seen in a regional and social light rather than in a strictly agricultural light.
As one who represents a peripheral part of the United Kingdom, I am aware of the feeling of neglect and frustration that our problems in the regions are not fully understood in Whitehall or possibly in Brussels. But we must resist the temptation to assume that, because many of these problems concern other parts of the Community, we should dismiss them. That would be totally wrong.
We must examine these proposals in the light of the Community's future requirements of its farm policy. Is directive 72/159, relating to farm modernisation, a national aid which will put no direct cost on Community funds? If, as I believe, that is so, would not the Minister agree that this practice is in effect subsidising farm incomes, and thus does little to contribute to basic restructuring? Also, do not the products of these smaller units receive Community funds from the guarantee sector of the farm budget?
What will be the cost to Community funds of the amendment in directive 75/268 in respect of farming in hill and less favoured areas? The Minister rightly pointed out the concern felt by the Department about the cost-effectiveness of certain of these proposals. Will he go into a little more detail and say how much is involved?

1131
Does the Minister really believe that the reduction in the qualifying area for headage payments in certain parts of the Community from three hectares to two hectares and the increased level of payments in these areas is consistent with the declared aim of improving farm structures, on the one hand, and reducing structural surpluses, on the other?
In the context of the directive concerning less favoured areas, may I ask the Minister also what representations his Department made in respect of the application of this directive to Britain? The proposals concern in the main other parts of the Community, but there is a real problem in that certain parts of Britain meet the necessary criteria to be considered as less favoured areas, but, because the Government chose to go for the old hill cow and hill ewe subsidies, those areas now fall outside this provision.
A comparison of areas in the United Kingdom which do not qualify under the less-favoured area directive with other parts of the Community in which farmers qualify shows that an injustice is being done to the farmers of approximately 1½ million acres of such land in the United Kingdom. Would not the Minister agree that, as the Commission is looking at amendments to these directives, the time is appropriate for a review of the land within the United Kingdom that should qualify to be classified as less favoured areas? It has been suggested, for example, that some parts of France that produce milk are classified as less favoured areas. This is not so in Britain.
It is proposed in directive 72/160, which concerns measures to encourage the cessation of farming, to create an additional special premium relating to the rental value of the land. This would be a supplement to the existing arrangements involving payment of a lump sum or an annuity. What will the cost be? What representations has the Department made to the Commission as to the effectiveness of these proposals? As the Minister rightly implied, some of us doubt from experience how effective these measures are. There is reason to doubt the role of a financial incentive in persuading people to leave farming.
I conclude by adding a few general comments to my remarks about the Commission's
1132
report on the measures aimed at achieving reforms necessary to improve the structure of Community agriculture. It is true that progress has been made. It is only necessary to look at the statistics to see the fall in the number engaged in full-time agriculture. Would not the Minister agree that there is still a long way to go and that it is more difficult now to persuade those who have not already decided to leave agriculture? There is a natural wastage, but will the Minister quantify the numbers of those expected to leave as a result of these inducements, as opposed to leaving for other reasons?
We on this side of the House express a general concern about the lack of activity that has resulted from these measures, because there is no doubt in our minds that we still have a long way to go in implementing a meaningful programme of farm reorganisation and farm modernisation throughout the Community if we are to achieve the two objects which I mentioned at the beginning of my remarks, which are, first, to promote a better farm structure and, secondly, to avoid unnecessary farm surpluses.
10.41 p.m.
Mr. Wm. Ross: The Minister will no doubt be aware of the reaction in Northern Ireland to any suggestion that the Irish Republic is getting a better deal out of the EEC than is the Northern Ireland part of the United Kingdom. In the light of the reaction that is often heard in the Press, and sometimes deliberately fostered in Northern Ireland in this regard, I echo the words of the hon. Member for Bodmin (Mr. Hicks) when he said that it was time we reassessed the areas of less favoured land in the United Kingdom, and I say in particular Northern Ireland. This is a serious bone of contention and it is a matter on which I should like the Minister to give some sort of understanding this evening.
Given that there is always an adverse reaction in Northern Ireland to any suggestion that the Republic of Ireland is getting a better deal than is Northern Ireland, there would be an even worse reaction if any idea arose in Northern Ireland that something that was done in the Republic was having an adverse effect on the farmers in Northern Ireland.

1133
In that respect I draw the Minister's attention to the cross-border rivers which run from the Republic into Northern Ireland, and specifically those rivers which flow into Lough Neagh or Lough Erne, because both those loughs are used in one way or another in Northern Ireland for drainage and fishing purposes, and they are subject to flooding along the shores. Sometimes heavy rainfall over the catchment area of the rivers concerned can cause those loughs to rise very rapidly, with extremely serious results in the low-lying areas surrounding them.
In those circumstances, has any thought been given by the Department of Agriculture in Northern Ireland, and by the Minister of Agriculture, Fisheries and Food here, to what steps should be taken to prevent any serious consequences arising from works taking place in the Irish Republic? The rivers are principally the Erne and the Blackwater, but no doubt there are other smaller streams. We also have the problem that will arise, inevitably, if these rivers are drained and banked in the Republic, and the downstream sections are not banked. The flooding that would result would be immediate and immense as soon as the drainage schemes commenced, and this is a matter which I hope the Minister has taken on board.
There is also the problem of the River Finn, which flows into the Mourne from County Donegal. I do not think that the problem is as serious there as in other places, but no doubt there will be a problem in that area too, although of lesser dimensions.
I now deal briefly with the areas to be drained. I note that these are restricted to catchment areas of 30,000 hectares and field drainage areas of 100,000 hectares. What puzzles me is that according to the Twelfth Report of the Select Committee on European Legislation the machinery costs in field drainage are restricted to 5 per cent. of the costs. Is this correct? If it is, I must tell the Minister that nobody does land drainage in that way any more. If machinery costs are restricted to 5 per cent. of the total cost, that would have to imply hand labour in the digging of the ditches for the land drains. If that is so, it could not be said that the money was being spent in a cost-effective way under modern conditions.
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Will the Minister comment on that aspect of the papers before us?
I turn briefly to the whole contention that it is possible to improve the farm structure through getting small farmers to leave their land and allow it to be sold to someone else. The plain truth is that all these schemes simply have not worked, for a variety of reasons, not least of which is the rate of inflation in Western society today. That inflation rate, even in the remaining lifetime of a person of 55, has been seen very rapidly to erode the economic advantages that are supposed to accrue to the former owner from the loss of his land. People are no longer prepared to believe in the supposed advantages. They are no longer prepared to take the risk. Therefore, the contention fails on that ground alone.
In addition, there is among small farmers everywhere—in Ireland perhaps more than in most places—an almost mystical attachment to the land they own. This is well known to anyone engaged in farming. To those people the property they own is far beyond any money price. In those circumstances the pride of ownership overrules any economic advantage that can accrue to the owner.
On those two facts alone—thoueh no doubt others will be brought forward this evening—this whole concept founders. I believe that it will continue to founder. It just cannot float.
On the basis of my experience, and looking at the farming structure in my own area, where farms are growing in size, I believe that a change in the structure will come about only through the death of the present owners and through their children and grandchildren being unwilling to live the existence that their forebears had. Young people are no longer prepared to put up with that existence. If they can get a better job they will go to it, even if it means going quite a long way. They will not return. When the old folk die off the land is sold, and in that way the farms will naturally increase in size. There is no way of speeding up that process.
According to these documents, the farms that have increased in size are mainly cattle and dairy farms. They do not mention sheep farms, but they are fairly large in acreage anyway, and are often one-man and two-man farms, or at any rate family farms. They do not need

1135
further to increase in size. Quite a lot are as big as the family can handle now in many parts of the country, so we cannot expect them to grow very much.
I suggest that the dairy and cattle farms have increased in size simply because they are not labour-intensive. They are machinery-intensive, if one is going in for dairying and silage. They may be intensive in the same sense to some extent in cattle farms, but one family—the farmer and his son; or perhaps one should say two families—can handle a very large acreage.
We are all aware that such farms are not normally found in areas suitable for grain growing. Grain farms in, for instance, Eastern England are a fair size anyway, and they are highly mechanised. Such farms may increase in size quite a bit yet, but I doubt that. We may well have seen the end of the major part of growth for the present generation in that direction as well.
These directives represent an attempt to speed up a natural process in the growth of farms. It is an attempt that will fail. The process will take place naturally anyway, and I believe that we are wasting money in trying to do it in this way.
10.50 p.m.
Mr. Peter Mills: I must declare an interest in these matters. As one surveys the Community scene today, and the common agricultural policy in particular, one must agree that these directives are of great importance. I believe that the hon. Member for Londonderry (Mr. Ross) has the matter slightly wrong, and I shall come to that in a minute. In my view, in the context of the problems of the Community, of the CAP and of surpluses, for the long term we must take measures such as those proposed in the directives.
In the short term, it may well be that it is a matter of price—the end price—that can be controlled in order to deal with some of the surpluses in some commodities but—this is where I think that the hon. Member for Londonderry has it slightly wrong—the fact is that in the Community as a whole there are areas that have a long way to go.
There are areas where the process of modernisation and amalgamation into
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more viable farms with the right structure is already under way. I think that Northern Ireland presents an excellent example of that, with small viable farms. Many of them have the structure right because they are family farms. In the South-West of England we have already made good progress. If I may speak of my own past for a moment, I started with 28 acres—hardly a viable farm nowadays—but in the South-West now the average is considerably higher.
Already many of the policies set out in these directives are in operation in certain parts of the United Kingdom, and in the South-West in particular. We have had farm amalgamations. We have had viable units set up, and we have modernised. Already the process is under way, but in other parts of the Community—in certain parts of France and Germany, for example—there is a long way to go before farming comes up to the standard of the excellent small family farms of the South-West or, indeed, of Northern Ireland.
There is, therefore, a difference, and I believe that these directives can play a role in the future in dealing with the problems of the Community as a whole and of the CAP in particular.
The Commission's single aim, as it is put, is
"to help farmers who are willing and able to do so to attain 'comparable' incomes, and provide an alternative non-agricultural income or occupation, or an early retirement annuity, for farmers who do not wish or cannot attain this level."
I am sure that we should all agree with that aim. One hears constantly about the problems of very small farmers and of farm workers in earning incomes comparable with those of other sections of the community. I am sure that that is right, but one must try to ensure that one does not set the end prices so high that the big farmers make large profits and the very small farmer is still struggling to obtain a living standard—a living wage, if one cares to call it that.
Therefore, I believe that in the Community as a whole we should look seriously at providing some help to the very small farmers who can never attain that position. That is what this is all about. It is sad to have to say that in practice the measures have not worked very much. In my view, Governments within the Community are not taking these problems

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seriously enough. We in this country take them seriously. We have quite a good track record in dealing with these matters.
Unless these measures are effective, I am certain that the very small farmers, not in this country but elsewhere in the Community, will stick it out. They will become more and more stubborn in refusing to move from the land, more and more determined to stay and go on farming. However much the cut in end price, they will have no alternative work, no other occupation, to go to. I believe, therefore, that these directives are very important and that many of the other measures that the Community is dealing with are merely tinkering with the problem. Until we get the structure right, we cannot deal with the surpluses or with these very small farmers desperately trying to live on the small acreages.
Farm modernisation is crucial both to the farmer and the consumer. One cannot expect the consumer to pay high prices for various farm products, and it is right that we should try to make our farms modern so that they can have an output at reasonable cost to the consumer. I am all for farm modernisation, and I hope that the directive on modernisation can go ahead.
But when considering the directive on payments to outgoers, I emphasise again that it is not much use paying a small farmer to go out of business if we have not provided some alternative work, some alternative hope for him, so that he and his children can make a decent living. There are many areas in other countries of the Community where there is no alternative work or no hope for such people. So we have to think not only of payments to the out-goers but of alternative work for them. That must cost money. Time is needed for these things to have a genuine impact. Time must be given. We cannot do it overnight. It takes a very long time to persuade people to make such changes.
Mr. Nigel Spearing: Can the hon. Gentleman resolve this apparent dilemma? He has laid great emphasis upon changing the structure of farm holdings, on the assumption, I presume, that that will provide viable units. But it will not necessarily decrease the amount of land in cultivation. If that is
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so, presumably surpluses will remain the same, particularly if lowland farms become more efficient. Unless the structure actually takes land out of cultivation—and that would be the marginal, less accessible land, which, apparently, is not the policy—surely the policy that the hon. Gentleman is advocating will fail even on his own criteria.
Mr. Mills: That is a fair point. My answer is that I do think that in some circumstances it is right to take land out of production. The land I am thinking about is the poor scrubby land in the Community which could be used either for forestry or for the "playground"—the sort of land necessary in the modern world for holidaying and other pursuits. I believe that in certain areas it is just not feasible to go on farming on such land. I am talking not about this country but about certain areas within the rest of the Community. I believe that there is a problem, but that forestry can play a considerable role on some of the poorer land—and in the long term that would be of great benefit to the Community itself and to the nation concerned.
The directive talks about training. How right that is. It is important to retrain people. The Governments must pay attention to this aspect, particularly with regard to the younger members of these small farming families.
Then there is the question of the less favoured areas. Here I perhaps disagree slightly with my hon. Friend the Member for Bodmin (Mr. Hicks). I believe that the problem of the less-favoured areas is a social problem more than a farming problem. Again it is a matter of many smallholdings in upland areas which are very difficult ever to make viable. The recognition of this as a social problem lay behind the whole idea of the hill-cow subsidy in days gone by. Admittedly it had the advantage of ensuring the production of store cattle for fattening lower down. But there was a real social element in giving those subsidies, for otherwise there would be depopulation of the uplands areas. This is the sort of thing that ought to be done not quite so much by the Community as by national Governments, and it should be dealt with as a social problem rather than as a farming problem.
The whole problem with the set-up in Brussels at the moment is that far too

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much money is being directed at the guarantee side and at supporting farmers in production, rather than seeing that the money is used for the Regional Development Fund and other alternative work within the more difficult areas.
I hope that we shall urge the Government to look at these various directives very carefully indeed. It is not such an urgent problem in this country as in other countries within the Community. We have already gone a long way towards dealing with these matters. The other countries in the Community need to put their house in order, in a sense. We have started on that road under various Governments over a number of years. We have begun to get the structure right. The other countries within the Community have not taken the message seriously.
I urge the Minister to redouble his efforts to see that other Agriculture Ministers within the Community start to take this matter seriously, so that there will be pressure for more of the funds within the Community to be used in dealing with the whole of the problem that I have tried to outline. It is essential that they do this, otherwise surpluses will go on and on and on. Until we get the structure right and provide alternative work for many of these small farmers within the Community, these surpluses will go on and on and on.
11.3 p.m.
Mr. Richard Body: I am very glad that my hon. Friend the Member for Devon, West (Mr. Mills) acknowledges that some of our land is not fit to be farmed, but I think I am right in saying that, just across the border from him, 700 acres of Exmoor was brought into cultivation, not because it is land which should be cultivated but because of the system of grants and subsidies which makes it possible.
Like my hon. Friend the Member for Bodmin (Mr. Hicks), I was disappointed that the Parliamentary Secretary gave no estimate of the cost involved as a result of these directives. Five years have now gone by and I should have thought that we could have some estimate of at least the visible cost of what has so far been done. The visible cost would be the money that has actually been received by the farmers who have been the beneficiaries of these schemes, but there is
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also the invisible cost, and it is this that disturbs me, as I think it must disturb anyone who is concerned with the level of efficiency of British or European agriculture. The invisible cost is what must be paid out by those who contribute to the scheme, namely, the taxpayers themselves.
The whole essence of what is intended under these directives is that there should be a transfer of resources from the efficient to the inefficient, from those who are able to pay taxes, and who therefore by that standard are at least reasonably efficient, to those who are inefficient in a sense and would be out of business, or very nearly out of business, were it not for the grants and subsidies that are available.
The purpose of these directives, in other words, is that the strong should be weakened in the hope that the weak should be strengthened. That, surely, is no prescription for raising the level of efficiency of either British or European agriculture. This is something that will be of great importance from now on, because we are now facing structural surpluses. These are chronic and permanent surpluses, which will pile up from now on.
I like to think that there are many efficient farmers in Lincolnshire. I am delighted that my hon. Friend the Member for Gainsborough (Mr. Kimball) is here, as he also comes from a county which is capable of growing food much more efficiently than Devon and Cornwall, where the farmers thrive on grants and subsidies. My part of England is extremely apprehensive about the way in which these surpluses are mounting. If they are to continue to mount, the efficient producer will be at a grave disadvantage, because he has to compete against those marginal producers who will be kept in business as a result of schemes of this kind. They will, therefore, face unfair competition.
For that fundamental reason I am one of those hon. Members who are rather more sceptical of these directives than the Parliamentary Secretary himself indicated. I hope that he will meet my first query as to the total cost. However, I recognise that he can give no hint to this House of the true invisible cost of these schemes as a result of diverting resources from the efficient to the inefficient.
11.6 p.m.
Mr. Geraint Howells: I have listened with interest to many of the points made by hon. Members. Whatever our views about the structural problem in this country and other countries of the Community, to many small and large farmers farming is a way of life.
One matter that I should like to raise tonight—I am sure that the majority of hon. Members will agree—is that, whatever the outcome of the farm structure in the years to come, we must not introduce any sort of element of compulsion in order to move any farmer from the land, whether he be in Wales, Scotland, England, Northern Ireland, or anywhere in the Community. If those people prefer to be small farmers—farming 10 or 20 acres or even 1,000 acres—that is their way of life.
I believe that they have played a major role, although not perhaps in producing food for the country. I also believe that we have a social problem as well. If we do away with many of our part-time farmers, in many areas more depopulation will take place. Over a period of time these small farmers have been of benefit to the community in which they have served and lived. I hope that the Minister will do everything to persuade his colleagues in Europe not to introduce any element of compulsion whatever in the years to come.
Mr. Body: Except on the taxpayers.
Mr. Howells: I should also like to mention the plight of the marginal farmer. I hope that the Minister will say something about the inquiry that is now taking place into the future role of the marginal farmers. As I have said on many occasions, they can play a major role as well in increasing production from that particular type of land. I hope that many of those who are farming in the marginal areas, which have been deprived under the orders and directives that we have accepted from the EEC during the last few years, will come under the hill area compensatory allowance scheme in the years to come.
I hope that the Minister will be able to let us know when he will be able to finalise that inquiry and others which are looking after the interests of the marginal farmers.
11.9 p.m.
Mr. Strang: Perhaps I may reply briefly to a number of points made by hon. Members. The hon. Member for Bodmin (Mr. Hicks) referred to directive 72/159, on modernisation. He asked whether this was a national aid only. In the United Kingdom context, this is the farm and horticulture development scheme which is supported by FEOGA to the extent of 25 per cent. of total expenditure.
I agree with the hon. Gentleman's comments on the proposal to reduce the minimum qualifying area from three hectares to two hectares. As for extending the area eligible for compensatory allowances under the directive on less favoured areas, I must say that hon. Members are rather underestimating the stringency of the criteria. In fact, the United Kingdom went to considerable lengths to secure the maximum coverage for this directive. It is fair to say that this is one of the measures out of which we do very well financially. It is also worth noting that France recently endeavoured to extend its area but was refused.
One of the considerations overlooked by hon. Members is that if one brings in too dense a population, it throws the area that it is intended to cover outwith the necessary criteria and renders it ineligible. I shall not go into any more detail, although I sympathise with the general objectives of extending the less favoured areas directive's coverage. But if hon. Members look hard at the criteria in the directive, they will find that it is not as easy as they suggest and that, of course, 41 per cent. of the United Kingdom's agricultural area is covered already, with Ireland the only country with a higher percentage.
On this general question of the role of financial incentives in encouraging structural reform and encouraging farmers to leave the land and to amalgamate, I tend to agree with the observation of the hon. Member for Londonderry (Mr. Ross). One can exaggerate the impact of these measures, and that is why we should be pretty hard headed when looking at the cost. It is no use spending a great deal of money if it is likely to have little effect. As I indicated in opening this debate, we have found that our own scheme, which was introduced in the 1967

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Act, has not been a success in terms of its objective of achieving farm amalgamations. Therefore, when the hon. Member for Devon, West (Mr. Mills) speaks as though we had achieved a great success in this connection, I am not sure whether he is referring to a historical fact of life in that we have had our good farm structure for a very long time, or whether he is suggesting that recent Governments can claim credit for this. I very much doubt the latter.
Mr. Peter Mills: I agree with the hon. Gentleman when he says that the amalgamation scheme has not worked very well. But what has happened is that both Governments have provided alternative work. In many small towns in the South-West there are now factories set up where there is alternative work for young people who used to work on farms.
Mr. Strang: I do not dissent from that. I think that the hon. Member will also agree that our pricing policy over the years has probably had an effect on the number of smaller holdings and that we have genuinely endeavoured to relate our prices to the efficient producer. To the extent that there is a case for these measures seen from a United Kingdom standpoint, perhaps the less favoured areas directive would make it easier for us to secure greater restraint on common prices. For example, we support the nondelivery premiums for milk under the milk action programme not so much as a means of moving milk producers out of production as a compensation for what we should like to see, namely, a policy of total restraint on the common milk price.
On the general point about West Devonshire, we must not forget that we are now discussing these structural proposals against a background of very high unemployment throughout Europe, where more than 6 million people are out of work. That is likely to have a much greater impact on changes in this direction over the next few years than any measure that we are discussing now.
Turning to the specific matter raised by the hon. Member for Londonderry in
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relation to the Irish Republic and Northern Ireland, I agree that we do not want to see a measure which simply provides aid for the Republic when there is just as good a case for its implementation in certain parts of Northern Ireland. Certainly we have in mind the two-river catchment areas referred to by the hon. Member—the Blackwater and the Finn-Lacky—as cross-border catchment areas where we believe that there is a general willingness to co-operate and implement a scheme of this nature.
The limit on the element of machinery does not apply to the land drainage cost. All land drainage costs qualify for grant. The limit applies only to the total grants for co-operatives that purchase machinery.
The hon. Member for Holland with Boston (Mr. Body) asked for an estimate of the cost. The Commission's estimate of the FEOGA cost per annum is about 12 million units of account. Over five years the total cost to FEOGA is estimated to be 65 million units of account. I emphasise that we are in the very early stages of discussion of these measures. They have been discussed only at official level. They have not yet come to the Council. We see a great deal of work to be done in modifying them. As I have indicated, we are not very enthusiastic about parts of them. That is generally accepted by hon. Members, including the hon. Member for Bodmin (Mr. Hicks) from the Opposition Front Bench.
I agree with the hon. Member for Cardigan (Mr. Howells) that there can be no question of compelling any producer to leave the land.
We have had a useful debate. A number of points have been made, from none of which I dissent. The views of hon. Members, and perhaps more especially the comments of the Scrutiny Committee, will be helpful to the Government in pursuing these matters in the Community in the months ahead.
Question put and agreed to.
Resolved,
That this House takes note of Commission Documents Nos. R/3069/77 and R/3121/77 on Farm Structure.

SERVICE FAMILIES (MEANS-TESTED BENEFITS)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Marshall.]
11.17 p.m.
Mr. Robert Boscawen: I am glad to be able to raise the issue of Service men's families in receipt of means-tested beenfits at a time when the report of the Armed Services Pay Review Body is before the Prime Minister.
The fact that about 8,000 families have to go cap in hand for rent rebates and other benefit entitlements is a national disgrace. But for the fact that many Service men's wives are earning, the figure would be much higher. It is the most unacceptable tip of the iceberg of the Service pay problem as a whole that is present at all levels of the Armed Forces. There is widespread concern about the inadequate level of pay.
In a recent visit to a resident battalion in Londonderry that the Secretary of State permitted it was disturbing to find that more than a quarter of the 250 or so married families, despite the special Northern Ireland allowance, were in receipt of rebates to keep their pay above the poverty line. The men are often working an 18-hour day for prolonged periods without any overtime. They do their arduous job extremely well and with great good humour. However, their families a few miles away are badly off compared with many of their civilian friends and relatives. There are few jobs available for their wives and there is no chance of moonlighting. These circumstances are having an effect on the wives and families and on the Service men.
Service men are the last to complain. Often they are too shy or too proud to tell outsiders what they feel about these matters. However, the fact that many of the wives and families are showing a new militancy about the pay of their husbands is a matter for shame. The manifestations of the past few days demonstrate in no uncertain terms that they expect the Government to take action, and soon.
The young private soldier, sailor or airman with a family of small children is the prime example of the inequality of the poverty trap. I am astonished that the
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last two reports of the Armed Forces Pay Review Body do not mention that there are families which are not only taxed to pay directly for their own supplemental benefits, but which, when awarded a rise in pay, suffer an increase in their tax bite and immediately begin to forfeit their benefits, so that at the end they are left only a few pence better off. The Minister of State should know only too well after his experience at the Treasury that the poverty trap bites into this kind of family.
The excellent statistical section of the Library has prepared for me a list of figures which illustrate clearly how the poverty trap affects members of the Armed Forces. I shall mention only one in the time available, but it illustrates the situation very well.
A 10 per cent. pay increase for a private, grade IV, scale A, band I, married, with two children, will mean even if his accommodation charge is not increased, only 81p more a week in his pocket or a 2·1 per cent. increase in his take-home pay, which is £38·62. That is after allowing for all the latest increases in child benefits and the reduced contracted-out rate for his national insurance contribution. The explanation is that he loses some of his family income supplement automatically and some of his rent and rate rebates as a result of his increase in pay.
If Service men are given the Irishman's rise of last year, when accommodation and food charges rose at the same rate—in other words, this year up by 10 per cent. again, which is what is feared by many Service men at present—their take-home pay will be only 1·5 per cent. above what it is today. As things stand at the moment, to raise them out of this manmade slough of the poverty trap the Service pay of the family that I have illustrated will have to rise not 10 per cent. or even 20 per cent. from the present £41·26 gross, but much nearer 50 per cent.
I understand that for that grade of Service man's pay to be equal to what he would receive on short-term unemployment benefit together with the tax rebate that he would receive if he were unemployed, it would mean gross pay of about £65 a week. That is the measure of how disturbingly far behind the private soldier's pay lags compared with what he

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might earn as a civilian. It illustrates well the appalling muddle of the interrelationship of low pay, inadequate child benefits, over-dependency on means-tested social security and high taxation.
Service men on means-tested benefits cannot ignore the poverty trap. The Pay Review Body cannot put right the tangle of this inter-relation between tax and social security benefits, but it should at least pay attention to it and ensure that individuals who are affected by it have their pay jerked up substantially so that, in as short a time as possible, they can be moved outside it altogether.
I hope that the Government will take on board the effect of the poverty trap on these low-paid Service men. It will not be sufficient for the Government to say that the tax allowances may be raised tomorrow, or that the level of income tax will be reduced. Even if the tax take on the Service men were to be halved, the poverty trap would still mean that a 10 per cent. rise in gross pay would not make up for increases in the cost of living.
The overstretched, hard-working members of the Armed Forces do not expect to be given more than the country can afford, but they have a right to justice. Justice in their case means pay which is comparable with the earnings of skilled men in civilian life. They should be given that as soon as possible. For their self-respect, as for our self-respect in the House and the country, they should not have to do all the dirty jobs that we have served them and then stay below the level at which they must rely upon means-tested benefits.
Our Armed Forces are smaller than they have ever been in modern times. They should be properly paid and equipped. One young Doncaster-born wife of a guardsman in Londonderry to whom I talked a few weeks ago said "We really are very poor indeed. Yet I think that we are still happier than those at home because we feel that we are part of a team doing a real job." I believe that they are doing a real job—there and everywhere else where they are called upon to serve.
The Armed Forces of the Queen are poor yet honest defenders of our country's liberty. We value the job that they are doing. We demand that this Government set the record straight. If the Secretary of State cannot get his way in
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the Cabinet and go a long distance towards taking the Service men out of the poverty trap, he owes it to them to resign.
11.28 p.m.
The Minister of State, Ministry of Defence (Dr. John Gilbert): I congratulate the hon. Member on his good fortune in having an Adjournment debate and on raising this important subject, which is of concern to all sides of the House. I accept his strong feelings on the matter, and I am grateful to him for the moderate tone in which he put his case. I hope that he will accept that Ministers feel as unhappy about this situation as he.
I speak with some difficulty this evening. As hon. Members know, the Armed Forces Pay Review Body report was submitted to the Prime Minister on 31st March. Everybody knows that a pay increase for the Services is on the way and that it will be backdated to 1st April. Everybody knows that I am able to speculate neither about what that report says nor about the Government's response to it.
The debate covers a certain amount of confusion in the public mind on the question of the military salary and some of the means-tested benefits. I shall start by trying to set the matter in perspective.
Perhaps I could take, first, the question of the military salary itself. As has been explained often before, this is based on the fundamental principle that Service men's and Service women's pay should be comparable with civilian earnings in jobs of equivalent weight, including those with similar skills and responsibility. To the resultant figure there is added, as hon. Members will know, as extra element, the "X" factor, which is currently set at 10 per cent., in recognition of the balance of disadvantages as against the advantages which exist in Service life. From the resultant military salary, which is set without regard to individual family circumstances—that is, whether the Service man is married, or how many children or other dependants he may have—are deducted charges by which he pays for his food and accommodation, except in very special circumstances, as for example when he is serving under field conditions on operations.
The concept, thus, is that the Service man should, like his civilian counterpart, receive the rate for the job, and, like the

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civilian, pay for his own living expenses, while being eligible, subject to a set of standard criteria, for the welfare benefits that are available to the community as a whole.
The military salary concept was introduced in 1970, following the acceptance by the previous Labour Administration of the recommendations of the National Board for Prices and Incomes, and the concept was endorsed by the incoming Conservative Administration, which established the Armed Forces Pay Review Body to make recommendations on Service pay.
As we all know, Governments of both major political parties have found it necessary to introduce pay policies. These pay policies have had the inevitable effect of disturbing the normal arrangements for wage determination, including the fixing of the military salary by comparison with civilian earnings. This is extremely unfortunate, but I do not think that any hon. Member would deny the necessity for the overall policies—leaving aside the difficulties that their implementation occasionally creates—which the Government have been seeking to pursue in the overriding national interest in the last three years by seeking to reduce inflation. I hope that not many people would attempt to deny the success of these policies in terms of a consistently falling inflation rate.
Everyone will benefit from the lower rate of inflation—Service personnel and Service families along with everyone else.
The Armed Forces are not unique in having had their pay affected by pay policies. I would be the first to recognise that the consequences for the Armed Forces that have resulted from pay restraint have been particularly harsh in many cases. It is the loss of comparability with civilian earnings which, as the Government have accepted on many occasions—myself and my right hon. Friend the Secretary of State, at this Dispatch Box—is the fundamental problem to be put right as soon as economic circumstances permit.
Sir Timothy Kitson: With Catterick in my constituency, I recognise the difficulties of so many soldiers at present. What makes the comparison difficult is the fact that a
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civilian in a comparable job, as the right hon. Gentleman has suggested, is able to choose his living quarters. The problem with so many people in the Army is that they are allocated quarters which at present are extremely expensive. A man who, as the right hon. Gentleman said, has a comparable job in the Army finds himself £7 or £8 a week worse off than he would be on the dole, because not only are his accommodation charges so high but very many of the quarters in Catterick are heated only by electricity, and the inflation in electricity charges is a great deal more than the compensation for inflation represented by his salary increases. Therefore, one cannot compare the two positions. A civilian can at least choose his own accommodation. A man in the Army is allocated quarters over which he has no choice.
Dr. Gilbert: I am obliged to the hon. Gentleman. I dissent from only one element of the proposition that he puts forward—that is that the Service man would normally be worse off than someone on the dole. It goes rather wider than this debate. If I have time, I shall comment on that matter. But I certainly take the points that the hon. Gentleman has raised. These are intended to be compensated for, in part at least, by the "x" factor, which takes cognisance of the turbulence in Service life and the fact that the Service man does not have the freedom of choice of accommodation that the person in private life has, as the hon. Gentleman points out.
As I have said, it is the loss of comparability which has to be put right as soon as our economic circumstances permit. In the meantime, it is inevitable that the wholly understandable and proper concern about the central issue results in attention being focused on conditions of service and on such matters as are the subject of the current debate. I hope to show that the remarks made on this subject by the hon. Member are rather off target, although I do not for a moment dispute the genuineness of the concern for the forces' welfare which has led him to introduce this subject for debate.
The hon. Gentleman refers to "means-tested benefits". This is an expression which in some people's mind conjures up images of the 1930s dole queues and

1151
carries with it the implication that the recipients are in dire poverty. However, the situation nowadays is considerably more complex, since there exists a wide range of benefits for which the qualifying levels vary widely. Entitlement is generally dependent on family size and sometimes on net income after tax, rent or mortgage and other expenses have been deducted. Consequently, many individuals with the same gross pay may find themselves on different sides of the qualifying line.
When replying to a Question from the hon. Member on 21st March, I reminded the House of an important point made by the Armed Forces Pay Review Body in its 1974 report. It was made in connection with rent and rate rebates and it therefore bears repeating. The body stated that disqualification from rebates altogether would require a minimum weekly rate of pay for all Service men of the income needed by the Service man with the largest family to exclude him from entitlement. It concluded that such a proposition was patently absurd.
Mr. Boscawen: That was before child benefit was introduced. Child benefit is paid automatically as of right. That makes a difference.
Dr. Gilbert: I accept what the hon. Member says.
I turn to the question of rent and rate rebates, which was the main subject of the hon. Gentleman's remarks. This is the one area in which Defence Ministers are responsible, in so far as the scheme for members of the Armed Forces in public accommodation is administered by the Ministry of Defence. The qualifying levels and the amounts payable under the MOD scheme are essentially the same as those which apply under the local authority schemes. The MOD scheme operates on a world-wide basis, since married quarters charges are the same everywhere and because allowances paid overseas compensate Service personnel only for the extra costs that they incur. Thus, a man's eligibility will not change if he moves with his family from, say, Aldershot to Hong Kong or any other place.
Mr. David Walder: The hon. Gentleman may be missing the point, that certainly there is considerable doubt whether some of the family benefits are payable overseas.
Dr. Gilbert: I am advised that in respect of rent and rate rebates what I have said is correct. I shall look into any point that the hon. Gentleman likes to put to me. I hope that I shall not have to give way again, because I am trying to reply to the debate.
The total numbers in receipt of rate rebates fluctuates throughout the year, the main determinant being the pay award in April, which brings them down very considerably, and then the figures tend to move upwards through the year and to be raised in a step increase in November each year when the qualifying levels are revised.
I have tried to make some investigations into how those in the Services compare with those in the civilian sector. Such comparisons are very difficult to make, and all the figures would have to be treated with very considerable reserve because necessarily they are estimates. The total in receipt of benefit—that is, rent and rate rebates—as a proportion of the total number of occupied married quarters and hirings is about 9½ per cent. compared with the percentage of employed council tenants—which is roughly the same analogue for the civilian sector—of 13·3 per cent. for the population as a whole. In other words, 50 per cent. more civilians in public accommodation receive rent and rate rebates. I do not say that either situation is satisfactory, but it helps us to get the matter in perspective.
I have already referred to the views expressed by the AFPRB in 1974 on the question of pay in relation to rebates. In its report of the following year, it returned to the same theme, expressing itself in stronger language:
"There appears to be a great deal of misunderstanding, both in the Armed Forces and outside, about the nature and purpose of rent and rate rebate schemes. So far as they apply to the Armed Forces, they have been misinterpreted, in some instances misrepresented, either as some kind of social stigma or as evidence that the earnings of some members of the Armed Forces are below what is described as the 'poverty line', or both. Interpretations of this kind are erroneous. The purpose of the rebate scheme is to assist people according to their family means and their family circumstances."
Again, that is not me speaking as a Minister but a direct quotation from the AFPRB report of 1975.
Sir Timothy Kitson: Could the Minister explain one thing? A private with 12 years' service and three children in a C-type quarter has gross pay of £53.90. His income tax is £5.26, his national insurance is £2.76 and his quartering charges £9.59. His net entitlement is therefore £36.29. He gets £2.31 rent rebate, £4 allowance for his children, and ends up with £42.60, so he is £4.50 a week worse off than in civilian life. That is the point that we are trying to make and that is the matter in respect of which there is not a fair comparison with civilians.
Dr. Gilbert: The hon. Gentleman threw about eight statistics at me. I would not seek to impugn any of them, but before I could answer I should have to have them before me in writing. I shall write to him after I have had a chance to study his remarks in Hansard.
I should say something about the poverty trap, a subject the hon. Gentleman raised with me both today and in a supplementary question to a Question that he put to me a couple of weeks ago. It is true that when anyone receives any benefit determined by reference to his family circumstances and income, the amount of benefit payable will be reduced when his pay is increased. That is an inevitable product of means-tested benefits, and the problem could be solved only by a much higher level of flat-rate, universal benefit. It would be an excellent idea if we had unlimited resources, but, as Conservative Members are the first to point out when we are discussing many subjects, resources are not unlimited.
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Many factors affect the Service man currently receiving benefits. The April pay rise, about which I am unable to speculate, and the Chancellor's Budget proposals, yet to be announced, will undoubtedly be major factors. However, setting aside tax changes, I shall be extremely surprised if no one receives a net gain in income levels after the Services pay award of this year.
I should stress that nothing that I have said is meant to deny that Service pay is currently lower than it should be under the military salary concept. This is a situation of which the Government are fully aware and in which Ministers take no pleasure. I assure the hon. Gentleman that it will be taken into account fully in our current consideration of the AFPRB's 1978 report.
What I have to reject, however, is the suggestion that the claiming of benefits such as those to which I have referred in itself shows that large numbers of Armed Forces personnel are below the so-called poverty line. That simply is not so, though there are of course certain families in very straitened circumstances. One fully understands that, and we all regret it. Neither the Service men nor any other claimant is helped by anyone trying to make out that some sort of stigma is attached to the benefits designed to aid a substantial proportion of the community according to their family circumstances.
Question put and agreed to.
Adjourned accordingly at fifteen minutes to Twelve o'clock.

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

STATUTORY INSTRUMENTS
Baroness VICKERS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they are taking to meet the criticisms made by the Joint Committee on Statutory Instruments (First Special Report (H.L. 51, H.C. 169)) that the Government seek to by-pass Parliament by omitting necessary detail from Instruments and conferring wide discretion on Ministers to vary provisions without making further Instruments, and do not always allow adequate time between the laying, publication and coming into force of Instruments.
The LORD PRIVY SEAL (Lord Peart): My Lords, the Government are considering this report and will be making a reply shortly.
Baroness VICKERS: My Lords, while thanking the noble Lord for that short reply I should like to ask him what "shortly" means. This report has been before the House for quite a long time and I should like to ask whether he will take into consideration the fact that there are so many of these regulations coming before the House the explanatory notes to which are not adequate. The fact is that today we have to see 14 different witnesses to try to explain these regulations, so does the noble Lord not think that it is essential to look into the matter rather urgently?
Lord PEART: My Lords, I am sure the noble Baroness will understand that I cannot comment on what I hope will be the Government's response. I understand
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her point of view, but, on the other hand, this system has worked well. The whole argument about delegated legislation is an important one and there should be checks. If she will read the report she will see that here and there the system is praised.
Lord BALFOUR of INCHRYE: My Lords, I should like to ask the noble Lord the Leader of the House whether he will be so good as to say whether the result of the consideration will be made known by the Government to this House and that then we might even have an opportunity of further debating this very important subject?
Lord PEART: My Lords, certainly a Statement will be made—probably in another place first, naturally; but it affects us considerably and I will take note as to whether or not we should have a debate. However, I do not promise one.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, when the Government are drafting their reply will they take into consideration the fact that the profession is badly in need of up-to-date information on delegated legislation in order that they may advise their clients on the law; or do the Government take the view that ignorance of the law is no excuse?
Lord PEART: My Lords, I thought the noble and learned Lord was going to say "bliss", but that is another matter. Of course I will take note of what the noble and learned Lord has said.
Baroness WARD of NORTH TYNESIDE: My Lords, in view of the fact that it would be to the advantage of us all if the recommendations of the Renton Committee—not just some of them, but all of them—were put into operation, I should like to ask the noble Lord whether the Government have accepted all the recommendations of the Renton Committee which examined in detail many of the points which have been raised under this Question by my noble friend.
Lord PEART: My Lords, I cannot wander into other matters. I have given an assurance that there will be a Government response to this report on Statutory Instruments.

OIL POLLUTION: WRECKED TANKERS
2.40 p.m.
Lord HAWKE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are satisfied that in the event of an oil tanker becoming a wreck on United Kingdom shores they have the powers immediately to see that the cargo is burnt without delay involved in arguing about necessity or compensation; and if not, whether they will take steps to get such powers.
Baroness STEDMAN: My Lords, Section 12 of the Prevention of Oil Pollution Act 1971 empowers the Secretary of State to give directions to those in charge of a stricken tanker as to the action they should or should not take, or to take appropriate action himself. But an undertaking was given to Parliament during the passage of the relevant Bill that the interests likely to be affected by any proposed intervention measures would be consulted.
Lord HAWKE: My Lords, I thank the noble Baroness for her reply, which will be satisfactory to many people in Britain who value our coastline. But would she not agree that the sting in the tail, that various interests have to be consulted before decisive action can be taken, might lead to the bumbling and fumbling that went on over the "Amoco Cadiz"?
Baroness STEDMAN: My Lords, I do not think there is any danger of that. The 1969 Intervention Convention relates to measures taken on the High Seas to protect coastal and related interests and normally requires consultation with the vessel's flag State, and with persons likely to be affected by the measures; but it recognises that in cases of exceptional urgency this may not be possible. We believe this to be the right approach to casualties both within and outside our territorial waters.
Lord HALE: My Lords, does the noble Baroness not realise that the words she used, if I heard them correctly, seemed to imply that
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one has to consult people in all parts of the world while a major disaster is taking place? So far as the Channel is concerned, with its special risks, its special geographical problem and the fact that two nations or more may be in danger at once with different coastlines and variations of winds, is it not absolutely essential that one should know the position and that there should be international powers to take emergency measures, even of the most drastic kind if necessary, without international argument and discussion?
Baroness STEDMAN: My Lords, in answer to the supplementary question, I said that in cases of exceptional urgency it may not be possible to have the consultations. Where there are cases of exceptional urgency, our Secretary of State has the power to take action.
Lord CAMPBELL of CROY: My Lords, will the Government consult—if they have not already done so—Sir Eric Drake, the former chairman of BP? He has made it clear that in his opinion the burning of the oil in such circumstances should be carried out as soon as possible by a boarding party, and that this is far more effective than attempts at bombing.
Baroness STEDMAN: My Lords, I am aware of the view of the former chairman of BP, but there are other things that we have to consider. It depends whether the tanker has gone aground and if there is a possibility of towing it off and perhaps salvaging the cargo. it is not something on which we can advise Governments to take an immediate off-the-cuff decision as to what they should do. There are bound to be a few hours' delay, at any rate. In so far as the "Amoco Cadiz" was concerned, we made our help available immediately, but we had to wait until the consultations had taken place before it was used. If there were any difficulties off our own shores in our own territorial waters, I am assured by my officials that we could have experts there within hours to give advice to the Secretary of State as to what action he should take.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, are the Government satisfied about the compensation provisions of the law in this respect? Some of these tankers are owned by one-ship companies.

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Are the Government satisfied that such companies will be in a position to pay the enormous sums for which they will probably become liable in the event of a disaster? Have the Government properly explored the availability of funds to pay for these disasters?
Baroness STEDMAN: My Lords, in so far as compensation is concerned, any person who incurs expense or suffers damage as a result of action ordered by our Secretary of State is entitled to compensation if that action can be proved to have been unnecessary and not the kind of action that ought to have been taken in the circumstances.
Lord SHINWELL: My Lords, is my noble friend aware that most of the accidents that have occurred were due to faulty navigation, not on the part of United Kingdom ships' navigating officers but particularly those associated with ships registered in Liberia and similar countries? Is the important consideration not a matter of compensation or consultation for this and that, but rather of ensuring that ships which are likely to be proceeding through the English Channel should have navigating officers of the best quality?
Baroness STEDMAN: My Lords, I am assured that there is a real skill in the navigating of these very large tankers and other ships within the Strait of Dover and our Channel waters. I am also assured that the voluntary measures, of using lanes for the sea traffic, are being increasingly and better used than they were. It is not something on which at this time the Government think they ought to introduce compulsion; but our Coastguard Service have the right to draw it to the attention of anyone straying from the lane and ask them to get back into it, and usually in their own interests they do so.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I am sorry to ask another question about this. I do not think the noble Baroness fully appreciated the purport of my last question. Could she have it studied and write to me, and perhaps put the answer in the Library?
Baroness STEDMAN: On the question of compensation, certainly, my Lords.
Lord PAGET of NORTHAMPTON: My Lords, would the noble Baroness consider the desirability of requiring tankers to take on pilots upon entering the Channel?
Baroness STEDMAN: My Lords, that is a point I will put to my right honourable friend.
Lord HAWKE: My Lords, will Her Majesty's Government realise that the immediate destruction of the cargo is of vital importance in many cases, and that the risk can be covered by the owners of the ship and the cargo for a minute fraction on the insurance?
Baroness STEDMAN: Yes, my Lords, that is one of the problems. It is one of the points we shall have to look at and are continually looking at.
Lord MORRIS: My Lords, have Her Majesty's Government received any satisfactory reason from the French Government as to why they turned down our immediate offer of every possible assistance, to the great distress of the people of Brittany?
Baroness STEDMAN: My Lords, I think this question really arises out of a Question which has been put down on the Order Paper for me to answer tomorrow. I can say that we had a frigate and six other ships operating within the waters and helping out with the French. It was for the French Government, as the coastal State involved, to have consultations and to decide what they want from other countries.

CPRS REVIEW: BRITISH INFORMATION SERVICES
2.48 p.m.
Lord CAMPBELL of CROY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what stage has been reached in the review being carried out of the role of the British information services in the United States.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, following the Central Policy Review Staff's review of overseas representation, Ministers have been considering the level of information staffing in our major posts, including those in the United States. This process, which involves a careful examination of each post's individual requirements, has not yet been completed and no decisions have been taken.
Lord CAMPBELL of CROY: My Lords, I thank the noble Lord for that reply. Do the Government consider it any less important now, in 1978, that Britain's policies and views should be expertly and effectively projected in the United States, and, if not, can the noble Lord give an assurance that no significant changes will he made before full Parliamentary consideration has been completed on the relevant recommendations in the CPRS report?
Lord GORONWY-ROBERTS: My Lords, I can certainly give the assurance asked for by the noble Lord that our representation in this respect in the United States and, indeed, in other major posts will be maintained as a result of this consideration at a viable and effective level. As soon as decisions have been reached, I have no doubt that Statements will be made which will enable both Houses of Parliament to debate what is proposed.

LUCAS AEROSPACE: CLOSURES
2.50 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will institute an inquiry into the Lucas Aerospace plants at Liverpool and Bradford which are to be closed; and especially into the alternative proposals for the production of socially useful goods put forward by the shop stewards' committee.
Lord WINTERBOTTOM: My Lords, I understand that, following the announcement by the Lucas Aerospace management
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on 16th March of proposals to reorganise the company, discussions are now taking place between the Confederation of Shipbuilding and Engineering Unions and management, both on management's own proposals and on the shop stewards' committees' proposals. It would be sensible to await the outcome of these discussions.
Lord BROCKWAY: My Lords, while welcoming the decision that this matter will be considered by the Confederation and particularly the influence which Her Majesty's Government have exerted to that end, may I ask the following question: Is it not the case that it was the Department of Industry itself which encouraged the shop stewards' combine to prepare this plan? My noble friend Lord Beswick, when he was in that Department, said that it was the most important piece of work from trade unionists that he had seen. In view of that, will Her Majesty's Government give the fullest support to these constructive proposals?
Lord WINTERBOTTOM: My Lords, the Government have consistently welcomed the initiative of the shop stewards in thinking positively about the future of their company. The Government have urged on the company and the CSEU, at a number of meetings and in correspondence, that the corporate plan should be discussed. However, it is also stressed that this should take place through the proper channels—that is to say, through the Confederation.
Lord MACLEOD of FUINARY: My Lords, arising from the Government's Answer to the noble Lord, Lord Brockway, I should like to ask a residual question. I understand that in the financial year ending last July, Lucas Industries acknowledged a £56 million deferred tax concession by the Government. As part of the Government's industrial policy is the rejuvenation of industry—
Several noble Lords: Order!
Lord MACLEOD of FUINARY: My Lords, would I be in order to ask the Government how Lucas disposed of the deferred tax, or should I first approach Lucas Industries?
Lord WINTERBOTTOM: My Lords, I was answering a Question on the proposals of the shop stewards' committee. The noble Lord has asked another question.
Lord BALFOUR of INCHRYE: My Lords, am I right in thinking that the Government take the view that socially useful goods, whatever they are—I do not know—would be produced economically only if they had a ready sale at an appropriate price and would not, in fact, become a hidden subsidy from the taxpayer?
Lord WINTERBOTTOM: Yes, my Lords, that is the view of the Government on the subject. However attractive some of the projects may be, they must be economically viable.
Lord BROCKWAY: My Lords, the noble Lord referred to the "proper channels". Is it not the case that the shop stewards' combine represents the shop stewards in all the plants of Lucas Aerospace, and represents also the 15 trade unions? Is the noble Lord aware that those of us who have met its representatives are tremendously impressed not merely by their devotion but by their skill and their plan, which answers the points which were raised in the previous question?
Lord WINTERBOTTOM: My Lords, this is a major problem which must be discussed at the highest level. As far as the Government are concerned, it is the senior officials of the Confederation of Shipbuilding and Engineering Unions with whom the Government must talk if we are to avoid chaos. Nevertheless, as I said in my original Answer, the CSEU is discussing the corporate plan that has been put forward by the shop stewards' committee.
Lord PAGET of NORTHAMPTON: My Lords, when the noble Lord says "economically viable", does he mean more or less economically viable than paying unemployment benefit?
Lord WINTERBOTTOM: My Lords, that is another question.

EUROPEAN COUNCIL MEETING
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House my noble friend the Leader of the House, at a convenient moment after 3.30 p.m., will repeat a Statement on the European Council meeting held in Copenhagen. May I also take this opportunity to say that House dinners will be available tomorrow, and on Wednesday and Thursday evenings.

COLLECTIVE BARGAINING
2.54 p.m.
Viscount TRENCHARDrose to call attention to the great differences between the structure of and atmosphere surrounding the system of collective bargaining in this country and that of our competitors abroad; and to move for Papers. The noble Viscount said: My Lords, in rising to move the Motion standing in my name on the Order Paper I feel that many would first like me to echo their thoughts of sorrow at the death last week of Lord Douglass of Cleveland.
Several noble Lords: Hear, hear!
Viscount TRENCHARD: My Lords, I did not know him well personally as his industry was, as it were, at the opposite end of industry from my sphere, but I met him and I knew of him as a man of greatness, dedication and, above all, of moderate opinions to try to improve industrial efficiency in this country. 1 had hoped that he would have been taking part in this debate. It is our loss that he will no longer be able to give us his great wisdom.
I note, with some relief, the list of extremely distinguished speakers who are to follow me, and I believe that they will compensate for my lack of Parliamentary experience and will raise the level of this debate to the standard to which your Lordships are accustomed. My lack of experience has been due partly to my having been a fairly full-time manager in industry for the past 30 years. During those years I personally have had to perform trade union negotiations; I have had the nerve-racking experience of

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industrial disputes and strikes, and I have had experience of those matters in other countries in Europe and North America. I have been responsible for companies in the same industries in different countries and for managers of many nationalities, and I have moved them from country to country, listening to their comparisons in addition to making my own. One's personal experience is inevitably limited to a narrow segment of industry, but from talking to many other industrialists in recent years I feel that the views that I shall be expressing today are widely held, even if not quite so widely expressed. I hope that the House will feel that this Motion follows well the debates in February introduced by my noble friend Lord Selsdon and by the noble Lord, Lord McCarthy.
I do not think that anyone will argue any longer that we have declined disastrously as a manufacturing country. Every survey, every report and every comparison shows it. The result is that, while our wage levels were, in 1950, in real terms above those of any other EEC country, we are now down to half in most cases, and even less in some. North Sea oil may give us a breathing space, but it will not give us more than that. I believe that the most important area for reform of British industry is to regain competitive efficiency in collective bargaining, industrial relations and trade union affairs. There are larger differences in those areas between us and competitor countries than there are in any other aspects of industrial performance. I do not think that simply because of my personal experience; I believe that it is self-evident that this area is the nation's Achilles heel. It is self-evident because British performance in many other areas since the War has been good and competitive, with productivity records even above those on the Continent. 1 refer to agriculture, to the City, to many of the service industries, to much of the retail industry and even to some parts of manufacturing industry.
The trouble and the lack of productivity lies mainly in the large labour employment areas of industry. Without the good performance of the sectors that I have mentioned, our standard of living, relative to those other countries, would have fallen lower still. The areas of
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manufacturing industry which are successful tend to be those where smaller numbers are employed, at least per site. One must also note that many British owned and British managed enterprises abroad, in this case including even fairly large-scale ones, have been successful. Therefore, I believe that it is impossible not to conclude that this area is, indeed, the key area and, further, that there is no more wrong with British businessmen, investors and managers than there is with those of other countries. Of course, we must always struggle to improve, and there is plenty of room for improvement. But qualities will vary in all countries.
Why then are we uncompetitive, with such appalling productivity records in our large factories? I believe that it is probably because we had the Industrial Revolution first, ran into the problems of scale first, and made the most mistakes. Since then we have allowed to evolve the biggest mess verging on a degree of anarchy, mainly in those big factories: cotton, steel, the mines, shipbuilding, the docks and motor cars, and there are still other large ducks which are not yet lame. The sturdy individualistic British spirit was perhaps bound to react more fiercely to some of the more inhuman aspects of mass production. Tragic emotional struggles have been remembered and, indeed, have been handed down from heart to heart for far too long, as they have been in a totally different context in Northern Ireland.
Some may feel that the problem is simpler, and that good as British performance is in the areas that I have mentioned, our management is somehow incapable of motivating and communicating with very large numbers of employees. Not only have I seen them do it abroad but I doubt whether the experience of this nation at war would give any backing to that belief. Therefore, I believe that it is not coincidental that one also finds that there are greater differences between industry in this country and in others in the atmosphere surrounding collective bargaining and industrial relations.
I do not mean to suggest that there are not problems abroad—even the same problems—but the degree to which they suffer them is less, the disease is less virulent and for some reason or other we are extremely reluctant to try the cures

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which some of those countries use. What are these differences? I shall emphasise Germany, the United States of America and Japan. However, I think that all successful competitor countries tend to accept the need to make the cake first before arguing about its division.
In Germany, with only 16 unions, participation for the profitable success of each operation is cemented through the legally-backed works council structure. I believe that the devastation of the German economy in the war also played a major part by ensuring that the whole population realised the need to remake the cake. In the USA there is no legal requirement for participaiton and no real movement to get one. It seems that the history of the enormous growth of that country, and of enterprises within it, over the last 100 years puts across the same point; namely, that cakes are of variable size, can be greatly enlarged and need to be baked before eating. In Japan lifetime employment by one enterprise as a custom and one union per enterprise effectively secure the same kind of atmosphere.
There is less legal immunity for trade unions abroad. We have been repealing legislation and, to a degree, excluding trade unions from legislation while other countries—particularly Germany and the USA—have been enacting. In virtually every country except Britain, agreements are enforceable and trade union leaders have to check that their members are prepared to honour an agreement—and their members have to say so—before they sign it. otherwise they put their funds at risk.
Membership of trade unions is much more voluntary, and more truly voluntary. The importance of this is that the leaders, who generally want to keep their eyes on what the mass of their members want, have to do so rather than being diverted by a militant, controlling and often politically-orientated minority. In the German case, the closed shop is outlawed. In the American case, it is not legal, but post-entry shops are allowed in most States. But the procedure for unscrambling such a shop is clear, relatively easy and democratic. Political ties for trade unions are forbidden in Germany and are less rigid in other countries. We would
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make more progress in the efficiency of industry if we could stop it being a political battleground.
The deduction of union dues from pay packets is not common elsewhere, and where it takes place regular safeguards—better than ours—are, on the whole, provided. Controls on, even the outlawing of, political strikes, sympathy strikes, and strikes before procedures for settling disputes have been tried, are common. Controls on picketing tend to be greater. Procedures for democratic elections and for ballots before strikes are meticulously laid down, just as we meticulously lay them down for Parliamentary or local government elections. No one seems to have our particular system involving tax rebates, supplementary benefits and other factors which enable, at least in certain months of the year, long strikes to continue with relatively less hardship to those taking part than is the case in other countries. There are many other devices; arbitration is used to a greater extent in many countries.
Have we, perhaps, been over-compensating since we made those mistakes in the Industrial Revolution? Have we done this in Acts of the last century and of this? We were repealing our 1927 Industrial Disputes Act in 1946—at the moment when Germany, with its amalgam of laws and structure in the new Constitution after the War, and the United States of America, with the Taft-Hartley Act, were steaming in the opposite direction. We have also excluded trade unions from all-important provisions of the monopolies and restrictive practices legislation. These Acts apply more and more to those on the other side of the collective bargaining table.
I am sure that many noble Lords may feel that law is counter-productive in this area. Indeed, the urgency of our situation is such that, if a consensus for a code of practice could be reached and if reform could be brought about without much legal change, it would be very good indeed. However, I am not one who subscribes to the view that law spoils atmosphere. I also note the quite frequent recourse to law and suggested recourse to law when it is a question of furthering the interests of employees and of trade unions. However, while it takes time for new law to become established, if it is good law I believe

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that it can condition atmosphere for the better. I believe that it is doubtful whether the number of transactions which are carried out in the City of London on the telephone could be so reliably carried out if there was not a law of contract in the background.
In quite a different context, 1 believe that if there were no law against robbery the number of thieves would probably increase. At any rate, I believe that we need most urgently a reform of our collective bargaining system to bring it in line with successful countries of the 20th century. Re-reading the Donovan Commission's Report, I believe that today they would agree. They recommended much reform and left many questions open for the future as that reform got under way. I, however, feel that they studied too little the systems in competitor countries.
I believe that the only theoretical alternative to reform in the current British framework is the continuation of an incomes policy. I believe that that involves continuation of the rÔle of the trade union leaders as the Government's henchmen to keep down their members' pay. I doubt if the phrase "flexible incomes policy" is a reality. I believe it is probably a contradiction in terms. No central body or bodies, I believe, can put all the factors required by a dynamic growth economy into a central formula. Even social justice is a matter of many opinions. I doubt whether we can ever sufficiently improve our productivity records, notwithstanding the efforts being made today, under an incomes policy of a kind, on the basis of an incomes policy. The stresses and distortions get larger with time and in each new phase—and, ironically, the injustices done to the weaker bargaining areas seem in practice to get worse under an incomes policy.
I believe that a Government incomes policy is a device reluctantly applied because the collective bargaining position is unbalanced, and the logical remedy would be to balance the bargaining position. Is it a pipe-dream to suggest that the trade union leaders might themselves initiate reform and discuss it with the other parts of industry? There are considerable advantages which would accrue to the trade union movement if they were to initiate such reform. I believe that it is perfectly possible to double the real wages
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of their members in little more than a decade if we put our productivity records right. I believe that we can eliminate the shameful level of unemployment which we have today. I say this because with our current wage levels at half those of our competitors, and with North Sea oil and gas at our back, there is no reason why we cannot recover the large shares of world markets which we have lost. We have only to be as efficient in the large labour employment industries as we are in the agricultural, service, retail and small manufacturing sectors, to cut through world competition.
If the fears of employers were removed that major investments would not pay off in the current bargaining position, or that current participation schemes would be used as a means to obtain worker control therein, efficiency would be boosted further and we would get nearer to that target of doubling real wages. I do not believe at the moment that the image of the trade union movement to the public is very good, and according to opinion polls it seems to be declining. I believe that it would be enormously improved if the trade unions took a lead in major reform. I believe that most trade union leaders would like to see a return to free collective bargaining, or at least much freer collective bargaining, and I believe that an initiation of reform would make that possible.
I do not believe that monetary control and cash limits for the nationalised industries are, on their own, sufficient to enable the return to free collective bargaining in the British situation. Inflation would be quite certain to result again. The alternative before a British firm faced with an inflationary claim is to suffer great and sometimes quite unsustainable losses by refusing to grant it, or to risk a small loss of volume through increasing prices after granting it. In the big muscle areas they will grant such claims. If the money supply is kept fixed it will be the weaker elements of the population who will suffer. Firms which have a high indebtedness at a moment in time —often small ones—will find interest rates soaring as a greater share of a fixed money supply would be taken by the strong bargaining areas. It is in these areas that the standards of living would fall and unemployment would

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rise. Eventually, of course, the big muscle areas would suffer too, but long before that time I think that any Government would be faced with the need to reimpose an incomes policy, or to print more money.
I do not think that we can rely on trade unions showing moderation to avoid inflation under free collective bargaining. I do not say this because there are not many moderate leaders and responsible leaders, nor indeed because of their difficulties in controlling some of their militant members at shop steward level, but rather more because I think we all in this world always think that our particular case for more is better than the other chap's!
I fear that your Lordships even now may be thinking that we could avoid major reform if our management was better in these large employment areas. I have said on a previous occasion that it takes a good and determined manager in an atmosphere of good industrial relations to spare even 15 per cent. of his time from routine duties. It is this 15 per cent. that can move an organisation forward and improve efficiency. If the whole of this time, and more, is taken up with negotiation with many unions at many levels on every management action, the organisation will tend to move backwards and even routine duties will get left undone, and we shall complain that management is poor. In my experience, the pressures on our management in our big factories in this country compared with others are unique and can become unsustainable.
Another belief is that we should get out of the large employment industries, and that "small is beautiful". I have not the time to spell out my feelings on this, but they could be summarised by saying that the big factories and the big employment areas are too large a part of our economy, and that I doubt whether we would continue to be successful in some of the small and beautiful areas if we are not successful and strong in industries such as basic steel and volume motor cars. I ask today, therefore, whether trade union leaders will consider putting together a package of reforms, not copying any one country but paralleling the kind of balanced situation that exists abroad. I do this because I believe that
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the choice before trade union leaders is a choice which will decide, certainly after oil runs out, whether this nation continues to sink downwards into oblivion as an industrial Power—and some would say that it is almost too late—or whether we double our standard of living in a remarkably short time.
The choice that I believe is the right one is, I recognise, a very difficult one for them because it will undoubtedly involve curtailing some of the factory floor bargaining power--not their bargaining power but the factory floor bargaining power. But does not the alternative before long really mean that trade union leaders must permanently accept the rÔle of distributing inadequate wages in an increasingly poverty-ridden corporate State? This, I believe, is the inheritance that they could leave to their successors, but I hope and believe that they will rise to this enormous challenge and join in a determined effort to reach the not impractical target of doubling the standard of living of their members in little more than a decade. My Lords, I beg to move for Papers.
3.20 p.m.
Lord CARR of HADLEY: My Lords, before I say anything else, I should like to associate myself with what my noble friend Lord Trenchard said about our sadness at the death of Lord Douglass of Cleveland. I first had the privilege of meeting him, I suppose, twenty years ago, not meeting him as often as I should have liked, but sometimes joining with him on work on a particular project: so I know as well as many what he has given to this country and how much we shall miss him.
I am sure that we are all grateful to my noble friend Lord Trenchard for raising this debate today; first, because of the opportunity it gives us to discuss what I am sure no one can deny is a subject of major importance both to the economic efficiency of Britain and also to the cohesion of our society and the satisfaction and sense of purpose which employees at all levels can find in their working lives. Secondly, we are grateful to him because, very much in the traditions of your Lordships' House, he has spoken to us as a professional and as a man who has had long experience of practical responsibility in conducting collective

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bargaining both in Britain and in other countries. Therefore, we are listening to actual experience and not to either political doctrine or academic theory, and we must give it all the more weight because of that.
My noble friend said he believed that the most important area in British industry was the regaining of our competitive efficiency in the area of collective bargaining, trade union affairs and industrial relations. I agree with that because I believe that many of the other vital reforms needed will not, in practice, be successfully tackled until we have put our industrial relations upon a more orderly and constructive footing. Not all will agree with the absolute primacy which my noble friend gives to industrial relations in general and collective bargaining in particular. But even those who would not give it the absolute priority that he does would, I am sure, agree that it is a very important area indeed.
What I should like first to do is to consider what are the basic purposes of any--not ours, particularly—industrial relations system. They are surely, first, to determine levels of pay, including fringe benefits; secondly, to regulate conditions of work; thirdly, to promote the efficiency of each enterprise. in order to maximise the contribution of each enterprise to the total wealth of the nation; fourthly, to promote a growing sense of purpose and satisfaction which employees at all levels can obtain in their working lives; and fifthly, to make progress in all those objectives with the minimum of industrial strife.
Now, if those are the objectives of an industrial relations system, let us look round the world at other industrial countries and ask ourselves honestly how our present industrial relations practices are in fact serving these purposes, compared with what is being achieved in other countries. The answer, I think, if we are honest, is a rather depressing one.
In terms of real earnings, British employees, who used to be at or near the top of the international league, are now well down the table, and their position is falling lower every year. The same is true of fringe benefits such as holidays or provision for sickness and other benefits. The same is true of hours of work. The same is true of our levels of productivity
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and therefore of wealth-creation, on which the standard of living of our whole society depends. The same is true of the degree of participation and co-determination enjoyed by British employees at all levels in the enterprises by which they are employed.
The same is unfortunately true of our recent—and I stress recent—record of industrial strife. In 1977 we had more than 2,600 recorded strikes, an average of about 10 new strikes recorded every working day during last year. Those figures do not include the stoppages which a strike in one factory causes elsewhere. This is an appalling figure. Apart from coal mining, it is a figure which is far, far worse than it used to be in the 1950s or for all but the last year or two of the 1960s. It is, in fact, over roughly the last 10 years that this really serious deterioration has occurred. I think that that is something that we ought to take into account. It is really only over the last 10 years that this deterioration has occurred, at least so far as industrial strife is concerned.
Luckily, of course, this is not the whole story of peace in British industry, because many industries and vital services in Britain are not strike-ridden at all. Many have never experienced a strike. Moreover some countries—for example, the United States and Canada, to take just two—suffer more than we do from really big and longlasting strikes. But among the major industrialised nations which are our chief competitors, no country, I believe, has, relative to its size, such a large total number of strikes.
Although most of our strikes may be small ones, they do immense damage because of the instability they cause in the particular enterprises where they occur, and also because of the chain reaction of dislocation which they cause, which spreads up and down the economy among both suppliers and customers at home and abroad. As the late Ray Gunter once said when he was Minister of Labour, the dilemma of British industry is continuous interruption of production lines; no one knows when it will strike next. This means that in many, if not most, of our largest factories and industries, industrial relations in Britain arc perpetually on the boil. There are relatively few and relatively short periods of assured stability and this really does differentiate British industry from the

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industries of most of our competitor countries, as anybody who has had practical experience in different countries will know.
Lord BALOGH: Will the noble Lord give way?
Lord CARR of HADLEY: I shall in just a moment. Therefore, one very damaging result of this, I believe, is that the physical and mental resources of both managers and union officials in many industries in Britain are so exhausted by the demands of putting out fires that, as the noble Lord said in moving this Motion, far too little resource of time and energy is left over for constructive thinking and development. I really do believe that this perpetual ferment of industrial relations, even when it is not showing itself in the form of actual strikes, is a very serious detriment to the prosperity of this country as well as to the well-being and happiness of those who work in industry.
Lord BALOGH: My Lords, would the noble Lord not agree with me that his policy was one of the greatest causes of growing militancy? Secondly would he not consider that, given what he has done in legislation between 1970 and 1974, he should be the last person to address us in this way?
Lord CARR of HADLEY: My Lords, with due respect to the noble Lord, I would not agree. We could argue, although I do not intend to do so today, about the merits not only of the proposals which my Government—and I in particular, as Secretary of State for Employment—put forward, but also of those put forward in In Place of Strife by the previous Labour Government. We could argue about that, but I think we ought to recognise—and I hope we can seek for agreement rather than difference here—that whether those were right or wrong in their prescription, the policies put forward both by Mr. Wilson's Government in 1969 and by Mr. Heath's Government in 1970, were not the cause of the strife which I have been describing; they were the reaction to it. It was because there had been very serious deterioration compared with our previous good record in the field of industry as a whole, with the single exception of coal mining, that first
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the Labour Government and then the Conservative Government felt, rightly or wrongly, that that sort of action was necessary. Their prescription may have been wrong, but their identification of an illness which required urgent treatment was, I believe, indisputably right and certainly not the cause of the trouble.
As I have said, that is not the whole story but it is very important. Here, then, is the scale and the nature of our problem compared with other countries, whether you look at levels of real wages, fringe benefits, levels of productivity or levels of employee participation and involvement or the degree of industrial strife. Of course these problems are not wholly caused by industrial relations failures. As the noble Lord said, collective bargaining in industrial relations is not bad in by any means all British industry and fields of employment. And of course it is not the fault solely of the British trade unions, nor indeed of British managers. I believe it is the fault of an old system which served us very well when conditions were different but which we have not been successful in adapting to meet conditions as they have changed so radically, particularly over the last 20 years.
In so far as industrial relations are involved, I want to discuss what we can do to solve these problems so that, once again, Britain's record in all these matters is, as it used to be, among the best. In particular, I want to think a little about what is the role of Government in this process. Of course this is a very controversial area, as the intervention of the noble Lord, Lord Balogh, has already demonstrated, and one which is politically and emotionally highly charged—and no one knows that better than I do. But I hope we can all agree at least with the proposition that in a free society our industrial relations system must be a voluntary one. This does not mean that the Government can keep out of it altogether. "Voluntary" is not by any means the same thing as "private". Indeed, at different times in our history employers and unions in turn have each assumed too readily that the conduct of their own industrial relations was their private affair and that everyone else should keep off the ground. This cannot be so because the efficiency and temper of our industrial relations affect drastically the wellbeing of the whole community,

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so no Government can be indifferent to what is happening in industrial relations. Every Government, whatever its political Party, must intervene. The question is how and to what extent. As soon as we ask this question we are at once on controversial ground, of which mention has already been made, and I want to steer my way so far as possible away from controversy and towards areas of agreement.
Thus I hope we can all agree at least on two propositions; that is, if we are to have a free and voluntary system of industrial relations, then the State must not direct labour and the State must not get involved in fixing the detailed levels of wages, salaries and fringe benefits, except, of course, for its own employees. Apart from wartime, when the needs of maintaining a free society have temporarily to take second place, the State in Britain has kept safely out of the first of these areas; namely, the direction of labour. But for most of the last 20 years the State has got itself involved to an increasing extent in the second form of intervention; namely, the detailed fixing of levels of wages and salaries outside the field of the State's own employees. I believe that this is both dangerous in terms of democracy and inefficient in economic terms. Despite that, successive Governments of both Parties hare, much against their will and certainly to their grave political discomfort, found such intervention impossible to avoid. Why is this so and how can we escape from it? Why is it that other countries have been able to cope so much more successfully than we have with the problems, for example, of relating wages to productivity and, therefore, of controlling cost inflation without having to resort, if at all —certainly not as much as we have—to a Government-imposed incomes policy of a detailed kind?
As I have said to your Lordships on several previous occasions when discussing this area, I do not believe that our failure to do without incomes policies is because trade union members and their leaders in Britain are any less responsible or less well-informed or less patriotic than trade union leaders and their members in other countries. I do not accept such a suggestion for a moment, nor do I believe that our troubles in this field are because employers in other countries are all that
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much more enlightened and skilful than they are here. As my noble friend said, from his own experience, he has seen British managers at work in other countries as well as here, and overseas they are perfectly able to achieve results which they are apparently incapable of achieving here.
So I do not blame the employers or the trade unions. I come hack to blaming our system and our failure to adapt it. As I say, I am sure that the basic reason is that systems of collective bargaining in the other countries are much more orderly than they now are in Britain and because in these systems in other countries the threat and the use of strike action is much more frequently held in reserve as an instrument of real last resort, as it once used to be here in Britain.
I agree very much with my noble friend when he says that the Government's incomes policy is therefore a device reluctantly applied because the collective bargaining system has gone wrong. If we want to avoid the use of this device in future, we must reform the collective bargaining system to meet the needs of modern conditions, otherwise I am sure that we shall keep on finding ourselves hack in Government-imposed incomes policies of a detailed kind. At the moment we are in another phase of disengagement. The official policy is described as an orderly return to collective bargaining. But what is the good of a return, orderly or not, to a system which is itself chaotic, because "chaos" is the only word which can be used to describe the state of collective bargaining in some —though not, of course, in all—important parts of British industry.
Lord BROWN: My Lords, I am trying to be helpful. The noble Lord has said two or three times that the Government have intervened in a detailed way in wages policies. I wonder whether he could explain a little more what he means by that. The public knows that they have intervened in setting an overall limit, which does not seem to equate with the words, "in a detailed way". I am puzzled by this constant reference to the "detailed intervention". It has not been detailed, has it?
Lord CARR of HADLEY: My Lords, if the current Phase 3 of the present

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Government is not detailed arm-twisting of a pretty strong kind. and arm-twisting over details, including fringe benefits as well as other things, I do not know what it is. With respect, I think that the noble Lord ought to ask many employers. T say this with some diffidence because I know of his own experience in industry. I find it difficult to believe that he can maintain that the present intervention of the Government is not rather detailed and should be even more surprised if he finds many trade unionists who would say that it is not rather detailed.
In any event, let us forget the word "detailed"; it is surely too much—here I return to my main theme—because our basic system is in need of reform, not because British trade union leaders or their members, or British managers, individually and collectively, are particularly perverse or unskilful or anything else compared with their opposite numbers overseas. We are in this trouble because we are trying to operate a system which is no longer right for the circumstances in which we now live. If we want to get the State out of our hair in fixing wages, except for its own employees, and therefore to continue our free and voluntary system, we must set about bringing more reason and order into our methods of collective bargaining.
I end by outlining some of the main areas where I believe this has to be done and I shall suggest tentatively how we should set about trying to do it. First and most important is the multi-union situation in Britain, surely Britain's chief handicap. It is no good, however, just envying Germany with 16 unions, or other countries which have one union per enterprise; this is part of our inheritance. Unions are, or should be, voluntary bodies and they cannot be compelled to merge with each other, although in so far as they do merge, that may be a good thing and some of that has been going on. Basically, though, we have to learn how to live more successfully with this British handicap of multi-unionism. It is a potential and often a real cause of strife, first of all at the union recognition stage.
Inter-union rivalry—if not actual disputes—is never far below the surface in many British factories or industries. And even when recognition problems are
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peacefully settled, the need to bargain separately with a number of different unions in any single plant is one of the main reasons why industrial relations are so continuously on the boil, and one of the main reasons for those leapfrogging claims which are surely one of the main causes of Britain's failure to keep wage and productivity increases as much in step with each other as has been achieved in other countries. Moreover, the multi-union situation is also the main cause of actual inter-union strikes, to say nothing of demarcation rules which do so much to reduce the efficiency of British industry, particularly where engineering maintenance of production lines is concerned. Thus, living with a multi-union structure is one area which we must tackle.
We must also improve the content and clarity of our collective agreements because they fail in these respects compared with other countries, and this point was of course most strongly urged by the Donovan Royal Commission. Then there is the need to improve the procedures for making sure that the terms of collective agreements are understood, accepted and observed by those to whom they apply, and, in particular for this purpose, to define more clearly how shop stewards are to be responsible and accountable both within their unions and to the employees who elect them. Then, and almost part of the two previous points, is the need to see that each and every collective agreement in Britain contains a proper disputes procedure which should clearly lay down the steps that have to be taken before there is any resort to strike action.
Then, I suggest—again, this is closely related—we need to make greater use in Britain of arbitration in settling what are called disputes over rights. I understand and sympathise with the reluctance of trade unions to accept arbitration in a dispute over interests; that is, when in making a collective agreement there is dispute between the two sides about the basic quantum of the rewards and so on which should go in the agreement. I accept that often that is not a satisfactory matter for arbitration either for the employer or the union, and perhaps particularly for the union. But having said that, it has always seemed to me irresponsible to refuse arbitration and to go instead to strike action when a dispute

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is not over a basic interest but is over the meaning of a clause or clauses in an agreement to which both parties have agreed and which both have signed. Here, surely, is a field where we must make greater use of arbitration in Britain.
There are three other areas which I will mention very briefly. The first is the need to improve the present practice of mass meetings as a means of validating or otherwise decisions to go on strike or to return to work. The second is the need to define the proper role of picketing and the control of potential intimidation and violence as a result of what are really mass demonstrations and not picketing at all. The third is the need within the ambit of the closed shop to lay down proper safeguards for genuine conscientious objectors. Those are, I believe, some of the main needs, but how do we meet them? As Lord Trenchard pointed out, other industrial countries do so to a large extent by the provisions contained in their comprehensive industrial relations law. I do not want to press this controversial point any further today because, as I said, I am looking for agreement rather than controversy.
Also, I do not want to do it partly because we now have a better and fuller framework of industrial relations law than we ever had prior to 1970, in spite of what I still believe are some major gaps and unfairnesses. The Industrial Relations Act may have been repealed, but surprisingly large parts of it have reappeared on the Statute Book under different names and in guises not as radically altered as some people seem to imagine; but if it helps them to imagine it then I am delighted that they should go on doing so. However, I also want to go in a different way because, in the light of our recent history, I believe we both can and should now proceed rather differently.
I suggest the Government should make it absolutely clear to both unions and employers, preferably to begin with in private, that reform of our collective bargaining system is both necesssary and urgent. But having done that, the Government should then stand back and leave it to employers and unions to think among themselves and put their heads together in order to come up with concrete proposals. Out of this voluntary process, undertaken at the request of Government, I would
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hope to see coming forward a series of codes of practice covering the sort of problems I have described, and there may be others as well.
Some of these codes of practice would be produced by the TUC, others by the CBI, and others no doubt would have to be joint documents agreed by both the TUC and CBI. These codes of practice, although not legally enforceable, would be public documents endorsed by the TUC or CBI, or both, and possibly also by Parliament itself. They would not create any legal straitjacket but would provide clear lines of guidance of a practical kind, and those who refused to take proper notice of them would be likely, I think, to forfeit the degree of public sympathy and support which in the end is the critical factor in a free society.
Here, then, is a possible way forward which would avoid the heat and controversy of further major industrial relations legislation but which would provide for specific action to tackle acute concrete problems. Perhaps there are better ways of approaching our problems. If so, I should he glad to hear of them. But surely there should at least be wholehearted agreement that changes and improvements there must be of a major kind and as a matter of urgency.
Our system used to work well, better than most, if not all, of the systems used in other countries. It is no longer working well, largely because there have been enormous changes in the conditions, structures and needs of both industrial and non-industrial employment. My theme, therefore, is that we must make changes to adapt to these wholly different conditions and needs. If we do not, the heart of our voluntary system will die. And when I say we must make changes I am not thinking just about the trade unions, although I am certainly thinking about them. I am thinking just as much about employers and I am thinking about Government. I am also thinking of the need to make many more improvements beyond our system of collective bargaining, which is the limited subject of today's debate. But I am convinced that if we could make our system of collective bargaining into a more orderly and stable system of responsible negotiation, we should soon in this country get higher real

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wages, we should soon get fewer strikes, and we should soon get greater prosperity for the whole of our nation.
3.50 p.m.
Lord ROCHESTER: My Lords, first, I should like to associate myself and my noble friends with the remarks that have been made about the sad passing of Lord Douglass of Cleveland. We shall, like others, miss his good sense, his humour, and his willingness always to seek common ground when it could be found.
I should like to join in thanking the noble Viscount, Lord Trenchard, for having initiated this debate on a matter which is of such vital importance to our country's future, and I think that he is particularly to be congratulated on the way in which he has framed his Motion in a factual and a dispassionate manner, so that we are not called upon to concur in any particular view. Because the field to be covered is so vast, I shall be selective and concentrate on a few points which, it seems to me, are of major importance, and on which, for the most part, I think noble Lords in all parts of the House might well agree.
First, in my view, the basic difference between us and our competitors is one of attitude: in many other countries there is a clear and a general recognition that, while conflict is necessary in collective bargaining, it is highly damaging, unless it is subordinated to the need for collaboration in increasing wealth for the benefit of the community as a whole. In Germany, Scandinavia, and the Low Countries the key institution, as the noble Viscount reminded us, is the works council, the organisation through which common interests of employees and management are identified, and ways of furthering those joint interests are discussed. The purpose is to involve not only trade union members but all employees in the success of their company.
Over the years European managements have learned to trust works councils with an enormous amount of information on finance and on investment planning, which is commonly discussed in detail before orders for new equipment are placed. This is not an occasion to make Party points, but I think I should say that the Liberal Party has long advocated the need
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for the establishment of works councils in all companies above a certain size, and we think that unions have nothing to lose from this. Indeed, in the company for which I used to work, where among weekly paid employees there is a closed shop situation, all the employees on works councils, or works committees as they are called in that particular company, are, in fact, shop stewards, and that applies the whole way up the consultative structure, including the central business and investment committee which has recently been established at the very top.
Whatever the views of trade unions may be about works councils, whatever the structures under which collective bargaining and consultation take place in this country, I suggest that trade union leaders have a special responsibility in encouraging their members to collaborate with management in increasing—as the noble Viscount put it so well—the size of the cake before arguing about how it is to be sliced up. It is only in this way that we shall be able to finance the better educational, health, and social services that we all so earnestly desire to have.
This brines me to the second matter I should like to dwell on for a moment —again, one of attitude—and this time it concerns investment, for it is often said that investment. or the lack of investment, is a fundamental reason for our economic decline. As I have said, European practice is to involve employee representatives in discussing new investment, the return that is expected from it, and the manning standards on which the financial calculations are based. Of course, opposition to the investment plan may then be voiced from its inception, but it is judged better, in Europe, that this should occur while there is still opportunity for the plan to be modified, so that the frustration that occurs so naturally when people are confronted with a fait accompli does not take place, and management thus has to strive to gain commitment before investment decisions are taken. But, once obtained, that commitment is a very powerful argument in favour of the investment.
Such an approach, if it could be practised more widely in this country, would call for just as much change in the attitude of employees and of their representatives, for just as much change in

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trade unions, as it does in the attitude of management. It involves, in particular, the renunciation of the habit which, though it has often formed the pretext for a so-called productivity bargain, is in practice a disincentive to investment and inimical to improved productivity. We must somehow rid ourselves of the bad, old British custom that new equipment is not worked unless management first make concessions to the employees immediately concerned in the form of increased wages or the provision of sonic other benefit.
In the same way, it is not the general practice in Europe for unions or employees to argue about manning standards before a new plant is in operation. Where there is argument it is likely to be confined to evaluation of the facts by common standards, by commonly accepted measurement techniques in which unions, as well as management, employ their own well-qualified practitioners. Unions are just as keen as management in Western Europe, as I understand it, to ensure that both labour and capital are used to the best effect, and that new equipment is put to work quickly and efficiently. For the employees and their representatives the pay-off comes when, very properly, the financial benefits that thus accrue to the company concerned have to be taken into account in the collective bargaining that follows at a later stage. Would it not help enormously to improve our industrial performance if employers and trade unions in this country, too, could co-operate in seeking to promote this kind of attitude to investment and to manning standards?
I was going to say a word or two about the way in which the unions, particularly in Europe, seem to contrive to settle their disputes, but I think that the noble Lord, Lord Carr of Hadley, has very largely done this for me. All I would say is that, in the light of our experience under both Labour and Conservative Governments during the last 10 years, it seems to me that we should be very careful before we seek, once more, to alter the law, at any rate in the immediate future, in relation to resolving industrial disputes.
However I should very much like to support what I understood the noble Lord, Lord Carr, to say: that it would be helpful if employers, trade unions and, indeed, it
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seems to me, the Government and Opposition Parties could, apart altogether from this question of how far the law affecting collective bargaining should be altered, join together in pressing for agreed negotiating procedures to be universally established and adhered to, and, in the case of those disputes which involve the terms of existing agreements or their interpretation, for the parties to them invariably to have recourse to and abide by arbitration rather than take industrial action. I have a lot of sympathy with what the noble Lord said in relation to the method; namely, that, in our present situation, this might well best be done through some new or revised code of practice. Is this not one step which we could agree to take in the interests of us all?
Apart from historical causes, which were rightly touched on by the noble Viscount, Lord Trenchard, in my view the main reason why there are these great differences between the atmosphere surrounding collective bargaining here and that abroad is to be found in the huge amounts of time and money that are spent—for example, in Germany and in Scandinavia—on the education and training of management, supervisors and, particularly, employee representatives. I cannot go into detail now—there is not time —but I believe that management and trade unions in this country, too, have a joint interest in seeing that shop stewards, in particular, have at least an elementary training in the basic facts of how a business is run, the effects of alternative uses to which money can be put, the fact (and this has already been mentioned) that only improved productivity will bring higher real wages, and so on.
It may be that trade unions in this country do not themselves dispose of sufficient funds to finance the training of shop stewards on the European scale, but, in my experience, such training is best undertaken jointly by management and trade unions. I know that trade unions have some reservations about this approach. I understand those reservations, though I do not subscribe to them because I think they are based largely on a lack of trust. There are a number of firms in this country which are practising what might be called a participative style of management and which are now giving a lot of information about the business to their employee representatives, often

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in response to requests for that information. I should like to suggest that a very much stronger lead in this matter should be given from the top, and that discussion of this whole question of education and training should be given a much higher priority by the Government, the CBI and the TUC; for example, on the agenda for meetings of the NEDC.
The last specific point I want to touch on—and I make no apology for this—is what I believe to be the adverse (I think I might fairly say the "adversarial") effect on industrial relations, and therefore on collective bargaining, of our present electoral system compared with those of our European competitors. In this connection, I am not going to beat a Liberal drum but I want to refer your Lordships to a very significant letter, as it seemed to me, which was published in The Times of January 17, by Sir Anthony Bowlby and others like him who hold or have held very senior positions in the field of industrial relations. They included, in particular, a past chairman of the Commission of Industrial Relations and the present Director of The Industrial Society.
In this letter the point was made:
"In all European countries trade unions have strong ties with the political parties of the left while employers tend to support parties of the right, but in many of them this does not exacerbate their industrial relations, because the electoral systems of those countries do not polarize their politics. But the present electoral law in the United Kingdom … fosters the existence of two parties only, one of the left and one of the right, and eliminates parties of the centre by radically reducing the value of any vote cast for them."
They go on to say:
The consequences of this for our industrial relations have been serious. By exaggerating the swing of the vote in general elections the 'first past the post' system has enabled successive governments not supported by a majority of the electorate to make sharp changes in opposite directions in the law concerning industrial relations."
These well qualified writers conclude:
"In the difference between their electoral systems and ours we can see one reason why industrial relations are so much better in Germany, Austria, Scandinavia and Benelux than here, and why informed opinion within the European Commission holds that we must reform our electoral law before we can solve the problem of our industrial relations."
I do not for a moment suggest that because, in general, our system of collective
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bargaining appears to operate less effectively than that of many of our competitors we should immediately seek to transplant their system into our very different environment. We have to start from where we are, and not from where any of us think we ought to be. For example, because Germany does not seem to find it necessary at the moment to have a formal incomes policy, though in 1966 and on several occasions since the German Government have intervened very strongly to influence collective bargaining in that country, it does not, in my view, follow that we should now return to a system of so-called free collective bargaining. For one thing, the Germans are very much better educated in these matters than we are. I understand that the argument at present running between employers and trade unions in Germany is broadly as to whether the new going rate should represent a wages increase of 4 per cent. or 5 per cent., compared with our current 10 per cent.-plus. In my view, what we now very badly need in this country are agreed long-term procedures for the determination of wages and salaries generally; but I do not propose to pursue that subject now.
I must end where I began. I believe that this is basically a matter of attitude. I do not believe that attitudes can be changed by legislation or by re-structuring: there needs to be the will. There are, in my view, no short cuts. Change will come only gradually and painfully, through better leadership on the part as much or more of trade unions—and here I very much agree with the first two speakers—as of management. It will come by example, and particularly by long-term education. Speaking for my noble friends, I very much hope that this debate will help in that process of education by bringing nearer the time when there will be agreed action, on some such lines as I have sought to suggest to your Lordships, between the Government, the Opposition Parties and, particularly, between employers and trade unions for the benefit of the country at large.

EUROPEAN COUNCIL MEETING
4.10 p.m.
Lord PEART: My Lords, with the leave of the House I will now repeat a

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Statement being made in another place by my right honourable friend the Prime Minister. The Statement is as follows:—
"With permission, I should like to report to the House on the meeting of the European Council in Copenhagen which I attended at the end of last week with my right honourable friend the Foreign and Commonwealth Secretary.
"The Council expressed to the people of Italy its distress at the cruel abduction of Signor Aldo Moro in Italy. There was agreement on the need for close co-operation among the Nine in countering terrorism and to reach conclusions on the proposals put forward by President Giscard with the aim of improving judicial co-operation among the Member countries.
"The nine Foreign Ministers, meeting separately for part of the time, reviewed a number of current international problems, including the current position in the Middle East. The Council deplored all recent acts of violence in this area and the events in Southern Lebanon, and expressed support for the new United Nations force and for the integrity of the Lebanon. The Council emphasised that the momentum of the peace process in the Middle East should he maintained with a settlement based on Security Council Resolution 242 in all its parts and on all fronts.
"A statement was issued by the Council supporting efforts of the five Members of the Security Council to bring about a peaceful solution to Namibia. My right honourable friend the Foreign and Commonwealth Secretary gave an account of recent developments in Rhodesia and the Council expressed their continuing support for a satisfactory solution based on the principles of the Anglo/American plan.
"On Community affairs, the Council agreed that the legislative procedures in the Member States were sufficiently advanced to select the dates of 7th to 10th June, 1979, for the first direct elections to the European Assembly. Each Member State will choose its customary day of the week. For Britain that would be Thursday, 7th June, 1979. The Council adopted a declaration on democracy re-affirming the link
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between membership of the Community and the observance of democratic principles, which is valid for both present and future Member States.
"Following the "Amoco Cadiz" disaster on the French coast, the Council called on Member States to adopt common attitudes in preventing pollution of the sea and, in particular, to co-ordinate action on compulsory shipping lanes and on effective control over vessels which do not meet the minimum standards for the operation of ships.
"It was agreed that a European Foundation should be established in Paris to promote cultural and other contacts within the Community.
"The main focus of our discussions, however, was on the unemployment of both human and material resources within the Community. The growth rate of the Community during 1977 was 1.9 per cent. and it was agreed that we should develop a common strategy designed to reverse this unsatisfactory situation. The strategy should cover five broad areas —economic and monetary affairs, employment, energy, trade and relations with the developing world—similar to those I recently suggested to President Carter as areas in which the industrial world needs to take collective action. It is the Council's view that agreement in these fields would be an important contribution to world economic recovery, higher economic growth and the creation of new jobs. The Council laid stress on the need to prevent inflation as part of the same objective.
"It was decided to aim for a Community growth rate of 41/2 per cent. by the middle of 1979 and to define the margin of manoeuvre that would be open to Member States as a result of co-ordinating their actions. The possibilities should be known when the Council next meets in Bremen in July. It was agreed to recommend a doubling of the capital of the European Investment Bank.
"An improvement in the general employment situation would be a key objective of such a common overall strategy. The Council agreed to examine whether work-sharing measures

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should have a supplementary part to play in alleviating the present grave employment problems.
"There was a discussion on the European aspects of what are called "industries in distress" and agreement to set up tripartite committees on a European basis made up of Governments, employers and trade unions to overcome the serious problems of structural overcapacity and to restore the industries to world competitiveness.
"Work is being set in hand on these matters and on the imbalances of current account surpluses and deficits which lead to currency instability; as well as on measures to reduce demand and increase supplies of energy in the Community. It was also recognised that there is a need to reach a successful conclusion on the present multilateral trade negotiations and for an overall increase in capital flows to the developing countries.
"It is intended that conclusions on these matters should be reported to the next European Council in Bremen early in July. This meeting will be followed by an economic summit meeting between the United States, Canada, Japan, Germany, France, Italy and the United Kingdom in Bonn on 16th and 17th July. It will thus be possible to present a European dimension to the wider summit. I am glad to say that the agreed statement announcing the wider summit also recognises the need for concerted and mutually supportive action in the main areas I have mentioned, and the participants agree to develop their policies so as to take account of this, both in preparing for the July meeting and in any action they take meanwhile. The Budget to be introduced by my right honourable friend the Chancellor of the Exchequer tomorrow will take this into account.
"This recognition of common purpose must now be reflected in the work that will take place and must lead to concrete action in the coming months and at the July summits. The discussions so far held with Heads of Governments within and outside the Community have now to be made effective by policy measures which, taken together, will offer the best
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chance of bringing about a change in the direction of the world economy, and an improvement in world confidence."
My Lords, that concludes the Statement.
4.19 p.m.
Earl FERRERS: My Lords, we are grateful to noble Lord the Lord Privy Seal, for having repeated that Statement. Like all Statements of this nature, it refers to generalities rather than to detail, and, while generalities are welcome as objectives to aim for, the difficulty comes in their implementation as between one country and another or corporately. I would share in the regret expressed by the Heads of Government over the abduction of Signor Moro. It is a sad reflection on our civilised society, in which we take great pride, that there are throughout the world those who are shown to be quite ruthless in determining to overturn regularised society for their own ends and by any means. Our sympathy goes to the people of Italy and to the family of Signor Moro and we are grateful to know that the Heads of Government are determined to use all in their power to redress this drift which has taken place.
We welcome the date of the elections to the European Parliament. These have been long delayed and we are glad to know that there is now a fixed date for June of next year. I would also welcome the declaration on democracy to which the Statement referred. It is an important statement of policy, and we are glad to see it reaffirmed that there is no part in the European Community for countries which are or have become one-Party States.
The Statement covers a very wide ground. I shall restrict myself to two areas on which I should like enlightenment. The first is that the Statement mentioned Rhodesia in a passing but important way. It said that the Council expressed their continuing support for a satisfactory solution based on the principles of the Anglo-American plan. I should like to ask the noble Lord whether this means that the European Council welcomed the proposed settlement in Rhodesia, or does it mean by implication that they rejected it because it does not conform to the exact pattern of the Anglo-US proposals? When the Statement

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refers to a satisfactory solution, will he explain to whom that is supposed to he satisfactory? Is it to our Government, to the United States Government or to the people of Rhodesia? Presumably it is to the people who live in Rhodesia, and presumably it is satisfying to them as it was a settlement agreed internally. Is it therefore the philosophy of the Heads of Governments that, even though a solution may be satisfying to those living within Rhodesia, it should nevertheless be considered unsatisfactory if it does not meet the requirements of those living outside Rhodesia? If so, will the noble Lord say on which of the Six Principles the Heads of Government considered the settlement to he unsatisfactory?
The second area upon which I should like enlightenment is the economy. How much real agreement was there on currency problems? Did the Heads of Government accept that the resolution of the European Economic Communities' currencies was dependent upon the resolution of the dollar problem or did they consider it a problem which was internal to the Community? The Statement said that the growth of the economy during 1977, which finished only four months ago, was 1.9 per cent. I think that the Finance Ministers agreed last month that the objective should be that by mid-1979 there should be an average growth of 41/2 per cent. Already in the Statement which the noble Lord has given us that has been altered to achieving a growth rate by mid-1979, as opposed to an average for the year, of 41/2 per cent. It is difficult to see the practical application of such declarations if they are altered so substantially within a month.
Will the noble Lord the Lord Privy Seal agree that, while such declarations are important, we can contribute little to the solution of this corporate problem until we put our own house in order; and that so long as we create conditions in this country where incentive is discouraged, and where it pays people better not to work than to work, it is difficult for us to be able to solve our own economic problems without contributing to the solution of the European Communities' problems? Will the noble Lord say whether he agrees with that and, if so, how he proposes to rectify the problem exercising us?
4.24 p.m.
Lord BANKS: My Lords, I should like to join in thanking the noble Lord the Leader of the House for repeating the Statement which has been made in another place. While we on these Benches regret that the original target date of 1978 for direct elections to the European Parliament has not been achieved, we welcome the fact that a firm date has now been fixed and that Thursday, 7th June 1979, is to be the date on which these elections will take place in this country.
I should also like to welcome the declaration on democratic principles, linking the membership of the Community with the adherence to the principle of democratic government. I think that this is important at a time when enlargement is in prospect, both as a reminder to the existing Members and to the prospective Members of the basic nature of the Community. I wonder whether the noble Lord can tell us whether the Heads of Government have considered the decision-making process of the Community in the light of enlargement, and what may be necessary in the way of its reform. I am quite sure that the whole House will join in sharing the distress which was expressed by the Heads of Government about the abduction of Signor Moro. We remain convinced that terrorism and abduction of this kind requires a calm but determined reaction. I welcome the support once again on the part of the Government for a solution of the Middle East problem on the basis of Resolution 242 of the United Nations.
A great deal of time at the Summit Meeting appears to have been taken up with discussion of economic matters, and understandably so. We welcome the determination to work for a growth rate of 4.5 per cent. by the middle of next year. We understand from Press reports—and, indeed, it is touched upon in the Statement—that much attention was given to monetary matters. Mr. Jenkins, as President of the Commission, put forward proposals for linking the currencies within the "Snake" in a flexible way with the currencies of other Community Members outside the "Snake". I wonder whether the noble Lord can tell us a little more about what has been decided in that respect.
4.28 p.m.
Lord PEART: My Lords, first may I take the point raised by the noble Earl, Lord Ferrers, which was taken up by the noble Lord, Lord Banks, concerning the declaration on democracy: in other words, the admittance of other States, Greece, Spain and Portugal, into the Community. I would say to the noble Lord, Lord Banks, that obviously there are problems there. Naturally, such a decision will create problems and these must be sorted out if the Community is to be enlarged. I know that in a particular area in which I was previously concerned, when I was at the Council of Ministers concerning agriculture, inevitably there will be problems of a very important kind affecting the economy of all the countries, including our own. These are matters which have certainly been discussed by those people who have specialist tasks to perform in relation to achieving a satisfactory solution.
The noble Earl, Lord Ferrers, referring to Rhodesia, asked what our aim is there. He talked about a satisfactory solution and asked for whom was it to he a satisfactory solution. Of course it is to the Anglo-American alliance, the Council of Europe, the people of Europe and of the world. This is our aim. We want peace there and a satisfactory solution. We think that what we have proposed is the only way we can achieve it. Of course that has been elaborated here on many occasions.
On currency problems the noble Lord, Lord Banks, raised a matter which was referred to by Mr. Jenkins as President of the Commission at the talks; the question of the Snake. I understand that there is an interest in this point. As my right honourable friend the Prime Minister will agree, the position of the dollar is at the heart of our world currency problems. The difficulties which have been mentioned are important; but, for the moment, I believe that the position of the dollar is at the heart of the world currency problems. Again, I accept what has been said about the Middle East by the noble Lord, Lord Banks. That was endorsed by the, noble Earl. Above all, these talks were fundamentally about economic matters. I am not underestimating the political issues which were raised. But unemployment in the Community and trade—
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and world trade in particular—are matters of great concern.
The noble Earl had his little "dig". The Government have been trying—and I as a Minister have been trying—to create a new situation in this country, and to reverse the trends which took place in our economy long before we took power. The road is going to be a long one, but we can see the way ahead now. There has been a change in the economic climate. There are still problems, but I suggest that the noble Earl, in his desire to score debating points—quite rightly, if he so wishes—should await the Budget speech of my right honourable friend tomorrow.
Lord HOME of the HIRSEL: My Lords, I accept of course that the Government's objective is peace in Rhodesia; but would the noble Lord accept that the settlement in Rhodesia and the ultimate grant of independence is a matter solely for the British Parliament? Could he give an assurance that the Government are not trying to farm off, either on to Europe or the United States, the responsibility for a settlement of this kind?
Lord PEART: My Lords, that is absolutely right, and I give that assurance to the noble Lord.
Lord NORTHFIELD: My Lords, may I ask my noble friend two brief questions? In the discussion about elections to the European Parliament, did the summit discuss a permanent seat for the European Parliament and, if so, have they made any progress on it? We have been waiting for a decision on this for a very long time. Secondly, in relation to the European Cultural Foundation, did the summit make not just a decision in principle but did they actually vote funds for it and show how it could be put on the road to success?
Lord PEART: My Lords, I know there is concern about this matter of the seat, whether it is Luxembourg, Strasbourg or Brussels. I do not think it was discussed: I get that impression. This meeting was mainly to discuss economic matters, as I have said. On the other hand, there were discussed such matters as the Cultural Foundation. I do not think any funds, as such, have been allocated, but it has been stated in principle as a desired objective.
Lord HARMAR-NICHOLLS: My Lords, is the noble Lord aware that the fact that our unemployment is so much worse than that of countries which are our main competitors is not a debating point or a Party political point? It is a fact of life; and the reason why it is essential to keep referring to it is because, if the Government, which have the power, are suggesting that this is a world problem, without recognising the special problem which is ours, then we cannot feel that they are on the right track for getting us out of trouble.
Lord PEART: My Lords, the noble Lord must accept that there are some problems which are common to a lot of people in Europe and all over the world. The steel industry is one classic example. It is not just peculiar to this country. I take a great interest in this as my former constituency was concerned with steel. This is a world problem, and some of our difficulties were there when the noble Lord was an active supporter of a Tory Government in another place. We are trying to overcome these problems and we think, given goodwill and co-operation between all concerned—after all this affects industry, trade unions and the general British public—that we can overcome these difficulties. We have to, otherwise, it will be disastrous not only for us but for the world and for Europe.
Baroness GAITSKELL: My Lords, noble Lords opposite keep saying that our unemployment figures are much higher than those of countries in Europe and other parts of the world. I do not believe that is so. Is it really so, and could we not have an answer on this point, with figures?
Lord PEART: My Lords, I am prepared to get figures for European and other countries and I will write to the noble Baroness; but our position is certainly no worse than that of other countries. In fact, when you consider the progress that has been made to counteract inflation, we have a success story.

COLLECTIVE BARGAINING
4.24 p.m.
Debate resumed.
Lord COOPER of STOCKTON HEATH: My Lords, in resuming the debate on the Motion before us, may I first of all express our indebtedness, as other speakers have done, to the noble Viscount, Lord Trenchard, for giving us the opportunity of looking at this matter in a different setting. I would also, with sadness, add my voice to those of the three previous speakers in regretting the loss of Lord Douglass of Cleveland, who was head of the steel workers' union for many years and had an excellent and peaceful record of industrial negotiations with the steel companies. Even on retirement, he worked very hard indeed with groups of people—there are many in this country—concerned with doing all they can to improve industrial relations.
I should like to take up a point made by the noble Lord, Lord Rochester, in regard to training. I entirely agree with what he said, but I should not like him to think that there are not some very good training schools. In fact it was one of my prides and joys to introduce the first one in my union. Now we have two full-time schools which will accommodate about 80 persons full-time. That is a very good step, and it is needed with the developments and complications of industry. A trade union official's job today is very difficult indeed and he needs a very high level of training to assist him.
In approaching this Motion, I am looking for improvements and trying to pinpoint where improvement is possible; I do not wish to be partisan nor to express partisan criticism. I regret two of the points that were made by the noble Viscount, Lord Trenchard, which I felt were unfortunate. He referred to America, not in glowing terms, but in comparison with our own record. I could not help but reflect that they have just finished with a three months' miners' strike. That is something which we could not stand and it illustrates something I shall refer to later. It is very difficult comparing nation with nation.
The noble Viscount also referred to the close links of trade unions with politics, by which, I suppose, he meant with the Labour Party. This was regrettable because I do not think it is too material these days. It is an historic association going back to the turn of the century, and

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at the turn of the century trade unions found out, very naturally, that all their endeavours came up against a blank wall so far as Parliament was concerned. Parliament had a very great influence and so the unions started to look round to see what they could do about Parliament. Strange to say—this is very interesting—they formed a Lib-Lab pact with the Liberals. In the 1906 Elections there were Lib-Lab candidates; and so that is how they set about it. We do not want to discuss political philosophy today, but for something like 50 or 60 years I have known that in the constitution of the Labour Party you have that phrase which every good Labour man should learn:
"the aim of the Party is to secure for the worker by hand or by brain the full fruits of his labour and the most equitable distribution thereof".
Of course you might find that in the rule books of the unions, or words to that effect; so there was a common sympathy between the trade unions and the Labour Party. But, in this day and age, with all its complications, the trade union movement, expressed through the TUC, does not discriminate between the Labour Party and the Conservative Party. That is on record. The Conservative Party did ask that they should be allowed to meet with the TUC, just as the Government were doing, and we gave that assurance. Again, of course, it would not profit anyone to go through with the experience of discussing with a Labour Government and discussing with a Conservative Government because it was sometimes possible, because of political philosophy, to see eye to eye with the Labour Party but not with the Conservative Party.
Let us now look at this Motion. It has been rightly said that industrial relations is a never-ending study—
Lord CARR of HADLEY: My Lords, before the noble Lord leaves his reflections upon history, will he allow me to remind him, just to get the record complete, that it was actually a Tory Home Secretary in Disraeli's Government, Mr. Cross, who was invited by the TUC to attend a TUC Congress to receive their grateful thanks for the legislation which really put the trade unions on their feet in this country?
Lord COOPER of STOCKTON HEATH: My Lords, we should not start another debate on this. But I must say that, since the turn of the century, the Conservatives have learned a lot. Let me speak to the Motion. I was saying that industrial relations is a never-ending study, and it is also a very wide field of study with a variety of approaches Today, we are invited to take notice of.
"the great differences between the structure of and atmosphere surrounding the system of collective bargaining in this country and that of our competitors".
My broad reaction to this Motion is that good industrial relations cannot be borrowed or imported. They can be achieved only by great patience, particularly by those involved in the art of negotiation at all levels, who accept that the purpose of negotiation is to reach agreement. It is important to appreciate that trade union structures and the atmosphere surrounding collective bargaining depend to a great extent on the environment in which they operate. I think that it is worth looking for a moment at a few examples of this.
The emergence of effective shop-floor bargaining is a reaction to the development of highly concentrated industry. Where continuous-line production exists, it does not require a wizard to recognise the newly created power placed in the hands of the local negotiator, the shop steward. A similar development of power in local hands occurs when a large industry depends for its components on a small but highly concentrated factory. My point here is that industry has become highly concentrated, and this has been done very deliberately. Today, there are, of course, people who are asking—I think that even the Swedes are asking—whether it would be better to have smaller units, because of the personal contact and so on. The noble Lord, Lord Rochester, has mentioned his company, which shall be nameless, but I must say that it has an excellent industrial relations record although it is a very large company. That has been achieved by dint of breaking down and keeping a group situation, where supervision is very close to the man on the shop floor.
Another example of trade unions being affected by environment is West Germany, which has already been referred

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to. After being destroyed by Hitler and by total defeat in war, a new trade union movement was established in Germany. This was created by the occupying Powers on a structure built upon British and American blueprints, so that they had a complete trade union movement created for them. The late Vic Feather, who was a Member of this House for a short while, spent a great deal of time in Germany helping to create the new trade unions. It goes without saying that, if you are starting from scratch again, you know of the mistakes which you made earlier, so you avoid them and get a better result.
To take the Scandinavian countries—and these are very sweeping and general comments—they had their industrial revolution much later than ours and they benefited from our early experiences. The United States, which has been mentioned several times, took a sudden leap forward in growth as a result of the New Deal legislation in the 'thirties. 1 think that the industrial legislation dated from the beginning of 1935, and that resulted in the provision of an elaborate legal framework in which American unions operate.
In this consideration let us not forget the situation in Communist countries where, notionally, the unions are strong, with 99 per cent. membership, but are, in effect, agencies of the State. This subject would take us into the realms of political philosophy, but these unions are quite different from those that we know. Recently, we had discussions in this House when apprehension was expressed about competition from Communist countries, so that these countries are competitive just as are others in Europe, of which mention has been made. So much for differences in the varying social, political and economic factors.
In considering the structure of British trade unions, it must be remembered that Britain's is the oldest trade union movement in the world. In fact, in my earlier days, when speaking to trade union classes, I used to say that the British trade union movement is like Topsy—it grew up. We are suffering from age, and it is very difficult to adapt oneself to change, although, having regard to all the circumstances, we do a good job. "In its over 200 years of existence, the movement has undergone many changes, particularly
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as a reaction to the attitude of Governments. At times the movement has been treated as an illegal conspiracy. Of recent years it has been treated as a partner of Government, almost as an arm of the State. I suggest that in these changing surroundings the British trade union movement has adapted itself very well.
In studying our own movement, we should have regard to recent official studies and, of course, I have in mind, in particular, the Report of the Royal Commission on Trade Unions and Employers' Associations which sat from 1965 and reported three years later. Their report is, of course, more popularly known as the Donovan Report, after the name of its chairman. The fundamental, though simple, finding of the Commission was that our industrial relations consisted of two systems, the formal and the informal. They pointed out that the formal system, to which they referred, consisted of the national institutions which took part in national negotiations; the informal system consisted of the parties negotiating at local level. Negotiations and settlements at local level are very often not set out in written agreements, but are more significant to the grass roots than national settlements.
They found that, in many ways, those two systems were at odds with each other. They recommended restricting national negotiations to national rates and conditions, leaving all matters of local significance to local factory and workshop negotiations. Clearly, in the light of their recommendations, it was necessary to improve local negotiating machinery, so they placed the main responsibility on the employers by recommending that boards of companies should review industrial relations within their undertakings, with six objectives in view. I shall refer to these objectives very briefly, because they give the picture and the pattern for improved industrial relations.
These were, first, to develop comprehensive collective bargaining machinery secondly, to develop joint procedures for rapid and equitable settlement of grievances in a manner consistent with the relative collective agreements; thirdly, to conclude agreements regulating the position of shop stewards; fourthly, to conclude agreements covering the handling of redundancies; fifthly, to adopt effective

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rules and procedures governing disciplinary matters and, sixthly, to ensure regular joint discussion of measures to promote safety at work.
The report also went on to say that to assist the process of collective bargaining, companies should welcome the exercise by employees of their right to join trade unions. All of this development might be described as formalising the informal. They further suggested that once these local procedures were established and effective— we have had the point made to us by the noble Lord, Lord Rochester, that none of these procedures will work unless attitudes are right—the development of these procedures could also develop attitudes. Therefore, they recommended that once these procedures were functioning, the two parties should accept a peace obligation; namely, to include in their procedure agreements provision for conciliation and arbitration before resorting to strike action. No doubt since Donovan progress in this direction has taken place, but I believe that there is much more to do.
I was pleased to note the recent comments of Mr. Jack Jones on the subject of conciliation and arbitration. It is the case that when a trade union official retires he feels free to speak perhaps more freely than when he is in office. These comments were made by Mr. Jack Jones when he gave the Richard Dimbleby Lecture last December. He spoke about industrial relations and came to the conclusion to which I have come and which is the main point of my contribution today: that it is conciliation and arbitration which gives us the best immediate chance of improving industrial relations. Mr. Jack Jones took the view that there is a need for better industrial relations and, where good industrial relations exist—the same point of atmosphere and attitude—for using conciliation and arbitration. Mr. Jones pointed out that to make these procedures work there is a need for confidence on the part of the workers and that to use the procedures effectively they are required to be made available easily and speedily. As I have said, in my view it is in this direction that better industrial relations lie.
As a demonstration of what 1 am saying, I think it should be mentioned that I am not unmindful of the splendid achievements of the Advisory Conciliation and
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Arbitration Service. This Service should be given every encouragement. Of some 3,000 disputes referred to the Service in 1976, three-quarters were resolved to the satisfaction of both parties, while less than one-quarter resulted in a stoppage of work. I believe that a greater use of conciliation and arbitration by voluntary agreement will improve industrial relations more than anything else.
In the Motion before us we are asked to take note of collective bargaining in competitor countries. In my remarks I have suggested ways in which we can help ourselves by reforming collective bargaining, mainly by shifting the responsibility, where appropriate, of negotiation from the centre to the grass roots. Throughout my comments I have restricted my suggestions to development on a voluntary basis by the two parties to the negotiations. I have not suggested development by legislation. That is not to say that the Government do not have an important and essential part to play. The Government must be involved. Their role, in my opinion, is to encourage at every opportunity steps towards the greater use of conciliation and arbitration.
This country cannot afford crippling strikes of the type which so frequently threaten this country. The alternative is soundly based conciliation and arbitration procedures. Such procedures can contribute to improved industrial relations, to better collective bargaining and to a wider extension of industrial peace.
4.55 p.m.
Viscount WATKINSON: My Lords, I should like to follow the noble Lord, Lord Cooper of Stockton Heath, by paying a tribute to a very old friend of mine, Harry Douglass. May I now congratulate the noble Viscount, Lord Trenchard, who initiated this debate. I hope that he will forgive me—although I suspect that the noble Lord, Lord Cooper of Stockton Heath, might agree with me—if I say that what other countries do is interesting but not necessarily relevant to our problems. It certainly shows the need to reform our procedures but not necessarily the means.
In this debate, I think we have all agreed that our systems of pay bargaining perhaps owe more to the circumstances

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surrounding the Tolpuddle Martyrs than they do to the circumstances of today, but we are stuck with this long, historical background of both myth and fact and we have to live with it. Therefore, the solution, in my view, must be our own. However, I do not want that to mean—I very strongly support the noble Viscount, Lord Trenchard, in this view—that we can merely shrug the matter off and say that nothing needs to be done.
One cannot be President of the CBI for a time, as I was, and not know—perhaps the noble Lord, Lord Cooper of Stockton Heath, will not be quite so happy about this—that it is this endless wrangle, on the shop floor and elsewhere, about pay that has been the main factor barring Britain from industrial success in the last decade or so. It is while this largely unproductive wrangle has gone on that, as other noble Lords have said, we have slipped down the European league until we are nudging Italy for bottom place in productivity, effective use of capital or almost anything else that one likes to mention.
Yet it is not my purpose this afternoon to say much about the past; usually it does not help our consideration of the future. I should like merely to leave the matter, as I see it, by saying that in the past there have been major faults of commission and omission on all sides. Now, as the noble Viscount, Lord Trenchard, has said, North Sea oil has given us a short breathing space, or perhaps one might more fairly say, an undeserved chance to do better.
Where should we look for reform and progress? Not, I personally believe, in a kind of happy new consideration by either managers or trade union leaders of the whole system. We must realise that, whether we like it or whether we do not, before this summer is out we shall embark on the next round of pay negotiations. This situation has to be faced and something has to be done. I should like to say that that "something", in my view, does not lie in an immediate return to the ritual dance of free collective bargaining not, at least, as it has been known in the past.
Have we really forgotten what an inflation rate of 30 per cent. nearly did to us? It was largely a product of pay and prices bidding one another up. Perhaps
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we have at least learned how dangerous the pay and prices spiral can be and how dangerous to a country like our own that still is economically weak and has much to do can be one large union bidding against another and winning leap-frogging price increases. Yet I hope we learned something in those bitter years of difficult pay negotiations, of difficult pay policy and of raging inflation. Perhaps, therefore, this is a moment when there is a real chance to do something about it.
What can we do about it? That is the question to which I propose to devote my few remarks. As I said before, I am afraid that it is no use spending much time upon interesting hypotheses about what we could do, might do or should do. The fact is that the Government of the country, whatever Party is in power, will have to do something before the summer months are out and, as the largest single employer in this nation, will have to put their cards pretty firmly on the table. Therefore, these decisions have to be taken.
What should be done about them? Perhaps the noble Lord, Lord Cooper of Stockton Heath, and I will be in agreement when I say that, after the stresses and strains of legal pay policies, voluntary pay policies and all the rest, there ought surely to be a better way. What is it? The first thing we have to realise is that whatever the Budget does or does not do tomorrow, the problem remains. We must get our inflation down further—we are still not adequately competitive—and we must get our earnings up because, as the noble Viscount, Lord Trenchard, rightly said, we are the hewer of wood and drawer of water in Europe today; we are not the top nation in earnings or efficiency or almost anything else.
The first point I want to make is perhaps a rather surprising one because, regarding the plan which we have to consider—and I think it is a plan where we shall have to institutionalise more than we have done the processes of pay determination, and thus of collective bargaining—I want to say as firmly as I can that I believe Parliament must be much more firmly involved in this process. The pay problem really must not be left to urgent, late night, last minute decisions in smoke-filled back rooms, whether they are at No. 10 or at No. 11 or anywhere else. Therefore,

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the issue must be more freely debated, and for that we owe a great debt of thanks to the noble Viscount who raised this issue. There must be a more national view and a more national consensus on what should or should not be done; and this means, as I have said, that to some extent the whole situation must be more institutionalised.
We have to start at the grass roots, and here the essential is the provision by each employer to each of his employees of all the facts surrounding his or her job. Whether we call this "participation" or "consultation" does not seem to matter very much. What matters is that each company, large or small, accepts its responsibility to tell the facts of job security, company progress, capital investment, and all the rest, in understandable terms, to its own employees. Much progress has been made on this; more must be made, and the progress made by the leading firms in this connection must be followed by others. We have to start there, and one of the tragedies of Bullock was that it obscured this necessary requirement on which future pay policy has to be based.
I must say again that before long, when we have the Budget out of the way, we must get a feeling of what this country can afford to add to its pay bill in the year 1979. I believe there is some merit in the CBI proposal for some kind of independent look at this question. Heaven knows! in this country we have perhaps the most highly developed—what shall I call it?—system of national pulse-takers. They exist in the universities and everywhere else, and I think they do their job very well. Why should they not be asked, either individually or severally, or in the person of one or two of their representatives, to come up with views on what should be the addition to the national pay bill in the next 12 months? I see nothing wrong with that. Some may say that we are going back to something called the "three wise men" or "guiding lights", which the noble Lord, Lord Cooper, remembers, as I do, and which were not notably successful. But somehow we must find a solution, and I think that at least this proposal should be looked at again.
If such a recommendation were made, then in my view—and again this is no
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doubt controversial—it should be made to the National Economic Development Council. Although this would be new medicine for them, and perhaps a little painful, it should there be debated in front of the trade union representatives, the representatives of industry, the representatives of nationalised industry, the Government and all the rest. We must get some kind of agreement on where we start and on what the general parameters have to be.
I want to reiterate, particularly to those who say that this is just the corporate state at work, that Parliament must be more closely associated with this process. To prove that at least I am not talking about things which I have not tried to do, there is a letter on the file of the present Committee on Procedure written formally by me as President of the CBI and carrying the support of the CBI, saying that so far as CBI matters are concerned we should like to see a strong Select Committee of the other place, and possibly this House, with the right to overview the work of NEDC, to send for people and papers, and thus to keep Parliament closely associated with w hat the National Economic Development Council does. Subject to that Parliamentary link, in my view the next stage in our pay determination has to be, as I have said, debate and agreement between the Government and the parties concerned —which to some extent now includes consumer interests—as to what the general parameters ought to be.
That agreement could be reached. In a way, as the noble Lord, Lord Cooper, knows very well, it was so reached in this current year of pay. There was the normal argument, a certain amount of protestation and perhaps rather too many late night meetings at No. 11, but none the less, in the end, there was a fairly general agreement that we should aim for 10 per cent. The CBI reported yesterday that most pay agreements known to us are still around 10 per cent., and those that are not are only a little above it. So we have done it once and now I am saying we must do it again. Therefore there has to be agreement between the Government, the CBI, the TUC and Parliament on a pay figure for 1979; and this should be follow ed by enough public debate to fix firmly in the minds of all concerned the arguments, the solution and the figure.

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Now we have to go on. I do not see how any Government, whether it be Labour or Conservative, can possibly avoid their responsibilities as the largest employer in the State, or, where they are not the employer, as the paymaster. Therefore, in the end, the Government will have to name a figure; and they had then better stick to it, much the same as has happened this year. I do not myself disagree that in sticking to it they will have to do what they can to persuade the private enterprise sector to stick to it too. The only point I would make here is that, as recent events have shown, it might be much wiser for the Government to try to carry the CBI with them rather than to have a great argument with the CBI as to whether what they were doing was right or wrong. There was a lapse in consultation but, subject to that, I do not disagree that the Government have first to make their own decision quite clear, that they do not think it right to pay more than x; and they then have to try to get the private enterprise sector to support them as best they may.
But that is not really the main point. Probably that increment is bound to be relatively small in the kind of circumstances in which we find ourselves. Then there should be a united effort. While this is hardly a subject for this debate, I would hope that your Lordships' House will debate this issue because I believe it is the real crux of our future. Having settled basic pay there should then be the maximum effort made to get the largest possible earned supplement in terms of self-financing productivity deals, greater efficiency, better use of capital resources and all the rest; and that should go forward as the main objective in the year's round of how to do it and how to get on with it.
I accept that in such proposals lies a fundamental change in trade union attitudes. It was a very old friend of mine, the late Lord Feather, who, I think I am correct in quoting, is on the record as saying that, looking ahead, perhaps trade unions would become more like management consultants and less like the old-fashioned concept of a trade union. I believe that to be right and I believe that, looking ahead, if the union is to do a good job for its members in the long term, it has to worry much more
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about management consultancy and much less about crude industrial obstruction. There is no doubt in my view that, if it wants to do the best long-term deal for its members, this is the sort of approach it must make.
This, therefore, brings unions right into the middle of the debates on the better use of capital, how to get better self-financing productivity deals, and all the rest. I am not saying for a moment that the unions do not show interest in this and are not to some extent involved. But I should like to go back to Lord Trenchard's remarks when he said it is up to the unions to call and name their reform. Well, I hope that one of the things the unions might do is to show a much greater interest, and formal interest, in a very simple statement, that the more a man earns for which he has honestly worked the better for him, the better for his union and the better for the nation.
So my proposal— and it is only mine; I am not speaking for the CBI or for anyone else—is that you have to instittionalise the first rounds, you have to establish some kind of figure. If this could be helped by an independent examination of the nation's circumstances then that should be done, and certainly I think it should be considered. Then the issue has to be debated in NEDC, and Parliament has to have a better link with NEDC so that Parliament, too, has a chance to pronounce on these matters and take an interest in them. I think it would have to be done through a Select Committee; possibly, I would hope, a new Select Committee, not just a sub-committee of the Estimates Committee or anything of that kind. There are many difficulties in that sort of proposal. I am well aware that if I were still a member of the NEDC and I raised this at the next meeting, I should not perhaps find wild acceptance from the trade union members or from the Treasury, or perhaps from anyone else. But we have got to make an effort to do better, and we have got to face the fact that at the moment, compared to our main competitors, we are still really very bad.
Take one example, the motorcar industry. The figures are available for anybody who wants them. Of men working on identical machinery in West Germany and Britain, the difference

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in the output per man in the number of cars they produce, as we all know, is absolutely disastrous. The comparison with the Japanese is worse still, but I do not take that as a fair comparison because I personally do not regard the Japanese as a proper democratic industrial society, and I do not regard Japanse unions as a very desirable form of union; so I am not using that comparison, But I do not think there is much wrong with the West German system of trade unions; and if you compare the British car industry with the West German car industry, it is depressing and shaming for all of us to see the difference in output on the same machines from West German trade unionists as compared with British trade unionists. We have got to do something.
The points I have made are at least matters which could be progressed in this next year of pay round, which, I have said before and I say again, is upon us in the summer whether we like it or not. I hope my old colleagues in the CBI will proceed with their proposals, which are not perhaps entirely dissimilar to those I have announced this afternoon. As a member of the CBI council I will do my best to support them. I hope the trade unions—and I really mean this, if I may say this to the noble Lord, Lord Cooper—will be willing at least to think about this. In the meetings which they have with the CBI, which I hope remain secret and unscripted. as they were in my day, we could make a start on seeing whether we could make this new approach and get out of the way the one single issue which I think is still stopping us from taking our rightful place in the industrial world.
5.13 p.m.
Lord GEORGE-BROWN: My Lords, may I, too, begin with a tribute to a departed colleague, Harry Douglass, a great friend to many of us, who played a very outstanding role in the attempted resolution in earlier days of the very issue we are discussing today. As a matter of fact, Lord Cooper was not far from the truth in that first half-statement he made, which he hastily withdrew, when he referred to Harry Douglass running his union. It is, of course, true that Harry belonged to a generation of trade union leaders who had a different concept of leadership of trade unions from that which
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holds the field today, and it may well be that part of our trouble is, as I shall try to suggest later on, wrapped up in that. It might not be a bad idea if our modern trade union leaders looked a little more at the concept of leadership for which Harry, with Lord Carron and others, so obviously stood.
I want to follow very largely what has just been said by the noble Viscount Lord Watkinson, and perhaps emphasise a little more—as reflects the difference in make-up between the two of us—some of the points he made. I think that Lord Carr, who spoke for the Government Front Bench
A noble Lord: Opposition.
Lord GEORGE-BROWN: who spoke for the Opposition Front Bench—do not tempt me—could not have stated the problem more wrongly. He, of course, was in complete conflict with Lord Watkinson, and here I declare myself wholly on the side of the Benches below the Gangway. A phrase I noted from Lord Carr was that he wanted to "get the Government out of our hair". He based on that an argument for the employers and their employees to be allowed to get on with the job of building free collective bargaining.
Lord CARR of HADLEY: My Lords, I apologise for asking the noble Lord to give way. I want to be quite clear. If I did not make it clear, I should like to. I thought I did. What I meant was, out of our hair in the detailed fixing of levels. That is what I meant; I think that is what I said.
Lord GEORGE-BROWN: Yes, my Lords, but then when we had a little difference of opinion between the noble Lord and the noble Lord, Lord Brown -who is responsible for my hyphen, for which I have hardly ever forgiven him-it became, I thought, very clear in the answers that Lord Carr gave to Lord Brown that in fact the detailed discussion here meant the whole discussion of the matter. Anyway, what I want to say will stand up without me pressing that point. If the noble Lord, Lord Carr, says that I have misinterpreted him, I certainly withdraw.

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It is my view, and I think the view of many of us, that we are long past the day when either trade unionists or employers should be thinking of negotiations in the industrial field which do not in all their major policy decisions involve the Government. This is not nowadays a private war, a private argument, a private area for employers and employed. There is, of course, a third partner in this, which is the rest of us, and indeed the employees and their families themselves when considered as consumers and as taxpayers and as price payers. So any suggestion that we should try to get back to a situation where we are allowed to do it for ourselves must be pushed away. I think that perhaps the best thing that we can say to trade union leaders, to trade unionists generally, to the CBI and to manufacturers generally is that this repeated catch-phrase of free collective bargaining is a myth. It is a misnomer. It will mislead us and is misleading us into terrible disasters.
I was very interested the other night, as no doubt other people were, to watch the first television interview of Jack Jones' successor at the Transport and General Workers' Union, my own union. It interested me that Moss Evans spent a lot of time establishing that his priority was to get back to free collective bargaining, and he mentioned not at all as a priority of any kind the questions of productivity, of what the bargaining was to achieve and of how it was to be paid for.
Free collective bargaining in the sense in which it is so often used, certainly by some of my colleagues in the trade union movement, really means "catch as catch can". It really is putting the emphasis again on muscle—seeing who has enough strength to be able to produce a blackmailing situation where the case must be conceded whatever its morality and whatever its effect upon others. Of course, we all keep harping back to how the trade unions grew, why the Labour Party was born and so on. It puzzles me that in the Socialist movement we should almost be becoming the only non-thinkers. We are almost becoming the real Conservatives.
Whatever was done in 1890 we are almost, by definition, determined to make sure is never changed. In fact, the whole situation has changed even since I began
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as a full-time trade union official. We do not need muscle now in the sense of vast numbers. We do not need muscle in the sense of being a great octopus of a union. In fact, in modern technology the capacity to pull one fuse wire can negate all the muscle of all the others. Free collective bargaining, if it means what the words ought to mean, puts all power in the hands of small groups who happen to be properly placed.
Of course, the one thing that nobody likes to mention—and perhaps one venturesome soul on these Benches ought to slip it in—is that the one body in this country which has learnt that lesson is the Communists and the general extreme Left. Do not let us ignore the fact, even if we do not mention it in great detail, that Mr. Ramelson and the Communist Party industrial leadership have been very busy putting their people in the right places during the decade which has passed since they decided that they could never win political power through the ballot box. They have learnt the new technology and the new situation for muscle.
I also think that the free collective bargaining process, even if it were ever possible, can be and is distorted by the operation nowadays of the closed shop meaning the enforced closed shop, meaning the ability to deny the right to earn a living to any dissentients within the trade union movement. I do not want to go into the arguments because they will lead me astray from other matters, but I was a little sorry at the way in which I thought the noble Lord, Lord Carr of Hadley, seemed to assume that the closed shop, in the form of total imposition, is still with us.
I have always said that in my view free collective bargaining cannot be encouraged. We cannot return to unfettered free collective bargaining because it ignores the interests of the consumers. I also want to emphasise that I think it continually puts the emphasis upon industrial conflict. It assumes, or at least it always seems to me to assume, whether people realise it or not, that the two sides of industry arc getting together to fight over something. We call it collective bargaining: it is really authorised collision.
One of the things that we must get away from—and if there is one explanation

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which holds more weight than another as regards the differences between the situation on the Continent and here, it is that they have got away from it—is the idea that there is something that we must always fight over. The noble Lord, Lord Carr, or the noble Lord, Lord Rochester, referred to the matter of the distribution of the cake before we have decided the size of the cake.
On the Continent it is natural for members of trade unions to want two houses. In the Scandinavian countries and the Low Countries they have a cabin or a house on the lake or in the mountains. However, here it is still, I am sorry to say, rather the habit to denounce anybody who has two houses. People say: "Take one away from him". They do not say: "Let us so get the size of the cake that we can have enough to get another one also". There is a completely different attitude. r think that the business of free collective bargaining in the sense in which it is normally meant, enshrines that attitude.
I agree with the noble Viscount, Lord Watkinson, about the question of the Government. The Government have interests much wider than holding the ring within which the contestants can fight. The Government are part of the process, and a very important part, establishing what the noble Viscount, Lord Watkinson, called the parameters within which it must all take place. The day of the planned economy is here. Planning the economy means trying to forecast the size of the resources, planning the priorities to apply in the use of those resources and planning the distribution. In the whole of this situation incomes cannot be dealt with in isolation.
I remain an economic and industrial planner. Personal incomes, whether wages, salaries or in any other form, are part of the distribution of the cake. The Government are concerned with all sorts of other matters that come out of the same cake. The hospitals, the schools, all the social spending and all the infrastructure are part of the same argument about how we distinguish. I shall come to the steps that I think need to be taken. However, I want to establish as firmly as I can in support of what I thought the noble Viscount, Lord Watkinson, was saying, that we cannot simply aim for a situation in which we get the Government out of our
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hair and let the employers and employed argue about incomes. Incomes relate to prices. We know that if we have learnt nothing else over the past few years. Moreover, incomes and prices must relate to productivity.
One of the problems about Government interference is not, in my view, the fact of Government interference over the past few years but the fact that Governments have become recognised or thought of as the body which tried to hold down what people could otherwise have done for themselves. Our aim must be to get industry, and the population in general, thinking in terms of rising productivity, financing and providing the wherewithal for rising standards. I do not know how we do this, except by continually saying it, but we do not start by fixing the maximum level. The level is whatever your output will justify. We are as bad as we are in terms of earnings in this country compared with out Continental colleagues, because we are as bad as we are in terms of output and productivity in relation to our Continental colleagues.
Therefore, I want to see—as I think the noble Lord was arguing for—a return to the view that we must at the beginning of each period try to establish between Government and industry, after the "pulse takers" as they have been called have advised, a plan for output. I wholly agree with using the NEDC as the place where the argument is held. Perhaps the noble Lord will forgive me for reminding him—it should not be such nasty medicine for him—that that was done in 1965, right through to the middle of 1966, and having got used to it then, the Government themselves retreated.
As a result of doing that, we could give to industry the level of distribution in broad terms that any given level of productivity would sustain. We should then have a basis for establishing what we think productivity can sensibly be aimed at in the coming period, whether it be this year or the five-year period. Then we can set them to negotiating what they want to do within that time, after the Government themselves have decided what can be allocated for social distribution, defence and the infrastructure. What is left is industrial personal income. Unless we do it that way—rather than simply try to return to free collective bargaining carried out in a better way—we ignore the position of tax.

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I believe that much of our recent industrial disturbance stems from the fact that the man is thinking of his take-home pay and everyone else is thinking of his gross pay. When the tax rises too much, either he thinks how he can "holiday", as he calls it—which includes strikes—and thus get it back from the Chancellor of the Exchequer in the form of a tax rebate, or he thinks in terms of where he should stop his effort so that he does not contribute any more. I think that that, as much as a genuine industrial dispute with the boss, is at the bottom of many of our strikes. But if you want to have a strike for that reason, you can always think up a decent industrial argument for one. Thus what the Government take in tax must be fixed in our minds at the same time as we try to encourage the fellow about his "take", so that he gives rather more productivity.
Therefore, my conclusion remains that we should return to thinking in terms of a planned economy and of returning to a national plan, with its individual regional and industrial sectors, which would enable us to state our economic and social priorities, so that trade union leaders, the CBI, Government Ministers and ourselves will continue to emphasise all the time that it is productivity which will determine the rewards, as it will determine the costs, and that we are aiming virtually for any figure you like to mention. The higher we can push output per machine, per man, per hour, clearly the higher the distribution can be in addition to the priority take which, as I have said, would be the social wage, the industrial infrastructure, defence and other things.
That is how it is done in parts of the Continent. There is a machinery for fixing the size of the national cake which they are aiming for, guided by their best estimates of the resources that will be available. Within that are determined industrial priorities. Once that has been decided with the aid of the NEDC, or however it is decided, it can then be handed to industry. Then individual industries, having been given their share of the resources as well as everything else, can decide how they want to divide their share within their industry. There I agree with the noble Lord, Lord Carr of Hadley—and perhaps this was the difference, with the distinction, which he
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sought to make earlier. At that point the Government do not need to hold their hands.
When a decision has been made between the two sides at industrial level, a decision can be made within their decision at plant level. Again, we do not want Government holding their hands at plant level unless they are having difficulties, in which case arbitration and conciliation can take place. Plant bargaining has thus been included, which is something that fellows must have—they will not accept decisions without having something to bargain about at plant level. You can have plant bargaining within the industrial decisions, which are themselves within the national decisions, which are themselves related to Government policy.
It follows from all this that, with respect to my present generation, I believe that trade unions are wrong to go for a free-for-all. There is no such thing. Nor in the end will they accept the consequences of a free-for-all; their members will not accept them. They must also attend to their own controls, which refers back to what I said about Harry Douglass, and to their own leadership problems. There has been a takeover on the factory floor. Jack Jones tried to explain it in his final television interview, just as Moss Evans tried to explain it in his first. Let us face it: much of that takeover is not an extension of democracy, as Jack said it was; much of it is because other motivated people have filled a vacuum in leadership because leadership has greatly abdicated its responsibilities.
I have already spoken about the consumer and the taxpayer. Finally, I should like to agree with the remarks made by the noble Viscount, Lord Watkinson. We—at any rate to our satisfaction—buried Bullock some months ago. I think that he is probably pretty safely buried. I believe that during that debate I also followed the noble Lord, Lord Rochester; one of the things I said was that having buried Bullock, we must not let the matter rest. In fact, that is what we have done; we have made no advance. If we want plant bargaining, plant discussion and to involve everyone, we must make some progress towards "participation"—I like that word because it means so much more than "consultation". We must make faster progress to involve

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the fellows in the plants in the taking of decisions, and not merely tell them how we take such decisions or on what basis. Because it involves taking responsibilities, this would disqualify much of the rather unhappy leadership which has grown in the plants. I have seen this happen in Sweden, Holland and Germany. Contrary to what is said, fellows like taking responsibility and like having the knowledge and authority that goes with it. Once they have the responsibility, they like ensuring that decisions are adhered to by the fellows for whom they have spoken.
I do not think that I have added much, but I have tried to pinpoint a little more where I think we must be quite open and honest with industry. This involves the whole nation and, therefore, it must involve the Government. It is no use starting another year saying: "We want 10", and ending up with 14, or: "We want four", and ending up with eight or nine. We must have some basis on which to fix any figure. It must take into account all the different ways in which we spend our income.
5.39 p.m.
Viscount CALDECOTE: My Lords, I should like to join with other noble Lords in thanking the noble Viscount, Lord Trenchard, for so ably introducing the debate on this important subject. I agree with almost everything that he has said. Despite much talk about other problems in industry—including, for instance, lack of investment—industrial relations and pay determination are still the Archilles' heel of our industrial regeneration.
For reasons that have been so clearly set out by the noble Viscount, the fact is that conditions for collective bargaining and attitudes in Britain make it more difficult to achieve constructive settlements on pay and methods of working. That affects our productivity as well as our efficiency and our overall competitiveness and, to a major extent, is to the detriment of everyone in Britain. I listened—as I always do—with great interest and respect to the noble Lord, Lord Cooper of Stockton Heath, and agreed with much of what he said, especially with his emphasis on the importance and value of local bargaining. But he seemed to me to accept in the first place that we are at a
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disadvantage compared to other people, other countries, due to our history, and, further, that little can be done about it. It seems to me that we have to be much less complacent than that and much more dynamic.
The noble Viscount, Lord Trenchard, has covered the points of this debate so well that I want only to try to amplify three points relating particularly to the important engineering industry in which my experience lies. First, I should like to make a few more detailed comparisons between the British and German industrial scene, for I think there is much we can learn. Secondly, I should like to emphasise again the urgent need for more flexibility in negotiations so that we can improve pay differentials for skills. Thirdly, I should like to make one or two suggestions for the future in both the short and long term.
A major contrast with most other European countries is the multiplicity of unions, as everybody knows, in the United Kingdom. For instance, in our engineering industry we have at least seven main unions and many more small ones. In my own company, just one part of the engineering industry in which we employ some 24,000 people in Britain, we have formal recognition agreements with no fewer than 11 trade unions and many other subsidiary ones, whereas in the engineering industry of the Federal Republic of Germany there is one major union, IGM, with which employers negotiate.
As a result the union concentrates on the genuine needs of its members, which are seen to be closely related to the circumstances of the industry, rather than devoting so much effort, as happens here, to inter-union rivalry. Although there is much personal good will between trade union leaders and managers, the competition between the unions has also made technological change in our industry much more difficult, and the delay in achieving innovation has inevitably been really harmful to the engineering industry. That sad story will be all too familiar to any of your Lordships who have worked in the shipbuilding industry, as I once did.
On the other hand, on the brighter side, we must not forget the achievements of the

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joint industrial councils, on which the main unions of an industry sector are represented. Where these have been established, as has happened in the electric cable-making industry since 1919, there is virtually no inter-union conflict and negotiations are conducted in a much more constructive way. Disputes not settled locally are referred to the JIC. If there is failure to agree there, and it very seldom happens, that is followed by arbitration, the outcome of which is accepted by all the parties involved. It is a happy and constructive situation. I wish it could be followed by more industries, for it gets much closer to the effect of one union, as exists in the German engineering industry.
Other problems stemming from the British situation are the plethora of bargaining units within plants and companies and the resultant extra time and diversion of effort, as other noble Lords have pointed out, for managers involved in negotiations, not only on pay but also on methods of working, technological change, and the like. On the employers' side, too, there are also important differences in Germany. There is a stronger feeling of common identity and interest between employers, and the German Employers Federation finds it much easier to achieve solidarity and a common approach to industrial problems. The noble Lord, Lord Cooper, referred to the connections between the trade unions and the Labour Party. Alas!, the historical fact that the Labour Party in Britain came into being as the political wing of the trade union movement, and relied to a large measure for its support upon the trade unions, does not help to achieve the best climate in which industrial negotiations should take place.
It is unfortunate, too, that our determination to uphold the rule of law in Britain seems to have declined over the past 10 years, whereas in Germany both employers and unions have a deep respect for the law. There neither side is in the least willing to come in conflict with it. This causes unions to avoid entanglements with such illegal arrangements, under German law, as the closed shop or wildcat strikes. It also restricts disputes to industrial rather than political matters, and ensures that while official strikes and lockouts are legal, as we can see at the moment, their use is confined to rare occasions and they remain for both sides weapons of last
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resort. Too often, as we can all see, industrial action in Britain is threatened or taken before any worthwhile negotiations have taken place, and interruptions to production occur before agreed procedures have been exhausted.
There is an important example of the very different and more responsible attitude to strikes which exists in most European countries, and that is to be found in the official booklet of IGM, the German engineering industry trade union, where the following paragraphs appear:
"Because a strike is a weapon to be used only in extreme circumstances, and because a strike in the metal industry may have particularly far-reaching effects on the economy as a whole, the IGM constitution creates the following safety measures regarding work stoppage:

(i)Each strike must be approved by the Executive Council.

(ii) Such consent can only be given if a minimum 75 per cent. of the organised workers involved have voted in favour of a strike in a secret ballot, which first has to be approved by the Executive Council.

(iii) if negotiations or other circumstances change the situation during a strike, the Executive Council may only continue the strike if at least 75 per cent. of the workers organised by the Trade Union concerned vote to do so in a secret ballot.".

That booklet was published in 1974, and so far as I know there has been no change in it. Indeed the fact is—I checked this morning—that in the two current very difficult disputes in the German engineering industry, the trade union did get a 75 per cent. vote in a secret ballot, but their record stands. The average over the last 10 years for days lost per employee in German industry is less than one-tenth of the days lost in this country over the same period. How wonderful it would be if British trade unions could literally take a leaf out of that German book! Surely we ought to make another major effort to improve the environment in which negotiations take place in this country, to change some of our practices and to reduce the disadvantages which are now diverting so much effort into destructive conflict.
There is little doubt that the great majority of the British people, including trade unionists, would like to see this happen. The first step therefore is to discover the real reasons why virtually nothing is being done to change the present unsatisfactory situation, and to put the searchlight of public opinion on

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the reasons. The symptoms of the so-called "English disease" have been endlessly discussed, and the diagnosis shows quite clearly at least how some improvements could be made, but the patient seems completely unwilling to undergo the necessary treatment to effect a cure.
I turn to my second point. One of the most pressing and difficult problems here in Britain is the need to improve differentials for skill and to reward people fairly for responsibility, enterprise and hard work. Although the overall level of unemployment is unacceptably high here, there is still an almost universal shortage of skilled people, certainly in the engineering industry and probably elsewhere as well. Already some plant—perhaps much plant—is inadequately maintained, or used less efficiently than it should be due to the lack of skilled fitters, electricians, toolmakers, and machine setters. If this is the case now, how much worse will the situation be when the economy picks up and there is greater demand for our products? Unless we ensure an adequate supply of skilled people that demand will simply be met by massive imports, and to the extent that the demand remains unsatisfied inflationary pressures will rapidy build up again due to the shortage of goods.
The unpalatable fact is that over the last 10 years when the balance of power between negotiators has moved sharply in favour of the big trade unions, neither collective bargaining without guidelines nor a strictly-applied incomes policy has enabled us to reward skill adequately while avoiding inflationary pay settlements. As my noble friend Lord Watkinson said, there is a most urgent need to tackle this problem without delay. The hour is already late. There are fewer than four months until August 1st, when the present arrangements come to an end. Although the solution is in the interests of everybody, not least of the unskilled, who would be the first to benefit from the better prospects of employment, we seem to have made virtually no progress.
What can we do? Most of the difficulties and disadvantages under which we labour require changed attitudes and other longer-term remedies. But the
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issue of differentials is too urgent to wait for them to become effective. I have come to the conclusion that, at least in the engineering industry, we shall not make progress in improving our efficiency and expanding the economy unless we can have the flexibility that is needed in pay negotiations to improve differentials for skill, enterprise and hard work, and to remove anomalies from pay structures.
It will still be important to attempt to reach agreement on what overall increase in pay can be afforded—and it will not be much—or, in the absence of agreement, for the Government to state its conclusions. But, if we are to have the required flexibility, it will not be possible to define permissible limits for increases as a basis for applying sanctions of any kind for breaking them, although it would be highly desirable to maintain the principle of the 12-month rule between pay settlements. In such conditions, if we are to avoid a return to rapid inflation and even greater unemployment than we have now, we shall have to rely on the good sense and the determination of the negotiators to achieve settlements based on ability to pay, backed up by a strict control of the money supply, and cash limits in the non-productive public sector.
I fully recognise the gravity of that proposal. I fully recognise that this is tantamount to having no effective incomes policy and that there is a serious risk of inflationary pay settlements and interruptions to production if the militants have their way. That is why, so far, I have been strongly in favour of a con tinuing incomes policy. But I have reluctantly come to the conclusion—and here I think I disagree with the noble Viscount, Lord Trenchard—that the balance of advantage now lies in the direction of greater flexibility in the immediate future.
A decision needs to be taken very soon so that we can spend the time left before 1st August in putting over the huge damage and the misery which will result if this return to greater freedom in negotiations is abused, and the enormous advantages to all if it is used responsibly. As my noble friend Lord Watkinson indicated, we must look beyond the next few months to more fundamental changes

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in the way we determine what we pay ourselves. At the national level, the paramount need is to find a way of agreeing the overall increase —if any—in pay which can be afforded each year. The CBI have already put forward important proposals in their document The Future of Pay Determination. That analyses the inherent weaknesses of the present system and outlines proposals which would lead to pay negotiations taking place in a much better atmosphere and with a much greater knowledge of the options open to us. The proposals include a central mechanism to provide economic analysis and indicate the various options. I should like to support most strongly the suggestion put forward by my noble friend Lord Watkinson that a new Select Committee should play a very big part in this.
If we are to restore respect for Parliament and the rule of law, then Parliament must be closely involved in determining this fundamental issue. The appointment of a Parliamentary Select Committee would he a sensible way to proceed—and it is certainly worth very serious consideration. That Committee would have to have adequate resources to do its job. It would take evidence in public from various bodies, including the Government, the Opposition, the CBI, the TUC and any independent experts whom it wished to consult. It could produce a report each year, perhaps some time early in November, which would form the basis for the pay determinations the following year and perhaps also for the White Paper on Public Expenditure.
However, although Parliament and other national organisations have a very important contribution to make to all this, in the end, good industrial relations depend on people and how they get on with each other in companies and factories all over the country. There, too, we need to seek for long-term solutions rather than short-term gains of one sector against another. We must, as the noble Lord, Lord George-Brown said, tell everyone the true facts of industrial and economic life all the time, and not just when we are negotiating with them. All employees must be involved in the plans, progress and problems of their own companies and in the decision-making process whenever they can make constructive contributions. Whenever several trade unions are involved in negotiations, we must make
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every effort to get them round the same table so that we can have one comprehensive settlement, as could so readily be achieved in the German conditions. We also need to achieve a much better understanding among all employees of the agreed procedures for settling disputes and to ensure that management and unions work closely together to maintain discipline for using and exhausting these procedures before production is interrupted.
In all this, managers at every level have to take the initiative, so they, too, must be fully informed about their companies' policies and plans. But little will be achieved unless the directors and the board of the company arc fully behind those proposals and see them implemented. Many responsible trade union leaders make major contributions to better relations and constructive settlements, but a heavy burden of responsibility rests on management. It is hard, relentless work, adding greatly to the daily pressures of the job, and it is a tribute to the patience and determination of British managers that so much is achieved in the present difficult and restrictive conditions—conditions which I believe have been imposed upon them very largely by impractical idealists and vote-seeking politicians. There is so much to do and it is high time that the job was made less difficult by improving the environment in which negotiations take place. But it will be a long job and the sooner we get down to tackling it in earnest, the better.
5.59 p.m.
Viscount AMORY: I am sure that we all wish to express our gratitude to my noble friend Lord Trenchard for giving us the opportunity of this debate. His wide and distinguished experience, with responsibility for similar operations in different countries, makes him so well placed to make valid comparisons. What he said I found most interesting, as indeed I did with regard to what my noble friend Lord Caldecote has just said.
To begin with, may I join with those who have expressed our deep sense of loss at the death of Lord Douglass of Cleveland. His wisdom and long experience made his advice extremely valuable, and we shall miss him greatly. I fear that there is no dispute that our current national performance is deplorable. Cases in which

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industrial relations are really intolerable are, I believe, confined to a few important industries. The trouble in general is not bitterness but apathy, lethargy and a lack of purposeful co-operation. These defects, I fear, run generally below the surface throughout British industry. Even when relations are easy and unstrained, as they often are, the record of productivity is often far from impressive.
It looks as if we have not yet taken the urgency of the essential lessons to heart. In that, as in everything else he said, I agree with my noble friend Lord Watkinson. The biggest single need for British industry—and it really is an urgent need—is for an increase in competitive efficiency and the recreation of a spirit of entrepreneurial zest and dynamism. However, I do not intend today to speak much about this immensely important problem of overmanning and low productivity. I hope that before long there may be another opportunity in your Lordships' House for a further debate on that subject, the urgency of which I thought was well summarised in the leading article in The Times last Saturday.
I agree with my noble friend Lord Trenchard, that the performance of small units of production is generally far better, and the general attitude of responsibility far higher, than the larger. The fact that agriculture has such a good record is surely due to a combination of two things: the fact that the work is generally of a satisfying nature and also the intimacy and the personal nature of relations between employer and employee. My experience of relatively small family businesses confirms that in factories of 200 or 300 there need be no difficulty in maintaining a satisfactory spirit of cooperation. Loyalty to a small company or group seems easier to feel than to a large impersonal organisation. The trouble is that in some industries large production units seem to be technically necessary. I thought Prince Charles was surely right when he said recently that greater efforts must be made to increase the interest of jobs to the individuals performing them. I entirely agree.
Coming more directly to collective bargaining, I do not believe that absolutely uninfluenced collective bargaining is going to be feasible under conditions of actual or
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threatening inflation. Some kind of incomes policy is going to be essential, and I agree with what my noble friend Lord Watkinson said about that. In any case, the Government must have one in relation to their own employees and those of the nationalised industries. Such an incomes policy, however, must not amount to a rigidly applied figure either in terms of cash or of percentage. That is too damaging to incentive and to differentials.
That is the rub—what should it be? I believe that action is essential on two levels. At the national level the need is for some generally accepted assessment of the sum which can be in the aggregate made available for increases in any year without disastrous results to our national economy through inflation. Such a figure must he authoritively worked out and accepted by public opinion. Perhaps that is as far as a formal incomes policy can go. There should be two levels—a higher level and a lower level. At the lower there should be no attempt by the Government themselves to lay down a single rigid central formula; there should be room for much collective bargaining against the background of what in the aggregate is available. In that sector of the field of bargaining, I believe that the principle of genuine arbitration—people often talk about arbitration and conciliation, but the two things, of course, are entirely different—should have room to play a part. Also, I believe that works councils should have an important part to play.
Would it not be good if the NEDC could be strengthened as being the best forum in which to seek general acceptance of the limitation or scope at the higher level? Would it not be a good thing to set up some small body—this is not a new idea as my noble friend Lord Thorneycroft knows—of economists or others to advise the Government and the NEDC what this annual allocation of resources should be? The Three Wise Men instituted by my noble friend Lord Thorneycroft about 20 years ago was essentially the right idea, but that idea was killed by the trade unions who would not have anything to do with it.
Is it too much to hope that one day there might be one economic staff jointly controlled by the CBI and the TUC, which might provide both bodies with

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relevant factual economic intelligence perhaps through the NEDC. I remember, when I was Minister of Agriculture, how helpful we found it when the staffs of the Ministry and the NFU found it possible to present jointly agreed economic facts which could be accepted by both sides.
As regards the trade unions, I do not want to allege for a moment that the current faults are all on the side of the trade unions. The standard of management obviously varies enormously in skill and enterprise. One sad thing is that entrepreneurial skills seem with the managerial revolution to have become much scarcer than they used to be. I think a valid criticism of some managements is that they still do not give employees as much information as to the prospects and fortunes of a company, or as much responsibility, as they might.
I thought that the opinion my noble friend Lord Trenchard gave that British businessmen with responsibilities overseas seem to be able to put up as good a performance as their foreign colleagues was interesting. When one examines many industrial stoppages, one finds that the dispute is not of the kind of old-fashioned battle between employer and employees but a strike in which the public is the real sufferer. Another kind of dispute, generally I believe unofficial action, is the exercise of local power by groups of employees who know that the effect of the stoppage will be so expensive to the company concerned that it will almost certainly accept the less intolerable alternative of bowing to the pressures.
When trade unions seek to increase employment by maintaining uneconomic manning levels, the effect is counterproductive by raising costs to uncompetitive levels and so actively increasing unemployment. In the same way, when legislation designed to protect employment has the unintended effect of causing small employers in particular to shy away from adding to their manpower commitments, for fear of the high cost of compensation if the extra business obtainable proves only temporary it has a counter-productive effect.
I fear that, when the economic history of the past 30 years comes to be written, it will be said that the trade unions, while
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they have often shown a commendable degree of restraint by not exercising their full power, have seldom effectively served the best interests of their members by positively encouraging higher real output per man, the best long-term service they could have rendered their members. The Trines leading article to which I referred said:
"Higher real wages per man can be secured only by higher real output per man. The trade unions themselves cannot perform any useful function for their members if they cannot help their members to raise productivity".
A higher level of new investment in British industry will never come about until management and unions join together in common action to ensure that the new investment results in increased competitive efficiency. That simply must be the common target. Old hatchets must be buried, together with outdated habits of thought and misdirected loyalties stemming from a past which no longer exists, and I thought that was one of the messages which the noble Lord, Lord Cooper of Stockton Heath, gave in his temperate and responsible speech.
In practical terms, we must have policies jointly worked out by the CBI and TUC to start with, and backed by public opinion, to ensure that our besetting national weakness of low productivity is steadily replaced by a level at least in line with our international competitors. If it is maintained that that is pie in the sky, we must realise that anything less will be a certain recipe for higher unemployment and a lower standard of living.
6.13 p.m.
Lord BROWN: My Lords, the House must be grateful to the noble Viscount, Lord Trenchard, particularly because he introduced the whole subject to us in strictly non-political terms. That has led to many speeches, notably from the noble Lord, Lord Carr of Hadley, the noble Viscount, Lord Watkinson, and my noble friend Lord Cooper of Stockton Heath, in similarly non-political terms. Having said that, I wish to take up one point where I think Lord Trenchard was at fault. He referred to the experience of British managers managing companies overseas and he wrongly deduced from that that there was nothing much wrong with British managers.

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I suggest that it would be disastrous if we became complacent. When we have a situation in industry which is as bad as it is today, It must be hard to eliminate anybody from blame. Something which T do not think obtrudes itself enough into our thinking is the fact that the greatest single variable in any company is the calibre of its chief executive, and, if we want to start having better participation, better cooperation, better industrial relationships, higher investment and greater productivity we have not a hope in hell of getting it unless he backs it.
Viscount TRENCHARD: My Lords, I said that we must always make every effort to improve management standards and that these varied in every country. However, in the comparison I made, I actually said that there was no more wrong with them—and I used the words that way round—than with those of other countries. I have seen strong and weak points in management. At present, we have the best management available and we must work on it. I certainly did not mean to imply that we should stop working on it flat out all the time.
Lord BROWN: My Lords, my view—intuititively, but based on a great deal of contact—is that one-third of our chief executives are probably better than anybody else; that one-third of them get by; and that the other third of them should not be there. I shall not give my evidence for that because I have a speech to make. I suggest that we must think most seriously about this issue. One reason why I think one-third of them should not be there is because I do not think many boards of non-executive directors are doing their job competently in assessing those people and removing them when they are not competent. I shall be moving an Amendment to the Companies Bill which will shortly be coming before your Lordships' House to prevent chief executives—managing directors —from being chairmen also because 1 think that is one of the faults which leads to the situation that I have described. I shall leave the subject there.
Perhaps I may refer in passing to two great figures of the past. The first was Alfred Mond, who later became Lord Melchett, whose pronouncements in 1925 on this whole business of industrial
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relations, which I remember him making, were, I am afraid, sneered at by most of British industry and were certainly not followed. Yet, in one of our greatest companies, ICI, he laid the foundations for the sort of relationships that have endured to this day. The other was Seebohm Rowntree, to whom I remember talking very late in his life, in fact just before he died, at a meeting of the British Institute of Management. He was relating the things he had done years before in what he called the "cocoa factory", things done in advance of what the British Institute of Management stood for at the time he was talking. If we had followed the ideas of men such as that years ago we might not be in the trouble we are in today.
I wish to take up two points made by Lord Carr. First, he laid considerable stress on the alleviation of our difficulties which might flow from having less unions in this country: he was referring to the German situation where they have one union per industry and so on. I doubt whether that sort of solution would yield us much benefit. When one recalls the British Leyland toolmakers' strike, the Lucas toolmakers' strike and the British aircraft industry maintenance workers' strike, they were all striking to achieve the right to bargain separately from their colleagues in the same union. Thus, I do not think all belonging to the same union would prevent people from having inter-occupational fights. I am not saying it would not be a good thing to have less unions; simply that to pin any hopes to that might result in great effort being made to get fewer unions and then finding we are really very little better off.
Lord CARR of HADLEY: I seem to have been worse than usual today at making myself clear, my Lords. I thought I said—I certainly meant to say—that this was a fact of life with which we in this country had to live and that we should concentrate on learning to live with it rather than searching to get down to a few unions, something which I do not think is attainable, even if desirable.
Lord BROWN: My Lords, I am sorry if I misunderstood the noble Lord. I thought he was saying, as so many are saying—one hears it throughout industry— "If we had one union per company,

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everything would be all right". I apologise to him if I misunderstood his argument. However, Lord Carr went on to refer to the number of working days lost through strikes in 1977, but I would point out to him that that was not by any means the worst year.
Lord CARR of HADLEY: That was not my point, my Lords.
Lord BROWN: My Lords, I got the impression the noble Lord thought it was a very bad year. In fact, many years have been worse: in 1970, 11 million days were lost; in 1971, 14 million days were lost; and in 1972, 24 million was the figure.
Lord CARR of HADLEY: My Lords, I was referring to numbers of strikes and I was particularly differentiating, as the late Ray Gunter did so often, between numbers of strikes and total hours lost. It is the number of strikes which is particularly bad in Britain, and, in terms of numbers, 1977 was a very bad year.
Lord BROWN: I always think that the number of days lost is the real, basic criterion of the damage done to our economy—but never mind. I found myself, a little to my surprise, in a much greater measure of agreement with the words of the noble Viscount, Lord Watkinson, than I expected, and with the words of the noble Lord, Lord George-Brown. I notice that they are both missing now—
A noble Lord: Lord George-Brown is here now.
Lord BROWN: Good, my hyphenated friend. I must say that I wrote to him when he became a peer, and I said, "George, either you take a hyphen, or I do". I wish now that I had got the hyphen instead of him, because he would get all my mail instead of me getting all his.
There has been much talk this afternoon about collective bargaining, and I bow to the words of wisdom spoken by the noble Lord, Lord George-Brown. But I want to say a few words about this. If you take literally the phrase "collective bargaining"—I am ignoring the word "free"; I don't know what it means in
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this context—you would expect it to mean that collective bargaining at national level would be all the trade unions getting together to negotiate perhaps with the Government. You would expect it to relate to inside a company, with all the different occupations and unions getting together to bargain with the employer.
I fear that, by the use of the term, the TUC means something very different indeed, something which lay within the expectations of the noble Lord, Lord George-Brown. I fear that it means fragmented bargaining, with everybody having the right to bargain on behalf of those represented, regardless of the effect or the result of their bargains on others. In other words, back to industrial chaos.
The strange thing is that the TUC refers to "going back" to collective bargaining, whereas I think that the last three years have shown an example of the TUC indulging in collective bargaining at national level: the members have got together and they have agreed by a majority to accept certain limits on pay claims, and this, to me, is collective bargaining. I think that, in terms of the words they are using, they have got this the wrong way round.
When it comes to the employers, you find that their attitude to collective bargaining is equivocal. I do not think that anybody knows precisely what they mean when they use these words. Some may mean fragmented bargaining, some may mean collective bargaining. It is anybody's word to describe any situation which happens to be present in their mind at a given moment of time. I believe that we must get this right. Collective bargaining should mean getting together.
I want to say a few words about this. If the representatives of a series of unions, or a series of departments, or levels of staff in a company, get together, collectively bargaining with the employer, there are preconditions which make it possible. Without these preconditions, collective bargaining of a real kind cannot emerge because, if the representative of one union goes into such a situation with the prospect, or the possibility, of being out-voted by a majority of others then he is abdicating his position as a representative. He will be forced to go back to those he represents and say, Well, I'm sorry, chaps, I've lost out for you. All the rest

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are getting something. but you are getting nothing". The alternative situation would be that those he represented would fail to agree about the bargaining he had made on their behalf, and would go on strike or choose whatever action they liked.
There is, therefore, a pre-condition of collective bargaining; that is, that every representative and the employer with whom the representatives are negotiating should have the right to veto, so they must come to agreement. It is not so idealistic as it sounds. British Rail have collective bargaining at three levels with the right of veto encompassed in it. The bargaining of 14 unions at Ford, until recently led by Moss Evans, is based on the use of the veto, so they know that every union has agreed whatever proposition it has received, or is putting up to management, before it is put up. It is committed and it has the right to defend those whom it represents.
The whole principle has been acknowledged internationally in the unanimous voting rule of the EEC, which has been debated in this House. The EEC could not exist without it. It is not in the Treaty of Rome, but it has been developed since, because no country could continue to be a member of the EEC if it always stood in danger of having imposed upon it by a majority of other nations some piece of legislation which is wholly inimical to it.
Any situation where there are a number of nations or a number of unions bargaining in the interests of their own members involves the use of veto. We have to face this, but I think it is the last thing that most employers will face. I have talked for 20 years about the need for this principle to be adopted. You can call it the right of veto, or the unanimous vote in council; the expressions mean the same thing. But few employers would agree to such a measure, although in fact they are faced with precisely the situation that any one representative of some key occupation in their employment can stop them doing something and can bring the firm to a halt.
We have to institutionalise this situation. The noble Viscount, Lord Watkinson, talked about institutionalisation. I was very glad to hear him use the term. We must get our institutions right. They are
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not right now. If you look through history you will find that nations get in trouble because their institutions get out of date. One of the ways of keeping out of trouble as a nation, as a company or as a trade union is to see that the institutions—the constitution—are in line with the circumstances in which you have to exist.
So much for collective bargaining. Now I want to do some really basic thinking. I want to put up three propositions, and they are all, in a sense, about differentials. When one gets down to the last analysis and faces the fact, all the squabbles about wages and earnings differentials of all kinds and about entitlements—a broader expression than "wages"—are really about the relationship between what one group and another group gets; it is all a question of relativities. If you want to change the pattern of differentials, there is a principle to be observed. It is that you must get the agreement not only of those who benefit by that change, but also of all those who do not benefit, because, if you do not get the agreement of all those who do not benefit, then they and the others will all jump onto the same bandwagon and claim the same as whoever benefited. In no time, you are back at the status quo, or in an even worse position. Then the original payment of some increment that takes the group in question level with the others or puts them in front of those others starts the battle all over again.
Every industrial manager knows all about this. It is called leap-frogging. The one way you can get around it is by not shifting the pattern of differentials until all those involved in that pattern are agreed. We must begin thinking in terms of the basic principle like this. It means unanimous agreement about changes in differential patterns, and no movement until you get it.
I turn to the second matter to which I want to draw attention. If one thinks of the unions as being the custodians of the interests of many of the employees in this country—and, indeed, in a sense, of nearly all of them, because many, though they are not members of unions, have their fate settled by the unions because their pattern of wages follows those come to by the TUC—when one realises that their activities and their use of power will dictate the standard of living of the consumers of this country, then one asks

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the question: "Who is to look after the interests of the consumers of this country"? I do not think one gets the answer that it is the employers. How can they? They have not the power to defend the standard of living of the consumer against the very powerful activities of the trade unions. It is the Government; and here I go along with Lord George-Brown and Lord Watkinson—and it is a very happy situation to see them agreeing on this point. The Government cannot escape the decision as to how much can be added to the national wage bill year by year.
We had this in operation for three years under the Heath Government. Unfortunately, owing to the fact that they did not recognise the quite different position of coalminers—and they should have done so—it broke down, but there were three years of it which largely succeeded, apart from the coalminers' strike. Then, we have had three years of it under Labour, which have largely succeeded. Are we going to desert it next year to the clarion call for free collective bargaining, whatever that means, and go back to industrial chaos? No, we cannot do it. It is the Government's job to defend the interests of the consumer and the economy, and the unions' job to look after the interests of those in occupation as employees. I do not think we can escape that basic statement of the position. I am very grateful to the noble Viscount, Lord Trenchard, for saying that he did not believe in the use of monetary policy as a means of coping with a situation where free bargaining would break out again.
Viscount TRENCHARD: My Lords, I believe that a sensible monetary policy is an important factor—indeed, an essential factor—which has been lacking in the past, but it is not alone sufficient to contain the factors in free collective bargaining.
Lord BROWN: My Lords, that is exactly what I understood the noble Viscount to say, and I am very glad he said it because I think Milton Friedman, in his sayings, is an extremely dangerous and really rather stupid man. I do not know how many of your Lordships saw him on "the box" the other night in the discussion about what is to be done with the national gold brick arising from the North Sea situation—I am sorry to mix
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my metaphors—but his specific was to give every citizen of the country a bonus payment of £5,000 and let him spend it; that this was the right way to go about spending this great inheritance that we have in the North Sea. He is a very stupid and foolish man, taking his theories to the extreme.
The last underlying point I want to make concerns the power position of the unions, which is now enormous in this country. If we went back to the early part of the last century we could note, through the eyes of historians like Trevelyan and others, that various citizens of this country in our cities had no representation in Parliament whatsoever, and they were showing their growing power by the formation of political unions and by creating chaos of a sort which we have not known since. Governments, in both Houses, largely led by the aristocrats of this country, showed enormous wisdom in realising that, distasteful as it was to them, they would have to bring these power groups within the ambit of the Constitution by extending the franchise to them. This they did through successive Reform Acts: in 1832, in 1867 led by Disraeli, and by later Acts. They extended the basis of Government because they faced the fact that citizens had power, and either they were included in the Constitution or they would go on disrupting the nation.
Today we are faced again with a not dissimilar situation: a situation in which all citizens have the right to take part, however indirectly, through the use of their votes, in the legislature, but in their occupational roles they have no such right, and they express their power in their occupational roles through unions. The day is coming, sooner or later, when we are going to have a great constitutional change which will create something like a sub-Parliament, in an advisory role to the main Parliaments, composed of representatives of those in occupational roles. These are things that 1 think we must think about in principle, not because they are going to happen in the next two, three or four years but because, unless we have these basic things in mind, then the attempts which we make to solve the problems we face will not take these basic things into account and to that extent they will prove faulty. I have in mind for next year or the year following

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a situation in which the Government should decide the amount by which the national wage bill can increase; and I should very much like them to work out that figure, as to how much it should increase, through some sort of institution such as that described by the noble Viscount, Lord Watkinson, with the CBI and NEDO all taking part in deciding what it should be but the Government making the decision as to the ultimate figure.
This overall Government policy of saying 6 per cent. or 10 per cent., or whatever it may be, produces rigidity in differentials, and this is the problem which has not been overcome. How should it be overcome? I think it should be overcome by the Government saying to the TUC, as the best available body, "Here it is, 10 per cent. We give you the authority to differentiate this 10 per cent. if you can agree how to do it. It may be that you will give some great industries more than others, but we will back your decision if you are prepared to differentiate it". Then, in turn, when every company receives its TUC-decided share, the Government should say, as was the case during the last phase of the plan of the Heath Government, "If you, the representatives of all strata and groups in that firm, and of management, can agree to differentiate your share, as decided by the TUC, you have authority to differentiate it, so that it gives flexibility".
Now I think I know what would happen if the Government said this. I do not think the TUC would be able to agree on any degree of differentiation in the first year or two; but when all the squabbles broke out about the rigidity of the Government's pay policy they would be able to turn to the TUC and say, "You have had the authority to differentiate it, and you are the only body that can do so". Governments cannot say that the coal miners shall get this, the engineering industries shall get that and the teachers shall get the other, because differentials must be decided on a relatively unanimous basis by those whom they affect, which is the point I made earlier. So that, although I do not think that the TUC, given such authority, would exercise it to begin with, I think they might be driven eventually to realise that that is the only place where
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flexibility about differentials can be initiated. I am sorry to have kept your Lordships for so long.
Lord ROCHESTER: My Lords, before the noble Lord sits down, may I say that I was following his last argument very closely. Would he not agree that there is a case for the employers to be included in his scheme? The employers also have a stake in this problem, and they are in a position, I suggest, to wield some power in the situation, as was evidenced last year, for example, by their reaction to the Bullock proposals. Would the noble Lord not agree that the employers also should be involved in this scheme of pay determination of which he speaks?
Lord BROWN: My Lords, at the company level, Yes, I would agree; hut at national level, No, I would not agree—for this simple reason. If you get the employers involved in differentials at national level you once again buttress the idea, which is a false idea, that when unions wrest a differential increase they are wresting it from the employer; that they are gaining it at the expense of the profits of a company, and so on. I think you have got to keep them out of that situation because they are affected by the size of the addition to the national wage bill but they are not really affected by decisions on differentials as between industries; and if you include them in this situation you are going to recreate the old animosity between employers and unions at that level and it will become a polarised fight between employers and unions. So I would agree at company level, at institutional level, but not at national level.
6.40 p.m.
Lord MOTTISTONE: My Lords, I shall endeavour to be brief. I should like to start by joining in the tributes paid by noble Lords to the late Lord Douglass of Cleveland. It was my pleasure when I first joined this House and occasionally took part in debates of this kind that he should have been doing so, too. The wisdom in his contributions to these debates is something that we shall sadly lack in the future. I should like also to thank my noble friend Lord Trenchard for having put down this Motion. It seems to have inspired a lot of very important and worthwhile speeches. I hope that its conclusions may come somehow towards

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helping us down the way. My feeling, however, is that the trouble with collective bargaining—and we are directed to compare collective bargaining in this country with that in other countries, in Europe, perhaps—is that it depends on the bargain.
My concern is that the bargain depends on confidence. I believe that in recent years there has been a gradual erosion of confidence as between the different peoples in this country. This does not only mean as between management and unions, to use the well-known phrase, but between the people who are viewing those in authority generally. Those in authority include trade union officials and foremen just as much as managing directors and (shall we say?) lawyers. There has been a rather excessive over-indulgence in the debunking of authority. Maybe this is a healthy thing to happen in a democratic State; maybe it is the penalty we pay for living in a country where we try to have as much freedom as we can for individuals; maybe it is, indeed, good for people belonging to authoritative groupings to be viewed in this way. I would not debate that.
I think the great difference that has come about between now and, say, 20 years ago is that at all times people might say that managers are bad or that trade unionists have got too much power or whatever; but that, more often than not, they would qualify this by saying, "My boss is a jolly good one" or, "My union official that I am dealing with is first-class". This qualification, this admixture of view, the general view of the criticism of authority as a general purpose, and the view of the representative of that authority with which one was dealing oneself, was the thing which made it possible, in the last resort, for confidence between groups of people to be preserved—because they had confidence at the level at which they were working.
Your Lordships might well ask, if this is right, "What is it that has caused this change"? I suggest that the cause of the change is the degree of centralisation which has gradually and imperceptibly increased. It has increased partly because of what I regret I must describe as the baleful influence of some of the policies of the Party of noble Lords opposite. For example, the increasing State control of enterprise about the failings of which the noble Lord, Lord Vaizey, was very clear
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in his exposition in the debate last Wednesday. I would therefore refer your Lordships to column 211 of the Official Report for 5th April last.
It is partly that; but also it is that the development of improved communications and the development of improved transport systems has caused this in any case to happen generally. For example, whereas perhaps 25 years ago in a particular section of industry you might have 400 companies producing a particular product, now you perhaps have 40. The danger of this centralisation is that its effect is to diminish authority at the working level. That, I believe, is part of the cause of the lack of confidence as between one group and another.
For example, how can a manager who may be very competent, and, indeed, respected, as a person, command the same authority and the same obedience if everybody knows that in the last resort the shop stewards are permitted to bypass him in communicating with the board of directors? This must undermine his authority. I am sure that noble Lords are very well aware of many examples where that happens. It may happen for very good reasons. It may happen—if you like—to keep senior management in the picture in a way that they would not have been before. But the fact is that, whenever you allow somebody who is given a particular responsibility to be short-circuited in a chain of authority, you are diminishing his ability to lead and to manage.
I suggest that this is the fundamental problem which we have got to override. I have quoted the example of a company and I have quoted earlier the baleful effect of State control of enterprise. I suggest that the chairman or senior executive of a nationalised industry also lacks the full authority that he should have; because everybody knows that his decisions are subject to approval by a Minister advised by some senior officials of the Civil Service. The very fact that this happens—even if it very rarely happens—diminishes the authority of this particular person.
I suggest further that this shortcoming is a very serious one, because I think there is enough evidence in this country and others to show that people who are not in any way in a position to suffer for any

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errors that may be made, cannot get themselves as involved, and, therefore, cannot take the same necessary responsibility for their decisions as can people who are part of the system instead of outside it. I suggest that this whole concept of external control of enterprise is one which needs to be examined very carefully. It does not apply to the large private enterprise business in the same way because those in top authority in those enterprises take the full responsibility for the actions both of themselves and their subordinates. They cannot withdraw from the situation. I suggest that until we can somehow seek to organise ourselves to eliminate this diffusion of authority we shall not have a proper basis in which we can have any bargaining, whether it be collective or otherwise. Not only must this authority be ensured on paper and by rules, it must be seen to be effective in practice.
Unlike other noble Lords, I have not said much about trade unions and their powers. This is not because I do not feel that, in many industries and, indeed, geographically in some parts of the country, such power is not excessive and almost invariably seems to be counter-productive so far as the union membership is concerned. It is because I believe that any organisation or any individual will take to itself or himself as much power as can be grasped within the law. We can only modify that power in businesses by organisation within companies, organisation designed to deal with the power. Maybe we need to examine in the country at large whether the law needs modifying to give a proper balance of power as between organised labour and the rest for us in the kingdom. I suspect that it does but perhaps not as much as some would wish and others could fear.
I conclude by returning to my opening remarks. I believe that it is vital that confidence in our abilities as a people to work together for the common good should be regenerated. We have certainly shown this to he possible as recently as 25 years ago. It is vital not only to this United Kingdom but also to all our friends and allies in the Western World.
6.52 p.m.
Viscount ROCHDALE: My Lords, it has been my loss not to have had the
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privilege during my career in industry of working with the late Lord Douglass of Cleveland. I should like to join with other noble Lords who paid tribute to his great services during his lifetime in industry and in your Lordships' House. I should also like to express my thanks to my noble friend Lord Trenchard who has really done us a remarkable service this afternoon in introducing this Motion. Quite apart from the fact that he has had massive practical experience of negotiating overseas, it must have involved a considerable amount of thought, research and effort to prepare this debate and to put it forward in such a concise, coherent, and cogent way. It can be a subject that is sensitive, potentially even emotive; but it is a tribute to your Lordships' House today that we have been able to discuss it in a way where emotion does not enter into it at all and where it is being debated entirely objectively. That is the way it should be. I am most grateful to my noble friend.
I agree with him that this debate must on no account be regarded in isolation. It is really just one debate in a very long continuing debate of great importance. My noble friend referred to the earlier debates of my noble friend Lord Selsdon and the noble Lord, Lord McCarthy. They all contributed to this one debate, which, as I see it, is this: How do we as a nation propose to be able to pay our way in the world? It can be put in a few words like that, but it is the most difficult and complex subject, and no doubt there will he many other debates in your Lordships' House in the near future which will approach this subject from different angles. Today we approach it from the angle of pay determination, comparing our methods with those of our main competitors overseas; and bearing in mind, also, that our methods have been evolved over a great number of years
I have spent all my working life in industry, except for the war years. I started life in the wool textile industry and my first job was to sort greasy wool. It was a very humble job but not without interest. As time went on, I was fortunate enough to become associated with a wide variety of other industries, finishing at the heaviest end of the shipbuilding industry. I mention these personal experiences, hope, with due modesty, for one very important reason—at least, I think it is

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important—and it is this: in this wide variety of industries, textiles, chemicals, steel, shipbuilding and so on, there are a number of common points. No point has stayed with me more than—and this has been apparent in all industry—the supreme importance of the relationship between the shop floor and all levels of management. To emphasise the point that this is a two-way business, I would repeat it by saying between all levels of management and the shop floor.
To the extent that that relationship is open, frank and friendly, the problems—and it is evident to all here today that in this field we are bound to get problems—will be more easily resolved. But to the extent that the relationship is quite different, is aloof, is charged with suspicion, is frigid, those self-same problems, which in the other climate could be soluble, will be increasingly difficult, more intractable and frustrating. In all these problems there is the general context of pay determination and the structure for it, which is the purpose of the debate today.
Before saying a few words about negotiating, I should like to say something about the climate which is so essential for good negotiation. To my mind, the happier of the two climates to which I referred a moment ago is —and other noble Lords have also said this—apparently more easily come by in smaller or medium-sized companies or plants. This alone has a useful lesson to teach us. I have yet to be convinced that that same situation cannot be translated with imagination, skilful planning and decentralisation into the largest companies in the country. I believe it can. I have no doubt whatever Lord Trenchard's own great company has achieved it in this way already, and other great companies have been referred to today in the same way. Of course, in this field of relationships there can never be an end. There can never be an end to that road, especially when one remembers the ever-continuing development in technology and, perhaps even more so, the tremendous growth in national education throughout the country with the consequent and not unexpected growth of expectations.
There is therefore in my mind a need for a continuous campaign of explanation of what is going on within any company or plant, and that campaign of explanation
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must go on right from the top down to the bottom. To my mind that is what is meant by participation. As I have said on previous occasions in your Lordships' House, I regard participation as an absolute "must", provided that we agree what is meant by that word—and I do not think that there should be much difficulty about that—and provided that it is genuine participation and not mere façade.
We hear a great deal of participation of one kind and another in countries overseas. I wonder how genuine some of that really is? I hope I am not being unfair to them. I see participation in essence as an extension of the true team spirit in which everyone contributes and helps—the team spirit which has been translated in a much more elaborate and sophisticated form from the football field or cricket pitch into industry. This principle must be the same whatever the size of the organisation where it is to be found. But how do we achieve it?
I accept that perhaps some statutory guidelines or framework for participation may be needed but, in my view, that must be minimal and, in so far as anything which is statutory may become mandatory, I would merely remind your Lordships that you cannot legislate for people to participate any more than you can legislate for people to be friends. To use an old adage. you may bring a horse to water but you cannot make him drink. You cannot therefore legislate for participation. Participation must be allowed to evolve throughout a company from the lowest level right up to board level. Perhaps I should just explain at this point why I use the word "evolve". I may be misunderstood, because "evolve" has a connotation which could all too easily mean delay, or dragging one's feet. That is certainly not what I have in mind, because I believe there can be very few companies in this country where some immediate action is not needed, with considerable effort mainly on the part of management but also, I think, on the union side as well.
I should like to say a very brief word on participation at board level. I spoke at some length on this when we debated Bullock and I do not want to repeat myself at all. I realise that it can present a very real problem for worker-directors

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if they are going to play their full part as directors of the company and at the same time forfeit nothing of the trust placed in them by their fellow-workers or trade union colleagues. To my mind that is their great dilemma. When we debated Bullock, I quoted the case of the company of which I was chairman in Belfast. We had virtually completed two and a half years ago the framework for worker-directors to he appointed. It was a negotiated agreement, and I regret to say that the information I had, only two or three weeks ago, from the present chairman of the company was that they have not yet agreed to be appointed. That only indicates the problem that exists: yet it is a problem that somehow we must get round. To the extent that we do get round it and really have participation from the top to the bottom—and I hope we shall get that to a great and increasing degree—so as to provide a solid foundation for a mutual understanding of each other's problems and intentions based on an understood, acknowledged and common set of facts, the most difficult and sensitive problems, I believe, can be tackled with some hope of proper solution.
So much for the climate, which is absolutely essential if we are going to get the right negotiating system in this country. That brings me to the question of negotiated arrangements. I cannot claim to have, as my noble friend has, practical experience of negotiating in countries overseas, but of course there is an immense amount of literature on the subject. One has talked to many people about it and compared it with what one knows from personal experience of what goes on in this country. It is quite obvious that there are a certain number of aspects of our system which would seem to be most unsatisfactory and at times even chaotic and inherently inflationary. They call for change. In days gone by, employers in this country undoubtedly held the balance of negotiating power. To what extent this power may have been abused from time to time, and perhaps absolutely ruthlessly abused, is not for discussion today. It would be a fruitless effort to try to do so. But over recent years there can be no doubt that the pendulum has shifted right across to the other side, and we want to see whether or not that is satisfactory. My own feeling is that we should all surely aim to try,
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difficult though it is, to come to a steady and reasonable equilibrium in the case of negotiated power, so that trade unions and managements can objectively and responsibly negotiate across the table, thinking not merely of immediate demands but of their effect on the longer-term future.
I referred a moment ago to the debate initiated by the noble Lord, Lord McCarthy, on the 15th February. I have reread what he said there with great interest and care. There was one point in particular that rather surprised me. I hope I am in order in referring to it although he is not in his seat today. The noble Lord said at column 1464 that he was,
"….convinced that most pay explosions in the past…have been rooted in the private sector, not the public sector…".
I hesitate to cross swords with the noble Lord, who is such an absolute expert on these matters, but that remark of his surprised me. Of course, I may have misinterpreted what he had intended, but I should have thought that the negotiating power of employers in the private sector is all too often eroded by advances previously made in the public sector
I should like to explain just how I see that. Public sector negotiations are usually at the start of the negotiating year and they relate to industries or departments which are essential to the life of the country. They have therefore the inherent weakness of being subject less to effective financial sanctions. It follows that they are conducted in a setting where an inflationary settlement can all too easily be arrived at, short of there being a tough statutory incomes policy. That may be all right so long as it lasts, but that is surely something which cannot be held to indefinitely. So all in all, the public sector, the largest employer, will set the going rate for all private and public industry during the year. When it comes to negotiating in the private sector, bearing in mind the great variety of circumstances and demands—different trades, different crafts, different responsibilities and so on, even within a single plant—there may well be cases where it is easier, and possbily wiser, for an employer to take the easier line and to say that he will increase prices rather than resist a further wage demand or possible disruptive effort.

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I understand that for many of our overseas competitors there is an increasing degree of Government intervention in all these matters. While I would be the last to suggest that we cannot often usefully learn from our competitors overseas, I think that we should be very careful to make sure that we are, in fact, comparing like with like. Equally, we should remember that many of the problems that our competitors overseas are having to deal with today are problems that confronted us 50 years or more ago. To my mind, there are no easy solutions to be borrowed or bought from overseas. Whether we like it or not, we are still pioneers in this field, as we were 50 years ago; and, as I think my noble friend Lord Watkinson and others said, we must continue to paddle our own boat. But that does not mean that we cannot learn from, and take note of, what other people do.
I have already referred to Government intervention in order to encourage participation, but that is, to my mind, quite different from Government intervention in the negotiating sphere. This is one point which needs to be very carefully looked at, because there are two aspects to it. First, there are the Government themselves as an employer, and, secondly, the Government as Government. This raises considerable difficulties, and the latter role needs to be looked at with very great caution if it is not to result in negotiations in industry as a whole, below the Government, being fixed in a rigid position.
It may be that some kind of agreement could be arrived at, perhaps between the Government, the CBI and the TUC, laying down the national cake, the national figure, for the year. Alternatively, there could be some kind of independent body. All kinds of suggestions have been made, to which I shall not refer, but I agree that some guidelines should be laid down within which we could then get back to collective bargaining where both sides are fully aware in advance of the facts and of the constraints, but are otherwise free to negotiate seriously and responsibly, knowing that what is agreed will not later be negatived from above and will also be honoured by the members whom they represent.
If this is not to prove too inflationary certain conditions are absolutely essential,
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and I should like to mention these in conclusion. These conditions are, by no means, exhaustive and there may be a great many more. The first is that, as I have already said, we must push ahead and develop plans for further participation. freely negotiated, and have greater mutual understanding from the start across the negotiating table, which should improve the climate for negotiations. This means better communications and constant effort. by trade unions and managements alike, in explaining to employees the true facts of economic life on which responsible negotiations will be undertaken on their behalf. This process of explanation must be carried on not merely in times of crisis, when we are on the edge of a precipice, but in good times, in bad times and continuously. To my mind, this is the first absolute essential.
My second condition is that there should be annual guidelines—the question of who produces them would be a matter for discussion—made as unrestrictive as possible, so as to avoid rigidity. Once accepted and recognised, these guidelines must be regarded as being meant to stick. They will include the cake, to which my noble friend referred, which has to be divided out. It must also be accepted that some will stand to gain more of the cake and some will stand to gain less. This is a very difficult but important point.
My third condition is that, while certain basic issues may be negotiated at national or industrial level, as many as possible should be negotiated at company or plant level. This, too, I regard as very importtant. It may be that, just as many of our overseas competitors include in their negotiating package many more items than we include, such as thresholds, profit sharing, travel allowances, education expenses and a whole lot more, these should be part of our negotiating package.
My fourth condition is that it should be mutually accepted that the likely fortunes of individual companies must be allowed to influence their own settlements. if I may put it in another way, pay increases, intended to recognise and reward greater efficiency and success, must not become the going rate for lame ducks elsewhere. In other words, the potentially successful company must have freedom to attract, by its terms, the people it really wants,

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because by that alone will growth come, and growth will be the basis from which investment, which we all want, can follow. My fifth condition is that there should be fewer negotiating units. My sixth and final condition is that there should be a review of what, for want of a better term, I have called the annual negotiating calendar. This is important, if we are to avoid inflationary leapfrogging.
I realise that these goals are exceedingly difficult. I cannot see them working really well if they are imposed. Government may help, but they must be arrived at by consensus in an atmosphere of sincere, enthusiastic participation. They may call—and this could be a delicate point—for some revision of cherished company practices and trade union rule books. They will probably require some transitional arrangements until the present still high rate of inflation is even more under control. But the stakes are very high, success is in everyone's interest and there is no time to waste. While Government may help, I do not think we must necessarily wait for Government to do anything. I am not making a political point, because I say exactly the same whether I am talking about a Conservative Government or a Labour Government. It is up to managements of companies and trade unions to move together, and the quicker they do so the better.
7.19 p.m.
Lord COLLISON: My Lords, I wish to join with others who have paid tribute to my old friend Lord Douglass. I experience a real sense of loss, and the suddenness of his death has contributed to that. I knew him and worked with him for many years. He was with me and other colleagues on the General Council of the TUC. He was also chairman of the TUC's Economic Committee, and his service to the trade union movement and to the country is undoubted. It is a great loss and we shall all miss him.
I should also like to express my thanks to the noble Viscount, Lord Trenchard, for introducing our debate this evening. I apologise for imposing myself upon your Lordships at so late an hour. However, the noble Viscount, Lord Trenchard, will appreciate, by the number of speakers and by the length of some of the speeches,
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that noble Lords have welcomed the introduction of this subject. No stones have been left unturned and therefore I shall find it difficult to find any more to turn.
However, it is right that from time to time we should study the structure and operation of the trade union movement abroad and make a comparison between what they and what we in this country do, provided that our investigations are purely objective and that, as several noble Lords have said, we do not seek to impose upon our workforce here conditions which may operate well abroad. Therefore it is good that we are having this opportunity to continue that study, although I hope most sincerely that nothing which has been said by any noble Lord in this House today will add fuel to the fire of those who tend to criticise the trade unions. It does not do any good; in fact, it does harm.
I suppose I am one of the least sensitive people to belong to the trade union movement. However, one reacts when one gets the impression that many things which are said are critical of trade unions and of the workers. It takes all sorts to make a world. Certainly in industry there are at least two partners—the employers and the workpeople—and any failure or success which British industry achieves is due to the efforts of both. Therefore, neither the one nor the other ought automatically and with prejudice to be condemned out of hand.
We hear a great deal about the "British disease". I admire the British. I admire what the British people have achieved and accomplished in the past. The things that we have done, stood for and, indeed, fought for ought not to be forgotten. The rather loose, easy and cheap talk that one hears about the "British disease" is to me both annoying and objectionable. The talk always comes around to strikes, and that is what has happened today in this House. The impression is often given that the British workman is strike happy: that he walks off his job at the drop of a hat, that he is entirely irresponsible and, if I may use the word in your Lordships' House, that he is "bloody-minded".
People forget that there is always a cause and a reason for behaviour of all kinds—for good behaviour and, if you

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like, for bad behaviour—but one has to look for the reasons for such behaviour. I do not want to try to whitewash the problems which we in this country face. However, the fact is that quite recently the International Labour Organisation issued statistics which prompted the Department of Employment to produce in one of their publications a banner headline which read: "Britain among the Best Four". The text explained that only four of the 16 countries for which figures were available—and those countries were Canada, Japan, Sweden and the United Kingdom—lost fewer days in 1976 per 1,000 people employed than in the previous year. It explained also that over the past 10-year period the United Kingdom was about in the middle of the league and was by no means either the worst or the best. We were not at the rear end of the queue.
I was honoured to be a member of the Royal Commission on Trade Unions and Employers' Organisations. That Royal Commission has already been mentioned today in our debate. The Royal Commission also made a study of conditions as they existed at that time. It looked at the statistics over the past 10 years and found that from 1964 to 1966 the best indication as to the favourability or otherwise of industrial relations could well be based on the number of working days lost in relation to the numbers employed, as the Department of Employment accepts from the ILO today. In those days, the Royal Commission went on record as saying:
"The United Kingdom's recent record has been about average compared with other countries"..
Viscount TRENCHARD: My Lords, I thank the noble Lord, Lord Collison, for allowing me to intervene at this stage on a point which I made to that Royal Commission. The number of days lost by strikes is governed by a natural economic law. No country or company over any length of time can lose more than a certain number of working days. The richer the company, the richer the country, the more the number of days that can be lost. The position that needs to be examined—a point upon which my noble friend Lord Carr of Hadley touched—is the position before a strike. In this connection, all of the managers of companies in this country whom I met when
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I went from place to place made the point that they are up against the constant threat of strike action and that it is this which makes it so hard to move forward productivity.
Lord COLLISON: My Lords, I understand this argument, and that comment is in fact made in the Royal Commission's report. The argument is well known. I am not suggesting that such criticism, which I consider to be unfair, is thrown by Members of this House at the trade unions and the workpeople of this country. What I am afraid of is that that impression has got about outside, and I hope that nothing which is said in this House will add fuel to that particular fire.
I have already said that I am making no attempt to whitewash the situation. Of course it is not entirely satisfactory. The number of unofficial strikes is still very high, as it was at the time of the Donovan Commission. Indeed, it was because the number of unofficial strikes was high, and getting higher, whereas the number of official strikes was more or less steady in both number and duration, that the Commission came to its main recommendation. The Commission took the view that the traditional system, which provided for negotiation at national or central level on an industry basis, was no longer adequate in an industrial set-up which had resulted in a multitude of shop floor agreements supplementing national agreements which could cover virtually only such questions as annual holidays and other general issues.
The view of the Royal Commission is put very clearly in paragraph 454 of the report, where it says:
"By far the most important part in remedying the problem of unofficial strikes and other forms of unofficial action will be played by reforming the institutions of whose defects they are a symptom. Unofficial strikes are, above all, the result of the inadequate conduct of industrial relations at company and plant level. They will persist so long as companies pay inadequate attention to their pay structures, and personnel policies and methods of negotiation adopted at the workplace are essential and the trouble will continue so far as they remain in their present chaotic state."
The report added:
"They will persist so long as neither employers nor trade unions are willing adequately to recognise, define and control the part played by shop stewards in our collective bargaining system".

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"They will continue until the confusion which so often surrounds the exercise by management of its 'rights' has been resolved by the settlement of clear rules and procedures which are accepted as fair and reasonable by all concerned."
A number of years have passed since the Commission came to that conclusion. I still hold to it; I think it is still a major problem with us, although I believe—and I have been out of this arena for some time—that progress is being made in the right direction. What I am sure about is that the shop floor arm and all that goes with it in terms of personnel and management, is an essential arm, one which has been under-rated and neglected in the past
Quite apart from the technical advantages that a development towards shop floor negotiation and its understanding and control would mean in terms of better negotiations, it also means something else: it means that the communication between management and workpeople will inevitably be improved, because sitting across the table and negotiating and arguing with people will bring to the knowledge of both workpeople and management all the issues which are causing stress and creating the very problems which cause dissatisfaction. I have said so often before that I am convinced—and my conviction has sprung from what I learned on the Royal Commission—that, above all else, good communications form the real basis for industrial peace, because if conducted with complete openness and with nothing being held back on either side, one can get understanding, whereas without communication and frankness one can only achieve distrust and suspicion. Without knowledge, without understanding, without being told and having the opportunity to discover what are the problems affecting workpeople and management, including money, cash liquidity and all the rest of it, it is so easy and becomes almost commonplace to blame the other side; for workpeople to blame management and management to blame workpeople. That happens almost automatically as a result of prejudice and lack of information. There is irritation; what is considered on the part of management to be constant nagging by work-people and what workpeople consider to be demands made upon them which ought not to be made and which affect their lives. These considerations lead to automatic
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condemnation on either side and there is far too much of what I call "instant condemnation" which is born of ignorance. What is required is a willingness to he completely open and frank and to put ail the cards on the table. I am sure that the improvement we are all hoping to see in industrial relations will then come about.
On another front, comparisons are often made about trade union structure. For instance, our trade union structure is often criticised because of the multiplicity of trade unions and often—as has happened today—the comparison is made with Germany. The point has already been made by my noble friend Lord Cooper that in fact Hitler did the German industrial sector a great service when he destroyed the trade union movement. I personally knew two people who have since died, who spent the war years in a concentration camp because they would not renege on their basic beliefs. But the effect of that was that, after the war, it was possible to start from scratch and indeed, as my noble friend has said, the British trade union movement, together with the American trade union movement, went into Germany to give advice and help on the reconstruction. The outcome is that they obviously have a more rational system. There are 16 trade unions organised on an industrial basis; it is what is called vertical organisation and it clearly makes things a great deal easier, and it has made it easy in Germany to develop the works council machinery and other sorts of machinery which allow for participation.
I think it is of some interest to your Lordships to know what was the feeling of the Royal Commission on the question of participation. Before I mention that, however, I should like to say this: it is not possible, and it is pure wishful thinking to imagine that, in this country, we can simply knock down all that has grown up over the years. You can refer to it as having grown up like Topsy if you like and point out all the difficulties which emanate from having a number of trade unions in the same industry but you cannot knock down that which has been built up over the years and certainly no one would desire to emulate Hitler and destroy it by legislation, by a stroke of the pen.

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What we can do is to work towards amalgamation and rationalisation and, indeed, considerable progress has been made over the years. At the time of the report, we looked at the situation and observed that, at the beginning of the century, there were 1,323 trade unions with a membership of about 2,022,000 workers. Between that time and 1966, the number of unions decreased and the number of workers increased so that, when we were considering this matter, there were 574 unions with a total membership of 10,111,000. That process of amalgamation and rationalisation is still going on. That is the way to go about it. Furthermore, it is a fact that half of all trade unionists in this country are in the nine largest unions and four-fifths of the membership is to be found in the 38 largest unions. So, there again, an automatic rationalisation is taking place.
I return to the question of participation. On the Royal Commission at the time, a majority of members were not able to recommend the appointment of worker-directors. The problem was the question of accountability which the noble Lord has mentioned, but, as a matter of interest, there were three of us—Mr. Woodcock, Professor Kahn-Freund and myself—who took a slightly different view. We thought that, while one could not expect that the introduction of worker-directors would immediately result in dramatic results, it would be worth while to continue the experiment. I still feel as I felt then; that is, that the time will come when worker-directors will become commonplace, and, as we three said then, I repeat now, we did not believe and I do not believe that this problem of workers accountability will prove insuperable. In the light of Bullock that is interesting.
My last word is on incomes policy. The noble Viscount suggested that there were alternatives, either following something of the Continental structure or incomes policy. I am convinced that, whatever we do about improving our structure, incomes policy is a must. I am one who admired very greatly the stand on incomes policy taken by my noble friend Lord George-Brown when he was a Minister. He showed great courage in difficult circumstances. But you know, my Lords, you do not need to be an expert economist to understand that, unless you limit the money in people's
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pockets, limit income, to what the increase in the national product will stand, you are bound to create inflationary pressure. I believe that lesson has been driven home. I should like to see certain things. I would join with those who would like to see arbitration machinery. I should like to see a wages policy evolving not by compulsion, as has been suggested by some, and tried in the past, but by agreement; that is, an agreement between the three parties concerned, the Government, the employers (the CBI) and the trade union movement. I believe that agreement as to what limitations ought to be imposed could be reached and worked out if one has sufficient confidence in people to accept that.
I have known, known for too long, that the history of the trade union movement is quite strange in a sense; it is a huge success story. Unions when they decided to start were opposed by prejudice born of fear. Trade unionists were abused and there were legal measures taken against them. We in my field had our Tolpuddle Martyrs. But after years of struggle the unions became established, and now, it has been said in other words, the boot is almost on the other foot. I have watched what has happened. Unions who have great strength have achieved good conditions for their people and unions who have not have been left behind.
Therefore, I do not believe in this balance of power theory. I believe that what we have discovered and now know is that self-interest has to be limited. There is an understanding that, if you have power and you press it too far, then you will create problems not only for nearly all the citizens in the country but, in the long run, for yourself, because whatever you do you cannot keep up, and catch up, with inflation. Therefore, there is, I believe, the understanding that the best self-interest, paradoxically, requires that there has to be a limit to that, and you cannot use your sectional powers to the exclusion of all other considerations.
I therefore believe that the future of industrial relations in this country will be good; I am optimistic about that. 1 do not believe those who denigrate the unions and denigrate workpeople. I wish they would not do it. I think it only causes resentment and does no good.

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But, so far as the considerations of this Motion are concerned, it is a good thing, as I said when I started, to have a look at what is going on abroad. Knowledge is good and in this country we must work with that knowledge, using what we can or need; but we must work towards the creation of an industrial relations system which, in my view, can be, and perhaps is approaching now, the envy of the world.
7.45 p.m.
Lord DIGBY: My Lords, I listened with great interest to the debate between the noble Lord, Lord Carr, and the noble Lord, Lord George-Brown, about the introduction of Government into the process of collective bargaining. As was pointed out by the noble Lord, Lord Brown, this is necessary in order to deal with the interests of the consumer—of the general public. But we have seen all the problems that are caused by Government intervention in this system, desirable though it may be in some ways.
I am wondering whether there is a half-way course which would be to have representatives of consumers attending negotiating tables at company level. There, it is a question of the balance of power, and many people feel that the union power has become too great and that the consumers—the general public—are losing out on that. The union has the ultimate weapon of the strike, the employer has the ultimate weapon of dismissal, which was much used in the last century though it certainly could not be used very much now. What power would this consumer representative have? I suggest that, if public opinion were behind him, he could call for a boycott from consumers of a company who were putting up prices because they were bargaining very weakly. I have no doubt that that would be a most difficult situation, but it would be a way of bringing the various power groups together in a negotiating situation and without too much rigidity.
I do not think many angels have spoken to us tonight, and certainly I would not claim to be one, but I do fear to tread in the steps of so many people who have forgotten more about trade unionism and industrial relations than I shall ever hope
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to know. But I do so because I believe that it is the atmosphere of collective bargaining that is so fundamental to our way of life.
Lord BROWN: My Lords, surely the noble Lord recognises that the real representative of the consumer is the Government itself?
Lord DIGBY: Yes, my Lords, indeed I realise that, but we have seen the problems Governments get into when they come into direct conflict with different unions, because it is the same Government that is dealing with the miners and everyone else. Of course it should work, but my only query is, does it? The reason I address your Lordships today is that I feel that anything said here which can improve industrial relations by one iota will have more long-term impact than the Budget speech in another place tomorrow. Industrial relations is the fundamental issue on which our prosperity depends.
This House, where so many Members have experienced so much of the hurly-burly of politics, industrial relations and political life, is in a unique position to judge from past failures and to suggest constructive ways forward. I intend to concentrate on only one simple theme—that is, that it is not the forms and the law of industrial relations that matter; but the underlying belief and philosophy of all citizens, whether managers, workers or housewives. The very words that I have used are, I think, a symptom of our philosophy as anyone who believes that managers and housewives are not workers is divorced from reality. However, our present philosophy is an extraordinary mixture of public desire for equality and private belief in "I'm all right Jack" which is producing a low-wage and low-output economy. Why is that so in a country with so much wealth, brains and expertise?
I suggest that the prime reason for our industrial problems is fear. Fear causes men to act irrationally. Fear is felt on the union side because of the exploitation in the Industrial Revolution and the hardships and suffering during the depression of the 1930s. The fear on the management side is that the increase of union power since the war has made it impossible for managers to manage. It is that fear that has caused unions to

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mount restrictive practices and it is that fear that has produced weak management which has given way to union pressure, very often not on wages but on fringe benefits and restrictive practices. These have reduced productivity to the detriment of all. Sectional fear has stopped us working together for the good of all.
In discussions with businessmen and politicians at a recent Commonwealth Conference there appeared to be a common thread throughout the white Commonwealth—the United Kingdom, Canada and Australia—which was quite different to that in the United States of America and Germany. That common thread was the lack in those white Commonwealth countries of the acknowledgment that it is essential to ensure a prosperous company in order that the unions may secure the best possible wages and conditions for their men. In other words, philosophy tended to be one of confrontation rather than co-operation and partnership. I hesitate to say this following the noble Lord, Lord Collison, because his members very much realise the advantage and the necessity of ensuring that their employers are prosperous. Indeed, as a result of that realisation, the agricultural industry is probably the most efficient in the country.
The philosophy of conflict built up over generations is not easily dispelled, but a change should he a major objective of Government. It is easy to say that, but I can only suggest two very small lines of thought that might be followed. First, one of the characteristics of the British is loyalty. That loyalty produced the comradeship of war and was a major factor in our survival and victory. However, since the war, national loyalty has been deliberately denounced as chauvinistic and has been replaced by loyalty to smaller groups which, in the industrial situation, means loyalty to the union. In other words, "My country right or wrong" has been changed to, "My union right or wrong". Loyalty can prosper only where there is leadership. How can we expect loyalty when leaders continually emphasise what is wrong and forget the fact that, despite our problems, Britain has probably the nicest and most humane society in the world?
To inspire loyalty there must be something of which people can be proud.
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That brings me to my second point that we should exploit people's pride in our social and health services. Despite all the criticism of the bureaucratic health service and of the welfare State producing a workshy population, the fact is that people are proud of our social services and a survey has shown that they are prepared to work to maintain them. I believe that we should make the point that the result of increased productivity does not just go into the pockets of private shareholders, but provides the money to pay company taxes which support the social services, money for capital investment in better machinery, money for better pensions and money to pay better wages. If people are proud of working effectively and ashamed of causing disruption, then half the battle is won.
I know that these all sound like very esoteric ideas and people who have great experience have been talking about the practical difficulties, hut I believe that it is the atmosphere in which industrial relations are performed—the actual feelings of the people on the shop floor—that is vital. It is easy to pass laws, but it is very difficult to think years ahead to see to how people's social views may evolve.
I have suggested two lines of approach, but it is up to the Government. If Ministers direct their policies towards effective work—I do not believe that people here do not work hard, but it is very often the case that they do not work effectively —and if we can somehow bring a realisation to ordinary people that good work is fashionable and shoddy work is unacceptable, then a step will have been taken towards easier industrial relations.
7.58 p.m.
Earl DE LA WARR: My Lords, like the noble Viscount, Lord Trenchard, to whom I am extremely grateful for the timeliness of his debate, I am speaking to your Lordships in no way as a politician but as an industrialist. The noble Viscount has, I think, recently retired from active industry, whereas I am still upon the treadmill. However, I think that for about the same period we were engaged in industrial life and, to quite a large extent, in dealing with the unions. The only difference between us is that the noble Viscount has experience of union matters

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overseas whereas I do not. So it is not with that side of matters that I intend to deal.
I have very strong views about the inequities of the closed shop; the dangers of some of the current theories about worker participation—and I hope that I shall not raise the blood pressure of the noble Lord, Lord Brown—the disincentives to investment that are inherent in recent industrial legislation, particularly the Employment Protection Act, and the absolute need to do what we can to help the unions reform themselves. But, like the noble Viscount, Lord Watkinson, I take the view that we have a very urgent and a very acute task in front of us. Therefore, I shall spend no time in dealing with the sort of reforms which are more likely to take half a decade than half a year to achieve. I shall deal precisely with what I see as the central point in this debate, and what I call "methods for fixing wages". Quite specifically, I do not say "free collective bargaining"; nor do I say "statutory incomes policy". They are, in fact, all methods, but I have found that such phrases are creeping into the political vocabulary, and if we are not careful we shall find them being used as the jargon of the hustings. I do not believe that any noble Lord would welcome that kind of treatment.
The employee's primary interest is his pay rather than the methods of fixing it, and he hopes that it will increase in real terms. The employer's primary interest is the payroll, and he hopes that his increasing payroll will be accompanied by lower unit costs from increased productivity. However, regardless of incomes policy and of trade unions, the fundamental market forces of supply and demand for labour will always operate in the end in fixing pay, just as the laws of supply and demand operate in fixing the price of any commodity. Collective bargaining is merely a mechanism by which trade unions, acting as agents for their members, try to obtain the best price for their members' labour. They do this no matter who the owners of the business are—no matter whether it is the State, the local authority or private enterprise. They argue cost of living; they argue comparability with other companies, which sometimes in jargon terms is known as "Schedule 11";
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they argue the company's ability to pay, and many other things.
When inflation went out of control, intervention by the Government appeared to be inevitable—and in my opinion it was—and some bargaining rights had to be shelved. But do not let us deceive ourselves by thinking that Government incomes policies in any way diminished those basic market forces of supply and demand. Beneath the surface they remained as strong as ever. The maximum almost invariably became the minimum. The salaried trade union official was told by his members, "The Government have said that we can have 10 per cent.; now go and see what more you can get out of the company". I assure your Lordships from experience that there have been far more rather than fewer bargaining meetings throughout these last few years.
In theory, when inflation comes right down and is deemed to be under control—if that ever happens— I suppose that we could return to the type of unfettered bargaining which we knew in the past. But we must look at this in the light of realities. The distortions which exist today to the whole concept of a free market for labour are very big. A number of noble Lords have given good examples of this, and I shall not deploy the subject very far. But I would remind noble Lords that much of the labour force is now employed by the public sector, and the percentage is increasing. Would that I could see it coming down, but I am afraid that that is not the case. It seems, too, to be accepted—I know not for how long this may go on—that some private enterprise companies are too big to be allowed to go to the wall.
Lord BROWN: My Lords, the noble Earl has stated his approval of the law of supply and demand for labour, but he has not given his approval to unfettered bargaining. You cannot distinguish between the two, so he is approving and disapproving the same thing. Is that not the case?
Earl DE LA WARR: My Lords, No, I do not think it is. I have stated that the law of supply and demand is an inexorable natural law. I have given no approval or disapproval to it. I have simply said that it is there. Does that satisfy the noble Lord?
Lord BROWN: My Lords, if it is the natural law, presumably the noble Earl wants to let it prevail, but at the same time he disapproves of an outcome of the natural law; that is, unfettered power bargaining. Therefore, he is in an inconsistent argument.
Earl DE LA WARR: My Lords, I am not aware that I have yet given a view about unfettered bargaining.
Lord BROWN: My Lords, I thought I heard the noble Earl say so.
Earl DE LA WARR: My Lords, I think not. For the reasons that I have given, as well as for other reasons, whether it be Government as Government or Government as a big employer, it seems to me that it is in the highest degree probable that pay in all sectors—and I do not approve of splitting this into different sectors because it cannot be done—will partly at least be influenced by the Government. I for one feel no impending sense of doom on this account. I was very interested in the references of the noble Viscount, Lord Watkinson, to NEDC and possibly to a Select Committee. Certainly, they deserve careful study.
I said "partly influenced by Government" because there are certainly very important conditions. We must return to the employer the right to pay for ability, initiative, productivity and responsibility. Only with that can we restore incentives that are needed as a spur to that competitiveness, without which these cannot be any growth in our wealth. Above all, we must—and I am assuming that under any circumstances we shall—give employers the ability properly to reward managers at all levels. This has been one of the most unhealthy aspects of the last year.
One does not have to be an employer to know of the despair among first-line managers when overtaken by the people who work for them and who are earning more by virtue of overtime. The despair—and I make no bones about saying this—is at least as bad as one goes up the scale to top managers whose whole standard of living over the last few years has been reduced very substantially indeed. These things cannot be allowed to continue if
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we are to restore our position in world markets.
Income tax is a huge subject and one with which I do not attempt to deal. Indeed, I thought that the noble Lord, Lord George-Brown, did a very good job on it. However, I will remind your Lordships that trade unions and employers negotiate in terms of gross pay, and whatever the role of the Government in determining pay we should remember that they alone are able to influence the after-tax position, which is so vital in maintaining differentials and incentives. Just as the underlying law of supply and demand for labour will continue, so I believe that in some form Government regulations will continue. They must be better, they must be more humane, but, above all, they must be more flexible. Finally, let us remember, as the noble Viscount, Lord Watkinson, reminded us that we are disscusing a matter of grave urgency. 1st August is not very far away, and we have little time to find the next solution.
8.11 p.m.
Baroness SEEAR: My Lords, I must first apologise that I was not in my seat when the noble Viscount introduced the subject which is the gist of this debate. Long before I knew that the House was to sit this afternoon, let alone debate this subject, I had made an appointment which I could not break. The best way I can make amends is to be extremely brief at this time of night, so many speeches of such excellent calibre having already been delivered. I have discarded the mental notes I had intended to deliver—if one can deliver mental notes—and I intend simply to make a few marginal jottings on points of great importance that have been made in the debate.
It has been an important, urgent and exciting debate. It is important because within the problems of low productivity and low pay—because today we are, as other noble Lords have said, a very low-paid country—lie the core and the root of many of our other economic, social and political problems. If we could overcome that problem of low productivity and low pay many of the other issues confronting us would fall into position. The debate is urgent because there is little time, as other noble Lords have said, between now and when the decisions have to be made as

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to what is going to happen when the present pay round conies to an end. There is no position on the fence. We either go back to a situation in which there is no kind of control or we need to have some kind of fourth round, whatever you like to call it, to put in place of what we have at the present time. The distance in time between the middle of April and the 1st August is very short indeed.
It is exciting because it has seemed to me that across Parties on all sides, and on the Cross-Benches, there has been a degree of agreement that is perhaps unexpected, and an ability to put forward proposals which might, put together, really contribute considerably to solving this central and immensely important problem. As I listened I wondered whether perhaps a small Committee of your Lordships' House might get together after this debate and work on some of the points which have been raised, to see whether we could put on paper a proposal to put forward to the Government, dealing in greater detail with the points and working out some of the issues raised which could be used in the discussion which must take place between now and 1st August. There is much common agreement, and many ideas of great importance have been raised.
The marginal notes which I wish to add briefly have to do with collective bargaining and the modification of collective bargaining which must surely take place now. I accept, my Party accepts, that there is an important place for collective bargaining. Of course there is an essential rôle for trade unions and employers in this whole question of the fixing of pay. But we must get out of the way of talking about going back to collective bargaining. We have to go forward to a different kind of collective bargaining in a different context, because we are operating in a different economic and social world. That is the problem that we are up against.
I go along entirely with the view that certainly there are at least three partners, three groups with different rôles to play in the determination of pay in this country. There is the Government with the Governmental rôle, the employers with the employers' rôle, and the trade unions with the trade unions' rôle. We need to think
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even more clearly than we have done this evening about what those rôles are; what it is appropriate for the Government to do and what it is not appropriate for the Government to do, and similarly for employers and trade unions.
The Government's rôle is twofold. The Government are a very big employer. I do not know whether, in that part of the debate which unfortunately I missed, anything more was said in detail about the rôle of the Government as employer. All I should like to say about it at this time in the evening is that we should not lose sight of the proposals put forward by Mr. David Basnett some months ago about relativities within the public sector, because there is no escaping the fact that the problems of pay in the public sector are of the greatest importance, but are different in nature from the problems of pay in the private sector. They overlap with the problems of pay in the private sector, but they are not the same as the problems of pay in the private sector.
I should like to underline the need for looking again at the proposal put forward by Mr. Basnett, and to see whether more work could be done in that area in looking at the rôle of Government as employer and the particular problems that arise in that context, and the other rôle of Government, the role of Government as the protector of the public interest, and in particular in 1978/79/80 the whole problem of the fight against inflation. I go along entirely with what was said by the noble Viscount, Lord Watkinson, the noble Lord, Lord George-Brown, and the noble Lord, Lord Brown, about the need for some tripartite discussions with expert presentation of what the economy can stand, probably done within the framework of NEDC.
The footnote, the marginal scribble I want to add to that part of the discussion is this: although independent experts disagree on a great many things, there is one thing on which I think they would all agree: that the norms—or whatever you like to call them—that we have had in recent pay policies, and that are seen to be politically acceptable, have all been a great deal too high in terms of controlling inflation. If you really carry out what has been suggested this evening, that tripartite group at NEDC which is going to be confronted with the figures put

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forward by the experts is going to find, in terms of expected increased productivity, that the kind of figure that they put forward as being acceptable as an increase, with adequate safeguards against inflation, is a great deal lower than people have become accustomed to accept as being appropriate.
Let us be honest about this. The fact is that we did not start with the assumption that everybody was going to get as a minimum 10 per cent. We started this year by saying that average earnings were to come to 10 per cent. A great many of us knew, because in industrial relations a minimum always becomes an average, and the confusion between wage rates and earnings goes on all the time, that we would start with an increase in rates of 10 per cent. and on that we would build the additions. Every time we have these central agreements on norms, they have been exceeded considerably. Let us be blunt about this. This country cannot afford continuing 10 per cent., 11 per cent., 14 per cent. increases in earnings against our present low levels of productivity or against any likely increase in productivity that we are going to get over the next three, four or five years. A 10 per cent. increase halves the value of money in 71/2 years. That is a horrific thought.
There are two points here. We must face the fact that, if we are going to have this central discussion and agreement, it is going to be round figures which will seem quite shocking to a considerable number of people, because we shall not get our experts—at least I believe that we shall not—to fudge those figures. They will give us the kind of answers that people say do not meet their expectations. But this is implicit in what we are saying here tonight. I suggest it is very important that we should stick to this, that we should have this discussion and that the figures should be at an honest and realistic level. I believe that we could get this accepted, if not immediately, by the trade union leaders, the employers —who may find that they are today a little behind the rank and file—and by the rank and file. This is where it matters, provided that we take the necessary steps.
I think, as the noble Lord, Lord Shepherd, said about 18 months ago,
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that sometime in the summer of 1975 the British people looked over the abyss and drew back. i believe that at that time they realised what inflation really could mean. We did not have to go through the horrific experiences of the Germans to realise what inflation can mean. I believe that we must make an all-out effort while the discussions in Neddy are going on, and afterwards, to explain, through television and all the media of communications that are now at our disposal, what the relationship is between given pay increases and prices, what it means to people's savings, and what it means to pensioners. We must get those points over with an intensity of effort that we have not yet begun to put into communicating with the public.
Lord Collison talked about communications—not only communications between trade unions and employers but communications with the general public, too. At the end of the day, the trade unions depend on the knowledge and support of the rank and file. The whole movement in the country has been to go more to ordinary people in their own homes. There is plenty of evidence that when this is done we get increasingly good support. I should like to add the suggestion to the Neddy discussions that we face the fact that it is right to do this. We should face the fact that the information that comes out will at first sight be unacceptable because the figures will be low. We should accompany it by new ways of keeping continuously in touch with the public about what is involved in the figures that are being put forward.
That is the first marginal note that I should like to make. The second is this: I agree very much that, if we can put this figure at a low level, and get it accepted at a low level, we shall also accept that there is still room for increases in pay where these are genuinely earned by increases in productivity, by technical changes, by all those many developments which we need to bring about if we are to alter our position in the productivity league table. This is what can be so well done at the level of the company. We can build up a figure, on top of what has been agreed as being a reasonable minimum, but low figure, because of the great success and greater productivity of the

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particular company in which one is concerned.
We must work this out. I am not suggesting tonight how it should be done. It was suggested in the Donovan Report. I very much agree with the noble Lord, Lord Donovan, that it is time we brushed the dust off the Donovan Report and looked again at some of the ideas of the report in depth, perhaps, to see where we go from here. This will be one of the items on the agenda, as to what should be done at the industrial level and what should be done at company level.
Surely it is true that these increases, related to productivity, abolishing inefficient practices, and the introduction of new technology, are all things which should be negotiated at company level. This will give the flexibility and the opportunity for genuine collective bargaining about a real change of economic value at the level at which it really matters. Of course, that was what Donovan said.
I would remind you also that Donovan said that this needed to be institutionalised properly. There has been a move towards the plant, but it has not been an institutionalised move. We have not done what Donovan suggested, which was to find ways of drawing really clearly-defined plant agreements and then enforcing them properly. Donovan even suggested—although the committee did not recommend it—that it was thinkable, at least, that we should, in certain cases and in certain circumstances, make those agreements legally enforceable. I do not say that we want to do that, but it was suggested as something that might be done.
We should put effort at the level of the NEDC into taking the public far more into our confidence and educating them far better and keeping them informed all the time. I understand that the Germans do this through their television machine far more effectively than we do. Then, we should look at the proper institutionalisation of plant negotiation, allowing quite considerable increases in return for genuine increases in productivity to be negotiated at the level of the plant. If we did, we should get our flexibility and make adjustments for differentials there. There, after all, is where the new, real wealth comes into being.
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I do not want to go on any longer. I promised to be short. I have already been 15 minutes. However, these are the points which 1 think we should take on board and work at, because, unless we do these things, the very good ideas that are being put forward may well not get us very much further. It may be—and this is my last word, which I hope will not be misunderstood—that we do need to have some additional legislation in this field. I am the last person who wants to see more law in industrial relations. But, on the other hand, let us get rid of the humbug that we cannot have law in industrial relations. It is humbug. because we have a great deal of such law already. It is also humbug because there is no other sphere of life—whether domestic, international or commercial—in which appropriate law is not laid down to establish and support institutions. I can see no conceivable reason why that field of life which happens to deal with industrial relations should be exempted and should be the one exception to the need to draw ground rules for keeping the peace and, where appropriate, to have them reinforced by some kind of legal standards.
8.28 p.m.
The PARLIAMENTARY UNDERSECRETARY of STATE. DEPARTMENT of the ENVIRONMENT: My Lords, may I start by paying my tribute to my late noble friend, Lord Douglass of Cleveland, and to say how comforting I think it will be to his family to read the tributes which have come from all parts of the House and for which we in the Government who knew him are grateful. I personally was introduced into this House and took my seat on the same day as he did, so I felt a very personal tie with him.
I am grateful to the noble Viscount, Lord Trenchard, for giving us this opportunity to hear so many variations on the theme of collective bargaining. What it has certainly proved, among many other things, is that this is a facet of an enormous subject. I think that I must say to the noble Lord, Lord Digby, that I shall be very surprised if public interest in this matter pushes the Budget off the newspapers and TV tomorrow.
It is true that there is always a temptation, when the United Kingdom's economic

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performance falls behind, to look at the practices of our competitors and to say, because we see it, that they order things differently and better abroad. This has been expressed tonight by the noble Viscount, Lord Trenchard. I think it is true that international comparisons can be helpful to the analyst, but transplanting is quite a different matter.
I was glad to note that my noble friend Lord Cooper, the noble Lord, Lord Rochester, and the noble Viscount, Lord Rochdale, all took the same view as the Government, who, as the Donovan Commission pointed out in 1968, believe that suggestions that our performance can be improved by the wholesale adoption of overseas industrial relations practices are misconceived. Social conditions, historical tradition and human nature do not lend themselves to the ready transposition of foreign structures of collective bargaining, which, like some wines, are inclined to travel badly. I can think of nothing harder to arrange than the controlled adoption of foreign "atmospheres" (the noble Viscount referred to atmosphere in his Motion). Therefore, when we praise or condemn other nations' practices, we have to look at them in a much more rounded and wider context.
Many noble Lords take the view that, in terms of our competitors' success, our collective bargaining system is lame, anarchic and halting. I do not believe that this is so and my noble friends Lord Cooper and Lord Collison spoke up in a very spirited and informed way on this. It is certainly subject to failures. I would not defend every aspect of it—that would be quite stupid—but I know of no system of human relationships which is not fallible. I agree with my noble friend Lord Collison that the view that Britain is a strike-torn country where conflict and unrest are endemic is largely unjustified.
The truth is that the great majority of firms in this country do not experience any strikes at all. The Department of Employment figures for 1971 to 1975, which contained some particularly bad years for industrial relations, reveal that on average 98 per cent. of plants were strike-free in any one year. Incidentally, the "explosion" referred to by the noble Lord, Lord Carr, was not confined to the United Kingdom. The OECD figures
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show that, in 17 major countries between 1969 and 1974, 100 per cent. more working days were lost than in the period between 1965 and 1968. I do not say that this makes things much better, but it at least spreads the burden and does not make us unique. It leads one to think that there are international factors as well as national factors concerned with this.
Indeed, as pointed out by my noble friend Lord Brown—I think, we have started dropping the Wilfred now—the highest level of strikes occurred under the last Conservative Administration, and this was largely due to attempts to impose a statutory and legal strait-jacket on collective bargaining in the disastrous Industrial Relations Act of 1971. This was together with a form of incomes policy which was one of confrontation, and which we know ended in the miners' strike and the decision for which the Government went to the country in the Election. That Act demonstrated the terrible error of believing that improvements in industrial relations can be achieved by imposing on our own national traditions new systems copied from other societies. This is what, however well intentioned, the Government of the day was trying to do. In fact I felt that the noble Lord, Lord Carr, showed great courage, and I admire him for intervening and speaking in this debate because I think what happened in those years, and which we are still feeling, is to a considerable degree the aftermath of that.
The great weakness of the Act was not the myth which has been spread—and I must mention this because it is still being spread—that the trade unions wrecked it. It was wrecked because it depended on employers invoking the law, which the great majority avoided doing like the plague. Only the "cowboys" took up the legal cudgels.
The International Labour Office figures covering the mining, manufacturing, construction and transport industries demonstrate that over the last decade our strike record—and I shall not go into details because my noble friend Lord Collison did so—really comes about in the middle. I am not supporting the view that any level of strikes is a good thing, but at least let us not paint ourselves worse than we are. A great deal has been said about the English disease. There is another English disease, that of masochism, which we practise constantly.

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Furthermore, strikes are not the only measure of industrial relations failure. Absenteeism is a more serious problem in both West Germany and Sweden than it is here, and it is growing in Japan. The Swedish system, which is so much admired, was accepted only after 40 years of bitter strife, and it is now uncertain how long the years of stability will continue because instability is setting in there. As has been pointed out by several noble Lords, the West German industrial system was imposed on a defeated nation after the last war and a limited number of unions incorporated in the scheme, which, as the noble Viscount, Lord Trenchard, and the noble Viscount, Lord Caldecote, said was largely worked out by Ernest Bevin and our own TUC. Here again, we are dealing with different factors. Similarly, it is doubtful whether the traditions of discipline in the industrial labour force in Japan could have been achieved in our more individualistic and less paternalistic society. I am not sure whether it was the noble Viscount, Lord Rochdale, or the noble Viscount, Lord Watkinson, who echoed my own misgivings about the Japanese trade unions.
Viscount CALDECOTE: My Lords, may I intervene at this point? Would the noble Baroness not agree that it is important to look at our competitors' record. Experience in the Government Statistical Service gives a rather different account of the strike record in Germany and here. In the last decade, 56 days were lost by strikes per 1,000 employees in Germany, whereas the figure in the United Kingdom was 788. Does that not show that there is something to be learned from Germany? I do not think we ought to be too complacent.
Baroness BIRK: My Lords, I am not complacent. As I have not got those figures at my fingertips, I do not propose to argue about them at the moment but I shall write to the noble Viscount about them. Even if on occasion there are more strikes here, it does not follow necessarily that we should imitate or take in what other countries are doing. As has been pointed out, there are fewer strikes in the Soviet Union, but I do not think that means that we find that that is the better way of industrial planning than our own.
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This leads me on to another point which many noble Lords have made, particularly the noble Lord, Lord Carr: that there is less irrationality in the conduct of industrial relations; he pointed to the orderliness and efficiency abroad. Yet here we must remember that some of the countries which are admired for their greater mechanical discipline in industrial relations show more extreme and alarming forms of social indiscipline outside the field of industrial relations. I am trying to make the point that we have to compare like with like, and it is very difficult when one is talking about different national characteristics, different cultures and entirely different things.
If the industrial relations scene in Britain is not wholly grim—and I do not consider that even with all the difficulties we have (and we can not be complacent) that it is as grim as it is sometimes painted—why do we manage to convey such a bad image? I believe—and I very seldom say this—that this is partly due to the media. The Royal Commission on the Press, chaired by professor McGregor, now a Member of this House, in 1977 regarded coverage of industrial relations and trade union affairs as a significant weakness in newspapers, and recognised that this reflected a complex set of news values which could not be speedily changed. I have recently come back from the United States where I spoke with our Consul-General in Los Angeles. He said that one of the great problems was that if there was any strike here, such as the firemen's strike, that received headline news there. When he was discussing this with a number of very well-informed people, they had nothing to say about their own coal strike, or the dock strike going on in America at the time. The strike in England was what was catching the news.
Similarly, relatively little attention is paid to conciliation, for which the continued confidence of trade unions and employers is essential. As my noble friend Lord Cooper of Stockton Heath pointed out, ACAS handles about 3,000 cases a year and there are settlements in about 75 per cent. of them, though they seldom make the newspapers; of course they are not so interesting as the cases that "get away". However, it would be foolish to deny that there are real problems. Low productivity in some key industries,

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especially where units are large, has been mentioned; and I entirely agree with the noble Baroness, Lady Seear, and others, including the noble Viscount, Lord Trenchard, that greater rewards can be obtained only from higher productivity.
Like the noble Viscount, Lord Amory, I am concerned at the damage that is done by restrictive practices. However, once again it is impossible to isolate such cases—and here I agree with Lord Cooper and Lord Collision—from the industrial history in which they are embedded. People tend to cling to antiquated manning practices and their tendency to resist change is greatest when their continued employment seems threatened. When one looks at, say, the North East and realises that the grandparents or parents of the unemployed were also unemployed, it is not surprising that there is a base of insecurity running through a great deal of our industry in particular areas.
There are no magic recipes to overcome this and, as most noble Lords agree, progress must be slow and gradual. But despite the slump and insecurity of the last 10 years, there have been tremendous reductions in manning levels in several major industries; all has not stood completely still. For example, the registered labour force in the docks fell between 1965 and 1975 from 63,000 to 29,000. The Government accept that further changes are necessary if collective bargaining is to function more effectively and companies whose practices are less advanced are to be encouraged to catch up with the leaders in the field. I agree with my noble friend Lord Brown and others who have emphasised the responsibility of management for improving productivity. The trade unions cannot do it alone; they are prepared to work with management, and solutions to problems of work flow or supervision clearly lie very much in managements' hands. The achievement of higher productivity is a joint responsibility for unions and management.
Lord Carr suggested that much can be done to improve collective bargaining by the propagation of agreed codes of practice. I certainly agree with him that such codes can be useful, and there is nothing to stop further agreement on codes if people both subscribe to and use them. ACAS has already put out three extremely helpful codes since 1974,
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including one on the disclosure of information to trade unions for collective bargaining purposes, and a code on time off for trade union duties and activities which will give better opportunities to trade unionists to acquire appropriate skills and knowledge. This was emphasised by Lord Rochester and Lord Cooper, who described the part he played in his own union. We share their view that it is essential for employee representatives to have training adequate for them to carry out their duties; and in 1976, for the first time, the Government made a grant to the TUC for trade union training; in 1977–78, £650,000 was made available and the grant for the 1978–79 financial year is now under consideration.
I believe the predominant need in the future is to continue the gradual progress we have made towards more communication between management and unions. I was delighted to hear Lord Collison say he believes this to be of supreme importance. That, coming from someone as experienced in the trade union movement as he is, must carry great weight; and Lord Cooper spoke along similar lines. Baroness Seear enlarged this to include communications with the general public in the whole question of pay policy, and this was dealt with by several other speakers. This is such an enormous question that, while it is part of the whole financial and economic scene, I do not think at this hour I could go into it and discuss it in detail.
Poor communication is a particular problem in large units—and Lord Trenchard particularly spoke about large units—where it is so easy for the workforce to feel alienated from the overall purpose of the company. If it is essential to have these large units for financial and technological reasons, we must find ways of making them more human. The noble Viscount rightly spoke of the greater success of smaller units. It is fair to say that one reason surely is that in smaller units people feel very much more part of a coherent group than is the case with a very large unit. However, we know, as noble Lords have pointed out, that it is possible to have large firms where the workers feel themselves involved and where industrial relations are at a much better level than in other comparable firms.
What we need to develop are effective forms of industrial democracy in which

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people believe. The best companies have already gone some way along this road; they have gone towards industrial democracy and open government within industry. They have shown the advantages of co-operation at the point where decisions are made. However, the worst companies, at the other end of the spectrum, still operate what I can only call industrial Victoriana. The only way towards more stable industrial relations and greater output must lie in changing attitudes, and most noble Lords have commented on this question of attitude. Legal or institutional changes—I am not arguing against all such changes—which are not reflected in people's attitudes are generally sterile or counter-productive; Lord Trenchard referred to this sort of atmosphere. Employers and unions must establish a meaningful dialogue as a basis for mutual trust.
It is absolutely essential that people at work, whether they are part of management or the workforce—I would like to think that we could consider everybody together as part of a joint workforce, though they may be doing a different type of work—should be able to have a say in the decisions which affect their livelihood. Industrial democracy, which in this country has lagged far behind our political democracy, will create a vital sense of involvement, joint interest and common purpose. Shortly we intend to publish a White Paper setting out our proposals for legislation. It is not the Government's intention to impose a legislative straitjacket on industry, but to provide a flexible framework within which employees and employers together can develop participation arrangements tailored to their own needs and circumstances. No statutory cage can possibly take the place of voluntary and co-operative groundwork.
The Report of the Bullock Committee of Inquiry, which played such a valuable role in opening out the debate on this issue, recognised that the move towards industrial democracy is essential and saw that it should be seen against the background of wider social changes. The increasing pursuit of goals other than economic growth, the longing for improvement in the quality of life and for better working conditions, the feeling that the environment must be protected—all these
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aspirations, many of which are incorporated in an EEC Green Paper, will best be achieved, may only be achieved, if decision-making processes within industrial concerns are given a broader and more democratic base. This is where we must stop dragging our feet. Our political democracy is something which other countries envy. We must find a way to an equivalently mature and equitable form of industrial democracy.
8.50 p.m.
Viscount TRENCHARD: My Lords, I am conscious of the hour, and probably your Lordships' thirst. I am happy that so many eminent people have made such valuable contributions to our debate today. I confess that I was disappointed, and a little surprised, by the start of the noble Baroness's reply. I say that—and think I will deal with the point very quickly —in that I do not think there has been much political speaking in the debate. I have been very conscious of the very sincere efforts of everybody to try constructively to look to the future. I think that I have to put the record straight in relation to my noble friend Lord Carr of Hadley and the Industrial Relations Act. He himself has said that he may well have got the prescription wrong, but he has reminded the Government that the diagnosis was made by the Government Party several years earlier. In fact, the Industrial Relations Act did not bring down the Heath Government. A rigid incomes policy brought down the Heath Government. The miners confronted the rigid incomes policy, not the Industrial Relations Act. The Industrial Relations Act had its critics—
Baroness BIRK: Will the noble Viscount give way? I am afraid that I was speaking very quickly because of the lateness of the hour, but I used the phrase—and I have this written down in the margin of my notes—"plus an incomes policy which led to confrontation". What I was saying was that the Act laid the basis, and then there was the incomes policy. The diagnosis may have been sound; I am not going to argue about that now. But it is one thing to have a diagnosis, and another thing is what you do about it. If I go to a doctor and get a diagnosis I might be poisoned, or I might be made better.
Viscount TRENCHARD: My Lords, without commenting on either of those two results, I would just stick to the point. In my view at least—and it can be a matter of opinions—it was primarily the rigidity of the incomes policy, and I know a number of trade union leaders who were beginning to use parts of the Industrial Relations Act, and were even considering registration.
I am conscious of one major point which was once summed up by a boss of mine when I explained to him that a lot of problems were very long-term problems because they were so serious. He said, "Yes, but they are urgent, and so you had better deal with them within the next six months". We had to, because that part of the enterprise with which I was dealing at the moment would not have survived if we had not. I do not believe that Great Britain Limited can survive long after the breathing space of North Sea oil, unless we find a way of tackling massive problems, which one would normally call long-term, in a very short time.
All else that is debated in this Chamber—of improvement of social services, or of any other desirable features of our life—depends upon our tackling this huge and urgent problem really urgently, and not being defensive about it. I did not at any stage say that we should copy any one country, or even any one measure in other countries, but I spoke from my experience and my study of the differences, which led me to believe that we needed to parallel a more balanced bargaining position than we have in this country today. It is not an accident that our productivity records are half those of our competitors, even where the same firm is involved, as one speaker mentioned today, with the same capital equipment in three countries in Europe. It is almost always in the large employment areas, as the Department of Employment Gazette also shows, that we get the majority of the strikes, although the number of strikes themselves is not the point. It is the position before a strike and, compared to any other country, there are bigger differences in the system and structure surrounding collective bargaining in this country than in any other part of the industrial scene.
On the positive side, I think we have all agreed that everything should be done
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in a realistic way to try to bring home regularly, and often, what the nation can afford. At national level, therefore, if that is called an incomes policy, the information on what the nation can afford is vital. It is when we try to translate that into the necessary unevennesses, where millions of factors have to be taken into account if the economy is to be a growth economy—when we try to do that translation to the lower level—that we get into trouble. Do we want the economy to be a growth economy? If we do, my Lords, I suggest that we have to think of moving from our current situation to another one.
I may have trespassed on the custom of the House by speaking for a second too long—and I see my Chief Whip looking at me and confirming that fact. I should like to thank the noble Baroness for the second half of her reply (if I may put it that way), and I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

CHURCH OF ENGLAND (MISCELLANEOUS PROVISIONS) MEASURE
(together with the Report of the Ecclesiastical Committee thereon)
Laid before the House pursuant to Section 4 of the Church of England Assembly (Powers) Act 1919; and to be printed.

WRITTEN ANSWER

  MOTABILITY AND THE DISABLED
  Lord FISHER of CAMDENasked Her Majesty's Government:
  What information they can give about the new organisation, Motability, and to what extent they are assisting in financing the organisation.
  Lord WALLACE of COSLANY: Motability is an important new voluntary organisation. It aims to help disabled people in receipt of mobility allowance to obtain and run suitable cars either as drivers or as passengers when they are

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  unable to do so by themselves. The Government are providing practical administrative support for the organisation, including a grant towards expenses, and are watching its development with the closest interest. By the end of 1979, it is estimated that mobility allowance will be payable to 100,000 new beneficiaries and possibly 25,000 ex-vehicle scheme bene-
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  ficiaries. By increasing the value of mobility allowance to £10 a week from July 1978 the Government are putting potentially some £65 million a year in the hands of disabled people to spend with Motability if they so wish.
  House adjourned at three minutes before nine o'clock.