Sitting of 5 July 1978

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS

  BRITISH RAILWAYS BILL
  Order for Third Reading read.
  To be read the Third time tomorrow.

ORAL ANSWERS TO QUESTIONS
  ORAL ANSWERS TO QUESTIONS
  Mr. Speaker: May I appeal once again for short supplementary questions to help the House make greater progress?
  ORAL ANSWERS TO QUESTIONS
    TRANSPORT

      Advanced Passenger Train
      Mr. Ronald Atkinsasked the Secretary of State for Transport what proposals he has received for investment in the advanced passenger train.
      The Secretary of State for Transport (Mr. William Rodgers): None beyond those approved in 1974 for the construction of prototypes.
      Mr. Atkins: When my right hon. Friend approves funds, will he ensure that sufficient productive capacity and marketing facilities are available so that Britain will reap through exports the rewards of British inventive genius and not lose this invention, as many others have been lost, to foreign industries?
      Mr. Rodgers: I am grateful to my hon. Friend for that question and I certainly give him the assurance for which he asks. This is a first-class technological development and I hope that it will have considerable export potential.
      Mr. Adley: May I reinforce the point made by the hon. Member for Preston, North (Mr. Atkins) and ask the Secretary of State to ensure that our posts in foreign
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      countries bring to the attention of railway companies, whether nationalised or private, the tremendous advances that British Rail engineering has made on this project?
      Mr. Rodgers: It probably needs an even more intensive marketing operation than the hon. Gentleman suggests. British Rail has this very much in mind and I am glad that quite a number of people have been to Derby to see the present prototype.

      British Railways
      Mr. Canavanasked the Secretary of State for Transport when he next expects to meet the chairman of British Railways.
      Mr. Ron Lewisasked the Secretary of State for Transport when he plans next to meet the chairman of British Railways.
      Mr. Shepherdasked the Secretary of State for Transport when he intends next to meet the chairman of the British Railways Board.
      Mr. Jesselasked the Secretary of State for Transport when he will next meet the chairman of British Railways.
      Mr. Crawfordasked the Secretary of State for Transport when he intends next to meet the chairman of British Railways.
      Mr. Clemitsonasked the Secretary of State for Transport when he intends next to meet the chairman of British Railways.
      Mr. Gouldasked the Secretary of State for Transport when he intends next to meet the chairman of British Railways.
      Mr. William Rodgers: I saw him this morning, but I expect to see him again soon.
      Mr. Canavan: Will my right hon. Friend tell the chairman that we do not all agree with Lord Boyle's recommendation that he is worth £40,000 a year and that it is about time that the Board members were seen to be earning even their present salaries by fighting for more public investment in the railways, including the speeding up of the railway electrification programme in Scotland?
      Mr. Raphael Tuck: The chairman made a £68 million profit this year.
      Mr. Rodgers: The chairman is fully aware of the fact that there is a certain amount of controversy surrounding the Boyle report and its acceptance, but hon. Members on both sides of the House have paid tribute to Sir Peter Parker, who is doing a first-class job for British Rail.
      Several Hon. Members rose—
      Mr. Speaker: Order. I propose to call first those hon. Members whose Questions are being answered with Question No. 2.
      Mr. Shepherd: Is the Secretary of State aware that in the chairman's report this year reference is made to the need for decisions to be taken on financing and replacing the assets of heavy loss-making rural services? What general advice will the Secretary of State be giving the chairman on this matter and, in particular, how does he see the future of the Hereford-Malvern-Worcester link in the light of the development of Worcester Parkway station?
      Mr. Rodgers: I have not lately discussed with the chairman that passage of his report and I do not have in mind giving him any advice. I know the hon. Gentleman's concern about the Hereford-Worcester line. Improvements are being made and I think that they will make the service better for people travelling to and from Worcester. There is certainly no proposal to reduce the service or, least of all, to close the line.
      Mr. Jessel: Is the Secretary of State aware that trains passing at speed through Twickenham at night and carrying heavy loads of stone for the building of the Thames barrier are excessively noisy, wake people, and shake their houses? Will he ask the chairman to take urgent action to deal with this nuisance?
      Mr. Rodgers: I am aware of the problem. As always, the hon. Gentleman has drawn it to my attention on behalf of his constituents. There is a genuine dilemma here. The whole House wants British Rail to carry more freight that is suitable to it, and there are some penalties involved, particularly on lines that are heavily used by day. I shall draw the chairman's attention to what the hon. Gentleman said.
      Mr. Crawford: Will the Secretary of State ask the chairman to give us an assurance that the first Motorail service —between London and Perth—which was threatened with closure last year, will be maintained next year and in succeeding years, because it is vital to the interests of railwaymen in my constituency?
      Mr. Rodgers: I shall draw that matter to the chairman's attention.
      Mr. Clemitson: Will my right hon. Friend discuss with Sir Peter Parker the future of the railway network—particularly the commuter network— in the South-East of England and how much-needed capital investment in that system is to be funded, remembering that the benefits will accrue not only to the commuter but to the community as a whole?
      Mr. Rodgers: I think that Sir Peter Parker is fully aware of the considerable concern that exists because of the deterioration—that is what it has been—of these services in the London commuter area. I am sure that he is anxious to improve the convenience and comfort of such services. It is not easy to do so, but certainly investment must be provided for this.
      Mr. Gould: Will my right hon. Friend raise with the chairman the need for further electrification in the Southern region? Will he point out to the chairman that there has been no major electrification in the South since 1964 and that the Southern region is very much the poor relation in this respect? Many major lines, such as the one between Southampton and Portsmouth, urgently need this improvement.
      Mr. Rodgers: There is a later Question on electrification. The Board of British Rail has the matter much in mind. I have no proposals before me at present, but within an investment ceiling I am happy to consider them.
      Mr. Rost: Has the right hon. Gentleman yet discussed with British Rail the new plans for a Channel rail link, possibly with the assistance and co-operation of the European Community?
      Mr. Rodgers: I have not discussed that matter with British Rail because the Government's position remains as I have stated previously. However, I am aware

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      of the studies that British Rail is undertaking. The matter was raised with me during the course of the visit of the German Minister of Transport, Herr Gscheidle, last week.
      Mr. Bagier: When my right hon. Friend meets Sir Peter Parker will he ensure that he asks him, in spite of the Boyle report, whether he has had any difficulties arising from the fact that he accepted a £40,000-per-year reduction in his salary when he took on the job? Secondly, will he ensure that in his considerations of the running of the business of British Rail and all its subsidiaries he has no ideas about hiving off the more profitable sections of British Rail to private enterprise?
      Mr. Rodgers: First, I do not believe that the chairman has any plans to hive off any part of British Rail. I should be strongly against any such plan. Secondly, it is recognised that when we get first-class men running nationalised industries it is good for the industries and good for the country. Quite often they take a considerable reduction in salary.
      Mr. Norman Fowler: Is the right hon. Gentleman aware that one of the most welcome trends has been the reduction of the deficit on the freight and parcels business of British Rail? Do the Government still agree with the Opposition that the deficit should be totally eliminated? If the right hon. Gentleman still agrees with that proposition, does he expect that to take place during 1978?
      Mr. Rodgers: I always hesitate to say that I agree with the hon. Gentleman. I prefer to say that my position has always been that freight must pay its way. There has been no change in the policy and no change in the targets. I believe that British Rail is making good progress towards ensuring that there are no deficits after the end of this year.
      Mr. Speaker: I shall call one more hon. Member from either side of the House on this Question.
      Miss Boothroyd: Will my right hon. Friend tell the chairman of British Rail that while we recognise the efforts made to win back business by special offer fares, those efforts should be matched by bringing forward catering plans, especially the buffet saver, which I know he has in
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      mind, so that that may be made use of during the summer by those making use of the special fare plans, including families and the elderly?
      Mr. Rodgers: My hon. Friend is right to draw my attention to the fact that when people use the railways they go to them because they provide a complete service. That includes adequate catering facilities. I shall make the point to Sir Peter Parker.
      Mr. Gow: When the right hon. Gentleman next meets the chairman of British Rail, will he discuss with him the fate of the 42 former employees of British Rail who were dismissed either because they declined to join a trade union or because they retired from a trade union after the closed shop agreement had been introduced? If he will not do that, are we to interpret his attitude as meaning that he is careless and callous about the fate of the 42 men?
      Mr. Rodgers: I do not think that the House would generally interpret my attitude to be that on any subject. I discuss matters of urgent business with the chairman and he is fully aware of the discussions that we have had in the House on the matter that the hon. Gentleman has mentioned.

      Motor Coaches (Accidents)
      Mr. Gwilym Robertsasked the Secretary of State for Transport what are the latest figures available for the number of deaths and serious accidents involving coaches; and if he will give in the Official Report any available breakdown on the nature of the damage to the coach and the cause of accident.
      The Under-Secretary of State for Transport (Mr. John Horam): In 1977 occupants of public service vehicles suffered 64 deaths and 1,269 serious injuries. Any casualty rate is of course a matter for concern, but these figures represent a fatality rate of only one-sixth of that for car and taxi passengers. I regret that a detailed breakdown is not available of the nature of the damage and the cause of the accidents.
      Mr. Roberts: Does my hon. Friend accept that unfortunately there will probably be many casualties during the summer due to the considerable delay in

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      implementing the proposals for roof strengthening and brake improvements? As he put proposals before the House about two years ago, is it not now time that something was done?
      Mr. Horam: I thoroughly understand my hon. Friend's concern for speedy progress. We forwarded to the EEC draft regulations for strengthening roofs in 1977. The EEC has not made very fast progress. Therefore, I am not waiting for the EEC to come to conclusions and we shall proceed independently of the EEC. As I have said, I understand my hon. Friend's concern that we should make rapid progress.
      Mr. Temple-Morris: I think that the Minister will agree that we appreciate the problem and that the industry is to be congratulated on the considerable fall in accident rates over the past decade. I think that the figure has fallen from 17,000 to about 12,000. Does he agree that when accidents happen they are horrendous and often involve children and old people? When may we expect action —we are grateful that we are going ahead on our own—especially on brakes and roof strengths?
      Mr. Horam: We are consulting later this year on individual requirements for higher braking standards. We are close to making progress on that score. However, implementation must follow industry action, which inevitably takes some time. In this instance it will inevitably take a couple of years before coaches can be produced to the new braking standards. I have already indicated that we are determined to make progress on roof strengths despite the relatively slow progress that is being made by the EEC.

      Trolleybuses
      Mr. Adleyasked the Secretary of State for Transport what research he is undertaking concerning the use of trolley-buses in urban areas; and if he will make a statement.
      Mr. Horam: A study of the design and possible use of a battery-trolleybus system has just been completed by the Transport and Road Research Laboratory. I shall send the hon. Gentleman a copy of its report.
      Mr. Adley: I thank the hon. Gentleman for that reply. Does he agree that
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      municipal transport undertakings, following the then fashion fad, tended to scrap trolleybuses and trams with indecent haste, and that new technology such as he has mentioned, a greater concern for the environment and a changed attitude to public transport justify a fresh and unprejudiced consideration of both these forms of urban transport?
      Mr. Horam: I entirely agree with the hon. Gentleman. The last trolleybus went out of service in Britain in 1968. They are still used in Madrid and Mexico City. It may be that in some ways those countries are more progressive than ourselves The report that I mentioned concluded that the battery-operated trolleybus to which the hon. Gentleman refers is technically feasible. We shall give the report full consideration.
      Mr. Ronald Atkins: Does my hon. Friend agree that so far trolleybuses operated by batteries have not proved themselves and that a much more efficient system is to be found in Europe with trolleybuses operated by overhead wires?
      Mr. Horam: Such trolleybuses have certain economies compared with battery-operated systems, and we must consider carefully the relative costs. The system that my hon. Friend is talking about is cheaper in running costs and on capital costs. It is something that we shall have to consider extremely carefully.

      Motor Vehicles (Defects)
      Mr. Litterickasked the Secretary of State for Transport what powers he has to require motor vehicle manufacturers to report to him the occurrence of defects in new vehicles being sold to the public which may place lives at risk; and if he is satisfied that existing procedures provide adequate protection for the public.
      Mr. Horam: We have no powers at present to require such information, but certain powers will be conferred by the Consumer Safety Bill, which is now at an advanced stage. The current voluntary arrangements for notifying us of defects have worked well, but we intend to review them when the Bill becomes law.
      Mr. Litterick: I am grateful for that answer. Is my hon. Friend aware that last year, for example, the Volkswagen

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      company of Germany discovered that two of its models had serious defects that resulted in fatalities on the Continent of Europe, and that the two models were at that time being marketed in Britain? As it happens, so far as we know no fatalities occurred in Britain as a result of the weaknesses. Does my hon. Friend agree that the present situation is unsatisfactory and that what is desired is a mandatory obligation for motor car manufacturers to inform his Department, so that at least it has the discretion, where it thinks it appropriate, to advise the motoring public that a certain model has a dangerous defect?
      Mr. Horam: Clause 4 of the Consumer Safety Bill will give the Department power to require information from manufacturers for the purpose of deciding whether to prohibit sales of unsafe vehicles or components. Obviously we shall look at that power most carefully when it comes into operation.
      Mr. Anderson: Will my hon. Friend confirm that the manufacturers' recall procedures in the case of defects have been much facilitated by the existence of a centralised computer giving the names and addresses of the registered owners of vehicles?
      Mr. Horam: Yes, indeed. My hon. Friend makes a very serious and important point, and I entirely support it.
      Mr. Tebbit: Has the Minister any idea why his hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) mentioned the Volkswagen motor car rather than those particularly lethal motor cars—and they have been described as lethal—which are imported from East Europe?
      Mr. Horam: I think that the hon. Gentleman should address his question to my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) and not to me.

      Beverley South-West Bypass
      Mr. Wallasked the Secretary of State for Transport if he will make a statement on the Beverley south-west bypass; and what is the earliest date on which it can be completed.
      Mr. Horam: The inspector's report on the public inquiry held in April into the draft compulsory purchase order and side roads variation orders is at present under consideration. Subject to the satisfactory completion of these outstanding statutory procedures and to the availability of funds, the bypass could be completed by the end of 1980.
      Mr. Wall: Is the Minister aware that the Humber bridge—the biggest single, span bridge in the world—is due for completion at the end of next year and that there will be grave congestion throughout the area unless this bypass follows it very quickly? Will he therefore do everything that he can to speed up the work?
      Mr. Horam: Yes, I certainly shall. As the hon. Gentleman knows, there have been one or two difficult problems over access to farms. That has slowed up the preparatory work. But, now that we are at this advanced stage, I shall see that the further processes are expedited as much as possible.

      Trunk Road Assessment
      Mr. Tom McMillanasked the Secretary of State for Transport if he accepts paragraph 20.19 of the report of the advisory committee on trunk road assessment.
      Mr. William Rodgers: Yes, but good transport is a necessary condition for regional development.
      Mr. McMillan: Since the economic benefits of road building are very dubious indeed, will my right hon. Friend now consider diverting funds to British Rail's development programme, where real value for money can be obtained in the years to come?
      Mr. Rodgers: I do not entirely agree with my hon. Friend that the economic benefits of road building are very dubious indeed. In fact, that was not the conclusion of the Leitch Committee. The conclusion was that roads were not the only major factor determining industrial location. I agree that we must have a proper balance between road and rail. I think that the current position is about right.

      Railway Commuter Organisations
      Mr. Crouchasked the Secretary of State for Transport what recent representations he has received from railway commuter organisations.
      Mr. William Rodgers: None, Sir.
      Mr. Crouch: Is the Secretary of State aware that many hon. Members have received representations from commuter associations to the effect that the recent higher-than-average fare increases that have taken place constitute an unreasonable discrimination against a largely captive commuter market? Perhaps he recognises those words.
      Mr. Rodgers: I think that we have been over this course before. I appreciate, and British Rail appreciates, that there is bound to be irritation on the part of those who find themselves charged more than the average increases. I hope that we shall get away from the very high increases that we have had in recent years. I am glad to know that we are at least getting on to an annual cycle. That is a start. But British Rail must make both ends meet, and it is not easy. However, I am sure that the chairman is fully aware of the extent to which there is dissatisfaction.
      Mr. Raphael Tuck: My right hon. Friend said that "British Rail must make both ends met". Is he aware that in 1977 it realised a surplus of £68 million? In the interests of keeping fares down, would it not be better if my right hon. Friend were to allow British Rail to retain a greater proportion of that surplus rather than hand it over to the Treasury, as it has to do today, and then have to go back to the Treasury with a begging bowl when it wants funds? That seems to me to be perfectly cock-eyed.
      Mr. Rodgers: With respect to my hon. Friend, the finances of British Rail are more rather complicated than he suggested. When the chairman of British Rail refers to a figure of that kind in his annual report, allowance has to be made for the substantial sums of Exchequer money which go to support the railways under what Sir Peter Parker calls a contract. I think that we have got the balance about right. It is not easy for British Rail to do all that it wants to do, but that is true of every one of us.
      Mr. Tebbit: Would the Secretary of State at some time care to meet some of the commuters from Chingford? Is he aware that they can stoically ensure the inconvenience caused by a landslip on their railway line but are unable to understand why, with 4,000 people registered locally as unemployed, British Rail is unable to recruit signalmen? Is there something wrong somewhere with the Government's policy on incomes and British Rail's pay scales?
      Mr. Rodgers: I do not think that there is anything wrong in the sense that the hon. Gentleman has in mind. I am ready to admit that there are peculiarities, in that British Rail cannot recruit all the men that it wants for particular grades. Signalmen are specialist workers and standards have to be high. The problem is recognised by and has been discussed between the British Railways Board and the trade unions.
      Mr. Newens: If we are to keep back increases in fares to commuters—I know that commuters in Harlow are deeply concerned about this matter—is it not a fact that we have to allocate public funds for the modernisation and development of the railways in order that we may have a decent system? Is it not time that Opposition Members also made clear that public expenditure has to be maintained on the railways if we are to have the conditions for commuters which they are demanding?
      Mr. Rodgers: My hon. Friend is right to draw attention to the ambivalence of the Opposition in the area of public expenditure. We must have adequate investment today to guarantee the future of the railways. However, the running costs of the railways will still have to be met out of public funds through either Exchequer grants or fares. I hope that, with falling inflation, increases in fares will be significantly less than in the past.
      Mr. Temple-Morris: In view of what the Secretary of State said, may I ask him a question and hope that in the answer he will not be ambivalent? Does he accept the Price Commission's report that British rail commuters have been discriminated against in this year's fares increases and that there should not be any further increases which amount to

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      discrimination until the question of rail costs has been resolved?
      Mr. Rodgers: Both I and my right hon. Friend the Secretary of State for Prices and Consumer Protection made a statement at the time of the Price Commission's report and made it clear that we accepted the Commission's view although I think that its precise wording is slightly different from what the hon. Gentleman suggested.

      Transport and General Workers' Union
      Mr. Michael McNair-Wilsonasked the Secretary of State for Transport when he intends next to meet the general secretary of the Transport and General Workers' Union.
      Mr. William Rodgers: Soon.
      Mr. McNair-Wilson: When the Secretary of State next meets Mr. Moss Evans, will he seek from him an assurance that the Transport and General Workers' Union will not either employ or threaten to use industrial action against companies which have installed or are contemplating installing rail sidings by using a section 8 grant because they wish to convey some of their goods on the railways?
      Mr. Rodgers: I should not want to speak to Mr. Moss Evans precisely in those terms. I think that he fully recognises the importance of a co-ordinated transport system in which road and rail carry that part of freight which is best suited to them. I am glad to welcome the development of section 8 grants. I had considerable pleasure in opening a major scheme only three weeks ago.
      Mr. Spearing: When my right hon. Friend next meets or, indeed, communicates with the general secretary of the Transport and General Workers' Union, will he make it quite clear that the Government have no imminent decision to make on the Port of London Authority's proposals? Indeed, will he confirm that there are no proposals yet before him and that, if any come and whatever they may be, the Government's proposals for inner city regeneration will be fully taken into account when their response is made?
      Mr. Rodgers: I think that there were three parts to my hon. Friend's supple.
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      mentary question. The answer to all three is "Yes".

      Roads (Policy)
      Mr. Rhodes Jamesasked the Secretary of State for Transport when he expects to announce his promised debate on the White Paper "Policy for Roads: England 1978", Command Paper No. 7132.
      Mr. Macfarlaneasked the Secretary of State for Transport when he expects to announce his promised debate on the White Paper, "Policy for Roads: England 1978" (Command Paper No.
      7132).
      Mr. William Rodgers: It is for my right hon. Friend the Lord President to make any such announcement.
      Mr. Rhodes James: Is the Secretary of State pressing the Leader of the House frequently for the opportunity to have this debate so that he can devise his own policy and announce it on that occasion?
      Mr. Rodgers: The truthful answer is that I am not pressing my right hon. Friend. That is not because I should not like a debate but because there is so much business in July that a debate is unlikely.
      Mr. Noble: Does my right hon. Friend agree that we need no further debate on the question of the Calder Valley highway? Does he accept that the delay in building this highway is causing serious environmental problems in North-East Lancashire? May we have an assurance that when the present inquiry is completed it will not create a precedent for additional inquiries in the future which will delay the building of the road still further?
      Mr. Rodgers: I am grateful to my hon. Friend for giving me the opportunity to confirm that this road is important, as he has emphasised frequently to my hon. Friend the Under-Secretary of State and me. We shall move forward with it as soon as possible. But we must recognise that road building has become a more laborious and time-consuming process as more and more people find that they have objections which they wish to make to road schemes in which other people believe.
      Mr. Raison: Has the Secretary of State considered the possibility that major decisions on new roads which at present are published in orders by the Secretary of State might be subject to decision by the House of Commons?
      Mr. Rodgers: Yes. That is an interesting suggestion. I have thought a good deal about it. My view is that for the moment we should rest upon the proposals in our second White Paper on public inquiries, but I do not exclude such a development, if the House wishes it. However, given the shortage of parliamentary time it might not be universally popular.
      Mr. Peter Bottomley: Will the Secretary of State's policy for roads include any proposals to turn some roads into trunk roads? I am referring in particular to the Rochester Way, which runs through my constituency in Eltham.
      Mr. Rodgers: The hon. Member has raised this question before. Our position on that road remains the same. I am prepared to consider detrunking some roads and bringing others within my responsibilities, depending on the importance of the road and the willingness of the elected local authorities to accept responsibility.

      Driver and Vehicle Licensing Centre
      Mr. MacKayasked the Secretary of State for Transport by what indicators he judges any improvement in performance of the Driver and Vehicle Licensing Centre at Swansea.
      Mr. William Sheltonasked the Secretary of State for Transport by what indicators he assesses any improvement in the performance of the Driver and Vehicle Licensing Centre at Swansea.
      Mr. Budgenasked the Secretary of State for Transport by what indicators he judges any improvement in performance of the Driver and Vehicle Licensing Centre at Swansea.
      Mr. Horam: The time taken to deal with transactions and the number of inquiries are important factors. Letters from hon. Members are also a helpful guide.
      Mr. MacKay: I am glad that the Minister thinks that letters from hon. Members are a guide. Will he take it from me that many of my colleagues and I are receiving an increasing number of complaints from constituents? I appreciate that the centre is an acute embarrassment to the Minister, but does he think that it is time to hold a public inquiry into the running of the centre so that it can be made efficient and so that we do not have to scrap it, as some hon. Members wish?
      Mr. Horam: The hon. Member has made four inquiries at a fairly steady pace—I would not say at an accelerated pace. I am pleased to be able to tell him that letters from hon. Members are no less than 40 per cent. down compared with the same period last year. I do not believe that that considerable improvement justifies an inquiry.
      Mr. Shelton: Does the Under-Secretary of State recall that on 1st March his right hon. Friend, as reported in column 347 of Hansard, agreed that there were strong arguments for abolishing the road tax? Does he recall that at the same time the Secretary of State accepted that there might be some problems? Given the degree of dissatisfaction in the country and the House, is it not time that the Secretary of State looked at the problems to see how they might be overcome—as they have been in other countries—and at least produced a discussion document?
      Mr. Horam: That is an interesting suggestion. When the hon. Member strays into the question of abolishing road tax it is interesting, but it is a matter for the Chancellor of the Exchequer.
      Mr. Budgen: The Under-Secretary of State said that the number of complaints had declined by 40 per cent. Will he state the number of complaints that occurred in the two periods which he compared? How many complaints would he regard as being compatible with a properly run office at Swansea?
      Mr. Horam: Between January and May 1977 the number of complaints from hon. Members was 494. In the equivalent period this year 297 complaints were received from hon. Members.
      Mr. Anderson: Apart from the improvement in turn-round times, would not

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      a useful indicator be a reduction in the number of complaints from informed bodies, such as the Automobile Association, and an increase in the volume of complaints from ill-informed sources, such as Members of the Opposition? Will my hon. Friend seek to improve that lack of information by allowing those Opposition Members who wish to do so to visit the centre?
      Mr. Horam: The Automobile Association, which is never slow to defend the interests of motorists, gave the Swansea centre a clean bill of health no less than a year ago. Since then a further improvement has taken place. I am only too anxious to draw that to the attention of the House. If hon. Members wish to visit the Swansea centre, I shall certainly afford them every facility.
      Mr. Norman Fowler: How many letters ha.s the Department received about the repayment of vehicle excise duty and applications that came in after the Secretary of State's deadline? What replies have been sent to such representations?
      Mr. Horam: There is a further Question on the Order Paper about that, and I refer the hon. Member to it.

      Tachographs
      Mr. Knoxasked the Secretary of State for Transport when he expects the issue of tachographs to be considered by the European Court of Justice.
      Mr. William Rodgers: I have no precise information—but soon, I would expect.
      Mr. Knox: Since the Secretary of State is a strong supporter of the EEC and a progressive politician, is he not ashamed of the situation in which he has placed himself over this matter?
      Mr. Rodgers: No. I am not ashamed. It is a complicated matter, and sometimes it is rather embarrassing. But the case that we have established—which I hope the European Court will consider—is a serious one, relying, among other things, upon the cost of introducing the tachograph. As I have made clear in the House before, I should be happy to see voluntary agreements for its use.
      Mr. John Evans: The views of the European Court are important, but does
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      my right hon. Friend agree that in this case the views of the transport workers' unions are even more important? Will my right hon. Friend therefore invite the leaders of those unions to give evidence to the Court. so that their case can be stated?
      Mr. Rodgers: I do not think that I can agree with my hon. Friend's rendering of the balance in this respect. The European Court has a proper responsibility. I am the last person to complain about that. But I hope that it will recognise that there are real problems, in some cases based upon justified concern. I hope that the court will take that into account, along with the representations that have been made by the Transport and General Workers' Union and others.
      Mr. Temple-Morris: If we can forget all the political difficulties and the moment of glorious abandon by the Secretary of State, may I ask the right hon. Gentleman what he personally thinks about tachographs? Are they a good thing, or are they a bad thing?
      Mr. Rodgers: If I were allowed I could make a long contribution on that subject. My view is that their advantages, from the safety point of view, for example, have been greatly exaggerated. Had they not been invented we should have no need to introduce them in this country. We have long-standing practices. Perhaps they could be improved, but they have served us well. It is worth bearing in mind that our safety record is much better than that of most other European countries. That is my personal view, but I accept that the matter is a good deal more complicated than that.
      Mr. Flannery: The hon. Member for Leominster (Mr. Temple-Morris) asked us to forget political difficulties. He is so lyrical that he should set that to music and call it "Temple-Morris Superstar". The reality is that those difficulties exist, and they are definite.
      Mr. Adley: Excuse me while I hold my sides.
      Mr. Flannery: We still have a degree of sovereignty in this country. Does my right hon. Friend agree that there are many laws—on fisheries for instance—with which we cannot agree, and that we must assert ourselves? Will my right hon.

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      Friend ask the Opposition whether they would, without conditions—
      Mr. Speaker: Order. The House knows that the Secretary of State cannot ask the Opposition any questions. He is here to answer questions.

      Concessionary Fares (Disabled Persons)
      Mr. Grocottasked the Secretary of State for Transport whether he will encourage local authorities in the West Midlands region to adopt a regional policy on concessionary fares for the disabled which would be based on the best scheme currently being operated.
      Mr. William Rodgers: I welcome local authorities getting together to agree common policies. My recent circular advocated half-fares for disabled people, but I am pleased where local authorities can do better than this.
      Mr. Grocott: Does my right hon. Friend accept that the whole question of concessionary fares is far too important to be left to largely Tory-controlled local authorities which could not care less? Does he agree that there is a need, if not for a national policy, at least for a regional policy, and to this end will he summon a conference in the West Midlands to make the recalcitrant local authorities adopt a decent scheme?
      Mr. Rodgers: I agree that this matter is too important to be left to local authorities, and that is precisely why I issued my circular and why I clearly indicated —I know this to be the view of both sides of the House—that schemes are needed where there are no schemes and that better schemes are needed where there are inferior schemes. Certainly, however, the local authorities should get together. There are two forms of elected government in this country—central and local. Both have responsibilities and both should behave responsibly. I recognise that there are special problems in the West Midlands to which my hon. Friend has drawn my attention, and I hope that they will be resolved.
      Mr. Nicholas Winterton: I appreciate very much the context of the Minister's reply. What action would he propose by local authorities to meet the needs of disabled people who live in rural areas
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      which have no public transport? How can those people be helped by a concessionary fare scheme when there is no public transport for them to travel on?
      Mr. John Evans: Persuade the Cheshire Tories to pay some subsidies.
      Mr. Rodgers: If I may intervene in this discussion for a moment, I think that it is the case that the neglect of public transport which is clearly more the responsibility of the Conservatives than of Labour is the cause of the problem which the hon. Member for Macclesfield (Mr. Winterton) described. I hope that he will speak loud and clear everywhere in the terms that he has used this afternoon. In the meantime, with the extra sums that we are providing in the Transport Bill, against which the Opposition voted on Second Reading, there is the prospect of improving public transport in rural areas and of introducing new and helpful forms of public transport.
      Mr. Greville Janner: When considering concessionary fares, does my right hon. Friend not agree that there is a most powerful case for giving concessions to schoolchildren who are required to stay on at school but who, on public transport, are treated as adults for fares purposes? Is he aware that the lack of such a scheme, combined with the abolition, in Leicestershire and other areas, of concessionary rights for everyone from old people and the disabled to home helps, causes grave hardship and anger among people who can do nothing whatever about it because the matter is under the control of Tory local authorities?
      Mr. Rodgers: Those authorities may be controlled by the Tories now, but that will not last for ever. The opportunity will arise to make some improvement then. However, my hon. and learned Friend makes a point which is very much in my mind. I hope that operators will do what they can to ensure a reasonable level of fares, not only for the disabled, the sick and the old, but for young people, because fares can represent a major item in the household budget when young people stay on at school after 16.
      Sir A. Meyer: Does the Secretary of State agree that the best concessionary fare schemes, whether for the disabled or the elderly, are those which give travellers

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      the maximum amount of choice? Does he agree that such schemes are perfectly consistent with making the maximum use of existing carriers in off-peak periods?
      Mr. Rodgers: Yes, I agree with that. It is for the operators, in widely differing circumstances in different parts of the country, to try to devise a form of scheme which uses the fare capacity but which enables people to travel when it is important for them to do so.

      Evesham Bypass
      Mr. Michael Spicerasked the Secretary of State for Transport if he will make a statement on the proposed timetable for the construction of the bypass around Evesham.
      Mr. Horam: I am pleased to announce that the Evesham bypass has now been added to the trunk road preparation pool, together with three associated schemes to improve existing roads and provide local bypasses. These are Ash-church to Evesham, Evesham to Alcester, and Alcester to Gorcott Hill. First priority will be given to the Evesham bypass.
      Mr. Spicer: May I express my sincere gratitude and appreciation for that reply? Since the M5 is now appallingly over-congested, and improvements are needed on the A435, what is the next step now, so that perhaps the Leitch Committee average lead time of 10 years can be substantially reduced and we can get on with building this bypass, for which the citizens of Evesham have been waiting about 40 years?
      Mr. Horam: The next step will be public consultation. However, I take the hon. Member's point. In talking to the county council we are considering how we can minimise the time taken, especially since in this case there may turn out to be only one feasible alternative for the route.

      Sheffield-Manchester Road Improvements
      Mr. Edwin Wainwrightasked the Secretary of State for Transport what is the present estimated cost of the pros posed roadway improvements between Sheffield and Manchester; and what would be the estimated cost of a double three-lane motorway between these two cities.
      Mr. Horam: On the Manchester to Sheffield route through Longdendale a bypass for Mottram-Tintwistle is under investigation, and I am announcing today my right hon. Friend's choice of a preferred route for the Stocksbridge bypass. These bypasses, together with selective and limited improvements to the existing A628, are currently estimated to cost about £40 million. There are no proposals for a dual three-lane motorway from Manchester to Sheffield but, if one were built between Hyde, Greater Manchester and the M1 north of Sheffield, it could cost about £100 million.
      Mr. Wainwright: Does my hon. Friend realise that the improvements he is suggesting will last for only a few years but that eventually we shall need—so the experts tell me—a dual three-lane road from Sheffield to Manchester to ensure that heavy freight from South Yorkshire to Manchester is carried efficiently?
      Mr. Horam: I cannot agree with my hon. Friend. The proposals that we are putting forward today will, on present forecasts, last until the end of the century. I am happy to leave any further decision on this matter to the appropriate Minister at that time.
      Mr. Nicholas Winterton: Is the Minister aware that his reply will be very well received in the area of the Peak Park through which this road is likely to run, and that his views certainly reflect the views of the many people, including the environmentalists, who feel that the invasion of this area would pose a great danger to the Peak Park and that the proposals that he has made will create the minimum intrusion? We are grateful to him.
      Mr. Horam: That was a statement rather than a question but I welcome t none the less.
      Mr. Ronald Atkins: Does my hon. Friend agree that it would be inconsistent to talk at the moment of a new motorway between Sheffield and Manchester when we are considering closing down a major railway line? What is the value of Leitch's recommendations on comparability?
      Mr. Horam: We have taken on board the Leitch conclusions on comparability between railways and roads where we can

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      make appropriate studies, and I can assure my hon. Friend that that will not be lost sight of.

      National Parks (Road Development)
      Mr. Hooleyasked the Secretary of State for Transport what is his policy on future road development in national parks.
      Mr. Horam: Our policy remains that road development in national parks should be avoided unless there is a compelling need and no reasonable alternative.
      Mr. Hooley: Is my hon. Friend aware that I welcome that statement? Does he agree that it is most important that long-distance heavy traffic routes should be devised to avoid the parks altogether, and that there should be no unnecessary so-called improvements in the natural road linkage within a park?
      Mr. Horam: The only changes to the Peak route that we have just been discussing will be minor improvements along the existing route. There will be no new route.
      Mr. Roderick: Will the Minister maintain a flexible approach to this problem? Whereas we do not want motorways going through national parks, in my constituency the main route between North and South Wales passes through the Brecon Beacons National Park. We want improvements to that road, because traffic is no help to a national park.
      Mr. Horam: The situation is different where there is an existing trunk route which is heavily used by traffic. Of course, one would consider that in the circumstances which are appropriate. Earlier I was talking about building a new route, and there one is obviously predisposed to be against it, in these sorts of circumstances.
      Mr. Edwin Wainwright: Is my hon. Friend aware that I used to walk through the Derbyshire dales and through North Yorkshire, and that I know the beauty of the countryside? Should we not be doing something to try to open up the national parks? A roadway through them with good service stations and excellent parking facilities would encourage motorists to get out there with their families and stroll around.
      Mr. Horam: I am delighted to hear of my hon. Friend's walking habits. I hope that he lives to a ripe old age to enjoy the Peak National Park. I am sure that he will.

      Railways (Electrification)
      Mr. Whiteheadasked the Secretary of State for Transport when he expects to receive the report of the steering group studying the case for a programme of main line electrification.
      Mr. Raphael Tuckasked the Secretary of State for Transport what proposals he has received for further railway electrification.
      Mr. William Rodgers: I expect to receive the steering group's report early next year. Meanwhile, no proposals are in front of me.
      Mr. Whitehead: In view of the delay before the report comes out, will my right hon. Friend urgently consider the case for electrifying the London Midland region, which is rapidly becoming the weak sister of the English regions in railway services? If he cannot agree with me about that now, will he take a ride on the train from London to Derby or Sheffield, when he speedily would agree with me?
      Mr. Rodgers: No, I do not think that I can agree with my hon. Friend now or that I would agree with him even if I took the ride that he invites me to take —and for one simple reason; that I would not have set up the steering group if I knew the answers. It is right to wait for its report in order to consider a decision.
      Mr. Tuck: Will my right hon. friend try to ensure that the United Kingdom rises from the bottom of the electrification league of European countries, in the interests of efficiency in operation, greater productivity and fuel conservation?
      Mr. Rodgers: I am always in favour of this country's rising from the bottom of the league in any area, but I think that we should do so on merit, when the justification is plain.
      Mr. Tuck: It is.
      Mr. Rodgers: My hon. Friend knows better than some. I wish that I shared

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      his certainty. However, as soon as we get the steering group's report, we shall have to move forward to decisions. I recognise the strength of feeling about electrification.

      Bus Services
      Mr. Newtonasked the Secretary of State for Transport if he is satisfied with the adequacy of arrangements for consulting the public about proposed changes in bus services.
      Mr. Horam: Much depends on the attitude of individual local authorities, but the Transport Bill lays down firmer guidelines.
      Mr. Newton: Is the hon. Gentleman aware in at least two recent cases in my constituency, major proposed changes in bus route have come as a sudden and unpleasant surprise to groups of constituents and, in one case, to their parish council? Since this seems to be direct evidence of inadequacy, will he not take another look at this and see whether he can strengthen the provisions in the Transport Bill?
      Mr. Horam: I know the difficulties that the hon. Gentleman's constituents have faced in one case and I understand that discussions are now taking place between the operators, the council and the police to sort out the problems in good time. Certainly I take the point that the Transport Bill goes to this area. What we are providing elsewhere, apart from what is in the Bill, is that the county councils should set up advisory committees to consider plans of this kind about bus routes under the provisions that we are making in response to the views of nationalised industries.
      Mr. John Ellis: Will my hon. Friend take note that the opening of the Humber bridge, although that date goes further and further back, will affect the whole of the transport infrastructure in North Lincolnshire, and that there is a vital need that the inquiries which have to be held —whether we keep the ferry or discontinue it—will have an impact on the bus services in that area? Will he press for the appropriate bodies to put those inquiries in hand immediately, so that we have plenty of time before the due date?
      Mr. Horam: My hon. Friend contrives to bring the Humber bridge into
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      absolutely everything. I shall ensure that the appropriate consultations take place.
      Mr. Adley: Does the hon. Gentleman recall that, at the last Transport Question Time, we talked about the National Bus Company's community bus scheme? Is he aware that when I have had a chance to discuss this with neighbourhood councils in my constituency, some of their members were under the impression that this scheme was available only in what one described as "remote rural areas"? Will he yet again take on board the need to encourage the NBC to bring to the attention of parish councils, neighbourhood councils and community groups everywhere the fact that community bus schemes can be operated successfully in many parts of the country, provided that the information is made known to the right people?
      Mr. Horam: The hon. Gentleman is absolutely right. The NBC has made a great effort to publicise its scheme. As he knows, the pamphlet "With a Little Help from your Friends" is now widely distributed. I will put all the support I can behind it. In addition, at the end of our consideration of the Transport Bill, which is now due to come back to the House, we shall certainly issue a comprehensive circular setting out what can be done in this area. I agree that the maximum publicity is needed.
      Mr. Molloy: Would the Minister see the chairman of London Transport to ask him whether the head of his bus section could see representatives of the outer London boroughs to see what can be done to improve the deteriorating provision of bus services in, for example, the London borough of Ealing? Will he also discuss with him the alarming increase in violence used against London bus crews?
      Mr. Horam: My hon. Friend has raised one detailed point and one more general point. I shall certainly see that they are drawn to the attention of the appropriate bodies.
      Mr. Norman Fowler: Is it not a fact that the Government have done almost nothing to encourage new bus services to develop, particularly in rural areas? Why do not the Government reform the traffic commissioner system so that new services can develop naturally, which

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      would be to the benefit of the public and was requested by the county councils?
      Mr. Horam: The hon. Member's charges are breathtaking in their inaccuracy. It is Tory-controlled county councils throughout the country which have been denying operators and people their bus services and have been cutting back one after another. It is only as a consequence of our policies that they are now beginning to change their minds.
      Mr. John Ellis: You walked right into that one, Norman.

      Motorways (Repairs)
      Mr. Dudley Smithasked the Secretary of State for Transport whether, in view of the increasing number of major repairs needed for the United Kingdom's motorway network, he will put in hand an urgent review of the safety procedures adopted when such operations take place.
      Mr. Horam: Because of the particular problems of carrying out road works on motorways, methods of operation are carefully and clearly laid down. We are satisfied that these provide the safest available means of carrying out this essential work, but the arrangements are kept under continuing review in the light of research and operating experience.
      Mr. Smith: In view of the horrendous number of serious accidents—particularly on the M1 recently—where there have been major road works, does not the Minister think that there is still scope for improving the traffic contra-flow and that more ought to be done to reduce the speed of vehicles as they approach road works?
      Mr. Horam: I entirely accept the hon. Gentleman's point. It is a difficult question of judgment. On the one hand, we want to cause the minimum of inconvenience to motorway users and, therefore, we have instituted these contra-flow measures, which allow two streams of traffic in each direction although one lane is wholly closed; on the other hand, I accept that these provisions should be carefully monitored, with a keen eye to safety considerations.
      Mr. Greville Janner: Do not the latest figures show that a substantial number of serious motorway accidents occur
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      where repairs are being carried out and that the public do not understand the dangers and need to be taught? What is my hon. Friend doing to emphasise to drivers the dangers that they are causing to themselves and others by the way in which they approach, and behave in. repair areas?
      Mr. Horam: Undoubtedly accidents are more numerous when repairs are taking place to a section of road. What we are trying to do is to give the maximum information to motorists about the period over which the repair work will be carried out, the amount of road involved, and the speed at which they should go.
      Mr. Emery: Will the Minister look at the instructions given to those carrying out repairs to ensure that the problem is kept to the minimum and that, where traffic diversions or lane closures have been indicated, the signs are taken down when, particularly at weekends, the work has stopped? In too many instances, the signs for closures are kept on when no one is working on the lane; traffic is bunching although the barricades could have been removed ages before.
      Mr. Horam: The hon. Gentleman's observation is one that many people have made. As a consequence, my right hon. Friend and I instituted a special investigation to ensure that cones are taken down when it is possible to do so, when no work is taking place. I agree that nothing is more frustrating than the sight of a stretch of road coned off when no work is being done on it.
      Mr. Loyden: What co-operation takes place between my hon. Friend's Department and, for instance, research divisions in the Department of Industry on the question of developing and producing safer and more durable road surfaces?
      Mr. Horam: There is research into road surfaces, and there has been a major change in our practices. There was a thickening of the road surface in the early 1970s to take account of the forecast number of heavy lorries, for example. There is continuing research in these matters.
      Mr. Nicholas Winterton: Is it the policy of those responsible for undertaking major road works on motorways that

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      such road works should be undertaken at peak traffic periods during the year? Would it not be sensible to have the road repair works on motorways undertaken when the volume of traffic on motorways is at the minimum rather than the maximum?
      Mr. Horam: Of course. I have personally gone into the schedules of motorway repairs, especially on the M5, M6 and M1 this summer, for example, to ensure that the minimum amount of repair work is undertaken during the peak holiday periods. I have in fact rescheduled repair work on the M5 because of the difficulties there during peak periods, and I have insisted that there shall be no repair work on the Midland motorway links during, for example, the period of the Motor Show.

UNITED STATES AIR FORCE (BASE)
Mr. Ridley(by Private Notice) asked the Secretary of State for Defence if he has now taken a decision on which airfield is to be provided for the KC135 aircraft as requested by the United States Air Force.
The Secretary of State for Defence (Mr. Frederick Mulley): Yes, Sir. After thorough examination of all the many factors involved, I have concluded that RAF Fairford is the right airfield for this task. I have today placed in the Library of the House a detailed memorandum which explains the reasons for this choice. A copy of the memorandum has been sent to the local planning authorities, with which we shall discuss the proposal, which has the agreement of the United States authorities.
Mr. Ridley: That decision will cause grave disappointment to many people in the Cotswolds and to many of my constituents, but will the Secretary of State take it that if he is nevertheless able to persuade people that the location of this base at Fairford is essential in the interests of Western security, I believe that they will accept it, provided that the cost of noise, pollution, disturbance and damage does not fall upon them, since they will not be responsible?
Mr. Mulley: I am obliged to the hon. Gentleman. The stationing of 15 KC135s
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is a substantial addition to the capability of the allied air forces in the event of tension or difficulty, and I think it absolutely right that we should act as host for this additional American provision for the security of Europe. I accept that the question of location was difficult, but, as the hon. Gentleman will see from the memorandum which I have provided, Fairford is a fully operational airfield which for many years had already had aircraft of a similar type, the B47, and it has recently been used for Concorde purposes. I think that on balance there will be less, not more, noise and pollution. I regret, though I understand, that many of the protests come from those who would rather not have any airfield there at all. In my view, it will not in any way add to the understandable problems which arise anywhere where we have military airfield installations.
Mr. Hugh Jenkins: Will my right hon. Friend take it that there are a number of us on his own side of the House who have grave doubts about whether this operation is necessary at all and it is regarded by some of us an undesirable? However, will my right hon. Friend agree that, if it has to come, it would seem to many of us entirely appropriate that it should be established in the constituency of the warlike hon. Member for Cirencester and Tewkesbury (Mr. Ridley).
Mr. Mulley: I am glad to tell my hon. Friend that I did not bring into the very full consideration of the problems the personalities of hon. Members in the areas of the various airfields which we examined. I know my hon. Friends' views about NATO, but I must tell him again that I cannot share them. I think it right that the preparedness of NATO in current circumstances should be enhanced by the extra capability, because the possibility of air refuelling substantially multiplies the capability of all aircraft in the alliance.
Mr. Hurd: Will the right hon. Gentle. man take it that most of my constituents affected by the decision will, I believe understand and acknowledge the defence need which he has explained, but, on the other hand, they feel that the matter has been rather clumsily handled and they see little evidence that the Department of the Environment or anyone else has

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visibly taken account of the environmental factors before the choice was made?
Mr. Mulley: I have, of course, consulted my right hon. Friend the Secretary of State for the Environment, although responsibility for the decision is mine and I do not seek to run away from that. The position is that, the United States Air Force having asked for facilities, I can, as it were, veto its choice, but I cannot direct it in any particular direction. I must add, however, that there is something here which I have never understood. Fairford has a distinguished history in providing a home for the Royal Air Force and the United States Air Force over most of the past 40 years. This is merely a change of aircraft it is not a change of use. It is an operational airfield, and why anyone thought that it would not remain so still puzzles me.
Mr. Ron Thomas: Although it is quite appropriate to suggest that the base ought to be situated in or near the areas of those hon. Members on the Opposition Benches who are demanding more and more expenditure on defence, will my right hon. Friend take it that the trades council in the area chosen has expressed opposition and that working people there are opposed to having this base used in the way proposed? They are opposed to it simply because they do not believe that it ought to be in this country at all, and I ask my right hon. Friend to accept that, in my view, what he has said so far does not justify its being in this country.
Mr. Mulley: I hope that my hon. Friend will do me the courtesy of reading the memorandum, which sets out at rather greater length than you would permit me to give at this point. Mr. Speaker, the reasons for the decision. Since we have—in my view, rightly—supported all the efforts in the alliance to increase the reinforcement and readiness capability of the alliance, I think that it would be wholly wrong if we were to say to our United States allies that we were not prepared to find facilities for these aircraft in this country. In fact, 15 KC135s have been operating for a considerable time, without any of these suggested hazards, in Mildenhall in the constituency of one hon. Member opposite.
Several Hon. Members rose—
Mr. Speaker: Order. This is a Private Notice Question. I propose to call two more hon. Members from each side.
Mr. Kershaw: Will the Secretary of State accept that I echo what has been said already by my hon. Friends in saying that in my area we recognise that there should be a capability of this kind in this country and if it has to be at Fairford we shall grin and bear it. [HON. MEMBERS: "Tories against defence."] It is a great relief to find the unofficial opposition on the Government Benches below the Gangway in favour of NATO for once. Will the right hon. Gentleman nevertheless bear in mind that proper compensation will be the environmental quid pro quo for putting up with this thing over many years?
Mr. Motley: Compensation will be subject to the existing legislation. Although, of course, all the cases will be examined, I am bound to tell the hon. Gentleman that, since there is no change of use—it is an operational airfield—I should think it unlikely that there would be a substantial case for additional compensation in this instance.
Mr. William Hamilton: Can my right hon. Friend say whether our American allies are likely to want additional facilities of this kind in the future? If they ask for such facilities, will he consider writing to hon. Members opposite to ask them to volunteer their constituencies for such purposes?
Mr. Mulley: I am obliged to my hon. Friend for that suggestion, but the essential factor which I have had to take into account is that one needs a runway long enough for an aircraft to operate from and, in particular, if it is to be a tanker aircraft, one needs fuel pipeline facilities, which has somewhat limited the choice. No doubt, should further occasion arise, my hon. Friend might like to make some inquiries on my behalf.
Mr. Cope: Can the Secretary of State say whether any undertaking was either offered by the United States, or asked for by us, about whether the technical characteristics of these aircraft will be improved in the future so as to minimise the environmental ramifications of the decision?
Mr. Mulley: As to the future, it is likely that more modern aircraft may be employed. But the idea that this aircraft—which is basically a 707, which is the most widely used civil aircraft—is a particularly bad one to have, is totally wrong. Technically, it is not very different from the B47s which actually operated from this very airfield for a very long time without any of this sort of problem. Additionally, of course, there will be further employment in the area as a result of this decision. I am told that there will be expenditure of between £3 million and £5 million a year in that community, which in some quarters will not be unwelcome.
Mr. Swain: Is my right hon. Friend aware that the nearest air force depot to the village in which I live is 30 miles away at Flinningley? Daily aeroplanes are flying from Finningley at an approximate height of 1,000 ft., causing disturbance not only to older people but to people who are on shift work. It also causes environmental disturbance. I have raised this question before by letter with the Ministry of Defence. Nothing has been done. It started with the Queen's Jubilee. On that occasion we were not asleep because we could not go to sleep.
Mr. Mulley: My hon. Friend raises a rather different point. Had he followed the activities of my hon. Friend the Under-Secretary of State for Defence for the Royal Air Force as closely as I try to do, he would know that he has been much exercised with the problem of low flying. It is absolutely essential that the Royal Air Force and the United States Air Force have facilities for low flying if they are to have the capability of exercising their NATO role. We are seeking arrangements so that the burden can be more widely spread around the countryside. In that endeavour I hope that we shall have my hon. Friend's support.

ALLOCATION OF TIME ORDER (MR. SPEAKER'S RULING)
Mr. Speaker: Last night I undertook to give the hon. Member for Cambridge (Mr. Rhodes James) a considered ruling on the allocation of time Order. That I can now do in somewhat greater detail
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than was possible during the short time available for a point of order raised during a Division when, as usual, there were other distractions.
The hon. Member raised in effect two points. The first was the effect of the business motion on the time allowed for the order. The second was the effect of Standing Order No. 44 upon the order.
First, as to the effect of the business motion upon the order, the position here is amply precedented. On 16th November last, the House agreed to an order concerning the the allocation of time to the Scotland Bill. Paragraph 10 of that order provides that the proceedings on any motion to vary or supplement the provisions of the order
"shall, if not previously concluded, be brought to a conclusion one hour after they have been commenced",
and paragraph 9 of the order provides that at the conclusion of the proceedings Mr. Speaker shall proceed to put the Question on the motion. That is when the House gave me instructions.
The business of the House motion on the Order Paper yesterday enabled debate on the motion for a supplemental allocation of time Order to be proceeded with at any time after 10 o'clock to the extent that it had not already been disposed of by that hour. However, under the terms of the allocation of time Order of last November, I had a quite separate duty to put the Question on the motion at the end of one hour after the proceedings commenced. The business motion did not remove that duty from me.
Similar circumstances arose on 20th July 1976, in relation to three allocation of time motions debated on that day, and on 16th November 1977, in relation to the allocation of time motion relating to the Wales Bill. I refer the hon. Member to the ruling which I gave to the House on the latter occasion in reply to a point of order raised by his hon. Friend the Member for Eastbourne (Mr. Gow).
The hon. Member's second point concerned the application of Standing Order No. 44 to this order which is, as I have already explained, supplemental to the original order of 16th November 1977. Standing Order No. 44 applied to the original order, and there was accordingly a three-hour debate on that order. The original order itself, however, provided

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in paragraph 10 that there should be only one hour's debate on supplemental orders. If the hon. Member believed that paragraph 10 of the original order was irregular with regard to Standing Order No. 44, he should have raised his point when the original order was debated on 16th November last.
All that I can say now is that provisions granting one hour for supplemental orders have been contained in most allocation of time Orders debated under Standing Order No. 44 ever since the Standing Order was first passed in 1967. Supplemental orders have, in fact, been dealt with in this way in 15 allocation of time Orders passed since 1968. In two of these, two hours instead of one hour was allowed for debate on a supplemental order. Only three of the allocation of time Orders passed since 1968 have made no provision for a supplemental order.
Therefore, I do not see anything irregular in the provision for an hour's debate for supplemental orders, despite Standing Order No. 44, and nor evidently could my two immediate predecessors, since these provisions were a regular feature of allocation of time Orders during their Speakership, and they were never queried. But in any event, I think they must now be accepted as having been incorporated into the practice of the House.
I have taken rather long to explain this today, because I felt that I was not able to give full courtesy to the hon. Gentleman last night. I hope that he accepts that ruling today.
Mr. Rhodes James: I am obliged to you, Mr. Speaker, as, I am sure, is the House. The point that I was making is a deeply serious one, because the provision of Standing Order No. 44—originally in 1967, and then the amendment in 1971—was to ensure that it was written into the Standing Orders of this House that there would be adequate time for debate on allocation of time Orders. I
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am sorry to say that the fact that supplemental orders have been made by motion appears to be a regrettable development in the procedure of this House. In effect, what it means is that the Government of the day can terminate that time even more and completely destroy the purpose of the original Standing Order.
As you have said, Mr. Speaker, I know that this has become the practice of the House. I feel, and I felt last night, that at least one Back Bencher should make a protest about it. It is all very well for Front-Bench spokesmen, Governments and Governments-to-be, but these particular developments further deprive Back Benchers of whatever rights and privileges they have, and they are few enough. In my view this is an evil precedent and one which I hope the House will think carefully about before it proceeds further. However, I am deeply grateful to you, Mr. Speaker.
Mr. Speaker: I am much obliged to the hon. Gentleman. I was a little cautious, bearing in mind his previous existence, but the practice of the House has become established.
Mr. Emery: On a point of order, Mr Speaker. I wonder whether you would indicate to the Leader of the House who, after all, is not very far away from us, that there are a number of hon. Members concerned at the apparent way in which the original Standing Order, finally amended in the 1970s, is now able to be got rid of by a practice which has grown up? Perhaps it would be relevant for the Procedure Committee to study this practice at some time to see whether it should be continued or whether we ought to revert to the previous practice
Mr. Speaker: I advise the House to study carefully the long statement which I made, and I congratulate any hon. Member who took it all in at once, without warning. I had warning of it. But I must say that the Lord President will have heard what the hon. Member for Honiton (Mr. Emery) said.

BRITISH VINEYARDS
Dr. Reginald Bennett: I beg to move,
That leave be given to bring in a Bill to provide relief from duty and rating in respect of British vineyards and associated wine-producing establishments.
I hasten to say at the outset that I do not wish in any way to pre-empt the Bill which follows my modest effort in talking about any fiscal matters. However, this seems perhaps to be a matter which is reasonably appropriate for me to raise in view of the responsibilities that the House has put upon me. Certainly it is a matter which I find very near to my heart or various other adjacent organs, and I feel that there is likely to be general sympathy in the House for the sentiments which I hope to express.
Many hon. Members may not have realised that there is an English or British vineyards industry. I say "British" because I am told that there are two vineyards in Wales and therefore I cannot confine my remarks to England. As I say, many people may not realise that there are British vineyards. Indeed, it seems improbable in the light of our climate, and this year is probably giving us the best possible demonstration of that.
In fact, there are no fewer than 100 commercial vineyards in operation actually making and selling wine, and they are making a very good effort. They manage to combat the climate, and they succeed in making wine. It may be that to some extent they have to call in aid the excellent firm of Tate and Lyle. However, that is done a good deal legally in Germany and illegally in France, as many of us know. Nevertheless, the end product often is admirable, and I submit that if it were not so, the effort would be wasted because it would not be worth doing. If they are not likely to make good wine, they would do better not to try at all.
Although the handicap of the climate is great, it does not discourage these gallant fellows who are working in the vineyards. But I am afraid that there are fiscal provisions which are having a deeply discouraging effect. Therefore, I feel that perhaps it is timely for us to try to give this growing and rather infant
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industry a chance to thrive and to prosper.
What happens is that, although people are making the wine, when they have made it, the duties upon it make it remarkably expensive compared with wines which are made abroad under easier conditions—for instance, more sunshine—and which are imported but which pay only the same duty as wines which are grown in this country.
That is the nub of the argument. To ease this there are several things that can be done. We are basically under the laws of the Treaty of Rome and the EEC, and I know that there is one small matter with which the Chief Secretary will not be unacquainted, which is that the EEC looks like taking this country to the European Court of Justice because we charge seven times as much duty on wine as we do on beer. Some countries do not charge on either. In countries such as France and Germany the duty is the same. Here, it is seven times as much, which is very nice for the brewers but a bit rough on the wine !rakers. I do not think that that necessarily is a matter that I can hope to rectify in a modest Private Member's Bill. But I am sure that members of the Government, who I see are so interested, will wish to champion our cause when the Government are arraigned in the clock, wherever it may be.
The other matter which is also international and which comes under the purview of the EEC is that, although we are bound by the laws of the EEC, the Treaty of Rome, and all the rest of it, to have an excise duty on all wines irrespective of their origin, nevertheless there is a small country called Luxembourg, a founder member of the EEC, which somehow has managed to waive those duties for its own wines while still keeping them on imported wines. As I am sure every hon. Member knows, Luxembourg is beautifully situated on the headwaters of the Moselle in extremely good terrain and with an excellent climate for producing wine, which is more than can generally be said for any of the vineyards in this country. Again, it is more than a Private Member's Bill can undertake to get the duties relieved entirely on home-produced wines, although, as it has been done, there is a precedent. Perhaps I

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had better leave that to the Government, too.
My own interests in this Bill, therefore, are more modestly domestic. The first provision would be to make vineyards, which already are classified as agricultural, together with associated buildings, which are classified as industrial, one entity as an agricultural proceeding, as it produces an agricultural product. That would make it necessary for rating to be relieved on the vineyard complexes, and that would help the wine growers. I must cite in aid of my argument the fact that the hop growers of Kent get away with this, so why not the grape growers of the rest of England?
The second aspect is that if vineyards become eligible for that relief, they should be—and my Bill will hope to make it so—eligible for the horticultural capital grants schemes. To do so, the minimum area of territory involved should be reduced, and will be in the Bill that I hope to introduce, from four acres to one acre, because four acres is a very big vineyard in this country.
The next aspect is that specialist gear such as the posts and wires for the vines to be trained upon should be included, as they are not now, in the materials for which capital grants might be available.
Finally, my Bill would seek to cover the point that money spent on research —not necessarily money that the Government would be asked to grant but
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money spent by the industry in conjunction with agricultural colleges such as Wye and elsewhere—should be eligible for tax relief, so that this would be, as is most generally allowed in France and other countries, an allowance which would be only fair to enable our wine growers to compete with those whose wines we import.
In short, I ask for a few modest reliefs for wine growers and wine makers in this country such as are allowed abroad. I ask the House to look sympathetically on my proposals in view of the fact that such reliefs would at least assist us in making a very good and very adequate import substitute.
Question put and agreed to.
Bill ordered to be brought in by Dr. Reginald Bennett, Mr. John MacGregor, Mr. Charles Irving, Mr. Cyril Smith, Mr. Edward du Cann, Mr. John Wake-ham, Mr. Geoffrey Finsberg, Mr. David Ginsburg, Mr. Spencer Le Marchant, Mr. Peter Viggers, Mr. Neville Sandelson and Mr. Michael Grylls.

BRITISH VINEYARDS
Dr. Reginald Bennett accordingly presented a Bill to provide relief from duty and rating in respect of British vineyards and associated wine-producing establishments: And the same was read the First time; and ordered to be read a Second time upon Friday 14th July and to be printed. [Bill 163.]
WAYS AND MEANS

  NATIONAL INSURANCE SURCHARGE
  4.0 p.m.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move,
  That for the percentage specified in section 1(1) of the National Insurance Surcharge Act 1976 there shall be substituted a higher percentage applying to all persons by or in respect of whom the surcharge imposed by that Act is payable.
  I understand that if we say from this Front Bench that the new clause and the Ways and Means Resolution would not have been necessary but for the irresponsibility of the Opposition, that upsets them rather a bit. So perhaps I should repeat it: this new clause would not have been necessary had it not been for the irresponsibility of the Opposition.
  However, I am bound to accept that a majority of the House voted for the two amendments increasing the borrowing requirement by £440 million in 1978–79. We do not propose to try to reverse those two votes. The new clause, on the other hand, seeks to offset a major part of the cost by increasing the national insurance surcharge by 1½ per cent., instead of the 2½ per cent. that we originally had in mind.
  Of course we would have preferred neither. The 2½ per cent. had the attraction that it would not only have more than offset the cost of the two amendments but would have given us a substantial surplus next year to enable us to have sufficient funds available for further income tax cuts, which all sides of the House would have liked to see.
  However one is bound to recognise that there was no majority in the House for a 2½ per cent. increase in the national insurance surcharge. I hope, however, that when the House sees the arguments for a 1½ per cent. increase it will find them acceptable.
  Perhaps first of all I should take a question—what the right hon. Member for Down, South (Mr. Powell) termed his "examination question" to us when he spoke in the debate on 8th May. I think that I paraphrase him correctly when I say that he asked us on what grounds
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  we asserted that our £8·5 billion borrowing requirement was safe, whereas a requirement of £9 billion was unsafe. That was his basic question. He recognised in his remarks that at the end of the day it was a matter of judgment. In the past he indicated that on the whole he had supported the Chancellor in his Budget judgment, but on that occasion he felt that by implication, as the question could not be answered precisely and as it was basically political, there was an overriding consideration—namely local government in Northern Ireland. Therefore, on that occasion he voted against the Government.
  It is not only true that the figure of £8·5 billion—or more or less—is a matter of judgment at the end of the day, it is also true that that figure is the best estimate. No one is saying with absolute exactitude that it will be the figure. It is easy to poke fun at the fact that it could be £1 billion or more out by way of a margin of error. But we should recognise that we are talking about cash flows of £148 billion. Therefore, it is in that context that we must look at any margin of error.
  One must bear in mind particularly that those cash flows are not under the direct control of the Government. That having been said—and because there is such a large cash flow and the margin of error is so imprecise, because the out-turn may be less than the £8·5 billion—I do not think that that is an excuse for adding a further £440 million to that requirement. Whatever the eventual outturn, the House, by its votes, has added an additional £440 million to that figure, which is the best estimate that we can make.
  Of course it is foolish to get hysterical over comparatively small sums in a context of a borrowing requirement of £8·5 billion. But in my view it is equally foolish, because of the margin of error argument, to take that to the ultimate, and say that it does not matter whether there is an extra few hundred million pounds added to the requirement. That kind of argument takes the margin of error argument to the ultimate end of the logic of the case by saying that because there is a margin of error we can allow an extra few hundred million pounds with impunity.

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  The income tax cuts in question to which the two amendments relate, cannot be implemented under the PAYE scheme until about 9th November. That is because of the need to have new tables printed and distributed. In the meantime I make clear to the House that we shall review the prospect for the borrowing requirement in the light of all the further information coming before us between now and then. This will enable us to take any corrective action necessary to keep the borrowing requirement within the £8·5 billion to which we are committed.
  I make clear that the £140 million difference between the national insurance surcharge increase of 1½ per cent. and the £440 million of the two amendments is about 0.1 per cent. of the public sector receipts and payments. Therefore, we are dealing with comparatively small sums.
  However, whatever the judgment may be about the outturn of the borrowing requirement I begin from an assumption that even those who voted for the two amendments would want to see the amount offset, and see a borrowing requirement considerably lower than £8·5 billion.
  Mr. Nigel Lawson: Just to clear up the business about the margin of error, did I understand the Chief Secretary to say that within a total of cash flows of £148 billion the £440 million was not very much it was still very significant, but that the £140 million which he is not recouping is so small as to be insignificant? Can he tell the House where he draws the line between something which is insignificant and something which is significant?
  Mr. Barnett: The hon. Gentleman should have been listening, as I assume everyone else was. I said that the £140 million is about 0·1 per cent. of the cash flows of public sector receipts and payments—a comparatively small sum. But I did not say that we would not necessarily need to recoup it. I said that we would study the situation between now and November, when the income tax cuts take effect, and decide then what further action is necessary, if any, in order to ensure that the borrowing requirement remains within the £8·5 billion.
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  Whatever the judgment about the borrowing requirement, I assume that most people want to see the £440 million offset in whole or part. There are two ways in which this can be done. It can be done by public expenditure cuts or by tax increases, or by a combination of the two.
  I start by looking at possible public expenditure decreases. We have had few specific public expenditure cuts suggested by the right hon. and learned Member for Surrey, East (Sir G. Howe), apart from the specific one to cut the Chancellor's salary—and that motion was defective anyway, so even had it been carried his salary would have been all right. The only other specific proposals we have had from the right hon. and learned Gentleman amounted to savings of £500 million and it was shown quite conclusively to the satisfaction of the House and probably to the satisfaction of the right hon. and learned Gentleman himself that those items that he suggested proved to be a myth to a very large extent.
  We now read a variety of leaks in the press these days from various working parties of the Conservative Party. I quote from The Guardian of 26th June:
  "The Conservative Party is engaged in an increasingly acrimonious row over the scale and distribution of the cuts in public spending which will be needed to finance the level of reductions in direct taxation now being recommended by Mrs. Thatcher's team of top economic advisers."
  It goes on to say that these top economic advisers are the
  "axemen, who include Sir Geoffrey Howe, Mr. Nigel Lawson and Sir Keith Joseph".
  I am told elsewhere that my right hon. Friend the Chancellor of the Exchequer is now the "viable ogre" of the Conservative Party in any coming election. Looking at that bunch of mad axemen opposite, a finer bunch of viable ogres I never wish to meet. The article continued:
  "The original belief was that the range of cuts would be between £2½ billion and £3 billion. It now seems certain that the global figure will be very much higher than this, with housing subsidies as the major target. Shadow Ministers have been told in the bluntest possible terms: 'We intend to do it'."
  That sounds like the hon. Member for Blaby (Mr. Lawson), if ever there was an ogre.

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  Perhaps the right hon. and learned Member for Surrey, East would say whether that is true. Do they intend to take this action? I think that it is worth giving the House one or two figures. He could make cuts in public expenditure in that way. He could increase council house rents by £5 per week and in the process could cut subsidies by a figure of £1¼ billion. He could take that action, but the effect on those council house tenants would be the same as if income tax were increased. The effect on their living standards would certainly be the same.
  If what is being said is "We shall give it back in tax cuts", which is the customary argument of Conservative Members, it is worth reminding the House that if they sought to do that in respect of a married man with no children and were to give proportionate allowances to other people, single and others, the cost of so doing would be about £5 billion. Therefore, it would not exactly help the borrowing requirement, if one sought to give it back in tax cuts, or one could leave it and not make tax cuts to the individuals concerned, and they would be £5 per week worse off.
  I hope that some time the right hon. and learned Member for Surrey, East, who is looking closely at his brief, will tell us the answer.
  Sir Geoffrey Howe: I am looking at my watch.
  Mr. Barnett: The right hon. and learned Gentleman should certainly look at something and tell us whether he intends to listen to his hon. Friend the Member for Blaby and do what has been suggested on housing subsidies. Council house tenants are entitled to know. Are these the Opposition proposals on public expenditure?
  I have been very modest in some of the suggestions I have made about what the Opposition might do to reduce the borrowing requirement, but the press tells us rather more. We were told in the Financial Times on 6th July that the right hon. Member for Leeds, North-East (Sir K. Joseph), who shares a city with my right hon. Friend the Chancellor of the Exchequer, said in Cardiff:
  "…as part of a general programme of public expenditure cuts the Tories proposed a limit on the rate of grant for large capital projects such as a new petrochemical capacity."
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  How much will they save on that? The total expenditure this year is about £450 million. Have they calculated the effect of such a saving on inward investment in the regions? Would they, for example—perhaps the right hon. and learned Gentleman will tell us—cut grants on the Ford project in Wales, which is a large capital project? I see that the right hon. and learned Gentleman is still writing. I hope that at some time he will tell us what he proposes to do.
  Mr. Tim Renton (Mid-Sussex): Will the right hon. Gentleman give way?
  Mr. Barnett: I would rather give way to the right hon. and learned Gentleman the Member for Surrey, East. I am not sure that the hon. Member for Mid-Sussex (Mr. Renton) can speak for his right hon. and learned Friend.
  Mr. Tim Renton: Will the Chief Secretary leave his teasing, baiting mood, which he enjoys so much, and say seriously whether he has considered the application of Laffer's curve to this country? As he will know, that principle is based on the example of the United States in the 1920s and West Germany since the war—namely, the argument that much lower tax rates can lead to a higher tax revenue because people are encouraged to work much more, productivity increases, and thus GDP grows at a much faster rare. I fully appreciate the difficulties we face in the present state of high unemployment, but has the right hon. Gentleman considered the application of that economic theory and its potential to this country?
  Mr. Barnett: There is a wide variety of economic theories that I study constantly and Laffer's curve, together with many other curves, I spend a great deal of my time thinking about. However, I must tell the hon. Gentleman that the people of California may not be quite so pleased with what is happening there when they begin to see the precise consequences of what they have done. Although personally I should like to see lower rates of direct taxation, I do not believe that that is the answer to all our problems. Certainly there is a need to reduce taxation, but to suggest that that would solve the serious problems of this country is to take it to a somewhat exaggerated length.

  475
  The hon. Member for Mid-Sussex diverted me in my course. I was trying to extract some answers from the right hon. and learned Member for Surrey, East. I am desperately trying to make him a credible figure. It is a difficult task. I am trying hard to persuade him to make clear to the House and the country how he will ever make all these huge tax cuts about which he constantly talks. I never mention my own speeches, but I shall do so on this occasion because recently I suggested that the Conservatives intended drastically to reduce Government employment measures, reduce grants to the regions, increase prescription charges, make charges for staying in hospital, impose charges for visiting doctors. I put all these suggestions and suggested that the right hon. and learned Gentleman could deny or confirm them. Needless to say he has not dropped me a note about the matter, so I can only assume that he intends to keep the information a secret.
  I overlooked a number of items in my modest suggestions about what the Conservatives might intend to do. I hope that the right hon. and learned Gentleman will tell the House today what they have in mind in order to make the kind of tax cuts they suggest, and also at the same time, to reduce the borrowing requirement. Perhaps he will use the curve which the hon. Member for Mid-Sussex had in mind. If so, it would be a somewhat miraculous one if he were to cut the borrowing requirement at the same time as he reduced the tax yield in the early years of so doing by thousands of millions of pounds.
  However, as he will not answer my simple questions about public expenditure, perhaps he will answer one last question: Does he intend to cut public expenditure at all? I see that I do not even get a nod from the hon. Member for Blaby, who usually is able to move his head at almost any time. But the reason I ask that simple question is that in a speech in Wales on 9th June the right hon. and learned Member for Surrey, East said:
  "This is why we shall have to rein back public spending."
  Why did the right hon. and learned Gentleman use the words "rein back"? He is usually very careful in his choice
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  of words. Why use two four-letter words when one three-letter word will do? Why did he not say that he proposed to "cut" public expenditure? Will not even the hon. Member for Blaby tell me? He usually does—and indeed he usually speaks for everybody. Will he tell me why his right hon. and learned Friend used the words "rein back" when he meant "cut"? I noted those words carefully because the right hon. and learned Gentleman is a lawyer and does not use two words where one would do. Perhaps he does if he gets paid by the word. I hope that the right hon. and learned Gentleman will tell us at some time.
  If the right hon. and learned Gentleman does not intend to tell us about any specific public expenditure cuts, how will he meet the objective which he constantly puts before the House? Surely he will be able to tell us that he is proposing substantial indirect tax increases. Indeed, when he was in Wales he spoke about tax in the speech to which I referred, but that part of the speech was not in the Conservative Central Office handout because presumably he wrote it on his way down. I quote from The Guardian of Monday 12th June:
  "It is left to Sir Geoffrey Howe—proudly introduced as a son of Wales '—to rewrite Harry Secombe's signature tune: Sir Geoffrey, whose efforts would not cut much ice in the Gorsedd of Bards, promised that Well make a tax cut on the hillsides we'll pay a bonus in the Dales; we'll bring the jobs back to the Valleys, when you come home to Tory Wales."'
  I am bound to say that if those tax cuts are dependent on a Tory Wales, the Opposition will be waiting a very long time. Coming from a man who complains about the PSBR being too high, that is irresponsibility of the highest order.
  However, to be fair, the right hon. and learned Gentleman said in that same speech that we must accept higher taxes on what we spend. So we know that the Opposition are in favour of increasing indirect taxes.
  The Liberals, of course, honest in this and in every other matter, spell out precisely what they mean—by just how much they would increase indirect taxes and how they would do it. But as for the Opposition 10 per cent. VAT broadly recoups the two amendments which they

  477
  carried in the House, but that is all. It certainly would not reduce the borrowing requirement, which the right hon. and learned Gentleman says he wants to do. It would not help to make bigger cuts in direct taxation. Therefore, what is the right hon. and learned Gentleman suggesting on VAT?
  Is it a massive further increase in VAT, an increase in petrol taxes—which he voted against last year—or an increase in beer duty and whisky duty? Which indirect tax increases will give him room to cut income taxes? He has not told us.
  I am bound to say to the right hon. and learned Gentleman that he cannot be both coy and credible. Despite all my attempts at trying my best to lift him up and make him a more credible figure, I am sorry to say that I am not getting very far. If he says, as he does, that there must be higher taxes on what we spend—with which I would not broadly disagree—he is bound to say, if he wants to be credible, where and when he is going to do it. If he does not do that, his whole policy of income tax cuts does not bear examination. [Interruption.]
  What is the hon. Member for Blaby muttering about now? Is he going to tell us?
  Mr. Lawson: The right hon. Gentleman looks like a worried man.
  Mr. Barnett: If I look like a worried man, the country must be in a serious condition. If I am worried, it is about the credibility of the Opposition Front Bench.
  Mr. Deputy Speaker (Mr. Oscar Murton): Order. I hope that there will not be too many interventions, because that will worry the Chair, too.
  Mr. Barnett: I would not want to worry you, Mr. Deputy Speaker. That is the last thing in my mind.
  It is interesting that I am always able to provoke the hon. Member for Blaby at a second's notice. On this occasion, despite all the questions I have put, even he has not been prepared to get up and tell us. It is very strange. It is very interesting why the Opposition are keeping these things so secret. No doubt they will tell us some time in the not too distant future. At least I promise this:
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  I shall keep asking and putting suggestions as to what they will be doing.
  The Opposition are never slow to complain that United Kingdom taxes are the highest in the OECD countries. It is not true, of course. It is not even true that income tax, if one includes social security contributions of employees, is the highest in the OECD countries. I would personally accept that our income tax, certainly on the margins, at the highest and lowest ends, is very high and needs to be cut. But as far as being out of line with that of OECD countries, it is nothing compared with how far we are out of line with their employers' national insurance contributions. On that we are wildly out of line.
  So why are the Opposition so selective in which taxes they want to get back into line? Why are they in favour of reducing income tax in order to get us into line with OECD countries, but opposed to the idea of bringing us into line on employers' national insurance contributions? Or is it—perhaps the right hon. and learned Gentleman will answer this question—that they are in favour of increasing the employers' national insurance contributions, but not now? Are they in favour of increasing them at some time in the future, or are they permanently opposed to any increase?
  I am bound to ask Opposition Members, who may, very shortly, some time before October 1979, be having to stump the country, telling the people how they are proposing to pay for these income tax cuts which their incredible Shadow Chancellor talks about, how they are going to explain it when they are not in favour of, or not prepared to spell out, a single specific public expenditure cut, or a single specific indirect tax increase. How are they going to explain it? Certainly the right hon. and learned Gentleman never has, and I assume he has no intention of doing so today, either.
  I make it clear to this House, as I did at the outset, that I would personally have preferred not to increase the national insurance surcharge at this time. Indeed, my right hon. Friend and I told the right hon. Gentleman the Leader of the Liberal Party and the hon. Member for Cornwall, North (Mr. Pardoe), very politely at the time, why we disagreed

  479
  with their proposition. I do not understand this other myth that my right hon. Friend is always very rough with the hon. Member for Cornwall, North. I cannot understand it. Everybody knows that my right hon. Friend is such a nice fellow. If anything, he is a lovable bear on these occasions—perhaps, a lovable grizzly bear. But certainly he is never rude, never discourteous, and always very polite. We told the hon. Member for Cornwall, North very politely why we were not able to go along with the Liberal proposals on that occasion. It was because we did not wish to add to industrial costs and, ultimately, to prices.
  I make it quite clear to the House that the consequences of this new clause, in general demand, employment and GDP terms, to the first half of 1979, are broadly to offset the income tax cuts represented by the two amendments. Of course, there will be differential employment and liquidity effects, dependent on the ability of the firm to pass on the national insurance surcharge. On the other hand, it might also encourage more efficient use of labour, and an improvement of productivity—to which I assume the Opposition are not opposed. I assume that they are in favour of it.
  Therefore, I say again that although in the interim there will be some effect on cash flow, which is why I would have preferred the switch at another time—but then, while not wishing to hurt the hon. Gentleman any more, I did not vote for those two amendments, nor did any of my hon. Friends—that is why we have the new clause before us today.
  Therefore, whilst I would have preferred not to do it, the fact is that the financing position of manufacturing industry generally has improved—indeed, company liquidity improved markedly in 1977—and while, of course, the national insurance surcharge will affect liquidity and cash flow in firms for a while, this would be far outweighed by the excessive pay settlements in the next round, which would certainly have been the case if we had gone for immediate price increases through VAT, as the Opposition have suggested.
  This is not an ideal solution. It certainly would have been better if the two amendments had not been carried, but if
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  we agree that the Budget financial balance is right. or even that the public sector borrowing requirement is too high—as the right hon. and learned Gentleman suggests—then, it having been unbalanced by those two amendments, we must responsibly put it right. There have been no meaningful public expenditure proposals as an alternative which would not do much more harm and no indirect tax alternatives which equally would not do much more harm. I therefore ask the House to approve the new clause.
  4.30 p.m.
  Sir Geoffrey Howe: There are a number of curious omissions from the right hon. Gentleman's speech. He began by reminiscing about the basis on which I might once have been paid as a lawyer, rehearsing the old myth that one was paid by the word. As we well know, the right hon. Gentleman, in his own private existence—to which he will shortly be returning—was paid by the amount of tax he avoided. [HON. MEMBERS: "Oh."] Certainly the right hon. Gentleman's practice would not have flourished if he had not been able to produce successful results in that direction. I do not criticise him at all. It is an entirely legitimate activity. There must be many people outside this House now suffering because they have not had the benefit of his advice in avoiding some of the taxes he has been imposing.
  But the right hon. Gentleman seems to have changed to a different style and should really be paid by the amount of attention he devotes to study of my speeches, as reported in the press and in Conservative Central Office press releases. I am very flattered by that, and I shall come back to deal with his points in a moment.
  The right hon. Gentleman seems also to be paid by the number of questions he asks, certainly not by the number of points he makes in defence of his own propositions. He should remember that it is his proposal, the Budget that he is seeking to support, the new clause that he will put before the House, that are on trial, and he should begin trying to defend what he is putting before the House instead of seeking to divert the argument elsewhere.
  The reality of the argument underlying the right hon. Gentleman's case is that

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  for the foreseeable future he sees no prospect of any substantial change in the burden of public spending. He will denounce us, as he and his right hon. Friends have denounced us in debate after debate, for having been so rash as to make even the most modest steps towards getting down the high rates of personal taxation in this country. He is making plain that his party is and will remain a high-tax party, stifling the prospects of growth and success, into the foreseeable future.
  It is exactly in line with that tradition that the right hon. Gentleman brings before the House now, although he is not prepared to say much about its merits, what we regard as a foolish and unnecessary measure, introduced, as the Chancellor of the Exchequer himself explained not long ago, at a foolish time and in a foolish fashion. I do not want to burden the Chancellor unduly, but he must remember what he said about the matter in his Budget statement, and why he said then that such a move would be quite wrong. He said:
  "I do not believe it would be right to increase it so soon after it has been introduced, and at a time when unemployment is our major problem. It would increase industrial costs at a time when it is essential to improve our competitiveness and it would ultimately be largely passed on in higher prices at a time when the fight against inflation is at a crucial stage."—[Official Report, 11 th April 1978; Vol. 947, c. 1204.]
  The Chief Secretary had a different way of describing that in his speech this afternoon. The increased surcharge would no longer increase unemployment at the wrong time but would encourage the efficient use of labour. That was the euphemism we heard from the right hon. Gentleman. In fact, he knows perfectly well that the measure takes effect as a tax on jobs, a tax on profits and a tax on investment. He knows perfectly well that the Chancellor was right to say how foolish it would be to go further down that road at this time.
  In the 18 months since March last year, the total burden of payroll taxes being paid by employers will have risen from 8¾ per cent. to 13 per cent. To push it up by that amount over 18 months seems plain folly. It is a tax increased over that period to the tune of about £200 per full-time job.
  That is the way in which the tax is perceived. I have received letters, and I
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  know that my hon. Friends have, from employers large and small throughout the country, and from co-operative societies complaining about the impact on their employment pattern. It is having distortionary effects, as many people have pointed out to me, because many full-time employees are either not being taken on or are being laid off in order to be replaced by part-time employees who do not have the surcharge placed upon them.
  The Chancellor tried to argue—although the Chief Secretary did not try to repeat the argument today—that the last surcharge of 2 per cent. had no effect upon employment, although as a matter of fact in the six months after it was first imposed unemployment rose by 100,000. If the Chief Secretary thinks that employers are not influenced in deciding whether to maintain or increase their payroll by the fact that there is an additional burden of this kind on them, he must be living in a totally foolish world of him own.
  Aside from jobs, the tax falls on profits as well. The Chief Secretary tried to brush this aside. He took some comfort from the fact that company liquidity and profitability were agreeably high. But he knows that profits are still running at a very low level compared with those in the early 1970s, and that they have been flat since the end of last year.
  The right hon. Gentleman may well have seen the impressive analysis produced recently by Messrs. Phillips and Drew suggesting that even before this increase took place company liquidity in the year ahead was likely to be severely affected and that the sector was likely to be in deficit to the tune of about £3½ billion. Therefore, it is no wonder this increase will be damaging in its effects on jobs and in its effects on company confidence and investment.
  The Chief Secretary taunted us, saying that in a speech at Llandudno, one of many I have made on the subject, I had explained that the necessary reductions in personal taxation would involve increases in taxes on expenditure. The right hon. Gentleman must have been unusually neglectful, because we have made that point in virtually every Budget debate and every public expenditure debate in the House. We have made it on

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  every platform in the country, and the right hon. Gentleman must have noticed it in his frequent studies of "The Right Approach" and "The Right Approach to the Economy". Yet he says that we keep it a secret. There is no secret about it. He cannot have it both ways, denouncing me on the one hand for candour and on the other for secrecy.
  Ever since the Chancellor first cut the basic rate of VAT from 10 per cent. to 8 per cent. we have said that it was a foolish step in the wrong direction. It would have been far more sensible to consider increases in indirect taxation of that kind than the tax that we are now dealing with. We would wish to make changes of that kind not as part of some lumbering, limping accommodation to the judgments of this House, as the Chancellor has done, but as part of a considered strategy for the reduction of taxes on personal income, earnings and investment, in order to promote incentives.
  That has been our policy, declared in debate after debate, and it is a policy on which the Liberal Party shares the same general approach. It is a policy on which all the Opposition parties take the same view. It is a policy on which almost every independent adviser outside the House takes the same view. It is a policy on which the great mass of the citizenry take the same view. It is a policy that the Chancellor of the Duchy of Lancaster considers to be entirely right. He never ceases to reiterate that. In answer to a Question recently he said that of course we must do something to reduce the high burdens of personal taxation.
  The only people who are unable or unprepared to move in that direction are those who compose the present Government, either because of their lack of enthusiasm or because they are fettered and tied by those below the Gangway. It is a clear change to which we are committed, and there is no secret about it.
  Mr. Joel Barnett: Perhaps the right hon. and learned Gentleman can explain why he voted against the petrol tax increase.
  Sir G. Howe: We explained at the time that a petrol tax increase of that kind, taken in isolation—
  The Chancellor of the Exchequer (Mr. Denis Healey): Oh.
  Sir G. Howe: The Chancellor cannot seek to refight the battles that he has lost in years gone by. We voted against the petrol tax increase, again with the support of other Opposition parties, for reasons that we explained then. We are not discussing why the Chancellor has been defeated on occasion after occasion. We are discussing the absurd measure that is now before the House.
  The Chief Secretary sought again to justify this change at this time by saying that it was justifiable by reference to foreign comparisons. If he looks at what has been happening to other countries' payroll and social security taxes, he will see that they have been at a higher level than ours. Some of them still are. But the important point is that while this Government are raising taxes of that kind most of those countries are reducing them.
  The OECD report on the subject, produced last December, said that a number of countries—Finland, France, Italy, the Netherlands, Norway, Spain and the United States—had reduced employers' charges to improve the cost position of firms and/or encourage employment.
  Mr. Healey: The right hon. and learned Gentleman mentioned one country on the continent of Europe which after the change we propose, which I think the House will approve tonight, will have a lower level of employers' contribution for payroll tax than the United Kingdom has—one.
  Sir G. Howe: The Chancellor misses the point.
  Mr. Healey: Will the right hon. and learned Gentleman answer?
  Sir G. Howe: The right hon. Gentleman misses the point completely.
  Mr. Healey: What about answering?
  Sir G. Howe: My point is that, of course, from the point of view of a standback analysis of the shape of tax structures there has been a case to be made for a change in this direction. Such a case was put forward by many people when unemployment was not as high as it is now and was not rising. At the very time when every other

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  country that has had high levels of social security taxation is reducing them for the sake of encouraging employment—
  Mr. Healey: Nonsense.
  Sir G. Howe: The Chancellor cannot get away with it by shouting "nonsense".
  Mr. Healey: What about answering the question?
  Sir C. Howe: The Chancellor may not like what I am saying, but these are the facts.
  Mr. Healey rose—
  Sir G. Howe: Does the Chancellor of the Exchequer deny that employers' paroll taxes are being reduced in Finland, France, Italy—
  Mr. Healey: Will the right hon. and learned Gentleman give way?
  Sir G. Howe: Does the Chancellor deny that?
  Mr. Healey: On a point of order, Mr. Deputy Speaker. The right hon. and learned Gentleman has asked me a question. I rose to answer it, but he refused to give way.
  Sir G. Howe: The Chancellor knows that in the countries that I have listed, and I shall list them again—
  Mr. Healey: Will the right hon. and learned Gentleman give way?
  Sir G. Howe: Not yet.
  Mr. Deputy Speaker: It would be helpful to the Chair if one of the right hon. Gentlemen would give way and allow the other to answer.
  Sir G. Howe: I want the Chancellor to address himself to this question. At a time when the Government have increased the employers' surcharge by 2 per cent. initially and now propose a further increase of 1½ per cent., adding to the burden and raising it by a total of 50 per cent. over the last 18 months, is it not a fact that Finland, France, Italy, Netherlands, Norway, Spain and the United States have been reducing those employers' charges and moving in exactly the opposite direction for the sake of promoting employment?
  Mr. Healey: I am most grateful to the right hon. and learned Gentleman for
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  allowing me to answer. It is true that the countries he mentioned have reduced their level of taxation in this area, but it is still very much higher than it is in this country. He cannot deny that. He is misleading the House and the country if he makes his point without also recognising that, even with the proposed increase, the level of British taxation derived from this source is substantially lower than that in any of the countries he has mentioned.
  Sir G. Howe rose—
  Mr. Healey: Does the right hon. and learned Gentleman deny that?
  Sir G. Howe: The figures are not directly comparable in any event. The Chancellor can snort as much as he likes, but the figures in this country do not take account of the fact that we have very much larger private pension provisions and the total cost of private pension contributions and employers' contributions to the State are significantly larger here for that reason.
  Mr. Healey: That is quite untrue.
  Sir G. Howe: If the Chancellor was right when he said in his Budget statement that he did not want to increase the surcharge because it would have an adverse effect on unemployment and if other countries are right to be moving in the opposite direction for precisely that reason, what could be more foolish than the Government's decision to impose the proposed increase in the surcharge?
  The effect of the Government's policy has been to achieve three results. Over their period in office, they have progressively diminished the rewards for going to work and being employed, they have progressively increased the rewards for not going to work and for being unemployed and, by the latest proposals, they have progressively increased the cost of employing people. In the light of those three factors, it is not in the least surprising that unemployment has risen and is likely to go on rising as a result of these measures.
  Mr. Joel Barnett: Will the right hon. and learned Gentleman give way?
  Sir G. Howe: No. I am making my own speech.
  Mr. Joel Barnett: I wish to ask a very simple question.
  Sir G. Howe: The Chief Secretary asked enough foolish questions in his own speech. He ought to let me proceed with my speech.
  The cause of the problem is nothing done by Opposition parties in the House. It is the failure of the Government to take any of the right steps in their Budget this year and afterwards. The Chief Secretary said that the Budget was a matter of judgment, but that is the judgment which the Chancellor got wrong and which has led to the collapse of confidence since that time so that he has difficulty in covering the borrowing requirement, which has led to the necessity of making changes of which this proposal is just a part.
  The public sector borrowing requirement started off by being too high as a result of the Government's decision to raise public expenditure by £4 billion.
  Mr. Healey: That is not true.
  Sir G. Howe: The Chancellor knows perfectly well that it is true, and the House and the country know that it is true. Interest rates have been going up steadily since the Budget was introduced. They went up on Budget day and that is why we face these measures now.
  I want to ask the Chief Secretary, or whoever is to reply to the debate, some questions about the Government's proposals. I understand that these measures impose a burden on the cost of employing people in the public sector. For example, the Chancellor made great play in his Budget Statement about a decision to give £50 million more to the National Health Service, but the cost of the surcharge to the NHS will be more than that. It will increase costs by £54 million. It has a similar effect in local government. The cost of employment there will be increased by about £42 million.
  The Chief Secretary has given an indication of the consequences of this measure on the borrowing requirement. Does it take account of the offsetting expense to the public sector? Will there be a corresponding change in the cash limits for the NHS or will it be this much light as a result of the Government's proposals? Will there be any change in the rate
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  support grant or in any other way to help local government?
  Hon. Members: Answer.
  Mr. Joel Barnett: It is very interesting that when I am asked one question, Conservative Members demand that I should answer it. I asked the right hon. and learned Gentleman dozens of questions and he has not answered one.
  Cash limits will be increased as necessary. May I now ask the right hon. and learned Gentleman to answer a question about the national insurance surcharge? Is he opposed to an increase in the surcharge at any time to pay for income tax cuts?
  Sir G. Howe: We are dealing with this measure at this time in this House. The Chancellor explained to the House in his Budget Statement that introducing such a change at a time when unemployment was high is profoundly foolish. To introduce it just after having introduced a 2 per cent. increase is to compound the folly and the effect is to diminish employment, investment, profits and success. It is a result of the extraordinary way in which the Chancellor has approached this matter throughout.
  In the Budget Statement, the Chancellor said that he would not impose an increase. When the cuts in income tax were imposed upon him, he made the most menacing noises and said that he would do all sorts of things that man could not dream of, including increasing the surcharge. A week before the announcement of the increase, he said in answer to Questions in the House that he was watching carefully but had not decided that it was necessary to do anything. When the measure first came before the House, it was proposed that the increase should be 2½ per cent. As a result of some consorting with the Liberal Party, the Chancellor appears to regard 1½ per cent. as an adequate increase and apparently the balance of £140 million is to be held over for future consideration. It is a most erratic way of coping with the matter and of taking us in the wrong direction at the wrong time in a foolish fashion.
  The Chief Secretary knows that the Government are off course and are offering no sensible strategy for the restoration of employment or prosperity in this country. He and the great mass of people

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  outside the House know that we must set about rewarding work and enterprise more sensibly and effectively. The Chief Secretary may shake his head, but in his more candid moments he says such things. But he never does anything about it.
  It is necessary to reward success and enterprise of all kinds if we are to begin creating jobs in this country. Labour Members constantly say that this analysis is not credible, but they should look at the credibility and disastrous nature of their own performance. We have had four years of the Government reaching from measure to measure and from expedient to expedient without any sign of a return of prosperity or enterprise to this country.
  The Chancellor of the Exchequer is fond of suggesting that he has done no worse than other countries in this sense, but he should look around him. Let him look at those societies where success is taking place. Let him look at the United States, for example, where he will see that in that society, going through the same world recession that we have gone through, 9 million new jobs have come into existence over the past five years and a far better performance is being achieved in terms of growth and in every other sense than has been achieved in this country. If we contrast that with what is on offer from the Government, it cannot be seen how they can continue defending a record of such total and complete failure.
  Their policy has reached a dead end. If we are to make the necessary changes, there is involved the checking and reducing of the size of the public sector borrowing requirement. We have made that clear. That is an essential pre-condition to the conquest of inflation. As we have also made clear, it involves taking steps to switch the burden from taxes on income to taxes on expenditure. The change will take time but the switch is necessary. Nobody should know better than the Chief Secretary and the Chancellor that one essential part of the strategy is a reduction in public expenditure.
  The tragedy is that the Chief Secretary, having striven so valiantly to achieve a reduction of the borrowing requirement, seems to have cast the achievements aside. When it finally became inescapable under pressure from the International Monetary Fund, why
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  did the Chief Secretary slog and sweat to reduce public spending by £4 billion? He did so because he knew that it was necessary. Only a year or so ago he and the Chancellor were saying that it was necessary to secure a progressive reduction in the size of the public sector borrowing requirement. He was right to do so and he was able to achieve a reduction. It is tragic that within a matter of months he and the Chancellor are saying to the TUC and the country as a whole that they are determined and pledged to achieve a growth in public spending of 6 per cent. and to achieve an expansion of public spending to the tune of £4,000 million, exactly the sum that they had first saved.
  The Chief Secretary asks why I use the words "reined back" rather than "reduced"? The right hon. Gentleman knows that during the debate on the public expenditure White Paper my hon. Friend the Member for Blaby (Mr. Lawson) and I said that the figure at which public spending should be held and "reined back" was the outturn for last year. That has been our position throughout. The Chief Secretary should reflect that he has spent the past four years extremely foolishly. He spent two years struggling to reduce public spending and this year he has been struggling and pledging himself to fulfil a re-expansion to exactly the same extent as the reduction that he achieved. That is a futile waste of four years. It has destroyed any scope for maneouvre that we should have.
  Mr. Joel Barnett: We should try to get this straight. The right hon. and learned Gentleman knows that we did not increase public expenditure in 1978–79 by £4 billion. There was a shortfall in 1977–78. In 1977–78, much to my personal regret, public expenditure was in real terms below the level of that of 1975–76 and 1976–77.
  Sir G. Howe: The figures are not in dispute. All that I am saying is that it is supremely foolish for the right hon. Gentleman to have taken his party and Britain through three different phases of tribulation. He has taken us through a massive expansion of public spending. That took place in his first period of office. Following that the right hon. Gentleman spent two years hauling it back. He is now saying specifically that

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  underspending is equally as serious a fault as overspending and that the Government are now determined, come what may, to expand public spending by 6 per cent., even if that pushes the borrowing requirement up against the limit of £8·5 billion. That is their policy, even if it prevents them cutting taxes in any sensible way.
  The Chief Secretary has heard us speak often enough about the sort of savings that should be made in public expenditure.
  Mr. Healey: No.
  Sir G. Howe: He has heard us say so often enough, even if we contemplate only the areas in which he has tried to achieve reductions. The total pattern of spending on subsidies to trade, industry and employment is running at over £3,000 million a year, but we are not achieving anything like the returns that we should be gaining in terms of jobs. Surely the plainest example is that the British people heard yesterday of the continuing losses of the British Steel Corporation. That is not immediately public expenditure out of this year's Budget, but the Government are spending from the borrowing limit money that should be being spent on capital investment. That spending will have to be financed in due course by the future borrowing requirement.
  How can it be sensible to spend huge sums to finance losses in the steel industry in such a way in the past three years? The Chief Secretary knows that that cannot continue. The losses of the steel industry since nationalisation—I say this with some regret—amount to £764 million in 11 years.
  I spent my first two elections fighting steel nationalisation. I considered that it would do no good to those working in the industry. I have spent most of my life working professionally for the Iron and Steel Trades Confederation throughout Wales. What has happened to the steel industry as a result of nationalisation is not merely a matter of public expenditure but a total tragedy.
  We hear that in the three and a half years to October 1978 more than £1,000 million will have been spent or committed in meeting the losses of the British Steel Corporation. If that were doing anything useful in maintaining jobs in
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  the long term, it would be a sensible pattern to be following. However, it is doing no such thing. That has to be compared with the achievements of the private steel industry that is competing alongside BSC. For example, Guest, Keen and Nettlefolds has made a post-tax profit of £324 million while the nationalised steel industry has lost more than £760 million in the past 11 years. Guest, Keen and Nettlefords has seen an expansion in its total labour force of 10,000 while the nationalised steel industry has seen a contraction of nearly 60,000.
  In no sense are the huge losses and huge outpourings of public money, present or in prospect, doing anything in the long run to achieve greater prosperity for the people.
  Mr. Healey: What are you going to do about it?
  Sir G. Howe: The Chancellor knows what should be happening. The solutions are not easy, but Britain would be trying to deceive itself, as the Government are doing, if it continued trying to pretend that we can maintain jobs indefinitely at great expense to the public sector, to the cost of huge burdens being placed on prosperous firms that could be expanding their employment.
  The answers to the Chief Secretary's questions about public spending are not easy. They cannot be easy for the British people. However, when the right hon. Gentleman was in his cutting mood and addressing himself honestly to the problems, he frequently drew our attention to the need to begin restoring the percentage of the cost of housing paid for by rents. He set himself a target to that effect. He has now abandoned that target, but he knows as well as us that if we are to reduce the public sector borrowing requirement it is throughout the larger sections of public spending that economies must be found. It is only in that way that we can begin to reduce the borrowing requirement. It is only in that way that we shall begin to get inflation under control and begin to find room for making tax cuts. Unless the right hon. Gentleman is prepared to face those issues, there is no prospect for Britain.
  The Opposition want better social services. The Chancellor may laugh, but

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  the periods during which our social services improve steadily and progressively were periods of Conservative Government. That is when we could afford to pay for better services. We can begin to achieve better social services only if we achieve a better standard of wealth creation.
  The two parties have shared time in their responsibility for governing Britain almost equally since the end of the war. During l6½ years of Labour Government living standards rose by 6 per cent. overall. During 16½ years of Conservative Government living standards rose by 60 per cent. The real wealth of Britain has improved 10 times more quickly under Conservative Governments than under Labour Governments. That has happened because we have been willing to give people a chance to keep something of what they earn and because we have been willing to restore incentives.
  That is the only way of achieving a higher standard of wealth creation. That can be done only by controlling and reducing the borrowing requirement and controlling and reducing public expenditure along the lines that the Chief Secretary knows very well—namely, along lines that he has proposed to his colleagues, sometimes with success and sometimes with failure. He knows that perfectly well. It must be done along lines that he followed during the past two years. He knows that perfectly well.
  The right hon. Gentleman should be filled with remorse and regret that the past four years of his life have been totally wasted by acting like the Duke of York, going in one direction and then in the other and back again. The sooner that he ceases to defend measures of this sort and returns to more profitable private practice, the better it will be for the British people.
  5.0 p.m.
  Mr. John Pardoe: I cannot imagine that any right hon. or hon. Member wants to increase any taxes. I think that we can start from that position. But that is not the question that we are debating today. We are being asked, if there is a debate about taxation at all, to decide between different kinds of taxes. That is the issue to which the right hon. and learned Member for Surrey, East (Sir G. Howe) addressed himself partly in his speech.
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  What I want to say is primarily concerned with which is the least bad form of taxation and whether the payroll tax is that form of tax.
  The right hon. and learned Gentleman spoke of a consensus on reducing income tax. A very wide-ranging consensus on the reduction of income tax is emerging. It is not confined to the Opposition parties, because the Chief Secretary, the Chancellor of the Exchequer, the Chancellor of the Duchy of Lancaster and other Chancellors have said that they recognise that income tax is too high. The trouble is that they recognise that it is too high in principle but, when asked to do anything about it, they find it extraordinarily difficult. It is because it is extraordinarily difficult that we, having looked at the British tax system in some detail, came to the conclusion that taxes had to be raised in order to bring down income tax.
  I put it to the right hon. and learned Member for Surrey, East that there may be a consensus on reducing income tax but there is precious little consensus on how to pay for that reduction. That is the real problem facing the House and a Government of any political persuasion in trying to change our tax system. Indeed, we cannot have a consensus with the Conservatives on how we should pay for reductions in income tax, because, as the Chief Secretary told us, they determinedly refuse to tell us how they would pay for those reductions. I think that they do that because they can then more freely attack those who put forward specific and constructive suggestions on how cuts in income tax can be paid for. It is easy for the Conservative Opposition to attack the Liberal Party, which puts a figure to its increases in taxes on spending and decides which taxes it wishes to increase, if they are not liable to be attacked at the same time for having done the same thing on VAT or some other form of expenditure tax.
  The Conservative Opposition have in the past said that they would pay for some of these cuts by a switch to taxes on spending and that one of those taxes would be VAT. They have said that it would be 10 per cent. this year, but that would not pay for very much. It would in fact pay for the sum with which we are concerned this afternoon. But it is not the answer to the problem. The

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  Conservative Opposition must recognise that if they are to make a major change in the balance between taxes on income and taxes on spending, the total amount required to make the necessary reductions in income tax, if they are to have any impact on incentives right across the board, is very substantail, because income tax is such a heavy revenue raiser.
  The problem is that we have relied so heavily on income tax to raise such a large proportion of our total revenue that we have had to go very far down the income scale to get it. We know that £1 from 20 million people will bring in more revenue than £10 from 1 million people. Because we have relied on income tax for this revenue, we have taxed people who were never intended by any politicians to be taxed through income tax. If it is a tax on anyone, it is or should be a tax on middle and upper incomes. It ought never to be a tax on lower incomes, but it has become a tax on lower incomes. For that reason, it is not now a progressive tax in any real sense of that word.
  The Conservative Opposition then turn from VAT to public spending cuts, but again they do not say what, or how much. That means that they are not prepared to set out the ways in which these cuts in income tax will be paid for.
  The right hon. and learned Member for Surrey, East, in answer to questions from the Government Front Bench on this matter designed to pin him down, said "We are dealing with this clause at this time." In previous debates the right hon. and learned Gentleman excused the Conservative Opposition from putting forward specific proposals by saying that Oppositions cannot put forward specific proposals for increasing taxes.
  I should like to put a question to the hon. Member for Blaby (Mr. Lawson), should he be winding up for the Opposition forced through these tax cuts in been able to put forward amendments which incorporated both tax cuts and tax increases at the time when the Opposition forced through these tax cuts in Committee on the Floor of the House, it would presumably have been open to them to have added to those amendments a specific commitment to increase taxes accordingly. Which taxes would they
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  have inserted into those amendments had the rules of the House allowed them to do so? I hope that we get a specific answer to that question, because so far we have had none.
  Mr. Lawson: Perhaps I may save some time by answering the hon. Gentleman now. We made it clear at the time that if there were a question of a tax switch—we prefer the public expenditure route—we would have been happy to see a 10 per cent. value added tax, which, as the Chief Secretary conceded, would have more than recouped the amount at stake.
  Mr. Pardoe: I am well aware of that, and I had partially dealt with it. But, although that would pay for these tax cuts this year, it would not pay for any major long-term reductions in income tax. I understood that the Conservative Party partially agreed with the Liberal Party's position, namely, that we needed a three- or four-year plan for the reduction of income tax to levels substantially lower than we have now. If so, we want to know not how the Conservative Opposition would finance the cuts which, with the aid of other Opposition parties, they introduced in Committee, but how they would go beyond the 10 per cent. VAT to finance their changes in future.
  Perhaps I may spell out the Liberal Party's position. First, we believe that income tax is far too high at every level of income. I do not wish to develop that aspect, because we are debating a particular tax increase. If we accept it—the right hon. and learned Member for Surrey East made it clear this afternoon, if not before, that the Conservative Party agrees to a large extent with the Liberal Party on this matter—the question is: how do we reduce it?
  First, there is public spending. By how much do we have to cut public spending to finance the necessary cuts in income tax? The problem is that Britain is not a high-public-spending country. In no sense of the word can we say that we spend a higher proportion of our GNP on the public sector than do other successful economies. There are many very successful economies which spend on the public sector substantially more of their GNP, both current and capital, than we do. It is important to distinguish between these two forms of expenditure.

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  If other countries are spending more, we should ask ourselves: is there something inherent in society in those economies which makes it necessary to have fairly high levels of public spending? I think that there is. I do not believe that any Government will be able to make substantial cuts in public spending in the short term—and by that I mean within five years. Obviously, if the economy grew rapidly it might be possible at the end of a decade to have public spending as a lower proportion of GNP. However, I do not think that it would accomplish the kind of changes that the Conservative Opposition want to see and that the Liberal Party certainly wants to see in income taxes in a five-year Parliament.
  The question whether these cuts will be capital or current is important. Again, I hope that the hon. Member for Blaby will say exactly where these cuts should be made, or, if not in specific terms, whether they should be capital or current. If they are to be on current spending—I think that would be more relevant—are they to be cuts merely in transfer payments? Is the Conservative Party absolutely determined to commit itself for all time to the continued indexation of benefits, such as old-age pensions, or does it believe that it will be necessary to cut back, or "rein back" as the right hon. and learned Member for Surrey, East said, on those benefits? I do not see how we shall make the necessary cuts in current expenditure without making attacks on transfer payments. That is one reason why I do not accept that we need to go down the road of making cuts in public spending.
  If, however, the cuts that the Conservatives would make are to be capital cuts, how will they ensure that the money goes into the formation of private capital? It is one thing to take money out of public current spending and put it into private current spending, but if one takes money out of capital public spending and puts it into private current spending, one gets the worst of all worlds, and investment as a whole falls substantially. I do not believe that that is what the Conservative Party wants. I do not accept that the money can come from public spending. I want it to be proved to us that the Conservatives have a plan to do so.
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  The second possibility is that it should come from the borrowing requirement. Many of us regard the City's reaction to the Budget as stark, raving bonkers. The people in the City have all gone monetary mad. They have been totally converted, bewitched, seduced, bothered and bewildered by the guru from Chicago and his absolute lunacy. It is time that they all went on a compulsory course to the department of applied economics at Cambridge for a renewal in Keynesianism.
  Whatever we might think about the City and its nonsense, unfortunately markets dictate our lives to an extent that we do not always like to admit. The Government have to borrow the money. If they have to borrow the money, under the present regime and the present system they have somehow to placate those people who decree that it shall or shall not be lent.
  I am sorry to introduce a note of criticism into the happy atmosphere that the Chief Secretary has built up between the Chancellor and myself, but if the Chancellor had ensured an agreed Budget—and that would have been extremely easy for him to do—the borrowing requirement could have been coped with easily, without any of the reaction that we have seen in the City.
  The right hon. and learned Member for Surrey, East lectured the Government on how to reduce the borrowing requirement, and talked about the Duke of York. He will not like me mentioning 1974, because he always says that I urged them to do even more. That is true. I am urging the Government to do even more now, because I do not believe that the borrowing requirement is too high. In real terms it is substantially less than when the hon. Member for Blaby and his Government had anything to do with it. In real terms it is substantially less as a proportion of GNP.
  I do not know whether the right hon. and learned Member for Surrey, East criticised it from within the Cabinet. It is easier to criticise things from within the Cabinet than from the Opposition Benches. The right hon. and learned Member now stands as the great high priest of monetarism and cutting the borrowing requirement. I do not. He must

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  explain how the Conservative Government of which he was an esteemed senior member increased the borrowing requirement to such an extent.
  Mr. Joel Barnett: Esteemed?
  Mr. Pardoe: Is the Minister questioning that the right hon. and learned Member for Surrey, East was a senior member of the Cabinet?
  Mr. Barnett: I was questioning the word "esteemed".
  Mr. Pardoe: That word might have been ill-chosen.
  I do not believe that this can be financed by cutting public spending or by raising the borrowing requirement. We could do it to some extent, but I do not believe that it would finance the size of cuts in income tax that both Conservatives and Liberals want.
  We must consider the possibility of other taxes. First, there is the possibility of new revenues from North Sea oil. Clearly, the Government will receive substantial revenues from North Sea oil, but there are huge dangers in financing cuts in income tax from North Sea oil revenues. If we do that, there is no guarantee that the money will find its way into the renewal of British industry or into the development of new sources of energy. In 1990 we could end up with massive imports, nothing to pay for them and an industry which bears a relation to a desert but to little else. We cannot use North Sea oil.
  The Conservatives have suggested VAT. I wish to know at what rate it would be set to obtain the size of revenue for which they are searching. We would have to have a single rate of at least 15 per cent.—possibly 18 per cent.—because VAT, for every 1 per cent. it goes up, raises only half the revenue that can be raised from a payroll tax.
  We could do something on excise duties and tobacco. But we must look at other tax systems in Europe. We must recognise that they have been able to cut income tax by increasing taxes on the payroll. That is the biggest difference between ourselves and other OECD countries.
  In the publication which came out in November last year "Revenue Statistics,
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  1965 to 1975", page 23, paragraph 18 it is stated that in the period covered the revenues from social security contributions rose significantly—in Germany from 27 per cent. to 34 per cent.; in Ireland, from 6 per cent. to 14 per cent.; in Italy, from 34 per cent. to 36 per cent.; in the Netherlands, from 31 per cent. to 38 per cent.; in Portugal, from 21 per cent. to 31 per cent.; in Sweden, from 12 per cent. to 19 per cent.; in the United States, from 16 per cent. to 25 per cent. The percentage decreased in three countries only—Denmark, Greece and Luxembourg.
  I do not think that we should look to Finland as the great example of what we should be doing. In Finland income tax is substantially higher as a proportion of GNP than it is here. I do not think that that is what we wish to accomplish.
  It is true that some of these countries have been reducing income tax, but they have not reduced it to our present levels? We have much lower levels of payroll tax than almost any other major OECD country. That being so, we have to ask ourselves whether this is not the best way of financing cuts in income tax.
  My view, for which I make no apology, is that income tax is a fundamentally bad tax. I do not regard any tax as a good tax but, in so far as there can be one that is better than others, the payroll tax seems to have substantial advantages. It has advantages because it is an extremely efficient revenue raiser. It has advantages because it is extremely broad-based and therefore does not distort the economy.
  If it has any effect on employment at all, it encourages the optimum use of that employment. But whether it has an effect on employment is open to question. I do not believe that 1½ per cent. will have a substantial effect on employment but something higher than that, at the margin—and this is one of the reasons way we came to the conclusion that 2½ per cent. in one year would be too big—it could have an effect. I believe that 2½ per cent. in one year would have a significant effect on employment. I do not believe that 1½ per cent. would have that effect.
  The payroll tax is flexible. It is possible to use it as the major weapon in regional planning. We have always advocated that the payroll tax should be used

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  for that purpose. It should be used by varying it. For instance, one should have a higher rate of payroll tax in areas such as the south-east and a lower rate in the assisted areas such as Scotland, Wales, the south-west and Merseyside.
  It is also possible to discriminate in favour of the employment of the low-paid. The payroll tax should be used in that way. Its flexibility comes to our aid in that respect. At the moment those who are earning less than £17 a week—mainly part-timers—are exempt from the payroll tax. It would be a much more effective weapon on employment policy if it were to be recast completely and if the first £17, or whatever figure, of income per week were exempted from it.
  Britain has a surplus of unskilled and a shortage of skilled people. The cost to the State of converting unskilled people into skilled people is considerable. We should therefore devise a payroll tax that puts a premium on the employment of unskilled people as long as there is a surplus of them, but also puts a premium on the efficient use of skilled labour. If, say, the first £15 of income was exempted from the payroll tax, that would undoubtedly work in the direction we seek.
  Therefore, for all these reasons, the 1·5 per cent. proposal is the least bad way of raising the revenue which the Opposition cut from the Budget. I must tell the Chief Secretary that it is no good blaming the Opposition for cutting income tax. We are here to cut taxes and to deny the Government revenue. If we did that more efficiently Governments would spend their money a lot more efficiently too—
  Mr. Russell Kerr: The hon. Gentleman is getting too enthusiastic.
  Mr. Pardoe: Well, that is one of our jobs. I thought we had done it rather well so far.
  Therefore, I do not take any share of the blame for making the cuts, but now that we have made them I accept that the Government are entitled to ask for the revenue to be replaced. Until today I understood that the Conservative Party, too, believed that a responsible Opposition would be willing to replace the revenue. We have not heard too much of that from the right hon. and learned Member for Surrey, East this afternoon.
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  Certainly when the amendments ware being debated I said that we would be prepared to vote for replacing the revenue, and the 1½ per cent. proposal replaces it in the least bad way——
  Mr. Lawson: Two-thirds of it.
  Mr. Pardoe: Is the hon. Member for Blaby worried about £140 million? If he thinks that he can forecast the borrowing requirement to the nearest £140 million he is more of a lunatic than I take him to be. I am glad that he has now stopped mumbling. He is much better when he stops mumbling.—[Interruption.] He has started mumbling again.
  I agree with the Government that nobody wants to increase the tax, but if we are making a switch from taxes on income to taxes on spending, this is the best way of doing that. This is not a tax on employment, profits or investment, but on spending—
  Mr. Robin Maxwell-Hyslop: It is a tax on employment.
  Mr. Pardoe: The Conservatives have clearly been reading the CBI submission, and that is why they have it all wrong. The CBI has gone berserk on this.
  Mr. Cyril Smith: The CBI goes beserk on everything.
  Mr. Pardoe: It goes berserk on most things. The CBI thinks that there is some special magic about taking money out of the economy by one tax rather than another. Any tax that brings in £350 million to £400 million will reduce demand and, therefore, employment. That is inevitable. The answer to that is to print lots more money, have a bigger borrowing requirement, and put everyone back to work. I do not think, however, that the Conservatives want to make that argument.
  Even if we had increased VAT by 2 per cent. and got the £700 million extra revenue that that would have brought in, that would have reduced demand and employment. I do not believe that, pound for pound, a payroll tax reduces employment any more than a tax on beer, tobacco, or any other form of expenditure.
  Mr. Maxwell-Hyslop: Of course it does.
  Mr. Pardoe: Conservatives believe that there is a direct relationship between employment and a payroll tax. Germany has a much higher payroll tax than we do, as does the United States. The United States has successfully created new jobs. Germany has not. The country in Europe with the lowest payroll taxSwitzerland—has the worst record for loss of jobs since 1973 of any economy in Europe.
  The two factors do not correlate. Every kind of exercise one does fails to provide convincing evidence of a straight relationship between employment and a payroll tax. In the long term there must come a point somewhere up the scale where there is an effect on employment—
  Mr. Lawson: Ah!
  Mr. Pardoe:—but I do not believe that it is happening at this stage, and I believe that we could go a lot higher. I must tell the hon. Member for Blaby that I had understood that part of the Conservative position was that the high incidence of income tax was deterring people from taking up work, taking risks, using their enterprise and creating new jobs. We cannot have it both ways. If we want to reduce income tax in order to create interprise and encourage private industry to build factories and make jobs, and I believe that the hon. Member for Blaby supports that, we have to pay for it by finding other sources of revenue. The 1½ per cent. proposal is such another source of revenue, and it is the least bad method we could find.
  5.28 p.m.
  Mr. Giles Radice: I was tempted to intervene in the debate by the speech of the right hon. and learned Member for Surrey, East (Sir G. Howe). It was such a blatantly opportunistic speech that it cannot go unchallenged. He spent a lot of time arguing against the idea of increasing the surcharge because, he said, it would increase unemployment. There may be something in that. I do not believe that we on the Labour Benches can predict the precise impact of this tax, and therefore the right hon. and learned Gentleman is entitled to take the view he took. We did not hear from him, however, that the Chancellor was forced to raise the
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  extra revenue because the Conservatives supported the extra tax reduction.
  That factor was certainly mentioned by the hon. Member for Cornwall, North (Mr. Pardoe). He said, quite properly, that the Opposition parties had combined to reduce the tax and that it was right and proper for the Government to secure that lost revenue in some way. He said that it was the task of an Opposition party to cut the revenue. That is true. We hear a lot of talk about the Conservatives having a grand strategy for increasing indirect taxation, but it is an odd strategy when it enables them to oppose an increase in indirect tax—for example, the petrol tax. Whenever proposals have been made in this Parliament to increase indirect tax they have opposed them, in spite of their grand strategy.
  Mr. Lawson: We made clear at the time that with the petrol tax we were concerned that many people found it paid them more to be out of work than to work. The problem mainly concerned income tax and untaxed social security benefits. But one of the elements was the cost of travel to work and we did not think that it was sensible to increase the cost of that and so make the problem of "Why work?" even more acute.
  Mr. Radice: I think that the real answer was that the Conservatives were more concerned about the by-election that was to take place two or three days later. I was glad that my right hon. Friend the Chancellor did not take the same opportunistic view. However, the behaviour of the Conservatives on that occasion was characteristic of them throughout this Parliament. Is it suggested that the Chancellor should at this stage have sought to increase indirect taxation just when he is trying to talk to the major unions into agreeing to another round of incomes policy?
  It would be total folly to decide that this was the best moment to increase indirect taxation. Even when the Tory Party has come to favour an incomes policy, at least in the public sector—they do not reveal what will happen in the private sector—they should see that such an increase now would be the worst of the Government's options.
  The right hon. and learned Member for Surrey, East therefore took up a

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  strange position. He said of course that he would not have arrived at this stage in the first place, because under a Conservative Government public spending would have been greatly reduced, and they would not have had the problem of the PSBR. The right hon. and learned Gentleman did not mention that the Government have substantially reduced the PSBR over the years and that, even with the increases in the Budget, public spending will be well within the IMF limits. The right hon. Gentleman spends most of his time saying that any improvements in the economy are due to the IMF, but he ignores that fact.
  The £4 billion to which the right hon. and learned Gentleman referred is a totally phoney figure, as anyone who was on the General Sub-Committee of the Expenditure Committee will realise. That will come about only if one ignores totally the fact that there was a shortfall in public expenditure last year—as the right hon. Gentleman ignored it. Public spending is well within control. There has been no practical proposal by the Tory Party to cut it, because they know that if they were the Government they would find it difficult to do so.
  We are told that too much is spent on aids to industry. What will the Opposition cut? Will they cut regional incentives, money spent on industrial innovation, money given to the NEB—
  Mr. Anthony Nelson: Yes.
  Mr. Radice: We are told they will cut that. We have also been told that they will cut support for nationalised industries, international trade and export promotion. Will they cut the money spent on industrial training? They always say that we should spend more. Will they cut the money spent on health and safety at work? If too much money is being spent in this area, they should say what will be cut. All that we hear are vague and irresponsible suggestions.
  One or two speeches by Opposition spokesmen suggest that they will cut the housing budget. Does that mean that rents will go up? They say that taxation should be further reduced, but they do not say how.
  The right hon. and learned Member made an entirely opportunistic speech. The proper course for an Opposition who
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  have blown a hole in the Budget strategy would have been to come forward with a credible way to raise revenue. They have not done that, so I conclude that their attack has been opportunistic. I include their lack of a credible strategy for taxation, for public spending control or for the economy as a whole. They deserve to lose tonight and they deserve to lose in October, or whenever the election comes.
  5.36 p.m.
  Mr. Ian Stewart: I have a feeling that there is an element of shadowboxing about this debate. We had yesterday a serious and in many ways odd debate about some of the fundamental issues of employment and the level of economic activity. This afternoon's debate is set against that background. The vehicle that the Government have chosen to recover some of their lost revenue as a result of defeats on the Budget is the national insurance surcharge. I doubt whether a Government can conduct their own economic policy or whether Parliament can debate acutely the exact effects of marginal changes in individual taxes taken on their own.
  It is self-evident that such a change in the surcharge must damage employment. It could not possibly improve it. There must he marginal cases in which the extra 1½ per cent. will just tip the scales. No hon. Member can deny that. On the other hand, it is impossible to measure the effect. There is no doubt that the effect will be adverse, which is one ground on which we oppose the proposals.
  When interviewed by the Select Committee on the then proposals for a 2½ per cent. increase, the Chancellor suggested that the unemployment effect over the next 12 months might be as low as 5,000 jobs. That is almost certainly incredible—first because it is so precise and second because I do not see how such minor changes are measureable at all. I do not know whether the CBI's figure of 100,000 jobs is any more precise and informed, but this proposal can only damage employment.
  We must therefore ask whether such a relatively minor adjustment to tax revenues and company finances should be brought about in this way. I question also the effect of any adjustment in taxation and that sort of pseudo-precision

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  in measuring the effect of a change in one tax, disregarding the consequential effects throughout the tax system and the economy as a whole. I get the impression that the effect of tax changes is much greater in their impact on the economy as a whole than in the revenue which they raise or do not raise in many areas.
  Parliament must ask, what is the proper level of taxation that we raise from companies and what is the correct method of raising it? We had lengthy debates in Committee on the Finance Bill about the structure of company taxation. There was a clause in the Bill to perpetuate the existing corporation tax rate of 52 per cent. Many of us pointed out that very few companies actually pay that rate.
  In shifting some of the burden of tax-raising from the corporate structure to the national insurance surcharge, I suspect that the Government feel that this is a certain form of tax, because it depends on the numbers of persons employed and not on some variable amount of allowances and offsets or even on the actual level of profits in the companies which are paying their tax.
  I do not believe that it is possible for Government or Opposition—obviously, it is even more difficult for any Opposition—to say here and now, for all time, that they have a policy to increase this type of taxation on companies or reduce that type of taxation on companies—to say that they would or would not impose the national insurance surcharge, increase it or reduce it—whatever it may be—in future circumstances which none of us can precisely predict.
  What we have to beware of is the simplicity with which this particular tax can be imposed and the temptation which it therefore offers to Governments for raising a bit of revenue at short notice when they have got themselves into a corner. This is the way in which the tax came about in the first place. It came in the summer of 1976 when an emergency package was needed. I cannot remember which of the Chancellor's Budget it was—it must have been about the seventh—
  Mr. Maxwell-Hyslop: Or which crisis.
  Mr. Stewart: In the summer of 1976 the Chancellor put to the Cabinet some proposals for public expenditure cuts, and, if I recall aright, they were to reduce the borrowing requirement by only £1 billion or so. It was felt that an extra billion was necessary, so the 2 per cent. national insurance surcharge was wheeled on stage at a very late point in the discussions. We did not enact it until about November of that year, when things had greatly changed because the Government had then been forced to have recourse to the IMF.
  At that stage it was an emergency expedient. Today, we are finding circumstances of precisely the same kind. Whatever its merits and demerits, and whether they are measurable at all, this form of tax has been chosen because it is capable of being brought into play fairly quickly and it has a more or less predictable and certain yield. That is what the Government are looking for in today's conditions.
  We have already had hints that if, by the end of the year or Budget time next year, conditions have changed, it may be possible to unwind this tax, to offset it or to reduce it— the matter will be up for review—and it does not actually come into play until October of this year, so the revenue effect will be concentrated in the last half of the year.
  That brings me to the next point, that this form of tax has considerable disadvantages in a technical sense as a means of raising revenue because, in order to offset a shortfall of revenue during the current year, the surcharge has to be set at a much higher rate if it is imposed merely for the last few months in order to raise enough revenue before the next year's Budget than would he necessary if it were a continuing revenue raiser. It has a distorting effect.
  The Government may reply that because there is a delay in implementing the income tax coding changes, the effect of this tax will harmonise with the income tax rebate which will be due to taxpayers later in the year. That is fortuitous on this occasion, and it does not in any way detract from my main point that there is a temptation if Governments find that there is a relatively simple way of imposing tax on the corporate sector at short

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  notice to get themselves out of a problem. Whenever circumstances of this kind arise, this is the measure to which they are likely first to turn, and I suspect that in the choice of measures which the Government have decided to bring forward for Report on the Finance Bill this year, that has been one of the motives uppermost in their mind.
  I believe that the need to introduce this tax at all—in a moment or two I shall question its necessity in any event—arises from a fundamental confusion of Government strategy regarding what they are trying to do—what they were trying to do at the time of the Budget and what they are trying to do now. Hon. Members may recall that in the Standing Committee we had a debate on the regulator clause not many weeks ago before the emergency measures were introduced. I said at that time that I felt that the problems in which the Government then found themselves were the outcome of miscalculations made many months ago. It had taken a considerable time for the effect to work through and for the Government to realise that further action had to be taken.
  In fact, I take that matter back to the original publication of the Government's White Paper on public expenditure. I take issue here with the hon. Member for Chester-le-Street (Mr. Radice). Of course, part of the change in the planned public expenditure for this year over the actual outturn for last year arises from shortfall on last year's Estimates. I think that that is common ground between us. It is a matter of practical arithmetic.
  But I differ with the hon. Gentleman in this respect. Whatever was the out-turn last year was the outturn last year, and that is the base from which we start. If it was a base which the Government had some difficulty in financing, any change to increase that requirement in the following year will obviously give rise to added difficulties. I do not believe that this is a matter open to much question. As a matter of fact, the Government did not find it easy until a late stage last year—and certainly not at Budget time in 1977—to meet what was then considered, and for a long time proved to be, a borrowing requirement of a size which was difficult to finance. Their financing problems were somewhat eased by the discovery later during that financial year
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  that the borrowing requirement would actually be less than it was expected to be, and had it remained at the intended level there would have been continuing difficulty in financing it.
  Thus, if we say that the public expenditure during the current year is projected to be whatever it is—£4,000 million higher than last year—in actual terms it is that amount higher than the level which had to be coped with last year. So if we are talking in real terms of the practical problem which Governments face in financing their expenditure, we have to look at the actual figures, and to say that the increase in the public sector borrowing requirement this year would not have been as high if last year's public expenditure had been higher than it actually was is true, but it does not get one out of the problem that it is this year's public sector borrowing requirement which has to be funded this year, and last year's last year.
  The hon. Member for Cornwall, North (Mr. Pardoe) said—I do not know whether he included me specifically in this comment—that people in the City seemed to be pretty well off their heads in their reaction to these financial difficulties. To some extent, I agree, but we cannot speak just of the City's reaction or the reaction of an individual market. The City is an international centre and it reflects international views about what is happening domestically in this country just as our markets reflect what is happening elsewhere. If the market is distorted, the distortion derives from an international as well as a domestic view of what is happening in the British economy and in our domestic financial affairs.
  I shall give one example showing where I think that the views of the City or the views of the market are perverse at present. I refer to the question of the effect of dollar interest rates on sterling interest rates. I have read a great deal in the past week or two about the threat of higher interest rates in this country because dollar interest rates were having to rise This comes out in the leading columns of the financial press and in the various financial pages of the serious press, and it is commonly mentioned in discussion.
  But why are interest rates having to rise in the United States? It is because the dollar is weak, because the Americans have a severe imbalance on their foreign

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  trade, they have a serious balance of payments deficit, and the dollar has been falling in value sharply against many of the major currencies of the world, including sterling. So to put up sterling rates to offset that would merely make the problem worse, and I think that certain cases such as that the reflexes of the market are perverse.
  But why do those reactions come about? They are not deliberately perverse. They come about because of long experience over many years of having a feeling about how these things actually work out in practice after a period of time. By their hesitancy to buy Government stock, by their threatening higher interest rates and by their not being satisfied with the Budget posture of the Government, the markets are not saying specifically that a £8·5 billion borrowing requirement is too much and that it ought to be £8·2 billion, £7·8 billion, £7·5 billion or whatever. I make no apology for saying this. I say freely that I have an interest as a banker, but that is probably sufficiently well known for me not to have to mention it every time I speak on a matter remotely related to that subject. But, having been a banker for nearly 20 years, I have at least some insight into the instincts which motivate the markets in which the Government have to operate.
  I hope that it will be helpful if I make a few remarks on the psychology which sometimes is not readily understood by the authorities. When I say "the authorities" I mean not only Ministers but the Treasury, the Bank of England and all those others concerned with these problems. In fact, a few weeks ago in Committee, when I was talking on this same subject, I said that I thought it would be necessary quite soon to change the system of bank rate, to impose the restriction on bank lending by reintroducing the corset and to have a serious look at whether Government statements about keeping the PSBR under control were credible to markets. Two days after that the authorities did change the system of bank rate, and two weeks after that they raised interest rates, imposed restrictions on bank lending through the corset and made this proposal about national insurance surcharge. I think they were strategically correct to do those things, but I do
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  not think that is the question at issue this afternoon.
  What it illustrates is that there was an inevitability to which markets were moving because the Government had not sufficiently appreciated that their earlier statements about the financial balance in the economy were not regarded as credible. They may have been credible. I do not know. We do not get enough information to judge. That is one of the permanent problems of Parliament. As I have learned in the year that I have been a member of the General Sub-Committee of the Public Expenditure Committee, one of the difficulties is that anyone outside the Treasury finds it exceedingly difficult to get any sort of realistic, up-to-date information on which to make informed judgments about what is going on.
  What do markets do in those circumstances? If they find that history shows that Governments have tended to be a little too optimistic in their estimates for public expenditure, or the buoyancy of the revenue, or whatever—and this has happened over many years—and if they find that Governments are likely to be even more over-optimistic in the year of a General Election, they will play safe and say "It looks to us as if the situation this year is a bit dangerous. We are not convinced by the figures which have been put forward. If the Government can make the sums add up and convince us about the arithmetic, we shall respond".
  But it is not the fault of the markets. If someone is in debt he cannot blame those to whom he owes money. That is the basic problem of Governments today throughout the industrial world. Because of the recession, quite apart from Government policies, it has come about that quite substantial sums of money have had to be borrowed, rather than raised in revenue, in order to meet government outgoings, both in this country and elsewhere. The consequence of that is absolutely unavoidable by any Government, and particularly unavoidable by a Government such as ours, which wants to go on increasing public expenditure.
  Nevertheless, the fact is that a Government, like any other body, are creditworthy in varying degrees. If they are very credit-worthy, and are conducting their affairs in a most cautious and conservative way, they will find it very easy to

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  borrow money. In the latter part of 1977, when the Budget and financial posture of this Government were actually very cautious, they found it very easy to raise money. Today the Government are finding it very difficult to raise money, and the commentary of the markets is "We no longer believe that the Government's posture is sufficiently responsible".
  How are the markets to know? This is the difficulty of the problem, because there is a severe shortage of information. I was hoping that in his introductory remarks the Chief Secretary would say something a little bit more up to date about his estimates for what the borrowing requirement now is. He implied that it might actually be a bit below £8½ billion and that if that were the case it might well prove in retrospect that it was not necessary to bring forward this measure at all. But the House of Commons, which this afternoon must take this decision on the new clause, is not in a position to make any informed judgment.
  Therefore, as I said at the beginning, we are reduced to an element of shadow boxing about the detailed implications of fairly slight shifts in specific taxes rather than trying to understand the fundamental question whether such adjustments are needed in the first place on economic grounds. Apart from being self-evident superficial politics and an apology for the fact that they are not too happy about what they are trying to defend, I must say that I think the tactic of the Government to get through every embarrassing debate of this kind by a series of provocations and jibes at my right hon. and hon. Friends on the Front Bench, in relation to the details of a future Conservative Government's economic and tax policies, misses the point entirely. The Government do not do that themselves. Does anyone believe that the Government will stick to their public expenditure plans for the next three or four years as outlined in the public expenditure White Paper of last year? Yet that is the stated intention, category by category and subhead by subhead, for every Department which is spelled out in great and specific detail in relation to what Government expenditure will be up to 1980 and beyond.
  But I am sure that no Labour Member or Opposition Member believes or expects the Government to stick to every
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  detail of those proposals. What about the Budget? Although there have been one or two changes along the line, it is broadly the Budget which was introduced in April. That contained a series of tax proposals which were brought to the House in order that the House might grant the Government Supply. Does anyone seriously believe that major changes about the way in which those taxes will be raised will not be made in next year's spring Budget? Of course not, The fact is that the financial and detailed tax policies on public expenditure, on the level of income tax, on allowances and everything else, are changed at least from year to year, and very often more frequently. It is only three months since the last Budget, and yet a new tax has already been introduce after such a short time. To say that any Opposition have a responsibility to spell out the detail of some sort of draft public expenditure White Paper for their second or third years in office, and the details of their tax plans to meet the revenue, when they do not even know what is in this year's books, seems manifestly absurd.
  Mr. Radice: Surely an Opposition party which says, first, that taxes ought to be cut further and, secondly, that the public sector borrowing requirement ought to be reduced ought to give at least some indication of where it will do that. That is precisely what the Conservative Party does not do. It does not do that because it thinks that it would be electorally unpopular.
  Mr. Stewart: With great respect to the hon. Gentleman, nor do the Government say what they are going to do about tax changes which they have already said are necessary and overdue. It seems to me that a Government have far greater responsibility than an Opposition to spell out their specific plans. After all, if one looks carefully at the words of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) or my hon. Friend the Member for Blaby (Mr. Lawson), and others who have talked about it, one will see that certain general outlines, which are what are needed, have been carefully explained.
  Mr. F. A. Burden: Does not my hon. Friend also agree that not only the Opposition but Government supporters did not know the impositions put

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  upon the Government by the International Monetary Fund and what controls were imposed upon them? Therefore, how can Government supporters expect the Opposition to come up with details when they have not had an opportunity to look at the books—which I think will be ghastly?
  Mr. Stewart: My hon. Friend raises a very important topic. Picking up a point which I have made already and which did not seem to attract any horrified response from Government supporters when I made it the first time, frankly, we do not know the financial situation of the country even now, let alone what it is likely to be in three, six or nine months.
  As I said before, I was hoping to hear from the Chief Secretary how things were going, because they have changed. We know that many of the assumptions on which the public expenditure White Paper was drawn up—it was in draft this time last year, and it was produced six months ago—have changed considerably since then. Major assumptions about the level of employment and the level of wage settlements on which the Budget judgment was made have also changed considerably since the Budget was constructed. We are on a moving staircase, and no one knows how far it will have moved a number of months or years in the future.
  Clearly it is an attempt to divert attention from the central issue, which is why the Government have to bring this measure before the House at this stage. We have heard trotted out the inevitable claim that this is all due to the irresponsibility of the Opposition. I refute that. I was always led to believe that the House of Commons was responsible for granting the Government Supply and that the money raised in taxes had to be voted to the Government by Members of the House of Commons for the time being, whatever their parties and whatever the constitution of the House at the time.
  One of the consequences of the Government deciding that they want to hold on to office when they cannot command a majority in the House is that they cannot always carry their wishes in their original form on Supply. The Government will be voted down from time to
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  time. They were voted down on income tax, and a little pressure behind the scenes has caused them to adjust their proposals to raise the national insurance surcharge.
  There is nothing irresponsible about it. A Government can spend only the money which Parliament grants them. The mistake is on the Government's side for having decided in the first place to spend so much that it was doubtful whether Parliament would grant them the Supply to pay for it all. That is the reason why they find themselves in the present mess.
  I can understand why Ministers use this argument. It is only natural that when they have to bring in an unpalatable fourteenth Budget only two months after their thirteenth, they will look for scapegoats and for a reason. It is natural to say "It is the fault of all these wicked Conservatives, Liberals and the rest who have caused us to do this."
  I am convinced that that argument is being used only to disguise what the Government would have had to do, anyway. Does anyone say that without the amendments on income tax, the Government would have avoided having minimum lending rate raised to 10 per cent. and putting very severe restrictions on the money supply through restraint of bank lending? Of course not. All that has happened is that the Government have been given a fairly convenient handle to say "This is the package which we are bringing forward, and it is all due to this wretched House of Commons which unfortunately we cannot control and which has not coughed up all the money that we want to spend."
  Naturally, it is quite convenient for the Government to have an alibi. But do not let anyone be deceived when the truth is that they were moving inexorably to having to take such measures and that, although they might have been able to stave them off for a few more weeks, they would have had to take them sooner or later. So we find ourselves in July yet again debating new Budget measures which were not put forward in the spring Budget, and for the traditional reason that the Government got it wrong.
  I listened carefully to the remarks of the Chief Secretary, when I thought that he would try to justify his proposal. I thought that he would explain the need

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  to raise this £300 million through the national insurance surcharge. However, he rather brushed that aside and said that he did not think that anyone would want to question whether the Government should do it if it proved eventually to be needed. The only justification for introducing additional revenue-raising measures of this kind at this stage in the year is if there is some danger that the PSBR figure of £8·5 billion is likely to be breached. If there is such a danger, the situation is very much more serious than the Chief Secretary has led us to believe. If there is no such danger, I am not sure whether there is any economic ground for introducing a measure of this kind with the inevitable side effects that it will have.
  As I said before, there have been considerable changes in the aggregates since the Budget judgment and since this estimate of £8·5 billion borrowing requirement was made. I do not know whether the Government have yet taken into account the figures and fed them into their computer. But if they talk, as Ministers do, about the pleasing reduction in unemployment and if official comments are that this is going better than expected, and if they talk about the level of earnings being higher than they had hoped, presumably the arithmetic on which they made their original calculations has to be revised.
  I think that no case has been made by the Chief Secretary that this money needs to be raised. Certainly he has not made the ease that it needs to be raised in this way. Therefore, the Opposition are entirely justified in voting against these measures.
  6.7 p.m.
  Mr. Ron Thomas: I was interested in part of what the hon. Member for Hitchin (Mr. Stewart) said, especially when he told us about the psychology of bankers and the way in which apparently they reacted to certain situations.
  We can be reasonably certain about one matter. Whatever problems Britain faces, according to the press, more often than not the workers are to blame. Sometimes it is the employers who are to blame. But it is never suggested that it is the bankers who are to blame. No one ever blames the money market. The
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  money market is suggested to be some kind of sterile intermediary which is completely neutral.
  The hon. Member for Hitchin did not tell us—and I wish that he had—why, on the occasion of which he spoke, those institutions suddenly, like a close-knit monopoly or oligopoly, went on strike. That is what they did. If a group of workers had done that, they would have been holding the country to ransom.
  Here we had what is supposed to be some kind of free market in buying Government securities. That is the image that is put across—the so-called market mechanism determining the buying and selling of Government securities. Whether we like it or not, we have an oligopolistic set-up. They decided that they would go on strike to force down the price of securities in order to get a higher return and therefore enhance their profits at the end of the day, irrespective of the impact that this would have on the country or on the British people.
  Mr. Lawson: Before the hon. Member gets carried away too far by his curious language, will he say whether he is aware that amongst the institutions which at that time were reluctant to buy gilt-edged securities were trade union pension funds? Is he attacking them as well?
  Mr. Thomas: Whether trade union pension funds or the institutions which handle trade union pension funds—and that is what the hon. Member is talking about; he means the insurance companies which handle trade union pension funds—
  Mr. Lawson: No.
  Mr. Thomas: I do not know of any trade unionists who themselves handle their pension funds in the way that the hon. Member suggests. In any event, I do not care who the institutions are. I am saying that they went on strike and refused to buy Government securities.
  Mr. Peter Hordern (Horsham and Crawley): Did the hon. Member say that he did not know of any trade unionists being represented on the boards of pension funds? I remind him that the British Rail pension fund, for example, certainly has trade unionists among the members of the trustees of that fund. Since he has commented on the so-called

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  strike of the City in not buying gilt-edged securities, perhaps he would like to apply his mind to the British Rail pension fund which has been buying antiques and works of art rather than Government securities.
  Mr. Thomas: I did not say that trade unionists were not represented on certain boards or management committees which manage pension funds. I was talking about the institutions, whether they are representing the funds of trade unions or the advisers whom the trade unions use. The trade unionists are not involved in the day-to-day management of pension funds. I wish that they were. In the bulk of cases, they have no control over their own pension funds at all. Certainly this is the case in the vast majority of companies. If the hon. Member can show me a particular trade union that is knowingly part of that monopolistic or oligopolistic set-up, my strictures would apply to them just as much as they apply to any other part of the market. I am not reluctant to say that.
  The hon. Member for Hitchin was apparently telling us that either he or the market did not have much idea of the current situation in terms of the public sector borrowing requirement, or the rate of growth of the money supply. Perhaps he should ask his hon. Friend the Member for Blaby (Mr. Lawson) who has told us that in his judgment the total of the PSBR should fall roughly between £4 billion and £8 billion.
  If one looks at any of these statistics one will find that they vary month by month. One needs to look only at the increase in the supply of money, whether it is measured M1 or M3, and one sees that the actual figure can be plus £90 million in January and become minus £900 million when seasonally adjusted because of seasonal variations. All kinds of issues arise. We have not been told the kind of seasonal factors that are used to adjust the figures. But most people will accept that it is very difficult to predict the growth of the money supply.
  Day after day Conservative Members come to the House demanding more and more public expenditure when it suits them to do so. They want more money for industries in which they have constituency interests. I do not complain about that. They also want more and
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  more money for defence, the police force and the armed forces' pay and so on. Eeven if some of those demands were met it would make it much more difficult to predict the final outcome.
  I oppose militant monetarism, even though I believe that there is a consensus on this between the two Front Benches. However, I admit that they are more militant on the right-hand side, especially when they are worried about trade union pension funds.
  Certainly the cuts in public expenditure, which many of us opposed, have left a legacy for local authorities, the Health Service and other parts of the public sector, where it will be very difficult to predict the result. Predictions were made of the outturn last year which proved to be up to £2 billion out.
  There is also the general atmosphere. We have created an atmosphere in which cuts of any kind will be very uneconomic anyway. Many cuts in the Health Service, roads and so on have already proved uneconomic, and here again it is very difficult to predict the final outcome.
  Mr. Burden: Does the hon. Member realise that this year the Government are raising £8·4 billion on the home markets? Since the Government came into office in 1974 they have raised $8·55 billion. which all has to be repaid in dollars. Of this, $4·62 billion was raised last year when North Sea oil was flowing. The cost of interest alone is $621 million and this has to be found somehow. Where is the interest coming from to pay for the increasing loans that the Government are raising, and when will these loans be paid back?
  Mr. Thomas: The hon. Member must accept that at a time when we have at least 1·5 milion unemployed, we cannot avoid having a considerable public sector borrowing requirement—unless we adopt the measures that have been advocated by some of us on this side of the House. It is just not on. A total of 1·5 million unemployed is an indictment of the capitalist system. Despite everything that has been said, there is unemployment in West Germany, just as there is throughout Europe and other parts of the capitalist world. Given 1·5 milion unemployed, and having to pay them not to produce, we must inevitably have a public

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  sector borrowing requirement. In fact it is surprising that the PSBR is as low as it is.
  Accepting that PSBR is necessary, one must borrow money. One can argue until the cows come home about whether it is better in terms of the balance of payments, and interest rates for the Government, local authorities and nationalised industries to borrow abroad or in this country. Certainly I do not want to see North Sea oil revenue dissipated in this way. The hon. Member for Cornwall, North (Mr. Pardoe) was right to raise the question of revenue from North Sea oil not being dissipated by large tax handouts.
  It worries me that at present we have a growing and very serious import bill on finished and semi-finished manufactured goods. In terms of the balance of payments this will be masked by North Sea oil revenue. We shall tend to sit back and say that we have got our balance of payments right. But we shall be wasting the heritage of North Sea oil, and masking a very serious and critical problem of our manufacturing industries being caught in a spiral of contraction and decline. At the same time we shall be taking; more imports of finished and semi-finished manufactured goods with the resultant impact on jobs.
  I do not know what hon. Members opposite feel about the PSBR. Do they feel that we should be able to run the economy without a PSBR at all at a time when we have 1·5 million unemployed? Are the Opposition still living in the nineteenth century, do they want to return to the days of Gladstone, or have they caught up with modern ideas? If we consider our national income and our economic problems, I believe that our public sector borrowing requirement is far lower than that in other countries. It has been calculated that if we had full employment in Britain, we would be running a considerable surplus in our Budget and that we would not have a PSBR of £7 billion or £8 billion, or whatever the figure is.
  Mr. Nelson: Does the hon. Gentleman accept that a country with a rate of growth in GNP has a much more arguable case for a higher PSBR, and that where the rate of growth is nil or declineing
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  the argument against having a large and rising PSBR is questionable?
  Mr. Thomas: There is a difficulty in sustaining that argument. If the PSBR is cut in the way proposed by the Conservatives, it will increase the level of unemployment and eventually with it the PSBR. Alternatively, there will be no system of unemployment pay or supplementary benefit. Is that what the hon. Gentleman is advocating? If the PSBR is cut, it will create further unemployment. That in turn will create higher total levels of unemployment pay and supplementary benefit and will involve loss of tax revenue. In other words, one will return to a situation in which in any case one will require a higher PSBR.
  In this debate we have heard a good deal about the figure of £440 million, which is the amount which the Government must now recoup. We should consider what will happen if the Tory Party has its way in its own Budget proposals. The hon. Member for Cornwall, North said that he did not know what the Tory Budget proposals were. I accept that we do not know how they intend to raise the revenue to implement their proposals, but certainly the Conservatives made it clear in their Budget proposals that there would be massive tax handouts to those on £10,000 a year plus, including the indexation of capital gains. The hon. Member for Blaby said that he did not know where the Conservatives would get the money from but said that if they were returned to Government they would find £350 million from somewhere.
  The hon. Member for Blaby can find this all set out in the Official Report of 18th May this year, in column 293. The Tories want to hand out to those earning £10,000 a year plus—the richest sector in our society—about £1,100 million. This is set out in that debate and the figure arrived at, including indexation of capital gains, was £1,100 million. That was the additional handout to be made by the Tories to those earning over £10,000 a year. I do not necessarily call that irresponsible, but it is certainly a blatant example of serving the class interests that Tories are here to represent. Let us not use trivial words such as "irresponsible" or phrases such as "naughty boys", but let us state

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  clearly that the Tories are here to represent a certain class interest.
  Mr. Nick Budgen: Will the hon. Gentleman comment on the fact that it is said to be the prime objective of the Labour Party to make a massive redistribution of wealth and power in favour of ordinary working people? Is that a class programme?
  Mr. Thomas: Yes, it is. I am happy that he at least on the Tory Benches admits that that is what the Tory Budget is all about and that it is aimed at serving class interests. He then says that it is the cornerstone of the Labour Party's manifesto that we exist to bring about a fundamental and irreversible shift in the balance of wealth and power in favour of working people and their families. The aim is precisely that. If people are earning more than £10,000 a year, the Tory Members are here to represent them. However, if they are in the position of 99 per cent. of the population and earn less than £10,000 a year, they will know where to put their cross in a General Election.
  Mr. Pardoe: Is the hon. Gentleman not being a little unfair to the Labour Party's manifesto? Will he say what proportion of the British people come within the category of working people? My guess is that it is about 99 per cent. In that case, from whom and to whom are we distributing?
  Mr. Thomas: I believe that if there is £500 million or even £1,100 million to spare, it should all go to those who earn less than £10,000 a year. We could argue until the cows come home the definition of "working people". We have often been told in these debates of innovators earning £10,000, £20,000, £30,000 or even £50,000 a year and that the Tories intended to give another £5,000 a year to such people. However, the only innovators who are mentioned are the pop singers, golfers, and tennis stars. We are told that ever since those people left these shores Britain has ceased to remain a great country.
  Mr. Bugden: Is the hon. Gentleman saying that he, or any politician, is capable of making a moral judgment as to which sector of the economy should flourish and which should die?
  Mr. ThomasI would suggest that, because of the kind of planning that we envisage, we would lay down priorities. Within those priorities it could well be that, for example, brothels, bingo palaces and betting shops would be given less resources than would manufacturing industry, hospitals and schools. If that were the result, we would be happy to say that certain sections of the community should die and that others should expand and flourish.
  The point of my remarks is to emphasise that it is indefensible to give the bulk of the £1,100 million to those earning £10,000 a year plus. People in that category are in any case already receiving massive tax handouts from the Labour Budget. Since we are now to implement the proposals of the Boyle report following the investigation into top salaries, the judges and chairmen of boards will receive massive tax handouts. I do not know whether judges and chairmen fall into the category of working class. I shall have to have time to think about that. Having had massive tax handouts, having heard about the Tory proposals, and also having heard of the indefensible increases that are about to be paid to them, those people must be laughing all the way to the bank.
  Mr. Burden: The hon. Gentleman appears to think that a top salary of £10,000 a year is unacceptable. Is he suggesting that that should be the net top salary or the salary before tax and that those earning anything above that figure should have that money taken away from them so that it may be distributed elsewhere? If that is the hon. Gentleman's view, should he not start with the Labour Cabinet?
  Mr. Thomas: I know that the hon. Member is very busy, as we all are, with other matters. However, if he had looked at the amendments that have been tabled, he would have realised that what many of my hon. Friends were saying was that the tax rates above earned income of £4,500 should remain as they were. We said that, given the opportunity, we would vote for that, whether it applied to Cabinet Ministers, Members of Parliament, or anyone else. We did not get the opportunity to vote on it. We got the opportunity to vote only against even more massive tax handouts.

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  Even before the Opposition amendments, 57 per cent. of the handouts under the Budget were going to go to those earning over £4,500 per year anyway, which is the average wage. But if we add the £1,100 million, if the Tories had got away with that, 70 per cent. of all the tax handouts would have gone to those earning above the average wage. It is a pure example of serving naked class interest.
  My right hon. Friend said that £440 million, set against the total cash flow of the public sector, was not very much. It is £150 million more than we are spending on hospitals capital expenditure. It is almost a quarter of what we spend on law and order and protective services. That is something that Opposition Members might like to note. They are always calling for more to be spent on those. It is about 25 per cent. or more of what we spend in Northern Ireland. It is a considerable amount when one thinks in terms of hospitals and schools.
  Opposition Members have put forward this picture of public expenditure and the public sector, and the suggestion that because of the cuts in public expenditure last year and the failure of local authorities and hospitals to spend up to their cash limits, that is the base from which we ought to begin. I wonder whether they visit hospitals and schools in their constituencies to see the impact that these expenditure cuts are having. I wonder whether they know that in the county of Avon, parents are having to pay for children to go to the public baths to take swimming lessons. That is the kind of level to which we have come down. It is not simply the Government cuts, but Tory local authorities have cut back even more than the Government have demanded.
  We all know the situation in the National Health Service. Do Opposition Members want more cuts in the National Health Service, more cuts in education and more cuts in the social services? We are still waiting for a reply.
  I say to my right hon. Friend that £450 million is a sizeable sum. It could be used to build many hospitals and many schools. But the Tories prefer to give it, in massive tax handouts, to those earning £10,000-a-year-plus. I hope that all their constituents realise exactly what they are doing.
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  We are told that in order to pay for this £450 million the Tory way out would be to increase taxes on expenditure, to increase VAT. I do not think that one can make the assumption that an increase in VAT will not create unemployment. One has to do one thing or the other. If there is an increase in VAT, either working people have to be able to put up their wages and incomes to offset it or they have to cut their expenditure.
  If working people have to cut then expenditure, it must lead to unemployment. We could go into a recondite argument whether it would lead to more unemployment or less unemployment than the proposals being put forward by the Government. I do not particularly like the Government's proposals in terms of their employment effects. On the other hand, I know that VAT or any kind of tax on expenditure hits low-paid families and those least able to look after themselves far more than it hits people such as ourselves, who sit in this most exclusive club in Europe, and the other wealthy members of our society.
  Let us be quite clear about it. We have a retail price index, and it measures the effect of increases in prices. It is based nowadays on an average expenditure of about £70 per week. But price increases have a far bigger effect on those receiving a wage below that sum than they have on those receiving more. This is why the rationale of the Boyle report—if one can call it that—is nonsense, because those on £20,000 to £25,000 a year are not affected in the same way by increases in the prices of food, housing and electricity as those earning only, say, between E45 and £55 per week. It is high time that we made that absolutely clear.
  Therefore, I would be completely opposed to this switch from income tax to value added tax.
  Mr. John Evans: Is my hon. Friend aware that the Tory Party is constantly going on about the impositions that are placed upon the small business man? The Tories try to pretend that they are the party of the small business man. Is my hon. Friend aware that one of the greatest impositions which the small business man faces is value added tax, and that if one varied the rate from 10 per cent. and increased it to 11 per cent., 12 per cent. or 13 per cent., one would be further adding to the already

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  dreadful problems of VAT which the Tories imposed upon the small business man?
  Mr. Thomas: My hon. Friend has struck a very important note, which I hope will be listened to with care.
  The hon. Member for Cornwall, North—it is a pity that he is not present now—said that he would like to reduce income tax, as I understood him, at all levels. He went on to say that he thought it quite wrong, and never intended that families below a certain level of income should pay income tax at all. I think that we would all agree with that. But what is the justification for their paying VAT, either? Why is it that it is such a wonderful thing to say that the wage earner, most often the husband, ought not to be paying income tax on his wages, but that his wife can be taxed like hell when she goes to the local shops to buy anything? That is all right, presumably. I have never met a more arrogant piece of male chauvinism in my life.
  That is what it really means. That is what people are really worried about. They are not worried about the harassed housewives who have to go out and do the shopping—put the prices she has to pay up to any level. What they are worried about is the psychological effect on the husband because of the pay packets and the possible effects on votes, and so on.
  I know that many millions of women go out to work, but basically we are talking about a male wage earner or salary earner, and that it is quite wrong for them to be paying tax, but, on the other hand, that we can keep pushing up prices in the shops to whatever limit. That is what we are saying.
  I say to Opposition Members and, indeed, to my right hon. Friends on the Front Bench, that I believe that there is more frustration and anger felt as a result of increases in prices in the shops than there is by deductions for income tax from wage packets by those who receive them, whether they are wage or salary earners.
  We must get this absolutely clear. Taxes on what we spend, as I have said, hit low paid families first of all, and those least able to look after themselves, such as pensioners and those on unemployment
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  benefit and supplementary benefits and so on, 10, 50 or 100 times harder than they hit those on £25,000, £30,000, or £40,000 a year, and some of those who, for example, will be getting massive increases out of the Boyle report.
  There is no way in which we can base value added tax on the ability to pay. We start from the premise that we must raise £X thousand million in tax. Our second thought should be that the method must be based on ability to pay. Those with higher levels of income and more wealth should make a bigger contribution than those with lower incomes and less wealth.
  That should be the basis on which we raise taxation, but it is not the basis for the Tories. To judge by their outburst, it is not even the basis for our friends the Liberals. They say that we should cut income tax because the pop singers are losing their incentives, that we should cut income tax, especially for those earning more than £10,000 a year, and raise the money by an expenditure tax, so that the wives of working people will become more frustrated and angry as prices rise.
  I can suggest a number of ways in which my right hon. Friend could have raised the £450 million. He could have cut defence expenditure to that extent, just like that, because we are already spending as a proportion of our national income far more than any other NATO country on defence.
  The hon. Member for Gillingham (Mr. Burden) made a valuable point about the amount we are paying in interest on dollar loans. Will he give as much thought to the fact that we are paying West Germany £600 million, £700 million or £800 million a year in hard-earned foreign currency to keep British troops in West Germany, and have been doing so ever since the last war?
  Mr. Burden: The hon. Gentleman clearly disagrees with the Prime Minister and the Government. Only a few days ago the Prime Minister stated that our defence position was such that defence expenditure this year must be increased by 3 per cent. Therefore, the hon. Gentleman is clearly at loggerheads with the Government on this issue.
  Mr. Thomas: I honestly thought that it was common knowledge that about 50

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  or 60 of us on the Labour Benches were at odds with the Government on defence expenditure. It is one of those issues—and there are many—on which there is no Opposition party in the House. There is a consensus militant monetarist group and there is the Tribune Group. Whether we are right or wrong, we have consistently called for cuts in defence expenditure to bring it down to the same level as that of our NATO allies as a proportion of our national income.
  When we talk about the public sector borrowing requirement or public expenditure, the Tories always say that we should do only what we can afford within our national income. But when it comes to expenditure on defence the sky is the limit.
  Mr. John Evans: They want a blank cheque.
  Mr. Thomas: My hon. Friend is right.
  There is another possible way of raising the revenue needed. We are still giving large subsidies to firms in the form of stock relief. I do not know how long we shall keep this up. I think that in one year the amount involved was between £2,000 million and £3,000 million. It has built up into a considerable sum over the two to three years it has been running.
  The argument originally was based on levels of inflation of 20 per cent. or 22 per cent. We have now brought the level of inflation down considerably, and we should now seriously think of stopping the tax relief given on stocks. That could make an important contribution towards the £450 million that the Government now require.
  But the basic point I want to get across is that if the Tories had had their way they would have given another £1,100 million to those earning more than £10,000 a year and in order to serve the naked class interests that they are sent here to serve.
  6.44 p.m.
  Mr. Peter Hordern: The hon. Member for Bristol, North-West (Mr. Thomas) is, as is well known, in favour of higher public expenditure. I understand from him that he is not averse to obtaining more
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  revenue from those whom he terms the rich. I imagine that he would include in that description the propertied class, of which he is a member. But I think that he is wrong to say that the money should best be raised by a further Increase in the national insurance surcharge, because that must inevitably have a very damaging effect on employment.
  I could not understand what the hon. Gentleman was saying when he told us that he would have liked to see the public sector borrowing requirement increased. I assume that he means increased as a natural consequence of increasing public expenditure.
  Mr. Ron Thomas: Yes.
  Mr. Hordern: What the hon. Gentleman does not seem to appreciate is that if the PSBR is increased more money must inevitably be borrowed from those who have it, and if that happens there will be less money available for industry and business, which must be damaging to employment prospects in both industry and business.
  Mr. Thomas: I take the hon. Gentleman's point, but is it not the case that the banks and the finance houses, and so on, are absolutely swollen with funds that they cannot get rid of? I do not accept the argument about competition for funds. There are plenty of funds available, but we do not have the mechanism to channel them in the right direction.
  Mr. Hordern: If the hon. Gentleman believes that, he will believe anything. What those with funds know is that the Government have a great deal of money to borrow, and they believe that the likelihood is that the Government will have to borrow even more than they said they would. The figures for public expenditure so far this year are well above those for the similar period last year. The difficulty that the Government will find themselves in is that not only is the PSBR very large but there is a lack of confidence in the City and among those with money about to question whether that sum will not prove to be more than £8·4 bilion. If that is so, the Government will be in serious trouble.

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  However, that is pure speculation. Nobody knows what the borrowing requirement will prove to be. But the Government are in a very exposed position in having to depend largely on outside supplies of capital to carry out their programme.
  I know that it is customary to bandy words about in the House and to call some hon. Members monetarists and others Keynesians, but from where I sit I think that Governments have become far too dependent upon borrowing money from those who have it. In other words, I think that the PBSR has for a long time been much too large.
  It cannot altogether surprise those who are now responsible for our affairs if they see that those with money in the City are less anxious to lend money to the Government than they were because they see that the Government will have to borrow so much. The Government should not be surprised by the City's reluctance to provide money to them. It is very difficult for the Government to obtain their money when they try to carry out their programme dependent rather upon a game of musical chairs, when the third chair is possessed by those who can make up their minds whether to take that chair out of the game. That is a very difficult position for anyone who has to borrow money.
  I believe that the hon. Gentleman was wrong to think that the impact of the national insurance surcharge would have no great effect on employment. I believe that it will. We are not talking of large sums of money, but many companies would like to take on more employees and will be discouraged from doing so because they see the trend in the Government's always putting more expense on companies.
  Companies have also noted the effect of the Employment Protection Act. They have seen that whenever there is a crisis the Government put an extra strain on those companies which provide profitable opportunities for labour.
  The present unemployment position is very serious. I am surprised that the hon. Gentleman did not refer to it. I know that there is a seeming improvement in the unemployment figures, but I believe that the worst aspect of unemployment
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  is not widely known. People who have been unemployed for more than six months do not receive unemployment benefit, and many are entirely dependent on supplementary benefits.
  In October 1973, a total of 62,000 people had been unemployed for more than six months. In April this year the figure was 284,000. In October 1973, a total of 142,000 people had been unemployed for more than 12 months. In April this year the figure was 332,000. What is worse is that the number of those who have been out of work for more than six months is increasing substantially each quarter. More than 616,000 people have now been unemployed for more than six months. That represents 44 per cent. of the total number of unemployed. That is very serious. Any measure that makes it more difficult for firms to employ people must be regarded as very dangerous, and I am sure that that is the case with this measure.
  The number of those who have been unemployed for more than six months is the highest proportion of the total number of unemployed since the war. I see no reason to believe that it will improve in the near future, and certainly this measure will do nothing to improve it.
  I regard the efforts of the Department of Employment, through the temporary employment subsidy and the youth opportunities programme, as very much cosmetic operations. They do not begin to reach the root of our unemployment problem. The Department is inaptly named. It should be called the Department of Cosmetics. Elizabeth Arden would have been proud to set up the Department of Employment, although I am not sure that she would have chosen the Secretary of State for Employment as managing director. It is a Department of cosmetics and nothing more. It is concerned not with dealing with unemployment but with dealing with the unemployment statistics.
  The unemployment situation today is very serious and ought to be regarded as such. There are many more fundamental reasons for the very sorry state of unemployment today than the Department is prepared to admit. One of the worst aspects is that, compared with previous cycles, there is no easy or early opportunity of expansion in the economy. I do not believe that we have reached the

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  trough of an economic or a trade cycle. We are in a much more serious position, not just because of the fall of world trade but because of the very low and declining level in the activity of our business. I very much hope that I may be proved wrong, but the figures show that return of capital employed in business and industry has deteriorated during the last 10 years. The real reason for the high and permanent levels of unemployment today is the very low level of return which industry and business can earn on their assets.
  Mr. Tom Litterick: A number of us on the Government Benches would agree with many of the points that the hon. Gentleman has made in the last few minutes. He is seriously concerned about the global depression that has taken place. Will he take on board the fact that during the last 20 years the rate of return on capital employed in all the developed nations of the world has shown a marked longterm decline?
  Mr. Hordern: I accept that, but the figures also show that the decline has been more marked in this country than in any other country of which I am aware, and there are interesting statistics available on that. One of the more interesting statistics was included in the chart in the recent White Paper on nationalised industries, which showed the decline in the rate of return on capital. The net return on capital in the business sector was 11 per cent. in 1965. By 1976 it had fallen to 3½ per cent.
  The return on capital employed in nationalised industries was a good deal lower. But the most interesting work done has been by Dr. Frank Jones and others, which shows the real rate of return on assets if one takes into account the effect of inflation, or stock appreciation. The figures show that if one takes the added value basis, there was a net loss of £2,000 million, which represents 3·8 per cent. of the total assets of industry in 1976. We cannot go on running down our industrial assets in that way.
  If Government policies result in an even heavier weight upon industry and business, it will be impossible to improve the return available to industry and there is no reasonable expectation that industry
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  will employ more people. It cannot do so if it is running its affairs at a loss. I believe it to be very unhealthy that industry should be so dependent on tax arrangements such as stock appreciation in order to show itself in some form of profitability. If that is what the working lives of people depend on—through some artificial accounting device—it is a very serious situation indeed.
  Mr. Litterick: But that is universal.
  Mr. Hordern: I am just coming to the point that the hon. Gentleman made. I want to make some further remarks about the fall in capital and about the amount that the Government take out of business at present.
  In 1973 the Government took, in taxation and national insurance surcharge, 24·7 per cent. of all the cash flow of a company. In 1976 this figure had reached 31·4 per cent., and I say again that it is not possible to expect industry or business to expand if the Government take more of the cake of industry every year. On any comparison, whether with Japan, the United States or West Germany, the fact is that the Government take more of the cash flow than any other country, and the figures are irrefutable.
  Mr. Litterick: And it gives a great deal more back.
  Mr. Hordern: On the contrary. Let us consider the experience of those who provide capital for industry. In 1973, they had a return of about 7·8 per cent. of the total cash flow in business and industry. In 1976 this figure had shrunk to 1·9 per cent. I do not think that it is possible to have those two movements going along side by side. We cannot have the Government taking a higher share of the cash flow of industry year after year and those who provide the finance for industry getting a smaller return. How can we expect investment in our industry and business to proceed if an increasing proportion is taken up by the Government and a smaller proportion is available to be ploughed back? It is simply not reasonable to think that that can proceed.
  Mr. Litterick: We are at odds on a matter of fact. What seems to have happened over the past few years is that the net contribution of top corporate

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  taxation to the total revenues of the Treasury has been declining and the public contribution to the revenues of private corporate enterprise has been increasing. In other words, the so-called private corporate enterprises have become a net charge on the public revenue during the past few years.
  Mr. Hordern: The hon. Gentleman is partly right, but only in a small degree. It is true that manufacturing industry pays very little corporation tax. On the other hand, it has not had many profits with which to pay tax. However, I do not deny that manufacturing industry has certain advantages. For instance, it is able to offset its investment against taxation. I agree that that is favourable. I am talking about the cash flow that is available to every company in Britain. The proportion that I am talking about that the Government take is that paid by employers on behalf of employees both in income tax and in the national insurance surcharge.
  There is no other modern industrial country in which employers pay such a high proportion of employee's incomes in the form of tax. There is no other country that leaves so little after the deduction of taxation to companies either to plough back or to provide for the return on capital. The consequence of the dual process—namely, the Government taking more and those who provide the capital in industry receiving less—is plain. Not only has there been no investment; the propensity of industry and business to expand their business has declined markedly. That is why the level of imports is as high as it is presently. That is why it has been growing for many years.
  I anticipate what the hon. Member for Birmingham, Selly Oak (Mr. Litterick) will say—that the level of imports is growing in other countries as well. I do not deny that that is so, but the level has grown far more in Britain, and far more in manufactured products, than in other countries.
  It would be foolish to ignore the trend of imports into Britain. The proportion was 6·7 per cent. of GNP in 1960. It was 10·5 per cent. in 1970 and it is now 17·7 per cent. It is growing inexorably. Even if it were possible by some magic means
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  to reduce the level of imports, if we were more price competitive, the fact is that we are now apparenly unable to meet the demand of our domestic market.
  In the past Governments have tried to rectify the situation by increasing the general level of demand. That has been done by increasing the public sector borrowing requirement and increasing the deficit. That has always led to a difficult financing position. It has always led either to highly inflationary borrowing or, what is worse, to the printing of money. It has been done on many occasions since the war and it is being done again now.
  The Government are printing money at a very fast rate. Hon. Members on both sides of the House have seen the process before. It is inevitable that the effects will be seen next year. They will be seen in the level of inflation and in price increases. They will be seen in the level of industrial activity. Demand will in-increase sure enough, but it will be taken by imported products, and manufactured products at that. When that happens it it is unlikely that those who have won a larger stake in our market will be easily beaten off in future.
  There is no way out of that position for the Government. To place upon industry the incubus of an extra national insurance surcharge seems to be the height of folly.
  Mr. Litterick: I believe that that is the third time that the hon. Gentleman has said that what we call the social costs of employing labour are excessive in Britain. Surely he knows that it is a fact that the social costs of employing labour in every other member State of the Common Market is much higher.
  Mr. Hordern: I do not think that the hon. Gentleman is correct in making that assertion. I am comparing what industry has to pay to the Government in Britain in the form of direct taxation and the national insurance surcharge with that taken by Governments in other countries. I merely say that the total level is demonstrably much higher in Britain than anywhere else.
  Mr. Litterick: No.
  Mr. Hordern: If the hon. Gentleman is interested, I shall send him the figures. The facts are as I say.

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  We are using the revenues of North Sea oil to finance the imports of large stocks of manufactured goods. As our industry is so run down by high taxation, personal taxation, it is unable to provide the goods that we need and is unable to export. That is what is happening. Curiously enough, that happened earlier in Holland during the Dutch natural gas boom. There was just the same effect in the Dutch economy. I have heard it said that if only we could work at half the pace of the Dutch we should have no problems. However, if the Dutch were presented with problems stemming from their natural gas discoveries, we should not hold out too much hope in our own future for the expenditure of revenue from North Sea oil.
  I regard the stage that we have now reached as extremely serious. I am certain that the measure before the House will do nothing to assist industry. I very much fear the consequences of what may occur next year. I am sure that the only solution to our problems is for the Government to take less of the national cake and to allow industry and business and individuals to earn more and to keep more of what they earn. That seems to be the route that has been followed by the economies that have been successful in the world and its absence here is the reason for our being so markedly unsuccessful in recent years. I am much concerned that this measure will do nothing but harm to industry, the economy and the country as a whole.
  7.8 p.m.
  Mr. R. B. Cant: I do not think that I have ever risen to speak on so narrow an issue that has been prefaced by such a wide-ranging debate. We have discussed almost every aspect of British and world economic problems. I suggest that that is a consequence of the narrow issue before us relating to the national insurance surcharge.
  As the House will appreciate, we have a problem because important as the issue is there are only three Labour Members who have indicated any wish or intention to speak. I suppose that there is an obligation on each one of us at least to try to expand our remarks to fill the time that is available.
  Mr. Litterick: Parkinson's law.
  Mr. Cant: As applied to the House of Commons.
  I was most interested in the comments of the hon. Member for Horsham and Crawley (Mr. Hordern). I think that he is almost entirely wrong. I agree with those who have said that there is an air of unreality about the debate. That is because we are attributing a significance to marginal factors that they do not possess.
  Is it suggested that if we move a tax rate up or down the implications will be disastrous? Is it said that if the Treasury once more makes an inaccurate assessment of the public sector borrowing requirement that might spell great fortune or disaster depending on whether it is plus or minus? I cannot believe such suggestions. Further, I cannot believe the more general point made by the hon. Member for Horsham and Crawley, that the cause of all our troubles is that the rates of personal and corporate tax are too high, that we are sapping the enterprise and vitality of the men in charge of our industries, and that if only we would lift the burden we would have an economy transformed.
  That must be an extremely ridiculous argument, although it may have a percentage of truth. It must be ridiculous if only we consider our own history. Let us not go back into medieval times of pre-1939; let us start at 1945. What was remarkable about the period to the end of the 1960s was that, despite levels of taxation and all the bad things about which the hon. Gentleman talked, the British people enjoyed a slow but regular increase in their living standards. That happened in every year from 1945 almost to the end of the 1960s, with the exception of the one year of the Korean war.
  There are obvious explanations for that situation. In the presence of the right hon. Member for Down, South (Mr. Powell), I hesitate to mention fixed interest rates, but I think that it can be argued that fixed interest rates were a contributory factor, for various reasons. There was technological advance of all kinds in the consumer sphere. There was the American balance of payments deficit. That was enormously helpful, because, by the doctrine of the benign neglect of the balance of payments, it was allowed to underpin developments in deficit countries, and so on.

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  Since 1970 there has been a disastrous change in our fortunes. This has nothing to do with our present economic dilemma. It represents what my right hon. Friend the Chancellor of the Exchequer calls the real economy. Certain situations in industry today cannot be explained in terms of levels of taxation.
  In my area there is a dominant industry, of which I am immensely proud. When I went to my constituency in 1945, I thought that it would be down and out. That industry makes cups and saucers. I thought that the underdeveloped parts of the world would make just such things. Yet it is one of the most dynamic industries in this country. Its export ratio is enormous. Its output is growing. Its employment is growing as its investment grows. That is because the old families have been superseded by dynamic managers who pay enormous taxes.
  Now that my hon. Friend the Member for Bristol, North-West (Mr. Thomas) has left the Chamber, I can say that one of those people, as chairman, earns £140,000 a year. No one bothers about that unduly, except some of the more Maoist elements in my constituency. The fact that I looked at my hon. Friend the Member for Ealing, Southall (Mr. Bidwell) was purely fortuitous. I was trying to get some relief from the tightness of my collar.
  That is one example, but there are others. They survive within the tax framework about which the hon. Member for Horsham and Crawley was speaking. For example, Alfred Herbert announced today that it is to sack another 700 employees.
  Some years ago the heads of a number of firms in the machine tool industry came to the House of Commons to talk to the west Midlands group of MPs. I said—and I think we all agreed—that if they were the leaders of the machine tool industry, God help us. I hope that the hon. Member for Horsham and Crawley is not a machine tool manufacturer in addition to his many other great attributes. These people have similar tax burdens.
  What has happened to British Leyland? Other car manufacturers manage to thrive. We are in a world situation. The right hon. and learned Member for Surrey, East (Sir G. Howe) mentioned the
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  steel industry. I should like to talk about that industry at great length, but I shall not. The structural changes in the world situation are frightening. Merely to say that we have a tax problem which is crippling industry is about 1 per cent. right and 99 per cent. wrong.
  If we accept the logic of a great deal of what has been said, not only by the hon. Member for Horsham and Crawley but by others, about the need to reduce taxation, I think that we must link that with the main point made by the hon. Gentleman. We know that there are two significant factors on the British scene relating to income, taxes and so on. One is the propensity to import. If we have a massive decrease in personal taxation or a reduction in corporation tax, if such tax is being paid, what will happen to our import bill? Obviously, business men will import more manufactured products. That fact should clearly indicate to any Government that, even if it were fiscally possible, it is not practical to reduce personal taxation now.
  There is another aspect. We have not only a massive propensity to import but a frightening propensity to save. The result cannot be explained—certainly not in O-level textbooks on economics. On Friday we shall know what the first quarter's personal savings ratio is. It is remarkable that, although there were one or two special circumstances, in the last quarter of last year we saved over 16 per cent. of our personal disposable income. That was exactly twice the norm for the period of the 1950s and 1960s. For example, we know that the Germans are reluctant to make cuts in personal taxation, because they are offset by increases in savings.
  I do not think that cuts in personal taxation are the way to recovery. They do not increase demand, for the simple reason that we tend to save money. They do not increase demand in this country—that is another myth that has grown up—because we merely increase the employment prospects of people in other countries. Those who talk about making cuts in expenditure to help to reduce the public sector borrowing requirement do not understand the difficulties that we face in this sense.
  I do not want to go on too long. I want to raise only one other important point, if I may have the permission of

  541
  the hon. Member for Wolverhampton, South-West (Mr. Budgen). I return to the question of financing the public sector borrowing requirement. I agree that there are difficulties, but what staggers me is that people who are experienced in the ways of the City say that what we have to face, if we are to deal with the City, is an element of psychopathology. In other words, they say that the money is there. It is no use anybody saying that the money is not there, because if we are talking only of pension and insurance funds we are talking about an aggregate sum, available annually, of £7,000 million.
  The money is available, but there are certain operators of the funds who refuse to let the Government have the money. It is as simple as that. I would not go as far as to say, as do some of my hon. Friends, that such people go on strike.
  It is remarkable that both in 1976 and this year the financial institutions have had money running out of their ears and yet they have held back from buying gilts. They have done that because they want to get the best return from the Government.
  This raises problems that relate not only to finance and the public sector borrowing requirement but to social issues which, if these institutions are not careful, might have serious consequences for them. They argue that they must do the best for the people for whose pensions they are responsible or who have insurance policies that will attract reversionary and terminal bonuses, and so forth. But when I examine the overall situation my conclusion is that the disposal of these funds is far too important to be left to investment fund management. I go as far as that, although I do not believe that anybody could accuse me of being a member of the Tribune group or of being too Left wing.
  Mr. Sydney Bidwell: Not even a probationary member of the Tribune group?
  Mr. Cant: I am not even a probationary member. A total of £7 billion is going into property. To a large extent it is going to purchase existing properties and forcing up prices. A margin of the funds goes into new industrial property and into equities. It is the dominant influence
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  on the movement of the Financial Times index.
  More than half of the money—probably £4 billion plus last year—is going into the purchase of gilt-edged securities. It is understandable that if the rate of interest offered by the Government is negative the institutions might be reluctant to let their money go. That was certainly true in 1976. It is indefensible that they should refuse to finance the Government's public sector borrowing requirement when a real rate of return of interest exists. That is especially so when they can enjoy capital gains.
  If the financial institutions adopt this arms-length approach to the Government some measure of control of the institutions is inevitable. We should never forget that this has always been the accepted role of the banking system. Whenever the Government need short-term finance, three-month IOUs or Treasury bills have always been made available for Government purposes.
  These are some of the issues that we should be discussing instead of wondering whether we should have a surcharge of 2½ per cent. or 1½ per cent. I am glad that the Chancellor of the Exchequer is not trying to raise any more to meet the £140 milion that he is prepared to lose in the general financial statistics.
  I have made my contribution in terms of minutes, but I shall take 30 seconds more. If we believe that by the wave of a magic wand of a fiscal or monetary kind we shall solve the great problems of the economy, we are living in cloud-cuckoo-land.
  7.27 p.m.
  Mr. Peter Brooke: Membership of Standing Committee A on the Finance Bill is not an unmixed blessing, but one blessing that it did confer was the occasional opportunity to listen to the hon. Member for Stoke-on-Trent, Central (Mr. Cant). One of the disadvantages of the Committee was that the hon. Member did not speak as often as some of us would have liked. One of the pleasures of this evening is that he has felt that he has had an opportunity to expand his remarks.
  I did not welcome everything that the hon. Member said. He referred to past

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  references by the Tribune group to an industrial investment strike and accused my constituents of a gilt edged investment strike. I shall not take up that argument, because it is not directly connected with the debate. It is a subject that I should enjoy debating with him at some other time.
  I shall make one brief constituency point. It is related not to the City of London but to Westminster, South. The Financial Secretary received a letter from me on behalf of constituents who belong to the charity The Friends of the Elderly. They complained to me—and I passed on the complaint to the Financial Secretary—that in order to run the nursing wings of their homes they have to maintain a part-time staff of 200 nurses. There is no way in which they can recruit enough nurses as direct employees. Consequently, in the course of the year they may employ 50 or 100 agency nurses to fill the gap.
  The complaint is that if they employed those agency nurses directly they would be spared the national insurance surcharge, because they are running a charity, but because they are buying in a service they are obliged to pay that surcharge to the agencies that supply the nurses.
  The Financial Secretary wrote to me explaining with impeccable logic why the scheme could not be modified. I regret that his head had to prevail over his heart. I am sure that he understood the thrust of the argument. Inevitably, as a result of the motion the amount that they will have to pay will rise, and that will exacerbate the problem.
  How many other representations have been made to the Treasury on this subject? If the answer is "None" or "Very few", I hope that tonight's debate will provoke others who are affected to get in touch with me or, more relevantly, with the Treasury. Then we shall know how large a problem this is for charities, and we can then address ourselves to finding a way round the fiscal burden which I am sure in his heart the Financial Secretary would prefer to see removed.
  I begin my main comments by congratulating the Chief Secretary and the Financial Secretary. In Standing Committee we had the usual debate on the regulator clause—clause 8—on the state
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  of the economy. That took place on 23rd May. At columns 248 to 258 my hon. Friend the Member for Hitchin (Mr. Stewart) made a notable speech, which inspired the hon. Member for Stoke-on-Trent, Central to rise on a point of order and say:
  "We are hearing such an interesting speech of great authority that, even though the Chief Secretary and the Financial Secretary are not listening, I hope that at least they will read it."—[Official Report, Standing Committee A, 23rd May 1978; c. 255.1
  I congratulate the Chief Secretary and the Financial Secretary on having read it, because clearly they have. Everything that my hon. Friend the Member for Hitchin said in that speech has come to pass. My only regret, since they followed his advice so slavishly, is that he did not on that occasion advise them how to make up the tax revenues. Had he given them advice on that point, and had they accepted it, we would not have been having the discussion we are having this evening.
  Nothing that the Government did in response to my hon. Friend's speech can undo their mistake in putting the public sector borrowing requirement so close to its permitted limits in the Budget in April. Putting it so close, of course, offered the Government an insurance policy, in that they could charge the Opposition with irresponsibility if my right hon. Friends altered it by imposing additional tax cuts. However, it also put an obligation on the Government to restore the revenues so lost because their Budget strategy was too nicely balanced.
  My hon. Friend the Member for Hitchin referred to yesterday's debate on unemployment. I heard the opening and closing speeches in that debate and I heard the speech by the hon. Member for Chester-le-Street (Mr. Radice). The only intervening speeches that I heard were those which were broadcast on "Yesterday in Parliament". I spent part of that intervening period last night with the hon. Member for Stoke-on-Trent, Central, listening to the presentation made by the British Steel Corporation.
  Two of the speeches that were broadcast on "Yesterday in Parliament" were those by the hon. Members for The Wrekin (Mr. Fowler) and Birmingham,

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  Selly Oak (Mr. Litterick). Both coincided in blaming the lack of historic industrial investment for our present economic ills and unemployment. Yesterday's debate is important today because of the impact that the national insurance provisions will have on investment. Last year, manufacturing investment, excluding investment in steel and metal manufacturing, was surprisingly and creditably 14 per cent. up on the previous year. With this year's predictions the forecasters agreed that the econometric facts were against a further increase of investment of that sort, but they acknowledged that, even so, business men were expecting to raise their figures, and they came to the conclusion that if that was how business men felt they, the commentators, should go along with their optimism.
  My misgiving about these provisions and the way in which the Government are seeking to restore their lost revenue is that they will hit precisely at this optimism and at industry's capacity to invest. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) referred to the prognostications of my constituents at Phillips and Drew about company liquidity in present circumstances and as a result of these measures.
  Take the specific example of Guest, Keen and Nettlefolds, which was cited by my right hon. and learned Friend. These provisions will cost GKN almost £5 million if it maintains its present employment levels. That is a massive sum to take out of the resources that are available for investment, quite apart from the extra liquidity problems that it creates. I have here The Times's list of the 1,000 largest companies, which records the numbers of people which each of those companies employs. The figure that I have quoted for GKN could be repeated again and again.
  It is a considerable irony in these matters of investment and unemployment that Labour Governments have a disastrous penchant for employing payroll taxes at the wrong time. Yesterday and today my right hon. and hon. Friends quoted the relative growth rates for the 17-year periods of Conservative and Labour rule since the war, which show to the advantage of the Conservatives and the disadvantage of the Labour Party. Today is not the first time that
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  a Labour Government have got it wrong. They got it wrong before on selective employment tax, which was introduced to discourage the service industries when it was clear to any seeing eye that we were entering a post industrial society in which service industries would predominate.
  If service industries had not been discouraged as they were between 1966–70 we would be in a much better position now to provide employment through those industries. Now the Government, by the measure that is being proposed this evening, are to clobber industrial investment at a time when industrial expectations and intentions are already beginning to look fragile. The method by which the Government have chosen to recover the revenues is singularly unfortunate.
  7.37 p.m.
  Mr. John Cronin: The hon. Member for City of London and Westminster, South (Mr. Brooke) made an interesting speech. I particularly liked the ingenious way in which he introduced his constituency point about agency nurses. On the whole, they are probably a somewhat undesirable institution, but they fill many gaps and it is unfortunate that we must have so many of them.
  The hon. Member made a pessimistic point about the effect of the surcharge on investment. It amounts to only 3½ per cent. on the total employer's national insurance contribution, which is a relatively small part of the total cash flow. Investment usually comes not from immediate cash flow but from funds which have been accumulated over the years from rights issues and from direct loans from banks and other financing authorities. The hon. Member is being a little pessimistic even in the short term in suggesting that the surcharge will appreciably affect investment. In the long term it will be a boost to the consumer. His argument that it will seriously affect investment—the right hon. and learned Member for Surrey, East (Sir G. Howe) made the same point—is far from proved.
  It is unfortunate that investment has not increased, but there is no way of inducing industrialists to invest against their will. Anyone who has attended

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  many Committee debates on the Finance Bill knows that many attempts have been made—usually without effect.
  I am glad that my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) drew attention to people's propensity to buy goods from abroad. That is one of the most unfortunate aspects of our economy. Sooner or later the Government will have to heed the warnings of those who think that at least some protectionism is desirable. That is now becoming a respectable economic dogma. The Cambridge school favours some protection. It is absurd not to protect ourselves from the exports of countries which take little or nothing from us—preeminently Japan.
  I am glad that the Chancellor has reduced his original proposal for a 2½ per cent. increase in the surcharge. The tax cuts meant an increase of £440 million in the PSBR and a 1½ per cent. increase will supply £300 million. The remaining hole of £140 million is negligible against the thousands of millions involved in the Budget, and could easily be lost. The experience of the past few years suggests that it is well within the possible errors of Treasury forecasts.
  The amendments made in Committee on 8th and 10th May, which necessitated this surcharge, show the Opposition's irresponsibility. It was a purely vote-catching gesture, but it is inappropriate when the economy is so delicate. The Opposition behaved like bulls in a china shop, prancing about and destroying the delicate balance of the Budget strategy.
  The tax reduction was certainly not welcomed by sober people in the City and the world's money markets. Immediately afterwards, the stock market rocked and the performance of the pound was impaired, so the Opposition certainly did not have the approval of those financial experts.
  I favour the reduction of income tax, with certain provisos. It is too high. It bears too heavily on the management classes, on whom—let us be under no illusion—we depend for our exports, for increasing productivity and for industrial efficiency. It bears too heavily on workers generally—the majority of trade unionists have to pay too much tax—and it bears most heavily of all on people
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  on low incomes, many of whom should pay no tax at all.
  There is no case for cutting income tax while the economy is so delicately balanced. There would be a good case for doing so when it has improved. Nothing will improve the economy more than increased productivity and overseas sales. That will require much better leadership in industry, which is sadly lacking. Much more effort should be put into exports and much more money into investment. That would enormously improve the economy, and income tax could be cut without deleterious effects. The yield from lower rates of income tax in real terms would be much higher than from income tax at its present high levels.
  I am glad that the Chancellor chose to increase the surcharge rather than to take the other measures suggested by the Opposition. I do not know why they are so against the surcharge. When the amendment is enacted, the surcharge will be practically the lowest of any European country. Why do they fear it, when it is taken comparatively lightheartedly by other countries and apparently does not seriously affect their economies?
  I reject the suggestion by the right hon. and learned Member for Surrey, East of an increase in indirect taxation. What he is saying is that it is more sensible to increase inflation, which would be the immediate consequence. That is the height of irresponsibility, when we have just succeeded in getting inflation under control. The right hon. and learned Gentleman is affected by the obsessional disorder of the Tory Party that income tax must be reduced at all costs and is prepared to increase inflation simply to achieve that end.
  The right hon. and learned Gentleman and his immediate followers are somewhat muddleheaded. He strongly advocates an increase in indirect taxes, yet he and his leader led their supporters into the Lobby to vote against the increased petrol tax.
  I am glad that the Chancellor did not contemplate cutting Government spending to pay for the improvement in income tax. Public spending is still far too law. Too little is spent on education and on the Health Service. The £50 million provided for the NHS in the Budget is derisory. The Opposition constantly say that they will reduce income

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  tax and cut public expenditure, but do not say where the cuts would be made. Reducing income tax would benefit the high-income groups which are their tradiditional supports, but would have an unfortunate effect on most other members of the population.
  I shall now put to the hon. Member for Horncastle (Mr. Tapsell), who is listening so courteously and attentively, the question which has been asked many times but without response. What would his party cut in public expenditure if it came to power? Would the Tories cut capital expenditure or current Government expenditure? If their intention is to cut capital expenditure, does that mean that there would be cuts in hospital building, in educational building and in road building? What are they thinking of cutting if it is to be capital expenditure?
  If the Tories were to cut current expenditure, that would entail an immediate increase in unemployment. The Government's current expenditure is always labour-intensive, so there would be an immediate increase in unemployment.
  Mr. Nicholas Fairbairn: I am interested in what the hon. Gentleman says about unemployment. I take by way of illustration a typical farming estate in my constituency. The proposed increase in the national insurance surcharge will cost £4,000 in respect of those there employed, which means that at least two people will have to lose their jobs on the highest agricultural salary in order to pay it. That will have an immediate effect on employment. There is no way to increase productivity or income. Two people have to be sacked. There is no other way. Is that what the Government want?
  Mr. Cronin: I think that the Government have had a choice of evils here. Obviously, the surcharge will have some effect on employment. The Chancellor said, two or three weeks ago, that the higher increase then proposed would cause the loss of about 5,000 jobs some time next year. On the same basis, presumably, the diminished increase will cause an increase in unemployment of about 3,000, but one hopes that in the Chancellor's next Budget steps will be taken to prevent that.
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  The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) is behaving a little oddly in complaining about an increase in unemployment, small though it be, brought about by this surcharge, because the only reason for the surcharge is the decrease in taxation for which he and his party voted. The small evil which arises is a direct result of his own vote and the vote of his right hon. and hon. Friends, which, as I say, I regard as thoroughly irresponsible.
  If current expenditure were cut—if that is the Opposition's policy—apart from the effect on employment there would be an immediate reduction in the level and standard of public services. There would be cuts in services for the sick and there would be cuts in education.
  Perhaps the hon. Member for Horncastle will consider this, too. Are the Opposition considering cutting retirement pensions or other social security benefits? There is an equation here which cannot be escaped. Cuts in Government expenditure have to be counterbalanced somewhere else.
  Mr. Peter Tapsell: Since the hon. Gentleman has been good enough to put certain questions to me, may I say that my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) set out the position of the Conservative Party on all these matters in considerable detail in the debate on the White Paper on public expenditure? The essential point which I put to the hon. Gentleman, which is the answer to the questions he now raises, is that over the past four years the wealth of this country has not increased at all. Manufacturing output is now lower than it was when the Government came to power. We can generate wealth to provide the money to improve the Health Service, for example, to which the hon. Gentleman referred, only by providing incentives for people to generate wealth, and to do that we have to reduce direct taxation.
  Mr. Cronin: The hon. Gentleman has made a good political point, but there is no escape from the fact that he still does not say what would be cut. All he says is that direct taxation should be reduced, that will give the incentives, and everything will improve in the economy. There is no evidence for that. We have had the

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  Royal Commission on the taxation of profits and income, and there have been reports by various committees on the question of incentives and income tax. There is no real evidence that cutting income tax produces more incentives to better work.
  Mr. John Evans: The hon. Member for Horncastle (Mr. Tapsell) makes a valid point when he says that manufacturing productivity has declined since this Government took office. Will my hon. Friend bear in mind in that connection that when we joined the EEC we were told that that would give the solution to all our industrial problems, but in the period since then the deficit in manufacturing terms between ourselves and the original Six has grown enormously. Is not some of the responsibility for the decline in our industrial capacity to be laid at the door of our membership of the EEC?
  Mr. Cronin: My hon. Friend is rather ingenious in exhibiting his anti-EEC propensities and trying to hang them on to me.
  Mr. Evans: No, hang them on the hon. Member for Horncastle (Mr. Tapsell).
  Mr. Cronin: I was in favour of our joining the EEC, and I am still in favour of our remaining in the EEC, but it never occurred to me at any time that our joining the EEC would be some sort of magic wand which would transform our economy. There is much in the EEC, in its economics and its budgeting, which is deplorable and must be improved. I am with my hon. Friend there, but I think it most unwise to consider leaving the EEC. We have to improve it from within. To that extent, I entirely agree with my hon. Friend.
  In spite of the suggestion from my hon. Friend the Member for Stoke-on-Trent, Central that we on the Government Benches have an unlimited right to take up the time of the House in view of the relative paucity of Members attending the debate, I shall not presume to follow that line but shall keep my speech within reasonable bounds. I am sure that we are to hear some interesting contributions from hon. Members on the Opposition Benches who are showing a tendency to rise on their toes at any moment.
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  My final point is that this debate has served a valuable purpose. It has made quite clear that it is not possible to cut direct taxation without fiscal and economic effects which are hurtful to large sections of the community. There has thus been revealed the bogus nature of Opposition promises that they could cut income tax with impunity, and do it easily, if they got power. It cannot be done without harm to the economy and without seriously reducing the standard of living of most people, apart from the very richest.
  7.59 p.m.
  Mr. Nick Budgen: It is a convention of the House that whenever a Member gets to his feet he remarks that the debate has been interesting. I regret to say that I am unable to follow that convention. I suspect that it is said because most of us, with our self-preoccupation and inclination to self-congratulation, assume that any debate in which we take part must be interesting.
  The truth today is quite otherwise. This has been a boring and irrelevant debate, and it has been boring and irrelevant primarily because, in the brief periods when they have been in the Chamber, hon. Members on the Government Benches have made no attempt whatever to keep to the subject under discussion. There has, however, been one considerable advantage in the rambling, meandering irrelevancies which we have heard from Labour Members, for they have revealed their bigoted preoccupations of the moment. For instance, I note that the hon. Member for Loughborough (Mr. Cronin) pinned his colours to the new mast of protectionism. I shall not take up that point, because I do not think it is in any way related even to the measures as a whole which were forced upon the Chancellor at the beginning of June.
  But I should like to take up the point raised by the hon. Member for Bristol, North-West (Mr. Thomas), who has not been in the Chamber since he made his speech. He attacked the Tory Benches generally—not only the Tory Benches, because the right hon. Member for Down, South (Mr. Powell) is also present—for what he described as their militant monetarism. The hon. Gentleman should understand, as should all right hon. and

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  hon. Members below the Gangway, that militant monetarism is no longer the faith of a small and insignificant sect of the Tory Party. Militant monetarism is now the common ground of politics.
  It is wholly inconsistent for Labour Members to cheer when the Minister of State is rolled on. I am very pleased to see the Minister of State in his seat now. He has an extremely good peroration which he adds to nearly every one of his speeches on the economy—his two or three paragraphs about Barber and the corruption of the financial institutions. It is a very good piece. Yet at the same time as those hon. Members shout and cheer when they hear that peroration, they particularly attack the City and the financial institutions when they say that those institutions have become militant monetarists. They go on to take the point that was put forward by the hon. Member for Stoke-on-Trent, Central (Mr. Cant) and say that there has been a strike of capital. They also go on to threaten the financial institutions in more or less a specific way with some form of political or State direction or nationalisation.
  Let us just look for a moment at the attitude of the City. My hon. Friend the Member for Hitchin (Mr. Stewart), as always, accurately portrayed the views of the City. It must be understood that the Minister of State is right when he speaks about the way in which the financial institutions were corrupted. But the City learnt its monetarism in the hardest of schools. It did not learn its monetarism, as many of us do, by reading the articles of Mr. Sam Brittan or having a look, as we did in the past, at the articles of Mr. Peter Jay and saying "Ha ha, that was quite a nice, useful attitude. Let us adopt that for a couple of days or weeks and see whether we cannot bash the Government with a few of those theories". Oh no, the City learnt its monetarism by personal disaster.
  For instance, we start at one end with the less secure financial institutions, such as the secondary banks and the more rocky property companies, which went bust—not just Mr. Stern who personally went bust for £100 million, but those quite respectable secondary banks and property companies which found themselves in the lifeboat. Or again, there was that accepting house which found itself very severely troubled as a consequence of the crash
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  within the secondary bank and property markets. Perhaps the best illustration of how the highest and most responsible financial institutions were so hit by the disaster which taught them their monetarism was when the chairman of the National Westminster Bank had to make a public statement explaining that his bank had not been severely hit by the losses on property. That is an illustration of how they in the City learnt their monetarism in the hardest school. It was not just a matter of picking up a political theory with which to belt a political opponent.
  Mr. John Evans: The hon. Gentleman has rightly drawn attention to the enormous crash which took place in the City, when all these financial experts got their fingers badly burned. I am sure that he appreciates that those of us who do not understand the financial world read about that with great interest. However, would he lay the blame for this crash at the door of this Government or at the door of the previous Tory Administration?
  Mr. Budgen: I made it quite plain that I accept the argument put forward by the Minister of State. I accept that the increase in the money supply under the previous Administration was a great mistake. I accept that it had an appalling effect on the financial institutions 18 months or so after the increase in the money supply was at its highest level. What I am simply saying is that it is impossible for hon. Members such as the hon. Member for Newton (Mr. Evans) to shout with pleasure and glee when the Minister of State makes his usual entertaining turn and at the same time attack the financial institutions, because those financial institutions have also learnt in the hardest school that monetarism which the Minister of State demonstrates so eloquently in his frequent turn.
  The Minister of State, Treasury (Mr. Denzil Davies): If the hon. Gentleman were to study that entertaining turn again I think he would see that my criticism of the City is that it has not learnt through post-war history. If one looks at what happened in 1945, one will see that Labour Governments have usually been much more financially correct in money supply and every other way than Tory Governments. I would have thought that the City would learn that lesson

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  by now—that we are much more responsible in these matters than Tory Governments.
  Mr. Budgen: It may well be that the City takes the view that in some respects it prefers Labour financiers. That may be a view which some members of the City hold, although I think that it is wrong. But that does not mean that they suspend all critical judgment when they see the money supply M3 increasing at 16½ per cent., well above a target which has been announced.
  I conclude my description of how the City was hit by a description of the life of a provincial stockbroker. Essentially I am a provincial person. I do not pretend to know very much about the way in which the personal lives of those who do business in the City work out. But I know from my own experience how during the crash—
  Mr. Cronin: I should like to improve the hon. Gentleman's personal experience. I can assure him that the City was much more appalled when the increase in money supply was 24 per cent. in one year and 28 per cent. the next year in the last two years of the Government of the right hon. Member for Sidcup (Mr. Heath).
  Mr. Budgen: I regret to say that I do not understand the relevance of that intervention. I thought that I had dealt with that point at least twice in my earlier remarks. If I may, I shall proceed in an attempt to try to keep at least within the broad compass of this debate. Provincial stockbrokers who are now being attacked were in 1974–75 sacking half their staff, selling off their few shares at about one-quarter of the price which they had paid for them, selling their insurance policies and withdrawing their children from private education. Labour Members may say that they ought not to have children in private education.
  Mr. Fairbairn: Or shares.
  Mr. Budgen: Or shares. I understand that argument. But the fact is that there are people in this country who control the financial institutions and who learnt their present preoccupation with monetarist beliefs through personal disaster. That is a far more cogent and eloquent lesson than reading any of Milton Friedman, or
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  Peter Jay or Sam Brittan. I hope that those hon. Members who cheer the Minister of State will be consistent in their application of monetarist principles.
  Government supporters are also inconsistent when they say "We note with pleasure the way in which the City on occasions is now ambivalent in its attitude towards the Tory Party, and we say that because of the disasters of the past." Yet they say in the same breath "The City is so inconsistent and so unpatriotic" because of the so-called investment strike which occurred after the announcement of the last Budget.
  I go a little further and say that it is not merely the attitude of mind of the money markets which has now become monetarist. It is the whole philosophy of the Bank of England which has changed totally. I hope that I shall be forgiven if I repeat what I said on 8th May. On that occasion, I predicted that it would be necessary for the Government to take some corrective measures because I believed that the public sector borrowing requirement was too big and could not be financed within the monetary targets which had been announced.
  I wish to emphasise that the City now follows the adherence or non-adherence to announced monetary targets because these are now the new indication whether the Government of the day are pursuing a sound financial policy. That philosophy was most of all set out by the Governor of the Bank of England in a speech which was supported in the March Bank of England Quarterly Review. The Governor said:
  "Our first order of business must, therefore, be to restore confidence in the framework of the system. The crucial economic decisions, for example, to undertake investment, involve an act of faith in the future. That faith has been undermined by uncertainty—uncertainty in particular about the future value of money, externally and internally. In times past other features of the economic system such as fixed exchange rates, or Gladstonian budgetary principles were thought to provide a guarantee of stability. Those restraints have now gone. The main role, therefore, that I see for monetary targets is to provide the framework of stability within which other policy objectives can be more easily achieved."
  Mr. J. Enoch Powell indicated dissent
  Mr. Budgen: I see the right hon. Member for Down, South (Mr. Powell) indicating his disagreement. It may be that

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  he is right in saying that there are other and better disciplines upon the economy than the publishing of monetary targets. But a published monetary target is a discipline upon the economy.
  Mr. Powell: My reason for the dissent which the hon. Member observed is that the trouble with monetary aggregates—the money supply figures—is that, like coral, they are evidence of something which has happened already and which can no longer in that form be corrected. What is done at the time will produce its effect in monetary figures one, two or more years ahead, so that this is a sort of gauge by which it is impossible to steer.
  Mr. Budgen: I do not wish to argue which of the various monetary or fiscal disciplines is best. I suspect that the right hon. Member may be right in his preference for Gladstonian principles of budgetary control. I suspect, too, that he is right in saying that our first preference should be for a balanced Budget. But if that cannot be achieved immediately, the publication of monetary targets is a useful second preference, and some discipline is better than no discipline. That has now been accepted as a discipline by those who lost large sums of money through the last financial crash. We do not know whether it is the right discipline, but it has been accepted by them as the discipline.
  It is no good Government supporters who sit below the Gangway screaming with pleasure as the Minister of State does his turn. He will do it tonight, and it will be a very good turn.
  Mr. Powell: No. We are not to have it. It is an off night.
  Mr. Budgen: Then it will come on another night, and it will be just as good when it comes. We look forward to it.
  The fact is that monetarism rules and, contrary to what the hon. Member for Bristol, North-West says, it is no longer a minority view. It is the view now of the Government, of the Opposition and of the financial institutions. It must be understood that monetarism is not undemocratic in the sense that it is impossible to have Socialism if a policy of monetarism is being pursued. It simply means that if we are to have a Socialist Government with high spending—and the people are
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  entitled to elect a Socialist Government with that platform—the Socialist Government of the day must raise a very much higher proportion of their expenditure by proper taxation. It means that there cannot he Socialism with the very high public sector borrowing requirements thought possible a couple of years ago.
  It was extremely interesting to hear the hon. Member for Stoke-on-Trent, Central speak about the need to subject the financial institutions to some form of political direction. Those who have their money controlled and invested by the financial institutions should understand that the hon. Member's speech was very significant.
  There are wild men in every party. No doubt 10 years ago there would have been a wild man in the Labour Party who would have advocated State direction of the financial institutions. But the hon. Member for Stoke-on-Trent, Central is no wild man. He is a man of mature years. He is a well-read, learned man of kindly disposition and of moderate views. He has been a self-proclaimed monetarist for many years. He is a very much on the moderate Right wing of the Labour Party. When he reveals in a rambling speech his inner preoccupations and suggests that it may be necessary to control the financial institutions by legislation and by State interference, it means that that mood is becoming prevalent and very important within the Labour Party. It means not that it is likely to be in the next manifesto but that it is one of those ideas which could easily and quickly be adopted by the Labour Party.
  It means that the future of every working person in the land is at risk. All of us have our future security potentially at risk at the hands of inflation. All of us know that whichever Government we happen to elect may corrupt the coinage and make our future almost completely insecure. But most of us have some sort of hope that these fears of inflation may be balanced by the hope of having some sort of independently-funded pension. These pensions will be subject to political control if even the moderate wing of the Labour Party has its way, and every working person in the land should know that this is a real threat.
  It is true, of course, that there are scaremongers on the Opposition Benches.

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  There are some who too quickly and too irresponsibly shout "Communist" at Government supporters. I hope that I am no scaremonger, and certainly the hon. Member for Stoke-on-Trent, Central is no Commie or irresponsible young politician on the make on the Left wing of the Labour Party. He represents the solid decent right of the Labour Party and when he articulates suggestions like the one he has made tonight, the working people of this country should be very careful.
  8.20 p.m.
  Mr. John Evans: The hon. Member for Wolverhampton, South-West (Mr. Budgen) started his speech by condemning this debate as irrelevant and a complete waste of time. Therefore I had hopes that there would be a little sparkle and champagne in his speech. Unfortunately, he did not live up to expectations.
  The hon. Member's comments about my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) and the Labour Party in general are in line with the hysterical comments coming from the Tory Party about the Labour Party. I am not surprised. Any party which has no policies whatsoever in any field whatsoever generally resorts to hysterical abuse of its opponents. In that respect the hon. Member was true to form.
  One aspect of his speech interested me greatly. He dealt with the City, the collapse of the various financial institutions and the role of the Bank of England's lifeboat fund. I do not want to raise the disasters of Lord Barber and the previous Tory Administration. Both sides of the House are now unanimous in believing that the financial activities of the last Tory Government were utterly and totally disastrous. There is no need to repeat that fact.
  We are constantly told by commentators from the Conservatives Benches, the Government Front Bench, the various financial institutions and financial columns of the serious newspapers that the City is full of experts. We are told that there are experts in every financial field, who perform wonders throughout the western world. Yet these same experts got themselves into an almighty plight between 1972 and 1975 when financial institutions were collapsing around
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  their ears like derelict tenement buildings in Glasgow.
  Those of us who represent the ordinary people of this country—
  Mr. Budgen: We all do.
  Mr. Evans: Some of us represent more ordinary people than others. This applies particularly to those Labour Members who represent huge working-class areas. Also, some of us come from the same class as the ordinary people whom we represent.
  I wonder whether we ordinary people are right to place any more faith and trust in the financial experts who made such a mess in 1972, 1973 and 1974. While we accept that the then Tory Cabinet was making a mess of things, the fact is that the experts in the City did not have to go along with them. They did that of their own free will, and they collapsed.
  I turn to the national insurance surcharge. I am not at all happy at the imposition of an extra 1½ per cent. At least I am relieved that it is not to be 2½ per cent. I accept the argument that the surcharge can and probably will produce some unemployment if it stays on very long. I accept that it does not come into operation until October. I suspect that this is part of a package deal produced for the benefit of the City to persuade it to invest in Government funds.
  I recognise that any financial charge that is likely to increase unemployment is bad in itself. But when we are faced with 1½ million unemployed people, anything that is likely to add to that unemployment is to be deplored. This probably will increase the pressures on employers to work more overtime, rather than employ more labour. I know that some of my hon. Friends have suggested that there should be legislation about overtime, but of course that is not possible and in some respects the idea is nonsense. However, there is no escaping the fact that the surcharge will increase the pressure to work more overtime rather than employ more labour.
  Unfortunately we on this side of the House have no choice in the matter. We deplore the strategy of the Tory Party on the Finance Bill, and we deplore the cuts that were made in income tax. But

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  now we are faced with a situation in which the Government must seek to restore the overall Budget strategy. Therefore, tonight we must go into the Lobby to support the imposition of the surcharge. We do not like it particularly but at least we like it a little better than we like the cuts in income tax.
  While we would all like income tax to be cut as part of a national strategy, it cannot be cut, in fairness, in the way that the Opposition have forced upon the Government. I would far sooner have seen income tax cuts given to lower-paid workers. I would have liked to see the introduction of a lower tax band so that those on lower incomes would pay income tax at a much lower level than they do now. I accept that the present lower tax band is far too high. But the Opposition did not put forward that kind of strategy—a lower band of, say, 20 per cent.—because they were more concerned with people at the top end of the income scale. They show very little concern for those at the lower levels.
  The Chancellor and the Prime Minister have both made it clear that the surcharge will not come into operation until October. I hope that it will be removed altogether after we are returned to office following a General Election in October. I hope that one of the first things that we shall do when we are returned—as we shall be—is to remove this surcharge.
  The Opposition constantly attack the Government's plans and strategy, but we expect the Tories to offer some alternative strategy. Today's debate on the narrow issue of the increase in national insurance surcharge follows yesterday's important debate on unemployment. It has been suggested that the increase in the surcharge will result in a higher rate of unemployment. A total of 1·4 million people are unemployed in the United Kingdom, 6½ million in the EEC countries, and 15 million in the OECD countries. However, despite speeches from the Opposition Front Bench yesterday amounting to over an hour in length, the House was given not one constructive concrete suggestion about how to reduce unemployment. All we had were the usual slogans about reducing taxation, as though that would automatically improve employment, and we also heard that public expenditure should be reduced even further.
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  The people of this country have a right to hear what areas of public expenditure the Conservatives wish to cut. If the Conservatives intend to cut subsidies to private industry, to denationalise certain sections of publicly owned industry, and to abolish the National Enterprise Board, it is obvious that unemployment will rise. One has only to bear in mind the cost of maintaining a man in unemployment to appreciate that this covers a huge area of public expenditure.
  In yesterday's debate on unemployment the hon. Member for Aberdeenshire, East (Mr. Henderson) asked my right hon. Friend the Secretary of State for Employment whether it was correct that
  "the cost of supporting a married man with two children would be £4,000 per annum in transfer costs and loss of revenue."
  My right hon. Friend replied:
  "On a quick mental calculation, I believe that the figure of £4,000 produced by the Treasury is an initial cost. I think that the average cost of sustaining a man in unemployment is lower than that—namely, about £50 to £60 a week."—[Official Report, 4th July 1978; Vol. 953, c. 273.]
  If we take the figure of £50 to £60 to maintain a man in unemployment, and if we had the good fortune to reduce unemployment by as much as a million, we would save in unemployment costs £2·5 billion. Surely all parties should be united in trying to slash that aspect of public expenditure. We could also benefit from the productive capacity of the individuals concerned, who would add to the wealth of our economy.
  Whenever the House discusses industrial strategy, taxation and fiscal policy, the Tories harp on the constant theme of cutting public expenditure to the bone. However, if we cut public expenditure we all know that that will lead to considerable increases in unemployment. I challenge the Opposition Front Bench to tell the people of this country whether they intend to cut social security payments, pensions and unemployment benefits and whether they intend to operate those schemes nationally, as have the Labour Government. The country is entitled to an answer to those questions.
  When we examine the amount of money involved in the cuts which the Tories allege they wish to make, we must face the consequences of that action.

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  Where exactly do they intend to make those cuts? I ask the hon. Member for Blaby (Mr. Lawson) to say whether they intend to cut the social transfer payments. That seems to be the only major area in which they can achieve the level of cuts which they have in mind.
  The Conservatives could—and probably will, if they ever have a chance to do so—increase the rate of VAT. However, that action, although perhaps all very well in theory, will hit the poorest section in the community. I may be accused of being paranoic about the EEC, and I appreciate the arguments within the Community to increase the level of VAT in the United Kingdom, but I sometimes wonder whether it may be part of the EEC strategy to increase VAT in this country to the level at which it stands among our European partners. We all know the budgetary ramifications of such a move for the EEC. However, I repeat that any increase in that tax must hit the poorest sections of the community. So far I have not mentioned VAT on food, which I recognise is zero-rated.
  Mr. Terence Higgins: We are considering VAT as it now exists in this country. It is not just a question of food being zero-rated, because the present VAT was specifically designed so that it did not fall on those items which were of greatest importance to low-income families. It is not just food; it is a number of other items as well.
  Therefore, the effect on those families of putting up VAT will be less significant, for the reason I have just mentioned, than putting up the employer's contribution, which will fall on all things, including food and other items of greatest importance to those families on the lowest incomes.
  Mr. Evans: I do not think that the hon. Gentleman was present when I began my speech. I made it clear that I was not in the least happy about the introduction of the surcharge. I made the point that the surcharge was an alternative to what had been put forward. But the hon. Gentleman must accept that there are many items which bear VAT which the poorest sections of the community have to purchase. After all, if the poorest sections of the community do
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  not pay income tax at all because they are the poorest sections, if they are asked to pay increased VAT on other articles, obviously they are hit the hardest. That would seem to me to be completely logical.
  I doubt whether an incoming Tory Government would maintain VAT as it is presently constituted. In my view there would be pressures from the present Opposition Benches to spread VAT to a much wider range of goods. That would seem to be the logic of reducing direct taxation and increasing consumer spending. That would be a natural pressure and something that would result from policies which the Opposition suggest they would adopt.
  The other aspect of the question of increasing VAT is the effect that that would have on the retail price index and the cost of living. As far as we are concerned, we have to acknowledge and support the Government's strategy on wages policy. It may be that some of us do not like some aspects of the Government's policy, but at least it is one which the present Administration have pursued with some success with the trade union movement over the past three years.
  Anything which increases the cost of living, anything which makes it more difficult for people on lower incomes to make ends meet, will increase pressure upon trade unions to ask for bigger and bigger wage increases. This is one part of the strategy which the Opposition have completely and utterly ignored. They tell us that when they are returned to power they will abandon wage controls completely, but that story is one which I seem to have heard before. I believe I heard it in 1970, and yet within about 18 months the incoming Tory Government introduced a statutory wages policy.
  We are faced with the difficulties of a situation in which the right hon. Lady the Leader of the Opposition talks about freedom for those in the industrial private sector, but with rigid cash limits for those in the public sector. It would seem that the right hon. Lady is not thinking through very clearly her policy in this respect. I do not know whether she is classifying the miners and the power workers as being in the private or the public sector. She has not spelt that out. But she knows full well that there are a

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  number of workers involved in the public sector who will simply not acquiesce in her wishes in this respect.
  It would appear to me to be an extremely divisive solution to our problems if the right hon. Lady is saying that two sections of workers shall be treated differently. Those in the private sector will presumably be able to obtain as much as they can screw out of their employers, irrespective of what it does to the cost of the goods which they produce, whereas those in the public sector will be restricted by rigid cash limits which will be laid down by the Tories and which presumably—again because of their demands for cuts in public expenditure—will be considerably less than the present cash limits on public expenditure.
  We have to recognise that one aspect of the policy which the Government are pursuing is the need to restore that package. I have already said that I do not like some aspects of the package. I accept completely that the proposals put forward by the Opposition were divisive. If they had simply been meekly accepted by this Government, they would have made things much more difficult for the workers and their trade unions.
  I think it also fair to say that one of the aspects that has not helped the Government at present has been the acceptance of the Boyle report on top people's pay. That will have repercussions within industry. The skilled workers who have been claiming that their differentials have been very badly eroded over the past three or four years will be looking with very great interest at the Boyle report and the Government's views on it.
  One area at which we should be looking is the re-establishment of an incomes board. It seems that those who have had the benefit of that type of board—the top people, the police, firemen and, not so very long ago, teachers—have done rather well out of having some independent body to look at their remuneration.
  Again, it may be that one of the many disasters of the previous Tory Administration was to abolish the National Board for Prices and Incomes. I would imagine that one of the things that will flow from a re-elected Labour Government is a very long, hard look, after discussions with the TUC and the CBI, at the question of the restoration of that board. Although
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  Opposition Members did not like the Price Commission, it is doing an excellent job and is very well supported by the people.
  Opposition Members will have to accept that if we are to have any sort of compact between the Government—irrespective of which party is in Government—and the workers and their trade unions, it is essential that it be based on a policy of fairness, and it must be seen to be fair by those in industry who actually produce the wealth. The speeches made by some Opposition Members seem to suggest that it is the financiers, the entrepreneurs and the insurance brokers who produce the wealth of this country. Without being doctrinaire and without being classified as a Red, I hope, I would remind Opposition Members that it is the workers who produce the wealth. One of the factors at which Opposition Members should look is the very sad management that we have had in Britain since the end of the war. It is that which has been our greatest failure.
  I am sure that we all accept the argument that it is absolutely essential that we increase productivity and try to move from a low-wage, low-productivity economy to a high-wage, high-productivity economy. Unfortunately, however, until such time as we have management that is capable of organising our industry and of going out and winning orders throughout the world—no matter that we have the best workers in the world—with the type of management from which we too often suffer, we shall have very considerable difficulties.
  Finally, it seems to be suggested that if the Opposition are returned to power at the next General Election, we shall go back to a free-for-all, and that those with the greatest muscle will be able to win the greatest rewards, and those with the hardest faces will be able to create the biggest fortunes. Let me remind the Opposition of something that was said a long time ago. If by some mischance the Tory Party is returned to power and we go back to a free-for-all, the Tories should never forget that the trade unions are also part of the "all", and they will defend their workers, come what may.
  8.44 p.m.
  Mr. Nicholas Fairbairn: The hon. Member for

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  Newton (Mr. Evans) said that he represented ordinary people, presumably on the assumption that there are others in the House who represent some other breed. I do not know whom the hon. Member regards as ordinary people. Perhaps they are high-wage trade unionists who live in council houses, or it may be others—I know not. Perhaps it is the inefficient managers as opposed to the efficient workers, as he calls them, as if managers do not work and those whom he classifies as workers do.
  I want to deal with the ordinary people whom I represent. I represent people who work on farms, who work in shops, who work in hotels, who run garages and services in a vast rural area and who earn very much lower wages than those whom the hon. Member represents. I regard them, as I regard all mankind, as ordinary people. We in Scotland regard ourselves as all Jock Thompson's bairns and we do not make condescending distinctions, such as who is ordinary and who is not.
  The people whom I represent and about whom I have told the House write to me regularly and say that if there is one element above all others which prevents them from employing other ordinary people it is, first, the national insurance contribution—not the surcharge, but the contribution in the first place—and, secondly, the vast number of statutory rules which Socialism imposes in its fantasy that humankind can be perfected and arranged by edict—
  Mr. John Evans: Such as VAT.
  Mr. Fairbairn: I receive letters every week from ordinary people—
  Mr. Evans: What about VAT?
  Mr. Fairbairn: Do not mock employment—that comes ill from Labour Members below the Gangway. If you wish to make a mockery of small firms, stand up and interrupt me.
  Mr. Deputy Speaker: Order. The Chair makes a mockery of nobody.
  Mr. Fairbairn: If each of those people could employ one more man or one more woman, or perhaps two more, the employment scene would be transformed. We must be absolutely clear that a sur-
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  charge such as that proposed will ensure a reduction in employment. I gave an illustration earlier showing that on a typical farming estate the increase in the surcharge will mean an increase in costs of £4,000, which means that two workers must go because that is the cost of their wages. The increase cannot be met in any other way and there is no saving that can be made except by the sacrifice of employment. That is a miserable prospect, particularly for rural areas.
  One fallacy that was raised tonight was that public expenditure, or employers' expenditure, is different from other types of expenditure. All public expenditure comes out of the pockets of ordinary people. It comes not from Santa Government or from rich employers who get it from the people, but from those who make the wealth. Those who make the wealth are those who work, whatever their station in life and whatever their job.
  What I find most offensive is that all money spent by public bodies is spent infinitely less thriftily and diligently than money spent by individuals in their own interests. Outside the door of this Chamber is a box half the length of a coffin which has been made by the Department of the Environment at a cost of £874. Those who take the trouble to ring up a funeral undertaker, as I did, will find that a coffin in English oak, with brass handles and a lid, and lined with satin, would not cost £190. It is the waste of public money that causes taxes on the individual. It is important that we understand that the tax that the State takes from individuals affects ordinary people.
  I am not so interested in financial institutions, and I am sure that I do not understand them, but I understand those who set up businesses, little shops, farms and factories to earn their living, and I understand what motivates them, which is the fact that they can make their enterprise work, make it profitable, and hand it on.
  The seed corn of employment, the seed corn of the generation of wealth, is essential, for it is the pence that count, and not the pounds. The imposition that we are considering ensures that that flame is being damped, if not extinguished.
  8.50 p.m.
  Mr. J. Enoch Powell: It is an ironical paradox that it is less

  569
  than 24 hours since the House was bitterly disputing whether we should impose a guillotine to restrict the time available for discussing matters of major importance. Now we are coming to the end of this debate with a relief that is shared by the few who have attended it, and which is exceptional.
  It is a debate which has been reminiscent of that feast in the gospel which could be kept going only—indeed, could be got started only—by bringing them in from the byways and hedges, a function which in this context is performed by the Whips. The wide area which the debate traversed was mainly very well known territory. But there was one little patch to which the hon. Member for Wolverhampton, South-West (Mr. Budgen) most usefully drew attention. It occurred in the speech of the hon. Member for Stoke-on-Trent, Central (Mr. Cant), where he found himself arguing that if the institutions would not lend money to a Government who had an embarrassing public sector borrowing requirement presently measures of some sort must be found to compel them to lend.
  I do not think that that was at all an isolated or chance thought which the hon. Gentleman was ventilating. I have heard it before, and I dare say that we shall hear more of it again. Certainly, the hon. Member for Wolverhampton, South-West was fair in saying that it was not a Communist thought. Indeed, it is not a particularly Left-wing thought. It is a very old thought.
  Since the earliest records of history the folly has been indulged in by kings and princes of forcing the bankers to lend to them money which they would not part with voluntarily. Perhaps before the policy is developed on the lines which the hon. Member for Stoke-on-Trent, Central was adumbrating it might be wise to look at some of the historical precedents.
  In particular, I was reminded of that great emperor, that almost universal emperor Charles V, and his relations with Fugger, the banker of Augsburg. They had a long relationship, though not an entirely happy relationship. It was a relationship during which vast sums were advanced unwillingly by Fugger to the Emperor Charles V. But in the end it was not Fugger who went broke. It was Charles
  570
  V. For once show that they can borrow only by compulsion and there will be very little credit left to a Government.
  However, my only purpose in claiming the attention of the House for a few minutes at the close of this debate was to say that my hon. Friends and I do not propose to seek to deny this Ways and Means Resolution to the Government. I want briefly to indicate our reasons for having come to that conclusion.
  This debate goes back, as so many debates seem to have done in the past two months, to the fateful night of 8th May, when the House temporarily took charge of the Budget and the Finance Bill and altered the Bill beyond the intentions of its parent. In referring to the deed of 8th May in a debate on 14th June, when an unsuccessful attempt was made to impose a cut upon the salary of the Chancellor of the Exchequer, I said that the debate of 8th May had raised two separate questions which ought to be kept separate. The first was whether the Budget and the Finance Bill had given sufficient priority to the reduction of direct taxation at the standard and higher rates. The second question, which was essentially separate from the first, was whether the public service borrowing requirement ought to be increased. I said that a decision upon the one did not carry with it a decision upon the other.
  I proved to be mistaken in thinking that only two questions were raised. It turned out that a third question was raised or, at any rate, a different question was interpolated between the first, which we decided against the Government on 8th May, and the second, on which we believe that the Government should have their way, which is taking place tonight.
  In that interpolated debate, the whole question of the Government's monetary management was raised and I expressed the belief that, in present circumstances, anything like a public service borrowing requirement of £8½ billion was unmanageable and a constant threat to monetary stability and that the events that immediately preceded that debate went a long way to support that view. Thas was the ground for censuring the management of the Chancellor of the Exchequer. It is not the subject of this debate which, in reality, is very narrow.

  571
  Throughout the whole of this Parliament, my hon. Friends and I have contended that the Government were attempting to borrow too much and that the public service borrowing requirement was not merely excessive but grossly excessive. We have therefore thought it our duty, consistently with that, not to support attempts to increase that borrowing requirement. That, after all, is elementary consistency. We are still of that mind. It is a point of view of which we have made no secret in the Province which we represent and a view which we have frequently stated and restated in financial debates in the House. Consistently with that view, we could not deny to the Government the opportunity to replace such a portion as they think necessary of the revenue that was diminished on 8th May.
  Of course, those on the Opposition Front Bench, who are in some ambivalence in this matter, for they, too, have uttered statements adverse to the present size of the public service borrowing requirement, say that it is not the replacement of £300 million of revenue or the reduction of the potential borrowing requirement by £300 million to which they are opposed. They say that they are opposed to the way it is intended to be done—opposed simply to the method.
  We are always in the difficulty in the House in financial debates that Oppositions do not have their choice of methods, but after listening to most of the debates on and since the Budget, I am prepared to say that whatever method the Government had brought forward this evening and whatever had been the object of a Ways and Means Resolution to replace £300 million of revenue, the Opposition would have found reasons for disagreeing with it.
  Mr. Lawson: No.
  Mr. Powell: That is most interesting. It is unfortunate that our procedures do not allow us the opportunity of testing the claim of the hon. Member for Blaby (Mr. Lawson). It is unfortunate that we cannot have the opportunity of seeing the Government bring forward proposals for an increase in, for example, the petrol revenue. It would be interesting to see the reaction to that proposal. Alternatively, they might come forward with a proposal
  572
  to increase the duty on wines and spirits, or tobacco.
  Mr. Higgins: Or VAT.
  Mr. Powell: Yes, of course, something quite impracticable and over-hitting in the context of the Budget. The Opposition are safe in saying "Of course we would agree to a major increase in VAT". They are safe in saying that as they know that the Government have no intention of doing so. They are prepared to be against tax proposals. They are prepared to be in favour of tax proposals so long as they can be reasonably sure that the Government will not bring them forward.
  Mr. Higgins rose—
  Mr. Powell: I am sorry to keep causing the hon. Member for Worthing (Mr. Higgins) to rise to his feet. However, he is getting a good deal of exercise. I cannot resist the recollection of a former Leader of the Conservative Party, who threatened to go to the country, but only when he was sure that he would win the impending Division.
  Mr. Higgins: If the right hon. Gentleman genuinely believes what he has just said, why does he not join us in voting against the Government's proposal? If the Government still feel that they need to recoup the money that was denied to them, we can vote on the alternatives that they put forward until we get the right one.
  Mr. Powell: I do not happen to think that that would be a satisfactory way in which to legislate, in which to enact a Finance Bill. I do not believe that the hon. Gentleman thinks it satisfactory. Nor do I believe that when he was a Treasury Minister he would have thought it a good method with which to conduct a dialogue between the two sides of the House.
  The House is faced with the question "Are you or are you not going to replace the major part of the revenue which, in order to rearrange the priorities in the Budget, you decide to reduce?" In other words, is the House prepared, whatever its views about the size of the net borrowing requirement and the difficulty of predicting the outturn of the net borrowing requirement, to increase the requirement by £300 million?

  573
  It would be inconsistent with all that I have said in the coursce of this Parliament and all that I have said on behalf of my hon. Friends as well as myself if we were to take that point of view. I believe that tonight the Government should get their Ways and Means Resolution.
  9.3 p.m.
  Mr. Nigel Lawson: The right hon. Member for Down, South (Mr. Powell) intervened late in the debate to announce that the Ulster Unionists are prepared, as I understand it, to support the resolution and the clause that goes with it. That must raise in the mind of the Chief Secretary the tantalising possibility that the Government might have been able to get their 2½ per cent. surcharge proposal through the House after all and need not have surrendered without a shot having been fired.
  I cannot, however, allow the right hon. Gentleman to say that the Opposition would have opposed anything put forward to fill the gap, or even that part of the gap which the 1½ per cent. surcharge is now to fill, namely, two-thirds of the reduction in revenue produced by the income tax cuts of 8th May to which the right hon. Gentleman referred.
  As my hon. Friend the Member for Worthing (Mr. Higgins) said, we made it clear from the beginning that we were prepared to accept the reduction to be recouped through, if need be, value added tax. I cannot recall one previous occasion when an Opposition have said "If you put forward a proposal to increase value added tax, we shall let it go through; we shall not oppose it."
  The right hon. Member said that such a proposition is wholly impracticable and that that is why we put it forward. Far from its being impracticable, because of the regulator powers to raise value added tax by order, of which the House is well aware, it is considerably easier and quicker to recoup the money through value added tax than through the national insurance surcharge.
  However, the right hon. Gentleman made one important point, for which I am grateful, when he echoed his successor, my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), who is not in his place, by drawing the attention of the House to the remarks made by the hon. Member for Stoke-on-Trent,
  574
  Central (Mr. Cant), who called for direction of investment. He called for the Government to have considerable powers of decision over where people's pensions and savings should be invested.
  I think that my hon. Friend the Member for Wolverhampton, South-West and the right hon. Member for Down. South were right to draw attention to that point. It is such an important point that I think it is incumbent upon the Financial Secretary, when he replies to the debate, to say whether it is Government policy for there to be direction of investment. Indeed, because many hon. Members and people outside are worried about talk of this kind—as has been said, the hon. Member for Stoke-on-Trent, Central is normally sound and moderate—I hope that he will go further and assure the House that in no circumstances will the Government take or exercise these powers.
  This debate on the Ways and Means Resolution for Government new clause No. 26 has turned out to be something of a general and, as one of my hon. Friends said, meandering economic debate. Therefore, I think that it might be helpful if I try not to meander, but to begin by returning to the specific subject of the payroll tax increase, which we are debating.
  According to the Chief Secretary, when he opened the debate this afternoon, the clause and the increase in the payroll tax would not have been necessary had it not been for what he liked to call the irresponsibility of the Opposition. Therefore, it seems established that Labour Party policy is that to cut income tax is irresponsible. I am sure that that will be of great interest to the whole country when the time for a General Election comes.
  However, to put the Chief Secretary's allegation in context, it might be worth recounting a brief history of the events which have led us to debate this new clause to raise the payroll tax, which was first imposed by the present Government last year, from 2 per cent. to 3½ per cent.
  The possibility was first mentioned by the Chancellor in his thirteenth Budget Statement on 11th April, only to be dismissed. The terms in which he dismissed it were quoted by my right hon. and learned Friend the Member for Surrey,

  575
  East (Sir G. Howe), but they are so telling that it is worth quoting again from the Budget Statement. The Chancellor said:
  "I do not believe it would be right to increase it so soon after it has been introduced, and at a time when unemployment is our major problem. It would increase industrial costs at a time when it is essential to improve our competitiveness and it would ultimately be largely passed on in higher prices at a time when the fight against inflation is at a crucial stage."—[Official Report, 11th April 1978; Vol. 947, c. 1204.]
  I stress the words "at a time", which occur three times in the Chancellor's Statement, to show not merely that he was opposed to this tax but was opposed to it in particular at this particular time. Therefore, it is absurd for the Government to turn to us and to say that at this particular time it would be wrong to increase VAT. The very undesirability of taking tonight's step at this particular time was the main reason why the Chancellor rejected the proposal put forward by the Liberal Party to increase the payroll tax.
  At any rate, we then move on to 8th May—that historic day mentioned by the right hon. Member for Down, South—when, to the evident fury of the Prime Minister and the Chancellor, the Opposition cut the basic rate of income tax by 1p in the pound, making it clear at the same time that the £340 million that that would cost this year should be recovered elsewhere—preferably by trimming back the massive £4,000 million increase in public expenditure planned for this year. I think that my hon. Friend the Member for Hitchin (Mr. Stewart), in a most enlightening speech, demonstrated to some of the sceptics that this is indeed the real figure by which public expenditure is planned to increase this year. At any rate, that was the big money which the Government were so cross about losing.
  The Prime Minister fulminated that we have destroyed what he called his family Budget. Of course, we do know one thing about the Prime Minister. It is that when he talks about the family he is absolutely sincere in his devotion to that cause. Anyone who has made his son-in-law ambassador in Washington clearly has a profound belief in the family.
  What some of us on the Opposition Benches find difficult to understand, however, is why he imagines that the mil-
  576
  lions of people who pay income tax at the basic rate—the vast majority of income taxpayers of this country—do not have families too, even though those families might not be as well placed as the Prime Minister's family.
  The Chancellor of the Exchequer also complained, but on different grounds. He complained that we destroyed his carefully judged Budget strategy. I must say that the pristine perfection of that strategy was hard to discern from the beginning. After all, the minimum lending rate was put up by 1 per cent. on Budget day itself. Despite this, there was a total collapse of confidence. Within a matter of days, Government stocks fell by £1,000 million, equities fell by £2,000 million, and the pound fell to its lowest level for nine months.
  All this happened within a few days of the Chancellor's carefully judged Budget strategy. Indeed, there was a further 1¼ per cent. increase in minimum lending rate before the Committee stage of the Bill, which is now on Report, even began. In short, it was quite clear that the strategy was a mess from the beginning, that markets were understandably shocked at the £3 billion increase in the public sector borrowing requirement, at a time of some slight recovery in the economy, at the incompatibility between the public sector borrowing requirement and the money supply target, and at the lunacy of attempting to have monetary and fiscal policies which were pulling in diametrically opposite directions.
  The question was, what was the Chancellor going to do? In the debate on 8th May, before the House had reached a verdict, he said that if we cut the basic rate he would
  "watch the situation closely".—[Official Report, 8th May 1978; Vol. 949, c. 817.]
  It is true that he also warned that he might increase corporation tax, that he might increase stamp duty, or that he might even—this was the third of the possibilities he mentioned—increase the national insurance surcharge which employers pay—the payroll tax. But his only commitment was to "watch the situation closely".
  As confidence ebbed away further in the succeeding days and weeks, particularly following the revelation that the

  577
  rate of growth in money supply in 1977–78—again, long before the cut in the basic rate—had exceeded the central target figure by about 50 per cent. and was accelerating, the Chancellor continued to play the part of a pathological voyeur, watching the situation but not actually doing anything himself. Indeed, when I asked him, at Treasury Question Time as late as 25th May—more than a fortnight after the income tax cuts—whether he intended to recoup the money either by trimming back public expenditure by £500 million or by finding some increases in taxation other than income tax, all that he could do was to mutter about the margin of error in the public sector borrowing requirement. He clearly implied then that he was hoping to do nothing by way of fiscal changes.
  Then, very suddenly, a fortnight later, after almost two months of dithering, with the money supply clearly out of control and a 1976 style sterling crisis looming, it was announced outside the House on 8th June that there was to be a further increase in minimum lending rate, to 10 per cent. It was also announced that there were to be savage controls on bank lending and that there was to be a 2½ per cent. increase in the national insurance surcharge—the payroll tax—to 4½ per cent.
  So important was this 2½ per cent. addition to the payroll tax that the Government insisted on going to the brink, to a confidence vote, on which the Government's very existence depended, in order to defend it the following week. That was not so, of course, for the 10 per cent. minimum lending rate. That was intended to be so ephemeral that the Chancellor stated in the debate on his salary on 14th June that he expected MLR to be cut in a matter of days—those were his words. Three weeks have elapsed since then, but MLR is still at 10 per cent. I do not know how many more days we shall have to wait. Perhaps tonight we may be told.
  The irony is that instead of the 2½ per cent. national insurance surcharge enduring and the 10 per cent. MLR disappearing, the 10 per cent. MLR has endured and the 2½ per cent. surcharge has disappeared. It has gone as suddenly as it emerged, to be replaced by
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  a 1½ per cent. surcharge to make a total payroll tax of 3½ per cent., if the clause goes through, as no doubt it will.
  There is no explanation of this sudden change. There is no explanation for the abandonment of the doctrine that every penny of revenue lost in the tax cuts of 8th and 10th May must be recouped. Now only two-thirds is to be recouped, leaving a shortfall of £140 million. What about that? The Chancellor is still watching it, we were told today. The only explanation for the change, for why the 1½ per cent. increase is suddenly all right when a few days ago 2½ per cent. was regarded as essential, is the apparent desire of the Government to please the Liberal Party. This desire and attempt to please the Liberal Party, I admit, requires a considerable amount of nimble footwork.
  The hon. Member for Cornwall, North (Mr. Pardoe) said very proudly in the debate earlier today that the Liberals always make clear exactly what their policies are. They do indeed, but it is never the same policy twice. In September 1976 the hon. Member said that we needed a progressive and graduated expenditure tax. He had an attack of the Meades then. A short while later his right hon. Friend the Leader of the Liberal Party called for a 20 per cent. value added tax. Now the Liberals' new policy, for the moment, as enunciated by the hon. Member for Cornwall, North, is a regionally variable payroll tax. But at what rate is this payroll tax to be levied? This is an important part of the Government's equation.
  We know from the behaviour of the Liberals that they regard a 2 per cent. payroll tax as monstrous. At the end of 1976 they voted against it not once, but twice. They voted against the Ways and Means Resolution and against the relevant Bill on Second Reading. But a 4 per cent. payroll tax is intolerable, and that was what drove the Government to the very brink in the confidence vote, when they won by a majority of only five. It seems, however, that between the two there is a 3½ per cent. payroll tax, which, for some special reason, is the very quintessence of Liberal economic wisdom. This is the reductio ad absurcham of fine tuning elevated into a political principle.
  Mr. Pardoe: The regionally graduated payroll tax has been Liberal policy for the 12 years during which I have been in the House, and earlier than that. The progressive graduated expenditure tax is still Liberal policy, and not a touch of the Meades. We decided on that before the Meade committee reported. I am afraid that the hon. Gentleman has not been reading either the long-term or short-term policies of the Liberal Party, which happen to coincide.
  Mr. Lawson: I wonder whether, to complete the picture of all the taxes which the Liberal Party would like to see imposed on the long-suffering British people, the hon. Member will tell us whether the 20 per cent. VAT which the leader of the Liberal Party advocated—
  Mr. Pardoe: He never said that.
  Mr. Lawson: Yes he did. He said it in October 1976.
  Mr. Pardoe: He never said it.
  Mr. Lawson:—is still Liberal policy. There is a certain amount of wriggling going on now, but let us leave the Liberals to wriggle and return to the Labour Party. Seldom, if ever, have a Government been more irresolute. It has been a diary of dither, a course so erratic that even the Hampton Court maze looks like a straight line in comparison.
  This tax that we are debating was first adumbrated by the then Chancellor of the Exchequer, Mr. Selwyn Lloyd, in the Budget of 1961, as I am sure the right hon. Member for Down, South will keenly recall. That was at a time when unemployment was only 1½ per cent.—very different from today. The Chancellor then felt that there was a case for using such a payroll tax as a regulator, to make more economic use of that precious and scarce resource, labour.
  He was violently attacked by the then Shadow Chancellor, the right hon. Member for Huyton (Sir H. Wilson), who said:
  "The idea amazes me.…Has he considered the effect that the new proposal will have on industrial relations? Does not he feel that the workers will consider themselves to have been cheated when they think that employers can afford, or can be made to afford, to pay the labour tax to the Government—while, at the same time, those same employers are refusing to give them wage rises?"[Official Report, 18th April 1961; Vol. 658, c. 986.]
  580
  One begins to understand why this tax commends itself to the present Prime Minister—because anything of which his predecessor, the right hon. Member for Huyton, disapproved is almost bound to do so. However, as a result of criticism, not only by the right hon. Member for Hunyton but from outside the House, the proposal was never implemented.
  As was said then and has been said many times today, it is a tax on jobs, running—if the amendment goes through—along with the existing surcharge of 2 per cent. at a total of £2½ billion in a full year, or about 15 times as much as the temporary employment subsidy. There can be nothing more bizarre than taxing and subsidising jobs at the same time. Moreover, it is jobs with a future which will be taxed heavily—some of them destroyed—in order to save temporary jobs, which in most cases have no future at all. So much for the Government's industrial strategy.
  Labour Members who are concerned about import penetration should also remember that the surcharge is a tax on exports and not on imports—unlike VAT, which taxes imports but not exports. The Chancellor pointed this out on 22nd July 1976. Introducing the first round of this tax, he said:
  "Any price increases resulting from the national insurance increase will also be felt by exports, which is not the case with VAT. With the present level of competitiveness, such a price increase can well be afforded by British industry."—[Official Report, 22nd July 1976; Vol. 915, c. 2021.]
  I doubt whether that is the view of British industry at present.
  Mr. Ron Thomas: Does the hon. Gentleman not also agree that VAT or any tax on expenditure must, ipso facto, hit those least able to afford it—especially the low-paid, pensioners, the unemployed and those on supplementary benefits?
  Mr. Lawson: Again the hon. Gentleman is wrong. As my hon. Friend the Member for Worthing pointed out, VAT does not fall on the four basic essentials of food, fuel, transport and housing. The payroll tax falls on precisely those industries, along with all other industries. Again, therefore, the picture is the very reverse of what the hon. Gentleman has just maintained.

  581
  Next, I take the effect on prices. There has been much argument about the effect on prices—whether it is as great as that of value added tax or not. I think that it is foolish to go into this question in fine detail, trying to work out exactly the percentage effect on the RPI, but one thing can be said with absolute clarity: in so far as the tax is passed on it will feed into prices, and in so far as it is not passed on it will be a tax on employment and lead to more unemployment. Those are the two effects, and it must be one or the other. The Government cannot maintain that neither effect will occur.
  Moreover, as has been said, the surcharge has to be introduced at a rate higher than the corresponding rate that would have been needed for VAT, for the very reason that VAT could have been adjusted by order, by the regulator, straight away in May, with almost a full year to run. Indeed, to take up a point made by the right hon. Member for Down, South, the regulator could have been used also for the excise duties, and this would to some extent have made up for the fact that without any increase the excise duties fall year by year in real terms in times of inflation.
  It could have been done by the regulator immediately in May, within a week, as was done when the Chancellor so unwisely reduced VAT from 10 per cent. to 8 per cent. in July 1974. That could have been done within a week, whereas this surcharge does not come in until October, six months through the year, so that there has to be a higher rate in order to bring in the same amount of revenue.
  But, of course, that is the whole point of this surcharge. All the economic arguments are against it, but the great point is that it does not come in until October, and the effect will not be felt until after October. That is what lies behind this proposal, and nothing else. It is an attempt to defer any impact until after the General Election. Everything else has been subordinated to that one objective.
  Although, as I said earlier, we should have accepted increases in VAT or excise duties, those would still have been a second-best to savings in public expenditure. But the present Government, and any Labour Government—we have seen this time after time—will always prefer to clobber the private sector. I do not think
  582
  that the full extent of the way this tax does that is fully appreciated. Ninety per cent. of the burden of the surcharge falls on the private sector. Almost in an aside, prompted, by my right hon. and learned Friend the Member for Surrey, East—he would not otherwise have said it, and it was not in his opening speech today—the Chief Secretary mentioned that cash limits will be adjusted upwards, that the rate support grant will be increased, and central Government employees will not have their pay block cash limits confined, but they will be increased as a result of the imposition of the surcharge.
  In other words, the surcharge will not fall on the public sector at all, save on nationalised industry, whereas it falls totally and without remission on the private sector, 90 per cent. of the total burden falling on the private sector.
  That is not surprising. It is characteristic of the Labour Party. For the benefit of the House, which is filling up a little more than was the case earlier during the debate, I shall quote from the Labour Party's last party-political broadcast. This was an important statement of the Government's policy:
  "The Labour Party's aim is the common ownership of the means of production"
  Hon. Members: Hear, hear.
  Mr. Lawson: Hon. Members opposite cheer. Wholesale nationalisation is still clearly the Labour Party's policy, as enunciated in its last party-political broadcast. A tax which falls as to 90 per cent. of its burden on the private sector is a further way of pursuing that policy.
  The Chancellor of the Exchequer, of course, does not use precisely those terms. He is somewhat less open. When speaking on 13th June to the conference of the National and Local Government Officers' Association, he said this on the question of public expenditure:
  "And if we had curt public expenditure, the loss of jobs in the public sector would have been shattering and immediate."
  Evidently, for the Chancellor, it is quite all right for the private sector to suffer a loss of jobs. What he cannot tolerate is any loss of jobs in the public sector.

  583
  I do not wish to detain the House much longer, but there is an important point here which should be examined. I refer to the argument which we heard during the debate that cuts in public expenditure necessarily and of themselves cause unemployment. I am surprised to hear that from the Government Benches, because we all remember the Prime Minister's teach-in at the Labour Party conference of 1976, when he made that very remarkable speech in which he said that increasing public expenditure was no way of creating more jobs and that it would just create more inflation. Obviously, if increasing public expenditure is no way of creating more jobs, then, by the same token, cutting public expenditure will not destroy jobs.
  However, let us forget about the Prime Minister's doctrine, although he was absolutely right, and look at what has actually happened. It is a very striking record. In the two years between 1973–74 and 1975–76, public expenditure rose, at constant 1976–77 prices, by £6¼ billion. Over the next two years, between 1975–76 and 1977–78, public expenditure fell, on the same price basis, by £4 billion. Yet what happened to unemployment over that period? In the first two-year period it rose from 600,000 to 1 million, an increase of 400,000. Over the second two-year period it rose from 1 million to 1·4 million, also an increase of 400,000. In other words, the trend of unemployment was in no way affected, even though in the first two-year period public expenditure was rising very rapidly, while in the second two-year period it was cut with unprecedented severity at the behest of the International Monetary Fund.
  Mr. Pardoe: What does it prove?
  Mr. Lawson: The hon. Member for Cornwall, North should calm down. I know that he finds it difficult to do that, but if he does not want to listen to what I am saying, I draw his attention to an interesting and important article in the current issue of the London Business School's Economic Outlook. I know how carefully he reads these documents, and I know what great respect he pays to them. He should do so with this one. There he will see an article called "The lessons of 1976–77: A case study in fiscal policy." It is demonstrated there, I should have
  584
  thought beyond any reasonable doubt—even beyond the reasonable doubts of the hon. Member for Cornwall, North—that between 1976–77 and 1977–78, when the bulk of the public expenditure cuts came, the rise in unemployment was the lowest since the present Government took office.
  Mr. Martin Flannery (Sheffield, Hillsborough): The hon. Gentleman's economics really are dazzling. Does not he realise, if he is honest about it, that unemployment has increased all over western Europe and, indeed, throughout the western world? Is it not a fact that when unemployment increases, a compassionate Minister will see to it that public expenditure is bound to be increased in order to keep those people alive? Is it not a fact that increased public expenditure must follow increased unemployment if we are compassionate in any way at all?
  Mr. Lawson: I do not think that the hon. Gentleman was listening to what I was saying. I was saying that the lowest rate of increase in unemployment which has occurred during the whole of this Government's lifetime occurred when they were making the biggest cuts in public expenditure. That is the important point. What is also important is that all the predictions made by the Chancellor—and others who supported him at that time, such as Lord Kaldor—about the employment effect of public expenditure cuts, were proved wholly and totally wrong. I shall not detain the House tonight by quoting, although I could, in order to demonstrate this. Moreover, those of us who said that there would not be these unemployment consequences, which of course none of us wanted to see, were proved absolutely right.
  Those unemployment consequences did not occur. So let us have no more of this myth that cutting public expenditure of itself causes an increase in unemployment, because it has not happened.
  Dr. Jeremy Bray: I am not asking the hon. Member to do it now, but perhaps he would look at the distinction between public investment and public current expenditure. If he does, he will see that it presents a rather different picture.
  Mr. Lawson: As another Government supporter is telling the hon. Member, it is usually alleged that the employment consequences of cutting capital expenditure are simply passed on to the construction industry, for example, so I do not think that the distinction is an important one. Be that as it may, the striking fact is what happened, and people have to adjust their theories about how the economy works to accord with what happens rather than try to paint a false picture of what happens to accord with their pet theories.
  Of course, the tragedy now is that the Government are undoing all the good which was done at the behest of the International Monetary Fund—that package of which public expenditure cuts were an essential part and which, as I say, led not to adverse effects on unemployment but to beneficial effects on the rate of inflation. All this is being undone as a result of the decision, at current prices, to increase expenditure by £4 billion this year alone.
  I ask right hon. and hon. Members to imagine the tax cuts which would have been possible if public expenditure were not roaring ahead at the present rate this year. If it were not roaring ahead at the rate that it is, with a £4,000 million increase this year alone, we would not now be debating this misbegotten measure, and I invite the House to reject it.
  9.36 p.m.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): We have had what the hon. Member for Blaby (Mr. Lawson) called a rather meandering debate. I think that it has been a very wide-ranging debate, but one of the kind to which we are well accustomed as a result of the number of general discussions of this type which we have on the Floor of the House.
  In this Ways and Means Resolution, we have the proposal to increase the national insurance surcharge by a further 1½ per cent., which will produce about £360 million in 1978–79, £900 million in the full year, and reduce the PSBR by £300 million. As we know, it is to come into effect on 2nd October. The purpose of it, of course, is to replace the income tax reductions which were carried in Committee against the wishes of the Gov-
  586
  eminent. Those reductions cost £520 million in the full year and £440 million in the current year.
  The amendments made in Committee to reduce the basic rate of income tax for the income tax year 1978–79 from 34 per cent. to 33 per cent. as well as the amendments made on the thresholds of the higher rate bands have no statutory force until the enactment of the Finance Bill. If they are confirmed, they will take effect as from 6th April 1978.
  A number of further pieces of information will be available in the press release published today by the Inland Revenue. A certain number of further details will be available for hon. Members and others as a result of that.
  The right hon. Member for Down, South (Mr. Powell) drew attention to the fact that in these debates the Opposition normally put down their amendments for political reasons to express attitudes which they wish to convey both to their supporters outside and to adherents to their general philosophy. The early debates in Committee called for a greater measure of responsibility because the Opposition were then in a position to secure implementation of the amendments which they had put down. I note that the right hon. Member for Down, South and others followed through the logic of that power which Oppositions rarely have in the responsibility, which he accepted, to make sure that the Budget judgment itself was not vitiated and that the money which had been removed as a result of those income tax amendments was made good in other ways. We note that the Opposition will not support this measure. It is very difficult to understand how our parliamentary processes could proceed if Oppositions behaved in this way.
  These changes will have hardly any effect on the retail price index this year. By the end of 1979 there will be an increase of less than 1 per cent. During the first half of 1979 the demand effects of the NIS increase will not be much different in size from the effects of additional income tax changes for which the Opposition voted. Thereafter there should be a net contraction. Of course, the Budget of 1979 will give us the opportunity to correct the situation that may arise then, and that is an opportunity of which we shall make full use in due course.

  587
  The construction of this year's Budget, as announced by the Chancellor, had two main features. The first was to create the conditions for a successful wage round. We felt that the changes introduced by the Opposition hardly improved the possibilities of that, and constrained us in our reactions.
  The second feature was to remain within the ceiling of £8·5 billion for the public sector borrowing requirement. The whole House has accepted that it is right to keep within that ceiling. In fact, the right hon. and learned Member for Surrey, East (Sir G. Howe), in moving the first of the Tory amendments, said that he did not wish to increase the PSBR. Yet the purpose of his amendment was to do just that.
  A lot of work goes into a Budget: account must be taken of economic, financial and fiscal matters. It was necessary to preserve the essential strategy that I have outlined, and the alternatives for doing so were that income tax would be left as it was, the national insurance surcharge, or a change in VAT and customs and excise duties. I list them in descending order of desirability.
  The national insurance surcharge was a measure that had to be introduced to recoup most of the money that had been forgone as a result of the Tory amendments. I would have far preferred to see the original tax proposals passed intact, even though they have certain disadvantages, as some of my hon. Friends have pointed out. But the national insurance surcharge is better than VAT.
  If we had increased the standard rate of VAT to produce the same amount of money as the NIS, starting in July, we would have needed a 2·8 per cent. increase in the standard rate. Had we introduced a uniform rate of VAT, that rate would have had to be more than 11 per cent. The unemployment effects arising from that would have been greater than those from the national insurance surcharge. Had we considered Customs and Excise duties there would have been further problems and difficulties.
  The right hon. and learned Member for Surrey, East pointed out the decreases in payroll taxes in other countries. I do not
  588
  think that we should go into a comparison of league tables in these matters. But certainly if we look at all our Continental competitors we see that the employers' national insurance contribution and payroll tax is much higher than ours. We are in the lower part of the table. The imposition that we are placing upon employers generally is far less than that placed on those in our competitor countries.
  My hon. Friend the Member for Newton (Mr. Evans) pointed out that yesterday's debate dealt with a number of these points. In that debate we had contributions from the same side from the right hon. Member for Leeds, North-East (Sir K. Joseph) and the right hon. Member for Lowestoft (Mr. Prior). Those right hon. Gentlemen should normally be debating against each other, but yesterday they were in a debate dealing with the same motion. Students in the art of political compromise recognised that exercise for the vintage occasion it was.
  The first one to shift his position was the right hon. Member for Leeds, North-East. He is the director of the Centre for Policy Studies. If we look at one of its outstanding publications—I suppose it can be regarded as near as anything to the Tory Bible on monetarism—written by Tim Congdon, it says on page 25:
  "The best advice that an economist can give to a finance minister or Chancellor of the Exchequer is the quietest injunction 'Do nothing except control the money supply'."
  It was that which has formed the basis of the thinking of the right hon. Member for Leeds, North-East and of so much Conservative political and economic thinking in the past few years.
  It was this stand that led to the silliest comment on economic policy which has been made this year—that made by the hon. Member for Blaby (Mr. Lawson), that the Bank of England should implement under legislative direction the control of money supply. That kind of extremist statement is the result of a period in the history of the Tory Party at which its members look back in horror and anguish. This happened on our own side when we look back at 1931. Conservatives look back to the year 1974 in a way that is not perhaps altogether dissimilar.
  Mr. Lawson: Let me say this in defence of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), since he is not present and the Minister is attacking him. I do not know whether the Minister informed my right hon. Friend that he would be attacking him. My right hon. Friend published a pamphlet two years ago entitled "Monetarism is not enough". It would be more sensible to build on the considerable common ground that exists on this technical matter rather than try to invent chimeras and then attack them.
  Mr. Sheldon: I shall be coming to the pamphlet "Monetarism is not enough". There has been a change. I have been a student of that change and I shall seek to record it. I believe it is right that we should note alterations in policy as they take place and as we approach the next General Election.
  When we see the Tory obsession with the events of 1974, and when we see the products of the committees set up by Lord Carrington and the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), we can well understand why they dearly wish to hive off this problem to some other body—whether it be the Bank of England or somebody else—to regulate details of money supply. When awkward trade unionists say that they wish to do this or that, they can then be sent to the authority which is dealing with that part of the problem. But we know that one cannot hive off those political decisions because they rest in this House and will always return here.
  Mr. Cant: I am getting slightly schizophrenic on this subject. I have listened to the remarks of my right hon. Friend the Chancellor of the Exchequer, who is obviously a convert to the monetary pragmatism of the Bank of England, and then today I have heard the comments of my right hon. Friend the Financial Secretary, who is a faithful adherent to Treasury Keynesianism. I want to be a loyal supporter of the Government.
  Mr. Sheldon: I shall do my best to retain the loyalty of my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant), and I hope I shall succeed. We have seen in the Opposition a change from the dogma "Do nothing except
  590
  control the money supply" to political reality when they are faced with the prospect of a General Election. We know that the right hon. Member for Leeds, North-East takes the view that monetarism is not enough. Then we are told by the right hon. Member for Lowestoft that there is no panacea or simple solution to the problem. But the right hon. Member for Leeds, North-East says that the Labour Party's attitude lies in monetarism, plus subsidy, and he says that the Tories want less regulation.
  What are the subsidies which the right hon. Member for Leeds, North-East does not want? The right hon. Member for Lowestoft said that we must not cut off the temporary employment subsidy suddenly, nor must we cut off other subsidies that exist to improve employment opportunities. He said that we must examine these subsidies very carefully. We hear the language of the man who understands that an election is coming when he says "We had better be careful about what we say about cutting subsidies."
  When the right hon. Gentleman talks about fewer regulations, what regulations is he talking about? A regulation for which the Opposition have expressed their utter contempt is the Employment Protection Act. The right hon. Member for Lowestoft gave an undertaking yesterday that there would be no repeal of it and no amendments to it without consultation, and that there would be stability. I do not know what is left of the aims of the right hon. Member for Leeds, North-East.
  When the right hon. Member for Lowestoft talked about pay policy, he spoke of something between leap-frogging pay claims and a rigid pay policy. I think that that covers most of us, does it not? Most of us want something between leapfrogging pay claims and rigid pay policy.
  The right hon. Member for Leeds, North-East listened to all this and he heard about the subsidies continuing, the regulations remaining and the pay policy that was implicit. He must have asked himself whether this was the great message for which he wandered into the wilderness for four years, searching for answers and whether this would be the result of the years of work which he dedicated to the Centre for Policy Studies. Were these the tablets for which he

  591
  climbed Mount Sinai? I must say that it hardly seems to have been worth the effort. He could have packed a number of his hon. Friends into a room and come up with a solution that was not much different from that.
  The hon. Member for Blaby, in asking for the income tax changes on 8th May 1978, justified them by saying that they were a boost to supply—not a boost to demand. The argument would presumably be that through incentives we would boost supply without having the changes of demand. I understand this argument. It is basically an argument that demand management is what Labour does and supply boosting is what Conservatives do. Either way it reduces the levels of taxation, but when the Conservatives do it, that is boosting supply, and when Labour does it, we are boosting demand.
  These convolutions of thought by the hon. Gentleman are not acceptable. When we examine them, we see them for what they are. Tax cuts, whatever they are, whoever they are done by, result in people going out to buy goods that they otherwise might not have bought. We also hope that they will produce more goods.
  We had an example of boosting supply by a Conservative Government; they did it in 1970. They cut income tax by sixpence in the pound. Of course, they would say, that was boosting supply, not increasing demand. We saw what happened on that occasion, in October 1970. The new Tory Government announced tax cuts, worth, at present prices, about £150 million in 1970–71.
  Who received the benefits of those tax cuts? They were cuts in income tax and in corporation tax. What happened? Industry and production stayed essentially flat, right through to the end of 1971. Investment in manufacturing industry promptly started turning downwards, and unemployment, one and a half years later, had increased by 300,000. That was the result of the kind of boost that the Tories gave.
  We have to ask the question: whose supply are we boosting? If we take the typical man—the Chancellor referred to him in his Budget Statement—earning £75 a week, we find that as a result of the Tory amendments supply was boosted to those people to the extent of £14 per
  592
  year. The man getting £25,000 a year got a boost of £504. So whose supply were we boosting? If we are to argue that what we need is to provide a boost, then the boost needs to be to all those who are producing and not only to a particular section of them.
  If the Opposition had wanted this boost to apply generally, they could, for the same amount of money, have tabled an amendment to increase the tax thresholds. That option was available to them. Approximately the same amount of money would increase the threshold by £50 for a single person and £80 for a married person. The Opposition did not do that. They brought about a selective increase to improve the tax position of those people they felt ought to get advantage.
  My right hon. Friend the Chancellor of the Duchy of Lancaster is quite right when he says that we shall have to ensure that the high levels of taxation, which were essential and necessary as a result of the position over the past few years, will need to be altered. I accept that, and the Chancellor of the Exchequer accepts it. In the last few years we have seen the price that the country has—rightly—paid in order to ensure that where the living standards of so many people had to be restricted, there has been greater sacrifice called for from those who had the greatest ability to bear that sacrifice. That is what we did and what we have achieved.
  If the result has been, as I believe it has been, to unite and knit together our country, it has been a price well worth the paying. If Opposition Members had remained in power with their divisive policies, which were only half way implemented and not fully implemented, we might have seen a much more dangerous situation in this country.
  We do believe that income tax needs to be reduced. We look forward to seeing these further reductions in our next Budget. But these reductions need to apply to all taxpayers. The original Budget strategy was the one that we would have wished to see carried through. The Opposition decided otherwise, and we have had to come to the House with the next best alternative—that which is before us.

  593
  I ask the House to approve the motion
  Question put:—
  The House divided: Ayes 284, Noes 270.

  Division No. 2451]

  AYES

  [9.57 p.m.

  Abse, Leo

  Faulds, Andrew

  McMillan, Tom (Glasgow C)

  Allaun, Frank

  Fernyhough, Rt Hon E.

  McNamara, Kevin

  Anderson, Donald

  Flannery, Martin

  Madden, Max

  Archer, Rt Hon Peter

  Fletcher, L. R. (Ilkeston)

  Magee, Bryan

  Armstrong, Ernest

  Fletcher, Ted (Darlington)

  Manor., Simon

  Ashley, Jack

  Foot, Rt Hon Michael

  Mallalieu, J. P. W.

  Ashton, Joe

  Ford, Ben

  Marks, Kenneth

  Atkins, Ronald (Preston N)

  Forrester, John

  Marshall, Dr. Edmund (Goole)

  Atkinson, Norman (H'gey Tott'ham)

  Fowler, Gerald (The Wrekin)

  Marshall, Jim (Leicester S)

  Bagier, Gordon A. T.

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

  Mason, Rt Hon Roy

  Barnett, Guy (Greenwich)

  Freeson, Rt Hon Reginald

  Maynard, Miss Joan

  Barnett, Rt Hon Joel (Heywood)

  Freud, Clement

  Meacher, Michael

  Bates, Alt

  Garrett, John (Norwich S)

  Mellish, Rt Hon Robert

  Bean, R. E.

  Garrett, W. E. (Wallsend)

  Mikardo, Ian

  Belth, A. J.

  George, Bruce

  Millan, Rt Hon Bruce

  Benn, Rt Hon Anthony Wedgwood

  Gilbert, Rt Hon Dr John

  Miller, Dr M. S. (E Kilbride)

  Bennett, Andrew (Stockport N)

  Ginsburg, David

  Mitchell, Austin (Grimsby)

  Bidwell, Sydney

  Gould, Bryan

  Molloy, William

  Bishop, Rt Hon Edward

  Gourlay, Harry

  Moonman, Eric

  Blenkinsop, Arthur

  Graham, Ted

  Morris, Alfred (Wythenshawe)

  Boardman, H.

  Grant, John (Islington C)

  Morris, Rt Hon J. (Aberavon)

  Booth, Rt Hon Albert

  Grocott, Bruce

  Moyle, Rt. Hon. Roland

  Boothroyd, Miss Betty

  Hamilton, W. W. (Central Fife)

  Mulley, Rt Hon Frederick

  Bottomley, Rt Hon Arthur

  Hardy, Peter

  Murray, Rt Hon Ronald King

  Boyden, James (Bish Auck)

  Harrison, Rt Hon Walter

  Newens, Stanley

  Bradley, Tom

  Hart, Rt Hon Judith

  Noble, Mike

  Bray, Or Jeremy

  Hattersley, Rt Hon Roy

  Oakes, Gordon

  Brown, Hugh D. (Provan)

  Hayman, Mrs Helene

  Ogden, Eric

  Brown, Robert C. (Newcastle W)

  Healey, Rt Hon Denis

  O'Halloran, Michael

  Buchan, Norman

  Heffer, Eric S.

  Orbach, Maurice

  Buchanan, Richard

  Hooley, Frank

  Orme, Rt Hon Stanley

  Callaghan, Rt Hon J. (Cardiff SE)

  Horam, John

  Ovenden, John

  Callaghan, Jim (Middleton & P)

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

  Padley, Walter

  Campbell, Ian

  Howells, Geraint (Cardigan)

  Palmer, Arthur

  Canavan, Dennis

  Hoyle, Doug (Nelson)

  Pardoe, John

  Cant, R. B.

  Huckfield, Les

  Park, George

  Carmichael, Nell

  Hughes, Rt Hon C. (Anglesey)

  Parker, John

  Carter, Ray

  Hughes, Robert (Aberdeen N)

  Parry, Robert

  Carter-Jones, Lewis

  Hughes, Roy (Newport)

  Pavitt, Laurie

  Cartwright, John

  Irvine, Rt Hon Sir A. (Edge Hill)

  Pendry, Tom

  Castle, Rt Hon Barbara

  Irving, Rt Hon S. (Dartford)

  Penhaligon, David

  Clemitson, Ivor

  Jackson, Colin (Brighouse)

  Perry, Ernest

  Cocks, Rt Hon Michael (Bristol S)

  Jackson, Miss Margaret (Lincoln)

  Price, C. (Lewisham W)

  Cohen, Stanley

  Janner, Greville

  Price, William (Rugby)

  Conlan, Bernard

  Jay, Rt Hon Douglas

  Radice, Giles

  Cook, Robin F. (Edin C)

  Jeger, Mrs Lena

  Rees, Rt Hon Merlyn (Leeds S)

  Corbett, Robin

  Jenkins, Hugh (Putney)

  Richardson, Miss Jo

  Cowans, Harry

  John, Brynmor

  Roberts, Gwilym (Cannock)

  Cox, Thomas (Tooting)

  Johnson, James (Hull West)

  Robertson, George (Hamilton)

  Craigen, Jim (Maryhill)

  Johnson, Walter (Derby S)

  Robertson, John (Paisley)

  Crawshaw, Richard

  Johnston, Russell (Inverness)

  Robinson, Geoffrey

  Cronin, John

  Jones, Alec (Rhondda)

  Roderick, Caerwyn

  Crowther, Stan (Rotherham)

  Jones, Dan (Burnley)

  Rodgers, George (Chorley)

  Cryer, Bob

  Judd, Frank

  Rodgers, Rt Hon William (Stockton)

  Cunningham, Dr J. (Whiteh)

  Kaufman, Rt Hon Gerald

  Rooker, J. W.

  Davidson, Arthur

  Kelley, Richard

  Roper, John

  Davies, Bryan (Enfield N)

  Kerr, Russell

  Rose, Paul B.

  Davies, Rt Hon Denzil

  Kilroy-Silk, Robert

  Ross, Stephen (Isle of Wight)

  Davies, Ifor (Gower)

  Kinnock, Neil

  Ross, Rt Hon W. (Kilmarnock)

  Davis, Clinton (Hackney C)

  Lambie, David

  Rowlands, Ted

  Deakins, Eric

  Lamborn, Harry

  Ryman, John

  Dean, Joseph (Leeds West)

  Lamond, James

  Sandelson, Neville

  Dell, Rt Hon Edmund

  Latham, Arthur (Paddington)

  Sedgemore, Brian

  Dempsey, James

  Leadbitter, Ted

  Selby, Harry

  Dewar, Donald

  Lee, John

  Sever, John

  Doig Peter

  Lever, Rt Hon Harold

  Shaw, Arnold (llford South)

  Dormand, J. D.

  Lewis, Ron (Carlisle)

  Sheldon, Rt Hon Robert

  Douglas-Mann, Bruce

  Litterick, Tom

  Shore, Rt Hon Peter

  Duffy, A. E. P.

  Loyden, Eddie

  Short, Mrs Renée (Wolv NE)

  Dunn, James A.

  Luard, Evan

  Silkin, Rt Hon John (Deptford)

  Dunnett, Jack

  Lyon, Alexander (York)

  Silkin, Rt Hon S. C. (Dulwich)

  Eadie, Alex

  Lyons, Edward (Bradford W)

  Sillars, James

  Edge, Geoff

  Mabon, Rt Hon Dr J. Dickson

  Silverman, Julius

  Ellis, John (Brigg & Scun)

  McCartney, Hugh

  Skinner, Dennis

  English, Michael

  McDonald, Dr Oonagh

  Smith, Cyril (Rochdale)

  Evans, Fred (Caerphilly)

  McElhone, Frank

  Smith, Rt. Hon. John (N Lanarkshire)

  Evans, loan (Aberdare)

  MacFarcuhar, Roderick

  Snape, Peter

  Evans, John (Newton)

  McGuire, Michael (Ince)

  Spriggs, Leslie

  Ewing, Harry (Stirling)

  Maclennan, Robert

  Stallard, A. W.

  Steel, Rt Hon David

  Tomney, Frank

  Whitlock, William

  Stewart, Rt Hon M. (Fulham)

  Torney, Tom

  Willey, Rt Hon Frederick

  Stoddart, David

  Tuck, Raphael

  Williams, Rt Hon Alan (Swansea W)

  Stott, Roger

  Urwin, T. W.

  Williams, Alan Lee (Hornch'ch)

  Strang, Gavin

  Varley, Rt Hon Eric G.

  Williams, Rt Hon Shirley (Hertford)

  Strauss, Rt Hon G. R.

  Wainwright, Edwin (Dearne V)

  Williams, Sir Thomas (Warrington)

  Summerskill, Hon Dr Shirley

  Wainwright, Richard (Colne V)

  Wilson, Rt Hon Sir Harold (Huyton)

  Swain, Thomas

  Walker, Harold (Doncaster)

  Wilson, William (Coventry SE)

  Taylor, Mrs Ann (Bolton W)

  Walker, Terry (Kingswood)

  Wise, Mrs Audrey

  Thomas, Jeffrey (Abertillery)

  Ward, Michael

  Woodall, Alec

  Thomas, Mike (Newcastle E)

  Watkins, David

  Woof, Robert

  Thomas, Ron (Bristol NW)

  Weetch, Ken

  Wrigglesworth, Ian

  Thorne, Stan (Preston South)

  Weitzman, David

  Young, David (Bolton E)

  Tierney, Sydney

  Wellbeloved, James

  Tiley, John

  White, Frank R. (Bury)

  TELLERS FOR THE AYES:

  Tinn, James

  White, James (Pollok)

  Mr. James Hamilton and

  Tomlinson, John

  Whitehead, Phillip

  Mr. Donald Coleman-

  NOES

  Adley, Robert

  Fairbairn, Nicholas

  Kershaw, Anthony

  Aitken, Jonathan

  Fairgreve. Russell

  Kilfedder, James

  Alison, Michael

  Farr, John

  Kimball, Marcus

  Arnold, Tom

  Fell, Anthony

  King, Evelyn (South Dorset)

  Atkins, Rt Hon H. (Spelthorne)

  Finsberg, Geoffrey

  King, Tom (Bridgwater)

  Atkinson, David (B'mouth, East)

  Fisher, Sir Nigel

  Knight, Mrs Jill

  Awdry, Daniel

  Fletcher, Ales (Edinburgh N)

  Knox, David

  Bain, Mrs Margaret

  Cookes, Miss Janet

  Lamont, Norman

  Baker, Kenneth

  Forman, Nigel

  Langford-Holt, Sir John

  Banks, Robert

  Fowler, Norman (Sutton C'f'd)

  Latham, Michael (Melton)

  Bell, Ronald

  Fox, Marcus

  Lawrence, Ivan

  Bendall, Vivian

  Fraser, Rt Hon H. (Stafford & St)

  Lawson, Nigel

  Bennett, Sir Frederic (Torbay)

  Fry, Peter

  Lester, Jim (Beeston)

  Bennett, Dr Reginald (Fareham)

  Golbralth, H T. G. D.

  Lewis, Kenneth (Rutland)

  Benyon, W.

  Gardiner, George (Reigate)

  Lloyd, Ian

  Berry, Hon Anthony

  Gardiner, Edward (S Fylde)

  Loveridge, John

  Bitten, John

  Gilmour, Rt Hon Sir Ian (Chesham)

  Luce, Richard

  Biggs-Davison, John

  Gilmour, Sir John (East Fife)

  McAdden, Sir Stephen

  Blaker, Peter

  Glyn, Dr Alan

  MacCormick, Iain

  Boscawen, Hon Robert

  Godber, Rt Hon Joseph

  McCrindle, Robert

  Bottomley, Peter

  Goodhart, Philip

  Macfarlane, Neil

  Bowden, A. (Brighton, Kemptown)

  Goodlad, Alastair

  MacGregor, John

  Boyson, Dr Rhodes (Brent)

  Gorst, John

  MacKay, Andrew (Stechford)

  Braine, Sir Bernard

  Gow, Ian (Eastbourne)

  Macmillan, Rt Hon M. (Farnham)

  Brittan, Leon

  Gower, Sir Raymond (Barry)

  McNair-Wilson, M. (Newbury)

  Brocklebank-Fowler, C.

  Grant, Anthony (Harrow C)

  McNair-Wilson, P. (New Forest)

  Brooke, Hon Peter

  Gray, Hamish

  Madel, David

  Brotherton, Michael

  Grieve, Percy

  Marshall, Michael (Arundel)

  Brown, Sir Edward (Bath)

  Griffiths, Eldon

  Mates, Michael

  Bryan, Sir Paul

  Grist, Ian

  Mather, Carol

  Buchanan-Smith, Alick

  Grylls, Michael

  Maude, Angus

  Buck, Antony Budgen, Nick

  Hall-Davis, A. G. F.

  Maudling, Rt Hon Reginald

  Budgen, Nick

  Hamilton, Archibald (Epsom & Ewell)

  Mawby, Ray

  Bulmer, Esmond

  Hamilton, Michael (Salisbury)

  Maxwell-Hyslop, Robin

  Burden, F. A.

  Hampson, Dr Keith

  Mayhew, Patrick

  Butler, Adam (Bosworth)

  Hannam, John

  Meyer, Sir Anthony

  Carlisle, Mark

  Harrison, Col Sir Harwood (Eye)

  Miller, Hal (Bromsgrove)

  Chalker, Mrs Lynda

  Harvie Anderson, Rt Hon Miss

  Mills, Peter

  Channon, Paul

  Haselhurst, Alan

  Miscampbell, Norman

  Churchill, W. S.

  Hastings, Stephen

  Mitchell, David (Basingstoke)

  Clark, Alan (Plymouth, Sutton)

  Havers, Rt Hon Sir Michael

  Moate, Roger

  Clark, William (Croydon S)

  Hawkins, Paul

  Monro, Hector

  Clarke, Kenneth (Rushcliffe)

  Hayhoe, Barney

  Montgomery, Fergus

  Cockcroft, John

  Henderson, Douglas

  Moore, John (Croydon C)

  Cooke, Robert (Bristol W)

  Heseltine, Michael

  More, Jasper (Ludlow)

  Cope, John

  Hicks, Robert

  Morgan, Geraint

  Cormack, Patrick

  Higgins, Terence L.

  Morgan-Giles, Rear Admiral

  Costain, A. P.

  Hodgson, Robin

  Morris, Michael (Northampton S)

  Crawford, Douglas

  Holland, Philip

  Morrison, Charles (Devizes)

  Crouch, David

  Hordern, Peter

  Morrison, Hon Peter (Chester)

  Crowder, F. P.

  Howe, Rt Hon Sir Geoffrey

  Mudd, David

  Dean, Paul (N Somerset)

  Howell, David (Guildford)

  Neave, Airey

  Dodsworth, Geoffrey

  Hunt, David (Wirral)

  Nelson, Anthony

  Douglas-Hamilton, Lord James

  Hunt, John (Ravensbourne)

  Neubert, Michael

  Drayson, Burnaby

  Hurd, Douglas

  Newton, Tony

  du Cann, Rt Hon Edward

  Hutchison, Michael Clark

  Nott, John

  Durant, Tony

  Irving, Charles (Cheltenham)

  Onslow, Cranley

  Dykes, Hugh

  James, David

  Oppenheim, Mrs Sally

  Eden, Rt Hon Sir John

  Jenkin, Rt Hon P. (Wanst'd&W'df'd)

  Page, Rt Hon R. Graham (Crosby)

  Edwards, Nicholas (Pembroke)

  Jesse!, Toby

  Page, Richard (Workington)

  Elliott, Sir William

  Johnson Smith, G. (E Grinstead)

  Parkinson, Cecil

  Emery, Peter

  Jones, Arthur (Daventry)

  Pattie, Geoffrey

  Evans, Gwynfor (Carmarthen)

  Jopling, Michael

  Percival, Ian

  Ewing, Mrs Winifred (Moray)

  Joseph, Rt Hon Sir Keith

  Peyton, Rt Hon John

  Eyre, Reginald

  Kaberry, Sir Donald

  Pink, R. Bonner

  596

  597

  Prentice, Rt Hon Reg

  Sinclair, Sir George

  trotter, Neville

  Price, David (Eastleigh)

  Skeet, T. H. H.

  van Straubenzee, W. R.

  Prior, Rt Hon James

  Smith, Dudley (Warwick)

  Vaughan, Dr Gerard

  Pym, Rt Hon Francis

  Smith, Timothy John (Ashfield)

  Viggers, Peter

  Raison, Timothy

  Speed, Keith

  Wakeham, John

  Rathbone, Tim

  Spence, John

  Walder, David (Clitheroe)

  Rees, Peter (Dover & Deal)

  Spicer, Michael (S Worcester)

  Walker, Rt Hon P. (Worcester)

  Rees-Davies, W. R.

  Sproat, Iain

  Wall, Patrick

  Renton, Tim (Mid-Sussex)

  Stainton, Keith

  Walters, Dennis

  Rhodes James, R.

  Stanbrook, Ivor

  Warren, Kenneth

  Ridley, Hon Nicholas

  Stanley, John

  Watt, Hamish

  Ridsdale, Julian

  Steen, Anthony (Wavertree)

  Weatherill, Bernard

  Rifkind, Malcolm

  Stewart, Rt Hon Donald

  Wells, John

  Roberts, Wyn (Conway)

  Stewart, Ian (Hitchin)

  Welsh, Andrew

  Rossi, Hugh (Hornsey)

  Stokes, John

  Whitelaw, Rt Hon William

  Rost, Peter (SE Derbyshire)

  Stradling Thomas, J.

  Whitney, Raymond

  Royle, Sir Anthony

  Tap8ell, Peter

  Wiggin, Jerry

  Sainsbury, Tim

  Taylor, R. (Croydon NW)

  Wigley, Dafydd

  St. John-Stevas, Norman

  Taylor, Teddy (Cathcart)

  Wilson, Gordon (Dundee E)

  Scott, Nicholas

  Tebbit, Norman

  Winterton, Nicholas

  Shaw, Giles (Pudsey)

  Temple-Morris, Peter

  Young, Sir G. (Ealing, Acton)

  Shelton, William (Streatham)

  Thatcher, Rt Hon Margaret

  Younger, Hon George

  Shepherd, Colin

  Thomas, Dafydd (Merioneth)

  Shersby, Michael

  Thomas, Rt Hon P. (Hendon S)

  TELLERS FOR THE NOES

  Silvester, Fred

  Thompson, George

  Mr. Spencer Le Marchant and

  Sims, Roger

  Townsend, Cyril D.

  Mr. Michael Roberts.

  Question accordingly agreed to
  Resolved,
  That for the percentage specified in section 1(1) of the National Insurance Surcharge Act 1976 there shall be substituted a higher percentage applying to all persons by or in respect of whom the surcharge imposed by that Act is payable.

  BUSINESS OF THE HOUSE
  Ordered,
  That, at this day's sitting, the second Motion relating to Ways and Means and the consideration of Lords Amendments to Commons Amendments to the State Immunity Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Bates.]

WAYS AND MEANS

  CAPITAL GAINS TAX: DEEDS OF FAMILY ARRANGEMENT
  Resolved,
  That new provision may be made in place of section 24(11) of the Finance Act 1965.—[Mr. Healey.]

ORDERS OF THE DAY

  FINANCE BILL
  As amended (in the Committee and in the Standing Committee), considered.
  Resolved,
  That the Finance Bill, as amended, be considered in the following order—

  (a) new Clauses;

  (b) Amendments relating to Clauses 1 to 6, Schedule 1, Clauses 7 to 12, Schedule 2, Clauses 13 to 22, Schedule 3, Clause 23, Schedule 4, Clauses 24 to 31, Schedule 5, Clauses 32 and 33, Schedule 6, Clauses 34 to 38, Schedule 7, Clauses 39 to 42, Schedule 8, Clauses 43 to 50, Schedule 9, Clauses 51 to 55, Schedule 10, Clauses 56 to 65, Schedule 11. Clause 66;

  (c) new Schedules; and

  (d) Amendments relating to Schedule 12.—[Mr. Healey.]

New Clause No. 26

  NATIONAL INSURANCE SURCHARGE
  '(1) In section 1(1) of the National Insurance Surcharge Act 1976 (surcharge of 2 per cent. on secondary Class 1 contributions) for the words "2 per cent." there shall be substituted the words "3½ per cent.".
  (2) This section has effect in relation to any contribution in respect of earnings which are paid on or after 2nd October 1978.'.—[Mr. Healey.]
  Brought up, read the First and Second time, and added to the Bill.

New Clause No. 27

  RELIEF FOR PRIVATE RESIDENCES
  '(1) In section 29 of the Finance Act 1965 (relief for private residences) after subsection (4) there shall be inserted—
  "(4A) If at any time during an individual's period of ownership of a dwelling-house or part of a dwelling-house he—

  (a) resides in living accommodation which is for him job-related within the meaning of paragraph 4A of Schedule 1 to the Finance Act 1974; and

  (b) intends in due course to occupy the dwelling-house or part of a dwelling-house as his only or main residence,

  this section shall apply as if the dwelling-house or part of a dwelling-house were at that time occupied by him as a residence."
  (2) The new subsection (4A) set out above applies where the time referred to in that subsection is after the passing of this Act.'.—[Mr. Denzil Davies.]
  Brought up, and read the First time.
  10.17 p.m.
  The Minister of State, Treasury (Mr. Denzil Davies): I beg to move, That the clause be read a Second time.
  The new clause meets the recommendation that we made in Committee on the basis of an Opposition amendment giving relief from capital gains tax in respect of the sale of some private residences. It extends the scope of section 29 of the Finance Act 1965, which exempts an owner-occupier from capital gains tax where he disposes of his home, to include an individual who is living in job-related accommodation who disposes of a dwelling house, or part of a dwelling house, which he intends to occupy eventually as his main residence.
  It will be remembered that in Committee I conceded that there were good arguments for accepting the Opposition amendments. There were some technical problems and the new clause meets the Government's commitment.
  Mr. Jerry Wiggin: It is only right and proper for me and my hon. Friend the Member for Mid-Sussex (Mr. Renton) to welcome the new clause. It is an amalgam of two new clauses that we moved in Committee to deal with the very points that the right hon. Gentleman has put to the House.
  The difficulties that are experienced are now well known to the House as they have been put before it in difference ways by my right hon. and hon. Friends for at least the past three years in Committee and on Report. It is obviously to be welcomed that the Government have now accepted the problem and understand the difficulties of those concerned. I sincerely welcome the clause, especially on behalf of those who have job-related accommodation in agriculture. I and my hon. Friends are most grateful to the Government for introducing it.
  I am sorry that there has been some hardship over the last two years for those who have been faced with the worry of not knowing that this concession was available. The arguments were very good and I am delighted that they have been accepted.
  Mr. Tim Renton (Mid-Sussex): Like my hon. Friend the hon. Member for Weston-super-Mare (Mr. Wiggin), I welcome the new clause. I am pleased that
  602
  the Government have taken up the suggestion that we made in Committee not only this year, but in previous years, to help a person living in job-related accommodation who has another house to which he proposes subsequently to move, perhaps on retirement. As my hon. Friend said, this clause deals with the hardship of which we have been aware for many years. Unlike my hon. Friend, when I raised the point in Committee, it was to deal not only with a person in agricultural employment but specifically with the man who runs a grocer's shop to which a sub-post office is attached with accomodation above the shop and who has a house in some other part of the country to which he hopes to retire.
  There is one point that I should like the Minister to clarify. Is it clear that if, whilst a person is still living in job-related accommodation, he sells the house to which he proposes to retire or which he owns, even though he has not yet moved into that house, he would be free of capital gains tax liability? I think that is so, but I should like the Minister's assurance.
  Mr. Wiggin: I think that it is accepted that the rationale to this clause is that the people affected find the need to stay in the house market. In other words, they are protecting themselves against inflation and the difference in price. We conducted our argument on that point. Indeed, it does not matter whether the person concerned is the headmaster of a school, a farm manager or a policeman. The point is that if he has a house, he must be able to keep it in the house market as a capital investment so that, when he retires or changes his job, he has the capital appreciation, if necessary, to be able to move. It must be transferable.
  Mr. Renton: That is the exact point. In a sense, it reaffirms my point that, even if the house is sold whilst the owner is living in job-related accommodation, the proceeds from the sale should be free of capital gains tax so that, as my hon. Friend said, he still has the capital available to purchase another house. Such people, as my hon. Friend said, are staying in the house market. Subject to that question, I welcome the new clause.
  Mr. Peter Rees: The Minister of State moved the new

  603
  clause so baldly and with such a notable lack of luxuriance that I think we should spend a minute or two, as my hon. Friends the Members for Weston-superMare (Mr. Wiggin) and Mid-Sussex (Mr. Renton) have done, to explain to the House and to those outside who may be following our debates how the new clause finds itself on the Order Paper.
  Of course, we recognise the responsiveness of the Minister of State to the pleas that we made upstairs, particularly in the debate on new clause No. 67. But that clause, in its turn, picked up a theme which had run through our debates over two, if not three, Finance Bills.
  The House will recall—indeed, I am sure that the Minister of State will confirm—that this point was originally picked up in relation to mortgage interest relief. I deprecate the use of the words "job-related accommodation". I prefer the more old-fashioned phrase "tied accommodation". It was observed from the Conservative Opposition Benches that those in tied accommodation—that is generally understood; people do not usually understand the jargon of "job-related accommodation"—were particularly harshly treated against a background of high taxation in a highly inflationary world with house prices going up year by year, so that, when the time came for them to retire, they had nowhere to live. That was what led my hon. Friends and I to raise the question of mortgage interest relief. Indeed, all credit to the Minister of State, because I think that he conceded that point in our debates several years ago.
  Therefore, we came to the question of capital gains tax, which had not been covered. My hon. Friend the Member for Mid-Sussex instanced sub-post offices. My hon. Friend the Member for Westonsuper-Mare, ever tender of the agricultural world, instanced farm managers—indeed, it may soon apply to people working at every level in agriculture—being anxious to buy their own accommodation.
  I have had representations from the prison service, the police, the forces, the Church and mine managers. I am sure that hon. Members on both sides of the House can add to that list. It is an important point. As my hon. Friends have pointed out, it is right that they should get the capital gains relief on their proper
  604
  homes of which they would be deprived because they have to spend their working careers in tied accommodation.
  On that basis we welcome the new clause. We must be grateful to the Minister for responding to our pleas, but particular credit must go to my hon. Friend the Member for Weston-super-Mare and my hon. Friend the Member for Mid-Sussex. We can extend a general unqualified welcome to the new clause, late in the life of this Administration as it comes.
  Mr. Denzil Davies: I can give the hon. Member for Mid-Sussex (Mr. Renton) the assurance that there will be no charge to tax in the circumstances that he outlined.
  The hon. and learned Member for Dover and Deal (Mr. Rees) chastised me for moving the new clause too baldly. The main congratulations for this concession go to the hon. Member for Weston-super-Mare (Mr. Wiggin), who moved a similar amendment in Committee. On the Amendment Paper it was not supported by his Front Bench, although it was in speeches. I find that rather surprising. This is a concession which we are pleased to grant.
  Mr. Wiggin: We must be realistic. There were several hundred amendments in Committee. The Committee stage was taken in a short time and, therefore, the number of names is not relevant. My hon. Friends supported me in this issue last year and the year before and when the original legislation was drafted. It is not fair to say that we have not been as one on this issue. The amendment was in my name, but there were many other amendments in my hon. Friends' names which I also supported.
  Question put and agreed to.
  Clause read a Second time and added to the Bill.

New Clause No. 28

  PART DISPOSALS OF LAND
  "(1) In paragraph 10(3a) and (b) of Schedule 19 to the Finance Act 1969 (rollover relief for gain on part disposal of land where consideration does not exceed '£2,500') for '£2,500' there shall be substituted £10,000'.
  (2)This section applies with respect to any disposal after 5th April 1978.".—[Mr. Denzil Davies.]
  Brought up, and read the First time.
  Mr. Denzil Davies: I beg to move, That the clause be read a Second time.
  The new clause is the result of an amendment which was moved in Committee by the hon. Member for Westonsuper-Mare (Mr. Wiggin). It increases the roll-over exemption or relief for capital gains tax purposes which was set at £2,500 in 1965. It increases that sum to £10,000. It is not a complete exemption from tax but it is valuable both to the taxpayer and to the Revenue, not least because of the savings in administrative costs involved in making the calculation.
  Mr. Wiggin: I adopted this course as a result of advice from the Scottish Landowners Federation which, over the years, has given helpful advice to hon Members on both sides of the House on some subtle matters.
  The new clause recognises the change in values and allows a land owner selling a small piece of land for the widening of a road, the extension of a garden or the laying of a sewer pipe to delay payment of tax. It is a concession to inflation and represents administrative good sense. I welcome the new clause and I am grateful for the way in which the Government have accepted my suggestion.
  10.30 p.m.
  Mr. Peter Rees: There may be an element of monotony in my interventions this evening, but a pleasurable monotony, I hope, since I rise once again to congratulate my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin). It was in response to New Clause No. 88, which he so ably moved in Committee, that the Minister of State has produced this new clause.
  The House should note the Minister of State's point that this is a new clause which advantages the taxpayer and the Inland Revenue. I hope that there may be many more of those and that they will carry the support of the whole House. The Financial Secretary comments from a seated position. He injects a jarring note into our debates. He may be a little bruised by his experiences in our last debate. It would certainly be worth while for this Administration to go through the tax code to consider whether there is not a whole range of cases where, by raising the threshold and taking a considerable number of people and a considerable range of transactions out of
  606
  tax, the burden of the Inland Revenue and the taxpayer may be lifted.
  The relief here is even more generous than that which was foreshadowed by the Minister of State. It goes back to 5th April 1978 and not to 11th April. The Minister of State now looks a little startled, but I checked his speech in Committee. It is not often that I extend these unreserved congratulations to the Minister of State, but I congratulate him on this.
  On new clause No. 32, however, should I be lucky enough to catch your eye, Mr. Deputy Speaker, I shall have occasion to remark that, alas, the same generosity is not to be found.
  Mr. Wiggin: Will my hon. and learned Friend also acknowledge that these matters, when dealt with in this way, also consume a very brief period of parliamentary time?
  Mr. Rees: It is not for me to observe that. It may be a matter for the Patronage Secretary and those who manage Government business. We might get through our debates on the Finance Bill with considerably greater speed if all clauses and provisions advantaged both taxpayer and Revenue. I suspect that that would tax unreasonably the ingenuity of the Government Front Bench. We could not expect that from there, certainly not from the Financial Secretary.
  Mr. Denzil Davies: Perhaps I may explain why the clause goes back to 5th April 1978 whereas other new clauses do not. This roll-over relief applies to the whole year of assessment. It applies to all the gains within the year of assessment, and so the relief has to start from 5th April.
  Question put and agreed to.
  Clause read a Second time and added to the Bill.

New Clause No. 32

  ALTERATION OF DISPOSITIONS TAKING EFFECT ON DEATH
  '(1) For section 24(11) of the Finance Act 1965 (deeds of family arrangement, etc) there shall be substituted—
  "(11) Subject to subsections (12) and (13) of this section, where within the period of two years after a person's death any of the

  607
  dispositions (whether effected by will, under the law relating to intestacy or otherwise) of the property of which he was competent to dispose are varied, or the benefit conferred by any of those dispositions is disclaimed, by an instrument in writing made by the persons or any of the persons who benefit or would benefit under the dispositions—

  (a) the variation or disclaimer shall not constitute a disposal for the purposes of this Part of this Act; and

  (b) this section shall apply as if the variation had been effected by the deceased or, as the case may be, the disclaimed benefit had never been conferred.

  (12) Subsection (11) of this section does not apply to a variation unless the person or persons making the instrument so elect by written notice given to the Board within six months after the date of the instrument or such longer time as the Board may allow.
  (13) Subsection (11) of this section does not apply to a variation or disclaimer made for any consideration in money or money's worth other than consideration consisting of the making of a variation or disclaimer in respect of another of the dispositions.
  (14) Subsection (11) of this section applies whether or not the administration of the estate is complete or the property has been distributed in accordance with the original dispositions."
  (2) This section applies in relation to any variation or disclaimer made after the passing of this Act.'.—[Mr. Denzil Davies.]
  Brought up, and read the First time.
  Mr. Denzil Davies: I beg to move, That the clause be read a Second time.
  It is concerned with what were originally called deeds of family arrangement which are now called alterations of dispositions taking effect on death. I do not know whether that is an improvement, but in terms of practicality it probably is. That is dealt with in clause 56, which deals with capital transfer tax. It was supported in Standing Committee by the hon. and learned Member for Dover and Deal (Mr. Rees) and the right hon. Member for Crosby (Mr. Page). They requested that this change in the law should be extended to capital gains tax.
  The new clause meets the commitment that I gave in Committee that we would extend to capital gains tax the treatment that is provided in clause 56 in respect of capital transfer tax. That is reasonable and logical.
  Mr. Peter Rees: I must immodestly claim to have had some part in this my-
  608
  self. I cannot on this occasion bring into this issue my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin.) I was not privileged to move a new clause on this matter, but I drew it to the Minister of State's attention and I congratulate him on his generosity and logic.
  However, I must draw the attention of the House to two points. First, the clause is supposed to come into effect only after the passing of the Act. The Minister of State has effectively disposed of my point in relation to new clause No. 28 and he explained why that should be dated back to 5th April 1978. I take that point, and I recognise that that argument would not apply to new clause No. 32, but I draw attention to the fact that the parallel capital transfer tax relief under clause 56 which prompted me to suggest to the Minister of State that the relief should be extended to capital gains tax is expressed to apply from 11th April this year. If that be so, I do not see—if I may adopt the right hon. Gentleman's phrase—why in logic the relief from capital gains tax also should not apply from 11th April this year.
  I do not want to look this gift horse too closely in the mouth, and it may be a little late to amend it, due to the pressure under which we are having to examine the Bill on report. I do not wish to inject a partisan note, but if we had been able to give slightly more leisurely examination to the Government's new clause we might have put down an amendment.
  I do not know whether the Minister of State can offer an extra-statutory concession so that any deeds of family arrangement taking effect after 5th April should have the relief. I know that that affronts the sensitive soul of the Financial Secretary, who, like me, deprecates extra-statutory concessions, but there are always special situations.
  Second, I draw attention to the provision which makes it necessary for a person to claim the relief within six months after the date of the instrument. We had certain exchanges in Standing Committee when we pressed the Government on why it was necessary in so many cases for the taxpayer to claim the relief, especially where it was almost inevitable that it would be to his advantage to do so. It seems to me that this is an added burden on both taxpayer and Revenue, and, to take up the point so ably made by the

  609
  Minister of State earlier, if we can relieve the taxpayer and the Revenue of unnecessary burdens, we should seek to do so.
  I wonder whether the right hon. Gentleman can explain why it is necessary in this case for the taxpayer to make such a claim. It seems to me that there will inevitably be virtually 100 per cent. take-up, save on the part of those who may not have observed what may be available to them.
  Subject to those two criticisms, we give this new clause an unreserved welcome. We hope that the Minister of State will recall—I do not say the "assurance"—the indication which he gave that he would consider whether relief in respect of the same type of instrument could be extended to stamp duty. As the House knows, this kind of deed is subject to ad valorem stamp duty. If we can relieve the taxpayer in such cases from capital gains tax and capital transfer tax, then, to adopt the Minister of State's phraseology, in logic we should go further and consider relieving him of the ad valorem stamp duty as well.
  Mr. Graham Page: I thank the Minister for producing this clause on Report, and I thank him also for his kind words when introducing it. I wish to press the two points which my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) has raised, particularly on the question of the length of time for claims. We are dealing here with estates administered in the normal way, and it is a burden on those administering such estates to have to put claims in within six months.
  The difficulty is the greater when one has to deal with different dates here—namely, the date when the new clause is to take effect and the date on which clause 56 takes effect. I hope that there will be some flexibility in the application of the clause, whether by extra-statutory provision or not. It seems peculiar that we should have the two different dates applicable to capital gains tax and capital transfer tax relief in the case of what the Minister of State said were alterations of dispositions taking effect on death.
  Mr. Denzil Davies: I take first the question regarding the effective date being that of Royal Assent and not 11th April.
  610
  In practice, the Inland Revenue will give relief from capital gains tax for the period between 11th April and Royal Assent. Whether that is an extra-statutory concession or it is a relief given in practice —whichever is the better way of describing it—I do not know.
  Second, I take the question why the taxpayer has to make a claim. I understand that, in the extensive consultations with the Law Societies which preceded the tabling of the clause, one of the requests made by the Law Societies was that the taxpayer should have an option to claim or not to claim this relief. Since the taxpayer has an option, he has to make his claim.
  I take the point made by the right hon. Member for Crosby (Mr. Page) that six months could be a short time in relation to the administration of many estates. Of course, there is a discretion for the board to allow a longer time in which to make the claim. No doubt the right hon. Gentleman's remarks will be borne in mind, as well as the difficulty of making a claim in a complicated administration.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New Clause No. 37

  RETIREMENT ANNUITIES
  '(1) The Board may, if they think fit, and subject to any conditions they think proper to impose, approve an annuity contract under section 226 of the Taxes Act (approval of retirement annuity contracts), notwithstanding that the contract provides that the individual by whom it is made may require a sum representing the value of his accrued rights thereunder to be paid by the person with whom it is made to such other person as he may specify, that sum to be applied as the premium or other consideration under an annuity contract made between the individual and that other person and approved by the Board under that section.
  (2) References in subsection (1) above to the individual by whom the contract is made include references to any widow, widower or dependant having accrued rights under the contract.
  (3) Where in pursuance of any such provision as is mentioned in subsection (1) above of an annuity contract approved under section 226 of the Taxes Act, or of a corresponding provision of a contract approved under section 226A(1)(a) of that Act (contracts for dependants), a sum representing the value of accrued rights under one contract ("the original contract") is paid by way of premium or other

  611
  consideration under another contract ("the substituted contract"), any annuity payable under the substituted contract shall be treated as earned income of the annuitant to the same extent that an annuity payable under the original contract would have been so treated.
  (4) In section 230(7) of the Taxes Act (purchased life annuities, other than retirement annuities), there shall be added at the end of paragraph (b) the words "to any annuity payable under a substituted contract within the meaning of section (Retirement annuities) (3) of the Finance Act 1978, or".
  (5) In section 323(4) of the Taxes Act (pension business), for the words from ",being a contract" onwards in paragraph (a) there shall be substituted the words "(being a contract approved by the Board under that section), or any substituted contract within the meaning of section (Retirement annuities) (3) of the Finance Act 1978".'.—[Mr. Robert Sheldon.]
  Brought up, and read the First time.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): I beg to move, That the clause be read a Second time.
  This new clause meets the undertaking which I gave to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and allows a person with a retirement annuity contract with a life office to take the value of his accrued benefits and place them with another life office offering rather better terms. It is known as the "open market" option. At present, a taxpayer who has his contract with the life office has to make use of the same life office and is not able to make the change in the way which the hon. Member for Cirencester and Tewkesbury proposed. I was persuaded by his arguments, and the new clause will give a taxpayer the power to do so. It will also give the same power to his widow or any other dependant in regard to annuities under separate contracts. I am glad to be able to implement the undertaking which I gave.
  Mr. Peter Rees: I do not wish to detain the House, because on behalf of the Conservative Opposition Benches I welcome the new clause. Perhaps I should reveal a personal interest, since in the course of my professional life I have entered into several such annuity contracts. I am not aware that at present I am in negotiation to transfer them to any life or other office, but none the less I suppose that at some point in time I might be a beneficiary under the new clause.
  612
  Obviously we welcome the new clause, which is a warm response from the Financial Secretary to points made both by my hon. Friend the Member for Blaby (Mr. Lawson) and by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) during the final stages of our debates in Committee. We are glad to note that on occasions the Financial Secretary can take account of the points which we put to him. As I have said, I do not wish to qualify my thanks and congratulations to him—except in one regard.
  I notice that in subsection (1) this is all subject to conditions which
  "The Board may, if they think fit,"
  impose. I am always a little hesitant about this. We should like some indication about what kind of conditions the Board of Inland Revenue might think proper in this kind of case. I appreciate that the permutations, details and situations which can be encountered in this area are endless and that it may be necessary slightly to circumscribe the situations in which a transfer can be made. I am sure that it would be of assistance to those who are concerned in this area if we were to have some indication from the Financial Secretary, even if in rather general terms. Perhaps he could indicate that the terms under which approval will be granted will be published.
  However, at present I do not express any major reservation. As I have said, I think that it would be for the convenience of the House and of those who are concerned with these matters if the Minister could enlighten us as I have suggested.
  Mr. Robert Sheldon: I should be happy to look at the point about publication of the terms under which approval will be granted in the light of what the hon. and learned Gentleman has said. I should like to consider it further.
  10.45 p.m.
  Mr. Graham Page: May I press the Financial Secretary a little further? It is necessary that there should be some guidelines. I was hoping that he right hon. Gentleman would remove the word "consider" from what he said just now and assure us that there will be guidelines on which those advising the persons concerned will be able to judge what the

  613
  conditions are likely to be. Obviously, one must be flexible about this. When one applies the conditions to any particular case, the commissioners should have flexibility. But some definite guidelines would be of very great help to those concerned in this.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New Clause No. 38

  DEDUCTION OF TAX FROM PAYMENTS OF INTEREST IN 1978–79
  "Section 522 of the Taxes Act (effect of reduction in basic rate on deduction of tax from payments of interest) shall apply as if a resolution having statutory effect under the Provisional Collection of Taxes Act 1968 and providing for the charging of income tax as specified in section 11 above had been passed immediately before the passing of this Act; and the proviso to paragraph (b) of the said section 522 shall apply to any over-deduction to he made good in consequence of this section as if the reference to the passing of the Act imposing the tax were a reference to a date one month after the passing of this Act." —[Mr. Robert Sheldon.]
  Brought up, and read the First time.
  Mr. Robert Sheldon: I beg to move, that the clause be read a Second time.
  The clause is consequential upon the Government's acceptance of the amendments passed by the House in Committee reducing the basic rate from 34 per cent. to 33 per cent. As a result of the rules that we have for deduction of tax at source, there is a need to correct the over-deduction of tax when the rate is reduced. This is normally done by means of a resolution of the House. As a result of this change being made by amendment there can be no resolution, and the clause is required because there is no mechanism for dealing with the over-deduction of tax on interest. This puts the matter right.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New Clause No. 39

  CAPITAL ALLOWANCES: SPORTS GROUNDS
  Brought up, and read the First time.
  "(1) If a person carrying on a trade has since the passing of the Safety of Sports
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  Grounds Act 1975 incurred expenditure in respect of a sports stadium used for the purposes of the trade, then, if—

  (a) at the time when the expenditure was incurred the stadium was of the description specified in subsection (1) of section 1 of that Act but no designation order under that section had come into operation in respect of the stadium; and

  (b) the expenditure was incurred in taking steps which the local authority for the area in which the stadium is situated certify would have fallen within subsection (1)(a) or (b) of section 49 of the Finance (No. 2) Act 1975 (relief for safety expenditure at a designated sports stadium) if such an order had then been in operation and a safety certificate had then been issued or applied for.

  subsection (1) of the said section 49 shall have effect in relation to the expenditure mentioned in that subsection.
  (2) All such adjustments shall be made by discharge or repayment of tax as may be required for giving effect to the relief available under this section for expenditure incurred before the passing of this Act.
  (3) Any disclaimer or claim under section 41 (3) of the Finance Act 1971 in respect of the relief available under this section for expenditure incurred before the passing of this Act, and any claim for relief (or additional relief) under any other provision of the Tax Acts which is made in consequence of the relief available under this section for such expenditure, shall not be out of time if made within twelve months after the passing of this Act.
  (4) Any provision of regulations made under section 6(1)(b) of the Safety of Sports Grounds Act 1975 (power of local authorities to charge fees) shall, with the necessary modifications, apply to the issue of a certificate for the purposes of this section as it applies to the issue of a safety certificate.
  (5) In this section "sports stadium", "safety certificate" and "local authority" have the same meaning as in the said Act of 1975.
  (6) The Tax Acts shall have effect as if this section were contained in Chapter I of Part III of the Finance Act 1971.".—[Mr. Denzil Davies.]
  Brought up and read the First time.
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I understand that the new clause, as printed, requires a slight amendment.
  Mr. Denzil Davies: I beg to move, That the clause be read a Second time.
  As you have indicated, Mr. Deputy Speaker, there is a misprint on the Amendment Paper as a result of which a few words have been left out.

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  The omission follows the word "expenditure", five words from the end of subsection (1). The words which have been omitted are
  "as it has effect in relation to expenditure".
  I hope that that can be put right without the need for a manuscript amendment.
  The clause arises as a result of a new clause moved in Committee by my hon. Friend the Member for Nottingham, East (Mr. Dunnett), who pressed upon the Government the need to extend the relief given for expenditure incurred in connection with safety certificates at sports grounds. My hon. Friend referred especially to the problems at football grounds, but this covers all sports. It was due to my hon. Friend's persistence and the cogent arguments that he put forward in Committee that I was able to accept his suggested new clause in principle, subject to certain drafting deficiencies which had to be put right. The clause meets that commitment and the substance of the points made by my hon. Friend, and I am happy to move it in pursuance of that commitment.
  Mr. Jack Dunnett: I thank my right hon. Friend for so completely implementing his undertaking to me in Committee. All football clubs and many other athletic clubs will be extremely grateful for this considerable concession.
  Mr. Graham Page: I join the hon. Member for Nottingham, East (Mr. Dunnett) in welcoming the clause, and I congratulate the hon. Member on his persistence.
  The clause will be of great value in my area to football clubs and, as the Minister said in Committee, not only to football clubs. Rugby Union, Rugby League and all other sports clubs which have large stadia will welcome it.
  Mr. Peter Rees: I add my congratulations to the hon. Member for Nottingham, East (Mr. Dunnett), to whose perception we owe this new clause.
  I do not wish to add a jarring note, but the fact that the Minister had to suggest a manuscript amendment makes it appropriate to comment on the rather unseemly haste with which we are being asked to consider these new clauses. I know that they are relieving new clauses,
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  but it is always necessary to scrutinise the scope of them from the Opposition Benches.
  I see that the capital allowances are to be offered to persons carrying on a trade. There may be situations—they certainly do not occur in my constituency, but they might in others—where a sports ground has been leased to a sports club. Would the lessor, if he introduced the safety precautions, be entitled to capital allowances? I know that if one leases plant and machinery one is entitled to them, but perhaps this is a new extension of the allowances, and it would be interesting to have the assurance of the Minister of State that that kind of case, exceptional though it may be, is covered by the new clause.
  Subject to that, I am sure that on behalf of sportsmen throughout our constituencies, we are able to give the clause a warm welcome.
  Mr. Denzil Davies: I cannot give the hon. and learned Member the assurance that he seeks because I do not know. I shall certainly find out. It is not our intention to deny this relief to anybody. If, in fact, on the strict interpretation of the clause such relief is being denied, no doubt we can look at it and perhaps deal with it through an extra-statutory concession or by Inland Revenue Practice.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.
  Further consideration adjourned.—[Mr. Frank R. White.]
  Bill, as amended in the Committee and in the Standing Committee, to be further considered tomorrow.

STATE IMMUNITY BILL [LORDS]
Lords amendments to Commons amendments considered.
STATE IMMUNITY BILL [LORDS]
  Clause 23

    SHORT TITLE, REPEALS, COMMENCEMENT AND EXTENT
    Lords amendment No. 1:
    The Lords have agreed to the amendment made by the Commons in page 14, line 1, leave out subsection (3) and insert:
    '(3) Subject to subsection (3A) below, Parts I and II of this Act do not apply to proceedings in respect of matters that occurred before

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    the date of the coming into force of this Act and, in particular, sections 3, 4 and 9 do not apply in the case of any transaction, contract or arbitration agreement entered into before that date.
    (3A) Sections 2 and 12 above apply to any proceedings instituted after the coming into force of this Act.'
    with the following amendment:
    In subsection (3), line 4, leave out
    '3, 4 and 9 do not apply in the case of any' and insert
    '2(2), 3, 4 and 9 do not apply in the case of any written agreement'
    Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With Lords amendment No. 1, we may take the Commons amendment thereto and Lords amendment No. 2.
    The Solicitor-General (Mr. Peter Archer): I beg to move, as an amendment to Lords Amendment No. 1, to leave out from '2(2)' to end and insert
    '13(3) do not apply to any prior agreement, and sections 3. 4 and 9 do not apply to any'.
    At this stage in the evening I normally detect a feeling that the House would appreciate brevity rather than detailed exposition—
    Mr. Andrew F. Bennett: Too long.
    The Solicitor General: I would be neglecting my duty if I omitted to remind the House of the history of this matter. It relates to the situation in which a State enters into a contract with a private individual or a commercial undertaking and agrees by a provision in the contract that, in the event of proceedings arising out of that contract, it will not claim State immunity.
    The common law rule in the past has been, in plain English, that that agreement is not worth the paper it is written on. A State can effectively waive its immunity and submit to the jurisdiction only after a dispute has arisen, by a submission made in proceedings which have already been brought.
    The Bill provides that that shall no longer be the case. If a State purports to submit to the jurisdiction by a prior written agreement, it will be held to what it has said. I cannot believe that there will be any at the graveside to mourn the passing of the former common law
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    rule. The only question is on the transitional provisions.
    The Bill was introduced in another place, and when it arrived at this House it was generally agreed that there was an ambiguity in clause 23. It was not clear whether the new statutory provision applied to contracts made before the Act came into force when the dispute and the proceedings arose after the Act came into force.
    In Committee I introduced a Government amendment to resolve that ambiguity. Its effect was that in respect of amendments to the substantive law the Act should apply only as from the date when the Act came into force. But in relation to procedural matters the Act would apply in all proceedings initiated after it came into force, even where the proceedings were in respect of an agreement made prior to the Act.
    In Committee the right hon. and learned Member for Wimbledon (Sir M. Havers) moved an amendment to my amendment. He argued that to make the new provision applicable to agreements which had already been concluded was an infringement of the principle against retrospective legislation. I said that I was not entirely convinced, and I still take leave to doubt whether a State could evoke general indignation by saying "I have been deprived retrospectively of a legitimate expectation. I thought I would be allowed to break my promise, and now I find that I am being compelled to keep it."
    I accepted that there were weighty arguments on both sides, and I said that the matter was for my noble Friend the Lord Chancellor to decide and that I would refer it to him. He considered the matter and was impressed by the arguments adduced by the right hon. and learned Member for Wimbledon and by the arguments in another place. I think that my noble Friend was particularly impressed because the very institutions that stood to gain most from the change in the rule were those most anxious that the provisions should not operate retrospectively, because they feared that this country might acquire a reputation, however unjustly, for legislating retrospectively. Therefore, my noble Friend agreed to the amendment introduced in another place.

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    It now falls to me to move that we should agree with that amendment, but I fear that there is a further complication. The amendment in its present form makes provision only for written agreements to submit to the jurisdiction, those covered by clause 2(2). It makes no provision for written agreements to submit to execution, dealt with in clause 13(3). Clearly, it would be inconsistent to make different provision for the two cases. Therefore, the proposed amendment to the Lords amendment is to extend this principle to include also those agreements falling within clause 13(3).
    Finally, I think that I should repeat a warning given by my noble Friend in another place. The amendment says only that the statutory provision will not apply to agreements made before the Bill comes into effect. Therefore, the rules of the common law will apply, but the common law may no longer always recognise immunity. It appears from the majority of judgments of the Court of Appeal in the Trendex case that the common law itself may have developed. First, a State may have no immunity to waive where a contract was commercial in character, so an undertaking not to claim immunity may transpire to be academic. Secondly, even if it were entitled to immunity, the common law may now recognise that that can be waived by a previous agreement. These questions may have to be argued if and when they arise, but if that is the case at least it cannot be contended that that result came about by reason of retrospective legislation.
    Sir Michael Havers: I stayed in this Chamber after the division at 10 o'clock and time after time heard Opposition speakers congratulating the Government on their generosity and kindness and wondered whether I had wandered into the wrong Chamber. However, the needle is stuck in the groove and I am in exactly the same position. I, too, must congratulate the Government on responding to the request that I made in Committee and to the amendment made in the other place by Baroness Elles.
    I am grateful to the Government, because not only have they accepted the point I made in Committee but they have gone further and taken on board a
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    point which, I confess, we missed. It is right, as the Solicitor-General said, that there was an inconsistency in that we were dealing with the matters covered in clause 2(2) and had overlooked matters provided in clause 13. However, this has now been covered. The Solicitor-General made the point, and it should be appreciated, that it is at the request of those who would stand to gain most if the law had not been altered in the way in which we wish it to be altered by this further amendment that the element of retrospection should be removed. It would be usually their clients who would benefit by the element of retrospection, but quite properly the City of London Solicitors Company put the reputation of our law and legal system in England above the interests of the clients of its members—which in the long term, I suspect, will be in the interests of their clients—and said that it was important that there should be no feeling among foreign sovereign States that if they entered into contracts in this country there would be any risk of future retrospective legislation, which would be very damaging to the very important and remunerative work that is done in the City of London.
    Therefore, I join in what has become the common form since 10.15 p.m. in this Chamber tonight and I thank the Government very much for the response they have made to what I wanted them to do.
    Question put and agreed to.
    Lords amendment No. 2 to Commons amendment agreed to.

FALKLAND ISLANDS
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Frank R. White.]
11.0 p.m.
Mr. John Farr: I wish to raise on the Adjournment the illegal occupation of South Thule, in the Falkland Islands, by the Argentine.
This debate is taking place as the result of an unsatisfactory exchange at Question Time on 24th May. It relates to the illegal occupation, by an Argentine expedition of about 50 persons, of Southern Thule Island, which is one of the South

621
Sandwich Island group, in the Falkland Islands Dependencies, lying far to the east of the Falkland Islands and over 1,400 miles from Argentina.
I remind the House that on 24th May I asked whether Argentina had yet brought to an end this squatting, and, if not, when their departure would take place. Tonight, six weeks later, my remarks will hinge around these two essential questions—namely, whether Argentina has ended this occupation, and, if not, when their departure will take place.
I suggest right away that if Argentina has ended the occupation or is about to end it, perhaps the Minister will be kind enough to indicate that in the usual way. I would then sit down right away and we could have an early night's sleep. In the absence of that confirmation, I should like to point out that this occupation was first published and generally known on 7th May, about two months ago. Many hon. Members, on both sides of the House, want to know why the Foreign and Commonwealth Office has been so reluctant to make the announcement about this particular incursion beforehand.
If Her Majesty's Government are unable to give confirmation that the illegal occupation is about to come to an end, I want to urge the Minister to say tonight quite clearly that the situation which was continued there for about 20 or 21 months will no longer be tolerated and that Her Majesty's Government will formally notify the Argentine Government that, after a reasonable period for evacuation of personnel and stores—say, six months or thereabouts, which would enable the evacuation to take place in the spring and summer months there—after 31st December this year any illegal immigrants will be repatriated in the normal manner to their homeland.
I very much hope that tonight the Minister will give the House that particular assurance. It is a simple, straightforward request. A statement of that nature would be in accordance with international custom and precedent.
Whatever are the considerations in the Minister's mind, possibly relating to export orders for Argentina or matters relating to questions about the sovereignty of the Falkland Islands group as a whole, they should be of no concern to
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him in this particular issue, as they surely only fudge what is a perfectly clear case of illegal occupation by peope from a country which has a military Government.
Another point which has been puzzling the House for some time and which the Minister must clear up tonight is why the Government have remained silent about this invasion for about 21 months. Is it true that the Falkland Islands office in London was asked to keep quiet about this invasion when it occurred nearly two years ago, and, if so, what was the purpose of this conspiracy of silence? Can the Minister tell us what has been achieved since November 1976, when this occupation began?
In order to give a little background to the present serious situation, I shall remind the House of one or two facts which are of great importance. Southern Thule lies nearer to the Falkland Islands than it does to Argentina. A few years ago a navel vessel visited the island and raised the Argentine flag there, and, as far as is known, they were the first Argentinian people to visit the South Sandwich Islands, which had been British since their discovery by Captain Cook in 1775.
What are the consequences if this illegal occupation is allowed to continue? Surely, if it is allowed to continue it will be an invitation, by tacit assent, for Argentina or any other ambitious country to establish bases on other islands in the Falkland Islands which bases might well be physically defended. If this occupation remains unchallenged and these people are allowed to remain where they are, it will be an open invitation not only to the Argentine Government to take steps of this nature and perhaps cast their eyes elsewhere in the group but for other countries to do the same, especially in view of the possibility of there being very large oil and other natural resources under the ocean.
The Falkiandese people themselves—one tends to take it for granted that they are British and wish to remain so; the Minister was there recently and he found out for himself how staunchly pro-British they are—are very worried about this incursion. They are becoming more and more worried now because, apparently, Her Majesty's Government are pursuing the matter by sending messages to the

623
Argentine Government and leaving it at that.
It is possible that significant reserves of oil and other minerals could be found in the Falkland Islands group. If an illegal occupation is allowed to take place, it could well have a serious effect when it comes to our re-establishing our sovereignty and our rights to those resources on their being exploited. There are already known to be massive resources of natural food in the seas around the Falkland Islands which cover immense areas. The continued presence of a foreign base within the area would affect our establishment of sovereignty on those resources being exploited.
In 1976 we had an excellent report by Lord Shackleton dealing with some of the long-term problems in the Falkland Islands. The noble Lord made a number of important and interesting recommendations on the agro-structure of the country, education, further education and special measures for the economy and recommendations relating to fish and other matters in particular on extending the runway.
Perhaps the Minister will take the opportunity tonight to say whether the Government will do something about those recommendations. As far as the House can ascertain, very few of the noble Lord's recommendations have been put into effect, though I gather that they received universal support from both sides of the House.
I hope that the Minister can give me an assurance that a message will be sent to the Argentine Government giving them a deadline by which they must be out and that he will do his best to end the continued aggro by Argentina and serve it notice to quit Southern Thule.
11.12 p.m.
The Minister of State, Foreign and Commonwealth Office (Mr. Edward Rowlands): I accept and appreciate the concern of the hon. Member for Harborough (Mr. Farr) and many other hon. Members about this issue. It is one involving the principle of sovereignty, and that is why we take it seriously.
I should like to make clear exactly what we are dealing with, as I think the hon. Gentleman started to do in his
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way. He spoke of the infringement of the sovereignty of the Falkland Islands. There has been some confusion about this in recent weeks. Let us clear up some of it.
We are not dealing with an illegal occupation of the Falkland Islands themselves. But our estimation, Thule is—I must take 200 miles away from the hon. Gentleman—about 1,200 miles south-east of the Falklands. It is an inlet in the Southern Thule group of islands, which are in turn the southernmost of the South Sandwich Islands, themselves one of the Falkland Islands Dependencies, as opposed to the Falkland Islands themselves
None of the islands is inhabited. Indeed, few are habitable. The islet is at present in the depth of the Antarctic winter. Not only is the weather bad, as one would expect in a place which is only 60 miles north of the Antarctic Treaty area, but there is constant seismic activity and there is a coating of penguin guano—there is a more colloquial expression which I do not know whether Mr. Deputy Speaker would allow me to use—up to a metre thick. In other words, it is a very unpleasant place to be at the best of times.
Nor are we dealing at this time with a military occupation. It is important to say that. Although the Argentines use service personnel for logistic support in their Antarctic work, their activities on Thule are purely scientific. I do not think that anybody has challenged that assumption.
We have a dialogue with the Argentines about scientific work in this area, and they have both explained to us and given details publicly of the scientific work that has been carried on. A recent Argentine article on the subject said:
"The aim"—
of this activity—
"is scientific and includes the collection of meteorological and geological data, data on fauna and flora, magnetism, the study of the ice flows, heliography, etc."
The hon. Gentleman should also be reminded that the Argentines have carried on this scientific work on Thule on previous occasions—in the 1954–55 and 1955–56 Antarctic seasons. The record shows that successive British Governments considered then, as now, that the best way to pursue an answer to the

625
problems caused by such activity was by diplomatic action.
Indeed, I was extremely interested to consider how successive Governments have dealt with such situations. One of my predecessors in Mr. Churchill's Government reported to the House that there were no fewer than 11 such unauthorised occupations. He recommended—and rightly so—a policy of "firmness and patience". What is interesting about such a precedent is that the answer lay not in military confrontation but in diplomatic and political action. The result was a form of scientific co-operation which damaged the sovereignty arguments on neither side.
The hon. Member did not claim that we object to the scientific activities, and that is correct. We object to the fact that they are being carried out on British territory without our permission. That is the bone of contention of the hon. Member. What the Argentines are doing there does indeed constitute a violation of our sovereignty, and, as hon. Members are already aware, we have firmly protested to them about this. Our sovereignty position has thus been protected fully and explicitly.
It is important to spell out the background and perspective of the issue. We are disturbed at the renewal of activity on South Thule, despite its distance and despite the context in which I have placed the matter. When we learnt of it, we pursued the matter immediately. We are going back 18 months, but at that time we had reason to believe that the dispute would be resolved speedily and satisfactorily.
However, information was received at the end of 1977 that these activities might be renewed in the 1977–78 Antarctic season. We again protested to the Argentines, but because of the difficult conditions in the area, to which I have already referred, we were only able to verify that the Argentines had returned in February of this year.
It was only then that we had concrete and independent evidence that the Argentine activities were not short-term and temporary but had a wider and more permanent basis. The Governor in Port Stanley discussed the matter with the Falkland Island councillors, who have, of course, been informed of the action we have been taking in recent months.
626
The hon. Gentleman referred to a conspiracy of silence. I had a difficult decision to make on how to handle the issue. I thought that it would be wrong for us to have a slanging match with the Argentine Government. The original presence of the Argentines on the island had become known earlier and it had been mentioned in the Falkland Islands. The hon. Gentleman has a right to criticise me, but it was my view that we should not enter into a public slanging match on an issue which, I firmly believe, can and should be resolved by diplomatic and political action. I do not support the idea of a conspiracy of silence. Discussions took place between ourselves and the members of the important and valuable committee in London. I was not at the meetings, but the official view was that we would not embark on a slanging match and it was up to the committee to decide what to do. I go no further than that because there is no point in going over old ground.
The Government take this matter seriously. We have protected our sovereignty position by formal action and by diplomatic and political action. If the hon. Gentleman believes that by not pursuing a policy of direct and hard confrontation with Argentina we have jeopardised our sovereignty rights or the rights that follow from our sovereignty in regard to oil or fisheries, I can assure him that this is just not so. We firmly believe that international disputes and incidents of this sort, which are not new in our relationships with the Argentine Government, can and should be pursued by negotiation rather than by force.
It has been suggested by some that we should break off any form of negotiation with the Argentine Government and, therefore, pursue a course of confrontation. I say to those who take that view —the hon. Gentleman was extremely moderate in his remarks—that there are many wider issues involved in the discussions and negotiations concerning not only an uninhabited piece of territory, to which, nevertheless, we attach importance as the issue of sovereignty is raised, but the people of the Falkland Islands.
The matters under discussion and negotiation cover many areas of economic co-operation as well as sovereignty. To break off negotiations would be to take a serious step. It is one that we should

627
not take without considering the full and fundamental implications.
We must say to the Argentine Government that the negotiations that began last year were begun in a spirit of agreement. My visit to the islands involved the most extensive consultation with the islanders. I challenge any Minister in a previous Government to say that it was not the most extensive that has ever been made. There were agreed terms of reference with the Argentine Government which implied that no action should be taken which would challenge the respective positions of sovereignty.
The development of our negotiations and discussions depends upon Governments creating the right climate and context. The Argentine authorities should and must be aware of that.
The Argentine Government's activities on Thule are only a part of the more general problem of our dispute with the Argentine Government about the Falkland Islands. The Government's policy throughout has been one designed to protect the interests and to further the prosperity of the Falkland Islanders. Such prosperity is inevitably dependent upon a measure of co-operation.
We must accept the realities of life. No one will invest in the area, privately or publicly, while a cloud of political uncertainty hangs over the future of the islands. Such investment is necessary whether for the development of possible, though as yet unproven, oil resources, of fishing or of industries based on alginates. That is why, with the explicit concurrence of the islanders, we have embarked on a series of meetings with the Argentine Government to explore possible ways forward in that respect.
These are early days. We have had only one meeting of the working group that was set up to consider the possibilities. We have made it clear to the Argentine Government that actions such as those they are undertaking in Southern Thule, and those which involve the harassment of shipping in waters over which we could ourselves claim fishing rights, make the process of negotiating much more difficult for us. However, like previous Governments in the 1950s and like other Governments who have dealt with such problems in the past,
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we believe that it is necessary to be patient. Patience can go hand in hand with firmness. That is what my predecessors have said from both sides of the House. I support that view.
Whenever and wherever there has been an Argentine infringement of our sovereignty, we have protested vigorously. By doing so we have protected our position. In parallel, we have been seeking solutions that would be compatible with both the development of the area and the desire of the islanders to remain British.
Although the exploratory process is still in an early stage, it is sure—everybody knows it and I have repeated it over and over again in the House—that no proposals will be brought before the House unless we know that such proposals have the support of the islanders. With that assurance, they have nothing to fear from the exploratory process on which we have embarked.
It is in that context that I ask the House to consider what I agree are disturbing developments on Southern Thule. Of course we should react. We have reacted promptly and firmly. I ask the hon. Gentleman to accept that we should not over react.
Finally, I should say that, over many years, understandably the feeling has grown—and I think that the hon. Gentleman might express it not only on this occasion, but on others—that the Foreign Office, its Ministers and officials, thousands of miles away from the Falkland Islands, do not have deep concern and worries for the islanders and the islands. It is no part of my brief remarks tonight to comment on the historic past, but during the last two years we have tried to create a new relationship with the islanders based on consultation and contact.
The hon. Gentleman referred to the Shackleton report. I share and support not only the sentiments but many of the recommendations in that report. We have made new efforts to get developments off the ground in order to meet what I once described as the "doorstep hopes" of the majority of islanders. They have an interest in getting on with a number of specific developments. We may not be able to accept some of the recommendations in the Shackleton report, but I must tell the hon. Gentleman that we have already done a great deal.
Mr. Farr: Does the Minister recognise that we cannot wait for ever for the Argentine Government to co-operate? Will he assure the House that if ready co-operation in a sensible manner, is not forthcoming from the Argentine Government at an early date, we shall proceed with the necessary work set out in the Shackleton report?
Mr. Rowlands: There are two different areas of developments. There are developments which extend beyond the islands and inevitably involve us in areas of co-operation with the Argentine Government. There are things on the islands that we can do which arise from the Shackleton report. That is what I meant when I referred to the "doorstep hopes" of the islanders. A great deal more progress has been made on those things in the last 18 months to two years than has been made for a very long time.
I am proud that, for the first time, a road is to be built between Stanley and Darwin. That is the result of pressures that have been brought to bear both
630
personally ministerially and collectively. A new school is to be built. We have acquired public equipment so that the islanders may build some of these public developments. There is a host of things which have been listed in replies to Questions. I shall be happy to provide the hon. Gentleman with the list as he has taken such a genuine interest in this matter, an interest which I share.
Whatever criticisms one makes—the hon. Gentleman may make them—and however we choose to act or deal with the kind of problems we have had to face in relation to Southern Thule, our actions are dictated by real concern, created by my own knowledge of and contact with the islanders and for the well-being and future of the people I have the privilege and pleasure of serving as a Minister. It is in that context that I ask the hon. Gentleman to appreciate the way in which we are trying to deal with this incident.
Question put and agreed to.
Adjourned accordingly at twenty-eight minutes past Eleven o'clock.

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  OVERSEAS DEVELOPMENT
    Eritrea
    Eritrea
  NATIONAL FINANCE
    Road Haulage Firms (Government Action)
    Road Haulage Firms (Government Action)
    Motor Vehicle Benefits (Taxation)
    Motor Vehicle Benefits (Taxation)
    Personal Incomes
    Personal Incomes
    Cheques
    Cheques
    Ticket Touts (Tax Assessments)
    Ticket Touts (Tax Assessments)
    Civil Servants (Air Travel)
    Civil Servants (Air Travel)
  AGRICULTURE, FISHERIES AND FOOD
    Horses and Ponies (Export)
    Horses and Ponies (Export)
  EMPLOYMENT
    Homeworkers
    Homeworkers
    Cadbury Typhoo, Catterick
    Cadbury Typhoo, Catterick
    Youth Opportunities and Special Temporary Employment Programmes (Thanet)
    Youth Opportunities and Special Temporary Employment Programmes (Thanet)
    Launderettes
    Launderettes
    National Service
    National Service
    Small Firms Employment Subsidy
    Small Firms Employment Subsidy
    Employment Protection Laws (Survey)
    Employment Protection Laws (Survey)
    David Brown Foundry, Penistone
    David Brown Foundry, Penistone
    Health and Safety Commission
    Health and Safety Commission
    Advisory, Conciliation and Arbitration Service
    Advisory, Conciliation and Arbitration Service
    Unemployed Persons (Chester)
    Unemployed Persons (Chester)
    Penistone
    Penistone
    Barclays Bank Brent (Staff Pay)
    Barclays Bank Brent (Staff Pay)
    Staffordshire (Industrial Workers)
    Staffordshire (Industrial Workers)
    UNITED STATES OF AMERICA (PRIME MINISTER'S VISIT)
    UNITED STATES OF AMERICA (PRIME MINISTER'S VISIT)
    PEACE-TIME HISTORIES
    PEACE-TIME HISTORIES
  TRANSPORT
    Minibuses (European Community Regulations)
    Minibuses (European Community Regulations)
    Lorries (Jack-Knifing)
    Lorries (Jack-Knifing)
    Motor Cycle Training Schemes
    Motor Cycle Training Schemes
    Vehicle Excise Duty (Excess Payments)
    Vehicle Excise Duty (Excess Payments)
    Motorways (Traffic News Broadcasts)
    Motorways (Traffic News Broadcasts)
    Channel Tunnel
    Channel Tunnel
    Port of London Authority
    Port of London Authority
    Rail Fares (Price Commission's Report)
    Rail Fares (Price Commission's Report)
    Motorways (Petrol and Catering Centres)
    Motorways (Petrol and Catering Centres)
    Nationalised Industries
    Nationalised Industries
    M5 and M6 (Repairs)
    M5 and M6 (Repairs)
    Dangerous Substances
    Dangerous Substances
    M63, Stockport
    M63, Stockport
    Car Parks
    Car Parks
    Ports
    Ports
    Noise Insulation Regulations 1975
    Noise Insulation Regulations 1975
    Road Safety (Conference)
    Road Safety (Conference)
    Pedestrians (Residential Areas)
    Pedestrians (Residential Areas)
    National Bus Company
    National Bus Company
    Driving Licences (Regulations)
    Driving Licences (Regulations)
    British Railways
    British Railways
    Public Services (London Environs)
    Public Services (London Environs)
    A5, Whittington (Accidents)
    A5, Whittington (Accidents)
    A259, Brookland (Bypass)
    A259, Brookland (Bypass)
    Motorway Service Areas (Inquiry)
    Motorway Service Areas (Inquiry)
    Roads (Camber)
    Roads (Camber)
    Transport and General Workers' Union
    Transport and General Workers' Union
    Railway Commuter Organisations
    Railway Commuter Organisations
    Freight Integration Council
    Freight Integration Council
    Road Haulage
    Road Haulage
    Tachographs
    Tachographs
    Policy (White Paper)
    Policy (White Paper)
    Flixborough (Phenol Supplies)
    Flixborough (Phenol Supplies)
    Lorries (Speed Limits)
    Lorries (Speed Limits)
    Warminster Bypass
    Warminster Bypass
    Motor Vehicles (Registration)
    Motor Vehicles (Registration)
    Railways (Electrification)
    Railways (Electrification)
    Trunk Road Assessment (Advisory Committee)
    Trunk Road Assessment (Advisory Committee)
    Traffic Commissioners
    Traffic Commissioners
  FOREIGN AND COMMONWEALTH AFFAIRS
    European Community Employees (Overpayment)
    European Community Employees (Overpayment)
    Morocco (Sahara Dispute)
    Morocco (Sahara Dispute)
    Angola (British Subjects)
    Angola (British Subjects)
    Baghdad (British Diplomat's Arrest)
    Baghdad (British Diplomat's Arrest)
  INDUSTRY
    Industrial Development Certificates
    Industrial Development Certificates
    Nationalisation (Compensation)
    Nationalisation (Compensation)
    British Aerospace
    British Aerospace
  TRADE
    Uganda
    Uganda
    South Africa (Trade Missions)
    South Africa (Trade Missions)
    Queen's Award to Industry
    Queen's Award to Industry
    Horsemeat (Exports)
    Horsemeat (Exports)
    Export Credits (Finance)
    Export Credits (Finance)
  WALES
    Pwllheli (Advance Factory)
    Pwllheli (Advance Factory)
  ENVIRONMENT
    Titchfield (Garden)
    Titchfield (Garden)
    Industrial Dereliction
    Industrial Dereliction
    Derelict Land (Leek)
    Derelict Land (Leek)
    Gipsies
    Gipsies
    Coastal Erosion
    Coastal Erosion
    New Town Development Corporations
    New Town Development Corporations
    Regional Water Authorities
    Regional Water Authorities
    Housing Association Schemes
    Housing Association Schemes
  DEFENCE
    Provost Training Aircraft
    Provost Training Aircraft
    Recruiting
    Recruiting
    Territorial Army Volunteer Reserve (Shapland Report)
    Territorial Army Volunteer Reserve (Shapland Report)
    Aircrew Candidates
    Aircrew Candidates
  SOCIAL SERVICES
    Personal Incomes
    Personal Incomes
    Hospital Waiting Lists
    Hospital Waiting Lists
    Prescribing Costs
    Prescribing Costs
    Drugs
    Drugs
    Perinatal Epidemiology Unit (Oxford)
    Perinatal Epidemiology Unit (Oxford)
    Handicapped Students (Supplementary Benefit)
    Handicapped Students (Supplementary Benefit)
    Hospital Beds
    Hospital Beds
    National Health Service Employees (Merseyside)
    National Health Service Employees (Merseyside)
    Pensions Increases
    Pensions Increases
    London Area Health Authorities (Discussions)
    London Area Health Authorities (Discussions)
  NORTHERN IRELAND
    Intensive and Special Care Baby Units
    Intensive and Special Care Baby Units
    Infant Mortality
    Infant Mortality
    Pregnancy
    Pregnancy
    Midwives
    Midwives
    Births and Mortality Rates
    Births and Mortality Rates
    Births
    Births
    Smoking and Drinking (Women)
    Smoking and Drinking (Women)
    Cereal Production
    Cereal Production
    Terrorist Activities
    Terrorist Activities

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

LORD HUTCHINSON OF LULLINGTON
Jeremy Nicolas Hutchinson, Esquire, QC, having been created Baron Hutchinson of Lullington, of Lullington in the County of East Sussex, for life—Was, in his robes, introduced between the Lord Gardiner and the Lord Donaldson of Kingsbridge.
The Lord Rennell—Sat first in Parliament after the death of his kinsman.

SEA FISHING INDUSTRY: POLICY
2.46 p.m.
Baroness WARD of NORTH TYNESIDE: 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 are their plans on the nationalisation of parts of the sea fishing industry.
Lord STRABOLGI: My Lords, Her Majesty's Government have no such plans.
Baroness WARD of NORTH TYNESIDE: My Lords, I thank the noble Lord for that complete and outstanding declaration, which will give the fishing community, particularly in my part of the world, very much pleasure. I thank the noble Lord for the Answer.
Lord STRABOLGI: My Lords, the main problems of the fishing industry, of course, stem mainly from the unsatisfactory Common Fisheries policy, and not from threats of nationalisation.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, is this not the first time that a Minister has answered a question when none has been asked?
Lord ORR-EWING: My Lords, would the Minister not agree that since Mr. Hugh Gaitskell fought so very gallantly in the mid-fifties to eradicate further nationalisation from the Labour Party's programme there has been steady and continued nationalisation? Can we be assured that when the Labour Party Conference has, with a huge majority, adopted this programme—with 5·9 million voting for it and 0·12 million against it—it will not be in the Manifesto? Can we be assured of that right now?
Lord STRABOLGI: My Lords, I must ask the noble Lord to wait for the next Manifesto and the policy of the next Labour Government.
Lord BLYTON: My Lords, could my noble friend assure me that he will not allow the Tory Party to dictate the issues on which we shall fight the next Election?
Lord ORR-EWING: My Lords, will the noble Lord bear in mind that 90 per cent. of the electorate are against it, so the sooner we know about it the greater the chance he has of selling this policy to the country? He has a lot of way to make up, since 90 per cent. are now opposed to it.
Lord STRABOLGI: My Lords, I do not think that is anything very much to do with the original Question.
Lord LEATHERLAND: My Lords, is my noble friend aware of the fact that, with the fishing industry under private enterprise, it is very difficult indeed to buy kippers, and that when you do buy them they are nearly ten shillings a pair? While I do not want to see the fishing industry nationalised, is it not about time something was done about this?
Lord STRABOLGI: My Lords, my right honourable friend the Minister of Agriculture continues to negotiate at Brussels to get the best arrangements that we can, but we are labouring under the Treaty of Accession. I do not want to make a Party point here, but the Conservatives did their best but they did not do well enough.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, is it not possible that the shortage of kippers is due to the shortage of herrings? Will the noble Lord perhaps explain to his noble friend that kippers are made out of herrings, which are in short supply?
Lord STRABOLGI: Yes, my Lords; there is a ban on herring fishing at present.
Baroness WARD of NORTH TYNESIDE: My Lords, will the noble Lord bear in mind, we having had an exchange, that I am interpreting that to mean that in the Manifesto—when it does come, if it ever comes—there will be no plans for nationalising the fishing industry? That is what (I think he will agree with me) I have interpreted from the very straight answer that he gave me. I shall always watch what he really is doing.
Lord STRABOLGI: My Lords, I said no such thing.

CYPRUS: EXCHANGE OF VIEWS
2.51 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what conclusions were reached in the discussions between the Prime Minister and President Kyprianou of Cyprus.
The MINISTER of STATE, FOREIGN and COMMONWEALTH AFFAIRS (Lord Goronwy-Roberts): My Lords, the Prime Minister and the President had a friendly and frank general exchange of views on the Cyprus problem. The Prime Minister made it clear—and the President warmly welcomed this—that Britain continues to be deeply concerned to see a just and rapid settlement.
Lord BROCKWAY: My Lords, is it not now time for some new initiative four years after the Turkish invasion of Cyprus? Could my noble friend confirm the Press reports that in these talks there were two fundamental issues: partition or federation and demilitarisation of the Island? Is it not the case that the
984
Turkish proposals involve partition of the Island, while the Greek Cypriots are urging federation with demilitarisation and a united police force under the United Nations? Will Her Majesty's Government give full support to those proposals?
Lord GORONWY-ROBERTS: My Lords, my noble friend has mentioned a number of conflicting proposals. The heart of the matter is for the two communities themselves to negotiate the terms of the settlement with which ultimately they will have to live. I think that I can say that we would be prepared, together with our partners, to accept anything which was acceptable to the two communities. We have made it clear that we are willing to help in any way which the parties would find useful, without ourselves intruding unduly to indicate what particular form of solution appeals to us.
Lord MAYBRAY-KING: My Lords, will the noble Lord remember that we, together with Turkey and Greece, have a special responsibility for the wellbeing of Cyprus? While we welcome his Answer to the original Question, is he aware that all Greek Cypriots and, indeed, many Turkish Cypriots want only the independence of Cyprus—not association with Greece or Turkey; but utter independence and the end of the occupation of part of Cyprus by a foreign Power?
Lord GORONWY-ROBERTS: My Lords, I think that I can best answer the two points raised by my noble and right honourable friend by saying that the Prime Minister agreed at his recent meeting with the President that the 1960 Cyprus Treaties remain valid, at least until they are changed by agreement. On the second point, Her Majesty's Government recognise only one Government in Cyprus, that of the Republic of Cyprus under President Kyprianou. That is the right way to underline our belief in the independence of Cyprus.
Lord BROCKWAY: My Lords, may I ask an immediate question? Is my noble friend aware that President Kyprianou has been refused permission by the Turks to visit the Greek-Cypriot enclave in the Turkish area and has appealed to the Secretary-General of the United Nations for such permission?

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Will our Government give support to that request?
Lord GORONWY-ROBERTS: My Lords, without addressing myself to the detail of the particular case that my noble friend has raised, I can certainly give a general undertaking on behalf of the Government that we shall assist in every way possible to make access by members of either community more free and more possible in the future than it has been in the past. I would remind my noble friend that the Secretary-General, Doctor Waldheim, is currently examining the possibility of a new initiative to bring the two communities together to deal, among other things, with questions such as the one that my noble friend has just raised.

BRITISH CALEDONIAN AIRWAYS: "LABOUR'S PROGRAMME 1976"
2.54 p.m.
Lord THOMAS: 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 are their plans on the nationalisation of British Caledonian Airways as set out in Labour's Programme 1976 and endorsed by the Labour Party's Annual Conference.
Lord WINTERBOTTOM: My Lords, the policy of Her Majesty's Government is set out in the White Paper, Future Civil Aviation Policy, presented to Parliament on 11th February, 1976. It does not include plans for the nationalisation of British Caledonian Airways.
Lord THOMAS: My Lords, while thanking the noble Lord for that Answer, may I ask whether he would agree that in the Labour Programme dated 1975—and I quote from page 77—it says:
"In our view the most sensible course of action would be to take British Caledonian into public ownership"?
Lord WINTERBOTTONI: My Lords, if the noble Lord could tell me and my noble friends who in the Conservative Party is drafting the Labour Party Manifesto it would be of great help to us.
Lord BOYD-CARPENTER: My Lords, does the noble Lord appreciate that among people outside who are insufficiently sophisticated to distinguish between the Labour Party and the Government, there can be a good deal of uncertainty and unhappiness caused by the publication of what are regarded as threats of this kind; and that this is particularly so in respect of the staff of this highly-efficient and competitive airline? Can he find some way of reassuring them that the Labour Party Conference was talking nonsense on this occasion?
Lord WINTERBOTTOM: My Lords, so far as I know, the Labour Party Conference has not talked about this at all. The statement that I have made is definitive.
Lord CLIFFORD of CHUDLEIGH: My Lords, is it not a fact that BOAC was running the South American route at a loss; and that they then handed that run over to British Caledonian who, within two years, were making a colossal profit?
Lord WINTERBOTTOM: My Lords, that is very much a different Question.
Lord LEE of NEWTON: My Lords, would my noble friend agree that the nationalisation of Rolls-Royce has been an outstanding success? Would he not therefore take the advice of the eminent nationalisers on the opposite side of the House?
Lord WINTERBOTTOM: My Lords, speaking personally, I believe that any system can be made to work if people want it to work—and people wanted Rolls-Royce to work.
Lord GLENKINGLAS: My Lords, does the noble Lord not agree—and I am delighted to hear that the Government have no intention of nationalising British Caledonian—that those of us who have to travel regularly from London to Scotland have found an enormous improvement in the service while there were the two different lines operating?
Lord WINTERBOTTOM: My Lords, I believe in competition between nationally-owned and privately-owned services. May the best man win!

CONCORDE: UNITED STATES' AIRLINES
2.59 p.m.
The Earl of KIMBERLEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking to sell or lease Concordes to Pan American and TWA.
Lord WINTERBOTTOM: My Lords, the chairman and chief executive of Pan American has recently publicly stated his airline's intention to take a further serious look at the Concorde aircraft. We welcome this declaration, and the manufacturers have been asked to report on the nature and extent of the airline's interest in Concorde, and to suggest how it might best be met. Trans-World Airlines have indicated that they have no current plans to operate the aircraft.
The Earl of KIMBERLEY: My Lords, while thanking the noble Lord for that rather satisfactory Answer, may I ask whether he can give any idea of how long he anticipates the negotiations will continue? Should they continue satisfactorily, would it be British Airways or Pan American who will maintain this particular aircraft? Lastly, does the noble Lord realise that for two or three years I have advocated that Concorde should be leased? If this one works, will the Government use their best endeavours to lease the remaining Concordes to other airlines?
Lord WINTERBOTTOM: My Lords, the noble Earl has asked a number of questions, but the key question which immediately concerns us is this: When can a decision be expected? This is a complex matter affecting a number of parties. The airline's chairman and chief executive has indicated that Pan Am's own analysis is still at an early stage and it will not be rushed. This is very much the position of Her Majesty's Government and the manufacturers.
The Earl of KIMBERLEY: My Lords, I appreciate that answer from the noble Lord. Is he able to confirm that, should this matter go well, they will endeavour
988
to lease the other aircraft which at present are unsold or unleased?
Lord WINTERBOTTOM: My Lords, I would have thought that was blindingly obvious. We do not want these beautiful aircraft sitting on the ground doing nothing.

KC135 TANKER AIRCRAFT: AIRFIELD LOCATION
Lord DENHAM: My Lords, I beg to ask Her Majesty's Government a Question of which I have given Private Notice. The Question is as follows:
To ask Her Majesty's Government whether they have now taken a decision on which airfield is to be provided for the KC135 aircraft as requested by the United States Air Force.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m. my noble friend Lord Winter-bottom will answer this Question in the form of a Statement.

EMPLOYMENT PROTECTION (CONSOLIDATION) BILL [H.L.]
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I beg to introduce a Bill to consolidate certain enactments relating to rights of employees arising out of their employment; and certain enactments relating to the insolvency of employers; to industrial tribunals; to recoupment of certain benefits; to conciliation officers; and to the Employment Appeal Tribunal. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a.—(The Lord Chancellor.)
On Question, Bill read 1a; and to be printed.

GREATER LONDON COUNCIL (MONEY) BILL
Read 3a, and passed.

STATUTORY INSTRUMENTS
The PRINCIPAL DEPUTY CHAIRMAN of COMMITTEES (Lord Greenwood of Rossendale): My Lords, on behalf of my noble friend the Chairman of Committees, I beg to move the Motion standing in his name on the Order Paper.
Moved, on behalf of the Committee of Selection, That the Earl of Listowel be added to the Joint Committee on Statutory Instruments in the place of the Lord Peddie deceased.—(Lord Greenwood of Rossendale.)
On Question, Motion agreed to.

INTERPRETATION BILL [H.L.]
Report received.
NATIONAL HEALTH SERVICE (SCOTLAND) BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
LOCAL GOVERNMENT BILL
Report received.

WALES BILL
3.4 p.m.
Report received.
Clause 2 [Time of election and term of office of members]:
Lord ELTON Lord ELTON moved Amendment No. 1:
Page 2, line 32, leave out ("elected to fill a casual vacancy") and insert ("otherwise").
The noble Lord said: My Lords, at the Committee stage of this Bill we tabled an Amendment to provide a means for the Assembly to be dissolved under circumstances where that was the only solution to a political deadlock. There followed an exchange across this Table and across the Floor of the Committee in which the principal doubt was whether or not there was to be in the Welsh Assembly an Executive within the meaning of the term normally attributed to it.
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The noble Lord, Lord Harris of Greenwich, understandably advanced the view that, unlike the provision in the Scotland Bill whereby the Assembly would have a legislative Chamber with an Executive dependent upon carrying a majority of the Members of that Chamber with it, and exposed to all the risks of failing to achieve such a majority, unlike that situation which required a power of dissolution of some form or another, in the Welsh Assembly there was no Executive because it was not a legislative Chamber.
There are two considerations here. The first is that there is a considerable measure of legislative power entrusted to the Welsh Assembly as a body, although this takes the form of subordinate legislation rather than statutory legislation. That I think is not the principal consideration, although it was advanced as an important one at the Committee stage. The important consideration seems to me to be this. The Welsh Assembly, as envisaged by the Government when they drafted this Bill, was to consist of a Chamber made up of representatives of electors in constituencies of different Parties sitting in the Chamber, and most of the committees to which it would delegate the greater part of its powers would be similarly constructed, while the Executive Committee—note the word, my Lords—was to be made up only of the majority Party. That is a position which we have I hope happily changed.
Another change in the Bill since it was originally drafted has been the introduction by my noble friend Lord Harlech, and others, of the principle of proportional representation which could quite radically alter the expected balance of Parties in the Chamber of the Welsh Assembly as a whole. We have no means of telling in what form this Bill will return to us from another place, nor until we have seen that form can we tell which of our Amendments ought to stand and which ought to fall. It is therefore by no means unlikely that we shall receive a Bill which has an Executive Committee restored to its mono-Party construction and thus in effect restored to the role of a Cabinet in any other Chamber and, at the same time, an Assembly which could be well of a colour which led to its being hung between two different political groupings. In other words, there could be a situation

991
where that balance could lead to the stultification of the business of the Assembly. It is not a prospect which is likely to occur frequently, but one which, if it arose, could give rise to considerable embarrassment and inconvenience.
I do not regard this as in any way a Party measure, and I do not think that any of your Lordships will. It is a question of the practical machinery of Government. We are well aware of the sensitivity that exists in Wales about any restriction of the powers of the Welsh Assembly, and of the extent to which noble Lords opposite feel that this should be voiced here. Therefore, we do not seek to introduce any reduction in the authority of the Assembly at all. We wish merely to provide the means by which the Assembly, when it recognises that the only way forward is by means of what we in this House call an appeal to the country (and the Assembly might call it the same), that is to say, dissolution and an election, has that alternative presented to it. When the Assembly have considered it, if they wish to do so, they should take advantage of it. Nobody will impose it upon them; nobody will overrule their decision; but they should be empowered to set in motion the machinery for winding up an Assembly which might otherwise fritter away two or even three years in sterile argument at great expense and to the frustration of their electorate and, indeed, of the Members of the Assembly itself.
I hope noble Lords opposite will accept that this Amendment is put forward therefore in a non-partisan and constructive manner, and that they will find it in them either to accept the Amendment or to rebut it with arguments which will seem to us more forceful than those which they advanced against the same principle at the Committee stage. I beg to move.
Lord DAVIES of LEEK: My Lords, if I may insert a caveat, I am worried about the number of Amendments that are put forward, as I mentioned earlier when we were debating the future Assembly. We are trying in regard to this Assembly, so it seems, to make a completely watertight Bill, and thus an enactment which will be water-tight, for an organisation which is not yet in existence and which may or may not come into existence.
992
Nevertheless, it is an organisation which we hope will be an intelligent organisation, and therefore many things will be empirical in its existence. I do not in any way wish to deprecate the magnificent work and the effort that the noble Lord, Lord Elton, has put in to improve the Bill; but in some cases I sincerely believe that we are trying too much to put down exact phraseology to guide an Assembly which will have to learn to govern itself by trial and error, to put it simply. I hope we shall not have too many of these "fernickety"—perhaps that is an ugly word, but nevertheless I will use it—Amendments, which in the end could stultify an organisation which must learn through trial and error.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, as the noble Lord, Lord Elton, said, we discussed this matter at some length in Committee, and I said then that we did not regard it as necessary to give the Welsh Assembly the power of premature dissolution. However, we do regard it as necessary for the Scottish Assembly, in certain very limited circumstances, and I explained that also when we dealt with this in Committee. In view of what the noble Lord, Lord Elton, has said in moving this Amendment, I do not think there is any need for me to remind the House that the Scottish Assembly is to be a legislative body, from which a separate Executive is to be formed. The Welsh Assembly is not to have a legislative competence and is itself to be the Executive.
In Scotland, the Executive will need to secure a sufficient measure of support from the Assembly as a whole if it is to continue to ensure the progress of essential public business. If a situation arose in which the Scottish Assembly could not ensure the continuance of essential business, the good governance of devolved matters would clearly be at quite considerable risk. Such a situation could arise, obviously, because of the progressive effect of a number of by-elections or because of political realignments within the Assembly itself. Such a situation could persist so long as the Assembly remained constituted broadly as it was at the time of the last Assembly election. Clearly, a situation of the kind I have just described would be one of some

993
crisis. That is why the Scotland Bill provides for the test of a two-thirds majority of all Members before a premature election could be held. What is more, the Members of the Assembly elected after a premature dissolution would only serve out the remainder of the original four-year term.
I do not believe that a similar situation could be seen as arising in Wales, on the basis of the Bill that is before us. There is to be no Executive dependent on majority support in the Assembly for any particular proposal or for its policies as a whole. I am even tempted to ask, in the light of what the noble Lord, Lord Elton, has said in moving this Amendment, how this form of words he has put forward is consistent with requiring, Party balance in the Executive Committee, a proposition carried by noble Lords opposite when we were in Committee.
I suggest that the Amendments which are proposed rest on a basic misunderstanding of differences in the Government's proposals for Scotland and Wales. I do not believe that situations will arise when a premature dissolution would be required. Although I do not wish to equate the wide powers and responsibilities of the Assembly with those of local authorities—we went over this ground in Committee, as the noble Lord will recall—I feel it is necessary to point out that there is no provision for premature dissolution in local government. I am sure that the absence of such a provision has not been found critically damaging: indeed, I cannot recall this particular point being raised in relation to local government.
Perhaps I might add one rather technical, but not unimportant, footnote as to the effect of this Amendment, if it is carried. Clause 1(6) provides that the Assembly shall be a corporate body. These Amendments provide that the Assembly shall be dissolved. I am advised that if you dissolve a corporate body it simply disappears. I know that some noble Lords opposite would very much like this Bill to disappear, but I suspect that is not the direct intention in this Amendment. I hope that, in the light of what I have said, the noble Lord will decide not to press the Amendment.
Lord ELTON: My Lords, I am obliged to the noble Lord. I hope your Lordships will have appreciated something which I forgot to say at the beginning; namely, that this Amendment and the next one hang together. That must have been clear from what we were saying.
If I may deal with the objections made in series, the noble Lord, Lord Davies of Leek, couched his criticisms in the most flattering language, for which I thank him, although he went on to say that many of the Amendments were "fernickety". I should like to point out that this is not a "fernickety" Amendment because, if it is not made and if the circumstances I have described should arise, it will be no good the Welsh Assembly then saying: "Ah, a new situation has arisen: we must learn how to govern ourselves", because there will be no provision for them to do anything about it at all. That has to be done, if it is to be done at all, before the Bill leaves this House.
The noble Lord, Lord Harris, again advanced the understandable theorem that the Assembly is itself the Executive. However, he will recall that it is the intention of the Bill that by far the greater power of the functions of the Assembly shall be delegated to committees, and the most important of those committees is the Executive Committee. He rightly reminded me, as I reminded your Lordships a moment earlier, that we have provided now for this Committee to reflect the Party balance; but as I understand the procedures of our House, if that Amendment were to be taken out of the Bill in another place and if we were to abide by that excision, we could not then bring this Amendment back in because it refers to a different clause in the Bill. I may, of course, be wrong about that.
A number of subsidiary questions suggest themselves to me, of which I suppose the most pertinent is: what would the Government expect the composition of the Executive Committee to become, supposing the colour of the majority in the Assembly changed in mid-term? That would be relevant to the need to dissolve, or not, because if you could have a change in the composition of the Executive Committee entirely in harmony with the composition of the Assembly itself, the difficulty I fear would

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not arise. That is something which the noble Lord may wish to advise me about before a further stage of the Bill.
As to the disappearance of the corporate body, I take it that this is something to which it will become accustomed in every fourth year. I think that the noble Lord, Lord Harris, is about to correct me, but perhaps I may just make the statement so that he can put it right. At the moment, the natural life of the Assembly is to be four years. Presumably, it then ceases to be an Assembly and it is dissolved on the eve of the day of an election. So that it must cease to be, and will be able to solve certain problems, if not its own, in that manner. If the noble Lord will advise me between now and the next stage as to the composition of the Executive in the event of a change in the majority in the Assembly, then I think that, as a mark of the fact that this is in no way a partisan action, it would be better if I were not to press this Amendment further and if we were to move on to the next Amendment. Therefore, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendment No. 2 not moved.]
Clause 3 [Elections]:
3.21 p.m.
Lord ELTON Lord ELTON had given Notice of his intention to move Amendment No. 3.
Page 3, line 23, leave out from ("any") to ("provision") in line 24.
The noble Lord said: My Lords, the noble Lord, Lord Harris, has written me a courteous and explanatory letter on this Amendment. He has pointed out to me that my difficulty rested on not recognising the difference between the phrase "the provision of an enactment", and the phrase "the provision under an enactment". This has the effect, I understand, of meaning that the words which I sought to delete are not, in fact, superfluous. At great length, I have said that I shall not move this Amendment.
Lord CULLEN of ASHBOURNE Lord CULLEN of ASHBOURNE moved Amendment No. 3A:
Page 3, line 32, after ("the") insert ("Welsh").
The noble Lord said: My Lords, this is a similar Amendment to one which was
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moved by my noble friend Lord Campbell of Croy during the Committee stage of the Scotland Bill. That Amendment was accepted but with reservations, since it was consequential on a previous Amendment which transferred from Westminster to the Assembly the responsibility for reviewing the electoral arrangements. If this Amendment were passed, the estimated cost of elections would, no doubt, be one of the fixed items to be taken into account when negotiations over the block grant took place. The Amendment would mean that an order under this clause would provide for the charging of any sum to the Welsh Consolidated Fund, instead of to the United Kingdom Consolidated Fund. It may be that the Government, after their reflections on the Scotland Bill, will find this Amendment to their liking. My Lords, I beg to move.
Lord HARRIS of GREENWICH: My Lords, electoral matters are, as the House is aware, not to be devolved. The basic arrangements for the conduct of elections are set out in Clause 3, and the detailed arrangements will be set out in an order under subsection (3). Because the Secretary of State will retain control over the electoral arrangements, the Government's view is that it is appropriate that the cost of meeting these arrangements should fall on United Kingdom, rather than Assembly, funds. However, noble Lords have already amended the Scotland Bill to ensure that such expenses should fall on the Scottish Consolidated Fund. At the end of the day, to be absolutely blunt, it makes very little difference which Fund the expenses are charged upon, and although the Government feel that logic, as always, is on their side, they are willing to accept this Amendment so far as this House is concerned.
Lord CULLEN of ASHBOURNE: My Lords, I am very grateful to the noble Lord.
On Question, Amendment agreed to.
Clause 4 [By-elections]:
3.25 p.m.
Lord ELTON Lord ELTON moved Amendment No. 3B:
Page 3, line 40, after ("below") insert ("(a)").
The noble Lord said: My Lords, this Amendment seeks to clarify what has remained persistently obscure to me since the Committee stage, and relates to the passage of the Bill amended by the proportional representation provision. I asked in Committee stage—and I think that those of your Lordships who were in a position to answer my question thought I was not serious in my inquiries—what was to happen if there should be no person remaining on the list of candidates available to step into the breach, should an additional Member's seat fall vacant. What would then happen? There was no provision that I could see in the Bill for the holding of a by-election.
I did not devise the proportional representation Amendments, though I found them welcome; nor, indeed, did the noble Lord, Lord Harris, who is doubtless expected to reply to this Amendment. My principal inquiry was addressed to the noble Lord, Lord Lloyd of Kilgerran, who I believe cannot be here. But he has allies in this matter, who will perhaps be able to tell your Lordships how many names are expected to be on the list in question, what is the smallest number that there might be upon that list and what will happen if it is a short list and there is nobody on it still willing to serve as a Member of the Assembly, say, two years after an election has taken place, when some of them may have signed contracts of employment which they cannot afford to break, some may have died and some may have left the country or in other ways disqualified themselves? It is quite possible that four or five people could vanish, like summer mist, at the moment when they were asked whether they would like to take up a seat; and at the moment I see no provision other than that which I now suggest for avoiding a vacancy in the Assembly, which might last for two or even three years, and which would not be satisfactory. My Lords, I beg to move.
Lord BANKS: My Lords, I think that the answer to the noble Lord who has moved the Amendment is that each political Party—and this deals only with political Parties—would nominate as many candidates as there were topping-up seats to be filled, so that each political Party would have a full list. It would
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clearly be in their interests to do that. It seems to me that the chance of this situation ever arising is fairly remote. I understand that this system works in Western Germany in the way described in the Bill, and that the problem has not arisen there.
I am not clear from the Amendment where it is proposed that the election would be held. Would it be held throughout the whole of the region? It seems necessary that it should be held throughout the whole of the region, since the Member to be replaced would be a regional topping-up Member and not a constituency Member. If it were held throughout the region, then it would be certain to operate against the whole principle of topping-up, which is to take the Members elected by the constituencies and then top them up so that the total result is proportional to the votes cast.
So it seems to me that it would be better not to accept the Amendment proposed by the noble Lord, Lord Elton, but to leave the situation as it is and, if it were found that this unlikely contingency arose, it would be possible at that time—I should have thought fairly simply—by means of legislation, to provide, for example, that other regional lists of the same Party could be used, and that you could move on to them if there was nobody on the list for that region and for that Party, who was willing to fill the topping-up place. I think we should remember that these are topping-up places and the whole object of the exercise goes if you have an election on "first-past-the-post", whether on a regional or on a constituency basis.
Lord HARRIS of GREENWICH: My Lords, the Government would be perfectly content to accept this Amendment, given the decision of the House on the point of substance—of course, entirely without any commitment to the view that might be taken in another place. It is a matter for the House, so far as we are concerned. We are not disposed to quarrel with this Amendment, given that the previous decision was taken; but it is a matter for the House to decide.
Lord ELTON: My Lords, I am grateful to the noble Lord, Lord Harris of Greenwich, for what he has just said. I am a little less than content with the information

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I have been given in answer to my question in the unusual direction in which it is directed, in that I still do not know what the number in the shortest list might be. It would seem to depend, first, upon the size of the region, and, secondly, the degree of success of the Party in question. It is not at all clear to me that this situation will not arise. I am obliged to the noble Lord, Lord Harris of Greenwich, if in fact his advisers are content with the drafting of this Amendment. I always pay the greatest attention to what they say and I am sure they would have told us if they were not content with it. I shall in a moment give way so that the noble Lord can set my mind at rest on this matter and then we would be happy to proceed on this basis. If he feels there are defects, then they would have to be remedied at a further stage; but it would be of help to the House if he was to make them party to the comments of his own advisers as to the efficacy of the remedy here devised.
Lord HARRIS of GREENWICH: My Lords, I am in some slight difficulty. Objection was taken during our proceedings on the Protection of Children Bill by a number of noble Lords about people speaking twice during the Report stage. I will gladly answer the noble Lord's question but I shall say that in view of the fact that I undertook then to draw the exchanges to the attention of the normal channels it would be wrong for me to make two speeches even when invited to do so by the noble Lord, Lord Elton. All I would say is, Yes, we are content with this particular form of words, given my clear and rather substantial qualification that this is a matter which will have to be reconsidered in another place.
Lord ELTON: My Lords, I am much obliged to the noble Lord for his not undelphic statement, and therefore I beg to move the Amendment.
On Question, Amendment agreed to.
3.33 p.m.
Lord ELTON Lord ELTON moved Amendment No. 3C:
Page 3, line 41, after ("vacant") insert ("or
(b) where the seat of an additional member of the Assembly is vacant and there is no such willing candidate under subsection (5) below.").
The noble Lord said: My Lords, this belongs with 3B. I beg to move.
On Question, Amendment agreed to.
Baroness ELLES Baroness ELLES moved Amendment No. 4:
Page 4, line 32, at end insert—
("(cc) he is a Minister of the Crown; or").
The noble Baroness said: My Lords, this is partly a consequential Amendment on Amendments which were debated during the Committee stage of the Bill when we inserted in your Lordships' House a disqualification of being a Member of the House of Commons from being a Member of the Welsh Assembly. There were two matters which were not discussed in connection with that particular Amendment or indeed with the Amendment which is now before your Lordships' House. The first point is that the noble Lord, Lord Harris of Greenwich, when he replied to the proposal that a Minister of the Crown should be disqualified, said that he did not think that any Minister would "moonlight" and that a Prime Minister would probably see to it that he did not keep a Minister who also stood for the Welsh Assembly. That is what was implied. But what was never discussed was a Prime Minister who might seek from among the Members of the Welsh Assembly somebody who should become a Minister.
It seems very sensible that if somebody is made a Minister from the Welsh Assembly—and we hope that they will be producing people of that calibre in the Welsh Assembly—he should be automatically disqualified from sitting as a Member of the Welsh Assembly, so that he can take up immediately the appointment as a Minister without any question of continuing to represent a part of Wales in the Welsh Assembly. That is one reason for putting forward this Amendment now. The second point is that a Minister of the Crown who is in the House of Commons would be disqualified as the Bill now stands, whereas a Minister of the Crown in your Lordships' House would not be disqualified; and on these matters we could consider ourselves as ranking pari passu with another place and disqualify all Ministers of the Crown from being Members of the Welsh Assembly. I beg to move.
Lord LEATHERLAND: My Lords, I wish to raise a minor point similar to the one which I raised on the Scottish Bill a week or two ago. It is, who is to be regarded for this purpose as a Minister of the Crown? Is it to be the head of a Government Department, a fully fledged Minister? Is it to be his Parliamentary Secretary, his Secretary of State? Is it to be a Party Whip who holds some Government office? I know that this matter was discussed at some length after it had been originally raised, but apparently the phrase in its original, bald form appears in this Bill. I feel that "Minister of the Crown" deserves to be described in some detail.
Lord HARRIS of GREENWICH: My Lords, if I may begin I hope with only very mild complaint, I believe we are making extraordinarily heavy weather of this particular issue. I say that not as a bad loser so far as the last Amendment, which the noble Baroness described as having been passed during the Committee stage, is concerned. We on this side of the House are used to being losers in Divisions because of the Party majority of this House. But I am bound to say that this is not a very serious matter for this House. I do not want to go over the territory covered on the last occasion. What we have as a House said—and I just draw this to the attention of the entire House—is that it is quite all right to have a dual mandate so far as the European Assembly is concerned but it is quite wrong to have one so far as the Welsh Assembly is concerned. I did not believe then, and I do not believe now, that that is a serious proposition which can be defended in debate.
What we are now discussing, as the noble Baroness indicated in her speech, is whether a Minister who qualifies because of a residential qualification in Wales should be debarred from being both a Minister and a Member of the Welsh Assembly. The noble Baroness very widely and kindly drew attention to what I had said, which is that anybody who sought election while a Minister of the Crown to the Welsh Assembly would, 1 suspect—I more than suspect—be deprived rather rapidly of his office by the Prime Minister of the day. I do not think it is necessary to put that sort of material
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on the face of our Statute Book. The noble and learned Lord, Lord Hailsham of Saint Marylebone, has drawn attention on a number of occasions to the size of the Statute Book and this kind of material does not, in my view, add very greatly to the common sense of the legislation that appears there.
This particular form of words applies, as the noble Baroness rightly said, to Members of your Lordships' House, not Members of another place. That was dealt with on the previous occasion. I suspect that my noble friend Lord Goronwy-Roberts is the only person who would be covered by this particular Amendment. My noble friend is not with us, and I do not know whether he has a residential qualification in Wales—he may or may not have—but the point which the noble Baroness put to us was this. While one accepts the fact that a Minister is unlikely to say he wants to stand as a candidate for the Welsh Assembly, what happens if the Prime Minister of the day says to a Member of the Welsh Assembly, "We would rather like you to be"—as I assume—"a Member of the House of Lords and a Minister"? I suspect that the Prime Minister of the day would actually say, "Of course, you will realise this actually does mean giving up your seat in the Welsh Assembly". I do not believe that it is right or sensible to put this sort of material on the Statute Book. I must once again remind the House that at no stage during the European Assembly Bill was this point raised in any part of the House. We can have a dual mandate so far as Europe is concerned but not so far as Wales is concerned. I do not believe that we should do a great deal to encourage respect for this House by passing an Amendment of this kind.
The Marquess of TWEEDDALE: My Lords, I should like to say one thing to the Minister. We have had continual accusations thrown at us of being in a built-in majority. I should have thought it would be fairer for the Minister to have thought rather of the number of Life Peers who have been created by Sir Harold Wilson when he was Prime Minister and by Mr. Callaghan. If they should all bother to turn up, I think it would be found that this side was in a minority.
On Question, Amendment negatived.

KC135 TANKER AIRCRAFT: AIRFIELD LOCATION
3.40 p.m.
Lord WINTERBOTTOM: My Lords, with the leave of the House I should like to make a Statement repeating an Answer to a Private Notice Question being answered in another place by my right honourable friend the Secretary of State for Defence, asking whether he has now taken a decision on which airfield is to be provided for the KC135 aircraft as requested by the United States authorities:
"After thorough examination of all the many factors involved I have concluded that RAF Fairford is the right airfield for this task. I have today placed in the Library of the House a detailed memorandum which explains the reasons for this choice. A copy of the memorandum has been sent to the local planning authorities with whom we shall discuss the proposal, which has the agreement of the United States' authorities."
Lord DENHAM: My Lords, in view of the fact that the House debated this subject fully last night, I do not want to say anything about the content of this Statement, but I should like to comment on its timing. In replying to the debate last night the noble Lord, Lord Winter bottom, said.
"I regret that I am not able to say anything tonight about the Government's choice of airfield as the base for these tankers, or even about the list of airfields which has been considered. My right honourable friend the Secretary of State for Defence hopes to make an announcement in the very near future".—[Official Report; 4/7/78, col. 977.]
Your Lordships have come to realise that "the very near future" may mean anything from next week to next Session. If they meant "tomorrow" why could not Her Majesty's Government have said so? To debate a subject on the day before such a Statement is to be made is ridiculous. The noble Earl, Lord Kimberley, has had this Question down on the Order Paper since the 14th June and it is apparent from the Statement that this decision has been made some time ago because a detailed Paper is being put in the Library of the reasons why it has been made. If the noble Earl had been warned that this Statement was going to be made today he may very well have
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wished to withdraw his Unstarred Question and put it down later, possibly in an amended form, so that it could have been debated properly. Five noble Lords took part in the debate last night: it might have been assumed that they had a more than passing interest in the decision that has been announced today. Why could they not have been warned last night?
Your Lordships will acquit the noble Lord, Lord Winterbottom, of any impoliteness, but I feel that over this matter Her Majesty's Government have treated this House with gross discourtesy and I hope the noble Lord and, indeed the Leader of the House, will take very firm steps to see that such a thing never occurs again.
Lord WINTERBOTTOM: My Lords, I have very great sympathy with what the noble Lord the Chief Whip for the Conservative Party has said on this matter. What I said last night was, in fact, the case. My right honourable friend the Secretary of State for Defence was not ready last night to announce his decision although, as I indicated, the announcement was imminent. Unfortunately—and speaking quite bluntly—there was a leak at the Ministry of Defence, and the first that I knew about the proposals was when I read The Times this morning. One can only apologise to the House and to noble Lords who may have felt that they wasted their time, but this was why there arose the situation we are speaking about today.
Lord DENHAM: My Lords, can the noble Lord just explain one thing: Did Her Majesty's Government not know last night that a Statement was going to be made today?
Lord WINTERBOTTOM: My Lords, if we are speaking frankly, the intention was that the Statement would be made tomorrow.
The Earl of KIMBERLEY: My Lords, while thanking the noble Lord for reading out that Statement, I think he must agree that it was unfortunate that nobody could have said anything about it last night, particularly as his right honourable friend was present during the debate. I had seen him before the Question was asked, at a quarter to nine, and I asked

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him: "Have I got to make the speech?" and the answer was "Yes". Then the next thing I know is from reading The Times this morning at breakfast.
I should like to ask this: In the Statement it says,
"… the local planning authorities with whom we shall discuss the proposal".
Last night I actually asked the question:
"Will there be a public inquiry? In what circumstances could objections from the planning authority concerned lead to the abandonment of a base chosen by the Ministry of Defence?"— [Official Report; 4/7/78, col. 964.]
Is the noble Lord in a position to say whether there will be a public inquiry about this matter?
Lord WINTERBOTTOM: My Lords, perhaps I may tackle the last point first. A decision has been reached; however, a number of decisions are consequential upon it, including the housing of a very large number of American families in the area, which in fact will bring some prosperity to the district. This is a coin with two sides: 1,200 United States Air Force men and their dependants will benefit the local economy by between £3 million and £5 million a year and about 150 civilian jobs will be created. The decision has been reached but, of course, just reaching a decision does not mean that other corresponding decisions must not also be reached and this document, which I commend to your Lordships, will, in fact, produce information which will enable local authorities to base their adaptations on this decision, to the benefit not only of the Americans who are going to settle in that area but also the various trades and trades-people.
I can only say that one of the unfortunate results of dragging defence policy into an area of political controversy—and I understand it; I am not arguing against it, it has just happened —in fact works its way through to individuals, in this case the Ministry of Defence. There was a leak, and what should have been a planned announcement tomorrow appeared in The Times today as a result of that leakage from the Ministry of Defence.
Lord WIGG: My Lords, surely the House wants to retain some sense of
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proportion. Obviously, any Member of this House will regret any inconvenience caused to the House as a whole or to individual Members about matters of this kind, but I recollect only a couple of weeks ago coming here to listen to a debate on an Unstarred Question on pollution, and I found the House adjourned during pleasure because the noble Earl who was to ask it could not be found. I did not make a song and dance about it; I regretted it because I had come back specially and at some inconvenience. But this incident needs to be put into balance with that kind of happening. Then we should bear in mind that the decision which the Government have taken is an extremely delicate one. Do the Government not realise—indeed I am sure they do—that this is a matter of great confidentiality, indeed secrecy, because we have a statement today by the noble Lord that he knew nothing about it, because it involved matters of utmost importance in regard to defence for the stationing of United States personnel here, and for the security of all of us? That fact needs to be taken into account and weighed against that other incident which occurred in the House, while quite properly remembering that this involves the security not only of Britain but the United States, and indeed of Western Europe. Please let us get on with the debate on Wales.
Lord WINTERBOTTOM: My Lords, I am most grateful to my noble friend for putting the matter in perspective. This is part of the cussedness of things which we in politics have to face up to.
The Marquess of HERTFORD: My Lords, the noble Lord used the phrase, "a decision has been reached". Does that mean that that decision is absolutely regardless of any subsequent protest by local people? I quite accept the fact that the decision may be the right one, but his statement was that "a decision has been reached". Is there no further appeal?
Lord WINTERBOTTOM: My Lords, a decision has been reached. That is the business of Government. What we want to do is to make certain that that decision, which can bring substantial benefits to the area, avoids unnecessary hardship to individuals. But a decision has been reached.
Viscount MERSEY: My Lords, the Minister, as usual, treats this House with great courtesy, and I think we all appreciate that he is not personally to blame. It has been stated that there was a leak in the Ministry. is it not time, this sort of excuse having been put up—and not for the first time—that the officials, it may be high officials, who are responsible should be named? Would he consider that suggestion?
Lord WINTERBOTTOM: My Lords, this is a matter which is being treated very seriously.

WALES BILL
3.52 p.m.
Further considered on Report.
Clause 9 [Existing statutory functions]:
3.52 p.m.
Baroness ELLES Baroness ELLES moved Amendment No. 5:
Page 7, line 7, leave out subsection (2)
The noble Baroness said: My Lords, this is a probing Amendment concerning concurrent powers to be exercised by both the Welsh Assembly and the Minister. We did debate this at Committee stage and I am not going to go through all the arguments, but there are one or two points on which we would like further clarification before coming to a conclusion about this. I should be grateful if the Minister, either now or in writing, could let us have some reply.
In the reply I got from the noble Baroness, Lady Stedman, on 14th June, she said:
"Technically, there is nothing in the terms of the Bill to prevent the Welsh Assembly using powers under such enactments as are listed in Schedule 3, within non-devolved areas, or, for that matter, the Minister using his powers within the devolved areas ".—[Official Report, 14/6/78; col. 345.]
Does that mean that the Welsh Assembly will be able to exercise functions within a non-devolved area which have not in fact been given to them in any other part of the Bill? This, of course, would to some extent clearly affect the functions of the Welsh Assembly, if they can, through Schedule 3, step outside the already accepted matters which have been devolved.
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The noble Baroness also said—which did cause some doubts in our minds—
"We are reasonably satisfied that there will be collaboration and co-operation between the Assembly and the Government in the use of these powers, as we are sure there will be so far as the Scottish Assembly and the Government are concerned as regards the Scottish powers ".—[Official Report, 14/6/78; col. 346.]
Both in another place and in your Lordships' House considerable concern has been expressed, because it is almost certain that there will be no collaboration and co-operation if there are different Parties in power, one in Government and one in the Welsh Assembly. What I am seeking to be told is, how do the Government think there can be collaboration and co-operation where you get that situation? What kind of mechanism do they envisage will be used to overcome the obvious difficulties that will arise in this connection? I connect it with a further statement from the noble Baroness, where she says:
"In that sense …"
—she refers to where there is conflict—
"… where there are concurrent powers, the Secretary of State is the "Supremo", if one likes to describe him in that way ".—[official Report, 14/6/78; col. 352.]
Does that mean that the Secretary of State will be able to override a decision of the Welsh Assembly, even in matters which are devolved to the Assembly but also remain in the hands of the Secretary of State under Schedule 3?
Can the Secretary of State, despite the concurrent powers, remove powers from the Welsh Assembly in any of those seven Acts—I think with the new Amendment put down by the Government there are now eight—which are contained in Schedule 3? It is very difficult to know how it is intended to operate in accordance with the interpretation of the Bill, because there would seem to be no powers in Clause 33—the override powers of the Secretary of State to intervene in a matter which has been devolved to the Assembly. This does need some explanation.
A matter which was raised in another place—and here again there was no satisfactory explanation from the Minister because of the effect of the guillotine—was how the current powers under the Local Government Act, Section 177(1)(b) and (2)(c) will operate. These are powers

1009
to prescribe bodies for the purpose of payment of attendance and financial allowances. These powers will be devolved to the Assembly as well as being retained by the Secretary of State. We should be grateful for some clarification of how this will operate. Will there be two sets of allowances, one decided on by the Assembly and another by the Secretary of State, or will there be some ultimate decision and who will have the overriding right to take the decision? These seem petty and technical matters, but they are worrying. We do not think we have had a satisfactory or clear answer.
The noble Baroness, in concluding her remarks to your Lordships, said:
"I shall look at this again. I shall happily send the noble Baroness a copy of the kind of things we have in mind so that she can see how we think this will work. Then perhaps we can have a little more agreement or further discussion at the next stage ".—[Official Report, 14/6/78; col. 352.]
I do not know whether it is the internal post of your Lordships' House—and I totally accept the question of overwork on the part of the noble Baroness—but I have not received the letter. There may be some perfectly justifiable reason, knowing the enormous amount of work this Bill has involved. I hope the Minister will not take this as any criticism of those who have to draft these answers, but I have not received an answer and I would be grateful for one at some stage. I beg to move.
Lord HARRIS of GREENWICH: My Lords, on the first point, I am sure my noble friend has written to the noble Baroness on this particular point. I cannot pretend I am at the moment clear when the letter was despatched or where it may now be, but it certainly is on its way. As the noble Baroness said in moving this Amendment, this is a fairly well-trodden path as far as this particular Bill is concerned. There has already been a great deal of discussion on this point in this House and in another place. The equivalent provision in the Scotland Bill has also been subject to the same detailed scrutiny, perfectly properly, because this is clearly a matter of some importance and it is right that we should go into it in some detail.
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Having said that, I fear I will not be able to say anything particularly fresh on this matter. It might be more sensible, given the character of the speech which I would otherwise have to unleash upon your Lordships, if I communicated some of this myself to the noble Baroness. It may indeed be covered in my noble friend's letter, but if it is not I will, gladly deal with the matter myself before the next stage.
I do not want at this stage to say anything more to rehearse the reasons for the inclusion of Clause 9(2) in this Bill. However, perhaps I could make a few comments. It is a device for coping with a very few, relatively marginal, powers which cannot be dealt with by the more usual mechanisms in the Bill. During earlier debates much was made of the confusion, and possibly the conflict, which might arise through the operation of this subsection. It was even suggested, I think, during the Committe stage discussions that it represented a unique, indeed vast, new way of spending substantial sums of public money. I do not think that I can deal with these particular fears by the use of generalities and I must therefore give a number of examples as to why these particular powers are required.
Let us take first the case of the Commissioners of Works Act 1852 and the Town and Country Planning Act 1971. Those provisions relate to the acquisition of land for the public service and, to take a fairly obvious example, Government offices. The Schedule 2 entry for the provisions has the effect of ensuring that the functions will be available to the Assembly only in respect of the devolved public service. But, the listings in Schedule 3 will ensure that the Government will be able to exercise functions in respect of the devolved public service as well as that which is not devolved. Thus, the Secretary of State will be able to acquire and hold property over which the Assembly exercises powers under Clause 64(1)(b). Those user rights involve sharing in that neither the Assembly, nor indeed the Government, has exclusive possession.
Let us take as another example the Historic Buildings and Ancient Monuments Act 1953. The Assembly will have functions as regards ancient monuments and historic buildings. Payments for the acquisition of buildings will

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therefore normally be the responsibility of the Assembly. But the Assembly will be financed only by the block fund and it will have no access to the National Loan Fund. This fund is, however, intended for use throughout Great Britain, and it would be wrong, in our judgment, that payments could not be made from it for the purchase of buildings in Wales. By way of the Schedule 3 listings, the Secretary of State has the necessary authority to make grants and to acquire property in Wales with money from the Land Fund. He will then hand that property over to the Assembly.
Another example is the Transport Act 1968. Transport functions devolved to the Assembly are shown in Part XIV of Schedule 2, but it will not have powers in respect of other functions in this area—for example, over most of freight transport. It will have no control over that. Both the Government and the Assembly will therefore need powers to finance research. It is impractical to divide the power in Section 57 between devolved and reserved functions—for example, although some aspects of passenger transport are reserved in other contexts, the Assembly by virtue of Clause 11(b) has some interest in all forms of passenger transport, including rail.
Once more, the funding of such research by the Assembly will be from the block fund. It is from there that it will get the money. The spending of what has been described as vast sums of public money on, in this case, transport research, would be at the expense of other functions such as education and health. I find it difficult to imagine what advantage the Assembly would see in such a proposition. Obviously, to take a ludicrous example, it could use the entire block fund for that particular purpose, but it is answerable to an electorate and that is the way of ensuring—as is the situation in another place—that, in the final analysis, people behave reasonably.
There are a number of other examples that I could work my way through, but as I have indicated, my noble friend Lady Stedman has already written to the noble Baroness on this point. However, I shall gladly look at what she has said and, if there is any additional information that I can make available, of course I shall be glad to do so.
Baroness ELLES: My Lords, on that understanding I shall be grateful to the noble Lord if I could receive some sort of reply, particularly as regards the first point that I raised, concerning the devolved functions and whether they can, in fact, under the provisions of Clause 9(2) governing Schedule 3, step beyond the devolved functions. As I understood the reply of the noble Baroness to me, that would be possible; but I may have misread what was said and perhaps some clarification could be given on that matter and the point about the supremacy of the Secretary of State over the Welsh Assembly in any particular sitution. With that, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Schedule 2 [Existing statutory functions]:
4.5 p.m.
The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Lord Donaldson of Kingsbridge)The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Lord Donaldson of Kingsbridge) moved Amendment No. 6:
Page 38, column 2, leave out lines 26 to 30 and insert—

("The powers under section 250 so far as their exercise is incidental to functions which remain exercisable by a Minister of the Crown.

The functions under sections 254 and 262 except so far as exercisable in relation to matters with respect to which the powers of the Assembly are exercisable").

The noble Lord said: My Lords, this is a rather complicated tidying-up Amendment. It seeks to provide a more logical boundary between the Assembly's and the Government's powers under Sections 250, 254 and 262 of the Local Government Act 1972. Those sections are concerned respectively with local inquiries; with the making by order of provisions consequential on the Local Government Act 1972; and with local enactments. They are all generally ancillary provisions with application to a wide variety of matters under the Act. At present the Bill provides that the powers under those sections are to be transferred to the Assembly except where they relate to matters listed in Schedule 5.
The difficulty is that after devolution Ministers will need to exercise powers

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under those sections for a wider range of matters than are dealt with in Schedule 5, which lists only matters for which local authorities have responsibilities. To give an illustration, Section 254 provides, inter alia, that an order may be made with respect to the Welsh Local Government Boundary Commission. As other functions in respect of the Commission are reserved in the Bill, the application of Section 254 to the Commission should also be reserved. But matters in relation to the Commission are not listed in Schedule 5 to the Bill because there are no local authority responsibilities. So reservation is not achieved.
If, therefore, the Bill is to reserve the full range of matters for which the Government will need powers under Sections 250, 254 and 262, a different formula is required. The Amendments accordingly reserve not by reference to Schedule 5, but by reference to functions which will remain with Ministers. So, to take up the earlier example, Section 254 will he reserved in respect of the Welsh Local Government Boundary Commission by virtue of the reservation of other ministerial functions in respect of the Commission. I beg to move.
Lord ELTON: My Lords, I am grateful to the noble Lord for his elegant description of a complicated process. It is rather nice to see somebody else pirouetting upon the theological needle point of the interaction of Schedule 2 with other Schedules in the Bill, Maybe it is because I am less critical than him that he found it easier to do than I did.
On Question, Amendment agreed to.
4.9 p.m.
Lord DONALDSON of KINGS-BRIDGE Lord DONALDSON of KINGS-BRIDGE moved Amendment No. 7:
Page 38, line 44, column 1, leave out ("and 35(3)") and insert (",35(3) and 40(1)").
The noble Lord said: My Lords, this is a minor Amendment to devolve to the Assembly the power under Section 40(1) of the Local Government Act 1974. This power concerns the classification of highways and coheres with powers under the Highways Act 1959 which are transferred to the Assembly in Part XV of Schedule 2. There is no change of policy. I beg to move.
Lord SWANSEA: My Lords, I am slightly puzzled here. Perhaps the noble Lord opposite can enlighten us to why this reference to Section 41 of the Local Government Act 1974 is being inserted at this point in Schedule 2 and not in Part XV of the Schedule which relates specifically to highways.
Lord DONALDSON of KINGS-BRIDGE: My Lords, it concerns the classification of highways and it is connected with the powers under the Highways Act, which are transferred in Part XV. I shall have to write to the noble Lord on why the draftsman has chosen to put it in this Part of Schedule 2 rather than in Part XV, because I do not know the answer. I assure the noble Lord that I shall write to him.
On Question, Amendment agreed to.
[Amendment No. 8 not moved.]
4.11 p.m.
Lord DONALDSON of KINGS-BRIDGE Lord DONALDSON of KINGS-BRIDGE moved Amendment No. 9:
Page 41, line 5, column 2, at end insert—

("The powers under section 93 of that Act so far as their exercise is incidental to functions which remain exercisable by a Minister of the Crown.")

The noble Lord said: My Lords, Section 93 of the Education Act 1944 contains a Secretary of State power to hold an inquiry for the purpose of the exercise of his functions under the Act. The effect of the Wales Bill is to devolve this power to the Assembly. During our debates at the Committee stage, the noble Lord, Lord Elton, drew my attention to this provision and I agreed to look at it and return later.
On consideration, the Government believe that the Secretary of State must retain the right to hold inquiries in respect of the functions in the education field in Wales for which he will remain responsible after devolution. The Amendment before your Lordships, therefore, provides that the Assembly will exercise the power in relation to its functions and the Secretary of State in relation to his. I trust that noble Lords will find this acceptable and will, therefore, agree to the Amendment.
Lord ELTON: My Lords, it is very agreeable to welcome the noble Lord's reasonable reply to a reasonable request.
On Question, Amendment agreed to.
Lord DONALDSON of KINGS-BRIDGE Lord DONALDSON of KINGS-BRIDGE moved Amendment No. 10:
Page 41, line 19, column 2, at end insert—

("The functions under section 6 of the Education (Miscellaneous Provisions) Act 1948 (c. 40) except those exercisable under subsection (1) in cases involving two authorities in Wales.

The functions under section 7 of the Education (Miscellaneous Provisions) Act 1953 (c. 33) except those exercisable under subsection (1) in cases involving two authorities in Wales.")

The noble Lord said: My Lords, during our discussions in Committee I agreed to take away and reconsider the effect of the Bill on Section 6 of the Education (Miscellaneous Provisions) Act 1948 and Section 7 of the Education (Miscellaneous Provisions) Act 1953. These Amendments before your Lordships are the result of that reconsideration. Section 6 of the 1948 Act is concerned with the recoupment of a local authority's costs when it provides school education for a person not belonging to its own area. Section 7 of the 1953 Act contains similar provisions in respect of further education costs.
Both enactments contain three main ministerial functions. In each case the Minister is required to make a decision in respect of the activities of two or more educational authorities. It was suggested that if one authority was in England and another in Wales, there could be problems caused by the devolution of the ministerial function to the Assembly. I think it might be helpful to your Lordships if I take each function in turn and describe the Government's policy in each case on cross-Border issues. As the functions in both enactments are similar, I shall illustrate by reference to Section 6 of the 1948 Act above.
The first function in Section 6 is in Section 6(1)(a). It is concerned with cases where one education authority provides education for a person belonging to another education authority. When no agreement can be reached by the authorities concerned about the payment
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of costs, the Assembly will make a determination in respect of disagreements between authorities in Wales. When one of the authorities concerned is in Wales and one in England, the determination should continue to be made by the Secretary of State.
The second ministerial function is in Section 6(1)(b). This deals with cases in which education is provided by an authority for a person who does not belong to any authority. In these cases, the Secretary of State makes regulations about the apportionment of costs between all authorities in England and Wales. These powers have now been superseded by powers under the Local Government Act 1974, although they have not been repealed. The Government's policy is that, after devolution, the Welsh education authorities should pay for a person educated by a Welsh authority and the English authorities for a person educated by an English authority. Since payments are now made by means of adjustments in the rate support grant, it is entirely compatible with the structure of the Wales Bill that apportionment should be on this basis. I shall, therefore, be moving an Amendment to the entry in Schedule 11 for that Act to ensure the Government's policy in respect of this matter is properly reflected in the Bill, which ensures that children from England who are educated in Wales are not treated as not belonging to the area of any authority and vice versa.
Finally, Section 3 contains prescribing powers in relation to determining which authority a pupil is to be treated as belonging to. It seems to the Government that these are not powers which can sensibly be split, and so they are to be reserved. The Amendment before your Lordships gives effect to the policy I have outlined. I am grateful to the noble Lord, Lord Elton, for bringing to my attention the defects in the present entry. I hope that your Lordships will agree that the Amendment represents a practicable and acceptable policy. As always, we take note of what the noble Lords say opposite. I beg to move.
Lord ELTON: My Lords, it is very gratifying when one's toil is thus rewarded. I thank the noble Lord for his courteous explanation of what he has done and I

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appreciate it. It may be worth mentioning one matter in passing, in addition to the explanation which the noble Lord has given to the operation of the Education (Miscellaneous Provisions) Act 1948, Section 6. He stopped short at subsection (3). I notice with interest that subsection (4), which is reserved by this Amendment, is, in fact, as follows:
"Any question whether a pupil ought to be treated as belonging to the area of any particular local education authority, or as not belonging to the area on any such authority, shall, in case of dispute, be determined by the Minister".
As I understand it, that is reserved. Therefore, where there is a dispute in that section, the appeal is not to the Authority, but to the Secretary of State.
I do not want to make a meal of this, but this was a principle about which we fell out during the Committee stage. I was anxious to have an appeal to the Secretary of State reserved in certain circumstances and had to have a Division to get it. Therefore, I am glad to have it here. I am not sure that I want it so much on this occasion because, in fact, this is an area where the Welsh Authority might well carry the appeal itself, where the dispute is within the borders of its competence and not across the Border.
However, I should not like anything I say to detract from my genuine feeling of gratitude to the noble Lord for having taken action on this in response to our request.
On Question, Amendment agreed to.
4.19 p.m.
Lord STANLEY of ALDERLEY Lord STANLEY of ALDERLEY moved Amendment No. 11:
Page 43, column 2, line 21, at end insert ("The powers under sections 29(8) and 29(9).").
The noble Lord said: My Lords, the purpose of this Amendment is to ensure that any regulations—or, indeed, statutory instruments—regarding the operation of the Agricultural Dwelling House Advisory Committees, which are commonly called ADHACs, are standard throughout England and Wales. This matter was raised in Committee by my noble friend Lord O'Hagan on 15th June at columns 519 and 520 of the Official Report.
The noble Baroness, Lady Stedman, replied to the point at column 528. I
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should like to quote her reply to my noble friend's question.
"On the Rent (Agriculture) Act 1976, the power to establish the advisory committees on agricultural housing, the intention is that the ministerial powers should pass to the Assembly. The committees are concerned primarily with housing. Housing conditions vary between areas of different kinds, and housing is essentially the kind of matter which is suitable for devolution. The Government think it very suitable that these committees should become the province of the Assembly. They see no cross-Border problems, but human beings being what they are we may find some problems ".
I am not quite sure what the noble Baroness was saying there, but I think that is why I am raising it now.
May I reinforce the noble Baroness's last sentence by saying that I can see some cross-Border problems. There are many cases of farms straddling the Border, and one can too easily see the situation of, say, the authority in Wales rehousing and the authority in England not so doing. This could cause anguish, distress and bitterness, and I therefore feel that the guidelines of these ADHACs should be the same for both.
I should mention that the noble Lord's right honourable friend Mr. Silkin has not issued many Statutory Instruments. Indeed, in his Guidelines for Agricultural Dwelling House Advisory Committees he stated:
"That is why at this stage I am not proposing to issue any statutory regulations or directions governing the committees' functions and procedures. Instead, and to make for reasonable uniformity and consistency up and down the country these guidelines have been drawn up after consultation with the housing authority interests".
No doubt the noble Lord will say that the Welsh Assembly will conform to these guidelines, but, if so, surely it would be better to keep it under the Secretary of State, or the Ministry of Agriculture, so as to ensure that, as his right honourable friend said, there was uniformity and consistency up and down the country.
May I also say that the Rent (Agriculture) Act 1976 has worked much better than was expected by some. It received, however, quite a lot of support from some sectors of the farming community, particularly, strangely enough, the farming Press, which is not always very keen about flattering the Government. I therefore feel it very much better for it to continue to work under its present rules, which I am glad to say have been interpreted by

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those on the ground extremely sympathetically and sensibly.
ADHACs are dealing entirely with agricultural matters. Agriculture has not been devolved. Surely the rules and regulations by which they operate should remain with the Ministry of Agriculture; I think in this case it would be the Secretary of State for Wales. This Amendment would only do that. It has nothing to do with housing, as such. Indeed, I am not even changing the composition of who should be on those ADHACs. That would still remain with the Welsh Assembly. I hope, therefore, that the Government will look kindly on this Amendment. It does not even alter the appointments to ADHACs. I beg to move.
4.24 p.m.
Baroness ELLIOT of HARWOOD: My Lords, may I support the noble Lord, Lord Stanley of Alderley. It is not one of those very big matters but one of the things which could become much more difficult under the Bill, if it ever goes through. Agriculture is not devolved, and anything that applies to agriculture, in my opinion, should be under the Ministry of Agriculture. If you take away from them some of the powers which, under this particular clause, would be taken away, you are going to complicate matters quite a little because housing is a vital part of agriculture. It is a vital part of farming.
In some areas you have far too many agricultural houses and in other areas a shortage. The whole point is that it is all part and parcel of the same industry, and if that industry is not devolved then surely it is a mistake to have one important part of it, namely housing, devolved because you are bound to have difficulties. I should have thought it would have been simple to accept this Amendment. It will not affect anything except the question of agricultural housing. I hope that the noble Lord, who is an expert on agriculture himself and housing, will be able to see his way to accepting this Amendment.
Lord COLLISON: My Lords, I should like to refer to what the noble Lord said about the good working of the Act. It certainly has operated well although many
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people, one remembers, expressed considerable fear about the consequences of it. In the event, it has made things very much better within the industry, having removed the one element which was of considerable concern to the work people and which they resented very much. It is gone, and things are happier. My old union would prefer the powers to be kept under the Ministry of Agriculture. They have not expressed extreme discontent with the proposal; but I shall be anxious to hear what my noble friend the Minister has to say because, if it is possible, we should prefer it to remain with agriculture.
Lord O'HAGAN: My Lords, I hope I may add a word of support to my noble friends who have raised this question, and to the points put by the noble Lord, Lord Collison. At a previous stage of the discussion of this Bill I put forward a general Amendment to try and flush out some of the particular aspects of the Bill which seemed obscure. The one which, in retrospect, I am most glad that your Lordships could examine is the one we are debating now. We have not needed, and I think it is right not to do so, to spend a great deal of time at this stage of the Bill on the major matters of housing. They have been decided.
We have not looked at the broad principle of how agriculture should be dealt with under this Bill, but this particular proposal of the Government's is at the cross-ways between agriculture and housing. As my noble friend Lady Elliot said both subjects are of great intimacy to the noble Lord who is to answer for the Government. Because the demarcation line needs to be looked at with particular care, I hope that the Government will take this expression of anxiety from various quarters of the House very seriously indeed, because the system that has recently been set up by the Government is now generally considered to be working pretty well. It should not be disturbed by an incidental proposal in a devolution Bill.
4.28 p.m.
Lord DONALDSON of KINGSBRIDGE: My Lords, this is one of these marginal cases where we have the two functions, one of which is devolved and the other of which is not; this particular subject falls between the two. I do not

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think that it is in the least unreasonable of the noble Lord and his supporters to ask that we should have taken a different decision from the decision we have in fact taken. I should like to say a word or two about why we did this.
Part IV of Schedule 2 transfers to the Assembly a wide range of powers relating to housing, and landlord and tenant matters. These are of course matters that are of the closest local concern and are clearly things which should be devolved. Into this category come the powers under the Rent (Agriculture) Act 1976, about which my noble friend Lord Collison and I are glad that noble Lords opposite feel less hostile than they did when we brought it in—with a good deal of trouble in this House, I may say. I agree that it has worked better than many people thought it would and there is a certain risk in altering anything here. Our view, however, is that all the powers in the Act are suitable for devolution, except the Lord Chancellor's powers to fix judicial rents, and the powers in respect of the hours worked by agricultural workers.
This Amendment concerns agricultural dwelling-house advisory committees which are set up under Section 29 of the Act. These committees advise housing authorities on applications by landlords for the rehousing of their agricultural tenants, and clearly it would be foolish to deny that there is an agricultural element in their work, but there is also an important housing element. In the Government's view, the housing element is the more important. The Amendment would reserve the powers to direct the committees and to regulate their procedure. In practice, it is unlikely that much use would be made of these powers whether devolved or reserved, but in our view there is no reason why they should not be devolved along with the other functions in respect of the committees; for instance, the duty to meet their expenses. There seems no purpose in involving the Government in this particular aspect of the Act when almost all other aspects are to be devolved. And the Assembly is hardly likely to prescribe different procedures for the committees in Wales unless there is good cause so to do. They will have better things to do.
I would much rather not accept this Amendment. On the other hand, I think
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it is a very marginal situation and if noble Lords feel sufficiently strongly, I would be prepared at the next stage to bring in a more complete Amendment meeting their wishes and also making a little more sense than this does in that it leaves out certain things. I repeat, I would prefer not to. I believe it would be better to leave things as they are. We should record our views, but mine will not be expressed very strongly.
Lord ELTON: My Lords, as it is the custom on Report for everybody to speak only once, except the mover of an Amendment, I take this opportunity to thank the Minister for being prepared to meet your Lordships should it be their wish that he should do so, and obviously he will need more than one voice to say that that is the wish of your Lordships, otherwise it is placing rather a burden of responsibility on the shoulders of the solitary voice he is about to hear. Therefore, I would say that we regard this as a very useful approach on his part and, so far as I am in touch with the feeling of the House, I would say that was the feeling of noble Lords; but of course it rests with my noble friend to conclude our deliberations on this point.
Lord HYLTON: My Lords, I rise to urge the noble Lord, Lord Donaldson of Kingsbridge, to stand by his generous offer and to ask my noble friend to be kind enough to accept it. The point about these committees which has not perhaps been made fully clear is that their function is not one that is a matter of the law of landlord and tenant, nor is it to do with housing; it is to assess the agricultural need for retaining a particular house in the use of a person engaged in agriculture. That is the point.
Lord STANLEY of ALDERLEY: My Lords, I will of course accept anything from a fellow farmer, and I shall be delighted to accept the Minister's offer to look at this matter again before Third Reading. I shall do the same, I hope in the company of the noble Lord, Lord Collison, whose help I was most pleased to receive. I remember how strongly he felt about what I called the tied house legislation that went through this House. I am glad I did not oppose him then and I believe that the only Amendment accepted had my name attached to it. I

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support my noble friend Lord Hylton in saying that this is an entirely agricultural matter. It has nothing to do with housing, except that it is up to the local authority to rehouse, and most gratefully I accept the Minister's offer and beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.35 p.m.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 12:
Page 44, line 11, leave out ("to 20").
The noble Lord said: My Lords, this Amendment removed from devolved functions Sections 19 and 20 of the Children and Young Persons Act 1933. Section 19 contains a commencement power to bring into force provisions about local authority by-laws in relation to the employment of persons under 18 other than children. It is a power which has not been exercised in the 45 years since the Act was put on the Statute Book and to all intent and purposes never will be. Section 20 contains no ministerial power and to leave a reference to it in column 1 of Schedule 2 would cast doubt on the structure of that Schedule. The Government therefore feel that there is advantage in removing the reference affecting these two provisions from column 1 of Schedule 2. With great confidence, I beg to move.
Lord SANDYS: My Lords, we wish to be assured that Section 18 of the Children and Young Persons Act 1933 contains a ministerial power. There is a reference to an Order in Council there, but it might be for the convenience of the House to know that it is necessary to exclude Section 18 from this Amendment.
Lord DONALDSON of KINGSBRIDGE: That is a valid point, my Lords. I would not like to answer it off the cuff and I will write to the noble Lord.
On Question, Amendment agreed to.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 13:
Page 44, leave out lines 26 to 30 and insert —

("The Mental Health Act 1959 (c. 72) section 3(4), Part IV,

The powers under section 39(1) and (4) and the powers of consent under sections 41 and 47 (being powers conferred by virtue of section 65(3)).

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sections 64, 81,85,99, 133, 142 and 143 and Schedule 1.

The functions under sections 81 and 85 so far as relating to a patient subject to an order or direction restricting his discharge.

The powers under section 99 other than the powers to direct transfers between hospitals in Wales.").

The noble Lord said: My Lords, when I moved an identical Amendment in Committee your Lordships were not happy about the Government's proposals, so I agreed to withdraw the Amendment and return later, and here I am. I have also written to the noble Lord, Lord Sandys, and the noble Baroness, Lady Faithfull, and they have had a meeting with my advisers, which I hope has satisfied them that the Government's proposals are coherent and make sense. This is an important and obscure part of the Bill and 1 shall, if I may, reply rather fully. This Amendment does not reflect any change on policy. It is a technical Amendment designed to put right defects in the existing entry for the Mental Health Act 1959 in Schedule 2. The 1959 Act is complex and the difficulties we have had in getting the entry right is a reflection of this fact.
The 1959 Act has been extensively amended. It is now largely concerned with admissions to, releases from and transfers between hospitals, guardianship and mental health tribunals. The provision of facilities for treating mentally ill patients is now dealt with in other statutes, in particular the National Health Service Act 1977. The relevant powers and duties, for example, in Section 4 of that Act to provide and maintain special hospitals are devolved to the Assembly.
I will now explain the Government's approach to the devolution of powers in the 1959 Act. The first power to be devolved is that in Section 3(4). This subsection contains ministerial powers in relation to the payment of members of mental health tribunals. The Government's policy is that ministerial powers in relation to such tribunals should be devolved, but those of the Lord Chancellor should he reserved. This is in line with the intention that all powers of the Lord Chancellor, being of a judical or quasijudicial nature, should remain with him and not be devolved.
The next and major area of devolution is that of Part IV of the Act. This Part

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contains a variety of ministerial powers and functions concerned with, for example, admissions to hospital and guardianship. At the moment these powers and functions are exercised in Wales by the Secretary of State for Wales. In the Government's view, their devolution to the Assembly is entirely consistent with the policy to give the Assembly responsibility for the Health Service and personal social services in Wales.
Before I explain the entries in column 2 in respect of enactments in Part IV of the Act, I must comment on Part V of the Act. This part relates to patients concerned in criminal proceedings. Contained in that part are a number of ministerial powers in respect of special matters relating to such patients. These powers are currently exercised by the Home Secretary. The Assembly is to have no responsibilities in the field of crime, and to devolve the Home Secretary's powers in the 1959 Act would mean that the Assembly would be administering something for which it would not have the necessary knowledge and experience. The Government have therefore decided that these powers should remain with the Home Secretary.
As I said earlier, the 1959 Act is complex. One of its structural complexities is brought about by the fact that most of the provisions in Part IV of the Act apply equally to patients covered by Part V of the Act. An example is the provisions in Section 39 of the Act in relation to leave of absence from hospitals. But in the case of patients detained under a Section 60 order with restrictions which I shall refer to, in shorthand, as serious criminal cases—the Act applies these provisions in a different way. In these cases the power to grant leave of absence, or revoke that leave, or transfer patients, or discharge patients, can only be exercised with the consent of the Home Secretary. This is achieved by the Act in Section 65; this section overlays, as it were, the Home Secretary's powers in relation to these patients on to the relevant provisions in Part IV.
These powers need to be reserved, and this is achieved by the entries in column 2 for Sections 39(1) and (4), 41 and 47. I am well aware of the potential confusion that these entries could cause, but I am afraid they are forced upon us by the
1026
structure on the 1959 Act, which was never designed to take account of the possibility of devolution.
I should like to deal with the remaining devolved powers and functions rather more briefly. The Ministerial powers in Section 64 are concerned with emergency admissions to a different hospital than that specified in the Court order, and Section 99, the transfer of patients between special hospitals, which is devolved insofar as the hospitals concerned are in Wales. Section 133 contains a power to pay pocket money to in-patients and Section 142 is to declare a local social services authority in default. This latter power is devolved only insofar as it relates to the Assembly's responsibilities.
Sections 81 and 85 were referred to in earlier discussions. They deal respectively with the transfer of patients to Scotland and Northern Ireland. A Minister authorises the removal of the patient. The effect of the proposed entry in the Wales Bill will be to devolve the authorisation for patients in Wales to the Assembly. The Secretary of State for Social Services will continue to exercise the power as regards patients in England. The Home Secretary will continue to exercise the power in both England and Wales in respect of serious criminal cases.
I said that the Mental Health Act was a complicated Act. The Government's proposals do not add to the complications, since their intention is to devolve to the Assembly those powers held by the Secretary of State for Wales and to reserve those held by the Home Secretary. This arrangement, therefore, continues the present arrangements whereby two authorities are concerned with this aspect of health administration, but there will be no increase in the number of authorities.
Before leaving this subject—which noble Lords will be glad to hear I shall do shortly—I should like to remind your Lordships that Schedule 2 of the Wales Bill transfers to the Assembly existing statutory Ministerial powers. Powers in enactments presently exercised by, for example, local social services authorities, will continue to be exercised by those authorities. Neither can Schedule 2 anticipage future legislation.
If, for example, a new Mental Health Act were to be brought on the Statute

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Book it would have to take account of the Wales Act and the existence of the Assembly. The Amendment before your Lordships seeks to ensure that the entry in Schedule 2 is as accurate a reflection of the Government's devolution policy as it can be in respect of the existing legislation.
I have spoken at length because I thought that this rather complicated issue should be on the record, even though I believe that in the discussions he had with my advisers the noble Lord was satisfied as to its validity. 1 beg to move.
Lord SANDYS: My Lords, I am extremely grateful to the noble Lord, Lord Donaldson of Kingsbridge, both for his long and helpful letter and for the opportunity which he gave to my noble friend Lady Faithful' and myself to discuss the particularly difficult situation which the Government were concerned with in making suitable arrangements for devolution in regard to the Mental Health Act, 1959.
The noble Lord, Lord Donaldson, has further added to his helpful explanation this afternoon. I would not wish to add any further complication, except in one regard: that is, to emphasise the first part of the Amendment, in the right hand column, where reference is made to Section 65(3) of the Mental Health Act. This is of particular significance for those interpreting what has taken place in this regard. We shall be guided by what the Government have said this afternoon. Of course, it would be only too easy if it had been possible to suggest that Part IV of the Mental Health Act was to have been devolved and Part V reserved. That was impossible, as the noble Lord, Lord Donaldson, explained to us. Therefore, with gratitude to the Government for advising my noble friend, myself and the House about how we should proceed, I would not wish to add anything further to what has been said.
On Question, Amendment agreed to.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 14:
Page 45, line 29, leave out from ("under") to end of line 39 and insert ("sections 69, 98(1)(e), 107(1) and 108").
The noble Lord said: My Lords, the present entry for the Children Act 1975 reserves in column 2 functions under
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Section 107(1) of the Act. These are the designation of countries to be considered as British territory; and specification of conditions to be fulfilled by citizens of the United Kingdom and Colonies for them to be designated as United Kingdom nationals. Both these functions are tied up with Hague Convention adoption orders, Ministerial functions in relation to which are reserved. I am sure your Lordships would accept that it would be quite wrong to have, for example, different criteria applied in England and Wales as to who should be considered a United Kingdom national for the purposes of the Act.
It has now been realised that Section 107(1) contains a third Ministerial function of the same family. This is one to designate a country as being one in which the Convention is in force. In the Government's view, this function too should be excluded from the competence of the Assembly, as is the equivalent provision in the Adoption Act 1976. This is an afterthought. I hope noble Lords will find it easy to accept. 1 beg to move.
On Question, Amendment agreed to.
Lord DONALDSON of KINGS-BRIDGE Lord DONALDSON of KINGS-BRIDGE moved Amendment No. 15:
Page 48, line 12, column 2, at beginning insert—

("The powers under section 6 of the Rivers (Prevention of Pollution) Act 1951 (c. 64).

The powers under section 9(6) of the Rivers (Prevention of Pollution) Act 1961 (c. 50).").

The noble Lord said: My Lords, this Amendment reserves the Ministerial powers under the Rivers (Prevention of Pollution) Acts 1951 and 1961 to extends the seaward application of those Acts. The Government consider that all such powers should be reserved because they are essentially powers to extend the frontier of devolution. Similar Amendments will be moved in respect of the Water Act 1973 and the Control of Pollution Act 1974. I beg to move.
On Question, Amendment agreed to.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 16:
Page 48, column 2, leave out lines 20 to 23 and insert—

("The functions under sections 6(1), 8 to 12 and 15 so far as

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exercisable in relation to premises mentioned in section 8(1) or radioactive waste on or from such premises.")'

The noble Lord said: My Lords, the Amendment tidies up the entry in Schedule 2 for the Radioactive Substances Act 1960. The Government's policy—which was explained during Committee stage—is that functions in respect of waste from United Kingdom Atomic Energy Authority premises and from licensed nuclear sites should be reserved. Such waste has implications not only for energy policy, but also for national safety. However, these considerations do not apply for minor sources of radioactive waste, such as hospitals. So this lesser aspect of radioactive waste is devolved as part of the Assembly's general control of pollution responsibilities.
The Amendment gives effect to this policy in respect of two particular provisions of the 1960 Act which were previously devolved outright. The first of these is Section 6(1), which provides for the authorisation of the disposal of radioactive waste. The second is Section 10, which concerns the provision of additional facilities for the accumulation and disposal of radioactive waste. The Amendment reserves the powers under these sections so far as they relate to waste from United Kingdom Atomic Energy Authority premises and licensed nuclear sites. I hope that the distinction is clear. I beg to move.
Lord SKELMERSDALE: My Lords, this appears to be a tidying up Amendment which arises from discussions in which my noble friend Lord Sandys joined me during the Committee stage. We welcome the Amendment very much because it seems to make absolutely clear exactly which functions regarding radioactive wastes and their disposal are to be devolved, and exactly which are to remain in the hands of the Secretary of State.
Lord SANDYS: My Lords, in view of the fact that I spoke to this proposal at Committee stage in support of my noble friend Lord Skelmersdale, I should like to join him in thanking the Government for their efforts in this regard.
On Question, Amendment agreed to.
The DEPUTY SPEAKER (Lord Derwent): My Lords, I must point out to the House that if Amendment No. 17 is agreed to, I will not be able to call Amendment No. 18.
4.53 p.m.
Lord SKELMERSDALE Lord SKELMERSDALE moved Amendment No. 17:
Page 48, in column 1, line 31, leave out ("1(1)(d), 3(3), 5(1)") and insert ("3(3)").
The noble Lord said: My Lords, I think that it will be to the convenience of the House if I speak also to Amendment No. 18 because it covers substantially the same point. I advanced the original arguments for the Amendment rather badly at the Committee stage during consideration of the Motion, Whether Schedule 2 shall be a Schedule to the Bill? At that time the noble Baroness, Lady Stedman, was answering for the Government. I asked then why on earth were Sections 1(1)(d) and 5(1) of the Health and Safety at Work, etc. Act in the left-hand column in the Schedule, which indicated that they were to be devolved, while in the next breath, as it seemed to me, they were promptly excluded in the second column. I recognise that this needs a little clarification, but the point at issue is quite simple, and my hope is that it would tidy up quite considerably this area of the Schedule.
The Government's object regarding pollution in the atmosphere has been made abundantly clear. It is that functions regarding basic pollutants should be the responsibility of the Assembly, while matters relating to the emission into the atmosphere of noxious or offensive substances should remain with the Secretary of State. Sections 1(1)(d) and 5(1) are concerned first with the control of emission into the atmosphere of noxious or offensive substances and, secondly, with the general duty of those persons in control of the premises to which these noxious effluents pertain. It would be much tidier and neater to omit Sections 1(1)(d) and 5(1) altogether from column 1, rather than have them mentioned twice—first in column 1, then in column 2. I beg to move.
Lord DONALDSON of KINGSBRIDGE: My Lords, I should like to

1031
speak to Government Amendments Nos. 18 and 19 before I come to move them, because if I can persuade the noble Lord not to press Amendment No. 17, I shall be able to move the other two Amendments which I believe meet Lord Skelmersdale's requirements better than his Amendment does. The noble Lord's Amendment seeks to reserve the power referred to in Sections 1(1)(d) and 5 of the Health and Safety at Work, etc. Act 1974 to prescribe premises to which the atmospheric pollution aspects of the Act apply. The Government without collusion, incidentally—have tabled two Amendments, Nos. 18 and 19, which also deal with this question, and I wish to discuss those first.
The Government's starting point is that the provisions of the Act dealing with atmospheric pollution should be devolved, as are the similar provisions of other related Acts. However, in retrospect we think that we have devolved too much. First, we agree that we should not devolve any powers in respect of vehicles, hovercraft and aircraft. Our reasoning here is that pollution from all of these is essentially connected with design and fuel standards, and hence has major implications for industry and energy. With vessels, which essentially means ships, it is not necessary to have such a complete reservation. We consider that the power to prescribe ships as premises for purposes of the Act should be retained by Ministers, but, if they are so prescribed, the Assembly should be able to apply the smoke controls provided for in the Act; for example, in port. Accordingly we do not go all the way with the noble Lord, who would reserve entirely the power to prescribe premises to which the atmospheric pollution provisions of the Act apply. He would, for instance, reserve this power in respect of offices and industry. We believe that all powers in respect of atmospheric pollution from such premises should be devolved as part of the Assembly's general control of pullution powers. If it wants to be tougher on pollution by prescribing more classes of premises it should be able to do so. I hope that your Lordships will accept the somewhat lesser deletions in Amendment No. 18, to which No. 19 is complementary. I also hope that I can persuade the noble Lord to withdraw his Amendment and to assist me to enforce mine.
Lord SKELMERSDALE: My Lords, the noble Lord has obviously had a far better success ratio in delving into the back of my mind than I have had myself. Most certainly his Amendments cover the points I was trying to make, and I am very pleased to beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 18:
Page 48, line 31, column 1, leave out ("5(1)") and insert (" 5 ").
On Question, Amendment agreed to.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 19:
Page 48, line 34, column 2, at end insert—

(" The functions under those sections so far as exercisable in relation to the control of emissions from vehicles, aircraft or hovercraft.

The power to prescribe vehicles, vessels, aircraft or hovercraft for the purposes of section 1(1)(d).").

On Question, Amendment agreed to.
5 p.m.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE: moved Amendment No. 20:
Page 48, line 35, column 2, leave out from ("under") to end of line 8 on page 49 and insert ("sections 21(2) and (5), 30(5) and 31(9).").
The noble Lord said: My Lords, this is an Amendment which I hope will quickly attract the approval of the House because it takes out 21 lines of the Bill and replaces them with two, and this can hardly be wrong. It concerns Section 30(5) of the Control of Pollution Act 1974. This is a complex provision which enables the Secretary of State to apply to radioactive waste the general waste disposal code set out in the 1974 Act. The previous entry in the Bill reserved the powers under Section 30(5) in relation to waste from United Kingdom Atomic Energy Authority premises and licensed nuclear sites, but otherwise devolved it.
We were obliged to look at this entry again because a consequential Amendment would have been required to take account of our earlier Amendment, No. 16, to the entry for the Radioactive Substances Act 1960. This consequential Amend

1033
ment would have rendered the entry for Section 30(5) of the 1974 Act yet more complex. Instead, we propose to reserve Section 30(5) outright. So it will be for the Secretary of State alone to adapt the Control of Pollution Act to radioactive waste, but he will of course consult the Assembly in the light of their other responsibilities for pollution, including some forms of radioactive pollution. I hope noble Lords will think that this is a sensible solution. I beg to move.
Lord SANDYS: My Lords, the noble Lord, Lord Donaldson, rightly anticipated the pleasure which we hope your Lordships will share with this Front Bench in accepting the Amendment as proposed. At Committee stage we devoted some little time to the subject of the disposal of radioactive waste, and if the Government have reached the conclusion, as they have, to simplify and ensure that the Secretary of State retains all powers under this section, we believe that this w ill have conferred a benefit on the Bill.
On Question, Amendment agreed to.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 21:
Page 49, line 10, column 2, at end insert—

("The power to prescribe parts of the territorial sea for the purposes of the definition of "controlled waters" in section 56(1).

The functions under section 56(4).").

The noble Lord said: My Lords, with the leave of the House, in moving Amendment No. 21 I should like to speak also to Amendment No. 22. Both have the effect of reserving powers to determine, or arbitrate on, the seaward extent of the application of the Control of Pollution Act 1974. Again, the Government's approach is that all powers to extend the frontier of devolution should be reserved. These Amendments are part of a series of four with similar effect, the others being No. 15, with which we have already dealt, and No. 37, which deals with the Water Act and will come later. I think this is a simple and obvious improvement, and I beg to move.
Lord SKELMERSDALE: My Lords, being a bit slow on the uptake I did not
1034
speak to Amendment No. 15, but what I had to say on that Amendment goes just as well for these Amendments, too. They are quite obviously, as the noble Lord has said, very welcome to all partsof the House, and indeed will be, 1 think, to the understanding of the future Assemblymen. This is no small matter. I think it is quite obvious that these particular powers should be reserved to the Secretary of State, because to give them to the Assembly will only lead to ultimate confusion.
On Question, Amendment agreed to.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 22:
Page 49, line 14, column 2, after (" sections ") insert (" 73(2)(a) ").
On Question, Amendment agreed to.
Lord STANLEY of ALDERLEY Lord STANLEY of ALDERLEY moved Amendment No. 23:
Page 49, leave out lines 35 to 47.
The noble Lord said: My Lords, with your Lordships' permission 1 will also speak to Amendment No. 73. The purpose of these Amendments is to ensure that the Minister of Agriculture has control of the management of common land and, in particular, allotments. As the Bill is written, I understand that any matter affecting the farming of commons or the future of allotments will be dealt with by a planning committee of the Welsh Assembly. Surely such matters are agricultural, and as such should be dealt with by the Minister of Agriculture or the Secretary of State for Wales in his capacity as Minister of Agriculture. At least he should be consulted; and if the Government cannot accept my Amendment (as I am sure they cannot) perhaps they can assure me that the Minister of Agriculture would be consulted in matters affecting the farming of commons or allotments. I beg to move.
Lord DONALDSON of KINGSBRIDGE: My Lords, if I may first make a comment on the last point, agriculture is not devolved and, therefore, the agriculture of commons is not devolved. So if new operations were to be introduced into commons it would be a matter, inevitably, for the Minister. But, on the whole, the effect of the Amendment would be to reserve almost all existing ministerial powers in respect of commons. Some

1035
of these powers are admittedly very rarely used, but others, especially those under the Commons Act 1899 and the Law of Property Act 1925, are at present constantly being exerciesd by the Secretary of State for Wales—not by the Minister of Agriculture, I note.
What we must decide is whether they continue to be exercised by him or whether they should be transferred to the Assembly. The Government's strong view is that they should be devolved. Commons are essentially a local matter and, especially in South Wales, they are a very important local matter. Right across South Wales there are commons in the hills between the industrial valleys, and these are a much-valued source of recreation for those living in the valleys. It seems to the Government that this is just the kind of local matter which is ideal for devolution. There is no impact at all for other parts of the United Kingdom. Commons also cohere with other matters for which the Assembly will have responsibilities: most particularly, land-use planning, countryside and recreation. The Assembly will therefore be well placed to exercise its powers.
It might perhaps be argued that there is a connection between commons and agriculture. This is so, of course, but I do not think it should be overstated. Commons powers at present do not rest with agriculture Ministers, but with planning Ministers; and it is noteworthy that these powers were among the first to be transferred to the Secretary of State for Wales. In practice, most cases arising today turn on planning and amenity considerations. But even going back to the early Commons Acts, the powers are exercisable with regard not just to agriculture but to more general considerations. For instance, Section 7 of the Commons Act 1876 (which is included in the list of Acts devolved by the entry for Inclosure Acts 1845 to 1882) provides that powers are exercisable "for the benefit of the neighbourhood". Where agricultural considerations are relevant, as I said at the beginning of this speech, the Assembly will be required to take them into account along with other considerations. The Assembly will be bound by statutory requirements, just as is the Secretary of State at present. For instance, if the Assembly is to consent under Section 194 of the 1925 Act to the restriction of
1036
access to commons, it will be bound by the requirements of the 1876 Act to hold an inquiry and will also be required to weigh all the criteria listed in the Inclosure Acts of 1845 to 1862; and if the Assembly does not come to its decision in a proper manner, the decision will be open to challenge in the courts.
Against this background, my Lords, may I say that the Government are quite sure that it would be wrong to deprive the Assembly of powers in respect of commons. They are of a very local nature, and entirely suitable for devolution. I trust that what I have said will put the noble Lord's mind a little more at ease, and I hope very much that he will not think it necessary to press this Amendment.
Lord STANLEY of ALDERLEY: My Lords, I thank the noble Lord for that detailed reply—much more detailed than I expected. I have to accept it although, as he intimated, I do not accept it with a completely glad heart. I feel at the back of my mind that agriculture is inclined to be pushed into second place, or it might be so. The noble Lord shakes his head. However, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
5.10 p.m.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 24:
Page 50, line 16, column 2, at end insert—

(" The functions under section 17(5) so far as exercisable in relation to excepted statutory undertakers, and the function conferred on the Treasury by section 17(8).").

The noble Lord said: My Lords, this Amendment concerns the carrying out of coast protection work by statutory undertakers. It is technical and involves no policy change. Section 17 of the Coast Protection Act 1949 provides that statutory undertakers carrying out coast protection work must satisfy the coast protection authority. If there is a dispute, subsection (4) provides that it should be resolved jointly by the "appropriate Minister" (that is, the Minister responsible for the undertakers) and the Minister responsible for the coast protection authority; that is, both of them. Subsection(5)then provides for the appropriate

1037
Minister to direct the statutory undertakers to carry out the work or not to do so as the case may be.
The Amendment reserves this power under subsection (5) in cases where the undertakers are "excepted statutory undertakers "—that is to say, undertakers which operate in reserved areas. The term is defined in Clause 76(1) and includes, for example, British Rail. The power will remain devolved for other statutory undertakers such as water authorities. The Amendment also reserves the power in subsection (8), which is, in effect, the power to decide whether the Assembly is the "appropriate Minister in any particular case.
There is a later related Amendment (No. 70) to Schedule 4 to the Bill which I shall move when we get there. It is worth noticing that corresponding changes were made and accepted to the Scotland Bill. I beg to move.
Lord ELTON: My Lords, I rise briefly on this technical point with another. I deplore putting down Amendments later than they should be put down and I thought it fair to give the noble Lord notice on this occasion since he mentioned statutory excepted undertakers. I may tell him that I am in process of tabling an Amendment to the definitions, to the interpretation clause, in which I find the strange provision that the Secretary of State is the only person who, in the long run, determines what an "excepted statutory undertaking" is. It seems a strange place to put it. I wanted to air the matter. The noble Lord's advisers will wish to think about it, and I hope that the usual means will be taken of alerting them to the subject.
On Question, Amendment agreed to.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 25:
Page 50, line 33, column 2, leave out (" those sections ") and insert (" sections 23(2)(b) and (in a case within subsection (2)(b)) 26(2) ")
The noble Lord said: My Lords, if I may, with the permission of the House, I will speak to Amendments Nos. 25 and 26 together. They both relate to Part II of the Town and Country Planning Act 1959. As my noble friend Lady Stedman explained in Committee stage, Part II of
1038
the 1959 Act makes provision for the acquisition, appropriation and disposal of property by local authorities. At present, local authorities require the consent of the Minister concerned with the purpose for which the land was acquired. After devolution it will be for the Assembly to give consent where the purpose is one for which they will be responsible; for instance, housing. The Bill already achieves this satisfactorily. Part II of the 1959 Act also includes some powers of a more general nature—for example, relating to the appropriation of open space or to the adjustment of local authority accounts. These arc powers related to the general supervision of local government. As such they should be devolved outright. At present they are reserved outright, and the Amendment corrects this. I think it a simple point and I hope that noble Lords will be able to accept it. I beg to move.
On Question, Amendment agreed to.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 26:
Page 50, line 34, column 1, leave out (" 23(2)(b) and 26(2)(b) and (3)(b)") and insert (" 23, 24, 26 and 27").
On Question, Amendment agreed to.
Lord DONALDSON of KINGSBRIDGE Lord DONALDSON of KINGSBRIDGE moved Amendment No. 27:
Page 50, line 42, at end insert—

("The Land Compensation Act 1961 (c. 33) sections 18 and 37 and paragraph 2 of Schedule 2.

The powers under section 37 so far as their exercise is incidental to functions which remain exercisable by a Minister of the Crown.").

The noble Lord said: My Lords, this Amendment transfers to the Assembly powers under Sections 18 and 37 of, and paragraph 2 of Schedule 2 to the Land Compensation Act 1961. Section 18 concerns appeals against certificates of appropriate alternative development. The certificates may be granted by local authorities where land is to be compulsorily acquired. The certificate states whether the land was likely to receive planning permission for any other use—a matter of some significance for compensation purposes. Appeals currently go to the Secretary of State for Wales. But as the Assembly will be responsible after devolution for land use matters, it is sensible that appeals under Section 18 should go to it. Para

1039
graph 2 of Schedule 2 concerns the confirmation of compulsory purchase orders in respect of houses unfit for human habitation. After devolution, it is appropriate that the Assembly should be responsible for confirmation of such orders as the Assembly will be responsible for related housing and public health matters.
The Amendment also ensures that the Assembly will be able to hold local inquiries under Section 37 for the purposes of both Section 18 and paragraph 2 of Schedule 2. The Government will be able to hold local inquiries in respect of functions under the Act which are to be reserved. I should stress that this Amendment does not devolve any functions relating to the basis on which compensation is assessed. This will remain uniform throughout Great Britain. I hope that noble Lords will think that this is a sensible Amendment. I beg to move.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 28:
Page 51, column 2, leave out lines 4 to 9 and insert—

("The functions under section 10(3) so far as exercisable in relation to excepted statutory undertakers.

The functions under sections 28 to 30 and Schedule 8 so far as exercisable by virtue of representations made by excepted statutory undertakers.").

The noble Baroness said: My Lords, I indicated during Committee stage that the Government would he proposing a series of technical Amendments concerning the Bill's treatment of excepted statutory undertakers. This is the first of these Amendments, and perhaps I could save time later if I explain our general approach now. Statutory undertakers by their nature have statutory duties to perform—for instance, to supply electricity to households—and planning legislation contains a number of ministerial protections to ensure that these duties are not unduly prejudiced by planning decisions. After devolution, the Assembly will have responsibility for most planning functions, and it is necessary to ensure that they are not exercised in a way which might prejudice those statutory undertakers who will remain responsible to the Government. These are termed "excepted statutory undertakers" and are defined
1040
in Clause 76(1). They include, for example, the Post Office and Electricity Boards.
The Wales Bill accordingly reserves certain planning powers where they are exercised in respect of excepted statutory undertakers, or, depending on the nature of the power, devolves them in Schedule 2 subject to ministerial consent under Schedule 4. However, the detail is not in all cases right, and that is why we are proposing this series of Amendments. This particular Amendment has the effect of reserving the powers in Sections 28 and 29 of the New Towns Act 1965 where their exercise stems from representations by excepted statutory undertakers. Section 28 concerns the extension or modification of the functions of statutory undertakers, and Section 29 contains related procedural provisions. The Amendment also mentions Sections 10(3) and 30 and Schedule 8 of the Act, but in these cases it merely carries over the effect of the entry as it previously stood. I beg to move.
On Question, Amendment agreed to.
5.20 p.m.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 29:
Page 51, line 11, column 2, leave out from ("(5)") to end of line 12 and insert ("and 43 to 45.").]
The noble Baroness said: My Lords, the effect of this Amendment is to reserve the powers under Section 44 of the New Towns Act 1965 relating to grants and loans made to the Commission for New Towns from the Consolidated Fund. This is in line with the reservation of other matters relating to the Commission for New Towns. Section 44 also relates to grants to new town development corporations. Powers in respect of development corporations are in general to be devolved. But no specific provision is required in the case of Section 44, because Clause 54(1) has the effect of converting the references as necessary to provide for devolution. This is all very technical, and no policy change is involved. I beg to move.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 30:
Page 51, line 21, column 2, at end insert —

1041

("The powers under section 50 so far as their exercise is incidental to functions which remain exercisable by a Minister of the Crown.")

The noble Baroness said: My Lords, this Amendment relates to the holding of local inquiries under Section 50 of the New Towns Act 1965. It involves no change of policy. Most ministerial functions under the 1965 Act are to be transferred to the Assembly. But some—for example, in respect of excepted statutory undertakers—will remain with the Government. Both the Assembly and the Government will, therefore, need to have the power under Section 50 to hold inquiries. The Amendment ensures that each can hold inquiries where this is required for the exercise of their functions under the Act. Previously only the Assembly would have been able to hold an inquiry. I beg to move.
On Question, Amendment agreed to.
The DEPUTY SPEAKER: My Lords, I must point out to the House that if Amendment No. 31 is agreed to, I shall not be able to call Amendment No. 32.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 31:
Page 51, leave out lines 28 and 29 and insert—

("The Commons Registration Act 1965 (c. 64) section 19.

The power to make regulations for the purposes specified in paragraphs (e) and (g) of subsection (1).").

The noble Baroness said: My Lords, it might be for the convenience of your Lordships' House, if, in introducing the Government's Amendment, I refer also to Amendment No. 32. Both concern Section 19 of the Commons Registration Act 1965. Section 19 of the Commons Registration Act contains powers which are not of great significance in practice. I say that not because commons are an unimportant subject—I know that, rightfully, they arouse strong feelings—but because most of the powers are either spent or are unlikely to be exercised again. This is because the initial process of applications for registration under the 1965 Act, and of the making of objections, is now complete. However, whether powers are major or minor, our task is to ensure that they are allocated to the Government or the Assembly as is the more appropriate.
The Government's Amendment does two things. First, it acknowledges the fact that the only section containing powers to be devolved is Section 19. The powers in the other sections are either spent or irrelevant; except those in Section 17, which we agree should be reserved because they establish the Commons Commissioners. Secondly, it reserves two aspects of Section 19 because, we believe, they are not apt for the Assembly to exercise. There is the power under subsection 1(e) to make regulations in respect of the procedure of the Commons Commissioners; and there is the power under subsection 1(g) to provide for the Church Commissioners to act on behalf of Church of England benefices. I am told that the Church of England is not totally disestablished in Wales; some border parishes remain part of the Established Church.
This leaves devolved a variety of powers to make regulations with respect to the keeping of commons registers by local authorities. What do we do with these? I suggest that we should leave them devolved: because most local authority matters of this nature are devolved, and because most other aspects of commons under other legislation are also to be devolved. We are concerned here essentially with a local matter. The Assembly are not going to make different Welsh regulations for their own sake—they will have better things to do. But if there is a need to reflect particular Welsh circumstances, then it is appropriate for the Assembly rather than the Government to do so.
I hope therefore that your Lordships will accept our Amendment. We have looked at the matter carefully in the light of the Amendment tabled on Committee stage, and believe that in practical administrative terms what we propose is sensible. I hope also that Amendment No. 32, which in effect reserves all functions under the 1965 Act, will not be pressed. I beg to move.
Baroness ELLES: My Lords, while reserving the right of my noble friend to speak to Amendment No. 32, I should like to comment briefly on Amendment No. 31 and draw the attention of the noble Baroness to the fact that by her Amendment she is deleting the functions under Section 17 from excluded functions. By leaving out lines 28 and 29 one is

1043
leaving out chapter 64 and the functions under Section 17, which is in the second column of the Bill. According to the very clear explanation from the noble Baroness and from what she said at Committee stage, this was not the intention of the Amendment. If she will look at it again I shall be grateful.
Lord STANLEY of ALDERLEY: My Lords, I assume from the fact that the noble Baroness, Lady Stedman, is nodding that she is going to withdraw her Amendment.
Baroness STEDMAN: No, my Lords. I am happy to look at the point that the noble Baroness has raised. Our understanding is that all the powers in the other sections referred to are spent or irrelevant, but those in Sections 17 we agree ought to he reserved because they establish the Commons Commissioners. That is the way that we want to leave it.
Baroness ELLES: With respect, my Lords, from the way the Amendment is drafted the functions under Section 17 would be removed from the Bill. I am sure that this is not the intention of the noble Baroness. As I understand it, the words:
"the functions under Section 17"
should remain printed in the second column of the Bill. By removing lines 28 and 29 from the Bill that particular reference would be excluded. I do not believe that that is the intention of the noble Baroness. I should be grateful if she would withdraw this Amendment. If the noble Baroness presses this Amendment, she will be excluding the functions under Section 17. They will be deleted from the Bill and it will put my noble friend in a difficult position over Amendment No. 32. If the noble Baroness withdraws this Amendment and looks closely at the effect of it, I am sure that my noble friend would undertake not to press his Amendment at this stage. The drafting can be sorted out later. This will allow my noble friend to speak to the substance of Amendment No. 32 without creating confusion.
Baroness STEDMAN: My Lords, with the leave of the House, my "pigeon post" has been active and I understand that Section 17 is reserved by silence.
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We have returned to what we had in the Scotland Bill where we had things reserved by silence. If the noble Baroness is not happy, I will take the Amendment back and look at it again on the undertaking that the noble Lord does the same. We can then consider it before the next stage.
Baroness ELLES: My Lords, so far as I am concerned, I shall be very happy with that explanation and to reserve this matter to a further stage. Many of us are not always happy about exclusion by silence.
Baroness STEDMAN: My Lords, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
5.28 p.m.
Lord STANLEY of ALDERLEY Lord STANLEY of ALDERLEY had given Notice of his intention to move Amendment No. 32:
Page 51, line 28, leave out ("section 17") and insert ("sections 17 and 19").
The noble Lord said: My Lords, it gives me great pleasure to find myself for once not being the only one wrong and for once seeing, as I thought, that the noble Baroness was wrong in not putting in:
"The functions under Section 17".
I cannot understand why she had the functions under Section 17 before, but not in this Bill. This must be sorted out between now and Third Reading.
As the noble Baroness knows, I raised the matter in Committee. I received a favourable reply, as I did today in what the noble Baroness said to Amendment No. 31. However, having wounded the "bird" I should like to try to finish him off. The object of this Amendment is to make sure that the regulations of common land are the same in England and Wales. I do not agree with what the noble Baroness said about her Amendment. As I understand it, the 1965 Commons Registration Act was passed for that reason with, to the best of my knowledge, little dissension. There are already provisions under Section 19(4) of the Bill to allow different regulations for different circumstances.
I cannot accept the Government's argument as stated by the noble Baroness

1045
in Committee on 15th June. In column 610 of Hansard she said:
"It seems unlikely that it"—
I think she means the Welsh Assembly—
"would wish to make regulations differing greatly from those applying in England, but circumstances are, of course, not always the same in Wales, and it should have the opportunity to take account of this".
As I said, there are provisions under Section 19(4) to do this. If, however, it did make different regulations, despite the fact that the noble Baroness said that she did not think it would, there could be a muddle on commons straddling the Border between England and Wales. If it does not make these different regulations, why devolve them? It seems to me to be a case of "heads I win and tails you lose".
There is also the question of the class of person eligible to re-register. Paragraph 29(2)(b) of the Statutory Instrument of 1966, No. 1471, defines the different classes of person eligible. As I understand it, the Welsh Assembly could redefine "a person having an interest", and this, I believe could add confusion. I have one probing question to put: Could the Government tell me whether under Section 15(3) of the 1965 Act it will be Parliament and not the Welsh Assembly which will have the powers with regard to quantification of certain grazing rights? I think perhaps I ought to know that, but this does not make it quite clear to me as to whether it has or has not been devolved.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 33:
Page 51, line 48, column 2, at end insert (",73 to 77 and 84").
The noble Baroness said: My Lords, during Committee stage the noble Baroness, Baroness Elles, suggested that the Bill should reserve ministerial powers in respect of office development permits under the Town and Country Planning Act 1971. This Amendment is a direct response to that suggestion, and reserves all the ministerial powers. Office development permits have never applied to Wales, and are perhaps unlikely to do so. But we accept that we should nevertheless get the Bill right, and that reservation is consistent with the reservation of other functions relating to regional employment policy. I beg to move.
Baroness ELLES: My Lords, I should like to take this opportunity to thank the noble Baroness for the way she has dealt with my proposals made at the Committee stage, and I naturally support the Amendment.
On Question, Amendment agreed to.
[Amendment No. 34 not moved.]
5.33 p.m.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 35:
Page 52, line 19, leave out from ("under") to ("exercisable") in line 22 and insert ("sections 233 to 236 so far as").
The noble Baroness said: My Lords, this is a further Amendment in respect of excepted statutory undertakers, and the effect is to reserve the powers referred to in Sections 233 and 234 of the Town and Country Planning Act 1971, where exercisable, following representations from an excepted statutory undertaker. These provisions are parallel to Sections 28 and 29 of the New Towns Act 1965, which were the subject of an earlier Amendment this afternoon. I beg to move.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 36:
Page 53, line 10, column 1, at end insert—

("The Land Compensation Act 1973 (c. 26) sections 15(2), 20, 22(5), 41(2), 42(5), 51 and 72.").

The noble Baroness said: My Lords, this Amendment transfers to the Assembly a series of functions under the Land Compensation Act 1973 which cohere with other devolved functions. The function are as follows: (1) the function under Section 15 of certifying whether runway alterations have been carried out; (2) the making of regulations under Section 20 as to sound-proofing of buildings to mitigate noise from public works: (3) the functions under Section 22(5) of authorising the acquisition of land by local highway authorities; (4) the functions under Sections 41(2) and 42(5) relating to people displaced from their homes as a result of compulsory acquisition by public bodies; (5) the functions under Section 51 of specifying that land to be designated as a new town is required for purposes of public development. This is

1047
relevant to entitlements to compensation; and (6) the power under Section 72 to acquire land compulsorily in pursuance of a blight notice where land has been designated as part of a new town.
All these provisions cohere with other functions which are to be transferred to the Assembly, and the Assembly will be much better placed than the Secretary of State to exercise them. All matters relating to the basis on which compensation is assessed are, of course, reserved. I beg to move.
Lord LLOYD of KILGERRAN: My Lords, may I, from these Benches, say how much we welcome the transfer of this authority to the Assembly.
Baroness ELLES: My Lords, I wonder whether I might just ask the noble Baroness, in view of her explanation of the purpose of this Amendment, whether it will make any difference to where the money comes from, in view of this devolution of power. Obviously, many of these matters are going to involve certain amount of expenditure—particularly insulation and some of the other matters she has referred to. Will this mean that these matters will now be paid for out of the block grant given to the Welsh Assembly, as opposed to other funds which are available to the Secretary of State?
Baroness STEDMAN: My Lords, where they are strictly devolved powers, they will come out of the Consolidated Fund for the Assembly. Where they are powers within the remit of the Secretary of State, the Secretary of State will still provide the money in the normal way, as he does now.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 37:
Page 54, line 14, column 2, after ("4") insert ("5").
The noble Baroness said: My Lords, this is the last in the series of Amendments dealing with seaward limits. It concerns the power of the Secretary of State under paragraph 5 of Schedule 2 to the Water Act 1973 to determine questions arising as to the extent of the seaward boundaries
1048
of water authorities. This power is to be reserved along with all other powers relating to seaward limits. The House dealt with the other Amendments, Nos. 15, 21 and 22, earlier this afternoon, when my noble friend Lord Donaldson was present. I beg to move.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendments Nos. 38 to 47:
Page 54, column 2, leave out lines 32 and 33.
Page 54, line 34, column 2, leave out ("(5)")
Page 54, line 35, column 2, leave out ("section 42") and insert ("sections 42 and 64")
Page 54, line 35, column 2, leave out lines 49 and 50.
The noble Baroness said: My Lords, it might be convenient to the House to take Amendments Nos. 38 to 41 together because they all tidy up the entry in Schedule 2 to the Bill for the Land Drainage Act 1976. Amendment No. 38 concerns the powers under Section 23 of the Act to approve arrangements between drainage authorities on the one hand and navigation or conservancy authorities on the other hand. The Assembly will be responsible for drainage authorities, but powers in respect of conservancy and navigation authorities are generally to be reserved. The present entry in the Bill seeks to reflect this by reserving the powers under Section 23 of the Secretary of State, but not of the Minister for Agriculture, Fisheries and Food. However, Section 23 has been affected by a recent transfer of functions order which took effect on 1st April—the Transfer of Functions (Wales) (No. 1) Order—and this solution is no longer possible. Instead, the Amendment devolves all the powers under Section 23, and a later Amendment, No. 72, requires that their exercise be subject to ministerial consent.
Amendment No. 39 reserves all the powers under Section 27 of the Act. These are concerned with navigation authorities, responsibility for which is generally reserved in the Bill. Amendment No. 40 reserves the power of the Treasury in Section 64 to fix the fee for the provision of information by the Inspector of Taxes to internal drainage boards. This is essentially a power in respect of the Inland Revenue. Amendment No. 41 is a technical Amendment in relation to the pay, pensions and allowances of the chairman of regional and local land drainage committees of the

1049
Welsh Water Authority. This was previously dealt with in paragraph 87 of Schedule 11, but it is not for technical reasons appropriate to deal with the matter in Schedule 2. The functions in question are to be devolved to the Assembly.
As I said, these are all tidying Amendments, and we shall come to some more far-reaching Amendments concerning internal drainage boards when we get to Clause 61. I beg to move.
On Question, Amendments agreed to.
5.40 p.m.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 41A:
Page 55, leave out lines 24 and 25.
The noble Baroness said: My Lords, this, again, is a technical Amendment. It deletes the entry in Part XI of Schedule 2 for Sections 7 and 9 of the Local Government Act 1974, for the reason that the necessary devolution of the ministerial functions in these provisions is already provided for in paragraphs 58, 66 and 68 of Schedule 11. Section 7 of the 1974 Act concerns supplementary grants towards expenditure in national parks. Section 9 concerns grants and loans by the Countryside Commission which, after devolution, will be the Welsh Countryside Commission. My Lords, I beg to move.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 42:
Page 56, line 45, after ("29") insert ("(7) and (8)")
The noble Baroness said: My Lords, during the debate in Committee on Schedule 2 stand part, the noble Lord, Lord O'Hagan, raised a point about the devolution of powers in relation to noise pollution from aircraft. At the time I said that the noble Lord had put his finger on a defect in the Bill which the Government intended to rectify at Report. This is the first of two such Amendments designed to put things right. Section 29A of the Civil Aviation Act 1971 (added by the Airports Authority Act 1975) is concerned with the mitigation of the effects of noise and vibration from aircraft. It provides for a scheme whereby grants can be made for the insulation of buildings.
1050
It is entirely in keeping with the Assembly's powers, in relation to housing and other local matters, that it should have transferred to it the powers in this section.
Functions in relation to the control of noise pollution are to be excluded from the competence of the Assembly. It is not the Government's intention that the Assembly should have powers, for example, to specify the number of aircraft, or to determine the periods during which aircraft take off or land at an aerodrome. Powers of this nature are contained in Section 29 of the 1971 Act, and the Bill at present wrongly devolves them to the Assembly. But Section 29(7) of the 1971 Act contains powers in relation to the measurement of noise, and Section 29(8) contains powers in respect of failure to perform the duties laid down in Section 29(7). The Assembly needs these powers in order to carry out its functions under Section 29A. Equally, the Secretary of State needs the same powers in order to perform his functions under the remainder of Section 29.
Accordingly, the Amendment before your Lordships devolves the power under Sections 29(7) and (8) and 29A to the Assembly. We will shortly reach Government Amendment No. 47 to Schedule 3, which makes the powers under Sections 29(7) and (8) concurrent so that they are available to both the Assembly and the Secretary of State. My Lords, I beg to move.
Lord O'HAGAN: My Lords, may I, on behalf of my noble friends, say that I am most grateful to the noble Baroness for remedying the defect in this part of the Schedule, which was brought to her attention at an earlier stage of the proceedings on this Bill. Can she confirm —and this is a question asked from ignorance rather than malice—whether the nature of the control over the by-products of aircraft, if one may call them that, is now reserved to central Government? Is it noise levels, or is it pollution generally from aircraft? There can be pollution by noise and there can also be pollution of other kinds. If I understand it correctly, what is being reserved is central control of the noise level itself: that alone and nothing more.
I am grateful for what the noble Baroness has said, and may I serve notice

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on her that as I, like some of my noble friends, have not received letters which I am sure are in the post, I look forward to hearing, when we come to later Amendments, what are Her Majesty's Government's views about the devolution of various aspects of the Road Traffic Act 1967, particularly in regard to bollards in central London and statutory notices controlling dogs, both of which I mentioned at the Committee stage of the Bill. Meanwhile, I am grateful for the Amendment which the noble Baroness has brought forward, together with the one that follows from it.
Baroness STEDMAN: My Lords, with the leave of the House, I understand that in my absence there were some comments about letters which appear to have gone astray. I apologise to noble Lords if they have not received them. My understanding was that they had all been sent, but 1 will certainly check on that when I get back to my office.
Baroness ELLES: My Lords, may I say, on behalf of my noble friends—and I am one of those who have not had a letter—that we are very grateful to the noble Baroness for having said that. No doubt the letters are somewhere on their way.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 43:
Page 56, line 47, column 1, at end insert—

("The Passenger Vehicles (Experimental Areas) Act 1977 (c. 21.").

The noble Baroness said: My Lords, this Amendment devolves to the Assembly all powers under the Passenger Vehicles (Experimental Areas) Act 1977. This Act provides for the designation of areas in which local authorities may authorise the relaxation of the licensing requirements of Part III of the Road Traffic Act 1960. The authorisation may apply to private vehicles or commercial vehicles carrying up to five people. Where an authorisation is made, there is no need to have a road service licence or a public service vehicle licence. The main ministerial powers are to be found in Sections 1(2) and 2(6); they are the power to designate areas and the power to approve authorisations granted by local authorities. These
1052
and the other ministerial powers in the Act are essentially of a local nature and are suitable for transfer to the Assembly as part of its wider responsibilities related to road service licensing and transport in general. My Lords, I beg to move.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 44:
Page 56, line 47, at end insert—

("The Minibus Act 1977 (c.25).

The power under section 1(3) except so far as exercisable in connection with the grant of permits in respect of vehicles ordinarily kept in Wales.

The functions under section 3 except the power under subsection (1) to prescribe the matters to be taken into account in determining the conditions of permits granted in respect of vehicles ordinarily kept in Wales.").

The noble Baroness said: My Lords, this Amendment devolves powers under the Minibus Act 1977, and is very similar in nature to the previous one concerned with the Passenger Vehicles (Experimental Areas) Act of the same year. The Minibus Act provides that the Secretary of State may designate bodies as being able to grant permits in respect of minibuses. Where such a permit is granted, there is no requirement to have a road service licence or a public service vehicle licence. However, the Act applies only to minibus services which are not available to the public at large and which are not for profit. It is aimed particularly at minibuses run by voluntary community organisations.
The main ministerial power is that under Section 1 of designating bodies in respect of vehicles normally kept in Wales. But there are powers in Section 3 to make regulations in respect of vehicle safety, and these are to be reserved. This is in line with the reservation elsewhere in the Bill of matters relating to safety standards, including the reservation of public service vehicle licensing. Again, the powers to be devolved are of a local and social nature, and cohere with the devolution of other functions relating to road service licensing and transport. My Lords, I beg to move.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendments Nos. 45 and 46:
Page 58, leave out lines 43 to 52 and insert—

("The power under section 55(1) to give general directions other than directions as to the placing of signs of a type prescribed by regulations made by the Assembly under section 54.").

Page 59, leave out lines 6 to 11 and insert ("speed limits on any road specified in an order or on all roads in any area so specified.").
The noble Baroness said: My Lords, it might be convenient to take together Amendments Nos. 45 and 46, as they both relate to the Road Traffic Regulation Act 1967 and follow a common approach. The Government's view is that general rules relating to traffic should be the same in both England and Wales, and for this reason most general powers under the 1967 Act are reserved. But it is sensible that the Assembly should have powers which are of purely local application, as this will be more knowledgeable of local circumstances. These Amendments both concern local powers.
Amendment No. 45 concerns road signs. The Bill already reserves the powers under Section 55(1) of the 1967 Act to make general directions as to the placing of road signs—except that the Assembly will be able to make its own directions in respect of Welsh language variants of signs. However, powers in subsection (2) in respect of the placing and replacing of particular signs should be devolved outright because they are concerned with local circumstances. At present these powers are only partly devolved and this Amendment completes the job.
Amendment No. 46 concerns the power for the setting of speed limits under Section 77 of the 1967 Act. At present the Bill correctly reserves these powers in respect of general speed limits. It devolves them, again correctly, in respect of local maximum speed limits. But it omits to devolve in respect of local minimum limits, and this Amendment puts right that minor omission. I might add that both Amendments, although it is not their primary purpose, have the desirable effect of simplifying what is at the moment a rather complex entry in the Bill. I beg to move.
On Questions, Amendments agreed to.
Scheuled 3 [Enactments conferring powers exercisable concurrently]:
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 47:
Page 60, line 38, at end insert—
("The Civil Aviation Act 1971 (c. 75) section 29(7) and (8).").
The noble Baroness said: My Lords, this is the second leg of the Amendments to put right the treatment in the Bill of Sections 29 and 29A of the Civil Aviation Act 1971. When I moved Amendment No. 42 to Schedule 2, I explained the Government's policy towards noise pollution from aircraft. I do not propose to retread that same ground again. Suffice to say that the purpose of this Amendment is to give access to the powers in Sections 29(7) and (8) in respect of the measurement of noise levels at aerodromes to both the Assembly and the Secretary of State so that both can perform their respective functions effectively. My Lords, I beg to move.
On Question, Amendment agreed to.
Clause 10 [Cultural and recreative activities]:
5.53 p.m.
Lord ELTON Lord ELTON moved Amendment No. 48:
Page 7, line 13, at end insert ("but shall not make payments of grants with respect to items for the collections of museums and galleries and special grants with respect to items for the collections of libraries.")
The noble Lord said: My Lords, we enter now an area on which there was some considerable interest at the Committee stage. Your Lordships will recall that we were discussing in this context the future of the Arts Council and the question which we were considering at the close of our deliberations was the extent to which the functions of the Arts Council were to be devolved and divided. It was made clear to us that since the Arts Council was a chartered body it was not subject to legislation, and it was borne in upon us that where you have devolution it is reasonable to devolve the arts and it is likely that the different areas of the Kingdom which receive the devolved power are likely to wish to set up their own independent establishment in place of the United Kingdom one.
It was also clear that, while the functions of the Arts Council would not be subject to legislation, the funds which they administered would, and indeed I think of the Arts Council sometimes as a gardener with a hosepipe. He decides which parts of the garden should be made to flourish, which arc the most precious trees, which must suffer a temporary drought; and upon those most deserving, particularly those which look as though they are going to be taken out through the garden gate by foreign tourists, they pour sustaining torrents of money.
In this context I do not wish to argue against the principle that the Welsh should have a considerable or indeed a predominant say in the administration of their artistic affairs. They are an artistic people and this is a right which they may well feel they ought to be able to claim. But I am increasingly aware, since the time that we had our exchanges on this side of the House, that this is a whole area, discussion of which has not taken place in another place and which it is desirable that they should have an opportunity to discuss. Therefore, in introducing this Amendment to restrict the right to make payments for the special purchase grants of galleries and museums, I do so with the intention of enabling the subject to be discussed in another place by the elected representatives of the Welsh people who have a considerable interest in the matter. This is one of the occasions when your Lordships' function of a revising Chamber is overlaid by our function as a Chamber which opens the door to discussion in another place, and it is with that purpose principally in mind that I move this Amendment.
Lord DONALDSON of KINGSBRIDGE: My Lords, I should like to begin by saying that I appreciate the motives of the noble Lord. This needs further discussion and I am very glad to have further discussion. I should like to begin by quoting something which the Arts Council itself said, I think yesterday. They issued a statement after the discussion on devolution and said:
"The Council, and particularly its Scottish and Welsh members believe that, if devolution comes the principle of having an intermediate body between the politicians and the artists which has worked so well for the past 30 years should be preserved in any new arrangements made by the Scottish or Welsh Assemblies ".
1056
The fact that the Government are not laying this down does not mean that the Government, if asked—which they have not been—might not agree with this I do not think the Government should say what they think or should necessarily even have a view. If you are going to devolve, the devolved Assemblies must make their decision about that. I thought it important to say that this statement had been made and it is a statement which I find, at its least controversial, extremely interesting.
I have prepared a fairly complete statement about the purchase grant side. I prepared it very carefully and I think I sent a copy to the noble Lord, but I shall go through it again because this is the basis of what we want to discuss. Of course, the Amendment—and I am not going to criticise it in detail because it is a probing Amendment—it is just worth noticing, as it stands, would prevent the Assembly from making any contribution whatsoever to purchases at any time even for example, in a national appeal for something for a Welsh collection. I am quite sure that this is not meant, but it is worth noticing that that is where we stand at the moment.
By virtue of Clause 10 the Assembly will be expected to assume responsibility for the national collections in Wales—for example in the National Museum of Wales—and for their accommodation and care. All this will be funded from their block fund. It is also intended that this responsibility should extend to purchase grants. In the Government's view all these aspects are indivisible, the policy on purchases being but one aspect of total responsibility in this field. However, there is the question of special purchase grants about which we heard much in our debates on the same matters in the Scotland Bill and I shall deal with those. The question of special purchase grants is very complicated, so perhaps noble Lords will forgive me if I deal with these in general terms first before going on to discuss the impact of devolution.
The position now is that the national museums and galleries receive grants-in-aid earmarked for the purchases of objects to add to their collections. These grants-in-aid are revalued for inflation and from time to time are increased in real terms. Last October we announced an increase

1057
in real terms of £1 million a year to take effect from this year, and a further £1 million a year on top of that to take effect next year. This year's extra £1 million was allocated between England, Scotland and Wales. This is before devolution. The English money was added to the national institutions' purchase grants, approximately pro rata to their existing grants. The Scots and the Welsh have decided to keep their share of the extra £1 million separate from the individual purchase grants. But this is all money which is in the programme and budgeted for.
If the opportunity to purchase something exceptional comes along and the object is very expensive, as many works of art now are, there is a strong risk that the institute that is interested in buying it or bidding for it cannot find the money from within the purchase grant. But the purpose of adding the extra £1 million this year and next year another £1 million is to reduce that risk, and make it easier for galleries to find the money from what are their own budgeted resources. This was how the Tate managed to afford that marvellous picture of Ben Truman by Gainsborough. It cost about £400,000, but their purchase grant as enlarged stood at over £1 million.
Nevertheless, there are some works of art whose cost would exceed the whole of a gallery's purchase grant. And something might come up for sale when the gallery had used up most of its purchase grant, which could have been afforded if the grant had not been used up, and there may be no possibility of delaying the purchase to the following year. If the gallery wants the item badly, but cannot afford it, it can apply to the department—the Department of Education and Science in England, the Scottish Education Department in Scotland, and the Welsh Office in Wales—for a special purchase grant.
Such a grant has to have the approval of the Treasury. The Department and the Treasury have to be satisfied on several counts. First that the gallery genuinely cannot find the money out of its own purchase grant-in-aid. Secondly, that the gallery has mobilised all the private trust funds that it possibly can put towards the price. Thirdly, that it has already
1058
attempted, or will attempt, to raise some of the money from the public at large or other private sources such as local benefactors, charitable trusts and so on.
The Treasury then look to the Department to find the money for the grant from savings elsewhere. Only if they are satisfied that no such savings are available will they agree to have recourse to the Contingency Reserve of money set aside for unprogrammed eventualities. Even that, of course, may have been exhausted by the time the application comes in. Finally, if all these hoops are jumped through, it has always been the practice that the special grant should not be more than half the total cost of the object. Some people believe these special purchase grants have ceased to happen and that it is all too difficult. It is all too difficult, but they have not ceased to happen. Special purchase grants were, for example, provided towards the two Stubbs the Tate acquired last year—the Reapers and the Haymakers—and for the Cornbury Park Bellini, acquired by the Birmingham City Art Gallery.
What will be the position after devolution? The arrangements envisaged in the Wales Bill, and also in the Scotland Bill before the Government Amendment on Third Reading, are as follows. The museums and galleries would be the responsibility of the Welsh Assembly and the Scottish administration. They would provide their normal purchase grant money out of the block fund. It would be for the devolved administrations to decide whether to maintain the pre-devolution levels or increase them or reduce them. But the "routine" purchases, if I may so call them, of the galleries—small objects of the kind which they would acquire fairly frequently—could, I imagine, be capable of being budgeted for in advance.
When something really big came along, which could not be budgeted for, the devolved administrations would have to consider whether they could find the money from some unspent or unallocated section of the block fund. In this respect the expenditure on a work of art would be treated in the same way as any other piece of proposed expenditure which was not originally foreseen. The administrations will have to draw up rules for deciding whether to allow the expenditure.

1059
I daresay that the finance officers will be interested in the conditions in which the Treasury currently operates, and which will continue to operate in England.
But I think there is a worry over what would happen if an enormously expensive item came along. Chatsworth is sometimes cited as an example of the scale of things in England. The pictures on loan from the Duke of Sutherland are another, closer to the issue here, and were discussed in our last debate on Scotland. In the first instance the answer must be to see if the block fund can accommodate it. The block fund will, after all, be large, and with such a sum, covering such a wide range of activities, the possibility and scope for underspending elsewhere on a large scale cannot be ruled out. This must be the first question to ask in any extra expenditure proposal in fields covered by the block fund, not only for works of art; and one could not exempt works of art from that rule without exempting everything else.
However, without promising anything at all, if I may adopt my usual position, I think it would be reasonable to say that the issue, though strictly one for the devolved administrations, might well take on a Great Britain dimension if the works of art were important enough, and obviously they would have to be important if the sum of money involved was such that the block fund could not accommodate it. In those circumstances it would be open to the administrations to ask the Government to help. This is only commonsense. What the answer would be would have to depend on the circumstances, and would be a political decision by the Government of the day.
All special purchase grants now, under the present regime, are ad hoc and without prejudice, and involve a great turning out of pockets. They are the kind of hard cases for which one should not legislate. One has to strike a balance, between providing sufficient money for galleries and museums to pursue an adequate acquisition strategy and not providing them with so much that they lower their standards or hold the money unused when it could be spent in something totally different. The point has been made time and again in these debates that we must not credit the elected Assembly with malign intentions of spending its whole re
1060
sources on something other than one's own pet interests. A strong part of the whole movement for devolution stems from cultural factors, and it would be inconsistent, when we are recognising them in the broad policy we are trying to implement, to take back one of the principal elements in the cultural life of Wales and Scotland.
I have spoken at length but I thought it important that the Government should set out their views in some detail so that there should be no confusion on this matter. In the light of my remarks I hope the noble Lord, Lord Elton, will not find it necessary to press his Amendment.
Lord ELTON: My Lords, I am much obliged to the noble Lord for his long and informative answer. I should have thanked him at the outset for writing to me in similar terms, but I was a little pressed at the beginning of this exchange. I make no apology for leaving the Amendment on the Marshalled List, because noble Lords have been able to share his reasonings and they will also share the difficulty in which I now find myself. There are two considerations here: one was the really encouraging noise which the noble Lord made from what he chose to term his "usual position"—that is to say, "I am not allowed to say this but I am saying it and you can believe it if you want to, or not"—saying that there would very likely be recourse for the Assemblies of the two countries to national funds in the case of all the pockets being empty, as he put it.
Lord DONALDSON of KINGSBRIDGE: My Lords, I should just like to correct that. It is important to get this right: it is not merely very likely, but there would be recourse. But there is absolutely no reason to suppose that there would be the money voted by the central Government.
Lord ELTON: My Lords, I am obliged to the noble Lord for putting me straight on that. He went on towards the conclusion of his speech to say that we must not credit the Assembly with malign intentions of spending the whole of their resources on something other than one's own pet interests. I hoped I had made it plain that there was no such intention,

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that the purpose of this Amendment was purely to give another place an opportunity to discuss a matter which they have not as yet been able to discuss, and which it is evident they required an opportunity to discuss. It is my regret that the only way of framing such an Amendment is in such a form as I fear is open to exploitation as being a gesture of hostility and mistrust towards the Assembly.
My disposition to listen carefully to what the noble Lord has said has been blunted somewhat, on the other hand, by the circumstance to which he briefly alluded, and that was the Amendment carried by the Government into the Scotland Bill at Third Reading to bring it into line with other provisions within the Bill with which we are not on this occasion familiar. A great deal has been made by the Government at an earlier stage that the two Bills should be exactly
similar on every possible occasion, and therefore it is difficult for them to say that they should differ on this occasion rather than be the same, and it is difficult for me to say that these funds should be denied to the Assembly when I am fairly confident that in the outcome, when the Bill becomes an Act, they will be in it, and I would not regret that. But I think we have a duty to another place. We have said at the outset that it is our job to enable them to discuss matters of interest to them. When that interest is so openly expressed as it has been I think we have no option but to put this in at this stage, and if the noble Lord regards it as a poke in the eye I can only say that it is given very apologetically.
6.9 p.m.
On Question, Whether the said Amendment (No. 48) shall be agreed to?
Their Lordships divided: Contents: 79; Not-Contents, 81.

CONTENTS

Alexander of Tunis, E.

Dulverton, L.

Northchurch, B.

Alport, L.

Elles, B.

O'Hagan, L.

Atholl, D.

Elliot of Harwood, B.

Onslow, E.

Auckland, L.

Elton, L.

Rankeillour, L.

Berkeley, B.

Emmet of Amberley, B.

Rawlinson of Ewell, L.

Broadbridge, L.

Exeter, M.

Reigate, L.

Brougham and Vaux, L.

Faithfull, B.

Rochdale, V.

Burton, L.

Fortescue, E.

Romney, E.

Campbell of Croy, L.

Glenkinglas, L.

St. Aldwyn, E.

Cathcart, E.

Gridley, L.

Sandys, L.

Clitheroe, L.

Hylton-Foster, B.

Savile, L.

Clwyd, L.

Killearn, L.

Sharples, B.

Cockfield, L.

Kinloss, Ly.

Skelmersdale, L.

Colville of Culross, V.

Lauderdale, E.

Stamp, L.

Colwyn, L.

Long, V.

Stanley of Alderley, L.

Cork and Orrery, E.

Loudoun, C.

Strathcona and Mount Royal, L.

Cottesloe, L.

Lyell, L.

Craigavon, V.

Mancroft, L.

Swinfen, L.

Cranbrook, E.

Margadale, L.

Tenby, V.

Crathorne, L.

Merrivale, L.

Terrington, L.

Cullen of Ashbourne, L.

Middleton, L.

Tranmire, L.

Daventry, V.

Monson, L.

Tweeddale, M.

de Clifford, L.

Montgomery of Alamein, V.

Vickers, B.

De La Warr, E.

Mottistone, L.

Vivian, L.

Denman, L. [Teller.]

Mowbray and Stourton, L. [Teller.]

Ward of North Tyneside, B.

Digby, L.

Westbury, L.

Drumalbyn, L.

Newall, L.

Young, B.

NOT-CONTENTS

Airedale, L.

Cooper of Stockton Heath, L.

Gaitskell, B.

Aylestone, L.

Crook, L.

Gardiner, L.

Banks, L.

Cudlipp, L.

Garner, L.

Beaumont of Whitley, L.

Darling of Hillsborough, L.

Gladwyn, L.

Birk, B.

Davies of Leek, L.

Gordon-Walker, L.

Blyton, L.

Diamond, L.

Greenwood of Rossendale, L.

Boston of Faversham, L.

Donaldson of Kingsbridge, L.

Hale, L.

Bowden, L.

Douglas of Barloch, L.

Halsbury, E.

Brockway, L.

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

Hampton, L.

Byers, L.

Evans of Claughton, L.

Harris of Greenwich, L.

Collison, L.

Fisher of Camden, L.

Hatch of Lusby, L.

Henderson, L.

McNair, L.

Stedman, B.

Hughes, L.

Morris of Borth-y-Gest, L.

Stewart of Alvechurch, B.

Jacobson, L.

Ogmore, L.

Stone, L.

Jacques, L.

Oram, L.

Strabolgi, L. [Teller.]

Janner, L.

Paget of Northampton, L.

Wallace of Coslany, L. [Teller.]

Kaldor, L.

Parry, L.

Kilmarnock, L.

Peart, L. (L. Privy Seal.)

Walston, L.

Leatherland, L.

Phillips, B.

Wells-Pestell, L.

Leonard, L.

Plant, L.

White, B.

Llewelyn-Davies of Hastoe, B.

Ponsonby of Shulbrede, L.

Wigg, L.

Lloyd of Kilgerran, L.

Rhodes, L.

Wigoder, L.

Longford, E.

Seear, B.

Willis, L.

Lovell-Davis, L.

Sefton of Garston, L.

Wilson of Radcliffe, L.

McCarthy, L.

Shinwell, L.

Winterbottom, L.

McCluskey, L.

Simon, V.

Wynne-Jones, L.

McGregor of Durris, L.

Snow, L.

Mackie of Benshie, L.

Somers, L.

Resolved in the negative, and Amendment disagreed to accordingly.

Clause 14 [Standing Orders]:
6.21 p.m.
Lord ELTON Lord ELTON moved Amendment No. 49:
Page 8, line 7, at end insert—
(" (4) The standing orders shall include provision for the publication of a verbatim report of the proceedings of the Assembly as soon as practicable after the day on which they take place.").
The noble Lord said: My Lords, let it not be said that there is a permanent, automatic and in-built majority for the Conservative Party in this House. The contrary has just been proved, to the great satisfaction of noble Lords opposite and with some illumination to my noble friends. We move to an Amendment to Clause 14, the clause which sets out the requirements for the standing orders of the Assembly. During the Committee stage we had a debate of some extent and precision about the requirement for the publication of a verbatim report of the proceedings of the Assembly, and that is what Amendment No. 49 seeks to establish. I should also like to refer to Amendment No. 50 which seeks to apply the same requirement to the committees of the Assembly, but at, as it were, a different level.
As regards Amendment No. 49, the intention is that there shall be published by the Assembly—as there is by this House—a verbatim account of its proceedings as soon as may be after those proceedings have taken place. The only argument of which I am cognisant that was adduced against this proposal with any great force at the last stage was
1064
that this was something which the Assembly could be relied upon to do itself. If the Assembly is going to do it itself, it cannot really take offence if it comes to life under circumstances which require it to do what it intends to do. The importance of these reports should not be underestimated, because the Welsh people, as a whole, will certainly be interested in the transactions of their Assembly. Moreover, the professional classes in Wales—that is to say, the people who have, so far as possible, to anticipate the subordinate legislation of the Assembly— will be very much in the dark if they are not able to have access to those proceedings.
The width of distribution of Hansard of both Houses of Parliament is witness to the fact that it is a useful tool for professional people as well as those who merely have a general interest in the progress of political affairs in Parliament. It seems to me a reasonable requirement, and that to resist it with force suggests that for some reason it is a requirement that might not be met. I do not understand the argument which says that the Welsh Assembly is certain to do this, so do not tell it to do it, and which then seeks to strike out of the Bill the requirement that it should be done. The only purpose in making that decision must be to enable the Assembly not to do it. Therefore, it seems to me that resistance to this Amendment is what makes it seem more necessary than would otherwise be the case.
I should like to refer to Amendment No. 50. It is understood that there are occasions when a committee may require to deliberate in private. I went into that matter at some length at an earlier stage. In planning matters, in particular, the release of chance phrases in discussion,

1065
taken seriously outside a chamber, can have a quite disproportionate effect—disproportionate, that is, to their intention. Surely the way to overcome that is merely to have a record of meetings in the form of minutes which will determine what were the subjects discussed and who were the people present. That is a function of minutes. I hope that I have said enough and that an answer will be forthcoming from the opposite Bench—I now understand that it will come from the Woolsack: that explains the vacancy; I was extending my delivery in order to have the gap filled. I beg to move.
The LORD CHANCELLOR: My Lords, Amendment No. 49 and, indeed, Amendment No. 50 which we are discussing together are, I fear, unacceptable both as a matter of principle and as one of practice. We had a discussion on this matter in Committee and on that occasion my noble friend Lord Harris of Greenwich thought it unnecessary to provide for the Assembly to publish its proceedings, and he also said that to legislate to require it to do so showed a lack of faith in the ability of Assembly Members to run their affairs responsibly. That, I think, is a well-founded objection.
However, there are also serious practical objections to what is proposed. The first is that I do not think that it is reasonable to impose on the Assembly a duty to prepare a verbatim report of proceedings. The Assembly may decide to operate bilingually, and that would mean verbatim reports of the proceedings in English and Welsh. The production of those reports would be an extremely expensive business and the Assembly may well judge that it could inform the public of what was going on by some other method.
It is interesting in this connection to note that in relation to the Scotland Bill your Lordships have written in the new clause requiring the Assembly to make provision for the reporting of proceedings and for the publication of the reports of such proceedings. There is nothing in that new clause about verbatim reports, which is the requirement of this Amendment. In the case of the Scottish Assembly the scope and form of the reports is left to the Assembly itself to decide. It may well be, of course, that the Assembly—or either Assembly—will not wish to
1066
publish verbatim reports, or may well, indeed, wish to do so. All I am saying at present is that it would be an extremely expensive business and I do not think that it would be right to impose, by statute, an unduly onerous burden on the Assembly which, for its own purposes, it may not wish to undertake.
I am afraid also that I cannot accept the second Amendment which we are considering which provides, among other things, that the minutes of the Executive Committee shall be published. Quite what is comprehended by minutes—
Lord ELTON: My Lords, I hesitate to interrupt, but I ought to draw the attention of the noble and learned Lord to the fact that the Amendment refers to "committees" and not specifically to the Executive Committee to which the noble and learned Lord has just referred.
The LORD CHANCELLOR: My Lords, I am much obliged. The Amendment refers to "the minutes of the proceedings of committees". The noble Lord is quite right. Quite what is comprehended by "minutes of the proceedings of committees", I know not; they vary enormously in their content and in their form. The noble Lord, Lord Elton, has conceded that in respect of some of the committees their proceedings could well be confidential and probably will be confidential. I should have thought that the minutes of such confidential proceedings would be objectionable if they were to be of any value sufficient to expose what has been discussed and decided. Therefore, in my submission, both in principle and in regard to the practical difficulties involved, there are serious objections to these Amendments, which I accordingly resist.
Lord GRIDLEY: My Lords, may I, respectfully, say a few words in reply to what the noble and learned Lord has just said on this matter. I should have thought that as we are devolving these powers to the Welsh Assembly—and a large number of Acts are being devolved to it which were formerly Acts of a British Parliament, certain parts of those Acts being reserved to the Secretary of State—it would not be inconceivable that at some time in the future there might be points of disagreement between what was reserved to the Secretary of State and

1067
what should be administered by the Assembly. I should have thought that in such circumstances, in order to encourage the running of this new Assembly in a conciliatory manner, it would possibly be of great value to the Secretary of State to have some verbatim report of what the Members of the Assembly were saying on a particular point.
I cannot understand why there is objection to this. It seems to me that what my noble friend has said in proposing this Amendment would assist the smooth running of the proposed Assembly and would make a contribution to the satisfaction of Her Majesty's Government and to the Assembly in Wales.
Lord WIGG: My Lords, I cannot understand what the discussion is about. As it is drafted, in due course Clause 14 will give a power to the Assembly to regulate its own procedure. Therefore, if it proposes to publish its proceedings in Sanskrit, as long as it can find something to bake the bricks, I cannot see that there is anything to stop it. It simply means that until the Assembly has taken its decision whether to publish in shorthand, Sanskrit, Welsh, English or whatever language it likes, the Secretary of State will regulate the procedure.
However, when the Assembly begins to work, I should have thought that being composed of Welshmen and, therefore, a little prolix, or inclined to it, it would certainly take steps to ensure that posterity knows everything that has been said. Therefore, it will draft its standing orders which, I should have thought, will automatically provide for the publication of something like Hansard. But if it is put into the statute that such reports must be verbatim and then someone makes a mistake and gets a semicolon mixed up with a comma or omits a word, it seems to me that the Assembly could be taken to the courts because it would not be carrying out the statute inasmuch as it would not have published a verbatim report.
I do not know quite what all this is about. It has been made perfectly plain that the Assembly can run its own "show", and if it is wise it will probably want to base its procedures and standing orders on something like the Standing Orders that operate at Westminster. But if it wants
1068
to do something else, it has all the power in the world to do it. As the noble and learned Lord the Lord Chancellor has pointed out, these Amendments, as drafted, are in error in principle, and when they come to be applied they will involve everyone—and I use the word "everyone"— in great difficulties. Therefore, as it is a cold night, I should have thought that we might just as well forget this and go on to the next Amendment on the Marshalled List.
Baroness ELLES: My Lords, I should like to add a few remarks on a technical matter in support of my noble friend's Amendments. The noble and learned Lord the Lord Chancellor referred to the difficulty if some of the speeches were made in Welsh. I want to assure him that in the European Parliament they publish daily what is called the Rainbow which gives a verbatim report of the proceedings of the previous day in English, French, German, Dutch, Italian and Danish. It is not a very expensive document to produce; it is produced very simply. But it means that all the speeches which have been made the previous day are available to all the members in the languages which they purport to speak and understand. I wanted to add that point in relation to the comment made by the noble and learned Lord.
Baroness GAITSKELL: My Lords, I should like to comment on the remark just made by the noble Baroness, Lady Elles. She said that these documents were not very expensive to produce. She knows perfectly well that in the United Nations these documents are also produced in all languages and that they are very expensive to produce.
Lord ELTON: My Lords, in the midst of these interesting exchanges it would suffice to say that, of course, the United Nations has many more tongues than has Europe. I thought that I had disposed of the argument about trust, but I failed. I see no purpose in returning to it. My noble friend Lady Elles has dealt very clearly and succinctly with the question of the practicalities. The difference between this Bill and the Scotland Bill is that the word "verbatim" is omitted from that Bill and included in this one.

1069
That is something which could quite well be put right in another place if, in fact, it is wrong. As to expense, as a fraction of the £12½ million which this exercise will cost, I think that we are discussing peanuts. I beg to move.
6.37 p.m.
On Question, Whether the said Amendment (No. 49) shall be agreed to?
Their Lordships divided: Contents, 80; Not-Contents, 77.

CONTENTS

Alexander of Tunis, E.

Elles, B.

Newall, L.

Alport, L.

Elliot of Harwood, B.

Northchurch, B.

Auckland, L.

Elton, L.

O'Hagan, L.

Berkeley, B.

Emmet of Amberley, B.

Onslow, E.

Broadbridge, L.

Fortescue, E.

Rankeillour, L.

Brougham and Vaux, L.

Glenkinglas, L.

Rawlinson of Ewell, L.

Burton, L.

Gridley, L.

Reigate, L.

Campbell of Croy, L.

Harvington, L.

Rochdale, V.

Cathcart, E.

Hylton-Foster, B.

Romney, E.

Clifford of Chudleigh, L.

Killearn, L.

St. Aldwyn, E.

Clitheroe, L.

Kilmarnock, L.

Sandys, L.

Cockfield, L.

Kimberley, E.

Savile, L.

Colville of Culross, V.

Kinnoull, E.

Shannon, E.

Colwyn, L.

Lauderdale, E.

Sharples, B.

Cork and Orrery, E.

Long, V.

Skelmersdale, L.

Cottesloe, L.

Loudoun, C.

Stamp, L.

Craigavon, V.

Lucas of Chilworth, L.

Stanley of Alderley, L.

Cranbrook, E.

Lyell, L.

Strathcona and Mount Royal, L.

Crathorne, L.

Mancroft, L.

Cullen of Ashbourne, L.

Margadale, L.

Swinfen, L.

Daventry, V.

Masham of Ilton, B.

Tranmire, L.

de Clifford, L.

Middleton, L.

Tweeddale, M.

De La Warr, E.

Monson, L.

Vickers, B.

Denham, L. [Teller.]

Montgomery of Alamein, V.

Vivian, L.

Devonshire, D.

Mottistone, L.

Ward of North Tyneside, B.

Digby, L.

Mowbray and Stourton, L. [Teller.]

Westbury, L.

Drumalbyn, L.

Dulverton, L.

Moyne, L.

NOT-CONTENTS

Airedale, L.

Halsbury, E.

Phillips, B.

Aylestone, L.

Hampton, L.

Pitt of Hampstead, L.

Banks, L.

Harris of Greenwich, L.

Plant, L.

Beaumont of Whitley, L.

Hatch of Lusby, L.

Ponsonby of Shulbrede, L.

Birk, B.

Henderson, L.

Rhodes, L.

Blyton, L.

Hughes, L.

Seear, B.

Boston of Faversham, L.

Jacobson, L.

Segal, L.

Brockway, L.

Jacques, L.

Simon, V.

Caccia, L.

Janner, L.

Snow, L.

Collison, L.

Kaldor, L.

Somers, L.

Crook, L.

Leatherland, L.

Stedman, B.

Darling of Hillsborough, L.

Leonard, L.

Stewart of Alvechurch, B.

Davies of Leek, L.

Llewelyn-Davies of Hastoe, B.

Stone, L.

Diamond, L.

Lloyd of Kilgerran, L.

Strabolgi, L. [Teller.]

Donaldson of Kingsbridge, L.

Longford, E.

Taylor of Mansfield, L.

Douglas of Barloch, L.

Lovell-Davis, L.

Wallace of Coslany, L. [Teller.]

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

McCarthy, L.

Evans of Claughton, L.

McCluskey, L.

Wells-Pestell, L.

Fisher of Camden, L.

McGregor of Durris, L.

Whaddon, L.

Foot, L.

Mackie of Benshie, L.

White, B.

Gaitskell, B.

Morris of Borth-y-Gest, L.

Wigg, L.

Gardiner, L.

Ogmore, L.

Wigoder, L.

Garner, L.

Oram, L.

Willis, L.

Gordon-Walker, L.

Paget of Northampton, L.

Wilson of Radcliffe, L.

Greenwood of Rossendale, L.

Parry, L,

Winterbottom, L.

Hale, L.

Peart, L. (L. Privy Seal.)

Wynne-Jones, L.

Resolved in the affirmative, and Amendment agreed to accordingly.

6.44 p.m.
Lord ELTON Lord ELTON moved Amendment No. 50:
Page 8, line 7, at end insert—
(" (5) The standing orders shall include provision for the publication of the minutes of the proceedings of committees appointed under sections 16, 17, 20 and 52 of this Act as soon as practicable after the day on which they take place.").
On Question, Amendment agreed to.
Clause 15 [Pecuniary interests]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 51:
Page 8, line 10, after ("orders") insert ("or such other interests (if any) as may be specified in the standing orders").
The noble and learned Lord said: My Lords, Amendments Nos. 51 and 52, which we might conveniently discuss together, mirror Government Amendments which were accepted by your Lordships at the Third Reading stage of the Scotland Bill. During our discussion on this subject at Report stage of the Scotland Bill my noble friend Lady Stedman sympathised with the Opposition's worries on this matter and agreed to look again at the suggestion of the noble Earl, Lord Selkirk, that the Assembly should be required to cover pecuniary and other interests, and at the other suggestion made that the Assembly should be able to suspend or exclude Members who fail to comply with standing orders on pecuniary interests.
The first Amendment that has now been put down after consideration has been given to what was discussed earlier, makes it clear beyond doubt that the Assembly may include in its standing orders provision for the disclosure of interests other than pecuniary interests. Without it, there might have been room to argue that the particularity of the provision on pecuniary interests was intended to exclude provision on other interests.
The second Amendment enables the Assembly to provide for the exclusion from its proceedings of a Member who contravenes the standing orders relating to pecuniary and any other interests. Exclusion is not the same as expulsion:
1072
to expel a duly elected Member would be a step of great constitutional significance requiring primary legislation and would not be done under standing orders. I hope that these Amendments will meet the criticisms and anxieties that were expressed earlier on this matter. I beg to move.
Lord CULLEN of ASHBOURNE: My Lords, I am most grateful to the noble and learned Lord for having put down these Amendments. I moved a similar Amendment at Committee stage. I would only say that the noble and learned Lord's Amendments are very much better than mine.
Lord LEATHERLAND: My Lords, with regard to Amendment No. 52, which includes provisions for excluding Members from the Assembly, I speak with some sympathy. I am wholeheartedly in favour of it. Some years ago I was chairman of a county council which possessed among its members a most unruly person, whose mission in life was to play hell with the chairman at every meeting. We had to call in the police on a number of occasions. If this Amendment will fortify the authorities at the Assembly then it is very much to be welcomed.
Lord LLOYD of KILGERRAN: My Lords, in view of the fact that the Liberal Party have a history in relation to encouraging the disclosure of interests may I also support the Amendments as moved by the noble and learned Lord.
On Question, Amendment agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 52:
Page 8, line 13, at end insert—
(" (2) Standing orders made in pursuance of subsection (1) above may include provision for excluding members contravening them from the proceedings of the Assembly.").
On Question, Amendment agreed to.
Clause 16 [Subject committees]:
6.50 p.m.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 53:
Page 8, line 24, leave out from ("all the") to end of line 26 and insert ("areas of government with which the Assembly is concerned").
The noble and learned Lord said: My Lords, this Amendment flows from debates in Committee on this clause when the Opposition criticised as vague the proposal to enable subject committees to have "other functions". This language will enable the Assembly to appoint subject committees and they would also have power to appoint other committees to deal, for example, with domestic matters. I think the language now proposed meets the earlier criticism and is a convenient formula for dealing with the problem.
Lord ELTON: My Lords, the difficulty on Report is that if one does not fully understand things one is denied the useful exchange of comment and answer that one has in Committee. I am in some difficulty, in the face of the noble and learned Lord's brief explanation of the results of this Amendment, of discovering quite how those results are arrived at. There is a preliminary difficulty which I will mention now so that the noble and learned Lord may reply to it when he replies to my larger difficulty.
The change in the wording brings in the word "areas"; I fear that if the noble Lord, Lord Davies of Leek, were in his place he might say that I was being pernickety. It seems to me that an area of Government is entirely ambiguous; it could relate to a number of concepts or places. What is intended may be clear at this moment, but it may not be clear when the intention is pursued in the courts, if it ever should be. The clause will, with the Amendment, include the words:
" areas of government with which the Assembly is concerned ".
In other words, it will relate to all the areas of government with which the Assembly is concerned. My first and minor difficulty is that that could refer to North and South Wales or Gwent as opposed to housing, transport and education. However, maybe that is not a matter of concern.
My larger difficulty is that I am not certain from what the noble and learned Lord said whether the difficulty which he feels he is meeting is the difficulty expressed, as it were, in Amendment No. 54A, the starred Amendment immediately after this one. This is because the anxiety that we expressed in Committee was that committees
1074
might be set up to consider and recommend action on things on which the Assembly had no power to act. It seems to me that Amendment No. 54A, to which my noble friend Baroness Elles will speak in due course, is designed to meet that, but I do not see how Amendment No. 53 is designed to meet it. It seemed from what the noble and learned Lord said that that is what it is designed to do. I hope, therefore, that when he replies he will explain how it achieves that result. because it is by no means clear to me.
The LORD CHANCELLOR: My Lords, I am afraid that my attempt at brevity has not meet the needs of the situation. In Committee there was criticism of the words in the Bill:
"the powers conferred on the Assembly by sections 9, 10 and 11 above and with such other functions (if any) as the Assembly may determine".
It was thought that the reference to "other functions" was too vague. Furthermore, there was a suggestion that to link those subject committees only to Clauses 9, 10 and 11 was arbitrary, and it is in an endeavour to deal with those two matters that this Amendment is proposed.
As proposed by this Amendment, Clause 16(1) provides that the Assembly must appoint subject committees with powers relating to all the areas of government with which the Assembly is concerned, and I should have thought, with respect, that that could not really be thought to be a geographical reference but to areas of government. Subsection (2) goes on to provide that the Assembly may delegate powers to those subject committees, and subsection (3) deals with the composition of the subject committees. The requirement to appoint subject committees is without prejudice to the Assembly's power to appoint other committees to deal, for example, with domestic matters—a catering committee or whatever it might be —but of course the provisions of subsections (2) and (3) would not apply to those other committees. It is now felt that by inserting the generality of the phrase:
"areas of government with which the Assembly is concerned"
we are dealing effectively with the need to give the Assembly powers to appoint the relevant committees.
Baroness ELLES: My Lords, I understand we are discussing Amendments Nos. 53 and 54A at the same time; they obviously overlap. I was interested to hear the noble and learned Lord say he now considers that the wording of Clause 16 as drafted concerning Clauses 9, 10 and 11 is too restrictive, and that the Government have decided to amend that part of the clause by inserting the words contained in Amendment No. 53. We on this side of the House consider that Amendment No. 54A is more suitable to a body which will have executive powers; that the committees which are set up must be clearly defined as to their functions and powers.
In our contention there will already be an enormous number of committees set up when one considers the number of functions, for example, contained in Schedule 2. One will have either separate committees dealing with individual subjects like local government, health or social services, pollution, fresh water fisheries or whatever the case may be; endless matters are contained in Schedule 2. Or it would be possible within the scope of our Amendment to have committees which would cover perhaps two or three of those functions and have, say, committees dealing with forestry and water and land drainage together, or planning and land use together with housing or the countryside. It would be possible in the areas that fall to the Welsh Assembly to set up a committee which would deal with two or three of the aspects of the matters devolved to them.
We must remember that the people who attend such committees will get attendance allowances and will probably receive remuneration to meet financial loss on their part, so if we are to have a great many committees set up and their number is not in some way controlled by Statute, there will be an absolute proliferation of committees. And that, incidentally, will involve the consequence of having large sums spent on the holding of those committee meetings. As a former Member of the European Parliament, and knowing how these committees are run and the number of times they can be called, I am aware that it can involve very large expense if some control is not exerted over both the number of committees and the times and places where they sit. Those last two matters are, I accept, matters for the
1076
Assembly itself to decide, but when defining by Statute how a new body like this is to be set up and run, it is a legitimate view to take that the Assembly should be constricted to setting up only those committees which are strictly necessary.
That is what our Amendment seeks to do. The Assembly would, for instance, not be able to set up a committee to deal with foreign affairs or matters dealing with the European Community. Those are two obvious areas of concern to a public body dealing in certain policy matters but which, as far as the Welsh are concerned, are specifically excluded from its powers and functions. This is the kind of committee which presumably the Assembly would not be able to set up. The wording of
"the areas of government with which the Assembly is concerned"
is, in our opinion, much too widely drawn. I accept that the wording of Clause 16 as it stood was too narrow. I was interested to hear the noble and learned Lord say that it was too restrictive to confine it to Clauses 9, 10 and 11. However, I consider that Amendment No. 53 goes too wide. I therefore recommend Amendment No. 54A to your Lordships.
The LORD CHANCELLOR: My Lords, I am not sure that we shall not get into a little difficulty if we do not make a decision about the earlier Amendment first. But, as we are now plunged into the discussion of Amendment No. 54A as well, in my submission the attempt in Amendment No. 54A to limit the areas of discussion of matters which the Assembly may be permitted to discuss is neither desirable nor effective.
The first main observation I wish to make is that with or without the proposed Amendment No. 54A there is no way in which an Assembly committee can be equipped with powers which are not devolved. The Assembly can only delegate its own powers. We have been over this ground before. We have pointed out that we should not try to restrict the matters the Assembly may wish to discuss. It may well want to discuss matters such as relations with the Common Market, if it wants to, and it should not be forbidden to do so. It is the National Assembly of Wales. It would clearly have no powers to affect the decisions in the Common Market. However, the

1077
attempt in this Amendment to limit matters that committees could discuss to those in respect of which the powers of the Assembly are exercisable is, in my submission, unwarranted, and will constitute an interference with the powers of the Assembly to appoint such committees as it likes—other committees—quite apart from those specifically charged with carrying out functions.
Baroness ELLES: My Lords, would the noble and learned Lord allow me to intervene? He may have misunderstood what I said or I may have expressed myself badly.
The committees to be set up are not debarred from discussing matters. We are saying that committees should not be set up to deal with matters which are outside the devolved functions. We are referring to the number of committees that are set up. We are not in any way restricting what is said in those committees. An Assembly of this nature could presumably discuss any matter brought before it, provided that the members of that Assembly all agree to discuss it. What we are saying is that we shall not have separate committees for functions which are not contained in the Bill and which are devolved to them. This is quite another matter from stopping them from talking about whatever they want to talk about.
The LORD CHANCELLOR: My Lords, the view the Government take is that it would not be right to prevent the Assembly from specifically giving committees a remit which does cover non-
devolved functions, if it wants to. If it wants to do so, and if the committee wants to discuss a matter in that way, why not? There is a kind of basic suspicion of what the Assembly will do, and what it will be about, emanating from the Opposition Front Bench. I should have thought that this attempted restriction in this way is unnecessary and indeed undesirable.
Lord PONSONBY of SHULBREDE: My Lords, I should have thought that the particular case raised by the noble Baroness of a sub-committee being set up for relations with—
Baroness ELLES: My Lords, with respect I did not say "sub-committee". I said "committee".
Lord PONSONBY of SHULBREDE:—being set up for relations with the EEC might be the kind of committee which the Assembly might well conceive that it wished to set up, although this was not a devolved matter. It is a matter which can affect the very lifeblood of Wales, whether regional grants are given by the EEC to forward certain processes in the Principality and to support industry there. It may well be that the Assembly would wish to have a sub-committee to argue the case with the EEC for increased grants.
7.6 p.m.
On Question, whether the said Amendment (No. 53) shall be agreed to?
Their Lordships divided: Contents, 75; Not-Contents, 54.

CONTENTS

Airedale, L.

Gaitskell, B.

Kirkhill, L.

Aylestone, L.

Gardiner, L.

Leonard, L.

Baker, L.

Glenamara, L.

Llewelyn-Davies of Hastoe, B.

Barrington, V.

Gordon-Walker, L.

Lloyd of Kilgerran, L.

Birk, B.

Greenwood of Rossendale, L.

Longford, E.

Boston of Faversham, L.

Gregson, L.

Loudoun, C.

Brockway, L.

Hale, L.

Lovell-Davis, L.

Caccia, L.

Hampton, L.

McCarthy, L.

Clifford of Chudleigh, L.

Hanworth, V.

McCluskey, L.

Collison, L.

Harris of Greenwich, L.

McGregor of Durris, L.

Cudlipp, L.

Hatch of Lusby, L.

Milner of Leeds, L.

Darling of Hillsborough, L.

Henderson, L.

Morris of Borth-y-Gest, L.

Davies of Leek, L.

Howie of Troon, L.

Morris of Kenwood, L.

Diamond, L.

Hughes, L.

Noel-Baker, L.

Donaldson of Kingsbridge, L.

Jacobson, L.

Oram, L.

Douglas of Barloch, L.

Jacques, L.

Parry, L.

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

Janner, L.

Pitt of Hampstead, L.

Fisher of Camden, L.

Kaldor, L.

Plant, L.

Foot, L.

Kilmarnock, L.

Ponsonby of Shulbrede, L.

Rhodes, L.

Stone, L.

White, B.

Sefton of Garston, L.

Strabolgi, L.

Wigg, L.

Segal, L.

Taylor of Mansfield, L.

Willis, L.

Simon, V.

Wallace of Coslany, L. [Teller.]

Winterbottom, L.

Snow, L.

Wynne-Jones, L.

Stedman, B.

Wells-Pestell, L. [Teller.]

Stewart of Alvechurch, B.

Whaddon, L.

NOT-CONTENTS

Alexander of Tunis, E.

Falkland, V.

Northchurch, B.

Berkeley, B.

Fortescue, E.

O'Hagan, L.

Brougham and Vaux, L.

Glenkinglas, L.

Rankeillour, L.

Burton, L.

Gridley, L.

Redesdale, L.

Colville of Culross, V.

Harvington, L.

Rochdale, V.

Colwyn, L.

Killearn, L.

Romney, E.

Cottesloe, L.

Kimberley, E.

Sandys, L.

Cranbrook, E.

Lauderdale, E.

Savile, L.

Crathorne, L.

Long, V.

Sharples, B.

Cullen of Ashbourne, L.

Lyell, L.

Skelmersdale, L.

de Clifford, L.

Middleton, L.

Stanley of Alderley, L.

De La Warr, E.

Molson, L.

Strathcona and Mount Royal, L.

Denham, L. [Teller.]

Monckton of Brenchley, V.

Digby, L.

Monson, L.

Tweeddale, M.

Drumalbyn, L.

Montgomery of Alamein, V.

Vickers, B.

Dulverton, L.

Mottistone, L.

Vivian, L.

Elles, B.

Mowbray and Stourton, L. [Teller.]

Ward of North Tyneside, B.

Elliot of Harwood, B.

Westbury, L.

Elton, L.

Newall, L.

On Question, Motion agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
7.14 p.m.
[Amendment No. 54A not moved.]
Lord STRABOLGI: My Lords, I beg to move that further consideration on Report be now adjourned.

RATING (DISABLED PERSONS) BILL
7.15 p.m.
Report received.
Clause 1 [Rebates for hereditaments with special facilities for disabled persons]:
Lord HUGHES Lord HUGHES moved Amendments Nos. 1 and 2:
Page 2, line 12, after ("includes") insert ("or consists of")
Page 2, line 15, leave out from ("person") to end of line 20.
The noble Lord said: My Lords, Amendment No. 1 is one of a group of Amendments—the others being Amendments Nos. 2, 7, 8, 15, 16, 17, 18 and 19—the purpose of which is to enable me to fulfil the promise I made at the Committee stage that disabled people, with garages the rateable value of which exceeds £25,
1080
should receive no less relief under the Bill than they receive at present. Clause 1(2)(f) and (g) of the Bill, together with paragraphs 7 and 8 of Schedule 1, will at present give relief in England and Wales based on £25 rateable value for a garage, £15 for a carport, and £5 for a parking space. The Amendments to Clause 1(2), which take the opportunity of removing the unnecessary distinction between cases where a disabled person lives in the hereditament and cases where he does not, pave the way to the Amendments to paragraphs 7 and 8 of Schedule 1.
These Amendments do not alter the rateable value specified in paragraph 7, but permit the applicant for a rebate to elect that the rebate should be based on the actual rateable value of his garage, carport, or parking space, or the amount attributable to his garage, carport, or parking space if it is part of a larger hereditament, with a proportionate reduction if the garage is also used for other purposes.
Where, therefore, the rateable value of, or attributable to, the applicant's garage is higher than the amount specified in paragraph 7, he can choose to have the rebate calculated by reference to the higher amount, and the applicant should receive no less relief than at present. For consistency an Amendment parallel to that made to Clause 1(2) is also made to the Scottish Clause 4(2). This deals

1081
with the point raised by the noble Baroness, Lady Masham of Ilton, when she referred to the possibility of the much higher rated garages in, for instance, central London. When I move Amendment No. 16 I shall ask the leave of the House to alter one word in it. Part of Amendment No. 16 reads:
(3) Where the application is made by reference to a garage, carport or land which is also used for other purposes, any rebate under paragraph (a) or (b) of sub-paragraph (2) above shall be proportionately reduced.")".
When I move that Amendment I shall ask permission to substitute the word "may" for the word "shall", which gives the authority a discretion and so would not put it into the rather ridiculous position that if, for instance, a garage had in it a deep freeze, the authority would have to say that the rebate must be reduced by a certain amount. I beg to move Amendments Nos. 1 and 2 en bloc.
Lord SANDYS: My Lords, I am most grateful to the noble Lord, Lord Hughes, for moving these two Amendments and for associating with them Amendments Nos. 7, 8, 15, 16, 17, 18 and 19. Perhaps it would be to the convenience of the House if at this stage I were to respond to what the noble Lord, Lord Hughes, said in regard to the amendment to the wording of Amendment No. 16. He will be referring to this at a later stage, but I would say now how very welcome is his suggestion. It was very noticeable, when reading through the report of the proceedings of Standing Committee C, how Mr. Guy Barnett, the Under-Secretary of State for the Environment, replied when he was asked whether existing relief would be withdrawn. The words of the question were:
"… no existing relief should be withdrawn; it is just the point that we want assurance, and no other";
and the Under-Secretary of State said categorically:
"I give that assurance".
It is a particularly welcome fact that the Government are to honour this pledge, given in Standing Committee, that no existing relief should be withdrawn.
My Lords, this has very wide implications so far as the garages are concerned. It was a matter discussed at considerable
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length in Standing Committee in another place. In your Lordships' Committee, too, we went into this matter on an Amendment raised by the noble Baroness, Lady Masham of Ilton. I think that the situation as proposed in this Amendment will rectify the position; and, further, that the remainder of the chain of Amendments puts the matter effectively in a position where we could say: Yes, all that could be done has been done in this regard.
Baroness MASHAM of ILTON: My Lords, I should like to add my thanks to the noble Lord, Lord Hughes, for his consideration and helpfulness over this matter. After my experience last night, I should like to tell your Lordships of the desperate need for garages in Central London. I found nowhere to park my car, and I had to park it on the pavement. No doubt I shall have to do the same tonight.
Clause 2 [Rebates for institutions for the disabled]:
7.23 p.m.
Lord HUGHES Lord HUGHES moved Amendments Nos. 3 to 6:
Page 3, line 5, after ("used") insert ("(a)")
Page 3, line 6, after first ("or") insert ("(b)")
Page 3, line 24, leave out subsection (3).
Page 3, line 32, at end insert—
(" "care" does not include the provision of medical, surgical or dental treatment, but without prejudice to subsection (1)(b) above; ").
The noble Lord said: My Lords, I beg to move Amendments Nos. 3, 4, 5 and 6, with which I would wish to associate Amendments Nos. 9, 10, 11 and 12. With the leave of the House, I would propose to move all these Amendments in two blocks: Nos. 3, 4, 5, and 6 as one, and then, in due course, Nos. 9, 10, 11 and 12 as one. The purpose of these Amendments to Clause 2 and to Clause 5 is to make clearer which institutions are to qualify for relief under these clauses and which are to be excluded. Subsection (3) of the clause at present purports to exclude from relief institutions whose predominant purpose is treatment; for example, hospitals and old people's homes. However, we do not want to exclude premises where the predominant purpose

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is one of those which do qualify under subsection (2) but where there is a subsidiary or ancillary treatment purpose. As presently drafted, there may possibly have been some room for doubt about this, and these Amendments should clear the point up. The Amendments do not make any reference to old people's homes because on further consideration it seems clear that such homes could not in any case come within the qualifying categories listed in subsection (2), unless the residents are actually disabled. Hence, there is really no need to exclude them explicitly as subsection (3) does at present. The Amendment therefore deletes this part of subsection (3) as being redundant.
Perhaps I can also take this opportunity to refer to the problems of the Thistle Foundation, to which the noble Lord, Lord Sandys, referred in Committee. I promised to look at this clause again bearing in mind the points he had made. I have now considered these points very carefully, and have sought the advice of my noble friend Lord Kirkhill on behalf of the Government. I am afraid that we have concluded that we cannot go as far as the Thistle Foundation would perhaps have liked. These Amendments to Clause 2 and Clause 5, which I have put down, will, I hope, do something to clarify the extent of the relief to be given to institutions under the Bill, and may possibly make the position of the Thistle Foundation easier in respect of some of the facilities they provide. But on the point of greater substance about housing, I am afraid we cannot accept that their houses should be treated more generously than those of other disabled people. They will, of course, be entitled to relief under Section 4 in respect of any special feature of their houses, and this, I suggest, must be accepted as being the right parallel.
My Lords, I have mentioned the help which I have received from my noble friend Lord Kirkhill in relation to the Thistle Foundation claim. I should also like to put on record the very great help which I have received, in relation to the fulfilling of the promises which I made at Committee stage, from my noble friend Lady Stedman and from her Department. Although the intention was mine, the putting of it into words has been hers, and for that I am exceedingly grateful. I beg to move.
Lord SANDYS: My Lords, I am extremely grateful to the noble Lord, Lord Hughes, for taking the situation further in regard to the very curious and unfortunate position of the Thistle Foundation. The Thistle Foundation found itself in difficulties because it could not benefit from the provisions of Section 8(1) of the Valuation and Rating (Scotland) Act 1956 in respect of its houses. It appears from what the noble Lord, Lord Hughes, said a few moments ago, that it would still be difficult to make this Bill the means by which to ensure that the Thistle Foundation would enjoy the relief which it has sought. Nevertheless, I am particularly grateful to the noble Lord for investigating the position further; and to the noble Baroness, Lady Stedman, for the part she has played in looking into the situation of this large charity in Scotland. While recognising that what is in the Bill is not totally satisfactory so far as this charity is concerned—and, indeed, other charities in a similar position—one fully acknowledges that it is a step in the right direction.
Baroness MASHAM of ILTON: My Lords, may I ask the noble Lord, Lord Hughes, a question about houses belonging to housing associations and housing societies? Will they be eligible for rating relief? Otherwise, social service departments may have quite a lot of extra to pay, because so many of the people who are living in this sort of housing are in receipt of social security.
Lord HUGHES: My Lords, I am afraid I shall need to take advice on that. Perhaps, as these are part of a group of Amendments, I might be able to get that help in the course of the proceedings, so that when I come to move the next series of Amendments formally I will, if the information has become available, be able to answer the noble Baroness then.
7.30 p.m.
Clause 4 [Rebates for lands and heritages with special facilities for disabled persons]:
Lord HUGHES Lord HUGHES moved Amendments Nos. 7 and 8:
Page 5, line 17, after ("include") insert ("or consist of")
Page 5, line 20, leave out from ("person" to end of line 26.
The noble Lord said: My Lords, I spoke to Amendment No. 7 and to the next one when speaking to Amendment No. 1. I beg to move Amendments Nos. 7 and 8 en bloc.
Clause 5 [Rebates for institutions in Scotland for the disabled]:
Lord HUGHES Lord HUGHES moved Amendments Nos. 9 to 12:
Page 7, line 5, after ("used") insert ("(a)")
Page 7, line 6, after first ("or") insert ("(b)"
Page 7, line 24, leave out subsection (3).
Page 7, line 32, at end insert—
(" "care" does not include the provision of medical, surgical or dental treatment, but without prejudice to subsection (1)(b) above;").
The noble Lord said: My Lords, I associated Amendment No. 9 and Amendments Nos. 10, 11 and 12 with Amendment No. 3 when I spoke to it. With the leave of the House, I beg to move Amendments Nos. 9 to 12 en bloc.
Lord HUGHES Lord HUGHES moved Amendment No. 13:
Page 7, line 33, leave out from ("section") to end of line 34 and insert ("108(1) of the National Health Service (Scotland) Act 1978").
The noble Lord said: My Lords, this is a drafting Amendment, the purpose of which is to ensure that the definition of the word "illness" in subsection (2) of Clause 5 is as accurate as possible and in line with the National Health Service (Scotland) Act 1978. The Amendment is a necessary consequence of the current consolidation of the Scottish National Health Service legislation, including the National Health Service (Scotland) Act 1947. I beg to move.
Lord SANDYS: My Lords, I am grateful to the noble Lord, Lord Hughes, once more for clarifying under this Amendment the definition of the word "illness". We hope that it will be for the benefit of both individual disabled people and also particular charities and foundations which have been referred to earlier. The law in this regard needed clarification and I think that this Amendment will be most useful.
Schedule 1 [Amount of rebate under section 1]:
Lord HUGHES Lord HUGHES had given Notice of his intention to move Amendment No. 14:
Page 10, line 35, at beginning insert ("(1)").
The noble Lord said: My Lords, I do not propose to move Amendment No. 14. I am advised that this is not necessary. It is an alteration which will be taken care of in the ordinary way by correction of the printing.
Lord HUGHES Lord HUGHES moved Amendments Nos. 15 to 18:
Page 10, line 35, at end insert ("subject to sub-paragraph (2) below")
Page 11, leave out lines 4 to 10 and insert—
("(2) The applicant may, in making the application, elect that the rebate shall, subject to sub-paragraph (3) below, be equal to—

(a) in the case of a hereditament which includes the garage, carport or land, the rates that would be chargeable on the hereditament for the rebate period if its rateable value were so much only of its rateable value as is attributable to the garage, carport or land;

(b) in the case of a hereditament which consists of the garage, carport or land, the rates chargeable on the hereditament for the rebate period.

(3) Where the application is made by reference to a garage, carport or land which is also used for other purposes, any rebate under paragraph (a) or (b) of sub-paragraph (2) above may be proportionately reduced.")
Page 11, line 13, leave out ("7 or 8(b)") and insert ("or 7(1)")
Page 11, line 17, leave out ("(f) of (g)") and insert ("or (f)").
The noble Lord said: My Lords, I spoke to Amendments Nos. 15, 16, 17 and 18 when speaking to Amendment No. 1. I beg to move them en bloc. Perhaps it might be convenient, although not perhaps strictly proper, if I were to say to the noble Baroness, Lady Masham, that there is nothing in Clause 1 or Clause 4 to disqualify a house provided by a housing association or a like body. I beg to move.
Lord SANDYS Lord SANDYS moved Amendment No. 18A:
Page 11, line 22, at end insert—
("10A. No ratepayer shall receive a diminished sum in rates relief arising from disability after this Act comes into force than he was receiving immediately before this Act became operative.").
The noble Lord said: My Lords, this Amendment proposes that no ratepayer shall receive a diminished sum in rate relief arising from disability after this Act comes into force than he was receiving immediately before the Act became operative. I think that it is self-explanatory. Nevertheless, there are circumstances in which some unfortunate situation might possibly arise. I am grateful to the Government for their agreement with the noble Lord, Lord Hughes, and the sponsor of the Bill in another place, that this situation is going to be considered and catered for, because we believe that some anomalies could arise. If, as I hope shortly will be the case, the noble Lord, Lord Hughes, will confirm that this Amendment may not be necessary, I shall be personally willing to withdraw it. I do not think it would be for the benefit of the House if I went further into it. I believe that the Amendment is self-explanatory. I beg to move.
Lord HUGHES: My Lords, I should have liked to be able to advise the House to accept this Amendment, with whose purpose I am in complete sympathy. I think that also fits in with the views expressed on behalf of the Government both in another place and here, because it had been made perfectly clear from the outset that it was the object to re-state the existing law more clearly so as to remove areas of doubt and to make sure that people's entitlement was well understood. In carrying out this task of clarification and tidying up, it has been necessary in some cases to provide marginal extensions of relief so as to secure sensible definitions of the various categories, and where there have been areas of doubt they have usually been resolved in the potential recipients favour. Likewise, on the level of relief, the tariff of amounts of relief to be given in respect of special facilities in disabled persons' houses in England and Wales has been fixed at a generous level, significantly above the average value throughout the country of such facilities, so that on the whole the present recipient of this relief will certainly be better off rather than the reverse. In general, therefore, disabled ratepayers will be slightly better off under this Bill than they were previously.
However, I am afraid that, notwithstanding the desire of all of us and what
1088
was said in another place, I would not feel justified in guaranteeing that there may not be a few people who live in comparatively highly-rated properties who will be slightly worse off receiving the tariff relief under the new scheme. But I think that we can be confident that the numbers involved, if any, must be very small and that the amount of loss involved will be small also. There is only one type of case which has been specifically drawn to our attention as being a problem here; namely, the problem of highly-rated garages. The Amendments which have been made deal with that very problem in the sense that the noble Lord, Lord Sandys, has asked. If there should be any case remaining in which the introduction of the new scheme could operate harshly, the rating authority will, of course, be able to increase the rebate by 20 per cent. under the powers conferred by paragraph 9 of Schedule 1.
If the undertaking is not met in its entirety, I think that the extent to which it falls short will be very small indeed. If one takes the swing-and-roundabouts principle, the number who will be better off as a result of this will perhaps be substantial, as against those who possibly will be a little worse off. They will be very few. I do not want to go into the technicalities of valuation for the very good reason that I do not understand them; particularly as in England and Wales they are much more complicated than in Scotland. I gather that the valuation authorities could be presented with great problems if the Amendment were to go into the Bill. There is also the much more practical reason for rejecting it: that it might imperil the prospects of the Bill as a whole in another place if somebody there can invoke the Inland Revenue on their side. I hope the noble Lord will not press this Amendment.
Baroness MASHAM of ILTON: My Lords, I should like to hope that the noble Lord, Lord Hughes, is right. The disabled are such a very complicated breed. They differ. I am sure some complications will arise; but I suppose, as with all legislation, this can be put right at a later date by amendment. I should like to add—for I rather missed it when Amendment No. 16 came up—that I am delighted that this question has been considered, because disabled people can need

1089
deep freezers desperately when they cannot go out to shop, and they can also need to be occupied at home when they cannot get a job. They may want to do some woodwork in their garage. So I am very grateful that the noble Lord, Lord Hughes, has made this possible. I hope that he is right in this matter.
Lord HUGHES: My Lords, if it turns out that I am not right and that more than a few people are affected, if the noble Baroness, Lady Masham of Ilton, finds it desirable to promote another Bill to take care of any remaining anomalies, I hope that she may be able to recruit the help of the noble Baroness, Lady Stedman, to the same extent as I have been able to do.
Lord SANDYS: My Lords, I am grateful to the noble Lord, Lord Hughes, for giving me these assurances on this Amendment. Before I withdraw it, may I say that what is intended is to ensure that the disabled will not lose out in rateable value terms. This is in many ways preferable to the examination of the problem in money terms, largely because of the inflation of rateable values as time goes on. I am very grateful for what has been said hitherto in regard to Amendment No. 16. It would be for the benefit of the House if I explained a small matter in that regard. Had Amendment No. 16 remained as it was, in a mandatory form, it would have been necessary for valuation officers from the Inland Revenue to visit all garages of disabled people to verify that the garage was used only and solely for the purpose of housing a motor-car and for no other purpose. By placing it in its new perspective—that is, in the permissive sense—and replacing the word "shall" with the word "may", it will benefit both the disabled people and also the very hard pressed valuation officers and their assistants. This is a beneficial and helpful Amendment to the Bill as a whole. I beg leave to withdraw Amendment No. 18A.
Amendment, by leave, withdrawn.
Lord HUGHES Lord HUGHES moved Amendment No. 19:
Page 11, line 43, after ("7") insert ("(1)").

CONSUMER SAFETY BILL
7.43 p.m.
Report received.
The LORD CHANCELLOR: Amendment No. 1. Lord Airedale?
Lord WALLACE of COSLANY: My Lords, before we proceed, I have been informed by the Table of the House that the noble Viscount, Lord Hanworth, has put down a manuscript Amendment at very short notice.
The LORD CHANCELLOR: My Lords, I am afraid that the fault is mine. I had not noticed the manuscript Amendment among the myriad of papers upon my desk. There is a manuscript Amendment in the name of the noble Viscount, Lord Hanworth.
Lord WALLACE of COSLANY: My Lords, before the manuscript Amendment is moved, I should like to draw the attention of the House to the fact that, with all due respect, this is a rather inconvenient move. I quote from the Companion to the Standing Orders of this House on Public Business:
"Manuscript Amendments are not out of order on Report, but the disadvantages and inconvenience attaching to the moving of manuscript Amendments are even greater on Report than at the Committee stage. The rule requiring the text of such Amendments to he read out to the House applies on Report as in Committee.
An Amendment to leave out a clause or Schedule is not desirable on Report if the purpose underlying the Amendment is to initiate a general debate, rather than a genuine desire to leave out the clause or Schedule. Such an Amendment is not, however, out of order; it may, indeed, he appropriate when, for instance, a Lord wishes to learn the outcome of art undertaking given in Committee".
Having said that, we have a Third Reading and it is conceivable for the Amendment to be moved then. This, I am sure, would be helpful to my noble colleague on this Bill, Lord Mottistone. This would give everybody a reasonable opportunity to study the matter. As it is, I have had to dash out to consult officials with but a few minutes' notice just before this stage is to take place. With all due respect, it is highly inconvenient to everybody.
Lord MOTTISTONE: My Lords, may I intervene to say that there were no under-

1091
takings given in Committee on Clause 1, so that does not apply. There was ample opportunity on Second Reading to discuss that clause. I hope that the noble Viscount will have another think and come back at Third Reading.
Viscount HANWORTH: My Lords, I am prepared to withdraw my manuscript Amendment and I apologise to the House. The point of my Amendment was to raise a matter which I hoped the Government might be able to consider before Third Reading. I felt it was not suitable to make an Amendment. The simple answer to this problem is to have a word with the Minister afterwards and to tell him what I had in mind. I apologise to the House and to the Government.
Lord MOTTISTONE: My Lords, perhaps I may draw attention to the fact that this is a Private Member's Bill and it is my Bill and not the Government's Bill.
Lord WALLACE of COSLANY: My Lords, in view of my earlier remarks, I greatly appreciate the noble Viscount's gesture, and no doubt we can come to some arrangement.
Clause 9 [Interpretation]:
Lord AIREDALE Lord AIREDALE moved Amendment No. 1:
Page 10, line 36, leave out ("if any").
The noble Lord said: My Lords, I have to begin with an apology for a misprint which is probably my fault. The words which appear on page 10 at line 36 are not "if any" but "if and". It is those words, "if and", that I seek to leave out. I moved a similar Amendment in Committee last week. I confessed that I thought I could find a precedent for it if only I had the time to make the necessary search. The weather of the past week has been conducive to prolonged research in the Library, and I have found my precedent. It appears in the proceedings of Standing Committee B of another place on the Consumer Credit Act 1974.
At column 83 of the report of Standing Committee B for 27th June 1974 we find the Minister in charge of the Bill moving an Amendment identical to this one and speaking in support of it. I shall burden
1092
your Lordships with only a single paragraph, because that was all he said. The Minister said:
"This again is a drafting Amendment. It makes no difference to the impact of the legislation. I should add that the noble Lord, Lord Airedale, drew the Government's attention to the matter in another place. At that time the proposal was resisted, but we have considered the matter raised by the noble Lord, and it is absolutely correct. The words that we now propose should be deleted are purely words of emphasis, with no legal significance. In terms of legal purity they add nothing to the Bill".
My Lords, the Amendment was agreed to nemine dissentiente. I hope that is the end of this matter. It is obviously desirable that there shall be consistency in the language used throughout legislation. I hope that the House will accept this Amendment and that whoever holds sway over the office of the Parliamentary draftsman will let it be known that henceforward the expression "if and only if" is to be eschewed. I beg to move.
Lord MOTTISTONE: My Lords, sadly, I cannot accept this Amendment, however persuasively the noble Lord, Lord Airedale, has put it—certainly not this particular Amendment and at this stage. Clause 9(1) makes two propositions. First, it provides that for the purpose of the Bill a person supplies goods if one of a number of specified conditions is fulfilled. Secondly, it provides that in no other case is a person to be regarded as having supplied the goods. If the words "if and" were deleted, the first proposition would not be made.
With regard to the establishing of a precedent on persuading parliamentary draftsmen not to use this phrase in the future, there would be difficulty if that were to be accepted and passed through the system. The noble Lord, Lord Airedale, quoted an example of where a Minister in another place agreed to an Amendment originally proposed by himself, but there are precedents also for the use of this phrase. For instance, Section 57(4) of the Fair Trading Act 1973, provides, somewhat similarly, "if but only if". Similarly, in Section 17(3) of the Films Act 1960 it provides "if and only if"—identical to this phrase. Rule No. 5 of the Rules of the Supreme Court and paragraph 1 of Schedule 2 to the Scotland Bill, which has recently been through your Lordships' House, also contain the phrase.

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So it would seem to me that there is room for argument, and perhaps the noble Lord, Lord Airedale, might be prepared to accept that the situation which he described to us of having raised an Amendment of this sort in this House and of its being accepted on reflection in another place might appeal to him as being a similar way through the problem on this occasion. I should be very happy to bring to the notice of my honourable friend Mr. Neville Trotter, whose Bill it is, what has happened and what the precedent was, and see whether he, no doubt with the support of the Government, would be prepared to take exactly the same course as the Minister did in 1974. I wonder whether that would appeal to the noble Lord.
Lord AIREDALE: My Lords, that, of course, would be possible; but this is not a House of Lords Bill. This Bill has come to us from another place in as good a state as they were able to make it. This is the revising Chamber, and our job is to revise the Bill as best we may. It would be more appropriate that we should tackle this matter.
May I applaud the noble Lord, Lord Mottistone, for apparently having done as much research on this as I have, which is a considerable amount. I have a private agreement with myself that I will never divide the House on a matter of pure drafting; but I think we shall perhaps be discussing this matter again on Third Reading. Also, we know that the noble Viscount, Lord Hanworth, will be giving us an opportunity to have a Third Reading debate. With those words, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Viscount HANWORTH Viscount HANWORTH moved Amendment No. 2:
Page 12, line 7, leave out paragraph (b).
The noble Viscount said: My Lords, as things stand, food and medicines are excluded from the Bill, but there seems to be a great deal to be said for having them in the Bill because, as far as I can gather, the Bill provides powers which are not available at the present time, and maybe provides an opportunity for taking action more quickly than night otherwise be done.
I do not believe there is really any argument against including food, except possibly that it is dealt with by a different Ministry. However, I gather that in another place there was a fairly strong lobby, presumably from the drug, companies, to exclude medicines. When one comes to consider the matter, I do not think that drug companies have a very good record in what they have done abroad. Certainly drugs like chloramphenicol, which are known to be dangerous, have been shipped to developing countries without any warnings of their side-effects.
Really we should not pay too much attention to their views on this subject, particularly when one remembers that they are churning out an enormous number of drugs, 75 per cent. of which are considered to be of little therapeutic value, because they are substitutes for what is already on the market. In view of that, I do not think we should take this lobby too seriously; and I beg to move.
Lord MOTTISTONE: My Lords, before responding to the noble Lord's Amendment, and really taking up the point made by the noble Lord, Lord Airedale, on the previous Amendment, perhaps it would be possible to convey to the House with great humility the fact that with a Private Member's Bill from another place the rules are somewhat different from those in connection with Government Bills. The reason is that with a Private Member's Bill, they do go through the Bill in great detail and they do all the revising. I had an opportunity to take such a Bill through some years ago, and so I am not talking absolutely ab initio. We are not here as a revising Chamber for Private Members' Bills in quite the same way as for Government Bills, because they have done all the dirty work, if you like, in a way that they do not do for "big" bills—and they have, of course, their own political reasons for not doing that. That is an important point to take account of.
The other point is that, because of the procedures in another place, they will think that they have done all the work that is necessary, and if your Lordships look at the relevant copies of Hansard you see that their work was considerable. Therefore they assume that the Bill is going to go back to them from here as what might be called more or less

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"clean", and they do not allocate very much time to it. The fact of the matter is that if we have contentious Amendments in this Bill which are likely to cause trouble when it goes back, the Bill will fail.
This is not a Second Reading and it is not the time to make an impassioned plea at any length, but this Bill is important for the safety of consumers. It really is a great pity to bother too much with any points of detail which may endanger the Bill, unless they are of absolutely vital significance or — and this would be an equally good reason—it would be assumed that another place would accept the Amendments without any problems. Those, I think, are considerations to be borne in mind
To take this particular Amendment, certain products are excluded from the definition of goods, for the purpose of the Bill, by virtue of paragraph (b) because adequate controls exist in other legislation. While it might seem preferable to simplify the Bill by deleting paragraph (b), and to rely on administrative arrangements between Government Departments to ensure that no action is taken under the Bill in relation to these products, manufacturers and suppliers prefer to know for certain that the legislation controlling their product is, say, the Agriculture Act 1970 or the Misuse of Drugs Act 1971, and that there is no power under this Bill to impose further regulations. It will avoid duplication, which makes it simpler and probably easier for people to carry out the various instructions under the relevant Acts.
I turn now to food, and before the noble Viscount, Lord Hanworth, put down his Amendment I was able to tell the House that I did not have to declare an interest. But I must at this point do so, and remind your Lordships that I am a director of a food trade association which looks after the cake and biscuit manufacturers. There are adequate powers to secure the safety of food and to protect consumers in the Food and Drugs Act 1955, and perhaps I may add that currently that Act is very much under review, with a view to bringing it up to date. Though it has the necessary powers within it now, there is reason to suppose, regardless of who is in Government,
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that within the next year or so that Act will be updated.
Turning to safety of fertiliser and feedingstuff, this is provided for in the Agriculture Act 1970, as amended by the European Communities Act 1972. There is power in Section 74A of the Agriculture Act to make regulations relating to the composition, content, labelling and packaging of fertiliser and animal feeding. stuff. The Medicines Act provides for control over medicinal products. How ever, as this control is not entirely adequate in relation to products which are not licensed, Amendment No. 3, in the name of the noble Lord, Lord Wallace, is proposed to ensure that the powers in the Bill, and in particular those in Clauses 3 and 4, can be exercised in relation to unlicensed medicinal products. But as cosmetic products fall within the responsibility of the Department of Prices and Consumer Protection, an Amendment was moved in Committee last Friday to enable the powers in the Bill to be exercised in relation to those cosmetics which are also medicinal products. Finally, Section 4(1)(b) of the Misuse of Drugs Act 1970 already prohibits the supply of controlled drugs, so an Amendment was moved in Committee to exempt controlled drugs from the definition of "goods" for the purposes of the Bill.
I hope the noble Viscount will take the point that there is a great deal of merit in not duplicating the sources from which regulations can emanate to cover different types of product, if there are already satisfactory powers laid down by Statute to cover those products. It is a fact that food, as such, is really a very different kind of product from the main run of those for which this Bill is intended, and it makes a lot of sense that it should be dealt with separately by a different group of experts, who have devoted, in some cases, a working lifetime to studying the problems of making sure that the food in this country is always wholesome and healthy for consumers to eat.
Viscount HANWORTH: My Lords, I shall be interested to study in detail whether the Acts mentioned do, in all cases, provide the same benefits as this Bill. Nevertheless, to save time, I take the point which the noble Lord has made that this Amendment would be contentious, and the last thing I wish is to delay

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the passage of this Bill. Therefore, I beg leave to withdraw the Amendment.
Lord AIREDALE: My Lords, before the Amendment is withdrawn, may I just refer to the earlier part of the speech of the noble Lord, Lord Mottistone. I am always willing to be told that I am wrong, particularly on matters of procedure, but it really comes as a great surprise to me to be told, when a Bill, even a Private Member's Bill, has been introduced into another place, amended in the other place, sent to this House and amended in this House, that when it goes back to the other place with the Amendments of this House, it is open to the other House to introduce new Amendments unrelated to any Amendments introduced in this House. That was the proposition to which the noble Lord invited me to agree when I moved my first Amendment, and I seriously doubt whether the procedures of Parliament would permit that.
Amendment, by leave, withdrawn.
8.6 p.m.
Lord WALLACE of COSLANY Lord WALLACE of COSLANY moved Amendment No. 3:
Page 12, line 11, after ("1968") insert ("in respect of which there is in force a product licence within the meaning of that Act").
The noble Lord said: My Lords, I hinted in Committee that an Amendment of this nature might be moved, and therefore it will come as no surprise to at least some noble Lords. This Amendment will enable the powers in the Bill to be exercised in relation to medicinal products which are not licensed under the Medicines Act 1968, either because they are exempt from the requirement that a licence should be obtained or because of a contravention of that requirement in the Medicines Act. While the Medicines Act 1968 provides fairly comprehensive controls over medicinal products, it would be advantageous if the powers in the Consumer Safety Bill were available in relation to products which are not licensed under the Medicines Act.
An example of a case where the Medicines Act does not provide comprehensive control over medicinal products is that there is no power to require a supplier of a medicinal product which is
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not licensed to issue a warning about the product. Moreover, although there is power under Section 62 of the Medicines Act to prohibit the supply of medicinal products of any description, this procedure would be very considerable if only one person was supplying the goods, and a prohibition notice would be a more suitable procedure.
The Amendment will not enable the powers in the Bill to be exercised in relation to all medicinal products. The Bill will apply only to medicinal products in respect of which there is no product licence in force. I would add that the Association of the British Pharmaceutical Industry, which originally proposed that the Bill should not apply to medicinal products, has no objection to this proposal. I beg to move.
Lord STRABOLGI: My Lords, I think that this might be a convenient moment to halt the Report stage. I beg to move that further consideration on Report be now adjourned.
Moved, That further consideration on Report be now adjourned.—(Lord Strabolgi.)
Lord LYELL: My Lords, one hates to dispute again with the noble and learned Lord, and I had a similar problem on the Committee stage. I had one or two very short comments to make on Amendment No. 4, but I suppose that, once again, the usual channels—dare I say it?—overcome the individual Peer. I was not aware that there had been any agreement here. I just wondered how long the noble Lord, Lord Airedale, would be. But, once again, I apologise to your Lordships for the fact that I shall be unable to be here later whenever the Bill is completed. However, I understood that we were taking the Report stage today.
Lord STRABOLGI: My Lords, perhaps I may say that if we could get through these Amendments fairly expeditiously, I should be quite happy to finish the Report stage today. The agreement was that we should get back to the Wales Bill at about 8.30 p.m., and there are still some orders to take. But, of course, I am in the hands of the House. Possibly, we might be able to get through everything.
Lord AIREDALE: My Lords, these two Amendments raise quite substantial matters and I do not think it would be right for me to feel that I was in any hurry in moving these Amendments. I have very great sympathy with what the noble Lord, Lord Lyell, has just said and I would be wholeheartedly supporting what he has just said were it not for the fact that there is a chance that these Amendments can be considered by the House when it is not so thinly populated as it is at the moment. I think there is perhaps a good chance of that, and I look forward to that possibility. However, I have much sympathy with what the noble Lord, Lord Lyell, has just said.
Lord MOTTISTONE: My Lords, I am in a great quandary because I think it is bad luck on us all.
Several noble Lords: Hear, hear!
Lord MOTTISTONE: For the second time the Government have organised their business whereby they have had an item before us which has taken perhaps longer to dispose of than they expected and so has pushed us into a corner. If it had happened once that would be reasonable, but to happen twice seems to me to be rather insupportable. My noble friend Lord Lyell has been gravely inconvenienced. The difficulty for himself and for other Members who have had to take his place has been great. It is not proper business for taking a Bill, even a Private Member's Bill—I hope there is no scorn there—in such a way that important contributions from the Opposition Front Bench have to be switched about because of the way things have gone.
But having said all that, I have the very greatest sympathy for the noble Lord, Lord Airedale. He does not want to move his Amendments with the pressure of Wales coming up behind him so that, yet again, all of us cannot give proper consideration. Proper consideration is what this Bill needs. Proper consideration is what it is not getting.
A noble Lord: Hear, hear!
Lord MOTTISTONE: On balance, with the greatest possible respect to my noble friend Lord Lyell, I accede to the view that this stage should be continued tomorrow; but I trust that, come what
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may, the Government give us all the time we want, and more, and will ensure that that is so. If it so be that we have it with the House full and everybody hearing the noble Lord, Lord Airedale, and I battering our way on his Amendments, that would be jolly good fun.
Lord STRABOLGI: My Lords, I am sure that what the noble Lord, Lord Mottistone, has said will be carefully noted and discussed through the usual channels. We are very grateful to him for his co-operation, and also to Lord Airedale, Lord Lyell, and all noble Lords.

ANCILLARY DENTAL WORKERS (AMENDMENT) REGULATIONS 1978
8.13 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL rose to move, That the draft Ancillary Dental Workers (Amendment) Regulations 1978, laid before the House on 6th June, be approved. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. The draft regulations propose an Amendment of the Ancillary Dental Workers Regulations 1968 as amended in 1974, by increasing the fees payable to the General Dental Council by persons in respect of their enrolment as dental hygienists or dental auxiliaries who provide limited treatment under the direction of dentists. The draft has been prepared by the General Dental Council. The Privy Council is of the opinion that the proposed fees are justified by changes in circumstances which have taken place and have given their approval. Before the regulations are made the draft requires the approval of your Lordships' House under Section 41(9) of the Dentists Act 1957.
The changes proposed are to increase at the end of this year the fee for the enrolment from £2 to £4 and the annual fee for the retention of a name on the rolls from £1·50 to £3. The fee for the first enrolment has not been changed since 1968 and that for the retention not since 1974. The fee income helps the General Dental Council meet the increasing administrative costs of maintaining the rolls and in the public interest

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exercising supervision of training, examinations and standards of practice. Last year the General Dental Council's costs directly related to ancillary dental workers were estimated at £6,400. Next year, even at the low level now proposed, income from these fees is expected to be no more than this figure.
The proposed changes are not excessive. I would point out that these have been fixed by the General Dental Council. They have been approved by the Privy Council and, in those circumstances, I commend the regulations to your Lordships.
Moved, That the draft Ancillary Dental Workers (Amendment) Regulations 1978, laid before the House on 6th June, be approved.—(Lord Wells-Pestell.)
Lord SANDYS: My Lords, the House will be grateful to the noble Lord, Lord Wells-Pestell, for giving your Lordships details of this draft regulation order. In the twenty-sixth report from the Joint Committe reference was made to this set of draft regulations and your Lordships are not invited in that report to consider any special comment. The noble Lord, Lord Wells-Pestell, did say very clearly that 10 years have passed since these fees have been revised in one case, and four years in the other. With the passage of time, unhappily the state of the pound and the relationship to its purchasing powers has varied so considerably that we feel these increases are justified.
Lord COLWYN: My Lords, on behalf of my dental colleagues I also welcome the regulations moved by the noble Lord, Lord Wells-Pestell. If the order is approved the cost of administration of the dental ancillary workers—I remind him now officially called dental therapists—would be fully covered. However, I should point out that I consider it to be of great importance that the control and administration of dental therapists is kept within the General Dental Council, the central organisation, by a committee of management controlling both registration and examination boards. The Court Report suggested the setting up of two new training schools. If their cost-effectiveness can be proved—and I await the findings of a report due out in three
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or four months—I feel that dental therapists will have an important role to play in the management of dental health within the community. Like all other dental personnel they must be controlled by the General Dental Council.
Lord WELLS-PESTELL: My Lords, I am grateful to the noble Lord, Lord Sandys, for his comments and observations, and to the noble Lord, Lord Colwyn, who will understand that I shall not comment upon the matters he has raised because I might well be told they are outside these regulations.

SOCIAL SECURITY (MAXIMUM ADDITIONAL COMPONENT) REGULATIONS 1978
8.19 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL rose to move, That the draft Social Security (Maximum Additional Component) Regulations 1978, laid before the House on 6th June, be approved. The noble Lord said: My Lords, these are minor and I think quite non-contentious regulations, the purpose of which is to fill in a little more of the fine detail of the Government's new pension scheme embodied in the Social Security Pensions Act 1975. Although the regulations may look a little complicated, I hope your Lordships will allow me to assure you that they are quite straightforward.
The Regulations prescribe the maximum amount of additional component of retirement pension that is to be payable to a widow or widower under the provisions of Section 9 of the Social Security Pensions Act 1975. That section will enable a widow or widower to increase or "top up" the retirement pension which is payable by virtue of his or her own contributions, by adding to it, within limits, some or all of the retirement pension entitlement derived from his or her late spouse's contributions.
Before I come to the regulations themselves, I think your Lordships may find it helpful if I explain how the provisions of Section 9 of the Pensions Act differ from the provisions contained in the present Social Security scheme. Your Lordships may be aware that at present the Social Security Act 1975 enables a

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widow who is entitled to a retirement pension by virtue of her late husband's contributions as well as one by virtue of her own contributions, to receive whichever pension is the more favourable to her but she cannot receive both pensions together. The benefit provisions of the Pensions Act which come into force in April of next year include two important and beneficial changes to the current provisions. First, widowers in certain circumstances will be able to qualify for a retirement pension by virtue of their late wife's contributions. This will make it possible for widowers as well as widows to have alternative entitlement to two retirement pensions at the same time, that is one on their own contributions and one on their late wife's contributions. If I may, I will come back to that point in a moment or two.
Secondly, the Pensions Act provides for widows and widowers to have alternative entitlement to these two pensions, to aggregate them up to certain maximum amounts instead of having to choose, as at the moment, the more favourable one. As your Lordships may also know, the Pensions Act provides for retirement pensions to consist of two parts—or to use the proper word, "components". There is a basic component which is equivalent to the present flat-rate retirement pension and an additional component related to the contributor's earnings from April 1978, when the new scheme started. In relation to the aggregation of the basic components, Section 9(2) of the Pensions Act already provides for the maximum to be the standard of basic Category A retirement pension; that is the present flat-rate retirement pension, which will he £19·50 when these Regulations come into operation next April, and the amount will of course go up with each uprating.
In relation to the aggregation of additional—that is earnings related components—Section 9(3) of the Pensions Act provides for a maximum to be prescribed by regulations and that is the purpose of the regulations which I am asking your Lordships to approve. The maximum which the regulations prescribe follows the provisions already made by Parliament for the basic component; namely, the maximum which one person could have earned by his own contributions. The amount of the maximum
1104
which will apply in any one case will be the amount appropriate to the time when the surviving spouse first becomes entitled to both pensions. In the case of a pensioner couple this will be when one of them dies, but in the case of a woman who was widowed before she was 60, it will be when she reaches that age.
Perhaps it would be helpful if I were to try to give some kind of example. If we take a person who loses his spouse and becomes entitled to both of the retirement pensions in the 1979–80 tax year, he or she will be able to receive a combined amount of additional component up to a maximum of £1·31 per week. This means that in the case of a couple who had more or less average earnings of, say, £80 a week for the husband and, say, £55 a week for the wife in 1978–79 the survivor would be able to receive a combined additional component of £1·24 per week over the normal basic amount. That is he or she would receive both additional components in full and it would not be affected by the maximum.
It is too early yet to calculate precisely the maximum amount that will apply in 1980–81 because that will depend upon revaluation orders and contribution orders not yet made, but the amount will probably be in the region of £3 a week over and above the normal pension. The maximum will of course be increased at times with the upratings. The maximum I am asking your Lordships to approve is in accordance with the Government's expressed intention as indicated in the original White Paper Better Pensions and in later leaflets explaining the scheme. I do not think any useful purpose would be served by going through the regulations. There are only two of them and I have endeavoured to explain their function in moving the approval of these regulations. I beg to move.
Moved, That the draft Social Security (Maximum Additional Component) Regulations 1978, laid before the House on 6th June, be approved.—(Lord Wells-Pesten.)
Lord SANDYS: My Lords, the House will be grateful to the noble Lord, Lord Wells-Pestell, for explaining a very useful but unhappily complicated set of regulations. The Social Security Pensions

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Act 1975 has to be read with care and patience in order to achieve a full understanding of what is intended in those regulations. We welcome it from these Benches for, among other reasons, the implementation of the Sex Discrimination Act which ensures that it is mutual in the case of either spouse.

WALES BILL
8.27 p.m.
Further considered on Report.
Baroness ELLES Baroness ELLES moved Amendment No. 55:
Page 8, line 37, at end insert ("and any exercise of such powers by the leader or by a sub-committee shall be reported to the relevant committee at its next meeting thereafter")
The noble Baroness said: My Lords, we consider that this Amendment is a useful reminder to the Welsh Assembly, and indeed to the public who will be following the proceedings of the Welsh Assembly, that a good many of the functions and powers which have been devolved to the Assembly may in turn be devolved by the Assembly to a committee and in turn by that committee to a leader of that committee, which means that the leader on his or her own can take important decisions and exert a considerable power over many of the devolved areas without being answerable to anybody, so far as one can see, either to the Assembly or to the committee, or to have any publication of what he or she has done. This does not seem to be a democratic process in following the general principle which we seem to hear so much about nowadays, open government.
I am not saying, of course, that the leader will take decisions on the quiet and that they will not be known to the public, but as the Bill now stands it is perfectly possible for the leader of a committee to do so. Without putting a great many restraints on such a leader, that decisions have to be taken with a minimum number of people attending the committee, or that there should be a quorum, or anything like that, it seems a reasonable demand that he or she should at least have to report after such a decision has
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been taken or a power has been exercised, that the committee of which he is leader should be advised of the action taken. That seems a perfectly reasonable and sensible precaution to take, particularly when a new body is being set up with powers and functions in respect of which although they may be clearly defined, it will certainly be difficult to devise the dividing line between what can and what cannot be done. Therefore, it seems to me this is a reasonable check to demand from an executive body such as the Welsh Assembly. I beg to move.
Lord HARRIS of GREENWICH: My Lords, the noble Baroness always speaks with moderation and persuasively, but I regret to say that we do not see this matter in exactly the same way as she does. It is reasonable to expect that when powers have been derogated by subject committees to their leaders, or indeed to sub-committees, those leaders or subcommittees will report back to the subject committee on the exercise of such powers. It is really unnecessary to provide specifically in the Bill for something which can be expected to happen anyway without a statutory provision I do not think it is necessary to clutter up this Bill with quite as much detail as this. We have to leave it to the good sense of the Assembly. We must assume that they are reasonable people.
I do not believe that a provision of this sort is in all the circumstances absolutely necessary. This is a matter which is entirely within the hands of the particular subject committee; if they wish to have regular and frequent reports of this kind they can require the leader or the subcommittee to make them as a condition of derogation. Indeed it would be open to the subject committee to revoke the act of derogation at any time; they could say, "If you want to have this particular responsibility derogated to you, it can only be on certain clearly defined criteria". I see no reason for imposing a statutory requirement of this kind. We have to leave this to the good sense of the Assembly. We must assume, as I think we all do, that they will be a group of perfectly responsible and experienced people. To go into this amount of detail is in all the circumstances rather unnecessary.
Baroness ELLES: My Lords, the noble Lord has given a perfectly reasonable reply, and I follow his argument, but one has to remember, before we conclude on this Amendment, that considerable sums of money are going to come within the powers of these leaders. I am not saying, of course, that they are going to be corrupt or that they will be tempted to apply these very large sums in a way that is not proper. But I know of no elected body which allocates to one of its elected members powers over such sums as this Welsh Assembly will have. Another place does not have these powers. No decisions can be taken on the allocation of any sum of money without the concurrence of Parliament. No individual could take a decision without being subject to Parliamentary control in another place.
In this instance, apparently, a leader has no control over him whatsoever when disbursing these large sums of money. I am not going to press this Amendment tonight, but it is something to which the Welsh public should be alerted, that somebody who is appointed leader of a committee will have within his or her hands considerable powers and enormous sums of money which can be allocated and disbursed in a way over which there is no evident control in the Bill as it stands now. I would like to leave it at this for the time being, but I think this has been a useful airing of this particular difficulty. I beg leave to withdraw the Amendment.
Amendment, by leave, withdraw.
[Amendment No. 56 not moved.]
Clause 17 [The Executive Committee.]
Lord ELTON Lord ELTON moved Amendment No. 57:
Page 9, leave out line 8.
The noble Lord said: My Lords, we now come to the question of the naming of certain officials. We are returning here, as is normal on Report stage, to ground which we have covered in the Committee stage. We are approaching the matter, by means of this Amendment and Amendment No. 59, by a different route. I do not doubt that my noble friend Lord Digby will wish to speak to his Amendment, No. 58, at the same time, and he will forgive me if I do the same.
Lord HARRIS of GREENWICH: My Lords, if I may interrupt the noble Lord, I think Amendments Nos. 57, 58, 59 and 60 are related so directly that we could take them all together.
Lord ELTON: My Lords, I am sorry that No. 60 escaped my notice; that also is a linked Amendment. At the Committee stage a good deal of warmth of expression was elicited by the question whether the presiding officer should be named as such in the Bill, and it was decided by your Lordships Committee that he should not be. When we were debating the Chief Executive at an earlier stage various alternative names were put forward to that term, which many of us are still convinced is profoundly misleading. The chief executive, as far as I know, throughout Wales is generally regarded as being a senior permanent official of an elected body and not a member of it.
The last sentence of Clause 17(1) starting at the semicolon in line 6, at present reads:
"and the person named by the Assembly as chairman of the Executive Committee shall also be its leader and shall be known as the Chief Executive".
That is telling the Welsh what they are to call the person holding this office. The first Amendment, No. 57, deletes those words
"and shall be known as the Chief Executive".
The Amendment No. 59 deletes the reference to him in the following subsection and inserts in its place simply the term "its leader".
I do not doubt—because one has come to depend so absolutely upon the powerful performance of the noble Lord opposite at the Despatch Box—that he will adduce very considerable arguments to persuade us from this course of action, and I shall address myself to them in a moment. In the interim, I will suggest to my noble friend Lord Digby that to insert the term "Executive Chairman", while it may remove what we regard as the embarrassing confusion implied in the role by calling him something else, will not in fact give to the Welsh the power to make their decision themselves. That they should be given the power to do so I think we are all persuaded by the powerful arguments brought forward by the noble Lord, Lord Harris, at the Committee stage. If I may quote from him col. 1170,

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6th June, when we were discussing the question of the presiding officer, the noble Lord said:
"I think that the Government would consider it altogether too paternalistic to seek to insist that any particular title such as "President", "Speaker" or indeed "chairman" were used. I very much hope that this issue will not be pressed"—
and indeed it was not.
"The Welsh Assembly can indeed adopt the form of words suggested by the noble Lord, but we think that this is a matter for the Assembly to decide. Perhaps I may finish with a final low blow":
and that may he appropriate at this juncture—
"we do not believe that the gentleman in Whitehall necessarily knows best!".
The noble Lord, Lord Harris of Greenwich, was so persuasive on the first occasion that he has persuaded us on the second that this is the proper course to adopt, and I expect that he will commend us for anticipating his wishes with this Amendment. I beg to move.
The DEPUTY SPEAKER (Lord Segal): My Lords, I must inform the House that if Amendment No. 57 is agreed to I cannot call Amendment No. 58.
Lord DIGBY: My Lords, I should like to support my noble friend as regards this Amendment, although if it is passed and accepted by your Lordships it means that my own Amendment will not be called. My reason for tabling the Amendment is that I dislike the term "Chief Executive" On many occasions we are told that we should accept matters decided in another place because the Members of another place have been elected. In this instance I think that a number of your Lordships probably know rather more about local government than people in another place, and certainly some—myself included—have been elected to that particular position. We object not just because of the difference between a paid and an unpaid office or the difference between an elected and an appointed office, but because of the difference between a political person and a non-political person.
It is clear in all local government circles that the chief executive is the officer who runs the council under the direction of the elected members of that council. He is,
1110
as all civil servants or local government officers must be, non-political. In this case lie will be an elected member. He will be leader of a political Party and therefore a political animal. As far as I can see, the only precedent for this, which has been quoted, is in the proposed Executive in Northern Ireland. I should remind the House that at the time that was proposed councils in England and Wales had clerks and no chief executives. Since then we have had a new reorganisation and everyone understands that the chief executive is a non-political person. There is confusion enough in the Bill without adding to it. Therefore, I hope that the Government will see their way either to leaving the Assembly to decide this matter—I have no wish to dictate to the Welsh what they should do—or to accepting my Amendment.
Baroness VICKERS: My Lords, I should like to support the noble Lord, Lord Digby, because I think that it is very infra dig. that we should have to tell the Welsh Assembly what it should call its chief executive or whatever. Throughout our discussions on the Bill we have been told that we are rather downgrading the Assembly. Under Clauses 10 and 11 the Assembly may do anything it considers appropriate, and may make arrangements for this, that and the other. Under Clause 31 it can settle what Members of the Assembly will he paid. Therefore, it seems to me rather foolish that it cannot settle what will be the title of its chief executive, or whatever name appears in the Bill at present. Therefore, I hope that the noble Lord, Lord Harris of Greenwich, will ensure that the Welsh people have a chance to choose the title of their own leader. I have tried on one or two occasions, especially, as regards the tourist Amendment, to give the Welsh Assembly more powers. Therefore, I am being quite consistent when I suggest that it should be allowed to make its own choice as regards who will lead it in future, or what the title of the officer should be.
Lord HARRIS of GREENWICH: My Lords, when the noble Lord, Lord Elton, began his remarks with such a generous tribute to me for what I had said in Committee, I feared that all was not well, and indeed so it proved. He quoted what I had said-they were rather felicitously phrased words which I delivered on that

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occasion—explaining our attitude as regards the position of the presiding officer. We have spent a fair amount of time considering this particular point and we have come to the conclusion that it is right to leave the Bill as it is drafted.
The noble Lord has argued that the Assembly should be left to determine the title of the chairman of its Executive Committee, but in our view that would not be appropriate. This is a different issue from that which arose as regards the presiding officer. The Chief Executive will clearly be the most influential member of the Welsh Assembly. As its foremost member it is right that the title should have the authority of statutory provision. Some noble Lords have implicitly recognised this need for a title to be written into the Bill by supporting propositions to change it. As to that, my noble friend Lord Donaldson of Kingsbridge agreed during the Committee stage to think further about the title of "Chief Executive" in the light of the alternative proposals, including "Executive Chairman", then put to him. However, as I have indicated, on reflection the Government remain of the view—contrary to what several noble Lords said during the last debate and contrary, I fear, to what they have said today—that there is no real danger of the title being confused in the minds of the Welsh people with that of the senior, non-elected official of local government bodies.
As the noble Viscount, Lord Amory, acknowledged in the earlier debate, "Chief Executive" has certainly become a fashionable title in the fairly recent past. It is used in many walks of life—as often in industry and commerce as in local government—to designate the senior member of an organisation responsible to the board or other governing body. In that sense, we think that it is a very suitable title for the head of the Executive Committee.
As regards the alternative (which has been put forward by the noble Lord, Lord Digby, "Executive Chairman" which has, if I may say so in a most friendly spirit, a certain Maoist ring about it) it lacks the ring of familiarity and solid tradition that surround the established title "Chief Executive". Moreover, the Chief Executive is to be the leader of the Executive as well as its chairman. Therefore, the alternative suggested is neither apt nor fully descriptive
1112
of his role. As I have indicated, we have considered this matter with some care. I recognise at once that it is perfectly easy to take a different view of the matter. However, for the reasons that I have given we have come back to the view that the term employed in the Bill is more appropriate than any alternative offered. Therefore, we think that it would be better to stay with this particular form of words.
Lord MOYNE: My Lords, may I suggest, coming as I do from Ireland, that the Assembly, while not a Parliament, is none the less intended to give expression to national culture. Very naturally in the Parliament of the Republic of Ireland they have chosen, for certain appointments, Irish names. Should we not give the Welsh the power to choose their own Welsh names if they wish to do so? Are we not otherwise thwarting the purpose of the Assembly?
Lord MOLSON: My Lords, I hesitate to intervene, but it appears to me to be inappropriate that the word "Executive", which normally is applied to civil servants who carry out the orders of the Legislalature, should be applied to the chairman who is appointed by the Legislature. If this is to be a genuine case of devolution, surely we should try to preserve the diffference between the legislative body and the executive body. It is of the utmost importance that the Executive should he maintained under the orders and control of the Legislature. The Legislature is popularly elected and I should have thought—although I hesitate to intervene on this point—that it is inappropriate to combine the words "Executive" and "Chairman"
Lord ELTON: My Lords, I am much obliged to my noble friends and to all noble Lords who have joined in this short but interesting debate. I am interested in what the noble Lord, Lord Harris of Greenwich, had to say. He concluded by saying that, for the reasons he had given, he felt that the Bill should remain as it is. I must say that I did not find the reasons particularly compelling. He said that the term "Chief Executive" had recently become fashionable and proceeded to quote examples from industry. We, of course, are talking

1113
about politics and administration, where the traditions are older and none the less strong.
The noble Lord also said that the suggestion of my noble friend Lord Digby had a Maoist flavour. I am tempted to suggest that we might have a little cultural revolution; but then, of course, I recall what happened to those who took part in the Cultural Revolution and I withdraw the simile. It seems to me that as always the simile which is appropriate to our proceedings in this House is cricket. In this case we meet the noble Lord, Lord Harris, running smartly from east to west along the pitch scoring a run; as soon as
Resolved in the affirmative, and Amendment agreed to accordingly.
9 p.m.
[Amendment No. 58 not moved.]
Lord ELTON Lord ELTON moved Amendment No. 59:
we decide that that is the direction which he wishes to pursue, we turn round and find him coming in the opposite direction with arguments totally contrary to those which he advanced at an earlier stage. I am not a cricketer; I am an oarsman; I have a certain irreverence for the game. I find the temptation to stick out my foot irresistible, and I am going to trip him up. I beg to move that Amendment No. 57 be agreed.
8.52 p.m.
On Question, Whether the said Amendment (No. 57) shall be agreed to?
Their Lordships divided: Contents, 61; Not-Contents, 44.

CONTENTS

Alexander of Tunis, E.

Fortescue, E.

O'Hagan, L.

Amherst of Hackney, L.

Gainford, L.

Pender, L.

Berkeley, B.

Gridley, L.

Rankeillour, L.

Campbell of Croy, L.

Hanworth, V.

Redesdale, L.

Carr of Hadley, L.

Harvington, L.

Rochdale, V.

Cockfield, L.

Hunt of Fawley, L.

Romney, E.

Colville of Culross, V.

Killearn, L.

Sandford, L.

Colwyn, L.

Long, V.

Sandys, L.

Cork and Orrery, E.

Loudoun, C.

Savile, L.

Cottesloe, L.

Margadale, L.

Seear, B.

Crathorne, L.

Masham of Ilton, B.

Sharples, B.

Cullen of Ashbourne, L.

Middleton, L.

Skelmersdale, L.

De La Warr, E.

Molson, L.

Stanley of Alderley, L.

Denham, L. [Teller.]

Monson, L.

Tranmire, L.

Derwent, L.

Montgomery of Alamein, V.

Tweeddale, M.

Digby, L.

Morris, L.

Vickers, B.

Drumalbyn, L.

Mottistone, L.

Vivian, L.

Elles, B.

Mowbray and Stourton, L. [Teller.]

Ward of North Tyneside, B

Elton, L.

Westbury, L.

Faithfull, B.

Moyne, L.

Wilson of Langside, L.

Falkland, V.

Newall, L.

NOT-CONTENTS

Birk, B.

Howie of Troon, L.

Paget of Northampton, L.

Brockway, L.

Janner, L.

Parry, L.

Collison, L.

Kaldor, L.

Poasonby of Shulbrede, L.

Davies of Leek, L.

Kirkhill, L.

Segal, L.

Donaldson of Kingsbridge, L.

Leonard, L.

Snow, L.

Elwyn-Jones, L.(L. Chancellor)

Llewelyn-Davies of Hastoe, B.

Stedman, B.

Fisher of Camden, L.

Lloyd of Kilgerran, L.

Stewart of Alvechurch, B.

Gaitskell, B.

Lockwood, B.

Stone, L.

Gardiner, L.

Lovell-Davis, L.

Strabolgi, L. [Teller.]

Glenamara, L.

McCluskey, L.

Wallace of Coslany, L.

Greenwood of Rossendale, L.

McGregor of Durris, L.

Wells-Pestell, L. [Teller.]

Gregson, L.

Milner of Leeds, L.

Whaddon, L.

Hale, L.

Morris of Borth-y-Gest, L.

Winterbottom, L.

Harris of Greenwich, L.

Morris of Kenwood, L.

Wynne-Jones, L.

Hatch of Lusby, L.

Oram, L.

Page 9, line 10, leave out ("the Chief Executive") and insert ("its leader").
The noble Lord said: My Lords, this is the second half of 57/59. I beg to move.
On Question, Amendment agreed to.
[Amendment No. 60 not moved.]
Clause 21 [Party balance in committees]:
Lord ELTON Lord ELTON moved Amendment No. 61:
Page 10, line 22, leave out ("other than the Executive Committee").
The noble Lord said: My Lords, I can claim responsibility for the drafting error which gives rise to the need for this Amendment. Your Lordships will recall that at the Committee stage we inserted a provision which subjected the Executive Committee to the requirements of Clause 21 as regards the balance of Parties. We did so by inserting the number "17" in the second line of the subsection, and 17 relates to the clause under which the Executive Committee is called into being. I am afraid that I failed to observe that the words "other than the Executive Committee", which neutralise the effect of that insertion, remained in the Bill. This Amendment is simply designed, therefore, as a drafting Amendment to correct that situation. I beg to move.
Lord HARRIS of GREENWICH: My Lords, we are not disposed to disagree with this Amendment given the fact that a requirement to ensure a Party balance in the Executive Committee was carried during the Committee stage, but we remain resolutely opposed to that. Our view is in no way conditioned, so far as this Amendment is concerned, by the fact that the Party opposite appear to have got a number of their supporters back from what I am sure was a series of most excellent dinners, and so have got their majority back once again.
Lord ELTON: My Lords, while I felicitate my noble friends on their return, I commiserate with the noble Lord on his friends eating at a greater distance from the Chamber. Of course, I never expect him to be persuaded by anything I say, but these frequently reiterated reservations are, I assure him, unnecessary.
On Question, Amendment agreed to.
Clause 22 [Defamation]:
9.3 p.m.
Lord MONSON Lord MONSON moved Amendment No. 62:
Page 10, line 29, leave out from ("statement") to ("in").
The noble Lord said: My Lords, this Amendment is identical to one moved only six days ago by the noble Earl, Lord Selkirk, on the Third Reading of the Scotland Bill and which, after a short debate, was carried by the substantial majority of 43 votes, with support from various quarters of the House including, incidentally, at least one staunch pro-devolutionist who acted as Teller. So far as Wales is concerned, I did not think when we were discussing Clause 22 in Committee, and I do not think now, that there is any case for giving a non-legislative body like the Welsh Assembly absolute privilege as opposed to the qualified privilege which it would have automatically, as do other non-legislative bodies like the Greater London Council. This qualified privilege has hitherto been quite adequate to ensure free and unfettered discussion.
The Conservative Benches seemed to share my view the other day. However, when it came to a vote the Committee decided otherwise. It was, as so often happens, late at night, the Committee was thin, and therefore possibly not representative of the feelings of your Lordships' House as a whole. Nevertheless, the fact remains that there was a two-to-one majority in favour of retaining the absolute privilege clause, Clause 22 as it now is, in the Bill, so I am not seeking now to reverse this decision. I propose some thing much more modest, which I believe to be the very minimum necessary to safeguard the rights of the individual throughout the United Kingdom.
I should like to remind your Lordships again of an Early Day Motion in the other place on 19th June, when the honourable Member for Gillingham, Mr. Burden—a Conservative Member, as it so happens—drew the attention of the House to the fact that it was regrettable that there was apparently a growing tendency for some honourable Members, under the rules of privilege, to impugn the honour and integrity of others outside the House.
I am not remotely capable of matching the legal and constitutional expertise of the noble Earl, Lord Selkirk, so I shall not attempt to explain the effects of this Amendment in detail. In a nutshell, Clause 22, if left unaltered, will not only give the Welsh Assembly greater privileges than the Scottish Assembly, as the Scotland

1117
Bill now stands, but, even more important, greater privileges than those granted to either House of Parliament at Westminster. I believe that this would be quite unacceptable to your Lordships. I believe it would be unacceptable, too, to the other place, and indeed to the country as a whole. Here I should remind the House that the great majority of my noble friends on these Benches supported Lord Selkirk's Amendment. I beg to move.
Baroness ELLES: My Lords, as the noble Lord, Lord Monson, has pointed out, this Amendment is identical with the one put down six days ago on Third Reading of the Scotland Bill by my noble friend Lord Selkirk, and was supported, very convincingly, by my noble friend Lord Colville. The noble Lord, Lord Monson, has already touched on the point of having a privilege clause for a body which is not legislative. I only make this point because during the earlier debates on this matter it was said that the Scottish Assembly needed this privilege because it was a legislative body.
Whatever the reasons, it is quite clear that the Welsh Assembly must have some protection. People speaking in it should have some protection, some privilege. The question is, how much? I do not think that this is the time to go into all the legal arguments which were put forward by my noble friend Lord Selkirk, but I think they were convincing, particularly in the point that the different Chambers and different bodies should not have different privileges. That is the real difficulty.
If you are going to give privileges to, for instance, the Scottish Assembly, then the Welsh Assembly privileges should not be different from those given to the Scottish Assembly. Whether they are more or less than the privileges given to another place I think is actually still in
doubt, because there was no very clear conclusion as to what, when they were inserted, was meant by the words, "whether oral or written". In order that the privileges which have been given to the Welsh Assembly should at least be on all fours and identical with those given to the Scottish Assembly, I beg to support this Amendment.
The LORD CHANCELLOR: As has been said, my Lords, I am afraid this is a case not only of déjà vu but of déjà entendu. I do not want to traverse the ground again. I am quite unrepentant in stating that the Scottish formula, using the phrase
"any statement (whether oral or written) made in proceedings of the Assembly".
is right. The Assembly needs protection from the law of defamation and I think the better course would be to adhere to the language of "proceedings in Parliament", however imprecise that may be. Whatever lack of precision there may be about the boundries of the Parliamentary concept, I suggest that the Amendment would create even greater doubt and imprecision. It would read:
"any statement made in proceedings of the Assembly",
and I should have thought that "any statement" would include statements both oral and written; and I wonder whether that is really in the contemplation of those who support the Amendment. If it is, we return to the same area of doubt as we are in already—but at least we have the respectability in the language of the Bill of following the language, as I submit, of proceedings in Parliament; and I oppose the Amendment for those reasons.
9.10 p.m.
On Question, Whether the said Amendment (No. 62) shall be agreed to?
Their Lordships divided: Contents, 58; Not-Contents, 47.

CONTENTS

Alexander of Tunis, E.

De La Warr, E.

Gridley, L.

Amherst of Hackney, L.

Denham, L.

Harvington, L.

Berkeley, B.

Derwent, L.

Hunt of Fawley, L.

Campbell of Croy, L.

Digby, L.

Killearn, L.

Carr of Hadley, L.

Drumalbyn, L.

Long, V.

Cockfleld, L.

Elles, B.

Loudoun, C.

Colville of Culross, V.

Elton, L.

Margadale, L.

Cork and Orrery, E.

Faithfull, B.

Masham of Ilton, B.

Cottesloe, L.

Falkland, V.

Middleton, L.

Crathorne, L.

Fortescue, E.

Molson, L.

Cullen of Ashbourne, L.

Gainford, L.

Monson, L. [Teller.]

Montgomery of Alamein, V.

Rankeillour, L.

Stanley of Alderley, L.

Morris, L.

Redesdale, L.

Tranmire, L.

Mottistone, L.

Rochdale, V.

Tweeddale, M.

Mowbray and Stourton, L. [Teller.]

Romney, E.

Vickers, B.

Sandford, L.

Vivian, L.

Moyne, L.

Sandys, L.

Ward of North Tyneside, B

Newall, L.

Savile, L.

Westbury, L.

O'Hagan, L.

Sharples, B.

Wilson of Langside, L.

Pender, L.

Skelmersdale, L.

NOT-CONTENTS

Airedale, L.

Hatch of Lusby, L.

Parry, L.

Birk, B.

Howie of Troon, L.

Ponsonby of Shulbrede, L.

Brockway, L.

Janner, L.

Seear, B.

Collison, L.

Kaldor, L.

Segal, L.

Davies of Leek, L.

Kirkhill, L.

Snow, L.

Donaldson of Kingsbridge, L.

Leonard, L.

Stedman, B.

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

Llewelyn-Davies of Hastoe, B.

Stewart of Alvechurch, B.

Fisher of Camden, L.

Lloyd of Kilgerran, L.

Stone, L.

Gaitskell, B.

Lockwood, B.

Strabolgi, L.

Gardiner, L.

Lovell-Davis, L.

Wallace of Coslany, L. [Teller.]

Glenamara, L.

McCIuskey, L.

Greenwood of Rossendale, L.

McGregor of Durris, L.

Wells-Pestell, L.

Gregson, L.

Milner of Leeds, L.

Whaddon, L.

Hale, L.

Morris of Borth-y-Gest, L.

White, B.

Hanworth, V.

Morris of Kenwood, L.

Winterbottom, L. [Teller.]

Harris of Greenwich, L.

Oram, L.

Wynne-Jones, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
9.18 p.m.
Clause 31 [Remuneration]:
Lord ELTON Lord ELTON moved Amendment No. 63:
Page 12, line 6, leave out ("Assembly") and insert ("Secretary of State")
The noble Lord said: My Lords, we now come to the matter of the salaries of Members of the Assembly. I suggest that it might be to the convenience of the House if we were to discuss Amendments Nos. 63 to 68 en bloc because they form a coherent whole with one object in mind. The whole matter is made explicit if I explain the effect of the first of this series of Amendments. In Clause 31, the subject of which is remuneration, the first subsection at present reads:
"There shall be paid to members of the Assembly such salaries and allowances as the Assembly may from time to time determine".
That is the meat of the matter. We are substituting for that:
"There shall be paid to members of the Assembly such salaries and allowances as the Secretary of State may by order from time to time determine".
We could spend some time in going into the details of the workings of the rest of the Amendments and the implications thereof. But what interests your Lordships is a very simple question: it is
1120
whether or not the Assembly men should determine their own salaries and pensions. I do not doubt that the noble Lord opposite will be moved to make an impassioned appeal that the Assembly should be "trusted"—that is the word that is apt to come across the Table—to do this. I expect he will say that, after all, if they over-reward themselves they will pay the proper democratic price at the end of their term of office. It may not be a surprise to him to know that to some extent I concur with that view, but if I look to the position of our colleagues in another place I see the opposite danger arising. I see a Chamber for which, because of the sensitive nature of its decisions on its own payment, and their effect upon the economy and upon the standing of the House in the eyes of the public—who rightly regard those Members as the masters of the purse strings of Parliament—it never seems to be a convenient moment at which our honourable and right honourable friends can fix an appropriate reward for their services. I believe few people dispute that they are among the lowest rewarded assemblies of that nature in the world; and I think that few of us dispute that there are considerable disadvantages in this. But it is never politically the right moment to increase the salary of a politician if the decision is made by him.
Therefore, there are two dangers to guard against. One is the improper

1121
raising of salaries by people who, with considerable funds in their hands, may feel it right that they should reward themselves at a rate which others do not think right. On that the Welsh can rightly after the first session, express their own opinion; but we shall not thereby, and they shall not thereby, have got over the problem for good.
At the Committee stage we attempted to provide a peg upon which the salaries of the Assemblymen could be hung and could travel for the rest of time on the side of the Civil Service wagon, but that was thought to be inappropriate, for two reasons. One reason was that the salary peg that we chose, for example, was considerably higher than what many other people had in mind, and the other reason was that this was in itself a bad principle. I wished merely to get the Assembly out of at least one difficulty, if not two, and I am not bothered if this is not the method which noble Lords in Committee saw fit to adopt. That is a pity. I believe that there is much advantage in this method if only because it is an example which could be followed by another place. However, that opportunity has been denied us, and therefore I suggest that we choose another method which another place cannot adopt—because the other place is the superior body in this case—and which we feel should determine what the salaries and the pensions should be.
The Amendments provide not only that the determinations should be made by the Secretary of State, but that they should be made by a Parliamentary order. Amendment No. 68, which is the last in this series, says:
"No order under this section shall be made unless a draft of it has been laid before and approved by resolution of the House of Commons.".
It seems to us that that is the appropriate way to deal with the matter; that Parliament is the proper body to guard against these difficulties; and that because it is a money matter it is not appropriate that this House should carry out the determination.
I hope I have said enough to convince your Lordships that there is no element of patronisation or lack of trust here. I accept in general principle the arguments that the noble Lord advanced on
1122
this matter at the Committee stage. I hope I have also said enough to convince your Lordships that this is the proper way in which those who do not accept those arguments should solve the problem, and that it is also the proper way in which those who do accept the arguments should solve the problem. I beg to move.
Lord HARRIS of GREENWICH: My Lords, I rejoice to hear from the noble Lord, Lord Elton, that there is no lack of trust so far as his noble friends and he are concerned with regard to the Welsh Assembly. On a number of occasions during the Committee stage and, I fear, also on Report, one has detected a certain lack of enthusiasm regarding the judgment of Members of the Welsh Assembly, and I believe that what we are now considering is another example of it. We discussed this matter during the Committee stage, and we came to the conclusion that it was not appropriate for the Secretary of State to make a judgment in this matter. I endeavoured at that time to explain why we took that view, which remains precisely our position. Our view is that the Assembly should have as much freedom as possible in deciding its procedures and other operational matters. We do not think it is appropriate, or indeed necessary, for the salaries or allowances of Assembly Members to be controlled in Westminster. We recognise that we will have to set the initial salaries, and indeed provision is made for that. Of course, somebody has to make it clear before the Assembly is set up what the initial salary is going to be. There was no dispute about that, because clearly somebody has to make it clear.
Lord ELTON: Could the noble Lord tell us what it is going to be?
Lord HARRIS of GREENWICH: No, I cannot tell the noble Lord what it is going to be. That is a matter which will be considered by the Secretary of State after the appropriate procedures have been gone through. No, I cannot indicate what that will be. But as was made clear, I think, by somebody during the discussion we had in Committee, it is obviously necessary for people who are going to run for election to know, roughly speaking, what the salary is going to be. That being so, it seems right that Parliament should decide that

1123
question. But, of course, once the Assembly is established, it should be for its Members to decide what salaries should be paid. Decisions on Members' salaries are, in our judgment, a matter for the Assembly, and neither Parliament nor the Secretary of State should be involved in what is essentially an internal matter for the Assembly itself.
We do not accept that necessarily it will be an embarrassment to the Assembly Members to have to decide what to pay themselves. Many people would argue that Members could be even more embarrassed by having imposed on them from outside a salary which might perhaps be higher than they would vote themselves. Indeed, it is only right to reflect in passing that the fact that Ministers make a decision about what allowances should be made as far as councillors are concerned does not spare members of local authorities from a great deal of criticism so far as this matter is concerned. I recognise that the Assembly is not a local authority, but it seems to me altogether surprising to hear it suggested that, simply because the Minister will make a decision on this matter, the Members of the Assembly will in no way whatever be criticised for whatever decision that Minister may make. As I pointed out, in the case of local authorities this is certainly not true.
Our view is that the Assembly will have responsibility for a very wide range of important matters affecting Wales, and in our view it would be quite out of keeping to deny it responsibility for fixing the salaries of Members in the light of its own assessments of its own likely workload—after all, who can know better what its likely workload will be than the Assembly itself?—and in the light of Welsh public opinion. We do not believe that an Amendment of this sort will in any way whatever improve the Bill. We think that the Assembly can be trusted to make a judgment of this sort, and, that being so, we are resolutely opposed to this Amendment.
Lord MOTTISTONE: I strongly support my noble friend. If the Government, for the reasons which the noble Lord, Lord Harris, so very cogently explained, sets the first salary, it seems to me that that is going to be the yardstick. I honestly do not see that it is going to be
1124
very easy for the Welsh Assembly to make much of an adjustment to that salary—I am talking of the real world rather than the theoretical one—because it would be more than one might expect of even a Welshman, that it should put it down. Practically nobody in this country today personally organises a downgrading of their salary. If the Members were to put it up, then, as my noble friend has said, they would be back facing the same problem as the other place in our Parliament suffers from today.
So it seems to me that my noble friend's argument about the practicality of the situation is entirely a sensible one, and is one to be fully supported. I would suggest that, as with the Scotland Bill—and I have said this in relation to it—there is obviously going to be lots of room for amendment to the contents of this Bill after the Assembly has been set up and operating for about six years, long after most of us in the Chamber today have ceased to take an active part in politics. I said "most of us", not "all of us". When that happens there will be lots of time to adjust the various provisions of the Bill, and I am certain that it is going to be necessary. How can we get it all right first time? At this point of time the sensible thing to do is to support my noble friend's Amendment.
Baroness FAITHFULL: My Lords, may I ask for guidance on two things? One is what happens if there is a very big discrepancy between those paid in the Assembly and those at Westminster? Unless my noble friend's Amendment is carried are we going to legislate against a very big discrepancy? Secondly, who, in fact pays initially?
Lord HARRIS of GREENWICH: My Lords, the noble Baroness is looking at me. I have made it clear on a previous Amendment that, in view of the fact that during the proceedings on the Protection of Children Bill when exception was taken to people speaking more than once on Report, I do not intend to speak again. There was general agreement in the House on that occasion that it was inappropriate, and not in accord with the traditions of the House, to speak more than once. Therefore, there was no lack of courtesy in my not responding to the noble Baroness.
A noble Lord: My Lords, is it not possible to do all things by leave of the House?
Lord ELTON: Yes, my Lords, but it is also conventional at Report stage for noble Lords opposite to sit in pairs and if a point is missed by one then the other can take it. There is also the noble and learned Lord who sits on the Woolsack who could oblige.
Lord HARRIS of GREENWICH: My Lords, with the greatest respect the noble Lord must consult Hansard and consider what was said during the proceedings on the Protection of Children Bill. These matters were argued, and I undertook to draw this matter to the attention of the usual channels. The noble Baroness was in the House at that time and is aware of the point, and of the strong feelings that were expressed on that occasion.
Lord ELTON: My Lords, I am somewhat surprised by what the noble Lord has said. I will consult Hansard, but I should have thought that this was a matter for the Procedure Committee. I have been present at many Report stages of many Bills on this Front Bench and on the Back Benches and it has been the custom to deal with these things in tandem. I would expect to have a note passed to
me by one of my noble friends if I had missed a point.
But, my Lords, we will leave this point now. My noble friend Lady Faith-full will he able to obtain satisfaction through the post or at Third Reading. It is manifest that the decision on this must be taken in ignorance of what the sum recommended by the Secretary of State is going to be after whatever may be the appropriate procedures that have to be gone through before the decision is taken. Therefore, one approaches the situation with even more feeling that the decision should he left in the hands of Westminster. I must say that the indications that I get from Wales about what the Welsh people feel on this matter do not coincide with the indication that the noble Lord opposite gives of what his friends feel. We may be on safer ground here than he imagines. Therefore, for the many reasons adduced, and in order not to prolong further the procedure question, I intend to press the Amendment to a Division.
9.34 p.m.
On Question, Whether the said Amendment (No. 63) shall be agreed to?
Their Lordships divided: Contents, 67; Not-Contents, 45.

CONTENTS

Alexander of Tunis, E.

Fortescue, E.

Newall, L.

Amherst of Hackney, L.

Gainford, L.

O'Hagan, L.

Atholl, D.

Glenkinglas, L.

Pender, L.

Belstead, L.

Gowrie, E.

Rankeillour, L.

Berkeley, B.

Gridley, L.

Redesdale, L.

Burton, L.

Harvington, L.

Rochdale, V.

Campbell of Croy, L.

Hunt of Fawley, L.

Romney, E.

Carr of Hadley, L.

Killearn, L.

Sandford, L.

Cockfield, L.

Lauderdale, E.

Sandys, L.

Colville of Culross, V.

Long, V.

Savile, L.

Cork and Orrery, E.

Loudoun, C.

Sharples, B.

Cottesloe, L.

Lyell, L.

Skelmersdale, L.

Crathorne, L.

Margadale, L.

Stanley of Alderley, L.

Cullen of Ashbourne, L.

Middleton, L.

Tranmire, L.

De La Warr, E.

Molson, L.

Tweeddale, M.

Denham, L. [Teller.]

Monson, L.

Tweedsmuir, L.

Derwent, L.

Montgomery of Alamein, V.

Vernon, L.

Digby, L.

Morris, L.

Vickers, B.

Drumalbyn, L.

Morris of Borth-y-Gest, L.

Vivian, L.

Elles, B.

Mottistone, L.

Ward of North Tyneside, B

Elton, L.

Mowbray and Stourton, L. [Teller.]

Westbury, L.

Faithfull, B.

Wilson of Langside, L.

Falkland, V.

Moyne, L.

NOT-CONTENTS

Airedale, L.

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

Hanworth, V.

Birk, B.

Fisher of Camden, L.

Harris of Greenwich, L

Boston of Faversham, L.

Gaitskell, B.

Hatch of Lusby, L.

Collison, L.

Glenamara, L.

Howie of Troon, L.

Davies of Leek, L.

Greenwood of Rossendale, L.

Janner, L.

Donaldson of Kingsbridge, L.

Gregson, L.

Kaldor, L.

Kirkhill, L.

Mishcon, L.

Stewart of Alvechurch, B.

Leonard, L.

Morris of Kenwood, L.

Stone, L.

Llewelyn-Davies of Hastoe, B.

Oram, L.

Strabolgi, L.

Lloyd of Kilgerran, L.

Parry, L.

Wallace of Coslany, L.

Lockwood, B.

Ponsonby of Shulbrede, L.

Wells-Pestell, L. [Teller.]

Lovell-Davis, L.

Seear, B.

Whaddon, L.

McCluskey, L.

Segal, L.

White, B.

McGregor of Durris, L.

Snow, L.

Winterbottom, L. [Teller.]

Milner of Leeds, L.

Stedman, B.

Wynne-Jones, L.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
9.40 p.m.
Lord ELTON Lord ELTON moved Amendments Nos. 64 to 68:
Page 12, line 6, after ("may") insert ("by order")
Page 12, line 7, leave out from ("determine" to end of line 8.
Page 12, line 9, leave out (" Assembly") and insert ("Secretary of State")
Page 12, line 9, after ("may") insert ("by order")
Page 12, line 20, at end insert—
("(6) No order under this section shall he made unless a draft of it has been laid before and approved by resolution of the House of Commons.").
The noble Lord said: My Lords, I have spoken to Amendments Nos. 64 to 68. If it is agreed by noble Lords opposite, and in the interests of the House, I beg leave to move them enbloc.
Clause 33 [Power of Secretary of State to prevent or require action]:
9.41 p.m.
Baroness ELLES Baroness ELLES moved Amendment No. 68A:
Page 13, line 15, leave out from ("Wales") to ("but") in line 16.
The noble Baroness said: My Lords, this particular Amendment is put down really to help us to understand how far the functions and powers of the Welsh Assembly are going to extend. I know this matter has been discussed very widely, both in the Committee stage of this Bill and also during the Report and Third Reading stages of the Scotland Bill. But the powers and functions of the Welsh Assembly are not on all fours with those of the Scottish Assembly, so that we have to pay a little more attention in this regard.
That is because the Scottish Assembly has now had its activities restricted to the confines of the territory of Scotland, through Amendments which were introduced during the various stages of the
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Scotland Bill. They, of course, will be passing legislation, whereas the Welsh Assembly will be passing not primary legislation but secondary legislation under enabling Acts passed by the United Kingdom Parliament. Therefore what one really wants to find out is that limits are imposed on the Welsh Assembly in exerting their powers and functions so as not to involve them in what might be called cross-Border activities.
If one looks at Clause 33 of the Bill, the Secretary of State is given certain powers to override the functions of the Welsh Assembly in certain specific circumstances. In Clause 33(1)(a) it says quite clearly (and I think this is easy to understand) that if the Assembly proposes to take a perfectly legitimate action—one which is not ultra vires but one within its powers—that action might affect a reserved matter, either directly or indirectly, in which case the Secretary of State would have the right to override that particular action.
There are two conditions attached to this. Although the Secretary of State has the right to do so, it must be "desirable in the public interest". So that he has to take that into account. It is not automatic, the minute the Assembly exercises its powers in a certain direction which affects a reserved matter, that the Secretary of State has to override it. On the contrary, he has to consider whether it is desirable in the public interest to exert that authority. The "public interest" has not been defined, and he might decide that something is in the public interest of the people of Wales, but not in the public interest of the people of the United Kingdom. There is nothing in the Bill which defines the "public interest".
But the definition of a "reserved matter", which is what will be affected by a perfectly legitimate act of the Welsh Assembly, causes my noble friends and myself a certain amount of doubt and we should like clarification. The definition of a "reserved matter" is spelled out in subsection (3) of Clause 33, and paragraph (b) states that it is something on

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which the Assembly has no power to act. That might be a matter of defence, trade, foreign affairs or anything else which is not devolved to the Welsh Assembly. But paragraph (a) uses the words "which concerns Wales".
It is reasonable that the Welsh Assembly will be interested in matters which concern Wales, and they will have to be matters on which the Assembly has no power to act. But I should be grateful if we could be told what happens when a reserved matter, over which the Assembly has no power to act and which concerns Wales, also has side effects or spills over into another part of the United Kingdom. I wonder whether the words,
"whether or not it also concerns another part of the United Kingdom"
have any significance in the definition of a "reserved matter" and, if so, what. If one were to remove those words, what would be the effect on the definition of a "reserved matter"? Would it enable the Welsh Assembly to exercise its functions with respect to certain issues which do not at all concern Wales, and which concern only England?
For example, it might be decided to remove some hospitals from the Borders of Wales, which would involve people who were ill having to use hospitals in Hereford. Perhaps some schools might be closed down and children have to go into a neighbouring county within England. This could happen as a result of a perfectly legitimate decision by the Welsh Assembly, and it could affect another part of the United Kingdom. So I should like to know whether the noble and learned Lord can say what value he attaches to the words in subsection (3), which my Amendment seeks to leave out:
"whether or not it also concerns any other part of the United Kingdom".
Secondly, does he consider that it is clear in the Bill that the Welsh Assembly has no power to take any action, or to exercise any function, which will affect any other part of the United Kingdom, without the Secretary of State being able to exercise his overriding powers under Clause 33, or under any other part of the Bill? Finally, there is one reason why I am more concerned than before; and it is one of the facets of the Bill that the more we discuss, it the more complicated
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and confused the issue becomes, to me if not to anybody else. I know that the Government Front Bench not only have wisdom of their own but have considerable support from Government Departments, which we do not have on this side of the House, so I think I am perfectly justified and entitled to say when I do not understand something. Even when I do I am still entitled to ask for an explanation. I would refer to Hansard of 21st June, column 1333, where the noble Lord, Lord Donaldson of Kingsbridge, in explaining this clause, said:
"The Government do not think it necessary to provide a power of policy override in respect of possible repercussion on what might be termed the English dimension' of a devolved matter. One of the merits of devolution is that it will allow reasonable diversity within the continuing unity of the United Kingdom"—
which of course sounds very fine, but not very effective—
"and the Government do not consider that there should be a power of policy override merely because an action of the Welsh Assembly in a devolved area might be inconvenient for the United Kingdom Government of the day".
I should be grateful for an explanation as to whether those words mean that the Welsh Assembly has powers under the Bill as it stands, with or without the words which I have left out in the Amendment, to introduce subordinate legislation which will have a cross-Border effect. I beg to move.
Lord DAVIES of LEEK: My Lords, I am a bit concerned. There is ambiguity in the language but I am also concerned with the nuances of this. I should like to make it clear that in the history of Wales from the time of the 11th century onwards it has always been when England has been in trouble that the Welsh archers and others have come to England's aid. Villages like the famous one of Senghenydd had to stop the miners volunteering as Sappers for World War 1. There has never been any doubt that when Britain has been in danger the Welsh, like the Scots, have loyally come to the aid of England, and they are devolved subjects. There is nothing wrong with the Welsh, from the military point of view, talking about where their regiments like the South Wales Borderers and others should be stationed. What I am worried about is that the implication seems to be that the Welsh would say, as in the phrase of the noble Prime Minister of the day, "I'm

1131
all right, Jack". That has never been the attitude of the Celts or the Scots. That is the kind of thing I am worried about. If you leave all these words out it might leave the sub-meaning that the Welsh are just thinking of themselves and not of the United Kingdom or of Britain as a whole. I am sure that the noble Baroness was not implying that, and that is why in passing I thought I should make reference to that to get it on the record.
Lord ELTON: My Lords, might I insert a couple of sentences to the noble Lord, Lord Davies of Leek, His analogy is not sound. He is talking of times when Britain has an interest and the Welsh who are British take action for it. But we are now looking at occasions when the interests of the Welsh and the English may differ, and then of course circumstances are different and the analogy does not hold. I do not think this is ground we wish to expatiate on, but I believe there was a genuine misunderstanding on it.
Lord DAVIES of LEEK: My Lords, I do not want to develop it because of the time factor.
The LORD CHANCELLOR: My Lords, it is very interesting that when we considered the Scotland Bill there passed through the House, presumably with the enthusiastic support of the Opposition Front Bench, subsection (3) of Clause 37 of the Scotland Bill which is in identical terms, save for the reference to Scotland rather than Wales, to the subsection which the noble Baroness now is asking your Lordships to amend. So presumably there is some virtue in the language, otherwise the alert and watchful eyes and minds that are occupying the Opposition Front Bench would have been ready in action and speech to amend what they thought undesirable.
As I understand it, the noble Baroness has expressed concern in this somewhat complex field, first as to whether there is any danger of the Welsh Assembly being provided with a general capacity to make subordinate instruments with cross-border effect, similar to that which was conferred on the Scottish Assembly originally in the Scotland Bill and before it was amended, following the advocacy of the noble Viscount, Lord Colville of Culross,
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at the Committee stage of that Bill. But the answer is that the Welsh Assembly has no such general capacity. Indeed, Clause 9 of the Wales Bill which affects the main transfer of functions, advisedly includes the words "as regards Wales", and the effect of subordinate legislation is certainly closely circumscribed by the enabling powers; so I do not see that the Welsh Assembly can add any general capacity to legislate across the border, similar to that which was originally intended to be given to the Scottish Assembly.
On the other matter, the effect of the inclusion of the words,
"whether or not it also concerns any other part of the United Kingdom",
which the noble Baroness finds creates matters of concern, the Government do not think it is necessary to provide a power of policy override in respect of possible repercussion on what might be termed the English dimension of a devolved matter, merely because a decision of the Welsh Assembly in regard to the matters within its powers, such as health or education, might be inconvenient for the United Kingdom Government of the day. It is not, we think, a matter which would entitle the exercise of policy override, which we think should only be kept in reserve in case it is needed to protect matters lying at the root of the continuing unity of the United Kingdom defence, trade, energy, economy and industrial policy and matters of that kind.
So that the formula which has been adopted preserves the important area of matters of the kind which I have mentioned, for which there is no devolved responsibility. The Assembly has no powers in respect of those matters. Nevertheless, in the case of circumstances where there could be repercussive effects on the English dimension from the exercise of the powers of the Assembly in areas like health or education—providing more hospitals or providing teachers or more schools, or whatever the circumstances may be—we do not think that there should be limitation of the use of the override powers to achieve that, and that is why we use the words in the section which concerns Wales,
"the reserve matter is one which concerns Wales whether or not it also concerns any other part of the United Kingdom but with respect to which the Assembly has no power to act".

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I hope that in the light of what I have said, and the retention of similar language in the Scotland Bill, the anxiety which the noble Baroness has expressed may be at any rate somewhat assuaged.
9.59 p.m.
Viscount COLVILLE of CULROSS: My Lords, I should like to spring to the defence of those who considered these words in the Scotland Bill. The noble and learned Lord is, of course, perfectly right in saying that the identical formula appears in the equivalent clauses in the Scotland Bill, but there is a difference. The noble and learned Lord will remember that the Scotland Bill as it originally arrived in this House had a formula in Schedule 2 which enabled the legislative exercise of the Scottish Assembly to cross the border. In that context, I understood the wording of the Scotland Bill, as it stood at that time, to enable subordinate legislation at least arguably to do the same, because it would take its flavour from the primary legislative activity of the Assembly, which expressly was allowed to apply to other parts of the United Kingdom.
The Scotland Bill was then amended and two new paragraphs were put in, paragraph 2 and paragraph 8, which made it abundantly clear that the primary legislative activity in Scotland could no longer cross the border at all; and that was an agreed situation, as the noble and learned Lord has just mentioned. That seemed to me to carry with it the corollary that by the same token neither would the subordinate legislation be able to cross the border, because that equally would be governed by the flavour of the primary activity which had now been constrained.
The reason why in the Wales Bill this gives me cause for concern is that there is no equivalent in this Bill to Schedule 2 to the Scotland Bill. There is no need for it, of course, because there is no primary legislative activity in the Welsh Assembly; we have nothing in terms of the flavour that I have just suggested. It is very true that in Clause 9 of the Wales Bill, as in the equivalent provision of the Scotland Bill, you have got the words "as regards Wales". That is the power to make subordinate instruments. But so you had in the Scotland Bill, and I do not think
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that in itself would necessarily have meant that a subordinate instrument made by the Scottish Secretary would have been bound to be confined, as the Bill reached us, solely to Scotland.
You then have this proposition, that you look to Clause 33 to see what it is that Parliament has said. True, it has said that the subordinate instrument has to concern Wales; that is in Clause 9. But it then, in Clause 33(3), contains two propositions. One is that the matter which is being complained about as being a reserved matter is something that may concern other parts of the United Kingdom as well as Wales, because that is what (a) says; but equally, and the second proposition is, that it is something "with respect to which the Assembly has no power to act". If the Assembly has no power to act in relation to any other part of the United Kingdom at all, you do not need both propositions. You do not need the words in brackets as well as (b), because if the Welsh Assembly has no power to act in respect of any other part of the United Kingdom then (b) covers it by itself.
What then, I wonder, is the point of (b). The only practical danger about it, I think, is this. The noble and learned Lord has said very clearly that there is no intention that the Welsh Assembly should pass subordinate instruments which apply to Herefordshire or indeed Cheshire. But when by mistake they do—or when on purpose they do; it does not matter which—and the Secretary of State decides whether or not he is going to use his override power under Clause 33, is he precluded from doing so by the words in subsection (3)(a)?—because the supposition there is that, although there may be matters with respect to which the Assembly has no power to act in relation to any other part of the United Kingdom, there must, from the logic of paragraph (a), be other matters in relation to which it has power to act for other parts of the United Kingdom. Otherwise, you would not put in both propositions.
All I want to make sure is that there will not be a practical slip-up and that the Secretary of State is going to be advised that, because of the dubiety of the language of the Bill, he is not able to put his foot on an attempt to cross the border. On this

1135
there is no difference between those on this side of the House and the Government; it is simply a matter of drafting. All we want to be sure about is that when we have not the equivalent of Schedule 2 to the Scotland Bill we do have the right effect in the Wales Bill.
The LORD CHANCELLOR: My Lords, I quite see the purpose, and the basis of the concern. I think that the language is all right. It only indicates that if there is some mere repercussive effect, say, of a measure affecting health policy in Wales which could cause nurses in England to say, "We ought to get more money to keep up with the Welsh"—apparently keeping up with the Joneses is always something which everybody aspires to achieve—or if something of that kind were to develop, the contemplation that the policy override should be used by the Secretary of State to deal with that situation is, we think, quite unnecessary. However, in the light of what has been said, I am willing to look at the matter again to be quite sure that we are achieving what apparently both sides of the House want to achieve. Having given that assurance perhaps we can return to this highly complicated matter at a later stage.
Baroness ELLES: My Lords, I am grateful to the noble and learned Lord for that reply, and also to my noble friend Lord Colville of Culross who is very knowledgeable and expert on these matters. This is a matter of great concern and something which we should really try to get right. I should be very grateful if later on the noble and learned Lord will let us know his views on it. On that understanding I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 35 [Welsh Consolidated Fund and Loans Fund]:
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 69:
Page 14, line 35, leave out from beginning to end of line 39 and insert ("if the land in respect of which the order is made or an interest or right in it—

(a) is held by excepted statutory undertakers for the purposes of their undertaking, or

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(b) is held by a local authority (or by a body formed by local authorities) for the purposes of any of the matters listed in Schedule 5 to this Act,

and the undertakers, authority or body have duly objected to the making of the order and have not withdrawn their objection.").
The noble Baroness said: My Lords, this is a technical Amendment, and is primarily concerned with excepted statutory undertakers. Clause 35(2) provides that any power of the Assembly to make or confirm a compulsory purchase order should be subject to Ministerial consent if it concerns land held by an excepted statutory undertaker or by a local authority for the purposes of a function listed in Schedule 5.
The Amendment alters the subsection in three respects. First, it makes it clear that it relates not just to land itself but to interests and rights in land. Secondly, it ensures that Ministerial consent is required in respect of the land of excepted statutory undertakers only where the land is held for the purposes of their undertaking. This is a formula used in other legislation which ensures that recreational land, et cetera is not given any special protection. Thirdly, it ensures that Ministerial consent is not required if the excepted statutory undertaker or local authority affected by the order has not actually made, and failed to withdraw an objection to the order. Thus there will be no need to involve Ministers in uncontroversial orders to which there is no objection. I hope that your Lordships will agree that the proposed Amendment lends greater precision to the entry for compulsory purchase orders. I beg to move.
Schedule 4 [Powers exercisable only with consent of a Minister of the Crown]:
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 70:
Page 61, leave out lines 11 to 16 and insert—

("The Coast Protection Act 1949 (c. 74) sections 5 and 8.

The powers exercisable under subsections (4) (5) where notice of objection is served by excepted statutory undertakers.

The Coast Protection Act 1949 (c. 74) section 17.

The powers exercisable under subsection (4) where the undertakers are excepted statutory undertakers.

The noble Baroness said: My Lords, this Amendment provides that certain coast protection powers, which are devolved to the Assembly in Schedule 2, should be exercisable subject to Ministerial consent where they concern excepted statutory undertakers, such as, British Rail.
Sections 5 and 8 make provision for the resolution of disputes where objections are made to works to be carried out by coast protection authorities. In each case subsection (4) provides for the objection to be determined, and subsection (5) provides for the proposal or scheme to be approved or not approved. These powers are devolved because they are generally of a planning and land use nature. But it is necessary to protect the interests of excepted statutory undertakers where they are the objectors to the works. Hence the Amendment creates a requirement for Ministerial consent.
Section 17 is similar, but deals with the reverse situation where the works are to be carried out by statutory undertakers and where the coast protection authority is the body making the objection. In such cases the Amendment provides that the Assembly's power under subsection (4) to determine the objection should be subject to Ministerial consent where the works are to be carried out by excepted statutory undertakers. The power of direction under subsection (5) is reserved in Schedule 2 because it would be wrong for the Assembly to direct an undertaker which is otherwise responsible to the Government. I beg to move.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 71:
Page 61, line 16, at end insert—

("The New Towns Act 1965 (c. 59) section 10(5).

The power to make an order order respect of land of excepted statutory undertakers.")

The noble Baroness said: My Lords, this is another Amendment in respect of excepted statutory undertakers. Section 10(5) of the New Towns Act 1965 provides for the making of an order declaring that the land of a statutory undertaker should be subject to compulsory acquisition even though it is "operational land". At
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present this power is exercisable jointly by the Secretary of State for Wales, as the planning Minister, and the Minister responsible for the statutory undertaker.
After devolution such an arrangement would be constitutionally inappropriate as it would, in some cases, lead to the Assembly and a Minister taking a decision jointly. The Government's solution is to devolve all the powers in Section 10(5) to the Assembly, but to make them subject to ministerial consent where they concern the land of an excepted statutory undertaker. The Bill already provides in Schedule 2 for devolution, but it fails to provide in Schedule 4 for ministerial consent. This Amendment puts the matter right. I beg to move.
10.11 p.m.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 72:
Page 61, line 30, at end insert—

("The Land Drainage Act 1967 (c. 70) section 23.

The power of approval subsection (2).").

The noble Baroness said: My Lords, this Amendment is related to an earlier Amendment to Schedule 2, Amendment No. 38, which we considered earlier today. It concerns the powers in Section 23 of the Land Drainage Act 1976 to approve arrangements between drainage authorities on the one hand and navigation or conservancy authorities on the other. The powers are devolved in Schedule 2 because the Assembly will be responsible for drainage authorities. They are made subject to Ministerial consent by this Amendment because responsibility for navigation and conservancy authorities will generally be reserved. Both devolved and reserved interests will therefore be represented. I beg to move.
Schedule 5 [Reserved local matters]:
Lord STANLEY of ALDERLEY Lord STANLEY of ALDERLEY had given Notice of his intention to move Amendment No. 73:
Page 61, column 1, line 48, at end insert— ("Commons and allotments").
The noble Lord said: My Lords, I spoke to this Amendment earlier on in the Report stage. I therefore do not move it.
Clause 43 [Payments into Welsh Consolidated Fund out of monies provided by Parliament]:
10.13 p.m.
Lord CULLEN of ASHBOURNE Lord CULLEN of ASHBOURNE moved Amendment No. 74:
Page 17, line 16, at end insert—
("( ) The sums paid under subsection (1) above for the purposes of section 57(1) below shall be specified as such.").
The noble Lord said: My Lords, when we debated the financial provisions during the Committee stage it was three o'clock in the morning on 22nd June, when we naturally did not have anything approaching a full House. As we believe that the financial provisions, and in particular the rate support grant, are extremely important, I want as briefly as possible to give your Lordships arguments why the rate support grant should be specified.
The present position is that local authorities in Wales negotiate their rate support grant with the Secretary of State. Under the present Bill it will he for the Assembly to carry out these negotiations in place of the Secretary of State. Having added up the requirements of the various local authorities, the Assembly will come to a total figure. This total figure will be a very large component part of the block grant which the Secretary of State pays to the Welsh Assembly. The block grant has, of course, to he voted by Parliament. What I fail to see is how the Members of Parliament can judge whether the amount of the block grant is either too high or too low, if they are unaware of how it has been calculated. I do not suggest that it would be necessary to specify each of the component parts of the block grant, as many may be relatively insignificant. But to specify the rate support grant, which I understand will amount to over 50 per cent. of the block grant, seems to us to he essential.
When the noble Lord, Lord Harris of Greenwich, replied to the speech of my noble friend Lord Gowrie about the financial provisions, he made four points during his rejection of an Amendment requiring that the rate support grant should be specified and distributed: first, that the responsibility for payment of the rate support grant is transferred to the
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Assembly. I agree that it is, and I trust that they will pay it all out.
Secondly, that rate support grant is only one of the forms of central Government spending. Again I agree, but it does amount to over 50 per cent. of the block fund. It was £463 million in 1976, and will presumably be considerably higher now. Thirdly, it would be wrong to specify rate support grant alone. Why? when it is far the largest component. If the Government think that, why not specify other significant components as well? Fourthly, it would turn payment of the rate support grant into some kind of special charge upon the fund. But since the calculation of the amount of the block grant was predominantly based on the figure for rate support grant, would not that be eminently reasonable?
I fully realise that the financial provisions are central to the thinking behind the Bill, and it is in no way our intention to attempt to wreck these provisions. What we object to is that the rate support grant is concealed in the block grant. Not only is it concealed from the local authorities but also from Parliament, and presumably from the Assembly as well. If there is some really good reason for this, let the Government tell us what it is, but I must say, with respect, that the reasons so far advanced by the noble Lord, Lord Harris, fail to convince us.
Since the Committee stage the noble Lord, Lord Harris, kindly wrote to my noble friend Lord Gowrie, and I should like to quote from that letter. It was an extremely clear explanation and I think it would be beneficial to have it on the record:
"Once the block fund is fixed the Assembly, on whom will rest the statutory duty of fixing the rate support grant, will have to determine the total to be paid out and in doing so will have to follow the procedures for consultations with the local authorities, which are statutorily laid down. This determination involves two variables, the total of relevant local expenditure and the proportion of this to be met by way of grant. This proportion may in the future rise or fall from year to year as it has done in the past; but should a fall occur in any year it would not, in our view, be right to regard this as 'withholding' rate support grant or as a form of back-door taxation. The Assembly would merely be exercising in one particular way the important, and essential, discretion vested in them to re-order priorities in devolved spending: without the ability to vary the percentage figure for rate support grant the devolution of powers in relation to local finance

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and the administration of the main local authority spending services would be very seriously restricted."
We do not wish to restrict the Assembly from using proper discretion. On the other hand, in these days when open government enjoys popular acclaim, there would seem to be a great deal in favour of disclosing rather than hiding the rate support grant. One of the reasons is a matter to which I have not yet referred but with which the noble Lord, Lord Harris, disagreed in his letter to my noble friend: that is, the matter of the discretion allowed to the Assembly to distribute the block grant as it thinks fit.
Concern has been expressed in the debates both on this Bill and on the Scotland Bill that the Assembly could use this discretion in a way that, by making only a partial distribution of the rate support grant, would more or less force local authorities to increase their rates to cover expenditure to which they were already committed. Personally, I think it unlikely that the Assembly would under-distribute unless they had a very good reason. But if they had such a reason would it not be very much better if they announced it so that the Welsh people could be aware of their sagacity and prudence? If the rate support grant is not specified nobody will know whether the Assembly is over- or under-distributing, or why they are so doing.
Surely it is important that the Assembly should be seen by all concerned to be acting in the responsible manner that the Government are so confident they will. I hope the Government will think again, and I feel sufficiently optimistic to have almost persuaded myself that they will. We are, I repeat, in no way attempting to wreck the financial provisions: in fact we are not altering them at all. What we visualise is that failure to specify the figure of rate support grant will cause difficulty and conflict.
Lord HARRIS of GREENWICH: My Lords, I rejoiced to hear the noble Lord say he did not want to wreck the financial provisions of the Bill. I am bound to say that despite any feeling that I should recommend the House to accept the Amendment, following on from what the
1142
noble Lord said, I fear I cannot do so for reasons which I will endeavour to persuade noble Lords are reasonably based. Perhaps I should give an indication at the outset of what the Bill is proposing so far as rate support grant is concerned.
At the present time a single sum is determined as rate support grant for local authorities in England and Wales. Under the Bill there will be two determinations—one to be made by the Secretary of State for the Environment for England, and one to be made by the Assembly for Wales. The Bill confers on the Assembly all the necessary powers under existing statute for determining the rate support grant after due consultation with the local authority associations; and these powers will not be available to Ministers so far as rate support grant for Welsh local authorities is concerned. The Assembly will also be responsible for distributing the grant.
The Government consider it entirely right that the Assembly should take over responsibility for rate support grant. They will exercise powers of supervision and guidance over most of the existing local authority functions, including powers to pay specific grants when applicable. Rate support grant is an integral grant in support of local revenues which does not attach to particular local authority services, whether within the ambit of the Assembly or of the Government.
The Earl of GOWRIE: Would the noble Lord permit me to intervene, my Lords?
Lord HARRIS of GREENWICH: I have a long speech to make, my Lords. I do not mind giving way to the noble Earl, if he wishes me to do so, but I must tell him that I have a long speech to make on a substantial matter.
The Earl of GOWRIE: I rise only on a point of information, my Lords. He said the Assembly was to be responsible for determining the grant. May I ask what he meant by that?
Lord HARRIS of GREENWICH: My Lords, I do not want to make a debating point with the noble Earl at this hour, and I hope I made this clear in my letter to him. I did not know there was any

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dispute about the meaning of the word "determining"; it means deciding. That is what the Assembly will do; they will have a discussion with the local authority associations and then decide what it will be. That is what determination means in this particular situation.
The Amendment would not of course affect the devolution of responsibility for determination of rate support grant, nor for its distribution to individual local authorities. It would leave these functions with the Assembly. It would merely ensure that every time the Secretary of State paid an instalment of the block fund to the Assembly he would have to indicate how much of it was referable to rate support grant. That may not be what noble Lords opposite intend by their Amendment, but that is what the effect of what they have tabled would be.
In practice the block grant will be paid over to the Assembly in instalments, each available for the whole range of payments which it will fall to the Assembly to make. The timing of payments of rate support grant to local authorities will be a matter between the Assembly and the local authorities—instalments are paid over at weekly intervals at present. It may well be, subject to discussions with the Assembly, that the block fund instalments will also be paid at weekly intervals; but, even so, the Secretary of State will have no direct concern with how much of any particular block fund payment is passed on in this fashion. The Assembly will be committed to pay over the whole of whatever it has undertaken to pay over to the local authorities, and I have no doubt that the local authorities will make a very substantial clamour indeed if they do not receive the payments to which they are entitled. It is difficult to see, therefore, what practical effect the Amendment would have. I do not know what was in the minds of noble Lords opposite when they framed it, but I am trying to explain to the House what the effect of this would be.
The question raised by the noble Lord, Lord Cullen of Ashbourne, as to the earmarking of a sum within the block fund as the amount intended for rate support grant, is one of very substantial practical difficulty. It would not, in the Government's view, be possible to identify part
1144
of the block fund in. this way. Assumptions may be made when the block fund is being worked out as to the needs of rate support grant or any other major form of expenditure by the Assembly, but such assumptions would cease to have ally validity once the total amount was fixed. This is, indeed, what happens when the rate support grant itself is determined. Assumptions have to be made about the pattern of local government expenditure, but once the total is fixed the sums paid over are in no way earmarked for specific purposes.
Even if the Government wished to earmark part of the block fund for passing on as rate support grant, how could they reasonably do this? They will no longer have responsibility for the main spending services of local authorities in Wales. That will not be a matter for Ministers here. They will have no means of conducting the necessary dialogue with the local authority associations because, as I have pointed out, this is a matter for the Assembly. It will not be a matter for Ministers here. These discussions with the local authority associations will take place between the Welsh local authorities and the Assembly. It is not a matter for Ministers here. In this situation I am not clear how a Minister here could form a view on this matter. I am bound to say, with great respect to the noble Lord, Lord Cullen of Ashbourne, that he did not give any indication when he moved this Amendment as to how this would be achieved.
It would be quite wrong for the Government to pre-empt the discussions between the Assembly and the local authorities and to deny the local authorities the rights of consultation which they have enjoyed. The Government consider that whatever assumptions it may be necessary to make when the block fund is settled, the amount of the statutory rate support grant settlement must be left to the discretion of the Assembly. I think that there will be very strong domestic political pressures within Wales to ensure that the Assembly acts in a reasonable way and comes to an equitable conclusion.
Before concluding, I might just raise one other question which I am sure noble Lords opposite will wish to consider. That is the problem of difficulty of timing

1145
as far as their Amendment is concerned. The total of rate support grant will be fixed by the Assembly well before the beginning of the financial year, whereas the payments of block fund to be made by the Secretary of State under Clause 43 will be made after the year has begun. Therefore, by that time all he could do would be to identify payments referable to a total of rate support grant fixed by the Assembly, and it would be too late for his identifications to affect the total to be paid to local authorities. This would have been committed by an order made some time previously by the Assembly.
I have gone into this matter in some detail because, as the noble Lord, Lord Cullen of Ashbourne, indicated, the financial provisions of the Bill are of substantial importance, and no part of them is of more importance than that which deals with the rate support grant. I have endeavoured to explain why, whatever may have been the intentions of the noble Lords when they framed the Amendment, I do not believe that it has
the effect that they intend. I very much hope that they will be able to reflect on the points I have made in this inevitably rather extensive speech, in which I have tried to put the basis of our case.
Lord CULLEN of ASHBOURNE: My Lords, I am grateful to the noble Lord for having taken so much trouble to explain the Government's view on this matter. I am rather disappointed that he is not prepared to accept the Amendment. We on this side of the Chamber have been subjected to considerable criticism regarding our attitude towards the Assembly, and so I took great pains to try to convince your Lordships that the whole purpose of the Amendment is to avoid potential conflict between the local authorities and the Assembly. I still feel the same way about this.
10.32 p.m.
On Question, Whether the said Amendment (No. 74) shall be agreed to?
Their Lordships divided: Contents, 61; Not-Contents, 35.

CONTENTS

Alexander of Tunis, E.

Gainford, L.

Newall, L.

Amherst of Hackney, L.

Glenkinglas, L.

Rankeillour, L.

Atholl, D.

Gowrie, E.

Redesdale, L.

Belstead, L.

Gridley, L.

Rochdale, V.

Berkeley, B.

Harvington, L.

Romney, E.

Brabazon of Tara, L.

Henley, L.

Sandford, L.

Burton, L.

Hunt of Fawley, L.

Sandys, L.

Campbell of Croy, L.

Killearn, L.

Savile, L.

Carr of Hadley, L.

Lauderdale, E.

Sharples, B.

Colville of Culross, V.

Long, V.

Skelmersdale, L.

Cork and Orrery, E.

Lyell, L.

Stanley of Alderley, L.

Cottesloe, L.

Margadale, L.

Swansea, L.

Crathorne, L.

Middleton, L.

Tweeddale, M.

Cullen of Ashbourne, L.

Monckton of Brenchley, V.

Tweedsmuir, L.

De La Warr, E.

Monson, L.

Vernon, L.

Denham, L. [Teller.]

Montgomery of Alamein, V.

Vickers, B.

Drumalbyn, L.

Morris, L.

Vivian, L.

Elles, B.

Mottistone, L.

Ward of North Tyneside, B

Elton, L.

Mowbray and Stourton, L. [Teller]

Westbury, L.

Faithfull, B.

Wilson of Langside, L.

Fortescue, E.

Moyne, L.

NOT-CONTENTS

Birk, B.

Kirkhill, L.

Ponsonby of Shulbrede, L.

Boston of Faversham, L.

Leonard, L.

Stedman, B.

Collison, L.

Llewelyn-Davies of Hastoe, B.

Stewart of Alvechurch, B.

David, B.

Lockwood, B.

Stone, L.

Davies of Leek, L.

Lovell-Davis, L.

Strabolgi, L. [Teller.]

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

McCluskey, L.

Wallace of Coslany, L.

Fisher of Camden, L.

Milner of Leeds, L.

Wells-Pestell, L. [Teller.]

Gaitskell, B.

Mishcon, L.

Whaddon, L.

Gregson, L.

Morris of Borth-y-Gest, L.

White, B.

Harris of Greenwich, L.

Morris of Kenwood, L.

Wigg, L.

Hatch of Lusby, L.

Oram, L.

Winterbottom, L.

Howie of Troon, L.

Parry, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
Clause 47 [Limitation of capital expenditure. financed by borrowing]:
10.38 p.m.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 75:
Page 19, line 24, leave out ("National Water Development") and insert ("Water").
The noble Baroness said: My Lords, perhaps I could explain Amendments Nos. 75 and 77 together. Both take account of the fact that the Welsh National Water Development Authority, to which the Bill presently refers, was, at the beginning of April, renamed the Welsh Water Authority. There are other similar Amendments later in the Bill: to Schedule 7, No. 81, and to Clause 61, Nos. 84 and 85; but at the moment I beg to move Amendment No. 75.
Lord SKELMERSDALE: My Lords, since I raised this point at Committee stage, it falls to me to thank the Government very much indeed for following through their own legislation, which by order, as the noble Baroness has said, changed the name on 1st April from the Welsh National Water Development Authority to the Welsh Water Authority. I am very grateful that they have seen sense.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 76:
Page 19, line 37, after ("1976)") insert ("for a district which is wholly in Wales or is within the area of the Welsh Water Authority and partly").
The noble Baroness said: My Lords, this Amendment takes account of the fact that the Welsh Assembly will be responsible for the borrowing not only of internal drainage boards entirely in Wales but also of the Lower Wye Internal Drainage Board, which, although wholly in the Welsh Water Authority's area, is partly in England. It follows from this that borrowing by the Lower Wye Board should count to the aggregate limit under Clause 47. We shall be coming more generally to the question of internal drainage boards straddling the Border when we reach Clause 61. The Government have tabled Amendments to provide
1148
for the practical allocation of ministerial responsibilities. I beg to move.
On Question, Amendment agreed to.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 77:
Page 19, line 40, leave out ("National Water Development") and insert ("Water")
The noble Baroness said: My Lords, I spoke to this Amendment with Amendment No. 75. 1 beg to move.
On Question, Amendment agreed to.
Clause 48 [Welsh Comptroller and Auditor General]:
[Amendment No. 78 not moved.]
Lord MONSON Lord MONSON moved Amendment No. 79:
Before Clause 57 insert the following new clause:
("Speaker's Conference
.—(1) For the purposes of this Act there may be appointed not less than six, nor more than twelve months after the first occasion on which the Assembly meets a Speaker's Conference, being a conference convened at the request of the Prime Minister and presided over by the Speaker of the House of Commons with the function of considering and making recommendations to the House of Commons relating to the appropriate number of Members of the House representing Welsh constituencies after the enactment of this Act.
(2) Those participating in the Conference shall be Members of the House of Commons invited to do so by the Speaker, who shall secure that the balance of parties in the House of Commons is reflected, so far as practicable, among the participants in the Conference.").
The noble Lord said: My Lords, I seem to be fated to move these important and contentious Amendments late at night when everyone has either gone home or is itching to get home. The fact that this may give me the opportunity to watch tomorrow afternoon on television that splendid unseeded player Mr. Tom Okker play the men's singles semi-final at Wimbledon is small consolation, because in consequence this unseeded Amendment may not reach the final draft of this Bill as it eventually emerges from your Lordships' House.
The Amendment is identical to one moved by various noble Lords on the Opposition Front Bench, including the noble Lord, Lord Elton, during the deliberations on the Scotland Bill (and

1149
subsequently written into the Bill, having been carried by 9 votes) except that the word "Welsh" towards the end of subsection (1) replaces the word "Scottish". I did not support that Amendment because I, with a great many other noble Lords, felt that the case for a reduction in the Scottish representation to English levels, or almost to English levels, in the event of the Scottish Assembly with legislative powers coming into being, was so overwhelming and clear-cut that a Speaker's Conference would merely delay the inevitable and confuse the issue.
However, in the case of the Welsh Assembly the arguments are rather more finely balanced. Wales is over-represented compared with England by about 15 per cent. or 16 per cent. There does not at the present time (there may have been earlier) seem to he any good reason for this. It is not as if Wales were remote from the centre of things or the seats of power. Compared with Devon, Cornwall, Cumbria or the North-East of England, Wales is particularly well-favoured. It is possible to reach South Wales from London by car along the M4 in less than two hours. Similarly, by the 125 mph high speed train.
There was a suggestion the other day —I think it may have been in this House—that the third London airport he sited not at Stansted or Maplin but on the sands near Swansea, this scheme being made economically viable by virtue of the current high speed connections. It is not fanciful to suppose that within a relatively short space of time the well-known golden triangle within which most of the wealth of Europe is supposed to reside, Birmingham—Dortmund—Lyons, may become the golden tetrahedron with its westernmost point at Cardiff or even Swansea.
Obviously the Welsh Assembly will not be coming into being (in the event of a "Yes" vote in the referendum) on the conventional grounds of decentralisation; on the argument that Wales is an economically depressed area remote from the centre of things. Apart from anything else, Wales cannot form a self-contained economic unit, given the poor communications between north and south of the Principality.
On the Second Reading of the Scotland
1150
Bill, the noble Lord, Lord Glenamara—I hope he will not mind my referring to him although he is not in his seat—declared himself to be a keen supporter of devolution. By "devolution" he seemed to imply decentralisation, and this impression was reinforced by his comparing the proposed Welsh Assembly with "a large local authority", during the Committee stage. In that sense alone, the sense of decentralisation, many of us who do not care for the Scotland and Wales Bills, as they have evolved, would agree with him. However, it became clear during our deliberations in Committee, and indeed earlier this afternoon, that a far grander rôle—or at any rate the illusion of a far grander rÔle—is planned for the Assembly than was at first imagined by most of us.
In defending in Committee the granting of absolute privilege to the Assembly—a unique privilege for a non-legislative body—the noble and learned Lord the Lord Chancellor referred to the prospective Assembly as the national Assembly of Wales, the accent being on the word "national". He did so again this afternoon when defending the right of the Assembly to set up committees dealing with the Common Market. The noble Lord, Lord Ponsonby of Shulbrede, also defended this ability (which would be given if the Amendment had not been carried) and other areas outside the functions to be devolved under the Bill as it stands.
This sop to nationalist sentiment (as opposed to regional sentiment) is likely to backfire because, as the noble and learned Lord the Lord Chancellor went on to point out, the Assembly will not be able to do anything about the wide-ranging subjects that it is going to be empowered to discuss. When the nationalists—and here I should interject that I have nothing against nationalism as such: it is a perfectly respectable philosophy although I do not agree with it—realise how little of substance lies behind the impressive façade which is being erected to keep them quiet for the time being, I suggest that there will be a backlash. In order to cope with this, the Government of the day will, little by little, have to concede more and more to pacify nationalist feelings. For that reason, there is at any rate a case for a Speaker's Conference, anticipating this development

1151
in advance, to review Welsh representation accordingly. The Conference may well, after due deliberation, recommend no change in Welsh representation at Westminster. If so, one would accept their verdict without demur. But the matter ought at least to be examined, I submit. From the point of view of time, trouble and expense, how much more convenient if a single Speaker's Conference were to examine Scottish and Welsh representation at the same time. I beg to move.
10.49 p.m.
Lord WIGG: My Lords, my approach to this problem is almost identical with Lord Monson's. He and I have been associated through the passage of the Scotland Bill. On this issue my opposition is like his: we are fearful of the political consequences of the passing of these two measures. I believe that the Scotland Bill was introduced by the Government in a somewhat panic atmosphere because they were fearful of the growlings of Scottish nationalism; and this Bill is a parallel.
For my part, I am fearful of another factor. I do not believe that one can throw bones, if I may say so, to the Scottish and Welsh "growlers" and imagine that the English bulldog is going to stay at the back of the kennel and that there will be no noise from him. I have always believed that once there is an Assembly in Scotland and it becomes realised by the English electorate just what the Government have done, not only as regards Scotland but as regards the reverse effects upon England, there will rise a feeling which has remained quiescent in England for some three hundred years. It could take a very unpleasant form.
I would not have chosen, in relation to Scotland, the formula of a Speaker's Conference. I observe that in another place Mr. Pym, the Conservative spokesman there, endeavoured without success to establish a Speaker's Conference. And when the Scotland Bill was going through I certainly wanted to limit the number of Members of Parliament who would be returned to Westminster, because once the Scottish Assembly was established and it became perfectly clear that power was being transferred from Westminster to Scotland, the question
1152
was bound to arise of the continuance of the over-representation of Scottish political power at Westminster. It will be called into question. What the answer will be I do not know.
I believe that the same thing is going to happen in Wales. We have made various efforts to amend the Scotland Bill in a logical, reasonable sort of way, but it was a decision of the House that the formula embraced in the Amendment moved by my noble friend Lord Monson should be accepted. They wanted a Speaker's Conference. All I would say is that if a Speaker's Conference is the right technique, it was certainly not one which aroused great enthusiasm in my mind—I should much have preferred other and more straightforward ways. But if the decision of the House is to tackle the problem on the basis of the number of Scottish Members of Parliament at Westminster, then what is good enough for Scotland ought to be good enough for Wales; and ultimately the numbers of Members from Scotland and from Wales must have an effect on the numbers which come from England.
So if the Conservative Party asked the House to approve—and the House did—the decision that there should be a Speaker's Conference for Scotland, then I say it is perfectly logical, even at this late hour, to ask the House to agree that the same formula should be applied to Wales. I can understand the logic of the Government's position—that having resisted it on Scotland, they will want to resist it on Wales. But the Conservative Party, having in another place put forward the technique of a Speaker's Conference, and having successfully asked the House to approve, naturally I had thought they would put down some Amendment. When I found they had not done so, I thought perhaps it was due to an oversight. After all, I have from time to time found oversights in the Government's thinking, and so perhaps it was the turn of the Opposition. Therefore, when the noble Lord, Lord Monson, put down his Amendment, in logic I put my name to it. I anticipate the opposition of the Government, but I do look forward with complete confidence to support—not very numerous it may seem—from the Benches opposite, to do for Wales what they have done for Scotland.
Lord SKELMERSDALE: My Lords, I would take issue with the noble Lord, Lord Wigg, on several points. Although I do not speak for my Front Bench, on my part at least this is not an oversight. The noble Lord, Lord Wigg, said, if I may quote his words:
"what is good enough for Scotland ought to be good enough for Wales."
I would entirely disagree with that. The Government have told us, and we have perhaps finally been convinced, that the Scottish Assembly is to be a legislative body, whereas the Welsh Assembly has no legislative powers at all. I would say for this reason, and for this reason only, that what is good enough for Scotland is completely and utterly different for Wales. Having said that, I would say for myself that 1 supported this move for Scotland, but for this reason I have no intention of supporting this move for Wales.
10.55 p.m.
Lord ELTON: My Lords, one is always grateful for the assisting hand of the noble Lord, Lord Wigg, extended on sometimes surprising occasions. However, it was not by accident that my noble friends and I had not tabled an Amendment of such significance as this, nor by oversight. It is a subject on which I personally take a deep interest, and I supported the equivalent Amendment to the Scotland Bill. The proposal in this case rests upon two propositions. The first is that the representation of the Welsh in Parliament is unfair, and the second is that something must be done about it; and I suppose there is a third, that what should be done about it is a Speaker's Conference.
The assumption is made that the cases of Scotland and Wales are similar. My noble friend Lord Skelmersdale has already given the lie to part of this proposition, because, of course, the Assemblies in Scotland and in Wales are avowedly—and how frequently we hear it avowed—not the same in function or in construction. But there are other considerations which affect the pressure which there might be for such a solution. The average electorate in England is 66,056, and in Scotland it is only 53,336; there is a discrepancy of 12,000 between the two. In Wales, however, the average is 57,088, which is a discrepancy of under 9,000. There is a considerable numerical
1154
difference here. In the matter of geographical size, one has to consider the importance of obtaining constituencies which are manageable to Members. In certain instances in Wales, this is a difficult thing to achieve if you are going to maintain the balance, and there is always the consideration of balancing the North and the South.
If we are to go back to the origins of this debate, we have to look at the Kilbrandon Report where we find that, whereas there is a need, in the view of the Kilbrandon Committee, for a balancing effect in the number of representatives in the United Kingdom Parliament, where the national Parliament is an executive affair, it is upon the executive nature of that Parliament or assembly that the argument rests, and it is not proposed that there should be a balancing act performed, if I may so phrase it, where there is no legislative function.
The Division in the House of Lords to which the noble Lord, Lord Wigg, referred, and in which I voted, pronounced in the much more powerful case of Scotland—much more powerful in the sense that there was a much stronger argument in favour of a Speaker's Conference, because the arguments for a redress of the balance were more powerful—by only 9 votes in a considerable turn-out of, I believe, 93 to 102. We are also speaking in this Bill of an Amendment that was debated at some length in a very similar form—this is, of course, true of Scotland as well—in another place. But we got over that in our case by removing an objection to the Speaker's Conference, which, it was suggested in the Commons, would have delayed the onset of devolution by an appreciable time.
There is rarely ground which I share with noble Lords on the other side of the House in this sphere, but I am very sensitive to their view on this matter—not yet expressed, but which I anticipate to be expressed—that, to the Welsh, an English insistence that this procedure should be resorted to, with the avowed intention that the Welsh representation should be reduced, when the reduction would in any case be very small and when the arguments in favour of it are less powerful than in the case of Scotland, really would look like the English having it in for the Welsh.

1155
It may not be a good thing to temper one's principles in the light of what people are going to think of them. However, where we are examining a proposition upon which the balance is so narrow and so delicate, I find this an argument more persuasive on this occasion than on most. Moreover, I am convinced that if it becomes clear during the operations of the Welsh Assembly as it feels its strength and flexes its muscles that there is a need for a Speaker's Conference, by that time there will be a Speaker's Conference in session on the matter of the Scottish representation in Westminster, and it is scarcely likely that what the noble Lord, Lord Wigg, and the noble Lord, Lord Monson, seek to achieve by this Amendment will not in any case happen in the course of events.
For myself, I would rather like to see what remains as the real burden of the Members of Parliament for Wales after a part of it has been carried on the shoulders of the Welsh Assembly. I would not presume to instruct my noble friends on a Whip to vote on this very delicately balanced matter, but certainly I would not commend them to vote for this Amendment, and I should not myself do so either.
The LORD CHANCELLOR: My Lords, I have been happy to hear some supportive statements from both the noble Lord, Lord Skelmersdale, and the noble Lord, Lord Elton, underlining first of all the very great difference between the provisions for Wales and the provisions for Scotland and the effect of that difference upon the functions and duties of Members of Parliament.
The Welsh Assembly is going to have only executive power. It will have no powers to introduce primary legislation affecting the matters about which it has executive responsibility and authority, and I respectfully submit that that is a difference of very great importance in this field. Then, there has been pointed out by the noble Lord, Lord Elton, the minimal effect of any suggested change, and it would indeed be thought in Wales to be a curious piece of un-English spite if this were persisted in and that we would find an extremely unattractive accusation to have to make especially against my noble friend Lord Wigg, for instance,
1156
who is wholly innocent of any sense of spite, I am quite sure, in all matters.
The fact about the powers of the Welsh Members of Parliament will be that they will be largely as substantial as they are now. The primary legislation in relation to the matters for which executive responsibility is to be devolved to the Welsh Assembly will continue to be their business in Westminster, and then, so far as the wide range of matters essential to the unity of the United Kingdom is concerned, they will remain the sole responsibility of Parliament. That responsibility will continue to be exercised in Parliament and will not be diminished.
I seriously submit that there is no good argument for seeking a reduction in the representation of the essential interests of those who happen to live in Wales on the achievement of devolution. We have been over this ground before many times. I thought myself that the speech of my noble and learned friend Lord McCluskey was devastating on this issue so far as it related to Scotland. However, I must not, on this occasion at any rate, reopen the Scottish question. So far as the Welsh question is concerned, I submit that the case has not been made out at all and, indeed, persistence in this Amendment would be somewhat unattractive.
Lord WIGG: Just one point: I am sure that the noble and learned Lord Chancellor did it by accident, but concerning the Amendment he referred to a "reduction". It does not talk about a reduction, it talks about "the appropriate number". It might even recommend an increase.
The LORD CHANCELLOR: If I really thought the noble Lord thought that—ah, no, no, no! That is not his line at all.
11.4 p.m.
Lord MONSON: My Lords, the noble and learned Lord the Lord Chancellor said that after devolution the powers of the Welsh Members at Westminster will be largely as substantial as they are now. He did not say that they would be wholly as substantial, and that, of course, lends weight to our contention. As my noble friend Lord Wigg pointed out, the Amendment does not provide for a reduction in Welsh Members, and in

1157
moving the Amendment I said that we would accept it if the Speaker's Conference were to recommend no change at all. We should think that quite reasonable.
I am most disappointed not to have had any support from the Conservative Benches in view of their attitude in regard to the Scotland Bill. The noble Lord, Lord Skelmersdale, and the noble Lord, Lord Elton, both made reasonable cases for leaving Welsh representation as it is, but they did not make decisive cases for doing so and therefore they made no case at all for rejecting this Amendment, which merely provides for the setting up of a Conference to examine the matter impartially and dispassionately.
A certain body of opinion in Scotland, including the Scotsman newspaper, has charged this House with anti-Scots bias in virtue of the very large number of Amendments made by your Lordships to the Scotland Bill during its passage through this House. Naturally, we strongly repudiate this charge, yet it becomes far more difficult to counter if the House in general, and the Conservative Party in particular, appear to be treating the Wales Bill much more tenderly than the Scotland Bill. But in view of the almost total lack of support I must beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendment No. 80 not moved.]
Lord STRABOLGI: My Lords, I beg to move that further consideration on Report be now adjourned.
Moved accordingly, and, on Question, Motion agreed to.

STATUTE LAW (REPEALS) BILL [H.L.]
Reported from the Joint Committee with Amendments, and recommitted to a Committee of the Whole House; Bill to be printed as amended.
  HONG KONG AND ILO CONVENTIONS
  HONG KONG AND ILO CONVENTIONS
  HONG KONG: MEDICAL AND HEALTH SERVICES
  HONG KONG: MEDICAL AND HEALTH SERVICES
  WALVIS BAY: FUTURE STATUS
  WALVIS BAY: FUTURE STATUS
  ROYAL COMMISSION ON STANDARDS OF CONDUCT IN PUBLIC LIFE: SCOTLAND
  ROYAL COMMISSION ON STANDARDS OF CONDUCT IN PUBLIC LIFE: SCOTLAND