Sitting of 10 July 1978

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

  Industrial Development Assistance
  Mr. Silvesterasked the Secretary of State for Industry what study he has made of the overlap of powers in bodies involved in the provision of assistance for industrial development.
  The Minister of State, Department of Industry (Mr. Alan Williams): I keep under continuous review all aspects of assistance to industry, including the complementary nature of the power of the Government and of other agencies.
  Mr. Silvester: Would it interest the Minister to know that I have counted at least two dozen committees, bodies and departments on the provision of industrial health in the Greater Manchester area alone? Is it not time for the pruning knife?
  Mr. Williams: I congratulate the hon. Gentleman on his arithmetic but not on his conclusions. I am afraid that most of these bodies have specific remits, and, as he will discover, industry normally has no great difficulty in establishing the appropriate source of finance for its requirements. All companies have to do is to approach the Department's regional offices, and we always aim them in the direction of the type of assistance relevant to their operations.
  Mr. Litterick: Is the Minister aware that more than half of all the money that goes in financial assistance to industry for use in research and development is devoted to research and development into armaments? Does he agree that this has a debilitating influence on the ability of British industry to continue to compete in civil and commercial markets?
  Mr. Speaker: Order. The hon. Gentleman has widened the Question. Question No. 1 relates to the overlap of powers. There are other Questions on which the hon. Gentleman can put his supplementary question.

  Lucas Aerospace
  Mr. Rookerasked the Secretary of State for Industry what representations he received from trade unions during his consultations before his recent announcement of financial assistance to Lucas Aerospace.
  The Minister of State, Department of Industry (Mr. Gerald Kaufman): Discussions with the trade unions on the situation at Lucas Aerospace have taken place on a number of occasions recently.
  Mr. Rooker: Will the Minister offer congratulations to the workers in Lucas Aerospace on the breakthrough they achieved last week in the discussions with the company on the corporate plan? Will he now seek to honour the commitment he gave to Labour Members to examine any proposal from the confederation now that that body has called for an inquiry into the role of the Department of Industry in the last two years when it has done nothing to help these workers?
  Mr. Kaufman: I am grateful for my hon. Friend's warm statement since it was partly through my initiative that lay representatives took part in the meeting on 29th June. Therefore, I hope that my hon. Friend will reconsider his latter rather uncharacteristically harsh words. Having said that, I wish to emphasise that if the confederation comes forward with plans or asks for a tripartite meeting, its proposals will be considered. Indeed, I have already told the confederation that, if it wants a tripartite meeting, the Government will convene it.
  Mr. Pavitt: In the representations made by Lucas workers in my area, will my right hon. Friend bear in mind the inner city problems that beset Harlesden, and also remember that the kidney machines made by Lucas are also made in my area and that there is the possibility of an extension along those lines for extra work?
  Mr. Kaufman: My hon. Friend, with his great knowledge of these matters, draws attention to the fact that Lucas already makes kidney machines—something that is being demanded by the combine committee as a development which has not so far taken place. I shall take account of my hon. Friend's remarks.

  Machine Tool Industry
  Mr. Litterickasked the Secretary of State for Industry what steps he is taking to prevent the further decline of the British machine tool industry.
  Mr. Alan Williams: Under the machine tool industry scheme, my Department has made some £30 million available to the industry to promote the development of new products and the modernisation and rationalisation of production facilities. Assistance for the development of new products is also available under the product and process development scheme and through the Mechanical Engineering and Machine Tools Requirements Board. In addition, we are working actively with the machine tools EDC to ensure the achievement of its industrial strategy objectives for the sector.
  Mr. Litterick: I am grateful for that answer, but is my right hon. Friend aware that the level of import penetration in the British machine tool market has now reached 48 per cent. and is apparently still growing? Is he also aware that, in addition to the recent devastating announcement of 700 redundancies at Herbert's, we are informed that the training school is being closed, which represents a retreat by that crucial organisation from the business of creating the next generation of skilled labour which is so essential to the survival of the British machine tool industry?
  Mr. Williams: I fully appreciate my hon. Friend's long-standing concern for the health of this industry. My hon. Friend will know that recently an additional £10 million in funds has been raised in respect of the Alfred Herbert company. Most of those funds are to be devoted to the modernisation, rationalisation and development of new products. One of the difficulties with Edgwick is that it is a plant with a rather
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  low technology compared with the rest of the industry.
  On the general question of import penetration, we put the figure at about 46 per cent. Some of this results from international specialisation through which British firms enter into arrangements with overseas companies so that they complement each other's product range, but the industry is making a surplus on its payments.
  Mr. Ridsdale: Will the Minister look into the fact that the Employment Protection Act is preventing some of the smaller firms expanding in order to achieve delivery? As evidence of this, will he bear in mind that several of the machine tool exhibitors at the industrial exhibition in Korea told me that the Act was having precisely this effect?
  Mr. Williams: If the hon. Gentleman has information, I should like to see it and I shall naturally draw the attention of my right hon. Friend the Secretary of State for Employment to any points relevant to his Department. I must emphasise that the fact that a firm is small does not mean that we should expect its workers to accept standards of protection and security of employment which are lower than those elsewhere.
  Mrs. Wise: Is my right hon. Friend aware that, out of desperate anxiety about the state of their industry, the machine tool workers in Coventry have set up the Coventry machine tool workers committee, with the blessing of the appropriate district committees of their respective unions, with the intention of formulating a plan for their industry? Will he look with favour on such a plan when it is forthcoming?
  Mr. Williams: We welcome any such initiative by a work force demonstrating its concern for the future of its industry. Trade unions are represented on the sector working parties. It is worth bearing in mind that the investment plans of the industry are higher than for any of the last eight years and, in money terms, are more than double the best of the past eight years. In real terms, too, they are considerably above the plans for any of those years.
  Mr. Richard Wainwright: Can the Minister say whether the Government's

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  denationalisation of Kearney Trecker Marwin is producing the benefits that the Government expected?
  Mr. Williams: That is a specific question and I should prefer notice of it, but from the latest information that I have seen there is nothing to suggest that it has not been beneficial.

  Manufacturing Investment
  Mr. Knoxasked the Secretary of State for Industry if he is satisfied with the current level of investment in manufacturing industry.
  The Under-Secretary of State for Industry (Mr. Bob Cryer): I am pleased that manufacturing industry increased its investment substantially during last year. This represents encouraging progress towards the levels of investment I would like to see.
  Mr. Knox: When does the Minister expect that investment in manufacturing industry will rise to the level of 1974? Does he agree that if it is to get back to that level there will have to be a substantial increase in the demand for the products of manufacturing industry?
  Mr. Cryer: While we would like to see the level of investment increase, I must tell the hon. Gentleman that the 1977 level was superior to that of 1972 and 1973, years when the Conservative Government were in power and when, as the hon. Gentleman will no doubt recall, the then Prime Minister called on industry to invest more and pointed out that the Govment had given every inducement to private enterprise to invest but it was still not investing.
  Mr. Ashley: When considering the current level of investment in manufacturing, will my hon. Friend bear in mind that North Staffordshire has been very gravely damaged by the crass incompetence of the British Steel Corporation and that the workers have been betrayed by the broken promises of the BSC? When considering inducements to investment, will he bear in mind the situation in North Staffordshire and consider inducements to help new industry go to that part of the country?
  Mr. Cryer: My right hon. Friend is seriously considering the representations that my hon. Friend and his accompany-
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  ing delegation made last week. My hon. Friend can rest assured that we recognise the serious position he represented and that his representations will be taken into account.

  Planning Agreements
  Mr. David Priceasked the Secretary of State for Industry how many planning agreements have been concluded in the private sector at the latest date for which figures are available.
  Mr. Alan Williams: To date, one planning agreement has been concluded in the private sector.
  Mr. Price: That is an interesting reply. Will the Minister place a specimen planning agreement in the Library so that we can all judge the commitments of both sides? Can he tell us the commitments on the Government's side of the agreement as well as the commitments on the private firm's side? What obligations do the Government enter into?
  Mr. Williams: I suggest that it might be worth while for the hon. Gentleman to look at the documents that are already in the Library. He may find them helpful, and that might save my duplicating what has already been done. Clearly the Government's commitment depends on the sector of industry, the firm and the needs of the firm. Essentially, a planning agreement is an attempt to establish a realistic, continuing relationship between the Government and a firm. It has to relate entirely to the operating circumstances of the firm.

  Confederation of British Industry
  Mr. Giles Shawasked the Secretary of State for Industry when he next expects to have a meeting with the chairman of the Confederation of British Industry.
  Mr. Alan Williams: My right hon. Friend and I will both be seeing the president and the director general of the Confederation of British Industry this evening.
  Mr. Shaw: When the Minister and his right hon. Friend meet the chairman of the CBI, will they draw his attention to the results of a research survey by Opinion Research Centre published in The Daily Telegraph today which showed that the

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  vast majority of the electorate, including those who have tended to vote Labour, are against any further extension of nationalisation? Will he tell the chairman that, in view of this fact, the Government propose substantially to revise their industrial strategy?
  Mr. Williams: I leave it to the CBI representatives to decide their own reading, but I shall certainly take the opportunity to draw their attention to the disastrous consequences of an abandonment of industrial strategy which is implied in the comments from Conservative Benches, particularly the Front Bench. If I get the opportunity, I shall also ask what the CBI leaders think of the possible abandonment of present regional policy, which seems to be outlined in certain comments on the proposed policies of the Opposition.
  Mr. Stoddart: When my right hon. Friend meets CBI representatives, will he draw to their attention the article in The Sunday Times yesterday that appeared to show that the largest industries in this country pay virtually no corporation tax? Is this not rather strange, bearing in mind the attitude of the CBI on taxation?
  Mr. Williams: There is probably no need to draw that article to the attention of the CBI because all it says is what I and my colleagues have repeated on various occasions at the Dispatch Box, namely, that a company in this country with a continuing investment programme does not have a tax bill by the time it has received its grants and tax allowances. Unfortunately, that seems to come as a great surprise to Conservative Members.
  Sir K. Joseph: Will the Minister discuss with the CBI the level of industrial profits in real terms which are catastrophically low if there is to be any hope of more jobs and more investment? Will he also discuss with the CBI whether it would be helpful for the Government to spend less so that they needed to take less out of industry?
  Mr. Williams: There is no difference of view on the fact that it is good for industry to be profitable because profitable industry can invest and sustain employment. We take that for granted. I am encouraged by the fact that, as my right hon. Friend the Chancellor of the Exchequer pointed out, in the last six
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  months before the recent Budget, the liquidity of the top 20 firms improved by more than £1 billion.
  Mr. Mike Thomas: Will my right hon. Friend discuss with the CBI last week's comments on the radio by the right hon. Member for Leeds, North-East (Sir K. Joseph), who appeared, on behalf of the Opposition, to abandon all responsibility for wages in the public and private sectors?
  Mr. Williams: What is frightening about the situation outlined by the Opposition is that they intend, apparently, to allow wages to be free in the private sector while operating a discriminating clampdown in the public sector. This is somewhat difficult to reconcile with their crocodile tears over the nurses, forces, teachers, firemen and any other workers in the public sector who make a wage claim.
  Mrs. Kellett-Bowman: When the right hon. Gentleman meets the leaders of the CBI, will he discuss with them the competitive investment disadvantage of firms in areas such as my own and that of North Fylde, which do not have development area status and have to compete with firms that receive substantial capital grants because their areas have development area status? Will he discuss with them in particular firms in my constituency and fish processors in the constituency of my hon. Friend the Member for North Fylde (Mr. Clegg)?
  Mr. Williams: If I take the advice of Opposition Members, it seems that my discussions with the CBI will overflow into the early hours of the following morning. I doubt whether I shall be discussing the issues that have been raised with the CBI representatives. I reiterate that the CBI has always recognised the need for a strong regional policy.

  British Aerospace
  Mrs. Haymanasked the Secretary of State for Industry when he proposes next to meet the chairman of British Aerospace.
  The Secretary of State for Industry (Mr. Eric G. Varley): I shall meet the chairman of British Aerospace later today.
  Mrs. Hayman: At that meeting, will my right hon. Friend be able to give

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  the chairman news of Government approval for the HS146 project, which is vital not only to my constituency but to the whole of the civil airframe industry?
  Mr. Varley: I shall be discussing with the chairman of British Aerospace collaborative possibilities and the HS146. I ask my hon. Friend to await the views of the Government, which will be set out later this afternoon by my right hon. Friend the Minister of State when he speaks in the debate initiated by my hon. Friend the Member for Kingswood (Mr. Walker).
  Mr. Tebbit: When the right hon. Gentleman next sees the chairman, will he make it plain who is responsible for the overall market strategy of the corporation? Is it the chairman and his board, or is it the Secretary of State?
  Mr. Varley: We look to British Aerospace to give the Government advice about the commercial benefits of collaboration, of the HS146 and of other such projects. However, at the end of the day British Aerospace has to come to the Government for financial resources. We have a view, and we shall make that view known. At the end of the day we shall look to the board of British Aerospace to give us the best advice available.

  Post Office
  Mr. Neubertasked the Secretary of State for Industry when he expects next to meet the chairman of the Post Office.
  Mr. Varley: I have no immediate plans to meet the chairman of the Post Office. However, my right hon. Friend the Minister of State met the chairman on 26th June.
  Mr. Neubert: Will the right hon. Gentleman congratulate the chairman on the breach of the Post Office monopoly implied by the recently renewed licence for the Hull telephone department? Will he urge him to continue the good work by relinquishing the Post Office stranglehold on British air waves, which has inhibited the development of direct person-to-person telecommunications compared with developments that have taken place in the United States? Will he point out that unless the monopoly is weakened the record £360 million profit for this year will be seen as the exploitation of a captive market?
  Mr. Varley: That shows that we cannot win. When a public corporation makes a loss, there are screams of anguish from Opposition Members. When the Post Office or any other public corporation makes a profit, it is seen as some sort of exploitation of a monopoly. It was I who renewed the licence for Hull. We have made it a condition of the licence that there will be no private interests involved. We shall be publishing a White Paper in due course in response to the Carter report, which will adequately answer the points that the hon. Gentleman has raised.
  Mr. Madden: What is happening about the companies whose boards are littered with top Tories who relieved the Post Office of about £9 million by the most dubious means?
  Mr. Varley: At the Government's insistence there was a renegotiation of the contract and the rebate has now been paid. There were those who urged that we should not involve ourselves, but here is a good example of Government intervention which I think is satisfactory to the corporation.
  Mr. Raison: Will the right hon. Gentleman arrange an early meeting with the chairman to ascertain what is happening about the dispute with the telephone engineers? Will he ascertain, for instance, how many people have been unable to have telephones installed or connected over the whole of this year because of the dispute? Will he make it clear that he condemns industrial action that consists of employees deciding which parts of their work they will do and which parts they will not do?
  Mr. Varley: I very much regret the difficulty that has been caused by the industrial action of the Post Office engineers. I have made that view known to the engineers direct. That is why I asked Lord McCarthy to inquire into the dispute. About three weeks ago we thought that some third party assistance would be necessary to bring the dispute to a satisfactory conclusion. I understand that we are likely to receive the report later this week. In the circumstances, I think that it would be unwise of me to make any further comment.
  Mr. Skinner: I revert to the issue concerning Pirelli Cables and others and the

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  Post Office. Would it not be wise for my right hon. Friend to urge the Post Office to reveal the true amount lost over many years as a result of the cartel and the price fixing that was taking place? Does not he agree that it is rather ironic that the right hon. Member for Taunton (Mr. du Cann), who seems to be anxious to use his Committee on many occasions to try to embarrass nationalised industries, has not stepped in to examine the details of the arrangement?
  Mr. Varley: I thought that a good deal of information had been made available by the Post Office. If the House requires further information, I shall ascertain whether it may be made available. It is not for me to ask a Select Committee to inquire into the circumstances of nationalised industries or anything of that sort. If the Public Accounts Committee or the Select Committee on Nationalised Industries wishes to do that, no doubt it will address itself to the question.
  Mr. Norman Lamont: I revert to the supplementary question of my hon. Friend the Member for Aylesbury (Mr. Raison). Is the right hon. Gentleman aware that many businesses are deeply concerned at the Government's lack of action on the Post Office engineering dispute? Does he agree that delays in modernising the network are serious both for users and for the electronics industry? Should not the Government have appointed a mediator earlier? What are they proposing to do about it now? The dispute is long standing.
  Mr. Varley: The hon. Gentleman is incorrect in suggesting that over the years of modernisation in telecommunications Post Office engineers have not co-operated to the full. They have a good record of assisting. In no way can they be regarded as Luddites. They feel strongly about the reduction in their working week. It is a long-standing claim. I regret very much the inconvenience that has been caused. I hope that Lord McCarthy's report, which I hope will be received later this week, will be the basis for calling off industrial action and settling the dispute.

  Yorkshire and Humberside (Financial Assistance)
  Mr. Edwin Wainwrightasked the Secretary of State for Industry how much financial assistance to industry has been
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  given to the Yorkshire and Humberside region over each of the past three years; and what are the amounts granted for the South Yorkshire area.
  Mr. Cryer: With permission, I will publish the detailed information in the Official Report, but the total financial assistance made available to industry in the Yorkshire and Humberside region over the past three years amounts to £129,840,000. It is expected that offers of assistance under section 7 of the Industry Act 1972 included in this total will give rise to 19,000 jobs and safeguard 3,700 jobs in the region.
  Mr. Wainwright: Does my hon. Friend realise that that figure means that the Yorkshire and Humberside region has been dealt with unfairly and unjustly compared with the treatment of other regions? Is he aware that there are large pockets of low wages and unemployment in the region? Is he aware that in the Dearne Valley the Manvers Main coking plant has already declared redundancies? We are informed that there is a great danger of its being closed down. It seems that the Government will not carry out the promise that they made a few years ago to build a chemical plant to replace it.
  Mr. Cryer: The Government fully realise the difficulties occurring in many parts of the country. Yorkshire and Humberside has received more than its fair share of section 8 assistance. Those in the region have been extremely forthright, as one would expect from Yorkshire people, in taking advantage of the many generous schemes that the Government have introduced. The Government offer generous schemes of assistance to the regions and nationally through section 8 schemes. They offer to private industry the most generous tax incentives throughout the whole of western Europe in the form of 100 per cent. grants on investment in plant and machinery. There are difficulties, but some of them must be ascribed to the failure of private industry to take advantage of the schemes that have been offered.
  Mr. Giles Shaw: Will the hon. Gentleman examine the wool textile industry's claim on effluent charges? Is he aware that a report has been made by the Yorkshire Water Authority and the wool textile industry and submitted to his

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  right hon. Friend? Will he agree to consider the matter to ascertain whether the issue may be resolved?
  Mr. Cryer: I know that the hon. Gentleman will want to recognise the fact that the Department of Industry met representatives from the industry some months ago and that, as a result, we jointly agreed to set up the working party that he described. We have received a report and are examining the matter with considerable urgency, because we are concerned that the wool textile industry should maintain its competitive position in world trade.
  Mr. Hardy: Why should not central assistance also include the conferring of adequate capacity to secure the vigorous development of attractive industrial

  ASSISTANCE MADE AVAILABLE TO INDUSTRY IN THE YORKSHIRE AND HUMBERSIDE REGION UNDER THE INDUSTRY ACT 1972

  1975–76

  1976–77

  1977–78

  £000

  £000

  £000

  Part I—Payment of Regional Development Grant: Yorkshire and Humberside Region

  …

  …

  …

  18,000

  23,500

  22,100

  Part II Section 7—Offers of Regional Selective Assistance: Yorkshire and Humberside Region

  …

  …

  …

  5,500

  8,400

  3,900

  South Yorkshire Metropolitan County

  …

  …

  …

  900

  4,100

  600

  Part II Section 8—Offers of Selective Financial Assistance: Yorkshire and Humberside Region

  …

  …

  …

  16,500

  21,500

  10,300

  South Yorkshire Metropolitan County

  …

  …

  …

  600

  3,800

  2,900

  Part III—Assistance to shipbuilding: Yorkshire and Humberside Region

  …

  …

  …

  75

  36

  29

  South Yorkshire Metropolitan County

  …

  …

  …

  —

  —

  —

  Note: Information on payments of regional development grant to firms in South Yorkshire is not readily available.

  National Enterprise Board
  Mr. Aitken10. Mr. Aitken asked the Secretary of State for. Industry when he expects to meet the chairman of the National Enterprise Board.
  Mr. Richard11. Mr. Richard Page asked the Secretary of State for Industry when he expects next to have a meeting with the chairman of the National Enterprise Board.
  Mr. Kaufman: My right hon. Friend meets the chairman very frequently.
  Mr. Aitken: Since the National Enterprise Board is now investing £1,000 million of taxpayers' money, does not the Minister think that he should obtain from the chairman a rather more coherent and precise definition of the NEB's strategy at the present time? In particular, is he aware that there is considerable
  sites for the service of which substantial public funds may have been expended? Is it not clear that that has not happened in the important Hellaby site, by the M18 in my constituency.
  Mr. Cryer: My hon. Friend has raised a detailed point. If he wants to expand on it, I hope that he will write to me. Certainly, from the point of view of the provision of industrial sites, the Department of Industry, through the English Industrial Estates Corporation, makes every possible endeavour to provide not only large and medium advance factories but small advance factories to encourage small firms to act as inducements to private enterprise to go to these areas and to provide jobs.
  Following is the information:
  public confusion whether the NEB is supposed to be a hospital for lame ducks, a high rolling punter in the shares of small companies or a speculative secondary bank? May we have a much more precise definition?
  Mr. Kaufman: The confusion is in the minds of the hon. Gentleman and his right hon. and hon. Friends. There is absolutely no confusion in the minds of the many workers who have benefited from the NEB's investments, including those of my constituents who work for the NEB's subsidiary, Fairey Engineering.
  Mr. Robinson: When my right hon. Friend next meets the chairman, will he draw to his attention our concern that, if the big investment in microcircuits and silicon chips is to go ahead, which may have many desirable features, there should be an adequate balance of risk between

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  the national capital provided and that of certain individuals who stand to gain enormously from it?
  Mr. Kaufman: I take account of the point made by my hon. Friend. I am glad to hear that he believes that this investment is inherently desirable, unlike the utterly extraordinary statement by the right hon. Member for Leeds, North-East (Sir K. Joseph) in his letter of 19th June to my right hon. Friend, in which he said:
  "Many informed people do not consider it prudent to attempt, at this stage, to catch up the Japanese and Americans in the volume production of general purpose computer chips without multinational backing."
  What total defeatism by the former party of patriotism!
  Mr. Page: As the NEB made only £34 million last year, what steps will the Minister take to ensure that it does not slide down the same path as that already followed by the Italian equivalent of the NEB, which owes £11 billion and needs another £3 billion to £4 billion to keep it going?
  Mr. Kaufman: The hon. Gentleman voted for the NEB to slide down a path when he voted to deny it money, but I am glad that the House defeated him and his right hon. and hon. Friends and gave the NEB the necessary funds.
  Mr. Conlan: When my right hon. Friend meets the chairman of the NEB, will he inform him that it was a matter of some regret that in the Northern region, where there is a very high level of unemployment, the NEB contributed to that high level by a recent closure? Will he also inform the chairman that in future we shall be looking to higher and more profitable investment by the NEB?
  Mr. Kaufman: I am aware of the great regret felt by a number of my hon. Friends and of the strong representations that they made on the matter to which my hon. Friend has drawn attention. The NEB took that decision. It was not one that we were able to dispute or to intervene in. I certainly take full account of what my hon. Friend has said. That was one of the reasons why we opened a regional office of the NEB in Newcastle, and why the special NEB for the north-east was set up. I hope that initiatives will be taken to increase employment in my hon. Friend's area.
  Sir K. Joseph: Does the right hon. Gentleman accept that the fact that, as admittedly appears from a leak, the partners in the proposed NEB scheme are to be paid in part abroad is a clear indication that people of enterprise cannot be expected to take risks in the tax climate provided by the present Government?
  Mr. Kaufman: The fact is that the people of enterprise went away under the Conservative Government's tax climate and that they are coming back under ours.
  Mr. Speaker: Mr. Joan Evans.
  Sir K. Joseph rose—
  Mr. Speaker: Order. I shall call the right hon. Gentleman next. Mr. Joan Evans.
  Mr. Ioan Evans: Does my right hon. Friend agree that, in view of the failure of the private sector to invest in manufacturing industry, the NEB will need to play an increasing role in future? Although this is an academic question, because of the concern expressed by workers whose jobs have been saved by the NEB, may I ask whether we have had any view from the Opposition on what they would do with the NEB in future?
  Mr. Kaufman: I fully accept my hon. Friend's view that the NEB should have an increasing role. It is in fact praise-worthily expanding its role all the time. Of course, there is great fear that, if the Opposition were to come to office, they would abolish the NEB. When I met the shop stewards of Fairey Engineering, their great fear was that their security of employment—many of them live in Manchester, including Moss Side—would be undermined by the activities of the Tory Opposition.
  Sir K. Joseph: Will the right hon. Gentleman now confirm or deny that the partners from abroad in the microprocessors scheme are proposing to be paid, in part at least, overseas in order to escape United Kingdom taxation?
  Mr. Kaufman: What I say to the right hon. Gentleman is that any matters—[HON. MEMBERS: "Answer."] I am endeavouring to do so to the best of my ability, limited though it is. The right hon. Gentleman knows that any matters

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  on taxation are for my right hon. Friend the Chancellor at the Exchequer. But I have also said, as my right hon. Friend the Secretary of State stated in reply to that weird letter from the right hon. Gentleman, that any information about these matters which is not commercially confidential and which can properly be made available will be made available by the National Enterprise Board.

  Telephone Subscribers (Deposits)
  Mr. Frank Allaunasked the Secretary of State for Industry if he will now issue a general direction to the Post Office to cease its policy of requiring deposits from all telephone subscribers in certain areas in addition to the usual installation charges.
  The Under-Secretary of State for Industry (Mr. Les Huckfield): No, Sir. But I understand that the Post Office is considering this matter in the light of consultations it has held with the Post Office Users' National Council.
  Mr. Allaun: Has not the Post Office Users' National Council protested against this grossly unfair £50 deposit? Is not this blanket discrimination against everyone living in certain working class areas, whether good payers or not, absolutely contrary to our ideas of justice? Will my hon. Friend therefore scrap the scheme, as has already been done in certain areas, such as the Midlands?
  Mr. Huckfield: I recognise that my hon. Friend has expressed a genuine and continuing concern about this matter, and I note that he has echoed it today. To set this matter in perspective, I should tell him that last year the Post Office had to write off £15 million in unpaid bills after making all efforts to make creditors pay up. Because of that, I think it is right that the Post Office should consider the matter appropriately, but I shall certainly bear in mind what my hon. Friend said.
  Mr. Durant: Will the Minister tell his hon. Friend the Member for Salford, East (Mr. Allaun) that if a policy such as that followed by the Hull Post Office were pursued there would be no deposit?
  Mr. Huckfield: It is easy to make such comparisons as that. If the hon. Gentleman wants to pay tribute to municipal
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  enterprise, I hope that he will be joined by others of his hon. Friends.

  Lucas Aerospace (Corporate Plan)
  Mrs. Wiseasked the Secretary' of State for Industry what steps he proposes to take towards the implementation of a planning agreement with Lucas Aerospace on the basis of the corporate plan for saving jobs by useful production; and whether he will discuss these proposals with the shop stewards combine committee and appropriate trade union officials
  Mr. Kaufman: The Government would welcome a planning agreement with Lucas Aerospace and my right hon. Friend has recently reminded the Lucas group of the advantages. The combine shop stewards committee corporate plan is appropriately the subject of discussion between the unions and company management.
  Mrs. Wise: Is my right hon. Friend aware that his reply to my hon. Friend the Member for Brent, South (Mr. Pavitt), which implied that the Lucas workers were not even aware that they were making kidney machines, was unworthy and slanderous? May I recommend my right hon. Friend to give more attention to the detail of this plan, from which he would learn that the Lucas Aerospace workers want expansion of kidney machine production and the production of portable machines? May I suggest that a serious effort be made by his Department to understand the valuable work which has been done by these workers if it is to have any chance of formulating a successful planning agreement with the company?
  Mr. Kaufman: If my hon. Friend had spent as much time as I in discussions with the Confederation of Shipbuilding and Engineering Unions and the Lucas workers on the corporate plan, as distinct from making public sloganeering statements, she would know that I have involved myself for two and a half years in this issue. She would also know that it was the initiative that I undertook in discussions with Ken Gill that helped to lead, for the first time, to representation by the combine committee in discussions with Lucas management. That breakthrough took place following my discussion with Mr. Ken Gill.

  1015
  My hon. Friend the Member for Brent, South (Mr. Pavitt) said that workers in Lucas industries who were employed in his area make these kidney machines. The workers in the corporate plan asked for the workers at Lucas Aerospace to make the kidney machines.
  Mr. Adley: I thank the Minister for giving us another glimpse of the authentic voice of the kitchen Cabinet. I do not wish to intervene in the fratricidal argument between the Government Front and Back Benches, but does the Minister recall telling us one, two and three years ago how planning agreements were absolutely central to the Government's economic strategy? However, he told us a few minutes ago that one planning agreement only has been reached in the private sector in the four years of office of this Government. If we are to believe the Government in saying that there has been a staggering economic recovery in the last three years and particularly in the last few months, is that in spite of or because of the lack of planning agreements?
  Mr. Kaufman: The hon. Member has drawn attention to the importance of planning agreements. Much advice has been given to the Minister of State on matters which he should raise with the CBI when he sees its members tonight. I shall be in his company and I shall advise him to tell the CBI that its hostility to planning agreements is shortsighted and blinkered, and that planning agreements can help individual companies as well as the Government's industrial strategy.
  Mr. Rooker: Is my right hon. Friend aware that his answer to my hon. Friend the Member for Coventry, South-West (Mrs. Wise) is about worthy of his Department at present? [HON. MEMBERS: "Hear, hear."] Will he note that the change that took place last week followed the accession of Mr. Roy Grantham to the position of leading for the confederation? Why did no Minister from his Department take part in the programme for the Open Uuniversity on the Lucas corporate plan?
  Mr. Kaufman: I realise that taking part in Open University television programmes is a high priority in the Socialist industrial strategy. I also notice that
  1016
  my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) not only votes with the Opposition but wins their cheers. If my hon. Friend, instead of writing letters to newspapers and making speeches, had taken positive action, we might have achieved earlier the type of meeting with the lay representatives of the combine that eventually came about as a result of the patient work of Ministers in the Department of Industry.

  Industry Act Assistance
  Mr. Maddenasked the Secretary of State for Industry how much assistance has been given to private industry under the Industry Act 1972 to the latest available date.
  Mr. Alan Williams: Up to 31st May 1978 offers of selective financial assistance totalling £415 million were made to private industry under the Industry Act 1972. In addition, in the same period, payments of regional development grant totalled £1,513 million, the larger part of which went to private industry.
  Mr. Madden: Is not one of the ironies of modern politics that these colossal sums of taxpayers' money are paid to private companies, many of which donate lavish sums to the Conservative Party, whose industrial spokesman regularly condemns all grants and subsidies as doing great harm?
  Mr. Williams: I agree. I find it incredible that industry should place any reliance whatsoever upon the so-called policy enunciated by the Opposition Front Bench. I gather that section 8 would be abandoned, and I understand that the Conservatives have no intention of going ahead with the industrial strategy. They are ambivalent but are inclined to talk about abandoning the National Enterprise Board. It would be a disaster for the country if they were elected.
  Mr. Alexander Fletcher: Will the Minister confirm press reports that the Secretary of State for Industry has advised workers at the Chrysler plant at Linwood that no more Government funds will be made available to that company? Will he join me in deploring the irresponsibility of those at Linwood who failed yesterday to turn up for a meeting in such

  1017
  numbers that the costly dispute could not be resolved?
  Mr. Williams: I am sure that the hon. Member has seen the reports of what my right hon. Friend said during his Linwood visit. On Friday I chaired a meeting of workers' representatives and Chrysler management in Coventry. I made it clear that if a pay settlement was reached that was in breach of the Government's guidelines, Government financial support could not be provided.

  Northern Region
  Mr. Radiceasked the Secretary of State for Industry whether he is satisfied with industrial progress in the Northern region.
  Mr. Cryer: We shall continue to do everything practical to promote industrial investment and employment in the Northern region. The north's share of the United Kingdom's investment in manufacturing has increased during the past eight years and regional policy has made a useful contribution to this increase.
  Mr. Radice: I thank my hon. Friend for that reply. I accept the difficulties of running a regional policy at a time of recession, but does he agree that there is now a case for a new ingredient in regional policy in the Northern region? Does he agree that there is a strong argument for a northern regional development agency matched by regional, democratic control?
  Mr. Cryer: That view has been promoted by representatives of the Northern Region. But we are satisfied with our regional policy. It represents an intervention in the economy against the private enterprise doctrines of the Opposition, who would seek to abandon regional policy. We have made the whole of the region either a special development area or a development area. In 1976–77 £237 million was spent in the Northern region. But we are satisfied jobs and retain manufacturing industry there. We are always open to further representations.
  Mr. Anthony Grant: Before the Minister castigates private enterprise too much, will he say whether it is his policy to encourage private enterprise small firms in the Northern region?
  Mr. Cryer: We are encouraging small firms in the Northern region, as we are in every assisted area, by a variety of means. On 1st July we introduced the small firms employment subsidy to encourage small firms to take on new employees. The point that I was making earlier was in direct contrast to the view of the Conservative Party—that private enterprise should be left totally alone. If that happened, the regions would be totally denuded because private enterprise would almost certainly drift away from the regions towards London and the south-east. Only through Government support measures has industry developed in the regions with traditionally high unemployment.

  Steel (Production and Sales)
  Mr. Hardyasked the Secretary of State for Industry what was the volume of steel produced and the volume sold by the British Steel Corporation in the last three months and in the same period in 1976 and 1977.
  Mr. Kaufman: This information is properly a matter for the British Steel Corporation, but I am arranging for a table giving this information to be published in the Official Report.
  Mr. Hardy: Given the present low level of world steel demand, is it not clear that the recent story that the British Steel Corporation will be selling off its successful enterprises in South Yorkshire is rather ridiculous? Will the Minister echo Sir Charles Villiers' firm denial of this story, which is clearly a squalid and silly manoeuvre to frighten Labour voters in the Penistone by-election?
  Mr. Kaufman: That report has been repudiated by the chairman of the British Steel Corporation. The Government fully endorse the chairman's statement on that matter.
  Mr. Emery: Will the Minister make it clear to the House that the British Steel Corporation will be unable to increase its sales to British industry unless it modernises its productive process? Will he also remind the trade unions of that?
  Mr. Kaufman: I shall also remind the Opposition of that since they voted against the borrowing powers to provide the money for modernisation.
  Mr. John Ellis: Is my right hon. Friend aware that sales of steel in this country have been affected, despite an agreement with the EEC, by the amounts of steel being made available in the EEC, allegedly to be shipped outside the EEC but which are coming into this country in contravention of the agreement? Will he consult other Ministers so that representations may be made to other EEC countries?
  Mr. Kaufman: I am willing to consider any information that is sent to me. I am willing to discuss the matter with the Secretary of State for Trade.
  Mr. Nelson: Was not production in both periods in question affected by the stockpiling schemes under which hundreds of millions of pounds of taxpayers' money was provided to finance anti-cyclical production of steel? Is it not the case that, in spite of this money being put into the BSC, there are shortages of certain types of steel, particularly of mild rolling bar? In view of the amount of money that has been spent, how does the Minister explain the severe shortages which exist?
  Mr. Kaufman: This is in part due to the fact that the corporation is not yet fully equipped to provide all sections of the market. The programme that it has undertaken for modernisation and for quality improvement, which is very important, can assist, but one does not deny that serious problems exist.
  Following is the information:

  STEEL OUTPUT BY BRITISH STEEL CORPORATION

  Three months ended

  Liquid steel produced Million tones

  Finished steel deliveries Million tones

  29th May 1976

  5·3

  3·7

  28th May 1977

  4·5

  3·5

  3rd June 1978*

  5·2

  3·8

  * 14 week period.

  Source: British Steel Corporation.

LAW OFFICERS' DEPARTMENT (STAFF)
Mr. Dalyellasked the Attorney-General whether he has any plans to increase staff of his Department in 1978–79 and 1979–80; and, if so, why.
The Attorney-General (Mr. S. C. Silkin): Not at present.
Mr. Dalyell: If Lord Scarman and Lord Wilberforce are right in supposing that in order to make the devolution Bills workable there has to be a constitutional court, what would be involved in terms of recruiting new staff? If they are wrong, will someone in the Government tell the senior Law Lords, point by point, why?
The Attorney-General: My right hon. Friend the Lord President indicated in a reply to my hon. Friend last Thursday that it is not intended to bring forward legislation to establish such a court, and I do not think that it is for me to answer the detailed questions that my hon. Friend has put to me.
Mr. Maxwell-Hyslop: Is the right hon. and learned Gentleman aware that the inquiry into the north Devon link road is being held up indefinitely by the failure of the Lord Chancellor to choose an inspector? If the Lord Chancellor's Department is overworked and that of the Attorney-General is underworked, will the right hon. and learned Gentleman transfer some of his staff to the Lord Chancellor's Department?
The Attorney-General: My Department is very definitely not underworked.
Mr. Edward Gardner: Does the Attorney-General agree that delays in the hearing of criminal trials remain a most serious problem which impedes justice? Can he do anything to diminish the delays in initiating prosecutions with which he is concerned without any addition of staff?
The Attorney-General: As the hon. and learned Gentleman makes clear from the form of his supplementary question, the delays, which I agree are very much regretted, are not solely the concern of my Department; they are the concern of my noble Friend the Lord Chancellor, of the police and so on. I am glad to be able to say that as a result of recent representations the Director of Public Prosecutions has received authority to increase his staff. He is now actively seeking to do so. I am sure that when he succeeds in getting staff of the right calibre, that will help a great deal.

DIRECTOR OF PUBLIC PROSECUTIONS
Mr. Skinnerasked the Attorney-General when he expects next to meet the Director of Public Prosecutions.
Canavanasked the Attorney-General when he expects next to meet the Director of Public Prosecutions.
Mr. Attorney-General: Presently.
Mr. Skinner: When my right hon. and learned Friend meets the Director of Public Prosecutions, will he have a serious discussion with him about why giant firms such as Pirelli, which is run by prominent Tories, can fleece telephone subscribers without having criminal charges taken out against them, while councillors can be discharged from office for keeping rents down and people drawing social security benefits who might default for a few weeks can be sent to prison? Surely it is high time that this matter was dealt with in a more equitable fashion.
The Attorney-General: All my discussions with the Director are concerned with the improvement of the administration of justice in order to ensure that justice is done and injustice is not done. I cannot guarantee that the scope of my discussions will cover the matters raised by my hon. Friend.
Mr. Canavan: Will my right hon. and learned Friend ask the Director of Public Prosecutions what action, if any, he is taking about the Department of Trade's report on Lonrho's sanction-busting activities in Rhodesia? Does not he agree that it is about time there was some action on this matter, especially since a decision might he forthcoming about Lonrho's bid to take over SUITS?
The Attorney-General: The investigation into that matter is continuing. On 27th April my right hon. Friend the Foreign Secretary, under the Southern Rhodesia sanctions order, signed an authorisation to the Director of Public Prosecutions which enables him to call for the production of documents. The Director has signed a request addressed to Lonrho asking for the production of certain documents. That request has been served and the investigation consequently will continue.
Mr. Adley: Has the right hon. and learned Gentleman noticed that a British court, albeit a Scottish court, has given an order to the Chilean Government saying that they are right in demanding the return at the hands of the British Government of certain property belonging to the Chilean Government? Since the Attorney-General has just told us that he is concerned with the administration of justice, what steps does he intend to take to ensure that this court order is carried out so that the good name of this country is not confused with the bad name of the Government'?
The Attorney-General: The hon. Gentleman very well knows that that is a question within the jurisdiction of my right hon. Friend the Secretary of State for Scotland and my right hon. and learned Friend the Lord Advocate. He knows that it ought to have been put to them.
Mr. Madden: If the Post Office can be fiddled out of £9 million, is it not fair to assume that other public corporations are equally vulnerable? Therefore, what are the Attorney-General and the Director of Public Prosecutions doing to protect the public interest?
The Attorney-General: The answer to that question is "A great deal". However, I do not entirely follow the purport of the supplementary question. If my hon. Friend will put down a specific Question or will write to me, I will do my best to give him an answer.

BRYANT BUILDING CO. LTD.
Mr. Rookerasked the Attorney-General what was the length of time between the receipt by the Director of Public Prosecutions from the West Midlands police of papers in the Bryant Building Company Limited case and his announcement on 22nd May that there would be no further prosecutions.
The Attorney-General: Fourteen months. The Director of Public Prosecutions received the final papers in the Bryant case in March 1977, and in the same month I gave my consent to prosecutions and summonses were issued. The trial was completed on 17th May 1978 and I made my statement five days later.
Mr. Rooker: Is my right hon. and learned Friend aware that his answer to me on 22nd May, when he said that there would be no further prosecutions, caused great dismay in the West Midlands, not least among the police, who had been involved for so long in the investigation and who know that 1,900 people have got off scot-free? Is he further aware that many people believe that a cover-up is under way because of the great and the good who appear on that list?
The Attorney-General: I am not aware that that reply was greeted with great dismay. I am aware that my hon. Friend has previously made allegations of a cover-up which I have denied. He has previously alleged in this House that the police themselves have spoken about a cover-up, but I have before me a report which clearly indicates that the chief constable has denied any suggestion of a cover-up. There is no cover-up and there has been no cover-up.

DIRECTOR OF PUBLIC PROSECUTIONS
Mr. Christopher Priceasked the Attorney-General when he last met the Director of Public Prosecutions.
The Solicitor-General (Mr. Peter Archer): Recently.
Mr. Price: Has my right hon. and learned Friend the Attorney-General yet decided whether he will give evidence personally to the Royal Commission on Criminal Procedure? Some weeks ago he had not made up his mind. If he has decided so to do, will he advocate publicly an independent prosecuting system in England and Wales?
The Solicitor-General: My right hon. and learned Friend is still considering whether he can helpfully give evidence. If he does, his proposals will be formulated when the evidence is being prepared.

LEGAL AID
Mr. Watkinsonasked the Attorney-General if he remains satisfied with the access that poor people have to legal services.
The Solicitor-General: My noble Friend regrets the restrictions on public
1024
expenditure that prevent him from improving the financial conditions governing access by people of limited means to legal services available under the legal aid scheme. It is his intention to improve them as soon as possible. The Royal Commission on Legal Services is examining the problem of access to legal services generally.
Mr. Watkinson: Does my right hon. and learned Friend agree that the development of law centres has been one of the most significant developments in the provision of legal services for poorer people? Will he do everything he can to encourage this development? Such a centre is being considered for my county of Gloucestershire. Will he give as much encouragement as he can to such schemes and try to elicit from the Treasury a greater share of public funds for the provision of legal services?
The Solicitor-General: I wholly agree with my hon. Friend, and he and I can be fortified by the reflection that my noble Friend the Lord Chancellor agrees with us both. As my hon. Friend has properly recognised, the problem is that one has to stretch the resources to meet the need. As regards the specific law centre which my hon. Friend mentions, I shall draw what he said to my noble Friend's attention.
Mr. Edward Gardner: Does the Solicitor-General agree that one of the prime weaknesses of our legal aid system at the moment is the absence of legal aid for those appearing before tribunals such as the national insurance commissioner, the medical appeal tribunal and others of that kind? Does the right hon. and learned Gentleman agree that this gap in the legal aid system causes great distress to people who have not the experience and ability to represent themselves or the resources to pay for the legal aid which they seriously need?
The Solicitor-General: I agree that there is a need for legal aid for representation in some cases before some tribunals. One of the difficulties, as the hon. and learned Gentleman appreciates, is to screen the cases so that the resources go to the right needs, as well as the difficulty of discerning priorities among the competing needs in this field.

EUROPEAN COMMUNITY COUNCIL (BREMEN MEETING)
The Prime Minister (Mr. James Callaghan): I should like, with permission, to report to the House on the meeting of the European Council in Bremen which I attended with my right hon. Friend the Foreign and Commonwealth Secretary on 6th and 7th July.
We were informed by the President of the Commission that the expected rate of growth in the Community countries this year, on present policies, would be lower than expected, and we agreed that increased growth is a crucial objective to improve employment prospects. As regards measures to combat youth unemployment, we called for decisions within the framework of the European Social Fund to come into force on 1st January 1979. All member States will take necessary measures to increase growth according to their own individual circumstances. But we agreed that countries with smaller inflation and balance of payments problems will do more to increase domestic demand.
We agreed that a zone of monetary stability in Europe was a highly desirable objective, as part of the concerted international action needed for economic recovery. The German and French Governments put forward for consideration a scheme for a European monetary system. A number of Heads of Government, including myself, wished to see the details fully worked out before entering into any commitment by our respective Governments. We therefore agreed that Finance Ministers should formulate guidelines for a possible scheme, taking as a starting point at their meeting on 24th July the Franco-German proposals. Officials would subsequently elaborate the necessary provisions by 31st October, and the final scheme would be in front of the meeting of the European Council on 4th and 5th December for decision and commitment.
This agreed timetable will permit the fuller preparation and consideration which is essential for a durable scheme. We can thus hope to avoid the errors of 1972 when the previous Government joined a similar scheme on 1st May but were forced to withdraw only seven weeks
1026
later, on 23rd June. However, the outlines of the Franco-German proposal contain some new features and the Government will play their full part in the forthcoming studies.
The Government have taken the view throughout these discussions that monetary arrangements are not enough by themselves to ensure a zone of monetary stability. Any new system must be one which will last and will take full account of the economic as well as monetary interests of each member of the Community. Therefore, in company with others, I pressed for parallel studies to be made of the action that is necessary to ensure a greater convergence in the economies of the member countries. especially in such matters as the commitments to growth and transfers of real resources. It was agreed to carry out such studies.
It will be necessary to judge how far all these matters have been satisfactorily arranged when we are called upon to take a final decision on such new proposals as the Finance Council may put forward.
There was a related discussion arising out of the need for a better use of resources in supporting Mediterranean agriculture. This led to an extensive discussion of the common agricultural policy as a whole which brought out the dissatisfaction felt by a number of member Governments with the present scale of agricultural expenditure and with the cost of financing surplus production. This was the most thorough and frank discussion of the defects of the common agricultural policy in which I have participated in the Community, and it revealed a great deal of support for our wish to see a more balanced distribution of the use of Community resources as a whole. The Commission was asked to come back with proposals to remedy this at the next European Council.
As regards energy, the Council adopted objectives for 1985 calling for the reduction of the Community's dependence on imported energy to 50 per cent. of its total requirements, including oil, and emphasised that other industrial countries should set themselves similar objectives.
The Council expressed its readiness to make progress with the developing countries on such matters as trade, commodity

1027
support, stabilisation of export earnings and assistance.
The Council discussed the situation in the Middle East and Lebanon and in Africa. It regretted the lack of progress towards a settlement in the Middle East, and reaffirmed the principles set out in the declaration issued by the Council in London on 29th June last year. The Council agreed on the necessity for early and peaceful independence for Namibia and Zimbabwe on the basis of negotiated and internationally acceptable solutions and expressed support for the efforts which Britain is making, with others, to this end.
This was a constructive meeting in which there was some hard talking because we were getting to grips with important problems. If, as a result, some new solutions can be agreed on the convergence of our economies, on a zone of monetary stability and on the transfer of resources inside the Community, including a better use of resources in the CAP, it could turn out to have been a historic occasion.
Mrs. Thatcher: May I put three points to the Prime Minister, two on the economic aspects of his statement and a third on another aspect? The right hon. Gentleman will recall that a short time ago he put up a five-point agenda to get us out of world recession, one of the main points of which was a currency stabilisation scheme. We have to determine precisely where the British interest lies and we must therefore look at the details of the present scheme and any strings which are attached to it, although it is a rather different scheme from that in 1972 to which the Prime Minister referred. But will the right hon. Gentleman agree, especially in view of his previous welcome for currency stabilisation schemes. that we are more likely to get out of the problem of world recession by co-operating with our partners than we are by standing aside from the scheme which they have put up?
Secondly, although we welcome the concept of a currency stabilisation scheme, will the Prime Minister agree that no such scheme either will work or could ever be a substitute for running our own economy in a sound financial way, and will he accept that one of the things
1028
which shocked the British people was the fact that we are now in the second division economically of European countries, and, since Britain was the victor in Europe, this comes very hard to the British people? However, that has nothing to do with currency stabilisation schemes. It is the result of the way in which the Government have run the British economy recently.
Thirdly, the Prime Minister referred to a number of foreign affairs matters. When he and his colleagues were all together, did they discuss the trials now taking place in the Soviet Union of Mr. Ginzburg and Mr. Shcharansky, and did they come to any concerted view upon them?
The Prime Minister: On the first question, I agree that the proposal which has been put up—I refer to the monetary arrangements—is rather different from that of 1972. It is a great pity, however, that the Opposition when they were in Government did not take the same precautions that we are taking now. I hope to learn from their mistakes in this matter. Of course it is better to co-operate than to stand aside. Indeed, I think that this is what I have been preaching over the past 12 months. We shall continue to examine these matters constructively. I am very ready to do anything which will strengthen our own currency and give it greater reserves, provided that our other interests are satisfied. We shall look at the scheme in that way. I think that that was fully understood by everybody.
On the second point, the right hon. Lady is echoing my own words, that none of these schemes can be a substitute for running our own economy properly. This is indeed what I have been trying to do, with no support from the Opposition, through the industrial strategy and through trying to overcome inflation. I must remind the right hon. Lady, when she talks about the deterioration in our situation, that inflation was much higher when she left office than it is now, and was going up and was forecast to go up over the next 12 months.
Therefore, I do not think that it comes very well from the right hon. Lady to talk about the way in which we have been running our economy recently. It is because of the way in which we have been running it recently that this country

1029
has more hope for the future that it ever had during the early years of the 1970s.
The trial of Mr. Shcharansky was not mentioned at the European Council of Ministers, but it is clear that if the Soviet Union goes ahead with the trial it will place a very severe test upon relations between it and other countries. It seems to bear some of the hallmarks of a return to the trials we knew in Stalinist days. That cannot but effect our relationships.
Mr. Jay: In studying the so-called currency stabilisation scheme, do we have to learn yet again that fixed exchange rates usually lead to unemployment? Can my right hon. Friend assure the House that we shall not accept any schemes resembling this until we have had a genuine reform of the common agriculture policy and a reasonable German contribution to the exchange costs of our forces in Germany?
The Prime Minister: My right hon. Friend is not as accurate as usual when he says that fixed exchange rates lead to unemployment. That depends upon the nature of the economy one is running. As I keep on saying to the British people, what is at stake here is the nature of our productivity and our efficiency and whether we have inflation. That will determine the level of unemployment. Therefore, I hope that my right hon. Friend will not desert a view that he held for many years about the desirability of having less flexibility in exchange rates because of his dislike of the Common Market as a whole.
On the question of the CAP, I have made it quite clear over many months, and, indeed, over years—as has my right hon. Friend the Minister of Agriculture, Fisheries and Food—that it is a matter which needs the most substantial reorganisation. What I think is now being seen by a number of members of the Community is that giving more help to the Mediterranean countries cannot be done by increasing the total budget. The agricultural budget is large enough, if indeed not too large. Therefore, if there is to be additional help for the Mediterranean countries it must come from a redistribution of resources between certain countries and the Mediterranean countries which might seek to benefit. The Commission has been asked to
1030
examine all that and to bring forward proposals in December.
Mr. Russell Johnston: Is the Prime Minister aware that the Liberals very much welcome the major proposal of a parallel currency backed by a European monetary fund, which is part of the manifesto of European Liberal democrats? Despite the existence of certain economic Visigoths around the right hon. Gentleman, can he assure the House that it is the Government's hope and intention to see the details that he mentions worked out positively by the end of the year?
The Prime Minister: I hope to see anything which will lessen monetary instability, which I think has been part of the cause of the decline in international trade, though obviously not the whole cause. I have been one of the most fervent advocates of monetary stability.
What I should like the House, including the Liberal Party, to accept, as I imagine and hope that that party does, is that monetary stability will not be achieved unless there is greater convergence between economies. That is the essential principle that we had to get into the original proposal. It was not there. The proposal seemed to me to be showing a substantial weakness because it was not there. That is what was got in at my insistence. It is something that we must consider between now and December. If we could get both those things, that could be of advantage to the United Kingdom as well as to Europe.
Mr. Roper: I congratulate my right hon. Friend on the realism he brought to the discussions in Bremen. Can he assure the House that it is perfectly appropriate for the Government to maintain a reserve on the specific proposals until the discussions in the Council of Foreign Ministers have made quite clear how the proposals on a zone of monetary stability can be linked with specific proposals which lead to a convergence of European economies as a whole?
The Prime Minister: Two studies are to run in parallel. I hope that the proposals on both will be equally tangible when they appear. Then it will be for the Government to judge whether they are in Britain's interests. I hope that they will be, but we shall have to wait and see the details.
Mr. Maurice Macmillan: Will the right hon. Gentleman accept meanwhile that it does not make it easier to control inflation in this country if he allows his exchange rate policy to increase the money supply unduly? Will talks on the general economic future of the Community include the present position in Africa and the difficulties that the Europeans and Japanese might experience if there were to be any interference with access to raw materials and minerals from that Continent?
The Prime Minister: I think that the exchange rate policy is well known. It is not proceeding unsatisfactorily. Sterling has been stable now for many months, and that is of assistance to our industrialists, who prefer a stable exchange rate. It has varied only within a very small ratio. Indeed, today it seems to be singularly strong, but I do not think that we should look at any one day, any one week or any one month. Over a period sterling is pretty stable, so it is having no adverse impact on monetary policy, which, as the right hon. Gentleman knows, is well under control at present.
As regards discussions on Africa, there is growing concern about the consequences to employment in Europe if there were interruption of supplies from African countries, including, of course, South Africa. But these matters, which are commercial matters are not discussed in open council.
Mrs. Castle: Is not the intention behind the proposals not merely greater monetary stability but the creation of a common European currency as the first step towards full monetary and economic union, which in turn will lead inevitably to a Federal Europe, for which the people of this country have never voted? Therefore, will my right hon. Friend continue to refuse to give any commitment, even in principle, until the House has had a full opportunity to examine the details and vote on them?
The Prime Minister: There is no doubt that any increases in monetary stability can lead in due course to common European currencies and to the kind of situation that my right hon. Friend forecasts and indeed fears. I do not have such fears, because the British Parliament and the British people will always judge this
1032
matter against what they believe to be their proper interests in these matters. But I think that it would be a long way—many years—from having a greater zone of monetary stability to the common European currency that my right hon. Friend forecasts. Indeed, such a thing would be possible and sustainable—otherwise, no Government could possibly accept it or live with it—only if there were a convergence of European economies. If that happened and raised the standard of life of the British people. I should be the first to cheer.
Mrs. Winifred Ewing: May I follow up the question of the right hon. Member for Blackburn (Mrs. Castle) and ask the Prime Minister to explain to me how it is that he has given assurances in answer to me and other hon. Members that there is no question of the Government's committing themselves to the principle of economic and monetary union? How does he square that with those words of his statement in which he talks about entering into a commitment by his Government? Is there not a betrayal of past assurances to the House here?
The Prime Minister: No, Sir. The hon. Lady should try to understand what she reads. What my statement says is
"A number of Heads of Government wished to see the details fully worked out before entering into any commitment by our respective Governments."
That is no betrayal of principle at all. I am sure that this matter will be discussed by Parliament, probably on more than one occasion, before it comes into being.
But, with respect to some hon. Members, I hope that they will not enter into this matter with all their antennae quivering because of preconceived ideas, because of their dislike of our original decision. We must judge it, and they will be betraying their interests if they do not so judge it, against what is in the best interests of Britain, in raising employment, achieving stable monetary conditions and engendering a higher rate of growth.
Mr. Gould: Is my right hon. Friend aware that there is widespread relief, both inside and outside Parliament, that he was strong-minded enough to resist a proposal which would lock us into the present unsatisfactory situation, and

1033
would block off one of the last remaining escape routes from the dilemma posed for us by the obstructive attitude of creditor countries? Can he say what powers he will have stop this dangerous development if the damaging potential becomes even clearer over the next six months than it is now?
The Prime Minister: The present scheme standing by itself is not satisfactory. I made that clear, although there was some pressure for me to go along for the sake of agreement. If we could get some of the redistribution of resources that I would welcome—
Mr. Skinner: If.
The Prime Minister: Of course it is "if". My hon. Friend is not the only one who has done a little negotiation in his time. As I was saying, if we could get some of the redistribution of resources, it would be certainly worth our while to examine it and see. But at the end of the day, as my hon. Friend himself has made clear, we shall have to take a decision whether we re-enter the snake or do not re-enter the snake, whatever name it is given. I shall look at it on that basis. I shall not make the mistake made by the Conservative Government, who did not work out the scheme properly and did not get the conditions they wanted. We should all of us at least try to learn from their mistakes.
Mr. Amery: I fully appreciate the need for giving careful study to the German-French proposals, but is the Prime Minister aware that we have paid a very high price for our refusal under successive Governments to join the coal and steel pool, for failing to join the European Defence Community, and for not getting into the Common Market earlier? Is he further aware that, although there may be obvious difficulties in the scheme at the moment, even if travelling with the convoy means a rough passage for a bit, it may be very much more uncomfortable and lonelier not to be in a convoy at all?
The Prime Minister: There are varying views whether we paid a high price in these matters—the right hon. Gentleman has some knowledge of them. But I am bound to remind him of what he has obviously forgotten—that between 1st May 1972 and 23rd June 1972 it cost us
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$2 billion in seven weeks. That was much too high a price to pay for joining a scheme that was clearly unsuitable. We must have regard to the costs of this scheme and the benefits that will accrue. It is no use joining a convoy if, after seven weeks, one has to jump overboard without a lifebelt.
Mr. Spearing: Will my right hon. Friend expand a little on the question of decision? Is it not a fact that the European Council is not a formal council? Will this scheme be promoted as a draft regulation by the Commission and subject to the procedures of this House prior to the meeting in December? My right hon. Friend says that it would promote stability, but even if that were true, would it not do so at the expense of the authority of Her Majesty's Government to order our own internal finances as they wished?
The Prime Minister: I cannot answer my hon. Friend's first question whether it would be a regulation. No one has got down to that kind of discussion yet. He asked whether it would remove some powers from us. The answer is "Yes"; all these matters remove powers from us. When we joined NATO, we removed some powers from ourselves but it was the general view of the House, continued for a quarter of a century, that in removing these powers we increased our security. That is surely the test that one needs to apply to this sort of proposal. If it meant lessening powers in order to increase prosperity, the House would have to take a decision whether it wished to remain poor and independent or whether it was willing to sacrifice some powers and be more prosperous.
Several Hon. Members rose—
Mr. Speaker: There is another statement to follow. I propose to allow four more questions from each side of the House, which will be a very good run indeed.
Mr. Nelson: I welcome the Prime Minister's statement, but will he accept that many of us see it as a first and welcome move towards full monetary union in Europe and the establishment of a common currency? The Prime Minister referred to the precondition of economies in Europe moving together before such

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a currency could be established. In this country we have areas of different economic performance, yet we have one currency. Why is it not possible within the European context also to have one common currency for different economies and countries of differing performances?
The Prime Minister: The hon. Gentleman hits on the correct point. We can sustain one currency in this country only because there are substantial resource transfers between varying parts of the United Kingdom, from which Scotland and Wales have benefited considerably, as Northern Ireland will in due course. The same condition must apply over a larger geographical area. This is why, before giving a reply to this particular monetary proposal, I have made it an essential condition that I should know what is to happen in the matter of monetary resources. The hon. Gentleman has summed up my stand on this question admirably.
Mr. MacFarquhar: While one knows that one has to wait for the detailed working out by officials and Finance Ministers, could my right hon. Friend say here and now whether Chancellor Schmidt, whose country would have to bear the biggest burden of resource transfer, at least indicated in principle that he was willing to increase West Germany's contribution to regional and social funds and also to European growth?
The Prime Minister: No one was asked to give any answers in principle at the weekend, so I cannot say what Chancellor Schmidt's view would be on that. Whether the amount of resources would be increased is a matter that will have to be found out when we embark on the studies. What could well take place without any increase of resources would be a greater diversion from the common agricultural policy cost to the social fund. That could take place without any addition, although I would like to see an addition. Chancellor Schmidt is being attacked in Germany for his proposal in this matter because there are people there who believe that it would be disadvantageous to Germany and advantageous to other countries. So perhaps all of us had better stand back, see how the scheme develops and then
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look how far we can each get our advantage or disadvantage from it.
Mr. Hordern: As one of the main objectives of these proposals is that of European economic integration, would not this purpose equally well be served in the meantime, before any agreement is reached, by allowing free convertability of European countries, particularly of sterling? Is it not also a remarkable commentary on the prospects for this country that the Prime Minister should see that under a Labour Government all he is really concerned with is quibbling about resources which should be transferred from richer European countries to Great Britain?
The Prime Minister: That is a very unfair way of putting it. As the hon. Gentleman knows, the Government have been concerned, both through their attack on inflation and through the 38 sector working parties, to try to improve the performance of British industry, which lies at the key to this situation. It is not sufficient to say that I am concerned only with the transfer of resources. Even if I were, I would he bound to say that it is a great pity that the Conservative Government were not sufficiently concerned before they lost $2 billion in seven weeks in 1972. That arose because there was a lack of convergence in the economies of the Community then.
Mr. Watkinson: Does my right hon. Friend agree that his opening words mean that the high aspirations of the Copenhagen summit in terms of economic growth have now been abandoned? Can he say what this will mean for unemployment in Europe next year? Are the Continentals prepared to approach the problem of unemployment as a structural one and support the sort of measures that are being taken in this country to protect jobs?
The Prime Minister: It is true that the expected rate of growth in Europe as a whole will lead, unless it is remedied, to higher unemployment in Europe as a whole during 1979. This is a factor that those present had to take into account, and that is why it is, in my view, essential that at the Bonn conference next weekend there should be undertakings to increase the rate of growth by those countries which are in a position to do it as quickly as possible I should like

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to remind my hon. Friend that I said specifically that there was agreement that increased growth is a crucial objective in improving employment prospects. No one dissented from that view. I take it, therefore, that it applies to everybody
As for the structural nature of unemployment, there are differences of view between members of the Community as to how this should be met, but so far I have not seen any better proposals than those which the Government have undertaken. They have resulted in considerable aid to companies and firms which have been in some distress, and have resulted in keeping in employment some 400,000 people.
Mr. Tapsell: By how many percentage points does the right hon. Gentleman expect the rate of inflation in Britain over the next 12 months to exceed that in the Federal Republic of Germany?
The Prime Minister: It will depend on a number of factors, including the level of inflation—[Interruption.] I beg the hon. Gentleman's pardon. It will depend on a number of factors, including the strength of sterling. That is what I wished to say. I apologise to the House for a slip of the tongue. It will depend on several factors, including the strength of sterling, the price of imported commodities and a number of factors of that sort. A great part of the very low rate of inflation in Germany—the lowest in the world. I should think, at the present time—is due to the strength of the deutschmark. [HON. MEMBERS: "Why?"] I will tell hon. Gentlemen that it is because the Germans are so successful in exporting. It is because they are able to have a big balance of payments surplus. I continually impress all these things on the Opposition. I have no doubt that one day they will agree with me that they are true.
Dr. Bray: Did my right hon. Friend have any discussion with his colleagues about the circumstances in which and the frequency with which exchange rates might be adjusted under the new scheme to take account of differing rates of inflation?
The Prime Minister: Yes, there was some preliminary discussion about that. It was pointed out that at the present time there are facilities in the snake. Indeed, many adjustments in rates have
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been made over a weekend when it has been thought necessary to do so. But there was no detailed discussion. It will be a matter for the Finance Ministers to consider in preparing the scheme.
Sir Anthony Boyle: Is the Prime Minister aware that many of our friends overseas, and also those who voted "Yes" in the referendum, will view with gloom the Prime Minister's negative reaction to the proposals concerning European monetary reform?
If other Heads of Government managed to do their homework and to provide positive reaction to the proposals put forward, will the Prime Minister explain why he was not able to do the same?
The Prime Minister: It is a matter of opinion whether it will be viewed with gloom, but there is really no case for the ridiculous euphoria with which the Conservative Government entered in a lighthearted manner into a scheme from which they had to retreat with ignominy in less than two months. I do not propose to repeat that mistake, even though the hon. Gentleman invites me to do so. I do not know what homework was needed in order to produce that piece of paper. I do not think that much was needed. It is a question where our political and economic interests lie. Ours do not happen always to lie in the same direction as those of the other countries. Some of them are getting very great benefit out of the common agricultural policy and do not want it to be touched at all. We are not.
Mr. Ron Thomas: Will my right hon. Friend agree that exchange rates are not simply determined by rates of growth in countries but more often than not by massive flows of speculative funds? Will he agree that the only way, therefore, in which the kind of policy suggested could be sustained is by economic and monetary union, and by the British people having to give up the right to determine their own economic future? Given that the European Common Market countries are certainly bankrupt in terms of ideas to deal with unemployment, can my right hon. Friend tell us why we are moving in this direction?
The Prime Minister: I go part of the way with my hon. Friend. I think that in the short run exchange rates can be very much influenced by speculative

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flows, as indeed was the case in the autumn of 1976, when sterling was depressed far below its real exchange value. That is the case, therefore, for examining a scheme of this sort, to see whether, by putting sufficient reserves behind a central fund, it will he possible to prevent the machinations of the speculators. I am sure that my hon. Friend would be in favour of that. It might mean giving up some control, but we would have to judge, at the end of the day, whether it was worth giving up the control in order the better to protect our currency, provided that the other conditions that I have enumerated are also fulfilled.
Mr. Heath: The Prime Minister has been working himself into a frenzy about the events of the spring and summer of 1972. I remind him that at that time Britain was not a member of the Community. What happened was that Britain was forced off an existing parity by speculation against sterling, in exactly the same way, as the Prime Minister recalled, as in 1976—and, indeed, as happened at the time when he devalued the pound. None of the events, therefore, of those three periods bears any relationship to the scheme which was put forward to the Prime Minister at the recent meeting.
Is the Prime Minister not aware that the whole difference between the present occasion and previous occasions is that the proposed scheme gives a backing to all currencies in order to avoid their being pushed off their parities or unduly depreciated by speculation against those currencies? It is, in fact, a scheme which I put to the German Chancellor in May 1973.
Is the Prime Minister not aware that the importance of this initiative—[Interruption.] I know that Labour Members below the Gangway do not like a progressive scheme of this kind. Is the Prime Minister not aware that the importance of this scheme is that the present German Chancellor has been prepared to commit high German reserves in order to get stability in European currencies, and that the scheme ought therefore to be welcomed?
May I ask the Prime Minister not to give the impression that he is trying to avoid the scheme on principle by insisting on unlimited discussion on detail?
The Prime Minister: I think that the right hon. Gentleman's memory fails him. There are, of course, members of the snake now who are not members of the Community, and who are in exactly the same position as that of Britain in 1972, when we entered the snake. It was not a question whether we were a member of the Community. It was a fact that we entered the snake at a rate of $2·61 and had to emerge seven weeks later at $2·45, having lost $2 billion. That is something that is not worth repeating.
This scheme is not an exact parallel to previous schemes. That is why I think we ought to look at it. There is a proposal to put behind it not just German reserves but also British reserves and the reserves of all Community countries. That would make a useful fund, although it would not add the equivalent of $50 billion, which I have seen stated, because some of this would be a mere transfer of reserves and not the creation of a new fund.
I draw the 1972 parallel only because yesterday the right hon. and learned Member for Surrey, East (Sir G. Howe) was pretending on the radio that this was something very new, and that if only we had handled our affairs properly over the last four years we would be able to go along with it. I thought that it was worth while drawing the historical parallel, and pointing out that the Conservatives tried it and failed and that we ought to do something a little different and a little better.
Mr. English: On a point of order, Mr. Speaker. Quite unintentionally, out of the kindness of your heart, after announcing that you would call only four questioners, you allowed a Conservative Privy Councillor to choose to be the last questioner. May I suggest, Sir, that in future you should choose the order of questioners yourself?
Several Hon. Members rose—
Mr. Speaker: Order. I extended a courtesy to a former Prime Minister. I shall do the same for the hon. Member for Nottingham, West (Mr. English) when he is of that rank.
Mr. Skinner: On a point of order, Mr. Speaker. Notwithstanding that slighting reference to my hon. Friend the Member

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for Nottingham, West (Mr. English), perhaps you will explain to me and to a lot of other Government supporters why it was necessary to have a statement made on this matter by the existing Prime Minister and then at the very end to allow another statement to be made by a former Prime Minister—the one who used to come with all the sunshine stories about the Common Market, the one who dragged in the British people, and the one who is now trying to make excuses? Is it not time that you gave opportunities to those Government supporters who will fight to the bitter end against the Common Market, in the way that you yourself used to do?
Hon. Members: Order.
Mr. Speaker: I have to tell the hon. Member for Bolsover (Mr. Skinner) that he needs to change his ways in addressing me. [HON. MEMBERS: "Hear, hear."] The Speaker of this House is not here to be bullied by anyone, and the hon. Member for Bolsover had better bear that in mind.

SHCHARANSKY AND GINZBURG (USSR TRIALS)
The Secretary of State for Foreign and Commonwealth Affairs (Dr. David Owen): I will, with permission, Mr. Speaker, make a statement on the trials of Anatoly Shcharansky and Alexander Ginzburg which have opened in the Soviet Union today.
The whole House will deplore the fact that the Soviet Government have now put on trial 15 members of the Helsinki monitoring group. The Helsinki Final Act states that individuals have the right to know and act upon their rights and duties in the field of human rights. These trials, inasmuch as the charges relate specifically to activities fully compatible with the Helsinki Final Act, are in direct contravention of the spirit and intention of the Act.
The British Government have repeatedly warned the Soviet Government of the consequences which their handling of such cases could have for the atmosphere of their relations with the United Kingdom, and for the chances of making progress on vital issues in East-West relations generally. I personally made this clear to the Soviet Foreign Minister when I met him on 1st June.
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A preparatory meeting for the CSCE scientific forum is now taking place in Bonn. I have instructed our representatives to raise at the earliest opportunity Soviet actions in relation to the Helsinki monitoring group and to make it crystal clear that we expect all the provisions of the Act to be implemented.
Mr. John Davies: I thank the Foreign Secretary for his statement, the brevity of which is appreciated in view of the fact that apparently it slipped through the net of parliamentary convention and was not made available to the Opposition Front Bench in the usual timely fashion.
The Opposition share the deep sentiments which the right hon. Gentleman expressed. We have a horror of thinking of innocent men being put on trial for crimes which we cannot recognise. May I ask the right hon. Gentleman whether he contemplates going beyond words and taking some action in the matter, as I understand the President of the United States has done in cancelling visits to the Soviet Union?
Will the right hon. Gentleman recognise that this further act reveals the total hostility of the USSR to any efforts to placate it, and will he take that lesson to heart in all his considerations of these fearful problems that we have in Africa?
Dr. Owen: I am grateful to the right hon. Gentleman. I am sorry that the statement was not issued. The main reason was that I was trying to discover whether our representatives had been allowed to take part in witnessing the trial of Mr. Ginzburg in Kaluga. I have not yet obtained information for the House about this, although we know that they have been prevented from attending the Shcharansky trial in Moscow.
As for what specific action can be taken, the House knows that, following the trial and sentencing of Professor Orlov, we stopped a bilateral sporting agreement being signed, and that is still held up. I think that we have to look at the question of what direct action we can take. I do not believe, for instance, that it would be right to call off our participation in the negotiations on comprehensive test bans or on mutual and balanced force reductions. I believe that we have shown in the most practical way our recognition of the deterioration in the atmosphere of detente generally by

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the decision to increase the defence budget by 3 per cent. a year as part of an overall NATO response. I think that that was a necessary response in the light of the events which we have been seeing.
I think also that we shall have to take into account Soviet susceptibilities in our relations with other countries, but I do not think that we will necessarily attach the same degree of importance to them as we might do otherwise. I have in mind our relations with China and other countries. We shall make those decisions on their merits. We seek good relations with the Soviet Union and with other countries, but we will not be intimidated, and we shall not make any distinctions in our approach to detente around the world. The Soviet Government claim that they recognise that detente is indivisible. I agree with the right hon. Member for Knutsford (Mr. Davies) that we must challenge their adventurism and attitudes in Africa.
Mr. Greville Janner: Is my right hon. Friend aware that the very forthright statements made by him and by my right hon. Friend the Prime Minister this afternoon reflect accurately the anxiety and anger of the vast majority of this House and of the British people at these terrible travesty trials and at their increasing tempo? Will my right hon. Friend impress upon the Soviet authorities that when they imprison and exile people such as Orlov, Slepak and Nudel and put on trial people such as Shcharansky and Ginzburg, they not only bring themselves into disrepute amongst those who are happy to find hatred for the Soviet Union but, in particular, they offend and upset those of us who have not forgotten that at one time they were our allies and those of us who want detente and are seeing it relentlessly destroyed by them?
Dr. Owen: I know my hon. and learned Friend's great interest in these issues, and I recognise that he and others want to see progress in detente. But there is a connection, and the Soviet Union had better understand it. That connection lies, if not in the actions of Governments' certainly in the attitudes of the people of our countries. They would not allow Governments to improve relations between the Soviet Union and the United Kingdom were they to sec daily
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evidence paraded before their eyes that the Soviet Union was not respecting the basic provisions of the Helsinki Final Act. The Soviet Government will have to understand that soon they will have to choose. There will not be an improvement in the atmosphere of detente if they continue to conduct matters like this in the way that they are showing every sign of doing.
Mr. Powell: What would be the reaction of Her Majesty's Government if the Soviet Government sought to interfere with the administration of the law in this country?
Dr. Owen: It would be to reject it. For that reason, I have very carefully—perhaps the right hon. Gentleman did not listen to what I said—not referred to the specific court proceedings taking place, and that is why I have always observed that and referred to the Helsinki monitoring group and its activities. Whatever one's disagreements with Governments—and they are very great, especially on this score—we must still respect due processes as far as we can and hope even at this late date that the courts will allow fair and just hearings. I say only that there are anxieties about that in the Soviet Government not allowing the press and officials of other countries to take part in this. That is why I attach particular importance to the trial of Mr. Ginzburg, because the charge relating to him is very similar to the one faced by Professor Orlov. That relates specifically to activities involving the Helsinki monitoring group. I draw a distinction between the two charges.
Mr. Faulds: Will my right hon. Friend accept the warm reassurance and support of the House for his statement, except perhaps for that somewhat dubious comment from the right hon. Member for Down, South (Mr. Powell)? Would my right hon. Friend consider, as a measure of the disapproval of Great Britain and of this House of such Soviet behaviour, the suspension from here on of all cultural connections with the Soviet Union?
An Hon. Member: And sporting.
Dr. Owen: These are difficult questions on which, in terms of culture and sport, there is a considerable element of individual choice. It is often an individual club or an individual orchestra or ballet

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company which will also be able to make its voice heard. In those activities, the decisive voice often is not the Government's but the people's. I believe that it is wise to make a distinction between discussions involving military detente such as SALT, CTB and MBFR and trading and commercial matters—those are best left to carry on in the normal way—and those other aspects which are cultural, sporting and in relation to the Helsinki Final Act where I think there is a strong case for individual actions to take effect.
Mr. Thorpe: In so far as diplomats and journalists from the western world have to date been excluded from both trials, is it not pertinent to remind ourselves that, when the European Court of Human Rights was looking into an allegation made by the Irish Republic against this country, the largest press corps present was from the Soviet Union? Is it not extraordinary that they should show so much interest in reporting human rights matters in other countries and be so frightened of having them reported in theirs?
For the record, is it not right to say that Shcharansky has been held at the Lefortovo gaol incommunicado for 18 months, contrary to the criminal code in the Soviet Union, that he has been denied access to any lawyer, and that the Soviet lawyer, Madame Kaminskaya, who wished to represent him, was told to leave the country because she was not on the KGB approved list of lawyers, which was essential before she could act for him? Finally, since the right hon. Gentleman says he wishes to make crystal clear that the implementation of the Helsinki Final Act matters to this country, will he consider the possibility of Great Britain withdrawing from the scientific forum in Bonn unless we get a satisfactory explanation from the Soviet Union?
Dr. Owen: The right hon. Gentleman asks about the period of detention. Certainly they have been in detention for 16 months without being brought to trial, and I understand that there is a maximum period laid down in the Soviet Union which already has been exceeded. I agree with the right hon. Gentleman that that aspect of itself causes great concern.
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As for being present during the trial, I think that people would find much more sympathy with the point made by the right hon. Member for Down, South (Mr. Powell) if they had seen proceedings in open court with the whole world being able to witness them and form its own judgment about the justice meted out.
As I say, there are problems in relation to the charge against Mr. Shcharansky because it is one of espionage, and in these cases, sometimes even in the western courts, a different procedure is adopted. I do not yet know the situation so far as Mr. Ginzburg is concerned, but it gives cause for concern, too, that even the relatives have been excluded from some of these trials.
The subject of the scientific forum will have to be left open. It is for consideration whether we can continue with the CSCE process while one aspect of it is being flagrantly flouted.
Sir Harold Wilson: As I am the only hon. Member in the House who was a signatory of the Final Act in common with the Heads of Government of every European country and the two North American countries, signing it in good faith and on the assumption that all others were signing it in good faith, may I ask my right hon. Friend whether, on this matter of the breach of certain carefully considered and important aspects of the Helsinki Final Act, he will make it his business, for the benefit of the House and the public generally, to give us a categoric statement in detail linking, section by section, the Final Act of Helsinki with the actions taken? Is my right hon. Friend aware that I believe that if he could make it his business to publish this, whether by way of a White Paper or in some other way, it would be extremely helpful? It would be better than talking a lot about cancelling this football match or that dirt track meeting, which would not have the same relevance in the public mind and could easily be dismissed by those whom he is seeking to influence.
Dr. Owen: I pay tribute to the success of my right hon. Friend the Member for Huyton (Sir H. Wilson) in getting a signature for the Helsinki Final Act, which opened up the prospect of human rights which many people thought

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would never have been able to be included in that Final Act. I have no doubt whatever that it was right for Britain to sign the Helsinki Final Act and I believe that it is right for us to go on, despite all the difficulties, pursuing the possibilities of detente.
Turning to the specific question raised by my right hon. Friend, following the Belgrade meeting we published a detailed White Paper which, although it did not mention the specific cases raised—because the Belgrade meeting was in private—gave a clear account of the representations that were made in a specific and detailed way over a whole range of areas concerning which we were dissatisfied with the implementation of the Helsinki Final Act. I will certainly see whether we can elaborate that White Paper further. We have tried to give as much information as possible to the House about the dialogue that took place at Belgrade. It was both specific and detailed. The point that my right hon. Friend makes is valid. We need to see the process as a whole rather than isolate certain aspects of it.
Sir Harold Wilson: May I put a supplementary question? We all know about the Belgrade meetings. They were at secondary level and they did not come to anything very much. It was a multilateral document that was produced. The fact that my right hon. Friend has asked the leave of the House to make a statement this afternoon suggests that something new has happened since Belgrade. Therefore, what Belgrade said is not, I think, of particular importance at this stage. Will my right hon. Friend present his own assessment, on behalf of the Government, of the position as he sees it today and not the lowest common denominator of agreement among the 35 countries at Belgrade?
Dr. Owen: We made our own view clear in the same White Paper following Belgrade, and not so many months have passed since. What might be interesting to the House are the details of the charges and the record of the 15 members who have already been brought to trial and some of the other members of the Helsinki monitoring group who are threatened at the moment.
Sir David Renton: Is the right hon. Gentleman aware that no one could accuse him of interfering in the internal affairs of the Sovet Union if he were to remind the Soviet Government that the mere holding of these trials is itself a breach of an international obligation?
Dr. Owen: We still have to face the fact that the courts can throw the charge out in the Soviet Union. Most of us would be surprised if that happened. That is the possibility that exists, and the main aim of the defence is to try to show that the case ought never to have been brought. This relates to the point made by the right hon. Member for Devon, North (Mr. Thorpe), that there has been a serious attempt to try to ensure proper legal advice for some of these people, sometimes from people outside the Soviet Union, at their own specific request. We have been unable to get legal advice for them while they have been in detention and unable to get them properly legally represented in the courts. It is this which is causing great concern.
Several Hon. Members rose—
Mr. Speaker: Order. We must be fair to the Private Member's motion which will finish at 7 o'clock. That debate has already been much abbreviated. I propose to call two more hon. Members from each side.
Mr. Whitehead: Does my right hon. Friend agree that the real answer to the right hon. Member for Down, South (Mr. Powell) is total absence of due process where both these prisoners are concerned? Would he not agree that this is bound to condition the way other States see the Soviet Union in the light of the Soviet Union's interpretation of the law in its own country? Does my right hon. Friend further agree that it would be appropriate for Her Majesty's Government to begin preparing now, along the lines suggested by my right hon. Friend the Member for Huyton (Sir H. Wilson), a memorandum which can be submitted at the next review conference in Madrid so that that conference shall discuss questions of civil rights, as was not done at Belgrade?
Dr. Owen: I agree with that, although Madrid is two years away. My right hon. Friend the Member for Huyton wants action rather earlier than that. The

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whole House may wish to debate some of these issues. We have had a discussion on this in the past. I shall draw the issue to the attention of my right hon. Friend the Leader of the House.
Mr. Blaker: I understood the Secretary of State to say that we should not link Soviet breaches of human rights with economic matters. I can see that we would want to think carefully before making such a linkage. However, are not those two matters linked in the Helsinki agreement, and were they not part of one bargain? Are not the economic provisions of the agreement very advantageous to the Soviet Union and sometimes doubtfully advantageous to us?
Dr. Owen: I said "at this moment". My preliminary reaction was that I would not take this into areas of trade. I do not think that we can exclude that possibility. In particular, there has been anxiety about the transfer of technology. The House has to be blunt with itself on this issue. It is one thing for us to withhold technology, but all the signs are that many other countries, many of them our allies, would not do the same. We would put our own industry and economic prosperity at risk. If there is any case for taking action in any of these areas—[An HON. MEMBER: "South Africa."] As for South Africa, it is best that action be taken collectively by the member nations of the world, or, if not the world, in the Community. It is better to look at this in relation to our allies as we have done at Belgrade and in other ways, when we have co-ordinated very effectively inside the European Community through political co-operation.
Mr. Newens: May I ask my right hon. Friend to note that while many of us on the Left deeply deplore the activities of the CIA and utterly condemn any action which it may be taking to intervene in Soviet domestic affairs, as it has done in Africa and elsewhere, we would none the less deeply deplore the trials which are taking place in the Soviet Union at present? Will my right hon. Friend make it clear that it is not people who are habitually opposed to the Soviet Union or to detente who are speaking out against these trials but many of those who are
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committed Socialists and who feel very deeply about the cause of social change throughout the world?
Dr. Owen: This is something which the Soviet Union would do well to understand, that the condemnation and repugnance over this activity is common to all hon. Members and to all people in the country. The Soviet Union must recognise that the people of the United Kingdom will not accept that there can be progress with detente and an improvement in relations between our two countries without progress being made on individual human rights.
Mr. Baker: While I welcome the original statement which has been made, may I ask the Foreign Secretary to convey to the Prime Minister the fact that many people in the country feel that it would be appropriate for the Prime Minister to convey to Mr. Brezhnev at Prime Ministerial level the sense of outrage felt by Britain about the travesty of justice in Russia this week? The Prime Minister should tell Mr. Brezhnev that trials in camera when the verdict is already known are no enhancement of human rights but rather a denial of them. Is it not appropriate that, while Russia continues to treat human rights in this way, it would be a correct and suitable approach for the Government to consider all points of contact—cultural, trading and even defence limitation talks—until there is more evidence that the Government of Russia are prepared to honour the obligations into which they have entered, such as the Helsinki agreement, which they signed?
Dr. Owen: The hon. Gentleman represents a point of view. I do not share it. I do not believe that it would be right at this moment to encourage the United States not to proceed with its discussions on the SALT talks or for us to withdraw from the comprehensive test ban negotiations or the negotiations on mutual and balanced force reductions. We have to try still to seek progress in these areas and not to let a reasonable and wholly justified sense of outrage affect what may be far-reaching consequences for relations between the two countries. I would not accept that at this stage we should contemplate withdrawing from those military dialogues.

HOUSE OF COMMONS PUBLIC GALLERIES (INCIDENT)
Mr. Stanbrook: On a point of order, Mr. Speaker. My point of order concerns the incident which occurred in the Chamber of the House last Thursday after which it was reported that you had ordered that the people concerned should be handed over to the police for prosecution in the magistrates' court. I will say nothing which will be in breach of the sub judice rule. However, if a contempt is given in the face of a court it is almost always followed by immediate imprisonment, sometimes for a long time. A studied or deliberate insult to the House of Commons should surely be treated no less seriously.
There was, perhaps, a humorous aspect to what happened on Thursday but it may not always be so. Because of our security arrangements here it may not always be possible to prevent someone with a real or fancied grievance from doing damage to this place far exceeding the damage that was done to the carpet in the Chamber last Thursday. I believe that there is a facility in the Victoria Tower for dealing with miscreants of this kind. Should it not be put into use?
Mr. Dalyell: Further to that point of order—
Mr. Speaker: Order. I hope that hon. Members will not pursue in public any questions concerning the security of the Chamber. I am about to reply to the hon. Member for Orpington (Mr. Stanbrook).
Mr. Dalyell: Further to that point of order, Mr. Speaker. As one of those who was involved the other day I am aware that there may be serious criticism of those involved with our security. Some of us would like to point out, since the issue has been raised, that there is surely a difference between soft objects, however offensive, and hard objects that would necessarily involve a bomb or something of that kind. There is a difference, and we think that some generosity ought to be shown to those involved with our security who have a difficult enough job.
Mr. Emery: Further to that point of order—
Mr. Speaker: Order. Perhaps it would help the hon. Member if I reply to the original point of order raised by the hon. Member for Orpington (Mr. Stanbrook). Then, I hope, the House will feel satisfied.
The hon. Gentleman was kind enough to give me notice of his point of order. Under Standing Order No. 113, the Serjeant at Arms has the standing instruction from the House to take into his custody any stranger who may be reported to him as having misconducted himself or herself in the Galleries. This method of dealing with the usual form of disturbance in the Public Galleries has the general approval of the House. Certainly I am not aware of any dissatisfaction with it on behalf of the House.
For a disturbance of a more serious nature, as last Thursday night's incident undoubtedly was, the House could indeed proceed by way of its jurisdiction in matters of contempt. I am sure, however, that right hon. and hon. Members will agree that such a course would be complicated. The House should also have regard to the limitations which are, in practice, imposed upon its penal powers.
It was my view in this case that it was better that the offenders should be handed over to the civil powers so that the offence could be dealt with by a court of law. I notified the House that I had instructed the Serjeant at Arms so to do. This was the course followed by my predecessor in July 1970 when there was another serious incident. I am convinced that it was the right course to adopt last week. It may well be that those responsible for the security of the House will want to look again at the various issues which arose out of last week's incident.
Mr. Emery: Further to that point of order, Mr. Speaker. I am sorry to pursue this matter but there is one point which has not been touched upon. It is known that the persons concerned were, quite rightly, handed over to the police, as you have said. There appears to have been some humour made of the House if the charge—after what was quite obviously a major breach of the peace—is to be published as being criminal damage of the carpet of the Chamber. That seems to put the whole incident into a ludicrous light when it is very serious. Would you look again at what action might be

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taken after these persons have left the jurisdiction of the Serjeant at Arms and been handed over to the civil authority?
Mr. Speaker: The answer to the hon. Gentleman is that that charge is not, of necessity, the only one. That is the first charge that is published. We would be wise to leave matters there. We do not know what course will be taken.
Mr. Skinner: Further to that point of order, Mr. Speaker. May I point out, although I may be in a minority on this matter, that we ought not to get terribly hysterical about the lack of security for Members of Parliament in the light of other matters? May I draw attention to the fact there are millions of people who suffer from a lack of security in one form or another, people whom we represent throughout the country? There are people on waiting lists for kidney machines, old people dying of hypothermia in winter. These are things that we, as politicians, might be able to deal with. I think that we should bring our attention to these matters before we become too hysterical about something that has occurred only twice in the course of the eight years that I have been a Member of Parliament. Let us face it, the people concerned were only trying to get a fresh motion before the House.
Mr. Speaker: I am much obliged to the hon. Gentleman. I noticed how fast he moved last Thursday.

AEROSPACE PRODUCTION POLICY
4.38 p.m.
Mr. Terry Walker: I beg to move,
That this House, mindful of the high technology of the British aircraft and aeroengine industries, calls upon the Govenment to come to an early decision on the future aerospace production policy of the United Kingdom; and to ensure that choices on the best collaborative projects are made on commercial grounds in order to protect Great Britain's capabilities in design and development as one of the world's leading aircraft manufacturing nations, as well as protecting the jobs and livelihoods of many thousands of workers employed in these important industries in this country.
Since the last debate which I initiated on a similar subject, on the Adjournment of the House on 26th May, when I sought to impress upon the Government the urgency of making a decision about the future manufacturing programme of British Aerospace, the situation has developed considerably. My right hon. Friend the Prime Minister saw senior management of Boeing, McDonnell Douglas and Eastern Airlines during his visit to the United States. I realise that these discussions were for information rather than negotiation.
The fact remains that these talks, together with the fact that Secretaries of State for Industry and Trade, had similar talks with Boeing, Lockheed and McDonnell Douglas, and also talks with French and German Ministers about the situation in Europe, must mean that the British Government are moving towards the time when they will have to formulate a decision on the matter as a whole. They are fully conversant with the magnitude of the decision that must be taken.
The question is, with which nation or nations should we collaborate on aircraft production in the future? The choice is between working with Europe on the development of a new short-to-mediumrange airliner, or accepting a deal with Boeing or McDonnell Douglas on one of the new jets those companies are planning for the future.
The outcome of that decision will affect the future of both British Aerospace and Rolls-Royce engines. It will also have an effect on the fleet that British Airways

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will fly in future. For the British Government it is a decision of the highest importance with important political implications. All three companies—British Aerospace, British Airways and RollsRoyce—have different views on the way in which the industry should develop. However, in the end the Government will have to decide, and the main consideration will have to be commercial.
The aircraft must be a seller and therefore the commercial considerations are of the highest importance. On both sides of the Atlantic the manufacturers are moving to meet market needs with similar kinds of aircraft. The Europeans rightly feel that the present production set-up—Boeing with 60 per cent., McDonnell Douglas-Lockheed with 30 per cent. and the United Kingdom and Europe with a mere 10 per cent.—is unacceptable. They feel that if the United Kingdom and Europe join together they could prise away a larger share of the market from the Americans.
Conversely, the Americans feel that if they could keep Britain away from the European industry, it will weaken the European project which will then be less of a threat to the Americans and their domination of the market in the future. Not for many years has this country been in a position in which so many people wanted to be our partners on an aircraft project. This bears out the fact that the British aircraft and aero engines industries are very good and very healthy. With so many people wanting us as partners, we should rejoice.
The Europeans want us because they feel that, together with them, we could secure 20 per cent. of the market in future. There are two main projects under consideration by the Europeans. These are the B-10, a derivative of the A-300 Airbus with 217 seats, and the two versions of JET—one with 130 seats and one with 160.
I was with a delegation from the aviation group of the Government side of the House which went to Toulouse last weekend to talk to senior management of Airbus Industrie about the way things were moving. Those people made it quite clear to us that they favour a decision by the partners in going ahead with the B-10 within a matter of days rather than weeks.
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If the United Kingdom did not want to collaborate with the present airbut partners they gave the strong impression that they would go ahead on their own.
But the first question I put to the Government is, are they prepared to make a decision on the B-10 in view of the time scale laid down by the European partners, or do they think that it is too early to commit themselves to this kind of development?
While we were in France the airbus partners also made it clear that it would not be enough for the United Kingdom just to make a decision on the B-10. Germany and France will want us to buy into the A-300 airbus consortium. British Aerospace is not a member of the consortium although it has contracts to make about 17 per cent. of the A-300.
Are the Government now prepared to buy into the A-300 project and, if so, how much will it cost? We were not told this and we want to know before we say that we should proceed with this project. The French and Germans made threatening noises, suggesting that unless we were prepared to buy in on the airbus, we would not be allowed on the B-10. Moreover, if we refused both, and went with the Americans, we would be in danger of losing our 17 per cent. production share of the A-300, because there was a clause in the contract that we must not produce any aircraft which is a competitor. In partnership with either Boeing or McDonnell Douglas, we could be held to be doing just that.
This is a matter of concern to those people who are working on part of the airbus at Chester. This was brought home to us last week when the delegation visited Chester on our way back from France in order to see the situation at first hand. Do the Government feel, therefore, that we should buy back into the A-300? Can we afford to do so? These questions make us rather reticent about the European collaboration.
The big point about the European deal is that Rolls-Royce seems to be excluded from those projects. One of our provisions in going in on the B-10 project surely must be that we should be allowed to produce Rolls-Royce engines for the customers who require them. This is possible if we are allowed to do so. If the airbus consortium seriously wants us

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in on the B-10, it must be prepared to give us greater involvement than is envisaged at present. The supply of American engines must be questioned. At the moment there is 28 per cent. American involvement on the A-300, including the engines and we would feel that we have a right to put Rolls-Royce engines into the B-10 if it comes forward.
It will not be an easy option to go in with the European airbus consortium. The matter will need strong negotiating on our side if we are to be successful in getting our fair share of the work in the United Kingdom. I hope that when the Prime Minister next meets the European Heads in Bonn he will speak to the Germans and the French about this matter. We are told that the decision is imminent.
Boeing's widely publicised offer to the United Kingdom is a partnership in the 757 project. This sounds most attractive to many people because we have been assured that the plane will have Rolls-Royce engines, and Rolls-Royce has made its views known. It supports our going for the Boeing offer.
One factor must be borne in mind. The airlines that will buy these aircraft specify the engines that are used. Boeings can never include as part of the deal the guarantee that Rolls-Royce engines will be used in every case. Indeed, one wonders whether Boeing intend to push Rolls-Royce at all. I have a copy of a Boeing presentation to Eastern Airlines produced in May this year showing comparisons involving three engines. That showed the Rolls-Royce engine to be the heaviest and to have the highest fuel consumption and the lowest cruise thrust—three distinct disadvantages. Even though Rolls-Royce wants to go with Boeing, I wonder whether Rolls-Royce has gone deeply into the matter and is aware of what is being put out by the Boeing company.
Dr. M. S. Miller: I appreciate the kind way in which my hon. Friend is putting forward his argument, but will he take it from me that there is, to say the least, some doubt about the figures we were given in Toulouse? Of the three engines he has compared, only two are in existence. The engine which is looked upon as the best of the three is an engine only on paper. I am sure he agrees that there is a very
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big difference between an engine which is already in use being tested against one which has not yet been put into action.
Mr. Walker: I appreciate my hon. Friend's comment. It is crystal clear to everybody now that perhaps the Boeing arrangement does not represent such a good deal as Rolls-Royce at one time thought. When we consider that it is the airlines which must decide eventually what goes into their aircraft and which engine is to be used, that is not part of the deal and must be discounted if figures of this kind are to be bandied about.
Mr. Robert Adley: The hon. Gentleman is right to make that point, but does he agree that Rolls-Royce has hardly gone out of its way to make it as clear as possible that that is the case? Information sent by Rolls-Royce to certain hon. Members seeks to give the impression that if British Aerospace and Boeing join up in the so-called 757 project, a whole string of orders for Rolls-Royce will follow. That is a quite erroneous impression.
Mr. Walker: I was about to come to that point, and I am glad that the hon. Gentleman mentioned it. To many of us it appears that the Boeing deal is not as attractive as we were lead to believe. Boeing does not particularly need us, and perhaps could manage without us. If we go in with Boeing, I am worried that in future we shall end up as sub-contractors to Boeing. Boeing can see this arrangement as a way of breaking the European competition to the 757, when it appears. The ultimate aim of this country must he to get away from the two separate blocks on either side of the Atlantic. In the long term there must be some collaboration between Europe and the United States.
The situation that is now developing, where similar projects are being embarked upon on either side of the Atlantic, must be deplored because it will lead to fierce competition. That will not be in the best interests of any of the people who work in the industry on either side of the Atlantic. Therefore, the offer of a partnership with McDonnell Douglas on its proposed ATMR aircraft appears to be the most attractive. The big question that remains unanswered is whether it could be linked with the proposed European projects. Perhaps the Minister will deal with this matter in his reply.

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The McDonnell Douglas suggested collaboration, based on a third for the United Kingdom, a third for Europe, and a third for that company, seems to be a most attractive offer. However, the best collaborative project for Great Britain relies on some complex factors, including the best deal that can be obtained for design and work-sharing—a very important consideration—and aircraft marketing. We want to be partners, not sub-contractors. To collaborate on our own with the Americans would lead to our being in a very weak position, but I feel that if we and the Europeans collaborate with the Americans we shall get a fair deal and we shall be in a much stronger position.
ATMR is a new technology aircraft which makes it more attractive to British industry than the half-new, half-old 757, and McDonnell Douglas would be happy for Rolls-Royce RB211–535 engines to power it. We are given to understand that a deal would also include joint work on military projects, and marketing of the HS146 airliner when it has been produced.
This brings me to the HS146 project itself. We were told by Lord Beswick some time ago that a decision was imminent. Judging by the newspaper comment over the weekend and again today, a decision is about to be made. It is to the Government's credit that this project still exists. Certainly the Government have been far-seeing enough to keep the project going, but a decision one way or the other has still to be made. This decision is of significance to Bristol because we understand from the British Aerospace management that some of this work will go to Bristol and some to the constituents of my hon. Friend the Member for Welwyn and Hatfield (Mrs. Hayman).
We all hope that some way will be found to put a Rolls-Royce engine into the HS146. I hope that we shall be able to go forward with this project, because the time is coming when we need some decision in view of the need for work to keep the factories going. I hope that in his reply, the Minister will deal with this matter.
It will be unthinkable to conclude this debate without referring to the Concorde. That is a great technological
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achievement, and now that the aircraft is fully in service many more airlines are showing an interest in running Concordes on a leasing or buying basis. I hope that the Government will be able to give an assurance that production lines will not be dispersed once the last aircraft comes off the line. If the valuable technical teams are broken up, we might be unprepared for the demand when further aircraft are required.
Looking to the future, supersonic travel, despite the attitude in the United States, is here to stay. At some time the Americans will want to become partners in producing a mark II version of Concorde. I hope that we shall be in a position in future to use all the technology amassed by Britain and France in producing the mark I Concorde to enable us to be at least equal partners with the Americans in producing supersonic aircraft until the end of the century. I believe that supersonic flying will go into the future, despite the dog-in-the-manger attitude by the Americans.
It is a pity that British Aerospace and Rolls-Royce are totally divided on their views about which way the industry should go. The decision must be the right one for all those who are employed in the aero engine and airframe industries. The aero engine industry cannot be divorced from airframe interests. I hope that both sides will recognise their interdependence and how important it is for both sides of the industry to be kept in a healthy condition.
My preference would be the establishment of a strong European collaborative aircraft industry, but I realise that this may not be possible. The price may be too high and the fact that Rolls-Royce engines will probably not be used in European projects may be a factor that the Government will take into account.
To go in with Boeing would reduce us from the mainstream of aircraft production to the role of a sub-contractor to the Americans some time in the future. From what we have been told—and this is all that we have to go on—the McDonnell Douglas offer looks the best, provided that the French and the Germans are prepared to come in on a project with us.
The best project must be a viable one on commercial grounds. That is most important. Whatever is produced must

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be something that we can sell. Our great experience in design, development and production must be protected and the jobs of the workers employed in these important industries must also be protected. I hope that the Government will be able to pledge to keep the British aircraft and aero engine industries viable and independent long into the future.
5.2 p.m.
Mr. Kenneth Warren: I am grateful to the hon. Member for Kingswood (Mr. Walker) for initiating a debate on this vital subject which affects the fortunes of 250,000 people in this country. As an aeronautical engineer I must declare my interest, but the future of the industry affects not only those people but many families and many business men around the industry's factories. They will be affected by whether the Government are prepared to make a statement and whether it is the Government's responsibility to make a statement at all.
The hon. Member for Kingswood said that he was worried about the delay of the Government in making a statement. Perhaps I may remind the House and the Ministers of the time that a number of hon. Members, including the Ministers and myself, got ourselves into the "Guinness Book of Records" by taking part in the longest sittings recorded in the House since 1265 in the Committee discussions on the Bill to nationalise the aerospace and shipbuilding industries. The hon. Member for Feltham and Heston (Mr. Kerr) and I were even able to take time out to go on a Concorde to Bahrein as part of our contribution to those debates.
The Minister of State, who was most assiduous during the whole passage of that Bill, stated categorically on 10th February 1976 that the market strategy in new projects must be for the board of British Aerospace and not for the Secretary of State. I do not expect from him today a statement on behalf of British Aerospace.
Mr. Norman Tebbit: My hon. Friend may have been in the House earlier at Question Time when I asked the Secretary of State for Industry whether he thought that it was for him or for the board of British Aerospace to make the marketing strategy decisions. It is curious that, contrary to what the Minister of State said during the passage
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of the Bill, the Secretary of State told me that he did not know—though he wrapped it up in a lot of waffle.
Mr. Warren: I am grateful for that intervention. It takes me on to the next point. In a recent Question, I asked the Secretary of State whether the Government were able to give us an idea about the market that existed for the HS146. I was told that the Government had no idea about this because they were not equipped to give such information and that only the board of British Aerospace could do so.
I also asked the Minister of Defence whether there was an operational requirement for the HS146, and I was told that there was no military requirement for that aircraft. Yet in The Sunday Times yesterday we were told that, at the British Aerospace headquarters in Weybridge last week,
"a group of 30 civil servants, including senior representatives from the Treasury, Ministry of Defence, Department of Industry and the head of the Think-Tank"
—that puts the coup de grâce on it—
"listened to a full review of the State aircraft manufacturer's future."
That would be fine, but the Minister of State dismissed the Treasury in our Committee debates. He said that the Treasury was not equipped to make an independent judgment about future projects.
I am fed up with the fact that now, as then, the Government admit that they are not equipped to make decisions and we are forced to use the sort of vehicle that the hon. Member for Kingswood has used to bring to the Floor of the House a debate which is crucial to the future of high technology in this country and to the aerospace industry in particular. I am fed up with the fact that we shall not hear from the Government any authoritative statement. They may say that they have backed the HS146 or that they have not, but they do not have the authority, because they have said that they do not have the authority, to say anything other than that which their paymasters in the trade unions have said they must say.
The tragedy is that throughout the Committee debates we were told repeatedly that industrial democracy would come. The hon. Member for Bristol, North-West (Mr. Thomas), the hon.

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Member for Feltham and Heston and all their friends in ASTMS and TASS were fobbed off with the excuse that they did not have to worry because there would be consultations and that more than 50 per cent. of the members of the board would be trade unionists. We were told all this, but we ended up with one luckless individual finding his way on to the board of British Aerospace and no decisions have ever come out of that corporation.
Mr. Ron Thomas: It may have been when the hon. Member was flying down to Bahrein in Concorde, but I recall that in Committee the Government rejected an amendment providing that 50 per cent. of the number of board members should be from trade unions, and such a provision has never, as far as I know, been incorporated in the Bill.
Can the hon. Gentleman tell us whether he thinks that the House ought to have some influence on aerospace policy? It has not been clear from what he has said so far.
Mr. Warren: I assure the hon. Gentleman that I shall give my view on the second point, but, on the first matter, the Minister of State said in Committee that he would be grateful if his hon. Friends did not continue with the amendments that promoted industrial democracy.
I am sure that the hon. Member for Bristol, North-West remembers that. He, the hon. Member for Feltham and Heston and the other trade union lackeys who expected to get something for the unions were fobbed off. I resent not only the fact that they did not get anything for the trade unions but that the workers on the shop floor have got nothing either.
Mr. Russell Kerr: The hon. Member for Hastings (Mr. Warren) will understand that I do not particularly enjoy being described as a trade union lackey. However, I was on the Committee representing, in part, my union. I certainly understood the meaning of the communication that passed between the Minister of State and my hon. Friend the Member for Bristol, North-West (Mr. Thomas) and myself. It was to the effect that, because of certain things that were already being formulated in the Government's mind, it was unneces-
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sary for us to push at a door that would be opened from the inside anyway.
Mr. Warren: Unfortunately, the door has remained locked. I thought that the hon. Gentleman represented Feltham and Heston. I did not know that he represents trade unions.
The problem is whether we in the House have the ability to debate such important questions and to get answers. I hope that we shall get some answers from the Government. In Westminster, this hothouse of politics, we must get away from the belief that there are only political answers to these very difficult questions. There are not. The most important fact is that the decisions on the next generation of civil aircraft can be made only by the customer airlines. The customers choose not only the airframes but the engines.
I was interested in the comments made by the hon. Member for Kingswood about the Rolls-Royce engine. The hon. Gentleman failed to observe that the Rolls-Royce engine happened to be the cheapest of the three engines that he mentioned. Secondly, many airlines already have an existing engine type, whether it be General Electric, Pratt and Whitney or Rolls-Royce. They will not change on account of the marginal differences shown in the analysis that the hon. Gentleman quoted.
I have seen the Boeing analysis in Seattle. I was advised by Boeing that the company thought that about one-third of the engines for the projects that it had in mind would be supplied by Rolls-Royce because the airlines wanted those engines. That is why Boeing has Rolls-Royce engines in its inventory.
It is the customer airlines that will decide whether aircraft are bought. Unforunately, it could be the politicians who decide whether they are built. I am frightened that, without sufficient cuscapital available to the British Aerospace corporation eaten up by a project such as the HS146, a project that buys jobs because it is based on a political decision but does not provide continuing employment for those in the industry.
I recognise the sincerity of interest of the hon. Member for Welwyn and Hatfield (Mrs. Hayman) in the HS146. I served on the shop floor of the Hatfield factory as an apprentice and I feel deeply

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that the Hatfield enterprise has great talent and should be able to suceed. However, when the last Trident has been delivered or is on its way to China, I recognise that it must be felt on the shop floor that there is no more opportunity.
I plead with the Minister not to take a political decision that buys jobs on the shop floor at the expense of not making available to the rest of the corporation the opportunity to proceed with other projects.
Mrs. Helene Hayman: The hon. Gentleman seems to suggest that it is only the Government who are interested in building the HS146. The House gave to the board of British Aerospace responsibility for formulating its plans and making the very assessments that he has been saying should be made of what is for the good of the industry. It was the board of British Aerospace that requested permission to proceed with the HS146.
Mr. Warren: That is what I do not understand. Why does it have to do that? The Minister of State said throughout our debates on the Aircraft and Shipbuilding Industries Bill that it was the right of the board to take such decisions. We gave it the authority in the Bill, when enacted, to have the working capital to fund the project of which the hon. Lady speaks. That is why we provided for capital of up to £50 million.
The Minister of State, Department of Industry (Mr. Gerald Kaufman): It may be helpful if I intervene to clear up any misapprehension about the lines of decision-making. I refer the hon. Member for Hastings (Mr. Warren) to section 7 of the Aircraft and Shipbuilding Industries Act, which makes two important statements. First, section 7(1) states:
"in formulating its corporate plan in each year and in determining the period to which the plan is to relate, and in the general conduct of the operations of the Corporation and its wholly owned subsidiaries in each year, the Corporation shall act on lines settled from time to time with the approval of the Secretary of State."
That is what the Act states, and the hon. Gentleman participated in the enactment of the Bill.
Section 7(3) goes directly to the argument that the hon. Gentleman is making. It states:
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"If the estimated cost to British Aerospace and its wholly owned subsidiaries of the development of any aircraft or guided weapon exceeds such amount as may for the time being be notified to British Aerospace by the Secretary of State for the purposes of this subsection, British Aerospace shall secure that neither it nor any of its wholly owned subsidiaries undertake, or participate with others in the undertaking of, that development except with the consent of the Secretary of State."
The hon. Gentleman was present for a large number of the sittings in Committee, but he and the hon. Member for Chingford (Mr. Tebbit) seem to be unaware of section 7.
Mr. Warren: I believe that subsection (4) still exists. I was hoping that the right hon. Gentleman would quote it. The subsection states that
"'estimated cost' does not include any cost which British Aerospace or any of its wholly owned subsidiaries expects to be reimbursed under the terms of a contract."
That implies that if the corporation and its subsidiaries do not get the money back from customers, subsection (3) will prevail. That makes the HS146 an even more unlikely proposition.
British Aerospace is the only group in Europe that could run a medium jet project as the prime contractor. Airbus Industrie could not do it as it is too heavily committed to its own efforts. It is only because British Aerospace has the capability that McDonnell Douglas and Boeing come to Great Britain to try to get us to opt out of the one chance of prime leadership that remains in Europe.
It is important to remember that if British Aerospace takes that prime leadership it is not expected to provide all the money. The business of McDonnell Douglas and Boeing makes that clear. The prime contractor has to put up only 25 per cent. or 50 per cent. of the capital required for a project. That is quite within the capability of subsections (3) and (4) of the 1977 Act.
I hope that the corporation will take the lead. It must do so if it is to stay in the race. If it fails to do so, it will not be able to get into the following generation of aircraft. To take the lead would not pre-empt it in any way from taking part in such sub-contracts as it can win from McDonnell Douglas, Airbus Industrie and Boeing. There is nothing to stop it from tendering for anything on a good business basis, exactly as it is now doing, for instance, with the Boeing 747.

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The whole essence of the debate is that those outside the House, such as the workers on the shop floor, should remember that they were told two and a half years ago by the right hon. Gentleman that the Aircraft and Shipbuilding Industries Bill was about the extension of Socialism. They should now realise, two and a half years later, that those words have been utterly repudiated and that they do not count any more in Socialism.
5.16 p.m.
Mrs. Helene Hayman: I shall not attempt to take up in all its aspects the somewhat muddled argument of the hon. Member for Hastings (Mr. Warren). I shall deal with the case for the HS146 as I have done on many occasions before in the House. It was the subject of my first speech in the Chamber and I hope that today it may be—
Mr. Tebbit:—the last.
Mrs. Hayman: I can assure the hon. Member for Chingford (Mr. Tebbit) that it will not be my last speech in the House, whatever his wishes may be. However, I hope that it may be the last of my speeches imploring the Government to go ahead with the project.
The hon. Member for Hastings correctly said that only the airlines determine the buying of aircraft. That is exactly the point that many of us have been trying to make to Rolls-Royce on aero engines. The company seems to be seduced by the Boeing offer for the 757 and collaboration. However, airlines cannot buy aircraft unless Governments and aerospace manufacturers build them, and that is what the HS146 decision is all about.
For the past four years the HS146 project has been in the balance. That is because Hawker Siddeley decided before nationalisation to withdraw from the partnership that it had with the British Government to go ahead and develop a feeder liner, for which there will undoubtedly be a market throughout the world in the 1980s. The only thing that has been on our side during the delay of the past four years has been the recession in the aircraft market throughout the world. That is why other countries have delayed decisions. However, there
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is now a flurry of activity in Europe and across the Atlantic. It is clear that the market is picking up. That is especially true for the 70 to 100 seater feeder liner jet market, which is the slot that the HS146 would fill.
We have now reached the stage when, if we do not have a decision, we shall lose out on orders. There are airlines throughout the world that are interested in the HS146. There are airlines that are making their choice now whether to buy the 146 or its competitor, the Fokker F28, one of the second hand jets on the market, or even to remain in the turboprop league.
The HS146 has many advantages over its competitors in terms of fuel economy, cost per passenger mile and its ability to be used on grass strips by third world airlines. I have never argued the case for the HS146 in political or job saving terms. I believe that it can be argued in strict commercial terms and the safeguarding of the design capacity which has been the greatest asset that this country's aerospace industry has ever had.
I do not believe that it is possible for the Government to make major collaborative decisions at this time. There are still things of which, as my hon. Friend the Member for Kingswood (Mr. Walker) pointed out, we are unaware—for example, the exact terms being offered to us in all the possible deals. Whatever our individual predilections for co-operation with Europe, McDonnell Douglas or anyone else, I hope that we are not so blinkered in our approach that we are not willing to listen to the terms of any collaborative project being offered to us. But we do not have the kind of information on which to decide immediately where we are going on the question of the major larger aircraft.
If we make no decisions on aerospace policy now, we shall let the industry go by default. In the last four years we have lost skilled men, designers and engineers, who will be extremely difficult to replace when, as I hope, this country has a positive and dynamic aerospace policy involving many projects and showing that it can compete successfully with the major aerospace manufacturers in the world.
I do not believe that the HS146 is a political aircraft. Of course, it will have

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an impact on jobs. Every hon. Member should be concerned about the possibility of wide-scale redundancies in the aerospace industry. Opposition Members with constituency interests would not be on their high horses so much about the HS146 being a political aeroplane if it were in their constituencies. Of course, it makes a difference to jobs. There is the possibility of 1,500 redundancies in my constituency, 1,500 more throughout British Aerospace and 15,000 in the 1980s in Hatfield, Filton and Manchester, including all the subcontractors in Great Britain.
If hon. Members talk to the designers, the skilled men, the work force, who want to build the HS146, they will not find them arguing in selfish personal terms. These people believe that they have a product that can do this country credit, a product to sell to the third world, a product which will bring in overeseas revenue, a product of which they can be proud.
The hon. Member for Hastings may accuse the Government of all kinds of vile manoeuvring—they could have given us a positive answer much earlier if they wanted to maneouvre—but I pay tribute to my right hon. Friend the Minister of State, who has always shown an interest in this project, and to the Government who have kept it alive, because, if it were not for the intervention of the Labour Government it would have been dead and buried in 1974.
Mr. Adley: The hon. Lady was not here in 1974.
Mrs. Hayman: I should be interested to hear what the hon. Gentleman had to say if he would care to stand up to make his remarks.
Mr. Adley: Perhaps the hon. Lady was not here in 1974. I am not being disrespectful. She won her seat in 1974. The fact is that Hawker Siddeley, faced with the threat of nationalisation, not surprisingly decided that that was no fair way to speculate with its shareholders' money. That is the reality of the HS146. If the Labour Party had not won the 1974 election, that project might have gone ahead then. Indeed, it looked a lot different then from what it does now.
Mrs. Hayman: I am interested to hear from the hon. Gentleman that private
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industry makes such political decisions on its investments. Far from the Government making political decisions, if private industry makes such political decisions about where to put its money, it is a fine reflection on the ability to judge what is in the best interests of the aerospace industry and of this country as a whole.
We have waited four years for this decision. The hon. Member for Christchurch and Lymington (Mr. Adley), not I, said that when Sir Arnold Hall heard about nationalisation he did not want to put the shareholders' money into the HS146. We have waited since then and through nationalisation for the board of British Aerospace to make a decision, which it did not make on any narrow sectarian basis. It had to weigh up all the interests not only of constituents, but of constituencies, and of the industry as a whole. That was its remit in giving advice to and asking the Government for permission to go ahead to spend money on projects such as this one. We delegated that responsibility to the board of British Aerospace in the nationalisation measure.
At the end of March the board decided that it could sell this aeroplane. I recognise that if we get the decision today, no one in Hatfield will sit back and say "We have a meal ticket for the next 10 years." We realise that we have to go out and sell 250 of those planes to get a return on the money invested, that we have to sell 350 to make a profit and that we have to develop a military application and sell 100 in order to prove that the plane can be a winner.
I believe that the Opposition, in their attitude to the HS146—an attitude which has changed much in the last few months—are adopting a political stance. They want to knock any positive decision which will give the aerospace industry the best boost that it would have—confidence in this Government and in its designers, engineers and workers to produce an aeroplane that we can sell in the civil market. I hope that the Minister will tell us today that that is precisely what we shall be allowed to do.
5.26 p.m.
Mr. John Cope: I congratulate my neighbour, the hon. Member for Kingswood (Mr.

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Walker), both on his good fortune in the Ballot and on his choice of subject which, as my hon. Friend the Member for Hastings (Mr. Warren) said, is both timely and extremely important to the country and to many constituencies. I am delighted that the hon. Gentleman used this opportunity to give us the chance to discuss this great series of decisions which are linked, though in some ways they are separate, before the Government take them.
I take the view that any Government must have a great financial interest in these decisions. After all, whatever else happens, the Government will have to put up a lot of the money for these projects, whichever of them goes ahead. As has been amply demonstrated in the debate, no one can be dogmatic about the correct decision at this stage. Apart from Government Members, no one in the House has the full details of what is on offer. That point was made by the hon. Member for Welwyn and Hatfield (Mrs. Hayman). These are matters of judgment. No one with all the figures at his command, however clever he may be and however much he may know, can say whether A or B is the right decision from every point of view. These are matters of judgment—less politely called guesswork. That is what this whole debate is about.
There are genuine divisions of opinion—not all on party lines. There are many divisions within the unions. One of the local TASS branches from Rolls-Royce sent Opposition Members a long paper in favour of the Boeing option. That goes against what the general secretary of TASS said not long ago, because he was in favour of the European option.
I should like to refer to the HS146, which occupied most of the speech made by the hon. Member for Welwyn and Hatfield. There is no unanimity of view on that project on the Opposition side, any more than there is in the country. The Government have frequently said that the decision must be a commercial one. I entirely agree, and I hope that it will lead to the HS146 going ahead.
One element in the commercial decision on this project is the question of in Filton in my constituency. The retenkeeping the skills in Hatfield and, indeed,
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tion of those various facilities would be assisted by a decision to go ahead with this project. I emphasise that this is one of the important commercial factors in considering the HS146 project.
I turn to the next decision in the scale, going up in size. A decision has to be made by the Government about whether to allow British Airways to go ahead with its request to buy the Boeing 737. This is a shorter term decision in the context of the time scale involved. The rival is the BAC111, about which the argument are familiar. I am on record as being in favour of British Airways buying the BAC111. I do not wish to develop my arguments but the Government should bear in mind two factors when examining British Airways' figures and making a decision.
The 737 is the more expensive aircraft. It is the slightly larger of the two. We are told that the costings of the 737 make it the better and cheaper buy for British Airways. There is talk of its remaining in service until 1994. Yet British Airways, on a piece of paper that it sent to me and to other hon. Members, talks of the 737 being replaced by a new stretched BAC111 in the late 1980s. There seems to be some discrepancy about dates. I believe that the argument is in favour of the BAC111. A stretched BAC111 could be a good aeroplane, not only for British Airways and its markets but for sale elsewhere in the world in places where American aircraft will not be so available or suitable. I am thinking of China and Eastern Europe.
Mr. Geoffrey Pattie: Is it not the case that the larger stretched aircraft would have the Rolls-Royce 432 engine and that this would therefore be a worthwhile project to develop? Is there not a good reason for keeping that project going in the short term?
Mr. Cope: My hon. Friend has anticipated my next point. I agree with him.
When making a decision, the Government must bear in mind the question of import duties. It is a matter which I have raised before and I make no apology for doing so again. If British Airways decides to buy the wholly American aircraft, including some American equipment for it, no duty will be payable

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either on the aircraft or on the equipment. But if British Airways decides to buy the BAC111 with the same American equipment it will have to pay import duty on that American equipment. This must be nonsense.
Mr. Warren: Is my hon. Friend aware that if we try to export the BAC111 to the United States we shall not enjoy the reciprocity that the Americans have when they export to this country? We have to pay duty when exporting to America.
Mr. Cope: I am aware of that. I know how the situation has arisen. I have had correspondence with the Department of Trade and I have asked questions of that Department. I always receive negative answers. The Department admits that duty is payable, but it will not take action to end the practice. It is a nonsense that we are in that position.
I hope that the Minister will say that when making a decision he and his officials will exclude in their calculations the element of duty on the BAC111. One hopes that by the time that these aircraft are built, bought and paid for they will have been able to sort out the nonsense involved in import duties which leads to the necessity of including them in calculations.
One must be more speculative about the big decision that has to be made in the long term. The big decision is which of the large aircraft—the 160 to 230 seat aircraft—for the 1980s the Government should back. There are two categories of aircraft which are separate and which should therefore be considered separately. There is the 180 seater and the larger 200-plus seater. They are not comparable aircraft. The question is whether there is a market for both sizes of aircraft.
Boeing has estimated that there is a market for about 1,000 of the 180 seater and a market for about 1,200 of the larger aircraft. Boeing is concentrating its effort on the larger of the aircraft. It is offering us participation in the smaller of the two types. McDonnell Douglas is offering us participation in the smaller aircraft as does the JET project. The difference could be extremely important to the commercial markets in the 1980s and beyond.
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The A-300 B-10 is in the larger bracket and will be in competition, not so much with the 757 but with the 767 and the 777 which will be of a comparable size. If the Government's commercial judgment indicates that the larger bracket is the better commercial bet—and that is Boeing's judgment—that improves the case for going for the B-10 as opposed to either of the other two options.
British Airways currently is speaking about the 757—the slightly smaller category rather than the larger category. British Airways argues that the benefit of that is the use of Rolls-Royce engines.
I have an even larger Rolls-Royce aero engine factory in my constituency than the BAC airframe factory at Filton. I am conscious of Rolls-Royce's position and of that company's arguments. The arguments in favour of the use of Rolls-Royce engines apply equally to the McDonnell Douglas aircraft which can be fitted with Rolls-Royce engines. The question boils down to how much advantage there is in having the so-called lead engine in an aircraft project. It is not nearly as big as an advantage as it used to be. There is no such thing any more as a lead engine. The airlines decide the engine that they want, provided that it will fit, from the options that are available. Saying that the Rolls-Royce engine is the lead engine is not as important as it is sometimes thought to be by those who study these matters.
The principal advantage of the McDonnell Douglas offer is the completeness of the package. It is a much greater package than that which is on offer from Boeing or the Europeans. The package includes the offer of marketing help for the HS146 and the offer of co-operation with the next generation of supersonic aircraft. We have spent vast sums on developing the Concorde, which is now proving successful on the Atlantic and other routes, and we have established with the French a world lead in this aspect of aviation, the great value of which we should not forget.
By the end of the century I believe that more advanced supersonic transports will be flying and in the course of preparation. I do not see such aircraft in terms of a mark II Concorde—the phrase used by the hon. Member for Kingswood. I should be most disappointed if whatever package emerges from the Government's

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decisions does not include work on a future SST. I do not mean that the project should be decided now. I mean that work should be done to determine what the project should be and to examine possibilities of future co-operation to enable us to capitalise on the existing project and get more value out of the money we have spent in getting this far with the Concorde.
The hon. Member for Kingswood has done a service to the House in initiating the debate and allowing us to use the time to discuss this topic. I hope that the Government will listen to the debate and will take the decisions that lie ahead as soon as they can. Once the decisions have been taken, I hope that the Government and the country will be able to stick to them. We have a very bad record of dithering over aircraft projects and of building up a lobby against all sorts of projects that we are building. We have never seen that to greater effect than with the Concorde. All the time we have damaged and destroyed our projects by dithering, bickering and arguing after the decisions have been taken. These decisions are finely balanced, and that is all the more reason not to dither after they have been taken but to make whatever decision we take the right one.
5.43 p.m.
Mr. Phillip Whitehead: I agree with the last sentiment expressed by the hon. Member for Gloucestershire, South (Mr. Cope). I want briefly to support the hon. Member in congratulating my hon. Friend the Member for Kingswood (Mr. Walker) on producing an extremely clear and concise introduction to a very complex and difficult subject.
We have been assured by the press that this debate might see not one but three announcements by way of policy decisions. I rather suspect, looking at the Treasury Bench, that we shall be lucky to get all three, but I believe that all of them are in the offing.
There is immense speculation about what the British Airways order is to be, about the go-ahead or otherwise for the HS146, and about launching aid for the RB211–535 engine. I have a constituency interest in that engine since Rolls-Royce is located in Derby. However, it will become clear to hon. Members that I
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cannot claim to represent the views of Sir Kenneth Keith in what I propose to say.
The strong pressure from the management of Rolls-Royce is for decisions to be taken which will be facilitated but not entirely clinched by a go-ahead on the launching aid for the RB211–535 to enter into a collaborative venture with the Boeing Corporation for the 757 aircraft. That would be with its fuselage already more or less stretched to the limit, with about a 20 per cent.-plus share of subcontracting work for British Aerospace, and with the RB211–535 as the launch, but not necessarily the only, engine for the project. As the hon. Member for Hastings (Mr. Warren) said, an aeroplane can be sold with a variety of engines. The launch engine is not necessarily the only engine. We have to look carefully at the whole pattern of development of the new family of aircraft which Boeing intends to introduce.
It is clear that there are considerable advantages in having a project of this kind. There is the advantage that Boeing already has 60 per cent. of the civil aircraft market. It has a world dominance which this kind of collaboration might intensify. In addition, it has had a succession of winners. If one thinks of its aircraft from the 707 on, it is clear that it has managed not only to penetrate the world market in rapid succession to the American market but to dominate with each of its arcraft. It would launch the RB211–535 engine in a very dramatic manner.
That seems to be the American strategy of Rolls-Royce, which has been followed under various managements and over many years, and which survived the bankruptcy of 1971. The American strategy has a good deal to be said for it. The Americans are dominant in civil aviation throughout the world, and within that dominance Boeing is pre-eminent.
We understand that British Airways would also wish to go along with that, not merely because it proposes and would like to buy the existing Boeing 737, but because it sees a considerable role for the proposed 757 in the 180 seater class aircraft.
I can understand all of these factors. I can understand that British Airways would like to have an all-Boeing fleet with the exception of an extended run of

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the Tristar aircraft and a few Concordes. I can understand that that would be a neater and simpler solution for it. I find it slightly more difficult to understand why it should claim that there would be no market requirement between the proposed 757, or an equivalent when it flies it, and the Tristar which carries very many more passengers. It rules out completely any aircraft like the A-300 B-10 or any successor in that category. I shall deal in a moment with the question of our collaboration with Europe, but it seems that to clinch the Boeing deal at this time would be to strike a mortal blow at future collaboration with Europe to which many of us have looked for a long time.
It is true that Boeing has always eschewed collaborative ventures in its own production. That is probably one of the reasons it has been so successful. It has not spread the design leadership around, and it has not had a number of production lines in different places. It has kept it all to itself, subcontracting a little risk here and there, and ladling out a little gravy. But essentially it has kept things for itself, and very successfully, too. The choice for us is between getting some considerable crumbs from the rich man's table for British Aerospace if we go ahead with this deal and the opportunity for a place at the table for a meal which may not be very well cooked if we go in with the Europeans.
Mr. Warren: Does the hon. Member accept that it would be much nicer if, instead of talking in terms of our collaboration with Europe, we spoke of Europe collaborating with us? We are the strong men in Europe.
Mr. Whitehead: I fully agree with the hon. Member's last point. That fact has been reinforced by the terms in which McDonnell Douglas has put forward its proposed collaboration, which is one-third for itself, one-third for the rest of Europe and one-third for us. I think that is seeing the matter about right in terms of the kind of collaborative projects we want. I shall deal in a moment with the McDonnell Douglas option and say why it is possibly the best of the three.
It seems to me that, if we rule out any further collaboration with the Europeans, with the B-10 project, and if we go in
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now with Boeing over the 757, we shall deal a blow to the JET project which it will not survive. We saw the announcement on Friday that the Europeans are to go ahead with the B-10. It was previously suggested that they would wait until they saw which way the British Government moved. They have not done that. They felt strongly enough to go ahead, with launch orders from Lufthansa, Swissair and, I believe, Air France. They have already been enormously encouraged by the sort of market penetration which they are getting with the A-300.
Anyone who has flown in the A-300, not merely in Europe but in, shall I say, less sophisticated areas of the world and with less sophisticated pilots, and seen how well the aircraft handles and how much the margins of error have been eliminated, will, I think, pay tribute to that design and regret now more than ever that we withdrew in such preremptory fashion from the airbus consortium some 10 years ago. I believe that we should have stayed with it, and I believe aI3o that we should leave the door open now for a collaborative venture with the Europeans, a venture which includes, I remind the House, two possibilities—one in the aero engine sector and the other in the airframe sector.
The great problem in this debate, feel, has been that in British terms the aero engine industry has been set at the throat of the airframe industry, and vice versa. This is totally a tragedy for Britain. We cannot expect to be dominant in either. We can expect a share in projects in both sectors provided that we are, on the one hand, not too greedy and, on the other, not too cowardly or supine. I believe that there is a possibility in joint discussions with either the Europeans or with McDonnell Douglas, or possibly at a later stage even with Lockheed—Lockheed's proposals seem to be somewhat vaguer at this stage—for the utilisation of the Rolls-Royce engines, either the 535, as has been proposed, I think, by McDonnell Douglas, for the ATMR project, or the 432 engine, which has been referred to in the debate.
The extension of the 432 project and a go-ahead for it allows us a certain number of other European options. One of these, which has been referred to already, would be the option of proceeding with

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a new version of the BAC111 rather than going ahead necessarily with JET 1 and JET 2, which are not expected to have British engines in them.
Mr. Pattie: Does the hon. Gentleman not feel, not only from the Rolls-Royce point of view but from the standpoint of British Aerospace interests generally and the good use of resources somewhat under pressure, that that might be a better option than the HS146 option, which will use American engines?
Mr. Whitehead: The hon. Gentleman anticipates me. I shall say a word in a moment about the HS146 and the decision which may come on that. At this stage I wish to finish my point about collaboration with the Europeans and possibly with McDonnell Douglas. It seems to me from what we have seen of the offer from McDonnell Douglas that McDonnell Douglas is proposing to us something which allows triple design leadership, something which does not rule out the compatibility of the ATMR and the JET project, and something which allows a role for the very successful Rolls-Royce company on the aero engine side. All these things keep options open. Going in with Boeing simply forecloses them.
That, I think, was the conclusion which my hon. Friend the Member for Kings-wood reached, and it is a conclusion in which, somewhat regretfully, I have to concur. One would very much like to see pre-eminent in this whole argument the interests of the major firm in one's constituency, but we have to look wider here. I think that Derby workers think of workers elsewhere throughout British Aerospace as much as they think of their own interests and their own future. They realise as much as anyone else does that a total collapse of British Aerospace, or at least of its technical and design capacity, would ultimately be disastrous for them, too.
My personal view is that we should favour a much closer look at the proposals which have come from McDonnell Douglas for a collaborative project with ourselves and the other Europeans, for a co-ordination of the European projects with the ATMR. That offers us rather more.
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A moment ago, the hon. Member for Chertsey and Walton (Mr. Pattie) asked me about the HS146. I must pay tribute here to my hon. Friend the Member for Welwyn and Hatfield (Miss Hayman), who has campaigned long and hard for this project. No one could have pursued a constituency interest more closely or more eloquently, and it may well be that she is successful and the aircraft will be launched.
I think it appropriate, therefore, that it be said—and perhaps especially appropriate that it be said from these Benches—that there are reasons for serious reservations about the financial viability of any HS146 project. If my right hon. Friend the Minister of State refers to the HS146 when he replies to the debate, I should like him to deal with the following points.
First, I believe that the launching aid for such a project to get off the ground will be in excess of £200 million. What kind of sales forecasts do we have for this aircraft, especially since it would enter the market with a rather old-fashioned design many years after an aircraft successfully flying which has over 50 per cent. British components within it'? I refer to the F28. The F28 itself has had a pretty difficult and perilous passage. It is now, I think, breaking into the domestic airline markets of the world. To envisage the HS146 successfully following it—not being abreast of it but following it—rather stretches credibility.
Therefore, if the gallant campaign pursued by my hon. Friend the Member for Welwyn and Hatfield is successful, we shall, I think, need to hear from the Government, if some announcement is to be made, a careful account of how that £200 million can be justified. There are other ways of keeping British Aerospace design teams and British Aerospace workers in business more successfully in the longer term than by following out that project. That is my instinct. I must honestly give it to the House.
I conclude, therefore, by asking my right hon. Friend two other questions. First, when may we expect a decision about launching aid for the RB211–535 engine? The 535, building as it does on the already enormously successful RB211 project, with a scaling down as an earlier development which the Government did fund having managed to increase the power of the engine already, makes it

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the most attractive offer of those proven engine designs in the market for both Europe and North America. In my view, therefore, we should go ahead, and go ahead without delay, on that project.
Finally, can my right hon. Friend tell us at what stage we shall have an announcement from the Department of Trade about the British Airways deal? These things have become interwoven now with the future of HS146 and things of that kind. It would not be right if we made investment decisions about the British aircraft industry as a palliative to balance buying decisions of British Airways, and it seems to me that we are heading again in that direction. I should like to know why British Airways is to buy the 737, if it is, and in that event will it buy that and that alone or will it also be asked to buy some BAC1 111s? It seems to me that the BAC111 is not at the end of its useful life. It is not half as bad an aircraft as publicity and propaganda from British Airways would sometimes have us believe. I should therefore like to hear my right hon. Friend's views on that.
We are always caught short in the civil aviation business. For many years now, it seems, we have been trying to persuade successive Governments that they should hold the line in the great shortfall of orders following the world recession post-1973. Suddenly now the market is opened up again. We see at Rolls-Royce, as is seen elsewhere, that the company does not have the skilled personnel to do all the jobs necessary, suddenly finding that the forecasts for sales and the time scale for new projects have been foreshortened.
We have to make the right decisions. I acknowledge that they are complex, but we cannot make all the right decisions unless we start off in the right way, and there are many of us in the House today who want to be assured that the Government will do just that.
6.0 p.m.
Mr. Robert Adley: I, too, begin by thanking the hon. Member for Kingswood (Mr. Walker) for his choice of subject and congratulating him on his good fortune in being able to give us the opportunity to talk about the future of the aerospace industry.
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We have already seen this afternoon that many of the decisions which face the Government are not only difficult but can be reached across party lines, if there be any party lines in these matters. I agree with the hon. Member for Derby, North (Mr. Whitehead) in having serious reservations about the HS146 project. It is now many years out of date, and it would be idle to deny that the apparent unanimity of view within the board of British Aerospace about it is matched right the way down the line by those within the corporation who will be responsible for the day-to-day decisions and for building the plane. There are people within British Aerospace who have grave doubts about the project.
The hon. Member for Welwyn and Hatfield (Mrs. Hayman) was rather scathing about the role of Sir Arnold Hall. His decision in 1974 on the HS146 may have been influenced, as I am sure it was to a degree, by the possibility of the future nationalisation of the industry. It was also influenced by the oil crisis. Now it is a decision which is four or five years out of date. Going back to an old project of that kind would cause many people to wonder and worry whether the Government, if they took the decision, were taking one that was strictly "commercial"—the word used in the motion.
In a short speech, one cannot deal m great detail with every possibility and prospect for the future of the British Aerospace industry, but some things are clear. The industry is a storehouse for the skill and ingenuity for which this country has always been renowned, but many skilled workers—and not only in the aerospace industry—are sullen and resentful over the way in which they have suffered under the Government's incomes policies. We have seen this in the motor industry and in many other industries. Therefore, the Government have a double duty, not only to the aerospace industry and to those who work in it but in the wider sphere, to those who earn their living by their skill, to see that a viable aerospace industry, with a design capacity, is retained for this country.
We know that we can no longer go it alone on any major new project. Therefore, the question is not "Do we need partners?" but "Who shall our partners be?" I am glad that tonight I think I have detected amongst hon. Members

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who have spoken the realisation that we are not faced with a simple choice between America and Europe. There is a good possibility of the British aerospace industry's becoming involved in two new projects. One could be a form of collaboration with Europe and one with the United States.
My view on co-operation with the Amercians is that co-operation with Boeing is rather like a mouse trying to co-operate with a cat. Partnership under those circumstances is extremely difficult. I suspect that the idea of Boeing is little more than, first, to pay lip service to the need to placate the British Government and British Aerospace in order to obtain an order from British Airways and, secondly, to further Boeing's long-term aims of destroying the independent design capability of the British areospace industry.
On that basis, Boeing has certainly found some remarkable and consistent allies within British Airways over the years. The hon. Member for Derby, North referred to that, and the hon. Member for Kingswood referred to the comments from British Airways. I remind my hon. Friend the Member for Hastings (Mr. Warren) that when he and I first entered the House in 1970 the first public comment that I think either of us made was a joint comment addressed to Mr. Keith Stainton, who had produced a violently anti-Concorde statement.
Mr. Warren: Ross Stainton.
Mr. Ridley: That was not a Freudian slip. I appologise to my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton) in absentia.
Ross Stainton saw it as his interest only to take account of the financial future of British Airways. He put at nil his wider responsibility as a senior executive of a nationalised corporation for any other part of the British aerospace industry. I am sorry to say that I think that that attitude still pervades many of those within British Airways. We must recognise that a nationalised industry has a wider responsibility than purely a commercial one. The fact that the Government are involved in such decisions means that they are inevitably to a certain degree political.
I want later to discuss briefly the BAC111 versus the Boeing 737 argu-
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ment. First, I wish to finish dealing with the question of partnership with the United States. I do not think that Boeing points the way to partnership. We have a far more likely successful partnership in prospect with McDonnell Douglas, as a number of hon. Members have pointed out.
Perhaps what we should examine is the twin evils, as many people see them. of partnership with French manufacturers or with American manufacturers. Speaking in private, many people will be very rude about both. Possibly the difference for our industry is that between partnership with a seducer and partnership with a rapist.
Dr. M. S. Miller: And salesmanship.
Mr. Adley: I agree.
I fear that the American industry takes the role of the rapist. I believe that the British industry is more likely to emerge smiling after a difficult liaison with France than after a voracious relationship with the Americans, and particularly with Boeing.
I have touched on the question of the obligations of nationalised industries and whether British Airways buys the BAC111 or the 737. We have heard brave speeches from the Prime Minister about buying British. I pay tribute to him in that I know that he is taking a personal interest in the decision, and I am certain that he wants to get it right. I hope that his words about buying British, aimed particularly at Government Departments and the nationalised industries, will be taken to heart by the Government when they have their final say in the decision whether British Airways should buy the BAC111 or the 737.
A massive propaganda campaign has been carried out by Boeing, aided and abetted by British Airways and Rolls-Royce. When one is dealing with public relations, in the triumvirate of Lord Beswick, Frank McFadzean and Kenneth Keith, Lord Beswick comes a very poor third in the sort of proganda exercise to which many hon. Members have been subjected over the past few months. I think that the Government have come to realise just what has been going on. I hope that as a result their decision will have been aimed rather more at trying to get the right solution for the British aircraft industry.

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The Government may try to say "We can't please everybody. Let's tell British Airways to buy a few 111s and a few 737s." That would be an unsatisfactory solution, because British Airways is already operating a fleet of 111s, although to hear it talk one would not know it. One would think that the 111s were the most unsuccessful aircraft British Airways had ever flown, which is not true.
The Government should come down clearly on the side of the BAC111. Let us take a positive step, perhaps tonight, in this respect. The Government must he aware that a great deal more than simply this order hangs on the decision. British Aerospace has been in lengthy negotiation with the Japanese on a cooperative venture with the BAC111. It is not credible to expect people in countries such as Japan merely to shrug their shoulders and take no interest if the British nationalised airline, the final decision on whose purchases is in the hands of Her Majesty's Government, shows its total disinterest in the 111 by being authorised to buy the 737. I have little doubt that it would have a damaging effect on the sales efforts in Japan if it happened.
Mr. Tebbit: My hon. Friend is being a little unfair to British Airways. We are all delighted when it turns in good profits. It does it by sound management and sound commercial sense. My hon. Friend should understand that British Airways has not said that the 111 is a no-good aeroplane. What it has said is that the 111 has 100 seats and it wants a 120 seater. My hon. Friend is dong very little good to the BAC111 by putting it about that British Airways is criticising it as a no-good aeroplane. British Airways is not doing so.
Mr. Adley: Unusually for him, my hon. Friend is being a little naive. Instead of British Airways coming to British Aerospace two years ago and saying that it wanted a specification for a 120 seater or a 100 seater, whatever it was, it gave British Aerospace just under four weeks to produce a detailed specification and proposal for a new plane. I do not believe that a major international airline with an open mind in looking at its forward purchasing projects would come up with a lead time of four weeks for a decision like that.
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I am speaking frankly about the way in which British Airways has gone about replacing its Tridents. I am sorry if I am offending my hon. Friend about the way in which I say it, but I believe that British Airways has done considerable damage to the BAC111 by the statements that have been made, including those at the press conference in New York given by Mr. Stainton. One recalls also the agreement by the chairmen of the three nationalised industries that they would not indulge in public debate on the issue, yet time and again British Airways has come up with statements. My hon. Friend may not think that those statements have been damaging, but I think that they have, and those involved in the sales effort of British Aerospace in Japan—and I put it no stronger than this—do not exactly think that British Airways has helped them.
Let us also be clear that the American aircraft manufacturing industry post-Lockheed is in bad odour in Japan. No one would be happier to destroy the burgeoning relationship between British Aerospace and the Japanese than the American aircraft manufacturing industry. It is being a little naive not to recognise the interest within the American aircraft manufacturing industry in trying to disrupt or prevent the birth of this long-term partnership relationship between British Aerospace and Japan.
I turn now to a subject which I think will not cause my hon. Friend to chastise me—the situation within British Aerospace. My hon. Friend the Member for Hastings rightly reminded the Minister of some of the things he said to the workers in British Aerospace when the nationalisation proposals were before the House. How sour those words have turned in the ears of those who work on the shop floor in the British aircraft manufacturing industry. The golden era of job security, the preservation and development of technology, and all the other wonderful things that the Minister said would happen have not come to pass.
Mr. Kaufman: During every one of the visits that I paid to most of the aircraft factories during the passage of the Aircraft and Shipbuilding Industries Bill, I specifically said that nationalisation

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would not of itself guarantee one single job in the aircraft industry.
Mr. Adley: I do not have with me the headline that appeared in the Evening Echo, in my constituency, following the meeting that the Minister had with the trade union leaders at the BAC factory at Hum, but if that was the message that he intended to convey, I must tell him that he did a poor job with the union leaders at Hum or with the press afterwards. The impression was very clearly given that job security was here to stay.
Mr. Russell Kerr: The hon. Gentleman was not born yesterday.
Mr. Adley: If the hon. Gentleman could possibly struggle to his feet for a second time in one afternoon, I should happily give way to him. In the meantime, I shall continue with my speech.
The fact is that industrial relations within British Aerospace are a great deal worse than they were two years ago. This may be partly to do with the expectations of better industrial relations through the so-called industrial democracy. That is only one factor.
For example, I can tell the House that the union leaders at Hurn were bitterly disappointed that the management of British Aerospace apparently did not think it necessary to invite any trade unionists to Bristol the other day for the signing of the agreement with Romania on the BAC111, although over 50 per cent. of that order will be produced by BAC at Hurn. At the request of the union leaders at BAC Hurn, I have now established a regular liaison meeting with them so that I can try to find out for them what is going on within British Aerospace. That situation is not very commendable in the light of the promises made about nationalisation improving industrial relations.
I end by referring to the question of the sales of the Harrier. Today the Foreign Secretary, in his statement on the trials of the Soviet dissidents, said that we may well have to reappraise our policy towards the Soviet Union. I believe that the Government, during the past three years, have sensibly and rightly come to share the view which many of us have expressed about the common sense and importance to our industry of
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making the Harrier available to China. That would be a major advantage to this country because it would simultaneously equip the Chinese with a defensive weapon on their long border with the Soviet Union and would equally supply much-needed work and revenue for a very long time to come, to British Aerospace. If we are to have some positive statements today, I invite the Minister of State to make that one of them.
6.16 p.m.
Mr. Lewis Carter-Jones: This process is becoming more complex every day. In my day, it was a Merlin water-cooled piston engine and the airframe made of wood by de Havilland, and it was a good aircraft. I wish that we could go back to those days. It would be delightful.
I have listened carefully to the debate and from it I have realised how many different people have had different briefings from different organisations. I think that I have been briefed by every engine company and by almost every airframe company, but I am still as confused as ever. I have some ideas in my mind, but I cannot help feeling that this debate might not have taken place if the chairman of Rolls-Royce, British Aerospace and British Airways had got together much sooner and decided something better for the advantage of the British aircraft industry as a whole.
This is the first time since I have been in the House that substantal numbers of people are wooing the British aircraft industry. It is the first time that we have ever been in that favourable position. That is why I would not like to have to take the decision that has to be taken in the very near future. The ideal situation would be to have all the airframes, all the avionics and all the engines in a superb aircraft selling in every country and made in Great Britain. But we are not going to get that in the next generation. Therefore, we have to try to get the best of all worlds.
What is significant is that hon. Members are speaking very often with their own constituency interests in mind, and I do not blame them for that. I have no constituency interest, although a very small number of my constituents may be indirectly involved. What worries me is that a substantial number of people will

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be made redundant and research and design teams will be disbanded if, for example, something like the BAC111 is not continued. That has to be said. Whether we like it or not, it would be naive to pretend that the Japanese are not looking at what we decide here now.
My second point about procurement is that Lockheed seems to be left out of the reckoning, apart from a reference by my hon. Friend the Member for Derby, North (Mr. Whitehead). But it is significant that at the moment when specific engines are required Rolls-Royce is deficient, and that is a tragedy; it does not have the right engine at the right time, but it has an engine which, seemingly, will be attractive to Boeing. I have the general feeling from both sides of the House that the House at present does not trust Boeing as far as its care of the British aircraft industry is concerned. We were told clearly that we could become sub-contractors and that we would do well out of the business. However, I realise that time is getting short, so I will quickly end with two observations.
There seems to be a chance of strong collaboration in Europe. The people there seem eager to get us. We have to find a good way in. The late starter from McDonnell Douglas is also very attractive. The one thing which seems to be missing is good consistent figures on the performance and opportunities for each and every one of the industries, whether engine-wise or airframe-wise.
6.20 p.m.
Mr. Norman Tebbit: Perhaps I should start by reminding the House that I have some financial interest, albeit an indirect one, in a subsidiary of United Technologies Limited, whose other subsidiary is Pratt and Whitney, but I do not think that the hon. Member for Derby, North (Mr. Whitehead) need worry unduly about my feelings on that account.
As ever in these debates, we have had some extremely interesting speeches. As ever, they have been liable to give rise to those little scenes in which the Minister of State, Department of Industry, says "Hear, hear" as I chastise one of my hon. Friends. That is unusual, but it makes these debates more interesting. There is a considerable cross-current of opinion. Indeed, I do not believe that
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any of the issues is overtly politically partisan.
We are grateful to the hon. Member for Kingswood (Mr. Walker) for his good fortune and his good sense in getting this debate and in asking all the right questions. I hope that the Minister of State will give some of the right answers, or even some answers. He has not done so before.
My hon. Friend the Member for Hastings (Mr. Warren) was right to point out two important facts—that the customer is king and that the British industry has greater ability than any other in Europe, although its lead is now in increasing danger. The hon. Member for Welwyn and Hatfield (Mrs. Hayman) naturally talked about the HS146. My hon. Friend the Member for Gloucestershire, South (Mr. Cope) referred to the British Airways order, as did the hon. Member for Derby, North and my hon. Friend the Member for Christchurch and Lymington (Mr. Adley).
I say to all of them that I hope that we shall all be fair to British Airways. There is nothing in the legislation relating to British Airways and nothing in the duties which this House lays upon British Airways about considering anything at all except the interests of British Airways. Of course, it is understood that British Airways will not be stupid about these matters and that whenever possible it will assist the British industry. It has done that to no mean extent, for example, in ensuring that the Rolls-Royce RB211 is fitted on the Boeing 747 and goes to other customers as well, and in helping to launch the Tristar with that engine.
We should not be so quick in suggesting that we as politicians should be there at all times, not only telling the aerospace industry what aircraft it should make but also telling the airlines which aircraft they should buy. If we are to do that, why on earth do we need to appoint boards of directors to these great industries? If we continue to look over their shoulders and second-guess them, what sort of men shall we get to take the jobs in these industries?
Mr. Frank Tomney: The decision which British Airways has to make is not one which is

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pro-European or pro-American or anti-American. The decision relates to aerospace development for the next 50 years and how we envisage that development. I say, quite frankly, that it must be transcontinental, and the bigger the size of the market the better. We ought to be interested in the Russian market, the Japanese market, the Australian market, the Canadian market and so on. We should forget the small continent of Europe and aim for the sort of aircraft which can carry the biggest payload, which has the biggest number of passengers, and which has a world-wide market.
Mr. Tebbit: The hon. Gentleman is probably right, but I do not think that his intervention is exactly relevant to what we are discussing.
The hon. Member for Derby, North was a brave man. He was in considerable difference with his major constituency employer, not to mention that formidable figure Sir Kenneth Keith. The hon. Member asked some extremely pertinent questions about the HS146 which may have caused some degree of pain to some of his hon. Friends, and also to some of mine. I agree with him that a decision about the RB 211–535 has to be made pretty soon; otherwise another decision will be made by default—a negative decision.
As in all the recent debates, there has been a theme of anxiety about the decisions running through the speeches of hon. Members from each side of the House. All hon. Members have been asking detailed and specific questions—and, indeed, more generalised ones—in order to try to understand what is the Government's thinking on these matters. I do not think that in the past even the Minister himself would claim to have answered many of the questions or to have dispelled much of the anxiety.
The Opposition have not sought to make partisan capital out of the obvious and growing concern of the Government's own supporters. We know that the decisions are difficult and complex, but we are becoming increasingly concerned—as the Minister must realise his own hon. Friends are—that, for all the brave words, there is a feeling that he is letting things drift and that he is letting events take charge of him rather than taking charge
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of events himself. We are entitled to expect rather more of him.
The Minister supported the proposal in 1974 to take the aerospace industry into public ownership. That proposal was carried through this House in an atmosphere of muddle, of indecision and of incompetence—so much so that it took over two years for the legislation to be enacted. We had the affair of the hybrid Bill, the disputed votes and all the other touches of nastiness which the Minister so often finds attaching to him. The whole affair of the nationalised industry has led to the near paralysis of decision-making in the industry for over four years.
Mr. Ron Thomas: Will the hon. Gentleman give examples of the other privately owned aerospace firms in the world which have, over the last four years, been making these dynamic decisions that he is speaking about?
Mr. Tebbit: Douglas has launched a new aircraft, the DC9-80. Boeing has maintained its impetus and will, I fancy, collect a considerable number of orders very shortly. I would not be in the least surprised if Douglas were to collect quite a few more as well.
The Minister said in Committee:
"I concur absolutely with my right hon. Friend the Member for Sunderland, North, and my other hon. Friends who have made the point, that previous forms of nationalisation are utterly unsatifactory."—[Official Report, Standing Committee D, 16th December 1975: c. 96.]
He went on to say that he would nationalise the industry in a way which would be totally different and completely new. He said that nationalisation was about the advance of Socialism, and that that was what the Bill was about.
I put this to the Minister:
"Sooner or later this board,"
the aerospace board—
"which will be dedicated to the advance of Socialism and not to the advance of the aircraft industry, will come into contact with the boards and salesmen of McDonnell Douglas, General Dynamics, Lockheed and Boeing, and they are dedicated to commercialism. My hon. Friends and I fear that when that happens, commercialism will win the day in the world markets, which will thereby prejudice jobs in this country."—[Official Report, Standing Committee D, 18th December 1975; c. 164.]
That is still the burden of our concern today. Indeed, we are still concerned

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today, as we were during the passage of that Bill in 1975 and 1976, about how the industry would be run.
Let us now look at the Minister's words:
"As the Bill has proceeded through its Committee stage, it has become clearer and clearer that there will be greater advances of industrial democracy in these industries under public ownership than we have ever had in any publicly-owned industries … The days of imposing decisions upon the workers in industry are gone."—[Official Report, Standing Committee D, 22nd January 1976; c. 348.]
That may be true, but the workers in the industry are not imposing any decisions either. In fact, it seems that no decisions are being imposed upon or, indeed, made by anyone.
The Minister was clear enough on 10th February about who would make the big decisions in the nationalised corporations and, despite section 7(1) and (3) of the Act, he said—the words have been quoted to him today by my hon. Friend the Member for Hastings—that the market strategy of the corporation would be in its hands and not those of the Government. Today, it is not even in the Minister's hands. The Prime Minister has felt it necessary to set up a Cabinet committee to consider the options in future civil aircraft construction. That does not sound like the board making the decisions.
We still have some great puzzles, of course. The Government have not yet announced the 146 decision. We expect them to do so soon. But what did the Minister say about that all that time ago? For how long did it go on? On 20th January 1976, the Minister said of the 146 project:
"That will be a matter for the board of British Aerospace to decide, not the Government."—[Official Report, Standing Committee D, 20th January 1976; c. 341.]
But who is making the decision today? It is not the board. The board has made its decision. It has asked for permission to go ahead with the project. If the Government were not stopping it, it would have gone ahead with it by now. The board made that decision in March.
On 6th May 1976, the Minister was even more emphatic. He said that he had just visited the workers at Hatfield, and he spoke today about those visits. In May 1976, he said:
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"I told them that the decision on the HS146 is open and that the representatives of, for example, the CSEU could discuss it with the organising committee. If the organising committee comes forward with recommendations before vesting day, and if those recommendations are accepted by the Government, a decision can be made before vesting day, and we do not have to wait for that."—[Official Report, Standing Committee D, 6th May 1976; c. 2979.]
Vesting day was more than a year ago, and the Minister has still not announced his decision. He was talking nonsense, as he usually does in this House.
Who is managing the industry's affairs? Is it the board or is it the Minister? Is it anyone at all? It is well known that the decision of the board to go for the 146 was reached only after some agonising within the corporation. Some of the professionals in the corporation believed that the £250 million of resources which it would require might be better spent elsewhere. The problem is that the Government do not seem to be able to make up their mind, after all this time, whether that is so or not.
Profitability is all, as the Minister put it at that time. We agree with him. But two factors worry us about the 146. The first is whether it will be profitable—or will it be just another Humber Bridge or another Stocksbridge bypass at Penistone to be brought out in celebration of an election—a touch of sugar on a Socialist pill—rather than because it will secure real jobs in a profitable programme?
Mrs. Hayman: Surely the gravamen of the hon. Member's case was that the Government should accept the recommendations of British Aerospace as the people competent to make decisions in this matter. British Aerospace says that it wants to build the plane. Surely the hon. Member is now going completely against that and setting up a whole set of red herrings against the 146.
Mr. Tebbit: On the contrary, I am sure that those who were contracted to build the Humber Bridge wanted to build it, just as those who are contracted to build the Stocksbridge bypass want to build that. The point is that the Government have sat on this decision, and they continue to sit on it. We want to know whether they have sat on it because they do not believe that the aeroplane is a commercial proposition, whether they

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have sat on it because they do not believe that the country can afford to build it although it is a commercial proposition, or whether they have sat on it in order to bring it out as a by-election or General Election bribe in a marginal seat.
If it is commercially viable, what has been the reason for the delay? British Aerospace says that it is losing orders now because of the delay. It says that it is not launched and that it cannot launch it because of the effect of section 7(1) and (3) of the Act. But, in fact, it is going ahead with spending at the rate of about £1 million a month, and so the project drifts, as so many of these projects drift.
Mrs. Hayman: Would a Conservative Government build it?
Mr. Tebbit: I cannot say whether it would be built. I do not have the information that the Minister has. If we were privy to all the information to which the Minister is privy, we could make decisions. But we cannot make decisions on the commercial activities of a corporation without having the full details of those commercial activities. It is absurd and totally ridiculous to expect anyone to do so. Is it not time that the Minister told us whether that delay has been due to doubts in the Government or whether it has been held up for other reasons?
This morning, I was told that at the meeting last week of the CSEU aviation section with the Secretaries of State for Employment, Industry and Trade the union members present formed the impression that the Government would allow British Airways to order at least some of the 19 737s which it wants and that the Government would then launch the 146 as a sop to British Aerospace, which has not got its way and had the whole of the British Airways order for 737s changed to ills, but that this strategy is delayed—if "strategy" is not too grand a word for it—by the fact that the board of British Airways is being notably obstinate and is not willing to accept the Government's interference with its commercial judgment. I believe that that is true. Is that the way to run an industry? It is rather like the way the rest of the programme seems to be run.
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The major options have been rehearsed today, as they have been on many occasions, almost ad nauseam. The Minister perpetually is peering over the shoulders of the British Airways board, second-guessing the opinions of the very men whom he appointed to make the market strategy. Then the Prime Minister sets up a Cabinet committee because the decision is too big to be left to the Minister whom he appointed. Not content with that, the Prime Minister, to the publicly expressed dismay of British Aerospace, goes off and talks not only to the aerospace manufacturers but to the airlines in the United States. Presumably he does not trust the Cabinet committee, the Minister, British Aerospace or anyone else.
Mr. Robin Maxwell-Hyslop: Very wise.
Mr. Tebbit: My hon. Friend says that he is very wise, but is this really the way that these decisions should be reached?
The big decision to be made is whether we commit ourselves to go it alone or ally ourselves to Boeing, Douglas, Lockheed or Europe. Very few of us think it possible to go it alone in the big league. I am told that the Boeing 757, on which we were offered collaboration, is now being offered to Eastern Airlines in a larger version than that which had been offered earlier, and that takes it perilously close to the Boeing 767 which will be launched earlier.
Then we have the possibility of collaboration with McDonnell Douglas. Are the Government pursuing this vigorously, or are they letting it drift? We know that the Prime Minister saw Mr. Sandy McDonnell recently. But who is taking the lead? Are we waiting for propositions from other people, or are we making the proposition?
More than two years ago, I put it to the Minister that he was in danger of seeing the A-300 decisions drift away from him. The airbus is now Europe's most successful programme, though it is a long way from profitability. The Minister will remember, as the hon. Member for Derby, North said that the Socialist Government pulled out of that in 1968 and left it to private enterprise to stay in, with the result that British Aerospace proudly put out a press release pointing

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out that it had £200 million worth of business out of that private enterprise decision which the present Secretary of State for Energy did his best to muck up.
What is the Government's reaction to the launch of the B-10? Is the Minister content to see us drift out of that programme too? Is he determined to leave the airbus programme, or is he determined to stay—or is it another great"don't know "?
Recently the Prime Minister saw President Giscard d'Estaing, and no doubt these matters were discussed. Probably the right hon. Gentleman discussed them with President Carter too. But is it not time that the Government actually took an initiative? The Prime Minister has been heard to describe the position of our industry as that of the blushing young maiden with a large dowry being courted by a horde of ardent suitors. The danger is that unless the lady says "Yes" or "No"—or even "Come on"—she will be left on the shelf as an old maid.
Could we not take an initiative? Have we put any proposals to the partners in the airbus consortium? Are we trying to discover what investment commitment the partners would require from us? Are we seeking an arrangement to stay in the airbus project and seek a transatlantic partnership as well? Does the Minister take the view that European and American partnerships are mutually exclusive or is he trying to get away with one of each? If not, what is he doing to try to achieve that aim?
The message to the Government that the Minister should understand from the industry and from our prospective partners is short and simple. It is "For God's sake say something, even if it is only goodbye."
6.40 p.m.
The Minister of State, Department of Industry (Mr. Gerald Kaufman): The odious and contemptible speech that we have just heard has demeaned the debate, which up to then was of a very high standard.
I should like to congratulate my hon. Friend the Member for Kingswood (Mr. Walker) both on his good fortune in the Ballot and on the use he has made of it. Like others of my hon. Friends, he is a fine and active champion of his constituents who work in the aircraft industry.
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The decisions on civil aircraft policy which seem likely to be taken in the near future will go far to decide the future of the aerospace industry in this country for the rest of this century. It is right, therefore, that both the House and the Government should give those decisions most careful consideration.
Our debate today has concentrated on civil aircraft. Civil aircraft policy is a vitally important matter. But we must not forget that two-thirds of the aircraft business of British Aerospace and two-thirds of the employment which that business provides relate to military aircraft.
Of course, we have to consider the needs of Rolls-Royce, a major part of the aerospace industry in this country. It is of roughly the same size as British Aerospace, and it faces some of the same problems. In particular, it must seek a proper commercial return in fiercely competitive markets.
Rolls-Royce, as hon. Members will know, is devoting considerable effort to the successful development and promotion of the existing members of the RB211 family. The deal with Pan Am is a most important step in that direction. For the future, the Government are considering the recommendations of the National Enterprise Board regarding the launch of the RB211–535, a proposed crop-fan derivative of about 33,000 lb. thrust. This new engine would be suitable for some members of the Boeing 767/777 family; but its most important potential market would be in airframes such as the Boeing 757 and the McDonnell Douglas ATMR.
We are examining the proposals of the National Enterprise Board very carefully. As with airframes, we shall require clear prospects of commercial viability. I cannot give my hon. Friend the Member for Derby, North (Mr. Whitehead) any more information on that, but I assure him that we share his concern about the importance of these decisions.
A number of hon. Members asked questions about British Airways procurement policy, which has exercised the minds of many people. The Secretary of State for Trade has answered a Question on this matter today telling hon. Members that, following exhaustive discussions and consultation with all interested parties, he has decided to grant approval to British

1099
Airways to acquire 19 Boeing 737 aircraft. British Airways has also carried out an evaluation of its needs, and my right hon. Friend has said that he will at the same time grant approval for the company to enter into negotiations with British Aerospace for the acquisition of between three and six BAC111s.
I come to the question of airframe manufacture, which, naturally, has dominated this debate and which is very close to the hearts of my hon. Friends who have taken part. On the civil side, of course, there is continuing production of the HS125 business jet, which has now sold over 400 copies, and the BAC111, a plane which this Government kept alive by underwriting further production in 1975–77. The recently announced deal with Romania will provide further valuable work. The deal is worth some £300 million and production work for the deal in British Aerospace is expected to last until 1985. The factories at Filton, Hurm and Weybridge all of course do work on the BAC111.
As for the new civil aircraft projects that are being so widely discussed, my right. hon. Friend the Prime Minister said during Questions on 29th June that the facts relating to the difficult decisions we shall have to take must be laid before the House. My hon. Friend the Member for Kingswood has done the House a service by providing an opportunity for these facts to be set out.
The option which British Aerospace has given top priority to investigating is a package involving the B10 derivative of the airbus, and a new design known as the JET—joint European transport. The B-10 is a derivative, with about 215 seats, of the successful 270-seat airbus. Like the existing B-2 and B-4 versions, it would be a wide-bodied, eight-abreast aircraft. It would have two engines, either derated 25-tonne engines or normally rated 20-tonne engines. Rolls-Royce produces suitable engines of these types within the RB211 family; but it must be recognised that existing airbus customers, who would be most likely to order the B-10, might tend to prefer GE or Pratt and Whitney engines because of the well-known argument of "commonality".
The part of the future airline market for which the B-10 is intended is sub-
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stantial. It derives both from the growth of traffic and from the need eventually to replace aircraft such as the Boeing 727. Depending on the rate of growth of air transport, it might require, say, 800–1,000 aircraft during the 1980s. Most of this market—perhaps as much as 60 per cent.—lies in the United States. The B-10 will face formidable competition from the Boeing 767 and 777 and possible other American aircraft. But the recent Eastern Airlines deal has shown that it is possible for a European airframe manufacturer to break into the United States market.
Airbus Industrie has decided to launch the B-10 aircraft subject to respective Governments' approval. It is still possible for British Aerospace to join this programme. This is being considered urgently by British Aerospace and Government.
Mr. Tebbit: How long does the Minister think that the offer will remain open? The French have made it plain that it is open for only a very short time.
Mr. Kaufman: We realise that there is not a very long time in which to make a decision. However, there is still time, and we are considering the matter urgently.
The JET aircraft is a new design in two main versions—the JET1, with 136 seats, and the JET2, with 163 seats. Both would have a six-abreast fuselage, though with a rather wider cross-section than existing narrow-bodied aircraft, such as the Boeing 727. They are designed to be powered by two Franco-American CFM-56 engines of about 24,000-lb thrust. The overall concept is that they would form part of a family of aircraft to be made by Airbus Industrie, and including the airbus and its derivatives.
The market sector at which the JET aircraft is aimed derives partly, again, from traffic growth and partly from the eventual need to replace existing versions of aircraft such as the Boeing 737, the Douglas DC9 and the BAC111. Total requirements for this part of the market during the 1980s seem likely to be very substantial—perhaps as many as 1,500 aircraft. Unlike the market for which the B10 is primarily intended, it is not dominated by the United States. It is expected to split much more equally between the United States, Western Europe and the rest of the world outside the Eastern bloc.

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It is for this sector of the market that the Boeing 757 and McDonnell Douglas ATMR, which have been the subjects of offers of collaboration to British Aerospace, are also intended. These aircraft would be rather larger than the JET2 and are intended to be powered by engines of the type of the proposed RB211-535, of about 30,000–35,000 lb. thrust.
The other collaborative possibility which is under consideration by British Aerospace is the Lockheed Twinstar, also known as the L1011–600. This would he a derivative of the Tristar, of much the same size as the B-10. It could be powered by two Rolls-Royce RB211–524s. It is agreed by both Lockheed and British Aerospace that this possibility would require extensive market and technical studies. British Aerospace is therefore treating it as a less immediate prospect than the others.
These are the aircraft which are the subjects of the collaborative possibilities under discussion. We have to consider them against the context of the organisations with which we would be collaboratting. I emphasise that we shall take our decisions when we have the commercial facts.
First, there is Airbus Industrie—roughly equivalent to a consortium, the members of which are jointly and severally responsible for its liabilities. The existing members of Airbus Industrie are the French firm Aerospatiale, Deutsche Airbus and the Spanish firm CASA. British Aerospace and the Dutch firm Fokker are associates. The main current involvement of British Aerospace lies in its contract to make the wing box for the B2-B4 version of the airbus.
It seems clear that if British Aerospace wishes to collaborate in future Airbus Industrie programmes, it will be expected to become a full member of the organisation instead of an associate. Quite apart from the detailed implications of such a change, which are far from insignificant, British Aerospace would effectively be undertaking a major long-term commitment. Before it could do so, or the Government could back it, it would need to satisfy itself about the long-term commercial prospects. The airbus has been successful. But we must not overlook the fact that Western Europe provides a
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much smaller home market than the United States and that over 40 per cent. of the total of the market sectors I have described lies in the United States. This is one of the reasons why both British Aerospace and the Government are examining the possibility of collaboration between Europe and the United States, if it can be achieved.
I am discussing the possibilities in strict alphabetical order. I do not want hon. Gentlemen to think that we are favouring one more than the other.
I now come to Boeing. Boeing is easily the largest manufacturer of civil aircraft in the world. The company's past record suggests that any aircraft it markets is likely to sell in substantial numbers. So its offer of collaboration on the 757, under which British Aerospace would develop and manufacture the wings and associated components, is naturally very attractive. But there are difficulties. There would be much hard bargaining on the terms of any deal. British Aerospace must naturally take account of the consequences of collaboration with Boeing for its long-term future and its designs and marketing skills.
Lockheed, as I have said, is a less immediate possibility.
Then we have McDonnell Douglas, which has offered British Aerospace collaboration on a long-term basis. The immediate prospects on the civil side would include collaboration on marketing the HS146 and on design and manufacture of the ATMR. But the offer goes much wider than this. It includes collaboration on military aircraft and guided weapons. It also envisages wider collaboration, involving Europe.
These are all attractive features, but there are problems too. In particular, the B-10 and the AMTR are very close in size, and they may conflict in the market This is a matter which is being carefully considered by British Aerospace and its potential partners.
The House will see that all the various possibilities have both their attractions and their difficulties. Difficulties can be overcome. But it is abundantly clear that there are major commercial and industrial issues which require the most careful consideration.
This also applies to another potential project to which many hon. Members

1103
have referred—the HS146. The HS146 is a four-engined jet aircraft intended to relace turbo-prop aircraft on feeder and commuter routes and, to a lesser extent, small twin-jet aircraft. Two civil versions covering a range of about 70 to 100 seats, and a military version are proposed.
The project was originally launched by Hawker Siddeley Aviation Limited in August 1973. The then Government decided to support development of the aircraft by launch aid equal to 50 per cent. of the estimated launch costs. In October 1974 Hawker Siddeley Aviation decided unilaterally to suspend work; but this Government decided to place a holding contract to keep the project alive. Some work continued, first under Government contract and then financed by British Aerospace, to keep open the option of proceeding with full development of the aircraft.
On 22nd March this year the chairman of British Aerospace wrote to my right hon. Friend the Secretary of State for Industry recommending on commercial grounds that full-scale development of the aircraft should be resumed. It was clear that the project, if approved, would require the commitment of substantial resources, in both money and manpower. The Government accordingly felt obliged to give it the most searching examination.
I can now announce that the Government have decided to approve the proposal from British Aerospace, so that full-scale development of the HS146 can now proceed. The first civil version of the aircraft should be in airline service by early 1982. A second civil version and a military version should follow. The Government regard the decision as independent of decisions regarding future collaboration on larger civil aircraft.
Depending on the extent to which British Aerospace arranges to collaborate with other manufacturers, the project will entail an investment of the order of £250 million at today's prices. This expenditure will form part of the corporation's approved capital investment programme which will be financed in the first instance from internal resources and, to the extent that further finance is required, from loans from the National Loans Fund and advances of public dividend capital. British Aerospace will be
1104
expected to earn an adequate rate of return on the whole of its capital.
British Aerospace is in discussion with other European manufacturers on collaboration on the HS146. The engines, subject to satisfactory terms, will be supplied by the United States firm Avco-Lycoming. Avco has also offered to act as risk-sharing contractor for the manufacture of the wing; this is being carefully considered by British Aerospace. All such collaboration will enhance the market prospects for the aircraft.
Work on the airframe of the HS146 is expected to provide over 7,000 jobs in British Aerospace. It is estimated that it should provide a further 4,000 to 5,000 jobs among suppliers of equipment. Both British Aerospace and the Government regard it as of the utmost importance that workers in the aerospace industry should commit themselves to achieving a high level of productivity on this new aircraft and their other work.
The HS146 is the first new aircraft project which British Aerospace has undertaken since it was created a little more than a year ago, and is the first new civil airliner to be undertaken by this country for a good number of years. With the wholehearted commitment of management and workers, I have no doubt that it will succeed.
I wish to pay tribute to my hon. Friend the Member for Welwyn and Hatfield (Mrs. Hayman) for the way in which, ever since she entered this House, she has campaigned for this aircraft and on the great success which she now deserves. I also wish to pay tribute to my hon. Friend the Member for Manchester, Blackley (Mr. Rose), who has also campaigned for this aircraft, knowing the important employment consequences which it has in the Manchester area.
Mr. Tebbit: The Minister has spoken of the jobs that this decision will create. How many jobs does he think will be lost at Shorts of Belfast, where the wings for the competitor are manufactured?
Mr. Kaufman: This helps with over 400 jobs at Shorts. The factories affected are Hatfield, Brough, Filton, Manchester, Chester and Prestwick, with over 400 at Shorts and 4,000 or more jobs in United Kingdom suppliers.

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I am sorry that the hon. Member for Chingford (Mr. Tebbit) has crabbed this announcement. Of course, he crabs everything. The House has a right to know what is the policy of the Tory Opposition. The hon. Gentleman spends his whole time niggling, knocking and narking. He does not state the policy of the Conservative Opposition on any issue. He attacked the BAC 111 deal with Romania.
Mr. Tebbit: No.
Mr. Kaufman: Yes, the hon. Gentleman attacked that deal in his last speech. What is the Opposition's view on the HS146? Do they support this British enterprise? The Government have made their position clear. The aircraft workers at Hatfield, Filton and Manchester have the right to know clearly and unmistakably whether the Tories support or oppose this decision. All that they do is crab.
In our last debate, the hon. Member for Chingford insulted workers in the British aircraft industry. He said:
"I do not think that any of us can have much confidence in the future of aerospace manufacturing in Britain."—Official Report, 28th June, 1978; Vol. 952, c. 1471.]
What a statement from the spokesman of a party that forlornly aspires to become the Government of this country. How are our potential collaborative partners to judge that? If the would-be alternative Government think so little of our aircraft industry potential collaborators might ask why they should think any more of it. But the happy fact is that our potential partners have a far higher opinion of our aircraft industry than has the Tory Party, and while Conservative Members belittle our aircraft industry the great aircraft manufacturers of the world are queueing up to become collaborators with British Aerospace. That is no thanks to the Tory Opposition, whose reckless and negative opposition to the nationalisation Act placed our industry in jeopardy.
It being Seven o'clock, the proceedings on the motion lapsed, pursuant to Standing Order No. 6 (Precedence of Government Business).

EUROPEAN COMMUNITY (DRAFT BUDGET)
7.0 p.m.
The Minister of State, Treasury (Mr. Denzil Davies): I beg to move,
That this House takes note of Volume 7 of Commission Document No. R/1577/78 relating to the EEC 1979 Preliminary Draft General Budget, together with Volumes 1, 2, 3, 4 and 5, and R/1104/78 and R/519/78.
Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I should inform the House that Mr. Speaker has selected the amendment in the names of the hen. Members for Banbury (Mr. Marten) and other right hon. and hon. Members.
Mr. Davies: The principal document before the House relates to the 1979 preliminary draft budget. Document R/1104 contains the Commission calculation for the maximum rate of increase in non-obligatory expenditure, and this will be taken into account when the Budget Council takes its decisions on the preliminary draft budget. Document R/519/78 contains a global appraisal of the budgetary problems of the Community.
I turn to the documents relating to the preliminary draft budget, and I must at once apologise to the House and to the members of the Scrutiny Committee for the confusion relating to some of them. There were misunderstandings about the availability of certain of the budget volumes and this was compounded by a change in Brussels of the system of numbering them. For example, the volume relating to the Court of Justice was described in volume 1, which was one of the first available to us, as number 6, but turned out to be volume 5.
The House will have seen the second addendum circulated by the Treasury on 6th July to its explanatory memorandum; this clarifies the situation and I hope that it is helpful to the House. Volume 6, relating to the budget of the court of auditors, is not yet available in English translation and for that reason is not mentioned in the motion.
The background on the budgetary procedures, in particular on the relationships between the Council and the European Assembly, is contained in the Treasury's explanatory memorandum of 20th June which also contains comparative figures

1107
of the provision in the agreed 1974 budget and the Commission proposals for 1979. The report of the Scrutiny Committee draws attention to the principal Commission proposals involving increases in expenditure over that in the adopted budget for 1978, whether in relation to extension of existing policies or for new policies.
The Commission proposals for 1979 will be considered by the first Budget Council on 18th July which my right hon. Friend the Chief Secretary hopes to attend. The Council's decisions on the preliminary draft budget will be incorporated into the draft budget which will then be forwarded to the European Assembly. Tonight's debate will enable my right hon. Friend to take account of the views of the House. I should, however, remind the House that, in accordance with the terms of the Treaty, decisions of the Council are taken by qualified majority voting.
This will be the third year of operation of an experimental timetable under which the Commission tables its proposals in mid-June and they are discussed by the Council in mid-July. This has some advantages, including the fact that the House is able to discuss the budget before the recess, but it also means that the estimates of agricultural expenditure, having been made so long in advance of the year to which they relate, are even more uncertain than they would otherwise be.
These estimates are difficult to make, because they depend to a considerable extent on the volume of surplus production, which can be affected by the weather and other factors, and on the course of world market prices at which surpluses will mostly have to be disposed of. The Commission has indicated that, as in the past, it will re-examine the provision in the autumn when better information will be available, for example, on crop yields and, if it concludes that the estimates are out of date, it will send rectifying proposals to the Budget Council in time for its second meeting in November. Any such rectifying proposals will of course be deposited in the usual way.
Mr. Neil Marten: May we have an assurance that when the Council
1108
of Ministers and the Assembly have seen the budget proposal and made amendments to it we shall have another opportunity to debate the matter because it is only at that point that the budget becomes realistic?
Mr. Davies: The hon. Gentleman will appreciate that that is not a matter for me, but I am sure that what he has said will be noted and considered carefully.
The United Kingdom contributes to the Community budget under the own resources system and 1979 is the second of the two final transitional years before the system will be applied in full to the United Kingdom and to the other new member States. At the European Council, is was agreed that all member States would contribute to the 1978 and 1979 budgets in accordance with their own interpretation of article 131. Initially the three new member States, like other member States, would pay over full "own resources", but they would then receive quarterly refunds outside the budget from the original six member States in order to bring down their actual contributions to the level implied by the Commission's interpretation of article 131.
Following the European Council's decision, the Commission has presented the 1979 budget on a full own resources basis and if the budget were finally adopted in identical form with the Commissions' proposals, this would mean for the United Kingdom a gross contribution of 2,801 million units of account, or £1,764 million—20·4 per cent. of the total budget. We would then obtain a refund in accordance with the European Council decisions. I anticipate that the refund to the United Kingdom, if the budget were finally adopted in identical form with the Commission's proposals would amount to some £260 million. The total gross United Kingdom contribution would therefore be of the order of £1,500 million but this will be reduced by United Kingdom receipts from the budget. Receipts are difficult to estimate, but could perhaps be in the region of £400 million to £500 million. This figure does not include the monetary compensatory amounts on our agricultural imports from other member States, which the budget assumes will continue to be paid at the point of export rather than at the point of import.

1109
In any case, we believe it is more appropriate to regard these payments as made for the benefit of the producers in the exporting member States, who are thereby enabled to export to the United Kingdom without suffering any loss of profit, than as a subsidy to United Kingdom consumers. But these figures all relate to the Commission's proposal and the actual United Kingdom contribution will be determined by the size of the budget as finally adopted in December. All I can say is that I anticipate that significant reductions will, by then, have been made on the Commission proposals. For this reason, the figure for the United Kingdom contribution included in the explanatory memorandum must be regarded as illustrative and intended only to show the financial effect of the Commission proposals as originally made and before they have been considered by the Budget Council and the European Assembly.
Because only two member States, of which we were one, had passed in time the necessary domestic legislation implementing the Community's sixth VAT directive, the 1978 Community budget had, in part, to be financed on the basis of member States' GNP shares, these representing a "topping-up" element above the proceeds of customs duties and agricultural levies collected by member States. For the 1979 budget, the Commission has assumed that all member States will have passed the necessary legislation and that contributions based on the system of VAT own resources will replace GNP-based contributions as the third element. As laid down in the own resources decision, VAT own resources are raised by the application of a rate of up to 1 per cent. of a harmonised VAT base throughout the Community. The rate will, of course, depend on the amount of budget expenditure, and the yield of duties and levies, but on the basis of the Commission's proposals in the preliminary draft budget the rate for 1979 is 0·75 per cent.
The maximum rate calculated by the Commission for the 1979 budget of 11·4 per cent, as indicated in document R/1104/78, is relevant to the degree to which the European Assembly has the ultimate power to increase the level of non-obligatory expenditure.
1110
The Commission has explained its approach to this in pages 101 to 106 of volume 7A. The most important point is that it has entered substantive appropriation under budget headings, not only when a Commission proposal has been accepted, but when in the Commission's view a proposal, submitted to the Council by 15th June, has every likelihood of being adopted by the end of the year. Otherwise token entries are made under the appropriate budget headings and on some occasions figures entered under chapter 100. The Budget Council, however, usually takes the view that all items on which no Council agreement exists should be deleted unless agreement is likely in the near future, in which case chapter 100 may be used. In accordance with its approach, the Commission has included provision in the 1979 budget in a number of areas, in particular in relation to energy and industrial policies, where no policy agreement has yet been reached by the councils concerned. I anticipate, therefore, that the provisions will be deleted by the Budget Council.
The Commission has proposed one innovation in the 1979 budget. To the normal budget it has proposed adding a second part, the purpose of which is to cover borrowing and lending operations by the Community. Hitherto, token entries only for such loan schemes have been shown in the budget, these being included to cover any expenditure incurred by the Community in honouring guarantee obligations.
The European Assembly has consistently argued for "budgetisation" of loans, which would involve the borrowing by the Community being entered into the budget as a receipt, and the on-lending as a payment. A number of member States, including ourselves, believe that the Commission's proposal gives rise to a number of practical and legal difficulties which need to be examined in depth. We shall therefore put forward the view that the Commission's proposal for amending the financial regulation, and for having a second part of the budget, should be examined later in the year.
Mr. Tam Dalyell: When we come to the Government's reply, perhaps we may be told about the Government's attitude to the so-called Ortoli loan. Do they favour such things

1111
being the subject of the criteria of the European Investment Bank or are they well disposed towards the Ortoli facility?
Mr. Davies: I shall take up my hon. Friend's generous suggestion to deal with that question in my reply.
Part of the confusion over documentation, to which I referred earlier, related to the budget of the Assembly. The Council will have before it the Assembly resolution of 15th June, a copy of which was attached to the first addendum to the Treasury's explanatory memorandum and which was not available to the Scrutiny Committee at the time that it prepared its report, and the draft budget proposed by the Assembly, which is contained in volume 2 of the preliminary draft budget and is available in the library.
The Council will have the opportunity, if it so desires, to comment on the Assembly's proposals for its own budget. The Council cannot, however, enforce any change because of the non-obligatory nature of the expenditure. However, for the 1979 budget exercise the Assembly is planning a two-stage contribution. Its first draft projects the cost of the Assembly's existing activities, and it will produce a second-stage document towards the end of the year containing proposals which would allow a new Assembly elected by direct universal suffrage to begin its work before the end of 1979.
The Government's general approach to the preliminary draft budget will, as previously, be in line with the Government's approach to domestic public expenditure, and will be to seek to restrain increases in expenditure bearing in mind the constraints of qualified majority voting by the Council, except where increases can be justified in line with our own priorities. I am, however, in considerable sympathy with the views expressed by Commissioner Tugendhat on the need to secure some movement away from the present dominance within the budget of expenditure on the CAP. That can be done only if in the main CAP expenditure can be more tightly controlled.
Agriculture dominates the budget, taking altogether 70·1 per cent. on a commitment basis and 72·7 per cent. on a payments basis. In turn, about 95 per
1112
cent. of total agricultural expenditure is accounted for by the so-called guarantee section, which finances all measures of farm price support.
The fact that the taxpayer is also called upon to make such a large contribution is, as the House knows, largely due to the need to dispose of farm surpluses, which the EEC ought never to be producing. Milk, the most surplus product, accounts for no less than 38 per cent. of the guarantee section and over 26 per cent. of the budget as a whole. It remains the Government's objective to bring supply into better balance with demand, and this essentially means bringing support price levels down in real terms. The increase in support prices for 1978–79, expressed in units of accounts, is only just 2 per cent. on average, which is the lowest increase for many years. Despite this, agricultural expenditure remains far too high. It would have been more satisfactory if there had been no increase at all in the support prices for surplus commodities.
Mrs. Gwyneth Dunwoody: May I, therefore, expect that Her Majesty's Government will make it plain to the Commission that far from supporting any further extension of the existing CAP—for example, a common market of sheepmeat—they will seek to lower the amount of support that is given to the CAP?
Mr. Davies: I can answer that question by saying "Yes". The British Government have no interest in extending the scope of the CAP. Indeed, it is in our interests to try to reduce expenditure on it.
Also, changes in the green currencies, agreed at the same time as the Agricultural Council decided price changes, lifted the average real increase in the EEC as a whole from the apparent figure of 2 per cent. that I mentioned in nearly 7 per cent. if we take the green currency increases into account.
That state of affairs is clearly most unsatisfactory and, as my right hon. Friend the Prime Minister informed the House this afternoon, the CAP was discussed at some length during the meeting of the European Council at Bremen last week. As he said, the Commission has been asked to make proposals. The Government will be looking for proposals

1113
which tackle the problem seriously and bring about a substantial reduction in the budgetary burden. It will be clear from what I have said that the amendment to tonight's motion, tabled in the names of hon. Members on both sides of the House, very much reflects the Government's view of the matter, and I am happy to say that the Government will be prepared to accept it.
Mr. Marten: I thank the right hon. Gentleman for indicating acceptance of the amendment. Year after year we hear that the Government of the day are dissatisfied with the expenditure on the CAP, but nothing effective is ever clone. Will the Minister of Agriculture, Fisheries and Food take with him to the Council of Agricultural Ministers the Chief Secretary to the Treasury, the experienced hatchet man, and really put it on the line that we shall not accept any more such expenditure on the CAP? Until that is done, nothing will happen.
Mr. Davies: The British Government have made it clear that we are not in favour of the way in which the CAP operates. Unfortunately, as the hon. Gentleman knows, we are one member of nine member States. It is one of the factors which, no doubt, was taken into account when the House voted for entry into the Common Market, and when the British people accepted membership in the referendum. These are the constraints within which we operate.
Mr. John Lee (Birmingham, Hands-worth): Is there not some sticking point at which the Government propose to use the veto?
Mr. Davies: My hon. Friend knows that, although the veto seems to be a potent weapon, in view of the bargaining that has to take place in this sort of Community, it is not in practice as strong as it seems to be in theory.
Mr. John Roper (Famworth): In view of what my right hon. Friend the Prime Minister was able to report today about all the Heads of Government, at the meeting in Bremen, being agreed that there should be a reform of the CAP, is not the position in that area somewhat brighter now than it has been in the past?
Mr. Davies: I hope that things look brighter. I think that it was agreed that
1114
there should be a review of the CAP and not a reform. It is not for me to say whether a review will lead to a reform.
It is often suggested that the Budget Council is the proper forum for deciding how much the Community should spend on the CAP and on its other policies. As my right hon. Friend the Chief Secretary told the Scrutiny Committee, this would be a new departure for the Budget Council, because it has up to now regarded its function as being confined to ensuring that the figures on the budget properly reflect the financial consequences of the policy decisions taken in the various specialist councils. Accordingly, all policy decisions on agriculture have been left to the Agricultural Council.
There is, of course, nothing to stop the Budget Council from voting to reduce the provision for agricultural expenditure. But this in itself would achieve nothing, unless the Agricultural Council were to regard itself as bound by that figure. All that would happen would be that the supplementary budget eventually required as a result of the next set of farm price decisions would need to be that much larger than it would otherwise have been. To have any practical effect, it would have to be accepted that the Budget Council's figure should be taken as a ceiling within which the Commission would operate in presenting its farm price proposals and within which the Agricultural Council would take its decisions on those proposals. From our point of view, this might be a very desirable change in the role of the Budget Council. But whether the other member States would look at it in that way is a different question.
There are various other proposals in the budget relating to the Regional Development Fund, the European Social Fund and aid to developing countries. I shall not go into them in detail now, but if hon. Members have questions on these aspects I shall be happy to deal with them.
In conclusion, I hope that taken together with the information provided in the documents before the House, including the Scrutiny Committee's report, the House will now have sufficient information to debate these proposals. My right hon. Friend the Chief Secretary will obviously take account of all comments

1115
made in the debate in deciding our attitude at the Budget Council.
7.23 p.m.
Mr. Michael Shaw: I think that the whole House will wish to thank the Minister of State for opening the debate in the way that he did. I should be interested to know whether he or his right hon. Friend the Chief Secretary will be going to Brussels for the consideration and preparation of the draft budget. I suppose that the lot falls on the usual shoulders.
The preliminary draft general budget for 1979 was discussed last week in the European Parliament. I hope that my hon. Friend the Member for Banbury (Mr. Marten) will excuse me if I continue to call it "Parliament", but that was the decision of the European Parliament some years ago and it is a title which we are accustomed to use. While I know that the use of the word "Assembly" would assist him, it would disadvantage others who are listening to my speech. Therefore, I hope that, with his usual courtesy, he will go along with me in the use of the word "Parliament".
At any rate, the matter was discussed there. The views of the European Parliament will be formally presented to the Council of Ministers on Tuesday 18th July in Brussels. After that meeting, the Council will draw up the draft budget. Therefore, from all points of view, this debate is well timed. I understand that the Chief Secretary will be going to the meeting and that he will go after Parliament has had the opportunity of presenting its views to him this evening.
In describing the proposals for 1979, Commissioner Tugendhat has described his proposals as being modest. I described them last week as being disciplined increases. They are certainly in no sense outrageous. The commitment appropriations have increased by 15· per cent. and the payment appropriations have increased by 12·1 per cent. As the Commissioner explained, this position was made possible by a deliberate policy of containing agriculture. The Minister referred to this matter. It is fair to say that the containment was not as great as the Commission would have wished. Thus, we have preliminary figures for
1116
1979 of 14·6 billion units of account for commitments and 13·8 billion units of account for payments. The Community's preliminary draft budget, therefore, represents 0·88 per cent. of its total gross domestic product, and nearly three-quarters of that is to be spent on agriculture.
Yet the discussion tonight, and, indeed, at the Council meeting next week, is not about agriculture in any detailed way, as the right hon. Gentleman explained. That debate can take place only when the letter of amendment is received in early October. That will then reflect the updated figures calculated after the harvest has been gathered in.
At this stage, we can only hope that the pattern of previous years is not repeated: a pattern in which the Council cuts back the non-agricultural sectors in July—that is, on 18th July this year—and the sums are then more than restored into the agricultural sector in October.
Mr. Lee: Perhaps the hon. Gentleman, who works for this extraordinary organisation, can give us the benefit of his assistance. He has expressed a pious hope, which I am sure is widely shared. Can he say what the pattern of events has been for the last two years? Has it gone up or down in each October review?
Mr. Shaw: The tendency has been for it to go up. So far, the Commission has said that it has got it under better control. The hon. Gentleman is assisting me in the point that I am making. I am asking the representative of the Council of Ministers to do his best to see that that containment continues when the draft budget is produced.
As a country, we must recognise that our future economic well-being and safety depend upon greater co-operation with other countries. Problems and projects which in the past were properly regarded as national more and more require Community solutions. If the Community is to be a leading economic force in the world we must not only develop together the expensive energy and industrial policies of the future but accept that the problems of regional policy, the restructuring of industry, unemployment and retraining must more and more become Community responsibilities.
Mr. Nick Budgen: Does my hon. Friend agree that, if we are to have monetary union within the Community, that will inevitably lead to economic union and that, if we are to have both economic and monetary union, those who want it will also want the biggest possible regional policy?
Mr. Shaw: I think that the two must go hand in hand.
Mr. Budgen: The three.
Mr. Shaw: Yes, the three. We cannot have the one without the others.
Mrs. Dunwoody: Would the hon. Gentleman therefore care to comment on the fact that it looks as though the Regional Fund will be very much smaller this year?
Mr. Shaw: That remains to be seen.
Mrs. Dunwoody: Look at the figures.
Mr. Shaw: I shall deal with that matter in detail later in my remarks. The hon. Lady has looked at the figures, as have I. I shall comment later on the very point that she made.
The way ahead must lie in our drawing closer and closer together, but the benefits of so doing must be shared by all countries. It is against that background and in that belief that the Commission has made its modest proposals. Obviously, such policies will not in themselves be in any way decisive. The sums involved are far too small. However, they are a beginning. By working together through such small beginnings, co-operation in these areas must develop and expand.
For example, the budget figures for energy follow the Commission's strategy, which is based on the development of Community energy resources. That is the only way in which we can reduce our dependence on imported energy. Expenditure on uranium and hydrocarbon exploration is to be increased, as also are efforts to extend the use of coal. Equally, the Commission is right to include the costs of programmes for energy conservation. Over a four-year period the total outlay in this area will be about 150 million units of account.
In industry, the Community must plan an increasing role to assist in reconstruct-
1118
tion and conversion projects, as also in advanced technology. The European Council at Copenhagen was right to emphasise the need to overcome the serious problems arising from structural over-capacity in several industries.
Mr. Budgen: I hope that my hon. Friend will help those of us who are sceptical by defining precisely the areas in which the Community should not interfere.
Mr. Shaw: I believe that we can look at the positive matters that are identified, but I do not believe that at this stage, when dealing with economic development, we can seek to deal with those matters which are not identified because such spheres will change from year to year, as will the requirements.
When dealing with research, it is logical and right for us to develop joint programmes. We have never lacked brains and ability in Europe, but more and more, through the complexity and expense of advanced technology, as individual count-tries we cannot provide the capital and resources to exploit them. If this potential future wealth is not to be lost to Europe, we must work together by developing joint programmes of both research and production. Above all, the Commission is rightly conscious of the seriousness of the unemployment problem in the Community, with all that that means in terms of human suffering and lost production.
Commissioner Tugendhat has told us that he has put expenditure in the social sphere in a central place. That must be right with unemployment in the Community running at about 6 million. Appropriations for the Social Fund have been increased substantially this year. For example, help is being given to farm and textile workers, to people in backward and declining regions, and particularly to the young unemployed. I remind the House that the European Parliament was particularly successful in persuading the Council to increase this expenditure in the negotiations last year on the 1978 budget.
As requested by the hon. Member for Crewe (Mrs. Dunwoody), I turn to the Regional Fund. It is from that fund that help is given to the areas of the Community with special unemployment and development difficulties. The European Parliament feels strongly about this

1119
sector. Expenditure in this sphere represented the greatest difference of opinion between the Council and Parliament last year.
This year, the Commission stated in volume 7, at page 47:
"Continued imbalances between the regions are a major obstacle to European integration and to economic and monetary union. This has been pointed out repeatedly—most recently at the Copenhagen meeting of the European Council on 7th-8th April, which declared that internal economic stability and the reduction of regional imbalances are Community objectives of paramount importance."
I agree with that. But why has the Commission so tamely accepted the figures put forward for the fund last year by the Council?
Last year, the Commission included in the 1978 budget figures which we understood had been carefully prepared. The European Parliament accepted them. The figures were 750 million units of account—that is, about £488 million—for commitments and 525 million units of account—about £342 million—for payments as a minimum requirement. When the Finance Ministers of the Council considered this item, they could not reach agreement. In the end the matter had to go to a meeting of Prime Ministers, who eventually agreed lower figures for the three years 1978, 1979 and 1980. The Finance Ministers of the Council told us that while all other figures were negotiable the commitment figure of 580 million units of account for 1978 was not, because it had been agreed over their heads by the Prime Ministers.
As rapporteur for the 1978 budget, I persuaded Parliament to accept this position. I was not very popular. I took the view that Parliament and Council had to reach agreement and that, since the Council had moved towards our view on other matters to an extent that it had never done in previous years, it was only right that we should concede this point. However, before conceding this position for 1978, the President, Mr. Eyskens, said in the debate on 13th December 1977:
"My view and that of the Council is that, unless we want to run the risk of a serious conflict between the Parliament and Council, we must stick to an amount of 580 million in commitment appropriations for 1978. I would add that for the two subsequent years, 1979 and 1980, despite the European Council's decision of principle, contacts, negotiations and
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amendments will always be possible … I have already said on another occasion that I do not consider it illogical for the 1979 and 1980 instalments of the 620 million and 650 million respectively as decided by the European Council, to be concentrated on a shorter period. That seems to be a working assumption that will require further discussion from 1978 onwards."
He concluded:
"Let us then stick to the first instalment in 1978, otherwise we shall have great political difficulties."
Clearly, the door was open for renegotiation in later years.
I generally welcome the way in which the Commission has presented the preliminary draft budget, but I have two serious complaints about the Regional Fund sector. First, having had to trim its proposals last year, it has now abandoned any thought of returning to them, although it must have known that it had the support of Parliament. Secondly, by accepting the figure that was put forward last year by the Council of 620 million for 1979 and 650 million for 1980, the Commission has closed the door to the negotiations envisaged by Mr. Eyskens last year.
If the fund is to be spent in a shorter period than was envisaged last year, it must be committed more quickly. Equally, figures entered this year by the Commission do not allow for possibly more generous amendments that were envisaged by Mr. Eyskens last year.
The problems of the regions and their development are critical to the future of the Community and to the success of plans such as those that were under discussion at Bremen last week. Can we be assured by the Minister that the Government will be receptive and flexible on the need for maximum help being provided through the Regional Fund? The European Parliament undoubtedly will make this a key point in its discussions with the Council
Mrs. Elaine Kellett-Bowman: In view of the vast importance of this subject, can my hon. Friend account for the Minister's total lack of comment, except for the cursory statement that he might answer questions if they were raised?
Mr. Shaw: I do not speak for the Minister. It is curious, however, because I should have expected to hear what

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part our Government played in the discussions that took place between the Prime Ministers when they arrived at a final decision on the reduced figure. The meeting of Prime Ministers certainly passed down to the Finance Ministers recommendations that they felt impelled to accept.
I turn now to the ideas involved in the budget. Of these, five are listed on page 13 of volume 7, and I shall refer to the first three. The first is aimed at improving a balance between agricultural expenditure and that devoted to the development of other policies. This view has been expressed many times in this House and elsewhere and it needs no further comment from me except to say how much I agree with it.
The second idea is that of taking a selective approach leading, in a limited number of priority sectors, to a real transfer of policies from national to community level. The third is bringing under the Community budget activities which can more advantageously be dealt with both politically and economically at Community rather than national level. An expansion of Community programmes in this way is vital if the Community is to bring benefit to all its parts and to all persons living in it. Perhaps the Minister of State will comment on these ideas as expressed in the preliminary draft budget.
Mr. Denzil Davies: The hon. Member is speaking from the Opposition Front Bench on behalf of the official Opposition. Is what he is saying the Conservative Party's view on all the items he has listed?
Mr. Marten: A good question.
Mr. Shaw: This is the view of the Commissioner—
Mr. Budgen: He is just a glorified civil servant.
Mr. Shaw: Perhaps I may be allowed to complete my sentence. This is the view that the Commissioner has put forward in his preliminary draft budget. If we are to draw nearer to and entertain in any real way economic and monetary union, we must advance such joint projects as JET. It is right for us to learn to work together.
Mr. Douglas Jay: Is the hon. Member speaking this evening for the EEC Commission or for the British Conservative Party?
Mr. Shaw: I believe that if we are to make a success of the Community we must find areas in which we can learn to work together. There was no point in our joining the Community unless we were prepared to carry out this sort of joint undertaking.
Mr. John Biffen: I am sure that my hon. Friend would not want inadvertently to leave the House with the impression that it was the policy that regional policy should be conducted on a Community basis and out of Cornmunity funds rather than on a national basis out of national funds. Will he make his position clear on that point?
Mr. Shaw: At the moment the programmes work through the national Governments, but they are supported by the Community. For the first time there is the possibility within the preliminary draft budget of non-quota aid being given by the Commission, and I believe that help in that way is of vital importance if we are to try to assist the more backward regions of the Community and to bring them up towards the levels of the more fortunate parts of the EEC.
Mr. David Stoddart: I should be grateful if the hon. Member could help me. I have been listening carefully to what he has been saying, and it seems to me that he was committing the Opposition to economic and monetary union. I found that most interesting, particularly bearing in mind the qualified statements earlier this afternoon by the Leader of the Opposition when my right hon. Friend the Prime Minister made his statement. Will the hon. Gentleman clarify the situation?
Mr. Shaw: Obviously we cannot reach any final conclusion, because, as the Prime Minister rightly said, there must be a good deal more examination of this matter. Until the terms have been produced and we are satisfied, I shall take the view that we can safely go into these matters. I do not think that what I have saicl—and, clearly, I am convinced that all those who voted to go into the Cornmon Market must have had these ideas

1123
in mind—[HON. MEMBERS "No."]—because I certainly had—contradicts anything I heard said from this Dispatch Box this afternoon.
Perhaps I may now be allowed to continue with my speech. I have already taken longer than I had intended. I hope that there will be reduction of agricultural expenditure and an expansion of expenditure elsewhere. An increase in those other sectors does not mean an automatic overall increase in expenditure. In so far as programmes are a substitution for national programmes, in so far as they are more efficient and effective and in so far as they create prosperity in place of subsidised poverty, they do not entail such increases in overall expenditure. This point has been brought out by Commissioner Tugendhat, and it was emphasised in the MacDougall report.
Now that the presentation has been made to the Council and to the European Parliament, the Commission's official task is complete. Although its important help and advice will be available throughout the remaining budgetary processes, the budgetary authority must now agree the budget, and that authority consists jointly of the Council and the Parliament. Later this month, the Council will draw up the draft budget based on the document that we are discussing now. In the past it has been the custom for the Council to cut back heavily on the non-agricultural expenditure, as shown in the preliminary draft. I shall be grateful if the Government will confirm tonight whether they continue to favour such substantial cuts this year.
The overall increases are modest, and the projects favoured by the Commission are in the sectors favoured certainly by the European Parliament and, as far as I know, by the Council as well.
After publication of the draft budget, there will follow the exhausting procedure of its consideration and amendment by the Parliament and the subsequent conciliation between Council and Parliament. In practical terms—I shall not go into the complicated and lengthy details—because the Council and the Parliament are the joint budgetary authority, because each institution has the last word on different types of expenditure and because the budget is not finally adopted until it is so declared by the
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President of the Parliament, it is necessary for Council and Parliament to reach agreement either at the proper time in December or, after disagreement, by a complicated procedure during the following year.
Mr. Marten: My hon. Friend began by saying that he would call the Assembly the Parliament. As I have listened to him, I have found his words somewhat confusing, if my hon. Friend will forgive my saying so, especially in the last few paragraphs, because he has referred to the "Parliament" and I have not been sure whether he was referring to the Assembly or to this Parliament here. It would therefore be better if my hon. Friend would kindly use the correct phraseology in this place, using "Assembly" for that thing over there in Europe and "Parliament" for our Parliament here. I do not mind which word my hon. Friend uses over there, but will he please use the word "Assembly" here?
Mr. Shaw: In the last few paragraphs I was referring to the European Parliament.
Last year, although the differences between us were originally substantial, I am glad to say, as rapporteur for the 1978 budget, that agreement was reached, and reached at the proper time. I hope that this year, too, Council and Parliament will be able to show that they have the same objectives in mind and can reach agreement once again.
I am convinced that the successful future of the Community depends not on the increasing of the European Parliament's power but on the better use of its existing powers and, perhaps above all, on the development of a proper and responsible relationship between Council and the European Parliament.
7.51 p.m.
Mr. Douglas Jay: I beg to move, at the end of the Question to add:
'and further notes with deep concern that the policy implied in this preliminary draft budget once again fails to make any reduction in the huge burden of agricultural expenditure under the guarantee section of the European Agriculltural Guidance and Guarantee Fund, in particular, in the cost of disposing of agriculltural surpluses outside the EEC'.
The Minister has wisely accepted the amendment in advance of its being

1125
moved. The essential words of the amendment are that this House
"notes with deep concern that the policy implied in this preliminary draft budget once again fails to make any reduction in the huge burden of agricultural expenditure "—
and so on.
It is not the fault of my right hon. Friend the Minister of State, Treasury that we are now members of the Common Market. I am not absolutely sure how the hon. Member for Scarborough (Mr. Shaw) voted on the European Communities Bill, but I suspect the worst. Certainly, a large part of his speech sounded to me as though it had been drafted by the EEC Commission.
Mr. Michael Shaw: It all depends on what is meant by the worst. I voted for it, of course.
Mr. Jay: That is what I feared.
When listening to the Minister, I was at times rather strengthened in my view that those responsible for EEC procedure and the drafting of documents deliberately make everything so complicated that no ordinary person is likely to understand what is really going on. However, one outstanding fact emerges beyond argument from this draft budget, and that is that over 70 per cent.—I think that the Minister's latest figure was 72 per cent.—of the immense sums involved is still to be spent on the common agricultural policy, which in plainer English means buying up huge surpluses of food at extortionate prices, preventing consumers inside the EEC from getting them at any reasonable price and then selling them at one-quarter or one-fifth of that price to the outside world. Compared with the agricultural budget, the sums to be spent on the Regional Development Fund and the other items are comparatively trivial.
The Treasury's explanatory memorandum which, I am sure, did its best to make matters clear, though giving the total figures did not give the percentage, but I believe that my right hon. Friend gave it as about 72 per cent. But this percentage has remained virtually the same over a number of recent years, or, if anything, it has increased from year to year. This colossal waste of public money —for that is what it is—goes on, and there has been no serious reform of the CAP in practice, despite all the promises that we have been given. Indeed, only the
1126
valiant efforts of my right hon. Friend the present Minister of Agriculture prevent the situation from getting very much worse. In fact, all that my right hon. Friend can tell us when he comes back from these adventures is that as a result of his strenuous efforts it is not quite as bad as it might have been.
I believe that the cause of this trouble and the real mistake which we have made is that the British Government have failed to take the initiative and themselves put forward major proposals for drastic reform. What happens over and over again in our relations with the EEC is that the British Government sit back and wait for other countries or the Commission to come forward with positive projects, such as the latest EEC currency stabilisation so-called plan which we heard about today, and the Government then react weakly to such initiatives coming from somebody else.
I do not believe that the situation will ever change until we take the initiative ourselves. For instance, the new currency stabilisation plan of which we heard only in the past 24 hours, which is really a plan for either fixed exchange rates or much more nearly fixed exchange rates, would in any foreseeable circumstances in this country, I believe, spell unemployment at a higher level than we have now, would weaken this country still further, and, incidentally, would strengthen the grip of the common agricultural policy on all the member countries.
The reason why the French are backing the currency stabilisation plan is that they know that it would tighten the hold of the common agricultural policy, which is what they really care about. We should keep that in mind in considering the currency plan.
Mr. Dalyell: This would be all very well if some of us did not remember those hectic nights in July 1966 and onwards when my right hon. Friend was a senior economics Minister and the rest of us were scurrying about voting for heaven knows what—with Lord George-Brown and the rest—precisely because there were unstable monetary conditions.
Mr. Jay: If I may say so, that is precisely what I am arguing—that a fixed rate of exchange takes away from the Goverment the power to carry out the

1127
economic policies which are in the country's interests. It was then done for the sake of the sterling rate of exchange. It will have exactly the same effect if it is part of so-called economic and monetary union.
I am straying rather far from the immediate subject, but I add just this. It seems to me, for the reasons I have given, that it should be the first condition of acceptance of any plan of that kind that there should be genuine reform of the common agricultural policy first. If we are to have dates fixed in the matter of the currency plan, with what will happen in October, what will happen in December and so forth, we should have similar dates fixed for the reform of the common agricultural policy and not have it perpetually postponed into the far distance.
I should like to be a little clearer than I was even after reading the Treasury's memorandum and listening to my right hon. Friend today on exactly what the United Kingdom's net contribution will be to the budget in the coming year and in later years. On the figures given up to now, I think it true that in the past year the contribution net, after allowing for all the inward payments which we are told so much about, was running at about £700 million sterling a year. After all, in this matter of the budget we were supposed to gain relief here at least from the renegotiation process, but there seems to be no sign that we have got that relief. I hope that the Minister will explain—I shall be delighted if he can do it in his winding-up speech—exactly what relief the renegotiation is providing us with at the present time.
Mr. Marten: The right hon. Gentleman mentioned the figure of £700 million net. I believe that it is estimated to be £800 million net next year, and even more the year after that. Does he agree that that makes absolute nonsense of all the propaganda put out by the Euro-movement, the Commission and so on that we are receiving grants? We are receiving nothing at all. We are paying in all the time. Had we not been members of the Common Market, we could have used all that money to make much bigger grants, if necessary, to our own country.
Mr. Jay: I entirely agree with the hon. Gentleman, but I regard the propaganda
1128
to the effect that we are being subsidised as being of so low a level that it is hardly worth referring to. It is rubbish.
I was trying to establish, with my hon. Friend's help a little later, exactly what we shall now have to pay. This is a payment across the exchanges. I think that my right hon. Friend told us that were the whole own resources system to be enforced, as the explanatory memorandum says it should be, the gross figure would be £1,760 million. I understood him then to say that there was a refund which would reduce that by, I think, £260 million. That brings the payment down to £1,500 million. My right hon. Friend then added that the payments inwards which we should receive to offset against that would be £400 million or £500 million next year. If I have that correct, the conclusion seems to be that the net burden on this country next year will be about £1,000 million, which is a huge increase on the £700 million that we are paying now.
Mr. Denzil Davies: My right hon. Friend is quite correct; but those figures are based on the preliminary draft budget and are fairly provisional.
Mr. Jay: I realise that, but even if the figures are provisional it is well to know what they are. If that is correct, it is ominous for what will happen in the next few years.
Why should even the gross United Kingdom contribution be 20 per cent.—my right hon. Friend gave us that figure again today—of the gross revenue of the EEC? The United Kingdom's gross domestic product is certainly less than 20 per cent. of the total GDP, and I thought that the renegotiation had done something to bring the two into relationship. Perhaps my right hon. Friend will explain that in his reply.
The House has a duty on these occasions. I do not say that it is voting money, because we cannot exactly describe these debates as that, but I suppose that this is as near as we shall ever get to voting our contribution to the EEC. In doing this, we should examine some of the items of expenditure and ask whether economies can be made. What are British representatives, both officials and Ministers, now doing in the EEC institutions to check the extravagance, on the one hand, and fraud, on the other, which are

1129
notorious, in particular in the common agricultural policy? As we must all be brief, I shall mention only one item tonight. I quote from the Financial Times of as recent date as 19th June, when it said:
"Many of the 12,000 permanent staff employed by the European Commission and other EEC institutions have for the past 18 months received higher pay than they are entitled to, because of a technical error.
In some cases, the overpayments are said to be £20 per week.
The error, estimated to be costing the Community several million pounds a year, became known to Commission officials and EEC governments more than a year ago, but has not been disclosed until now."
Is that true? Are these figures correct? The Financial Times continued:
"A plan to rectify it has been drawn up, but it will probably be several months before this goes into effect.
Officials in Brussels believe that it may be difficult to recoup money already paid.
The EEC's permanent staff are among the best-paid civil servants in Europe … The Commission has declined so far to publish complete information on the numbers of staff and the sums involved.
But officials estimate that it may amount to £5 million over the past 18 months."
That does not seem to be exactly a triviality when we are dealing with public money.
Mr. Dalyell rose—
Mr. Jay: Perhaps my hon. Friend has some information about this.
Mr. Dalyell: The matter should be put into perspective. There are fewer civil servants in Brussels than there are in the Scottish Office.
Mrs. Dunwoody: They cost rather more.
Mr. Dalyell: There are considerably fewer. As the hon. Member for Scarborough (Mr. Shaw) and I are vice-chairmen of the committee that is supposed to be looking at the subject of fraud, we frequently ask colleagues whether they have any evidence, because the matter is investigated. My right hon. Friend says that he has evidence of fraud. Naturally, it should be investigated by the Assembly, Parliament or whatever one likes to call it.
Mr. Jay: I did not say that I had evidence of fraud. I said that those
1130
positive statements were made by the Financial Times. I am asking my right hon. Friend the Minister whether they are correct. We should have the answer.
Mr. Stoddart: There seem to be double standards. We have one standard in this country and seemingly quite a different and looser standard in the EEC. A constituent of mine who was engaged at the princely salary of about £28 a week was informed by the Home Office after a month that it had overpaid him and would deduct the money, and it did so to the extent of £12. Is my right hon. Friend telling me that people in Europe who have been overpaid to the extent of many tens and perhaps hundreds of pounds will not suffer the same fate as my poor little constituent?
Mr. Jay: I am in favour of the same standard, whether in the Scottish Office or in the EEC Commission.
On the matter of correcting fraud, I remind my hon. Friend the Member for West Lothian (Mr. Dalyell) that we were told by Ministers only a week or so ago in a debate on the criminal law and proposals from the EEC Commission that changes must be made in criminal law procedure here in order to correct frauds which were going on in Brussels. If my hon. Friend cares to look up the Official Report of that debate, which occurred within the past 10 days, he will find that those statements were made by a Minister and not by a Back Bencher.
Since that debate, reports have been circulating that some of the frauds have been committed not by outside commercial agents but by employees of the Corn-mission. When we are dealing with large sums of money, we should also hear from my right hon. Friend whether that is true. It is a bit much if some officials are not merely grossly overpaid but are responsible for, or are condoning, frauds of public money and frauds on the long-suffering British taxpayer, who is making major contributions to the EEC fund. In the interests of at any rate some economy I shall be most grateful if my right hon. Friend can answer those questions.
Mr. Dalyell: Inadvertently, my right hon. Friend suggested that I had suggested that there was fraud in the Scottish Office. I meant to suggest no such

1131
thing, and I think that my right hon. Friend will accept that.
Secondly, my right hon. Friend is a former Minister of great experience, whom I genuinely and sincerely respect. With his great knowledge of Government machines, how would he suggest—I put this as an interrogative question, with no kind of slant—that the House of Commons puts its oar in on the genuine problem of alleged fraud or possible fraud within the Community? One of the questions I go on and on asking, without getting a very satisfactory answer, is what the relationship should be between the Commission and the European auditors, on the one hand, and the police forces of the various members of the Community, on the other. This is a very serious question. Perhaps my right hon. Friend has some ideas on the subject.
Mr. Jay: Surely one of the basic troubles is that the relationship of the EEC Assembly to the Commission is very different from the relationship of this House to our own Civil Service, because Ministers are responsible to this House under our system and can give instructions to our civil servants. I should have thought that the EEC, by moving a little further to that system, could make it easier to detect these frauds. All I am doing tonight is to ask the Minister to give an answer to the factual questions that have been asked.
8.10 p.m.
Mr. Russell Johnston: I shall be brief because many others want to speak. I intend to deal with only one item in the proposed budget, but before doing so I must say to the right hon. Member for Battersea, North (Mr. Jay) that he employed the tactic of putting a little mark on people. He started off by saying that there was a story in the Financial Times which referred to over-payments. That sort of thing happens in the best-ordered bureaucracies from time to time. He then read from the Financial Times that the money might be difficult to recover.
Then, behold, before we knew where we were, we were hearing that some officials, supposedly grossly overpaid, might be responsible for or condoning the fraud. There is no evidence of that at
1132
all. It is not good enough for the right hon. Gentleman to cover himself in making these allegations by couching them in interrogative form to the Minister. There is no evidence of any general fraud within the Commission, and it is wrong that these generalised criticisms should be made in such a way.
I wish to concentrate on the question of the Regional Fund. The hon. Member for Scarborough (Mr. Shaw) made some comments on it, but unfortunately the Minister did not so do. Amazingly, although this subject was much dwelt upon by the Labour Party at one point, the Minister spent rather more time in contrived flippancies about the common agricultural policy than in dealing with important matters such as the Regional Fund.
The report of the Select Committee is also singularly lacking in comment on the Regional Fund and that part of the draft budget. It is dealt with in one brief and extraordinary sentence which appears on page VII, which sasy:
"There is very little change in the Regional Development Fund, which benefited handsomely in 1978."
I find that an extraordinary comment. The situation has been covered in some detail by the hon. Member for Scarborough, but I shall repeat the figures.
A total of 750 million units of account was proposed by the Commission, which at that time wanted 100 million, which would be quota-free and would amount to about 13 per cent. At the end, we got 580 million and the proposal of 620 million for 1979 and 650 million for 1980, with no non-quota element built into it. How that can be described as a handsome benefit, I do not understand. Indeed, the fund as proposed barely keeps up with the cost of living. Actually, it falls below the inflation level. I find that this is an extraordinary approach to an element of the budget which I at least consider to be of enormous importance, as many other hon. Members do.
I make five brief comments on the situation. First, the Prime Minister has frequently emphasised, as he did again today answering questions on his statement on the Bremen economic summit meeting, that there is great need for a transfer of resources from rich to poor within the Community. I agree completely. I agree that it is desirable and

1133
necessary if the Community is to continue to exist and not to be subject to the sort of political criticism which would break it up, which might please a number of hon. Members present today but would not please, in the end, the people of Europe because of its consequences.
What does the Prime Minister mean by a transfer of resources? It is a question not only of transfer of resources from Germany to the United Kingdom but of transfer of resources from the United Kingdom to Greece and Portugal in the future. Is the Minister in a position to say whether that is the direction in which the Government see the Regional Fund developing because, if there is to be enlargement of the Community, that is the way in which it will have to develop?
Secondly, there is the way in which the Regional Fund is operated is by percentage carve-ups negotiated in the Council of Ministers in advance. Consequently, one could argue that there was some kind of supervised transfer of resources as the fact that Britain gets 28 per cent. of the Regional Fund means that a certain proportion of the budget is transferred back to the United Kingdom.
I do not believe that this is at all a satisfactory system. All Governments, by virtue of the fact that the fund is known two or three years ahead, can easily plan in such a way that they will expend Regional Fund money on projects which would have gone ahead in any event and, therefore, simply use the fund for balancing their books. This is a highly unsatisfactory method of doing it and it does not amount to any real change in resources. Is that the Government's view? Or what view do they have of an expansion of the non-quota element in the Regional Fund?
Mr. J. Enoch Powell: I am not quite clear what the hon. Gentleman wants to do and how he wants to put this right. How is it possible to oblige Governments to lay out expenditure for projects upon which they would have laid it out if there had not been contributions from the EEC?
Mr. Johnston: My answer to that is quite direct. I was intending to mention it a little later, but I will do so now. I would like to see the Regional Fund develop so that, in the first instance, it would
1134
have a reasonable proportion as nonquota—in other words, controlled by the Commission. I know that this is anathema to the right hon. Gentleman, but it is my point of view. I would like to see that non-quota element steadily extended and expanded so that there would be an objective European assessment of what represented regional shortcomings, according to objective criteria. Therefore, there would be a more effective transfer of resources.
Mr. Powell: I can see that that would work provided that all regional aids were from the EEC, but as long as part is national and part is EEC I cannot for the life of me see how national Governments can be prevented from adjusting their decisions to what they know the EEC is going to do. Or is the hon. Gentleman suggesting that the EEC could somehow keep it secret until the national Governments had fully committed themselves, and then out it would come with unexpected presents?
Mr. Johnston: The right hon. Gentleman seems to be suggesting that the long argument, which he will know well, within the Community about additionality is bogus. That is basically what he is saying. I do not think that it is so. First, if one takes the non-quota element as at present, it could effectively be used to correct disparities which may have been caused by Community agreements which may not have had as desirable an effect in one part of the Community as in another.
Secondly, after all, we have to have a Regional Fund within the Community because of a failure of individual national countries, or a lack of capacity by individual national countries, to correct the disparities within their boundaries which currently exist. I can see that one could argue with the right hon. Gentleman for a long time about this, but I dissent from his view that the concept of additionality is bogus. I do not think that it is. What is regrettable is that there is a refusal by national Governments, including, I believe, our own, to recognise that we shall not get a genuine regional policy until we have control of it to a much larger degree by the Commission.
I return to my five points. The fourth concerns the size of the Fund. When I

1135
read out the sentence from the Select Committee at the beginning of my speech, the Minister nodded his head and made an affirmative sound—at least, I judged it to be affirmative but it may have been negative. In fact the Regional Fund, according to the latest figures that we have, created some 60,000 jobs in 1975 and 75,000 jobs in 1976. I regard that not as handsome but as being far below the level necessary.
The Liberals believe that the fund should be increased, but I repeat the point I made in responding to the right hon. Member for Down, South (Mr. Powell) that that would be a proper course only if there was an increasing involvement of the Commission.
Fifthly, a number of hon. Members have said that an increase in the Regional Fund would be indicative of a desire to move towards economic and monetary union, and surely today's statement by the Prime Minister represents, if it represents anything at all, such a move. My answer—although, looking around the Chamber, I do not think that it is a point of view that will find general acquiescence—is that this is politically important to the future of the EEC, and in this regard the allocation to the Regional Fund is disappointing.
8.22 p.m.
Mr. Bryan Gould: Many of the points that I had intended to make have been made in the excellent speech by my right hon. Friend the Member for Battersea, North (Mr. Jay). I shall be brief, and I should like to begin by welcoming some aspects of the budget, and the way in which we are asked to deal with it, which represent an improvement over what we have been expected to do in the past.
First, I think that the different timetable gives us a proper opportunity of debating the broad principles of the budget before they are actually fixed. On the other hand, as my right hon. Friend the Minister of State, Treasury said, it involves us in the difficulty that many of the details upon which we need to form a judgment are simply not there at this stage of the exercise. I think we all recognise the difficulty under which that places us.
1136
The second aspect which is deserving of at least a qualified welcome is that the increase in the budget this year is substantially smaller than it has been in previous years. That is very much to be welcomed. I wonder whether my right hon. Friend would elucidate one small point. The Scrutiny Committee suggests that the increase in the funds allocated to the guarantee expenditure is entirely due to inflation. I wonder whether that is really the case, since the increase seems rather larger than the average inflation rate throughout the Community.
Having made those small points by way of welcome, I think that one is bound to pass to the substantial questions which remain extremely worrying to hon. Members. The first is the point which has been made very strongly already by my right hon. Friend the Member for Battersea, North, that there remains a considerable imbalance between the expenditure on the common agricultural policy and the expenditure on all the other purposes of the Community put together.
I have said before that it is no exaggeration to described the Common Market as simply the common agricultural policy dressed up with a few trimmings, and, as long as 70 per cent. or more of the Community's Budget is devoted to the CAP, I believe that that is an accurate statement. That money finds its way into the most extraordinary forms of expenditure.
We have it in the form of Written Answers from our own Ministers that the total cost of the disposal alone of the food surpluses arising under the CAP amounts to £5 billion a year. That seems to me not only extraordinary but horrifying. It is not only the imbalance as between agricultural expenditure and other forms of expenditure; there is the imbalance, which my right hon. Friend pointed out, between the amounts allocated to the guarantee and to the guidance sectors of the CAP.
I wish to offer a word of caution to those who say that a solution lies in redressing that imbalance. I suspect that, even if we were to spend more on guidance, we should, because of the different structure of our agriculture industry from that obtaining on the Continent, derive very little benefit from that

1137
change. In other words, the CAP, however constituted, is very much to our disadvantage.
What are the real chances of reducing that amount of money spent on the CAP? I believe that the chances are virtually nil. Indeed, all the tendencies and all the pressures are in the opposite direction. We have the enormous problem facing us of Mediterranean foodstuffs. Are they to be dealt with in the same way as the temperate zone foodstuffs are dealt with at the moment? If so, there will be an enormous increase in agricultural expenditure.
Mrs. Dunwoody: Has my hon. Friend seen the speech of Mr. Jacques Chirac, who says that he would demand a guarantee price for wine, particularly for those French wine growers who would be affected by the entry of Spain to the EEC?
Mr. Gould: My hon. Friend is absolutely right. We are put on notice that that is exactly what the French have in mind—an enormous increase in that form of expenditure.
There are other examples of increased expenditure in the pipeline. The sheep-meat regime—an unnecessary regime if ever there was one—will certainly cost further money. It is not just a question of the percentage of the money. It is a question of the total amount being spent on agriculture. I make that point again as a word of warning in relation to some remarks made by the Chief Secretary when he gave evidence to the Scrutiny Committee. He suggested that one could reduce the percentage of the budget devoted to agriculture by increasing the size of the budget as a whole, but that is no solution. That offers us not the difficulty of unnecessary and extravagant agricultural expenditure but the prospect of enormously increased expenditure on a whole range of industrial, social and regional matters which ought properly to remain the preserve of national Governments.
Then there is the second problem, which I think arises from the first—that there is no proper mechanism established in the decision-making procedures of the Community for controlling these global sums. The budget that we are debating today is not, in fact, a budget at all. It
1138
is simply a total, a combination, of estimates prepared by individual Councils of Ministers, therefore the ordinary budgetary and financial constraints and disciplines which would be imposed here in respect of national expenditure simply never come into force when these decisions are being made. Indeed, if there were any attempt to enforce them it would he far too late, because the substantive decisions would already have been made.
That leads me to the third major problem with this budget—again a subject with which my right hon. Friend has already dealt admirably. That is the size of the United Kingdom contribution to this expenditure. We have understood the calculation which was made at the Dispatch Box of the contribution which would arise under these proposals if they were implemented. The figure is probably a little over £1,000 million. It may be less, but the chances are that it may be more.
I know that it is regarded as the rankest bad manners—and, indeed, as a quite unforgivable departure from our Community dogma—to inquire, however timidly, for what it is that we are spending this money. It is a trifling sum. It is only £1,000 million. It is worth a couple of pence off income tax or two percentage points off VAT. But I think that we should know what we get for this money. Even with the best will in the world, I cannot believe that we are paying this price for the sake of our trade balance with the Community, for the sake of the impact of the CAP on our balance of payments or our cost structures, for the sake of fishing, or for the sake of the control which we now exercise over our own industrial and economic policies. Those are not quite enough to justify the expenditure of this sum of money.
I turn, then, to our percentage contribution to the budget. Which is put at 20·4 per cent. under these proposals. Like my right hon. Friend the Member for Battersea, North, I am mystified by this. There seems to be some disparity between that percentage and the percentage which we contribute to the combined totals of the GNPs of Community members. I had understood that the great renegotiation mechanism for budgetary adjustments would protect us against that kind of imbalance or disparity, although

1139
I have a niggling recollection that that mechanism was hedged around with all sorts of limitations, such as that we had to have a three-year cumulative period of being in balance of payments deficit. At the time, people seemed to think that of very little importance. But with the advent of North Sea oil, we cannot take advantage of that mechanism, and it is revealed to be the fraud which we all knew that it was at the time.
I cannot leave this subject without referring to the question whether this budget, with its great emphasis on agricultural expenditure, is likely to be changed in the light of the statement that we heard today from my right hon. Friend the Prime Minister. Here I differ slightly with my right hon. Friend the Member for Battersea, North. I do not believe that it is a matter of demanding a reform of the agricultural policy as the price for agreeing to a currency stabilisation programme. The two are quite incompatible. They cannot go together. They cannot be traded off one against the other. The whole point of currency stabilisation is to entrench the CAP, to ensure its continued existence and to protect it against the irrationality which now threatens to destroy it.
The CAP can survive only on the basis of fixed exchange rates. So long as exchange rates reflect economic divergencies in the Community, the CAP is under threat. It is for those reasons that the French especially are keen on currency stabilisation. We need speculate very little about the Germans' motives for pressing this programme upon us because they have their own and obvious reasons for wishing to maintain the status quo.
I end by recalling a childhood story, which I am sure is familiar to other hon. Members, about a tar baby and the difficulties that people had in disengaging themselves from the tar baby once they came into contact with it. In many ways, the EEC is our tar baby. As soon as we have been limited by one aspect of it, however much we may struggle to disengage ourselves we find that we are stuck in other ways. That is the truth about the proposals for currency stabilisation, and I believe that there is very little in this budget to suggest that we can escape from these difficulties.
8.32 p.m.
Mr. John Biffen: There is something of a contrast between the way that the House deals with a Community budget and the way that it deals with a national Budget. Apart from the fact that there are very few figures of even the most remote degree of reliability in the Community document, the essential difference is that it is perfectly natural for the hon. Member for Southampton, Test (Mr. Gould) to welcome how modest is the increase in the budget whereas the voices heard from the Opposition Benches are, if anything, bewailing the fact that the regional policy is not burgeoning forth and expanding at a sufficiently rapid rate.
That is a paradox with which we cannot live for very long, and I must say to my hon. Friend the Member for Scarborough (Mr. Shaw) that we have to resolve whether it is his belief that regional policy should be transferred from national Parliaments and become a function of Community economic policy, as agriculture is part of a common agricultural policy. In my view, the right hon. Member for Down, South (Mr. Powell) was right to say that there is not a very credible half-way house in this argument.
In common with other hon. Members, I intend to speak briefly because I realise that there are a wide number of interests who wish to be represented in what is a short debate. However, I think that it might be wise to reinforce ourselves with the knowledge of what the European Assembly has been saying about the mark I budget, which, we know, is but a very sketchy outline of what will emerge eventually.
In contrast to the robust and almost Gladstonian comments of the hon. Member for Southampton, Test, I am afraid that I read from Agence Europe, the daily bulletin for 5th July, that, in response to the presentation of the budget,
"On the socialists' behalf, Lord Bruce of Donington considered the preliminary draft budget unimaginative, stagnant and tiny."
He was reinforced by Mr. Cointat, for the European Progressives, who thought that it was
"an austere and compressed budget."
Monsieur Spinelli, on behalf of the Communists, thought that they showed—I quote—"A lack of imaginiation". He

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went on to say—and, my heavens, these are ominous words:
"In agricultural policy, it is necessary not to spend less, but better'"
Finally, there was the comment of Mr. Bangernann, speaking for the Liberals, when he said:
"The Budget was not important enough to exercise the 'anti-cyclical' function which it should occupy."
Mr. Dalyell: Has not the hon. Member learnt by now that the most extreme statements in favour of increasing the European budget often come from the most fervid ex-anti-Marketeers? It is a curious thing.
Mr. Biffen: It is not for me to comment on Monsieur Spinelli, who served on the Commission, which, I would have thought, meant that one could not describe him in such terms.
The advice which I think we should offer to the Treasury Bench when it goes to the next meeting of the Council of Ministers and engages in what I believe will be a fairly swingeing pruning exercise—if precedent is any guide—is as follows. I would have thought that the one clear message, which is repeated constantly, is that the common agricultural policy is an absurdity and a standing reproach to anything remotely approaching the sensible management of public finances.
It is easy enough to make those arguments, but the problem is to find the mechanism that will provide a reform in those expenditures. I suppose that I cannot do more than echo the conclusion of the hon. Member for Southampton, Test. My hon. Friend the Member for Devon, West (Mr. Mills) stated in the evidence that was taken by the Scrutiny Committee:
"Unless the Financial Ministers make a definite stand here you are not going to get the Agricultural Ministers to change their policy."
He went on to quote from his own experience when he was at the Ministry of Agriculture. He said:
"there was no doubt that the Treasury had a very real effect on agricultural policy, so you must start to do this in Europe; to insist that there are changes in agricultural policy to meet the commitments to get within the estimated Budget."
I think that it is a very fair question to ask the Treasury Bench what mechanism
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it sees as being likely to reform the common agricultural policy. If it is to be done through the Council of Ministers, can we really leave the common agricultural policy to be determined by Agriculture Ministers? This, it seems to me, goes to the very heart of the difficulties about the pattern of agricultural expenditure, with, as it were, the poachers being in charge of the hatcheries.
Mr. Peter Mills: Would not my hon. Friend agree that one solution would be to have some form of Cabinet committee within Europe to deal with these things?
Mr. Biffen: I do not know about that. What I do think is needed is a much reinforced status for the Finance Ministers in the Council of Ministers. Whether this can be essayed within the present institutional arrangement I do not know. I am quite certain that the financial control will not come about as a result of the common agricultural policy being preeminently the preserve of the Ministers of Agriculture.
For those in the agricultural community who may think that these sound fairly harsh words, it is worth while observing that as recently as 3rd July, at the opening of the Royal Agricultural Show, the President of the Commission, Roy Jenkins, said in respect of the dairy industry:
"One-sixth of milk output is already surplus to requirements, while total consumption of milk products is declining. We shall not be able to persuade Europe's taxpayers and consumers to support that indefinitely … We must find a way of checking the surplus through prices and the market mechanisms. Otherwise we shall have to introduce direct limits on production that will be less acceptable to producers than is the present position to consumers."
That move to the concept of direct quotas makes it a little easier to understand why the Commission is coming to accept the Milk Marketing Board. It would be the most natural instrument through which to operate a system of quotas in this country.
If my first piece of advice to the Treasury Bench is that it shall do its utmost to contain expenditure upon agriculture in the Community budget, the second piece of advice that I should like to offer is that it should not try to match that expenditure as a means of diluting

1143
it in the Community budget by expenditure upon some kind of industrial policy. I watch the activities of Commissioner Davignon and I think he has clearly a great desire to pursue a Community industrial policy—maybe a Community industrial strategy before we know where we are.
The experience of national Governments when dealing with the intractable problems of the textile industry, steel or shipbuilding is that they are extraordinarily expensive. The belief that somehow or other by elevating these problems into a Community dimension we can diminish the cost of the problems is an illusion. If anything, the cost will be almost certainly compounded. By all means let the Commission do what it can to regulate the use of national subsidies and non-tariff distortions so that there can be broad transparence and compatibility of practice throughout the Community on these important matters, and by all means let that be done in a way which takes account of prospective partners in the event of enlargement. But, above all, let us desist from trying to develop some Community spending programme under the title of an industrial strategy or policy.
Thirdly, I hope that in the budget discussions the Minister will be anxious to avoid those Community expenditures which are designed to trigger off national spending. It is difficult enough for any national Government to contain public spending. These external pressures upon a national Government are almost certain to invoke the argument "You are not paying for all of this expenditure because a certain amount of it comes from a Community treasure house." That was, broadly speaking, the attitude which developed among many local authorities which felt that, if the money was not rateborne but came from the Government, somehow or other it did not come out of anyone's pockets.
Public spending throughout the Community adds to the growth, weight and remoteness of Government, and many of the social problems of today derive from the inability of Government, laregly on account of their growth, to discharge many of the functions which preeminently need their attention. If only on that account, I hope that that third
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factor will weigh with the Treasury Bench.
Finally, will the Treasury Bench approach the whole question of the Community budget believing that it is perfectly reasonable to act in a Gladstonian sense of fiscal rectitude when it considers whatever proposals are advanced from the European Assembly, or from the Commission, because there is a partnership between the Assembly and the Commission which wants to expand the spending power and the authority of those institutions?
If we need any warning of that, it is contained, suitably enough, in the words of Commissioner Tugendhat, and again I quote from Agence Europe:
"Mr. Tugendhat rejected the idea that 1 per cent. of VAT is an 'absolute' rate. It will be necessary to exceed it, and the Commission will present a document to the Parliament on this subject before the end of the year."
We have been warned. There are no limits to the ambition of the Commission—and possibly a directly elected Assembly —to expand its powers and its authority, to the detriment of this institution of the House of Commons.
8.46 p.m.
Mrs. Gwyneth Dunwoody: I find myself in great sympathy with many of the views that have been expressed in this debate, because it is clear from the budget that the basic expenditure is still on agriculture.
Some of the remarks that have been made about one of my colleagues in another place have possibly mildly misrepresented the attitude that he took. Lord Bruce, in discussing this budget in the European Assembly, made clear that he found it utterly intolerable that one could have, for example, the expenditure of a larger sum of money on the storage of surplus foods—a situation which had been created by specific agricultural policies—than on regional matters and the Social Fund.
I believe that Lord Bruce's criticism was justified, because the real problem that we are facing this evening is that we are discussing a budget that is in no way final. Not only does expenditure on agriculture account for 70 per cent. of its estimated figures, but those of us who have followed the progression of successive budgets know that that is a minimal figure, and that by the time the total

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payments have been made they will be greater than the amount that has been entered in the budget for that purpose.
Let us face the situation. Agriculture is the one policy inside the Community that is paramount. It is the policy that will decide the attitude of the existing member States towards enlargement. It is the policy that will determine the attiture of many of the member States towards future developments.
There is a clear indication that the Mediterranean countries, which have already been given a massive injection of capital, will nevertheless, demand that even more money be put into the sort of support systems that are being used for dairy produce. In other words, in next year's budget we shall see not a smaller sum of money for agriculture, but a massive increase, because that is the true meaning of the financial policies that are being followed by many of the member States.
We did not hear from the hon. Member for Scarborough (Mr. Shaw) his attitude about sums of money such as those that have been entered in the budget for the Regional Development Fund. We have been told by members of the Commission that the amount of money to be made available is expected to decrease, and that the Social Fund is likely to be cut in respect of those very things where one would at least assume that there was some small justification for Community support, yet I have no doubt that the amount spent on agriculture next year will be at least as much as, if not more than, it was this year.
What we are talking about is fundamental policy, because that is the attitude of most of the member States. Therefore, what we are doing tonight is going through a somewhat sterile exercise because this House will not be asked to decide when the Council of Ministers have met whether it thinks that the decisions taken there are acceptable. It will not be asked to say whether the way in which the agricultural budget is operating is acceptable. We shall simply be told that this was the agreement, that Britain is one country out of nine and that we can be outvoted, therefore we must go along with the overall decisions taken by the Council.
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Therefore, to ask the Minister to comment tonight is, in a sense, just a courtesy. We are simply asking him for his opinion. In many instances his views and the views of this House will be overridden when it comes to the actual decision. Until this Parliament takes back to itself the right to decide on fundamental questions, many of the debates, such as the one we are having tonight, are frankly just a gentle exercise in the use of words. The final decision will be taken elsewhere and our involvement in it will be absolutely minimal.
I have looked at this budget with great care. Most of it is a total nonsense. Therefore, sensible discussion of it is exceedingly difficult. It is geared basically towards an agricultural policy which is not concerned in any way with defending the interests of the average consumer in the Community. It is geared towards protecting a particular level for the producers, and in many instances it does not even take account of the true effect of these injections of money in agriculture.
There is no evidence at all that the existing CAP, with the amounts of money which will be spent, will alter the siutuation of farmers in southern Italy. There is no evidence whatsoever that the amounts of money spent in the guarantee section will change the situation in many of the regions that have the lowest income. All there is evidence of—and this is shown time and time again—is that the Community is spending a vast amount of money in a totally unstructured and thoroughly incompetent fashion to the cost, in many cases, of ordinary taxpayers.
When we talk about this budget, we should ask the Ministers, whether they wish to protect those things that are important. Let them look at the Social Fund and see what amount of money can be used to create jobs for the young unemployed. Let them look at the fact that the amounts of money written in, minimal though they are, could prouce some help for the handicapped. More than that, let them look carefully at the political implications of many Community policies.
I looked at the subject of teaching of immigrant children on Friday —a scheme initiated with assistance from the EEC. The scheme is operating almost

1147
in a vacuum on the basis of a directive that has not even been fully discussed in this House. Yet money is being spent in this way in many instances without our having proper control over it, or even proper awareness of the amounts involved, or the effect on the children, which is much more important.
The real implications of the budget are political. We are talking not just about the future of the Community, but the effect that the Community has on the world as a whole. There are sums in this budget which will in due course be used to support the growth of particular commodities, such as sugar. Amounts of money will be entered and spent by the Community, and yet the effect of those policies will be felt outside the borders of the Nine. Many other countries will be directly affected by what is spent on the CAP. Yet ther is never any politcal discussion of the policy, and never any clear indication, even from our own Ministers, of the financial implications.
What we are doing tonight is discussing a budget which never at any point demonstrates a cohesive political policy. There is no evidence in the figures presented to us or in speeches made by representatives of other member States of any political will to change the CAP. It is that agricultural policy which informs the political decisions of the Common Market and which will continue to do so for many years to come.
What were we promised in the famous Bremen statement? We were told that there would be an examination of the implications. Those of us who have sat and watched the Agriculture Commissioner seeking to find any change of mind in any one of the member States know how difficult he finds that task. Even with the efforts he is making, we can see how impossible he finds it to get member States to agree to any change in a policy which has supported many of their agricultural communities very handsomely for a long time.
If that is the reality of the situation, in a year's time we shall be having a mirror image debate. We shall be saying "Why is it that our Ministers are unable to demonstrate changes in CAP? When will these pious hopes be carried into political operation?" The Government will have to reply, as undoubtedly they
1148
will tonight, "We are but one of nine—we are governed by machinery over which we have little control."
If we reach that point, the House of Commons will be failing in its duty as a monitoring body and we shall begin to pay the price in terms of public contempt. It will not be possible for us to continue as a serious Parliament if we have to go through the exercise of examining the dribs and drabs of other people's guesstimates. That is what we are doing tonight.
8.57 p.m.
Mr. Anthony Nelson: I do not share the implacable opposition of the hon. Member for Crewe (Mrs. Dunwoody) to all proposals and indeed this budget, which is associated with the gentle expansion at this stage of the European Community, but I pay tribute to the consistency of her opposition. I, in common with many other hon. Members, have been impressed by the sincerity with which she speaks on this subject.
My concern is somewhat different from that expressed by a number of contributors to this debate in that I am increasingly of the opinion that the budget does not go far enough. Document R/ 159/78 suggests that the budget in no way measures up to the part that it is expected to play in the move towards greater economic integration. Although we should give a cautious welcome to the budget, I should be prepared to countenance, as part of my support for the European Community, considerable expansion in the size of this budget in future, with certain conditions attached, particularly if concomitant relief were provided in term of national responsibilities.
The budget committed expenditure of 14·6 billion units of account, which amounts to only 0·8 per cent. of the member States' GDP. That figure is, in my view, too low to begin to move towards some of the basic principles and objectives of the Treaty in terms of economic integration and all the benefits of the Treaty in terms of economic integration and all the benefits which that will bring to this country among other member States.
What percentage one might contribute to the European Community, is an interesting and difficult question. Those Liberals who openly support a federal

1149
system might subscribe to a higher budget as a proportion of member States' gross domestic product. Some commentators feel that a contribution of 20 per cent. to 25 per cent. of gross domestic product is by no means unusual as a contribution towards a federal administration. The MacDougall report, which considered the matter, suggested in more moderate terms that a figure between the band of 2 per cent. to 7 per cent. of GDP would be more appropriate as a medium term objective for the European Community, but in either case this implies a substantial increase in the amount of money and of economic power and influence which the EEC will possess.
If one goes the whole federal hog and accepts a contribution of about 25 per cent., one could be talking of up to 150 billion units of account. That would be an entirely different situation from that which we have been discussing and the minor changes we have been proposing and the criticisms we have been making would be seen in retrospect to he insignificant in the new situation.
In a time scale of the next 25 years, as we look into the next century, I would place greater faith in the pluralism of Europe in making economic decisions for the benefit of this country in Europe than I would in going it alone and having a decreasing real economic influence over our own affairs.
Mr. Budgen: Is that because my hon. Friend mistrusts the people of this country in making their own decisions about economic management?
Mr. Nelson: I certainly mistrust the present Government about making such decisions, and the extent to which the IMF has efficiently taken a great deal of control over the economic management of this country in recent years indicates that we are not entirely in control of our own affairs anyway and the degree to which one is prepared to abdicate sovereignty—to put it in plain terms—to supranational bodies or within a confederation is a matter to be considered pragmatically.
The reality is that, in the world in which we have to live and trade, we are reliant on the activity and behaviour of
1150
the rest of the world. If we cannot control our own affairs the IMF will do that for us, as it has in recent years. I would rather that this country worked in Europe, and I place greater faith in a consensus economic policy based on the most prudent economic management of member States than I would on an entirely supra-national body, such as the IMF, controlling us.
The document to which I referred earlier sets out three functions of the budget. First, it should contribute directly to economic integration in Europe. Secondly, it should contribute to a redistributive function within the Community. Thirdly, it should contribute to stabilisation of cyclical trends in trade and supply.
The budget is only a partial contribution towards integration and is not enough to achieve the measure of European monetary union that I should like to see. A growth in the budget in future can be allowed only if it is associated with a relieving of national budgets and a recognition of the need to reduce regional imbalances.
This point has been raised by a number of hon. Members and arose during questions to the Prime Minister earlier today. His view, which is shared by a number of other hon. Members, is that movement towards absolute or partial monetary union can be achieved only with the precondition of increasing regional assistance within the Community. It is true that if there were a common currency within Europe and a free market prevailed within the Community, regions that were inefficient would have increasing strains placed upon them. But in such circumstances there would be vent the economic consequence of its could let the region run down and offer no regional or other assistance to prevent the economic consequence of its relative failure; it could protect the region by erecting walls within the Community, which in this instance would go against the objectives of the Treaty of Rome; or it could provide a regional fund which openly and directly assisted the inefficient industry for a variety of reasons.
I should like to see such regional funds based on encouraging a regeneration of those industries on a temporary

1151
basis. I would not countenance a Regional Fund based on a permanent application of funds to an area that was basically inefficient. On condition that it was used to make the decline of certain industries more gradual or that such aid was provided on a regional basis to assist new areas and industries to gain prosperity and to spring up, I would be prepared to countenance such a form of regional aid. I accept that that would be a necessary commitment with the sort of European monetary union that I should like to see encouraged.
Some hon. Members have said that the percentage contribution of the budget awarded to the agricultural sector is too large. In absolute terms, the amount allocated in commitment and payment for this year to the other sectors, especially the regional and social funds, is too small. Were that allocation to be increased substantially in absolute terms over a period —not necessarily this year—proportionately the contribution made to agriculture would decrease. Allocation should be increased, especially to the Regional Fund.
In the MacDougall report it is suggested that there should be a 10 per cent. allocation to the Regional Fund. That seems to be reasonable as an objective over a period. It is reasonably consistent with an earlier move towards European monetary union.
In the second part of the budget the document refers to the problems of the European unit of account and refers specifically to the 10 million units of account that will be set aside to cover disparities between the amount allocated to certain areas or recipients and the currency differences that prevail between the dates of deciding of those amounts and payment of those amounts. It relates that sum to the difficulties associated with having to translate the unit of account into a variety of different currencies within the Community.
My views in favour of European monetary union would go to assist in overcoming some of these problems and reduce the necessity for such a measure. I welcome the Prime Minister's announcement—it was a slightly reluctant commitment and cautiously worded in his statement—that he will support consideration
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of measures to move towards monetary stabilisation. I see that move as a step to full common currency and European monetary union.
In my view, it is untenable for any long period to have a currency stabilisation scheme. That must fail. Even if the divergent rates of economic performance within the Community are only 1 per cent. in inflation terms, over 15 years or 20 years it is obvious that that difference has to be reflected in differences of exchange rate, which are nothing more than a token or signal of what is going on within an economy. I believe in freely floating exchange rates, but possibly we shall have to go to the other extreme and have a fixed common currency.
The initial consideration of a scheme of stabilisation is only a means to the end. The end that I support is a common European currency. If a stabilisation scheme is made to last for years to see how it gets on, it must fail. It is quite impossible to have within the Community exactly parallel and concurrent economic performances of member States. If it is used as a means to move towards stabilisation and a common currency, which can be fixed at one period when Governments within the Community have the political will to fix that common currency, I welcome it.
Mr. Powell: Fixed in relation to what?
Mr. Nelson: In relation to each other. If all the common currencies are fixed at one time, as they are for the unit of account, the fixed currency is the unit of account for one's own currency.
It may be asked "What is to be the comparative value of the currency?" My answer is that it must be a freely floating currency on the world markets. Its value will be reflected by its exchange value against other currencies.
Mr. Budgen: Does my hon. Friend agree that we should then need to have detailed common economic policies so that all the currencies remain in that single relationship to each other?
Mr. Nelson: I hope that we shall have a common economic policy within Europe, yes. But I think that my hon. Friend misunderstands what I am suggesting. Individual member currencies will cease to exist. The pound will be replaced. There will be one currency for

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the whole of Europe. The value of that currency will be assessed in comparison with other international rates. But there will be no question of fixing the rate for the new European currency, because such fixation will not prevail for the same reasons as the stabilisation scheme within Europe will not prevail.
I believe that it is essential that we regard a stabilisation scheme as a move towards a common currency within Europe. I was interested to note from the communique that a European monetary fund should be established within two years from the start of the scheme. The commitment reached at Bremen just before the weekend goes rather beyond what the Prime Minister was prepared to admit today, for fairly obvious political reasons.
I believe that stabilisation of exchange rate schemes will be untenable in the long run. In my view, economic monetary union is a pre-condition of economic convergence within Europe. Many hon. Members—indeed, the Prime Minister and others—take refuge in saying that we must get European communities to move more together in terms of economic management and performance and that only then can we consider having a European common currency. I suggest that will never happen. We shall never reach that stage without a major political initiative and will to create a common currency. There will be no organic development of a European common currency. It will need an agreed, not a dictorial, initiative among the member States for that to happen.
I believe that a common currency would bring great advantages. We should not read into a common currency more than it indicates. I believe that it should stimulate expansion of efficient trade, industry and employment. Our original principle and objective of the Treaty of Rome was the free movement of capital and services within Europe. I believe that that can be fully achieved only if we have a common currency.
Furthermore, the vagaries and volatility of international exchange rates, which in recent years have been the subject of increasing comment and concern in industry and business internationally, inevitably create an atmosphere of uncertainty in which people are unable to invest and unwilling to trade.
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I believe that a common currency based on the collective economies of the European Community—based as it would be on a community which comprises the largest trading bloc in the world—would form a more satisfactory international system and the basis of a more confident system of trade and industry within Europe. In my view, it would be a more satisfactory store of wealth.
Implicit in the concept of a European currency is control through a European central bank, which, to a large extent, implies common monetary control of the European Community. However, as a committed Conservative, I place more faith in the pluralism of Europe than in the narrow political approach being adopted by the Government in their own monetary strategy. If we could have a European currency and money supply administered by a body based on the principles and policies of the least inflationary and most prudent States in the Community, I believe that we should be a great deal better off in future, as we might have been in the past had we adopted such an approach. Therefore, I am hopeful that with such monetary control we may move not only towards a more common price movement, either inflationary or deflationary, but towards more price stability because of the prudence to which I referred.
Many hon. Members are worried about sovereignty being ceded outside this country. I am the first to admit that it implies a secession of an element of sovereignty, but I emphasise again that it is no more than has been ceded to the International Monetary Fund in recent years.
The final argument against monetary union to which I should like to put paid is the suggestion that one cannot possibly have a common currency when the economies of member States are divergent. There is no reason why that should be so. One has within confederations and federations of States one currency representing regions with different economic performances, just as we have in this country. One currency may represent a number of regions with different economic performances.
Were we to have a separate currency for Scotland, as perhaps some hon. Members would like, in a freely floating situation it might assume a value different

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from sterling. Yet we manage to survive with one currency throughout this country. I see no reason why we should not in the European context, with different economies and regions, be able similarly to survive with one currency.
I am in favour of an early move towards European monetary union. I recognise that this cannot be done until we have gone through the process of stabilisation. But I hope that the talks which are to take place will be followed by concrete commitments, dates and objectives for moving towards European monetary union. These are certainly proposals which I should be prepared to examine sympathetically and, I hope, give my support.
I find it difficult to support the amendment which has been accepted by the Government, because it fails to envisage the need for an expansive budget in the future. I was particularly concerned at the Minister's response. He said that when considering the future cutback in order to comply with the terms of the budget he would countenance a major cut-back in subsidies to the dairy sector.
I declare a constituency interest. A considerable number of dairy farmers in the Chichester area will not receive his response well. The Minister might consider such subsidies lavish, but there are many severe difficulties in terms of return on capital and costs which my constituents have to face. Such assistance is necessary for strategic and economic reasons. I therefore do not agree with the amendment.
I hope that my comments will be taken as being in support of our continuing membership of the Common Market and of an increased move and support for economic union. I give my cautious support to the preliminary draft budget.
9.18 p.m.
Mr. John Lee (Birmingham, Hands-worth): If it were not for the fact that most hon. Members have a protective sense of humour, we should have the right to be rather angry at the way in which this subject has been presented to the House. What has been served up is, as usual, ludicrously complicated because the whole matter was founded in fraud. Because of the checks and balances, we are powerless to alter the budget.
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It would not matter if the Government had refused to accept the amendment and if the Government had been voted down. That would not have made a hoot of difference to the mandatory authority of the House.
The Minister has indicated clearly that there is no likelihood that the Government will use the veto, however indefensible are the final proposals. In addition, there is every prospect, as in past years, that, far from there being any diminution in the total budget and any diminution in the agricultural constituent of it, it is likely to be increased this autumn.
It is worth remembering that each spring there is a price review. As is clearly stated in volume 7A of document R /1577/ 78, it is likely that there will be a further increase in agricultural expenditure as a consequence of that review, apart from anything else. We can think of no organisation of any repute which would allow its financial affairs to be conducted in this slovenly and haphazard way. Even under our Companies Acts, which are deficient in terms of audit control, there would be no end of a row it matters were conducted in this fashion. I can think of no private club, and of hardly any banana republic diet, which would conduct its affairs in this way.
In so far as I understand the apologists for this organisation—there are not many of them here tonight—this is a welfare and charity organisation primarily for poor farmers in southern Europe but also to ladle out social funds for various deprived areas of Italy. One can compare it, I think, with the Commonwealth Development Corporation expenditure.
Whatever criticisms there may be of that organisation—and I have felt that it has put far too much emphasis on urban development in those parts of the developing world for which we have had a residual and historic moral responsibility since they were part of our old Empire—at least when we consider Commonwealth development expenditure, and other forms of overseas aid we know what we are voting and what we are voting it for. We get some idea afterwards, although perhaps not as much as we would like because the money is going to countries over which we no longer have any control, of how the money has

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been spent and how successfully it has been used on the projects to which it has been devoted. There is no comparison whatever so far with this exercise for the improvement of deprived parts of Europe.
At the moment, with the questionable exception of Italy, the Common Market does not include countries which can reasonably be classified as under developed countries. Most of the EEC countries are in any case in a much better financial position to look after them-selves. Certainly they would be if they had an effective system of domestic taxation, which the French have always lacked. They certainly should not be calling upon us, who have borne the heat and burden of the day outside this country because of our historic role and partly because sterling in the past has been so much of a reserve currency, to make a contribution of anything like that which we make. Even so, as my right hon. Friend the Member for Battersea, North (Mr. Jay) indicated, we are paying far more than is reasonable on a basis of size, and it is not desirable that we should do so.
If any or all of the quasi-developed countries of southern Europe—Greece, Spain, Portugal and, possibly, Turkey—were to be incorporated, that would add a yet more powerful lobby in favour of high-cost agriculture. The CAP would then show no sign of being removed, and there would be little chance of its being mitigated in any way.
I asked my right hon. Friend the Foreign Secretary whether we would make our acceptance of the membership of these nations dependent upon their undertaking to forgo acceptance of the CAP and perhaps, by way of an alternative, adopt a system of deficiency payments such as we operated before we joined the EEC. I got not change out of my right hon. Friend. Whatever other conditions we may impose—and I do not know of any at the moment— it seems that there is no possibility of the Government using their muscle even in that direction. We may confidently expect, therefore, that if these countries are admitted it will be in circumstances in which we can expect the present situation to get worse, not better.
Where do we go from here? Where are the benefits that we have waited patiently to discover, apart from the fact that
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we are net contributors by £700 million to £800 million, rising to £1,000 million, with every prospect of its growing bigger? We export far more capital to the Market than we get from it. From a position of comparative or marginal trade balance in 1970, last year we were in deficit to the extent of some £1,400 million in manufactured goods. Thus, apart from the common agricultural policy, on the other side of the coin, the industrial balance is as bad, and we are now probably running a deficit at the rate of £2,000 million, wiping out and more the benefits which we ought now to be gaining from North Sea oil.
If the Government hope to be able to present to the electorate in October, or whenever it is, the rosy prospect of dramatic economic improvement, they had better take account of the fact that for the time being, or so long as we remain in this structure, we have in all probability gratuitously thrown away the advantages which should otherwise have accrued to us, at least in terms of the balance of payments. I know that that is not the end of the North Sea saga, and in other respects, in terms of accessibility and reliability of oil supplies, some benefit is still there, and neither our membership of the Market nor anything else can gainsay that.
On top of that, we have had the fisheries policy. I see on looking through these volumes that there is to be about a 500 per cent. increase in the so-called "appropriations for commitment" on fisheries. That is an ominous note at a time when even our Minister of Agriculture, Fisheries and Food—bless his heart, who is the best Minister we have in the Government—is not prepared to stand up for a 200-mile exclusive zone in the way the Norwegians have done. His report last Friday, I am sorry to say, was quite the most waffly report—indeed, the only waffly report—that we have had from him, and the reason was that he had virtually nothing to say.
Altogether, it is a sorry state of affairs that confronts us. I do not propose to speak for more than a few minutes more in what may, for all I know, be my last contribution to debate in the House if there should be an October General Election, but I wish to address a few more words to my right hon. and hon. Friends.

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We have made a terrible mistake in agreeing to assent to the European elections. We shall give a spurious legitimacy to an Assembly which, if it goes on as it is at the moment, will be no more than a fatuous and futile talking shop, or, alternatively, if it develops the kind of bureaucratic megalomania which characterises the Commission, must inevitably draw power further and further away from the House of Commons.
Either way, we here shall have no possibility of controlling expenditure. If market's procedures remain as slovenly, and if its systems of scrutiny of expenditure and estimates preparation remain anything like as bad as they are, it will be no wonder that there will be fraud and no wonder that there will be waste, since it will be impossible for the House of Commons any longer to have any hope of controlling it, and it will probably be impossible for the Assembly, gathering up powers as no doubt it will, or will attempt to do, properly to gain effectively control.
What is the prospect for Britain? A small minority of Members in a House of 410, representing—if that be the right word—constituencies which no one can possibly manage and with which no one can possibly contact, will remain locked in a permanent minority situation in an organisation in which at least one, and possibly more than one, country will be in a state of chronic political instability, quite apart from the overall economic prospects which we face.
I hope that my hon. Friends will boycott the elections next year. I shall certainly campaign might and main to persuade people not to vote. I shall vote only for a candidate who pledges—and who I am convinced is genuine in his pledge—that he will in no circumstances take his seat in the Assembly and that he will not go near Brussels, Strasbourg or Luxembourg. If some people lawlessly decide to throw lighted cigarette ends, battery acid and other corrosive substances into the ballot boxes, I cannot say that I shall altogether blame them, though, of course, it is not for us to encourage illegality. I do not think I can ever forgive the fact that my party has agreed to take part in the election.
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What is most extraordinary of all is that the national executive, on which there is a majority of ostensible anti-Marketeers, should have tamely assented to putting forward candidates, on the rather fatuous ground that if it did not do so all sorts of people who would be unrepresentative of the party would present themselves as being Labour candidates, I should have thought that the fact that they were unrepresentative of the party, and were seen to be, would be a good reason for letting them go forward and being seen for what they were. I shall have nothing to do with the elections.
9.31 p.m.
Mrs. Winifred Ewing: I wish first to address myself to the document R/519/78. We are told on page 4 of it that one of the functions of the budget is to finance policies and measures which constitute
"a direct contribution to economic integration."
If one looks a little further around that statement, one finds numerous references in the document which seem to suggest that economic and monetary union, which is a part of economic integration, as understand it, is almost one of the vital statistics of the Community, a kind of fact of life, a fait accompli. Yet many times in the House I have had assurances from the Government that economic and monetary union is not their policy.
Only today the Prime Minister seemed to be going towards that policy. As I put to him in my question to him today, he seemed to suggest that he was now about to change the attitude he has expressed to me and other hon. Members when he has categorically said that the Government are not committed to economic and monetary union.
Quite a number of people who are proEuropeans—I am not putting myself in that category—are nevertheless opposed to that policy. It is time we pinned the Government down on this matter. I hope that the Minister will explain to me whether economic and monetary union will be a commitment in the Labour Party's manifesto on which the next election will be fought. That is a fair question, whether one is in favour of economic and monetary union or against it. I have been asking the question repeatedly. I am sure that Mr. Speaker will remember my asking it. Perhaps he is fed up with

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my doing so. Today we saw a total turnabout by the Prime Minister, who seemed unrepentant when his turnabout was pointed out to him by me and other hon. Members.
I feel much concern about the advisability of considering economic and monetary union at this time. It makes nonsense to consider a unified currency when we have such diverse economies. I am all for independence. Our independence of action would be further restricted if we wished to introduce economic measures that we had decided were tailor-made to our needs for various industries.
That brings me to another question. Shall we see another hurried propping up of a policy because there is a reason for speed? I am thinking of the question of enlargement and the effect it would have on economic and monetary union. Two of the countries concerned are extremely weak industrially and rather weak agriculturally. If we are to envisage a unified currency affecting those two countries, one can imagine the disparity between, for example, the German economy and their economies. In such circumstances, how could there be a unified currency? To that extent, it seems to me that, while enlargement is on the horizon, we do not know how quickly it can come about, although it might come about more quickly than we think.
Will we see another cobbled-up policy of the type we saw in the cobbling-up of the common fisheries policy, which has been such a disaster to the fishing industry of the United Kingdom, which represents 60 per cent. of the fish pond of the EEC—and of that 60 per cent. a high proportion is in Scottish waters, so that again Scotland suffered doubly? Are we to see the EMU concept repeated so often that suddenly, from having been non-Government policy—and I understand that it is also the policy of the Conservative Front Bench—
Mr. Budgen: I am not so sure about that.
Mrs. Ewing: I understood that to he so from the remarks that have been made. Are we to see the EMU concept, just because it is repeated by so many people and in so many official documents, having been a non-policy of the Government, becoming the policy of the Gov-
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ernment? We are entitled to press the Minister to answer that question.
Secondly, I want to address myself to the fact that the budget is one of the testing grounds of the relationship between the various institutions of the Community. It is in a sense one of the only democratic types of power, so far as it goes. Many of the deficiencies of budgetary control have been pointed out, so I will not rehearse them except to say that I agree with many of the comments.
But the actual weapon of approval of the budget, the discharge of the audit, is nevertheless a democratic weapon in the hands of the only democratic institution of the whole set of institutions. It is not as democratic as many of us would like it to be. Some say that it is a talking shop only, but at least it is composed of Members of Parliament who in various ways are responsible to an electorate. At least, to that extent, it is democratic, and this is one of its powers.
I suggest that it would be useful if the European Parliament could reject the budget piecemeal instead of having to reject the whole budget. That would be a useful power which I think must eventually come in logic and common sense. It is a bit like having a power so great that it will never the used. It is a bit like the other democratic power of the European Parliament to sack the whole Commission. It is not likely that we shall dislike the whole Commission enough to sack all its members at one time, but we might dislike one or two.
The power that we have in regard to the budget brings me to consider the relationship between the European Parliament and the Commission and between the European Parliament and the Council. I part company with many of the total opponents of contesting the elections to the European Parliament. The Parliament is there, and the Scottish National Party intends to fight for seats in it. That being so, it is desirable that the Parliament should be more democratic rather than less.
I want to quote from the speech of Commissioner Tugendhat which has already been referred to. It seems to give away the rather arrogant attitude that the Commission all too often adopts to the Parliament. The Commissioners

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talk a little bit like Big Brother. Mr. Tugendhat said that the Commission
"will have to ensure that wherever possible its own proposals are in harmony with Parliament's views."
That seems to me to give the case away. He went on to say that
"the Commission will have to make every effort to demonstrate that it holds the Parliament in high respect."
Is that so difficult?
"The Commission takes the existing Parliament very seriously and relations between the two bodies are, generally speaking, very satisfactory. But it would be a mistake for the Commission to assume that it can take the good will of the directly elected Parliament for granted."
That is possibly very true.
Mr. Lee: Is it really likely, taking the hon. Lady's point about elections, that an elected body will necessarily, by virtue of the fact that its Members are elected, cease to display the kind of arrogance to which she rightly referred?
Mrs. Ewing: That is an interesting question. It is one that I have thought about a good deal. I am absolutely convinced that a directly elected Parliament —which by its nature is bound to be more full time—will, with its responsibility directly to the electorate, be determined to deal with the arrogance of the Commission, if I may call it that. It seems to me that there is a degree of arrogance which appears quite regularly in the relationship between the Commission and the Parliament.
Mr. Dalyell: I feel bound to say that one can disagree—possibly all of us can —from time to time with Commissioner Tugendhat, but to accuse him of arrogance is really wide of the mark. In all our dealings with him, Commissioner Tugendhat has shown no arrogance.
Mrs. Ewing: I should like to endorse what the hon. Gentleman has said. I have found Commissioner Tugendhat's behaviour anything but arrogant. However, in my experience in the Parliament over two years, I have found that quite often this has been the general attitude. It has been shown, for instance, on the question of opening up some of the Commission's deliberations and making more open the way in which it exercises its functions and arrives at its decisions.
Mr. Roper rose—
Mrs. Ewing: I should like to get on with my speech. I have a few more points to make. At least, I should like to finish the point that I am on at the moment.
I suggest that the budget, especially in relation to its faults, is a weapon in the hands of the Parliament. If the Parliament is to achieve more powers after it is directly elected, it will probably have to be at the expense of the Commission. I give way to the hon. Gentleman.
Mr. Roper: I am grateful to the hon. Lady. She made a point about the powers of the Parliament, and earlier she referred to opening up the activities of the Commission. Is it not highly reprehensible that most of the Committees of the Parliament continue to meet in private?
Mrs. Ewing: I agree with the hon. Gentleman. That has been one of the planks that I have taken up in the Parliament, in common with other Members, to try to open up the deliberations of the Council. I have frequently suggested that the Council's deliberations should be open to Committee Members who have an interest in a particular subject. I have also recommended that Committees should open their doors. I see no harm in that. I do not think that we have anything to hide. It might overcome one of the problems about which everyone is talking—that there is not enough interest shown in this set of institutions. I am absolutely in agreement with the hon. Gentleman.
I turn now to the question of the Regional Fund, about which a lot has been said. We are all aware that it is just a small drop in the bucket. The rich get richer and the poor get poorer all the time. I think that the Fund is efficiently administered, however, and that it is operating without an excess of staff. I think that it is doing its best, as far as it goes. Nevertheless, because the Fund is so small, it represents just a drop in the bucket. Indeed, it is a tiny fraction of the United Kingdom's expenditure on regional policy. In spite of the efforts made by successive Governments, in Scotland we have an imbalance of population regionally, and in the west of Scotland we have some of the worst social deprivation. That is despite massive Government expenditure. The expenditure

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of the Regional Fund can only be a cosmetic propaganda exercise in its present form.
I should like by way of contrast to refer to another type of regional aid, namely, that given in Scotland by the Highlands and Islands Development Board. After the war, it decided to build up the western fleet in Scotland. It did this, and continued to do so consistently.
The regional grants of the EEC for fishing boats are made in a rather strange way. There would seem to be no rhyme or reason why one applicant with identical qualifications and experience to those of another should receive aid when that other applicant did not receive it. In a certain way, that type of aid is almost a kind of propaganda exercise, and it causes more harm than anything else because of the unfair way in which it is administered. That would be one of my criticisms of the fund.
As regards the Highland region, I should like to refer to an excellent document which has been prepared by its officials detailing their experience in making applications to the Regional Fund. If the Minister has not seen it, I shall see whether I can supply him with a copy. They make one or two basic criticisms from their point of view, and I mention them as an hon. Member whose constituency is partly in the Highland region.
It is pointed out that, although tourism is an accepted heading, it is not normal to give aid to tourist projects. Infrastructure to help create jobs is an acceptable heading. However, aid is limited to where there are more industries than one. So often in Scotland there is a great need to create jobs in order to keep remote populations in their communities, and there is a primary industry. Therefore, it seems that the very type of area which might claim to have been envisaged by the fund is not eligible when it makes application for aid under headings which are well within the spirit of the Fund but which seem to be disqualified by what I consider to be wrong technical rules.
The document also points to the lack of flexibility in the Fund, which again often prevents aid from being given for projects which I am sure are in the spirit of the Fund. Instances are given in the document, which goes into quite a lot of
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detail. It also makes a very simple suggestion, which I am sure would improve the Fund, that grants should be given to a project which does not need to be studied or which is not necessarily intended to proceed—in other words, a project could be subject to EEC grants. That is perfectly logical, but at the moment the rules are that a grant can be made only if the work is to proceed anyway.
The last matter to which I refer in relation to the Regional Fund concerns the vexed question of additionality. I suggest that it is not good enough for the Treasury to attempt to justify taking the money which comes from the Fund and letting it sink into the ordinary coffers of the Treasury. The original intention was that it should be additional. My information is that this is not the practice in some of the other member States, although I have found it very difficult to lay my hands on proof of this. If I succeed, I shall certainly be raising the matter. It is not so bad if we are all in the same boat. However, it is galling if only the United Kingdom Government take this money so that it is not applied in the way envisaged when the Fund was set up. I hope that the Minister will comment on the question of additionality before the conclusion of this debate.
A great deal has been said about the CAP. I begin to wonder whether there is anyone in this House who approves of the size of the CAP.
Mr. Nelson: Yes.
Mrs. Ewing: The hon. Member for Chichester (Mr. Nelson), who is enthusiastically pro-Market, is the exception. But is there anyone in the House who approves of surpluses and who can justify them in a world where a third of the people have not enough to eat? Any system which has created the absurdity of these surpluses must be found wanting. The truth is that the CAP does not work. Perhaps it cannot be worked.
The hon. Member for Crewe (Mrs. Dunwoody) said that we had to think of the consumer and that the agricultural policy was a great help to producers. It is not a help to all producers. It has not been a help to the pig farmers or to the hill farmers, especially those with small farms.
Mr. Budgen: They are not rich enough to lobby properly.
Mrs. Ewing: They are the very people who need help. They have had to see the loss of jobs. They have had to sack people. Our pig farmers are running at a loss, yet the Danish Government subsidise the advertising of bacon on our television screens to help Danish farmers to compete with our farmers to whom the CAP offers nothing.
We lose out in terms of wine and whisky, too. The French are very good at protecting the regulations for their wines and spirits—and certainly if they go against the regulations the United Kingdom Government do not take them to court quickly enough—yet, when it comes to the whisky industry, which is vital to the Exchequer and important to Scotland's economy in terms of employment, all sorts of artificial rules are made against whisky imports into some of the EEC countries. The CAP is out of control, and I agree with all those who say that the slice of the cake is far too big.
I end by asking the Minister whether his Government really will do anything about the CAP. Is there any time scale plan for reducing it and giving a bigger slice of the cake to the worthy Social Fund and Regional Fund which, although they do not go far enough, at least give help? I certainly dissociate myself from those who are anxious to advance us into further centralist policies—such as common energy policies and common industrial policies. Despite the EEC being such a great trading bloc, we do not seem to be able to protect our shipbuilding industry in European terms even against Japanese competition. The graph for Britain and other countries has gone sharply down since the war while the graph for Japan has gone in the opposite direction.
At the time of the referendum we were assured that the EEC would not affect three matters relating to energy—the rate of extraction, the price of oil, and the markets to which it could be sent. Now I see, in debates on the EEC, a considerable desire to interfere with these three areas of decision making. I see that you are looking at your watch, Mr. Speaker. I end by saying that the budget cannot be a true instrument for any social regeneration unless the CAP is drastically reduced.
9.53 p.m.
Mr. William Hamilton: The timing of this debate is singularly appropriate in the sense that just a few hours ago the Prime Minister was, in effect, saying that our national problems could not be solved solely in a national context but that they must be seen, and the solutions to them must be sought, in a European context, perhaps in a wider international context. In that sense, the proceedings at Bremen last week and the consequent developments flowing from those talks will make the proposals that we are now debating—the Commission's intentions in Europe for 1979—seem to be out of date and irrelevant long before the debates on them get under way in the European Parliament.
When the proposals were presented in the European Parliament last week by Commissioner Tugendhat, they got a frosty reception all round. Representatives from all parts of the political spectrum criticised the proposals on the ground that the non-obligatory expenditure was insufficient in every other area than the CAP. That was the gist of all the arguments. That was not surprising, because those who were making the criticisms would not have been in that Parliament if they did not accept the proposition that our problems—whether they be British problems, German problems or whatever—can better be solved by an additional element in them, a European element on top of and in addition to a national approach to them, whether we are referring to unemployment, structural weaknesses in basic industries or whatever else.
The criticisms that were laid at the feet of Commissioner Tugendhat and the Commission generally were that the overall proposals did not even begin to measure up to the problems that beset the Community as a whole. We all know what they are. They are chronic unemployment as a consequence of the world economic crisis, structural weaknesses in industries such as steel and shipbuilding and the rest, and varying exchange rates within Europe and outside. There is also Japanese competition, which is now being tackled by the Nine together rather than separately as nation States. We also have regional disparities in standards of living and quality of living. Not least there is the CAP, which is a cause of some of the

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disparities in Europe as between rich and poor farmers, and small and large farmers.
I hesitate to call this a budget, because it is not a budget in the sense that we know it. It is a declaration of intent. The Commission is saying "These are the things we would like to do and these are the sums of money we would like to spend in this or that direction." The global figures are trite in terms of national budgets or gross national products. They are minuscule compared with the scale of the problem. They simply cannot be expected to play more than a marginal role in tackling the problems besetting every member of the Community.
The importance of the Community lies in the recognition that we cannot solve our national problems by mouthing sentiments about having our own national sovereignty so as to solve our problems in our own way. It is no good saying that this House is, or should be, sovreign. It has never been sovereign for the past 100 years, and, in so far as it has been, that sovereignty has been steadily diminishing as we have signed and obeyed regional, national and international treaties of one kind or another.
The only common policy that we have so far devised during the 20 or more years that the Community has been in existence is the CAP. It has rightly come in for very rough words all round. I do not think that a kind word has been said for it during the debate. I will risk one. I do not speak as a Member representing an agricultural constituency. It is the case that we have had, partly as a result of the CAP, guaranteed supplies of the kind of foodstuffs that we need at a time when all signs are that there will be an overall shortage of food in the world in the course of the next century.
It would be idle, foolish and dishonest to pretend to the British people that it would be possible to obtain cheap food from other sources for a long time to come. New Zealand is often quoted in this context. Suppose that we got out of the Community and were free to negotiate with the New Zealanders. Does anyone seriously believe that they would guarantee us long-term low-priced food? It is nonsense. The New Zealanders want the same as we do, a high and
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rising standard of living. They seek industrialisation on an increasing scale. They are looking for markets closer to home. For all these reasons, it would be idle to pretend that in the long term we could get cheaper supplies from New Zealand.
If my hon. Friend the Member for Durham (Mr. Hughes) were present, he would have said that it is a fair point to make that a sizeable proportion of the money spent on the CAP goes into regional policies. I refer to such things as drainage schemes in Ireland. The same things are happening in southern Italy and more deprived agricultural areas within the Community. From the President of the Commission downwards, the CAP has suddenly had a diminishing number of friends, largely on account of the enormous surpluses that have been built up without any regard to the relationship between supply and demand. Indeed, farmers have been incited to produce irrespective of demand. The price has been so high that there has been a widening of the gulf between the supply of foodstuffs and the demand for them. This represents what has been repeated many times in this House—namely, the enormous political power of the farming lobby in Europe, which exerted that power long before we went into the Community.
The fault lies in our not being there at the start. It is no good—
It being Ten o'clock, the debate stood adjourned.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's sitting, the Adoption (Scotland) Bill [Lords], the National Health Service (Scotland) Bill [Lords] and the Interpretation Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Bates.]

EUROPEAN COMMUNITY (DRAFT BUDGET)
Question again proposed, That the amendment be made.
Mr. Hamilton: I give way to the hon. Member for Banbury (Mr. Marten).
Mr. Marten: The hon. Gentleman has slightly overrun the point on which I wanted to intervene. The New Zealanders

1171
would like to give us long-term contracts, and I suspect that their prices would remain lower than Common Market prices. Also, if we were outside the Common Market—I am not arguing that—we could buy the subsidised exports from the Common Market. Is the hon. Gentleman aware that in Hansard the other day it was calculated that the cost of the disposal of surpluses, calculated in sterling, was £5,284 million? The hon. Gentleman said that there was no insubstantial sum, but it is a large sum indeed.
Mr. Hamilton: I shall not go into the details of that argument, except to say that there is no assurance that we should get long-term cheap supplies from anywhere. The tendencies are all in the opposite direction. The producers of foodstuffs are determined—as we are, and as is the rest of Europe—to get far higher standards of living than they have had hitherto, and that must be reflected in the prices that they charge us and others for their products.
Several hon. Members who have criticised the CAP have asked the Government why they have not yet produced their alternative proposals. I was trying to ask the Prime Minister that very question this afternoon: whether the Government could produce a White Paper showing those policies of convergence before the December meeting of the Nine. It is significant that the Minister of Agriculture, who has a reputation for being extremely negative in his criticism of the CAP, has been extremely loth to produce his own alternative proposals.
Twelve months ago the Socialist group in Europe produced its own document on this subject. I have referred to this before in debates in the House. We obtained the agreement of all nine Socialist parties in Europe to that document. I put more than 100 copies of the document in our Whips' Office, but they were deliberately kept from our Members. It was an embarrassment to circulate those things because it was the only attempt by this party to produce an alternative policy to the CAP. It behoves our Government to enunciate these policies in accordance with what the Prime Minister said this afternoon about the need to get convergent economic policies.
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What makes me particularly angry in the context of this budget is not so much the size of the sums—because they really are chicken feed within a national and international context—as the discrepancy between the sums allocated to the CAP and to the Regional Fund. I shall not labour the point, except to say that this afternoon the Prime Minister emphasised the need to pursue more vigorously European policies designed to remove or reduce disparities of wealth within the European regions. The regional policies of national States and, on top of that, the regional policy of the EEC have an important part to play in that context.
In the draft budget, the Regional Fund is in a worse state in real terms than it was when it was introduced in 1975, as the hon. Member for Inverness (Mr. Johnston) said. The Commission itself, although it has frequently paid lip service to the principles and purposes of regional policies within the Community and to regional funds, has now proceeded to propose sums which are lower than they were three years ago when the policy was introduced. That is not the fault of Mr. Tugendhat or of the Commission. It is the Council's fault. The Commission is in touch with the Council, which has to make the final decision, and the commission knows that the Council simply would not accept over-ambitious figures for regional policy or anything else.
The Commissioners seem to be—I am an inexpert layman looking at this—a disorganised collection of men with no agreed common purpose. They carry varying degrees of political weight, and in that respect they are not unlike our own Cabinet. We look at various British Cabinets and we all know who are the heavy guys and who are the lightweights. This is often reflected in the legislation that is brought to this House. Similarly, in the Common Market we have Commissioners of great variety in ability, stature and weight, and those variations are reflected in the budget.
The budget is replete in trivia. There is little in it of any grand design for Europe as a whole. In yesterday's edition of The Guardian there was a letter from the right hon. Member for Sidcup (Mr. Heath), who came to the aid of the Leader of the Opposition at Penistone recently. That great European, who

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has refused the leadership of the Conservative Group in the elected Parliament, was talking about the sum of money that had been allocated to the European choir. For a start, he did not know what he was talking about. All of us who sit in the European Parliament have had letters about the cuts in the sum available for that choir. Choirs are important, but unemployment, the problems of the steel industry and the difficulties facing our youth are infinitely more important.
This is the great criticism that I have of the budget overall. Fortunately it will be largely overtaken by more important events at Bremen and at Bonn next weekend. The Government were right, in their response to the German and French initiative, to feel sore about being left out in the cold. They were equally right to reserve the right to stand back and study carefully all the implications of the Franco-German proposals without rejecting them out of hand.
I do not often agree with the sentiments expressed by the hon. Member for Chichester (Mr. Nelson). It may be a long time before I agree with him again, but I went along with what he said this afternoon about this House consisting of Conservatives all over the place and right across the board. I would spell "Conservative" with capital letters and apply the term to hon. Members on this side just as much as to hon. Members opposite. The debate today has emphasised this fact.
We look at Europe as if we wish it had never happened, as if we could stop the clock or even turn it back. But we cannot do it. We are in there to stay, and it would be foolish and irresponsible to pretend that we have anywhere else to go
1174
if we get out. That would be nonsense. If we go on pretending that we can solve our currency, economic and defence problems by any other step than joining and co-operating with larger organisations, we are deceiving ourselves and those whom we represent. In that sense, sovereignty here is dead and is diminishing all the time.
When we talk about our problems, we are concerned not only with the strength of sterling but with the strength of the dollar, the yen, the deutschemark and the franc. That is what it is all about. The right hon. Member for Down, South (Mr. Powell), who was at the Treasury, knows that this is the case, and it is now more true than ever. Nevertheless, we have a right to look with a jaundiced eye at any proposition, particularly that which has emanated from the French and the Germans in the last week or so which might result in the imposition on the United Kingdom of further deflationary policies which could lead to a further increase in unemployment and still greater regional imbalances within the EEC. But we should not pretend that the other States would not go along without us. Certainly they would go on without us. Therefore. we must resign ourselves to making the best of a bad job.
We are not powerless in this respect. We have on our side some negotiating power. I believe that the Prime Minister and the Government are facing a momentous challenge. I do not believe that we should be intimidated by those challenges by refusing to meet them because of the raucous clamour of little Englanders and by the disciples of a siege economy.
10.12 p.m.
Mrs. Elaine Kellett-Bowman: I was astonished that in his long opening statement the Minister deigned to make no comment, except in a throwaway offer to answer questions, on the vital subject of the Regional Fund, which is so important to the ordinary citizens of our country, particularly to the region from which I come, the north-west. Since the Minister so signally failed to comment on that important subject, I wish to take this brief opportunity to draw the attention of the House to certain anomalies in the Commission's estimates for 1979 which concern me very much indeed.
On 14th February this year the European Parliament listened with the greatest attention as President Jenkins presented the eleventh general report and outlined the annual work programme of the Commission for 1978. He correctly pointed to unemployment as the major problem facing the Community: He said
"Policy should begin at home."
He remarked:
"In the longer term we are concerned to promote the economic growth which will enable us to provide employment and prosperity for our citizens."
What he asked, can the Community do? His answer was clear:
"First, our sectoral and regional policies must be put together in a coherent way, and we must build on last year's limited but successful steps."
This idea Mr. Jenkins repeated in the speech concluding the debate, when he said:
"We must use the Social and Regional Funds in every possible way to counteract and mitigate the effects of unemployment."
His words have since that date been enshrined in the words of the new draft Council regulation on the Regional Fund which reads in Article 1:
"The European Regional Development Fund is intended to correct principal regional imbalances within the Community resulting in particular from agricultural preponderance industrial change and structural unemployment."
These words were echoed last Monday in Luxembourg by our excellent Commissioner, Mr. Tugendhat. I thought that the hon. Member for Moray and Nairn (Mrs. Ewing)—I am sorry to say
1176
this in her absence—did less than justice to Mr. Tugendhat's speech because I thought it was a masterly exposition. He said:
"We need industrial measures to enable the structural reform required."
By laying such emphasis on the priority which the Regional Fund would enjoy as an instrument of Community policy, President Jenkins without doubt gave new hope and confidence to all of us who for some time have been deeply concerned about the future of the Community's regional policy, and of the Regional Fund in particular. This hope, based on President Jenkins' words and the fine words of the draft Council regulation, have been cruelly disappointed in the draft budget. It appears, alas, that our confidence was misplaced, though that does not appear to have concerned the Minister unduly.
Since uttering those fine words, President Jenkins has failed to stand by the Commission's original figure of 1,000 million European units of account as the resources needed by the Fund to carry out its task in 1979. We have before us instead the miserable figure of 620 mua as laid down by the European Council in December last year.
This year's figure of 580 mua indexed to take account of inflation, is actually a reduction of 64 mua on the amount for 1977. What is even more astounding is that the Commission had proposed no less than 846 mua for 1976 which, if indexed to today's prices, would give a figure of 1,280 mua, so that the Commission is proposing an allocation of less than half its proposal for three years ago, despite the incontrovertible fact that the gap between richer and poorer regions has now reached the staggering ratio of six to one.
I am particularly puzzled by the fact that last year, as my hon. Friend the Member for Scarborough (Mr. Shaw) said, the Commission worked out carefully the cost of an effective Regional Fund and stuck to its guns until the very last minute when the European Council bludgeoned it into accepting a substantial cut in commitment appropriations. Since the Commission suggested in last year's budget a figure of 1,000 mua for 1979 to help cope with inflation and the worsening national and regional situation, it

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would have been reasonable to expect it to increase the amount this year to try to make up the ground that was lost last year. But instead of taking Eyskyns' hint of last year and far from asking for an increase, the Commission has meekly, and without justification, submitted a request for merely 620 mua—less than half, in real terms, what it originally proposed for the fund in 1976 under the old regulations. Those of us who are interested in regional policy feel that the Commission has well and truly sold the pass and its conduct is beyond the bounds of reason.
Mr Jay: Will the hon. Lady give way?
Mrs. Kellett-Bowman: No. The right hon. Gentleman has had quite enough time already. The Copenhagen summit declared that the Community's three priorities—
Mr. Budgen: Will my hon. Friend give way?
Mrs. Kellett-Bowman: No. My hon. Friend has also had too much time. The Copenhagen summit declared that the Community's three priorities would be social affairs, regional affairs and energy.
Mr. Budgen: Will my hon. Friend give way? I wish to help her.
Mrs. Kellett-Bowman: No. My hon. Friend can best help me and the House best by sitting down and shutting up.
It is inexplicable that the Social Fund has risen by 48·84 per cent., the energy sector by 81 per cent., but the Regional Fund by a beggarly 6·7 per cent.
I do not complain that the social and energy sectors have risen. Indeed, I rejoice that this is so, because there can be no industry without energy and no jobs without adequate training.
The House will know of my life-long interest in social problems, which brought me into the House—no doubt to the consternation of my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen). However, I complain bitterly that the Regional Fund, which is so vital to the rejuvenation of our regions and the restructuring of our industry, has been so scandalously neglected. There is not much hope for the expansion of the Social Fund, with its emphasis on retraining, if the Community is failing to promote through the Regional Fund
1178
employment opportunities where they are most needed for people when they have trained. That is especially true of the north-west and my own constituency of Lancaster, where unemployment is well above both the national average and the regional average. Sadly, it rose again last month, and no doubt it will do so again this month.
On a slightly happier note, I welcome the non-quota sector, for which the Conservative group in the European Parliament has fought for so long. I trust that it will be in addition to the eventual figure agreed for the Regional Fund. Small though it is, it is at least a start.
I am aware that my party stands, quite rightly for a reduction in overall public expenditure, so that men and women may keep more of the money that they earn to spend as they think fit on their personal and family priorities. However, all hon. Members who have read the carefully prepared MacDougall report. to which my hon. Friend the Member for Scarborough referred, will know that the higher Community allocation to the Regional Fund could well be bread cast upon the waters and could reduce the burden on national budgets. That is partly because money can be more effectively spent on co-operation and partly because of the increased prosperity and greater employment that it can generate.
It is for that reason that I urge the Minister of State, if he will pay attention, to urge the Chancellor of the Exchequer to refuse his consent to this meagre allocation and insist that a meaningful amount be allocated to the Regional Fund in 1979. I hope that many hon. Members in the Chamber will join me in that plea.
Several Hon. Members rose—
Mr. Speaker: Order. I inform the House that it is hoped that the winding-up speeches will begin at 11 o'clock, which leaves 39 minutes for the four hon. Members who I know are trying to catch my eye.
10.23 p.m.
Mr. David Stoddart: I have found the debate fascinating. Amazing changes of heart seem to have occurred in various parts of the House. There are some on the Opposition Benches who are virtually welcoming additional public

1179
expenditure whereas we usually hear cries from the Opposition for less public expenditure.
When we consider a Budget we are entitled to know what benefits we shall get from it. That is one of the questions that we are bound to ask. What is more, we are entitled to ask what return we shall get for taxation paid, and we are entitled to receive an answer. That is what it is all about.
The British people are paying taxation to the EEC. Therefore, we are entitled to know what return we shall get for the taxation. Furthermore, we are entitled to know what achievements there will be from the very preparation of the budget. It is only right that we should know what the organisation is out to achieve that seeks to tax.
These questions are being asked increasingly by the public, but they are not being asked sufficiently in the House. Many hon. Members are not doing their duty and querying our involvement in Europe and the price that we pay for it. Increasingly the British people are asking "What are the benefits? Where are the benefits? Show us the benefits of our membership of the EEC."
It was clear from the opening remarks of my right hon. Friend the Minister of State—it was confirmed in a later intervention—that we know roughly what our contribution or tax will be in 1979. Our contribution will be about £1,000 million to £1,100 million. Whichever way we look at it, that is public expenditure. There is no other way of looking at it. What is more, it is an increase over the current year of £250 million. I understand that our net contribution for the current financial year will be £750 million. In 1979, there will be an increase of £250 million—33 per cent. in one year.
It is strange—in my book anyway—that our contribution this year should be received with such enthusiasm by the Conservative Opposition who, generally speaking, are opposed to any increase in public expenditure when it applies in the United Kingdom. But this is public expenditure in the same way as public expenditure on pensions, assistance to industry, or what-have-you. But, instead of being criticised, it is welcomed. Indeed, some Opposition Members would have it larger.
1180
Furthermore, it is public expenditure, as has already been mentioned, which will be used to subsidise some of the richest countries in the world. Undoubtedly a percentage of our gross national product will assist Germany, which is one of the richest countries in the world. There can be no doubt but that it will be used to subsidise the rich nations of Europe. We can imagine the squeals of anguish from the Opposition Front Bench if we decided to increase the overseas aid budget to the under-developed countries by £250 million in one fell swoop. Yet we have not heard a squeak from the Opposition Front Bench tonight. Indeed, they would have us pay more to subsidise the rich countries.
Do we get any tangible return from the net expenditure of £1,000 million per annum? We were assured before we entered the Community that there would be substantial benefits through increased trade and the dynamising of our economy. We remember the propaganda that was put across in this country to persuade people that, having gone into the Community, we should remain within it. We were to enjoy the great benefits of trade. The cold wind of competition would hit the British industrial scene and we should immediately become dynamic. Our exports would increase; our standard of living would rise; everyone would be £7 a week better of. Those were some of the promised benefits.
Have they come about? Certainly our trading position has not improved. Far from it. On manufactured goods our balance of payments deficit with the original Six worsened from about minus £90 million in 1972 to £2,000 million in 1977. There is no benefit there, and this budget will give us no benefit in that respect in 1979.
Will the budget help to keep down food costs? After all, most of the budget will be used for subsidising agricultural products. Will it keep down food costs in this country? Of course not. Everybody knows—indeed, even the Government agree—that food costs are higher because we are members of the Community.
Furthermore, part of our contribution is being used to undermine the trading position of Commonwealth countries through the dumping of surplus food on world markets. My hon. Friend the

1181
Member for Fife, Central (Mr. Hamilton) said that the CAP had brought some benefit in that it guaranteed us food supplies at reasonable cost, and he doubted whether New Zealand or Australia would be able to guarantee us the same security of supplies at reasonable prices. My hon. Friend the Member for Fife, Central said that they would never conclude a long-term agreement with us. But I remind him that New Zealand, Australia and Canada did conclude such long-term agreements in 1945. They saw us through the worst difficulties that this country has known in food supply and costs. What was done then could certainly be done now. My contacts with people in New Zealand lead me to believe that they would welcome such long-term agreements, which would be for the benefit of this country and New Zealand.
The contribution that we shall be making in 1979 and the contributions that we have made so far have done considerable damage to many parts of the Commonwealth. Many beef farmers in Australia have gone out of business. Tens of thousands of head of cattle have been destroyed because the farmers can no longer sell their produce to the United Kingdom. We have been helping this trend by our contribution to the EEC budget.
No tangible benefits can be shown. We are being bled white by the Europeans. That view is gathering strength among the people, in spite of the insidious attempts by the BBC and other organs of the media to convince them otherwise by announcing with a great flourish every little loan or grant that comes from the EEC but never informing the people of the total net contribution that we make to the budget.
Mr. Marten: The hon. Member for Swindon (Mr. Stoddart) has overlooked one matter. We must not forget that our net contribution is a transfer across the exchanges and that therefore reduces our invisible surplus to a negative surplus or a deficit.
Mr. Stoddart: I understand that. I am obliged to the hon. Member for Banbury (Mr. Marten) for mentioning it. It has a considerably greater effect on our total economic activity than is obvious from a first glance. There is no doubt
1182
that, because this is a net contribution across the exchanges, it limits to the extent of about three to one the increased economic activity that could occur here were we not making that contribution across the exchanges.
I was most disturbed by the attitude of the hon. Member for Scarborough (Mr Shaw). He appeared to be advocating full blown economic and monetary union. Let us make no mistake: economic and monetary union would merely compound the disaster of British membership of the EEC and lead to a further decline in our economic and industrial base.
The hon. Member for Chichester (Mr. Nelson) waxed eloquent about economic and monetary union. He said that he was happy that public expenditure should be used for regional aid, provided that it was only temporary. History shows that if we become a member of a economic and monetary union, economic activity and finance will flow to the centre. The hon. Member should realise that it is inevitable that, far from keeping regional aid on a temporary basis, it will be made even more permanent than such aid is already. It has happened in this county as a result of economic activity of money and people flowing from Scotland, Wales and Northern Ireland into the south-east. If we get further tied up with Europe through economic and monetary union the same will begin to happen, with the flow-out across the Channel because inevitably economic activity and finance will move to the centre.
This has been a fascinating debate. A lot of economic arguments have been turned on their heads and many hon. Members have thrown aside, it seems, many of their political beliefs simply because they are so besotted with the EEC that anything goes. Things that they condemn out of hand in this country they will accept for the EEC. That is not good enough.
I am glad that this debate has filled its full time. We should have longer debates on the EEC budget, and this House should examine far more closely not only the budget but everything that happens in the EEC. The more we examine it, the more we shall understand exactly what sort of noose this country has put its head into. Perhaps with a bit more examination we can slip the noose off.
10.37 p.m.
Mr. Peter Mills: The hon. Member for Swindon (Mr. Stoddart) said that absolutely nothing comes out of the EEC. If it is any comfort to him, I have information which shows that in his own area there is help from the EEC for bottling equipment at a dairy near him. Not far from him the construction of a potato and carrot store is being undertaken. That will certainly help the consumer in his area. He is quite wrong to say that even such a small area as around Swindon receives no help from the EEC.
Mr. Daniel Awdry: Will my hon. Friend say exactly where these projects are?
Mr. Mills: Certainly. One is at Castle Combe, which, I imagine, is not far from Swindon. The other is further down the road at Ilminster. These will certainly help the consumers in Swindon.
Mr. Stoddart: Those areas are not remotely concerned with my constituency. My point was not that we did not receive grants or loans from the EEC, but that we pay the EEC first to pay us back the loans and grants, and that in the end the EEC makes a damned great profit out of the arrangement.
Mr. Mills: I apologise for delaying the House. I should not have gone down that road. I thought that since I had the information it might help and encourage the hon. Member for Swindon.
I do not take such a negative view as we have witnessed this evening. No one seems to be very satisfied with the enormous amount of paper that accompanies the budget, but at least the printers and paper producers must be pleased with the amount of material that is used. If one reads this documentation, however, one can find much in it that is of extreme value and help to this country. I am a fairly severe critic of certain sections of the Community, but I believe that it is totally wrong to dismiss the whole preliminary draft budget as being of no use. That is totally unfair.
As I look at the budget, paying particular attention to the things that concern me in agriculture and food production, it seems to me that Ministers have still not learn the lessons that they ought to have learnt over the years. This dis-
1184
tresses me. I believe in the CAP—fullstop. I believe that it can be made to work: it should be made to work, and it must be made to work, though I hope that it will be changed to a common food policy rather than a common agricultural policy.
I do not dismiss the common agricultural policy. I just want to see it improved. There are ways of improving it, though I cannot go into that tonight. I have done so at other times. If the hon. Member for Swindon laughs at that, I shall send him my two papers on the subject, where he can read about what can be done to change the CAP.
What disturbs me is the same old problem of the sums of money being in the guarantee fund rather than in the guidance fund. I do not want to spend any more money. What I want to see is money directed within the budget into different sections, and particularly into the guidance fund.
There is no doubt that the CAP is not at present in the interests of British agriculture. That is a fact. Very few farmers whom I know and to whom I speak would say otherwise. I am still up to the neck in agriculture. None of us wants it. We do not want policies of the sort that are produced in Brussels, and it is sad that Ministers have not learnt the lessons that they should have learnt. The present policy is certainly not in the interests of consumers.
We ought, therefore, to have had a much stronger representation from the Government in making those views known in Brussels and in seeing that changes were made. I am amazed when the Chief Secretary to the Treasury tells us in our Select Committees that he will try, that it is difficult, and that we have to change the policy. I remember the time when I was a junior Minister at the Ministry of Agriculture. The Treasury certainly had its sticky fingers on our policy. It saw to it that we did not spend too much money. I should like to see far more determination on the part of Ministers, including the Treasury Ministers, in going to Brussels to change the emphasis from a guarantee fund to a guidance fund.
In the long term, it can do no good to continue with things as they are, and

1185
in the short term it will do no good, either. There has been inadequate recognition that structural problems such as chronic surpluses or social difficulties in particular localities demand specific action. In my view, because most of these problems are the concern of individual members of the Community, they should be tackled by national Governments rather than by the Community as a whole. To continue to bolster up the guarantee side of the budget only stokes the fires of surpluses the whole time. In this sense, the budget is plain stupid and irresponsible, and before the next preliminary draft budget comes before the House we must have far more determination from the Government in dealing with these matters.
Hon. Members always talk about the end price. Although we certainly do not want to see any big increase in the end price, that alone will not solve the problem. We must tackle the problems of the small farmers in Community countries who produce agricultural products just for intervention. Until we find alternative work and until we see that far more money is paid to get some of the small farmers out—not in this country but elsewhere in the Community—we shall never overcome the problem.
The cheapest way to destroy a cow is to kill it, to take it out of circulation. That is the cheapest way of dealing with the surpluses. The amount of money being spent in that direction is pitiful. Something must be done.
I say to the Minister "You must do something about it. You must influence the Minister of Agriculture in Europe." I do not believe that it is too late this year. I believe that something can be done in these matters and that a tough line can be taken.
Mr. Marten: How?
Mr. Mills: My hon. Friend is always interrupting.
Mr. Marten: Tell us how.
Mr. Mills: If nothing is done, it is totally unfair to British agriculture to go on as things are going. In this country we have efficient farmers who are being blamed for the surpluses in the Community. This is totally wrong.
Mr. Roger Moate: What is to be done?
Mr. Mills: I can soon tell my hon. Friend. I can give him my two papers, which will tell him exactly how to right the position.
It is wrong that British farmers should go on being blamed for the surpluses when we are the most efficient in the Community. As a strong supporter of the Community and the CAP over the years, I feel great sadness that the lessons have not been learnt. Much of the blame must rest on this Government for not taking a tougher line in these matters.
10.46 p.m.
Mr. Tam Dalyell: All of us who have remained until this hour of night deserve to go on the mailing list of the hon. Member for Devon, West (Mr. Mills) for his two papers.
Mr. Mills: Here they are.
Mr. Dalyell: My hon. Friend the Member for Swindon (Mr. Stoddart) said that it was possible to become besotted with the EEC. Indeed, the late Jack Mendelson had a colourful expression for it, when he accused some of us of being unreconstructed Stalinist pro-Marketeers. I suppose that in one sense I fall into that category, because I am unrepentant. But, because time is short, and because one hopes not to be too besotted, I should like to make some remarks that may be interpreted as critical.
I have become more and more anxious as a member of the Budget Committee of the European Parliament, when time after time either Commissioners or Commission officials have come before us with yet another new scheme. It starts off with the steel industry. They seem to take responsibility for that. Then we go on to a proposal to reform aerospace, and then we go on to shipbuilding and youth unemployment.
If the Community is to take responsibility for every problem area, for every lame duck, we get into great difficulty, because one of the things that are most damaging—and I do not think that the budget has solved it—is to give the impression that the Community can solve problems that really it cannot solve and does not have the money to solve. The pretence of being able to do so is very

1187
damaging to the idea for which many of us, rightly or wrongly, voted when we joined the Market. Therefore, I hope that the Government and the Council of Ministers, which apparently in this debate is asking for advice, will speak very bluntly to the Commission.
The hon. Member for Oswestry (Mr. Biffen) and my hon. Friend the Member for Southampton, Test (Mr. Gould) were right in making the crucial point that the Commission is no kind of Cabinet. I believe that Roy Jenkins—I do not call him President Jenkins with quite the deferential air of the hon. Member for Lancaster (Mrs. Kellett-Bowman)—has probably tumbled to the fact that the Commission is no kind of Cabinet but a series of satraps who go off on their own sweet way.
That is a very worrying development, because it seems that no kind of coherence is imposed on the Government of any of our nation States by a powerful Finance Minister or powerful Chancellor of the Exchequer. Therefore, I hope that when our Ministers discuss these matters they will tell the Commission that it is high time it produced some kind of coherent strategy and a list of financial priorities and did not come forward with quite so many weird and wonderful schemes. This comes from a pro-Market-eer, and I hope that it is taken on board.
I have two questions. The first concerns the matter of the Ortoli loan, whether there should be a new device through the Commission for making loans for various projects, or whether it should be done, as hitherto, through the European Investment Bank. Many of my Socialist colleagues disagreed, but I want to know what kind of loans should be made, given the state of the capital market, by the Commission through the Ortoli facility that would not be acceptable to the European Investment Bank. After all, the Chancellor of the Exchequer and other Finance Ministers are governors of the bank, but I just wonder why, for this kind of operation, the mechanism of the bank should be passed over in favour of some kind of new device.
One of the difficulties in all this is that, if one presses the Commission as to what it is actually going to do with the Ortoli facility, one gets the answer from Mr.
1188
Ortoli himself, "Perhaps the Channel Tunnel could be financed through this mechanism", or, as the hon. Member for Scarborough (Mr. Shaw) will remember. when we asked certain officials to do with the Social Fund and the ECSC they said that it would help to finance the fusion project.
I think that there is a great deal 01 confusion as to precisely what the Ortoli loan is for, and I hope that, when they go to the meeting of Ministers, my right hon. Friends will find out, one way or another, precisely what they want to do with the Ortoli loan and state the attitude of Her Majesty's Government towards it.
My second question I put in my capacity as rapporteur—Heaven help me—ot the Energy Committee of the European Parliament in relation to the budget we are discussing. What bothers some of us —and I speak for an increasing number of members of the Committee—is again the watering-can effect of trying to do all sorts of things that are probably better done by nation States. I take for example the very grave concern whether it is really the business of the Commission to get involved in the subject of intra-Community trade in coal.
But, having said all this, there are some of us who believe that there are some matters that are better done by the Community than by nation States. Among these I would pinpoint the alternative methods of producing energy. I happen to be very pro-nuclear. I do not think that we can produce a panacea to suggest that somehow wave power, or wind power, or solar power, or even fusion, will be an easy way out of the difficult problems of nuclear waste that we have to face.
Having expressed a certain scepticism, nevertheless there are those of us who also think that people have to be serious about the so-called alternative uses of energy, and if that is so it is better done on a Community basis than on a nation state basis. This brings me to a precise question that I want to put to the Treasury.
The Community has done a great deal of work, very properly, in this matter at Ispra and elsewhere. These are things that it can do well, and those who have been to see know that it has done its work well. Why was it that suddenly, out of the blue, some three weeks ago the British

1189
Government produced a £16 million scheme for British research on the alternative uses of energy, without having so much as informed the European Commission that they were doing so? The Prime Minister this afternoon talked of common objectives in energy by 1985. These are fine sounding words, but I have to tell the Government that they sound a little hollow to those who know that this kind of idea is somewhat marred by current practice.
Why was it, I repeat, that the Department of Energy in this country did not so much as inform the European Commission, or our partners in Europe, that we were to put forward a relatively large scheme for the alternative uses of energy? At the very least, it would have been courteous to do so. It would have been sensible and constructive to do it with our partners in Europe rather than suddenly deciding to go off on our tod and to tell them not a thing about it. It seems to me a very unfortunate way of proceeding.
There may well be an explanation. If the British Government did tell the Commission, and if Commissioner Brunner is wrong in saying to the European Parliament that the Commission had not been informed, let us be told so before the end of the Session, otherwise some will go on and on with our efforts to winkle out an explanation from our Government for what seems to be an embarrassingly unfortunate sequence of events.
Mr. Frank Hooley: My hon. Friend must know that France has had a very advanced and high-powered solar energy programme for years. To the best of my knowledge, France has made no particular effort to consult Britain or the European Commission about it. The Germans have just announced a $1,000 billion conservation programme which they are doing on their own. What is peculiar about Britain pursuing these matters?
Mr. Dalyell: Full information was given to the Commission about the German conservation programme. I would be less certain about the French. It does seem that if we are partners and want to make Europe work—I speak as a reconstructed pro-Marketeer—at least I am entitled to ask this very precise
1190
question. In the next three weeks some of us want it be answered.
10.57 p.m.
Mr. Peter Tapsell (Horncastle): We have in this debate demonstrated that we have now reached the stage where we can discuss the institutions and documents of the Community with the same detached and critical scrutiny that we apply to their British equivalents without calling in question our commitment to British membership of the EEC, in most cases. Indeed, it is only by such a critical approach that constructive progress can be made in improving the many present defects in the functioning of both the British and the European bureaucracies and ensuring their proper subordination to the political will of the democratically elected national Governments and Parliaments.
Those hon. Members who have looked at or even lifted, some of the seven volumes of the EEC 1979 preliminary draft general budget, of which we are asked to take note this evening, can, whatever their past attitudes to British membership of the Community, at least agree that they are of the most enormous bulk, weight, length and obscurity. They tell us everything we could possibly want to know except exactly how much the Commission and the other institutions of the Community are to spend in 1979, and exactly how that expenditure is to be itemised.
Opening the debate, the Minister delicately described this mass of figures as "illustrative" and spoke of "token entries". The truth is that Gibbon illuminated 1,300 years of Roman history in fewer pages than the European Commission has devoted to the obfuscation of its spending plans for 1979. Volumes 7/A and 7/B are two massive tomes which alone run to 1,270 pages, yet they are merely an explanatory memorandum on the preceding six volumes. My right hon. and learned Friend the Member for Hexham (Mr. Rippon), in an understandable moment of exasperation, once threw an Order Paper across the Dispatch Boxes. If I were to throw these two volumes, complete with their deadly metal clips, at the Minister of State, the number of pending by-elections would increase immediately.
However, the Commission does not rely merely on weight. The "playing hard to

1191
get" ploy is also used. Volumes 1, 2, 3, 4 and 5, to which the Notice of Motion refers, reached the Library of the House of Commons only on the afternoon of last Thursday, 6th July, just as we were all leaving for our constituencies. Volume 6 has not arrived at all, presumably because the pantechnicon which was seeking to transport them here collapsed under the weight. Incidentally, the Library has only one copy of each of the other five volumes, and they may not be removed from the Library even to bring into the Chamber. Consequently, there can be few hon. Members who have had a proper opportunity to study the volumes in their original form, the massive contents of which we are invited in an exceptionally inapposite phrase "to take note". Winston Churchill once spoke of "some chicken, some neck". To that, we might now add "some note".
Although there is a comic aspect to all this, it raises a very serious parliamentary point. The relevant documents covering the proposed expenditure of the order of £9 billion, including nearly £1,800 million gross of British taxpayers' money or some £800 million net after the various cross-payments have been made, are not and have not been in any meaningful sense made available to this House before it is invited to approve them.
It is most unsatisfactory that this House of Commons should be expected to proceed in this way, and for all those like me who are supporters of membership of the European Community it has to be borne in mind that this is a major cause of feelings of ill will in this House towards a Commission which so often does not produce documents at the proper time and in a proper form for our consideration. A proper presentation of documents in adequate time for their detailed study is an essential prerequisite for the effective functioning of the democratic process as we have understood it for centuries in this House. That is simply not happening on these European matters, despite the efforts of the Scrutiny Committees in this House and in another place. It is a problem to which the Government and the Leader of the House especially must give much greater attention than they have shown so far.
It is high time also that the nine national Parliaments made it clear that
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they are not prepared to be treated in this cavalier fashion by national Governments and by the Commission. I hope and believe that the British Conservative Members of a directly-elected European Parliament or Assembly will wish to give urgent attention to remedying this situation. Otherwise the Community will not have a proper and effective democratic base.
Mr. Jay: Is the hon. Gentleman saying that he dislikes everything that the EEC does but that he wants us to go on being a member of it?
Mr. Tapsell: I have not so far reached any aspect of what the EEC does, beyond its failure to produce the necessary documents. I hope that that point has now registered.
The second point which needs to be made, and which has been made by a number of hon. Members, is that this is not a budget at all in the sense in which that term is commonly understood in Britain. We are in reality discussing the Commission's opinion of what the 1979 budget might be. It can, of course, still be substantially modified, both by the Council of Ministers and by the European Parliament. This so-called budget is what in British parliamentary parlance would more appropriately be called preliminary draft estimates of the cost of policies, many of which have not yet been approved and some of which appear to be only partially formulated.
Despite, or because of, the enormous length of the documentation before us, there is a marked lack of precision about the content of the budget. For example, volume 2, containing the European parliamentary budget, makes no attempt to estimate the increased cost of the directly elected Assembly or Parliament which will come into being in 1979. As my hon. Friend the Member for Harrow, East (Mr. Dykes) said in the debate last year:
"However, the discrepancies in assessments, and the fact that the final budget is different from the preliminary draft produce enormous obfuscation and an opportunity for deliberate obfuscation by the Council of Ministers. I hope that parliamentarians, national and European—and perhaps, to a lesser extent, even the Commission—will work hard together to overcome this central problem."—[Official Report, 18th July 1977; Vol. 935, c. 1255.]
We can all warmly endorse those sentiments of my hon. Friend, whose devoted

1193
loyalty to the concept of European unity is not in doubt. But we must add that the little headway which has been made in this regard since he addressed the House in those terms 12 months ago is a continuing cause of anxiety.
In 1978 the general budget of current expenditure of the Communities will total about 12·4 thousand million Eua in appropriations for payment. This corresponds to 0·8 per cent. of the gross domestic products of the nine nation States and about 2·5 per cent. of their national budgets. The present conversion rate of the Eua into £ sterling is about 0·65—it fluctuates daily—so that the pound is worth roughly two-thirds of a Eua based on the basket of currencies used.
For the purposes of the budget of 1979 a fixed conversion figure was taken on 1st February 1978 at the lower figure of 0·629926. It is on this fixed figure that conversions have to be made when we seek to undertake the somewhat daunting task of translating all these figures in all these volumes into meaningful amounts of money. On this basis the Commission estimates that the British contribution to the Community budget in 1979 will be £1,764 million or 20·4 per cent. of the total Community budget. I note, however, that the Chief Secretary, when questioned on this point by the Select Committee on 28th June, was unable to confirm this figure, for understandable reasons. It remains in doubt, as the Minister of State made clear by his qualifying remarks in opening the debate.
For 1979 the total budget expenditure proposed by the Commission is 13·8 thousand million Eua in appropriations for payment and 14·7 thousand million Eua for commitment. Translated into English that means £8·7 billion for current expenditure and £9·2 billion for future commitments. This constitutes an increase of 12·1 per cent. over the estimate of current expenditure, and an increase of 15·5 per cent. on the 1978 estimate of future expenditure. We are told that this is the smallest year-on-year increase of expenditure to be proposed for a long time, largely because agriculture's expenditure is not likely to rise by more than 7 per cent. this year, taking the green currencies into account.
No doubt Commissioner Tugendhat deserves considerable credit for limiting this
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overall increase, but it is still too much, and that is my answer to the hon. Member for Swindon (Mr. Stoddart), because percentage increases of public expenditure in the range of 12 per cent. to 15 per cent. are very substantial, even when set against the growth rates of the most dynamic economies in the Community, partticularly in the light of the Prime Minister's report to us earlier this afternoon that growth rates within the whole Community are likely to be lower than expected. I agree with the hon. Member for Swindon that public expenditure, like bureaucracy and corporatism, demands at least as much supervision and vigilance in the European as in the national context.
The Conservative group in the European Parliament has played a leading and notable part in the creation of the court of auditors, as has my hon. Friend the Member for Scarborough (Mr. Shaw), who opened this debate for the Opposition in such an able fashion and who, as a rapporteur of the 1978 budget, and in many other ways, has played a major role in the European Parliament. Clearly, what is needed is a Chief Secretary for Europe, of a Gladstonian disposition. Let us hope that Commissioner Tugendhat will adopt that role.
Of course, it will be argued, and is argued, that the proportion of national budgets—2½ per cent.—committed to the European institutions is still relatively tiny and that increases in Community spending should lead to compensating reductions in national expenditures on the same services, but those who take that point of view are, I think, subscribing to the triumph of hope over experience, because we all know that expenditure programmes develop a dynamism of their own and once started not only tend to grow faster than anticipated but become difficult to rein back. That has been the undoing of the present British Labour Government. Secondly, while the replacement of national expenditures by Community expenditures sounds fine in theory, may it not in practice lead to a great deal of duplication of effort and expenditure unless the European bureaucracy turns out to be very different from all other bureaucracies the world has seen so far?
Indeed, speaking at Luxembourg on this very matter on 3rd July, Commissioner Tugendhat, who is, after all, the EEC Commissioner for budget and financial

1195
control, told the European Parliament that later this year he would be presenting proposals for enlarging the Community's own resources. He went on to say, as my hon. Friend the Member for Oswestry (Mr. Biffen) pointed out, that Community expenditure was rising at such a rate that it would reach the present limit on revenue of a 1 per cent. rate of VAT within three years, and Mr. Tugendhat added:
"We are examining various possibilities for financing the budget when that ceiling is reached."
Mr. Biffen: That is hardly the voice of Gladstone.
Mr. Tapsell: No. indeed. It was the voice of a very young Gladstone. But it was a significant statement, and I hope that the Minister of State will give us some indication of the Government's thinking on this matter of expanding the Community's finances from our own resources. When, for instance, will the EEC be able to start operating the present own resources system by starting to collect up to 1 per cent. of VAT receipts?
Will the Minister confirm that the share of the Community budget falling upon the United Kingdom, which is now 20·4 per cent., is likely to rise by 1982 to about 23 per cent?
The Foreign Secretary recently referred to the need to raise yet again the question of the share of the United Kingdom contribution. What are the Government's proposals on this important subject? What was the basis for the Minister of State's prediction that the 1979 budget will turn out to be smaller than the estimates at present before us? All the evidence of past experience seems to suggest the opposite.
A debate such as this should provide an opportunity to review the whole strategy of the Community's future spending plans. But is there such a strategy'? Despite the unanimous criticism from all sides of the House about the unbalanced nature of the Community's expenditure programme, more than 70 per cent. of the budget will be spent on agriculture again in 1979, and of this nearly 40 per cent goes on one single commodity—milk and milk products. Indeed, 26 per cent. of the whole budget goes on milk.
We all agreed—with the solitary exception of my hon. Friend the Member
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for Chichester (Mr. Nelson)—that this is a nonsense. The Prime Minister indicated earlier today that there is growing support throughout the Community for a revision of these arrangements.
Commissioner Tugendhat made the point to the European Parliament on 3rd July that development of the Community's social and regional policies depended on greater restraint in agricultural spending. But when the Chief Secretary gave evidence to the Select Committee on European Legislation on 28th June, he said that there were two ways of reducing the agricultural percentage of the budget —by cutting agricultural expenditure or increasing expenditure in all other fields. I very much fear that the latter course will prevail.
I had a number of other points that I wanted to make, but we are nearing the end of the time for the debate. I finish by asking the Minister whether he will explain how the Government will implement the statement made to the House earlier this afternoon by the Prime Minister on his return from the Bremen summit. He said that a more sensible distribution of the Community's resources among its members was needed. This British Labour Government have conspicuously failed to achieve that so far.
11.17 p.m.
Mr. Denzil Davies: The hon. Member for Horncastle (Mr. Tapsell) has declared himself, as have others, a whole-hearted supporter of the European Community. They prefaced their remarks by making it clear that they were not seeking to go back on that commitment. Then the hon. Member for Horncastle tells us that our Government are not being firm enough on expenditure on the CAP. I remind hon. Members who supported the European Community that when they voted for it, they voted for the CAP, the way it is financed and the transfer of sovereignty from this House, which makes it very difficult for any British Minister, with a Gladstonian axe or not, to do anything about the CAP.
The hon. Member for Horncastle asked me about the "own resources" system. I confirm that the Commission believes that by 1981 it will have reached the 1 per cent. ceiling on VAT. I understand that it is now working on proposals to meet that problem when it gets to 1981.

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The proposals have not been put to member Governments yet, but when they are we shall look at them very seriously.
My hon. Friend the Member for West Lothian (Mr. Dalyell) asked two questions, which I shall deal with at the outset He asked me about the Ortoli loan facility. This facility of 1 billion Eua is available for investment in the industrial, energy and infrastructure sectors. I cannot give any more details. The fear he had was that the money would be channelled perhaps through the Commission and not through the European Investment Bank. The British Government—and this also applies to other Governments—think that this money should be lent through the European Bank, which has definite criteria for lending the money, rather than through the Commission. But I understand that there is pressure from the Assembly for the money to be lent through the Commission and not through the Investment Bank. But it is our firm view that the Investment Bank is the right vehicle because it has had established criteria.
Mr. Biffen: Would a decision to channel the Ortoli funds through the Commission require the consent of the Council of Ministers?
Mr. Davies: I am not certain of the answer to that question. I am not sure of the legality of the position. I can only emphasise that the British Government and other Governments are pressing through the Council of Ministers for this money to go through the Investment Bank.
My hon. Friend also asked me about energy policy. He made his point strongly, but he will appreciate that this is a matter for the Department of Energy and not for a Treasury Minister discussing the Common Market budget.
Mr. Dalyell: Will my right hon. Friend ask the Department to write to me about the matter?
Mr. Davies: Yes, I shall see that the Department writes to my hon. Friend.
My right hon. Friend the Member for Battersea, North (Mr. Jay) asked me a number of questions. He asked me why we cannot get some money back as a result of renegotiation. The mechanisms for repayment are complicated. They
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depend partly on per capita GNP, partly on balance of payments and partly on various other factors. In respect of the 1978 budget we did not qualify because I am told that in real terms our share of the budget was 15·3 per cent. and our share of Community GNP was 15·5 per cent. Therefore, in the 1978 budget we did not qualify under the mechanism.
For the 1979 budget the figures are provisional, but on the basis of those figures it looks as though we might get some benefit—it might not be very large —as a result of the renegotiation mechanism, which is related to GNP and contributions to the budget. It is difficult at the moment to put a figure on it, but it certainly will not be a large one.
My right hon. Friend also asked me about the report in the Press about errors in payments to staff. I can confirm that in substance that report is correct. A working party has been set up on which the British Government are represented and we are pressing and doing our best to obtain corrective action. There are legal problems into which I cannot go now, but we are pressing very hard for corrective action on that overpayment.
My right hon. Friend asked about fraud. That is similar to asking "When did you stop beating your wife?" If my right hon. Friend has any evidence, no doubt he will supply it to the authorities. But I have no evidence of any fraud, and I am told that the question of payment or overpayment to staff had nothing to do with fraud.
I was also taken to task for not mentioning the Regional Development Fund. I suppose I could have mentioned it in my opening remarks, but it is not as important in this year's budget as it was last year. That does not mean that we do not attach a high priority to the fund. But hon. Members will appreciate that it was the 1977 European Council, after much wrangling and final agreement, that laid down for three years the figures for expenditure on the fund—620 million Eua. It is a little unfair—and here I come to the Commission's defence—to criticise the Commission for not exceeding that agreement reached by Heads of Government. As for the 5 per cent. non-quota section, we feel that we should meet that within the figure of 620 million Eua.
Mr. Michael Shaw: The Minister of State might like to know that several of us voted against Parliament's wishes on loans, and some of us were for the Investment Ban. On the other point may I say that Mr. Eyskens, as President of the Budgetary Council last year, said that there was room for negotiation this year. What interpretation do the Government place on that—because I do not know?
Mr. Davies: We attach, generally, a priority to the Regional Fund, but we must recognise the reality of the decisions taken at the summit and we cannot go into the Council with plans for substantial increases in expenditure in view of the size of this year's budget.
My hon. Friend the Member for Southampton, Test (Mr. Gould) made the good point that we are not discussing a budget. We are discussing estimates, and the Budget Council is not the equivalent of the British Cabinet. The hon. Member for Devon, West (Mr. Mills) asked why Treasury Ministers did not instil some Treasury control into these matters. He recalled that when he was at the Ministry of Agriculture, the Treasury controlled expenditure within that Department. But we are not talking about that sort of situation. There is no salvation in asking why the Budget Council does not sit on the Agriculture Council. If other European Governments operate as our Government operate, their agriculture Ministers take to the Agriculture Council a collective negotiating stance decided upon within government. I imagine that the West German and French Governments operate in this way. To expect an agriculture Minister to argue one way in his Council and the budgetary Minister to argue against him in the Budget Council shows a lack of realism of the way government works. There is no answer in saying that a finance Minister should put a different case from an agriculture Minister of the same country. The Council of Ministers does not sit as a Cabinet. It is a question of deciding priorities. There is no simple solution.
The hon. Member for Devon, West also suggested that we should spend more on the guidance sector of agriculture and less on the guarantee sector. I am not an expert on agriculture, but I understand that we would not benefit all that much by increased expenditure on the guidance
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sector because our agriculture is efficient and the areas of Europe where the industry is not so efficient would get the greater benefit from the guidance sector. If they became more efficient, we would still have the problems of surplus production and price. There is no salvation that way either.
Mrs. Winifred Ewing: Does the Minister intend to answer my questions about EMU and additionality?
Mr. Davies: The answer on additionality was given by the right hon. Member for Down. South (Mr. Powell) in an intervention. There is no problem here because a Government will always, when deciding expenditure on regional policy or anything else, look at the amount of money likely to be coming from another source and will decide its expenditure in that light. I am sure that every Government in Europe operates in that way. There is no other way.
I shall not ask the hon. Lady what she means by economic and monetary union.
Mrs. Ewing: What do the Government mean by it?
Mr. Davies: I am not sure what is meant by the term. All I say is that one cannot have economic and monetary union without a federal Government. It must develop in an organic way. It cannot develop in any other way. It is not the policy of this Government to agree to a federal Government in Europe leading to economic and monetary union. I hope that that answers her question.
Mrs. Ewing: If the term economic and monetary union, which is used daily in the European Parliament, offends the Minister, will he tell us whether it is the new policy of the Government to favour economic integration, to us the phrase which appears in the document?
Mr. Davies: There is no new policy. The hon. Lady is chasing hares. I made it clear that all these matters can never come about except by organic development. When we consider the problems of inflation, exchange rates and different rates of growth in different countries, I do not see how we can move towards the economic and monetary union that apparently the hon. Lady favours.
Mr. Nelson: Does the right hon. Gentleman—
It being half-past Eleven o'clock, Mr. DEPUTY SPEAKER put the Questions necessary for the disposal of the proceedings, pursuant to Standing Order No. 3 (Exempted Business).
Question, That the amendment be made, put accordingly and agreed to.
Main Question, as amended, put and agreed to.
Resolved,
That this House takes note of Volume 7 of Commission Document No. R/1577/78 relating to the EEC 1979 Preliminary Draft General Budget, together with Volumes 1, 2, 3, 4 and 5, and R/1104/78 and R/5I9/78 and further notes with deep concern that the policy implied in this preliminary draft budget once again fails to make any reduction in the huge burden of agricultural expenditure under the guarantee section of the European Agricultural Guidance and Guarantee Fund, in particular, in the cost of disposing of agricultural surpluses outside the EEC.

ADOPTION (SCOTLAND) BILL [Lords]
11.31 p.m.
Order for Second Reading read.
The Lord Advocate (Mr. Ronald King Murray): I beg to move, That the Bill be now read a Second time.
The Bill is a consolidation measure covering enactments relating to adoption in Scotland together with amendments of a technical nature to give effect to two recommendations of the Scottish Law Commission.
The first recommendation relates to the provisions of the Children Act 1975 dealing with the extraction of parental rights on making an adoption order. The extinction should be extended to the functions of a tutor or curator to the child. There is also reference to a duty arising from an agreement that must be corrected for Scots law where a duty can arise from a unilateral promise as well. Provision should also be made for extinction of any alimentary right or duty between a child and a member of his original family. All these recommendations are given effect to in clauses 12(3) and 12(4).
The second recommendation relates to the provision in the Adoption Act 1958 entitling every person to search the index of the Adopted Children Register. It reflected current practice at the time with other registers. An enactment in 1965 purported to import the modern practice for inspection of registers but left the original provision for adoption unaltered so that the respective provisions were inconsistent with each other. The Law Commission recommendation resolves the conflict so it is now only the person applying who is permitted to search the index personally if he does not wish to rely upon the services of the Registrar General staff. That recommendation is effected in Clause 45(3).
The other place approved the Bill after a report by the Joint Committee on Consolidation Bills. I hope that the House will give it a Second Reading.
11.33 p.m.
Mr. Daniel Awdry: I rise to make one point. As I am retiring at the end of this Parliament, this may be

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my last speech in the House. I am glad to make a few observations from the Opposition Front Bench.
At the end of a long day we are embarking on three important consolidation Bills. The first measure, the Bill before us, has 67 clauses and consolidates the law of adoption for Scotland. It consolidates eight Acts of Parliament that have been passed over the past 20 years.
The second measure, the National Health Service (Scotland) Bill, contains 110 clauses, 17 schedules and consolidates no fewer than 13 Acts of Parliament passed by the House since 1947.
The third measure is the Interpretation Bill, which consolidates the 1889 Act and a number of other enactments relating to the construction and operation of a great number of Acts.
The simple point that I wish to make is that Parliament owes a considerable debt to the Joint Committee on Consolidation Bills. I have been pleased to be a member of the Committee for the past year or two. The Chairman, Lord Russell of Killowen, gives a great deal of his time to the Committee's important work.
Above all, we owe a great debt of gratitude to the draftsmen of these measures, who spend endless hours of labour helping to clarify the law, and thus benefit those like myself who try to practise in the law and need to refer to statute law from time to time.
I pay tribute to the work of the draftsmen and express the hope that the work of consolidation will flourish and expand in the next Parliament. It is a task that receives no publicity. The Joint Committee is, perhaps, the most boring Committee to sit upon. It is highly technical work. We never get a line in the papers, yet we sit every week. But it is work which will be of the utmost benefit to future generations who have to try to understand and to administer the laws which we pass in this place and have passed over the years. I pay tribute also therefore to the draftsmen.
The Lord Advocate: I associate the Government with the tribute which the hon. Gentleman has paid to the Chairman of the Joint Committee and to its members—not least to the hon. Gentleman himself, who has been a distinguished member of the Joint Committee
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—and to the draftsmen. I share the hon. Gentleman's hope that consolidation will proceed apace in the future, unrecognised and unheralded though it tends to be. If it be any comfort to the hon. Gentleman, I shall not be in the next Parliament, either.
Mr. Awdry: That is an extremely generous reaction. I am very humble. It is very nice of the Lord Advocate to say that. We both agree that the work of consolidation is important, though it receives no publicity. Let us hope that it will continue, with benefit to all concerned.
11.36 p.m.
Mr. Tam Dalyell: Although I very much hope to be here in the next Parliament, I wish at this point only to ask the lay question which is of some concern to those of us who have to deal with day-to-day constituency cases. Will the consolidation measure which we are now considering make it in any way easier for those at school to protect their privacy?
As we all know, one of the problems is that, when it becomes known at school, particularly at secondary school, that a child is adopted, difficulties often follow. We have all had cases in which this has happened. The fact of adoption has sometimes leaked out in rather odd ways.
I do not know the answer to this question, and I shall value the Lord Advocate's reply. Will what we are now doing make it any easier to protect the privacy of those who are adopted so that it does not become generally known, especially in the case of young children, that they happen to be adopted?
11.37 p.m.
Mr. George Thompson: I welcome these consolidation Bills because I think it important that we consolidate the law, especially when it may be scattered through many statutes. I hasten to say that I am not a lawyer. but I am sure that it must cause headaches to practising lawyers when they have to search for the law in many statutes.
I join in the tribute which has been paid to the Joint Committee which deals with these consolidation measures, and I give a welcome to the three which are coming before us tonight.
The Lord Advocate: By the leave of the House, may I reply to the specific question put to me by my hon. Friend the Member for West Lothian (Mr. Dalyell)? As this is consolidation, with two minimal technical amendments only, I cannot give him much comfort. What I can say, however, is that the amendments to which effect has been given, if anything, slightly tighten the confidentiality of the adoption register.
Question put and agreed to.
Bill accordingly read a Second time.
Bill committed to a Committee of the whole House.—[Mr. Jim Marshall.]
Bill immediately considered in Committee.
[Mr. OSCAR MURTON in the Chair.]
The Chairman: With the approval of the Committee, I shall put the Question on clauses 1 to 67 together.
Clauses 1 to 67 ordered to stand part of the Bill.
Schedules 1 to 4 agreed to.
Bill reported, without amendment.
Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.
Bill accordingly read the Third time and passed, without amendment.

NATIONAL HEALTH SERVICE (SCOTLAND) BILL [Lords]
Order for Second Reading read.
11.40 p.m.
The Lord Advocate (Mr. Ronald King Murray): I beg to move, That the Bill be now read a Second time.
This is a pure consolidation measure which consolidates a number of enactments relating to the National Health Service in Scotland, the 30th anniversary of which we are celebrating this year.
The enactments relating to the National Health Service in England and Wales were consolidated last year. This Bill does the same for Scotland. The House of Lords has approved the Bill after a report by the Joint Committee on Consolidation Bills to the effect that it is pure consolidation and does not change the existing law. I commend the Bill to the
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House as a useful measure which reenacts a considerable number of enactments from 14 separate statutes in a readily accessible and clearly set out form. I am confident that it will be useful to all those involved in the administration of the Health Service in Scotland.
11.41 p.m.
Mr. Tam Dalyell: I shall not try the patience of my colleagues at this time of night by mentioning the unmentionable. But why was it necessary to do this—there might be excellent reasons—before the Assembly is set up? I should have thought that from the Government's point of view this, of all things, should have been left until the Assembly has been set up at the High School.
The Lord Advocate: This is a highly desirable consolidation measure. That is reflected by the consolidation for England and Wales which took place last year. There are technical drafting reasons why it is satisfactory to pass the Bill before devolution. My hon. Friend the Member for West Lothian (Mr. Dalyell) will realise from his careful study of the Scotland Bill that there are inter-connections with almost every aspect of the devolved functions. One must start somewhere in legislation if one is to make it into an integrated whole. The simplest and best way, from a drafting and legislative view, is to do it this way.
Question put and agreed to.
Bill accordingly read a Second time.
Bill committed to a Committee of the whole House.—[Mr. Snape.]
Bill immediately considered in Committee.
[Mr. OSCAR MURTON in the Chair.]
The Chairman: With the approval of the Committee, I shall put the Question on clauses 1 to 110 together.
Clauses 1 to 110 ordered to stand part of the Bill.
Schedules 1 to 17 agreed to.
Bill reported, without amendment.
Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.
Bill accordingly read the Third time and passed, without amendment.

INTERPRETATION BILL [Lords]
Order for Second Reading read.
11.46 p.m.
The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson): I beg to move, That the Bill be now read a Second time.
This Bill, like its two distinguished predecessors, is also a consolidation measure. It consolidates the Interpretation Act 1889 and other measures relating to Acts of Parliament and other instruments. It is based upon the report of the Law Commission and the Scottish Law Commission and incorporates recommendations made in that report. The net result of the consolidation will be that in future Acts of Parliament and subordinate legislation certain verbiage will no longer be necessary. For that, I am sure, we all will feel deeply grateful.
I wish to associate myself with the remarks of my right hon. and learned Friend the Lord Advocate. I, too, would like to pay tribute to the hon. Member for Chippenham (Mr. Awdry). He and I have sat many a night in what is the most exclusive little group of people debating—not at length, because that would be inaccurate—this erudite subject. He is very distinguished in that exclusive area and I am sorry that he will no longer be debating this subject. I am sure, however, that as a practising lawyer he will at least have the practical benefits of the legislation he has helped to pass.
11.48 p.m.
Mr. Tam Dalyell: What happens to this cosy little club to which my hon. Friend referred if the Government get their way and there is an Assembly in Edinburgh? Will it be duplicated? What is the practical effect of the Scotland Bill on my hon. Friend's—
Mr. Deputy Speaker (Mr. Oscar Murton): Order. The Chair, although indulgent, is now becoming mildly impatient. We can discuss only the reasons for consolidation. I am afraid that we must not stray away north of the border.
Mr. Dalyell: I am sure that my hon. Friend is itching to give a 30-second answer.
Mr. Davidson: I am itching to say something about the devolution Bill because I am one of the few people in the House not to have said a word about it. However, itching though I am, Mr. Deputy Speaker, I am always most respectful to your rulings, with which I entirely agree. Therefore, unfortunately I cannot help my hon. Friend, much as I should like to do so.
Question put and agreed to.
Bill accordingly read a Second time.
Bill committed to a Committee of the whole House.—[Mr. Snape.]
Bill immediately considered in Committee.
[Mr. OSCAR MURTON in the Chair.]
The Chairman: With the permission of the Committee, I shall put the question on clauses 1 to 27 together.
Clauses 1 to 27 ordered to stand part of the Bill.
Schedules 1 to 3 agreed to.
Bill reported, without amendment.
Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56(Third Reading) and agreed to.
Bill accordingly read the Third time and passed, without amendment.

PEAK DISTRICT NATIONAL PARK
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Snape.]
11.50 p.m.
Mr. Frank Hooley: I believe that one of the great Socialist achievements of the post-war Labour Government was the creation of the national parks. The Peak District national park is unique in two respects. First, it is like a nut in a nut cracker, the jaws of which are the great industrial conurbations of South Lancashire and South Yorkshire. Secondly, the Peak park planning board is both a national park authority and a planning authority. In this latter capacity it has recently produced a structure plan to determine

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developments for the future of the park into the 1990s, after meticulous consultation with interested bodies and the general public.
In this regard, I should like to quote a brief sentence from a recent Fabian pamphlet on national parks which records the view:
"On all counts the park that comes out by far the best is the Peak District…Its success in provision for the public and care for the land under its remit and in the initiatives it has taken and is taking in recreation is by any yardstick remarkable."
The whole raison d'être of the national parks is to conserve and defend some part of our country from the kind of development that we are obliged to tolerate elsewhere as the price of an industrial society and to defend it also from the ravages caused by the indiscriminate pursuit of each and every form of recreation that ingenuity can devise and commerce profit from. The board endeavours to satisfy these two aims, but in no way ignores the reasonable demands for recreation, holiday caravans, homes, jobs and the national need for minerals.
The response of the Secretary of State to the board's recent proposals has alarmed and dismayed a great number of bodies and persons who are passionately concerned about the future of the park. These bodies include the Council for National Parks, the Council for the Preservation of Rural England, the National Trust, many private individuals and the National Farmers Union, which has made direct representations to me on this matter.
There are three main areas of serious concern: first, the extraction of minerals; secondly, the problems of recreation; thirdly, houses and jobs.
The question of mineral working is the crunch issue between the board and the Minister, and its eventual resolution will, in my view, determine just how far the Secretary of State is fully and truly committed to the concept of a national park.
The board forthrightly says:
"There will be a general presumption against new mineral workings or extensions of existing mineral working activities in the park."
It then goes on to apply two clear firm tests for the determination of any future applications for mineral extraction. First, is it vital to the public interest? Secondly, is it clear beyond doubt that there are no
1210
practicable alternative sources of supply? Anyone who has seen the ghastly ravages of limestone quarrying already taking place in the park must endorse these two criteria.
The report of the national parks policy review committee—the Sandford report —itself emphasised that:
"a fundamental conflict exists between the purposes of national parks and large scale industrial development".
It goes on to say:
"The presumption against development which would be out of accord with park purposes must be strong throughout the whole of the parks".
The Secretary of State appears to reject both criteria on the grounds that:
"it would be impracticable to require applicants to prove that their proposals were vital in the public interest or that there were no practicable alternative sources of supply".
of the mineral concerned.
I suggest that any competent geologist could give evidence on the second point and that it should not be such a very abstruse calculation to determine the economics of a particular application and the alternatives. As regards the public interest, the very creation and preservation of the national parks are themselves supremely acts in the public interest and ex hypothesi the onus should be placed on those who would tear it to pieces to prove that their proposals are no less vital to the public interest before being allowed to go ahead.
If the Secretary of State for the Environment is now going to throw all the weight and authority of his important office against the considered judgment of a unique national park planning board, which has a quarter of a century of experience in trying to cope with the vast economic power and vested interests of mining companies, the future outlook for national parks is bleak. The general presumption against, which is the planning board's policy, should stand.
However, with regard to minerals there are two particular problems. The board accepts the need for limestone working for chemical, steel, cement and some other industrial uses, but points out that these add up to only 47 per cent. of the rock extracted—chemical 22 per cent., steel, 10 per cent., cement and other uses, 15 per cent. The rest, more than half, is used as aggregate, especially for road building,

1211
and the board objects to this, proposing to limit planning permission to the need to supply industries
"requiring the unique properties of high purity limestone".
The use of this valuable material for road building has been a national scandal for some time, especially as there are in the United Kingdom vast spoil heaps which could be made to yield up material for this purpose.
Various Government committees—the Stevens committee and the Verney committee—have looked into the question of sensible controlled mineral working and a national policy on aggregates supply. My right hon. Friend the Secretary of State argues that it is not possible to regulate the end use of minerals by planning control. But he recently made a decision on mineral workings at Tunstead, near Buxton, which was entirely based on ICI's need for high purity limestone for use in the chemical industry. The need for aggregates was not upheld.
In these days, when conservation of raw materials, sources of supply, recycling and similar problems are coming more and more to the fore, the Secretary of State's curious abdication of effective planning control over mineral extraction is alarming, and the more robust approach of the planning board is much to be preferred.
The working of fluorspar is a more difficult problem than limestone, because 86 per cent. of United Kingdom deposits of this material are in the Peak park, and it is an important material for steel and aluminium production. It is also used in the petrol, chemical and ceramics industries.
However, a significant proportion of current fluorspar production from the Peak is exported overseas. The board argues with some cogency that the nation's interests might be better served by retaining known resources of this relatively rare mineral for future use rather than going for a short-term gain in export earnings, which have declined in each of the past three years, and amount to only about £1¼ million.
The Secretary of State seems to fall back on a vague phrase about proposals for working fluorspar being considered on their merits. He rejects suggested con-
1212
trols by the planning board to enforce the least damaging methods of operation. In my view, this would constitute a green light to the mining companies to go ahead with their plans and ignore environmental considerations.
I turn to the question of recreation. In any area designated as a national park there must of necessity arise some conflict between the almost infinite demands for recreation and the basic need to conserve the character of the park and its natural beauty. The planning board is not indifferent to the rising demand for recreation. The number of visitors over the past 10 years has trebled, to about 16 million each year, but the board takes the view that there must be some limits if the overriding duty to preserve and enhance the natural beauty of the park is to be discharged effectively.
The Secretary of State appears to think that recreational use should be pushed to the maximum compatible with natural beauty, and suggests that the scale of provision be increased to a level of use without significant detriment to its character and environment. These phrases would seem to me to imply that the demand for recreation takes priority over the principle of conservation of the park, and if this argument is accepted it would over a period of time undermine the whole purpose of the creation of the national parks.
The planning board makes a presumption against new sites for static caravans. The major objection to static caravans is that they constitute a permanent intrusion on the landscape even when not in use. Moreover, there is abundant scope for such sites outside the park but within easy access of it.
As regards touring caravans, the board wants firm control and discussions with surrounding local authorities to secure sites outside but within easy reach of the park. As the owner of a small touring caravan myself, I would be quite happy to use a site near, but outside, the park. By definition, people with touring caravans have cars to travel within the park if they wish.
The board stresses that the object of residential development, of new housing, will be to meet local need and safeguard the interests of local people, which seems sensible. The Secretary of State appears

1213
to be more concerned to cater for commuters, ignoring the problems which have already been created by the pressure of external demand on the housing stock in the park, to the detriment of local people. This is not a problem peculiar to the Peak park. People in parts of Wales have complained bitterly that cottages and bungalows have been bought up as country residences at prices way beyond the pockets of Welsh people who would have liked to buy them. Providing housing for the commuter may be a normal feature of life in the south-east. It is not an appropriate policy for a national park. I referred earlier to the Fabian pamphlet on the subject of the parks. This stresses that
"Local unemployment can only really be solved by the introduction of long-term smaller industries suited to the locality."
The board for its part makes it explicit that it is not opposed to industrial development but wishes to ensure that it is on a form and scale appropriate to the needs of particular parts of the park to offset the decline in jobs offered by mineral working and agriculture.
The Secretary of State seems to me to delete the careful safeguards spelt out by the board and to substitute a dangerously loose phrase about employment opportunities that could be accommodated with significant detriment to the character of the locality. This could just be a matter of wording, but in that case I prefer the more precise phraseology of the board to the vaguer terms suggested by Whitehall.
The strength of the structure plan as drawn up by the planning board is that it seeks to build firm, strong defences against developments that, may be blatantly, may be insidiously, erode the character and beauty of the park For this reason, the board is against additional static caravans, against the maximum exploitation of the park for recreation, opposed to new mineral working, and concerned to keep very tight control on industrial and residential development. The Secretary of State appears to want no hard lines, vague criteria and everything considered on its merits. In my judgment, since we are dealing with so unique and irreplaceable an entity as the Peak District national park, a great national asset, the planning board's approach is right and the Secre
1214
tary of State's attitude, as evidenced so far in his comments on the plan, is dangerous and unsound.
12.2 a.m.
Mr. Arthur Blenkinsop: I want to stress my great anxiety about possible developments in the Peak District national park. Indeed, this anxiety is shown by my being here at all at this hour of the night.
I am concerned because it is clear from the representations that I have had that this is a matter that concerns the whole of the national park planning authorities. They are deeply concerned lest a change in attitude by the Government is taking place, surreptitiously almost, in this way, and many are saying that an attitude that they understood was being maintained by the Government is now being altered.
This is a matter that concerns many of us very deeply. The National Trust has made clear to me its anxiety, too. It believes that the proposals that come from the Minister have clouded rather than made clear the intentions of the Government. Indeed, many of us are particularly anxious lest we are now getting some change in the attitude of the Government towards the national parks. The overwhelming desire of most of us is to ensure that in these areas in particular we shall give priority to conservation, as the Sandford report recommended.
We fear that this very laudable desire and effort is being eroded, and we hope to hear from the Minister at least that that is not so. But we also want to take the opportunity that clearly is not available in the short time at our disposal tonight to press the matter further, because it does raise in our view some matters of very deep concern.
12.4 p.m.
The Minister of State, Department of the Environment (Mr. Denis Howell): I am most grateful to my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) for initiating this debate, and to my hon. Friend the Member for South Shields (Mr. Blenkinsop) for supporting him. It gives me the opportunity to correct some of the misunderstandings that have arisen as a result of misinformed press reports.
I can well understand and appreciate the concern of my hon. Friend and other Members of this House who have written

1215
to the Secretary of State on the same matter when I read, as I am sure they have done, in sections of the press that the Secretary of State has insisted that controls over mineral working and development should be relaxed, and that the park will be destroyed by major Government changes in its policies, and that the draft modifications proposed by the Secretary of State represent a complete reversal of the aims of the park to put preservation before recreation as defined when the park was originally designated.
This is so far from the truth as to be unrecognisable. We have had a massive public participation exercise which I am sure everybody would welcome. We had the structure plan submitted in August 1976 by the park board. We had the examination in public in February 1977 by a panel, appointed by the Secretary of State, of three most distinguished gentlemen. They reported in September 1977, and now the Secretary of State has published his modifications on 8th June 1978.
After the Secretary of State's publication, six weeks were allowed for objections. I want to announce to the House immediately that, following representations from the board, who thought that that period was perhaps inadequate for its purpose, I am prepared to give a four week extension. That will make 10 weeks in all in which people can object to the Secretary of State's proposals, up to 18th August. Only after that whole process will the Secretary of State take his decisions, and he will certainly take into consideration what my two hon. Friends have said this evening, and any other representations which are made to us.
During the examination, which extended over a period of two weeks, participants in the discussion of the different issues included representatives of a large number of bodies. I will give the list in order to show how extensive was the public participation exercise. The participants included the Countryside Commission, the Nature Conservancy Council, the Council for the Protection of Rural England, the Conservation Society, the Friends of the Earth, the Ramblers Association, the National Farmers Union, the Automobile Associa-
1216
tion, the Camping Club of Great Britain and Ireland, six county councils, nine district councils, mining and quarrying interests, local chambers of commerce, trades unions and trades councils, and many other bodies with an interest in the use of the land and the provision to be made for recreational activities in the park.
Having taken account of all that those bodies had to say, it is quite ridiculous to expect the Secretary of State for confirm a plan totally unamended in any form at all. That would be unreasonable. The published draft modifications to the Peak park structure plans do not, I repeat, represent any change in Government policy towards the Peak park, nor any weakening at all in the Government's support for the general aims and objectives of the Peak park joint planning board.
I want to quote our circular 4/76, paragraph 35, which we authorised—I spent a lot of time on it myself—some two years ago. It reads:
"The Secretaries of State share the view underlying the Committee's recommendations that these applications"—
particularly in regard to minerals
"should be subject to the most rigorous examination because of the serious impact of mineral workings on the natural beauty of the parks".
That remains our policy.
There is a great dilemma, of course, at any planning inquiry for minerals, and that is how to supply the inquiry with information about alternatives. The evaluation of mineral deposits is an extremely expensive process, added to which there is the very difficult technical point that, even when alternative supplies are located, a judgment has to be made about the feasibility of mining the mineral.
The conflict is particularly acute in the Peak park. Clearly, we wish if possible to keep the park free of intrusive or alien development, but we cannot preserve it completely intact, and the hard fact is that there are important minerals in the park.
The board recognised this and tried to strike a balance in its policies, but it is the way it did it that we have to consider. My hon. Friend has drawn atten-

1217
tion to some of the words used in the policies. The board proposes a
"general presumption against mineral working",
and then proposes policies which imply that subject to certain criteria some mineral development will be allowed. If, therefore, the general presumption does not mean that it proposes to refuse all applications for mineral working, it must mean that it will apply tough criteria and permit development only if it is satisfied that those criteria are met.
Then there is the question of proof that proposals are vital in the public interest and that there is no alternative source. We do not see how this can be "proved", to use the terms of the board's submission.
The next point is that of regulating the end use of minerals. The plain fact is that the statutes simply do not enable a planning authority to say for what use a mineral shall be sold, any more than a factory's products can be controlled unless a change of use is involved.
Then there is the question of the board's wish to be satisfied that the least damaging methods of operation are to be used for fluorspar working. We do not disagree with this, and this brings me to the policy proposed by the Secretary of State which would, I believe, enable the board to satisfy itself on this matter —and that is the important, indeed, the critical factor. The planning board should be able to satisfy itself. That is what the policy of the Secretary of State seeks to provide. I will read it to the House:
"Proposals for mineral working will be subject to the most rigorous examination. The Board will consider each proposal on its merits in relation to the following criteria:

(a) the national and local interest;

(b) the availability of practical alternative sources of supply;

(c) the extent to which the proposed development might be materially damaging to the environment or character of the Park;

(d) the effect of the traffic likely to be generated by the proposals on the safety and the character of the Park."

I ask the House to note three aspects of our response. The first is that it echoes the words used by this Government in their 1976 response to the report of the Sandford committee. We are confirming in practice what we said two years ago. Secondly, it extends it. It adds the very important consideration of the effects of traffic to the others proposed by the
1218
board. The board had not proposed that. We are adding traffic considerations to these others. Thirdly, it will be for the board to decide how the criteria should be balanced and how it should exercise development control. I think that we all agree that at the end of the day it is a question of balance in most of these matters.
I turn now to the specific questions and say a word or two about them. If my hon. Friend wants more detailed answers, I shall be happy to write to him.
The first of them is housing. There is really little between us here. The difference between the number of new houses for which the draft modifications provide and the board's top target figures, after allowing for existing planning permission and the board's revised estimate of housing need in Bakewell, is about 40 houses, or a population of about 100 over the period up to 1991. That means 40 houses over a period of 15 years.
One important factor to bear in mind is that the submitted structure plan seeks to restrict permission for new housing development to applicants who can show that they live locally or have local connections. Not only is such a policy unacceptable in planning law, but it would be in conflict with the aims and objectives of the board in seeking to arrest the decline in the population of the park area and to maintain the settlements in the remote areas of the park as viable communities. The average age of the population of the park is already very high, and it is increasing as the years go by. The only hope for renewal lies in an inward movement of younger people, albeit on a limited scale. The draft modifications to the provision for residential development are intended to allow for this.
The next issue is that of jobs. We understand what the board is trying to achieve, and we are seeking to support it. But this cannot be done just by endorsing the language of the board's structure plan. It has said, for example:
"The Board will consider sympathetically, and in some instances may encourage development providing employment opportunities suitable for farms, farmers and their families."
That simply will not do when judging a planning application. It is not possible to single out farmers and their wives.

1219
We believe, therefore, that the draft modifications will better serve the board's purpose. I quote them:
"The Board will consider favourably any proposals for industrial development which would be accommodated within the Park without significant detriment to the character of the locality and without creating problems of excess traffic or unacceptable nuisance or disturbance."
I turn now to the question of recreation. This is again a matter of balance. It is wrong to suggest that we do not accept that where the duty to promote the public enjoyment of the park cannot be reconciled with the duty to preserve and enhance the natural beauty of the area, the latter should prevail. This is a vital principle and should be adhered to at all times. It was recognised by the joint planning board, that given the increase in leisure time which can be expected in the future as a result of a shorter working week and improved holidays, the use of the national parks for recreational activities is bound to continue to grow.
As the published statement of reasons indicates, the draft modifications to the recreational policies of the structure plan are intended to enable the board to make land use provision for the increase in the use of the park for recreational purposes, which the joint planning board expects to take place, within the framework of policies calculated to ensure that the scale and form of this provision can be accommodated without endangering the conservation of the natural beauty and the character of the environment of the park.
I come now to caravaning and camping. We really must be realistic. There has been an enormous growth in camping and caravaning. This growth is still continuing at a rate of 10 per cent. per year. The plain fact is that if these activities are not reasonably provided for in places which the park board thinks to be appropriate people will solve their own problems in a way which is more detrimental to the park. That is the sensible policy which the Secretary of State is seeking to sustain.
On the subject of holiday caravans, the proposed policies of the submitted structure plan relating to seasonal caravan sites would mean the removal of most, if not all, of such accommodation from
1220
the park. This is not on. The Sandford committee recognised that seasonal holiday caravans provide relatively inexpensive holidays for many people who might otherwise be unable to enjoy the national parks.
Circular 4/76 stated our conclusion that the concentration of caravan and camping sites outside the periphery of a national park would, in general, be undesirable as it would only create more planning problems outside the park than it would solve within it and it would not meet the requirements of many of the visitors to the park. It would lead to a greater volume of traffic on the roads of the park and into the park. In short it would be unworkable.
We have received a number of representations from individuals and organisations which support this general policy line. We have to cater for this growth, and have tried to do so. We want the sites to be in sensible places agreed by the board, protecting all the main environmental priorities which the board seeks to support and sustain. It is not our job to keep people out of a national park nor do I think that we should seek to give that impression. We have a duty, as has the board, to provide for the public enjoyment of national parks.
I conclude by saying that we recognise that the Peak park is a splendid achievement, that the work carried out by the board in managing the different activities taking place in the park is continually worthy of praise and is a great national asset both to the residents of the park and the many millions of people who visit the area each year. It is our expectation that, armed with an approved structure plan and with its own national park plan, the board will be able to control and manage the different uses of land and the varying activities for which the park provides such admirable facilities and to continue to preserve and enhance the natural beauty and character of the park as an amenity for many generations to come.
That is the policy of the Government and those are the criteria upon which we base it. It is against that background that we ask to be judged. If there are difficulties at any time we shall be pleased to receive deputations in an attempt to

1221
obtain maximum agreement, because, as I hope I have proved to the House, we are absolutely united in principle, with little between us in practice.
Question put and agreed to.
Adjourned accordingly at twenty minutes past Twelve o'clock.

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  Pharmacists
  Dentists
  Dentists
  Deaths (Causes)
  Deaths (Causes)
  Hospital Patients
  Hospital Patients
  Children in Care (Ipswich)
  Children in Care (Ipswich)
  Poliomyelitis
  Poliomyelitis
  Elderly Persons (Consultative Document)
  Elderly Persons (Consultative Document)
  National Health Service Employees (Essex)
  National Health Service Employees (Essex)
  Orthopaedic Services
  Orthopaedic Services
  Hospital Consultants and Registrars
  Hospital Consultants and Registrars
  Pay Beds
  Pay Beds
  Personal Incomes
  Personal Incomes
  Abortion
  Abortion
  Family Income Supplement
  Family Income Supplement
  Suffolk Area Health Authority
  Suffolk Area Health Authority
  Health Services (Expenditure)
  Health Services (Expenditure)
  Hospital Beds
  Hospital Beds
AGRICULTURE, FISHERIES AND FOOD
  Tenancy Succession
  Tenancy Succession
  Hospital Waiting Lists
  Hospital Waiting Lists
  Bees
  Bees
  Potatoes
  Potatoes
  Pigmeat
  Pigmeat
  International Whaling Commission (Conference)
  International Whaling Commission (Conference)
  Potato Prices
  Potato Prices
  Chip Potatoes (Imports)
  Chip Potatoes (Imports)
  Animals (Export)
  Animals (Export)
  Oil Seed Rape
  Oil Seed Rape
  Cattle Imports (Ireland)
  Cattle Imports (Ireland)
NORTHERN IRELAND
  Highly Qualified Persons
  Highly Qualified Persons
  Pay Beds
  Pay Beds
  Netting Licences
  Netting Licences
  Collectable Income (Definition)
  Collectable Income (Definition)
  River Faughan (Pollution)
  River Faughan (Pollution)
  Education
  Education
  Republican Meeting (Londonderry)
  Republican Meeting (Londonderry)
  Stephenson's School Building, Dunmurry
  Stephenson's School Building, Dunmurry
  Tattooing
  Tattooing
  Hospital Consultants and Registrars
  Hospital Consultants and Registrars
  Belfast Housing Executive
  Belfast Housing Executive

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

DIVIDEND CONTROL
Lord BOYD-CARPENTER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they intend to continue control of dividends when the present restrictions lapse on 31st July; and what public purpose has been served by their control.
The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk): My Lords, the Government are now considering what restrictions on ordinary dividends, if any, may be needed after 31st July when the current statutory controls lapse, and a Statement will be made at the appropriate time. Successive Governments of both Parties have taken the view that, when pay is being restrained, there should also be restraint on dividends.
Lord BOYD-CARPENTER: My Lords, does the noble Baroness fully appreciate that most companies take dividend decisions some months before the dividends are actually paid? Can she, in those circumstances, explain why the Government have now got to within three weeks of the lapsing of the present powers without telling companies and the country what they intend to do?
Baroness BIRK: My Lords, I accept that some companies may be put into difficulties with their planning in the absence of guidance on what would happen on 31st July, and the Government are well aware of this. But, as the noble Lord is aware, this is tied up with other negotiations which are going on at the present time.
Lord BOYD-CARPENTER: My Lords, can the noble Baroness explain, none the less, why the Government have let this get to within three weeks, regardless, apparently, of the consequences to industry? Can she at least, give an assurance that when the announcement is made it will not be made by means of a Written Answer in the Commons on a Friday afternoon?
Baroness BIRK: My Lords, I cannot give any answers about what is going to happen in another place on a Friday afternoon or any other afternoon. So far as the delay in making a Statement is concerned, a number of factors have to be carefully considered as part of the Government's general approach to counter inflation when the present pay round comes to an end. This is not something that one can look at in isolation.
Lord BYERS: My Lords, will the noble Baroness put to her colleagues when they consider this matter, the adverse effect which the control of dividends can have on pension funds, which is becoming quite an important factor?
Baroness BIRK: Yes, my Lords, we are aware of this, but I think that noble Lords must accept that, if one is asking for pay restraint on the part of the workers, then, at the same time, one must ask for dividend restraint.
Lord BYERS: My Lords, I appreciate that; but may I ask the noble Baroness whether or not she agrees that there comes a point in time when that is not an equality? What is going to happen with the present inflation is that pensions will be much more difficult to pay if dividends are restricted.
Baroness BIRK: My Lords, we are aware of the difficulties and the problems. This is why the matter is being looked at extremely carefully to get the balance that the noble Lord has expressed.
Lord PARGITER: My Lords, can the noble Baroness say whether or not it is the fact that the major pension schemes look to capital appreciation rather than to dividends?
Baroness BIRK: Yes, my Lords, I think so.
Lord ORR-EWING: My Lords, will the noble Baroness bear in mind that there is really no correlation between the rise in earnings and the permitted rise in dividends? In the last four years, earnings have risen more than 100 per cent. and dividends have been limited to 10 per cent. on 10 per cent. on 10 per cent. Does this not further create the anomaly that the best and most prosperous firms are not able to attract extra capital and therefore expand further and export better, whereas the moderate firms are treated in exactly the same way? The longer this dividend limitation goes on, the more arthritic our capitalist society will become and the less prosperous will be our nation.
Baroness BIRK: My Lords, I must, I am afraid, repeat that, while I take note (as do the Government) of the point that the noble Lord has made, some companies have already given a public indication of what they intend to do if controls on dividends disappear. Whatever the commercial justification may he (and there is some commercial justification here) large increases in dividends could seriously affect the climate of restraint on pay; and it is impossible for the Government not to be bound to take account of this.
Lord BOYD-CARPENTER: My Lords, can the noble Baroness explain what is the position of a company which, in view of the fact that no control is known to be being continued after 31st July, has already declared an increased dividend to be paid after that date? What is to happen?
Baroness BIRK: My Lords, I am hoping that very shortly there will be a Government Statement on this matter. The noble Lord will then be as much in the light as I shall be.
Lord GLENKINGLAS: My Lords, while I have sympathy with the difficulties that the Government have got themselves into, does the noble Baroness realise that they have known that July 31st was the operative date? It appears to many of us that they are playing this until the last moment so as to make the announcement after Parliament has risen. We may be wrong; but it looks as though this is the way that the Government are playing it.
Baroness BIRK: My Lords, I think, with respect, that that is wrong. The noble Lord started off his supplementary question by referring to the difficulties the Government have got into, but I may say that the Government have managed, with the co-operation of the unions, to keep pay demands down to quite a remarkable extent. Again—and I have to keep saying the same thing—this is part of the discussions on the next round of pay policy. The Government are conscious of this very unfortunate delay and I do not think there is anything more I can say about it.
Lord HEWLETT: My Lords, will the noble Baroness not take on board that the beneficiaries of the pensions are in many cases the employees whose pay increases are being restricted; so that they are in fact achieving not what they desire but precisely the opposite of what they desire?
Baroness BIRK: My Lords, we are aware that in some cases it has this effect. This is another point that is also being taken into consideration.

NUCLEAR MATERIAL: SAFEGUARDS
2.42 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will raise at the appropriate international level the need to verify, by requiring accountability to the International Atomic Energy Authority, that States do not direct nuclear materials from power plants into weapons.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, the International Atomic Energy Agency's existing safeguards system has as its aim the detection of any diversion of fissile material from peaceful nuclear programmes. We contribute substantially to the Agency's budget for this purpose, and we have taken an active part in international discussions about ways of improving the system.
Lord BROCKWAY: Yes, my Lords, but is it not the case that the recent report of the Agency showed that the present system is inadequate to detect elicit production of nuclear bombs by the diversion of material from foreign power plants? Does it not say that of 41 States inspected, 12 had deficiencies in accounting?
Lord GORONWY-ROBERTS: My Lords, the Agency report, to which my noble friend refers, indicates that it is satisfied that the safeguarding of the facilities with which it has so far been concerned—namely, research reactors and light-water power reactors—is adequate and has not resulted in the diversion of nuclear material. The Agency has recently undertaken the safeguarding of some fabrication and reprocessing plants on which the report admits that new techniques may be required, much as improved containment and surveillance measures should be developed further. In a letter to a newspaper the Agency has said that many of the inadequacies shown up in the 1977 report have been dealt with.
Lord BROCKWAY: My Lords, may I ask the Minister whether there is a developing danger? Is it not the case that recently there has been detailed evidence of massive material sent to Israel—I am not implying doubts about the Israeli Government—by methods which were fraudulent and deceptive by the companies concerned? Are not the possibilities now of West German supplies to Brazil, and of American recycling of nuclear waste to South Africa, illustrations of this danger?
Lord GORONWY-ROBERTS: My Lords, at the time when this incident allegedly took place in 1968, the then Member States of EURATOM had not ratified the non-proliferation treaty and no agreement existed whereby the EURATOM States accepted IAEA safeguards. The current safeguards applied by both EURATOM and IAEA to all EURATOM countries would make a repitition of this alleged incident of 1968 impossible to keep quiet. It would be reported to the agencies and subsequently to the Secretary-General of the United Nations.

ERITREAN DISPUTE AND THE UNITED NATIONS
2.46 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will propose to the Security Council that the United Nations should seek an end to the war between Ethiopia and Eritrea, in view of the United Nations resolution on the constitutional relationship of the two territories.
Lord GORONWY-ROBERTS: My Lords, the Government favour a negotiated settlement to the Eritrean dispute. Any consideration of the dispute should take into account past United Nations involvement. The Government would favour recourse to the United Nations if sufficient international support were forthcoming. The Government do not, however, believe that a proposal to refer the question of Eritrea to the Security Council would receive the necessary international backing at this stage.
Lord BROCKWAY: My Lords, may I ask whether the United Nations did not declare that there should be a federation between Ethiopia and Eritrea? Is it not a fact that ever since the time of Hailé Selassié, internal autonomy has been destroyed in Eritrea? In view of the fact that three Eritrean groups are now prepared for talks, which is even backed by the Soviet Union and Cuba, would it not be a suitable opportunity for the United Nations Security Council to take some action?
Lord GORONWY-ROBERTS: My Lords, my noble friend is substantially correct about the background to this. It is a fact that in 1950 the General Assembly adopted a resolution calling for autonomy for Eritrea. For a time this was implemented by the Ethiopian Government. However, since 1962, as he has reminded us, this has been taken away and there has been a situation of tension ending in actual conflict. We are cautious about the possibility of

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maintaining that the United Nations has any continuing legal standing in the Eritrean question arising from the General Assembly resolution of 1950, although in our view any solution of the Eritrean problem would have to take into account that fact of the United Nations involvement in 1950. Certainly the fact that there may not be a legal basis continuing from that resolution for involvement would not preclude raising the matter at the Security Council if—and I repeat "if"—there were sufficient international support, and particularly support from Africa itself.
Baroness GAITSKELL: My Lords, as I have said before, is it not illusory—an illusion—to speak as if the United Nations was the seat of world government? Is it not highly dangerous to go on speaking as if the United Nations is the seat of world government? It simply diminishes the role of the United Nations, rather than strengthening it.
Lord GORONWY-ROBERTS: My Lords, it may be illusory to refer to the United Nations as a world government at the present time. It is, I suggest, constructive and hopeful to say that it ought to develop in that direction.
Lord SEGAL: My Lords, do Her Majesty's Government accept the right of the Eritreans either to independence or to some degree of autonomy, since the Eritrean resistance movement has now been engaged in fighting for its rights for something like 20 years?
Lord GORONWY-ROBERTS: My Lords, my noble friend is quite right. The Eritrean liberation movements have been agitating and indeed fighting for something like 20 years for consideration of their national rights, as they see them. There is a certain difficulty here in that it is an internal problem of a sovereign State and a member of the United Nations—that is to say, Ethiopia. Questions of autonomy and devolution are, for all States, internal questions in which external Powers should be very careful not to intervene unless there is an overwhelming necessity to do so.

FOOTPATHS AND BRIDLEWAYS
2.51 p.m.
Lord DAVIES of LEEK: 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, in view of the growing tendency to obliterate footpaths and bridleways, what steps are being taken by the Public Rights of Way Advisory Committee to maintain or re-open these traditional rights of way, and what Government grants have been approved to help finance waymarking and repair of these old rights of way.
Baroness STEDMAN: My Lords, responsibility for the maintenance and waymarking of public footpaths and bridleways lies with the local highway authority in whose area the right of way runs. These authorities also have a duty to prevent, so far as possible, their stopping up and obstruction. These functions may be delegated to district councils. The Public Rights of Way Advisory Committee to which my noble friend refers has no executive responsibilities in these respects. The Committee advises the Countryside Commission on the experimental and research work it might undertake and on such other subjects as the Commission may refer to it. However, the Countryside Commission has a policy of grant-aiding approved recreational footpaths, including their waymarking.
Lord DAVIES of LEEK: My Lords, while thanking my noble friend for that Answer, may I ask whether she is aware that in the Tenth Report of the Countryside Commission page 23 refers to the lack of funds of local authorities for carrying out waymarking and keeping of footpaths? In other words, there has been a draconic cut-back. Also, although as regards pathways one wants to reconcile the needs of agriculture with the needs of the rambler, does my noble friend not believe that more publicity should be given to the Country Code, and also that higher fines should be imposed on those who dump rubbish and litter in our countryside, small as it is now becoming?
Baroness STEDMAN: My Lords, I accept that money is not as plentiful as it might be in very many fields in local government, including conservation of our countryside, but there is little doubt that local authorities are aware of their responsibilities towards maintaining and signposting footpaths in the countryside in general. The Department of the Environment is not content with the progress of all of them, but it would not be right in our present economic situation, which poses very difficult questions and decisions for local authorities as to how they shall allocate their resources, to over-emphasise this particular aspect of their work. What I should like to do at this time is to pay tribute to the very valuable help that many local authorities have had from voluntary bodies, Which have taken over the waymarking and maintenance of public paths. We all regret the dumping of rubbish on our footpaths, in our ditches and what-have-you; and the maintenance is a matter for the highway authorities. It is also a matter for more education and more publicity. But all those things cost money, which at the moment is not in over-plentiful supply.
Lord SANDYS: My Lords, while recognising the responsibilities of local authorities in the matter of waymarking, will the noble Baroness draw the attention of the Countryside Commission to the fact that money and time are very well spent on making recommendations for the amalgamation of footpaths as well as for providing waymarking?
Baroness STEDMAN: My Lords, I am sure that local authorities and the Countryside Commission are aware of that.
Lord MOLSON: My Lords, may I ask the Government whether they are aware that the Countryside Commission produced a policy statement called Bridlenays for Recreation, and that it is in the process of producing another booklet on the subject of footpaths for recreation? Is it not the case that some £40,000 was paid out by the Countryside Commission last year in order to help with the preservation of these footpaths?
Baroness STEDMAN: Yes, my Lords; the Countryside Commission has only
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limited amounts of money, but it has given grants of money and has done a very great deal in order to safeguard our footpaths.
Lord DAVIES of LEEK: My Lords, will my noble friend believe me when I say that I do not wish to denigrate the Countryside Commission, which has spent £30 per kilometre on keeping long-distance paths open? Nevertheless, may I say to her that this matter is something to be taken note of and something which is worthy of a higher amount of expenditure so as to cover the recreation of people from industrial areas as well as of those from country areas?
Baroness STEDMAN: My Lords, I have already accepted that there is a need for more money to be spent, but at the moment the money is not there. The Countryside Commission considers schemes which involve initial costs totalling £1,000 or more, and it does give grants towards them. Voluntary organisations have done a lot of work in this matter and local authorities, where they have the will and where they are willing to allocate resources, have also done a lot of work.
Lord HAWKE: My Lords, is not one of the great problems, particularly in clay country during the winter, that the footpaths are almost obliterated by galloping ponies so that they become virtually impassable because the pony-riders turn footpaths into bridleways?
Baroness STEDMAN: My Lords, that is another question, which raises problems about bridleways and other types of user apart from ramblers.

GOVERNMENT STATEMENTS
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, my noble friend Lord Goronwy-Roberts will repeat a Statement on the European Council meeting at Bremen after 3.30 this afternoon. He will then repeat a Statement on the Shcharansky and Ginsburg trials.
KINGS COLLEGE LONDON BILL
Read 3a, and passed, and returned to the Commons with the Amendments.
GREATER LONDON COUNCIL (GENERAL POWERS) BILL
Read 3a, and passed, and returned to the Commons with the Amendments.

BUSINESS OF THE HOUSE
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, on behalf of my noble friend the Lord Privy Seal, I beg to move the Motion standing in his name on the Order Paper.
Moved, That Standing Order No. 43 (No two stages of a Bill to be taken on one day) be suspended for the purpose of taking the Representation of the People Bill through its remaining stages this day. —(Baroness Llewelyn-Davies of Hastoe.)
On Question, Motion agreed to.

EMPLOYMENT PROTECTION (CONSOLIDATION) BILL [H.L.]
2.58 p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I beg to move that this Bill be now read a second time. This is an up-dated version of the Bill which passed through your Lordships' House last Session and was then overtaken by the Amendments made to the legislation being consolidated, so that it could not progress further. These Amendments have now been embodied in the present Bill. It is pure consolidation and makes no changes in the existing law. If given a Second Reading now, it will be referred to the Joint Committee on Consolidation Bills in the normal way. I beg to move.
Moved, That the Bill be now read 2a. —(The Lord Chancellor.)
On Question, Bill read 2a, and referred to the Joint Committee on Consolidation Bills.

LOCAL GOVERNMENT BILL
(formerly Local Government Act 1974 (Amendment) Bill)
Read 3a, with the Amendments, and passed, and returned to the Commons.

RATING (DISABLED PERSONS) BILL
3 p.m.
Lord HUGHES: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a. —(Lord Hughes.)
On Question, Bill read 3a, with the Amendments.
Schedule 1 [Amount of rebate under section 1]:
Lord HUGHES Lord HUGHES moved Amendments Nos. 1 and 2:
Page 11, line 15, after ("purposes") insert ("the rating authority may, if they think fit, reduce")
Page 11, line 16, leave out ("may be proportionately reduced") and insert ("by the proportionate amount or any lesser amount").
The noble Lord said: My Lords, Amendments Nos. 1 and 2 are technical Amendments arising from the last minute change which I made to one of my Amendments at Report stage. At Report stage, we amended paragraph 7(2) to give the applicant for a rebate on a garage or parking space the right to choose to have the rebate calculated on the actual rateable value of the garage, instead of the £25 tariff which would otherwise apply. Paragraph 7(3) then provided that a rebate calculated in this way may be proportionately reduced if the garage in question is used for purposes other than housing a disabled person's car.
On further consideration, it seems better that the wording of this sub-paragraph should correspond exactly to the similar provision in paragraph 10, which also gives a local authority discretion to reduce the rebate in certain circumstances. Amendments Nos. 1 and 2, which I seek permission to move en bloc, bring the wording into line and ensure that a local authority has complete discretion not only as to whether to reduce the rebate on a garage used for other purposes, but also as to the amount of any such reduction. My Lords, I beg to move.
Lord SANDYS: My Lords, while recognising the proposal in these Amendments, I should like to ask the noble Lord, Lord Hughes, whether their effect

1309
will be to cast a greater degree of responsibility on a local authority to view this matter with not quite so much benefit to the disabled person. This is a problem which we discussed at considerable length at the Report stage. In view of the fact that there have been a number of cases in Scotland where a disabled person's garage was occupied by equipment other than the disabled person's car, I am wondering whether a local authority would be inclined to take a view which was out of line with the general purport of this Bill. If we permit total discretion to a local authority in this regard, I hope that there will be safeguards and I am wondering what they will be. Your Lordships do not have the benefit this afternoon of the views of the noble Baroness, Lady Masham of Ilton, who has been so concerned with this clause, and I wonder whether the noble Lord, Lord Hughes, can tell us whether there is a safeguard.
Lord HUGHES: My Lords, I think it is perfectly clear that the effect of these Amendments is to give greater discretion to a local authority than it otherwise might have had. As the Bill originally stood, if there was use of the premises other than just for housing a disabled person's car, there was a mandatory requirement that the local authority would make a proportionate reduction of the amount of rebate. At the last minute, the noble Lord, Lord Sandys, suggested to me that the word "may" should be substituted for the word "shall", and the effect was that it could have been interpreted as meaning that a local authority had two things that it could do: it could either give total relief or make a proportionate reduction.
The effect of these Amendments is that a local authority does not have to make a choice between those two extremes, but it may make a lesser reduction of rebate than a proportionate one. It opens up the way to where a local authority may, for example, decide to make only a nominal alteration. So that the general effect of this wider discretion which local authorities will have must be for the benefit of the disabled person.
On Question, Amendments agreed to.
3.5 p.m.
Lord HUGHES Lord HUGHES moved Amendment No. 3:
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Page 11, line 36, leave out ("or 5") and insert (", 5 or 7(2)").
The noble Lord said: My Lords, this is another technical Amendment, consequential upon the ones made at Report stage. At Report stage, we amended what is now paragraph 7 of Schedule 1 to allow the applicant for a rebate to choose to have the rebate based on the rateable value of his garage, rather than on the £25 tariff. If he makes that choice, it will be necessary, in some cases, for the valuation officer to assess the rateable value of the garage, in accordance with the procedure laid down in paragraph 11 of the Schedule. This Amendment accordingly adds the necessary cross-reference in paragraph 11.
At Report stage, I pointed out how many of the Amendments which improve the Bill have been made possible by the co-operation of my noble friend Lady Stedman, and the noble Lord, Lord Sandys, joined me in thanking her and her Department for the helpful way in which they had regarded this Bill. Having reached the final Amendment to the Bill, I think it would be appropriate if I pointed out that the need for this Amendment was spotted by Mr. Vandyk, who has kept in close touch with the progress of the Bill since it was introduced. He has suggested several of the changes and improvements which we have made during its passage. It would be only right, and in accordance with the way in which your Lordships deal with matters of this kind, if I took this opportunity of publicly thanking him and congratulating him on his efforts in the matter. As noble Lords know, it was the case which he originally brought which drew attention to the unsatisfactory state of the existing law. He has been active, along with many other disabled people and their associations, in pressing for this new legislation and in assisting us in the preparation of the Amendment. I believe that this new Bill will put this rate relief on a much more satisfactory basis, and I hope that all who have been concerned with its introduction will be satisfied with the outcome. My Lords, I beg to move.
Lord SANDYS: My Lords, I am most grateful to the noble Lord, Lord Hughes, for introducing this further Amendment, because it improves the drafting. He has referred to what we said earlier on Report,

1311
so that there is no need for me to echo what was said at that time. I should like to thank the noble Lord, Lord Hughes, for his most cordial help and co-operation, and I should especially like to thank all those who have assisted in the better drafting of the Bill. The noble Baroness, Lady Stedman, has been particularly receptive, so far as possible, in regard to all the different outside interests. But, of course, no discussion at this stage is complete without further reference to Mr. Neville Vandyk, whose interest has been for a very wide number of disabled people. The drafting of this Bill has been exceptionally difficult, but what has been achieved is quite significant.
Viscount BARRINGTON: My Lords, before the Question is put, I do not know whether I am entitled to speak, not having spoken in any of the earlier debates, although I have followed them with great interest. But from a personal point of view—I cannot do it officially from the Liberal Benches—I should like to join in the congratulations to Mr. Vandyk, who sent me an account of the judgments in the House of Lords. I believe that he has done an immense amount to get this Bill improved. Whether it is improved as much as some disabled people would like is open to doubt, but I should like to join in the congratulations to him, and also to the noble Lord, Lord Hughes, on the co-operative way in which he has dealt with the Bill.
On Question, Amendment agreed to.
3.9 p.m.
Lord HUGHES: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.— (Lord Hughes.)
3.10 p.m.
Lord CAMPBELL of CROY: My Lords, I should just like to take a few seconds of your Lordships' time, because you will remember that for about two years I was putting questions on the state of the law following the appeal in the Vandyk case, which came to your Lordships sitting judicially, when the decision of the Appeal Court was reversed. However, they also pointed out how unsatisfactory was the state of the law.
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I seek now to explain that I should have taken part in the proceedings on the Bill if I had not been very fully occupied with other matters, especially the Scotland Bill. However, it is a matter of great gratification to me that so much agreement upon the Bill has been reached. I should like to congratulate all who have worked hard upon it, in particular the noble Lord, Lord Hughes, who has piloted it through this House. For my part, I passed the continuing representations and correspondence which came to me to my noble friend Lord Sandys who has been handling the matter from these Benches. I should also like to thank the noble Baroness, Lady Stedman, who over a period of more than two years now has been in correspondence with me about the fact that a Bill was going to be presented.
Baroness STEDMAN: My Lords, it is a long time since we started discussion of the Vandyk case and the other one. From the Government Benches, I am very happy to welcome the Bill and to say how much we appreciate the way in which my noble friend has handled it and the help we have had from all sides in getting it on to the Statute Book.
On Question, Bill passed and returned to the Commons.

INNER URBAN AREAS BILL
3.12 p.m.
Read 3a, with the Amendments.
Clause 4 [Declaration of and changes in industrial improvement areas]:
Lord DAVIES of LEEK Lord DAVIES of LEEK moved Amendments Nos. 1 to 3:
Page 4, line 20, leave out ("industrial").
Page 4, line 21, leave out ("industrial").
Clause 5, page 4, line 26, leave out ("industrial").
The noble Lord said: My Lords, I beg to move Amendments Nos. 1, 2 and 3, and, with permission, to discuss also Amendments Nos. 7 to 13. These Amendments have exactly the same intention as those moved at Report stage by my noble friend Lord Plant. I am advised that the Amendments represent a slightly better method of providing for commercial improvement areas. For example, they

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provide for mixed commercial and industrial areas. Noble Lords will recall that at the earlier stage I spoke in favour of the Amendments moved by my noble friend Lord Plant. As I then saw no move on the part of the Government to take up the issue, I put down these further Amendments to ensure that the matter does not go by default.
Briefly, there are four reasons for having commercial as well as industrial improvement areas. First, not all commercial employment is directly related to the needs of the immediate area and thus bound to decline with the reduction in population. There is less scope to attract office employment to inner areas. This was the aim of my noble friend Lord Plant and I when we initiated the change at Report stage.
Secondly, even if, as is often asserted, office employment is not the most suitable employment for inner area residents who have become unemployed because of the decline in manufacturing, surely some new employment is better than none. Thirdly, commerce should be encouraged in smaller centres surrounding the main centre of each conurbation. Finally, the belief that all commercial property development in inner areas will be adequately covered by the private sector is mistaken. There is a need to improve confidence in some of the smaller, rundown commercial centres, and that will be done only by some measure such as this.
I hope, therefore, that the noble Baroness will now be able to say that she can accept these Amendments which were discussed on the last occasion. Since we discussed the proposal at some length on that occasion, when there was general agreement that these Amendments would be useful, I hope that this brief speech of mine will be enough to convince the noble Baroness that the Amendments are worthy of recognition by the Government. I beg to move.
Baroness BIRK: My Lords, the House will be grateful to my noble friend for raising again the subject of commercial improvement areas. When we last discussed the subject I agreed to take away the issues and discuss them with my ministerial colleagues. Consideration of
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them is still continuing. Therefore I am unable today to give our final views to the House. The proposal was widely supported here when it was last raised, but noble Lords will recall that I was not completely convinced that the proposed change was necessary.
In the first place, I do not think that there is such a need for the public sector to take action to revitalise commercial areas as there is for such action to be taken in the older industrial areas. The ordinary property market seems to be better able to deal with commercial property. Secondly, the main environmental eyesores in inner city areas are industrial areas rather than office centres, so the main priority ought to be the improvement of those industrial areas. My worry is certainly not one of principle but one of priorities.
Third, as with the other powers in this Bill, we need to keep in mind the effect that granting these powers in the non-assisted areas will have on the effectiveness of the various regional incentive schemes. It could be that the declaration of commercial improvement areas in places outside the assisted areas would provide a counter-attraction to offices and service industries which might otherwise have moved to the assisted areas. It is extremely difficult to draw an exact line between incentives that will significantly undermine regional incentives and those which are acceptable.
Since the Report stage, the Government have had little time to take a view of the likely effect. In view of this, and since the Commons have not yet had an opportunity to discuss the Amendments relating to commercial improvement areas which were put down at Report stage by my noble friends Lord Davies of Leek and Lord Plant, I think that it would be advisable if the Amendments were to be included in the Bill when it is returned to the other place so that the Commons may have an opportunity to discuss them. It would also give an opportunity to my colleagues to make up their collective minds about them. Therefore, despite certain misgivings, I am prepared at this stage to allow the Amendments to be included in the Bill, although without making any necessary commitment to them on behalf of the Government.
Lord HAWKE: My Lords, when discussions take place I hope that the noble Baroness will not forget the very real problem which exists when urban areas are being redeveloped in providing very small workshops and factories for trades which could employ up to perhaps half a dozen craftsmen. Only too often when inner areas are redeveloped, rates and rents go up so high that these people have to be banished into completely different areas where nobody can get hold of them. That applies also to many types of small shops. Music shops, for instance, simply cannot pay the rates and taxes which are prevalent in redeveloped urban areas. Those problems ought to be considered.
Lord DERWENT: My Lords, further to what my noble friend has just said, many years ago now I raised the question of redevelopment. We have fallen down so often on the provision of foodshops. Sometimes a big store is set up, and there is no choice. People like butchers cannot afford the rents asked for, unless those rents are controlled by local authorities in some way.
Baroness YOUNG: My Lords, may I welcome what the noble Baroness has said. When the noble Lord, Lord Plant, moved his series of Amendments during the Report stage, I felt that this would be a very sensible inclusion. As I understood the position, the reason that the Government had doubts about it was because there was not any increase in the money available and in effect the resources would be spread more thinly.
I support the inclusion of these Amendments because it seems to me that they would provide a measure of alternative development within inner cities and a more flexible approach which would fall very much in line with what my noble friends Lord Hawke and Lord Derwent have suggested. I think this would be helpful for the redevelopment and revitalisation of inner cities. I am not quite sure that I understand the procedure when the Bill reaches another place. I hope very much, despite what the noble Baroness has said, that if the Amendments are included the Government will support them in another place and not seek to support anybody who might—although I do not anticipate this at all—seek to take them out, which I think would leave
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us in your Lordships' House in a difficult position. They certainly have my support and I believe that of my colleagues.
On Question, Amendments agreed to.
Baroness BIRK Baroness BIRK moved Amendment No. 4:
Page 4, line 34, at end insert—
("( ) the clearance or levelling of land;").
The noble Baroness said: My Lords, the Government are bringing forward this Amendment to deal with a point raised by the noble Lord, Lord Evans. He asked whether assistance could be given to help with the clearance and tidying of old railway land such as the sidings often found in industrial areas. On close examination we found that this subsection would not have covered such works. Therefore, this Amendment is designed to ensure that not only old railway land but also other vacant sites can be cleared. The new items to be inserted will provide for works which fall short of the full landscaping provided for by subsection (5)(b). I hope the noble Lord, Lord Evans, is now happy that we have dealt adequately with all the points he made at earlier stages.
Lord EVANS of CLAUGHTON: My Lords, may I say very briefly that I am very grateful to the noble Baroness, Lady Birk, for the consideration that she and her Department have given to this matter, and for the discussions that they have very kindly had with me about it. I am completely satisfied that the Amendment she proposes is a much better Amendment than the one I sought to insert previously to make sure that railway sidings were included. Some of the worst unsightliness in our inner urban areas comes from disused or semi-used or derelict railway sidings. I think my concern that they were not included has been justified. I am very grateful indeed to the Government and would like to thank them for inserting this additional paragraph. I hope it will be supported here and in another place.
Lord SANDFORD: My Lords, may I add my thanks to the noble Baroness. Although perhaps it was not the original intention of the Amendment, it also goes a long way to meet the point I was making in moving Amendments to Clause 6 to cover the preparation and

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improvement of sites for proposed new and converted buildings. It does not do it quite as expressly as that, but the preparation and levelling of sites goes a long way towards it. Clause 5 also makes provision for loans as well as grants. I am very grateful to the noble Baroness.
On Question, Amendment agreed to.
Baroness BIRK Baroness BIRK moved Amendments Nos. 5 and 6:
Page 4, line 37, after ("cleaning") insert ("painting, repair").
Page 4, line 37, leave out line 41.
The noble Baroness said: My Lords, I beg to move Amendment No. 5 and I think it would be for the convenience of the House if I also moved Amendment No. 6. On further consideration we accept the principle behind Lord Sand-ford's Amendment which was forcefully put at Report stage both by him and by other noble Lords. That is that in cleaning up a building to improve the environment it may well be necessary to repair and paint it also. It was again a very difficult line of division between different operations. The Amendments I am moving merely seek to improve the drafting by placing the cleaning, repair and painting together, and ensuring that they all apply to both buildings and structures. This has the same effect as the noble Lord's original Amendment.
I should, however, sound one note of caution. We are still very concerned that authorities should not give help to firms for works that are routine maintenance and part of every firm's normal responsibilities. All the work for which aid can be given must be for the benefit of the area, not just for the benefit of an individual firm. We will certainly emphasise this point in the guidance we give to local authorities. Subject to that caveat, we are happy to accept the spirit of the Amendment which was passed at Report stage and these Amendments seek only to clarify some points of drafting. I beg to move.
Lord SANDFORD: My Lords, I am grateful to the noble Baroness for moving these Amendments, which certainly do what we wanted to see achieved, and do it very elegently. This also makes it
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possible, where appropriate, for the buildings and structures to be repaired and painted on the inside as well as on the outside. I am most grateful to the noble Baroness.
On Question, Amendments agreed to.
Clause 6 [Grants for converting or improving buildings]:
Lord DAVIES of LEEK Lord DAVIES of LEEK moved Amendments Nos. 7 and 8:
Page 5, line 7, leave out ("industrial").
Clause 18, page 10, line 28, leave out ("industrial").
On Question, Amendments agreed to.
Schedule [Industrial improvement areas]:
Lord DAVIES of LEEK Lord DAVIES of LEEK moved Amendment No. 9:
Page 11, line 5, leave out from ("which") to ("could") in line 7 and insert—
("(a) is predominantly an industrial area, a commercial area or an industrial and commercial area; or
(b) if developed in accordance with the development plan, would be predominantly such an area.").
On Question, Amendment agreed to.
Lord DAVIES of LEEK Lord DAVIES of LEEK moved Amendments Nos. 10–13:
Page 11, line 10, leave out ("industrial").
Page 11, line 28, leave out ("industrial").
Page 11, line 31, leave out ("industrial").
Page 12, line 4, leave out ("industrial").
On Question, Amendments agreed to.
Baroness BIRK: My Lords, I beg to move that the Bill do now pass. We have had several useful debates on this Bill and I think we have made a number of improvements in the provisions since they were brought to us from another place. The Bill is only a small part of our inner city policy and it has been frequently described as a modest measure. Nevertheless, we believe it to be a useful one, and I hope that the selected authorities will make good use of the new powers to revive industry and commerce in their areas. I should like to end by thanking all noble Lords who have contributed to the various stages of the Bill and helped to bring it to a speedy conclusion.
Moved, That the Bill do now pass.—(Baroness Birk.)
Baroness YOUNG: My Lords, I, too, should like to say that we have achieved some very useful Amendments. I should like to support my noble friend Lord Sandford and to say how grateful we are to the Government for including these Amendments, which we feel will make a great difference to the appearance of inner industrial areas. We hope very much that the Government will keep in the Bill in another place what we regard as an important Amendment in relation to the voluntary organisations. Although they did not fully support this at Report stage, they did not seek to vote against the Amendments, and we hope, therefore, that they will agree to them. I should like to thank my noble friends who have helped on this Bill and to say that I regard it as a small but useful measure.
Lord EVANS of CLAUGHTON: My Lords, may I say very briefly from these Benches that we very much support the Bill as it now stands, improved, we believe, during its passage through this House and indeed through another place. There are certain disappointments, but life is full of those. We would have liked to see guarantees included, as well as one or two other matters; but, on the whole, on the basis of accepting half a loaf or perhaps even three-quarters of a loaf as better than no bread, which again we on these Benches have become used to in the last few months, I think this Bill should be warmly welcomed. All I hope is that the amity which has been shown here on all sides will be repeated at local authority level, and that the Bill will really be able to do something, through the co-operation of the various agencies at local government and voluntary level, actually to carry into effect the desires that the Bill expresses.
On Question, Bill passed, and returned to the Commons.

CONSUMER SAFETY BILL
3.30 p.m.
Read 3a, with the Amendment.
Lord AIREDALE Lord AIREDALE moved the Amendment:
Page 10, line 36, leave out ("if any").
The noble Lord said: My Lords, I have to apologise for a misprint. The actual words in line 36 are "if and", not "if any" and it is those words which I seek to leave out. It is a purely drafting Amendment. I beg to move.
Lord MOTTISTONE: My Lords, I am happy to accept this Amendment. The noble Lord, Lord Airedale, made a very convincing point in column 109 at Report stage on 5th July on the precedent for this, and close examination of the precedent in the Consumer Credit Bill of 1974 in which the Government accepted an identical Amendment convinced me that this one deserved similar treatment.
On Question, Amendment agreed to.
Lord MOTTISTONE: My Lords, I beg to move that the Bill do now pass.
Moved, That the Bill do now pass—(Lord Mottistone.)
The LORD CHANCELLOR: The Question is that this Bill do now pass.
Lord TREFGARNE: My Lords, I leapt to my feet as swiftly as I could because there is a point that I should like to raise before this Bill passes and I should like to ask the noble Lord, Lord Wallace of Coslany, whether he can help me on this. Your Lordships will recall that at an earlier stage of the Bill an Amendment was included in the Long Title, and perhaps I should read the Long Title which consists of only two lines:
"An Act to make further provision with respect to the safety of consumers and others".
The words "and others" were added at an earlier stage and have given rise to some concern in certain quarters that the powers which are now apparently available to health and safety inspectors and others arising out of the Long Title might be wider than were originally intended. Can the noble Lord give me an assurance that the powers which seem to be included in this Bill by virtue of the Long Title are not perhaps quite so onerous as some have feared? I hope the noble Lord will be able to put my mind at rest on that point.
Lord WALLACE of COSLANY: My Lords, I should like first to congratulate the noble Lord, Lord Trefgarne, on his

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most remarkable athletic leap to the Dispatch Box which surely should be entered in the Guinness Book of Records. I should like to congratulate the noble Lord, Lord Mottistone, on his able stewardship of the Bill during its passage through your Lordships' House. This Bill has important implications for manufacturers and importers as well as providing the means for the Government to take much more positive action in relation to hazardous goods than has existed before. The Bill is notable for the support it has enjoyed from Members of all Parties: the Amendments which have been introduced in your Lordships' House reflect the careful consideration which the Bill has received and the Bill leaves this House substantially the better for it.
I should also like to thank the noble Lord, Lord Lyell, who is not able to be present today but who has certainly played his part in the Bill although unfortunately he could not be present at all stages, for reasons of which we were well aware. I also thank the noble Lord, Lord Trefgarne. The noble Lord, Lord Airedale, has made his contribution. He has given us one or two headaches but he has proved that he is most persistent and now rejoices in something of a victory.
There is one small matter that I should like to clear up. It relates to the Amendment to the Long Title which added the words "and others". The Amendment was consequential on the acceptance of an Amendment moved by the noble Lord, Lord Mottistone, in Committee, which enables the Secretary of State, when contemplating safety regulations for goods containing radioactive substances, to take into account not only the degree of hazard which they may present to the users but also the possible consequences of radiation to other persons, primarily by the addition of the overall population dose. Doubts have been expressed in some quarters about the effect of widening the scope of the Bill so that safety regulations might he made under it which would bite not merely on consumers but, for example, on employees as employees rather than as consumers. Obviously, there may sometimes be an overlap where safety regulations cover goods which are on open sale to consumers but may also be used in the work situation. The consultation requirement
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in Clause 1(4) takes specific account of this eventuality whereby, in the case of proposed safety regulations relating to goods suitable for use at work, the Health and Safety Commission must first be consulted.
I can give an assurance, however, that there is absolutely no intention to alter the administrative powers of Departments as a result of this legislation so that, for example, the Department of Prices and Consumer Protection might make safety regulations for employees as employees. There is already adequate legislation in this respect in the Health and Safety at Work Etc. Act 1974 and the responsibility for ensuring the safety of employees will remain, as at present, with the Health and Safety Commission. Every endeavour will be made to ensure that, where there is any overlap such as I have mentioned, regulations made under the Health and Safety at Work Act and under this Bill when enacted will be harmonised. Otherwise the position would lead to confusion and would be illogical. I hope this assurance will remove the doubts to which I have referred.
I should like to say one further word on this very important Bill. The number of people injured and killed each year by accidents in the home is about the same as the number injured and killed on the roads. Some 7,000 people die and more than a million receive hospital treatment or treatment from their doctor. More than 30 per cent. of these are children under five years of age. I do not suggest that this Bill will prevent those accidents. No amount of legislation can prevent the human failings, illness and physical frailty which account for the bulk of the accidents. But the Bill will go a long way towards enabling the Government to act in relation to identified hazards in goods which might be called preventable accidents and, in consultation with the standard-making bodies, to assist in formulating standards of safety practices which, where necessary or desirable, can be made mandatory by their incorporation in safety regulations much more flexibly than was possible previously.
This Bill, in conjunction with the promotion of publicity and education on safety matters and the collection of information and promotion of research into the causes of accidents, all of which matters are interrelated and none of

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which is an answer on its own to accidents in the home, should contribute materially to the safety of consumers and, if the Bill results in some improvement in the accident statistics, as I believe it will, then it will be particularly valuable. The Government wholeheartedly support this Bill, as improved during its passage through your Lordships' House and I certainly commend it to your Lordships today.
Lord AIREDALE: My Lords, I should like to support what the noble Lord, Lord Wallace of Coslany, has said about the able stewardship of the noble Lord, Lord Mottistone. This Private Member's Bill is a long and intricate Bill and the noble Lord, Lord Mottistone, has had to grapple not only with the intricacies of the Bill but also with the intricacies of the quite extraordinary Parliamentary procedures which afflict us during the month of July. I am not about to make an attack upon any of the noble Lords who have to navigate and work the "usual channels", but I think that it ought briefly to be stated that here is a Bill which affects absolutely everybody. The safety of goods which one buys in the shops must affect everybody. It is a Bill in which the Government were keenly interested. I think I can say that confidently because the Government themselves moved 20 Amendments to the Bill during the Committee and Report stages and the noble Lord, Lord Mottistone, with apparent Government approval, moved a further 17 Amendments, making a total of 37 Amendments.
The background against which that work was done was as follows. The Committee stage of the Bill came on last Thursday, 29th June, at 7.53 in the evening. It lasted for 28 minutes and at 8.21 p.m. the House was resumed for what was considered to be more important business. Quite unexpectedly, we had to return to the Committee stage of the Bill the next day. Believe it or not, almost exactly the same thing happened on Report. The Report stage began at 7.43 in the evening on 5th July. It lasted for 25 minutes. It was then adjourned, unexpectedly, for what was considered to be other and more important business and the Report stage had to be concluded the next day. I think that one is entitled to say that Parliament cannot give its fullest and most careful attention to legislation affecting everybody under conditions of that kind.
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As regards the Bill itself, let me say at the outset that it contains one blemish. Having referred to this matter at length both in Committee and on Report I shall certainly not go into the arguments again. However, I shall state the blemish baldly, simply because I believe that this is only one in a series of Consumer Protection Bills and having got something wrong this time we must be careful not to make the same mistake again. Baldly stated, the situation is as follows. The Bill purports to give the enforcement officers of local authorities power to enter a trader's warehouse or other parts of his premises to which the public is not normally admitted, purely for the purpose of carrying out a routine inspection without there being any suspicion that anything is wrong in the warehouse. That may be right, but the fact is that the Bill, having stated that purported power, fails to provide a sanction and if the trader were to turn the officer away, refusing him admission, there is no sanction whereby the officer can obtain admittance to the warehouse.
That may tend to bring the officer into disrepute and one does not want that to occur. So, the next time round, we must surely ask ourselves: Do we really want to authorise entry into warehouses for purely routine inspections? That must be an open question. However, if we decide in the affirmative, that routine inspections are to be permitted, then we must provide a sanction so that the officer cannot be turned away by a simple refusal on the part of a trader to admit him to the premises. That is the blemish that we must cure the next time round.
I do not want to end upon a sour note. The Bill must be worthwhile. Nowadays shoppers have to buy sophisticated goods the safety of which they cannot judge for themselves. I am sure that we have done some good. If we have introduced 37 Amendments to the Bill this House must have done it some good, and I wish it well.
Lord MOTTISTONE: My Lords, it remains for me very briefly to say "Thank you" not only to the noble Lords whom Lord Wallace of Coslany thanked—namely, my two colleagues on the Front Bench who have helped me from time to time in different ways—but also to the noble Lord, Lord Wallace, himself for

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sharing part of the burden of Amendments which have come to us really from another place. I should also like to thank the noble and learned Lord who sits on the Woolsack, who did his best to help me the other evening over what the noble Lord, Lord Airedale, called "the blemish". I also wish to thank the noble Lord, Lord Darling of Hillsborough, who I do not think is in the Chamber today but who was of great assistance. Finally, I should like to thank the noble Lord, Lord Airedale, because even if I disagree with him, he has at least made sure that we considered the Bill very thoroughly in this place, perhaps as thoroughly as it was considered in the other place.
On Question, Bill passed, and returned to the Commons.

EUROPEAN COUNCIL MEETING (BREMEN)
3.45 p.m.
Lord GORONWY-ROBERTS: My Lords, with permission I shall now repeat a Statement being made in another place by my right honourable friend the Prime Minister. The Statement is as follows:
"I should like, with permission, to report to the House on the meeting of the European Council in Bremen which I attended with my right honourable friend the Foreign and Commonwealth Secretary on 6th and 7th July.
"We were informed by the President of the Commission that the expected rate of growth in the Community countries this year on present policies would be lower than expected, and we agreed that increased growth is a crucial objective to improve employment prospects. As regards measures to combat youth unemployment, we called for decisions within the framework of the European Social Fund to come into force on 1st January 1979. All Member States will take necessary measures to increase growth according to their own individual circumstances. We agreed that countries with smaller inflation and balance of payments problems will do more to increase domestic demand.
"We agreed that a zone of monetary stability in Europe was a highly desirable
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objective, as part of the concerted international action needed for economic recovery. The German and French Governments put forward for consideration a scheme for a European monetary system. A number of Heads of Government, including myself, wished to see the details fully worked out before entering into any commitment by our respective Governments. We therefore agreed that Finance Ministers should formulate guidelines for a possible scheme taking as a starting point, at their meeting on 24th July, the Franco-German proposals. Officials would subsequently elaborate the necessary provisions by 31st October, and the final scheme would be in front of the meeting of the European Council on 4th and 5th December for decision and commitment. This agreed timetable will permit the fuller preparation and consideration which is essential for a durable scheme. We can thus hope to avoid the errors of 1972 when the previous Government joined a similar scheme on 1st May, but were forced to withdraw only seven weeks later, on 23rd June. However, the outlines of the Franco-German proposal contain some new features and the Government will play their full part in the forthcoming studies.
"The Government have taken the view throughout these discussions that monetary arrangements are not enough by themselves to ensure a zone of monetary stability. Any new system must be one which will last and will take full account of the economic, as well as monetary, interests of each Member of the Community. Therefore, in company with others, I pressed for parallel studies to be made of the action that is necessary to ensure a greater convergence in the economies of the Member countries, especially in such matters as the commitments to growth and transfers of real resources. It was agreed to carry out such studies. It will be necessary to judge how far all these matters have been satisfactorily arranged when we are called upon to take a final decision on such new proposals as the Finance Council may put forward.
"There was a related discussion arising out of the need for a better use of resources in supporting Mediterranean agriculture. This led to an

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extensive discussion of the Common Agricultural Policy as a whole which brought out the dissatisfaction felt by a number of Member Governments with the present scale of agricultural expenditure and with the cost of financing surplus production. This was the most thorough and frank discussion of the defects of the CAP in which I have participated in the Community, and it revealed a great deal of support for our wish to see a more balanced distribution of the use of Community resources as a whole. The Commission was asked to come back with proposals to remedy this at the next European Council.
"As regards Energy, the Council adopted objectives for 1985 calling for the reduction of the Community's dependence on imported energy to 50 per cent. of its total requirements including oil, and emphasised that other industrial countries should set themselves similar objectives.
"The Council expressed its readiness to make progress with the developing countries on such matters as trade, commodity support, stabilisation of export earnings and assistance.
"The Council discussed the situation in the Middle East and Lebanon and in Africa. It regretted the lack of progress towards a settlement in the Middle East, and reaffirmed the principles set out in the Declaration issued by the Council in London on 29th June last year. The Council agreed on the necessity for early and peaceful independence for Namibia and Zimbabwe on the basis of negotiated and internationally-acceptable solutions, and expressed support for the efforts which Britain is making with others to this end.
"This was a constructive meeting in which there was some hard talking because we were getting to grips with important problems. If, as a result, some new solutions can be agreed on the convergence of our economies, on a zone of monetary stability and on the transfer of resources inside the Community, including a better use of resources in the CAP, it could turn out to have been an historic occasion."
My Lords, that concludes the Statement.
3.51 p.m.
Lord SOAMES: My Lords, I wonder whether the noble Lord would be kind enough to answer a few questions on the Statement. First, will he say what the difference is between the concept of the Franco-German proposals, on the one hand, and what the Prime Minister had in mind, on the other hand, when he made abundantly clear recently his desire to see Europe as an area of monetary stability? In asking these questions I refer, of course, not to the detail but to the overall concept of what is proposed.
Secondly, is the noble Lord aware that we should like to see this imaginative proposal studied in a positive manner? Our hope would be that the decision of Her Majesty's Government, if it be taken during the course of the next month or two, would not be influenced by those within their Party who are opposed to all monetary disciplines, be they imposed either from within or by external agreements. Finally, will the noble Lord agree that the postponement by the European Council of the final decision on this matter until December seems to us to be most prudent for good internal political reasons?
Lord BANKS: My Lords, I should like to join in thanking the noble Lord for repeating the Statement made by the Prime Minister in another place. We on these Benches certainly warmly welcome the progress made at the Bremen meeting towards currency stabilisation and towards the establishment of a parallel European currency. We believe this to be very important indeed, and in fact we think that the conference could turn out to be an historic occasion, as the Statement suggests.
However, we regret that the British Government appear to have been somewhat reluctant participants, according at any rate to all that we read in the Press. The timetable for consideration of the plan is given in the Statement, but I do not think that there is any indication as to when the scheme for currency stabilisation might come into effect. I wonder whether the noble Lord can give us any idea as to when that might be? The more permanent and the less experimental the arrangements for currency stabilisation prove to be, the more they will be likely

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to succeed. There will certainly have to be a transfer of resources; that is important, and Her Majesty's Government are right to lay stress on it. Nevertheless, I hope that their attitude between now and December will be positive and constructive in putting forward these different considerations relating to this remarkable and exciting new development.
3.54 p.m.
Lord GORONWY- ROBERTS: My Lords, I can immediately respond to the central point made by the noble Lord, Lord Banks, because it is one that was made by the noble Lord, Lord Soames. Our study will be as constructive and as helpful as we can make it.
The timetable, which both noble Lords mentioned, is as set out in the Statement which I have repeated. It is necessary that a complicated and very important movement forward, in the interests of economic unity, should be properly prepared and properly studied, and I cannot see that there is any suggestion of undue delay, for internal or other purposes, in stipulating, by agreement of the Nine, that by 24th July, when the Finance Ministers meet, there should be something for them to consider, which officials should then prepare by 31st October. That is a short enough period for them to go into the details of a massive scheme of this sort involving great changes in arrangements and, indeed, vast sums of money. Then, as a result of their meeting, in turn, Heads of Government and Foreign Ministers, by the meeting of the Council on 4th and 5th December, will be in a position to consider whether they can come to a decision and offer a commitment.
I would commend to your Lordships' House a further study of this Statement, which I imagine will, on close scrutiny, yield encouraging answers to the question that we have already heard.
Lord BALOGH: My Lords, I thank the noble Lord for repeating the Statement and congratulate the Prime Minister for his courageous stand against taking premature decisions. I should like to ask my noble friend whether he will not agree that this newly re-baptised Snake is a crude attempt by economic means to impose German domination of Europe, which they failed to achieve by military means?
Lord GORONWY-ROBERTS: My Lords, I must strongly dissent at once—
Several noble Lords: Hear, hear!
Lord GORONWY-ROBERTS:—with my noble friend in his animadversions on an important and helpful partner of ours in the Community. I think that on reflection he, himself, may wish to revise his statement. As to what he said about the Prime Minister, we are, indeed, fortunate that we have a Prime Minister who not only knows his way around these complicated subjects, but is willing to stand up for the interests of this country.
Lord GLADWYN: My Lords, will not the Government agree that, whatever the dangers inherent in our going along with some, let us hope tempered, version of the Franco-German plan for currency stabilisation, the prospect of our being relegated virtually to some kind of Second Division in Europe, with the inevitable consequence of protection so long advocated by noble Lords opposite, is considerably more alarming?
Lord GORONWY-ROBERTS: My Lords, I would deplore this use of terminology suggesting that this country is somehow being relegated in some league table or other. The fact is that we are playing our part in Europe by speaking out and making contributions of an informed and expert nature on the most difficult subjects, including this one. I know the noble Lord's record in this matter; he has served this principle with great distinction for many years. But I would ask him to accept that the best way in which a workable and lasting scheme on these lines can be adopted by consensus is to ensure that we get it right from the start. We did not get it right in 1972 and we had to beat a hurried retreat—in six or seven weeks, having put our signature to that scheme.
Lord LEE of NEWTON: My Lords, could my noble friend say a little more on the point that he made on energy? It would appear that the only two nations in the Community with coal are Great Britain and Germany. Germany is not proposing to increase its output of coal; therefore, we are the only nation that is. Along with our oil, it would appear that

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we are to play a far greater part than any other country in fulfilling the point made in the Statement about increasing indigenous supplies of energy. Could my noble friend say whether they are hoping to make up on atomic energy, or something of that kind?
Lord GORONWY-ROBERTS: My Lords, I think that my noble friend is well aware of Government policy to advance as far as possible appropriately in all sectors of the fuel industry, including that of nuclear energy. As to the decision of the Council last week, it was agreed that there should be every effort made to reduce by 50 per cent. our collective dependence on imported energy, including oil. That clearly means to me, as it did to them, that we should expand severally in our various countries, and certainly in this country, which has important indigenous resources, our own national production. We shall need to do so of course in every respect by co-operation and consultation with our partners in the Community.
Lord BLYTON: My Lords, would not the Minister agree that the new monetary policy means that the economic power to control our own economy here is to be further whittled away to the Continent?
Lord GORONWY-ROBERTS: Not necessarily, my Lords. Of course if we get it wrong, that and a number of other dangerous results may ensue, but we are hoping, with our partners, to tackle this question properly from the start, taking time to utilise all the expert advice available in order to get it right, so that it will work and be of lasting benefit to all Members of the Community. That is why it is natural for us to link with the Franco-German proposals the equally important and complementary suggestions about the reform of the CAP, and indeed of the distribution and deployment of resources in the Community as a whole, which is the second point which the Statement emphasises.
Lord SOAMES: My Lords, may I ask the noble Lord, following upon the question of his noble friend, whether he would appreciate that there are nine countries involved? We are not the only country which does not wish to see our economy controlled from outside. This is something which all together wish
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to bring about because it is going to be for the benefit of all. For goodness' sake, we are not going to stand out just because we are the only ones who say that this is not such a good idea because we are frightened of what other people might do. Others equally are going to see that decisions so vital to the health of their economy are not going to be taken above their heads, but a bit of common discipline is surely going to be required.
This leads me to ask the noble Lord—I asked him this in my supplementary, but I do not think that I understood his answer very well—what is the difference between the German-French proposals on the one hand for a zone of monetary stability within Europe, and what the Prime Minister had in mind when he was referring to the desirability of bringing about just this?
Lord GORONWY-ROBERTS: My Lords, the noble Lord did not understand my answer because—and I apologise for this—I did not answer. He asked what was the difference between the approach of the Franco-German proposals and the observations made cogently by my right honourable friend when these came up for discussion. I think it lies in the one word "convergence"; economic convergence, which the noble Lord perhaps understands better than any other Member in this House, and if we add also resources and proper distribution of resources so that the kind of fairness as between all Members of the Community, to which he spoke just now, is in fact achieved. That is the difference. We are not yet satisfied that those two points are fully understood by some of our partners. As to being on our own in asking for consideration of our own national interests, we were not on our own. As the Statement makes clear, my right honourable friend the Prime Minister was by no means the only Head of Government who expressed these necessary caveats and reservations.
Lord ARDWICK: My Lords, is my noble friend aware that many of us on this side of the House have great hopes that the Bremen scheme is going to lead somewhere, and that it is important and potentially valuable? But will he, for the sake of clarity, make it clear to some of my noble friends that this is a scheme of

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monetary co-operation? It is not to be confused with ultimate monetary union which implies a single currency and a kind of federal structure behind it for the implementation of a European monetary policy. This is a scheme of monetary co-operation with an economic side attached to it.
Lord GORONWY-ROBERTS: My Lords, I think that most people will define the scope and nature of these proposals—they are no more than proposals—in their own way. Of course it is more than a scheme of monetary co-operation. It has its implications for economic development, and that, quite properly, is one of the preoccupations of my right honourable friend and the Government in considering these proposals.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I am in some difficulty here. I see one noble Lord from that side and another noble Lord from our side of the House who wish to speak. Perhaps the House would like them very briefly to each ask a question, and then call it a day.
Lord MORRIS: My Lords, may I ask the Minister of State whether Her Majesty's Government consider monetary union to be a cause of economic union or a symptom of such economic union?
Lord GORONWY-ROBERTS: My Lords, to attempt to answer such a question at Question Time would be to introduce a not very rewarding seminar. If the noble Lord would like to discuss this with me, I should be glad to do my best, but not just now.
Lord WIGG: My Lords, will the Minister convey the thanks of most of us, at any rate, to the Prime Minister for the clarity of the Statement which has been repeated in this House today, and for his courage in standing up for the interests of this country? Would the Minister realise that he made a very important point when lie stressed how necessary it is to get our approach absolutely right? Would he therefore urge on the Prime Minister to seek every means in his power to make sure that the issues which, after all, although they affect the other eight countries also affect the British people,
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are made known to our fellow-countrymen? And, not least of all, to make known the terrible price that Britain is paying for the follies of a Conservative Government which dashed headlong into an arrangement and then, seven weeks later, withdrew from it, and that the price of that bill is still being paid in terms of unemployment?
Lord GORONWY-ROBERTS: My Lords, I shall most certainly convey my noble friend's words to the Prime Minister, who, in any case, knowing the source of those sentiments, will himself take care to read them in Hansard tomorrow.

REPRESENTATION OF THE PEOPLE BILL
4.8 p.m.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, I beg to move that this Bill be read a second time. This is a short Bill, and is deliberately of limited scope. Its two substantive clauses are both concerned with election expenses. The first proposes an increase in the maximum expenses which may be incurred by a candidate at a Parliamentary election. The second proposes that subsequent increases in these limits and in the comparable limits for local government elections should be effected by secondary, rather than primary, legislation.
My Lords, there has been a strict control over the expenses incurred by candidates at Parliamentary elections since the Corrupt and Illegal Practices Act 1883. I believe that there is general agreement on all sides that such a limitation is essential in the sort of democracy that we enjoy, to prevent the richer parties and candidates from obtaining an undue advantage in the election campaign as a result of their wealth.
The trend in the first half of this century was for a reduction to take place in these limits both in real and in money terms. Thus Acts of 1918, 1928 and 1948 successively reduced the limits on candidates' expenses contained in the Act of 1883. Subsequently, these limits were increased in 1969 and 1974, primarily to restore the value of the limits in real terms.

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Generally, these changes have been preceeded by discussion in a Speaker's Conference on Electoral Law and the legislation has been based on a Conference recommendation. The Government would have wished that the present Bill could have been similarly founded on a Speaker's Conference recommendation. My right honourable friend the Prime Minister proposed some time ago to the leaders of the other main Parties that a new Speaker's Conference should be established to consider a number of electoral topics. Unfortunately, it has not yet proved possible to secure the agreement of the official Opposition to the terms of reference for such a Conference.
In view of the fact that, under the Parliament Act 1911, there must be a General Election in or before October 1979, the Government considered it would be sensible to consult the other main Parties on an increase in the expenses limits for candidates at Parliamentary Elections. The results of that consultation were mixed; some of those consulted considered that no increase was required in the expenses limits, and some that it would be right to increase the limits to take more or less full account of inflation since February 1974, when, as I indicated, they were last checked. Most of those consulted, however, considered that there should be a substantial increase, but with more emphasis on the variable amount per elector than on the basic sum.
It is in the light of those views that the Government brings forward the proposals contained in this Bill. We propose that the present limits should be increased to a basic sum of £1,750 and a variable element of 2p per elector in a county constituency. In a borough constituency, the figures would be £1,750 plus 1½p per elector. The present limits, set in February 1974, are £1,075 plus 1p per elector in a county constituency, or £1,075 plus ¾p per elector in a borough constituency. These figures may be more meaningful if I relate them to a typical constituency of 60,000 electors. The proposals in the Bill would raise the total amount from £1,675 to £2,950 in a county constituency, and from £1,525 to £2,650 in a borough constituency. The percentage increase will vary depending on the size and type of constituency, but the increase in a county constituency of 60,000 electors
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is just over 75 per cent. The Government consider that these increases would be justified and would provide a fair balance between the needs of large and small constituencies and I hope the House will share that view.
I turn to the other part of the Bill covered by Clause 2. This provides that the Secretary of State may by order vary the maximum amounts of candidates' election expenses at Parliamentary Elections, certain local government elections and certain elections in the City of London to take account of any change in the value of money. At present, an Act of Parliament is required to make any change, however small, in the expenses limits for Parliamentary or local government elections. This is because the actual figures are provided in the Representation of the People Act 1949 and any change must at present be effected by primary Legislation.
It is clearly right that Parliament should retain control over these limits since, as I mentioned, they constitute an essential element in our democratic process. At the same time, it seems inappropriate to require the full legislative procedure in those cases where changes of a very limited nature are being made. It is for this reason that we are proposing this procedural change. Clause 2 contains, however, two essential safeguards. The first is that the order-making power should be limited to increases to take account of inflation. The second is that orders would be subject to the Affirmative Resolution of both Houses, and thus Parliament would have the final say.
I hope your Lordships will agree that this is a sensible and welcome proposal. The Government believe that the present proposals are sensible and necessary. As I have explained, they result from consultation with the other Parties, and I hope they will meet with the approval of the House.
Moved, That the Bill be read 2a—(Lord Harris of Greenwich.)
4.15 p.m.
Lord CAMPBELL of CROY: My Lords, we are grateful to the noble Lord, Lord Harris of Greenwich, for explaining the purposes of the Bill. It is of course a matter of special concern to the other

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Chamber, but it is of interest to all who are involved in our Parliamentary system. Such proposals normally follow a Speaker's Conference, and Lord Harris indicated that that has not occurred on this occasion and that the Bill has come forward as a result of consultations with other Parties.
There is general agreement that candidates' expenses should be raised and there is of course one main reason for that; that is, inflation. It is a reflection of the extent of the inflation there has been since the two Elections of 1974 that the limits set in this new Bill in real terms are less than the limits that existed in 1974. So it is not, in effect, an increase in purchasing power; it is a reduction from the limits which were available in the 1974 Elections. Some of us therefore think this increase in monetary limits is not enough and that it should have been put higher. However, I can see that because this had to be done on the basis of consultations—because the Government had to do that—they were cautious about raising the limits.
Also, for the reasons of inflation, there is in Clause 2 the new power for the Home Secretary in future, by an order with the Affirmative Resolution procedure, to obtain the consent of Parliament to raise the limits. We hope that will not be necessary for some time. If inflation were to go into double figures again, it would be necessary before long, but it is our hope it will be a much longer time than four years before it will be necessary to come forward with an order to raise the limits again.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I believe these limits are too low. I know the thinking behind the statutory limits and in my view they have always been too low. There was a time when the so-called richer Party, whichever that was, was able to influence very small electorates by the expenditure of very large sums of money, but I believe that, with universal suffrage, that time has now passed. The danger nowadays is that we set limits so low that after the end of the election either candidates or their agents swear affidavits which are not strictly true. That has happened on a gigantic scale in the United States, and I believe that one of the contributory causes of the decline of standards in American public life is that most candidates for
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office start their careers by committing perjury.
Lord HARMAR-NICHOLLS: My Lords, I rise to reiterate the last point made by my noble and learned friend—
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I hope the House will forgive me if I intervene to say that we had arranged to take a Statement now. One understands of course that some noble Lords wish to speak on the subject at present before the House. However, would noble Lords care to take the Statement now?
Several noble Lords: Yes.

SHCHARANSKY AND GINSBURG TRIALS
4.19 p.m.
Lord GORONWY-ROBERTS: My Lords, with permission, I will now read a Statement being made in another place by my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs. The Statement is as follows:
"I will, with permission, Mr. Speaker, make a Statement on the trials of Anatoly Shcharansky and Alexander Ginsburg which have opened in the Soviet Union today.
"The whole House will deplore the fact that the Soviet Government have now put on trial 15 members of the Helsinki Monitoring Group. The Helsinki Final Act states that individuals have the right to know and act upon their rights and duties in the field of human rights. These trials, in as much as the charges relate specifically to activities fully compatible with the Helsinki Final Act, are in direct contravention of the spirit and intention of the Act.
"The British Government have repeatedly warned the Soviet Government of the consequences which their handling of such cases could have for the atmosphere of their relations with the United Kingdom, and for the chances of making progress on vital issues in East/West relations generally. I personally made this clear to the Soviet Foreign Minister when I met him on the first of June.
"A Preparatory Meeting for the CSCE Scientific Forum is now taking place in Bonn. I have instructed our representative to raise at the earliest opportunity Soviet actions in relation to the Helsinki Monitoring Group and to make it crystal clear that we expect all the provisions of the Act to be implemented".
My Lords, that concludes the Statement.
Lord CARRINGTON: My Lords, the House is obliged to the noble Lord for repeating that Statement, and your Lordships on all sides of the House will welcome the firm tone of that Statement. Recent events are indicative of the Soviet Union's disregard of, and indeed contempt for, world opinion. They seem not to take any notice of the views of the whole civilised world about these trials and, incidentally, this action makes nonsense of the Soviet claims that they represent freedom-loving people in Africa.
In view of the Helsinki treaty, and the seemingly empty Russian acceptance of it, would the Government assure the House—and they have gone some way towards doing this—that there will be a linkage between the policies of the Soviet Union as a whole and the individual items, such as the SALT Treaty, on credit on easy terms, which they are either eager to finalise or eager to accept? Secondly, might I ask the noble Lord whether these trials were discussed at the EEC Heads of Government meeting, so that there is a concerted view on the part of the whole EEC towards what is happening in the Soviet Union?
Lord BYERS: My Lords, we join in deploring these latest Russian trials. Those of us who have been in politics since before the Second World War must be gravely concerned at what looks very like a return to Stalinism in these trials and these charges. It is clear that the Russians do not understand the meaning of détente. They cannot understand it if they can proceed in a mockery of justice to make the monitoring of an agreement which they signed at Helsinki a crime against the State. It simply does not make sense. May I ask the noble Lord whether Western broadcasts are still getting through to Russia, and,
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if they are, I should like to express the hope that the media in this country and the West reflect the feeling of grave concern in this country to the Russian people.
Lord GORONWY-ROBERTS: My Lords, the noble Lord, Lord Carrington, asked for an assurance that there is a relationship between various aspects of détente. Without using his words, I think I put it in a way that he would not disagree with. There certainly is a relationship and we point this out from time to time. I particularly take the point he made about detente being indivisible; that it is impossible to expect the good results of détente to be confined to one area of the world without regard for what is happening in other areas, and that applies particularly to Africa. As to the point he raised about the EEC, this question was not specifically discussed. One of these cases was the subject of discussion. The discussion was more general in the Community about this, but I have no doubt that there will be essentially concerted attitudes and action by our partners on these cases. It is necessary, as your Lordships will agree, to await the results of this trial before we definitively decide—possibly with our partners—precisely what further steps and further attitudes we should take.
I very much welcome, as always, the contribution of the noble Lord, Lord Byers. I believe that everything he has said coincides very closely indeed with the attitude of Her Majesty's Government and with our friends and allies both inside and outside Europe.
Lord JANNER: My Lords, may I thank my noble friend first of all for the steps which are being taken and also for the manner in which he has consulted with other members of the European Council, and so on. Does he realise that there is anguish in the hearts of millions of people throughout the world at what is happening today in these trials; that they very much resemble the Stalin trials at which, for example, even two very eminent Russians who came over here in order to obtain funds from this country to help during the war—in which I had the privilege of participating as an officer—were murdered; and that the world as a whole can only shudder at the horrific manner in which the USSR is

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treating this matter? My noble friend said that we have to await the result of these trials. May I respectfully ask him to try to get together as many people of standing in the world before the trials proceed further, so that iniquity may not be carried to the same bitter end that Stalin himself carried it. Knowing that public opinion eventually had the effect of making even the people of the USSR condemn what Stalin had done, perhaps it is not too late. So may I ask him to see what can be done without further delay.
Lord GORONWY-ROBERTS:My Lords, yes, certainly. I was addressing myself to the question of action, the expression of attitude or action by Her Majesty's Government, and addressing myself to a specific point made in these exchanges. We shall want to see how this trial proceeds. We have tried, unsuccessfully, to have an observer there. It is part of the illustration of how this trial is proceeding that we have not been able to get an observer to attend the court. We must await the result of the trial before we can decide whether further representations should be made, and, if so, of what kind. In the meantime, of course, during the trial the attitudes of the Government and people of this country will be made crystal clear to the Soviet authorities. Indeed, exchanges such as this here in your Lordships' House and no doubt in another place will not be lost upon the Soviet authorities.
Lord WIGODER: My Lords, may I ask the noble Lord whether he is aware that neither of the defendants in these cases has had the right to choose an advocate of his own choice; that neither of them will have the right to give evidence, and that neither of them will have the right to call witnesses on his own behalf, and, if that is so, is the noble Lord really in serious doubt about what the result of these farcial trials will be?
Lord GORONWY-ROBERTS: My Lords, I am in no serious doubt about the difficulties placed upon the defence, which the noble Lord has substantially illustrated. I do not know what the result of the trial will be. I can only hope it will be nothing like the savage treatment meted out to Orlov only a few weeks ago. While one
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is very careful not to use emotive words from this Box while this trial is proceeding, it is a function of the British Parliament—and it is performing that function today in the other place as well as here—to make it clear, through the voice of Parliament, that we expect this trial at least to be conducted within the bounds of fairness and equity and that we await its result with apprehension; one would like to say hope. It is for that reason that I venture to say that exchanges in this House and in another place may conceivably he of some help to the unfortunate people now facing these charges in Soviet Russia.
Lord WIGG: My Lords, does the Minister realise that when the noble Lord, Lord Carrington, put his question to him he asked for an assurance that there was a linkage between trials, on the one hand, and a policy, on the other? Is the Minister aware that the word "linkage" in that context has a special technical meaning, carrying with it consequences of very great seriousness? When the Minister replied he carefully avoided using that word, and he gave an assurance on something much less than linkage—rather a relationship, which I understand and approve—whereas linkage in this connection involves a path which leads right to the abyss. I should like to know whether the Minister was giving an assurance in relation to linkage, or whether he used the word "relationship" carefully and advisedly.
Lord GORONWY-ROBERTS: The short answer is, yes, my Lords. I used the word "relationship" advisedly, and I am sure that the noble Lord, Lord Carrington, in using the word "linkage", had in mind much the same meaning as I had in using the word "relationship".

REPRESENTATION OF THE PEOPLE BILL
4.31 p.m.
Second Reading debate resumed.
Lord HARMAR-NICHOLLS: My Lords, I should like to reiterate the point made by my noble and learned friend Lord Hailsham of Saint Marylebone. It was, I believe, a real point, and I consider that as a result of the discussions on

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costs, it ought to be given more weight than it has perhaps been given. There is no doubt that in almost every election the expense returns are not, strictly speaking, accurate. Technically, they are put in a form which permits them to be passed, hut I do not think that by merely taking into account inflation the real future problem has been met. Candidates in an election ought to be able to give their expense returns in the full knowledge that they have been able to do their duty in presenting what they consider to be the correct case, while at the same time not infringing the limits on expenses.
I do not think there is any longer need to be strictly accurate, down to three-quarters of a penny. Certainly there ought to be a ceiling, but there also ought to be a margin within which those who want to be economical in their campaign and assiduous in presenting their case can have a certain leeway which enables them to spend the amount of money needed in order for them to do their duty. There are certain constituencies—some held by Labour, others by Conservative—where there is no need to spend money to any great extent in fighting an election because the result is known even before the election date has been declared. Overwhelming majorities are virtually certain in such constituencies, and in these cases spending could fall well within the boundaries which have been agreed and which have been presented to us today.
However in the marginal seats, where candidates have to fight hard to ensure that their point of view is properly presented, they want to go to the limit allowed, and today the limit is not sufficient. We know that candidates get round this limit by all kinds of technicalities. For example, envelopes are bought well in advance and are then sold to the campaign committee for less than they cost. We know, too, of outside organisations which help the Parties. For example, trade unions help noble Lords opposite, while other organisations help some of my friends, and they find ways of giving electoral assistance without the cost of this having to be recorded on the expense returns. I believe that this is a bad thing; there is no need for it.
There ought to be a margin which would enable the case on all sides to be properly put, while at the same time the
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returns which are submitted can withstand probing. It is in this regard that I want to try to emphasise to the noble Lord the reason why I think that the words of my noble and learned friend should be taken into account. We know that in certain constituencies small groups try to unseat candidates, or at any rate try to ensure that certain candidates are not acceptable at future elections. The groups do this in order to try to get control. As the situation is at present, if these groups insisted upon a detailed investigation into expense returns submitted after an election, the returns might be found to be outside the legal limits set down. It could be that because of an infringement on what was possibly a mere technicality the genuine feelings of the electorate in a Parliamentary constituency were perverted.
There is no longer any need to try to evaluate, in the strict terms which are included even in the new arrangement which has been made after discussions, what it costs to fight an election. We have to agree to what is proposed because due to the time factor it must not be delayed. However, I hope that the Government, and any future Government, will consider very carefully the possibility of allowing a margin on the expenses which would enable candidates to submit returns which would be strictly accurate, which would withstand any probing, and which would give candidates a start in their Parliamentary life without having in the back of their minds the thought that there has been collusion with their agents and other organisations which has helped. Such collusion may not be alleged in a nasty way, but it would not be in strict conformity with the rules laid down. It is with that point in mind that I hope that, while we approve this proposal today, the real fears which my noble and learned friend and I have expressed will, in the very near future, be taken into account in terms of giving a more realistic basis for expense allowances.
4.37 p.m.
Lord WIGG: My Lords, no Member of this House or of another place has more right to speak on winning a Parliamentary seat by a short head than the noble Lord, Lord Harmar-Nicholls. Over the years he won his seat by under 10 votes

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on more than one occasion. For me it was a different story. I won a Conservative seat with no assets at all, other than a typewriter from which a couple of letters were missing. But my path was comparatively easy, and I intervene in the debate merely to say that one of the factors which has led to the increase in the cost of elections is the treating of the electorate as if they were a bar of soap or a packet of detergent. I am not looking across at the other side of the Chamber as I say this, although I notice that occasionally, including today, the exchanges are not always entirely free of what I would regard as one or two overhead shots connected with the coming General Election. However, I am basically a non-political animal and I will not indulge in such practices myself, except to say that I deplore the treating of the electorate on this basis.
The expenditure of vast sums of money by particular sections of industry, furthering the political causes of one political Party before the election starts, so that the amounts involved are not included in the election expenses, is just as important as the situation of the unfortunate candidate who has an inefficient agent and so has to go to the courts to obtain an indulgence because he has spent 4p over the odds. I hope that this problem is tackled in the next Parliament, by the next Labour Government, so that what happens at present becomes not unlawful, but at least difficult to carry out. The electorate consists of individuals, each of whom has his own feelings about how he wishes to vote. He makes a decision on voting based on rationality and on feelings which are associated not only with his own interests, but those of the community in which he lives as well as the country at large.
Elections should be approached with this borne in mind, rather than by trying to indulge in the "hard sell", which is backed up by a fictitious election expenses return which covers only part of the campaign period. Literally millions of pounds were spent before the last election, and I have no doubt that millions will be spent before the next election. Have a look at the hoardings even at the present time. Therefore, while I find no difficulty in supporting this Bill, let us remember that the escalation of costs is in part
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due, of course, to inflation, but are also due to the bringing in of professional advisers with expense accounts, which are the very nature of the advertisers' calling and where the sky is the limit.
4.40 p.m.
Lord HARRIS of GREENWICH: My Lords, I will speak, if I may, fairly briefly to the points which have been made. As my noble friend Lord Wigg has said, he is indeed an entirely non-partisan person, but I should say to him that matters of the sort which he has just raised really are matters for a Speaker's Conference, and obviously go outside the terms of the existing Bill. Indeed, this is the point which I must make in answer to the points made by the noble and learned Lord, Lord Hailsham, and the noble Lord, Lord Harmar-Nicholls. The fact of the matter is that we have decided that it is appropriate to take account of inflation so far as this is concerned, because here we are acting without a Speaker's Conference having taken place. If a Speaker's Conference had taken place, this and other matters might have been gone into; but, as the House is aware from what I said when I moved the Second Reading of this Bill, we have had consultations with representatives of the political Parties and have tried to effect the greatest amount of agreement between all those concerned. That is why the Bill is drafted as it is at the moment.
In answer to the noble and learned Lord, who referred to the point of the United States, I agree with him: there have indeed, if I may say so, been substantial abuses so far as election procedures in the United States are concerned. There has been a great deal of argument and debate about this in the Congress. But, of course, the United States have not in the past had anything approaching the tight supervision of candidates' expenses we have in this country. There has undoubtedly been abuse—and I would not in any way quarrel with the noble and learned Lord—but the American position is very different from our own. I say this not in any way to quarrel with him in terms of the general thrust of his argument; all I would wish to repeat is that I think this is the kind of question which should be gone into by a Speaker's Conference, and that can take place when all the Parties concerned are prepared to move in that direction.
On Question, Bill read 2a: Committee negatived.
Then, Standing Order No. 43 having been suspended, pursuant to Resolution, Bill read 3a, and passed, and sent to the Commons.

FARM CAPITAL GRANT (VARIATION) (No. 2) SCHEME 1978
4.43 p.m.
Lord WALLACE of COSLANY Lord WALLACE of COSLANY rose to move, That the Farm Capital Grant (Variation) (No. 2) Scheme 1978, laid before the House on 6th June, be approved. The noble Lord said: My Lords, noble Lords will no doubt recall that this Statutory Instrument was laid before Parliament on 6th June 1978 and was made to give effect to the undertakings given on 22nd March 1978 that we would give extra financial assistance to farmers and growers whose land, buildings, roads, fences and other works or facilities had been badly affected by the abnormal storms and blizzards of the winter. I shall not keep your Lordships' House very long because I am sure we are all in sympathy with the purpose of this Statutory Instrument. It is, however, rather more complex than the previous 1978 Variation Scheme, which dealt with the restoration of flooded land, and I shall try to cover only the more salient and important points.
Noble Lords will see that the Statutory Instrument came into operation on 7th June 1978; that is, the day after it was laid before Parliament. Its continuance is of course subject to the will of Parliament. As I explained when we debated the earlier Variation Scheme, no disrespect is involved in bringing the Statutory Instrument into effect before there has been an opportunity for debate. The primary legislation—Section 29 of the Agriculture Act 1970—permits us to do this. Noble Lords will, I am sure, understand that we acted as we did so as to be able to make cash available as soon as possible for farmers or growers whose buildings and other works had been seriously affected by the abnormal blizzards and storms this winter. We have particularly in mind the disastrous events of 30th-31st October 1977 and 28th-29th January 1978 in Scotland; 11th-12th November
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1977 in North-West England and Wales; 11th-12th January 1978 on the East Coast and in Kent; and 15th-19th February 1978 in South-West England and Wales.
What the Statutory Instrument will do, if Parliament approves, is to allow us to give 60 per cent. grant (as opposed to the normal rates of 20 per cent. or 30 per cent. available under the Farm Capital Grant Scheme, 25 per cent. or 40 per cent. under the Farm and Horticulture Development Scheme and 25 per cent. under the Horticulture Capital Grant Scheme) for replacing or reconditioning to their former condition buildings destroyed or damaged by the abnormal storms and blizzards. For similar operations on roads, fences, bridges, culverts, river banks, farm flood protection banks and other related items, as set out in the Schedule to the Statutory Instrument, the grant will be 50 per cent. except in less-favoured areas—broadly, the hills—where it will be 70 per cent. Grants for these operations are now at 20 per cent. for the lowlands and 50 per cent. for less-favoured areas under the Farm Capital Grant Scheme, and 25 per cent. and 50 per cent. respectively under the Farm and Horticulture Development Scheme.
Your Lordships will wish to know that special account is taken of Scottish circumstances. In Scotland, there will be special grants for replacing or reconditioning the banks or channels of watercourses affected by the abnormal storms, generally at 75 per cent. but at 85 per cent. in less-favoured areas. These grants reflect the Scottish farmers' position under the Farm Capital Grant Scheme 1973. Incidental operations, such as replacing electricity or water supply services in destroyed or damaged buildings, will also qualify for grant at the higher rate.
Noble Lords will have noted that the scheme before your Lordships' House is a United Kingdom Scheme. It will run in parallel with the Farm Capital Grant (Variation) Scheme 1978, which Parliament approved in April and provided higher grants for the restoration of flooded land to its former level of productivity. As we did for that scheme, we are taking advantage of Article 92.2(b) of the Treaty of Rome, which allows special aids to

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alleviate the effects of natural disasters. In this way, these special aids are not subject to the EEC's Farm Modernisation Directive. This means, my Lords, that they are not affected by the various restrictions contained in the Directive. One of these is a maximum amount of investment per labour unit which can qualify for grant, so that this limit will not apply to any of the work. The limitations on investment aids for pig enterprises and the total bar on grant for egg and poultry enterprises will also not apply.
Noble Lords will also wish to know that, in addition to providing the higher rates of grant, we are relaxing a number of statutory and administrative rules. I have already mentioned to your Lordships those relating to limits on expenditure. Others are the requirement to obtains prior written approval; the requirement that the income from the farm business must reach a certain level; and the special income test governing eligibility for the higher less-favoured area grants. In addition, certain tests usually applied to horticultural grants, such as an appraisal of the value of the investment to the business and the need for the business to have been in existence for at least 24 months to qualify for grant, will also not apply under these arrangements. Furthermore, my Lords, in the badly affected areas, we shall not apply the normal administrative rules relating to written prior approval for work to items which, although not covered by the Schedule to this Statutory Instrument, are nevertheless included in the main Farm Capital Grant Scheme. I refer to works and facilities such as electricity or water supply installations in their own right. Such items, however, will not attract the special rates of grant.
I must explain to your Lordships that this scheme, even more than the earlier Variation Scheme, breaks new ground, and for this reason contains some special features to ensure proper administration. Noble Lords will notice that the winter period is defined as extending from 1st October, 1977 to 31st Marsh 1978. However, only expenditure incurred on or after 1st November 1977 will qualify for the higher grants or exemption from the normal rules. Moreover, we need to be able to ensure that the higher grants are given only for buildings and other works
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destroyed or damaged by the abnormal weather of the past winter. For this reason, we require written intimation by 31st July 1978 that the farmer or grower considers that he suffered damage from those storms. This would enable inspection to be made to determine with reasonable certainty that we are dealing with genuine applications. I am sure that your Lordships will appreciate the importance of this. Formal applications may, however, be submitted up to and including 31st July 1979. This should give farmers or growers adequate time to prepare the detailed plans and specifications that may be necessary; but, as was the case for the first Variation Scheme, we have set a time limit for completion to encourage farmers and growers to get on with the necessary work quickly. We hope that applications will be submitted as soon as possible. I commend this scheme to the House and trust it will receive full approval.
Moved, That the Farm Capital Grant (Variation) (No. 2) Scheme 1978, laid before the House on 6th June, be approved. —(Lord Wallace of Coslany.)
4.52 p.m.
Lord SANDYS: My Lords, the House will be grateful to the noble Lord, Lord Wallace of Coslany, for explaining the order which is now before the House. I think the difficulties that the Government have been up against in regard to the timetable are well appreciated on this side of the House, and I think it is a matter of congratulation that they have been expeditious in handling claims. My remarks will be related to questions concerning the rather longer term. Your Lordships will be aware that Article 92(2)(b) of the Treaty of Rome (which has been referred to already in the speech of the noble Lord, Lord Wallace of Coslany) permits special treatment to be given to those who have suffered loss or damage as a result of special weather conditions. But one must think particularly carefully about the question of weather insurance here.
I should like to draw your Lordships' attention to the Answer to a Question for Written Answer in another place on 22nd March 1978. It is not long and perhaps I may quote it. The Answer is from the Secretary of State for Scotland and the words are:
"It is, of course, a firm principle that the Government do not pay compensation for losses

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due to natural hazards, especially in food production where the weather is a factor to be taken into account every year; nor do they cover insurable risks."
That is in the Official Report for 22nd March 1978, at cols. 554 and 555.
The Secretary of State at that time had not the advantage of this order in front of him. Nevertheless, there are very significant words there. Those are the closing words which he used:
"… nor do they cover insurable risks."
In the longer term undoubtedly it will be a matter in discussion for the Minister of Agriculture and the National Farmers' Union in this country to investigate in some depth the question of what are insurable risks and what are not insurable risks in this regard.
Unhappily, the definition of "abnormal weather conditions" is something very difficult to be achieved. In the particular cases referred to by the noble Lord, Lord Wallace of Coslany, these have been identified. But, if I may respectfully suggest this to your Lordships, some weather conditions affect particularly the agricultural areas affected by high tides. These are particularly subject to the problems which occurred during the East Coast floods of some years ago, and it is a matter of continuing anxiety that a situation may arise where sea walls, dykes and sea defences may be breached in some future tidal conditions.
I hope that the Government will give special attention to this area. From these Benches we welcome the relaxation of the rules, particularly as they regard the question of written prior approval and also the special income test governing eligibility. These appear to be both practical and sensible arrangements and to assist particularly in regard to early payment where need is a paramount factor. I should like to thank the Government for their expeditious handling and I hope that they will continue to pay close attention to what advice is given them by the National Farmers' Union in this country.
4.57 p.m.
Lord WALLACE of COSLANY: My Lords, as far as I can at short notice, I should like to reply briefly to the noble Lord, Lord Saydys. The question of insurance has come up again. It was raised
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in another place, So far as insurance is concerned, it has always been the Agriculture Department's policy to accept the industry's normal practice on insurance. Thus, for agricultural buildings we expect insurance only against fire and, therefore, we would not expect farmers to be insured against storm or flood. If any insurance payments are received they would be offset against the cost of the work, as only expenditure actually incurred by the applicant can be eligible for grant. So far as growers are concerned glass houses and similar structures are normally expected to be insured against storm damage and any insurance payments, therefore, will be offset. It is not normally possible, as I have already said, for other farmers or growers to insure against flood. That is generally the position on insurance. If there are further detailed points on this, I will be pleased to advise the noble Lord and will endeavour to give him an answer to his question of flood in future disasters.
It is difficult to take practical steps against the occurrence of abnormal weather of any kind other than to ensure that meteorological warnings are given as early as possible. That is the job of the Meteorological Office. In passing—and I have seen some of this in operation at Bracknell—I believe that there is very close contact between the farmers and the special services for farmers in giving warnings of unexpected bad weather in particular. The British Isles are susceptible to sudden changes which are difficult to predict. That is the "statement of the year" considering the present summer. These may be in both the type of weather and its severity. Standards of building and other facilities are constantly being improved, but it would be impossible to provide them to a strength that would withstand every weather condition.
So far as sea flooding is concerned, reviews by the water authorities in England and Wales and by the Ministry are continuing. A number of schemes for improvement are either in progress or are being designed. In other cases, work is being speeded up so as to seek completion before next winter's storm tide season. It is a fact that extra financial assistance is being provided for sea defence work. The Chancellor of the Exchequer announced in his Budget Statement that additional

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allocation will be made for sea defence work this year. The sum involved is £2 million which has now been allocated to water authorities. With grant rates of up to 85 per cent., this will result in additional Government expenditure of about £1¾ million this year. So far as possible, the Government are doing what they can. If the noble Lord wishes to raise matters later I shall be only too delighted to give him the information.
On Question, Motion agreed to.

ECC 32nd REPORT: COMMUNITY SHIPBUILDING INDUSTRY
5 p.m.
Lord RHODES Lord RHODES rose to move, That this House takes note of the Thirty-second Report of the European Commmunities Committee on the reorganisation of the Community shipbuilding industry (R/3216/77) (H.L. 188). The noble Lord said: My Lords, in moving that this House takes note of the Thirty-second Report of the European Communities Committee on the reorganisation of the Community shipbuilding industry, it is with the knowledge that there are people in this House who know more about the subject than I do, and I crave their indulgence. The noble Lord who chairs our Committee so efficiently must have been very persuasive to get me to agree to move this Motion. May I pay a tribute to him for the way in which for so long he has run that Committee so efficiently.
This is a sombre subject. I cannot cast it better than the shipping correspondent of The Times for this morning:
"As the slump moves into its fifth year—"—
he is talking now about shipowning—
"the longest ever recorded—with freight rates insufficient to cover even operating costs, more shipowners are facing financial collapse with every month that passes. Governments already struggling with unemployment and bankruptcy in the shipyards are faced within the next two years with widespread collapses among shipowners and erosion of national shipping assets disposed of at knock-down prices "
If shipowners are not prosperous, one cannot expect orders for ships.
May I say a word of praise for what the Community have done in this connection. Sitting on this Committee, as I have done for several years, I have seen
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the attempts that the Commission have made to grapple with the problem of unemployment in the shipbuilding industry. I remember years ago I suspected that a document had been written by a young man just out of Oxford who had taken the job on at the Commission. He had put in all sorts of things which, if the document had gone through, would have meant political dynamite because he was talking about closing shipyards in Jarrow and Barrow.
We took a lot of painstaking evidence, written and oral, from all who are vitally interested in this subject. Our attention was drawn to the appalling state of affairs in the shipbuilding industry, not only in the Community but in the world. They drew our attention to the fact that never in the history of the industrial revolution has there been such a spate of orders placed for ships as in the years 1968 to 1973. In 1973 alone there were placed orders for 73 million tons. In 1975 the completions were running at 34 million tons. In 1976 the completions were high and then, as a result I suppose of the recession in world trade and the OPEC difficulties, the bottom fell out of the market. It is estimated at the present time that the excess production capacity in the world will be from 45 per cent. to 50 per cent. Not only that: there is still a backlog of orders of ships to come on the market.
In Europe it was traditional until the end of the 1950s that they built 70 per cent. of the world's fleet. Now it is from between 20 per cent. and 30 per cent. Japan, with its ruthless efficiency, now builds half the world's ships, but even Japan is in difficulties. I do not know whether noble Lords saw the item of news in the papers last week, which stated that a citizen of Hong Kong, a big shipowner who was honoured in recent months in this country, was reputed to have bailed out Tasebo, one of the big shipping companies in Japan, by placing orders there. So the difficulty is world-wide. New dynamic countries like Brazil, Korea and Mexico are all coming into the market to build ships. These countries, with a sense of purpose and centrally controlled, seem to have no difficulty in undercutting Western prices. Anyone who saw the television programme on ITV on South Korea could not fail to be impressed by what can be achieved by a sense of purpose.
What is the situation in the United Kingdom? The United Kingdom shipbuilding industry consists in the main, as I understand it, of British Shipbuilders and Harland and Wolff. Twenty per cent. of the annual merchant shipping output is sold to British shipowners which, incidentally, is 30 per cent. of the normal requirements. So the United Kingdom is, as a matter of course, a net importer. Between 1950 and 1975 employment in the British shipbuilding industry dropped by 45 per cent. Nevertheless, the industry has managed to survive on the basis of 1·2 million gross registered tons per annum since 1950. This decline has been accepted by the Government as a very important part of the difficulties that we are facing today, and there is the shipbuilding intervention fund of £65 million to assist the industry; and this year we have passed the Shipbuilding (Redundancy Payments) Act.
This communication we have received is known as the Davignon Act on the Continent. It is refreshing to see that he is a man of some energy, really trying to get to grips with the problems with which he is faced. He asked the Associated Western European Shipbuilders to make a forecast. They did so. The Associated Western European Shipbuilders comprise the EEC countries, Finland, Norway, Sweden, Portugal and Spain—a large organisation. They made a proposal that in 1980 the world would be building 12 million tons of ships based on the compensated formula. It would be 4 million for Japan, 4 million for Europe and 4 million for all the other countries, including South Korea, Brazil and Mexico. There will be 4 million for Europe; that is, for the Associated Western European Shipbuilders, of which 2·4 million tons would be the share of the EEC.
The communiqué also went into some detail as to what should be done with regard to making the industry more efficient and more competitive in world markets and, in so doing, hoping to supply a significant amount of ships required by the Community shipowners. I said before it is a serious attempt to get to grips with the problem and it should not be underestimated. What would it mean? It would mean a reduction in the existing capacity of some 4–6 per cent.; it would mean the loss of 75,000 jobs in
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shipbuilding alone; it would mean the loss of 30,000 jobs in the ancillary trades —not small beer, by any count. We do not know what the figure would be for this country as yet. The communiqué also makes nice, satisfying noises about re-training, re-deploying and stimulating demand by various means. It refers to safety regulations, to building more sophisticated ships and thereby taking on more labour; altogether making out that it is possible to do something along those lines. I hope it is.
I talked about the forecast of four for Japan, four for Europe and four for everybody else. How were those forecasts arrived at?—because before we can assess what they are getting at we need to know the criteria on which they were based. The first assumption was that 4 per cent. would be the growth rate for most countries in Europe. The second assumption was that the OECD would have a tremendous lot of influence in terms of international arrangements; but anyone reading his paper this morning or last week would know very well that the OECD meets in Paris tomorrow, and one of the items on the agenda is a complaint by Japan that the European nations have not done their share in terms of reaching an understanding about how much of the shipbuilding industry in Europe is redundant. So there is difficulty there. We can assume, too, that there is going to be no 4 per cent. growth on average over Europe: it will be more like 1 per cent. during the next two or three years.
Another assumption was that no countries other than Japan or countries in Western Europe would produce more than they are now. That is a ridiculous assumption. How can you curb what South Korea is doing? They are already going ahead to double their production in two years' time. The next assuption was that the proportion between members of the AWES and the EEC should remain at the same sort of ratio. That is also a very difficult thing to grapple with, because there is the question of what is our share and what is agreed to be done. These difficulties are enormous and should be approached with great caution.
There are also objections to what have become known as indicative targets. It was pointed out that the shipbuilding

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industry is cyclical. I do not know what opinions your Lordships have about that, or whether you think that the old cyclical trade movements apply any more. Personally, I do not. I do not think it is quite the end of the capitalist system yet, but I am perfectly certain that it is the end of Keynes. The second objection is the problem of dividing capacity among Member States. The shipowners who gave evidence to us were quite definite in their minds about what should be done. They agreed straight away that the production capacity should be curtailed because, after all is said and done, if they cannot get trade for the ships they have, what hope is there for ships that will be coming on the market? That is a quite legitimate question. Strategic considerations, too, were put up to us but I will not deal with those because they are outside the Treaty of Rome when it comes to military hardware.
The Committee noted in its findings that the general agreement on the Commission's analysis of the world situation was correct. The Committee believed that the Commission's objective to create a competitive European shipbuilding industry was also correct. The Committee also expect that national arrangements will still continue, such as "scrap and build". They also consider that the Community policy is highly desirable. The anxiety of British shipbuilders to survive and become competitive are not incompatible with negotiations conducted with the Community. Here may I say that we must get into our heads that the Community is our hope in terms of world negotiations. We cannot negotiate from our base any more and it will have to be done on a Community basis. If anyone wants a real example of how this works, let him look at the multi-fibre agreements, which have been so successful over the last two years. We really must get it into our heads that it must be through the Community that we make our case.
If there is no agreement in the Community itself, or if national programmes are pursued which conflict with Community policy, how can the Community make the world-wide negotiations that it should be making? It is a terribly serious business, this unemployment, for anyone who cares about our people and our
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country. And where are the serious efforts which are being made to think it through? My Lords, this is one; and I beg to move.
Moved, That this House takes note of the Thirty-second Report of the European Communities Committee on the reorganisation of the Community shipbuilding industry. (R/3216/77 (H.L. 188).—(Lord Rhodes.)
5.20 p.m.
Lord CAMPBELL of CROY: My Lords, the House will be grateful for the helpful introduction to the Thirty-second Report of the Select Committee by the noble Lord, Lord Rhodes. He speaks from a lifetime's knowledge of industry, and he himself has always displayed the greatest vigour in promoting British interests. He also has the experience of seeing at close hand the contraction of the textile industry in the North of England. At that time we were both Members of another Chamber; I was an observer, but he was right in the thick of it.
The report which we have before us draws attention to a meeting of the Council of Ministers on 27th June. In fact, the Council met and briefly discussed this subject, but has referred it to the permanent representatives in Brussels and, I understand, is due to consider the subject again on 25th July. So that this debate is still in time, before ministerial decisions are taken. I agree broadly with the conclusions of the Select Committee and I should like to deal with the subject in two parts: first, the world crisis in shipbuilding; and, secondly, the position of the United Kingdom; and I propose to put certain questions to the Government.
This is probably the only opportunity which Parliament will have of considering this subject in either Chamber before November. The analysis of the world situation is, I think, virtually agreed. There are already too many ships in existence. Nearly one-tenth of the merchant fleet is lying idle; I am not considering warships, because the building of warships is not included in this report. World shipbuilding capacity far exceeds the expected demand over the next seven or eight years, and it is two or three times larger than is necessary. I say "seven or eight years", because that is as far ahead as the General Council of

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British Shipping felt they could see ahead. The Western countries, including the partners in the EEC, are also at a disadvantage compared with other shipbuilding countries, because the labour costs are less, sometimes considerably less, in the Far East and elsewhere. I suggest that an orderly reduction in world shipbuilding, none the less, must be to everyone's long-term advantage, even countries such as South Korea who feel that they want to trade their own goods, in their own ships, built in their own yards. That is a short-term view.
The arguments which arise are three: first, how much should the reduction be; secondly, how is it to be done and, thirdly,—and perhaps most difficult of all—how is it to be shared between the shipbuilding industries? The process of negotiations continues this week, as the noble Lord reminded us, at the OECD in Paris. There the Western countries and Japan are mainly negotiating. All the shipbuilding countries in the world are not members of the OECD. Outline agreement with Japan, however, if it could be reached, would be a very useful start. I say "outline", because exact reductions in percentages will be difficult to secure. There is bound to be much haggling over the last percentage point where each individual country is concerned. Within these worldwide negotiations, co-ordination within the EEC is sensible and should be helpful. That is where the Commission and our Select Committee are agreed.
Where the Commission can be faulted—and I agree with the Select Committee on this—is that they have taken some assumptions, most of them apparently conjured out of the air, and tried to prescribe a precise formula upon them. In their communication of last December, they based their proposals on an estimate of 2·4 million compensated gross registered tons as being required to be produced within the EEC in the early 1980s. Those proposals would mean reducing the capacity of shipbuilding within the EEC by no less than 46 per cent. since 1975—that is, almost halving the capacity—and I am not talking about jobs. Jobs, of course, would be reduced on a larger scale. There are too many variable factors to make such precise forecasts possible.
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Moreover, there are more considerations than have been taken into account by the Commission to be able to advocate so exact or certain a reduction. For example, I believe that the industry is cyclical by nature—a point which the noble Lord raised. My guess is that there will be an upturn in the mid-1980s. Even if, eventually, one managed to smooth out the cycles, the great swing that there was in the early '70s is bound to lead to another swing in the mid-'80s. There are also strategic considerations. The noble Lord desisted from mentioning them, but I think they must be mentioned, because they should be given more weight than the Commission have allocated to them.
When assessing the EEC's capacity and possible reductions in the 1980s, we must not overlook three new applicants to the EEC—Spain, Portugal and Greece; and in particular Spain. She will add significantly to the potential capacity when she joins the EEC, as I feel she will, in the near future. Most of the additional capacity in the 1960s and 1970s came from countries outside the EEC, notably Japan, South Korea and Brazil, and it is a valid argument that those countries which expanded inordinately during that period should bear the greater share of the reduction in the world which is now necessary. This applies particularly where the United Kingdom is concerned, because our capacity remained about the same, static, during that period. So that it would be unfair for us to be asked to reduce to the maximum amount, when we were not responsible for the speculative expansion which has occurred in the last 10 years.
As regards the general proposals of the Commission, I agree that there should be full use, where there are redundancies in shipbuilding areas, of the European Social Fund—for retraining, in particular, where it has helped in the past—and of the Regional Fund in those areas, for helping development and alternative jobs. Where it is not possible to agree with the Commission is in the precise amounts, because it is not possible, I believe, to make such an exact forecast as they have done.
My noble friend Lord Bessborough is the draftsman for the Committee of the European Parliament on Budgets, and in his interim opinion he has drawn attention to the massive sums which would be

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required if the proposals went forward on the scale suggested by the Commission. He has pointed out that there has been no proper consultation yet in the European Parliament of the effect that this would have on the Budget. My noble friend is with us today and I look forward to hearing him, if he speaks in the debate. But he made these points: first, that there appeared to be no basis for the cost per man in the calculations of the Commission in their communication; and, secondly, he asked why should a new job for replacing a redundancy in an ancillary industry cost half as much as a new job replacing one in the shipbuilding industry itself. That seems to be a quite arbitrary part of the calculations which the Commission have produced.
I come to the strategic part which particularly affects Britain. We have three former shipbuilding firms which were specialists in warship building—Vickers, Vosper Thorneycroft and Yarrow—and there are another three firms whose services are needed for naval shipbuilding but which also build merchant ships. So far as I know, the work of all six companies continues on the same lines under British Shipbuilders, all six companies having been nationalised. The naval demand should be much more in line with the capacity of our yards when one takes into account the exports in which we are successful—building ships for other countries, in particular Commonwealth countries.
The first question which I should like to put to the Government is this: Is it true that the Government are starting a scheme for building warships "on spec" and without individual orders, on the basis that they might find a place for them in our Navy, if they are not needed now or are not ordered eventually by a foreign country? There is another consideration—a strategic one—and that is the size of our merchant fleet. That size, and the building capacity for it, should not sink to dangerous levels where we could be held to ransom for supplies in peacetime, or could be seriously weakened in our carrying capability in war.
Now I turn to the British shipping industry because they are the customers, especially of our shipbuilding industry. May I remind the House that our shipping
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industry normally comes third in size in the world, and sometimes fourth. Japan and Greece are ahead; Liberia is the other one, but, as we all know, that is what is known as a flag of convenience. My point is that we are near to the top of the world league table so far as our shipping industry is concerned. There are many other industries in Britain where we are not in the top 10, but so far as the ownership and operating of ships is concerned we are near to the top. Our shipping industry brings in an enormous sum of money in terms of invisible earnings, in addition to the other advantages for our economy.
Over recent years, the United Kingdom shipping industry have placed 70 per cent. to 80 per cent. of their orders with the domestic shipbuilding industry. They have been a good customer of the United Kingdom shipbuilders. Consequently, the view of the shipping industry is important. The United Kingdom shipping industry have made it very clear that they consider that a reduction in shipbuilding capacity in Europe is necessary. Like others, they do not attempt the precision of figures that is aimed at by the Commission, but they regard overcapacity—the production of ships that are not wanted—as a threat to them. This leads to ships subsidised by the Government, as a consequence artificially cheap, being bought by competitors which can then undercut on freight charges during the lives of the ships and so capture United Kingdom business.
Returning to shipbuilding, the British shipbuilding industry is now about 90 per cent. nationalised in British Shipbuilders. In this connection I have more questions to ask the noble Lord. Recently we had passing through this House a Bill which became the Redundancy Payments Act. It provided for schemes of redundancy payments to men who were made redundant in British shipbuilding yards. Since that Act was passed, nothing has been announced. Therefore, may I ask the Government what is the latest position? When can we expect to hear of the first schemes under that Act? Thirdly, how will those schemes fit in with the EEC policy which has been put forward?
I turn next to the financial duties which have been imposed under Section 10 of the Aircraft and Shipbuilding Industries

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Act. Only last week, at col. 114 on 4th July, the Secretary of State for Industry set out in another place the financial discipline for British Shipbuilders during the current financial year. He instructed them to seek to limit their losses in the current year to £45 million. I should add that that figure appears to have been arrived at simply because that is British Shipbuilders' present estimate of what, tentatively, their loss is likely to be in the current year, but it assumes the availability of the announced intervention fund.
That brings me to subsidies. The intervention fund to help British Shipbuilders to obtain orders was announced last year, and both last year and this year limits have been set. The fund continues on an annual basis, and I am glad to say that it has been accepted as respectable by the EEC Commission and is not considered to be out of line with competition policies. The intervention fund is acceptable in crisis conditions, in accordance with the Fourth Directive. The United Kingdom is applying also for blessing from the Commission for a further subsidy scheme. This was reported in The Times, in one of the articles mentioned by the noble Lord, Lord Rhodes. Therefore, I put a further question to the Government: Unless the answer is confidential, can the noble Lord tell us what is the further subsidy scheme for which the Government are now trying to obtain the agreement of the Commission?
My last question to the Government is this: What are they themselves doing to encourage development in the shipbuilding areas so as to increase available alternative jobs? The Government have accepted that redundancies are inevitable, although they have not yet announced where they may take place. I hope, as I am sure that all Members of this House will hope, that any necessary redundancies will be carried out as painlessly as possible. The problem of additional unemployment occurring in areas where there is already a very high rate of unemployment is one which this House looks on with grave anxiety.
The subject of compensation for nationalisation is highly relevant here. Some of the firms which are due to receive compensation are in a position to invest and diversify in the areas concerned.
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That is where they have been operating in the past. May I ask the Government what is happening about compensation? The first significant news announced during the last few days was agreement on compensation for Swan Hunter. That appears to be the first compensation which has been agreed. Only a few weeks ago the noble Lord, Lord Robens, the chairman of Vickers, pointed out that formal negotiations for compensation in the case of his company had not even started and that as a result his company's investment programme was one-third less than it could have been.
There was much debate about this question over two years ago, especially in this House. The issue was not only fairness but also the loss of potential investment, probably in the very areas where new jobs are most needed. Therefore, may I ask the Government to give us the latest information they can about the timing of compensation negotiations, bearing in mind the assurances which were given from that Bench during the passage of the Aircraft and Shipbuilding Industries Act. I think no one will remember those assurances better than the noble Lord, Lord Winterbottom.
To sum up, I think the Government should aim for agreement on orderly reduction in world capacity in shipbuilding. They should participate in the co-ordination which will be necessary within the EEC but they should retain flexibility and resist commitments to precise targets years ahead.
Lord ARDWICK: My Lords, I did not want to interrupt the noble Lord in his speech but before he sits down I should like to ask him a question. In this House we are all concerned about the interplay between this Parliament and the European Parliament. The noble Lord mentioned the report which the noble Earl, Lord Bessborough, has prepared; I wonder whether he has also had access to the report which was prepared for the Economic Committee by my honourable friend Mr. John Prescott and to the report of the Social Committee. If he had, he would have seen that many of the questions that he put this afternoon are embodied in those reports to the Commission and indeed if he had been able to read the report of the debate

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(which he could not have done because the three-hour debate took place only on Wednesday and the reports arrived this morning) he would have seen that Viscount Davignon, the Commissioner responsible, gave a precise answer to the very question that he raised about why there was a projection of twice as much for people in shipbuilding who are displaced as for those in the ancillary industries. The simple answer is that shipbuilding machinery cannot be used for anything other than shipbuilding whereas the ancillary industries employ machinery which is applicable to other forms of engineering.
Lord CAMPBELL of CROY: My Lords, I regard that as an intervention; I think it was enabling me just to answer that and to finish my speech. Those points are really for my noble friend Lord Bessborough. I was able to read his report some time ago but curiously enough I have the complete record here of the debate which took place on the 5th July. Of course I have not been able to read it all, nor have I been able to read all the debates, but I have read what the noble Lord's friend Mr. Prescott said. From what the noble Lord has said, it appears that I have been asking all the relevant questions. Some of the answers may be available when we get round to seeing what the Commissioner, Viscount Davignon said, but I only received the record today and, as it is a long one, I have not yet had the opportunity wholly to consider it.
Lord ARDWICK: My Lords, unless the noble Lord's Danish and Dutch and German are as good as his French, he would not be able to read this report because it only exists in those particular languages. That is one of the disadvantages.
Lord CAMPBELL of CROY: My Lords, I must not abuse my opportunities of speaking and giving way. I would only say that my noble friend Lord Bessborough had told me that if I could follow French and German I should be able to understand most of it, and fortunately I am able to read both those languages.
Lord BRUCE of DONINGTON: My Lords, with the leave of the House I
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should like to ask the noble Lord one question arising from his speech. Did I understand him to say that 80 per cent. of the requirements of British shipowners were supplied by the shipbuilding industry? That is what I understood him to say, but perhaps he will correct that if necessary.
Lord CAMPBELL of CROY: My Lords, I am very glad to say that. The General Council of British Shipping have said it themselves and also the Government have said that in recent years the percentage has been between 70 and 80 per cent., but more recently it has been nearer 80 per cent.
Lord RHODES: My Lords, I should just like to correct that. The figures are that the shipbuilding industry is supplying ships to the Merchant Navy. They supply 80 per cent. of the shipbuilding capacity but that only represents 30 per cent. of the requirements of the British Merchant Navy. So, as I said in my speech, that results in the position that we are net importers of ships.
Lord BRUCE of DONINGTON: My Lords, I should like to enlarge on the point that I made to the noble Lord. I think that the noble Lord, Lord Campbell of Croy, is in fact misinformed. If he will refer to the Select Committee report, he will see that it says:
"Up to 80 per cent. of the industry's annual merchant output"—
that is, the shipbuilding industry's output—
"is sold to British shipowners, representing about 30 per cent. of their total requirements",—
30 per cent. of British shipowners' requirements—
"thus the United Kingdom remains a net importer of ships".
Lord CAMPBELL of CROY: My Lords, I am very grateful for that correction. Of course it is that way round: it is that the British shipping industry is responsible for nearly 80 per cent. of the orders to the British shipyards and if I said it the other way round, I apologise.
5.46 p.m.
Viscount SIMON: My Lords, I too should like to say how grateful I and my colleagues on these Benches are for the exposition which the noble Lord, Lord Rhodes, has given us of this very useful

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report and to say how much I agree with him that the Commission's communication is a most valuable document. I had wondered what they had been doing but I was glad to hear that they have been going into this subject for some time. When the document came before us I thought it was rather late in the day, but it is satisfactory to note that the Commission have this very well in their sights and are taking steps to tackle the subject. As the noble Lord has said, it is quite impossible for us because, although I am happy to say that we are still a great shipping country and a not insignificant shipbuilding country, we cannot negotiate these things on our own.
In Britain we have already recognised that there must be a substantial reduction in our shipbuilding capacity. This was explicit when we were engaged in the nationalisation of the shipbuilding industry and it was even more explicit when we passed the Redundancy Payments Act. It is true of course, as the noble Lord said, that we in Britain have not increased our capacity for many years and, as British Shipbuilders said in their evidence—and I think it is worth repeating; your Lordships will find it at page 3 of the evidence—
"The present size of the British shipbuilding industry is modest in relation to the needs of a maritime nation strategically dependent on the import of most raw materials and a large volume of foodstuffs".
In that connection, I hope the noble Lord, Lord Rhodes, will forgive me if just question what he said about the strategic position. It is quite true, as he said, that warships are excluded from the matter which is under consideration, but we have a strategic need for merchant ships which is not shared by all other countries because they are not all islands like Britain—and islands with a very small native production of what we need for our industries.
Lord RHODES: My Lords, I agree entirely with what the noble Viscount has said. The remit that we had was for merchant ships, having in mind that the strategic element is not included in the Treaty of Rome, but I agree that it is a most important part of the question.
Viscount SIMON: My Lords, I fancy that the noble Lord and I are using the
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word "strategic" in a slightly different sense, but nevertheless I take his point. As the noble Lord, Lord Campbell of Croy, pointed out, because we have not increased our capacity we are in a good position to argue that it would be quite unreasonable for us to suffer the same cut as everyone else (and particularly some of the big industries that have latterly grown so large) when the time comes to agree internationally to some reduction. I think we shall find it politically very difficult to get our way in this. It is manifestly fair to us, but I am not sure that the other nations will think it is manifestly fair; they may have other points of view that they will put forward. In the end, I have a nasty feeling that, however reasonable this is to us, we shall find it very difficult to achieve, and we may have in the end to choose between accepting an unfair reduction or getting no agreement at all. If it comes to that, it is not going to be an easy decision to make.
I should like to make one point with regard to the 2·4 million compensated gross registered tonnage target. Here did have an advantage over the noble Lord, Lord Campbell of Croy, because I read Viscount Davignon's speech last week in the European Parliament; thought he made it perfectly clear that it had been misunderstood, that it was not put forward as a target but merely as a basis upon which to discuss a broad principle. If the noble Earl, Lord Bessborough, is able to intervene, I am sure he will be able to tell us about that, because he was at the meeting of the Parliament. I should like to turn now to another aspect of the Commission's communication which we have not touched upon very much. When I came to page 9, I was very pleased to read the statement:
"The first objective of Community policy on shipbuilding must be to make our yards competitive in the world market".
I regard that as a splendid positive statement. But here again it is, surely, a very difficult thing; as the Committee's report says, the desirability of this aim is obvious but they do not make any suggestions about it. Presumably, the intention is for the new shipbuilding committee, which it is proposed to set up, to follow this up and put forward detailed suggestions later on. But I must say that I find it very difficult to see how the shipbuilding industries of Europe are going to get

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themselves really competitive against people like the South Koreans. You have an enormous divergence in hourly rates of pay and in hours of work.
There is some talk about re-equipment and modernisation. We have done a lot of re-equipment and modernisation in our yards, and no doubt some are better than others, but on the whole the British shipbuilding industry is now in very good shape. Further modernisation and re-equipment can be done, I regret to say, only for the purpose of doing more by machines and less by the labour of people, which is again a very sad thing in the present state of our labour market. Perhaps our best hope is that improved industrial relations, which we were promised as one of the pay-offs of nationalisation, will lead eventually (dare we hope it?) to a single union in each yard. That, I believe, would make more difference to the cost of producing our ships in British yards than any other single factor.
I should like to say a few words about stimulating demand, which is again one of the objectives the Commission place before us in their document. I was interested to read in The Times this morning of a scrap and build scheme upon which it appears high hopes are being placed. I hope perhaps the noble Lord, Lord Inverforth, when he comes to speak, will be able to tell us something about that. It would be a splendid thing if we could get a scheme agreed. There have been a number of attempts, I understand, over the past few years, but they have all failed. A good scrap and build scheme—that means scrapping at least two ships for building one—could make a great difference both to the shipping industry and to the shipbuilding industry. The particular thing which is suggested—I do not think it is actually proposed—in the Commission's document is something different. That is the possibility of accelerating the fitting of segregated ballast tanks to existing tankers. We spoke about this in your Lordships' House in January of this year, when discussing the subject of pollution, and I think we agreed with both the shipping industry and the Government that, so far as pollution is concerned, this is not worth while, or rather not worth the money it would cost, because the effect on pollution would
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not be very great and the cost would be enormous.
However, what the Commission have suggested is something much wider than that. Normally we—certainly we on these Benches—deprecate finding temporary work for ailing industries rather than facing up to the need to contract them. But I think that in this case there are special circumstances which deserve to be considered. If it was possible by some magic wand to produce almost immediately a shipbuilding industry of the right size to deal with our needs in five years time—not only to deal with our needs but even to build the ships that we think we ought to be able to build, for ourselves and to sell abroad—that industry would still face five years of under-employment because of the great surplus of ships existing today. That being so, it seems to me there can be a case for a temporary job, like the fitting of segregated ballast tanks which will occupy the shipyards.
It will, incidentally, take ships off the market; first, the number that go off to be fitted, and then, when they come back, they have something like 15 per cent. less capacity. This might have the added effect of improving the freight market, about which the noble Lord, Lord Rhodes, spoke so feelingly; it is really in an abysmal condition and any little improvement would be a Godsend to shipowners. Might it not be worth while looking at this proposition, which would do all these things at the same time?
I was interested to see in the Commission's paper that in fact there are studies going on to look at the cost-benefit analysis of this kind of job. The cost to the British industry alone, your Lordships may remember, we were told, was about £150 million. That is a terrible sum of money; I do not believe any of your Lordships can really conceive what it is—unless by any chance one of the ex-Governors of the Bank of England is here, which I do not think is so. The only way we can get any conception of a figure like that is to see it in its context; what are the other figures in relation to this operation, what are the earnings of all these ships, what are their other expenses, what is the cost to the oil industry? I suspect that the oil industry, which managed somehow to get over a

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nearly four-fold increase in the price of oil a few years ago, would manage to get over a small increase in these abysmally low freight rates without really feeling it at all.
So I do hope that the Government will consider following up this idea to which the Commissioners have drawn attention, and which they tell us is being examined at the present time, I am not sure by whom. It is on page 19 of their report. They simply say:
"The introduction of such measures, the time taken to bring them into force and their scope, should depend on the cost-benefit studies currently being made".
I suppose they are being made by the Commission. May I close by asking the noble Lord, Lord Winterbottom—although I do not suppose he can reply to it today—to take that idea into his mind, and perhaps find out and let us know whether the Government will follow up that idea. It may be that, when the studies are done, it will be found to be completely uneconomic. I would say, if the scrap and build scheme I referred to earlier turns out to be a winner, it would probably be a much better way to do it. But I think it is worth considering this other proposition which has been put forward, tentatively, I think, by the Commission.
6 p.m.
Lord TREVELYAN: My Lords, I am most grateful to the noble Lord, Lord Rhodes, for having agreed, at my request, to introduce the report of the Sub-Committee which was afterwards approved by the Select Committee. He has given an account of the problem in his usual very forthright and clear manner. I especially felt moved by the portion of his speech which dealt with the human problems behind this matter. I can do little except perhaps sum up the views of the Commission and the Committee and some of those who gave evidence before us. That may be of some use although I fear that I shall be rather repetitive.
This is an extremely difficult problem which I fear will be with us for a long time and which I think we shall probably discuss on many future occasions. It is not our business in this debate to deal directly with the question how the shipbuilding industry will make itself competitive, although that is the centre of the
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affair. Our purpose is to form a view on the Commission's proposals and to determine how far the Community can be helpful to the industry in the present deplorable condition of world shipbuilding.
The Commission aims at a co-ordinated approach which will include a 45 per cent. contraction of the industry; a form of adaptation to future demand designed to make the industry competitive without assistance; redeployment of excess labour outside the industry; and the stimulation of demand by the introduction of antipollution, safety and social regulations. We have heard a good deal about those matters from the previous speakers. For these purposes the Commission proposes the co-ordination of aid—a matter which has already been dealt with in the fourth Directive—the use of the Regional and Social Funds, and loans by the investment bank, and a high level committee to monitor development of policy.
I should like to sum up some of the evidence that was given to the Committee. British shipbuilders want the continuation for a period of the intervention fund, but are confident that in the long term they can face competition without aid. They do not accept the indicative figure of production proposed by the Commission, as they consider that there is at least a chance of the situation improving in the early 1980s. They suggest that an industry of about the present size, that is, with a production capacity of about 1·2 million, gross registered tonnage (GRT) a year will be viable. The unions generally support the views of the shipbuilders and seem to come near to advocating a policy of subsidy with protection against non-EEC ships.
British shippers consider that a policy of maintaining a higher output than is justified by market conditions would have a disastrous effect on the shipping industry by exacerbating the problem of shipping capacity. They therefore support the ideas of the Commission. They were very firm and forthright about it. In the light of the evidence submitted by the Ministry of Defence, the Committee accept that a merchant shipbuilding capacity of a moderate size is necessary for strategic reasons, not least in support of the naval programme.

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The Government do not accept the Commission's figure for the reduction of capacity, but do not rule out a Community shipbuilding policy. There is general agreement on the Commission's analysis of the present state of the industry in the world as a whole. Your Lordships have heard from the noble Lord, Lord Rhodes, that the Committee believes that the objective of the Commission's communication, to create a competitive European shipbuilding industry which can meet a significant proportion of the Community's requirement for ships, is correct and will be widely accepted. It does not doubt that national policies to meet the crisis, within the frame work of the fourth Directive, will continue and that other measures such as scrap and build programmes, may be adopted by Member States. But it considers that a Community policy, in addition to those national measures, is also desirable.
The aims of the British industry, to survive the slump and to be competitive in the long term, are not incompatible with negotiations through the Community. There may be difficulties in taking such negotiations as far as the Commission's communication suggests, but the Community is an important channel of discussion and should not be neglected. If there is to be an international agreement on shipbuilding capacities, there must first be agreement among the Members of the Community, and there will inevitably be a series of international negotiations through the OECD in which the Community has had a common negotiating position since 1976.
The Committee does not consider that the precise figure of the quantitative indicator proposed by the Commission is sufficiently reliable to be adopted as a firm figure for capacity in the early 1980s, but the Commission's general approach towards reorganisation by reducing capacity in an orderly fashion and increasing competitiveness is correct. It is obviously going to be difficult to apportion capacity among the Member States, but if the Community's industry is forced to contract, that is a problem which must be faced, and agreement between the Member States will strengthen their negotiating position within and outside the OECD.
There is much to be said for the Commission's detailed proposals, although
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they will not solve the major problems. However, these proposals could be usefully developed further during discussions within the Community. The Committee notes the Government's doubts as to whether a senior advisory committee is necessary. However, it considers that a standing body of that type might have a useful role to play in developing an internal Community policy on shipbuilding as well as a common position for external negotiations. In any case, if a committee is established for this purpose, the United Kingdom should surely be represented on it.
The main question is: What conclusions, if any, one can draw? There have been plenty of suggestions from the Committee, but I do not think that at this stage our conclusion can be any more precise than that we should be active on two fronts—within the Community and in our national efforts to make our industry competitive.
6.8 p.m.
Viscount ROCHDALE: My Lords, first I should like to join with other noble Lords who have spoken and thank the noble Lord, Lord Rhodes, for introducing this debate this afternoon. I should also like to thank personally the noble Lord, Lord Trevelyan, who has just spoken, for inviting me to join his Sub-Committee B and for enabling me to take some small part in the study of the communication which we made and in the preparation of the report.
A few years ago, the question which really stems from this whole discussion of the relative capacity of the shipbuilding industry as regards likely orders was one that affected me personally in the work that I was then doing, but it does not do so now. However, I have kept my eyes open as regards this problem since then and it is obviously one of great interest. Two main questions come to mind as regards this matter. First, how has this enormous imbalance in capacity as regards likely orders come about? We have been told that the figures show an excess capacity of 40 to 50 per cent., which is an enormous imbalance. How has that come about? Secondly, how is it that this has not come to a head? I shall not say that it has not been foreseen, because it obviously has been foreseen, but how has it not come to a head sooner than this?

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I should like to deal with the first of those two questions and I must apologise to your Lordships if I tend to repeat some of the figures that other noble Lords have quoted from the report. Undoubtedly the report gives us a number of very important figures and it is generally agreed that those figures come from an excellent source and can be assumed to be correct. However, I, personally, find it difficult to assess their relative importance; I find it very difficult to get an overall picture of the magnitude of the problem. It seems to me that, especially if we accept, as has been mentioned this afternoon, that the industry is a cyclical industry, we want to be very careful not to think that if there were only an upturn in the trade cycle we should return to the satisfactory position of the past. That is undoubtedly not the fact.
Therefore, I should like to look back quite a few years, to the period between the 1950s and 1960s, to remember a few of the underlying changes—which are sometimes forgotton—which have taken place. Some of those changes were of a technological nature; some were of a commercial nature, and no doubt some were of a political nature, although I use the word "politics" in its widest sense and am not talking about British politics.
The first point that comes to my mind and which has given rise to a tremendous gap in the British shipbuilding industry and in other countries' shipbuilding industries has, of course, been the virtual elimination of the passenger liner, which has been replaced by the aircraft. One can virtually say that, apart from a few cruise ships and one or two others, there has for some time now been no new building of passenger liners. Then there has been the tremendous increase in the size of the bulk carriers: the ore carriers, the grain carriers, the coal and phosphate carriers, and so on. That has had its effect. The effect of Suez was to stimulate tremendously the fantastic growth in the so-called VLCCs, the very large crude carriers.
The other quite remarkable development has been the so-called container revolution, the rapid development of which, has, I think, exceeded even the most sanguine hopes of its original protagonists. This has come about due
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to the size and speed of the ships, but more important than anything else has been the tremendous ability to turn the ships round in port in a very short time; one of those great ships can be turned round in a matter of two or three days, whereas in days done by it took many weeks, even running into months. The effect of this is—and this has been quoted to me from very good authoritative sources—that one of these big container ships can be said to displace 10 of the traditional tramp ships of a few years ago.
The one point that has been much raised this afternoon is the fiasco of the tanker situation. I remember very well that towards the end of the 1960s there were some shipyards which were really scratching round for business. Yet, as the noble Lord, Lord Rhodes, mentioned and as is mentioned in paragraph 8 of the report, by 1973 shipowners were jostling for places in the queue so that they could be sure of their orders being placed on the apparent assumption that the increase in the need to convey crude oil round the world would go on for ever. In fact, 75 per cent. of orders then placed were for tankers.
What was the result? The result was that new shipyards were started and old ones were expanded. Countries that did not have a shipyard were encouraged to build one; they probably already had the wish to do so, but this stimulated them. Today we have heard of South Korea, but Spain, Brazil, Mexico and so on were among them. Japan itself expanded enormously. Then what happened? The great OPEC decision was made and in 1975 the bubble burst, with catastrophic effects on the shipbuilding industry.
I have mentioned all these different facts because it is not only the tanker situation that has created the trouble. If and when, in time to come, those over-capacities, over-provision and so on are resolved, there will still be the cumulative effect of these other factors which I mentioned a moment ago. Figures for the tanker effect have been quoted and I do not want to repeat them too much; 32 per cent. of the present tanker fleet is surplus. However, I should like to mention one further figure which has not been given this afternoon and which I think is significant of the position as it was. I must apologise to your Lordships

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because I mentioned this figure two years ago during the Second Reading debate on the Aircraft and Shipbuilding Industry Bill. However, I think that it very significant indeed that even at that time, in September 1976, no less than 250 orders for tankers, or 55 million gross registered tons, had been cancelled. That is an astonishing figure when one compares it with the situation as it exists today.
One has only to think what all that means in relation to the position in the shipyards to appreciate what a desperate situation we are in. How timely it is that something is being said about it now, that it is being discussed both in Europe and in your Lordships' House; but how inscrutable the problem is. Of course, one's natural feeling is to say "Oh well, the cycle will turn; there will be an upsurge in trade; more ships will be brought back into service; more profits will be made so that new ships can be built to replace old ones and so the order books will be filled".
But, of course, that would be a complete over-simplification of a very complex matter, because there are these underlying structural effects in the shipbuilding industry, which I mentioned earlier. I do not think that this has been mentioned today, but increasing inroads are being made by the Soviet activities in the maritime world, which are enormous. Therefore, even with the 4 per cent. economic growth, which is mentioned in the report and which has been mentioned today as probably being far too optimistic, we cone down to a possible production needed of no more than 12 million compensated gross registered tons compared with a figure of 19·5 million in 1975.
We come to this very difficult problem which every noble Lord has mentioned this afternoon: how are we going to divide that up? The question is: how are we to deal with countries outside the OECD when they are bent on retaining all the expansion they already have and probably increasing it? Let me quote one remark that was mentioned to me only two days ago when I was discussing the question of prices quoted for ships from the great shipyard, the Hyundai shipyard, in South Korea. I was told—and I received this second-hand—that somebody there had said, "We don't
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bother any more to cost our ships when we tender. All we do is to find out the market price, then remove a satisfactory percentage from that so as to be certain of getting the order." If that is the situation, and I do not think that it is exaggerated, what hope is there of coming to an agreement limiting the different countries round the world? I find it difficult to see how much further arrangement we can even hope to get from Japan.
Of course, it is clear that the Commission recognise this only too well, But, as I read their communiction, they recognise that the squeeze must be more than ever on Community shipyards, and so—and I need not go into the details because everyone has said this —they come down to a figure of 2·4 million compensated gross registered tons which, to my mind, can only be regarded almost as a residue figure, which is a most unsatisfactory way of arriving at any figure at all. It relates to a 46 per cent. reduction between 1975 and 1980, which is quite disproportionate and unfair to the Community compared with the rest of the world.
One noble Lord has already mentioned that the British shipbuilding industry between, say, 1950 and 1975 has cut its employment by 45 per cent. while retaining the output of roughly 1·2 million tonnes. I cannot help commenting on that, bearing in mind the lengthy debate on productivity that we held in your Lordships' House only a week ago today. To some extent, of course, that drop, to be fair, must be due to the fact that the ships built more recently are far less sophisticated and need far fewer outfitting trades than the ships in the 1950s, which were much more sophisticated; more passenger liners, and so on, were needed. But, at the same time, some of that is undoubtedly due to the fact that there has been considerable technological investment in the industry and that productivity has increased. That is something that we do not want to forget, because it is a very good point.
Where does one go from here? I would entirely agree with other noble Lords who say that one of the most important things is that the Community and, if possible, the OECD, should speak with one voice: we should do our utmost to try to find, if we possibly can, some form of common maritime policy. But,

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if we are to succeed, one ingredient is absolutely essential, and that must be that we make our own shipbuilding as competitive as possible so that that one voice carries the weight in world discussions. I find it difficult to see that the question of responsibility can really lie with the Community. It must surely be more a national matter, and indeed an individual company matter.
This leads me to say a word—this may appear rather unnecessary—about what is the object of shipbuilding. The object of shipbuilding is to service the shipping industry. It is therefore terribly important that, in trying to preserve the shipbuilding industry, we do not do so, as other noble Lords have said, at the expense of the shipping industry by agreeing to what could all too easily be an unhealthy degree of subsidies, creating the cut-throat competition which has already been referred to and which, in turn, will end up reducing the number of orders that the shipping industry can give to the shipbuilders.
There was a little interchange a short time ago as to the percentage that the British yards were providing for British shipowners. I agree with noble Lords who said that it was 30 per cent., although it represented 70 per cent. to 80 per cent. of the production of British Shipbuilders. I think we are all clear about that now. But that is on the basis of 1·2 million tons production per year. In the light of the 30 per cent., and the 70 per cent. to 80 per cent., it is difficult to see how one could justify to oneself any permanent reduction of that figure. I say "permanent reduction" of that figure. On the other hand, if that is our argument, how do we justify that argument to the Community and the outside world? Again, it comes back to competitiveness, bearing in mind that, generally speaking, as the noble Viscount, Lord Simon, said, in many of our yards we have really first-class, up-to-date equipment. We have to make the best use of that that we possibly can.
That brings us to the personal matter: the inevitability of redundancies. The Government have recognised this. Reference has been made to the Shipyard Redundancy Bill, which we debated not so long ago. I think my noble friend has put
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a question to the Government on how this is getting on. It is difficult to know how to handle this, but, on the other hand, the sooner it can be handled the better it will be for the shipyards, if for no other reason than that uncertainty as to the future creates bad morale. Morale in some shipyards is undoubtedly not at all good. One knows of not very good timekeeping, and of people coming out of the yards before their time, five o'clock, or whatever it is. That shows bad morale. It is understandable, but bad morale breeds poor competitiveness.
To sum up, I agree in broad terms with the views of the Committee. I certainly agree that we must try to have one European voice; that we must aim for a Community maritime policy. I would agree with the need for some form of Standing Committee. I realise that it is a fairly controversial matter as to how it should he formed and of whom it should consist, but it is important that there should be some form of Standing Committee to monitor what is going on and to feed those who have to carry out the world discussions.
I agree about the desirability and the importance, of making use of any transitional help—the Social Fund, the Regional Fund—that one can. But, having agreed so far (and this is absolutely no criticism of my colleagues on the Committee), I must say that we have not in fact got very far. That brings me to the answer, which I have not given, to the question I asked at the outset—namely, how is it that we have got nowhere? I think the answer is that it is the nature of the beast; it is such a difficult problem that it is hard to see how we could have got further. I would only say the report will have done a good job if it helps to clarify the position, if it helps to drive home what a serious position the industry is in and if it makes us recognise that there is no quick answer; We must move step by step and hope that, with everybody trying to do their best, a solution will ultimately result.
6.31 p.m.
Lord INVERFORTH: My Lords, as a shipowner I have listened to the debate with interest, but I fear that my own morale is not very high at the moment. It is a very tricky subject, but I am grateful to the noble Lord, Lord Rhodes, for

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giving us an opportunity to air the many difficulties which are worrying us. I am not only a British shipowner but a customer of our own shipyards. Indeed, on completion of our current building programme, my company will have built since the war 84 ships, all in the United Kingdom, at a cost of some £200 million. We can say that represents a 100 per cent. British order in every way. This debate is therefore of particular interest to me, as we may wish to order further ships in the future, once the climate changes and world trade picks up.
The world's shipyards are producing ships far faster than they are receiving new orders, and in the last five years the total world order book has continually declined, so that today many countries have only a few months' work left. Japan, Sweden and Norway have responded to that situation by announcing specific plans to reduce capacity. Indeed, all OECD countries, including the United Kingdom, agreed two years ago that reductions were necessary and Her Majesty's Ministers have made no secret of that fact. I understand that many shipyard workers have already been switched from merchant to naval shipbuilding, and the Shipbuilding (Redundancy Payments) Act, which your Lordships approved two months ago, will assist a further reduction.
British shipbuilding has in fact thus cut down its merchant shipbuilding capacity, and will cut it down further, but because no figures are given to the public we are not given credit in Europe for what we are doing to implement the policy agreed with our colleagues in the EEC and OECD. Indeed, only a fortnight ago, when the EEC Council of Ministers discussed the Commission communication which we are now considering, the United Kingdom, apparently alone, opposed a common EEC position on shipbuilding and has shown little enthusiasm even for forecasts. Accordingly, the impression is given that the Government will do anything to secure new orders, even giving ships away. Such a policy must harm British shipping and delude United Kingdom shipbuilders. Accordingly, on behalf of the customers of United Kingdom shipyards, I ask the British Government to
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take this opportunity to emphasise that the British, like their colleagues abroad, are determined to discourage the artificial creation of new orders.
Last week the European Parliament was discussing the communication which is before the House today and many sensible things were said; but an old hobbyhorse raised its head again, namely, the idea that EEC shipowners should he required to build most or all of their ships in EEC yards. Those who advocate this protectionist line make a comparison with the EEC agricultural policy on imports, but the comparison is false. The consumers of the Community's agricultural products live in the Community and are captive customers. The consumers of the Community's shipping services are Malayan rubber growers, Japanese manufacturers and Australian iron-ore producers. They are not captive customers, and if we want to carry their cargoes we, as shipowners, must be competitive, and we can be that only if our ships have been built at competitive prices. I know that from personal experience; as I said, my company has always built in the EEC, indeed in the United Kingdom, but we are mainly cross-traders. We have no protected home market and we earn our living and the country's by carrying cargoes across the Pacific and Indian Oceans, for example. For 1977, my company's own fleet earned over £28 million towards the balance of payments. The Intervention Fund and the stimulus of foreign competition have enabled EEC shipyards to give us competitive prices, but once they had a monopoly those conditions would no longer apply. I hope therefore that we shall hear no more of that particular idea.
My noble friend Lord Simon asked about a report in The Times today concerning a scrap-and-build scheme being proposed by the International Maritime Industries Forum. That is not a body to which I belong and I am afraid I cannot answer his question because I have not looked fully at The Times article. Anybody looking for a solution deserves encouragement, but your Lordships should not underestimate the practical problems in devising a scheme which will produce new orders without increasing over-tonnaging or costing more than Governments are prepared to pay. If this new solution

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helps shipbuilders and shipowners, both will be delighted. Looking at many scrap-and-build schemes, it is hard to find one that is fair to everybody. When my company's current building programme is completed the average age of the fleet will be eight years; it seems rather a shame to start scrapping ships of that age. On the other hand, companies with very old ships may be delighted.
The report of the Select Committee is most valuable and we must be grateful to the noble Lords who produced it. I only urge that we encourage others to read it and be guided by it. The Commission has also done a splendid job in educating us all to the realities, and that in itself is a valuable achievement. There is no easy solution, but I remain hopeful that gradually the EEC and its OECD partners will adjust to the new world, and I hope that when the time comes there will be a viable British shipbuilding industry to build ships for my company, and the more the better.
Baroness WARD of NORTH TYNESIDE: My Lords, may I ask the noble Lord, being a shipowner, to make an additional statement! He said his firm had always ordered ships in United Kingdom yards. Would he add that British shipowners have over the years ordered about 70 per cent. of their tonnage in United Kingdom shipyards and a higher figure in EEC yards as a whole? It is vital in this debate that that point is emphasised. Having listened with great interest to his helpful speech, I should be grateful if he would confirm what the British shipping people have told me in a note.
Lord INVERFORTH: I believe that is absolutely true, my Lords. We have ourselves always built here, not just out of sentiment but because we have always had an extremely good bargain from British shipyards; Harland and Wolff, Swan Hunters, as it was in the old days, and Doxford, now Sunderland Shipbuilders. I believe that much has had to do with the type of tonnage; we are using a quite sophisticated cargo liner which has always been built extremely well here. Perhaps if we had been building the big bulkers or tankers we might have gone to Japan and got a better bargain there. Certainly the tonnage
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influences the situation; and of course delivery dates are important. We have been lucky and have not had many vessels delivered late, though I know other shipowners have had a ghastly experience in that respect. We, as an industry, have supported the United Kingdom and the EEC countries because they build fine ships. We have had many container ships from them and they have concentrated on that field. I should have thought therefore that as owners we have a good record for supporting both at home and on the Continent, in the EEC.
Lord CAMPBELL of CROY: My Lords, before the noble Lord sits down, and in no way detracting from what he said, I should perhaps record that the way in which my noble friend Lady Ward of North Tyneside read out that piece was to make the same inadvertent mistake that I made in my speech where I emphasised the 70 per cent. to 80 per cent. it is 70 per cent. to 80 per cent. of the United Kingdom shipbuilding production which the British shipowners have used, but it has been 30 per cent. of their ship orders. As I was the first to make that mistake and my noble friend Lord Rochdale and the noble Lord, Lord Bruce of Donington, redressed it, I should like for the record again to put it right.
Viscount SIMON: My Lords, as this matter has been raised, I wonder whether could put a point because I still find the figures almost impossible to understand. The lower figure of 70 per cent. of the output of the British yards, which is 1·2 million a year, comes to 0·84 million a year. We are told that that is 30 per cent. of the British requirement. That makes the British tonnage requirement 2·8 million a year, and yet at another point we are told that 1·2 million is sufficient to look after the British tonnage requirement. Is this because in future British tonnage is going to be less?
6.42 p.m.
The Earl of BESSBOROUGH: My Lords, I had not intended to speak in this debate but as my noble friend Lord Campbell of Croy referred to me and to the fact that I was the draftsman of the Opinion of the Budget Committee of the European Parliament, and in the presence

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too of the noble Lord, Lord Bruce of Donington, who is one of the great experts on the Community budget, I thought perhaps I should just speak very briefly. I do not intend to repeat what I said at some length during a three and a half hour debate in the European Parliament last week about the budgetary aspects, but there are just a few points which I should raise.
Before raising them very briefly I should like, with others, to congratulate the noble Lord, Lord Rhodes, and the noble Lord, Lord Trevelyan, on having produced this report and I should immediately, in parenthesis, take this opportunity of saying that the reports of your Lordships' Select Committee are the best reports produced by any House of Parliament in the whole of the Community, and the demand for them is quite astonishing. All my colleagues in the European Parliament come to me when a report has come out; it is hardly off the press before they say, "Have you got the Lords Select Committee report"—on shipbuilding or aerospace, or whatever it may be—and our Select Committee is to be congratulated in that way on doing a remarkable job.
As I say, I am not going to repeat all the arguments which I put forward in the European Parliament about the specific Commission proposals. I very much agree with the opening report of Mr. John Prescott for the Economic and Monetary Affairs Committee. It was a very thorough piece of work. I may say also that I did a thorough piece of work in so far as I wrote to, I think no fewer than 40 different shipbuilding firms or groups of firms in the Community, and as a result we have this 100-page report—which, I regret to say, probably most noble Lords have not actually read although I think it is worth reading—with its annexes of the replies from all the different firms. Both Mr. Prescott and I worked very hard on this subject and both committees met three or four times to discuss it.
One of the main points I want to make is that nowhere is it stated in the Commission proposals what the actual charge would be on the Community annual budget as such. Certain existing financing instruments, which the noble Lord, Lord Bruce of Donington, knows well, will be called upon, such as the Regional
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Fund and the Social Fund, as well as Article 375 which was created during the last budgetary procedure and which is designed to provide some economic aid to industries in distress. However, the amounts available in these different budgetary items are limited—usually as a result of a fairly restrictive attitude by the Council of Ministers—and it is difficult to see how they could be expanded significantly to cope with the extra task which arises specifically from these Commission proposals.
Another element—and I am just glossing the various points which I made in Luxembourg—which particularly concerned me was that the Commission had not troubled to take into account the differing situations within our Member States. The crisis in shipbuilding, as all noble Lords who have spoken in this debate know better than I do, is not an entirely new phenomenon. In the United Kingdom we have just passed, as various noble Lords have said, a Shipbuilding (Redundancy Payments) Act which affects very closely the relevance of the Commission's proposals and which does not seem to have been taken into account by the Commission. Moreover, the Government set up, as we have also heard, a Shipbuilding Intervention Fund. Do we also need a Community Intervention Fund? Again, that fund was mentioned by the Commission in its communication. I fear therefore, as I said in Luxembourg, that the Commission's policy document is largely overtaken by events.
The problems facing the industry are clearly of a social and regional character as well as of an economic one. The question is really that which the noble Viscount, Lord Rochdale, raised just now. I put it like this: should the Community assume responsibility for this crisis? I ask the question not only because the noble Viscount, Lord Rochdale, raised it, but also because many members of my own Budget Committee raised it and expressed their concern, as they have before, that the Commission is too willing to take on vast responsibilities in different sectors undergoing major crises. if the Community's responsibility was accepted, and I am not covering only the shipbuilding industry, it would involve massive financial commitment far beyond the limits of the Community's own resources as at present defined.

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Finally, my Lords, I would say that there is some merit in the Commission considering this matter, and it has been, I hope, persuaded to revise its proposals, to persevere in elaborating new proposals which can come back to the committees of the European Parliament—and I trust to the Select Committee in your Lordships' House—and also be discussed again in both Parliaments in plenary. I hope that by that time we shall have had some rather harder information. Viscount Davignon, although he made a very interesting reply last Wednesday, certainly did not give us all the hard information which the Budget Committee, in particular, wanted.
6.49 p.m.
Lord BRUCE of DONINGTON: My Lords, it gives me particular pleasure to have the opportunity of following the noble Earl, Lord Bessborough, in the contribution he has just made. I had the privilege of working next door to him in the Budget Committee of the European Parliament and I was able to hear the very effective speech he delivered on this subject in the European Parliament last week.
Before proceeding to the subject matter of this debate, with which I can assure your Lordships I shall deal with the utmost brevity, I should like to pay a tribute to my noble friend Lord Rhodes for the way in which he introduced the report of the Select Committee this afternoon. I also wish to endorse the remarks of the noble Earl, Lord Bessborough, about the quality of the reports which come from the Select Committees of this House. I entirely agree with everything he has said about this. It is common knowledge in the European Parliament that the reports of the Select Committee of the House of Lords are of the highest quality, comparable with—indeed, much better than—those from many other Member States. I shall not on this occasion mention another place.
I have a particular interest in the subject. Apart from being a member of the Budget Committee of the European Parliament, I also have the honour of being the chairman of the Regional Planning and Transport Committee of the European Parliament. It so happens that
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the very regions which are the underprivileged regions in the Community, and whose interests are my Committee's special study, also contain, by coincidence, most of the shipyards that are likely to be affected by any mass redundancies, or by any small-scale redundancies, for that matter.
I should like to pass to the section of the Commission's proposals which suggests that measures should be taken to stimulate demand, for instance, by establishing more stringent environmental and safety factors. It may be that there are too many ships afloat at this time. I should also like to tell your Lordships that there are too many substandard ships afloat at this time, and they are not only a menace to the crews who sail many of them, but are also a menace in terms of accidents at sea and consequent pollution.
A fortnight ago, I had the opportunity of conducting a public inquiry in Paris into the prevention of accidents at sea and the avoidance of consequential pollution, in the course of which I and my committee had the opportunity of listening to experts from shipbuilders, shipowners and oil companies, as well as to masters and crews, and to representatives from insurance and salvage interests, and from maritime regions of the Community, as well as from the Commission itself. Some quite alarming evidence began to emerge. It appears that as much as 10 per cent. of the tonnage afloat is substandard, anyway, and that, if steps were taken to ensure that the standards set by international conventions were kept, about 10 per cent. would have to be scrapped, and a very significant number would have to be replaced in order to deal with the current trend.
Why is this not done? Why are there so many substandard ships sailing the seas at present? There is a very simple reason: from time to time international conventions are held for the purpose of establishing standards of ship design and construction, facilities for repair and inspections, and the training of ships' crews, as well as a whole series of other matters. Many States throughout the world have signed these conventions, and everybody assumes that everything will be all right. But that is not so, because until the conventions are ratified by States—and some of them require 100 per cent. ratification

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—they do not come into force. So at present we have a number of very admirable conventions drawn up by IMCO (the Inter-Governmental Maritime Consultative Organisation, an agency of UNO) which have laid down standards to which large numbers of countries have assented, and which, if they were applied, and applied strictly, would result in an immediate increase in the demand for shipping. This is what the Commission mean when they say that measures should be taken to stimulate demand, for instance, by establishing more stringent environmental and safety standards.
Some of the evidence we heard in Paris was blood-curdling: for instance, there are a number of ships afloat in the hope that they may sink, so that the insurance money on them may be collected. I can produce the evidence to the noble Lords, if required. Remarkably enough, in this field the United Kingdom is one of the States in Europe that has ratified the most conventions. We in the United Kingdom are very often accused of lagging behind the rest of Europe in many respects in terms of being good Community Members. I must tell your Lordships that the United Kingdom is top of the league in ratifying the conventions and that there are many other States belonging to the Community which, in varying stages come well below, down to the Republic of Ireland which has so far ratified only one. Until these conventions are ratified, they cannot be enforced, and if they cannot be enforced, substandard ships will continue to float across the oceans, and in many cases will be a menace to other shipping and certainly a menace to the coasts close to which they sail.
The Commission's proposals in Document 161/78 to the Council, following the "Amoco Cadiz" disaster, drafted a Directive for issue by the Council, requiring the Member States of the Community to ratify forthwith all the conventions which they had not yet signed. This does not apply to the United Kingdom; the United Kingdom has ratified them all. I noted with regret that, for some reason or another, these proposals were vetoed at the last Council of Ministers by one or two Member States —not the United Kingdom—as a result of which the proposals have been watered down, and all the Council did at its last
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meeting was to take note of the Commission's requirements and to recommend them to other Members.
This lies at the heart of the problem. Not for one moment am I pretending that the increase in demand which would result from the strict enforcement of standards would eliminate the problem with which we are confronted; but I am saying that, when we are talking about redundancies in shipyards and reductions in capacity, we should remember that human individuals are involved in this industry and that they have spent their lives contributing their skills to it. Therefore, if we can do anything to contribute to a minimisation of the redundancy and the cut-backs that the Commission thinks are necessary, surely we should do so. I invite Her Majesty's Government to use all possible pressure at Council of Minister level to see that the other recalcitrant Member States of the Community put their money where their mouths originally were when they signed the conventions and in fact ratify them without any further delay.
I pass to a further point which arises from the question which I addressed to the noble Lord, Lord Campbell of Croy, (which he was kind enough to correct), and in which I pointed out, as the Select Committee did, that only 30 per cent. of the requirements of British shipowners came from British yards. I am very happy to congratulate the noble Lord, Lord Inverforth, upon the 100 per cent. record of his company. I do not know what further words of felicitation I can offer him in the face of such a record, but quite clearly this does not apply all the way through the shipbuilding industry in the United Kingdom. There are very good reasons why. The noble Lord, Lord Campbell of Croy, referred in the course of his speech to competition from Japan; he also referred to South Korea and Brazil. Three or four weeks ago the Economist pointed out, with great succinctness that wage levels in South Korea are one eighth of those in the United Kingdom, and the wages in Brazil, similarly. When this is translated into European terms as distinct from British terms—because British wage levels are lower than those in the remainder of the EEC—one can see immediately what a competitive advantage countries like South Korea and Brazil have.

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My Lords, we have to address ourselves to this question: How is it that competition can be offered from that quarter, where there are these low wage levels? The answer, my Lords—and the sooner we in the United Kingdom face it, the better —is that at a time when United Kingdom industry needs further investment from the capital resources of those that own the capital here, it is United Kingdom capital that is very largely responsible for the financing of South Korean shipyards and also shipyards in Brazil. I am not suggesting that Her Majesty's Government can do anything about this, but it is a fact that should be known in case, sometimes, shipowners are tempted or are prone—I do not mean the noble Lord, Lord Inverforth—to shed crocodile tears about what is happening within the British shipbuilding industry; because this is in fact what happens. In the way we organise our economy and our finance in Britain, financed capital itself is partly responsible for the competition from South Korea and Brazil which is endangering the continuance, not only of British shipyards but also of shipyards in Brest and other ports in other countries in Europe.
I repeat: there is nothing that Her Majesty's Government can do about this under existing legislation, but it might be a matter that Her Majesty's Government may see fit to consider when adopting certain taxation policies, certain intervention policies and certain subsidy policies in aid of British industry; and it might be reasonable and wise for the Community as a whole, if there are going to be aids to shipowners in the Community and in the United Kingdom, to stipulate that they should place their shipping orders in the Community and, to some extent, also in the United Kingdom. This does not seem to me to be an unreasonable stipulation.
My Lords, that is all I have to say on that subject. I return briefly to my original theme, which I hope will be taken to heart by Her Majesty's Government. I hope that, within the Community, in which the noble Earl, Lord Bessborough, and myself have some joint interest, Her Majesty's Government, in the Council of Ministers, will take the greatest possible energetic steps, first of all to ensure that the remainder of our Community colleagues
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follow Britain's example and ratify these international conventions, and then to use their best endeavours within the Community to ensure that when the Community have acted as one in this matter they should then, as a Community, with all the political and economic power possessed by that Community, bring pressure to bear upon the remainder of the recalcitrant nations, so that the conventions initiated and organised by IMCO can be brought into effect, the demand stimulated and accidents at sea and consequent pollution avoided.
7.4 p.m.
Lord WINTERBOTTOM: My Lords, my first duty is to congratulate the Select Committee on its excellent report, and, in particular, to thank my noble friend Lord Rhodes for introducing it. He said that the Committee had done its work painstakingly. Her Majesty's Government agree with that view, and find that there is really very little in the report with which the Government would wish to disagree. But perhaps before I deal with the report itself I could say a few words of a general kind about the Government's view of the need for a Community policy, and later in my speech I shall endeavour to answer certain questions put to me by noble Lords, provided they will not begrudge me the time for doing so.
The Government naturally support the principle of a Community policy for shipbuilding. We have always made this plain, and we welcome the opportunity presented by the Committee's report, both to learn the views of the House and to explain to the House our own views on this important but often difficult and controversial subject. I have said that we support the idea of a Community shipbuilding policy. It is worth pointing out that the communication from the Commission which is before us today is not the first such document. About two years ago the Commission produced another communication on shipbuilding which suggested the need for policies which would ensure that the Community did not have to bear more than its fair share of the burden which would result from the huge drop in world output. We, as a nation, waited in vain for such a policy; and in the end we had to lead the way by introducing our own domestic

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policy, the Shipbuilding Intervention Fund, without which the United Kingdom shipbuilding industry would have collapsed virtually overnight. That fund has helped in some measure to reduce the gross imbalance in the distribution of new orders between ourselves and Japan, on the one hand, and ourselves and certain non-OECD competitors, on the other.
Most other Community Member States have followed suit in one way or another and to a greater or lesser degree; and in due course the Commission itself recognised the need for a co-ordinated policy of this kind and introduced the Fourth Directive on aids to shipbuilding, which blessed the United Kingdom, Dutch and French schemes retrospectively, so to speak. But this was not a Community shipbuilding policy in the real sense. It was simply a recognition by the Commission's Competition Directorate that, in the absence of any common Community policy to ensure that we received a reasonable level of orders, Member States would have to plough their own furrows; and, that being so, it was essential, not only to give the necessary general dispensation from the Treaty for the introduction of production aids, but also to have some co-ordinating mechanism and some ground rules so as to ensure that these aid schemes genuinely brought new orders to the Community and not simply redistributed the few orders we already had inside the Community.
So we still had to await Commission proposals for a genuine common policy; and I have to say that when they came, in the form of the document which is the subject of your Lordships' Select Committee's report, they came as something of a disappointment. This was not so much because we disagreed with everything that the Commission suggested—far from it, as your Lordships will see—but because in our view the emphasis was put wholly on the wrong aspect. Noble Lords will remember the publicity which attended the publication of the Commission's communication. It concentrated almost exclusively on the need for drastic reductions in the size of the industry. The Commission even gave the precise level to which that reduction should go: 2·4 million compensated gross registered tons —not 2·5 million or 2 million or 3 million, but 2·4 million. I think the Commission
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now accepts that this was not a reasonable suggestion to make. The reasons are fairly obvious. The forecast on which it is based is two years out of date; it is also based on the lowest point of the demand cycle in a notoriously cyclical industry; it is a defeatist kind of policy; and it takes no account of social, industrial and political realities. But if we set this point aside and examine the document afresh, we find that there is not much between us. What kind of a Community policy would this Government like to see? I think we have to look only at our own policies for the answer to that question, for the fact is, my Lords, that we have anticipated just about every proposal the Commission has made.
Let us begin with restructuring. No one disputes that the British shipbuilding industry was not well placed to compete effectively against modern competition from the Far East and West. The industry needed reorganising and reinvigorating; and public ownership, we believe, is the means by which that can best be achieved. Our objective, and that of British Shipbuilders, is to make our industry efficient and enthusiastic enough to compete with anyone on level terms. Much work has already been accomplished to that end, as noble Lords have already pointed out, and much more is being and will be done. This is the first step towards the fundamental objective of a Community shipbuilding policy.
Restructuring takes time, however; and in the meantime competition for orders remains fierce, and it is our firm belief that no shipbuilder is today selling ships at an economic price. Our second step had to be to ensure the survival of our industry under those conditions, while the process of reorganisation and restructuring went on. That is why the Government introduced the Intervention Fund for shipbuilding, to slow down as best we could the dramatic drop in our flow of orders, which was out of all proportion to the average drop in world demand. The success of that policy last year is clear.
Our third step was to introduce the Shipbuilding (Redundancy Payments) Act. Let me say at once that the Government have never denied that there will have to be some contraction of the shipbuilding industry in this country. We cannot

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avoid it. World demand this year may well be as low as 7 million compensated gross registered tons; that is probably about a third of real world capacity. For nearly four years, orders have been running at about two-thirds of world capacity. No one, not even the Japanese, can escape the consequences of a slump of that magnitude. But here is where our approach differs from that of the Commission. Our policy is to keep that contraction to the minimum compatible with the order situation; not to set arbitrary targets which become self-fulfilling prophecies.
A noble Lord: Hear, hear!
Lord WINTERBOTTOM: My Lords, I am grateful to my noble friend. I think that this is absolutely fundamental. We are not taking a negative and self-defeatist attitude towards the problem. Shipbuilding, in our view, is not an industry which lends itself to such treatment; any policy needs to be a flexible one, and fully responsive to changes in the situation. It has to be a humane one, and it has to be industrially realistic. Of course, if there are not enough orders to go round, people will be without work, and it is right that the orders we win should go to the most competitive yards. But it would be neither sensible, practical nor humane to say that we shall shut down so much capacity here this year, so much there next year and so on; and if this is not practicable in a national context, how much less practicable is it in a Community context?
My Lords, the Commission also suggests that shipyards should diversify into other activities, and that new industries should be created to absorb surplus shipbuilding labour in the shipbuilding areas. Already, British Shipbuilders has reduced its employment in merchant shipbuilding, the sector affected by the crisis, by some 22 per cent, as compared with 1974. This has mostly been the result of an extension of the Government's warship building programme, but British Shipbuilders are also exploring other possibilities.
The noble Lord, Lord Campbell of Croy, raised the question of building warships as a speculative venture. At the moment, no speculative warships are planned or being built; but British Shipbuilders are, naturally, looking hard
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for new warship orders and, if they think that advance building would assist sales, they would, no doubt, want to consult the Government. Obviously, at this stage, I cannot say what the Government's attitude would be; but this is not a proposal that is ruled out. The Government have also introduced a programme of advanced factory building in shipbuilding areas. And provision for retraining workers for other employment already exists, as noble Lords have shown they are aware.
Noble Lords may ask, when we have already anticipated so much of what the Commission is seeking to achieve, what need do we have for a common Community policy? The Select Committee, we believe, has itself answered that question in paragraphs 38 and 39 of its report; and the Government agree that it is important that the Community should act as one in its efforts to meet the consequences of the shipbuilding crisis. Perhaps the Community's policy need not be so formal as the Commission suggests, but it is important that we should have common aims, and that our individual efforts to achieve those aims should be properly co-ordinated, and, equally importantly, that each Member State's national policies should be properly understood and appreciated by fellow Community Members.
There is, therefore, much value, in terms of co-operation, understanding and cross-fertilisation of ideas, in the Community getting together and jointly formulating objectives for shipbuilding, and deciding on the means by which they are to be achieved. Those means may differ from one Member State to another, for a variety of very good reasons; and the overall objectives will themselves have to take account of the differing social, political, economic and industrial factors in individual Member States, all of which will also have to be explained and understood by everyone; and in our case, as the Committee has noted, there are important strategic factors to be taken into account in determining any shipbuilding policy. That, again, was a point made by the noble Lord, Lord Campbell of Croy.
Might I now turn to the report itself? First, may I say that in addition to views expressed by noble Lords, it is probably the best public work of reference on the

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Commission's proposals that exists, and it ought to be compulsory reading for anyone who wants some background not only on Community shipbuilding policy, but also on the current shipbuilding slump. And there is not a great deal that I need comment on or add to. I should like to refer, first, to paragraph 18, however. It is here suggested that the Commission's figure of 2·4 million cgrt for demand that could be met by the Community in 1980 may be an overestimate. I do not especially want to disagree with that statement, but I think it needs to be qualified and explained a little. Here, perhaps I may have to call on the help of my more experienced colleagues in the world of the European Budget.
First, in borrowing this figure from a paper produced by the Association of Western European Shipbuilders, the Commission appear to have misrepresented its origin. They say in their Communication, in paragraph 2 of Part A in Section 1,
"The Association of Western European Shipbuilders' experts forecast that Community yards will deliver 2·4 million cgrt in 1980, compared with 4·4 million in 1975".
However, it is my understanding that this is not what the AWES experts said at all. I believe that they said that if world demand in 1980 was 11·8 million tons, and if the non-OECD countries captured 4 million tons of that total, then the rest ought to be divided equally: 3·9 million tons to Japan and 3·9 million to the other OECD members. The Community's proportionate share of that 3·9 million would have been 2·4 million tons. But, in fact, the AWES experts then went on to argue that if the Japanese industry insisted—as it did two years ago—on keeping 50 per cent. of the total world market, then the other OECD members' orders would drop to 1·5 million tons rather than 3·9 million tons. This is a complex argument which will probably read better than it is spoken. I think that criticism of that 2·4 million figure is valid and should be studied.
So you will see, my Lords, that in that sense, certainly, the 2·4 million cgrt figure might be described as over-optimistic in the terms used by the Commission. I have mentioned the origins of this figure because I think it necessary to be aware of its fallibility, and to understand that many
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factors will affect what we and other Community States will be producing in 1980 onwards.
Perhaps it might also be relevant for me to mention here that there have just been published, in a newspaper in Japan, some proposals for restructuring the Japanese shipbuilding industry. They purport to be the draft proposals being considered by the Japanese Shipping and Shipbuilding Rationalisation Council before submission to their Minister of Transport later this month. Although there has been no official confirmation, there has been no denial either, and there seems little reason to doubt that these proposals are essentially what the Japanese have in mind.
They appear to involve an overall reduction in capacity of about 35 per cent. by the middle of next year; but what is significant, perhaps, is that they are said to be based on an expected level of a demand for new orders from Japan of 6·5 million cgrt in 1985, which is 65 per cent. higher than the AWES suggested figure for Japanese output in 1980. So you will see, my Lords, that there are far too many qualifications attendant upon any figure to make any kind of forecasting a worthwhile exercise. Everything depends initially on the direction taken by the world economy, which is itself influenced by a wide variety of unpredictable factors. Much depends on the view of the future taken collectively by the world's shipowners; at present, they appear to be in a relatively gloomy mood. Much depends on the extent to which our competitors continue their uneconomic activities. Much depends on what success British Shipbuilders have in making the industry more competitive. And much depends on the protectionist attitude of other countries. Forecasts there are, and always will be; and very helpful they can be on occasion. But, under these circumstances, I do not think we want to base far-reaching and perhaps irreversible decisions on such uncertain prophecies.
In paragraphs 35 to 37, the Select Committee has referred to the European Council's Directive in aid to shipbuilding. I think it might be helpful if I expanded a little on the link between the Directive and the Communication. The Commission's Communication makes proposals for an industrial policy in a particular

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sector; it requires the agreement of the Council before any of its proposals can be implemented. Until the Council has reached a formal decision on any aspect, it remains as a set of proposals only, and is without any effect.
The Directive, on the other hand, is in the nature of a statutory instrument. It too requires the approval of the Council but it is of a different character to the Communication altogether. It is concerned not with shipbuilding policy, but with competition, and it is important to bear that in mind.
In general, the Treaty does not permit state production aids which distort competition; but where there is a crisis, they may become essential for a time, and it is so in shipbuilding. The Directive therefore sets out the kind of conditions under which certain State aids may be regarded as still being compatible with the Rome Treaty, and in that sense it is a permissive document. The Directive naturally says that one of the conditions is that such aids must be consistent with any agreed Community policy in the shipbuilding sector; but we do not yet have one.
The Committee suggests that the Directive can be seen as an attempt to coordinate national reactions to the shipbuilding crisis, to co-ordinate the policies of Member States to minimise discriminatory measures and avoid competitive subsidy. I think it is important to make clear that these principles apply inside the EEC; what the Directive aims to do is prevent distortion of internal community competition, while permitting Member States to deploy subsidies to preserve a reasonable level of orders. And it cannot take any part in the development of a Community policy until that policy has been agreed. It is perhaps at that point where my noble friend's remarks about substandard shipping might have application. There might be a Community policy on that.
It is important to make this clear because there have been suggestions that the Directive is the means by which the Commission intends to enforce the contraction proposals set out in the communication. Nothing could be further from the truth. The communication, as I have said, requires the approval of Council
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before it has any force, and the Directive's references to a Common community shipbuilding policy thus have no effect for the present.
I come finally to the Committee's opinion. They suggest, in paragraph 38, that the principal objective put forward in the Communication—that is, to create a competitive European shipbuilding industry which can meet a significant proportion of the Community's large requirement for ships—is an objective which will be widely accepted. That is so, my Lords; all Member States accept that objective.
The Committee has also noted, again correctly, that national policies can still continue within the framework of a Community policy. That is also what the Government should like to see. While the disparities of approach between Member States, and the differing factors to be taken into account make a wholly uniform policy very difficult to achieve, we believe that there should be room for every Member State's special requirements within a Community policy. The Community, moreover, needs common objectives in this difficult sector in order to be able to pursue a well-reasoned and effective international policy in the OECD, where it is equally essential for there to be agreement on common aims, and on the avoidance of "beggar-my-neighbour" policies. Perhaps, my Lords, it might be a convenient moment to say that this is an area where the proposals of the noble Viscount, Lord Simons, about "scrap and build" and the filling of segregated ballast tanks, and the proposals of my noble friend, should receive consideration.
The Committee is also right to note that the aims of British Shipbuilders to survive the slump and to become competitive are not incompatible with negotiations through the Community. I would go further than that; I would say that British Shipbuilders' objectives are wholly consistent with the Community's objectives, and will be an important factor in their achievement.
I have already remarked that the Government has accepted the inevitability of some contraction in the industry, and has made provision for it in the form of the Shipbuilding (Redundancy Payments) Act 1978, the schemes under which were laid before the House last week. But in

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their discussion of this question, the Committee have stated that the attempt to sustain a higher output or greater capacity than the market will bear can only lead to the continuance of aids or protective measures for a considerable period of time, which would be incompatible with the fourth Directive. That may be so, my Lords, but the fact of the matter is that the world cannot sustain a higher output or higher capacity than the market requires; the world will order just so many ships, according to its needs; and the real question to be resolved is: Who is going to build them?
The Community is agreed that it must have the capability of satisfying at least a considerable proportion of its own very considerable requirements, and if the Council decides that this is its policy, then the Commission must, of course, take this into account in administering the Directive, even if, for a time, that policy requires the continuance of aids. I think the noble Lord, Lord Campbell of Croy, asked for some wider information on this point. He asked me about the approval of the United Kingdom Intervention Fund for 1978–79, if I understood him correctly.
Lord CAMPBELL of CROY: My Lords, perhaps I may remind the noble Lord. I asked whether he could tell us any more about the redundancy schemes, but I realise that he may not be able to do so at three or four hours' notice. Secondly, on the point to which he has just referred, I recorded that the Government had announced limits for this year and the previous year for the Intervention Fund, but it was reported in the Press—notably, today in The Times—that the Government were seeking approval of the Commission for yet some other subsidy scheme. I asked—if it was not confidential—whether he could tell us what the scheme was.
Lord WINTERBOTTOM: My Lords, I believe that I can help on this matter. It is the case that we are in discussion with the Commission about a second tranche of Intervention Fund monies. Any delay in arriving at agreement is nothing to do with this Commission communication to the Council which, as I explained, has no force in the context of the Directive.
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I cannot give any details of the Government's proposals while they are still having these discussions. But the noble Lord is correct, discussions are taking place. As regards shipbuilding redundancy schemes, schemes for Great Britain and Northern Ireland were laid before both Houses on 6th July and will be debated before the Summer adjournment. That might be a convenient point at which to probe further.
I now come to the point at which I have to express rather more disagreement with the Select Committee. But, first, let me say that I was very glad to note their criticism of the Commission's unfortunate emphasis on selecting its so-called quantitative indicator as a target for capacity reduction. This was indeed a major error by the Commission, and one which I think they now recognise. Where we disagree with the Select Committee is in suggesting that we should substitute an order of reduction in capacity for the precise figure put forward by the Commission.
With respect, my Lords, there is very little difference between that and what the Commission has suggested. For what is an order of reduction? It means a quantification of some kind, presumably in percentage terms, and to say that we shall reduce capacity by 45 per cent. is the same, for all practical purposes, as saying that we shall reduce to 2·4 million cgrt. I think I have said enough in my earlier remarks to show that this is not the correct approach in all the circumstances.
The Committee goes on to suggest that the Community will have to face the problem of apportioning capacity between Member States. It says that would be a difficult task; I say that it would be impossible and that it would in any case take so long to agree that we should be in the middle of the next boom before any agreement was reached, by which time such a policy would no longer be necessary, of course.
No, my Lords, let us be practical. We know that we shall be forced to lose some capacity because of this disastrous world slump; but let is not give it away unnecessarily, and especially let us not give it away on the basis of such uncertain forecasts as those we have seen. We urge the Community to adopt the United

1403
Kingdom approach; to accept that some contraction will be forced upon us, but to plan to meet it in a flexible and humane way; to give our industry the opportunity to become competitive; to take advantage of the return to normal market conditions and to fulfil the fundamental objective of a Community shipbuilding policy which the Committee, the Government and all other Member States support.
Lastly, I should like to refer to the Select Committee's comment on the proposal to establish an advisory committee of senior officials from Member States. In fact, if that is all the Coin-mission wished to have, it could be said that such machinery already existed. But in fact, as is clear from Annex III to the Communication, the Commission sought a standing body which would "implement and co-ordinate common objectives" in this sector. That goes considerably further than merely supplementing existing machinery with an advisory committee to discuss community shipbuilding policy.
In our view, and in the view of most Member States, it would not have been appropriate to establish a committee on the lines originally proposed by the Commission until there was some agreement on the lines of a Community policy—at which stage we would wish to see whether there would, in fact, be any role for a committee in its implementation. As to the question of an advisory committee, I have already noted that such machinery already exists; indeed before formally submitting their communication of two years ago, the Commission organised a series of consultative meetings with shipbuilding experts from Member States which at least ensured that they got off on the right foot, even if the proposals did not in the end meet with unanimous approval.
Baroness WARD of NORTH TYNESIDE: My Lords, I am sorry to interrupt the noble Lord but, for somebody like me who does not know these things, could he perhaps let us know the names of the members of the Committee?
Lord WINTERBOTTOM: My Lords, I will find out and let the noble Baroness know. I cannot at this moment give names because I do not know them. As to the Committee's point that a
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Committee might be useful for developing a common position for external negotiations, as the Committee has itself noted in paragraph 33 of its report, the Community has had a common negotiating position on shipbuilding in the OECD since 1976, and has had some success. This policy is developed by a group of experts from Member States in a special series of co-ordination meetings chaired by the Presidency of the day.
I hope, my Lords, that I have made the Government's position clear, though at some inordinate length. We welcome the Commission's communication, even though we are disappointed by its approach and emphasis. We welcome the signs that the Commission wants to consult Member States on a regular basis about the development of a Community shipbuilding policy. We, like the Committee, recognise that the Commission's communication is merely a beginning, or a framework, and that as the Commission itself has said, there is still a good deal more to come by way of detailed proposals on several aspects. We believe that this country is already well embarked on the kind of policy that the Community as a whole should pursue, and we shall press hard, in the discussions, for a Community policy on these lines, and for common measures which will be supplementary or complementary to our national policies,—
Viscount SIMON: My Lords, before the noble Lord sits down, may I ask him to go back for a moment to the very interesting argument he advanced about having a flexible policy and eschewing any quantitative figures? Surely one of the most essential things we have to try to do if we possibly can is to get some agreement with the Japanese to reduce their capacity. Is there any hope of getting such an agreement with the Japanese if we are going to say that we are going to have whatever capacity we think we need?
Lord WINTERBOTTOM: My Lords, that is a very good point and it should be answered, but I was speaking in the main on the role of Britain within the EEC. Presumably if we can get an EEC policy then the negotiations with the Japanese will be possible; but, while the Community as yet has no policy,

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we must do the best we can for our own industry. That is, I think, the view of Her Majesty's Government. Despite the gloom which generally pervades, shipbuilding does have a future within the Community and it is up to the Community as a whole to see that that future is not jeopardised by damaging short-term market distortions caused by the slump, while at the same time both pursuing its internal policies and making its contribution to international understanding and consensus through the OECD. I hope that the noble Lord who introduced this debate has received at least some form of answer to the points that he raised.
7.36 p.m.
Lord RHODES: My Lords, we are very grateful for that answer. I thought we had made a very clear statement, and I was surprised that the 80 per cent. and the 30 per cent. got so muddled. I think if those figures had been read properly they would have been clear. The report says:
"up to 80 per cent. of the industry's annual merchant output is sold to British shipowners, representing about 30 per cent. of their total requirement. Thus the United Kingdom remains a net importer of ships".
I do not know how we could have made it more obvious than that.
With regard to the 2·4 and the difficulties with the Associated Western European Shipbuilders that the Minister seemed to be in difficulties about, may I explain very briefly—I shall not keep the House long —that the idea was that Japan should have four, that Europe as a whole should have four and that the remainder of world shipbuilders should have the other four. I made it clear that one of the four assumptions that were made to arrive at the figure of 2·4 was that Europe and the EEC would work on the basis of 60:40: the 2·4 and 4 is equivalent to a ratio of 60:40.
I should like to make encouraging noises about the naval shipbuilding and the remarks that have been made on the quality of our report. We welcome, too, everybody who has spoken in this debate, and particularly those representatives of this Parliament who go to Brussels. It is heartening to know that our reports have enjoyed much popularity in Europe. The Minister referred to co-ordination of aid and I should like to remind him, so that he
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can take the information, chew over, of the differences in aid. Ours really is a dead weight on productivity, and if he will just have a look at the way in which our aid has been administered he will find that it discourages productivity rather than encourages it, as the Belgian system does.
I think we ought to send a message to the Commission to pursue what it has been doing in the way of its good work. The possibility is that the noble Lord. Lord Trevelyan, would invite Viscount Davignon to come to this country, as he has accepted an invitation to go to the Paris Economic Commission. It would be a very good thing, as well as being informative, not only for the Committee but for Parliament as a whole.
On Question, Motion agreed to.

MILK COLLECTION
7.40 p.m.
Lord DAVIES of LEEK Lord DAVIES of LEEK rose to ask Her Majesty's Government, in view of the statement by the Milk Marketing Board that milk churn collection will cease on 31st July 1979 and be replaced by road tanker collection from refrigerated farm vats, what plans are envisaged to help farmers with small herds. The noble Lord said: My Lords, I have listened with fascination to every speech in the shipbuilding debate, which was of paramount importance to Britain's industrial and international situation. But, funnily enough, British agriculture is one of the greatest savers to our balance of payments and, whatever we may think about industry, agriculture is pretty well the greatest employer of labour. The saving on imports to the British taxpayer is immense. At this late hour, I do not want to weary your Lordships with masses of statistics, but I want to get clearly across the gravamen of my argument.
In passing, I do not want to be a critic of the Milk Marketing Board, as such. It was established in the '30s under the late Dr. Addison, who was in the MacDonald Government, and it was later improved. I do not want to make a cheap Party political point, but, whatever our politics, we pay tribute on both sides of the House to the work of Tom Williams, the late Minister of Agriculture. Let me

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leave it at that, without trying to make capital out of it. I can also remember Smith, who was a Conservative Minister of Agriculture in the transitional period at the time of the war.
I am old enough to remember the farming disasters of the '20s and '30s and some of my family were farmers while others were miners. There is a wonderful old apocryphal crack in my family. I do not know whether my grandmother believed it, but my great-grandfather was the champion milker of Wales. The only trouble about him was that he was so enamoured of his milking prowess that every time he met a stranger he shook hands with one finger at a time. I am not sure about that, but it is a good story in the apocryphal history of the Davies family.
Today, we have invented a new system of society. I do not want your Lordships to come back at me politically, but all over the world technological society has invented the system of socialising the losses and privatising the profits. Even in the United States of America, the railways are subsidised. Subsidies are a common form of economics in the 20th century, and the old idea of pure, crystal-clear private enterprise, as such, is almost reduced to the level of a sweet shop or a little farmer with a small herd of cows, who has to work very hard and often gets less income than a bus driver.
Since small farming is business, we ought to be prepared, because of the great saving to our balance of payments, to plough a little more back into helping the small farmer. I do not like the expression "small farmer", because it sounds as if I am talking about English, Scottish or Welsh dwarfs, and I am not. I am talking about the farmer with a small acreage. I am not using the horrible word "hectares". I doubt whether 10 people out of 50 could say how many acres there are in a hectare.
A noble Lord: Tell us !
Lord DAVIES of LEEK: It is 2·47. Are your Lordships trying to catch me out? The Milk Marketing Board aims ultimately to complete the refrigeration of milk in vats on farms, and in the bulk milk scheme, by July 1979. Milk will
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then be collected only by road tanker which, in the end, means the demise of small-scale milk production, and the day of the hand-milked small herd will probably be finished for ever. I want to know what will happen to the 60-gallon farmer, who is considered small. Is he to be abandoned? Is not he, too, a small business? After all, I thought that the spirit today was to encourage small business.
This week I happened to pass through Stoneleigh and saw miles of farmers' cars —bless them!—going to the Royal Agricultural Show. I wish that they had had better weather. It is a magnificent show which does much for British agriculture, and more people than ever now come from all over the world to the Royal. Britain can be very proud of its productivity, but in farming, per head of capital, nobody can beat the farmer on a small acreage. He still has the productivity. The theme of the Royal Agricultural Show at Stoneleigh this year was the next 25 years in agriculture and its likely developments, and what British agriculture will be like in the year 2003. The emphasis was on technical innovation.
I want to enter a caveat here. Too much technology means an increase in the arithmetical chances of accidental breakdown and the wearying of the human spirit. Let me make a philosophical point, in passing. Freedom from all superstitions and freedom from certain kinds of labour—because we have invented electronic computerisation and technological processes—do not necessarily result in the production of an orderly society. Certainly, looking at the ugly discourtesy of the motorists on the modern roads of Europe, they do not add to the serenity of modern life. Probably the most discourteous animal on the roads of Britain today is the average driver, pushing along with that marvellous mass of human technology underneath him as he drives his car. I do not want to see British farming going all technological and going all for productivity, thus destroying the purpose of life.
Whatever we may think about agriculture, milk is still the major product and British consumers drink more milk than any other country, except in the Irish Republic. As the farming correspondent,

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Mr. Murray, pointed out in the Sunday Observer the other day, mainly because of the operation of the Milk Marketing Boards, their monopoly—it may be qualified, according to which Party gets into power—allows them to iron out the fluctuations of supply and demand across the country. They have been a boon to the farmer, big and small. That monthly milk cheque was the salvation of British agriculture. Surpluses of milk have gone to special areas and creameries.
I want to ask my noble friend, why cannot the small gallonage of the little man, with maybe less than 60 gallons, go in a churn to the creameries as happens in Ireland? Can we do something about that? And, for heaven's sake, do not let the Common Market destroy our doorstep delivery of milk. The milkman delivering the milk also helps the farmer with the small gallonage. What is more, the milkman is part of the social services. Many old gentlemen or old ladies have had their lives saved, because, in their loneliness, the milkman is more often a visitor.
In the constituency in the North-East of Staffordshire, which I had the honour to represent for over a quarter of a century, there were 3,000 farms, 1,400 of which were of 30 acres or less. How those people worked! I do not suppose that many of them voted for me; they were individualists. But they worked and they had a purpose and they were living and breathing the deep, free air. Their success lay in milk deliveries to schools and other places. I deprecate those mean local authorities who are now objecting to free milk for children aged 7 to 11. I do not want to name anybody, or their politics. The high mark of Britain's consumption is because we have about 45,000 roundsmen delivering milk in the early morning. We have to argue with the bureaucrats in Brussels to keep those milkmen. I hope to goodness that we keep them, because each day 15 million to 16 million homes in the United Kingdom receive their milk on the doorstep. It is a social service. It was the great Churchill who said that there is no finer investment that any community can make than to put milk into babies and the rest of us. I wish that some mean county councils would remember that saying when they are next
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due to debate the supply of milk to children between the ages of 7 and 11.
There are 3,000 of these huge bulk tankers which scour the countryside each day. The Milk Marketing Board provide an excellent system of bulk tanker collection. Let us be fair to them and ask: What is the advantage? The purest and best milk in the world is delivered to our homes by the Milk Marketing Board. Because we enjoy the advantage of bulk tanker collection, we are asked to abandon sales from milk churns. The Milk Marketing Board has rigid standards of cleanliness and hygiene, and ensures the composition and quality of this nation's milk, thus safeguarding the consumer and producing the best milk in Britain. But it had the best milk in Britain before the tankers. I know that the cleanliness of the milk churns was maintained and that farmers' wives and others maintained cleanliness in their small dairies. Our cleanliness is second to none in Europe and it is essential. All that we are doing is hindering the man with the 60 gallon milk production. In Scotland, 100 per cent. of the milk is already collected in bulk, while in England and Wales about 97 per cent. and in Northern Ireland about 80 per cent. is collected in bulk. In England and Wales, 86 per cent. of all milk producers are in the bulk collection scheme.
May I ask my noble friend who is to reply whether it is possible to evolve a formula like the green top system that we can extend to the small farmer? It is growing increasingly difficult to find dairies that will accept churn milk. Could not some scheme be evolved whereby they would be able to sell their milk to manufacturers for the purpose of making cream, cheese and butter? The problem with the tankers is that they come on to our country roads. These are the old B and C roads and they have to carry the weight of these tankers. This necessitates quite a large upkeep, which ultimately falls on the ratepayers and taxpayers.
We must remember that big things are not always the most efficient. If we study ontology or the history of the human race from primeval times, we have to ask ourselves why some of the mighty animals —some of which were 100 feet or more

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long, with huge limbs and thick hides—did not survive. The reason is that the information carried from their feet to their brains took so long to reach there! The bigger technological organisations become, the more we get mixed up. Because of computers, my bank statements today are the most difficult things to understand. In the old days, I knew whether the Minister of Agriculture had borrowed £10 from me, and I knew, by looking at my cheque book, whether he had paid me back. Today I just deal with numbers. Human beings are becoming numbers. We are losing the reality of living.
What current grants and subsidies can be used? I was unable to be here earlier this afternoon when the order relating to grants for the damage done by the great storms which occurred last winter was dealt with. However, could the hill livestock compensation scheme favour the smaller farms? It is those of about 7·41 acres which are eligible. Could calf subsidy schemes be used to encourage a new approach? Are we prepared to consider the lower level of farming where only a man and his wife are able to keep going? Best of all, could we not now take a new look at the capital grant scheme which came into operation in January 1974? The main items which were eligible for grant were farm buildings, silos, yards, waste disposal, milking equipment, bulk milk tanks, electricity and gas supplies, dairy and parlour buildings. I think that the very small gallonage man could get some help here.
We first introduced farm structure schemes in 1967. I do not want to detain the House for too long, but may we look at this year's annual review, since it shows the trend. On page 6 we see that the number of farms in the United Kingdom continued to decline. In 1977, the total number of holdings was 261,000, which was 3 per cent. lower than in 1975. Then the review goes on to say that the average size of farms is increasing. Full-time businesses averaged 113 hectares. There are 2·74 hectares to the acre. Including rough grazing, the total area in 1977 has to be compared with 111 hectares in 1975.
The trend to greater specialisation continues. Can we think of some kind of
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specialisation that the little man can take up with the encouragement of the advisory service of the Ministry of Agriculture, which has done excellent work? Three years ago, the average size of a herd was about 30 to 32 cows. Now the average size is 40 to 44 cows. In other words, the number of farms is growing less while the number of cows per farm is increasing. Once again we are worshipping at the shrine of bigness rather than keeping economic units at the optimum level.
A scheme for improving farm structures was introduced in 1967. Without reading out all of the grants available, because this information is available to the Minister, I believe that the standard grants are too small. According to the applicant's choice, he can obtain a lump sum of £1,000 for a farm of up to four hectares, which increases by £50 for each additional hectare of land, up to a maximum of £3,000 if he gets off his land. What is £3,000 today to a man who has lived all his life on the edge of the hills, on the side of a riparian meadow? To push a man of 55 or 60 out into the bleak world with £3,000 is almost suicidal. The annuity payable up to the age of 65 is at an annual rate of £250 for a farm of up to four hectares, increasing by £5 for each additional hectare of eligible land, up to a maximum of £450. In these days of inflation, these grants mean nothing.
If we are saying that little farms are to be moulded, rolled and cajoled by specious promises, that hedgerows should be destroyed and that we should make prairies out of farms that nature will ultimately destroy by blowing the earth away from them, or that we should go in for factory farming, what incentives will there be for our young who want to become farmers? There will be no small acreages for them to buy. There are many other grants available and, without boring the House—because I have taken the trouble to let the Minister know mostly what I am going to say and thus save the House a long speech—I express the hope that the Minister will spend some time studying this problem. Britain owes it to these food producers to work out a viable formula to keep the man with a small gallonage or a small acreage in existence. After all, he helped us to win the war with his food production.
8.1 p.m.
Earl FORTESCUE: My Lords, we are grateful to the noble Lord, Lord Davies of Leek, for raising this matter today. I cannot compete with the noble Lord's humour but I hope to compensate with a little brevity. Equally I am not sure how much I personally appreciated his point about the longevity of the larger animal and the length of time it takes messages to get from one's feet to one's head. However, the noble Lord's Question really asks whether all milk producers, however small, should be forced to store their milk in a refrigerated vat and allow it to be removed in tanker lorries arranged for by the Milk Marketing Board.
The situation described by the noble Lord affects the whole of England and Wales and results from a scheme announced by the Board in 1973 under which there would be a gradual changeover from the handling and transport of milk in churns to bulk collection and bulk handling. The changeover is due to be completed by the end of July next year. It is only right to point out that all areas will have changed over to bulk handling by the end of this month, except for Wales, the South-west and North-west of England, which have another year to prepare. The National Farmers' Union tells me that, so far, the transition has taken place smoothly in these other areas and that there have been few problems. However, the situation may be different in the West, with its higher proportion of small and remote farms. The main benefits of the changeover accrue to the Milk Marketing Board and the dairies in reduced handling costs and the improved keeping quality of the milk.
In general, we on this side of the House think that the scheme is both a good and fair one. Bulk handling makes the producer's life somewhat easier and there is a considerable financial incentive for him to change over to bulk. To put the matter in perspective, the small bulk milk vat with cooler can be bought for just over £1,000 and a 20 per cent. grant is available. Probably a better financial proposition is to rent a vat from the Board for about £27 a month for the first three years and thereafter at a nominal rent. To offset this expenditure the Board pays the producer a bulk premium of £11 per month plus just over 1p per
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gallon of milk produced during the month. As a result, and on balance, the producer with 15 to 20 cows breaks about even; the man with 10 cows may be £8 per month out of pocket and the man with five cows, £12 per month out of pocket. One should bear in mind that the monthly milk cheque from a five cow herd comes to some £200.
It is a sad thing that the family farm with a very small herd on a very small and often isolated farm is running a doubtfully viable unit in any event. But there are a number of worthwhile people who value their independence and are prepared to accept what many others would call a low standard of living. Other very small herds are owned by men who have jobs in industry and who milk their cows in their spare time. Some young men find that their only prospect of getting into farming at all is to start off on their own account by buying or renting a small farm and accepting a hard life until they have gained the experience and hopefully a little money to move on to a larger holding. These men and their families are valuable and should be encouraged. I should hate to see them forced to leave their farms. Equally I should hate to see their houses and their buildings lying derelict and their land revert to bog or heath, as the case may be. There is a good case for the amalgamation of a few small farms but again, to my mind, vast farming units do not benefit the countryside.
It seems that the very small farmer has a number of alternatives if he is not prepared to install his own small vat. He can still make his own arrangements with a local dairy which may be prepared to accept deliveries in churn by private arrangement. He can retail his own milk if he is suitably situated and inclined. He can turn over to calf rearing, with or without sheep, and obtain an EEC grant under their non-marketing scheme. This grant is worth more than £500 per cow if the farmer agrees not to supply milk for five years. A point I am not entirely clear on is whether two or three neighbours can share a bulk vat. If this was permissible—and at present I think it is not permissible—I feel that there would be little hardship to the small producer.
One final point which concerns me is the contract between the Milk Board and

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the producer. There is the situation where the milk producer has been forced to purchase a fixed bulk tank by the Milk Board and the understanding is that a tanker will arrive each day to collect the milk, measure the quantity and the milk will be paid for on a monthly basis. However this is not the case in practice. During the snowstorms late last winter the tanker lorries failed to get to some farms for up to five days. As a result, a lot of milk was tipped to waste and the loss fell upon the producer. This is surely wrong. I would urge the National Farmers' Union and the Board to renegotiate the contract and perhaps the Government could use a little persuasion here. It could be more important to producers in the West and in hilly districts than in some other parts of the country. In conclusion, I should like to reiterate my previous point that it would be a great loss to the country if more small farms and farmers are lost and to urge that all reasonable help should be given to these farmers to remain in business on their farms.
8.9 p.m.
Lord DE CLIFFORD: My Lords, I should like to join my noble friend in thanking the noble Lord, Lord Davies of Leek, for raising this matter. As your Lordships are probably aware, it is a subject which is very close to my heart. I have a great feeling for the small man employed in agriculture in this country. If we look back over history we shall find that he has been the basis of everything on which this country has grown up and become strong. He is virtually the small countryman, the foundation on which this country rests. It frightens me when year after year we find the enormous progress which is made by cold financial reason, without any thought being given to the person to whom it applies. I think this is very sad and very disastrous, because what it is doing is discouraging from continuing with it the very people who are providing the basis of our life.
This business of doing away with the collection of churns is one which has been brought to my attention in a number of ways, and in one of the ways which the noble Lord, Lord Davies of Leek, pointed out. We now have enormous tankers
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which go down very small roads. I must tell your Lordships that it was only yesterday morning when I was stopped three times on three different roads by the same tanker, and had to back, I suppose, in all, about 450 yards to enable this tanker to pass me. Not only did it stop me but I had a queue of cars backing behind me. It is very nice to have these large tankers going round, but they do tend in remote districts to disrupt the movement of people who live there. If my memory serves me correctly, when we reorganised the county councils they were given a certain length of time to put weight limits on their roads and to draw up a plan as to what weights these roads would carry. I have a feeling that, had they done this, we would not be having milk tankers down many of our roads now. They are definitely breaking roads up. When it comes to these remote areas, the money which is put into repair of them gets less and less.
The people who have to use them day in and day out all their lives are the people who are suffering, not only from the wear and tear but the damage to their vehicles in using the roads. We are getting the feeling out in these large rural areas that nobody really cares very much about what happens. We have the feeling that the noble Lords who now represent the Government, feeling that they will not win an Election there anyway, are not particularly interested, and my noble friends on the Front Bench, who know that they are going to win it, tend to be exactly the same. It is a feeling which is growing very considerably.
My Lords, I do not like seeing the small people vanish. I do not like seeing these farms getting larger and larger. The smallholder throughout this country is a man who has got to be considered. If we must have these collections, I hope the suggestion about having group chilled vats could be considered, because that would be a tremendous step to ensure that these people are able to continue in business. I should like to end by saying that I hope that, every time finance and big business consider what is to be done in the production of our material from agriculture, some thought will be given to the people who produce it, particularly the small people who have very little voice to raise to protect themselves.
8.14 p.m.
Baroness GAITSKELL: My Lords, I should like to add three or four sentences to this debate, if I may. I speak as a lapsed housewife. It seems to me that there is everything to be said for the arguments which have been put forward in favour of my noble friend's Question. I support my noble friend, as I say. The social consequences of this move, which seems to me an utterly ridiculous move, outweigh all the economic advantages that we might get from getting rid of the doorstep milk and getting rid of the churn. It seems to me that the present system helps working women, and there are going to be far more working women in the future than there are now; it helps the small businesses; it helps the schools. I am very pleased that my noble friend stressed the value of milk for the seven to 11 year olds in the schools, because milk is the cheapest and best food that children can have, and not only children but grown-ups too. I think that is all I have to say on this matter.
8.17 p.m.
Lord WALLACE of COSLANY: My Lords, I think this has been an extremely interesting and extremely useful debate, far more interesting than some of the debates we have had during this day, at least to me. I am also privileged in the fact that my noble friend Lord Davies of Leek very kindly gave me a volume of his speech notes. I would like to congratulate my noble friend because he is an artist of some distinction. Accompanying the speech notes was this lovely drawing of a small farmer, with the usual piece of corn sticking out of his mouth, leaning on a gate and saying this:
"Dear Lord Wallace of Coslany, what about my milk churns, me missus and me cows! Write an epitaph for the little farmer".
My Lords, I am not going to write an epitaph for the little farmer. In fact I would thank my noble friend Lord Davies for giving us this opportunity to discuss these arrangements for bulk collection. Before I come to reply to his points, I would like to congratulate the noble Earl, Lord Fortescue, on his debut, his maiden speech at the Dispatch Box. He, like me, is not exactly short, and those of us who are rather long in the leg would like an expanding Dispatch Box to reach a little
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higher than they actually do. However, we have to cope.
I think we all accept, as my noble friend has already said, that milk remains the central agricultural commodity. Each day in the United Kingdom some 37 million litres of milk are collected from the farms of about 70,000 producers. Of this, the Milk Marketing Board of England and Wales, whose plans are referred to specifically in my noble friend's Question, accounts for over 31 million litres, involving about 55,000 producers. Much of what is covered by this Question relates to the Board's day-to-day operations, and it is, therefore—we must admit this—something where the Government do not have a direct locus. We are in fact discussing the Milk Marketing Board but noble Lords have given their views on the Milk Marketing Board's proposals. I think it is, however, a legitimate area for us to reflect on what has been done and what is being done.
The Milk Marketing Board in England and Wales first introduced bulk collection in 1955, as an alternative to the use of churns, on a trial basis in Berkshire, but it was not until the early 1960s that development really got under way. The benefits of bulk collection over churn consignment both to the consumer and to all sectors of the dairy industry quickly became apparent. There are considerable labour savings on the farm through the elimination of churn handling; milk transport costs are reduced through the use of refrigerated bulk tankers which are more efficient than churn collection lorries; there is a reduction in distribution costs since milk handled in bulk can be brought direct from farm to dairy thus reducing the need for double handling at country depots; and there are savings in labour and other costs at the dairies through elimination of the need to receive, handle and clean churns—not to mention the elimination of noise. Finally, as bulk milk is cooled on the farm, it arrives at the dairy in a better hygienic condition than milk in churns. This also benefits the producer, of course, by reducing the risk of his milk being rejected by the receiving dairy, a point, which, if I remember correctly, was mentioned by the noble Earl, Lord Fortescue.
By 1973 about 68 per cent. of all milk was being collected in bulk, but this

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represented only about 38 per cent. of the total number of farms in England and Wales. The Board had however already recognised the need to make bulk collection attractive to the smaller producers and were able to announce that the manufacturers of bulk milk vats had been encouraged to produce small refrigerated vats of 60 to 90 gallons capacity specifically for the benefit of farmers with small herds. A special fixed rate premium was made available to producers installing small vats as well as loan arrangements under which the Board were prepared to lend up to 100 per cent. of the total cost of the vat, the loan being repayable, with interest, by deductions from the producer's monthly milk cheque.
At the same time, the Board introduced a specially trained team of bulk milk development advisers whose specific task it was to visit each remaining churn producer in each of the 11 Regions of the Board in turn—starting with the Eastern, Southern and South-Eastern and East Midlands regions where bulk collection was already most highly developed and completing their task by the end of 1977 with visits to the least developed areas (the North-West, Wales and the South-West of England)—with the overall objective of achieving 100 per cent. conversion from churn to hulk collection in 1978. In all, over 20,000 of these visits were made.
Since October 1974, producers converting to bulk have also had the opportunity to rent their vats from the Board under a scheme providing for a monthly rental for the first three years (calculated to repay the cost of the vat to the Board) and thereafter a nominal rental of £1 per month. In turn the rental scheme has enabled the Board to obtain the benefit of a grant from the EEC Agricultural Fund and this, linked with the fact that the Board are able to negotiate discounts from vat manufacturers, has meant that producers are able to rent vats from the Board at prices up to 30 per cent. less than those for outright purchases. This scheme has proved immensely popular with producers; by way of illustration, over 70 per cent. of 17,500 producers converting to bulk since 1974 have chosen the rental scheme.
By May 1975, 83 per cent. of all milk in England and Wales was being collected in
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bulk; and the Board established that by March 1976 all but 2 per cent. of the milk produced in the four regions where bulk collection was most advanced would consist of churn supplies. In these cirstances, it was becoming increasingly difficult for the Board to find dairies willing or able to handle the residue of churns. The Board therefore announced that a churn collection charge would be introduced in the four regions on 1st August 1976 and that it would not be possible to collect churns at all in those regions after 31st July 1977—although in practice the Board decided to extend this deadline by three months to 31st October 1977 to coincide with the introduction of the EEC's Milk Non-Marketing and Conversion Premium Scheme. Churn collection charges were extended to the Board's Northern and West Midlands Regions from 1st August 1977 and will be extended to cover the rest of England and Wales from 1st August 1978. In accordance with the Board's policy to phase out churn collection completely 12 months after the introduction of the churn collection charge, churn collection will cease in the Northern and West Midlands Regions by 31st July 1978 and in the remaining regions by 31st July 1979. Currently it is estimated that about 97 per cent. of all milk produced in England and Wales involving 86 per cent. of all milk producers is collected by bulk tanker.
Noble Lords will, of course, be able to form their own judgment, but I think the Board themselves would say that they have taken considerable care in promoting bulk collection to consider the needs and problems of all milk producers particularly those with small herds, and that, over the many years that the scheme has been developing, they have been at pains to make bulk collection available to the producer on the best possible terms and to give him as much notice as possible of any developments likely to affect him. Nevertheless, I am sure they will be responsive to the points which have been raised in this excellent debate tonight, and that they will take a sympathetic view of any individual problems that may arise and do all they can to help. May I say that if any noble Lords have any individual points that they would like to make I should be grateful if they would either pass

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them forward through the usual channels or straight to the Milk Marketing Board.
As I have indicated, the arrangements for the collection of milk from farms are essentially a matter for the Board and the Government's role in this, both from a general point of view and in relation to the situation facing individual producers, is a very limited one. Nevertheless, from 1965 up to 31st December 1977 when the guaranteed price system came to an end, successive Governments felt justified in making financial assistance available to the Board for the bulk milk programme on the grounds of the benefits resulting from economies in milk handling and improved hygiene. Currently, grant aid is available under the Ministry of Agriculture's Farm Capital Grant Scheme at the rate of 20 per cent. to producers who install their own bulk milk vats. Thus incentives have been—and are being—offered to all producers to change over from churn to bulk milk collection, and there is no evidence to suggest that further measures are needed to help small producers.
Of course, there will be inevitable cases of special difficulty—especially the small farm with difficult access—but the Board have sought to meet this particular problem by the introduction in recent years of mobile vats which enable farmers with access problems to move their milk in bulk to a suitable roadside pick-up point. It is also fair to say that, whilst we have today dwelt on the position in England and Wales, the three milk marketing boards' areas in Scotland attained 100 per cent. bulk collection some two years ago in a way which suggests that any remaining difficulties South of the Border can be effectively dealt with.
A number of noble Lords have touched on various issues and I do not apologise for taking time to give, so far as I reasonably can, some detailed replies to their questions. The noble Lord, Lord de Clifford, made a point about large tankers and small roads. Other noble Lords made a similar point and I shall deal with the matter in a moment. I rather regret the noble Lord making a political point which rather tended to make the milk debate sour, but perhaps the advent of a certain election may have prompted him to be a little careless in his approach.
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I should like to say to my noble friend, Lady Gaitskell, that I cannot reply strongly enough that there is no question of stopping doorstep delivery of milk—no question whatever. No British housewife or British husband supporting his British housewife—as indeed he is almost bound to do—will allow a thing like that to come about. We can at least wave the Union Jack vigorously on that issue.
My noble friend Lord Davies of Leek certainly plied a large number of questions. He referred to grants for small farmers. I do not intend to take up the time of the House by going into a great deal of detail, but I should like to say something about the options that are open to them. It is not anticipated that the introduction of bulk milk collections will result in any farmer having to give up milk production. Small producers have, of course, been able to benefit from financial incentives, to which I have already referred, in just the same way as their colleagues with a larger scale of operation. As I have already said, it is unlikely that any farmer will be forced out of milk production by the Marketing Board's bulk conversion arrangments.
However, I should remind noble Lords that should a farmer decide that he no longer wishes to continue in milk production, certain grants are available to assist him to convert. I am speaking, of course, of the EEC's Milk Non-Marketing and Conversion Premium Scheme. This scheme—which, noble Lords may recall, was recently revised and extended by the Council of Agricultural Ministers—introduces grants, known as "non-marketing premia", to those farmers who decide to cease production of milk or milk products for marketing purposes. In addition, a higher rate of grant, known as a "conversion premium" is available to those farmers who are willing to convert from milk production to keeping beef animals or sheep. Any producer who is contemplating taking advantage of these arrangements would be well-advised to consult with local Agricultural Advisory Service, which will be pleased to assist him.
I would reiterate, as the noble Earl, Lord Fortescue, did, that a farmer with a small herd is not obliged by the Board to change to bulk collection if there is a

1423
dairy willing and able to receive his churn supply. A number of such cases exist in those regions where churn collection has already been phased out by the Board, the terms on which the churn supply is handled being a matter for agreement between the producer and the dairy.
My noble friend Lord Davies of Leek and other noble Lords have greatly stressed the question of tanker traffic. The noble Lord, Lord de Clifford, spoke about large tankers obstructing his progress. I hope that they were milk tankers; if not, they might be petrol or other tankers. However, I think that we have to consider the position as it actually is. The effects of tanker traffic on rural roads and the environment generally are expected to be small in relation to the present situation. The Board's larger tankers are used only for deliveries between dairies and for the transport of milk from smaller tankers. These latter vehicles, which are used on smaller country roads, are no bigger in overall size than the standard lorry used for churn collection. The extra carrying capacity of the tanker reduces the number of vehicles on the road at any given time and also increases the work-load in a day. Moreover, tankers usually travel right up to the farm building and, therefore, do not need to wait in the road for loading, as churn lorries do.
Another important point is that where farms have poor access facilities mobile mini-vats can be used. These can be pulled by tractor or manhandled to a convenient pick-up point where the milk can be transferred to a tanker, so obviating the need for tankers to use very small country lanes. Although it is nothing to do with this actual debate, country roads come into the picture. Local authorities may obtain assistance from the European Regional Development Fund. The trouble is that some local authorities are very slow to move, but that is not the fault of the Milk Marketing Board; it is the fault of the members of the local authority. I have already mentioned doorstep milk; doorstep deliveries will continue.
My noble friend Lord Davies of Leek also asked: Is it possible to extend the green top—that is, the untreated milk scheme—to the small farmer? Farmers
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who sell green top milk are those who do not heat-treat or pasteurise their milk. Many of these farmers have bulk milk storage facilities. I turn to a point on which I have very strong views indeed. I am the father of two bonny children—they are getting a bit elderly now—who were reared on milk. My noble friend referred to the value of drinking milk, particularly to young children. I should like to emphasise this. It is to be hoped that all those local authorities which have not yet made up their minds will take full account of the recent advertisement by the National Dairy Council, which set out a compelling case in favour of the new discretionary milk scheme. It is important that our children should get their full share of a very important element in their diet, apart from the desirability of this country as a whole deriving maximum benefit from the EEC subsidy.
The noble Earl, Lord Fortescue, and, I think, the noble Lord, Lord de Clifford, and others made a suggestion about producers sharing bulk vat facilities. That suggestion has certain possibilities; it is a good suggestion. There are problems in recording the quality and quantity of the milk collected and there might also be problems in monitoring supplies after they had been collected. However, we shall certainly look into the feasibility of the suggestion, which has practical possibilities; I think that there is a possibility that something could be done. That point will certainly be followed up.
I could go on and on about this very interesting subject, but I see that I have already taken 19 minutes. Perhaps I could sum up what has been said in the main issue before us tonight. I think that there is general agreement that real benefits in terms of economies in handling and improved hygiene have already accrued both to the consumer and to all sectors of the dairy industry through the conversion to bulk collection of our daily milk supplies. Most of the country is now enjoying these benefits and in England and Wales where, as I have said, 97 per cent. of all milk is now collected in bulk, the Milk Marketing Board's announcement that churn collection will cease on 31st July 1979 marks the end of a very long and painstaking exercise which has had the support of successive Governments. Throughout this exercise the Board has

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endeavoured to give special consideration to the position of farmers with small herds, and I am sure that this will remain uppermost in its mind as the bulk conversion programme moves to its conclusion.
May I conclude on this point. Stress has been put on the value of the small farmer and I should like to emphasise my personal support of the recognition of the small farmers for the work that they have put in. The small farmer is probably the hardest-worked member of the community in running his small farm. He not only has the problems of trying to make a living out of it, but he has the physical problems of coping with the tremendous demands. In this connection, do not let us overlook the value of the farmers' wives, many of whom are doing as hard a day's work as their husbands. I thank my noble friend for raising this Question tonight. I think that the House as a whole has given it a very reasonable and welcome discussion.

LONDON TRANSPORT BILL
Reported with Amendments.
  BANABAN WARTIME CONTRIBUTION TO UNITED KINGDOM
  BANABAN WARTIME CONTRIBUTION TO UNITED KINGDOM
  VIETNAM: FOREIGN MILITARY PRESENCE
  VIETNAM: FOREIGN MILITARY PRESENCE
  VIETNAM: ALLEGED PSYCHIATRY ABUSE
  VIETNAM: ALLEGED PSYCHIATRY ABUSE
  MR. VLADIMIR REZUN: UK ASYLUM
  MR. VLADIMIR REZUN: UK ASYLUM
  CHILD BENEFIT CENTRE, EMERSON
  CHILD BENEFIT CENTRE, EMERSON
  BLINDLEY HEATH AND AIRCRAFT ENGINE UNIT
  BLINDLEY HEATH AND AIRCRAFT ENGINE UNIT