Sitting of 27 July 1978

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  GREATER LONDON COUNCIL (GENERAL POWERS) (No. 2) BILL
    VALE OF GLAMORGAN (BARRY HARBOUR) BILL
    Lords amendments agreed to.

    PRIVATE BILLS [Lords] (SUSPENSION)
    Order read for resuming adjourned debate on Question [26th July]:
    That so much of the Lords Message [24th July] as relates to the Cheshire County Council Bill [Lords], the County of Merseyside Bill [Lords], the West Midlands County Council Bill [Lords], and the West Yorkshire Bill [Lords] be now considered.—[The Chairman of Ways and Means.]
    Question again proposed.
    Hon Members: Object.
    Debate to be resumed upon Tuesday next at Seven o'clock.

ORAL ANSWERS TO QUESTIONS
  NATIONAL FINANCE

    TUC
    Mr. Ashleyasked the Chancellor of the Exchequer when he intends next to meet the TUC.
    The Chancellor of the Exchequer (Mr. Denis Healey): I am in constant touch with representatives of the TUC at the NEDC and on other occasions, but I have no specific date in mind for a meeting at present.
    Mr. Ashley: Although I welcome and appreciate what the Chancellor has done
    1772
    for low-paid workers, may I ask him whether he will undertake to discuss their grievous problems with the TUC? Will he also bear in mind that £44·50 is a ludicrously low level beyond which no more than 5 per cent. can be negotiated and that this could and should be increased by at least £15 without in any way sabotaging the basic principles of the pay policy, which I support?
    Mr. Healey: If my hon. Friend could guarantee that higher-paid workers would not seek to rebuild their differentials on the back of the increase in low pay, to which he has referred, there might be something to be said for his views. However, I fear that to raise the level for low pay beyond that which the TUC itself set some years ago, adjusted for pay increases in the interim, would be a dangerous course.
    Mr. Bulmer: What undertakings have been sought by the Government and what undertakings have been received from the TUC about the operation of the 12-months rule?
    Mr. Healey: My impression is that the statement in the White Paper concerning the maintenance of existing annual settlement dates is one which is in line with the views of the TUC.
    Mr. Wrigglesworth: Is my right hon. Friend aware that there will be very great and broad welcome on the Government side of the House for the joint statement which has been published this week between the TUC and the Labour Party? In particular, will he note that some of us very much welcome the proposals for the establishment of a State bank by the amalgamation of the National Giro and the National Savings Bank, and for changes in the operation of the Bank of England? Will he clarify these propositions and say whether any more details are to be published?
    Mr. Healey: I think my hon. Friend is quite right that the mass of the population will welcome very much the statement of common objectives by the TUC and the Labour Party. I have noticed that the response to this announcement in the newspapers which support the Opposition has been one of alarm and despondency.
    On the question of the establishment of a single bank out of the National Savings

    1773
    Bank and the Giro, I hope that this will go ahead as fast as those concerned are able to negotiate the additional details. [Interruption.] I deeply regret that I missed the contribution of my hon. Friend the Member for Bolsolver (Mr. Skinner) on this point, but no doubt he will seek to make it shortly in an erect position.
    Sir G. Howe: Since the policies previously agreed between the TUC and the Labour Party have succeeded in the last four years only in lowering the living standards of British trade unions in contrast to those in every other part of the western world, is it not extremely foolish for the TUC once again to have agreed with the Labour Party on even stronger doses of the mixture as before, which can prove nothing but disastrous?
    Mr. Healey: The right hon. and learned Gentleman must make up his mind where he stands on these matters. I quoted in the debate on Tuesday the offensive remarks that he made about the TUC's attitude and the effect of the pay policy last year. He said that he had changed his mind and that he thought that pay policy was a good thing. I do not think that he will advance his party's electoral prospects by accusing the TUC leadership of being fools, which he did again this afternoon. He must be very grateful that the right hon. Member for Lowestoft (Mr. Prior) was not here to hear how he is betraying the position which the right hon. Gentleman is trying to establish.

    Taxation Levels
    Mr. John Huntasked the Chancellor of the Exchequer what proposals he has for the further reduction of taxation.
    The Chief Secretary to the Treasury (Mr. Joel Barnett): As circumstances permit, we shall continue to reduce the levels of income tax.
    !Ur. Hunt: Is the right hon. Gentleman aware that only a very few countries have higher top rates of tax than ours and that among them are Algeria, Egypt and Tanzania? Does he therefore feel proud, surprised or humiliated to find the United Kingdom figuring so prominently in this international league table?
    Mr. Barnett: I would not feel terribly proud if I were saying what the hon.
    1774
    Gentleman and his hon. Friends are saying—that nothing matters but the top rates of income tax.
    Mr. John Garrett: Does my right hon. Friend agree that there would be scope for reducing taxation on persons if the tax on the oil companies operating in the North Sea were raised? Does he agree that the tax regime in the North Sea amounts to little more than a rip-off at the moment and that we are not getting anything like the return for the public revenue that other countries get?
    Mr. Barnett: I note what my hon. Friend has said. He will note that there is a later Question related specifically to revenue from the North Sea.
    Mr. Peter Rees: Are we to understand that the Chancellor of the Exchequer has given up any idea of a July Budget, as foreshadowed by the Chief Secretary earlier this year? Or will he accept the advice of the hon. Member for Bolsover (Mr. Skinner) and have an autumn Budget prior to the General Election?
    Mr. Barnett: I am not sure which General Election the hon. and learned Gentleman has in mind, but some time between now and October 1979 there will be one or two more Budgets. As to whether there will be a July Budget, I am not prepared to commit my right hon. Friend.

    Economic Trends
    Mr. Flanneryasked the Chancellor of the Exchequer if he is satisfied with the present functioning of the economy; and if he will make a statement.
    Mr. Healey: I am satisfied that the economy remains broadly on the course charted in the economic forecasts published at the time of the Budget. Recent figures suggest that, on most indicators of economic performance, we are doing at least as well as predicted in the forecasts.
    Mr. Flannery: Does my right hon. Friend agree that, if there were a Tory Government led by the right hon. Lady who made that awful flop of a speech on Tuesday—which the Tories have now had second thoughts about—unemployment would be at least twice as high and the economy would be in chaos because of the confrontation tactics that they

    1775
    favour? Will my right hon. Friend also accept from me that the 5 per cent. limit plays right into the hands of the Tories, electorally and in many other ways? Will he not take into account the criticisms of the TUC and of individual unions and think closely about this causing more unemployment?
    Mr. Healey: I find myself in agreement with some of my hon. Friend's remarks and in disagreement with others. On the first part, of course it is absolutely right that if the policies proposed by the Tory Front Bench were put into effect we should have a massive and rapid increase in unemployment and a deterioration in our economic performance in almost every area. However, I cannot share my hon. Friend's view about the 5 per cent. limit. Our disagreement with the TUC here is confined solely to methods. On the question of keeping inflation in single figures, we are in agreement, and I have no doubt that we shall have the same co-operation from working men and women next year as we have had during the current pay round in achieving the Government's objectives.
    Mr. William Clark: Does not the right hon. Gentleman agree that, if there has been any improvement in the economy, it has been due to the regulations and stipulations laid down by the International Monetary Fund?
    Mr. Healey: No, Sir, I would not agree with that. However, at least it enables me to remind Conservative Members of the point honestly made by the hon. Member for Oswestry (Mr. Biffen), who found the company he kept in the Shadow Cabinet totally intolerable and therefore retired to the Back Benches. The hon. Member for Oswestry made the very fair point that Opposition Members cannot at the same time claim that the Government have been following a mistaken policy for the last 18 months and also that their successes are due solely to the right policies which they followed after the agreement with the IMF.
    Mr. Hooley: Does my right hon. Friend agree that the economy is not functioning satisfactorily in relation to unemployment and that we need a substantial stimulus to new jobs by using the great range of public corporations that we now possess and by means of the housing
    1776
    sector, where much could be done without putting any strain on the balance of payments?
    Mr. Healey: I agree that the unemployment situation is unsatisfactory, but the trend of unemployment has been steadily downwards since last September. My hon. Friend will no doubt have seen the figures published yesterday, which show an increase of 28,000 in employment in the first quarter of this year.
    Mr. Lawson: Apart from the many ways in which hon. Members have already demonstrated that the economy is far from satisfactory, does the right hon. Gentleman recall that, on 14th June last in the debate on his salary, he confidently forecast that minimum lending rate—bank rate—would be reduced within a matter of days? That is now six weeks ago. What went wrong?
    Mr. Healey: What went wrong, of course, is the hon. Member's recollection of what I said. I never said that the MLR would be down in a matter of days, and I ask the hon. Gentleman to withdraw that false statement.
    Mr. Skinner: Is not the truth of the matter that the Trades Union Congress finance committee yesterday took a decision almost exactly in line with the line that some of us pursued on Monday, when we refused to support the Government's attempt to impose a 5 per cent. incomes policy next year and presumably a permanent incomes policy after that, and that it is completely in direct contradistinction to the line which is pursued by the man who supposedly heads the manifesto group, who should be wearing a pair of knee-pads because of the many times that he crawls up and down the corridors trying to get a job in the Government?
    Mr. Healey: My hon. Friend has a colourful but usually inaccurate turn of phrase. What the TUC did yesterday so far as pay policy goes was to repeat the opposition that it expressed last year to the setting of a numerical guideline by the Government. However, I am confident that the TUC members will adhere to the guidelines set down, at least to the degree that they have over the last 12 months. My hon. Friend will have seen that at the same meeting the TUC committed itself to the same collective objectives as

    1777
    the Government have accepted for economic policy over the coming years. I hope that it will have the support of my hon. Friend in pursuing those objectives.

    Scotland (Devolution)
    Mr. Dalyellasked the Chancellor of the Exchequer whether he still expects that the Government will devise tax-raising powers for a Scottish Assembly; and which economists and tax inventors have been consulted.
    Mr. Joel Barnett: As we made clear in the White Paper, we are prepared to consider sympathetically any proposals other than in relation to offshore oil put to us by the devolved Administration. It would not be right for me to prejudge the results of any such discussions.
    Mr. Dalyell: May I go on my kneepads to the Chief Secretary and ask him how it is that able Ministers, clever civil servants and tax inventors as ingenious as Lord Kaldor can spend four long years reflecting on some form of an acceptable taxation system for a subordinate Parliament in part—though only in part—of the United Kingdom and come up with nothing?
    Mr. Barnett: My hon. Friend never has to go on his knees to me. I am happy to see him on his feet or in a seated position. Although he is absolutely right that there are many bright people around—particularly in the Treasury—who have thought about these and many other matters and will continue to do so, we do not pretend that it will not be fruitful also to have discussions with the new devolved Assembly. I hope that those discussions will be very useful.
    Mr. Rifkind: Will the Chief Secretary take comfort from the fact that few Scottish Members of Parliament have received representations from their constituents for the Assembly to have power to impose additional taxes upon them?
    Mr. Barnett: I note that the hon. Gentleman is able to speak for all Scottish Members of Parliament, but I am not sure whether I should take that as gospel.

    Departmental Staff (Retirement)
    Mr. Greville Jannerasked the Chancellor of the Exchequer at what average age men and women, respectively,
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    employed in his Department have retired in each of the past five years.
    The Minister of State, Treasury (Mr. Denzil Davies): With permission, I shall circulate the figures in the Official Report, but the overall average age of men and women who retired from the Treasury during the years 1973 to 1977 was 621 and 60, respectively.
    Mr. Janner: When does my right hon. Friend think we shall be able to afford to get rid of the present ludicrous system under which older men who are desperate to retire have to stay on at work while younger people who are desperate for jobs are left unemployed? When can we afford to bring in the flexible approach to pensionable ages which is presaged in the admirable Green Paper, "A Happier Old Age", which appeared last week?
    Mr. Davies: My hon. and learned Friend has raised an important point, but when he uses the word "afford" I must remind the House that the gross cost of reducing the pensionable age for men to 60 would be about £2½ billion. Some of that would be saved, of course, by a reduction in the unemployment register, but even with that taken into account the cost might still be about £1½ billion.
    Mr. McCrindle: Why do the Government insist on costing a reduction in male retirement age on the assumption that everyone entitled to retire at 60 would therefore do so? As this appears to be the most likely social change to develop in the immediate future, should not the Government start by finding out how many people would take the advantage of retiring early if it were given to them?
    Mr. Davies: It is extremely difficult to make those assumptions. This is the difficulty in this matter of putting a figure of cost on a reduction in the retirement age. We do not know, and it is very difficult to find out, what the pattern of retirement would be afterwards.
    Following are the figures:

    AVERAGE AGE OF MEN AND WOMEN RETIRING FROM THE TREASURY FROM 1ST JANUARY 1973 TO 31ST DECEMBER 1977

    1973

    1974

    1975

    1976

    1977

    Men

    64

    62

    64

    62

    61

    Women

    60

    60

    60

    61

    61½

    Inflation
    Mr. Neubedasked the Chancellor of the Exchequer what is the latest annual rate of inflation recorded in the United Kingdom and West Germany respectively.
    Mr. Joel Barnett: In the 12 months to June, the retail prices index for the United Kingdom rose by 7·4 per cent. In the 12 months to May, the latest figure available, consumer prices rose by 2·7 per cent. in the Federal Republic of Germany. This shows that, although we have made excellent progress in the last year, we still have some way to go before we catch up some of our main international competitors.
    Mr. Neubert: After four and a half years of Labour Government, what explanation does the Minister have for our rate of inflation still being three times worse than that of one of our major competitors?
    Mr. Barnett: The hon. Gentleman is really quite remarkable. He overlooks the fact that when we took office inflation was running at 13·2 per cent. and rising. What is more, if we listened to his right hon. Friends we should have inflation rising again.
    Mr. Fernyhough: Will my right hon. Friend bear in mind that over the past 20 years Germany's GNP has been running at double that of the United Kingdom and that over those 20 years the United Kingdom has spent roughly just as much on defence as has Germany? Is it not true that if the Germans had paid to us under the Paris agreements what it has cost the British Government to keep British troops in Europe, our position would have been very much better?
    Mr. Barnett: I agree with my right hon. Friend that we pay a much higher proportion of our GNP on defence expenditure than do many countries in Europe, but it would be quite wrong to imagine that that is the sole reason for our much worse performance over a long time on the industrial front in relation to Germany.
    Mr. Lawson: Is the Chief Secretary aware that over the period of this Government as a whole inflation has been twice
    1780
    as bad as it was under the previous Conservative Government? Is he aware also that the figure which he himself said is the most accurate guide to the current rate of inflation—namely, the annual rate over the past six months, leaving out seasonal foods—shows an increase of 9 per cent. and rising?
    Mr. Barnett: I think it fair to say that what the hon. Gentleman is proving is that an incoming Labour Government invariably inherit a much worse economic situation than do an incoming Conservative Government.

    European Community Finance Ministers
    Mr. Skinnerasked the Chancellor of the Exchequer when he next expects to meet other EEC Finance Ministers.
    Mr. Healey: I hope to meet them at the next meeting of the Finance Council scheduled for 18th September.
    Mr. Skinner: Does the Chancellor of the Exchequer realise what is happening inside the Common Market? Is it not time that he and his colleagues woke up and spoke for Britain for a change? Why does he not use some of his well-known parliamentary bullying tactics against the Common Market? Does not my right hon. Friend know that the Jenkins plan—the Franco-German plan announced at Bremen—will result in further industrial penetration of our markets and allow the common agricultural policy, which assists France, to exploit our consumers? Why does he not adopt those tactics inside the Common Market? We cannot expect anything from the European party on the Benches opposite.
    Mr. Healey: I can see that my hon. Friend prefers "bovver" boots to knee-pads—
    Mr. Skinner: My right hon. Friend knows all about that.
    Mr. Healey: —but he would be more impressive if he used them for some purpose other than tap-dancing on the Common Market.
    Mr. Adley: Why is it that the Chancellor appears to be polite to his colleagues in the EEC even if he does not agree with them but is consistently rude and abusive to anybody in this country with whom he disagrees? Does he not

    1781
    realise that the British people do not really like the sort of tactics that he and the Prime Minister have been indulging in? Will he give an assurance that he will have second thoughts and not conduct the General Election campaign at that sort of abusive level?
    Mr. Healey: My right hon. Friend the Prime Minister and I try to be honest and straightforward in our dealings with all those whom we meet. All I can assure the hon. Gentleman is that anything which the Prime Minister and I said about the leader of his party on Tuesday is as nothing to what the Conservative press said about her on Wednesday.
    Mr. Watkinson: When my right hon. hon. Friend next meets the EEC Ministers, will he continue to express reservations about the proposals brought forward at Bremen? Can he say whether there is any understanding yet among his EEC counterparts of the need for surplus countries to expand under a fixed exchange rate system if other countries are not to be subjected to crippling deflationary polices?
    Mr. Healey: There is a series of Questions on this matter on the Order Paper, which I shall answer with Question no. 13.
    Mr. Marten: Was there any discussion at the Bremen meeting about the Franco-German proposals of any element of control of the money supply by the Community in each national State?
    Mr. Healey: There was certainly no suggestion that every country in the Community should follow the same money supply targets.

    Taxation (Disabled Persons)
    Mr. Newtonasked the Chancellor of the Exchequer if he will review the working of the tax system in its application to disabled people.
    Mr. Denzil Davies: This aspect, like other aspects of the tax system, is always kept under review.
    Mr. Newton: Will the right hon. Gentleman recognise that there is a growing body of opinion on both sides of the House that we should be moving away from the present hotch-potch of disablement benefits towards a tax-free disable-
    1782
    ment costs allowance? Would it not be sensible in this context to consider giving early priority to the removal of tax from the mobility allowance?
    Mr. Davies: I do not agree that there is necessarily a growing body of opinion suggesting that we should move away from the taxation of benefits in that way. Indeed, it is often fairer to tax benefits within the tax system and then provide for relief through the social security system than to proceed in the way the hon. Gentleman suggests.
    Mr. George Rodgers: Is it not true that a great number of disabled people, by the very nature of their handicap, are totally dependent on State benefit and accordingly do not pay income tax? Would it not be much better, therefore, to make reductions in indirect taxation, such as value added tax, which falls unfairly not only on the disabled but on families and the elderly?
    Mr. Davies: My hon. Friend is right when he says that a vast number—perhaps the majority—of disabled people do not pay income tax at all and so would not benefit from some of the suggested changes in the tax system in relation to them. As regards VAT, it is fair to point out that it is not entirely a regressive tax because many of the necessities of life are exempt from VAT.

    International Monetary Fund
    Mr. Adleyasked the Chancellor of the Exchequer when he last met the heads of the International Monetary Fund.
    Mr. Healey: I last saw Mr. Witteveen, the retiring IMF managing director, and his successor, Mr. Larosiere, in their official capacity at the IMF interim committee meeting in Mexico City at the end of April. I also met Mr. Witteveen again a few weeks later at the OECD meeting in Paris.
    Mr. Adley: As we are approaching the manifesto season, would the Chancellor like to tell us whether he followed the advice he received from the IMF because he had to or because he agreed with it? If it was the latter, perhaps he would like to give us an insight into the Labour Party's new economic philosophies by publishing all the correspondence.
    Mr. Healey: There is nothing I should like more than to publish my correspondence with the IMF, because it would make such good reading in my election manifesto. If the hon. Gentleman wants to help his party, he must do rather better in his questions than he has this afternoon.
    Mr. Ron Thomas: When my right hon. Friend meets members of the IMF, will he make it clear to them that the British trade union movement is opposed to his 5 per cent. pay policy because it realises that if a trade unionist cannot get the full benefit of a legitimate pay claim that it will have gone for ever but that any kind of restraint on dividends simply means increased capital gains, scrip issues and extra dividends later? Therefore, it is simply a facade.
    Mr. Healey: I hope very much that my hon. Friend is not suggesting that he will vote against the Government's proposals for renewing dividend controls later today. If so, I think that he will have some accounting to do to his supporters in his constituency.
    As for the first part of my hon. Friend's question, my friends in the IMF—and I have many—are immensely impressed by the common sense of the British trade union movement in observing moderation and responsibility in pay claims over the past three years, whether or not they agreed with every detail in the Government's policy. I hope that my hon. Friend shares their views.
    Sir G. Howe: Does the Chancellor recall saying in the early rounds of his correspondence with the managing director of the IMF that an essential element of his strategy was to secure a steady reduction over the next few years in the share of resources being taken by the public sector? Is he not this year actually increasing public spending by at least twice as much as the likely growth in the economy? Is not the right hon. Gentleman profoundly foolish so swiftly to have broken his undertaking to the IMF?
    Mr. Healey: I discussed this matter with the IMF team when it visited this country a few months ago, and I was gratified to find that it totally supports the Government's policies on public expenditure, as on every other element of economic policy. I must ask the right
    1784
    hon. and learned Gentleman to read the remarks of his recent colleague, the hon. Member for Oswestry (Mr. Biffen). The right hon. and learned Gentleman cannot have it both ways. If he really thinks that we are following IMF policies, when the IMF endorses our policies he must support us.
    Mr. Hoyle: Will my right hon. Friend please make clear to the IMF that it is not only that the TUC is against the 5 per cent. limit? It wants a return to free collective bargaining and it is against cash limits in the public sector, which have held down wages and salaries in the public sector. Is it not time that we changed our policy on this?
    Mr. Healey: I do not think it is time we changed our policy on either of those matters. I think that the policies the Government have followed in these respects have contributed to the fall in inflation, on which the TUC no less than others in the country has congratulated us.

    Taxpayers
    Mr. Rifkindasked the Chancellor of the Exchequer if he is satisfied with his estimate that there will be more taxpayers in 1978–79 than in 1977–78.
    Mr. Denzil Davies: The numbers of taxpayers in 1977–78 were lower than they otherwise would have been as a result of the increases in personal allowances made last autumn in anticipation of the indexation required for 1978–79. The numbers for 1978–79 are about 300,000 less than for 1976–77. This year's main Budget proposal—the lower rate band—benefits large numbers of the lower paid but does not itself alter the number of taxpayers.
    Mr. Rifkind: Will the right hon. Gentleman confirm that there are likely to be more than 1 million more taxpayers this year than there were at the beginning of 1974? As there has been no general increase in the prosperity of the British public over those four years, will the Minister accept that the people who have profited most from inflation have been the Government themselves?
    Mr. Davies: Criticism from Conservative Members about the level of taxation and the number of taxpayers would be

    1785
    better received if the Conservatives were to tell us how they would compensate for the kind of reductions in taxation which they are always calling for. Those reductions would fall upon public expenditure and affect people at the lower end of the scale.
    Mr. Frank Allaun: While I welcome tax relief on lower incomes, may I ask my right hon. Friend to accept the proposals made yesterday by the TUC and the Labour Party in the document "Into the Eighties" for an expansion of housing, health, schools and social services, particularly as this would relieve need and at the same time provide employment, which is what we need most of all?
    Mr. Davies: This Government will always be concerned with the expansion of the public services. Indeed, this is one of our priorities. Unfortunately, that expansion must be financed through taxation or borrowing. These are often two constraints on that expansion.
    Mr. Peter Rees: Arising out of the right hon. Gentleman's reply to my hon. Friend the Member for Edinburgh, Pent-lands (Mr. Rifkind), will he confirm that, notwithstanding the cuts carried by the Opposition in this year's Finance Bill, the Government will still be taking more by way of income tax in the year 1978–79 than in 1977–78?
    Mr. Davies: The hon. and learned Gentleman should put down a specific Question on that. But I repeat what I said. Conservative Members concentrate on taxation but never tell us the other side of the balance sheet, which is a reduction in public expenditure. When they tell us how they will reduce public expenditure, I shall answer these questions on taxation.

    Taxation (Married Women)
    Mr. McCrindleasked the Chancellor of the Exchequer if he has any further plans to alter the position regarding the taxation of married women.
    Mr. Joel Barnett: We have already legislated to extend the statutory rights of wives to their own PAYE repayments, and we are looking at the fundamental question of the aggregation of wives' incomes with their husbands.
    Mr. McCrindle: But are not the changes which the Government made recently purely cosmetic? Is not the truly satisfactory solution to the problem to move to a situation in which a woman is automatically entitled to be assessed separately from her husband, with an equalisation of tax allowances? Is that the direction in which the Government propose to travel?
    Mr. Barnett: I am not sure whether it is cosmetic. Many wives are extremely concerned about the fact that pay-as-youearn repayments were made to their husbands. The correspondence I received did not make me feel that it was a cosmetic action that we had taken.
    As regards the method of dealing with the problem of aggregation, one way is the way which the hon. Gentleman suggested, but I think he knows that if he looks at the matter very carefully he will find that there are substantial problems that cannot be solved by a simple, instant policy solution such as is normally put forward by the Opposition.
    Mr. Dykes: Does the Chief Secretary believe that, apart from paying the tax and being assessed, wives should have a legal right to know how much their husbands earn, if they wish to know that information?
    Mr. Barnett: That is an entirely different question.

    European Monetary Proposals
    Mr. Dykesasked the Chancellor of the Exchequer what initiatives he now proposes to take in the EEC Finance Council to develop United Kingdom participation in the outline Franco-German monetary fusion scheme announced at the recent European Council meeting in Bremen.
    Mr. Silvesterasked the Chancellor of the Exchequer whether he will publish a White Paper setting out his response to the proposal for a European monetary system.
    Mr. Wrigglesworthasked the Chancellor of the Exchequer what progress has been made in the discussions about a European zone of currency stability.
    Mr. Healey: The Government are taking a constructive part in the work to

    1787
    formulate a practical European monetary system. The House will be kept informed of the progress of this work.
    The EEC Finance Council at a meeting on 24th July, called upon the Monetary Committee and the Committee of Governors of the Central Banks to examine in co-operation with the Commission, in the light of the discussions at the present meeting and at that on 19th June 1978, and taking into account the main points raised at those meetings, the system outlined in the annex to the summary of conclusions of the Presidency of the European Council on 6th and 7th July 1978 relating to the creation of a closer monetary co-operation. It asked these committees to report back to it for its meeting on 18th September 1978.
    The Council also called upon the Economic Policy Committee to study the action which needed to be taken, within the framework of a European monetary system, to strengthen the economies of the less prosperous member States and to report back to it, through the Permanent Representatives Committee, in time for its meeting on 18th September and its subsequent meetings on economic and monetary questions.
    The Council instructed the Permanent Representatives Committee to define the brief thus entrusted to the Economic Policy Committee at its meeting today—
    Mr. Ridley: On a point of order, Mr. Speaker. May we have shorter answers, in the interests of making progress?
    Mr. Speaker: The Chancellor and Ministers have heard the hon. Gentleman's point of order. That is the end of the answer, is it not?
    Mr. Healey: On a point of order, Mr. Speaker. I was answering three Questions and also replying to a point often made by hon. Members on both sides of the House that I should, where possible, give an oral report on the conclusions of the meetings of Community bodies.
    Mr. Dykes: I thank the Chancellor of the Exchequer for that detailed reply. Could he tell us which subsequent question he is trying to avoid or postpone? If this fund is set up in due course, will he press in the foreseeable future—which must be in the near term—that the idea of the fund being located in London
    1788
    should be put on the agenda for any subsequent meetings?
    Mr. Healey: I shall not particularly press for that.
    Mr. Wrigglesworth: Is my right hon. Friend aware that, while many of us share the anxieties that he and the Prime Minister have expressed about the Bremen scheme, it is important not to lose sight of the benefits to employment and growth and stability in the western world which could flow from the greater currency stability that a scheme of this sort could provide?
    Mr. Healey: The benefits which flow from a scheme of greater stability depend entirely on the nature and terms of the scheme. The British Government strongly take the view, which is held by many of our Community colleagues and the United States Government, that a form of scheme which had a deflationary effect on the Community would be very damaging to world growth. A form of scheme which relaxed the constraints on growth imposed by the anarchy in the currency markets at the present time would have a benign effect on the economies of the western world, and the discussions which I have described are designed to achieve the good outcome to which I have referred.
    Mr. Biffen: Arising out of Question no. 13, may I ask whether the Chancellor does not agree that one of the initiatives that would be available to the Government in the context of any future monetary arrangements would be to insist upon a fundamental reorganisation of the common agricultural policy? Is that one of the initiatives that he seeks to pursue?
    Mr. Healey: May I say first how much I welcome a question from the hon. Member for Oswestry (Mr. Biffen), whose very wise remarks I have quoted on several occasions during the last 45 minutes or so.
    The British Government believe very strongly that it is necessary to transform the CAP into a system which produces a much more rational distribution of benefits and costs. My right hon. Friends the Foreign Secretary and the Chief Secretary to the Treasury and I have made this point. I did so at the meeting of the Council which took place on 24th July. I am grateful to the hon. Member for

    1789
    Oswestry for the attention with which he follows our affairs and the helpful nature of his interventions.
    Mr. John Evans: Does my right hon. Friend agree that before the United Kingdom can join such a scheme there will have to be much greater convergence of the economies of the Community countries, and that if the United Kingdom were to join such a scheme as this in January it would have a completely disastrous effect on our economy?
    Mr. Healey: I have just made clear that the effect of the scheme will depend entirely on its structure, terms and conditions. We are seeking to produce a structure, terms and conditions which will reduce the constraints on growth rather than increase them. I know that in that endeavour I shall be able to count on the support of my hon. Friend.
    Sir G. Howe: Does not the Chancellor accept that one of the necessary implications of movement along the lines foreshadowed in the Bremen proposals would be relaxation of exchange controls in line with our treaty obligations? Are the Government prepared to move in that direction?
    Mr. Healey: As I have made clear, the Finance Council of the Community agreed last week that it would consider the Bremen proposals in the light of the discussions at meetings of the Finance Council both last week and on 19th June, when the Council adopted guidelines for a European monetary system in line with the proposals that I had made. The idea of relaxing exchange controls appeared neither in the Bremen proposals nor in the guidelines I have mentioned.
    Mr. Christopher Price: Is my right hon. Friend aware that to say at one and the same time that one is in favour of greater monetary fusion and the dismantlement of the CAP is simply nonsense, as the one involves the other? How do the Government intend to get over that?
    Mr. Healey: With great respect, I must say to my hon. Friend that he is quite mistaken in what he has just said. It is perfectly possible to change the CAP so that it works in a more rational way, reduces the cost of food instead of increasing it, and produces a sensible
    1790
    rather than nonsensical distribution of costs and benefits, and to achieve greater monetary stability in Europe. It is the intention not only of this Government but of many Governments in the Community to achieve both these objectives at the same time.

    PRIME MINISTER (ENGAGEMENTS)
    Mr. Viggersasked the Prime Minister if he will list his official engagements for Thursday 27th July.
    The Prime Minister (Mr. James Callaghan): This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be holding further meetings with ministerial colleagues and others.
    Mr. Viggers: As part of his duties today, will the Prime Minister explain why, in the debate on Tuesday, he took as his example a family man earning £75 a week when, as a result of his policies, there are trained and skilled industrial civil servants who are taking home £45 a week, and some are taking home as little as £30 a week and might even be better off unemployed?
    The Prime Minister: There is a dispute going on because industrial civil servants, whose pay year starts on 1st July, have not accepted the offer that was made within the 10 per cent. guidelines for this current year. They are unfortunately at the end of the queue. There are meetings tomorrow on the matter between Ministers and the various national officials, and I think that we should see how those negotiations go.
    Mr. Canavan: Will my right hon. Friend find time today to reconsider the granting of an export licence for the return of Chilean aero engines at East Kilbride in view of the real possibility that the Chilean Government may attempt to use force to remove the engines, with the resultant risk of physical confrontation with the trade union movement?
    The Prime Minister: The Government's attitude to Chile and to the subject of human rights is well known, and we have made it clear not only by words but by our action in accepting a great many Chilean refugees.

    1791
    The issue of the licence cannot be reconsidered. It was issued a week ago and cannot now be taken back. The removal of the engines is a matter of commercial concern between the Chilean Government and Rolls-Royce. I hope that no subterfuges will be entered into to try to remove the engines. Equally, I hope that the legal responsibility will be properly observed and that these engines, which now belong to the Chilean Government, when they are paid for, should be removed.
    Mrs. Thatcher: Doubtless the Prime Minister has had time to see the Chancellor of the Exchequer today. Will he therefore confirm that the assumption on which his Government are working is that the figure for unemployment for the rest of this Parliament will be 1·55 million?
    The Prime Minister: My right hon. Friend the Chancellor of the Exchequer has just told me that the figure has been revised downwards.
    Mrs. Thatcher: The Prime Minister said that it had been revised downwards from 1·7 million last week. He did not give the figure to which it had been revised. If it is 1·55 million under Socialist policies, will he say so, bearing in mind that he inherited only some 600,000 unemployed and that the result of his efforts and those of his predecessor has been to add some 600 men and women to the dole queue every day his party has been in office?
    The Prime Minister: The right hon. Lady is, of course, right to focus on the problem of unemployment. Inflation and unemployment are the two biggest problems that the country has to face. Certainly there has been a substantial increase in unemployment, for reasons which have often been explained in this House. But, when I hear the cheers of the Conservative Party about these matters, I can only reflect that if the Conservatives had been in power and had adopted their own policies, with the abolition of grants and subsidies which has been so consistently suggested by the right hon. Member for Leeds, North-East (Sir K. Joseph), the misfortune that has fallen upon us as a result of the world recession would have been very much greater and there would have been far more people out of work. As the
    1792
    right hon. Lady knows—I have explained this before—an assumption in technical terms is not the same as a forecast. The Government's policy is to return to full employment as soon as we can.
    Mrs. Thatcher: What is the revised working assumption? Will the Prime Minister answer the question?
    The Prime Minister: The revised working assumption was published last May at 1·55 million, as I informed the right hon. Lady at Question Time a week ago.
    Miss Joan Lestorasked the Prime Minister if he will list his official engagements for 27th July.
    The Prime Minister: I refer my hon. Friend to the reply which I have just given to the hon. Member for Gosport (Mr. Viggers).
    Miss Lestor: In his very busy schedule, will the Prime Minister find time today to contact President Carter to express to him the extreme disquiet felt by large numbers of us over any suggestion that sanctions against Southern Rhodesia will be lifted? Will he make it perfectly clear to him that this can happen only with the full agreement of Britain and all other countries involved when Southern Rhodesia is free and has a democratically elected majority Government?
    The Prime Minister: The position about sanctions, as my hon. Friend indicates, is that they were imposed as a result of a decision of the United Nations, and they will be lifted in the same way. The United States Administration and the British Government are working closely together on this. President Carter and Secretary of State Vance are in no doubt about the general position, and, I think, broadly accept the way in which it was summed up by my hon. Friend.
    Mr. Churchill: Has the Prime Minister forgotten the terms of the Anglo-American package presented to Rhodesia by Dr. Kissinger, and in particular the clause which stated that, on the establishment of the interim Government, sanctions would be lifted and economic aid would be provided? Where does the Prime Minister stand on that promise?
    The Prime Minister: Those conditions have not been utterly fulfilled. There is no acceptable Administration in Rhodesia

    1793
    at the present time. If there were, we would not have a guerrilla war backed by many thousands of people. The purpose of British policy—backed, I believe, by a large number of Conservatives in this House—is to try to ensure that we can bring all the elements in Rhodesia into a settlement that will lead to peace.
    Mr. William Hamilton: Will my right hon. Friend try to find time today in which to seek ways and means of publishing in the Official Report the editorial in the Daily Mirror today? Does he recognise that that editorial consists of all the comments of all the Tory press on the crass ineptitude of the Leader of the Opposition? Will he say whether he can recall a precedent when all the Tory papers in the land were unanimous in their condemnation of the behaviour of the leader of the Tory Party?
    The Prime Minister: I noted that there was one exception. That was The Sun. Perhaps that was because it was not appearing. But let me say that I think we all have off days at times, and not too much should be made of that.
    Mr. John Davies: May I recall to the Prime Minister his answer to the question put by my hon. Friend the Member for Stretford (Mr. Churchill)? Is he seeking to say to the House that the fact that a war is being waged from outside a country's frontiers by guerrilla forces means that automatically there is a case for non-recognition of the Administration within those frontiers?
    The Prime Minister: No, that was not what I said, and I do not think that the right hon. Gentleman would draw that deduction if he is making it as a general rule. If he is applying it only to Rhodesia at the moment, my answer would be "Yes, I am saying that."

    TUC Annual Conference
    Mr. Maddenasked the Prime Minister if he intends to address the TUC annual conference.
    The Prime Minister: The general council has invited me to address the TUC annual conference in September, and I have accepted.
    Mr. Madden: When the Prime Minister speaks there, will he warn workers against any overtures from a new small but
    1794
    sinister organisation called the National Union of Tory Intellectuals, which is extremely vague on incomes policy, packaged by a PR firm which was, at least until Tuesday, advised by the former Conservative Member for South Angus?
    The Prime Minister: I would be very happy to look into this interesting proposition. I thought that the Conservative policy was quite clear on pay: that those who are on low pay should have substantial increases, that those who are on high pay and skilled should get substantial increases, that the managers should also get substantial increases, and that it should all be done within 5 per cent. That, I thought was the policy that I heard on Tuesday.
    Mr. Michael Marshall: When the Prime Minister meets the TUC, will he take it into his confidence on his views as to the future of nationalised industries? Will he not confirm that many of the problems faced by nationalised industries—for example, the difficulties they face over their profit figures in relation to different accounting systems—need to be looked at in the light of the Government's own White Paper, which is long overdue for discussion?
    Will the Prime Minister undertake to play his part, and when he comes back to the House in October—[HON. MEMBERS: "Yes, as Prime Minister."] Will the Prime Minister, when he conies back to the House, play his part as Leader of the Opposition in trying to resolve these problems?
    The Prime Minister: The depreciation methods used by nationalised industries, I agree with the hon. Gentleman, are not satisfactory for them—or, indeed, for private industries and private companies, as many of them at the present time are calculating depreciation on a different basis. What the Electricity Council has done this year—which seems to reveal a reduced profit, but is, in fact, accounted for because of its new depreciation position—is probably a move in the right direction. Certainly the Government will continue to give more consideration to this, and I hope that we shall get some agreement from industry too.
    Mr. Stoddart: Will my right hon. Friend also remind the TUC that under his Administration—a Labour Administration—the nationalised industries have

    1795
    been brought back into a position of profitability, whereas under the Conservative Administration they were losing huge sums of money? Will he tell that to the TUC, and also tell it to the Opposition?
    The Prime Minister: Yes, it is the case that when the Conservative Opposition were in power they did not permit the nationalised industries to charge economic prices for the services they rendered, and they then had the effrontery to blame the nationalised industries for not making profits. The present position is far more healthy.

    COMMISSIONER JENKINS
    Mr. Martenasked the Prime Minister when he next expects to meet Commissioner Jenkins.
    The Prime Minister: I have at present no plans to meet Mr. Jenkins.
    Mr. Marten: Until the Prime Minister does so, will he take the opportunity to re-read his letter to Mr. Ron Hayward last September and perhaps have a discussion with Mr. Roy Jenkins about that? Does the Prime Minister recall that in that letter he said quite clearly that we should develop greater parliamentary control over Common Market legislation? But nothing has been done. Will he have all-party talks so that we can get all-party agreement before the General Election, whenever that might happen, so that we are quite clear where we stand on this?
    The Prime Minister: I do not think it is fair to say that nothing has been done. The Government gave an undertaking, through the Lord President, about the reference of some of these proposals to the Scrutiny Committee and about the action which Ministers should take. That undertaking has been faithfully carried out, to a scintilla. The Scrutiny Committee, I believe, is reconsidering the matter, and the Government will consider what further steps, if any, should be taken in due course. It would be quite wrong to suggest that the Government have not kept to their undertaking.
    Mr. Heffer: Will my right hon. Friend stress the fact that the Labour Party is very much in favour of a looser type of Common Market organisation and that
    1796
    we believe that the Common Market's agricultural policy must be fundamentally changed? Will he say that, if we cannot get such fundamental change, we shall tell the Common Market sooner or later that if it goes on in this way we shall have to consider coming out?
    The Prime Minister: I would not agree with the last part of my hon. Friend's supplementary question. The common agricultural policy is yielding to pressure, the pressure of inevitable results that flow from the fact that far too many resources are now being devoted to unproductive agriculture in Europe. That pressure will be sustained and will eventually transform the present agricultural policy into one which can be supported.

BUSINESS OF THE HOUSE
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): The House may wish to know that in addition to the business already announced for next week there will be, at the end of business on Monday, the Scottish orders on rating and valuation, and on Tuesday, at 7 p.m., private business named for consideration by the Chairman of Ways and Means.
Mrs. Thatcher: May I ask the right hon. Gentleman one question? Does he remember that last week he said that he expected the debate on Rhodesia to take place on the Adjournment? Will he confirm that that is so?
Mr. Foot: Yes. I gather that that is the desire of the House, and I should think that it is the best way for us to proceed.
Several Hon. Members rose—
Mr. Speaker: Order. I remind the House that we had business questions for next week on Thursday last. Questions now should be limited to the Business Statement that has just been made.
Mr. Jay: Does my right hon. Friend not intend to table a motion for discussion next week on the control of EEC legislation—
Mr. Speaker: Order. The right hon. Gentleman could not have heard what I said. Questions must be limited to the Business Statement that has been made

1797
this afternoon. This is not an open Business Question session.
Mr. Jay: I am asking my right hon. Friend why he has omitted in this statement to carry out the promise frequently given in the House to introduce a motion in this Session for the better control of EEC legislation.
Mr. Foot: I certainly did give an undertaking to the House in the debate we had in November of last year that I believed we would have a debate on the subject before we came to the recess. I must ask my right hon. Friend and the House to release me from that undertaking because I fear that I am not able to fulfil it. There are many representations which I have received from different parts of the House—from many of my hon. Friends and from the representatives of the Scrutiny Committee—to the effect that we should have further consultations before we proceed along those lines. I hope that the House will be willing to accept that.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call two more hon. Members from each side of the House.
Mr. Carlisle: Dealing with the private business for Tuesday, may I ask whether the Leader of the House agrees that it would be a total disaster if these Bills were to fail on a technicality rather than be allowed to be debated on their merits? Will the right hon. Gentleman do his best to see that these Private Bills are enabled to be carried through to the next Session since a great deal of ratepayers' money has already been spent on their presentation?
Mr. Foot: I agree that those are some of the considerations which the House will wish to take into account, although I hope that we shall be able to transact that business speedily so that the House can proceed with other business.
Mr. Arthur Lewis: Before we reach the Scottish business which the Lord President has announced for Monday, may I ask my right hon. Friend to have a word with the Secretary of State for Transport and ask him to stop deliberately evading giving an answer to questions
1798
when the information is freely available? Is my right hon. Friend aware that the Secretary of State for Transport is covering up the maladministration and neglect of himself, his Ministers and his civil servants over the question of the conveyance of dangerous substances on the roads? Is the Leader of the House aware that this has happened on the very day when there was another accident? Perhaps my right hon. Friend will have a word with the Prime Minister, who has all of the details, and ask him to get Ministers to do the job for which they are paid.
Mr. Foot: I cannot accept what my hon. Friend says in his charges against my right hon. Friend the Secretary of State for Transport. I have no doubt that these matters can be raised in the discussions that take place on Monday.
Mr. Geoffrey Finsberg: Does the Lord President realise that this question of the scrutiny of EEC matters is not a private issue between him and his right hon. Friend the Member for Battersea, North (Mr. Jay)? Is the right hon. Gentleman aware that he gave his undertaking to the House? The Prime Minister gave the House a false answer—in ignorance I am sure—saying that everything was satisfactory. It is not. It was not. I believe that the House must demand that the Lord President accepts his responsibility as Leader of the House and finds time before Wednesday for such a debate, to carry out his honourable undertaking. Otherwise we shall have to draw conclusions.
Mr. Foot: The hon. Gentleman is misconstruing what was said by my right hon. Friend the Prime Minister a few minutes ago. He referred to the statement that I had made in the House in August 1976 and he said that we had faithfully carried out what we said then. That is the case. When I referred earlier to this matter I was not in any sense suggesting that it was a private matter between myself and my right hon. Friend the Member for Battersea, North (Mr. Jay). Indeed, I said the exact opposite. I asked the House to release me from the undertaking that I had given and I indicated that I had received representations from different sides of the House, from many of my hon. Friends, and also from

1799
representatives of the Scrutiny Committee. There was certainly no question of any private arrangement which I was making. I was telling the House what I believed the situation to be.
Mr. Finsberg: On a point of order, Mr. Speaker. May I ask for your guidance? How can the House make the Leader of the House carry out his word, given to the House?
Mr. Speaker: That is not a matter for me.
Mr. Buchan: The Leader of the House has announced Scottish legislation for Monday. Perhaps he would also use Monday to make a statement to the House about the events of last night. My right hon. Friend will be aware that a wrecking amendment—wrecking in terms of the future operation of the Assembly—was passed last night by an unholy combination of official Opposition Tories and Scottish National Party Tories, who voted against the Government out of revenge. Is there any means whereby my right hon. Friend can make a statement next week to signify the Government's intention to unscramble this unsavoury business?
Mr. Foot: I doubt whether such a statement could be made in connection with the Scottish business which is to be dealt with on Monday. However, I agree with my hon. Friend that the clause which was passed last night is a constitutional imbecility. I would have thought that all those who joined together to force it through the House, including the other place who gave us that advice originally, should be thoroughly ashamed of themselves.
Mrs. Castle: On a point of order, Mr. Speaker. I believe that there is great concern on both sides of the House over the statement which the Lord President has just made about his inability to fulfil a promise to the House to let us know the Government's proposals for increasing the control of this Parliament over EEC legislation. May I press my right hon. Friend, through you, to give us some indication about when he intends to make a statement to the House? Or are we now to accept that there is to be no such statement within the lifetime of this Parliament?
Mr. Gould: Further to that point of order, Mr. Speaker. The Leader of the House has invited the House to relieve him of his obligation to fulfil his undertaking given as long ago as 28th November. May we have your guidance about what procedure the House ought to follow to decide whether to accede to the right hon. Gentleman's request to relieve him of that obligation?
Mr. Speaker: I have been asked many difficult questions in my time, but I am afraid that I do not know the answer to that one.
Sir David Renton: Further to that point of order, Mr. Speaker. Next week we shall be discussing the dates of the Summer Recess. Will it be in order during that discussion to raise this matter with the Lord President?
Mr. Speaker: Before calling the Lord President may I say that the right hon. and learned Gentleman, who came to this House on the same day as I did, has announced that at the end of this Parliament he will leave us. His contribution just now was a farewell gift. That debate will give the opportunity to raise this matter with the Lord President, and I am deeply grateful to him for pointing it out.
Mr. Goodhew: Further to that point of order, Mr. Speaker. Will it be possible for the Lord President to put down a motion, which we can debate and divide upon, deciding whether the House will release him from his undertaking?
Mr. Madden: On a different point of order, Mr. Speaker. You will remember that some time ago a number of hon. Members were considerably embarrassed by their names appearing on a motion on the Order Paper, the substance of which they did not support. A number of us have looked at Early-Day Motion no. 583, and we cannot believe our eyes when we see the names attached to that motion. Can it really be that the hon. Members for Christchurch and Lymington (Mr. Adley), Cirencester and Tewkesbury (Mr. Ridley), Eastbourne (Mr. Gow), Ching-ford (Mr. Tebbit) and Reigate (Mr. Gardiner) are against personal abuse? Will you run a check to see whether a mistake has been made in this motion so that embarrassment can be avoided?
[That this House regrets that the Prime Minister chose to launch a personal attack on the Leader of the Opposition; and hopes that he will not conduct his election campaign at this level.]

BUSINESS OF THE HOUSE
  BILL PRESENTED
    COMPANIES (DISCLOSURE OF AUDITORS' SHAREHOLDINGS)
    Mr. Terence Higgins, presented a Bill to amend the law relating to auditors of companies; and to require disclosure of the interests of auditors, and associates of auditors, in shares in, or debentures of, their clients: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed [Bill 190].
ORDERS OF THE DAY

  DIVIDENDS BILL
  Order for Second Reading read.
  3.42 p.m.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move, That the Bill be now read a Second time.
  There is only one substantive clause in this Bill—the clause which extends section 10 of the Counter-Inflation Act 1973 for one year to 31st July 1979.
  The 1973 Act which included this section 10 was commended to the House at that time by a number of right hon. and hon. Gentlemen opposite, particularly by the present shadow Chancellor, the right hon. and learned Member for Surrey, East (Sir G. Howe). He said at the time:
  "The policy is essential. There can be no doubt about the position. For the sake of greater price stability, a more dynamic economy and a more contented society the country needs the Bill, and I commend it to the House."—[Official Report, 29th January 1973; Vol. 849, c. 1074.]
  I now commend section 10 of that Bill to the House.
  Of course, it will be recalled that that Bill was preceded by the 1972 Act which brought about a five-month freeze on pay, prices and dividends. Many Opposition Back Benchers at that time were very unhappy about the Bill and other Bills of that kind. Indeed, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) told the House:
  "If the 90 days is used for other purposes, such as drafting statutory Bills, I find it very difficult to support the Government."—[Official Report, 8th November 1972; Vol. 845, c. 1043.]
  I have to tell the House that he supported the Government on that Bill and indeed on the statutory Bill which came later.
  Mr. Nicholas Ridley: I did not.
  Mr. Barnett: Is the hon. Member denying it?
  Mr. Ridley: Yes.
  Mr. Barnett: Perhaps the hon. Member should look up Hansard. Perhaps

  1803
  there was an error in Hansard. His name appears in the Division lists.
  Mr. J. Enoch Powell: I did not support it.
  Mr. Barnett: No, the right hon. Gentleman is always pure in all these matters.
  Mr. Ridley: I think I should clear this up now. The Chief Secretary may have forgotten—his memory is not always good—that I moved an amendment to that Bill which was carried, with his support, to restrict its life to three years. The Chief Secretary supported my amendment, for which I shall always be grateful.
  Mr. Barnett: I am not sure whether the hon. Member is saying that I misled the House in saying that he voted for those Bills. He did vote for them—the Counter-Inflation Bill and the freeze Bill. Section 10 of the Counter-Inflation Act is the one that we are now proposing should be extended for a year. I see that the hon. Member is not denying that he supported those Bills.
  Of course, other hon. Members opposite were less articulate at that time. They said very little about dividend control. In fact, most of them never said a word. They just voted. The right hon. and learned Member for Surrey, East said at the time:
  "The whole nation knows that we cannot afford to delay such an application of the short-term standstill which is contained in this Bill, and which is essential to the health of the nation."—[Official Report, 8th November 1972; Vol. 845, c. 1140.]
  That is true. We do need to extend section 10. If it was vital in 1972–73, I shall explain now why it is even more vital in 1978.
  We are in a position where there is a danger of slipping back into a vicious circle of higher earnings chasing higher prices being chased by higher earnings and so on. Indeed, dividends and their control remain an essential part of that package. That is precisely what the right hon. and learned Member for Surrey, East told the House on 18th September 1973.
  Some of the problems of the 1973 economic crisis still beset us and still beset the industrial world. No single country can succeed in solving that on its own. But what we can do is win the
  1804
  battle against inflation. That is within our command. We all agree on the objective—I do not think the Opposition would oppose it—that we want not only to maintain a rate of price inflation of 7 per cent. but to bring it down even more. Most of us agree that moderation in pay settlements plays an essential part in achieving that objective.
  It is now suggested, for example, that a man on £50 a week, all earned, should be asked to be reasonable and responsible in collective bargaining and accept a pay increase broadly within the sort of level about which we have spoken in order to achieve a price inflation target on which we all agree. At the same time somebody, for example, on £500 a week, all investment income, is faced with no limits and no sanctions, even though it is known that some companies stand ready to increase dividends by as much as 300 per cent.
  The Opposition, including the hon. Member for Blaby (Mr. Lawson), who is ever ready to tell us the Opposition's views on these matters, are prepared, so we understand, to allow dividends to be uncontrolled, have no limits and be left entirely to voluntary restraint. They seem to think that all we should do is to tell these people, "Please be decent about it and try to restrain your dividend increases in the interests of getting moderation in pay settlements".
  Mr. Peter Hordern: Will the Chief Secretary tell us how many people earn £500 a week investment income? Also will he tell us what additional net income would be received by such a person if there was no restraint on dividends, at that rate of income tax?
  Mr. Barnett: Even if there was only one person, it would be worth while. But the hon. Member is more sensible than that. We are asking the country to accept an objective of price inflation which we all want to see achieved and, within that objective, moderation in pay settlements. When we are asking the people of this country to be moderate and restrain their pay settlements, provocative increases in dividends do not help, to say the least—
  Mr. Hordern: One man?
  Mr. Barnett: There is more than one man getting dividend increases. Hon. Members know that. These sedentary interventions from a grinning posture do not help the debate. I shall come to the questions of the distribution of incomes and dividend income.
  Mr. Nigel Lawson: Before the Chief Secretary moves on, will he answer the question put by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern)? If there is a man with £500 per week income and dividends are, say, doubled, how much extra would that man get after tax'? Will the Chief Secretary also put the matter in perspective and say by how much dividends have risen compared with, say, earnings while this Government have been in office?
  Mr. Barnett: The hon. Gentleman always intervenes before I come to my main point. I want to deal with the specific question of the distribution of incomes, including dividends. The Leader of the Opposition misled the House on Tuesday on this whole question of the distribution of dividend incomes and personal incomes. We have heard many heartbreaking stories about the consequences of a 10 per cent. limit on dividends. I am quite happy to carry on amidst all the noise emanating from the Conservative Benches. I realise that they are very protective of the Leader of the Opposition and I understand why.
  There are serious problems. I do not dispute that the 10 per cent. limit on dividends will have an effect on certain forms of incomes, particularly, as the right hon. Lady said, on pension fund income and small incomes generally. However, the right hon. Lady, in what she told us would be an intellectual analysis of the various problems we face, read in a highly selective way from the Diamond Commission report. In relation to those getting benefit from dividend incomes, she told us:
  "For many, the main source of income comes from dividends from investments."
  A little later she said:
  "Furthermore, half of all recipients of dividends and interest had total incomes of less than £2,000 a year."—[Official Report, 25th July 1978; Vol. 945, c. 1399.]
  The clear implication of that was that those on £2,000 a year were receiving largely, if not entirely, dividend income.
  1806
  I looked up the Diamond Commission report. Paragraph 118 says:
  "At the bottom end over a million taxpayers with incomes of less than £2,000"
  —she was right about that, but she omitted to read on to where the report says that these people
  "received an average of £227 in this form"
  It was not all those poor people receiving incomes from pension funds or pensioners getting £2,000 a year in dividend income. The figure was £227 a year and not all of that was dividend income. It was dividends and taxed interest. That is what we are talking about.
  Mr. Michael Latham: Will the Chief Secretary give way?
  Mr. Barnett: No. There is a further omission.
  Mr. Latham: On a point of order, Mr. Speaker. The Chief Secretary castigated me a moment ago for intervening from a sedentary position. Yet when I stand to try to intervene, he will not give way.
  Mr. Barnett: I give way to serious interventions.
  Mr. Speaker: Order. The Chief Secretary should be heard in more reasonable silence. The House has had a high temperature for the whole afternoon. I hope that we can lower it a little, at least until I leave the Chair.
  Mr. Barnett: I shall do my best to lower the temperature. I move on to an important factor concerning high incomes. The hon. Member for Blaby asked me about this and I am grateful for his question because it exposes clearly how the Leader of the Opposition selectively and in a distorted way chose her quotations.
  Mr. Lawson: My right hon. Friend did not.
  Mr. Barnett: The hon. Gentleman must have written the speech for the right hon. Lady. I would not claim much credit if I had written that speech.
  Mr. Lawson: I have read the Diamond Commission report.
  Mr. Barnett: Let me refer to the same paragraph of the report as that from which the right hon. Lady selectively quoted when she tried to prove that dividend control has an important impact on

  1807
  low incomes. She omitted to read from paragraph 118 which says:
  "At the top end of the income distribution some 11,000 taxpayers with total statutory incomes of £20,000 or more a year received a pre-tax average of £11,884 in the form of dividends".
  Mr. Lawson: That is pre-tax income.
  Mr. Barnett: Of course. The hon. Gentleman may want to reduce the tax level on such incomes, but that is not what we are talking about. We are discussing dividend control. It is astonishing that the Leader of the Opposition should choose to select quotations from the Diamond Commission report to try to prove that dividend control largely affects those with small incomes but omits to mention that there are many thousands of people who will benefit considerably—and much more than those with modest incomes.
  I give way to the hon. Member for Eastbourne (Mr. Gow), who always makes interesting interventions.
  Mr. Ian Gow: The Chief Secretary read out pre-tax figures. Will he now give us the post-tax figures
  Mr. Lawson: They are in the Diamond 'Commission report.
  Mr. Barnett: I am not sure what that has to do with dividends. It is remarkable that the one area of personal incomes that the Opposition make the greatest fuss about is dividend income. Even more interesting is that when the dividends control legislation that we are seeking to 'extend for a further year was introduced, not one of the Conservative Members who are now making such a fuss got up and said a word. Where were they then on 'behalf of those paying high taxes on investment income?
  Mr. Ridley: Will the Chief Secretary give way?
  Mr. Barnett: We know where the hon. Member for Cirencester and Tewkesbury 1Mr. Ridley) was. He was in the Division Lobby voting for the legislation.
  Mr. Ridley: In view of the right hon. 'hon. Gentleman's recently disclosed support for dividend control, will he tell us why, when my hon. Friend the Member for Oswestry (Mr. Biffen) and I moved amendments to the Counter-Inflation Bill to limit its duration to two years, he and
  1808
  all his colleagues supported us with great fervour in opposing dividend control? What has happened to change his mind since then? Will he understand that the vagaries of which side of the House hon. Members occupy apply to him much more than to any of my hon. Friends?
  Mr. Barnett: I will tell the hon. Gentleman what has changed. That section 10 was in the context of a whole Bill and against a background of what the Conservative Government had been doing on income distribution against the interests of the lower-income groups of this country. That is why I voted as I did. The hon. Gentleman cannot wriggle out of the fact that he and all his right hon. and hon. Friends never spoke a word during the passage of those Bills about dividend control. Only now are they concerned about dividend control. I find it a remarkable transformation, but I hope to see it continued for many more years.
  Indeed, it was said by the right hon. Lady, and others who criticised this Dividends Bill, that this will have a terrible consequence for a majority of those who are pensioners and who receive dividend income. I see the hon. Member for Horsham and Crawley (Mr. Hordern) nodding. But I have pointed out that what the right hon. Lady omitted to quote was that out of the 1 million people with £2,000-a-year income and below who would be affected by dividend control, only £227 related to them. Even then, that did not wholly relate to dividend income. It related to dividend income and interest.
  The fact is that those pensioners and, indeed, the higher-paid income groups in the country, will all benefit from having a lower rate of price inflation. That is the way to benefit them all. Of course, it is true—and I do not deny it—that a large proportion of dividend income goes into pension funds and life assurance. The latest figures we have show that at the end of December 1975, 32·7 per cent. did so, and it is probably higher now. I would not dispute that at all. But it is still a fact—against this is in the Diamond report, which the hon. Member for Blaby seems to have written, even though he did not write his right hon. Friend's speech—that half of all dividend payments go directly to individual shareholders. That is also a fact

  1809
  which we did not have from the right hon. Lady.
  Mr. Ron Thomas: Will my right hon. Friend give way?
  Mr. Barnett: Just for a change, yes.
  Mr. Thomas: Is my right hon. Friend aware that the right hon. and !earned Member for Surrey, East (Sir G. Howe) made the statement on the radio on Sunday that the overwhelming amount of dividends accrue to pension receivers? The real situation is that only about one-third actually goes to pension receivers.
  Mr. Barnett: Nothing ever surprises me about statements made by the right hon. and learned Gentleman. I am very pleased to note that my hon. Friend listens to them so carefully, takes note of them and notes the factual errors in them. As I have pointed out, nevertheless—
  Mr. Ian Lloyd rose—
  Mr. Barnett: With respect, Mr. Speaker, I shall be quite happy to keep giving way and to go on until we have a vote. I know that you want to speak occasionally and interrupt me. But I think that I should try to make a little progress.
  Mr. Speaker: I can tell the right hon. Gentleman and the House that I have a long list of hon. Members who wish to speak. Too many interruptions will mean that at least one hon. Member will be cut out.
  Mr. Barnett: Of course, one accepts that a large number of pensioners obtain benefit from pensions funds and life assurance. It would be very foolish to deny that. I hope that Conservative Members will equally accept that many thousands with much larger investment income also benefit both from pension funds and from dividend income generally.
  Mr. Ian Lloyd rose—
  Mr. Barnett: The hon. Gentleman knows that I am perhaps one of the most willing Ministers in this House to give way, mainly because I know the kind of interventions that I am likely to get. Therefore, I am perfectly happy to give
  1810
  way. But in the interests of all those other hon. Members who wish to speak. I think that I should try to make a little progress.
  What I like about Conservative Members is the selective way in which they read from reports—[HON. MEMBERS: "Oh."]. I read the lot. I cannot understand it. I not only read what the Leader of the Opposition said, but I also read what she omitted. One cannot do more than that. How much better than that can one be? If the right hon Lady would not omit so much I should not even need to read that. But she reads selectively from these reports to try to prove a point, which is a bad point. I hope that I have demonstrated to the House—at least I know I have to my hon. Friends—that it was a bad point.
  Mr. John Evans: She should sack her speech-writer.
  Mr. Barnett: I think that she probably will be sacking her speech-writer. That is probably why the hon. Member for Blaby is looking so sick.
  The second heartbreak story which we constantly get is that the continuation of dividend control creates considerable problems for raising capital. Let me say at once that on the margin there will be some increase in the cost of raising capital. I would not dispute that. Nevertheless, there have been sharp increases in the market over a number of years despite dividend control. The evidence about the serious difficulties of raising capital from dividend control is, to say the least, far from clear. In the last three years-1975, 1976, 1977—£3,165 million was raised in cash, despite dividend control. That is between 6 per cent. and 8 per cent. of the total market value of United Kingdom industrial, commercial and financial companies.
  Nevertheless, it is true that many factors influence the value of shares and the ability of companies to raise capital, including the general state of the economy, the level of inflationary expectations, the level of company profits and so on, as I am sure all Conservative Members will agree. At least I hope they will agree, because that is undoubtedly true.
  Mr. Richard Wainwright: With regard to the interesting figure which the right hon. Gentleman has just

  1811
  given to the House—that of £3,165 million raised by industry in recent years —will he tell us how much of that has been raised in fixed-interest issues?
  Mr. Barnett: If the hon. Gentleman puts down a question I shall be happy to deal with it. He knows as well as I do that the problems of raising capital on the markets are manifold. There is not just one simple reason. Large sums of capital have been raised over the years despite dividend control, whereas at other times, when dividend controls have not been in existence, it has not been possible so easily to raise money on the markets.
  When I referred to the different reasons why it was difficult to raise money on the markets, I was in fact quoting from a predecessor of mine. During our debates in Committee on the Counter-Inflation Bill the right hon. Member for Wanstead and Woodford (Mr. Jenkin) said:
  "Share values are affected by many different factors, including the general state of the economy, the level of inflationary expectations … and so on."—[Official Report, Standing Committee H, 15th February 1973; c. 801.]
  That is Why I assume Conservative Members agree. It would be a nonsense to say that this is entirely due to dividend control. But it is a fact that on the margin dividend control has some consequence. On the other hand, rather more than on the margin, the problem of raising capital on the markets is connected with the level of inflationary expectations. If we had totally unrestrained dividend limits and totally unrestrained prices and pay, as Conservative Members seem to imply, I wonder what that would do in respect of raising capital on the markets.
  Mr. Peter Bottomley: Will the right hon. Gentleman allow me?
  Mr. Barnett: I would rather not allow the hon. Member. I would rather carry on a bit, if he does not mind. I shall give way to the hon. Member later, perhaps in about an hour or so when I have made a bit of progress. I am working my way through this one-clause Bill.
  As I said, dividend restraint is a factor, but capital markets will be hit much harder by many other factors as well. To those who complain that dividend controls, and the way in which they have worked since 1974, have had the effect
  1812
  of limiting the raising of capital on the markets, I am bound to say that they simply do not understand how this works. The fact is that there is no company which could show that it was raising substantial amounts of new money from the markets and which had been refused Treasury consent to increase its dividend, not one.
  Mr. Lawson: The right hon. Gentleman does not understand.
  Mr. Barnett: What I like about the hon. Member for Blaby is his deep humility on these matters. There is only one hon. Member in this House who ever understands anything, and that is the hon. Gentleman. At least I am grateful to know that he did not write his Leader's speech on Tuesday, so he does not need too much humility about that.
  Mr. Lawson: What the Chief Secretary does not understand, among many other things, is that the effect of dividend control is to depress the whole level of equity shares. Therefore, every company going to the market has to pay more for new capital. At the margin there are companies that will be unable to do that.
  Mr. Barnett: That is precisely what I said. I find that remarkable. What I like about the hon. Gentleman is that he is so busy teaching me and others that he does not hear what I said. I specifically said "on the margin there will be some increased cost". I am not disputing that. I said that. That is precisely what I said. It may be that the hon. Gentleman will read my remarks tomorrow. He may learn something from reading my speeches. I would never suggest that to anybody else. I hope that the hon. Gentleman, who is always so ready to teach us all, and me in particular, so many things, will in future read what I say before he intervenes. That may mean that he will not intervene at all in future.
  Mr. John Cronin: It might be convenient if my right hon. Friend points out to the hon. Member for Blaby (Mr. Lawson) that new issues represent only 6·5 per cent. of the total capital market, so the effect is small.
  Mr. Barnett: As my hon. Friend appreciates and as the House will appreciate, the greatest amount of capital for new investment in industry is provided from

  1813
  ploughed-back profits and not from new issues or rights issues. My hon. Friend knows that as he is well informed on these matters.
  Another problem about which we have heard a great deal is the introduction of the new rules that add a further exception with the extension of section 10. These are the rules that exist under the 1973 Act. I appreciate that initially there were some problems for those concerned. However, I believe that Monday's statement will have clarified the new area where consent will be given.
  I remind the House that it is not possible in advance to specify precise rules applicable to all instances. It is part of our intention to encourage companies to apply to the Treasury on matters where it is felt that the rules are not entirely clear-cut. That was the situation when the 1973 Act was first introduced by the previous Conservative Government. That is exactly what is said in Cmnd 5444 of October 1973. I believe that that is generally understood by those who are involved.
  Companies that are persistently successful, with a rate of growth above 10 per cent., and continue in that way next year, will be able to increase their dividends in line with profits. The new provision was introduced primarily to relieve pressure on those companies.
  I recognise that some companies will be disappointed about the way in which the provision will work. Obviously there will be some companies that wanted to increase their dividends that now will not be able to do so. I hope that it will be clear that under a policy of dividend control, as introduced in the 1973 measure, we cannot make exceptions in individual cases. However, I make it clear that the policy will be considered again in the light of the experience of its working.
  I ask Opposition Members not to rush so arbitrarily into expressing disappointment on behalf of the company sector. I ask them to remember the disappointment that is caused to so many people when we ask them to make much greater sacrifices in restraining their incomes.
  Mr. Lawson: Rubbish.
  Mr. Barnett: What I like about the hon. Gentleman is that his knowledge of everything, including rubbish, is better than anyone else's.
  There are some genuine complaints that are moderately stated—we can never expect that from the hon. Member for Blaby—but the complaints that we get from the Opposition, who have found their voices on the extension of the 1973 Act, are grossly exaggerated.
  If dividend control has a distorting effect, inflation distorts even more. It distorts all forms of income and not only dividend income. I accept that it has an enormous effect on dividend income but it has an equally great effect elsewhere. That is why it is crucial that we continue with an even-handed policy on all forms of income.
  On Tuesday the right hon. Lady the Leader of the Opposition talked about sanctions that we deployed in relation to incomes policy. She said that that was an "arbitrary law". The social effects of a high rate of inflation are very much more arbitrary than anything that has been imposed by the Government in the area of incomes policy. It is proposed by the Opposition to leave dividends totally free while seeking to ensure that incomes do not grow beyond a certain level.
  Mr. Nick Budgen: No.
  Mr. Barnett: That may not be the hon. Gentleman's policy, but the Opposition are in favour of restricting incomes. He is a member of the Conservative Party for the moment, unlike his predecessor, the right hon. Member for Down, South (Mr. Powell), who at least did the honest thing. It is the Opposition's policy to leave dividends totally free while seeking to ensure that incomes do not grow beyond a certain level.
  To avoid the worst distortions of inflation, we need an overall policy for all forms of income, including dividend income.
  Mr. Peter Bottomley: Will the right hon. Gentleman give way now?
  Mr. Barnett: No, not now. I said "later". I shall continue speaking for a long time yet. No one can doubt that I give way on a tremendous number of occasions in the House. I am always courteous—perhaps too courteous.

  1815
  The right hon. and learned Member for Surrey, East agrees that the total growth of incomes should not be more than about 5 per cent., although he does not now say that he is in favour of free collective bargaining. He says that there is no such thing as free collective bargaining. He is now talking about realistic and responsible collective bargaining. On television recently he told the country that bargaining should be within what the Government have told the nation it can afford. He agrees with the idea of the Government telling the nation broadly what it can afford. He is not carrying his hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) with him on that score. He is telling us that that is what should be done while he is in opposition. He will not tell us how he will achieve it.
  The right hon. and learned Gentleman explained on television on Friday night that if by any mischance—he did not put it in quite that way—he became a member of the Government if there were a General Election in October he would not scrap the 5 per cent. policy. Apparently he would continue it. That is what he said. His chance of doing that in the face of the Opposition—[HON. MEMBERS: "Oh."] I hope that no one is disputing what I have said. I have the right hon. and learned Gentleman's words before me. It would be so embarrassing to have to refer to them.
  Mr. Tom Litterick: What did he say?
  Mr. Barnett: I shall read part of the transcript. I quote from a verbatim transcript of BBC2 TV "Westminster Report" that is dated 21st July 1978 and timed 7 p.m. The interviewer, a Mr. Noel Lewis, said:
  "This 5 per cent. policy should hold until an October election but what would the Conservatives do if they win? Anyone who thinks the pay policy would change dramatically overnight will be surprised by this answer from Sir Geoffrey to the question—would the Conservatives accept today's policy?"
  The transcript continues:
  "SIR GEOFFREY: We come into office starting from the fact that that has been enunciated and will have been in operation for some time. I think it would be foolish for us to arrive and tear up everything and give the impression that our arrival involves a free-for-all, as the Government are always saying it does. A free-for-all is not what we are advocating."
  1816
  Is that enough?
  It seems that the Conservatives will try to carry on our policy. However, on Tuesday the right hon. Lady the Leader of the Opposition, in her desperate desire to be loved, told us how she will maintain the policy of her right hon. and learned Friend. It seems that she would give a great deal more money to the low-paid and everyone else.
  The right hon. Lady scrapped her right hon. and learned Friend's policy in advance. She wants large increases for the low-paid, large increases for the higher paid and in between she wants increases to improve differentials. To encourage a new free-for-all, she will allow total freedom on dividends. I hope that when the hon. Member for Horn-castle (Mr. Tapsell) addresses the House he will tell us how that miracle is to be achieved. I look forward to his reply with great interest. If he does not tell us, perhaps his hon. Friend the Member for Blaby, who is always ready to tell everybody everything, will tell us. No one could really believe that it was possible to achieve that kind of miracle. I am sure that even the hon. Member for Blaby does not believe that it is possible. The Opposition know that that kind of policy does not have a hope in hell of being achieved.
  If we allowed dividends to go totally free, there would be high inflation with high confrontation. It must inevitably happen from the result of scrapping just one element in the policy. How can we go to the rest of the country and say "We want you to be moderate, reasonable and responsible in your collective bargaining, but we shall not bother with dividends"?
  The fact is that what the right hon. and learned Member for Surrey, East and his right hon. Friend the Leader of the Opposition are proposing would lead this country on a road to disaster. We need an even-handed and fair policy. The Bill is an essential part of it, and I recommend it to the House.
  4.21 p.m.
  Mr. Peter Tapsell: Before turning to the important general principles raised by the Bill—they certainly are very important, although that would not have been readily apparent to the House from the somewhat perfunctory

  1817
  terms in which the Chief Secretary introduced it—I want briefly to comment on the proposed method of controlling dividends which, as the Chief Secretary pointed out, is set out not in the Bill but in a press release issued by the Treasury on Monday.
  Even if the principle of continued dividend control were to be accepted—I hope that the House will reject it—there are strong grounds for criticism of the method proposed, which favours the less successful company and penalises the dynamic growth company.
  Criticism on this point which has been widespread throughout the informed financial and business press, centres particularly on two features of the proposals: first, the intention to use end-1972 as the base date for dividend cover calculations and, secondly, the refusal to allow undistributed profits and transfers from reserves between end-1972 and now to be taken into account for the future. That will produce arbitrary effects if it is operated in that way, and the Chief Secretary was very vague about how it would be operated. It would also penalise the more efficient companies.
  For example, company A, which has quietly jogged along not increasing its dividend cover in the period 1972 to 1976, but which has had a sudden increase in its dividend cover in the last year from once-covered to two-and-a-half-times-covered, could, under the proposed rules, increase its dividend by 150 per cent.
  By contrast, company B, which may have made steady progress between 1972 and 1976 so that the dividend which was once-covered in 1973 was, because of the policy of dividend restraint, five-times-covered by last year, may have seen its dividend cover level out over the last 12 months. In those circumstances, company B will not be allowed to increase its dividend by more than 10 per cent. by contrast with company A which can increase its dividend by 150 per cent.
  Those may be slightly extreme and over-academic examples, but they clearly show the essentially arbitrary and unfair effects which are bound to flow from the refusal to allow any credit to be taken for previous growth in the dividend control scheme proposed by the Government.
  1818
  The White Paper, Command 7293— "Winning the Battle Against Inflation" —in paragraph 30 states that the proposed new provisions
  "will enable companies to increase their dividends …"
  I hope that the Chief Secretary and the Financial Secretary will be good enough to listen, because I am putting a serious point on which there is a great deal of concern in industry. I hope that when the Financial Secretary replies to the debate, we shall get a serious reply to this point and to others that I hope to make.
  The White Paper states that these provisions
  "will enable companies to increase their dividends in line with profits or in line with the statutory limit, whichever is the higher".
  But the procedures set out in the Treasury press notice of 24th July will not in practice permit that to happen, as I showed by my example of the treatment of company B.
  There are many companies whose dividend cover is lower today than it was in the earlier years of control. They may have received special permission from the Treasury, for instance, to raise their dividends in support of a rights issue or other capital raising operations, or they may have experienced a temporary deterioration in their trading position, but, like many companies, if not most, wish to pursue a long-term dividend policy. Whatever the reason, the operation of the proposed rules about dividend cover will put them at a disadvantage.
  The White Paper's declared aim to allow dividends
  "to increase … in line with profits"
  could more fairly and efficiently be achieved if the dividend cover rule were based on the level of cover in the latest completed accounting period rather than on the highest level since 1972.
  I hope that the Financial Secretary, when he replies to the debate, will give sympathetic consideration to that suggestion and will explain, if he is unable to accept it, why he does not think that the proposal that I have put forward makes better sense than the proposal in the Treasury press notice.

  1819
  I turn now to the wider issues of general principle raised by a Bill which, I emphasise, makes the wholly unprecedented proposal for the statutory control of dividends at a time when there is only voluntary restraint in other spheres.
  The Chief Secretary made no serious attempt to justify continued dividend controls on any grounds, and certainly not on the fact that in themselves they make financial or economic sense. The excuses that he advanced for the Bill were fundamentally political and, one might almost say, psychological in kind. It has become the political convention in this country in recent years to bracket together the words "wages" and "dividends" as though like were being compared with like. The whole thrust of the Chief Secretary's speech was to that effect.
  In fact, dividends paid to individuals account for less than 2 per cent. of personal income. Therefore, any attempt to equate income from dividends with income from wages and salaries is very wide of the mark. The disproportion between wages and dividends is so great that even the increase in employment incomes in 1977 under phase three was more than twice the total amount of dividends paid out in that year.
  Therefore, any argument for continued dividend control must rest on political or psychological considerations, not on any considerations of demand management or of equation of the amounts involved in dividend payments with the amounts earned in the form of wages and salaries. The argument, repeated by the Chief Secretary today, is that it will be difficult politically to apply restraint to the very large sums paid in wages without also applying restraint to the relatively much smaller sums paid out in dividends.
  I do not disregard that argument or seek to brush it lightly on one side, because it clearly deserves serious and searching examination, not least because it has had sufficient force to carry weight with successive Governments in recent years. However, I believe that the argument for continued dividend restraint is now outdated, for reasons that I shall seek to explain.
  By way of preface, I suggest that one of the factors that has most contributed to our poor economic performance as
  1820
  a country has been our slowness to adapt our economic and political thinking and business practices to a rapidly changing social and industrial scene. Attitudes to dividends and to all forms of so-called unearned income are a case in point.
  The debate on dividends is all too often conducted as if the television series "Upstairs, Downstairs" were a realistic depiction of life in contemporary Britain. The concept of dividend restraint had its political birth in the last war. But its progenitor was the business profiteering that went on in some quarters during the 1914–18 war which deeply shocked the inter-war generation and which Winston Churchill's wartime Government were rightly determined to avoid. But that Government eschewed statutory control.
  For the first time in peace Sir Stafford Cripps introduced a policy of voluntary dividend restraint in 1948. Share ownership was then still overwhelmingly in private hands. By 1966, when statutory dividend control was first introduced, the figure for private share ownership was already down under 70 per cent. By 1973, the year of the Conservative Counter-Inflation Act, it was down to 50 per cent. Today only about one-third of shares are privately owned. That trend, which has stretched over the whole of the post-war period, is continuing with ever greater momentum. There is no foreseeable likelihood that the trend will be reversed. I regret that.
  At present two-thirds of the shares are owned by the institutions, of which the pension funds and the life insurance companies are the most important. That fundamental transformation in share ownership over a period of 30 years is an economic fact of life. It must be grasped and reflected accurately in political rhetoric and Government policy.
  That is the more so because, as many of my hon. Friends said during interruptions to the Chief Secretary's speech, with a 98 per cent. top-rate personal taxation on savings income, plus capital gains tax, if one is seeking to restrict the amount of income from dividends to the rich one does not do that effectively by dividend restraint or control. It should be done, as this Government and previous Governments have done it, through the progressive tax system. It is a mistake to confuse those two methods.

  1821
  I shall now take a close look at the precise nature of the institutions and individuals which benefit from rising dividends and rising share values and which suffer a disadvantage when they are artifically restrained. The share of dividends going to superannuation funds, life insurance companies and private, nonprofit-making bodies has risen to between 40 per cent. and 45 per cent.
  About 11 million workers are members of occupational pension schemes, which are already paying pensions to nearly 2+ million retired workers. A total of 14 million households in the country pay life assurance premiums to protect themselves and their families against the hazards of life and death. A total of 17 out of 20 families in the United Kingdom have some part of their savings invested indirectly in company securities.
  For those buying their own homes, usually on a mortgage, their rights obtained by indirect shareholding are usually their second largest capital asset after the house that they are buying. For those millions of subscribers to the institutions that I have described who live in rented houses their indirect stock market holdings are their biggest personal assets.
  For the Chief Secretary to imply that only a relatively tiny group of our fellow countrymen are affected by the movement of share prices and the level of dividends is wholly misleading and untrue. The economic and social facts are as I have described them.
  All this is far removed from the situation depicted by the Chancellor of the Exchequer on Friday when he said:
  "a large number of very wealthy people derive immense income from dividends. If such people are to get increases of 100 per cent., 200 per cent. or 300 per cent. it will be very difficult for ordinary working people to observe the moderation in pay which is required." —[Official Report, 21st July 1978; Vol. 954, c. 1027.]
  As my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) said during the Chief Secretary's speech when he repeated that argument, it is absolute nonsense. With income tax going up to 83 per cent. and with an investment income surcharge of a further 15 per cent. and so a top rate of tax on so-called unearned income up to 98 per cent., the idea that there are large numbers of very
  1822
  rich people deriving enormous benefits from increases in dividend income only has to be stated to be shown to be absolute and unmitigated rubbish.
  Let us leave aside deliberate and somewhat childish misrepresentation of the that we have heard from the Chancellor and the Chief Secretary. Part of the difference between the two sides of the House on this issue comes from discussing these matters in too abstract a form and in generalities. When that is done even the words "institution" and "pension fund" can conjure up for some hon. Members below the Gangway a rather grand and lordly image of chandeliers, deep pile carpets and City lunch cigar smoke drifting across the port. But the reality is very different.
  This book "Pension Funds and their Advisers, 1978" lists alphabetically all the pension funds in the country. It runs to 300 pages of small print. Under the letter "B" for example one finds British Gas Corporation, British Leyland, British Petroleum, British Railways Superannuation Fund, British Steel Corporation Staff and Manual Grades Superannuation Services, British Waterways Board Pension Fund, and so on.
  Under the letter "N" one finds National Bus Company, National Dock Labour Board Pension Scheme, National Freight Corporation, National Ports Council Pension Scheme, National Coal Board Staff Superannuation Scheme, and Mineworkers Pension Scheme and the Coal Industry Ancillary Workers Pension Scheme. Hon. Members below the Gangway need not fear that these are the salons of a Lady Londonderry.
  I want to know why it is essential in the national interest, as suggested by the Chief Secretary and by the Government in introducing the Bill, to tell the workers in these and many other industries that in order to persuade them not to ask for more than a 5 per cent. increase in wages next year they are to be offered the inducement of a reduced pension when they retire. In a nutshell, that is the Government's case.
  When Admiral Byng was shot on his own quarterdeck on the orders of the British Government, Voltaire ventured the opinion that it was done to encourage the others. This legislation appears to be inspired by similarly lofty considerations.

  1823
  Why, to pose the same question in another form, should workers in nationalised industries and private enterprise firms, observing the index-linked inflation-proof pensions of million of Government employees, feel encouraged to moderate their wage demands by the news that their pension funds are to have the income upon which they depend artificially reduced? That is the intended consequence of this Bill.
  Mr. A. P. Costain: Has it occurred to my hon. Friend that because of the dividend control policy these pension funds are now buying antique pictures and furniture instead of putting their money back into industry?
  Mr. Tapsell: Yes. I shall shortly come to that very point.
  It is insulting to the millions of trade unionists and their wives for Ministers to treat them as though they are too ignorant to understand the truth of the situation and as though they need to be given a worthless bribe to persuade them to exercise wage restraint.
  I mentioned the National Coal Board mineworkers' pension fund. It is one of the biggest and best-managed pension funds in the country. It has 48,000 staff pensioners and 243,000 mineworker pensioners. Its staff contributors number 62.000 and its mineworker contributors 250,000. That is a total of 600,000 people from the coal mining industry past and present. In April 1977 the book value of the United Kingdom equities owned by the fund was £500 million.
  The Bill is intended to have two effects. The first is to reduce the income accruing to the miners' fund. The second is to reduce the capital value of its existing investments on behalf of miners. Why is that seen to be particularly good Socialism? The miners, however, with their customary shrewdness, have seen the Government coming. They have already taken the precaution of investing £280 million in property where there are no such controls as are proposed in this Bill for shares.
  No doubt—and here I take up the point of my hon. Friend the Member for Folkestone and Hythe (Mr. Costain)— they, like their friends and fellow workers in the British Rail pension fund, are
  1824
  shopping around for some twelfth century candlesticks going cheap at about £55,000, or even, for a mere £65,000, for a Louis XV commode. So again I ask the Chief Secretary why is it such good Socialism to bring forward a Bill which, as one of its many odd effects, diverts the flow of capital away from the provision of new jobs in industry and towards speculation in property and chamber pots?
  The Treasury evidence to the Wilson committee put that exact point, only rather more delicately, when it talked of dividend control distorting the equity market and increasing the cost of the provision of new capital, which the Chief Secretary openly admitted would result from the Bill. That Treasury evidence is contained in volume 1 of the evidence on the financing of industry and trade.
  We must examine the true circumstances of the overwhelming majority of private individuals who between them own about one-third of the equity shares of publicly quoted companies, because the Chief Secretary sought quite disgracefully to distort the remarks of my right hon. Friend the Leader of the Opposition and the facts of the case. The actual situation bears so little resemblance to the "idle rich" described by the Chancellor as his justification for the Bill that one wonders where the right hon. Gentleman has spent most of the intervening years since he came down from Balliol.
  To get the facts one does not have to look at any crystal ball because one can read the book—or rather the books which are the reports of the Royal Commission on the Distribution of Income and Wealth which was chaired by a previous Labour Chief Secretary, now Lord Diamond. In its second report, paragraph 118, from which the Chief Secretary quoted, it makes the position completely clear. When he was seeking to discredit what my right hon. Friend the Leader of the Opposition said on Tuesday he was careful only to quote part of paragraph 118 to suggest that the dividend system did not benefit the poorer people and that any form of dividend restraint would not adversely affect them. However, if he had turned to paragraph 119 he would see there quite clearly stated:
  "Under a system of progressive taxation any general increase in dividend payments would accrue in greater measure, relative to

  1825
  total dividend receipts, to shareholders in the lower income ranges than to those in the higher, where at the extreme an increment of investment income bears tax at 98 per cent."
  The Chief Secretary made very heavy weather of that point, but the answer to his argument was in this next paragraph of the document.
  The Diamond Commission also told us that there are over 2 million individual shareholders in this country. It told us quite a lot about those 2 million of our fellow countrymen and women. I will pick just four facts from the mass of statistics and tables that are available. They were for 1972–73, but there is no reason to suppose that the pattern has changed, although the figures should presumably be inflation tinged. Two out of every five of those shareholders are single women or widows. Nobody has ever suggested that we are talking about people whose sole income arises from dividends, which is what the Chief Secretary was trying to suggest in putting up that Aunt Sally. Of course, they have retirement pensions if they are pensioners, and they often have occupational pensions, too.
  One-third of the shares in this country are privately held by just over 2 million individuals, and three out of every five of those individuals are of pensionable age. In 1972–73 a quarter of them had a total statutory income from all sources of less than £20 a week. Half of them had a total statutory income of less than £40 a week. All that is perfectly clearly set out in the Diamond Commission report, and I cannot understand why the Chief Secretary devoted about one-third of his speech to trying to disprove it.
  Against this background of undoubted statistical fact it is carrying ignorance and prejudice to the lengths of cruelty to continue to mouth the tired old slogans of the Left about shareholders and dividends. For the greater part we are not talking of the hereditary rich or even the comfortable professional classes. For the most part we are talking about the poor, because the Diamond Commission figures show that a very significant proportion of private shareholders are to be found among the poorer sections of our community.
  I hope that the Labour Party will try to hoist that message on board, because
  1826
  I accept that most Labour Members are quite sincere in their wish to help the poorer sections of this community. It is about time that they recognised that many of the poorer sections of the community are shareholders.
  Mr. Cronin: Is the hon. Member seriously suggesting that relaxing dividends control will help the poor people of Britain?
  Mr. Tapsell: That is precisely what I am suggesting. If the hon. Gentleman has not been able to understand that the proposal is to reduce the flow of income to the pension funds, with 11 million future beneficiaries, and to the 2 million individuals about whom I have just been talking, and if he cannot understand that this is depressing their standard of living and that the whole effect of the Bill is to make life more difficult for the poorer sections of the community, he has not begun to understand the issues at stake. In that, he is very characteristic of his party and the Cabinet that he supports.
  Why should the Government want to depress the modest incomes of these shareholders still further or to reduce the capital value of their life savings? Yet that is precisely the object and will be the effect of the Bill if it becomes law.
  The problem—if it is a problem—of the relatively few rich individual shareholders, as I have already said twice, is more than adequately taken care of by rates of income tax rising to 83 per cent., plus an additional investment income surcharge of 15 per cent. These produce a top-rate tax on investment income of 98 per cent., which is by far the highest in the whole civilised world, among the countries of which, incidentally, only Canada practises dividend control at all, which it will be giving up in October.
  This Bill has nothing to do with the rich, because the tax system takes care of that matter. The truth is that the Bill, far from being an attack on the rich, is in reality an attack on the poor. It will adversely affect the pensions of those who are already retired. It will adversely affect the future pensions of the millions who will retire, the 11 million members of occupational pension schemes already, who are looking to that occupational pension as a major contribution to their security in old age.

  1827
  Moreover, as the Diamond Commission points out, and as I have already quoted from it, dividend restraint, in its tax aspects, bears most heavily, inevitably, on those with the smallest incomes. The shareholders in the lower-income ranges are those who get the most proportional benefit from dividend increases because they get virtually all the dividend, very little of it going in tax. Therefore, on top of all its other bad consequences, this Bill, in its fiscal effects, is actually regressive, as well.
  It is not as if the shareholder—large or small, rich or poor—has been on to a particularly good thing by investing in equity shares, or as if excessive profitability is or has been one of the conspicuous characteristics of British industry. Indeed, why anyone invests capital in British industry at all for an income return of about 5 per cent., when 12 per cent. can be got free of capital gains tax by lending money to the present spendthrift Government, has long been a mystery to me. I certainly hold no equity share in any publicly quoted company in this country for that reason.
  Nor has income from shares even begun to keep up with income from wages over the years. Since 1963, while income from employment has risen in real terms by over 40 per cent., income from dividends has declined by almost the same amount in real terms. That is part of the reason why individual shareholders are among the poorer people in this country. It is part of the reason why there has been so little new investment in British industry by comparison with that of our overseas competitors. It is part of the reason why British industrial exports are not more competitive in international markets. It is also part of the reason why British hourly wage rates are now the lowest in any EEC country and why we have 1½ million unemployed men and women in this country.
  The inadequate profitability of British industry and the inadequate distribution of those profits that are made back into the capital market through the payment of realistic dividends has made a most significant contribution to the impoverishment of Britain. This Bill will perpetuate that situation. I urge the House not to give it a Second Reading.
  4.55 p.m.
  Mr. John Cronin: The hon. Member for Horncastle (Mr. Tapsell) has made a most extraordinary speech. He painted a rather touching picture of how the Bill will grind the faces of the poor. I cannot help but wonder whether his speech was written by the same person as wrote the very unfortunate speech made by the right hon. Lady the Leader of the Opposition on Tuesday. Usually the hon. Member makes intelligent and helpful contributions to our debates, but I am sure that he has been affected in some curious psychological way by the total disaster for the Opposition on Tuesday. His speech was certainly not nearly as bad as that of the right hon. Lady, but it was an incredible attempt to achieve the same standard.
  I support the Bill. However, I say without question that dividend control has certain serious disadvantages. I think that this is accepted on both sides of the House. First, dividend control reduces incentives for managers in indstry who hold quantities of stock in the firms in which they work. Obviously, it must have an unfortunate effect from that point of view.
  Dividend control is in no way redistributive of incomes—or hardly at all. As has been rightly pointed out by the hon. Member for Horncastle, only about one-third of shareholders are individual shareholders. The rest of shareholders are pension funds, insurance companies, investment trusts and unit trust, public sector holdings, industrial companies' holdings, and charities and overseas holders. Therefore, restriction of dividends does not achieve any great redistributive effect.
  It would be unwise for anyone to assume that to restrict dividends is necessarily something that is particularly Socialist. I do not think that it is particularly Socialist. It does not have that effect. It is very important that people should be educated about dividends and should not think that dividends are something that increase the riches of wealthy people. That is manifestly not so, except in rare instances.
  Another objection to dividend control is that it genuinely makes it more difficult to raise capital. I am glad that I carry

  1829
  the hon. Member for St. Albans (Mr. Goodhew) with me on that point.
  Mr. Victor Goodhew: I was amused by the fact that what the hon. Member has done is to repeat some of the arguments made by my hon. Friend the Member for Horncastle (Mr. Tapsell), in a speech which the hon. Member has just said was a bad speech. The hon. Member is in danger of leading us to believe that he is making a bad speech.
  Mr. Cronin: I am merely pointing out matters which are common knowledge among those who have any dealings in financial affairs. If we are to have good, intelligent and useful debates in this place and, heaven knows, the standard has deteriorated badly this week—we must look at matters from all points of view. I am putting a point of view which may coincide with what the hon. Member for Horncastle was saying, but one must put the other points of view, and I shall do that if the hon. Member for St. Albans will bear with me for a few moments.
  The Treasury gave evidence to the Wilson committee that dividend control had an unfortunate effect on getting new capital. However, it is important to realise that this effect is very small and marginal. From the way in which the hon. Member for Horncastle was speaking, one would think that dividend control was some really serious interference with the whole capital market.
  In a rather strident article today, even the Financial Times admits that only 6·5 per cent. of total corporate capital investment is represented by new issues. Therefore, at worst, dividend control affects only 6·5 per cent. of corporate investment. It is therefore absurd to suggest that dividend control has a terrible effect on the capital market.
  Another objection is that dividend control widens the gap between indexed pensions, particularly in the public sector, and non-indexed private pensions. One accepts that too. There are, therefore, serious objections—
  Mr. Kenneth Lewis: That is what my hon. Friend was saying.
  Mr. Cronin: Of course, but there are some good effects of dividend control as
  1830
  well. Most successful companies have reached their strong financial position by not distributing their profits. GEC, for example, is now sitting on about £400 million in cash.
  Mr. Lewis: Does the hon. Gentleman realise that the Government are losing through dividend control? Most of the large companies today are simply not paying corporation tax. The Government have encouraged them not to pay it. They are getting rid of their money in all sorts of other ways. One way in which the Government can arrange to get money out of those companies is through a dividend tax, under which, if dividends were increased, the Government would get more money. Dividend control means that the Treasury is losing money.
  Mr. Cronin: This is a somewhat convoluted argument.
  Mr. Lewis: It is true.
  Mr. Cronin: I should have thought that companies gained chiefly from stock appreciation relief. That is where they save on corporation tax, and that was intended by the Government to get the economy moving. That has already been achieved at a rate of increase of about 4 per cent. a year, and better will come. The hon. Gentleman will find that life will be much better next year from that point of view.
  We should seriously consider the objections to suddenly lifting this control. First, it would distort the economy. Dividends would become, as they are now to some extent, a status symbol. Some companies would feel obliged as a matter of status to raise them immediately. Therefore, they would retain less of their earnings and they would invest less, absolutely contrary to what we all want.
  The money that goes into dividends obviously will not go into investment or into productive use. That is a serious objection. It is improbable in the immediate future, but if we had a Government who suddenly withdrew all dividend controls they would be acting like a bull in a china shop and causing chaos in the capital and commercial market.
  The main reasons for maintaining dividend controls are psychological and political—which the hon. Member for Horncastle dismissed as unimportant. That

  1831
  shows the ham-fisted, confrontation-minded attitude of the Conservative Party. That is why the Conservatives are clearly unfit to take over the economic management of the country. Those considerations do not count for them. I suppose that the same motive influenced the right hon. Member for Sidcup (Mr. Heath) when he took on the miners—that psychological conditions were not important.
  Mr. Tapsell: I did not say that psychological and political matters were of no importance at all. I said that the Chief Secretary had not attempted to justify the measure on economic and financial grounds.
  Mr. Cronin: Perhaps I did not hear the hon. Member clearly, but I cannot recollect his devoting any part of his speech to those reasons for the Bill. Yet they are the main reasons. The unions have been asked to show restraint—
  Mr. Kenneth Lewis: Not statutorily.
  Mr. Cronin: No, but they have been asked to show considerable restraint over the coming year. There is no escaping the fact that many unionists think that dividends increase the wealth of the rich. We realise that that is largely erroneous. The top echelons do not think it, but a substantial number of unionists think that dividends are somehow undesirable. That is the impression that I get from people in my constituency. One must accept that. That is what politics and psychology are all about—coping with what people think and not with what they ought to think.
  Many unionists understand about dividends, and the vast majority want to be helpful over the economy, but a small minority do not. I am talking about militants who cause widespread industrial disruption, such as those who operate in British Leyland. If the Government suddenly dropped all dividend control, they would be putting a card into the hands of every militant who tried to disrupt the production of his company. He could say "They expect you to restrain your wages, but they will not restrain dividends." These considerations are the main reason for continuing control.
  There is a good case for liberalising dividend controls, and the Bill is an effective step in that direction. It is a gradual
  1832
  step forward, but it will give an incentive for faster growth. From 1st August, all companies will be able to increase dividends in line with profits. In effect, the Bill is a productivity deal for shareholders, giving preferential treatment to companies which grow and increase their profits.
  The Chief Secretary gave us no detailed figures of the financial effects of the Bill, and possibly such figures are difficult to obtain at this early stage. However, a firm of stockbrokers called Phillips and Drew publishes frequent economic reports which most people will agree are quite helpful. Phillips and Drew worked rather hard last Friday night and produced a report on the effects of the Bill on 120 leading companies representing 80 per cent. of the equity market.
  According to the Phillips and Drew economists—or their computers or whoever worked it out—70 per cent. of the companies would be restricted from increasing their dividends by more than 10 per cent., but 40 per cent. would not be able to do so anyway because they did not have enough profit to do it. Further, the report said that 30 per cent. of this great selection of companies would be able to increase their dividends by as much as 20 per cent. That is a big advance on the 10 per cent. which we have had so far. Moreover, it was said in the same report that dividend growth for the whole market would be an increase of 15 per cent. over the coming year.
  That report may be erroneous—the figures may not be accurate—but it presents the only figures from an expert source which we have available at present, and all of them suggest that the Bill will therefore produce a real liberalising of dividend control, a real increase of incentives and an encouragement for companies to become more efficient and increase their profits.
  I suggest to the House, therefore, that, even with a General Election imminent. we should try to forget the somewhat political doctrinaire approaches to this matter and appreciate that the Bill is a step in the right direction. It is a liberalising of dividend control and will be of great advantage to the country's economy.
  5.11 p.m.
  Mr. Reginald Maudling: In current circumstances there is no argument either of logic or of economics for continuing the statutory control of dividends. No one has put one forward—least of all the Chief Secretary in his speech today, if one can call it a speech. If I may say so, I thought that it was a piece of buffoonery masquerading as a speech, and when such a performance comes from a man of such charm and intelligence as the Chief Secretary it shows conclusively that he has the worst possible case to put. The whole case is political. It is no less serious for that reason—we in this place understand the importance of political factors—hut let us be clear what the case is.
  The Government say that wage restraint is impossible without continued statutory control of dividends. The arguments in each case are wholly different. Dividends vary with the performance of companies. They may sometimes go down. I do not think that wages ever do. The fundamental case for wage restraint rests on the use of the monopoly power of labour to force up wages by blackmailing the consumer. No such monopoly power exists in the hands of capital, or, if at any instance it does arise, existing legislation is adequate to deal with it. Profits are subject to the competitive pressure of market forces. Wages in many cases are not. There is no logical economic connection between the two. That must be absolutely clear. I do not see how it can be gainsaid.
  Other points have been made already and, no doubt, they will be referred to again. The amounts involved in the distribution of dividends are small. The net addition to true purchasing power, which is the factor which accounts for inflation, from an increase in dividends is negligible. Dividends are the product of output, not a cost of output—wholly different from wages. The movement of capital into the most effective and promising industries can only be impeded by control over dividend distribution. As for those who receive these dividend increases, that aspect of the matter has already been adequately covered by my hon. Friend the Member for Horncastle (Mr. Tapsell).
  1834
  I have studied with interest what the Prime Minister said on Tuesday. Indeed, I have studied a lot of what he said, and I shall come back to it. He said:
  "I do not believe that the argument is conclusive that insurance policy holders or pension fund beneficiaries will be adversely affected by this measure."
  It may not be conclusive, but is it not important? What do the Government think? Is it important or not? No clear picture was given by the Chief Secretary. Indeed, he was rather dismissive about that. How important do the Government consider this argument to be? Certainly we on this side of the House regard it as very important.
  The Prime Minister continued, with reference to pension funds:
  "What affects them even more than dividend control is the erosion of the value of their savings by inflation, and they have as much to gain as any group by the success of the anti-inflation policies."
  That is absolutely true, but it is a complete non sequitur. It makes sense only if one accepts the assumption that dividend control on a statutory basis is essential to fight inflation. It is not.
  As I understand it, the Government's case is that this measure of statutory dividend control is essential to the maintenance of voluntary wage restraint. They have put no other argument. As my hon. Friend the Member for Horncastle rightly said, that is a case worth listening to, but we should like to hear it. One cannot listen to something which is never expounded. I now put three explicit questions to the Financial Secretary, and I shall be most obliged if he will answer them.
  First, why is it necessary, in order to achieve voluntary wage restraint, to have statutory control of dividends? That is a simple enough question. Second, if the Government believe that they can achieve a voluntary wage restraint, what reason have they to believe that they cannot get a voluntary dividend restraint? Again, that is a simple and straightforward question. Third—perhaps hypothetical but equally definite—if the Government fail to get a voluntary wage restraint, will they then abandon the control of dividends? If the House is to make a judgment on the merits of the Bill, one is entitled to ask for answers

  1835
  to those three brief but, I hope, clear questions.
  I come back to the speech of the Prime Minister, who had a lot to say about the economy on Tuesday. Addressing the Opposition, he said:
  "If they genuinely want to see moderation in pay settlements in 1978, they should vote for the Dividends Bill … To do otherwise, against the background of their own history, will destroy any claim they have to be taken seriously on this subject."
  That is utter nonsense. I think that, having held office, I am entitled to a view on this matter. I believe that my right hon. and hon. Friends know that I have always supported the idea of an incomes policy, preferably voluntary but statutory if necessary. I have had a certain amount of trouble as a result from time to time. But, despite that continuing belief in the need for an incomes policy, I shall certainly vote against the Bill tonight.
  What else did the Prime Minister say? He added:
  "In our view, it would be quite wrong, when we are asking working people"—
  I pause there for a moment. I dislike that phrase "working people". Wage earners are not the only working people in this country. There are salary earners, professional people and many others who work very hard for their incomes. I dislike the phrase. It is pejorative and should not be used. However, this is what the Prime Minister said:
  "it would be quite wrong, when we are asking working people to exercise moderation on pay in the year ahead, to fail to do everything in our power to see that moderation is exercised with dividend payments."—[Official Report, 25th July 1978; Vol. 954, c. 1386.]
  The Prime Minister makes that the argument for using the power of the Government by statute to control dividends. But will he use the power of the Government by statute to control wages if the TUC will not fall into line? That is the logic of it. It must be even-handed, in the Chief Secretary's phrase today. It must be the same for both sources of income. Either we have voluntary policies voluntarily agreed and accepted or we have statutory powers. For the Government to pretend that in order to get acceptance of a voluntary policy from the trade unions they must have statutory control over dividends seems to me unworthy of serious consideration.
  1836
  The Prime Minister is an interesting study at the moment. His favourite role, apparently, is as a latter-day Stanley Baldwin, though he sometimes departs from it. One man in his time plays many parts. But, brooding on his speech the other day, I could not help remembering the Earl of Rochester's epitaph on King Charles II:
  "Here lies a great and mighty king
  Whose promise none relies on;
  He never said a foolish thing,
  Nor ever did a wise one."
  I have also been looking through the pages of Dryden, as many others, no doubt, have done. The Prime Minister quoted Ddryden and, no doubt, occasionally he reads him.
  The Prime Minister's policy on dividends is the same as on the economy generally. It is one of total bluff, of pretending that the Government have brought down the rate of inflation from the rate which they inherited. What they have done is to make a dent on the position which they created by the unbridled inflation which they unloosed when they became the Government. I do not think that people will be taken in, but the Prime Minister and his colleagues will try very hard to take them in.
  Therefore, I was amused to find in Dryden these words:
  "When I consider life, 'tis all a cheat; Yet, fool'd with hope, men favour the deceit;
  Trust on, and think to-morrow will repay: To-morrow's falser than the former day; Lies worse, and, while it says, we shall be blest
  With some new joys, cuts off what we possest."
  I cannot give a better description of the Prime Minister's economic and election policies.
  5.21 p.m.
  Mr. John Evans: It is fitting that in what is undoubtedly the last full week of this Parliament before an October General Election we should spend so much time debating the economy and economic affairs.
  On Monday we spent a great deal of time discussing unemployment and the tragic consequences of having so much unemployment in our society at present. On Tuesday we discussed, as we are discussing today, incomes policy. We spent most of our time on Tuesday discussing

  1837
  wage restraint—restraint on earned incomes. Today we are discussing restraint on dividend earnings. It is important to get the matter into context. A great deal has been said about the psychological aspect of today's debate.
  I criticise some aspects of the White Paper "Winning the Battle Against Inflation", particularly its rather dogmatic approach to 5 per cent. as the maximum allowable to any group of workers, but I am convinced of the necessity to retain a limitation on dividends. Paragraph 9 of the White Paper reads:
  "the country should aim at a long-term approach in which collective bargaining is based each year on a broad agreement between Government, unions and employers about the maximum level of earnings which is compatible with keeping inflation under control in the following 12 months."
  The policy aspect that we are discussing is as important as that which affects the wage earners. The trade unions should have a right to discuss with the employers not only the question of wages but the question of dividend income.
  It is important to stress the psychology of the matter. I have sat through many debates on economic affairs since I became a Member of the House in February 1974. I made my maiden speech in the Budget debate in 1974, and whenever possible I have taken part in economic debates. When I have not been able to speak, I have sat through them. On Tuesday I sat through most of the debate on incomes policy without catching the eye of the Chair.
  I am convinced of Conservative Members' complete lack of understanding of ordinary people's psychology. I have listened to many of their speeches. It was interesting to listen to them today, particularly their interventions in the speech of my right hon. Friend the Chief Secretary, when they made it perfectly clear that they were prepared to fight to the death for the rights of those who receive income from dividends.
  The hon. Member for Horncastle (Mr. Tapsell) said that millions of workers were involved in a variety of ways in pension schemes and so on. Very few workers bother themselves about the policies operated by their pension schemes. Similarly, the millions of ordinary people who contribute to the funds of the various insurance companies have little con-
  1838
  cern about how the money is invested. Their money is there simply to make provision for them in the event of death or serious injury.
  I believe that the trade unions in particular and ordinary people in general should have more concern about what happens to the money they give to the insurance companies. The trade union movement has been very lax in not concerning themselves with how pension fund money is invested. I am as appalled as anyone is at British Rail's investing hundreds of thousands of pounds in candlesticks. It is time the trade union movement loked at the immense funds available in the pension funds and examined where the money is invested.
  Mr. Hugh Dykes: The hon. Gentleman referred to the importance of psychology and the need for Conservative Members to understand the feelings and sentiments of wage earners, including trade unionists. But have they not been much more concerned this year with the arguments about returning to free collective bargaining, to the exclusion of everything else? That is logical and understandable, but does not the hon. Gentleman agree that it is striking that at successive union conferences—and, so far as one can tell, in private discussions —very few trade unionists or trade union leaders have referred to the need to control dividends, and have not been worried about this matter?
  Mr. Evans: I am sure that the hon. Gentleman will accept that, while we have had many resolutions from union conferences about the need to return to free collective bargaining, there is a general understanding in the country that if we can have a fair and equitable incomes policy that is acceptable. The problem the Government have to overcome is that of persuading all those who regard themselves as special cases that they are not quite so special.
  If anyone is asked "Do you agree with an incomes policy if it is fair?", he will reply "Yes", provided it does not apply to him, because he is a special case.
  My point is that if Conservative Members think that the Government could get any agreement on income restraint with the trade union movement or people represented by it, and at the same time allow dividend restraints to be removed,

  1839
  they do not understand the psychology of those who earn their living by hourly paid work. This is a factor which influences people who work in the factories and shipyards. They make it clear that they know that their industries are profitable. I have heard many workers in my constituency say that if a firm has enjoyed enormous profits and would be free to pay a substantial dividend, they have a right to participate in those dividends through higher wages. That would clash with the whole concept of incomes policy.
  When I hear the old stories about the widows who would seemingly benefit from the abolition of dividend restraint, I recall that there are many thousands of widows in my constituency. It is the largest electorate in Great Britain. The vast majority of the widows whom I represent have to rely on the State pension. If we want to assist those in that category, we can do it simply by increasing that pension.
  The important thing that comes across in all these debates is the divisive attitude and approach of the Tory Party. In the closing words of his outstanding speech on Tuesday, my right hon. Friend the Prime Minister said:
  "The Tory Party once aspired to lead one nation and to speak for one nation."—[Official Report, 25th July, 1978; Vol. 954, c. 1393.]
  I have never quite believed that. I do not think that anyone with my background would ever believe it, but the Tory Party of yesteryear, with people such as Mr. Macleod, Mr. Macmillan and Mr. Butler, was different from the Tory Party of today. In every area today, divisive policies are put forward by the Tory Party. In education, the National Health Service, incomes policy and pension policy—right across the board—it seeks to divide our society.
  We shall have to make sure that we get that message across to the people in the forthcoming election. It is always difficult to learn precisely what the Tories' policies are. The Leader of the Opposition made a dismal speech on Tuesday, in which she said certain things that she would not do. She and her Front Bench spokesmen rarely say what they would do in office, apart from—we now understand—abolishing dividend control.
  It always depends on which voice is enunciating which policy—whether it be
  1840
  that of the right hon. Member for Leeds, North-East (Sir K. Joseph), who appears to have some of the weirdest ideas about controlling the economy, or the right hon. and learned Member for Surrey, East (Sir G. Howe), who seems to have a different set of ideas, or the Leader of the Opposition herself. As my right hon. Friend the Prime Minister pointed out on Tuesday, a whole variety of different policies flows from a variety of different Tory speakers.
  Broadly speaking, however, it appears that on the question of incomes the Tory Party wants to divide the nation into various groupings. First, there are those who benefit from dividends. It would appear that they would all get the benefit of complete lack of restraint.
  Mr. Hugh Fraser: Come off it.
  Mr. Evans: The right hon. Gentleman says "Come off it", but we have heard him before. We know what will happen if his policies are put into effect in our society. It will be a society of considerable strife.
  The group of workers who would benefit from Tory Party policy would be those employed in the profitable sectors of the economy. They would have no restraint; they would be able to enjoy whatever they could screw out of their employers. The second group of workers would be those employed in the not-so-profitable sectors of private industry. It appears that there would be no further lame ducks, and that if there were excessive wage demands those firms would be allowed to go into bankruptcy, irrespective of social cost. We heard all about that in 1970 before certain events took place on the Upper Clyde, after which Tory policy was scrapped and lame ducks resuscitated.
  Then there is the favoured group of workers in the public sector—the police and the armed forces. They seem to be highly favoured by the Tory Party, and would get a substantial increase all in one, whereas the Government are phasing in the increase. But the Conservative Front Bench demands that it all be paid immediately, again whatever the effect on incomes policy.
  Then there is the section of the public sector whose workers have political muscle—that presumably includes the

  1841
  miners and the power workers. According to the document that was leaked recently, those workers would be able to wring almost anything out of a Tory Government because of political muscle. But results would flow from that. For example, the closure of pits would be accelerated and further unemployment created.
  The weakest group would be the vast majority of people in the public sector, because they would be subject to rigid cash limits. How that would create the sort of society which the Labour Government are trying to create is beyond me. We would simply have division in every concern of our national life. One group of workers would be put against another.
  There is no question but that, on the whole issue of incomes policy, whether it be income from earnings or income from dividends, the only just way in which we as a society can proceed is on the basis of fairness and equity. In this context, it is essential that those who earn their living—whether they do so by skill of hand or by brain—must feel that equity is being established across all sections of the community. If we accept that, we cannot say that dividends will he allowed to rise to whatever levels they can produce—although it has been made clear that many companies would be in difficulty if they were asked to pay dividends. In such a situation, there would be considerable strife in our society.
  I have no doubt that all these issues that we are debating during this last week of Parliament will form a fundamental part of the next General Election. It is clear that Conservative policy is one of division, of strife and of setting one section of the community against another.
  I accept that there are some aspects of the Government's policies which one can criticise. They have made a great mistake in concentrating on a figure of 5 per cent. I hope that that will not do us serious damage, and that further discussions can be held with the trade union movement on the issue, because I recall that one of the things that did the Labour Party damage in the 1970 General Election campaign was the small sections of "In Place of Strife" which were regarded by the trade union movement and others who normally support the Labour Party as being unacceptable.
  1842
  I hope that the Government will think again about the figure of 5 per cent. because there are certain aspects of the White Paper which are worthy of fuller consideration by the people. For example, there is the reference to the necessity to work out a longer term economic strategy. The White Paper refers to setting a pattern for a number of years. I do not think that anyone can disagree with that, and it is essential for our society that we should work on a longer term basis rather than simply on annual settlements, because plainly that creates uncertainty.
  I feel, too, that the statement that we can allow increases for low-paid workers up to a level of £44·50 is of crucial importance because it is the first time, as I understand it, that a Government have accepted the principle of a national minimum wage. I do not know whether the Government actually intended to do it, but they have established it and it is an important step forward. I hope that those representing the lower paid workers will recognise that. While the £44·50 is a derisory figure, it can be lifted; it is the establishment of the principle itself that is important.
  No doubt, for the rest of the debate, the Opposition will talk about so-called iniquities in the Bill and question statutory control of dividends and voluntary agreements for wages. But, as they themselves have pointed out, there are far more people on earned income than on unearned income. It is in this context that we must have the Bill. There would be little chance of the people who in the main are represented by the unions accepting a situation where there was no equity.
  Mr. Kenneth Lewis: Can the hon. Gentleman confirm that if the Bill goes through the unions will accept wage control?
  Mr. Evans: I will say that if the Bill does not go through it will make it even more difficult for the unions to accept wage control. I have already criticised the proposed level of 5 per cent., and I hope that the Government will give it further consideration. I believe that if the Government had sought to persuade the trade union movement to adopt a figure nearer the current rate of inflation

  1843
  it would have had far more chance and been far more acceptable.
  At the weekend, many people whom I saw in my constituency talked about the Government's proposals, asking "Why cannot we be protected by an increase to match the current level of inflation?" Certainly that would be the more equitable settlement.
  Psychology comes into the whole question. Hon. Members opposite may say that it is the economic argument that is important, but in this case I suggest that psychology comes before the economic argument, and I suggest to the Government that, in the context of persuading people to accept policies which I think the vast majority do accept as being fair across the board, although there are individual problems, a figure based on the current rate of inflation would have been far more acceptable to the ordinary people.
  I shall conclude shortly because I know that many hon. Members opposite want to attack the Government—I appreciate and understand that—but I should put on record that, whatever the criticisms may be of this Government over the past four and a half years, they are being made by the Opposition because the Government are trying to be fair to all sections of the community.
  We can criticise certain aspects, but generally speaking the Government have tried to be fair in all aspects of policy and to all sections of the community. They have made this clear in their approach to education, to pensions and to taxation. In all aspects of their policy we have sought equity and fairness. We have tried to bring about conciliation and co-operation.
  Conservative Members, on the other hand, seem to have learned nothing from their experiences. What they are aiming for in the future is confrontation, further division, and further strife throughout industry and throughout our country.
  Very shortly, the people of this country will have to decide, and I for one am confident that they will look at the records of the two parties and ensure that a Labour Government are returned to this House with a working majority.
  5.40 p.m.
  Mr. Richard Wainwright: The hon. Member for Newton
  1844
  (Mr. Evans), in spite of much that I disagreed with in his speech, did a great service to the House by drawing our attention, and I hope particularly the attention of the Financial Secretary, to the extraordinary disparity in the Government's White Paper about the battle against inflation between the fairly extensive treatment of the possible future of pay control, and the incredibly shoddy, curt and dismissive paragraph 30 about dividend control that we are debating this afternoon.
  Since the whole of the Government's alleged case this afternoon is that all their great apparatus on pay must be balanced by an equivalent apparatus—if that is conceivable—on dividends, the Financial Secretary really owes it to all of us in all parties to explain, when he replies, why there is no Government talk whatever, no official speculation, about the future development of dividend control. If he says that this is positively the last appearance of this worn-out old pantomime dame, that will be a matter for rejoicing, but the White Paper leaves the matter in an entirely cloudy state, and this must be cleared up.
  The right hon. Member for Chipping Barnet (Mr. Maudling)—in a speech, not surprisingly, as liberal as it was elegant—asked the Financial Secretary three very pointed questions. It may save the time of the House and of other hon. Members who wish to speak, if, without trying to paraphrase the right hon. Gentleman's remarks—that would in any case be redundant—I simply tell the Financial Secretary that the right hon. Gentleman's questions are questions to which the Liberal Members also expect clear answers from him tonight.
  The Bill, naturally, bears the name of the Chancellor of the Exchequer. I am sure that I cannot be the only hon. Member to have told the Chancellor that I expected him to be here this afternoon in support of this Bill. But what has happened? It is the contrast with last Tuesday which makes his absence so extraordinary this afternoon. He knew that, in accordance with a written agreement, notice had been given to him that on Tuesday he would have reliable and unanimous Liberal support. He had already been told that the Liberal Members, on this vital question of pay control, were faced, on the one hand, with a

  1845
  Government pay policy which exists, but which is in tatters, and, on the other, with the Conservative segment of the House, which on pay policy is absolutely starkers. We told the Chancellor that on Tuesday we had to prefer the tatters and that he could count on our support.
  Knowing that the wicket had been rolled and re-rolled so that not even a Headingley groundsman could produce an easier pitch, down comes the Chancellor on Tuesday and, sponsored, as usual, by the fortune tellers' union, he peers into his rose-tinted crystal ball, tells us once again his view of the future course of inflation, and then breezes out. Then, when he gets outside this House, he is knocked absolutely flat by the old carthorse of the TUC.
  The Chancellor of the Exchequer knows that he will not have our support today, but he is apparently, according to the press, counting on some rather invisible allies—totally invisible, in fact—from the SNP. Indeed, I doubt whether they will all be here when the Division comes, but that is to be seen. Today the Chancellor abdicates, and leaves this very contentious Bill, which is in a very dicey position, to the Financial Secretary—we are hoping to hear from him tonight in answer to our questions—and to the Chief Secretary, who in my view, occupies the position which nature intended for the right hon. Lady who at present leads the Conservative segment of the Opposition.
  We heard this afternoon from the Chief Secretary a typical Manifesto group speech. There was a great deal of waffle from a mentality which applauds the mixed economy in theory and pretends to be in support of all democratic good causes but which in fact weakly surrenders to every move which tends to erode the very dynamics of the mixed economy.
  The Bill was described earlier this week, absolutely correctly, by my right hon. Friend the Leader of the Liberal Party as a piece of window dressing. That is a view that many people in this House endorse. From my own knowledge of the Colne Valley woollen trade, I will adopt a rather different simile. I think that the people there would describe it as low quality flannel. I can imagine some of them in Marsden, Slaithwaite
  1846
  and Golcai fingering this trouser length of Government shoddy. I think they would say "It's so poorly woven that their arse'll show through." Indeed, there is a danger, now that a patch of fairly tough cloth is gradually falling away from the Government's garments, that they may go down in history as the bare-bottomed Government.
  We heard an extraordinary speech from the hon. Member for Loughborough (Mr. Cronin) about the allegedly sensitive feelings of trade unionists who believe that the rich prance about this country, arrogantly flaunting their wealth and paying no taxes, as if we were still living in the time of Henry VIII. In the light of that speech, I ask why the Government, who have unrivalled knowledge of the trade union movement from top to bottom—perhaps rather more at the top than at the bottom—should insult honest, shrewd, trade unionists, whom we all know in our constituencies, by supposing that they are deceived by this flimsy and loophole-filled Bill.
  I can assure the Government that in 20 minutes spent in the works canteen or in the club at night, three or four shrewd and respected trade unionists will be able to destroy any deceit that the Government may hope to perpetrate. They all know about the high rates of taxation on investment income which are being very clearly put to us today. They all know of the enormous number of loopholes in this ramshackle apparatus of so-called dividend control, which is a misuse of the word control. They know about the innumerable ways in which dividend control can be avoided, perfectly legally. The popular press has quoted the many hundreds of exemptions which have been officially granted. The specialist press has made no secret of the fairly easy, although rather expensive, ways in which dividend control is avoided.
  We know about the rights issues, which mean that those companies which are owned largely by wealthy people, or by wealthy institutions which have money ready to subscribe, have been able to drive a coach and horses through the control. Then there is what I believe is known as the Marchwiel Ltd device, which amounts to rejigging the whole structure of the company so that dividend control cannot be made to apply, even by the Treasury.

  1847
  Then there are those companies, well known, which have called their overseas interests in aid. I have in mind companies such as Inchcape, Ocean Wilson, and Nigerian Electricity which have recently escaped dividend control.
  There has also been a remarkable achievement, to any accountant—I suppose that it is a possible epitaph for the Chief Secretary—in that there has been an extraordinary revival of what was previously the moribund preference share. An obvious way to get round dividend control is to issue preference shares carrying a high rate of fixed dividend. The preference share—which until a year or two ago was more dead than Lazarus ever was—has now revived at the instigation of the Labour Government.
  These matters are well known and it is going a little far for the Government to suggest with a straight face that they are seriously controlling dividends. I must refer to the one novel feature of today's Bill, which is described as a concession to enable some companies with increasing profits to increase their dividends more than the general norm. There is one sentence in the Treasury explanation which gives cause for comment. In dealing with the new rules for dividend cover the Treasury document says:
  "Where there have been changes in accounting policies the cover for each of the relevant years will be computed on a consistent basis."
  This means going as far back as the accounting year 1972 and trying to recompute each year's accounts for the whole period, making allowances for all of the changes in accounting policies over those six years. Since accounting is an art and not a textbook procedure, the Government must realise that this is a labour from which many companies will shrink on the grounds of the professional costs involved. In view of the changes in accounting procedures over those six years—for example, stock valuation, the treatment of deferred tax, the formula for computing cover for dividends, the treatment of extraordinary items and the changes in depreciation policy—it is too much for the Treasury to produce this glib formula saying that all of these years will be re-computed to arrive at a consistent basis.
  Of course, that can be done—just as the Round Pond in Kensington Gardens
  1848
  could be emptied by teaspoons—but it is not a task to which any person of serious intent will address himself. We all know that, except for a handful of companies which have accountants stuffed into every room in their offices, the remainder will do some crude horse trading with the Treasury and it will all depend on who lasts longest in the struggle. Bearing in mind that our personal tax rates are known for their severity, it seems unnecessary to be imposing this arbitrary type of control.
  I cannot resume my seat without referrine to the Government's record as a payer of money to the rentier. Have they respected these modest limits? Do they, like Marks and Spencer, survive on a yield to the investor of 3·9 per cent. per annum or, like ICI, on a yield of about 6 per cent. per annum? We all know that they do not. They have to pay about 12 per cent. or 13 per cent. as a matter of course for their current Government stock issues. But in certain cases the Government are perpetrating a spectacular atrocity on behalf of the rich that goes far beyond anything that any dividend-paying company can do.
  On the current issue of National Savings certificates the Government can apparently raise money only by offering them tax free. As hon. Members will know, perhaps to their benefit, the current gross rate of interest per annum to anyone paying the higher rates of income tax on investment income is 75 per cent. or more. That is allowed by the Government to rich holders of their securities. If the Government are to use the argument that trade unionists tremble and become all of an angry quiver when they hear of some company paying a high dividend, what will trade unionists say when they are told that the Labour Government, the descendants of Keir Hardie, are offering people 75 per cent. per annum on Government securities? The only possible excuse for such a usurious rate must be that the Government do not believe in their own forecasts of inflation.
  The Government have attempted to pull the wool over the eyes of the House by suggestirg that the choice is between this Bill and a total free-for-all. I make it clear, on behalf of my right hon. and hon. Friend h, that we told the Government weeks ago that we would certainly

  1849
  support a dividend control policy based on Government appeals for restraint and, if necessary, on certain carefully chosen sanctions against absolutely spectacular and grossly extravagant dividends.
  The Bill is not the only choice which the Government could have made. We believe that they have chosen wrongly. It is, as most hon. Members will know, a bad habit of overblown Ministers to hector the Opposition parties with terrible warnings of catastrophes which are bound to occur if the House dares to flout the wishes of the Government. In the course of, on the whole, very friendly exchanges with members of the Government during the past 15 months, we on the Liberal Bench have had some experience of this threatening nonsense.
  We were told, for instance, last summer that if we dared to insist on the 5½p coming off petrol the result would be that that amount would go on beer. It was thought that we would tremble at the prospect of being held responsible for an increase in the tax on beer. The 5½p came off petrol and nothing happened to beer. This year we were told that the 2½ per cent. increase in the employers' surcharge for National Insurance was holy writ and if we attempted, sacrilegiously, to disturb it, the Chancellor would lift the tax on tobacco, beer or VAT to embarrassing heights. We got the employers' surcharge down to 1½ per cent. in this House, and nothing has happened to other taxes. No one believes that anything can happen in the autumn, with an election coming up.
  The Government are perpetrating a deceit in asking us to pass this Bill. The answer to threats which we may hear to the effect that the Bill is absolutely essential is that which was given so poetically by G. K. Chesterton in answer to another arrogant Minister in this House— "Chuck it."
  5.57 p.m.
  Mr. Tom Litterick: I hope that the Financial Secretary will forgive me if I say that I do not take this Bill any more seriously than he did. It was clear from his speech that he regarded it as a joke, or at least that he regarded the occasion as something of a joke. I do not blame him because the Bill is singularly unconvincing, as hon.
  1850
  Members on both sides of the House have suggested. The country knows that the mechanisms for the control of dividends have as many holes as a colander. Further, and much more importantly, there is the knowledge that this Bill is brought forward mainly for cosmetic reasons, mainly to demonstrate that the Government have an even-handed approach to incomes policy, indeed that they have an incomes policy as opposed to a wages policy.
  Many of us on the Labour Benches have argued over the past two or three years that the Government have never seriously had anything more than a wage restriction policy. We have always argued against that. If one is to operate an incomes policy at all, it is necessary to convince people that that policy has built-in equity, and that at least an attempt is being made to ensure that Vagrant injustices are not being inflicted. People are prepared to recognise that occasionally mistakes would be made and special cases might be considered. The history of wages policy suggests that the British people are prepared from time to time to recognise special treatment for special cases.
  I doubt whether this Bill will do anything at all to convince toolmakers of British Leyland, for example, that they should wait yet another year for the settlement of their justifiable and longstanding grievance. They have waited a long time already and their patience has run out. We are now told that, as far as they are concerned, 5 per cent. will be the limit.
  The Chancellor of the Exchequer will say that there is flexibility built into the White Paper, but we know from experience what this means, as do the two dozen building workers—craftsmen all of them—working for Cadbury-Schweppes in my constituency who also have waited for more than two years for their wage grievance to be settled. We all know that the X per cent. defined in a wages policy —be it 5 per cent. or 10 per cent.—will be interpreted in such a way by their employers that their grievances cannot be resolved. The employers will fall back on the 5 per cent. or 10 per cent. guideline, and tell the workers that that is all that the Government will let them have. That is precisely what has happened to the two dozen building craftsmen in my

  1851
  constituency, and to the British Leyland toolmakers. For two years or more the respective companies have been able to invoke the existing wages policy in order to resist the justifiable claims of these people for rectification of anomalies in their complex wage systems.
  I do not think that the knowledge that companies will be restricted in paying out more than 10 per cent. more than last year will impress the British Leyland toolmakers or the Cadbury-Schweppes building workers. The fact that company dividends are allowed to climb along with profits is more likely to cause offence than anything else. It has been proved over and over again in this country that it is virtually impossible to operate a wages policy, or even an incomes policy, with a rigid formula that can be explained rationally.
  It is vital that those who operate such a policy are able to prove by example that there is fairness in it. That is the heart of the matter. It is not whether 5 per cent. or 10 per cent. is enough or too much. It is whether the formula used is regarded as being reasonable in the circumstances.
  It has been said by my hon. Friend the Member for Newton (Mr. Evans) that in present circumstances it is a mistake to quote 5 per cent. That is true. It would have been more sensible to relate the percentage to the expected rate of inflation in the coming 12 months.
  Will this Bill in any way increase or diminish the level of investment? Naturally hon. Members opposite have to go through the motions of believing that it will have a devastating effect on the level of investment. I do not believe that it will have either a positive or a negative effect. The history of this type of policy suggests that there is little or no connection between any form of dividend restraint or its absence and the level of real investment.
  Hon. Members opposite made far too much play of the effect dividend restraint would have on the controllers of new investment funds. We all know that the quantity of real new investment actually financed through the conventional financial institutions of this country is only a small proportion of the total new investment in any one year. We all know
  1852
  that that proportion has been declining very steadily for a long time.
  In those economies where raising new investment capital through stock exchanges is the major means of financing, the preference for that kind of capital raising has declined sharply. The new real investment is done by large organisations financing their own investment programmes from their own internal resources. That is why the British economy suffers so badly. Britain is the centre for a large number of very large companies which operate internationally and make their allocative decisions on an international basis. For many years they have decided on balance to invest overseas their available funds, created by British workers, rather than investing them in this country.
  These companies will not be influenced by this tiddly little Bill. They might be influenced by the fact that British workers' wages are being held down indefinitely, because these people are interested in getting cheap factors of production. As long as the Government play the game of holding wages down, they are playing the game for these companies.
  But the Government have not made British labour—virtually the cheapest in Europe—cheap enough for them, since they are still exporting the lion's share of the capital surplus created in this country by British workers. That makes inevitable the continued decline of the British economy as a manufacturing economy.
  For example, in my own city of Birmingham the Lucas organisation, which is a very large multinational conglomerate, has pursued an investment policy for some years which ensures that the productive operations of Lucas Industries Ltd. in the United Kingdom, and the number of jobs involved, will decline year in, year out and the number of enterprises owned and controlled by Lucas, and the number of jobs owned and controlled by Lucas outside the British Isles, increases year by year. But the basic powerhouse which has created that capital surplus has been and remains largely Britain itself. The British people are being made to pay. I doubt very much whether the people who control the Lucas capital surpluses will be influenced either positively or negatively by this

  1853
  Bill. I have every certainty that the workers of Birmingham will have to suffer, not because of this Bill, but because what is contained in the White Paper is totally inadequate to meet the case.
  One of the purposes of a Socialist Government is to ensure that the social surplus is used to society's advantage and that social values are brought to bear on the surplus created by the productive activity of people. This cannot be done if use of the social surplus is to remain in the hands of private corporate enterprises. There will be no difference at all between the end results of the individual decisions of private corporate enterprises and those decisions left in the hands of a myriad of individuals who are collecting all the profits made by industry in dividends and then in turn making their individual investment decisions. The outcome of that always has been economic chaos.
  It does not matter whether it is the Eagle Star insurance company or Mrs. Bloggs down the road who decides whether to put the investment funds they control into this or that, the logic used is the same. They are in pursuit of a combination of continued income and capital growth. Eagle Star behaves with no more economic sophistication and certainly no more social responsibility than does Mrs. Bloggs. They are, in the aggregate, as Keynes described them a long time ago, an "ignorant rabble". He meant that in a specific sense. He pointed out that one cannot assume that the sum total of the individual investment decisions of individual investors will amount to social, or even economic, wisdom. It does not and there is no evidence in history to suggest that it ever did.
  We have a duty as a Labour Party—and this Government have the same duty as any other Labour Government—to bring to bear some sort of social priority on the allocation of the capital surplus that is created by Britain's working men and women. I suggest that this has not been done. To be sure, some redistribution takes place through the taxation system and certain social benefits are paid out, but there is great doubt as to whether that redistribution makes any difference since the better off and the better educated seem to be that much
  1854
  more skilful at taking advantage of the benefits that are created by this attempt by social democratic Governments to mobilise part, at least, of the social surplus for social benefits. The general outcome of the whole welfare trend over the past 30 or 40 years is rather doubtful in the sense that it has not been redistributive at all.
  The real difficulty is that, notwithstanding the shift in share ownership to institutional ownership, companies are not managed with any more social responsibility today than they were 50 years ago. They may be better in handling their public relations and may be able to pay people to invent sophisticated advertising of a prestige type in newspapers, but that is all. They are no more socially responsible than they were in the previous generation.
  It is not the aggregate amount of dividend income which matters in any economic sense because the actual aggregate amount of dividends paid out is of no great weight in the total sum of consumer spending in the economy in any year. What matters is how people see dividend income in relation to the movement of their own earned incomes. Whether they are toolmakers at British Leyland or local authority labourers, people see their own income in relation to other people's income, including other people's unearned income.
  Announcements about companies paying X per cent. or Y per cent. or giving bonus issues, which are printed in the popular press, get through to people and confirm them in the notion that as much as everything changes, everything remains pretty much the same. There has been little in the past four years to encourage people in the belief that there is any likelihood of a positive change occurring in the future because those who work for wages are always told that they must restrain themselves and make the sacrifices. They do not walk around with their eyes shut and they are not deaf or daft. They can see what goes on around them in society and they know that, once again, they are being put off and put off. They must wait and wait in the housing queue, wait and wait in the hospital queue. They remember that it was always thus and it is still that way—except that it is getting worse. The housing queues

  1855
  and the queues for hospital beds are longer than they were before.
  These are the ordinary signs by which people judge whether society is getting better or getting worse. People are scandalised to know that someone got an increase in a property income of 10 per cent., 20 per cent. or 30 per cent., just as they are scandalised to hear about the vast increases in top people's incomes which are announced from time to time. They are scandalised because it offends their sense of justice.
  Mr. Alan Lee Williams: Why is my hon. Friend ignoring the massive effects of the redistribution of income arising from tax?
  Mr. Litterick: The average citizen asks where it goes, because, in his opinion, it does not come his way. I thought that I had made the point when I said that what seems to happen—and there are official documents to prove this fact—is that the better educated and more affluent class have proved themselves, not unexpectedly, to be far more efficient and competent at exploiting social services created by the taxation system to which my hon. Friend referred than are the working class. This is a familiar observation in British society. It is well established. There is no doubt about which social class benefits most from, for example, the British education system and so on, and that is what the taxation that my hon. Friend was talking about pays for.
  During the last General Election campaign, I met a man who asked me bluntly and in less than parliamentary language why he should vote for me. Like every other candidate everywhere else who is confronted with such a question. I explained to him what my party's manifesto was all about. The man pointed to the room that he was standing in—I spoke about this man during my maiden speech—and I have to say that it stank. We would not keep animals in it. Indeed, the average RSPCA inspector would make sure that we did not. It was a hovel, owned by the local council. This man was in full-time work. He said to me "Look around you. I work for a living and this is what it gets me. Why should I vote for you or anyone else? What good will it do?"
  His family has been rehoused, but I know that it has been replaced more than
  1856
  100 per cent. Not only has his place been taken by another family, but there are more people in such circumstances than there were four or five years ago. There are more poverty-stricken people now than there were four or five years ago.
  If I meet a man in similar circumstances during the next campaign, I may speak with less confidence about the Labour Party's programme and intentions because I have lived through a period of attempting to persuade people that the Labour Party has certain intentions and discovering that when we get to power something quite different happens. I may have to spend a great deal of energy explaining to people that the Labour Party is not the same thing as the Labour Government—and the difference is of great importance.
  Certainly, the number of poor people in this country will not be reduced by this Bill, no more than the number of poor people will be reduced by making, for example, Mr. Angus Ogilvy richer and more privileged than he already is. We have been asked to vote for certain things this week, and some of us have had great reluctance in doing so. Some of my hon. Friends have refused to do so. The Bill is part of a battery of questions that has been aimed at us by the Government, and could be subsumed under the general heading "Winning the Battle Against Inflation".
  In going into the Lobby, especially on Tuesday night, I remembered that Galileo was asked a long time ago to believe that the earth was the stationary centre of the universe. He had proved conclusively to himself that it was not the centre of the universe. He knew that but he was being asked to believe otherwise by the Church. Galileo, being a practical and wise man who had the example of Giordano Bruno before him, agreed that the earth was the stationary centre of the universe. History records that when he made that agreement he said "Nevertheless, it moves".
  So it is with many of us. We understand the tactical imperatives of this place and the humiliations that the House inflicts. We understand that certain courses of action would have repercussions that we do not wish to visit on our colleagues outside the House. Like Galileo, we have to go through the motion of agreeing with our right hon. Friends

  1857
  while saying "Nevertheless, we know that the truth is otherwise".
  6.21 p.m.
  Mr. Hugh Fraser: I do not want to follow the hon. Member for Birmingham, Selly Oak (Mr. Litterick) too far into the depths of truth that he has revealed. I agree with the spokesman for the Liberal Party, the hon. Member for Colne Valley (Mr. Wainwright), that it is a misfortune that the Chancellor of the Exchequer is not present. It is an even greater misfortune that the Prime Minister is not present.
  It is essentially a cosmetic Bill that the Prime Minister is forcing through the House against the advice of the hon. Member for Selly Oak and, I believe, against all sound financial advice coming from the Treasury and elsewhere.
  I do not want to run over the immensely tedious ground covered by the Chief Secretary to the Treasury when, at enormous length, he introduced the Bill. However, it is historically fair to say that the nearest equivalent to the introduction of such a measure was that introduced by President Nixon when he tried to introduce voluntary dividend restraint in the United States in 1974. It is a Nixonish type of Bill with every conceivable loophole. Now that there is a revival of Nixon's fame, doubtless that assiduous propagandist of the Prime Minister, our ambassador in Washington, the right hon. Gentleman's son-in-law, will be able to say that in the Prime Minister we have a man of positively Nixonian stature.
  For the Government to bring forward the Bill is rather a shaming enterprise for comparatively intelligent men. They must know that the main problem facing Britain is without doubt that of job creation through more investment. The Bill is not wholly unimportant. It is important in the sense that were it to be continued it would mean eventually the total erosion of the private sector. The hon. Member for Selly Oak shakes his head, but that is the position.
  As the hon. Member for Colne Valley observed, the place to make investment now is the only casino that exists in Britain. It is the casino set up by the gilt-edged market. It is from that sector that the tax-free money is coming. That is where the racket is. That is the racket
  1858
  of a Government raising money at absurd rates of interest.
  On Tuesday the Prime Minister was boasting of, as he claimed, the Government's great achievements and how easy it was to meet his funding operations. Let him tell the people how it is done. If they had funds, they would be all right. The cosmetic approach shown by the Prime Minister and the introduction of this absurd Bill reveal a scandalous attitude. The Bill is absurd and dangerous.
  The hon. Member for Selly Oak shook his head when I said that the Bill, if continued, would be the destruction of the private sector in the long run. That is exactly what it means. The funds for new investment can come only from the private sector, if we are to keep the private sector going. I hope that when the Opposition are returned to form the next Government they will move in an entirely different direction from the course which has been followed over the past 10 years. Far from accepting the idea of dividend limitation, we should move in entirely the opposite direction and provide that retained profits, unless they are spent on research and development, should suffer a higher rate of tax than distributed profits. That is what the Germans have done. That is one of the reasons for the Germans' success in reinvestment.
  Do not tell me, as did the learned doctor the hon. Member for Loughborough (Mr. Cronin), that it is all cosmetic and that the unions do not understand. The unions understand a darned sight better than many in the House. That is why the unions are buying Picassos and not investing in British industry. They do so because they know that the rate of return is much better in the art market or in the gilt-edged market. That is the problem that faces Britain, and the Bill makes no effort to meet it.
  Mr. Cronin rose —
  Mr. Fraser: No. The hon. Gentleman can correct me later if he wishes to do so. Everyone has spoken at enormous length this afternoon, and I propose to draw my remarks to a fairly early conclusion.
  We want to make a complete swing in direction. I hope that my colleagues on the Opposition Front Bench will pay attention to that view. We should take

  1859
  an entirely different approach and encourage investment. That means encouraging dividends.
  I am amazed by the attitude that the Treasury has adopted. In the evidence that it gave to the Wilson committee, it said that dividend limitation inevitably meant a distortion of the capital market. Indeed, that is bound to happen. That is bound to have a serious and dangerous effect upon the economy and the provision of new jobs. To build up the large, fat companies that sit on masses of cash and spend it on acquiring other firms is to build up too great a strength at the centre. When a Conservative Government are returned to power, they will be resolved to get big government and big inefficient industry off the backs of the people. Unless we have a change in the approach of the Government to dividends, we are bound to continue incurring the displeasure of the people and putting them into the sort of state that is complained of by Labour Members.
  On Tuesday the Prime Minister made a boasting speech on the economy. He boasted of his great successes. He turned on my right hon. Friend the Leader of the Opposition and quoted against her, doubtless after great midnight oil-burning by his staff, a passage from Absalom and Achitophel. It depends where the cap fits best. I can find many more phrases in that great poem that apply more to the Prime Minister than to my right hon. Friend.
  It is not only a matter of
  "Resolved to ruin or to rule the State".
  It is a matter even more aptly described by Dryden when he described the bogus patriot, the Stanley Baldwin of the day, making the honest appeal to the workers about the equality of sacrifice and not being worried by anything but "steady as she goes."
  In conclusion, I quote the following two lines from Dryden:
  "Then, seized with fear, yet still affecting fame, Usurped a patriot's all-atoning name."
  That sums up the Prime Minister.
  6.30 p.m.
  Mr. Peter Brooke: The last time that I spoke in close juxtaposition to my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) was 21 years ago in the Oxford Union, when he did me the
  1860
  honour of coming down to support me I am as happy and glad to follow him today as I was grateful to him on that occasion.
  I do not know, Mr. Deputy Speaker, whether you have ever read a novel called "The Gap in the Curtain" by John Buchan, lately a Member of this House and subsequently a noble Lord in another place. In the early stages of that book, a group of people have the chance of seeing a copy of The Times for exactly a year later. On the basis of what they read, they shape their lives during the subsequent year.
  A year ago when I was sitting in this House, I did not have the slightest idea of what I would be doing today. One reason why I am able to say that is that, on this very day a year ago, the Minister of State, Department of Prices and Consumer Protection, speaking in the debate on counter-inflation, said:
  "It is for that reason that, from the end of the year beginning on 1st August 1977, there will be no further dividend control."
  My right hon. Friend the Member for Bournemouth, West (Sir J. Eden), who pays sufficient attention to a gift horse that he has a good look at its teeth, asked the Minister to confirm what he said. The Minister said:
  "Perhaps I phrased the point badly. I thought I said that there would be no further dividend restraint at the end of the year beginning 1st August 1977. In other words, not after 1st August 1978."—[Official Report, 27th July 1977; Vol. 936, c. 807–8.]
  On the basis of what is before us today, frankly he could have fooled me. I am sure that there is some rationalisation in the small print that explains that contradiction. However, it is a subject to which I should like to return later.
  I came to this House by way of a business school. Business schools spend time on how companies do their financing. I have therefore made some inquiries about how much academic work has been done on dividend policy in terms of company financing. The House will be glad to hear that the articles which have been written are so highly mathematical that I am not sure that I understand them, and I certainly have no intention of reproducing them today.
  There has been study on two major subjects. The first relates to how far dividend policy affects the behaviour of the

  1861
  stock market and of individual prices. There is a discrepancy in the views of the academics on the one hand and the practitioners in the financial markets on the other. The academics are of the view that, at the end of the day, it does not make much difference, whereas the practitioners are certain that it does. The Government might claim that as an argument on their behalf today, not least on the ground that there are more academics on their Benches than there are practitioners in the financial markets.
  But, when we come to the totally different subject of the forecast of capital investment at present, the academics tell us that there is no reason why there should be greater investment in the current year, whereas the practitioners say that there will be.
  It was on the basis of that that the Prime Minister, in his speech in the House on Tuesday, said:
  "in 1978 investment will again show a substantial increase."—[Official Report, 25th July 1978; Vol. 954, c. 1380.]
  The other subject on which academics have carried out research is whether companies which have relied on retained earnings for their financing have done better or worse than other companies. Such American studies as have been done in this area have come to the conclusion that companies have used their retained earnings less effectively. The research which has been done in this country has come to an opposite and different conclusion are not necessarily contradictory, because different data were being studied. The outcome is that the academics, at least, say that dividend policy does not have a significant macro economic effect even though it may have a considerable micro economic effect on the behaviour of individual companies.
  I have gone into this academic background to a degree in order to demonstrate that There is no blind prejudice by the Opposition on the subject that we are discussing. However, it is clear that on the question of dividend restraint—the subject of the Bill—the academics would not go even to the extent of making a study. They take it for granted that dividend restraint will produce distortion in the market. As my right hon. Friend the Member for Stafford and Stone reminded us, the Treasury conceded that
  1862
  point in evidence to the Wilson committee.
  I want to develop this point about distortion. My constituency includes not only the City of London but, in terms of the electorate, the much larger area of Westminster, South. In total, about 100 out of "The Times 1,000" largest companies in the country have their headquarters in my constituency. I should like to consider the subject under discussion from the point of view of the finance directors of those 100 companies.
  Basically, a finance director is concerned about the cost of his capital. In the same way as the borough treasurer of a local authority will calculate an average rate of interest on all the funds that he has taken in, so a finance director operates techniques for establishing the overall cost of his capital. It is more difficult for a finance director because he has to balance equity financing and fixed-interest financing, whereas the borough treasurer has a simpler problem.
  Each piece of financing done by the finance director produces a different cost, which in turn affects his average. He knows perfectly well that the next piece of financing may have to be of a different kind. It may have to be fixed interest whereas the current one is equity, because that is the way that his balance sheet is structured. That calculation will also affect the cost of capital. The cost of that capital is important in terms of the investment decisions that he is prepared to sanction on behalf of the company.
  I have quoted before in the House that, in consequence of the uncertainty that succeeded the recession in world trade after the oil difficulties, the net after-tax return that large American companies now seek has gone up from 11 per cent. to 13 per cent. In these circumstances, we should seek to provide the maximum degree of certainty for such finance directors.
  By comparison, when we go back to what the Minister of State said a year ago, the Government are creating the maximum degree of uncertainty, because no finance director will know from one year to the next how to conduct his dividend policy and, therefore, what the cost of capital will be.

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  In consequence of this uncertainty, companies are reduced to doing in a given year not what they should do but what they think might turn out to have been prudent in a year's time. In other words, a company which cannot afford to put up its dividend in the current year will find itself putting it up in case there are future legislative restraints in a year's time, and the company chairman would look a Charlie if he had not taken advantage of the opportunity that was available to him this year.
  When, on the other hand, the Chief Secretary cites a company which could put up dividends by 300 per cent., what benefit does he think will flow from that company as a result of retaining those resources in cash instead? If the company cannot invest those resources, it would be eminently desirable for the money to be released for others to invest instead.
  It is worth spending time on the semantics of the word "investment". In the debate on this day last year, the Minister of State, Department of Prices and Consumer Protection said:
  "The hon. Member for Hertfordshire, South (Mr. Parkinson) said that the purchase of shares adds to investment. The purchase of shares does not add to investment. It enables money from one source to be put into the hands of somebody else who is selling the shares.
  The only real investment is subscribing for new capital issued on the market."—[Official Report, 27th July 1977; Vol. 936, c. 806.]
  I am as distrustful of references to "real investment" as I am of references to the "real economy". The fact remains that the purchase of existing shares which is done out of savings affects the price-earnings ratio of a company, which in turn affects its capacity to raise new capital.
  Another aspect of the debate a year ago is the inability of several hon. Members below the Gangway on the Government side to distinguish between a scrip issue and a rights issue. I do not hold that inability against anybody, but that level of unfamiliarity betrays hon. Members in a debate of this kind into making remarks of the same glorious irrelevance as the remark of the White Knight to Alice that the cleverest thing that he had done was to invent a pudding during the meat course.
  The irony of dividend control being supported by hon. Members below the
  1864
  Gangway is that a rich man has no interest whatsoever in dividends which are taxed at 98 per cent. if the alternative is capital gains arising out of those retained earnings which are taxed at 30 per cent. For that reason, the Government of 1964–66 introduced the close companies legislation in order to force companies to pay dividends—other times, other ways. What is consistent is the Labour Party's capacity to get it wrong whatever the circumstances.
  The Chief Secretary drew attention to the fact that £3,165 million has been raised by companies in the market in recent years. The hon. Member for Loughborough (Mr. Cronin) made a great virtue of saying that this represented only 6½ per cent. of new fixed corporate investment. He was relying on an article in the Financial Times. I am not sure whether he had hoisted in the converse —namely, that the balance of 93½ per cent. is coming from retained earnings simply because companies cannot pay it out in dividends. His hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) unconsciously also made that point.
  The Chief Secretary would not allow interventions from my hon. Friends on the subject of the £3,165 million. But most of that money has gone to major companies. Second-line and smaller companies have not been able to raise capital so easily. Few new companies have come to the market. Ironically, it is those medium and small companies upon which we rely to be led out of the present era of unemployment.
  The hon. Member for Loughborough based his argument on a handful of militants. At least he acknowledge that statutory dividend restraint is far from proved to induce wage restraint of itself. The handful of militants themselves do not justify distorting the working of the capital market upon which the re-equipment of British industry depends. If that handful of militants does justify it, we shall cease to be a free society.
  6.43 p.m.
  Mr. Nicholas Ridley: My hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) has done a service by explaining the damage which dividend control, particularly if it is carried on for a long time, can do to the workings

  1865
  of our economy and industry. Others of my hon. Friends have convincingly made the same point.
  I shall take for granted the damage that can be done and accept what my hon. Friends have said. It is a little ironic that the Chief Secretary should refer to the debates on this subject on the Counter-Inflation Bill Committee in 1973. The only two contributors from the Labour Party, which was in Opposition at that time, were the hon. Members for Salford, East (Mr. Allaun) and the hon. Member for Dudley, West (Dr. Phipps), who have graced our finance debates on many occasions.
  The hon. Member for Dudley, West attacked dividend control—he was more nearly right than usual—on the basis that retained dividends are simply part of the profit which is not paid out. He said that to encourage retention is to encourage the hoarding of capital resources and that we should seek to encourage distribution. He said that if one is to control this form of income at all, one should seek to control not dividends but profits per share.
  I have never advocated the controlling of wages, prices, dividends or any form of income by this means. The damage that we have done through these policies is inestimably greater than the contribution that it might have made to social harmony or the conquering of inflation. The sum of all these policies has greatly reduced our productive capacity and, therefore, our standard of living. The longer it continues, the worse the damage that will be done.
  I complain about the way in which these powers are to be administered. All that the Bill does is to give the Treasury power to make regulations. I presume that there will be more regulations; they were foreshadowed by the Chief Secretary. Government by Treasury regulation on a matter as important as wages or dividends leads, as we have seen, to Ministers being able to decide who gets what.
  We know that by agreeing to put a factory in the Prime Minister's constituency the Ford Motor Company was excused having to implement wages control for its employees. Other companies which offend in some way are clamped down upon. Dividend control works the same
  1866
  way. How one can best get round it is what matters.
  A year ago the Prime Minister used a new phrase twice. It was:
  "we are not living in a deferential society."— [Official Report, 20th July 1977; Vol. 935, c. 1620.]
  If he had said that we were not living in a "differential society", it would have been different. The truth is that we are living in a deferential society. We have to defer to Ministers. We have to allow them to decide everything. The partiality of the Labour Party in office has been one of the most disgusting sights of the last four years.
  Instead of having hundreds of thousands of independent bosses each deciding what wage can be paid according to the circumstances of each company, we have substituted deference to a politically slanted, politically oriented, partial and thoroughly unattractive group of Ministers. That is one of the worst features.
  Gibbon said:
  "The principles of a free constitution are irrecoverably lost when the legislative power is nominated by the Executive."
  That is exactly what has happened in relation to prices and incomes policy.
  The Prime Minister has used his position of patronage to stuff the public sector and the public service with those whom he thinks can be relied upon. The result is a type of Mafia with the Prime Minister at the head of it, like the godfather, deciding who can do what, who can do which and who can do the other. This massive edifice of personal concealed power, carried out beyond the confines of the House, is the reverse of participation and democracy and all the jingo words which members of the Labour Party still use to disguise the extent to which they have taken over executive as well as legislative power and taken it out of the House of Commons.
  When one examines the subject of dividend control against that background, the position is even more shocking. What is the motive for saying that there has to be dividend control against a background of wage control? It is—we heard this from the Chief Secretary and the hon. Member for Birmingham, Selly Oak (Mr. Litterick)—that the workers in the factories, as they trudge home exhausted

  1867
  with the evening paper in their hands, read that there has been some increase of profit or dividend somewhere and they turn to sour and bitter resentment at the scandalous way in which others are succeeding while they are failing.
  That argument has been used by the Labour Party to justify not only the highest personal taxes in the world but the squeezing of differentials, not by law but by the use of ministerial diktat in the way I have described, so that there is now probably no more egalitarian country than ours. It has been done by injecting jealousy and envy into the minds of the people. I had always thought that envy was one of the seven deadly sins, one of the qualities one should not seek to display. For the Labour Party, however, to have devoted its time to increasing envy and making people dislike factors which they should be prepared to accept seems to have been one of the most disgraceful services that it could have done to the country.
  Mr. Budgen: My hon. Friend referred to the man going home from work reading his evening newspaper. Surely, if we did not have the nonsense of wage control he would tell himself, on being told that a local firm was making large profits, that he must go and get a job there because it would pay him more.
  Mr. Ridley: Indeed, that is true.
  I want to pursue this point further in what will be a short speech. The Government always quote gross annual incomes or gross dividends for the so-called rich whereas they always talk about net after-tax hourly earnings for the so-called poor. The Financial Secretary did so the other night when I had occasion to take him to task. That is highly partial. One would never think that this country had net after tax differentials less than any other country, including the Communist States. No matter how hard the better off and the higher earners are squeezed, the same old parrot cries come from people such as the hon. Members for Loughborough (Mr. Cronin) and for Selly Oak, who, even if every citizen received the same net spendable income, would make the same old speech because they either do not realise what has happened or they are not prepared to change their thinking on the topic.
  1868
  There is a danger here, because we can control only that which happens in this country. We are part of Europe and part of the world—two facts that the Labour Party is not happy to live with. More and more our citizens see the French, Germans, Americans and Japanese who come here, or they travel to their countries, and they are beginning to realise the extreme disparity of wealth between the better-off Continentals and themselves.
  So the fact that there are such small differentials in this country is making the envy gap between this country and our foreign competitors seem even worse than before. What will the Labour Party say to the workers in the factories when they see a German shop manager or colliery manager earning 10 or 15 times the take-home pay of his British counterpart? How will the Labour Party explain that away? Why does envy stop at Calais? Why can one envy and wish to bring down and use one's spite against people as far as the Channel but across the Channel find that the doctrine of envy no longer applies?
  The sheer intellectual dishonesty of what the Labour Party has done and is doing in making out things that are not true about relative incomes is enshrined in the Bill. My hon. Friend the Member for Horncastle (Mr. Tapsell) proved quite rightly that most dividends go to the least well off. Of course, the people who have high dividend incomes would prefer not to have increased dividends but to have higher retentions. So, in spite of all the facts, the Labour Party is blindly and resolutely determined not to do away with the piece of nasty prejudice which it has invented and built up over the years in case it should be a political weapon the less for them to use.
  I come finally to the genesis of the Bill. We were told last year that there was to be a return to free collective bargaining. The Prime Minister said
  "Nevertheless, the desire to return to that freedom has been strongly expressed and cannot be gainsaid. So be it. We start from there."—[Official Report, 20th July 1977; Vol. 935, c. 1608.]
  But, instead of having free collective bargaining in wages and dividend distribution, the Prime Minister failed to turn that piece of rhetoric into reality. We

  1869
  had once more a rigid imposition of controls, none of them authorised by Parliament. None of them was passed by the Parliament which voted on 20th July not for wage control but for free collective bargaining. Nevertheless, we ended up with wage control.
  This time we must give a general endorsement to incomes and dividend control policies which are not specified or clear and which leave the Government free to do whatever they like. The reason is that last year the TUC wanted free collective bargaining. After a while, the Government managed to persuade it to accept the 10 per cent. limit. This year there has been the same argy-bargy between the Government and the trade union leaders about what should be done. The TUC leads the Government by the nose. It is the TUC, not this House, that determines the policy and whether there is to be free collective bargaining.
  I close by plagiarising a little nursery rhyme. It goes like this:
  "Murray had a little lamb
  Whose promises were hollow
  'Cause everywhere that Murray went
  The lamb was bound to follow."
  6.58 p.m.
  Mr. Maurice Orbach: I have spoken seldom in the House in the last few months because I do not propose to stand at the next General Election. I have been attending a retirement party which was given downstairs, and I came here to listen to the end of this debate. I have listened most carefully to the two lectures delivered by the hon. Members for Cirencester and Tewkesbury (Mr. Ridley) and for the City of London and Westminster, South (Mr. Brooke).
  I am convinced now that I made the greatest mistake of my life when I took the advice of my wife and purchased shares on the Stock Exchange. If I had left the damned things alone, I would have been worth much more than I am today. I could have bought gold, platinum or silver. If only I had left the Stock Exchange alone and others had followed my example, it might have gone smash by now.
  I listened to the lectures to the Labour Party with some dismay. The type of Member now in this House is different from the people who were here when I
  1870
  came in 1945. In those days we considered the issues. Even as late as 1972, Members were considering the serious issues that confronted us from time to time. Now it has become a party job in which we fight each other. On many occasions Members now make from the Opposition Benches above the Gangway the speeches they would have delivered from the Back Benches below the Gangway had they been in Government.
  I want to give some examples. I hope that I shall be forgiven for quoting. It is a bad habit in the House now that we are allowed to have copious notes. It never happened in the old days. One had to speak freely, and one was sometimes caught out of line. However, I shall quote from some remarks of the hon. Member for Cheadle (Mr. Normanton) and others. I have advised the hon. Members concerned that I would be speaking on this issue. They were talking about the freeze which was put on by the Conservative Government in 1972, not only on prices, wages and rents but also on dividends.
  The hon. Member for Cheadle said:
  "If one or two parties are hell-bent on going it alone there is no alternative. I see it as a last resort. It's really the only measure open to the Government in the short term."
  I quote next the gentleman who was then the Member for Stockport, North, Mr. Idris Owen. He said:
  "I supported the Government in their voluntary policy and I support them now. It is a pity such a policy has had to be enforced. I would have preferred to have relied on the good sense of the British people".
  Apparently the British people did not have any good sense then.
  "Mr. Heath has been too patient, he should have done this 12 months ago."
  I quote next the hon. Member for Macclesfield (Mr. Winterton). He said:
  "I both regretted and welcomed it. The Government have been prepared to push aside the party principle and dogma. They have been forced to take this action …
  It might create problems in industrial investment but the Government had no alternative."
  Then, to cap it all, we had a statement in the local press from the Stockport and district chamber of commerce, whose president said:
  "It is regrettable that we have to have more Government controls, but I think most people in this country are quite aware that we have got to get inflation under control whether by voluntary means or Government measures."

  1871
  This answers every one of the questions put today by Opposition Members. They were prepared to forget all their principles at a time when they thought it expedient to do so. I have not taken the time to look up any nursery rhyme. I suggest that the hon. Member for Circencester and Tewkesbury reads the work of some of the economic experts who are around, all of whom misguide us as much as possible.
  If the Bill is passed, the Government will be in a position to say to the trade unions "We are limiting the amount of dividends which shall be paid to shareholders. We trust that you will limit the amount you are to be paid in the next year and, by so doing, help to reduce inflation."
  I have not kept the House for very long. I hope that this is not the last speech that I shall make.
  Mr. Nicholas Fairbairn: I am interested in the hon. Member's remark about the great bargaining point that the trade unions will have. Let us suppose that they say "We are limiting the amount of income of an old, retired nurse whose dividends bring her in £1,500, so will you be good enough to limit the income of a skilled engineering worker who has an income of £12,000."
  Mr. Orbach: Really! Neither here nor anywhere else am I in the habit of answering hypothetical questions. That suggestion is a lot of rubbish. I have an income of over £1,500 a year in dividends, but I do not depend upon that because it is cut away by the taxes that are levied on it. The hon. and learned Gentleman is perfectly well aware of that. The poor nurse whom he mentions could never receive £1,500 in dividends unless she had invested about £30,000. I think I am correct in saying that. In the circumstances. the hon. and learned Gentleman is talking a lot of nonsense. This is not the first occasion on which he has done that sort of thing, and it will not be the last.
  7.5 p.m.
  Mr. Peter Hordern: There is no economic justification for this Bill, as many of my hon. Friends have said. Indeed, there is no academic justification for it either, as my
  1872
  hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) pointed out.
  I suppose that, in the Government's mind, at least, there is some political justification for the Bill. The Short Title is wholly wrong. It ought not to be called the Dividends Bill; it ought to be called the Dissemination of Envy Bill, because that is what it is about. I believe that it is an insult to the intelligence of those millions of trade unionists who know very well that the Bill will have no effect whatever in improving the situation concerning wage demands. Many of them, especially the trade union leaders, know very plainly of the damage that ate Bill will do to industry.
  However, I do not think that the main purpose of the Bill—so far as there is any purpose on the economic side—to extend dividend control as some means of getting a better bargain with the trade unions about pay control will succeed. I thought that I should refresh my memory about the Government's programme on controlling inflation and about what they said a year ago. They said then:
  "On the best forecasts now available of all the factors which may contribute to inflation, the prospect for prices in 1978 and after will depend critically on the rate of increase in the nation's wage bill."
  They went on to say:
  "If the rate of increase in earnings is as high as 15 per cent., we should not get inflation down to 10 per cent. at all and it would be rising steadily through the second half of next year and into 1979."
  I welcomed this White Paper for one reason, which is that instead of the opacity that one generally encounters in White Papers here was, at last, a very clear prediction about the close connection that existed between the level of earnings and the level of prices. The Chancellor of the Exchequer carried it through in a speech last year on 15th July. It is a very precise correlation. If earnings rise by 15 per cent., we shall not get inflation down to 10 per cent.
  Therefore, I thought that I should check what had happened from July last year to July this year. I find that earnings have risen by precisely 15 per cent. in that time, but that prices have risen not by 10 per cent., and rising, but by 7·7 per cent. This is a rather important factor because the whole purpose of the

  1873
  Bill relies on the idea that it is important to get wage control in order to get price control. Here is this very precise link shown to be wholly wrong.
  I shall certainly not go to any length this evening in pointing to what I believe to be the real reasons for inflation. I merely say that during the last year the Government have been responsible for increasing the supply of money in the banks and particularly in the building societies by some 20 per cent. Of course, they will not acknowledge that. When inflation rises very fast—as it inevitably will if consumers start spending fast, which the Government wish them to do—the Government will put the blame on the wage earner. They will not blame themselves. They certainly take no responsibility for that.
  However, the situation is now very serious. Not only has money supply increased by 20 per cent. in the last year, but the level of deposits in the building societies rose last year from £2·2 billion to £4·4 billion. All that money is available if the investors and those who have deposits decide to draw it out and to spend—and, goodness knows, the Government are encouraging them to spend now, because that is how they hope that industry will achieve increased production. If that happens, there is no way in which inflation can be controlled next year.
  Already the timber has been laid. Already the match has been lit. It is simply a question whether and when the conflagration will take place. So all this so-called economic justification is mere persiflage. The Bill has nothing to do with controlling inflation, and I suspect that the Treasury knows it.
  The only reason for its existence is that the Labour Party must have a windmill to tilt at. They like these expressions, particularly in General Elections, about "bloated capitalists" growing richer all the time on their dividends. There are no bloated capitalists about now; there are only filleted capitalists. They are the only ones who survive. It is surprising that the Bill could seriously have been introduced in the knowledge that taxation, especially on those who receive high dividends, rises to as much as 98 per cent.
  1874
  I was interested to note that, in reply to my intervention, the Chief Secretary appeared not to know the number of people who had £500 a week investment income. I wish that I knew the answer, but the Financial Secretary will have the time during the next couple of hours to get the information. I therefore ask him this. How many people have investment incomes of over £500 a week? I expect a clear answer on that point.
  I asked the Chief Secretary another question which he was unable to answer. If investment income rose by 50 per cent. for those people on the highest tax, what would be the net increase in income? Those are two straightforward questions relating to an example cited by the Chief Secretary. I look forward to a reply from the Financial Secretary.
  The idea that investors are mostly bloated capitalists is all part of Labour mythology. About 60 per cent. of individual shareholders are pensioners. They are not what one would call rich people at all. In addition, there are 11½ million people who benefit from occupational pension schemes and about 2 million who receive pensions under those schemes. There is a further 14 million who subscribe to life assurance policies. The investments and contributions that those people have made towards their policies will now be cut short by this Government's restriction of the dividends which those policies would otherwise have been able to expect.
  Since 1972, the retail price index has more than doubled, while dividends have risen by 40 per cent. or about 8 per cent. per year. Ever since we have had dividend control, since 1972, we have found that dividends have been restricted and consequently policy holders and pensioners have found the expected increase in their dividends and benefits restricted.
  That is bad enough, but it has a ludicrous effect on the Government's own funds. I am talking now not about the Government's gilt-edged securities but about the nationalised industries' and local authorities' pension funds. Both are funded—that is to say, they are invested in the Stock Exchange—and depend almost entirely on returns from property and equities. But the difference between those funds and ordinary company schemes is that they are index linked. That means that the Government—the taxpayer

  1875
  —have to make up the difference. Dividend restriction means that less revenue is going into nationalised industries' funds and local authorities' funds and the taxpayer has to make up the difference. What possible sense can that make? It is ludicrous.
  The figures are substantial. As taxpayers, we have been advancing about £100 million a year to one pension fund alone—that of British Rail—over the last two or three years. According to the public expenditure forecast, we are expected to provide that one fund with a further £81 million each year from now until 1981. So far as income falls short, as it is bound to do because dividends will be restricted, I suppose that that public expenditure item will have to be increased.
  Perhaps the Minister could tell us the precise estimate now of the increase in taxes or the increase in payments which the taxpayer will have to make in order to make up the index-linked pension funds.
  The pension funds of the nationalised industries are a great deal wiser than many Labour Members think. They know that there is every prospect that dividends will be restricted and that it is the taxpayer who will make up the difference anyway. They are therefore not worried about the yield on their investments. That is why they invest large sums in things like silver gilt candlesticks. The British Rail pension fund alone spends more money on works of art than the British Museum, which it outbid for those candlesticks, the Victoria and Albert Museum or the Tate Gallery. Yet it is we the taxpayers who are subsidising such pension funds. That is the extraordinary present position.
  There is a problem ahead for the Government over these funds which they have not recognised. The local authorities now control funds of £4,000 million. The nationalised industry pension funds control £9,000 million. I see from the Government Actuary's report which came out two weeks ago that if there is a negative rate of return of 2 per cent.—that is to say, for example, if inflation next year is 12 per cent. and the return on those funds is 10 per cent.—it will be necessary for contributions to rise to 50 per cent. of salaries over a period.
  1876
  The taxpayer makes substantial contributions towards those pension funds. This is a subject which merits closer examination—it is certainly worth more time than I can give it tonight. But it is clear that the Bill will make these subsidies even higher than they would have been.
  The Bill is not only irrelevant and unnecessary but actually damaging. It will cost the taxpayer more than he will gain from it. It is all of a piece with the Government's actions. I wonder how many of my hon. Friends were sickened by the sight of the Prime Minister and the Chancellor of the Exchequer claiming credit last week for the present state of the economy. When one thinks of those two old crocks, who have been broken and run over by every passing bus for the last two years and stand on their feet at all only with the aid of crutches lent by the IMF, one finds it fantastic that they should claim any credit for the performance of the economy.
  A short while ago, the Chancellor was scurrying about, returning in panic from a flight at Heathrow when he was supposed to be going to Japan, because the foreign exchange market was falling. The Prime Minister was sending desperate messages across the Atlantic to President Ford saying that unless he bailed him out and gave him some money the economy would collapse and the end of democracy in Britain was near.
  What rubbish this is. These two old crocks are pretending that they have managed to shore up the economy of this country. The economy has been badly served both by the Prime Minister when he was Chancellor and by the present Chancellor. It is time that those two right hon. Gentlemen went. I trust that we shall have the opportunity to remove them in October.
  Mr. Kenneth Lewis: On a point of order, Mr. Deputy Speaker. May I ask whether you could find out whether the Labour Party has already gone on its holidays or whether it is boycotting the debate? We have with us one Minister and one Government Whip, and that has been the position for the past half-hour. The hon. Member for Wrexham (Mr. Ellis) need not try to draw attention to his presence. He is not in the House. There is no one on the Government

  1877
  Benches save the two to whom I have referred.
  Mr. Deputy Speaker (Mr. Oscar Murton): The hon. Gentleman has been in the House long enough to know that that is certainly not a matter for the Chair.
  7.11 p.m.
  Mr. John Moore: I know that you will not mind, Mr. Deputy Speaker, if I pursue the small point which my hon. Friend the Member for Rutland and Stamford (Mr. Lewis) has touched on. Although we now see one or two hon. Members beginning to filter in on the Government Benches, it is not without note that this Bill, which the Government seem to regard as crucial to their whole programme, has had very little attention on their side. Attention was drawn earlier to the fact that the Prime Minister and the Chancellor of the Exchequer, who have said that this is a crucial part of their overall strategy, have not seen fit to grace us with their presence throughout the debate.
  The Bill is, of course, a cosmetic piece of legislation, and to that extent the outside world will notice the degree to which the Government and their supporters do not even bother to attend to patch on the powder of their own cosmetic preparation.
  I take, first, a point made earlier by the hon. Member for Birmingham, Selly Oak (Mr. Litterick). I hope that the attention of his electors and other electors will be drawn to what he said when he expressed the natural dilemma which he felt, as a member of the Labour Party, after four and a half years of Socialism. He found it difficult to work out how he would face his electorate and ask them to vote again for the Labour Party, and he sought rather tortuously to describe some of the essential difference between the Labour Party and a Labour Government. He need not worry, because after the next General Election, although there will, I suppose, be a Labour Party, there will certainly be no Labour Government.
  However, the hon. Gentleman's dilemma is one which worries many of us a good deal. There is a dilemma in a modern democratic State in that, when we
  1878
  deliberate on economic matters, our modern means of mass communication through radio, television and the national newspapers allow the whole of our electorate to know immediately what is being discussed and to assume, in a sense, that the immediacy of communication means that something decided today has in fact happened.
  On the other hand, all those who are responsibly involved in economic matters know that there is a time lag between decisions taken and their effect within the economy. Whether it be a two-year time lag in monetary matters or a six-month time lag for the impact of devaluation of the pound on the retail price index is not relevant to this point. The point is that, effectively, there are clear delays in economic matters and no effective delay in modern communication.
  Therefore, in a modern democracy it behoves those who seek positions of responsible leadership, whichever party they seek to represent, to understand and lead on the basis of the truth as opposed to an attempt to proliferate such ideas as we have heard today from the Government side.
  I was shatttered to hear what was said from the Government side today. The hon. Member for Colne Valley (Mr. Wainwright), speaking for the Liberal Party, was right to draw attention to the essence of what the Government say— "We all know that this is not relevant, we know that it does not have any effect, but people think that it does and therefore we must pander to that belief."
  The stench of total hypocrisy permeates this entire proposal. Instead of leadership, we have the Government seeking to base their policies on myths and envy. In the most elitist and arrogant fashion, they assume that the people are so supine, innocent, or ignorant that they will not be able to look beneath the surface. Worse still, their own supposed closest colleagues, the leaders of the trade unions, they assume to have no ability responsibly to communicate to their members the reality of the Bill as opposed to the cosmetic surface.
  I make no apology, therefore, for seeking to concentrate, in the limited time available to me, on the facts, since the facts as opposed to the illusions and the series of party-political broadcasts we

  1879
  have heard from the Government Benches are what is relevant.
  Again and again, we must study the facts behind the Bill. I shall direct attention to its effects in two specific areas. I take, first, its effect on the market place in money, and, second, I shall come to its effect on those who are the ultimate recipients of dividends.
  As for the market place, it has been said many times already, and it is worth repeating, that dividend controls distort the whole market in money raising. We see that not just in the Diamond report but, as we have heard, in the evidence of the Treasury itself to the Wilson committee. What does this mean? It is not some esoteric statement. It is not something unconnected with the real world.
  The market in money—the money market of which we talk in terms of the Stock Exchange and other methods of raising money—produces investment and ultimately jobs. That is a fact of the real world, the world in which Labour Members should be a little more interested.
  Let us examine for a moment the effective distortion which takes place through the ways in which these controls have an effect on the market. That distortion takes six basic routes, six basic distortions which can clearly be ascribed to dividend controls of this character. First, it re-emphasises the role of existing large companies versus smaller growing companies. Although this would not be all that bad, even though I should dislike it, if we were talking about a successful economy with a whole range of successful small, medium and large companies, the truth is that we see here the ossification of the present structure, which is a failed structure within a failed economy. We need radical change, not ossification in the kind of failure we now have.
  Mr. Budgen: Does my hon. Friend agree that even in a comparatively successful economy the important thing is that capital should go to the firms which are comparatively successful and come away from those which are comparative failures? It is that comparison which is important, and it really has no bearing on the question whether the economy is a failure or a success.
  Mr. Moore: With respect, I am coming to that in one of my six points. I have
  1880
  mentioned, first, the emphasis on large as opposed to small and the degree to which the current structure of the economy is thereby ossified.
  The second distortion that occurs is to encourage cash hoarding. It encourages cash hoarding by companies which one supposes have already carried out their basic research and development and commitments of funds to replacement. Therefore, with this cash hoarding we see horrifyingly poor marginal use of money—the sort of things which I imagine that the Labour Party in Government as opposed to Opposition would be concerned to see. For example, there is the degree to which companies then have to seek to speculate in other companies through the Stock Exchange itself. I ignore for a moment their contribution to the Government's funding programme through the acquisition of gilts.
  Third—this has not, I think, been touched on except by my right hon. Friend the Member for Chipping Barnet (Mr. Maudling) in a notable contribution to our debate—economic stagnation is encouraged because money is not put back into circulation. Consumption is therefore restrained and ultimately, again, we see jobs lost. I imagine that that is the sort of thing which Labour Members would not wish to see.
  Fourth, the restraint itself just does not work in the case of large companies. They drive a coach and horses through the whole pattern of regulations. But the key point here is that enormous effort, attention and energy are diverted to that non-productive avoidance as opposed to the productive economy.
  Fifth—this is the point which my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) would wish me to make—it protects and conceals the inefficient company, inefficient in its use of scarce resources which are vital to our country. Moreover, by masking the differences in performance, it prevents the market from reflecting the differences of success and failure.
  Finally, the distortion adds to the attraction of the uncontrolled section of the market place, the Government gilts section itself; and it adds to their yield differential. It helps to make the market place for money in the United Kingdom a market place for financing Government debt instead of one which creates

  1881
  productive investment. I should have thought that none of all this would have been attractive to hon. Members on the Government side.
  I come now to the effect of the controls on people as opposed to the market place in money. Here, the myths which are propagated are even worse. I was shocked and shattered by the speech of the Chief Secretary. He did not begin to do what I imagine he would normally try to do—that is, argue the case in detail. He simply perpetuated the myths. The essential fallacy which seems to lie behind the Government's argument is that rich people get dividends, poor people get wages, and therefore controls help the poor. There is a complete failure to examine the reality and the details.
  Some of the details have been covered already, but it will not harm the House to have them rehearsed again. The facts are clear. First, 97 per cent. of all personal income is earned outside dividends. To put it another way, gross dividends produce only 3 per cent. of all personal income. That puts the matter into perspective: 3 per cent. of all personal income.
  That tiny 3 per cent. of the whole income earned within our economy is very widely spread, despite the attempt to camouflage that fact. It is important to put on record the document to which reference keeps being made. It is the CSO's Economic Trends, no. 287 of September 1977, a document from the Government's statistical service. The reference is to be found in appendix I at page 100, table 1. The article was based on a study by Miss M. J. Erritt and Mr. J. C. D. Alexander, of the Department of Industry. It appeared under the column heading "Distribution by Category of Beneficial Holder."
  That is where the facts were adduced that at present holdings by persons within that tiny 3 per cent. who received dividend income only 37·5 per cent. Those widely spread beyond insurance companies and pension funds to investment trusts, unit trusts and the public sector consisted of 50·6 per cent.
  Thirdly, let us look more closely at those individuals. As the Chief Secretary must know very well, there has been more recent information, from the Diamond Royal Commission on wealth.
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  The Inland Revenue survey of personal incomes looked at the figures for 1975–76. They are to be found in an Inland Revenue pamphlet that is in the Library. In 1975–76, of the 37½ per cent. who personally received benefits from dividends, 48½ per cent. were families in receipt of less than £4,000 a year, or below the average industrial wage. We must put these figures into perspective.
  Fourthly, as regards the tax system and the way in which it and these controls have a direct effect, I remind the House that the proposed system of controls helps the very rich. I shall repeat that: the controls effectively help the very rich. I shall illustrate that, because we seem to be going on and on in the world of make-believe. Let us look at this mythical capitalist beast which Labour Members seem constantly to want to get their hands on.
  I will give a specific illustration of a purely arithmetical kind. My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) asked the Chief Secretary about the after-tax income of the character already earning £500 a week in dividends who have, say, a 300 per cent. increase in a company's dividend payout. Needless to say, despite all the Treasury advisers being in the Box, there was no attempt to give an answer.
  The mythical capitalist beast, about whom Labour Members want constantly to talk, is already very rich and already paying 98 per cent. tax on unearned income. Company Y decides to increase its dividend by 50 per cent. Let us be modest in this example. It is already paying him, say, £10,000 a year in dividend income. He is now to be paid an extra £5,000, but what does he receive? The answer is £100. That is his in-pocket annual increase in real earnings.
  Mr. Fairbairn rose—
  Mr. Moore: Perhaps I may finish this point. It is important that I state the other side of the picture, as opposed to what will happen under the Government's measure.
  In the absence of controls that are supposed to hurt the mythical capitalist beast, the very rich man receives £100 on the dividend paid out. Suppose that instead the company, with controls, cannot increase the dividend by 50 per cent. but retails it all. The

  1883
  man in question receives no increase in dividend and theoretically his £5,000 is added to the asset base of the company. I accept that this is a purely arithmetical example. But let us suppose that it is added to the asset base and he sells the shares and takes a long-term capital gain, paying the maximum long-term capital gains tax of 30 per cent. On the £5,000 net asset base he receives £3,500,35 times the amount, as a result of being encouraged to pursue the capital gain rather than the income earnings of £100.
  Therefore, what are we talking about? The facts show that the system which the Government seek to continue assists only the very rich. We must draw the factual conclusion that the impact of the controls on people is that if they hurt anyone they hurt the poorer people and reward the rich. They make no measurable impact on a person's real income. Therefore, the Bill is unproductive in the counter-inflation battle. That seems to be the crucial point that the Government do not even begin to want to discuss.
  Why on earth are we having the measure now? I said at the beginning of my speech that I thought it crucial, in a world in which economic events have a time delay whereas our debates are given an immediacy by the media, that those in positions of power have a special responsibility to lead. There is clearly no validity in the measure, so why on earth are the Government seeking to feed the myths? Why are they arguing again on the basis of the envy concepts that dominate relationships within our society and make them deteriorate?
  There is only one inescapable explanation for that kind of irresponsibility. It is done for short-term, shallow political advantage. It stinks of hypocrisy. It should make all those on the Labour Benches who regard themselves as social democrats finally despair of this Government and make all democrats outside the House excited at the chance that soon they will have the opportunity to vote in a Conservative Administration.
  7.36 p.m.
  Mr. Timothy Raison: My hon. Friend the Member for Croydon, Central (Mr. Moore) has done a most vigorous demolition job. I shall not try to compete with him. It has been a feature of our debate today that speaker
  1884
  after speaker among my hon. Friends has torn this ludicrous legislation to shreds.
  I would summarise some of the points that have been made as follows. First, the Bill attacks the whole notion of investment in equities. For a Government who spend their time exhorting people to invest in industry to subscribe to a policy which can be directed only to reducing the incentive to invest in industry passes all comprehension.
  As my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) pointed out so graphically, it is a deplorable fact that nowadays nobody bothers to think about investing in equities. People start thinking about buying works of art, perhaps investing in gilts and so on. Many of them simply turn to the roulette table, because Socialism has done such appalling damage to investment in our own industry, which it allegedly wants to revive. It makes a farce of the so-called industrial strategy that the Government are constantly prating about if they damage the essence of any kind of industrial revival in this way.
  It has frequently been pointed out that the effect of the Bill will be to harm those whose savings come through dividends, and to harm them in a way which in some cases will undoubtedly be callous. It has also been pointed out that these measures do not hit the rich, because with rates of taxation as they are not many of the rich bother to invest in equities. They look for other ways of making money more easily. There is no point in investing in equities in the present climate.
  The policy produces distortion and waste. It is almost by definition a faulty economic mechanism. It is a way of taking out any kind of rational judgment by those seeking to place their money to good effect. Moreover—perhaps this is the truth of the matter—the Bill is a pure piece of political eyewash, or, rather, a combination of eyewash and envy. I wonder whether in some ways that is not a rather charitable interpretation of what is happening.
  The hon. Member for Bristol, North-West (Mr. Thomas) may support me when I say that if we look back at what has been going on in the post-war years the Bill may also be seen to be part of a serious attempt to destroy the essence

  1885
  of the market economy by making sure, over time, that it is not worth while to invest. I believe that if we destroy the market economy we shall go a long way to destroying the liberties of our citizens as a whole.
  It is very alarming that there should have been such a drop in the return on investment in the post-war years. Whether it is the Government's desire to accelerate that drop by the Bill, I do not pretend to know. The truth probably is that some Labour Members are motivated by that kind of desire. Others, like the Minister of State, do not want to do that but feel that they must offer a sop to the unions to try to keep the successor to the social contract going.
  There is an important point to be made and understood about the long-term trends in return on capital invested.
  There is, I think, one partial point to be made in favour of the Bill. That is that at least it is a statutory measure brought before Parliament in an honest way. This is in contrast to the way in which the Government have brought their incomes policy before Parliament over the last few years.
  As the House knows, a day or two ago we had a debate about incomes policy. I was rather appalled to read, on the front page of The Times this morning, an article by the political editor in which he said that the House had approved the incomes policy White Paper, but that is by no means true. What was said in the motion that we debated on the economy was
  "That this House welcomes the substantial progress already made in combating inflation as described in the White Paper (Winning the Battle against Inflation) and recognises that a further sustained national effort is required to keep inflation under control as a basis for a healthy and productive, expanding economy capable of providing full employment and rising living standards for the British people."
  That is all claptrap, as we know, but the one thing that that motion did not say was that this House approved of the incomes policy White Paper. That is a deplorable thing, because the incomes policy White Paper has remarks in it, referring to particular claims, such as that
  "there must be clearance through the Department of Employment"
  and so on. In other words, the White Paper is using the language of a man
  1886
  datory requirement on the part of the Government. It is saying that people must do something, yet not only has it no statutory basis to it, but it has not in any way been approved by the House of Commons. I think that that is a deplorable fact, and it continues a very sorry record.
  I should like, if I may, to go back over the last few years in order to see what has happened. In 1975, to be fair to the Government, they brought to the House a motion
  "That this House approves the White Paper on the Attack on Inflation".
  There were many unsatisfactory features about their approach—including of course, the way in which they simply took a statement from the TUC, stuck it in the White Paper as an annex and converted it into the law of the land—but, nevertheless, in this particular instance they at least brought the White Paper before the House for approval.
  But what happened in 1976? There was a little bit of a breach, because the motion then put before the House said that
  "This House takes note of the White Paper entitled 'The Attack on Inflation '".
  There was no question of the House approving the White Paper. It was simply invited to take note of it.
  Then in 1977 we had a variant. We did not even have the words "takes note". We had a debate on the Adjournment. Now, in 1978, we have the motion which I have just read out.
  I think that it is utterly deplorable that the Government should not have the guts to stand up and present these White Papers at least for the approval of the House. We all know the reason for it. It is quite simply that the Tribune group and the Left of the party do not agree with the policies put forward and, therefore, would not support the Government. I imagine that the hon. Member for Bristol, North-West, who is present in the Chamber, would confirm what I am now saying if he were prepared to be honest.
  It really is an abuse of parliamentary procedure that the Government should expect the country to have to do things —I repeat that they have used the word "must"—which have not been approved by Parliament and have not been the subject of legislation. That is lamentable.

  1887
  The picture, therefore, that we have today, as my right hon. Friend the Member for Chipping Barnet (Mr. Maudling) pointed out in his very good speech, is one of statutory control of dividends but no statutory control of incomes. That is not very fair, nor is it even-handed. But I do not think that it is just a matter of things being fair and even-handed. There is a deeper objection to what the Government are doing today in economic terms, and it is this. The Bill, like the White Paper, does absolutely nothing to improve productivity. It does absolutely nothing to improve the output per man or woman employed in industry.
  Anybody who thinks for one minute about our economy knows that throughout the post-war period our greatest weakness has lain in exactly this realm of productivity. Indeed, it is true of the Bill that not merely does it do nothing to improve productivity, it actually achieves the opposite.
  I think it is fair to point out in the debate that the record of productivity in this country under the present Government is truly appalling. I am glad to see the Minister of State on the Treasury Bench, because I want to refer to a parliamentary answer that he gave earlier this year when my hon. Friend the Member for Blaby (Mr. Lawson) asked one of the many pertinent Questions which he has posed to Treasury Ministers over these last few months.
  My hon. Friend
  "asked the Chancellor of the Exchequer what was the percentage increase in national productivity, defined as output per person employed over the economy as a whole between 1973 and 1977, and for each of the five four-year periods: 1969 to 1973, 1965 to 1969, 1961 to 1965, 1957 to 1961 and 1953 to 1957".
  The answer given by the Minister of State was:
  "Between 1973 and 1977, gross domestic product—based on output data—fell by around ½ per cent. Although comprehensive employment data are not yet available for 1977 as a whole, it is estimated that output per person employed will have changed little over this period."—[Official Report, 7th March 1978; Vol. 945, c. 621–2.]
  In other words, the Minister of State was saying that between 1973 and 1977 productivity was absolutely flat. But he then gave the figures for the five previous four-year periods, which showed that the change in output per person employed between 1953 and 1957 was up by 7·1
  1888
  per cent., between 1957 and 1961 it was up by 9.3 per cent., between 1961 and 1965 it was up by 10·7 per cent., between 1965 and 1969 it was up by 11·8 per cent. and between 1969 and 1973 it was up by 11·5 per cent.
  Throughout the post-war period, therefore, under both Conservative and Labour Governments, there had been a steady improvement in productivity, but under this Government there has been absolutely no improvement at all in productivity. I believe that that is the most disastrous of all the very many disastrous ingredients of this period that we have had to endure.
  The figure is confirmed by the Department of Employment Gazette for June, in which it is said that the output per person employed in production industries, using 1970 as the base line, was 114·8 in 1973 and 114·4 in 1977, showing that there had actually been a very small drop in productivity over that period, in contrast to the very steady rate of improvement indicated in the Minister of State's answer dealing with the earlier period.
  Mr. Tom Ellis: As one of the hon. Gentleman's hon. Friends emphasised earlier the need not to display hypocrisy, I wonder whether the hon. Gentleman will agree that there has been a very substantial change in the world economy since 1973 as compared with the earlier period to which he was referring.
  Mr. Raison: I am talking not about production—although, goodness knows, production has been lousy enough—but about productivity, about output per person employed, and I am afraid that that has not been affected by the factor mentioned by the hon. Gentleman. It is affected by a climate which has been created by the Government which is totally unconducive to any kind of improvement in productivity.
  We all know that there are all sorts of reasons for it. I do not doubt that there are deep-seated cultural reasons why we are not as productive as our competitors, and so on. There are, however, some things which are within the power of the Government. There are some things which Governments can and should do about the problem. Essentially there must be incentives, whether through the taxation system, or through social security, and

  1889
  those incentives must include encouragement to invest.
  As I have said before, and as all my hon. Friends have said in the debate, the whole purpose of the Bill and the whole effect of it—if it has any effect—will be to discourage people from investing in productive industry. The Bill seems to me to be a suitable tombstone for this old, blind, despised and dying Government, who, as the debate has all too evidently shown, are now in their very last days.
  7.50 p.m.
  Mr. Kenneth Lewis: There is one form of dividend restraint to which this Bill does not apply. If a person puts his money in to Little-woods or Vernons Pools and wins, those dividends are not taxed. Further, there is no restriction on what can be paid to the lucky winners. That is the kind of casino society which the Labour Party has created.
  If a person has money invested in a successful industry which is capable of producing profits, the dividends are restricted. Now, of course, I believe that if we are asking for pay restraint we have a right to ask for dividend restraint. I make no complaint that the Government, having asked for the former, should also seek the latter. If I were on the Government Front Bench I would do the same. I hope, however, that I would be a little more successful in obtaining restraint on pay in return for restraint imposed on dividends. The dividend restraint so far has been much stronger than any pay restraint.
  My complaint is that the Government are legislating on dividends when they have not legislated on pay and have no intention of doing so. They may say that they have to legislate on dividends or the restraint will not stick. I do not accept that. I believe that they are legislating to please their trade union bosses, especially the Left wingers. I believe that they are legislating to try to convince the country that they are on the side of those who earn in industry as opposed to the capitalist investor who takes profits from it.
  Another reason why this Bill has been brought before the House is that there is
  1890
  to be a General Election. Labour Members have not been speaking in this debate because they want more Opposition Members to speak so that they can go to the country and say "The Tories are in favour of giving away more in dividends but we are not." The Government could have brought this Bill in weeks ago. They had plenty of time. They knew that 31st July was not far away.
  I understand that the Bill contains a variant on the old system. The door has been left open a little so that companies can increase dividends slightly. I have no doubt that the Government are thus hoping that new investment will still take place. They hope to be able to say that, although they have imposed dividend restraint, there is still a right given to some companies to increase dividends where justified. We heard earlier about the psychology of paying dividends. The truth is that the country is short of investment. Labour Members know this. Increased investment comes from the financial institutions and the pension funds when they know that they will get, not a return on their money, but an increase in the return. All of those institutions know that in the past few years there has been little increase in the return on their money.
  Let me tell the few Labour Members present that some years ago, when unit trusts were popular, I bought a block of trade union unit trust shares. I understand that a lot of other foolish people did the same, including the leaders of some trade unions—the TGWU, the NUR and others. No wonder the NUR has gone into pictures and candlesticks. If it looks at its investment in the trade union unit trust fund, it will see that the shares are worth no more than they were 10 years ago. There had to be a job for someone. Lord Hirshfield headed up the fund. I complained about this poor performance some time ago and he was very cross with me. I complain again. Some unit trusts have done well. Most of those which invested in companies abroad have done well. Those which have depended upon investment in companies in this country have done less well.
  Many years ago there was a campaign to get people to put money into unit trusts. The ordinary people of this country put large amounts of their savings into these trusts so as to get income from

  1891
  dividends. They did well at the beginning. The managers have done reasonably well all the way through because they receive their management fees. But the ordinary people with unit trust fund shares would have done better to have put their money in War Loan. At least they would have increased the size of their investment by now.
  Precisely the same thing is happening with pension funds. The Government now have a new pension scheme. After a good deal of argument, they have encouraged the private sector to provide second pensions, competing with the second pensions provided by the State. Yet the Government are telling us that they want dividend restraint. The best way to top up the pensions of those who have gone into the private sector as against the State sector for the second pension would be an increase in dividends rather than a restriction.
  The Government are encouraging the National Enterprise Board to invest in private industry. A Tory Government would not do that. But the Treasury has said that it is right that the NEB should do it. The Government are saying that public money should go into these companies through the NEB, but we should not expect an increased return out of profits. Why should anyone, even the NEB, invest if he cannot get a share in the increased profits?
  The last Finance Bill contained a provision dealing with employees' shareholdings in industry. The hon. Member for Rochdale (Mr. Smith) and his party encouraged this. They had better recognise, along with the profit-sharing employees, that if there is to be this profit sharing in industry there will be a poor return if the objectives of this Bill apply to such employees and such shares. In that event they may expect to get just the same dividend five or six years on because no more than a marginal increase will be allowed because of dividend restraint.
  There was today an interesting story in the financial columns of the newspapers concerning the Thomson Organisation, which has grown tremendously in this country. It has put money in The Times, enabling it to survive. The organisation owns The Sunday Times and a large tranche of North Sea oil. It employs a great many people. The
  1892
  group has now decided on a share reorganisation. I do not fully understand it, but I do know that it is being carried through because the company says that it cannot get maximum profits in this country and keep them, or invest in this country and receive an adequate return. Consequently, it is proposing to expand in Canada and the United States. It is not closing down what it has here but most expansion will be elsewhere. No matter which party is in power there must be an expansion of industry to reduce unemployment.
  We want this expansion of industry to increase the vitality and productivity of our country. We can get it in all sorts of ways and one way is from our great companies. Yet here is a great company which is so dissatisfied that it has decided that any expansion that takes place will take place in either Canada or the United States.
  One of the reasons for this decision is this kind of stupid Bill. The Bill is a product of the last throes of a dying Administration. The Government would do best to forget it. One thing is certain: if they are returned after the next General Election, there will be very little profit and very few dividends for the British people.
  8.1 p.m.
  Mr. Ron Thomas: I apologise to some hon. Members opposite because I have not been able to sit through this debate for reasons over which I have no control.
  From the speeches that I have heard I suggest that Conservative Members are full of all kinds of contradictions. The hon. Member for Rutland and Stamford (Mr. Lewis) has just been telling us about a large company which has decided not to invest in the United Kingdom and one of the reasons is this piece of legislation. Yet one of his hon. Friends made the point that this Bill will encourage large companies to hold on to their money. One thing that the Bill will do, up to a point, is to make more money available to large companies for capital investment. Whether they will use it for such investment I cannot say, but they will be defended from the the demands of their shareholders. They will not have to pay out the profits they have earned and they will have that money to use as they wish.

  1893
  Whether they take the next step and invest it in productive industry is another matter.
  The second contradiction that has come across all the time is that providing companies are allowed complete freedom to pay out their profits at whatever level of dividends they feel is correct, we shall get a regeneration of British industry. Do the Tories remember nothing of the 1970 to 1974 period? The Tory Government at that time gave British industry, British shareholders and British capitalism everything that they wanted. We had the Barber cuts, the Industrial Relations Act and the "dash for freedom", yet investment in British manufacturing industry continued to decline. The money went into speculation in land and property, in currencies and commodities and anything else one cares to name, other than real productive manufacturing industry.
  Mr. Budgen: Since the Minister of State, Treasury is here, will the hon. Member for Bristol, North-West (Mr. Thomas) tell us whether he has heard the Minister's excellent "turn" on the 1970–74 period? If he has not heard it on the five or six occasions that the Minister has used it, I suggest that he stays and listens because he may hear it tonight. But it is not right for the hon. Member to say that British industry got everything it wanted during the 1970–74 period.
  Mr. Thomas: I do not have to hear the Minister of State. My judgment is formed from looking at the history of the period. Piece after piece of legislation was given after being demanded by British capitalism. It wanted to clobber the trade unions and control the trade union negotiators allegedly to get the regeneration of British industry. So we had the Industrial Relations Act. This sort of thing happened time and again, and even the then Prime Minister had to lecture certain leading lights on the unacceptable face of British capitalism, because, despite all the help and handouts, they were still refusing to use the money to revitalise British industry.
  That is the source of our productivity problems today. One does not increase productivity in days, weeks or even months. The lack of productivity in British industry is due in part to the rapid
  1894
  decline in capital investment under the last Tory Government. We are now reaping the fruits of that period. There are other reasons for the decline as well, for which I have criticised my own Front Bench, such as the cutbacks in demand which lead to higher unit costs. The Tories have supported all the cuts in public expenditure and they keep urging more. Such action reduces productivity.
  It has been said that there has been a debate over a long period on whether firms that are making profits should distribute those profits via the market mechanism, and whether this will bring about the regeneration of British industry in the most effective way. Some people say that every bit of a firm's profit should be given back in dividends and that the market should sort out where that possible investment capital should go. One Conservative Member made clear that he believed there should be a higher level of consumption. The argument has gone on for decades about whether we have an effective mechanism for directing these dividends into productive manufacturing industry.
  My judgment is that we have no mechanism. It failed miserably a long time ago. That is why the majority of firms provide the capital investment they need out of their own retained funds. They are not worried about the shadow boxing or the tears from the Opposition. They need funds, and they realise that growth within the firm is far more important than satisfying the whims of shareholders.
  It is the free market economy that the Tories applaud. Some hon. Members have said that those enterprises that are more profitable should command available funds, even if when it comes to it that means bingo palaces, betting shops and brothels rather than British manufacturing industry. I do not think that some hon. Members would care a damn if the money continued going into bingo palaces, betting shops and brothels and the decline of manufacturing industry continued.
  Mr. Budgen: If, for the sake of argument, bingo palaces, betting shops and brothels are more profitable, this is an unhappy reflection of the preferences of the British people.
  Mr. Thomas: We on these Benches take a rather different view. We do not accept that the allocation of resources should be decided by the market mechanism. We believe in planning and priorities. We believe it is essential to regenerate British manufacturing industry. We do not want to see the British nation unemployed and the few who are employed working in bingo palaces, betting shops and brothels or in some other trivial industry. There are some Tories who think that we should be a nation of tourists and let manufacturing industry go altogether.
  I make my own position clear. I am not at all impressed with this proposed legislation. Nor am I impressed with the shadow boxing and crocodile tears from the Conservative Benches. When workers forgo a wage claim or are prevented from having the full amount of a legitimate wage claim that they have negotiated or could negotiate, that money is gone for ever. The fact that shareholders may be denied dividends today means nothing because those dividends will be paid in future. Moodies' cards in the Library show company after company saying that dividends will be paid as soon as Government regulations allow.
  Alternatively, that money is converted into capital gains or the companies use free scrip issues and so on. One of the people who support the Conservative Party and the financial establishments that Conservative Members have been referring to explained on "The Money Programme" recently that a host of firms have found ways of getting round dividend control by free scrip issues, one free share for every five shares held, and by every conceivable gimmick.
  We are talking about a charade and a cosmetic. It may be that certain Conservative Members feel that they must shed their crocodile tears because of the interests they represent. I should like to see a firm say to workers that they deserve a 25 per cent. rise—and many workers do deserve such an increase—and that, because the company is allowed to give them only 5 per cent., the remaining 20 per cent. will be held and paid out when the Government permit. That is what companies will do for shareholders under this legislation.
  All this comes at a time when we have just relaxed capital gains tax and allowed
  1896
  people to have up to £5,000 a year capital gains free of tax and up to £10,000 a year at a lower level of the tax. If we stop companies paying out their dividends, share prices should go up—I cannot imagine that they will go down if companies are sitting on these vast sums—so shareholders will make capital gains and will pay a lower level of tax on them. All in all, they will do very nicely out of it.
  I do not believe that the trade unions will be taken in, but hon. Members may be surprised to know that I shall be voting for the Bill, even though I want to see real and effective controls on profits. I want to know what the Government are doing about the latest profit figures. For example, the profits of motor distributors are up by 34·6 per cent. and distillers' profits have increased by 31 per cent.
  Mr. Kenneth Lewis: What about the gas boards?
  Mr. Thomas: I was one of the hon. Members who were not in favour of the Government accepting the IMF's instruction that publicly owned industries should move rapidly to making profits. They had to increase their prices in order to reduce their borrowing requirements and every Conservative Member backed the Government in that move. Some of my hon. Friends were opposed to it.
  Mr. Kenneth Lewis: Is the hon. Gentleman really saying that the country would be in a marvellous state if every private and public industry in the country made a loss and we ran on losses?
  Mr. Thomas: I said no such thing. I said that a number of my hon. Friends protested at what was, in effect, an IMF instruction that publicly owned industries should reduce their borrowing requirements and increase prices in order to meet more of the cost of their borrowings. Those industries put up their prices and in some cases overstepped the mark. One consolation is that there is always a good chance that a publicly owned industry will be made to pay back excess profits, but when the chairman of a certain political party heads a company that robs a nationalised industry it is a different story.
  Mr. Deputy Speaker: Order. The hon. Gentleman has not named any particular

  1897
  personfi mut he is moving on very dangerous ground.
  Mr. Thomas: It may be that I am on rather dangerous ground in supporting the Bill because I am opposed to incomes policies, pay policies and the rest. We have had goodness knows how many such policies since the last war with three wise men, guiding lights, the Prices and Incomes Board and so on. We talk about free collective bargaining, but I wonder whether that has ever existed since the war.
  I do not believe that it is the job of a Labour Government to prevent trade union negotiators looking after, sustaining and improving the salaries and conditions of the people they represent. The Bill is purely a cosmetic which will mean that when workers are unable to get what they legitimately negotiate, part of their possible wage increase will be gone for ever, but that the dividends that are held back from shareholders will be converted to capital gains, will be given back through free scrip issues or kept in the accounts to be paid later.
  There is no mechanism in a capitalist society that can transfer a possible wage increase out of profits that is given up by one group of workers to low-paid workers in another group. If incomes policies tell us anything, it is that low-paid workers come out worst of all.
  8.18 p.m.
  Mr. Hugh Dykes: I add my voice to those of hon. Members who have registered robust protests at this absurd legislation. The Goverment know that it is absurd and, at least in that respect, I agree wholeheartedly with what was said by the hon. Member for Bristol, North-West (Mr. Thomas). I also agree with the hon. Gentleman's espousal of the virtues of the free market mechanism—free collective bargaining and free dividends, though he was more hesitant about the latter. Presumably he wants similar conditions to be applied to bargaining and to dividends. He objected violently to the interference by the Government in all the instruments for measuring various sorts of rewards.
  I share that view with an important reservation. Recent political history in this country and the feelings of probably
  1898
  a majority of hon. Members—I say that with some hesitation because it would be arrogant even to try to count heads—indicate that the virtuous reality of free collective bargaining, in the light of the raging inflation that we have experienced in recent years, must inevitably be diminished by some sort of Government surveillance or monitoring—I do not like to use the word "control"—or some Government involvement in these processes.
  Mr. Budgen: No.
  Mr. Dykes: If my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) will remain calm for a moment, I shall explain why this is necessary. Most hon. Members on this side of the House, and perhaps even my hon. Friend, agree with what was said by my right hon. Friend the Member for Chipping Barnett (Mr. Maudling), that, as a result of the existence of monopoly union power, which has not benefited trade union members, even though some of them unwisely thought that it would, the prinples of free collective bargaining are not maintained and we get inflationary wage increases beyond the capacity of production and the marginal product of labour.
  However, as my right hon. Friend said, that does not apply to dividends, which are a different instrument for measurement. I am the first to concede to some of those below the Gangway opposite and to, for example, the hon. Member for Newton (Mr. Evans), that it is all very well for people to say that, in today's political climate, it is hard luck on the millions of wage earners, but dividends just happen to be different, and that we are sorry but we must apply freer conditions to dividends than to wages. That would be unrealistic. I do not think that any of my hon. Friends would suggest such a thing.
  However, we are entitled violently to object in the strongest condemnatory terms that my hon. Friend the Member for Aylesbury (Mr. Raison) used so successfully when an exhausted Government produce a tailend piece of legislation that has no proper rationality at the end of an exhausting Session. There is no real enthusiasm for the Bill in the Cabinet. It is based on a series of mythical arguments that have no foundation in objective fact and reality.

  1899
  It is extraordinary to look back over several months to the time when the newspapers first contained speculative articles and comments about what would happen when dividend controls ended on 31st July. The legislation that was introduced last year and the amendments that were made to the Price Commission Act 1977 gave us warning that on 31st July the controls would lapse. It was clear to any close observers of the political scene, be they journalists, politicians or interested members of the public, that a majority of the Government, and probably the whole Cabinet, in so far as its members thought about the issue, did not want a continuation of the controls.
  Until the middle of last week, when this absurd Bill was promulgated by an increasingly ridiculous and incompetent Government, the same position applied. There was no pressure in successive union conferences for continuing controls. No comments were made publicly by trade union leaders or members of unions at any level—locally, regionally or nationally—that the controls were vital and should continue. If Labour Members were to say "Of course not, because the Government were beginning their pay talks and everything depended on the talks", if the continuance of the controls had been such a burning requirement for the average trade unionist surely one or two utterances would have been made. In fact, nothing was said.
  When the official conversations took place last week and the week before between the TUC and the Government, in so far as we can legitimately judge—of course, by definition no one would be privy to private and confidential discussions—there was no insistence by TUC spokesmen that dividend controls should continue. Until the eleventh hour when meetings took place with the CBI—I can only guess what was said at the meetings—I am sure that nothing was said about continuing the controls.
  I should be fascinated to know what if anything was said about the controls. It is a pity that the Minister of State is in conversation with his right hon. Friend the Financial Secretary and is not listening to my words of wisdom. If he would listen for only a moment, I should ask him to tell the House whether in conversation with the CBI—I do not wish him to breach confidentialities—reference
  1900
  to the subject was made by the CBI or whether there was any conversation on it.
  If the Government had said to the CBI—here, inevitably, I speculate—that the policy previously seen in Britain of dividend control by exhortation, the practical effects of the combination of raging inflation on companies' returns and the natural and perpetual desire of company directors to increase or retain their retentions and not to pay out as much in dividends as some Labour Members suggest would continue, the old policy of voluntary restraint on dividends would have been enough. That would have satisfied anybody officially representing the CBI.
  Mr. Budgen: No.
  Mr. Dykes: My hon. Friend may shout "No". He has different views. Some of my hon. Friends wish to have a totally free regime, but that is now impractical in the context of modern British politics and the need to win the battle against an excessive rate of inflation.
  Ministers on the Treasury Bench know that the old policy of voluntary restraint would have been enough. They know that the Bill is not necessary. They know that it is wholly cosmetic and erects yet again a tedious, irritating apparatus of discretionary bureaucratic interference as a result of the Treasury guidance note that is couched in the usual absurd language of the Treasury. It is seeking to intervene to erect new criteria.
  Apparently the maintenance of dividend cover is to be the new criterion. That will apply for at least a year if the Government continue in office. That structure is not necessary. If the Bill is not given a Second Reading—I hope that the House will take that course—there would probably be no net effect on dividends in future, except that there is at least a risk that some companies would be adversely controlled by the onerous effects of legislation from increasing their dividends as a result of past retentions. I concede the argument of some Labour hon. Members on past accumulations. It should be acknowledged generally that that is an important difference. However, that in no way compares with the overwhelming need to have a rational system of wage restraint.

  1901
  There is a heavy involvement by ordinary working men and women in the large pension funds and institutions where collective investment increasingly takes place. The old individual investor is much less of a feature in the general investment scene. The members of the pension funds and insurance policy holders, in so far as they are given the opportunity to work out the precise effect of these ludicrous controls proposed in the Bill, will be dismayed to ascertain that there might be, as Opposition Members have said, adverse effects if such controls are to continue for a long time. I hope that that will not eventuate when the House votes on whether to give the Bill a Second Reading.
  It is time that the Government were more honest with the House and refrained from making spurious explanations that are wholly unconvincing about the need to introduce Bills of this sort without any proper justification. The resentment of the House will be shown tonight. I appeal to the Scottish National Party seriously to consider its attitude to an unjustified and thinly based Bill.
  8.26 p.m.
  Mr. Ernest G. Perry: I have listened carefully to what has been said while I have been in the Chamber. The Bill is merely a continuation of a measure enacted by the Conservative Government in 1973. All that we are doing is continuing that legislation. It was enacted by the Conservative Government because of the inherent dangers that they saw in our economic system.
  The right hon. Member for Chipping Barnet (Mr. Maudling) and the hon. Member for Worthing (Mr. Higgins) were both Ministers with responsibility for that legislation. They were members of the Government that introduced the 1973 legislation. I give them credit for what they did at that time. They appreciated the dangers. They knew that corrective action was necessary after the Barber Budget and the release of millions of pounds that they hoped would go into industrial development but went instead into property development. They tried to correct not the mistakes but the tendencies of that time. I give them credit for the 1973 measure. I give credit to the right hon. Gentleman and the hon
  1902
  Gentleman for having the foresight to understand what was happening. With fellow Members of the Cabinet, they were responsible for introducing the original legislation. Today we are continuing it.
  I believe that the need for dividend control has gone—[HON. MEMBERS: "Oh."] Let me finish. If I thought that dividend control would lead to the consumer, the shareholder and the worker getting a more equitable share, I would vote against the Government tonight. But, as we have a pay policy, I believe that it is essential at the same time to have some restriction on the wholesale distribution of dividends. Therefore, it is essential that the Bill be carried.
  Mr. Terence Higgins: The hon. Gentleman must surely accept that, although it may be justifiable to introduce such a measure as this on a temporary basis, the trouble is that the longer it goes on the worse the distortions become. The hon. Gentleman said that it would be more equitable if it were kept on. During the enormous wages explosion under this Government between 1974 and 1975, which had a terrible effect on many people relying on dividends, a control of dividends remained. Taking the whole period, the overall effect has been totally unfair on retired people who rely on dividends.
  Mr. Perry: I could not agree more with what the hon. Gentleman has said. But if we give way on one issue, we open the floodgates on another. If this country is to survive industrially and economically in competition with countries such as Japan, we must exercise strict supervision over what is going on.
  I make no bones about commending the legislation that was passed in 1973 by the Conservative Government. The continuation of it today is necessary. I shall be frank. We still have not solved the economic difficulties in which we find ourselves. Let us not kid ourselves. It does not matter whether the Opposition come to power in the next Parliament. Of course, that is very unlikely. But the mere fact of a change of Government will not solve our problems. We shall still be faced with them.
  In my opinion, if we are to exercise restraint in the amount that we take out of production in wages, we must do the

  1903
  same with dividends. If the Opposition were in Government, they would not be able to solve these problems by voting against the Bill. I think that the Bill is necessary if this country is to get on an even keel. If we want some kind of income control, it has to be at the expense not only of those working at the bench, in the office and elsewhere, but of those who draw dividends.
  I appreciate the difficulties of firms with large pension schemes. I realise that they want to improve the pensions that they pay to their past employees. I speak from self-interest, because I am one of those people. I also realise that, if we cast aside all forms of restraint, we shall suffer in the long run.
  I appeal to all hon. Members to realise that we cannot have a free-for-all for everybody for wages or for dividends. I ask the Opposition to realise that and to support the Government tonight.
  8.33 p.m.
  Mr. Nick Budgen: Not for the first time, I find myself in substantial agreement with the hon. Member for Bristol, North-West (Mr. Thomas), for he made no bones about how he felt. He regards the Bill as a nonsense. He might concede that it is a necessary nonsense, but he knows it to be a nonsense, and a nonsense that conflicts with his deeply felt principles. The hon. Gentleman is a free marketeer. He does not believe in any restrictions upon wages. He understands that, by saying that he does not believe in any restrictions upon wages, it would be completely illogical to say that there should be any restrictions upon dividends.
  I do not say that this is a necessary nonsense. I say that this is an unfair, wholly unnecessary nonsense and that the sooner we vote the Bill down the better.
  I do not go along with the hon. Member for Bristol, North-West in believing that the Government have any sincere belief in the Bill. If they had any sincere belief in it, they would have introduced it earlier. If the Chief Secretary had any sincere belief in the Bill, he would have introduced it in a slightly more serious manner. He would not have introduced it with that levity, that sense of embarrassment which all of us noted in his manner, because he realised perfectly well that the Bill is economic non-
  1904
  sense and is being introduced merely as a political sop.
  But it is worse than that, because some compliments, even at this stage before a General Election, can be handed to the present Administration, for it can be said, and said honestly, that after the end of 1976 they got a tight control of the money supply. It is true, as my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) said, that for about six months up to 8th June of this year the money supply again got out of control. For a period, however—and a significant period—the present Administration got a firm grip on the money supply, and that is what has brought down the rate of inflation. The Chief Secretary knows that to be so.
  The irony is that members of the present Administration do not merely go to the country now saying "We are the people who can co-operate with the TUC. Vote for us because a vote for the Tories would be a vote for conflict and a vote for class struggle." They go better than that. They do not merely say that they have the co-operation of organised labour. The really dishonest thing is that they have in their back pocket this alternative philosophy in which they do not believe, because when the rate of inflation goes up they can then blame organised labour for it, whereas they are, and know themselves to be, a monetarist Government, believing most of all in control of the money supply and knowing perfectly well that when the rate of inflation goes up next year it will be the fault not of organised labour but of themselves.
  My position in this debate is a clear and easy one. I am opposed to statutory or voluntary controls of wages. I am also opposed to statutory or voluntary controls of dividends or prices. Here, I think, I ought to deal with the good point which was made by my hon. Friend the Member for Aylesbury (Mr. Raison). There is one thing that can be said for the Bill, and that is that it is a Bill. At least one can see that when rights are being taken away from those who own shares the Government are bringing forward legislation, albeit very late, albeit that it is being rushed through the House, albeit that it contains some fairly despicable discretionary elements. But at least it is a Bill. It is at least a nod in the direction of the rule of law and parliamentary

  1905
  government, which is much to be preferred to the blackmail and the hypocrisy of so-called voluntary restraint.
  Our plea from this side of the House is, as always, a national one. We do not want dividends to be controlled, not because we want to support, as the hon. Member for Bristol, North-West was saying, the brothel owner, the bookie or the man who runs a gaming saloon—
  Mr. Fairbairn: A bingo hall.
  Mr. Budgen: I am sorry—a bingo hall, as my hon. and learned Friend says. It is not for that that we oppose the Bill. It is because we believe that control of dividends leads to unemployment.
  I turn to the question of the people in my constituency and the West Midlands who are unemployed. The unemployed are mostly school leavers, people who are black—and female. The Sex Discrimination Act has had an unfortunate effect upon female employment. Those people have little hope of being employed by the former big employers in the West Midlands—such as GKN, Dunlop and Goodyear. Goodyear has recently laid people off. When one talks to any of the big employers, one finds out clearly that in the next 10 years they offer little hope of a substantial amount more employment.
  Those companies say that if people are to find employment they must look to the smaller businesses. They are clear about that. If there were job opportunities, dividend control would not have an adverse effect upon big companies. That is because, contrary to what is said against the Tory Party, many managers and enterpreneurs are quite keen on dividend control. If they have a fat company with big profits, dividend control enables those profits to be ploughed back into the company without the disagreeable business of having to compete for that money in the market place.
  Trading conditions are such that big companies do not expect to be able to offer jobs, particularly to the weakest members of society, in the next decade. Where will my young constituents, my young black and female constituents, find jobs? Where will those who are termed "poor achievers" at school find jobs?
  1906
  They will find jobs in the small and medium-sized companies.
  One of the best and most revealing remarks in the debate was made by the hon. Member for Stockport, South (Mr. Orbach). In what, unhappily, might be his last speech in this Chamber, he said that his wife had encouraged him to invest in shares. He said that he wished he had not accepted his wife's encouragement and invested. How right he was.
  Why did the hon. Member's wife encourage him to invest in shares? She did so because she remembered the days when she was affected by advice from other people and when investing in shares was a good thing in the sense that one received a fair return. The reality of the hon. Member's position is that he should have done what the Chancellor of the Exchequer has done. I do not make a snide joks about the Chancellor of the Exchequer's house, which, I think, he bought for £70,000.
  Mr. Ernest G. Perry: But the hon. Member is making a snide remark.
  Mr. Budgen: No, I am not. It was a rational decision in the present tax climate and in the present climate of dividend control. It was a decision taken by an intelligent man.
  Mr. Perry: The hon. Member should be ashamed of himself.
  Mr. Budgen: I should not be ashamed of myself.
  The Chancellor does not often live in that large and splendid house. He has a grown-up family. He has a comfortable residence in London. No doubt he has a residence in his constituency, which is not in Sussex. He buys a house because he knows that he will get tax relief upon the borrowings against the house. He knows that the capital gain that he will make from the house will be tax-free
  On the other hand, if he had a tiny cottage in Sussex and £50,000 available for investment in a small business in my constituency, he would have to pay capital gains tax on the shares if he sold them, and he knows that there is dividend control on the return from the shares. As an intelligent man who understands the system in which we all operate, he realises that it is more sensible to buy the big house in Sussex. That is the sort of

  1907
  rational decision that many people are now making. If the hon. Member for Stockport, South had taken a similar decision, he would undoubtedly have earned more money than by accepting his wife's advice to invest in shares.
  We want to encourage people with spare capital to put it into small firms. It is only by doing that in their self-interest that we shall provide work for constituents such as mine. When the small firm competes for capital, it is at a disadvantage. It has been said rightly that the big firms are not caught by dividend control. They can make arrangements such as those which enabled GEC to avoid the effect of dividend control and make a cash distribution to its shareholders. That, however, is an expensive manoeuvre. It demands the advice of merchant bankers and company lawyers, and it demands careful negotiation with the Treasury. A small firm in Wolverhampton, which might be employing 20 or 30 people, does not have the necessary money or expertise available to it to do that.
  Much has been made of the large investments by pension funds. Two-thirds of equities are now held by such funds. However, investment by those funds is in no real sense voluntary saving or voluntary investment. The pension funds, in effect, take the money from wage earners. The wage earner has to make that sort of contribution—
  Mr. Perry: He does not have to. He is willing to do so.
  Mr. Budgen: In so far as he is—
  Mr. Perry: To assert that the money is taken away compulsorily from wage and salary earners is grossly unfair. Most of the people who work for firms of that nature, as I did at one time, are only too willing to have part of their wages taken to make provision for their old age. The pension system in this country is purely voluntary and is endorsed by millions of people.
  Mr. Budgen: I am glad that that is so, and if my remark offends the hon. Gentleman I shall try to rephrase it. But for the tax advantages, I suspect that those persons would not make those contributions—
  Mr. Perry: That is not true.
  Mr. Budgen: I suspect, therefore, that they could be described as involuntary investment. If they were voluntary investment, those persons would be making savings themselves out of their pay packets and selecting their own investments.
  The small company therefore relies upon private investors, because the big pension fund cannot take an interest in a small company employing, say, 20 to 50 people. It relies on the second cousin once removed of the managing director saying "I will lob a couple of thousand in." That is the way in which we shall provide work. We must ensure that investment is made as a preliminary to providing work for those who are unemployed in places such as my constituency.
  The alternative to that is that the small employer has to go either to the Government or to the banks. Everyone knows that borrowing money from the banks is expensive and that the cost is subject to the vast variations in interest rates that we have seen in recent years. Borrowing money from the Government—which the hon. Member for Battersea, South (Mr. Perry) might regard as the best alternative—leads only to an increase in Government expenditure, an increase in the public sector borrowing requirement and, in many instances, thereby not to proper borrowing but to an increase in inflation.
  Worse than that, though, it increases the power of the State. Worse than that, it increases the patronage society and the quango society under which we are now labouring so grievously.
  8.50 p.m.
  Mr. Nicholas Fairbairn: It has been apparent to me for some time that the language of politics has become abominably squinted. The Labour Party still tries to pretend that it stands for the weak and the poor, and that the Opposition stand for the rich and the privileged. On the one side, hard-working men, many of them unemployed, get their pittance in a wage packet. On this side, dukes and marquesses get their dividends.
  What interests me about this debate and about all the speeches I have heard is the complete unconcern of the Labour Party for the poor. It is not whether a person is poor or rich that Labour Members

  1909
  mind about. What they mind about is the way in which a person gets his money. If a person is a school teacher, a nurse, a matron or a garage mechanic, and that person pays tax on the money earned and is sufficiently thrifty and frugal to save some of it and to make an income out of it, and pay tax on that income again, that is wrong, because "dividend" is a class word.
  The fact that one's whole dividend is £300 a year matters not. However, if one makes £12,000 a year, first by earning it in Rosyth dockyard by day and then moonlighting in the evening and one happens to be able to call oneself a working man, one is a person who is earning properly. The saver is the bad man, because the word "dividend" is attached to that, and that is a class word, which is wrong.
  If one takes away the last syllable of the word and calls it "divi", then it becomes a good thing—because one gets "divis" at the Co-op. But is a bad thing if one gets a dividend from a company. That is the trivial nature of this proposed legislation.
  There are very few things that one can do with money. I suppose that if one is a masochist, one can eat it, or one can tear it up or throw it away. If one is a psychopathic guilt fanatic, one can give it away and reclaim one's soul. But most people, even Socialists, can do only three things with money: they can spend it; they can spend it on things that they eat, on things that they burn, on things that they swallow or on things that they keep; or they can invest it: they can have a bit over and they can invest it.
  The motivation of all human beings, even Socialists, even those who are inspired by the magnificence of Webb, Lenin and all those other philanthropists, is that they actually like to use money well in their own interests, or, if it suits their souls, in the interests of other people. Therefore, what is so bad about actually investing money and getting a little back from that?
  No doubt the Labour Party likes to imagine that those who live in Kinross and West Perthshire are all very rich people. In fact, they are all very poor people. For very many of them, the
  1910
  only income they have on retirement is what they have saved—as the district nurse, or the post mistress. They are the people who have done the awful thing. They have actually been evil enough to indulge in the practice of getting their incomes, twice taxed, by dividend.
  It is that awful thing which inspires the Government's philosophy and I find it offensive. They say "We shall be nasty to 23 million wage earners by telling them that they will get only 5 per cent.—in fact we know that they will get 15 per cent.—so to show that that is fair we shall be thoroughly nasty to many much poorer people whom we can put in the cage of those who get dividends." That is a mean political philosophy.
  If this godforsaken Bill gets a Second Reading, it will be because of the Scottish National Party, so I am glad to see the attention that its Members are paying to this debate. What is the greatest complaint that that party, and its newsletter, The Scotsman, sub-edited by Lenin, have been making over the last few weeks? The complaint is that people who do not have the tartan royalty and respectability of being Scottish voters are actually buying land in Scotland. The Holy Land is being in some way defiled because a Dutchman or an Arab or a pension fund buys land. Why do they buy land? Because there is no point in investing in industries on the Clyde. If the SNP wants Scotland to be bought by Dutchmen and by English—as they would put it—railway pension funds, they will, by supporting this Bill tonight, make absolutely sure that that is what happens.
  The matter is simple. This Bill is a piece of political nastiness. I find it offensive. It is a way of saying, "We are going to be nasty to wage earners and if you are going to hit one person it is only fair to hit someone else he dislikes, or is supposed to dislike." The fact that the first person may be well off is irrelevant: it is dividends that are wrong.
  I got into a taxi this week with one of these awful capitalist beasts. He gave the taxi driver a lop piece and said, "There is a fiver for you cabby." The taxi driver said, "That is a 10p piece, sir," The other man said, "But I had to earn £5 to give you that 10p piece." He was an evil dividend earner, paying 98 per cent. And what was his trade? He himself was an ordinary working taxi driver.
  8.58 p.m.
  Mr. Nigel Lawson: As my hon. Friend the Member for Aylesbury (Mr. Raison) said, the Bill has been torn to shreds already by the speeches of my hon. Friends, not least that of my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbaim), and it has enjoyed precious little support from the Labour Benches.
  I am sorry that the Chief Secretary is not in the Chamber at the moment. Seldom can any major Bill—this is a major Bill, despite its brevity, because of what it represents—have been so inadequately and irresponsibly introduced as this one was by the right hon. Gentleman.
  The right hon. Gentleman began by quoting, somewhat selectively, from the debates in 1972 and 1973, when the last Conservative Government introduced statutory controls on prices, pay and dividends. I was not a Member of the House at that time, but I think that many Labour Members will concede that I have consistently and publicly, and for the most practical of reasons, opposed the regimentation of pay, prices and dividends, certainly since 1961 and including 1961. That is a great deal more than can he said for the Chief Secretary, who voted for statutory controls in 1966 and against them in 1972 and now wants statutory controls on dividends coupled with a wholly different regime for wages. So let us have no more charges of inconsistency from that source.
  My right hon. Friend the Member for Chipping Barnet (Mr. Maudling) was right to ask the Financial Secretary his three questions about this statutory discrimination against dividend income, and I trust that he will receive answers when the Financial Secretary replies.
  First, we should ask ourselves, as a number of my hon. Friends have rightly done, how it is that the Bill is suddenly thrust upon us right at the end of the Session—indeed, the last Session of this Parliament—with all stages being taken in a single day and night. What sudden crisis has emerged to require this unusual treatment? It is not as though there has been an IRA bombing attack which made necessary the passage of some antiterrorist legislation. It is not as though the Prime Minister had suddenly taken it upon himself once again to remove the
  1912
  legal rights of United Kingdom passport holders. It has been known for a year that statutory dividend control would lapse at the end of this month unless new legislation were introduced.
  There has been no shortage of parliamentary time to take such a Bill through in the normal way. I asked the admirable staff of our Library to let me know the full amount of Government legislation in the month of June, the obvious month in which to take such a Bill. There were the Second Readings of just two Bills: the Employment (Continental Shelf) Bill, which chiefly extended the Sex Discrimination Act to United Kingdom employees working on the Frigg gas field, and the Parliamentary Pensions Bill, which, of course, we all understand to be of particular interest to Labour Members contemplating the forthcoming General Election. That was all, save for a few remaining stages—I must mention that in order to be fair to the Leader of the House, who is here with us. We had the remaining stages of the Nuclear Safeguards and Electricity (Finance) Bill, the Co-operative Development Agency Bill, the Homes Insulation Bill, the Iron and Steel (Amendment) Bill, the House of Commons (Administration) Bill and the Community Service by Offenders (Scotland) Bill.
  That was the massive total of Government legislation during June. The truth is that the Treasury had no intention whatever of renewing control. Indeed, what the Chief Secretary said today was the most arrant hypocrisy and humbug. He did not believe a word of it himself, as his hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) has already pointed out.
  The Treasury gave evidence—the Chief Secretary is a Treasury Minister for the time being—to the Wilson committee in June 1977 and said:
  "There can be little doubt that dividend control has tended to distort the equity market, making it less attractive particularly to private investors, and has thus to some extent increased the cost of raising new capital."
  The imminent end of statutory dividend control was ushered in more than a year ago with the passage of the celebrated amendment—I am glad to see her here—to the Price Commission Bill moved by the hon. Lady the Member for Thurrock (Dr. McDonald), who was

  1913
  rewarded—or, perhaps I should say, punished—for her success by being appointed PPS to the Chief Secretary shortly thereafter.
  On that occasion, when the amendment was moved in Committee, the Secretary of State for Prices and Consumer Protection said:
  "If my hon. Friend's amendment is carried, not only will the pay sanctions, so-called, not apply after the summer of next year"—
  that is, this year—
  "but nor will our powers to make a Price Code or to control dividends. I am prepared for that to happen, because I believe that it will produce a certain consistency with what the Bill seeks to achieve."—[Official Report, Standing Committee B, 24th May 1977; c. 559.]
  Subsequently, on Report, his Minister of State said, precisely one year ago today:
  "from the end of the year beginning on 1st August 1977, there will be no further dividend control."—[Official Report, 27th July 1977; Vol. 936, c. 807.]
  That was a categorical assurance. The Lord President, who is present now, said as recently as 22nd June:
  "With regard to dividend control … we do not believe that it will be necessary to have fresh legislation on the matter." —[Official Report, 22nd June 1978; Vol. 952, c. 712.]
  Mr. Norman Tebbit: What has changed?
  Mr. Lawson: That was the position until as recently as a month ago. There was no question during all that time of statutory dividend control being necessary in the battle against inflation—quite the contrary—so, as my hon. Friend asks very pertinently, as ever, what has changed?
  I shall tell my hon. Friend. The Top Salaries Review Body report turned up at the end of last month recommending substantial increases in the pay of nationalised industry chairmen and various others. The Cabinet accepted it, though not without an acrimonious row, not merely in the Parliamentary Labour Party but within the Cabinet, led by the Leader of the House, who even went so far as to threaten his resignation. The Prime Minister was obliged to throw him a sop to keep him quiet. That sop was the renewal, despite all the Treasury objections, of dividend control.
  1914
  The right hon. Gentleman was happy to accept that bone that he was thrown, with all the Hampstead intellectual's malign combination of contempt for the working class and guilt at not being a member of it. That is why the House is suddenly being asked to rush the Bill through tonight. Everything the Chief Secretary said about its being a necessary part of the battle against inflation is so much claptrap and balderdash. What is more, he knows it perfectly well. After all, he argued against it in Cabinet himself.
  I accused the Leader of the House of a basic contempt for the working class. I did so for a reason. Of course, trade unionists are far too intelligent to believe that there is any benefit whatever for them in statutory dividend control. No trade unionist cares two hoots about it and, to do them justice, no trade union leaders—who are not always representative of their members, but are on this occasion—have been campaigning for it up and down the country, as my hon. Friend the Member for Harrow, East (Mr. Dykes) pointed out.
  The Chief Secretary refused to answer a question I put to him when he opened the debate as to precisely how much dividends have gone up compared with wages over the relevant period. I shall tell him the answer as he did give it. Since 1972, when control of dividends was first imposed, despite the dismal record of the present Government, wages have risen slightly more than prices, but dividends have fallen over that period by as much as 25 per cent. in real terms. That does not take into account the very sharp fall that there has also been in the real capital value of equities. So much for the pressing need advanced by the Chief Secretary to prevent dividends rising faster than wages.
  The Chief Secretary also said that the Bill was necessary to ensure that those receiving dividends bore their fair share of the sacrifice—that was his word—made by wage earners as a result of the Government's pay policy. I somewhat startled him at that point by suggesting that he was talking rubbish.
  The right hon. Gentleman should have a word with his right hon. Friend the Chancellor of the Exchequer, because the

  1915
  Chancellor said in the economic debate only the day before yesterday:
  "The most important thing"—
  not just one thing, but the most important—
  "is that these difficult years of pay policy have not involved a sacrifice for the men and women who get the pay."—[Official Report, 25th July 1978; Vol. 954, c. 1502.]
  Perhaps the Chancellor and the Chief Secretary should get together some time and sort out this little problem.
  Who suffers from dividend limitation? It is not the rich, because with present rates of tax, they choose not to have dividend income. It does not pay them to have it. It is ordinary people who suffer. My hon. Friend the Member for Horncastle (Mr. Tapsell) quoted very tellingly from the second volume of the Diamond report, the report of the Royal Commission on the distribution of income and wealth, the findings of which have never been challenged in the three years that have elapsed since its publication, despite the ill-informed taunts of some Labour Members when he was quoting from it.
  It is worth reminding the House of what the Diamond Commission found. It found that nearly half of all recipients of dividends and taxed interest had total statutory incomes of less than £2,000 in that fiscal year, 1972–73, and that the majority of dividend and interest recipients—that is, individual recipients, who are roughly one-third of the total—were pensioners or, as the report calls them, aged persons. The report went on:
  "Pensioners indeed formed a substantial proportion of dividend and taxed interest recipients at all income levels."
  Then we come to the institutions, in particular the pension funds and the insurance companies, which alone hold well over one-third of equity shares. The Diamond Commission found that more than half of all employed people benefit from contractual savings through pension funds and/or life assurance, and of those currently drawing occupational pensions about four-fifths of occupational pensioner taxpayers had total taxable incomes in 1972–73 below £2,000.
  Indeed, Lord Diamond and his colleagues even discovered—and I quote this for the benefit particularly of the hon.
  1916
  Member for Loughborough (Mr. Cronin)—that
  "up to 200,000 retirement pensioner tax units"
  —I cannot help the language—
  "in receipt of income from dividends and taxed interest might have had total incomes which were roughly comparable with those of retirement pensioners with supplementary benefit."
  That was another finding of the report.
  Of course, the question of who really does receive dividends was conceded by the Chancellor of the Exchequer himself in one of our earlier July debates—they seem to have become something of an annual ritual. He said:
  "relaxation in dividend control will also help many retired people and assist the life insurance and pension funds which look after the savings of millions of people of modest means".— [Official Report, 22nd July 1974; Vol. 877, c. 1053.]
  Let us be quite clear as to who is being attacked by this Bill. It is the elderly and ordinary people, many of them with below-average incomes. But it is not merely the retired workers who are being clobbered—and this is the only argument produced in the debate in support of the Bill—in order to persuade other workers not yet retired to moderate their wage claims. As my hon. Friend the Member for Rutland and Stamford (Mr. Lewis) pointed out, the Bill is also penalising workers who decide to take advantage of the employee share schemes that the Government introduced in this year's Finance Bill, which has only just completed its very long passage through Parliament.
  What could be more ludicrous, what could be more bizarre or ridiculous, than introducing in the Finance Bill a measure designed to benefit workers by persuading them to take up shares in the company for which they work and then introducing this Bill in order to reduce the value of their shares? But that is what it will do, and it can do nothing else.
  The continuation of dividend control does still more damage than that. My hon. Friend the Member for Croydon, Central (Mr. Moore), in an excellent speech, and many others of my hon. Friends have indisputably pointed this fact out.
  I have already quoted, and I do not wish to quote again, the Treasury's evidence to the Wilson committee. The Chief Secretary likes to boast about how

  1917
  much equity capital has been raised by industry during the period that dividend control has existed. But it is worth putting these figures into perspective. In particular, it is worth looking at what has happened during the four years that the Government have been in office.
  During that period, about £4 billion of new equity capital has been raised by industry. That may seem on its own quite a lot, but at the same time very nearly £20 billion of gilt edged has been sold to finance the Government borrowing requirement. The capitalist system really cannot survive if it is being crowded out by the Government in this way, with the Government borrowing at rates of interest which industry cannot possibly match. Nor, indeed, can the system work if the successful companies are unable, by raising their dividends, to attract on favourable terms the capital they need for expansion, and of which the less successful cannot make good use.
  Mr. Cronin: The hon. Gentleman is making a very interesting speech, but he ought to bear in mind what the Financial Times said in its leading article this morning—namely, that new issues are no more than 6.5 per cent. of the total capital requirements of British industry.
  Mr. Lawson: The Financial Times in its leader today demolished the Bill utterly and totally, and I am surprised that the hon. Member for Loughborough should try to draw comfort from the words to which he referred. He makes a mistake which is characteristic of nearly all supporters of the Labour Party, and that is to look at things in the aggregate.
  It is not with industry as a whole but with individual companies that we are concerned. This legislation may not bear very hard on some companies but it does on others, and it bears hardest on those which have the greatest need for new capital and the greatest potentiality for expansion. That is the problem. They are the ones that need new capital.
  Mr. Percy Grieve: Might not the Government with advantage take a leaf out of the book of the French Government, who are giving deliberate, active, fiscal encouragement to Investment in industry by giving tax rebates to those
  1918
  with modest incomes who invest in ordinary shares in industrial companies?
  Mr. Lawson: I agree with my hon. and learned Friend that there are many interesting things that the French Government are now doing on the economic front, in particular in worker participation and in getting rid of a range of controls which have hamstrung the French economy for a very long time. This experiment that Monsieur Barre is conducting in France is something from which I hope Labour Members will learn a great deal, although that may be too much to expect. But at any rate, as I was arguing, that is the effect that this system of dividend limitation has on the go-ahead, enterprising companies. It makes it impossible for the capitalist system, the free enterprise system, to work as this control is prolonged further and further.
  Indeed, the prolongation is more than the Bill makes out, because the Chief Secretary has put the nation on notice that, although the Bill may be technically of only one year's duration, as long as there is a Labour Government there will always be statutory dividend control. If the Chief Secretary wishes to deny that, I offer him the opportunity to do so now. I note that he does not. If he wishes to deny it, I shall gladly give way to the Chief Secretary. He is very shy and very quiet all of a sudden. He has turned very silent. The country will draw its own conclusion from that, and business men who believe that they can have incomes policies without prices policies and dividends policies as well will be sadder and wiser men this evening.
  Of course the Prime Minister, we all understand, desperately wants just now to cobble together a deal with the trade union bosses—not, of course, because it has any relevance whatever to the fight against inflation or, indeed, to economic policy at all, but simply because he believes that something that can be presented as a deal is an electoral plus in itself. Unfortunately for him, the TUC met yesterday and made it absolutely clear that it will not play ball with the 5 per cent. norm. There is no deal over that figure.
  According to today's papers, a rather chastened Prime Minister hastily explained that the Government certainly

  1919
  did not regard the 5 per cent. as an objective. He is reported as having said that the objective was not 5 per cent. but keeping inflation to single figures. That is certainly an objective which would be universally shared. The argument is about whether the Government's policies will achieve that. Not only will they not do so, but the Prime Minister does not even have the satisfaction of the endorsement by the TUC of those policies.
  Despite the promise of more nationalisation through the NEB, despite the promise of the introduction of a wealth tax more severe in real terms than that proposed in 1974, despite the promise of the abolition of the House of Lords, which Labour Members seem to think is so popular—although, I believe, quite the reverse—and indeed despite this Bill, the Government have not been able to sell this policy to the TUC and get the deal which they sought purely for electoral purposes.
  This debate has shown the Labour Party at its divisive worst. It has shown its unprincipled exploitation of envy and it has demonstrated its persistent attempts to rekindle the class war.
  Mr. R. B. Cant: I hesitate to halt the hon. Gentleman in full flow, but is not the real truth about this problem that the Bill is necessary because we have now reached a moment of time—this is clear from all the private investors' circulars this week—when we are entering the second leg of a major bull market on the Stock Exchange which will take the FT index to 800? [Laughter.] I am merely quoting one of the most influential investors' letters of yesterday. In these circumstances, it would be quite right for the Chancellor to introduce a measure of restraint on this casino down the road without causing anyone any social injustice.
  Mr. Lawson: The hon.. Gentleman is far too intelligent to believe that. I should be interested to know how much of his own personal savings he invested in the stock market this morning as a result of reading that circular.
  The questions we have to put to the Government are these. Do they really want a mixed economy? Evidently not, on the basis of the Bill. Do they want a
  1920
  better understanding of the facts of economic life? Evidently not, on the basis of the Bill. For companies, this is a Bill which penalises all, but particularly the most successful, on which our future prosperity so greatly depends. Among individuals, the Bill penalises in particular the poor and the elderly. I ask the House to reject it.
  9.24 p.m.
  The Financial Secretary to the Treasury (Mr. Robert Sheldon): We heard, in the earlier part of the debate, a number of literary quotations from among others, the right hon. Member for Chipping Barnet (Mr. Maudling) and the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). I am tempted to present my offering—
  Mr. Speaker: Order. I should tell the House that when the time comes for a Division, if the House wishes to divide, I shall go by the clock opposite, as we did before we had the digital clocks.
  Mr. Sheldon: I was mentioning the literary quotations we have heard and saying that I was tempted to present my own offering. However, because I am a Benthamite, I believe that I can give greater pleasure to more people when I read our great literature than when I declaim it. On this occasion I will opt out.
  We have had in this long debate a number of contributions that have dealt with prices and incomes policies as well as the advantages and disadvantages of dividend controls. We have had dividend controls in one form or another for a long time.
  At the beginning of the last war dividend controls were considered by the Chamberlain Government. A Bill was debated in Parliament but it was withdrawn in favour of an excess profits tax, introduced by a coalition Government in June 1940. The reason for such a tax was that at a time when living standards were declining sharply, a policy of equity and fairness was absolutely necessary. It would have been quite wrong for some people to do well at a time of difficulty for all.
  Between 1947 and 1951 there were further voluntary dividend controls and in 1961, under a Conservative Government, there was a voluntary pause on dividends

  1921
  for 12 to 18 months. There were three further periods of dividend restraint during the term of office of the 1964–70 Labour Government. From November 1972 to March 1973 there was a five-month freeze on dividends followed by 16 months of limitations. This was followed by the current limitations introduced by the present Government.
  All those Governments, Conservative and Labour, introduced dividend control, not because of its direct economic advantages, but because of the outrage there would have been if certain people had been seen to be getting disproportionate increases in income at a time when the living standards of others were not rising so much.
  Those hon. Members who feel that dividend restraint is something new should look back over a period of nearly 40 years when this has been a constant part of our approach and the approach of all Governments to prices and incomes policies generally. In 1976 the right hon. Member for Sidcup (Mr. Heath) referred to the need for discussions with the trade union leaders on economic policy. He had realised—and perhaps the Opposition are now begining to realize—that these matters must be discussed with all those interested. The consultations that take place between the Government and the trade unions show the impossibility of asking for restraint for some while allowing concessions to others.
  Mr. Kenneth Lewis: Is not the point of the whole debate simply that there was nothing to prevent the Government from getting a voluntary deal on dividends just as they supposedly believe they have for pay? They would have received co-operation from the City. The Wilson committee has great influence in the City which they could have sought to use. They would have had cooperation from the CBI as well. This would have been a better approach than putting statutory controls on one side and not the other.
  Mr. Sheldon: This is a suitable time to refer to the questions that were asked by the right hon. Member for Chipping Barnet. He asked three questions, one of which was why there should be a volun-
  1922
  tary policy for dividends. The right hon. Member knows the history of this better than almost anybody. Between 1972 and 1974 the policy was statutory for both pay and dividends. That policy failed lamentably because one cannot have a statutory policy for incomes and we as a Government have never sought to introduce such a policy. Our record has shown that it is possible for Governments, acting in co-operation with the interested parties, to obtain a voluntary agreement on pay which is far preferable to anything attempted before. With dividends, we need a policy that will be accepted. That is the test—a policy that is accepted.
  Mr. Tebbit: By whom?
  Mr. Sheldon: By the people of this country and by those who are engaged in industry on both sides.
  The second question of the right hon. Member for Chipping Barnet was the same as that just asked by the hon. Member for Rutland and Stamford (Mr. Lewis), namely, why there is not voluntary control of dividends. The answer is simple. I would dearly wish to have voluntary control if I could be sure that it would work. I strongly believe, on all these matters, that if we can get agreement among those who look to the wider consequences of their undertakings, that is the best way to proceed. I regret that, as was pointed out by the hon. Member for Harrow, East (Mr. Dykes). who seemed to understand some of the problems, had we gone for a voluntary agreement on dividends, a number of companies were preparing to make large dividend increases and that sort of attitude would have made the pay policy with which we are determined to proceed very difficult.
  Mr. Peter Rost: The Minister continues to base his argument on the fallacious assumption that dividends are, for the most part, distributed to individuals and spent. The facts show that the majority of dividends are retained by a large number of the institutional funds and are ploughed back for new investment. Why does not the Minister stop distorting the situation and present the truth, which is that, in many cases, dividends are not adding to people's distributable income?
  Mr. Sheldon: I shall be dealing later with the economic implications of dividend control. I am at present outlining why it was not possible to establish voluntary control over dividends. I indicated to the House my personal preference for that, if it had been possible. I am, however, forced to accept that such voluntary control would not have been effective.
  The third question of the right hon. Member for Chipping Barnet was whether, if the voluntary pay agreement failed, dividend controls would be abandoned. In a sense, he answered himself because he said that it was a hypothetical question. My answer must be that I do not believe that the voluntary pay agreement will fail. We have been able to succeed with previous policies, and I believe that we shall be able to succeed for a fourth time.
  Mr. Maudling: I am most grateful to the Financial Secretary for discussing and commenting on my questions, but it would be more helpful if he would try to answer them. In particular, will he give his reasons for saying that it would not be possible to have a voluntary agreement on dividends?
  Mr. Sheldon: I thought that I had gone into that matter fully and I did so because of the respect that I and the House have for the right hon. Gentleman. We know of a number of companies that would have produced very large dividend payments—200 per cent. increases or more—which would have made it difficult for us to proceed with the pay policy on which we have embarked.
  Mr. Maudling: Did the Government make any attempt whatsoever to get a voluntary agreement?
  Mr. Sheldon: Our understanding is that such an agreement would be violated—perhaps by only a few, but they would have made it difficult for us to achieve the incomes policy on which we are embarked.
  Mr. Richard Wainwright: The right hon. Gentleman knows that Liberals, too, asked for answers to the questions put by the right hon. Member for Chipping Barnet (Mr. Maudling). I ask the right hon. Gentleman to consider whether he has been entirely frank with the House when
  1924
  he speaks of his doubts about a voluntary dividend policy. To what extent did he entertain the use of some sanctions against spectacularly gross dividend increases as he is prepared to have, and which we have supported, on pay increases? Let the right hon. Gentleman be frank. He has had our support on sanctions.
  Mr. Sheldon: That is an interesting observation. I always thought that hon. Members in the Opposition parties were against such sanctions. I much prefer to see these matters put in legislative form so that we may debate them in the House as we have the advantage of debating the Bill now.
  Mr. John Evans: Does my right hon. Friend think that firms such as Grunwick would be prepared to abide by voluntary policies? If such firms would not agree to abide by voluntary policies, Opposition Members would encourage them all the way.
  Mr. Sheldon: My hon. Friend indicates some of the obvious problems that would have faced us had we proceeded along that course.
  Mr. Lawson rose—
  Mr. Sheldon: I think that I had better proceed.
  Mr. Lawson: It seems that the right hon. Gentleman does not have much to say. Does he believe that what matters is the average increase in pay or each individual settlement? By the same token, does he feel that what matters is the average increase in dividends or each individual dividend?
  Mr. Sheldon: The hon. Gentleman will have seen the White Paper. He will know that arrangements are set out for increases in pay and increases in dividends. He will be aware of the level of earnings increases over the past year that we have achieved in comparison with that which we set out to achieve.
  The hon. Member for Horsham and Crawley (Mr. Hordern) sought to show that the level of earnings at the end of the pay round was substantially more than at the beginning. He was quoting the old earnings index. I had better clarify the position. There have been a number of misconceptions about the two indices.

  1925
  The index of average earnings shows that the present round of pay policy has worked better than most people were prophesying this time last year. The new series index for May showed an increase of 12·5 per cent. over a year previously, suggesting a figure of between 13 per cent. and 14 per cent. for July. Quite a bit of the 3 per cent. or 4 per cent. excess, possibly 1½ per cent., will be accounted for by payments under self-financing productivity deals, which by definition will not feed through into prices.
  The difference between the new series index, which I have just mentioned, and the older series mentioned by the hon. Member for Horsham and Crawley is worth pointing out. The older series index was introduced from January 1963 and covers about 11 million employees in the production industries, part of transport and communication, and some miscellaneous services. Because of this limited coverage, it is not a very good indicator of what is happening in the economy as a whole.
  The new series, on the other hand, covers in total about 21 million employees, virtually the entire economy. It was introduced from January 1976, and so our experience is too short to make a reliable assessment of the pattern of seasonal variations and so it is not seasonally adjusted. But this does not affect the reliability of the year-on-year increases it shows, which are a fair reflection of movements in the economy generally. Therefore, we should look at the new series to see whether the Government's pay policy is working, since it is based on the economy as a whole. By referring to the old index, the hon. Gentleman was clearly failing to take account of the rather more reliable figures that we now have available.
  Mr. Hordern: Of course, I should think that the old, not the new, index was being used in last year's White Paper. In any case, whether it was old or new, the White Paper last year stated that, if earnings were anything approaching 15 per cent., there was no possibility whatever of keeping prices below 10 per cent.; they would be above 10 per cent. and would go on increasing. As that has not happened, is it not apparent that the link between earnings and prices that the Government and the Treasury have for so
  1926
  many years tried to establish has been wholly fallacious?
  Mr. Sheldon: The level of earnings is determined not by the index but by the reality. In so far as we have this new index, it is a better measure of what has happened, and what has happened has been rather better than the hon. Gentleman indicated.
  A number of hon. Members have said—
  Mr. Dykes: Will the right hon. Gentleman give way?
  Mr. Sheldon: I think that I must make progress.
  Some hon. Members have said that shares and dividends are more widely held by unit trusts and the institutions, pension funds and so on than by individuals. That is, of course, true, because, as a proportion of the whole, pension funds, insurance companies, unit trusts and other institutions have increased their holdings of shares over the past years. But it would be misleading if it were assumed that individuals did not also have very considerable holdings of shares and received dividends in respect of them.
  The latest information that we have is for December 1975. We see that more than 37 per cent. of all shareholdings are shareholdings by the beneficial owners. That amounts to £17 billion—not a small sum. The figures show that more than £1 billion worth of shares was owned by people having individual shareholdings each of more than £100,000. Over £1 billion worth of shares was owned by people who had shareholdings in excess of £100,000. Opposition Members may laugh. But that is one factor that none of them brought out—that there are still substantial holdings of shares by individuals. It would clearly be a matter of some resentment if dividends were markedly increased so that those with large shareholdings were allowed to increase their incomes substantially at a time when there was restraint on the pay which others obtained by working.
  Mr. Tapsell: The Financial Secretary has just pointed out that one-seventeenth of 37 per cent. of shareholdings in this country are held by rich people who, when income tax and investment income

  1927
  surcharge are combined, pay up to 98 per cent. on the proceeds. What point does he think he is making?
  Mr. Sheldon: The point is that £100,000 in shares is a considerable sum to have and that £1 billion worth is held by those with such shareholdings. These are considerable sums of money. We are discussing the role of dividends as part of a policy on pay and prices.
  Mr. Ron Thomas: Will my right hon. Friend give way?
  Mr. Sheldon: I really think that I had better make progress.
  We cannot have such a policy without control of dividends.
  Mr. Ron Thomas: Does my right hon. Friend agree that if workers are unable to have the full extent of a legitimate pay claim, it has gone for ever? But the Bill simply puts on one side for the time being the dividends which would otherwise go to these rich individuals and will come back to them in capital gains, free scrip issues or deferred dividend payments.
  Mr. Sheldon: My hon. Friend is largely right. Most of this money will go back into other forms of investment that will benefit companies.
  Mr. Lawson: Will the right hon. Gentleman give way?
  Mr. Sheldon: The hon. Gentleman must be about the most prominent interrupter in the whole of our debates. I have taken an interest in him since I heard his maiden speech, because he interrupted the hon. Member who was congratulating him upon it.
  Mr. Lawson: Contrary to convention, the hon. Member was not congratulating me, and that was why I intervened. Can the Financial Secretary explain the morality of the proposition that he is putting forward? He is saying that because 2 per cent. of total shares are owned by rich people, against whom he wishes to wage a vendetta, he feels it right to penalise the other 98 per cent. How does he feel that that can be justified?
  Mr. Sheldon: It has never been part of my attitude to political life to wage vendettas against anybody. The hon. Gentleman must realise that when one is trying to achieve a consensus—which is very difficult to achieve—certain things
  1928
  have to be done to ensure that the sacrifices are borne generally. There are some Tory Members who do not believe in a pay and prices policy. If they hold that view—and we have heard today that a number do—they also hold the view that dividends should form no part of any Government policy. But there are those who say "You can have a pay and prices policy"—although their voices are rather uncertain—"but it ought not to include dividends".
  I do not believe that trade unions will accept controls on pay without at the same time pressing most strongly for constraints on dividends. We have seen this throughout the history of Government intervention in prices and incomes, which has extended now over a period of more than 30 years.
  What we have seen over the past few months is a slow, reluctant and uncertain shuffle in the direction of a pay and prices policy by the Opposition as they have approached the chopping block of a General Election. It is that, and that only, that has forced them to concentrate on the realities of their position and the demand of the people of this country that when incomes are restrained we ought to make sure that there is an equitable distribution of whatever increase is permitted. That sort of fairness is the very basis of the policy that we have set out in the White Paper.
  Mr. Higgins rose—
  Mr. Sheldon: I shall not give way. I have quite a lot to say. The question that we now have to consider is whether, in the light of their uncertain pronouncements, the Opposition generally believe in a pay and prices policy. The Tory Government, in 1972 to 1974, believed in a pay and prices policy, and the right hon. Member for Sidcup is clearly unrepentant about his activities on this front during that period. In fact, the right hon. Gentleman went further and even continued his enthusiasm for a pay and prices policy after he left office. He said:
  "I am unable to visualise a situation in which there was an incomes policy, either voluntary or statutory, but in which there was not a prices policy at the same time."
  A little later he said:
  "I fully and unequivocally support the agreement which the Government have reached

  1929
  with the trade unions. I believe that it is in the national interest that this agreement should have been reached. I do not believe we should hedge about it … I believe that this pay policy arrangement will stick. The last one did and perhaps therefore it will make the future task easier by disarming the sceptics who have always believed that such a move was possible."
  He hoped that
  "the present Opposition leaders will be prepared to enter into discussions with trade union leaders, because that is part of our life in a democracy."—[Official Report, 7th July 1976; Vol. 914, c. 1409–16.]
  This criticism of the Tory leadership was a criticism of the takeover of the Tory Party by the monetarists. But under the pressure of an approaching General Election the ideological purity of the monetarists, represented by the hon. Member for Blaby (Mr. Lawson), is now being questioned.
  The mouthpiece of this policy has for long been The Times, with its articles on the beauty of gold and the perfection of the theoretical relationship between inflation and monetary growth. For a long time The Times has felt that the Government have received, accepted and swallowed almost all the monetary policies which it advised.
  In The Times last Saturday I read:
  "In the Government's view, therefore, the incomes policy is the sine qua non of winning the battle against inflation. Mrs. Thatcher has clearly indicated that she does not share this economic analysis and that a Government led by her would follow different policies. The country is faced with an unusually clear choice of alternatives as far as central economic policy is concerned … The real course of the economy is determined by the monetary policy which the Government chooses to pursue … It is wrong to carry forward the attack against inflation with prices and incomes policies as a prime weapon."
  Mr. Lawson: Hear, hear.
  Mr. Sheldon: It is interesting to hear the cheers of the hon. Member for Blaby. We have to ask—and incredibly, after all these years, the question has not been answered—has The Times got it right?
  The Leader of the Opposition does not believe that an incomes policy is essential to win the battle against inflation. The Sunday Telegraph last Sunday, in an article by Patrick Hutber, whom I do not normally quote, said:
  "It would be wrong to deny that there is quite a lot of common ground … between Government and Opposition."
  1930
  The Sunday Telegraph leader of the same dated stated:
  "one might reasonably conclude that there is now a consensus between the two parties about the inevitability of some kind of Government-inspired wage limitation at least for the foreseeable future, the only remaining immediate argument being about details and implementation."
  Two of the strongest media supporters of the Opposition's economic policy show fundamental differences in their interpretation of that policy. If these two great organs of press opinion are unable to agree what the Opposition are saying on this central and critical issue of economic policy, of whether the Opposition believe in a prices and incomes policy, the country will conclude that it is better to have a Government who speak with a clear voice on these matters.
  Mr. Higgins: Apart from the quotations, the main point in the Minister's argument is that he is seeking equity between dividend recipients such as pensioners and wage earners. Is it not true that throughout the period of Labour government there has been dividend control from the time when we had the wage explosion in 1974 and 1975? The same was true in the last year when dividends were restrained and wages went up faster than the Government said that they should.
  Mr. Sheldon: The hon. Member for Worthing (Mr. Higgins) has not taken into account the crucial economic fact that, when one asks people to restrain themselves, that restraint must be spread over an area where comparisons are possible. The shifting of the ground in the Tory Party on economic policy was seen clearly in Tuesday's debate when the Leader of the Opposition was unable to approve the White Paper in any way, whereas the Shadow Chancellor of the Exchequer said:
  "It is important for the House to under-stand that the White Paper establishes a fair degree of common ground that the parties ought to recognise when discussing these matters."—[Official Report, 25th July 1978; Vol. 954, c. 1490.]
  Twice on later occasions in the same speech he referred again to what he called the "elements of common ground".
  The question which must be asked is, what is this common ground. Does the right hon. and learned Gentleman believe

  1931
  in a pay and prices policy, or are we seeing a policy change on the Conservative Benches? We heard from the hon. Member for Blaby tonight, but on a previous occasion he wanted to bring in an Act to limit the amount of monetary growth. Does he speak for the Opposition? We did not hear a great deal about that common ground from the Leader of the Opposition. She did not mention it, and we heard nothing about it last year or the year before. The great danger to which the Opposition are responding is their sense that the coming election will catch them with the wrong policies at the wrong time.
  If there is agreement that pay and price restraint needs to continue, an essential consequence of that is that dividend restaint should continue, too. That is not because of the economic advantages of dividend limitation. It is rather that the economic advantages of the pay and prices policy depend on dividend restraint.
  These, then, are the reasons why, when in Government, both parties introduced controls. They did so for very good reasons—equity and fairness, and because it was necessary to convince people that their sacrifices would not be exploited by others.
  I accept that dividend restraint cannot be continued indefinitely because of some of its distorting effects.—[HON. MEMBERS: "Ah."]—But we are seeking to achieve the fourth stage of our pay and prices policy and it is only right for us to continue with the dividend aspect of it. I believe that the time will come when we shall be able to find an agreed path leading to stable and responsible pay negotiations, and at that stage we can move towards freeing dividends from restraint. The right time for that, however, will be when inflation is firmly under control.
  The hon. Member for Horncastle (Mr. Tapsell) asked whether the main reasons for the Bill were political and psychological, not economic. Dividend control was first discussed in 1940, but the Bill
  was jettisoned in favour of an excess profits tax. The interesting point is that no one argued for it on economic grounds then. A 100 per cent. excess profits tax was charged because it was felt wrong to make excess profits. One could not have a united country when some people in it had special advantage while others did not. If the hon. Member calls that a political or psychological reason, I call it a common sense reason.
  If one is seeking to unite the country and secure the agreement of the people, one must take into account the problems that arise in introducing and maintaining a policy which is seen to be eminently fair—
  Mr. Tapsell rose—
  Mr. Sheldon: I cannot give way.
  This dividend policy is an essential part of a total policy, as all Governments have realised over the years. That is why we have brought forward the Bill, and that is why we ask the House to approve it.
  9.59 p.m.
  Mr. Norman Tebbitt: That was a most entertaining speech. The only problem was that the Financial Secretary ran out of newspaper cuttings. If only he had had a full copy of The Times, he would have been able to do much better, but in fact he did not—
  Mr. Walter Harrison (Treasurer of Her Majesty's Household)rose in his place and claimed to move, That the Question be now put.
  Question put, That the Question be now put:—
  The House proceeded to a Division—Mr. COLEMAN and Mr. JAMES HAMILTON were appointed Tellers for the Ayes but no Member being willing to act as Teller for the Noes, Mr. SPEAKER declared that the Ayes had it.
  Question put accordingly, That the Bill be now read a Second time—
  The House divided: Ayes 309, Noes 294.

  Division No. 317]

  AYES

  [10.00 p.m.

  Abse, Leo

  Ashton, Joe

  Barnett, Rt Hon Joel (Heywood)

  Allaun, Frank

  Atkins, Ronald (Preston N)

  Bates, Alf

  Anderson, Donald

  Atkinson, Norman (H'gey, Tott'ham)

  Bean, R. E.

  Archer, Fit Hon Peter

  Bagier, Gordon A. T.

  Benn, Rt Hon Anthony Wedgwood

  Armstrong, Ernest

  Bain, Mrs Margaret

  Bennett, Andrew (Stockport N)

  Ashley, Jack

  Barnett, Guy (Greenwich)

  Bidwell, Sydney

  Bishop, Rt Hon Edward

  Garrett, W. E. (Wallsend)

  Mellish, Rt Hon Robert

  Blenkinsop, Arthur

  George, Bruce

  Mikardo, Ian

  Boardman, H.

  Gilbert, Rt Hon Dr John

  Millan, Rt Hon Bruce

  Booth, Rt Hon Albert

  Ginsburg, David

  Miller, Dr M. S. (E Kilbride)

  Boothroyd, Miss Betty

  Golding, John

  Mitchell, Austin (Grimsby)

  Bottomley, Rt Hon Arthur

  Gould, Bryan

  Mitchell, R. C. (Soton, Itchen)

  Boyden, James (Bish Auck)

  Gourlay, Harry

  Molloy, William

  Bradley, Tom

  Graham, Ted

  Moonman, Eric

  Bray, Dr Jeremy

  Grant, George (Morpeth)

  Morris, Alfred (Wythenshawe)

  Broughton, Sir Alfred

  Grant, John (Islington C)

  Morris, Rt Hon Charles R.

  Brown, Robert C. (Newcastle W)

  Grocott, Bruce

  Morris, Rt Hon J. (Aberavon)

  Brown, Ronald (Hackney S)

  Hamilton, W. W. (Central Fife)

  Morton, George

  Buchan, Norman

  Hardy, Peter

  Moyle, Rt Hon Roland

  Buchanan, Richard

  Harrison, Rt Hon Walter

  Mulley, Rt Hon Frederick

  Butler, Mrs Joyce (Wood Green)

  Hart, Rt Hon Judith

  Murray, Rt Hon Ronald King

  Callaghan, Rt Hon J. (Cardiff SE)

  Hattersley, Rt Hon Roy

  Newens, Stanley

  Callaghan, Jim (Middleton & P)

  Hayman, Mrs Helene

  Noble, Mike

  Campbell, Ian

  Healey, Rt Hon Denis

  Oakes, Gordon

  Canavan, Dennis

  Heffer, Eric S.

  Ogden, Eric

  Cant, R. B.

  Henderson, Douglas

  O'Halioran, Michael

  Carmichael, Neil

  Hooley, Frank

  Orbach, Maurice

  Carter, Ray

  Horam, John

  Orme, Rt Hon Stanley

  Carter-Jones, Lewis

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

  Ovenden, John

  Cartwright, John

  Hoyle, Doug (Nelson)

  Padley, Walter

  Castle, Rt Hon Barbara

  Huckfield, Les

  Palmer, Arthur

  Clemitson, Ivor

  Hughes, Rt Hon C. (Anglesey)

  Park, George

  Cocks, Rt Hon Michael (Bristol S)

  Hughes, Mark (Durham)

  Parker, John

  Cohen, Stanley

  Hughes, Robert (Aberdeen N)

  Parry, Robert

  Coiquhoun, Ms Maureen

  Hughes, Roy (Newport)

  Pavitt, Laurie

  Concannon, Rt Hon John

  Hunter, Adam

  Pendry, Tom

  Conlan, Bernard

  Irvine, Rt Hon Sir A. (Edge Hill)

  Perry, Ernest

  Cook, Robin F. (Edin C)

  Irving, Rt Hon S. (Dartford)

  Phipps, Dr Colin

  Corbett, Robin

  Jackson, Colin (Brighouse)

  Prescott, John

  Cowans, Harry

  Jackson, Miss Margaret (Lincoln)

  Price, C. (Lewisham W)

  Craigen, Jim (Maryhill)

  Janner, Greville

  Price, William (Rugby)

  Crawshaw, Richard

  Jay, Rt Hon Douglas

  Radice, Giles

  Cronin, John

  Jeger, Mrs Lena

  Rees, Rt Hon Merlyn (Leeds S)

  Crowther, Stan (Rotherham)

  Jenkins, Hugh (Putney)

  Reid, George

  Cryer, Bob

  John, Brynmor

  Richardson, Miss Jo

  Cunningham, G. (Islington S)

  Johnson, James (Hull West)

  Roberts, Albert (Normanton)

  Cunningham, Dr J. (Whiteh)

  Johnson, Walter (Derby S)

  Roberts, Gwilym (Cannock)

  Dalyell, Tam

  Jones, Alec (Rhondda)

  Robertson, George (Hamilton)

  Davidson, Arthur

  Jones, Barry (East Flint)

  Robinson, Geoffrey

  Davies, Bryan (Enfield N)

  Jones, Dan (Burnley)

  Roderick, Caerwyn

  Davies, Rt Hon Denzil

  Judd, Frank

  Rodgers, George (Chorley)

  Davies, Ifor (Gower)

  Kaufman, Rt Hon Gerald

  Rodgers, Rt Hon William (Stockton)

  Davis, Clinton (Hackney C)

  Kelley, Richard

  Rooker, J. W.

  Deakins, Eric

  Kerr, Russell

  Roper, John

  Dean, Joseph (Leeds West)

  Kilroy-Silk, Robert

  Ross, Rt Hon W. (Kilmarnock)

  de Freitas, Rt Hon Sir Geoffrey

  Kinnock, Neil

  Rowlands, Ted

  Dell, Rt Hon Edmund

  Lambie, David

  Ryman, John

  Dempsey, James

  Lamborn, Harry

  Sandelson, Neville

  Dewar, Donald

  Lamond, James

  Sedgemore, Brian

  Doig, Peter

  Latham, Arthur (Paddington)

  Selby, Harry

  Dormand, J. D.

  Leadbitter, Ted

  Sever, John

  Douglas-Mann, Bruce

  Lee, John

  Shaw, Arnold (Ilford South)

  Duffy, A. E. P.

  Lestor, Miss Joan (Eton & Slough)

  Sheldon, Rt Hon Robert

  Dunn, James A.

  Lever, Rt Hon Harold

  Shore, Rt Hon Peter

  Dunnett, Jack

  Lewis, Arthur (Newham N)

  Short, Mrs Renée (Wolv NE)

  Dunwoody, Mrs Gwyneth

  Lewis, Ron (Carlisle)

  Silkln, Rt Hon John (Deptford)

  Eadie, Alex

  Litterick, Tom

  Silkln, Rt Hon S. C. (Dulwich)

  Edge, Geoff

  Lomas, Kenneth

  Sillars, James

  Edwards, Robert (Wolv SE)

  Loyden, Eddie

  Silverman, Julius

  Ellis, John (Brigg & Scun)

  Luard, Evan

  Skinner, Dennis

  Ellis, Tom (Wrexham)

  Lyon, Alexander (York)

  Smith, Rt Hon John (N Lanarkshire)

  English, Michael

  Lyons, Edward (Bradford W)

  Snape, Peter

  Ennals, Rt Hon David

  Mabon, Rt Hon Dr J. Dickson

  Spearing, Nigel

  Evans, Fred (Caerphilly)

  McCartney, Hugh

  Spriggs, Leslie

  Evans, Gwynfor (Carmarthen)

  McDonald, Dr Oonagh

  Stallard, A. W.

  Evans, Ioan (Aberdare)

  McElhone, Frank

  Stewart, Rt Hon M. (Fulham)

  Evans, John (Newton)

  MacFarquhar, Roderick

  Stoddart, David

  Ewing, Harry (Stirling)

  McGuire, Michael (Ince)

  Stott, Roger

  Faulds, Andrew

  McKay, Ailen (Penistone)

  Strang, Gavin

  Fernyhough, Rt Hon E.

  MacKenzie, Rt Hon Gregor

  Strauss, Rt Hon G. R.

  Fitch, Alan (Wigan)

  Maclennan, Robert

  Summerskill, Hon Dr Shirley

  Fitt, Gerard (Belfast W)

  McMillan, Tom (Glasgow C)

  Swain, Thomas

  Flannery, Martin

  Madden, Max

  Taylor, Mrs Ann (Bolton W)

  Fletcher, L. R. (Ilkeston)

  Magee, Bryan

  Thomas, Jeffrey (Abertillery)

  Fletcher, Ted (Darlington)

  Maguire, Frank (Fermanagh)

  Thomas, Mike (Newcastle E)

  Foot, Rt Hon Michael

  Mallalieu, J. P. W.

  Thomas, Ron (Bristol NW)

  Ford, Ben

  Marks, Kenneth

  Thompson, George

  Forrester, John

  Marshall, Dr Edmund (Goole)

  Thorne, Stan (Preston South)

  Fowler, Gerald (The Wrekin)

  Marshall, Jim (Leicester S)

  Tierney, Sydney

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

  Mason, Rt Hon Roy

  Tilley, John

  Freeson, Rt Hon Reginald

  Maynard, Miss Joan

  Tinn, James

  Garrett, John (Norwich S)

  Meacher, Michael

  Tomlinson, John

  1934

  1935

  Tomney, Frank

  Wellbeloved, James

  Wilson, Gordon (Dundee E)

  Torney, Tom

  Welsh, Andrew

  Wilson, Rt Hon Sir Harold (Huyton)

  Tuck, Raphael

  White, Frank R. (Bury)

  Wilson, William (Coventry SE)

  Urwin, T. W.

  White, James (Pollok)

  Wise, Mrs Audrey

  Varley, Rt Hon Eric G.

  Whitehead, Phillip

  Woodall, Alec

  Wainwright, Edwin (Dearne V)

  Whitlock, William

  Woof, Robert

  Walker, Harold (Doncaster)

  Wigley, Dafydd

  Wrigglesworth, Ian

  Walker, Terry (Kingswood)

  Willey, Rt Hon Frederick

  Young, David (Bolton E)

  Ward, Michael

  Williams, Rt Hon Alan (Swansea W)

  Watkins, David

  Williams, Alan Lee (Hornch'ch)

  TELLERS FOR THE AYES.

  Watkinson, John

  Williams, Rt Hon Shirley (Hertford)

  Mr. Donald Coleman and

  Weetch, Ken

  Williams, Sir Thomas (Warrington)

  Mr. James Hamilton

  Weitzman, David

  NOES

  Adley, Robert

  Eyre, Reginald

  Jopling, Michael

  Aitken, Jonathan

  Fairbairn, Nicholas

  Joseph, Rt Hon Sir Keith

  Alison, Michael

  Fairgrieve, Russell

  Kaberry, Sir Donald

  Amery, Rt Hon Julian

  Farr, John

  Kellett-Bowman, Mrs Elaine

  Arnold, Tom

  Fell, Anthony

  Kershaw, Anthony

  Atkins, Rt Hon H. (Spelthorne)

  Finsberg, Geoffrey

  Kilfedder, James

  Atkinson, David (B'mouth, East)

  Fisher, Sir Nigel

  Kimball, Marcus

  Awdry, Daniel

  Fletcher, Alex (Edinburgh N)

  King, Evelyn (South Dorset)

  Baker, Kenneth

  Fletcher-Cooke, Charles

  King, Tom (Bridgwater)

  Banks, Robert

  Fookes, Miss Janet

  Kitson, Sir Timothy

  Beith, A. J.

  Forman, Nigel

  Knight, Mrs Jill

  Bell, Ronald

  Fowler, Norman (Sutton C'f'd)

  Knox, David

  Bendall, Vivian

  Fox, Marcus

  Lamont, Norman

  Bennett, Sir Frederic (Torbay)

  Fraser, Rt Hon H. (Stafford & St)

  Langford-Holt, Sir John

  Bennett, Dr Reginald (Fareham)

  Freud, Clement

  Latham, Michael (Melton)

  Benyon, W.

  Fry, Peter

  Lawrence, Ivan

  Berry, Hon Anthony

  Galbraith, Hon T. G. D.

  Lawson, Nigel

  Biffen, John

  Gardiner, George (Reigate)

  Lester, Jim (Beeston)

  Biggs-Davison, John

  Gardner, Edward (S Fylde)

  Lewis, Kenneth (Rutland)

  Blaker, Peter

  Gilmour, Rt Hon Sir Ian (Chesham)

  Lloyd, Ian

  Body, Richard

  Gilmour, Sir John (East Fife)

  Loveridge, John

  Boscawen, Hon Robert

  Glyn, Dr Alan

  Luce, Richard

  Bottomiey, Peter

  Godber, Rt Hon Joseph

  McCrindle, Robert

  Bowden, A. (Brighton, Kemptown)

  Goodhart, Philip

  Macfarlane, Neil

  Boyson, Dr Rhodes (Brent)

  Goodhew, Victor

  MacGregor, John

  Bradford, Rev Robert

  Goodlad, Alastair

  MacKay, Andrew (Stechford)

  Braine, Sir Bernard

  Gorst, John

  Macmillan, Rt Hon M. (Farnham)

  Britlan, Leon

  Gow, Ian (Eastbourne)

  McNair-Wilson, M. (Newbury)

  Brocklebank-Fowler, C.

  Gower, Sir Raymond (Barry)

  McNair-Wilson, P. (New Forest)

  Brooke, Hon Peter

  Grant, Anthony (Harrow C)

  Madel, David

  Brotherton, Michael

  Gray, Hamish

  Marshall, Michael (Arundel)

  Brown, Sir Edward (Bath)

  Grieve, Percy

  Marten, Neil

  Bryan, Sir Paul

  Griffiths, Eldon

  Mates, Michael

  Buchanan-Smith, Alick

  Grimond, Rt Hon J.

  Mather, Carol

  Buck, Antony

  Grist, Ian

  Maude, Angus

  Budgen, Nick

  Grylls, Michael

  Maudling, Rt Hon Reginald

  Bulmer, Esmond

  Hall-Davis, A. G. F.

  Mawby, Ray

  Butler, Adam (Bosworth)

  Hamilton, Archibald (Epsom & Ewell)

  Maxwell-Hyslop, Robin

  Carlisle, Mark

  Hamilton, Michael (Salisbury)

  Mayhew, Patrick

  Carson, John

  Hampson, Dr Keith

  Meyer, Sir Anthony

  Chalker, Mrs Lydna

  Hannam, John

  Miller, Hal (Bromsgrove)

  Channon, Paul

  Harrison, Col Sir Harwood (Eye)

  Mills, Peter

  Churchill, W. S.

  Harvie Anderson, Rt Hon Miss

  Miscampbell, Norman

  Clark, Alan (Plymouth, Sutton)

  Haselhurst, Alan

  Mitchell, David (Basingstoke)

  Clark, William (Croydon S)

  Hastings, Stephen

  Moate, Roger

  Clarke, Kenneth (Rushcliffe)

  Havers, Rt Hon Sir Michael

  Monro, Hector

  Clegg, Walter

  Hawkins, Paul

  Montgomery, Fergus

  Cockcroft, John

  Hayhoe, Barney

  Moore, John (Croydon C)

  Cooke, Robert (Bristol W)

  Heath, Rt Hon Edward

  More, Jasper (Ludlow)

  Cope, John

  Heseltine, Michael

  Morgan, Geraint

  Cormack, Patrick

  Hicks, Robert

  Morgan-Giles, Rear-Admiral

  Corrie, John

  Higgins, Terence L.

  Morris, Michael (Northampton S)

  Costaln, A. P.

  Hodgson, Robin

  Morrison, Charles (Devizes)

  Craig, Rt Hon W. (Belfast E)

  Holland, Philip

  Neave, Airey

  Critchley, Julian

  Hooson, Emlyn

  Nelson, Anthony

  Crouch, David

  Hordern, Peter

  Neubert, Michael

  Crowder, F. P.

  Howe, Rt Hon Sir Geoffrey

  Newton, Tony

  Davies, Rt Hon J. (Knutsford)

  Howell, David (Gulldford)

  Normanton, Tom

  Dean, Paul (N Somerset)

  Howell, Ralph (North Norfolk)

  Nott, John

  Dodsworth, Geoffrey

  Hunt, David (Wirral)

  Onslow, Cranley

  Douglas-Hamilton, Lord James

  Hunt, John (Ravensbourne)

  Oppenheim, Mrs Sally

  Drayson, Burnaby

  Hurd, Douglas

  Osborn, John

  du Cann, at Hon Edward

  Hutchison, Michael Clark

  Page, John (Harrow West)

  Durant, Tony

  Irving, Charles (Cheltenham)

  Page, Rt Hon R. Graham (Crosby)

  Dykes, Hugh

  James, David

  Page, Richard (Workington)

  Eden, Rt Hon Sir John

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

  Paisley, Rev Ian

  Edwards, Nicholas (Pembroke)

  Johnson Smith, G. (E Grinstead)

  Pardoe, John

  Elliott, Sir William

  Johnston, Russell (Inverness)

  Parkinson, Cecil

  Emery, Peter

  Jones, Arthur (Daventry)

  Pattie, Geoffrey

  1936

  1937

  Penhaligon, David

  Scott-Hopkins, James

  Temple-Morris, Peter

  Percival, Ian

  Shaw, Giles (Pudsey)

  Thatcher, Rt Hon Margaret

  Peyton, Rt Hon John

  Shaw, Michael (Scarborough)

  Thomas, Rt Hon P. (Hendon S)

  Pink, R. Bonner

  Shelton, William (Streatham)

  Thorpe, Rt Hon Jeremy (N Devon)

  Powell, Rt Hon J. Enoch

  Shepherd, Colin

  Townsend, Cyril D.

  Prentice, Rt Hon Reg

  Shersby, Michael

  Trotter, Neville

  Price, David (Eastleigh)

  Silvester, Fred

  van Straubenzee, W. R.

  Prior, Rt Hon James

  Sims, Roger

  Vaughan, Dr Gerard

  Pym, Rt Hon Francis

  Sinciair, Sir George

  Viggers, Peter

  Raison, Timothy

  Skeet, T. H. H.

  Wainwright, Richard (Colne V)

  Rathbone, Tim

  Smith, Cyril (Rochdale)

  Wakeham, John

  Rees, Peter (Dover & Deal)

  Smith, Dudley (Warwick)

  Walder, David (Clitheroe)

  Rees-Davies, W. R.

  Smith, Timothy John (Ashfield)

  Walker, Rt Hon P. (Worcester)

  Renton, Rt Hon Sir D. (Hunts)

  Speed, Keith

  Walker-Smith, Rt Hon Sir Derek

  Renton, Tim (Mid-Sussex)

  Spence, John

  Wall, Patrick

  Rhodes James, R.

  Spicer, Jim (W Dorset)

  Walters, Dennis

  Rhys Williams, Sir Brandon

  Spicer, Michael (S Worcester)

  Warren, Kenneth

  Ridley, Hon Nicholas

  Sproat, Iain

  Weatherill, Bernard

  Ridsdale, Julian

  Stainton, Keith

  Wells, John

  Rifklnd, Malcolm

  Stanbrook, Ivor

  Whitelaw, Rt Hon William

  Rippon, Rt Hon Geoffrey

  Stanley, John

  Whitney, Raymond

  Roberts, Wyn (Conway)

  Steel, Rt Hon David

  Wiggin, Jerry

  Rodgers, Sir John (Sevenoaka)

  Steen, Anthony (Wavertree)

  Winterton, Nicholas

  Ross, Stephen (Isle of Wight)

  Stewart, Ian (Hitchln)

  Wood, Rt Hon Richard

  Ross, William (Londonderry)

  Stokes, John

  Young, Sir G. (Ealing, Acton)

  Rossi, Hugh (Hornsey)

  Stradling Thomas, J.

  Younger, Hon George

  Rost, Peter (SE Derbyshire)

  Tapsell, Peter

  Royle, Sir Anthony

  Taylor, R. (Croydon NW)

  TELLERS FOR THE NOES:

  Sainsbury, Tim

  Taylor, Teddy (Cathcart)

  Mr. Spencer Le Marchant and

  St. John-Stevas, Norman

  Tebblt, Norman

  Mr. Michael Roberts.

  Scott, Nicholas

  Question accordingly agreed to.
  Bill read a Second time.
  Bill committed to a Committee of the whole House—[Mr. Snape.]

  BUSINESS OF THE HOUSE
  Ordered,
  That the Dividends Bill may be proceeded with at this day's sitting, though opposed, until any hour.—[Mr. Snape.]

DIVIDENDS BILL
Bill immediately considered in Committee.
[Sir MYER GALPERN in the Chair]

DIVIDENDS BILL
  Clause 1

    CONTINUATION IN FORCE OF 1973 SECTION 10
    10.18 p.m.
    Mr. Richard Wainwright: I beg to move amendment no. 4, in page 1, line 10, leave out end of July 1979' and insert 31st December 1978'.
    The First Deputy Chairman (Sir Myer Galpern): With this we are to take the following amendments:
    No. 3, in page 1, line 10, leave out 'July 1979' and insert 'October 1978'.
    No. 5, in page 1, line 10, leave out 'July 1979' and insert 'December 1978'.
    No. 11, in Title, line 2, leave out 'July 1979' and insert December 1978'.
    Mr. Ian Gow: On a point of order, Sir Myer. You will have seen the paper headed "Provisional selection of amendments". It does not deal with the new clauses, of which there are four on the Notice Paper. May we take it that the Chairman has selected all the new clauses for debate, or have they not been selected for debate?
    The First Deputy Chairman: The hon. Gentleman has seen the provisional selection. The new clauses have not disappeared from the face of the paper.
    It may save many points of order if I point out that the scope of the Bill is very narrow. It has one purpose and one purpose only—to extend the duration of section 10 of the Counter-Inflation Act, which would otherwise expire. It has no effect whatever on the substance of section 10. Any amendment which would have such an effect is outside the scope of the Bill. The great majority of the amendments which have not been selected are out of order on that ground.
    Mr. Richard Wainwright: I am moving amendment no. 4 in the names of my
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    right hon. Friend the Leader of the Liberal Party and others of my hon. Friends. Amendment no. 11 is associated with it as a consequential amendment.
    During the Second Reading debate, it was accepted by both sides of the House that the Government's policy has a discrepancy, for better or worse—the House has just decided for better by a majority. That discrepancy is between a voluntary policy on pay, supported by certain sanctions, and a statutory policy on dividends.
    The First Deputy Chairman: Order. There is far too much noise, and the amplification is a bit disturbing to the occupant of the Chair.
    Mr. Wainwright: One of the themes of the debate which occupied both sides of the House to a considerable extent was that the maintenance of this precarious pay policy depends on trying to establish a national consensus. The amendment is a contribution towards such a consensus. It is an attempt to bridge somewhat the gap between statutory provision on dividends and voluntary provision on pay by moderating the period of the statute. The amendment would secure that the provisions of the statute would last only for five months instead of the 12 provided for in the Bill.
    To the Liberals and, I hope, others in the House, particularly those who joined us in opposing the Bill, one of the most objectionable features of the discrepancy is that the statute, if passed unamended, would be in force for a full 12 months whilst the voluntary pay policy can he abandoned by the Government at any moment—indeed, might have to be abandoned at any moment—or might cease to work so that it was as good as abandoned.
    It would, in our submission, be entirely unfair—and I expect hon. Members opposite to accept this, especially from the point of view of pension funds, occupational and otherwise—if, when a voluntary pay policy has ceased to operate for one reason or another, possibly as a result of an election or a new combination of parties in Government, the recipients of dividends, such as pension funds and the rest, were to be tied for 12 months to an extremely restrictive law.
    Therefore, the amendment provides that after five months' operation, which

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    we submit is, broadly speaking, about the right period, at the end of the calendar year the provisions of the Bill should expire, and it would then, of course, be open to the House, perhaps in a new Parliament—who knows who might be in control of it, jointly or severally—to consider whether to re-enact the statute, make certain alterations, or let the provision drop altogether.
    It seems to us that if it is the avowed object of the Government to secure a mood of consensus in the country in these matters, they should see the fairness of providing for a review at Christmas time of the operation of the statute, particularly as to those on small retirement incomes and to those who have the solemn obligation of doing their best for pension funds every month matters and every dividend matters. In these times every jot of income matters to such people in their later years.
    For these reasons we ask the House to endorse the proposition in all fairness that after five months this policy should be reviewed, and then the House would be free as to the course of action it should take. On these grounds, I commend the amendment to the Committee.
    Mr. Nicholas Ridley: I am happy to contribute to the debate so ably opened by the hon. Member for Colne Valley (Mr. Wainwright). My amendment no. 3 would bring the Bill to an end by the end of October, a couple of months earlier than the Liberal amendment suggests as an appropriate time. I do not want to quarrel with him about the precise details, because I am so pleased to see him with us and that we are at one, both on the principle of the Bill and on the principle of the amendment. He is jumping the gun. I thought that the Lib-Lab pact did not run out until the end of July. But it is only 27th July today and grouse shooting does not start until 12th August.
    Mr. Richard Wainwright: I would not in the least single out the hon. Gentleman for correction, but it is a common false assumption that the Lib-Lab pact in any way bound us to support any individual measure of the Government, or bound the Government to support any Liberal policy. It was related solely to votes
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    of confidence in the House, and this is not one.
    Mr. Ridley: I always thought that the Lib-Lab pact was much more flexible than the prices and incomes policy. That, I think, proves the point.
    I am delighted also to see that the right hon. Gentleman the Chancellor of the Duchy of Lancaster is here with us. He is always welcome to join in our debates. I am sure that he has been going round the City—and around the small businesses—telling people that he does not believe in dividend control, that he believes in lower taxes, and that he does not believe in capital transfer tax. Where was be, I wonder, at 10 p.m.? Did he vote? In which Lobby was he?
    I know perfectly well that the right hon. Gentleman is the front man to try to appease the City. He will tell the City that he thought that the hon. Member for Cirencester and Tewkesbury had a good point in his amendment relating to the end of October 1978. He will say that he agreed with the hon. Member for Cirencester and Tewkesbury but that, of course, the Whips made him vote against the amendment.
    The Chancellor of the Duchy of Lancaster (Mr. Harold Lever): The hon. Gentleman is curious about my whereabouts. If he will look at Hansard tomorrow he will discover my whereabouts. But I cannot so readily discover the hon. Gentleman's whereabouts when the Conservative Government brought in dividend limitation in the first place. As the hon. Gentleman was a member at one time of that Government, will he say whether he approved of dividend limitation, or whether he thought at the time that it was ridiculous nonsense?
    Mr. Ridley: I am delighted to deal with the right hon. Gentleman's question, because when the Counter-Inflation Bill was in Committee I moved an amendment to limit its life to one year. I was supported by the right hon. Gentleman the Chief Secretary, and the right hon. Gentleman the present Secretary of State for Energy. The right hon. Gentleman the Chancellor of the Duchy was not on the Committee. He does not do a lot of Committee work. We understand. He is not very good at Committee work. But

    1943
    we carried the amendment against the Conservative Government. Then we came back to the House on Report, and the right hon. Gentleman supported me on limiting the duration of the powers. But now the right hon. Gentleman is not supporting me on limiting the duration of the powers. The right hon. Gentleman has turned coat. [Interruption.] I have an apology to make, Sir Myer—
    The First Deputy Chairman: Order. If the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) wishes to resume his seat and not participate further, that is quite all right.
    Mr. Ridley: I have an apology to make, Sir Myer.
    The First Deputy Chairman: The hon. Gentleman has an apology to make? I thought that he wished to resume his seat.
    Mr. Ridley: I wish to apologise to the Committee, Sir Myer, for provoking the right hon. Gentleman the Chancellor of the Duchy, who has now gone away. I quite understand that what I said to him and about him thoroughly riled and nettled him. I withdraw any imputation upon his honour, but I do not withdraw any imputation upon his conduct. What I said was perfectly justified. The fact that the right hon. Gentleman left the Chamber in high dudgeon proves what I was seeking to establish.
    Mr. Tom Litterick: Tell us how you voted.
    The First Deputy Chairman: Order. I believe that we shall have a shorter debate if hon. Members will allow the hon. Member who is addressing the Committee to continue.
    10.30 a.m.
    Mr. Ridley: I should like to go into the events of 1973 at great length. I should like to talk at great length about how right hon. and hon. Members on the Labour Benches combined with me and my hon. Friend the Member for Oswestry (Mr. Biffen) to truncate the Bill. I am sorry that hon. Members do not want to talk about those events. I do not think that that is what we should be talking about now and I am sure that you, Sir Myer, as an excellent Chairman, whom we all admire and revere, would rule me
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    out of order if I were to try to go into those events at any great length.
    Mr. Gow: I have forgotten them.
    Mr. Ridley: My hon. Friend was not present. There was this occasion in Committee when the duration of those powers was proposed to be limited to a one-year period, with a further order power to extend them for another 12 months. I moved the amendment and was gratified on that occasion to have the support of the entire Labour Party, which was voting to end those powers which it now seeks to renew in this Bill.
    Although it is possible to say to my right hon. and hon. Friends that they have vacillated over this issue, it is not possible to say that about me and it is certainly not possible for Labour Members to say that, because they were the people who vacillated most. That is the only point I wish to establish. I do not want to blame anyone or apportion any blame. I merely want to clear that point out of the way so that I may start my speech on this group of amendments.
    We were told a week or two ago that Parliament was likely to rise on 2nd August. Why was it that this Bill was planned for tonight when the House was due to rise in three days' time? Why was it not brought forward earlier? It has all the appearance of a rushed job. It is not usual to take a Committee stage immediately after Second Reading. Presumably, Report stage will follow Committee stage with Third Reading thereafter. This is not how to legislate.
    If we had wished to pass this Bill, we could have entered upon it in May or June and taken the Committee stage upstairs in the normal way. Then the Bill would have come through and received the Royal Assent before the end of the Session. If on the other hand, the Government have changed their mind in the past few days, I suppose that they have the right to try to force the Bill through. But why make it last so long that we cannot return to the subject after October?
    We have been told that the House will be recalled on 24th October. If the Government so wished and we still had a Labour Government, they could introduce a Bill in October with considered proposals for the control of dividends.

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    They could introduce a Bill on 24th October which could be debated in detail on Second Reading.
    Mr. Litterick: Which the hon. Gentleman would approve.
    Mr. Ridley: No. I would disapprove of it—
    The First Deputy Chairman: Order. We cannot have sedentary interventions.
    Mr. Ridley: The hon. Member for Birmingham, Selly Oak (Mr. Litterick) made a speech that was highly critical of the Bill. Although it was a slightly unnatural alliance, some of my hon. Friends and I found ourselves in sympathy with the points that he made. It would be nice to explore those points in Committee, spending a few weeks going over that ground with the hon. Gentleman. We could try to explore the deficiencies in the system of dividend control which the Government are proposing. If we are to do that, it would be wise to start the Bill again in October. There would be plenty of time to get the Bill before the end of October. We would go into the minutiae.
    The trouble with this Bill is that it does not tell us the means of dividend control. It does not say what the Treasury order or the Treasury regulations will be. It does not say who will administer the control and whether there will be a system of appeals against a refusal of a dividend increase. It does not say anything at all about the details of control. These matters are important, because if we do not have a properly defined system for dividend increases, a system of appeals, and possibly recourse to the courts, we are not doing our duty as legislators. The Bill should contain provisions for all these things.
    We should not give Ministers blanket powers, especially as we are about to go into recess. In the next three months Ministers will be able to allow one dividend through and stop another at whim. I suppose that Canning Town Glass Ltd. will be allowed to increase its dividends as much as it likes, as will the Hodge group of bankers. But companies like Pirelli will not be able to do so. I expect Labour Party Properties will be able to increase its dividends by 100 per cent., and there is nothing that we can do to stop it.
    Mr. Robert Rhodes James: Has my hon. Friend noticed that although this Bill and the amendment relate very specifically to the problems of small businesses, the Minister responsible for small businesses is not in his place? His superior officer having departed, the Committee cannot hear a statement from either of them in reply to my hon. Friend's points.
    Mr. Ridley: Interest in small business on the Labour side is skin deep. Come the General Election, the Chancellor of the Duchy of Lancaster, and the Minister responsible for small businesses, the hon. Member for Keighley (Mr. Cryer) will be swept away. They will have served their purpose. That purpose is to convinu the electorate that there is some interest in small businesses in the Labour Party, which there positively is not. Does any hon. Member want to challenge that? The hon. Member for Liverpool, Walton (Mr. Heller) sits there like a stranded whale—
    Mr. Litterick: Who is in favour of preserving whales?
    Mr. Ridley: Museums are the places for preserved whales. There is no interest in small businesses on the other side of the Committee.
    Mr. Litterick: Get on with it.
    Mr. Ridley: I thought that we were in Committee on the Bill, and that a Committee stage should be taken seriously. May I seek your protection, Sir Myer? Surely we should discuss the issues involved thoroughly, and take our time to make sure we get them right.
    The Bill gives the Treasury the power to make regulations to control dividends. Will they be different from the existing regulations? There is this provision in the Bill about dividend cover which needs spelling out in an order or in regulations. We are not allowed to debate the power of Ministers, and we have no power to scrutinise regulations—
    The First Deputy Chairman: Order. I have allowed the hon. Member for Cirencester and Tewkesbury quite a bit of latitude. We began the debate with a point of order from the hon. Member for Eastbourne (Mr. Gow), on which I pointed out that this is a narrow debate,

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    dealing only with the extension of the duration of section 10 of the Counter-Inflation Act. We are not discussing the Act; we are debating only the extension of the period.
    Mr. Ridley: But if we are to discuss when the Act shall cease, it is highly relevant to discuss when the regulations are to be made and by what means. We shall adjourn next Thursday, so how are we to know what the regulations will be?
    I do not want to discuss amendment no. 7, which deals with the order-making power, because it has not been selected, but if we are not to be able to debate the regulations for detailed control of dividend increases, the power of the Act should not extend beyond the end a October.
    Mr. Hugh Dykes: Does not my hon. Friend agree that alongside those serious misgivings about the duration of the Bill, although he said that the criterion for dividend cover was in the Bill, he meant that the situation was even worse than he described, because the dividend cover criterion is not in the Bill but is part of a Treasury document to be issued arbitrarily later without sufficient explanation and establishing yet another arbitrary criterion for rule by Government decree and fiat wholly outside the legislation?
    Mr. Ridley: That is just the point. If we are to give the Government power to make regulations that will not be open to scrutiny by the House, including this new criterion, the least we can do is to return to the subject early in order to make clear what the rules are for those who may wish to raise their dividends and want to know whether they may do so. It is intolerable to give power to the Treasury to make regulations which will last for one year without our being able to scrutinise the regulations to make sure that they are fair.
    The Minister of State, Treasury (Mr. Denzil Davies): The hon. Gentleman will know that the Bill does not say anything about regulations and that the power sought in the Bill will enable the Treasury to use the existing dividends order which arose from the 1973 legislation, which the hon. Gentleman supported.
    Mr. Ridley: The Minister of State has not done his homework. The White Paper refers to a change in the basis and to this new criterion about dividend cover. Must we just accept the paragraph in the White Paper which says:
    "The Government intends to introduce a Bill to extend the statutory control for a further 12 months from 1 August 1978 on the present basis and with the present provisions for exceptions and with one addition. This is that from 1 August 1978 no company will he required by the controls to increase its dividend cover above the highest level achieved since the current controls began."
    That is not in the present regulations. Will it be put in new regulations? The Minister of State has just made a revelation to us. He said that there will not be new regulations. The new condition in the White Paper will presumably not be promulgated in regulations and we shall therefore have to rely on the vague words of the White Paper.
    Mr. Denzil Davies: The hon. Gentleman misunderstood me. The Bill that he supported in 1973 enabled a dividend order to be laid and such an order was laid as statutory instrument no. 659/73. The powers to make these rules regarding dividends arise under that order, and that applies to the regulations about cover to which he is referring.
    Mr. Ridley: The Bill which I made come to an end in 1974 and which the Minister reactivated gives him the power to make those regulations. Will he make new regulations in order to incorporate this new condition contained in the While Paper?
    Mr. Davies: There is no need to make new regulations, because the Act that the hon. Gentleman supported provides all the power that we need.
    Mr. Ridley: That will not do. The right hon. Gentleman says that the existing regulations are adequate and that he has the power under the Act to keep the regulations in force. However, we read in the White Paper that he is to change the criterion in accordance with the dividend cover condition. That may or may not be acceptable, although it is a welcome relief. However, we want to know what it means. It should be spelt out in a regulation. Will the right hon. Gentleman publish new regulations to spell out in detail what is meant so

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    that companies that might be considering taking advantage of the condition know exactly where they stand?
    10.45 p.m.
    The right hon. Gentleman says that we can live on the existing regulations. However, those regulations do not contain the condition. I ask him again: are we to have new regulations? It is no good the Minister of State talking to the Patronage Secretary. The Patronage Secretary is not welcome here at this moment. I ask him to stop interfering with the Minister of State, who is supposed to be answering a question that he cannot answer.
    Mr. Robin Hodgson: I draw my hon. Friend's attention to the article that appeared in The Times on Monday headed:
    "Treasury's dividend control plans tighter than expected by the City."
    It reads:
    "Treasury clarification of the Chancellor's dividend control proposals has revealed they are tighter than was originally thought by the City."
    It seems that the City is confused, which cannot be good. Secondly, it is obvious that some proposals are coming forward.
    Mr. Tim Renton: On a point of order, Sir Myer. Why is it that the electronic clocks have gone out of order?
    The First Deputy Chairman: I was beginning to think that in the Committee's present mood we were better off without clocks. If they are out of order, we shall not get alarmed about the time that is passing. I understand that the matter was referred to by Mr. Speaker, who announced that nothing could be done about the clocks during the sitting of the House of Commons. There is a clock in front of me and we shall get a calendar if we need it.
    Mr. Renton: Further to my point of order, Sir Myer. Is this a further example of industrial action in the House of Commons? Does not the non-functioning of the clocks make it extremely difficult for my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) to develop his argument properly, he being unable to see the time ahead of him and, therefore, unable to know how
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    the course of the debate is running? Would not it be sensible for the Committee to adjourn for a short while so that the clocks may be put in order?
    The First Deputy Chairman: Let us be serious. It is almost 10 minutes to 11 o'clock on Thursday evening. I am sure that it is helpful to the hon. Member for Cirencester and Tewkesbury if there are no clocks before him. Their absence will help the hon. Gentleman to concentrate on the subject.
    Mr. Ridley: I welcome the fact that the clocks are not working, because I am caused no feeling of guilty conscience about the sleepers to the north of the country and to Scotland. I do not remember precisely when the sleepers leave, but if I cannot see the clock there is no way in which I may know whether I am in any way inconveniencing hon. Members, and that would be the last thing that I should wish to do.
    I make a serious point about paragraph 30. The Minister of State has said that there will be no new regulations although he has put a new criterion in the White Paper. Parliament will soon go into recess and will not be sitting for three months. How are companies that come to declare dividends in the next three months to know the nature of the rules? We cannot ask questions and we cannot have debates while we are not sitting. It seems that the right hon. Gentleman owes it to the Committee to spell out in detail what the new criterion will mean so that companies may know exactly what they may do and how they may go about increasing their dividends if they so wish.
    The suggestion that the Minister will rely upon the existing regulations, although he is bringing in new conditions, is totally unacceptable. That is another reason why the whole procedure on the Bill is unacceptable. A Committee stage is to have points such as this clarified. The fact that we have to come to it immediately after Second Reading, as you so rightly said, Sir Myer, late on a Thursday night, when I am sure you are tired and wishing that you were—
    The First Deputy Chairman: Order. I have no wish to hold up the hon. Gentleman's contribution, but I am certainly not tired. If necessary, we shall

    1951
    go on till 5 or 6 o'clock in the morning. I am not going back to Scotland tonight.
    Mr. Ridley: I welcome that reassurance from you, Sir Myer, because I have quite a lot more to say.
    The First Deputy Chairman: Order. All I ask the hon. Gentleman is to remember that the Committee stage is to deal with amendments that have been submitted and selected and to speak to them.
    Mr. Ridley: I do not think that I can be accused of not speaking to the amendment.
    Mr. Bruce Grocott: The hon. Gentleman may not be tired, but I am concerned to hear that many of his hon. Friends are. I understand that many of them have gone home to bed. [HON. MEMBERS: "No"] His hon. Friends are denying it. Plainly, there is a dispute on this matter. The hon. Gentleman feels strongly about this amendment. Therefore, will he undertake to press it to a Division? It is important that it should be pressed to a Division. We shall then be able to see from the Division List how many of his right hon. and hon. Friends feel strongly enough about the amendment not to have gone to bed.
    Mr. Ridley: The hon. Gentleman was elected to come here to discharge a serious duty: to make sure that the legislation that he helps to pass is clear and precise and is available to his constituents so that they may know what the law is. The Committee stage of a Bill—I am sorry to give him this lecture, but he apparently does not know the procedure of the House of Commons—is to determine the precise meaning of legislation and to amend it in such a way as to make it clear to all so that they may obey it. If the hon. Gentleman is bored and tired and is not interested, he is not serving his constituents at all well.
    I believe that the Bill is in such a mess and will cause so much confusion that we should end its duration at the end of October and come back to the subject with a new Bill. The Liberal Party thinks that we could let this measure run till Christmas and come back to it then.
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    The difficulty about the dates argument is who will be sitting on the Treasury Bench either in October or at Christmas. The Minister of State looks terribly unhappy on the Treasury Bench. He has never seemed to sit there very well. Indeed, he has been abandoned by his right hon. and hon. Friends. I can only tell him that my hon. Friend the Member for Blaby (Mr. Lawson), my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) and my hon. Friend the Member for Horncastle (Mr. Tapsell) do not sit easily on the Opposition Front Bench. If my hon. Friends and the hon. Gentleman were the other way round, we might be able to deal more simply with this matter. I do not think that my hon. Friends would have a Bill of this kind. That would clear up the anomaly altogether. I think that we should review the position as soon as we have decided who is going to sit on which Bench. That is why I put down the amendment to which you, Sir Myer, have kindly allowed me to speak.
    I thought—maybe ignorantly and wrongly—that by the end of October we should know where we should sit in this Chamber. I am confident that we shall be sitting on the Government Benches. That would change the whole picture. Our whole attitude to the Bill would be changed in that event.
    The point is—there is the Chief Secretary now—that it would be much better to come back to this question after we have decided who is to govern the country. If by any chance there is not to be a contest in the autumn, the Government are beholden to come back with precise proposals, properly clarified in a schedule, with powers which we can amend in Committee, carefully set out so that everybody knows what they are so that there is a proper and accurate instruction to companies and so that we can go through them and amend them.
    It seems to me that that is the right way for us to proceed, and for this dying Government, in their dying days, at the end of July, to try to get through in one night this iniquitous little cosmetic Bill is one of the biggest assaults upon the rule of law and upon the trust of the people, and it is a practice which should never be repeated by people who should never be allowed to legislate again.
    Mr. Percy Grieve: I support the amendment moved by the hon. Member for Colne Valley (Mr. Wainwright), just as I would support any amendment which was moved endeavouring to cut short or truncate in any way the tragic obtuseness of the measure to which the House has given a Second Reading tonight.—[HON. MEMBERS: "Reading"] I am reading nothing. I am looking at the new amendment handed in and marked with an asterisk.
    Mr. Litterick: Bleeding hearts.
    Mr. Grieve: Bleeding hearts are something that the hon. Member for Birmingham, Selly Oak (Mr. Litterick) and I have shared in common, and I shall say nothing more about them.
    I am devoting my attention to the necessity which this country is under of encouraging investment in industry. When I ventured to intervene earlier this evening in the speech of my hon. Friend the Member for Blaby (Mr. Lawson) during the Second Reading debate it was to point out that other countries, much more successful than we at the moment in our industrial, commercial and financial policies, are adopting very different policies from these.
    Here we are, landed by this Government, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said, in their dying days, in the eleventh hour probably of their ultimate Session, with a Bill designed to be pushed through the House in one night to extend dividend limitation. Why? It is not because it is desirable in the interests of the economy of the country—it is utterly and completely undesirable in the interests of the economy—but so that the Government may say to the unions when they are trying to get support for a pay policy "Ah, but we have limited dividends as well". What a negation of all the qualities of leadership that one ought to expect in a Government who ought at least to have the nous and the ability to be able to explain that the raising of dividends within the limits of the capacity of the profitability of companies—
    The First Deputy Chairman: Order. The hon. and learned Member knows that what he is talking about is entirely out of order on this amendment. He is making a Second Reading speech.
    Mr. Grieve: I hesitate to join issue with the Chair, Sir Myer, but, with respect, the point that I am desiring to make is that the Bill is undesirable, and therefore the shorter its duration, the better. In my submission, it is in order to expound the reasons why the Bill should have no longer an existence than is absolutely necessary, even in the view of this Government, and in my view, because I voted against it tonight, it is undesirable anyway.
    Mr. Litterick: The House is gratified that the debate has ceased to be an exercise in irresponsible frivolity, which it was until a few minutes ago. Does the hon. and learned Gentleman agree that if the Bill is enacted the constraint on dividends will be just as ineffective as before the Bill was introduced?
    11.0 p.m.
    Mr. Grieve: I do not accept that it has been ineffective but it has been haphazard and unjust It has fallen wrongly on the wrong companies and piled up profits so that some companies have not been able to pay out their money. It has been haphazard and inefficient.
    I say that the measure should last as short a time as possible because it is inimical to the industrial and commercial well-being of the country. At the time when the Government of the French Republic are encouraging investment in the ordinary shares of industrial and commercial companies by giving tax relief on the first 5,000 francs of income that any citizen of the Republic who is paying taxes invests in industrial or commercial companies, we are doing the reverse by discouraging investment. It is time that we looked at our neighbours in the European Community and elsewhere and learned from them the stupidities and tragic inhibitions which we put upon industry.
    Mr. Ioan Evans: The hon. and learned Member is attacking not only the amendment but the whole Bill, root and branch. He disagrees with it in principle. What did the hon. and learned Member do when section 10 of the Counter-Inflation Act 1973 went through the House? Did he vote for it?
    Mr. Grieve: I cannot say whether I voted for it, against it, or abstained. Times change. Since 1974 we have seen

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    this country go down hill, unemployment increase from 800,000 to 1,800,000 and the worst inflation we have ever known. Why? Because industry is being penalised.
    The First Deputy Chairman: I insist that we discuss the amendment. The hon. and learned Member for Solihull (Mr. Grieve) knows that he is out of order.
    Mr. Grieve: I hesitate to take issue with the Chairman but, with respect, the limitation of time on the Bill goes to its root. I suggest that the Bill is bad. I am entitled to explain why I think it is bad and, therefore, why—
    The First Deputy Chairman: Order. The proper time for discussing whether a Bill is bad is on Second Reading. The House has given the Bill a Second Reading.
    Mr. Grieve: With respect, Sir Myer, the amendment limits the Bill, not until Christmas as my hon. Friend the Member for Cirencester and Tewkesbury said, but to Hogmanay. I would agree even more with my hon. Friend's amendment to limit the Bill to October when I hope we shall substitute a better Government. Whether it be to Christmas or Hogmanay, when some of our Scottish friends will have gone north to enjoy the pleasures of that season—
    Mr. Robert Mellish: I hope that the hon. and learned Member appreciates that the Scottish Tories have already gone north.
    Mr. Grieve: I cannot speak for my Scottish colleagues but I can say that I see on the Government side of the Committee fewer than half the number of hon. Members who are sitting on this side.
    I support the amendment of the hon. Member for Colne Valley, as I would have supported the amendment of my hon. Friend the Member for Cirencester and Tewkesbury, in that it would limit the duration of dividend control. I support it because dividend control is thoroughly bad. It is inimical to savings, to industrial progress and to the commercial and industrial well-being of the country.
    That has been recognised by countries that are currently eminently more successful than we are in meeting the prob-
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    lems that face the whole of the western world. I would have hoped that the Government would draw a lesson from that fact and not persist with this Bill tonight, or, if they persist, do so only for a limited period such as is advocated by the hon. Member for Colne Valley. The limitation he proposes would have no effect on the nation's economy in the sense that the amount involved would be minimal compared with the amount paid out in wages and salaries. The Bill will have a vastly inimical effect in discouraging investment, saving, thrift and enterprise.
    Mr. Hodgson: I support the amendment for a specific and technical reason relating to impending changes in accounting treatment that will affect the treatment and payment of dividends under the regulations that the Minister has already described.
    My hon. and learned Friend the Member for Solihull (Mr. Grieve) has already talked about some of the technical defects that have arisen under divided limitation. He referred to the artificial devices—the problems of having artificially to raise capital in order to secure freedom from dividend restraint. He said that weak companies are being forced to pay a 10 per cent. increase year after year, because if that increase is not paid the ground lost cannot be made up in subsequent years. He referred to the way in which good companies have ben held back and have been unable to pay a proper reward to their shareholders. All that seems to provide a praiseworthy reason for supporting the amendment and ensuring that dividend limitation is ended as soon as possible.
    There is an additional point which concerns the implementation of the accounting standards profession exposure draft 19 which relates to the subject of deferred taxation. It is important, because until now companies have had to set aside deferred taxation at the rate of 52 per cent., even where the taxation is likely never to have to be paid. Under the requirement of exposure draft 19, that will no longer be the case. Directors will no longer be required to put into a deferred taxation account such taxation as may not be expected to be paid within some reasonable period in the future.

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    That means that hereafter companies will show a highly variable rate of corporation tax in their accounts. Under the regulations that I understand will be made, and I refer here to the Financial Times article about the Government's plans for dividend control, there will be a considerable change in the method and manner of calculating dividend cover.
    The regulations contained in exposure draft 19 will come into effect at the end of this year. It will then be mandatory for United Kingdom companies to carry into effect the recommendations of the accounting profession. As a result, from 1st January next no United Kingdom companies will any longer be required to set aside deferred tax, but will be allowed to flow it through into profits. As such, their dividend cover will be radically altered.
    Mr. Terence Higgins: This is a most important point, which I am sure the Minister of State has taken. As I understand it, what the Government propose is that the calculation of cover shall be on what is described as "consistent accounting bases", which presumably would not be on the basis which my hon. Friend has suggested, which would be to change from one system to another. If that is so, despite what the Government are arguing, the fact is that companies would be increasing their dividend cover. Even at this late hour of the night, I hope that the Financial Secretary will make quite sure that his officials have got the answer right and that he will tell the House what it is.
    Mr. Hodgson: I am extremely grateful to my hon. Friend. It is a matter to which I was going to come, because it has arisen in the financial press several times in the past week. Quite apart from every other aspect of the inimical effects of dividend restraint, the conditions of uncertainty that are prevailing as a result of this particular approach seem to me to make the results doubly undesirable.
    Mr. Gow: Is my hon. Friend saying to the Committee that he thinks that if this Bill is passed without the amendments, we may be in breach of some obligation, real or imaginary, imposed upon us by Commissioner Jenkins and by Viscount Davignon?
    Mr. Hodgson: I do not think that it will be anything to do with them. It will be to do with the charered accountants' profession within the United Kingdom. None the less, the point made previously still stands. This is a United Kingdom requirement rather than an EEC requirement, and one that will have far-reaching effects. As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) pointed out, we do not yet know in detail the Government's thinking on this point. Next year a United Kingdom company, having a highly variable rate of corporation tax—and a rate that can vary from half-year to half-year—will be able, because of the requirement of exposure draft 19, to have a variable amount of dividend paid because of the restrictions contained in the calculation of cover.
    Mr. Tim Renton: I wonder whether my hon. Friend, despite his deep knowledge of the subject, has not dismissed the important point raised by my hon. Friend the Member for Eastbourne (Mr. Gow) a little too quickly.
    Mr. Peter Tapsell: I cannot hear my hon. Friend.
    Mr. Renton: Then I shall speak a little louder.
    Mr. William Ross: And take your hands out of your pockets.
    Mr. Renton: The fourth directive on company law—as the right hon. Member who has just interrupted from a sedentary position will well know—
    Mr. Gow: Will my hon. Friend give way?
    Mr. Renton: —has just passed into law in Brussels. [Interruption.] This is an important point, Sir Myer, and it is relevant.
    The First Deputy Chairman: What I am concerned about is that we seem to be entering into what is not strictly parliamentary conduct. We have one hon. Member wishing to intervene during another hon. Member's intervention. I think that this is getting somewhat out of hand. Has the hon. Member for Mid-Sussex (Mr. Renton) finished his intervention?
    Mr. Renton: I have not, Sir Myer, because I was pursuing this point. The

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    point about it, Sir Myer, as you will certainly know, is that the fourth directive on company law has just been passed by the Commission. That directive demands that companies follow certain standards laid down by the EEC so far as auditing their accounts is concerned. The point raised by my hon. Friend the Member for Eastbourne is that we shall be changing from one treatment of deferred tax to another on 1st January. This will be substantiated in EEC requirements.If therefore we are running—
    The First Deputy Chairman: Order. Is the hon. Member making a speech or an intervention?
    Mr. Hodgson: I am grateful to my hon. Friend. I would never dismiss lightly anything said by my hon. Friend the Member for Eastbourne (Mr. Gow). If I have missed some detail of EEC regulations and legislation for which Commissioner Jenkins or Viscount Davignon is responsible, I am sure, Sir Myer, that my hon. Friend will mention it if he catches your eye.
    However, returning to the point I was making, I think that the nub of it was put in the Lex column in the Financial Times on Monday, when Lex wrote:
    "However in practice there are obvious drawbacks. Take a company which, for one reason or another, paid little tax in 1973 and lots in 1978 It could be tempted to provide for deferred tax just in order to smooth out its dividend cover, even although it felt that such a treatment was not really appropriate for the business. An attempt to build statutory restrictions on loose accounting practices is bound to lead to distortions-and will provide yet another incentive for companies to pick and choose their accounting policies."
    I hope that Ministers are clear about whether they are prepared to encourage United Kingdom companies to pick and choose their accounting policies and about what effect that will have on economic and business management. We should restrict the Bill to the shortest possible time. I support the amendment.
    11.15 p.m.
    Mr. Nicholas Winterton: I will be brief, and will talk precisely to the amendment. I am concerned about justice. If, with their parliamentary majority, including the support of a minority party which has taken its decision on political grounds rather than
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    grounds of reason and sense, the Government are determined to force through the Bill, the injustice should last for the shortest possible time.
    The speeches in this debate have added ammunition to our case. The Government pay lip service to people and to concern about unemployment. Unemployment can be solved only by confidence and investment. The Bill will reduce investment and allow unemployment to stay high and perhaps increase.
    The hon. Member for Colne Valley (Mr. Wainwright), who is experienced in accountancy, made a brilliant speech on Second Reading, which I hope will be publicised tomorrow, both on the radio and in the press by those journalists who can write about such a complicated debate.
    One reason that the hon. Member gave for the amendment was justice, and that is why I make a plea to the Minister of State. He is a man of considerable ability, though not perhaps with the business experience to understand what dividend restraint involves. My hon. Friend the Member for Walsall, North (Mr. Hodgson), who is experienced in these matters, has asked important questions. The Minister may think that some of our speeches have been rather trivial and humorous, but that to some extent is the fault of the hon. Member for Birmingham, Selly Oak (Mr. Litterick), who has now left the Chamber. He encouraged my hon. Friends to indulge in the sort of parliamentary behaviour of which you, Sir Myer, do not approve, but the Opposition have only certain ways of dealing with legislation that is driven through the Committee by people who do not understand what is at stake.
    My hon. Friend the Member for Walsall, North and my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), whose knowledge of money matters should be respected by all hon. Members, made useful speeches. My hon. Friends the Members for Worthing (Mr. Higgins) and Mid-Sussex (Mr. Renton) will also speak from their considerable experience of the economy and of industry and commerce. This Bill will affect industry and commerce.
    The critical issue in the imminent General Election, which members of the Government will have to face, is likely

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    to be unemployment. If the Government and their supporters are genuinely concerned about unemployment, they ought not to press this Bill through all its stages tonight, or, if they are determined to do so, they should heed the sensible amendment moved from the Liberal Benches. Unemployment can be remedied only by further investment. The Bill will inhibit investment. Therefore, the shorter time it is in effect, the less damage will it do and the sooner will greater confidence return to this country.
    The trade union movement does not really want this face-saving device which the Government propose. As the hon. Member for Colne Valley said on Second Reading, the trade unionists see through it. It is meaningless, but it has an effect upon confidence and upon investment.
    I put this plea to the Treasury Minister: think again; recognise the good sense behind the amendment. It is up to the Government not just to pay lip service to employment but to do something positive about it. The Bill is not required. The leaders of the trade union movement, who are politically motivated, may indicate that they require it for some sort of bargaining over the voluntary incomes policy which the Government are endeavouring to force upon the country, which also is meaningless, in my view, but it will not be helpful. We want employment, and the Bill will damage it.
    I urge the Minister to show a glimmer of sense in the dying hours of this day, of this Parliament and of this Government. Perhaps he will go out of power then with a little bit of credibility.
    Mr. Higgins: The purpose of the amendments is to restrict the period for which the Government wish to extend dividend control, substituting for the end of July 1979 either October this year or December this year. There are powerful arguments in favour of the amendments.
    I shall deal first with the argument that those of us who supported the original introduction of dividend control back in 1973 should in some way feel obliged to continue to support it now. That is an unbelievably naive argument. It may well be that at any given moment one feels that there is a case for a temporary measure, but that does not means that one ought to go on supporting it indefinitely,
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    and least of all in the case of dividend control, because the distortions which it causes become greater and greater over time.
    It is extraordinary that in recent weeks, week after week, when the Chief Secretary has been asked when this measure was likely to come forward, or whether it was to come forward, he has replied "At the appropriate time". We now know that the appropriate time means the last possible moment, it then being rushed through the House without adequate time to consider the ramifications, not the least of which is the important matter of the accounting profession's recommendations just raised by my hon. Friend the Member for Walsall, North (Mr. Hodgson).
    Mr. Ioan Evans: The hon. Gentleman was one of those who supported the original measure in 1973. For the record, since it appeared that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) could not remember whether he had voted for it, it should be noted that in fact he voted for it, as did the hon. and learned Member for Solihull (Mr. Grieve). Is it that the country was in a worse state in 1973 and we needed this measure? Are the Opposition now arguing that the position has so much improved under this Government that it is no longer nececssary?
    Mr. Higgins: The question is simply one of equity and fairness. When we introduced it and I voted for it, we had a statutory policy on wages and we had a statutory policy on dividends. Therefore, it was an equitable arrangement. But nothing could be less equitable to dividend recipients, not least pensioners and others in my constituency, than the performance that we have had on dividends under this Government.
    The Government came into office in February 1974. For nearly two years we had a wages explosion. There were tremendous increases—increases of 30 per cent. to 35 per cent. or more were given to people under various trade union wage claims. Meanwhile, dividend control continued. I hope that the Minister of State, who is muttering to himself, will be kind enough to tell us exactly what the figures were for each year from 1974 until now for the increase in wages and the increase in dividends. This is a vital

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    matter, and it is why the measure should not be continued any longer. That is why I support the amendments.
    This is a matter of great concern to my constituents. My constitutents, many of whom are on fixed incomes, many of whom rely on insurance policies or their savings invested in equity shares, have been grossly penalised under this Government because of the way in which dividend control has been imposed at the same time as the Government have failed to control wages and earnings.
    Mr. Denzil Davies: I suggest that the hon. Gentleman's constituents were more grossly penalised by the money which he and his colleagues printed whilst at the Treasury, which caused the monetary explosion two years later and created the high rate of inflation.
    Mr. Higgins: The answer to that is very simple: my right hon. Friend the Leader of the Opposition gave it in the debate only two days ago—that we were told in October 1974 that all was well, that with all the problems of inflation, all the problems of unemployment and so on, everything was all right. Therefore, the right hon. Gentleman cannot argue that. It is a completely false argument, and he is estopped from putting it forward.
    I want a specific answer from the right hon. Gentleman to the following question, because we can judge the amendments only in the light of the answer. What has been the percentage increase in wages and dividends in each year since 1974? It is a matter of tremendous importance to my constituents. They have suffered as a result of the inequitable policy of this Government.
    It is not simply a matter of the period 1974, 1975, 1976. It is equally true of the last stage of the Government's pay policy, which we are told has been a tremendous success. What happened? We had a 10 per cent guideline, which shifted from being a guideline on earnings to being a guideline on wage rates and so on. I think that it is now generally conceded that the increases were of the order of 15 per cent., or more—in many cases a great deal more. In some cases, such as wages councils, they were up to 20 per cent.
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    Those increases were being paid to people under the Government's pay policy at the same time as dividends were being restricted to 10 per cent. My constituents who have been relying on dividends or on their pensions have been restricted accordingly. Therefore, even in the most recent period of Government pay policy the constraint on dividends has been grossly unfair. I do not see that the right hon. Gentleman can seriously dispute that.
    I want to take up another point which is relevant to the amendments. It was made by the Prime Minister in a rather more technical passage of an otherwise sordid speech. He said:
    "the Government have decided to introduce this Bill"
    —the one we are now debating—
    "because, in our view, it would be quite wrong, when we are asking working people to exercise moderation on pay in the year ahead,"
    I stress "the year ahead", because that is what the amendment is concerned about, namely, the duration of this measure—
    "to fail to do everything in our power to see that moderation is exercised with dividend payments.
    I do not believe that the argument is conclusive that insurance policy holders or pension fund beneficiaries will be adversely affected by this measure. What affects them even more than dividend control is the erosion of the value of their savings by inflation, and they have as much to gain as any other group"— [Official Report, 25th July 1978; Vol. 954, c.1386.]
    from the prevention of that, I agree, but it will be clear to the Committee that there is a monumental non sequitur in the Prime Minister's argument. It does not follow at all that because inflation is being brought under control such people should have their incomes restricted. Anyway, the policy as it has operated in the past year and as it is now proposed to operate under the Bill is grossly inequitable. That is why I believe there is a strong case for the amendments. The fact is that it is naive to suppose that the imposition of this measure will have any significant impact on the level of inflationary wage claims.
    11.30 p.m.
    The Chief Secretary sought on Second Reading, in a rather bumptious speech, to suggest that a great deal of these dividends go to people on high incomes.

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    He totally failed to answer—I hope that the Minister of State will do so—the question of precisely how much of any given dividend increase received by someone on a high income will go in taxation. The Chief Secretary seemed to express surprise that somehow we thought taxation was relevant in this context. Quite clearly, if one is considering whether the policy is equitable, it is after-tax income that one is concerned with, not pre-tax income. It is important that that point should be made.
    My next point again concerns the duration of the measure—should it go on for four months, six months, or a year? It is the question of the distortion of the capital markets. We had a wide-ranging debate on the point and we asserted that the effect of dividend control was to create a situation where capital markets were distorted so that money—that is to say, capital—did not go into those firms which were most efficient and which paid the greatest yield.
    A number of hon. Members opposite said that it did not really matter because companies were ploughing the money back and that therefore all was well. But it is not well at all. We do not want companies necessarily to plough money back; it is better that it should be distributed through the market and go to firms which have greatest need of it. The longer this distortion goes on, the worse it is. That is why we should not have a 12-month continuation. It continues to create a gross maldistribution of the resources of our economy to the detriment of everyone, not just the poor, or the rich, or those in the middle, but everyone.
    Mr. Hodgson: Is not the situation even worse than my hon. Friend has suggested, in that some companies not only are not ploughing it back into their own businesses, let alone having it redistributed through the market, but in some cases are keeping it in cash in their balance sheets? I am referring, for example, to the consolidated balance sheet of John Haggas Limited, for the year ended 30th June 1977, showing that it has £6 million invested in gilt-edged. Is that a good way to regenerate the British economy?
    Mr. Higgins: It is not a way to regenerate the British economy at all. It is a way of getting the Government off the hook of having a borrowing requirement that is too large. But I should be out of order, Sir Myer, if I were to pursue that point.
    The First Deputy Chairman: I would say that 90 per cent. of the hon. Gentleman's speech is out of order. We are having another Second Reading debate. It is grossly unfair to the Chair that advantage should be taken of it in this way.
    Mr. Ridley: On a point of order, Sir Myer. Could you tell me where my hon. Friend has been out of order? It seems to me that he has been making points entirely relevant to the amendment.
    The First Deputy Chairman: We have had a Second Reading debate on extending the Bill from 31st July 1978 to 31st July 1979. We had hours of debate on Second Reading—there was even difficulty getting hon. Members to come in and take part. Now we are beginning to get it resuscitated and are getting into a Second Reading debate again. That is my opinion.
    Mr. Higgins: Further to that point of order, Sir Myer. I must say to you that I spent a considerable time this afternoon trying to get in on the Second Reading debate, and I did not succeed. I am not now making a Second Reading speech. Had I been out of order earlier, surely you would have called me to order, which you did not do. When I was tempted by my hon. Friend the Member for Walsall, North (Mr. Hodgson), I immediately made but a passing reference and said that I did not propose to go out of order on that point.
    The First Deputy Chairman: As it gets towards midnight, I get very tolerant.
    Mr. Higgins: That may be, Sir Myer. Perhaps that may be true of all of us. Perhaps I may pursue the point as to the length of time this measure should continue, which is the point to which I have addressed my remarks throughout. In my view, there is not a case for continuing it for 12 months. The amendment would improve the situation because of the serious effects which I believe the

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    measure will have both on one's constituents and on the economy as a whole.
    There is a point here, on which I hope we shall have clarification from the Minister of State in winding up the debate, with regard to the duration of the policy. The Chancellor of the Exchequer this afternoon at Question Time, in a rather remarkable statement, said that all the economic policies of the Government had the support of the IMF. Can the Minister of State tell us whether the perpetuation of dividend control for another 12 months has the explicit support of the IMF? I should be very surprised indeed if that were so.
    As to the duration of dividend control, in putting forward these proposals the Government have suggested throughout—and particularly the Financial Secretary, who, I am glad to see, has just returned to his place—that they have to proceed by consensus. That is the key word that we have heard throughout the day in justifying the extension of dividend control for another year. What opportunity for expressing a consensus do any of my constituents, living on fixed incomes and investments in equities, have? They are not to be given any opportunity whatsoever to reach a consensus. My constituents will have no option to reach a consensus.
    Under the Bill, if the Government get their way and it is for a year and not for some shorter period, my constituents will be forced to conform, whereas those who are getting wage claims granted which are far in excess of anything that my constituents have had over the last five years will be part of the consensus. It is a very partial sort of consensus that the Government want for 12 months rather than four months. That being so, it seems to me that this is a measure which ought to be curtailed at the earliest possible moment.
    Finally, I turn to the question of dividend cover and the proposals made in the Bill. Again, I hope that if the Government are really proposing it for 12 months, they will make clear their intentions tonight. Surely, in considering the duration for which we ought to have dividend control extended we ought to consider what it is that the Government have in mind. As I understand the position, the original resolution was implemented by a statutory instrument, but its
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    operation has turned upon the way in which the Treasury has decided to agree or not to agree to a given increase of dividend or to the maintenance of existing dividends.
    In the light of the press notice from the Treasury, I understand that the Treasury will take into account several different factors in deciding whether to give consent. It is surely right in deciding what the duration of the measure should be to know on what criteria the Government and the Treasury propose to give consent to any given increase in dividend. I hope, therefore, that the Minister of State will not hesitate to ensure that that is covered during the course of the debate.
    For all these reasons, I believe it right and proper that the Government should give us an answer to these points before we decide what to do about the group of amendments, which I believe have powerful arguments in their favour.
    Mr. Gow: I rise to support the amendment moved by the hon. Member for Colne Valley (Mr. Wainwright). Of course, it was my hope, Sir Myer, that the Chairman of Ways and Means would select amendment no. 2, which stands in the names of my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) and my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). But very often in life we have to make do with second best. That is why, as amendment no. 2 was not selected, we turn to the amendment proposed by the spokesman for the Liberal Party.
    In the beneficent presence of my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) I wish to follow the remarks of my hon. Friend the Member for Worthing (Mr. Higgins). When we are deciding for how long the measure should remain in operation we are entitled to reflect how it will affect our constituents. My hon. Friend the Member for Worthing has a unique qualification for addressing the Committee. He used to occupy the post held by the Minister of State at the Treasury, who is to reply to the debate.
    It would be invidious to make a comment upon the contrast between the virtues of my hon. Friend and, as I believe, the shortcomings of his successor. My

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    hon. Friend the Member for Worthing—I do not wish to embarrass him by suggesting that he has anything in common with the hon. Member for Eastbourne—has, like the hon. Member for Eastbourne, a very high proportion of his constituents over the age of 65. I invite my hon. Friend to correct me when I suggest that 34 per cent. of his constituents are over the age of 65.
    Mr. Higgins: I have not checked up recently. The figures vary from time to time so that it is difficult to know whether his constituency or mine has the highest percentage of elderly people. What we can agree on is that they will all be badly hit by the Bill.
    Mr. Jonathan Aitken: Since we are in this game of statistics, particularly in relation to those of our constituents who are elderly and dependent for their livelihoods on fixed incomes and investments, may I draw my hon. Friends attention—lest it be thought that Worthing and Eastbourne have a monopoly in this matter—to the fact that further down the coast, in areas represented by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) and myself, there are even higher figures? There are 36 per cent. to 37 per cent of the population over the age of 65, many of them dependent upon fixed incomes and equities for their livelihood.
    Mr. Gow rose—
    Mr. Grieve: Will my hon. Friend give way? It is important that I should draw to the attention—
    The First Deputy Chairman: Order. I regret very much having to say that I am now experiencing something which I have not experienced during four years in the Chair, namely, behaviour that is wholly unbecoming. We have one intervention and then the hon. and learned Member for Solihull (Mr. Grieve) is intervening on an intervention. I do not think that that is behaviour which does credit to the British House of Commons.
    Mr. Grieve: My hon. Friend gave way to me, Sir Myer, I am intervening.
    The First Deputy Chairman: Mr. Gow.
    Mr. Gow: The longevity of the constituents of my hon. Friend the Member for Thanet, East (Mr. Aitken) will come as no surprise to the Committee. If I were a constituent of my hon. Friend, I believe that I, too, should live for ever.
    My point is that those who are dependent upon what the Government call unearned income and what I prefer to call hard-earned and hard-saved income have a particular interest in bringing this measure to an end as early as possible. This is where my hon. Friend the Member for Worthing and I have this common bond. This possibly applies to my hon. Friend the Member for Thanet, East and perhaps my hon. Friend the Member for Horncastle (Mr. Tapsell). Up to a third of our constituents are dependent upon their hard-earned, hard-saved income. That is why we want to bring this Bill to an end as soon as possible.
    11.45 p.m.
    At the beginning of this debate we saw the fleeting presence of the Chancellor of the Duchy of Lancaster. When this matter was debated around the Cabinet table, I expect that the Chancellor of the Duchy raised his voice against the Bill and in favour of an amendment —although it was not then tabled—along the lines of the one moved by the hon. Member for Colne Valley.
    Looking at the Government list one sees that there are 24 members of the Cabinet, and the Chancellor of the Duchy is No. 24. He is five places below the Chief Secretary to the Treasury, who is not with us at present. There is little doubt that both the Chancellor of the Duchy and the Chief Secretary are really hoping that the Liberal amendment is carried tonight.
    When we decide how long this Bill should remain in operation, we are entitled to look at the parent Act. A great deal of criticism has been levelled at some of my hon. Friends because of the way in which they voted in favour of the parent Act in 1973. Some of us, whatever our sins, were not guilty of that particular sin. Had we been here we might have been guilty, but by an accident of events were were not here.
    Mr. Aitken: My hon. Friend should not press my hon. Friends too hard to recant on their previous votes. Recently

    1971
    I was reading how the present Prime Minister once challenged Winston Churchill on a point of inconsistency because he had altered his views. The Prime Minister was floored by the Churchillian retort:
    "My views are a harmonious process in relation to current events."
    Surely the same could apply in this case.
    Mr. Gow: I am grateful to my hon. Friend, who has called in aid a former Prime Minister. In defence of my hon. Friends I call in aid the Lord President of the Council, who once said that a foolish consistency was the hobgoblin of little minds.
    Section 10(2) of the parent Act says:
    "The powers conferred by subsection (1) above shall be exercisable by order, or by notice given to the company, or each of the companies, affected by the notice."
    My hon. Friend the Member for Croydon, South (Mr. Clark), with his prolonged experience of financial matters at the very highest levels, explains to me that he agrees with my criticisms.
    In these amendments we are saying that we wish to restrict for as short a period as possible the power of the Treasury, by order or by notice, to restrict the declaration of dividends, because we do not like Ministers, least of all these Ministers, issuing notices and orders without the necessity for the assent of the House in accordance with section 10. There is power for an order under section 10 to be annulled in pursuance of a resolution of either House of Parliament, but that power does not apply to a notice.
    There is an amendment in the name of the hon. Member for Eastbourne suggesting that no order could be made unless it had been approved by a resolution of this House. That was not a bad suggestion, but, unfortunately, the amendment was not selected.
    What is the objection to following, just once, the guidance of the Liberal Party? It was once described by Lord Butler as a band of visionary missionaries with neither vision nor mission. I do not quarrel with that opinion, but it would be unfair to say that no good thing can come out of Colne Valley. Sometimes good things can come.
    Mr. Richard Wainwright: The hon. Gentleman will be aware that in the 97
    1972
    years that Colne Valley has been a parliamentary constituency it has never returned a Conservative Member. That adds force to his declaration.
    Mr. Gow: I see that the Patronage Secretary has come to listen to the speech by the hon. Member for Eastbourne, who was waxing eloquent—
    The First Deputy Chairman: Order. Will the hon. Member for Eastbourne (Mr. Gow) please keep to the amendment as far as possible and stay in order?
    Mr. Gow: I was paying tribute to the hon. Member for Colne Valley for the way in which he had drafted the amendment, because its effect will be that we shall have the Bill not for 12 months, as the Government propose, but for only five months. We could look at the matter again in five months' time. My hon. and learned Friend the Member for Dover and Deal and my hon. Friends the Members for Horsham and Crawley and Worthing will be able to speak with even greater authority then.
    There is no reason for us to extend this power of the Treasury for as long as 12 months. We have become mesmerised by a period of 12 months. I am glad to see that my hon. Friend the Member for City of London and Westminster, South nods in assent. We should not be mesmerised by the period of 12 months. There is no intrinsic superiority in that period over five months, and that is the burden of the amendment moved by the solitary representative of the Liberal Party, the hon. Member for Colne Valley.
    It is not only the Liberal Party that is in favour of five months as opposed to 12 months. The Liberal Party is hell bent en creating not Europe des patries, as I should like, but either a unitary State or a federal State. Therefore, it wants to move away from dozens. As even the hon. Member for Colne Valley will agree, there are 12 in a dozen. If the Liberals have their way, we shall move only in decimals. However, there is nothing magic about 12 months. The hon. Gentleman has hit upon that. He is asserting that there is sometimes virtue in five rather than 12.
    The Committee would be well advised—this does not happen very often—to accept the advice offered to us by the solitary representative of Liberalism. Before

    1973
    my hon. Friends add the weight of their voices, we need to remind ourselves that those who have retired and those no longer able to work desire and should receive the consideration of the House of Commons.
    Mr. Denzil Davies: At this stage I should intervene. There have been a number of speeches and a number of questions have been asked. Some of the questions did not necessarily appertain strictly to the amendment, but they were still important and I shall do my best to answer them.
    Before I deal wth the amendment of the hon. Member for Colne Valley (Mr. Wainwright) I shall deal with two questions. The hon. Member for Walsall, North (Mr. Hodgson) asked about the change that might take place in the accounting system as a result of various guidances issued by the accountancy bodies. The hon. Gentleman will not expect me to comment on the way in which the cover provisions will apply to a particular company. The Treasury will have to apply the provisions according to the way in which a company puts forward its accounts. I think that he will agree that the provisions will have to be applied on a consistent basis. It would not be right to apply one form of accounting procedure for year three, for example, and different procedures for years two and one. The answer that I give him may not be entirely satisfactory, but the accounting will have to be applied on a consistent basis. The cover provisions could not be applied on one basis for one year and on another for another year.
    Mr. Hodgson: Do the right hon. Gentleman and his advisers consider it possible to adjust back to take care of inconsistencies or changes in accounting procedures? Often it is not possible to make backwardation historic adjust ments?
    Mr. Davies: I am not an expert on these matters. I accept that it is probably difficult to adjust in that way. The Treasury, with its accounting experts and its accountant, will attempt to come to some arrangements with the companies to apply on a consistent basis.
    The hon. Member for Worthing (Mr. Higgins) made an extraordinary speech.
    1974
    I have great regard for the hon. Gentleman. I note that he is no longer in the Chamber. I shall wait until he returns before I answer his question.
    The amendment seeks to limit the date of operation of the Bill to 31st December 1978. He said that he was moving the amendment as a contribution towards a consensus. He accepted that there had to be some sort of consensus on incomes, profits and dividends. As the Government were seeking to get consensus on incomes, he accepted that there had to be some consensus on dividends. However, he thought that that should stop in December.
    All that the hon. Gentleman is putting forward is half a contribution towards a consensus. The period to 31st July 1979 more or less covers the pay round. But the hon. Gentleman wants to stop in the middle of the pay round.
    In December many of the more vital wage agreements come up. For example, the National Union of Mineworkers may be negotiating at that time, and other groups negotiate from November onwards. The House of Commons having accepted on Second Reading that we should have statutory dividend restraint, I cannot think of anything more silly than that in December—right in the middle of vital negotiations affecting the rate of inflation and the economy—dividends should be freed. If the Bill did not become law, we could have companies declaring dividends of possibly 200 per cent. to 300 per cent. and these being blazoned in the newspaper headlines at the very time that workers will be negotiating wage increases and the Government will be asking for those increases to be restricted to 5 per cent.
    12 midnight.
    Mr. Peter Viggers: Would it not be possible for the right hon. Gentleman to take a mature attitude to negotiations with any group of workers seeking a pay increase by explaining that, as two-thirds of dividends go to institutions, pension funds and so on, he is safeguarding not only their present position by allowing them a certain amount of increase in pay but their pension arrangements by allowing pension funds to be increased as well?
    Mr. Davies: Those arguments could be put forward, and no doubt attempts will be made to do so. But I suggest that it is much better in this vital area not to get involved in that kind of debate. It is better to have the restriction which has been accepted on Second Reading. I suggest that it does not make sense to stop at 31st December 1978. If we are to operate an incomes policy, it is necessary to have some restraint on dividends. I think that the hon. Member for Colne Valley accepts that proposition. All I am saying is that it makes no sense to stop that restraint during the most crucial part of a pay round when very important pay claims are being negotiated.
    Mr. Higgins: I apologise for being out for a couple of minutes during the last four hours and I am sorry that I missed the right hon. Gentleman's opening sentences. Is there not a case for having a short period of extension so that the Government can convey to those making wage claims the gross injustice that has already been done to those receiving dividends? Instead of saying "Because we are incapable of doing this, we must do it by legislation", could they not put forward what is a fair legitimate and sensible argument?
    Mr. Davies: The hon. Gentleman made an extraordinary speech. He talked about gross injustice to pensioners in his constituency and I intervened to say—and I say again—that the greatest injustice done to pensioners in his constituency was the money supply policy of the Conservative Government. Indeed, the hon. Gentleman was Minister of State at the Treasury at the time, presumably with some responsibility, as I have, for money supply. I suggest that he should have thought about his elderly pensioners when he agreed to an increase in the money supply.
    On Second Reading the House accepted, by a fairly comfortable majority, that it wished dividend restraint to proceed for another year. I suggest that it makes no sense to stop that restraint in the middle of a pay round. It is better that it should extend to July to cover the whole of the pay period in order to secure moderation in wage claims over the next 12 months and thereby seek a continual moderation in the rate of infla-
    1976
    tion. For that reason, I recommend the Committee to reject the amendment.
    Mr. Peter Rees: We have had a spirited debate. That is not surprising. Indeed, it is commendable. Of course, I am not suggesting that either the Chair or the Government wish to cut short the debate.
    We are debating what may turn out to be the last unattractive legislative twitch of a dying Government. It is not for me to forecast what is passing through the Prime Minister's mind now, or what he may think in August or September, but I think that we should be failing in our duty if we did not give this measure the most careful, detailed and thorough scrutiny.
    I am glad to see that I carry with me the Treasury Bench. We may soon reverse our roles and those on the Treasury Bench know, that it will then be their duty to give our measures the most careful scrutiny. I have no doubt that they will be delighted to do so, and we shall welcome their constructive criticisms, just as I know that over the past four years they have welcomed the constructive criticisms that we have offered over a wide range of financial measures. If the Chief Secretary were candid with the Committee he would recognise that there has been too wide a range of financial measures that perhaps he has taxed his own stamina and the patience of the House just a little too much. However, we are prepared to let bygones be bygones.
    Having said that, I offer my respectful sympathy to the Chair, because I recognise that it has been a little difficult to channel our contributions in this debate. The reason is not far to seek, and I think that it is right that we should put it on record. It is due to the extraordinarily narrow way in which the Long Title to the Bill has been drawn, which has effectively precluded a proper examination of the principles of this important Bill. If this is to become a constitutional precedent—
    The First Deputy Chairman: Order. The hon. and learned Member has been in the Committee throughout the whole of the debate. He has heard the Chair remonstrating with hon. Members who have not conformed strictly to the way

    1977
    in which the business of the Committee is conducted, which is for hon. Members to address themselves to the subject under consideration. In this instance it is the amendment that has been selected for debate, together with the three amendments that have been grouped with it. I hope that the hon. and learned Gentleman will try to set an example to other hon. Members.
    Mr. Rees: I am always ready, Sir Myer—
    Mr. Ridley: On a point of order, Sir Myer. I have listened to nearly every word that has been spoken in this debate, and I am at a loss to understand which of my hon. Friends, and where, have been out of order. I do not know when you have called any of my hon. Friends to order for going outside the terms of the amendment, and these vague threats make it more difficult for us to speak, because in future contributions on this amendment my hon. Friends will have difficulty in knowing whether they are near the boundaries of order.
    The First Deputy Chairman: Order. I strongly resent the accusation of making threats to hon. Members. I am making no threats whatsoever to any hon. Member. All that I am asking right hon. and hon. Members to do is to conform to the Standing Orders of the House—nothing more.
    Mr. Rees: As I was saying Sir Myer, I am always ready to take a lesson and correction from the Chair, but I think that I am entitled and, indeed, bound to comment on the way in which the Long Title has been drawn, which has effectively circumscribed—
    The First Deputy Chairman: Order. The amendment is not dealing with the Long Title.
    Mr. Rees: In which case I am certain that you will permit a debate on clause stand part, because then it will be proper and appropriate—
    The Chief Secretary to the Treasury (Mr. Joel Barnett): Get on with it.
    Mr. Rees: I shall take correction from the Chair, but not from the Chief Secretary. If I am to take correction from
    1978
    the Chief Secretary, I fear that the debate may be needlessly prolonged, unless, Sir Myer, you intervene to protect me.
    Mr. Tim Renton: On a point of order, Sir Myer. You said that this debate was not to do with the Long Title. Amendment no. 11, which is grouped with amendment no. 4, is to do with the long Title. It seeks to amend the Long Title.
    The First Deputy Chairman: That is a consequential amendment which deals only with the date.
    Mr. Rees: I am sure that the Committee is grateful to my hon. Friend the Member for Mid-Sussex (Mr. Renton) who has used his habitual skill.
    The First Deputy Chairman: We are discussing amendment no. 11.
    Mr. Rees: I am glad that my intervention was in order after all, Sir Myer, as I expected it to be. We recognise that the narrow way in which the Long Title is drawn has made it difficult for the Chair. It has been difficult for my hon. Friends to confine their remarks, because, naturally, they are exercised by the principle and detail of the Bill.
    It is a matter for comment that a Government who have introduced a mass of provisions designed to favour the introduction of share incentive schemes should, with their other hand, have made those schemes look less attractive.
    In debating the terminal date for the Bill we have been obliged to consider both the principle and detail of the measure. It is noticeable that there have been no interventions from the Government side of the Committee, except from the Minister of State. Obviously, Government Members are not concerned about shareholders, investors, retired people and pensioners in their constituents. They are concerned only about narrow, sectional interests. They are not prepared to take a broad view of their responsibilities to the electorate, as we are on this side of the Committee.
    Because of the lateness of the hour and the obvious impatience of the Committee to move on to the debate on the clause and to Third Reading, I do not intend to cover the principles, because they have been dealt with adequately. But I single out and commend the speech by my hon.

    1979
    Friend the Member for Worthing (Mr. Higgins). He has had to look at this problem from both sides—with the responsibility of office and with the responsibility of Opposition. He made a telling intervention. He has demonstrated conclusively from his vast experience that the measure is not attractive from a temporary point of view—
    Mr. Joel Barnett: Cheap.
    Mr. Rees: I think that the Chief Secretary is getting a little cheap. We know that he is a little frayed after a rather hard Session. We know that he deserves a holiday and that he might soon be taking a rather longer holiday than he foresees.
    As I was saying when I was so coarsely and rudely interrupted by the Chief Secretary from a sedentary position, my hon. Friend the Member for Worthing has demonstrated that this is unattractive as a temporary expedient. It becomes intolerable if it is perpetuated year after year. Distortions in the capital market make a mockery of the whole capitalist system.
    This is the moment when hon. Members below the Gangway leap to their feet and wave their Order Papers, because they have no desire to perpetuate the capitalist system. I am not certain where the Financial Secretary stands on this issue. I have always understood that he was dedicated to private enterprise. I understand that he has a personal interest and even enthusiasm for it. I cannot say that his defence of it this afternoon, or even his defence of the Bill, was commendable, attractive, or profound.
    When we turn to the detail—and this will interest the Minister of State, who attempted to deal rather perfunctorily with the case made by my hon. Friend the Member for Walsall, North (Mr. Hodgson)—we discover that the Bill is not only bad in principle but bad in detail.
    Of course we must proceed on the polite fiction that the House of Commons has given its approval to the Bill. It was given by a narrow margin. I have no doubt that had more time been allocated to it and we had considered the Bill at a more appropriate moment in the Session, instead of cramming it in in the last few days, a different decision would have been
    1980
    reached. Every possible opportunity was given to the Government both at Question Time and in debate to declare their hand, but they did not choose to do so. We can only speculate why. Probably there have been tense negotiations between the Government and the trade union movement.
    12.15 a.m.
    One wonders, after the declaration today, just whose good offices or favours the Government are bidding for. We feel that since the Bill is demonstrably bad in detail and in principle we should give the Government the chance to think again. Therefore we shall join the hon. Member for Colne Valley (Mr. Wainwright) should be feel disposed to press his amendment, or my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) with his if the hon. Member should not.
    We are faced with a compelling range of amendments. If one were carried, we should be able to return, as the House should at the earliest possible opportunity, to the Bill. A small cloud hangs over our activities in the autumn. But in case, contrary to expectation, there is no General Election, we feel that the Government should be compelled to reconsider the question again in the later stages of the autumn.
    If there is an election, a quite different scene might obtain. I am for the moment being charitable in assuming that we shall still be looking at the Chief Secretary, the Minister of State and the Financial Secretary across the Dispatch Box. We should like them, in a more dispassionate atmosphere, free of the trammels of the Finance Bill and away from Transport House, to return to consider once again the more compelling arguments that have been advanced from this side of the Committee. I hope, therefore, that my hon. Friends will support the hon. Member for Colne Valley in his laudable attempt to bring a little more sense into an unsatisfactory piece of legislation.
    Mr. Richard Wainwright: I am aware that part of the course of the debate has caused some anxiety and concern to the Chair. In so far as the debate has rambled at times, it has been largely due to the trilogy of poor parliamentary behaviour by the three Ministers who have had charge of the Bill.

    1981
    The debate started with a performance of unusually bumptious frivolity by the Chief Secretary, to the evident distaste of the House, including some Labour Members. There was a display of tedious arrogance in the Financial Secretary's winding-up speech. The Minister of State's attitude just now was one of casual irresponsibility which accorded ill with the helpful comments of some speakers on the Opposition side of the House.
    Any agony that you may have suffered in the Chair, Sir Myer, will have been in a good cause, because at least the debate has demolished—and this was a valuable contribution of common sense to financial affairs—this unutterably glib sentence in the Treasury notice which purports to say how the dividend cover notice will be operated. I risk repeating something that I said on Second Reading, that the statement by, of all bodies, Her Majesty's Treasury, that
    "where there have been changes in accounting policies the cover for each of the relevant years will be computed on a consistent basis"
    was bogus. The Minister of State had to confess just now that this will not be the formula. As he said, in each case the Treasury will come to some arrangement with the companies concerned.
    At long last we have that position established. These matters will not all be handled according to this glib Treasury formula. It will be a matter of horse trading on the basis of such figures as can be fudged together on both sides of the argument. It is helpful to have got down to reality after all these hours.
    The amendment is designed not to wreck the Bill but to establish some kind of balance between statutory control of dividends and more or less voluntary restraint on pay. In order to narrow the gap between those two quite conflicting principles it seems reasonable to say that at about Christmas time the House should have an opportunity to review the whole matter.
    It is a poor show for the Minister of State to say that this would mean that statutory control of dividends would collapse in ruins, of necessity, by Christmas time, because the Government have proved today that they can get this kind of measure through the House in one
    1982
    afternoon and evening. Therefore, if the next Parliament, misguided or otherwise, wishes towards the end of this calendar year to renew this control, or, one would hope, to refine and improve its methods, it would be perfectly able to do so.
    The idea that my amendment in some way wrecks the operation of dividend control is self-evident nonsense, as has been proved by the Governments success tonight in getting this measure through in a matter of a few hours.
    Finally, I must protest at the glib way in which the Minister of State says that a review of this matter at the end of December would come in the middle of a pay round. Where has he been these last few years to be still talking about a pay round? There is no longer a pay round. That is a concept that belongs to history. Now it is a constant series of negotiations which have no particular seasonality. I am really surprised that someone who is supposed to be brooding over pay controls should still think that this is a question of a pay round with a peak point in December. It is just not so.
    Bearing in mind the contributions we have heard this evening from some hon. Members, which have illuminated this subject, I shall recommend my right hon. and hon. Friends to divide the House, and I hope that we shall have support from all quarters.
    Several Hon. Members rose—
    Mr. Walter Harrison (Treasurer of Her Majesty's Household)rose in his place and claimed to move, That the Question be now put.
    Question put, That the Question be now put:—
    The Committee proceeded to a Division—
    Mr. Gow(seated and covered): On a point of order, Sir Myer. There is an amendment standing in the name of my hon. Friend the Member for Mid-Sussex (Mr. Renton), who has been seeking an opportunity of addressing the Committee but has not had such opportunity. I wonder, Sir Myer, whether you had overlooked that fact when you agreed to accept the motion moved by the Government Deputy Chief Whip.
    The First Deputy Chairman: I am obliged to the hon. Member for East-bourne (Mr. Gow). I took every fact into consideration before giving my judgment.
    Mr. Tim Renton(seated and covered): Further to that point of order, Sir Myer.
    The First Deputy Chairman: Order. I think that I can save the hon. Gentleman's time. I have just been reminded that on a Division on the closure no points of order can arise.
    The Committee having divided: Ayes 255, Noes 42.

    Division No. 318]

    AYES

    [12.22 a.m.

    Archer, Rt Hon Peter

    Fernyhough, Rt Hon E.

    Maclennan, Robert

    Armstrong, Ernest

    Fitch, Alan (Wigan)

    McMillan, Tom (Glasgow C)

    Ashton, Joe

    Fitt, Gerard (Belfast W)

    Madden, Max

    Atkins, Ronald (Preston N)

    Flannery, Martin

    Magee, Bryan

    Atkinson, Norman (H'gey, Tott'ham)

    Fletcher, L. R. (Ilkeston)

    Maguire, Frank (Fermanagh)

    Bagier, Gordon A. T.

    Fletcher, Ted (Darlington)

    Mallalieu, J. P. W.

    Bain, Mrs Margaret

    Foot, Rt Hon Michael

    Marks, Kenneth

    Barnett, Guy (Greenwich)

    Forrester, John

    Marshall, Dr Edmund (Goole)

    Barnett, Rt Hon Joel (Heywood)

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

    Marshall, Jim (Leicester S)

    Bates, Alt

    Freeson, Rt Hon Reginald

    Maynard, Miss Joan

    Bean, R. E.

    Garrett, John (Norwich S)

    Meacher, Michael

    Benn, Rt Hon Anthony Wedgwood

    George, Bruce

    Mikardo, Ian

    Bennett, Andrew (Stockport N)

    Gilbert, Rt Hon Dr John

    Millan, Rt Hon Bruce

    Bidwell, Sydney

    Golding, John

    Miller, Dr M. S. (E Kilbride)

    Bishop, Rt Hon Edward

    Gould, Bryan

    Mitchell, Austin (Grimsby)

    Bienkinsop, Arthur

    Graham, Ted

    Mitchell, R. C. (Soton, Itchen)

    Boardman, H.

    Grant, John (Islington C)

    Molloy, William

    Booth, Rt Hon Albert

    Grocott, Bruce

    Moonman, Eric

    Boothroyd, Miss Betty

    Hardy, Peter

    Morris, Alfred (Wythenshawe)

    Bottomley, Rt Hon Arthur

    Harrison, Rt Hon Walter

    Morris, Rt Hon Charles R.

    Boyden, James (Bish Auck)

    Hart, Rt Hon Judith

    Morris, Rt Hon J. (Aberavon)

    Bray, Dr Jeremy

    Hattersley, Rt Hon Roy

    Morton, George

    Brown, Robert C. (Newcastle W)

    Hayman, Mrs Helene

    Moyle, Rt Hon Roland

    Brown, Ronald (Hackney S)

    Healey, Rt Hon Denis

    Mulley, Rt Hon Frederick

    Buchan, Norman

    Heffer, Eric S.

    Murray, Rt Hon Ronald King

    Butler, Mrs Joyce (Wood Green)

    Henderson, Douglas

    Newens, Stanley

    Callaghan, Rt Hon J. (Cardiff SE)

    Hooley, Frank

    Noble, Mike

    Callaghan, Jim (Middleton & P)

    Horam, John

    Oakes, Gordon

    Campbell, Ian

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

    Ogden, Eric

    Canavan, Dennis

    Hoyle, Doug (Nelson)

    O'Halloran, Michael

    Cant, R. B.

    Huckfield, Les

    Orme, Rt Hon Stanley

    Carmichael, Neil

    Hughes, Rt Hon C. (Anglesey)

    Ovenden, John

    Carter, Ray

    Hughes, Mark (Durham)

    Palmer, Arthur

    Carter-Jones, Lewis

    Hughes, Robert (Aberdeen N)

    Park, George

    Cartwright, John

    Irving, Rt Hon S. (Dartford)

    Parker, John

    Castle, Rt Hon Barbara

    Jackson, Colin (Brighouse)

    Parry, Robert

    Clemitson, Ivor

    Jackson, Miss Margaret (Lincoln)

    Pavitt, Laurie

    Cocks, Rt Hon Michael (Bristol S)

    Janner, Greville

    Pendry, Tom

    Coleman, Donald

    Jay, Rt Hon Douglas

    Prescott, John

    Concannon, Rt Hon John

    Jager, Mrs Lena

    Price, C. (Lewisham W)

    Cook, Robin F. (Edin C)

    Jenkins, Hugh (Putney)

    Price, William (Rugby)

    Corbett, Robin

    John, Brynmor

    Radice, Giles

    Cowans, Harry

    Johnson, James (Hull West)

    Rees, Rt Hon Merlyn (Leeds S)

    Craigen, Jim (Maryhill)

    Jones, Alec (Rhondda)

    Reid, George

    Crawshaw, Richard

    Jones, Barry (East Flint)

    Richardson, Miss Jo

    Cronin, John

    Jones, Dan (Burnley)

    Roberts, Gwilym (Cannock)

    Crowther, Stan (Rotherham)

    Judd, Frank

    Robertson, George (Hamilton)

    Cryer, Bob

    Kaufman, Rt Hon Gerald

    Robinson, Geoffrey

    Cunningham, G. (Islington S)

    Kerr, Russell

    Roderick, Caerwyn

    Cunningham, Dr J. (Whiteh)

    Kilroy-Silk, Robert

    Rodgers, George (Chorley)

    Dalyell, Tam

    Kinnock, Nell

    Rodgers, Rt Hon William (Stockton)

    Davidson, Arthur

    Lambie, David

    Rooker, J. W.

    Davies, Bryan (Enfield N)

    Lamborn, Harry

    Roper, John

    Davies, Rt Hon Denzil

    Lamond, James

    Ross, Rt Hon W. (Kilmarnock)

    Davis, Clinton (Hackney C)

    Latham, Arthur (Paddington)

    Rowiands, Ted

    Deakins, Eric

    Leadbitter, Ted

    Sedgemore, Brian

    Dean, Joseph (Leeds West)

    Lee, John

    Selby, Harry

    de Freitas, Rt Hon Sir Geoffrey

    Lestor, Miss Joan (Eton & Slough)

    Sever, John

    Dell, Rt Hon Edmund

    Lewis, Ron (Carlisle)

    Shaw, Arnold (Ilford South)

    Dewar, Donald

    Litterick, Tom

    Sheldon, Rt Hon Robert

    Dormand, J. D.

    Loyden, Eddie

    Shore, Rt Hon Peter

    Douglas-Mann, Bruce

    Luard, Evan

    Silkin, Rt Hon John (Deptford)

    Duffy, A. E. P.

    Lyon, Alexander (York)

    Silkin, Rt Hon S. C. (Dulwich)

    Dunnett, Jack

    Lyons, Edward (Bradford W)

    Sillars, James

    Eadie, Alex

    Mabon, Rt Hon Dr J. Dickson

    Silverman, Julius

    Edwards, Robert (Wolv SE)

    McCartney, Hugh

    Skinner, Dennis

    Ellis, John (Brigg & Scun)

    McDonald, Dr Oonagh

    Smith, Rt Hon John (N Lanarkshtre)

    English, Michael

    Mcflhone, Frank

    Snape, Peter

    Evans, loan (Aberdare)

    MacFarquhar, Roderick

    Spearing, Nigel

    Evans, Join (Newton)

    McGuire, Michael (Ince)

    Spriggs, Leslie

    Ewing, Harry (Stirling)

    McKay, Allen (Penistone)

    Stallard, A. W.

    Faulds, Andrew

    MacKenzie, Rt Hon Gregor

    Stewart, Rt Hon M. (Fulham)

    Stoddart, David

    Walker, Harold (Doncaster)

    Williams, Alan Lee (Hornch'ch)

    Stott, Roger

    Walker, Terry (Kingswood)

    Williams, Rt Hon Shirley (Hertford)

    Strang, Gavin

    Ward, Michael

    Wilson, Gordon (Dundee E)

    Summerskill, Hon Dr Shirley

    Watkins, David

    Wilson, Rt Hon Sir Harold (Huyton)

    Taylor, Mrs Ann (Bolton W)

    Watkinson, John

    Wilson, William (Coventry SE)

    Thomas, Jeffrey (Abertillery)

    Weetch, Ken

    Wise, Mrs Audrey

    Thomas, Mike (Newcastle E)

    Weitzman, David

    Woodall, Alec

    Thomas, Ron (Bristol NW)

    Wellbeloved, James

    Woof, Robert

    Thorne, Stan (Preston South)

    White, Frank R. (Bury)

    Wrigglesworth, Ian

    Tilley, John

    White, James (Pollok)

    Young, David (Bolton E)

    Tomlinson, John

    Whitehead, Phillip

    Tomney, Frank

    Wigley, Dafydd

    TELLERS FOR THE AYES:

    Urwin, T. W.

    Willey, Rt Hon Frederick

    Mr. James Hamilton and

    Varley, Rt Hon Eric G.

    William, Rt Hon Alan (Swansea W)

    Mr. James Tinn.

    Wainwright, Edwin (Deanne V)

    NOES

    Aitken, Jonathan

    Johnston, Russell (Inverness)

    Sainsbury, Tim

    Baker, Kenneth

    Kitson, Sir Timothy

    Smith, Cyril (Rochdale)

    Beith, A. J.

    Lawrence, Ivan

    Steel, Rt Hon David

    Brooke, Hon Peter

    Lawson, Nigel

    Stradling Thomas, J.

    Budgen, Nick

    Macfarlane, Neil

    Tapsell, Peter

    Clark, William (Croydon S)

    MacGregor, John

    Thorpe, Rt Hon Jeremy (N Devon)

    Cooke, Robert (Bristol W)

    Page, John (Harrow West)

    Viggers, Peter

    Emery, Peter

    Pardoe, John

    Wainwright, Richard (Colne V)

    Freud, Clement

    Penhaligon, David

    Weatherill, Bernard

    Gow, Ian (Eastbourne)

    Rees, Peter (Dover & Deal)

    Wiggin, Jerry

    Grieve, Percy

    Renton, Tim (Mid-Sussex)

    Winterton, Nicholas

    Higgins, Terence L.

    Rhodes James, R.

    Hodgson, Robin

    Ridley, Hon Nicholas

    TELLERS FOR THE NOES:

    Hooson, Emlyn

    Roberts, Michael (Cardiff NW)

    Mr. Anthony Berry and

    Hordern, Peter

    Ross, Stephen (Isle of Wight)

    Lord James Douglas-Hamilton.

    Howe, Rt Hon Sir Geoffrey

    Question accordingly agreed to.
    Question put accordingly, That the amendment be made:—
    The House divided: Ayes 41, Noes 254.

    Division No. 319]

    AYES

    [12.35 a.m.

    Aitken, Jonathan

    Hooson, Emiyn

    Sainsbury, Tim

    Baker, Kenneth

    Hordern, Peter

    Smith, Cyril (Rochdale)

    Beith, A. J.

    Howe, Rt Hon Sir Geoffrey

    Steel, Rt Hon David

    Berry, Hon Anthony

    Johnston, Russell (Inverness)

    Stradling Thomas, J.

    Brooke, Hon Peter

    Lawrence, Ivan

    Tapsell, Peter

    Budgen, Nick

    Lawson, Nigel

    Thorpe, Rt Hon Jeremy (N Devon)

    Clark, William (Croydon S)

    Macfarlane, Neil

    Viggers, Peter

    Cooke, Robert (Bristol W)

    MacGregor, John

    Wainwright, Richard (Colne V)

    Douglas-Hamilton, Lord James

    Page John (Harrow West)

    Weatherill, Bernard

    Emery, Peter

    Penhaligon, David

    Wiggin, Jerry

    Freud, Clement

    Rees, Peter (Dover & Deal)

    Winterton, Nicholas

    Gow, Ian (Eastbourne)

    Renton, Tim (Mid-Sussex)

    Grieve, Percy

    Rhodes James, R.

    TELLERS FOR THE AYES:

    Higgins, Terence L.

    Ridley, Hon Nicholas

    Mr. John Pardoe and

    Hodgson, Robin

    Roberts, Michael (Cardiff NW)

    Mr. Stephen Ross.

    NOES

    Archer, Rt Hon Peter

    Brown, Ronald (Hackney S)

    Crowther, Stan (Rotherham)

    Armstrong, Ernest

    Buchan, Norman

    Cryer, Bob

    Ashton, Joe

    Butler, Mrs Joyce (Wood Green)

    Cunningham, G. (Islington S)

    Atkins, Ronald (Preston N)

    Callaghan, Rt Hon J. (Cardiff SE)

    Cunningham, Dr J. (Whiten)

    Atkinson, Norman (H'gey, Tott'ham)

    Callaghan, Jim (Middleton & P)

    Dalyell, Tam

    Bagier, Gordon A. T.

    Campbell, Ian

    Davidson, Arthur

    Bain, Mrs Margaret

    Canavan, Dennis

    Davies, Bryan (Enfield N)

    Barnett, Guy (Greenwich)

    Cant, R. B.

    Davies, Rt Hon Denzil

    Barnett, Rt Hon Joel (Heywood)

    Carmichael, Neil

    Davis, Clinton (Hackney C)

    Bates, Alf

    Carter, Ray

    Deakins, Eric

    Bean, R. E.

    Carter-Jones, Lewis

    Dean, Joseph (Leeds West)

    Benn, Rt Hon Anthony Wedgwood

    Cartwright, John

    de Freitas, Rt Hon Sir Geoffrey

    Bennett, Andrew (Stockport N)

    Castle, Rt Hon Barbara

    Dell, Rt Hon Edmund

    Bidwell, Sydney

    Clemitson, Ivor

    Dewar, Donald

    Bishop, Rt Hon Edward

    Cocks, Rt Hon Michael (Bristol S)

    Dormand, J. D.

    Blenkinsop, Arthur

    Cohen, Stanley

    Douglas-Mann, Bruce

    Boardman, H.

    Concannon, Rt Hon John

    Duffy, A. E. P.

    Booth, Rt Hon Albert

    Cook, Robin F. (Edin C)

    Dunnett, Jack

    Boothroyd, Miss Betty

    Corbett, Robin

    Eadie, Alex

    Bottomley, Rt Hon Arthur

    Cowans, Harry

    Edwards, Robert (Wolv SE)

    Boyden, James (Bish Auck)

    Craigen, Jim (Maryhill)

    Ellis, John (Brigg & Scun)

    Bray, Dr Jeremy

    Crawshaw, Richard

    English, Michael

    Brown, Robert C. (Newcastle W)

    Cronin, John

    Evans, loan (Aberdare)

    Evans, John (Newton)

    Litterick, Tom

    Roper, John

    Ewing, Harry (Stirling)

    Loyden, Eddie

    Ross, Rt Hon W. (Kilmarnock)

    Faulds, Andrew

    Luard, Evan

    Rowlands, Ted

    Fernyhough, Rt Hon E.

    Lyon, Alexander (York)

    Sedgemore, Brian

    Fitch, Alan (Wigan)

    Lyons, Edward (Bradford W)

    Selby, Harry

    Fitt, Gerard (Belfast W)

    Mabon, Rt Hon Dr J. Dickson

    Sever, John

    Flannery, Martin

    McCartney, Hugh

    Shaw, Arnold (Ilford South)

    Fletcher, L. R. (Ilkeston)

    McDonald, Dr Oonagh

    Sheldon, Rt Hon Robert

    Fletcher, Ted (Darlington)

    McElhone, Frank

    Shore, Rt Hon Peter

    Foot, Rt Hon Michael

    MacFarquhar, Roderick

    Silkln, Rt Hon John (Deptford)

    Forrester, John

    McGuire, Michael (Ince)

    Silkin, Rt Hon S. C. (Dulwich)

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

    McKay, Allen (Penlstone)

    Sillars, James

    Freeson, Rt Hon Reginald

    MacKenzie, Rt Hon Greg r

    Silverman, Julius

    Garrett, John (Norwich S)

    Maclennan, Robert

    Skinner, Dennis

    George, Bruce

    McMillan, Tom (Glasgow C)

    Smith, Rt Hon John (N Lanarkshire)

    Gilbert, Rt Hon Dr John

    Madden, Max

    Snape, Peter

    Golding, John

    Magee, Bryan

    Spearing, Nigel

    Gould, Bryan

    Mallalieu, J. P. W.

    Spriggs, Leslie

    Graham, Ted

    Marks, Kenneth

    Stallard, A. W.

    Grant, John (Islington C)

    Marshall, Dr Edmund (Goole)

    Stewart, Rt Hon M. (Fulham)

    Grocott, Bruce

    Marshall, Jim (Leicester S)

    Stoddart, David

    Hamilton, James (Bothwell)

    Maynard, Miss Joan

    Stott, Roger

    Hardy, Peter

    Meacher, Michael

    Strang, Gavin

    Harrison, Rt Hon Walter

    Mikardo, Ian

    Summerskill, Hon Dr Shirley

    Hart, Rt Hon Judith

    Millan, Rt Hon Bruce

    Taylor, Mrs Ann (Bolton W)

    Hattersley, Rt Hon Roy

    Miller, Dr M. S. (E Kilbride)

    Thomas, Jeffrey (Abertillery)

    Hayman, Mrs Helene

    Mitchell, Austin (Grimsby)

    Thomas, Mike (Newcastle E)

    Healey, Rl Hon Denis

    Mitchell, R. C. (Soton, Itchen)

    Thomas, Ron (Bristol NW)

    Heffer, Eric S.

    Molloy, William

    Thorne, Stan (Preston South)

    Henderson, Douglas

    Moonman, Eric

    Tilley, John

    Hooley, Frank

    Morris, Alfred (Wythenshawe)

    Tomlinson, John

    Horam, John

    Morris, Rt Hon Charles R.

    Tomney, Frank

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

    Morris, Rt Hon J. (Aberavon)

    Urwin, T. W.

    Hoyle, Doug (Nelson)

    Morton, George

    Varley, Rt Hon Eric G.

    Huckfielcl, Les

    Moyle, Rt Hon Roland

    Wainwright, Edwin (Deanne V)

    Hughes, Rt Hon C. (Anglesey)

    Mulley, Rt Hon Frederick

    Walker, Harold (Doncaster)

    Hughes, Mark (Durham)

    Murray, Rt Hon Ronald King

    Walker, Terry (Kingswood)

    Hughes, Robert (Aberdeen N)

    Newens, Stanley

    Ward. Michael

    Irving, Rt Hon S. (Dartford)

    Noble, Mike

    Watkins, David

    Jackson, Colin (Brighouse)

    Oakes, Gordon

    Watkinson, John

    Jackson, Miss Margaret (Lincoln)

    Ogden, Eric

    Weetch, Ken

    Janner, Greville

    O'Halloran, Michael

    Weitzman, David

    Jay, Rt Hon Douglas

    Orme, Rt Hon Stanley

    Wellbeloved, James

    Jager, Mrs Lena

    Ovenden, John

    White, Frank R. (Bury)

    Jenkins, Hugh (Putney)

    Palmer, Arthur

    White, James (Pollok)

    John, Brynmor

    Park, George

    Whitehead, Phillip

    Johnson, James (Hull West)

    Parker, John

    Wigley, Dafydd

    Jones, Alec (Rhondda)

    Parry, Robert

    Willey, Rt Hon Frederick

    Jones, Barry (East Flint)

    Pavitt, Laurie

    William, Rt Hon Alan (Swansea W)

    Jones, Dan (Burnley)

    Pendry, Tom

    Williams, Alan Lee (Hornch'ch)

    Judd, Frank

    Prescott, John

    Williams, Rt Hon Shirley (Hertford)

    Kaufman, Rt Hon Gerald

    Price, C. (Lewisham W)

    Wilson, Gordon (Dundee E)

    Kerr, Russell

    Price, William (Rugby)

    Wilson, Rt Hon Sir Harold (Huyton)

    Kilroy-Silk, Robert

    Radice, Giles

    Wilson, William (Coventry SE)

    Kinnock, Neil

    Rees, Rt Hon Merlyn (Leeds S)

    Wise, Mrs Audrey

    Lambie, David

    Richardson, Miss Jo

    Woodall, Alec

    Lamborn, Harry

    Roberts, Gwilym (Cannock)

    Woof, Robert

    Lamond, James

    Robertson, George (Hamilton)

    Wrigglesworth, Ian

    Latham, Arthur (Paddington)

    Robinson, Geoffrey

    Young, David (Bolton E)

    Leadbitter, Ted

    Roderick, Caerwyn

    Lee, John

    Rodgers, George (Chorley)

    TELLERS FOR THE NOES:

    Lestor, Miss Joan (Eton & Slough)

    Rodgers, Rt Hon William (Stockton)

    Mr. James Tinn and

    Lewis, Ron (Carlisle)

    Rooker, J. W.

    Mr. Donald Coleman.

    Question accordingly negatived.
    Mr. Tim Renton: On a point of order, Sir Myer. As amendment no. 5, standing in my name, was selected by the Chairman of Ways and Means but you—without precedent, I think—did not allow me to speak to it, may I ask you, Sir Myer, for a separate vote on amendment no. 5?
    The First Deputy Chairman: I am not inclined to allow a separate vote.
    Mr. Rhodes James: On a point of order, Sir Myer. I beg to move, That the
    1988
    Chairman do report Progress and ask leave to sit again.
    It seems to me, Sir Myer, at this stage of the proceedings, after a debate which has lasted for more than two hours and to which there has been a very inadequate response by the Government, and as we now have here the Prime Minister, the Chancellor of the Exchequer and the right hon. Lady the Secretary of State for Education and Science, who has travelled back especially from China for this debate and this Division, that now is the time at which the debate might usefully be postponed until next week, when there will

    1989
    be plenty of time in which to consider these matters in considerable detail. In view of this, it seems to me to be a very reasonable proposal at this late hour, and I move the motion in order to give the Prime Minister and others further time to consider these matters.
    The First Deputy Chairman: I am obliged to the hon. Member for Cambridge (Mr. Rhodes James). I am not prepared to accept that proposal.
    I have to state that it is my opinion that the principle of clause 1 and any matters arising thereon have been adequately discussed in the course of debate on the amendment, and therefore, under Standing Order No. 48, I shall now put the Question on the clause forthwith.
    Mr. Higgins: On a point of order, Sir Myer. This measure is being rushed—
    The First Deputy Chairman: Order. I have to put the Question.
    Question put, That the clause stand part of the Bill:—
    The Commitee proceeded to a Division—
    Mr. Peter Rees(seated and covered): On a point of order, Sir Myer. You were very careful, as you will recall, to give directions to the Committee to stay closely within the rules of order on the four amendments which we debated. Your instructions were scrupulously observed and it was not, therefore, possible to go very wide or make many intricate points which arise on a proper consideration of clause 1.
    I must, therefore, respectfully suggest that there must be some opportunity given to the Committee so that we can go back over clause 1 and the numerous points which my hon. Friends wish to raise. I raise this point of order in deference to the points which you made from the Chair during our debates and in view of the deference shown to your views by Opposition Members.
    The First Deputy Chairman: I am obliged to the hon. and learned Member. I referred to Standing Order No. 48. Perhaps when the hon. and learned Member learns what is in that Standing Order he will agree with my decision. It reads:
    "If, during the consideration of a bill in a committee of the whole House, the chairman is of opinion that the principle of a clause or schedule and any matters arising thereon have been adequately discussed in the course of debate on the amendments proposed thereto, he may after the last amendment to be selected has been disposed of, state that he is of this opinion and shall then forthwith put the question".
    Mr. Peter Rees(seated and covered): Further to that point of order, Sir Myer. I am sitting with Standing Order No. 48 in my hand, so I am well apprised of the principles at stake. I must respectfully point out that the only matter considered in relation to the four amendments which were the subject of debate was the question of the date on which this measure should cease to have effect. It will not have escaped your attention that there is a second subsection to the clause. All that we were permitted to debate, and I make no criticism of this, was the date when the measure should cease to have effect. There are many other points of considerable significance, as was demonstrated by the number of amendments on the Amendment Paper. Whether they were in order is a different matter. I adduce that fact to demonstrate that there were more points which could reasonably have been considered by the Committee than the point which arose on the amendments. Therefore, with profound respect, I ask you to consider your earlier ruling, conscious of Standing Order No. 48 which I am holding in my hand and which you, no doubt, have under your eye.
    The First Deputy Chairman: Standing Order No. 48 confers upon the Chairman the right to put the Question if in his opinion there has been adequate discussion. My opinion was that there had been adequate discussion.
    The Committee having divided: Ayes 253, Noes 30.

    Division No. 320]

    AYES

    [12.50 a.m.

    Archer, Rt Hon Peter

    Bain, Mrs Margaret

    Bennett, Andrew (Stockport N)

    Armstrong, Ernest

    Barnett, Gure (Greenwich)

    Bidwell, Sydney

    Ashton, Joe

    Barnett, Rt Hon Joel (Heywood)

    Bishop, Rt Hon Edward

    Atkins, Ronald (Preston N)

    Bates, All

    Blenkinsop, Arthur

    Atkinson, Norman (H'gey, Tott'ham)

    Bean, R. E.

    Boardman, H.

    Bagier, Gordon A. T.

    Bern, Rt Hon Anthony Wedgwood

    Booth, Rt Hon Albert

    Boothroyd, Miss Betty

    Hooley, Frank

    Parker, John

    Bottomley, Rt Hon Arthur

    Horam, John

    Parry, Robert

    Boyden, James (Bish Auck)

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

    Pavitt, Laurie

    Bray, Dr Jeremy

    Hoyle, Doug (Nelson)

    Pendry, Tom

    Brown, Robert C. (Newcastle W)

    Huckfield, Les

    Prescott, John

    Brown, Ronald (Hackney S)

    Hughes, Rt Hon C. (Anglesey)

    Price, C. (Lewisham W)

    Buchan, Norman

    Hughes, Mark (Durham)

    Price, William (Rugby)

    Butler, Mrs Joyce (Wood Green)

    Hughes, Robert (Aberdeen N)

    Radice, Giles

    Callaghan, Rt Hon J. (Cardiff SE)

    Irving, Rt Hon S. (Dartford)

    Rees, Rt Hon Merlyn (Leeds S)

    Callaghan, Jim (Middleton & P)

    Jackson, Colin (Brighouse)

    Richardson, Miss Jo

    Campbell, Ian

    Jackson, Miss Margaret (Lincoln)

    Roberts, Gwilym (Cannock)

    Canavan, Dennis

    Janner, Greville

    Robertson, George (Hamilton)

    Cant, R. B.

    Jay, Rt Hon Douglas

    Robinson, Geoffrey

    Carmichael, Neil

    Jeger, Mrs Lena

    Roderick, Caerwyn

    Carter, Ray

    Jenkins, Hugh (Putney)

    Rodgers, George (Chorley)

    Carter-Jones, Lewis

    John, Brynmor

    Rodgers, Rt Hon William (Stockton>

    Cartwright, John

    Johnson, James (Hull West)

    Rooker, J. W.

    Castle, Rt Hon Barbara

    Jones, Alec (Rhondda)

    Roper, John

    Clemitson, Ivor

    Jones, Barry (East Flint)

    Ross, Rt Hon W. (Kilmarnock)

    Cocks, Rt Hon Michael (Bristol S)

    Jones, Dan (Burnley)

    Rowlands, Ted

    Cohen, Stanley

    Judd, Frank

    Sedgemore, Brian

    Concannon, Rt Hon John

    Kaufman, Rt Hon Gerald

    Selby, Harry

    Conlan, Bernard

    Kerr, Russell

    Sever, John

    Cook, Robin F. (Edin C)

    Kilroy-Silk, Robert

    Shaw, Arnold (Ilford South)

    Corbett, Robin

    Kinnock, Neil

    Sheldon, Rt Hon Robert

    Cowans, Harry

    Lambie, David

    Shore, Rt Hon Peter

    Craigen, Jim (Maryhill)

    Lamborn, Harry

    Silkln, Rt Hon John (Deptford)

    Crawshaw, Richard

    Lamond, James

    Silkin, Rt Hon S. C. (Dulwich)

    Cronin, John

    Latham, Arthur (Paddington)

    Sillars, James

    Crowther, Stan (Rotherham)

    Leadbitler, Ted

    Silverman, jul

    Cryer, Bob

    Lee, John

    Skinner, Dennis

    Cunningham, Dr J. (Whiteh)

    Lestor, Miss Joan (Eton & Slough)

    Smith, Rt Hon John (N Lanarkshire)

    Dalyell, Tam

    Lewis, Ron (Carlisle)

    Snape, Peter

    Davidson, Arthur

    Litterick, Tom

    Spearing, Nigel

    Davies, Bryan (Enfield N)

    Loyden, Eddie

    Spriggs, Leslie

    Davies, Rt Hon Denzil

    Luard, Evan

    Stallard, A. W.

    Davis, Clinton (Hackney C)

    Lyon, Alexander (York)

    Stewart, Rt Hon M. (Fulham)

    Deakins, Eric

    Lyons, Edward (Bradford W)

    Stoddart, David

    Dean, Joseph (Leeds West)

    Mabon, Rt Hon Dr J. Dickson

    Stott, Roger

    de Freitas, Rt Hon Sir Geoffrey

    McCartney, Hugh

    Strang, Gavin

    Dell, Rt Hon Edmund

    McDonald, Dr Oonagh

    Summerskill, Hon Dr Shirley

    Dewar, Donald

    McElhone, Frank

    Taylor, Mrs Ann (Bolton W)

    Dormand, J. D.

    MacFarquhar, Roderick

    Thomas, Jeffrey (Abertillery)

    Douglas-Mann, Bruce

    McGuire, Michael (Ince)

    Thomas, Mike (Newcastle E)

    Duffy, A. E. P.

    McKay, Allen (Penistone)

    Thomas, Ron (Bristol NW)

    Dunnett, Jack

    MacKenzie, Rt Hon Gregor

    Thorne, Stan (Preston South)

    Eadie, Alex

    Maclennan, Robert

    Tilley, John

    Edwards. Robert (Wolv SE)

    McMillan, Tom (Glasgow C)

    Tinn, James

    Ellis, John (Brigg & Scun)

    Madden, Max

    Tomlinson, John

    English, Michael

    Magee, Bryan

    Tomney, Frank

    Evans, loan (Aberdare)

    Mallalleu, J. P. W.

    Urwin, T. W.

    Evans, John (Newton)

    Marks, Kenneth

    Varley, Rt Hon Eric G.

    Ewing, Harry (Stirling)

    Marshall, Dr Edmund (Goole)

    Wainwright, Edwin (Deanne V)

    Faulds, Andrew

    Marshall, Jim (Leicester S)

    Walker, Harold (Doncaster)

    Fernyhough, Rt Hon E.

    Maynard, Miss Joan

    Walker, Terry (Kingswood)

    Fitch, Alan (Wigan)

    Meacher, Michael

    Ward, Michael

    Fitt, Gerard (Belfast W)

    Mikardo, Ian

    Watkins, David

    Flannery, Martin

    Millan, Rt Hon Bruce

    Watkinson, John

    Fletcher, L. R. (Ilkeston)

    Miller, Dr M. S. (E Kilbride)

    Weetch, Ken

    Fletcher, Ted (Darlington)

    Mitchell, Austin (Grimsby)

    Weitzman, David

    Foot, Rt Hon Michael

    Mitchell, R. C. (Soton, Itchen)

    Wellbeloved, James

    Forrester, John

    Molloy, William

    White, Frank R. (Bury)

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

    Moonman, Eric

    White, James (Pollok)

    Freeson, Rt Hon Reginald

    Morris, Alfred (Wythenshawe)

    Whitehead, Phillip

    Garrett, John (Norwich S)

    Morris, Rt Hon Charles R.

    Willey, Rl Hon Frederick

    George, Bruce

    Morris, Rt Hon J. (Aberavon)

    William, Rt Hon Alan (Swansea W)

    Gilbert, Rt Hon Dr John

    Morton, George

    Williams, Alan Lee (Hornch'ch)

    Golding, John

    Moyle, Rt Hon Roland

    Williams, Rt Hon Shirley (Hertford)

    Gould, Bryan

    Mulley, Rt Hon Frederick

    Wilson, Gordon (Dundee E)

    Graham, Ted

    Murray, Rt Hon Ronald King

    Wilson, Rt Hon Sir Harold (Huyton)

    Grant, John (Islington C)

    Newens, Stanley

    Wilson, William (Coventry SE)

    Grocott, Bruce

    Noble, Mike

    Wise, Mrs Audrey

    Hardy, Peter

    Oakes, Gordon

    Woodall, Alec

    Harrison, Rt Hon Walter

    Ogden, Eric

    Woof, Robert

    Hart, Rt Hon Judith

    O'Halloran, Michael

    Wrigglesworth, Ian

    Hattersley, Rt Hon Roy

    Orme, Rt Hon Stanley

    Young, David (Bolton E)

    Hayman, Mrs Helene

    Ovenden, John

    TELLERS FOR THE AYES:

    Healey, Rt Hon Denis

    Palmer, Arthur

    Mr. James Hamilton and

    Heffer, Eric S.

    Park, George

    Mr. Donald Coleman

    Henderson, Douglas

    1992

    1993

    NOES

    Aitken, Jonathan

    Lawson, Nigel

    Steel, Rt Hon David

    Brooke, Hon Peter

    Macfarlane, Nell

    Stradling Thomas, J

    Cooke, Robert (Bristol W)

    MacGregor, John

    Tapsell, Peter

    Freud, Clement

    Page, John (Harrow West)

    Viggers, Peter

    Gow, Ian (Eastbourne)

    Pardoe, John

    Wainwright, Richard (Colne V)

    Grieve, Percy

    Penhaligon, David

    Weatherill, Bernard

    Higgins, Terence L.

    Rees, Peter (Dover & Deal)

    Winterton, Nicholas

    Hodgson, Robin

    Renton, Tim (Mid-Sussex)

    Hooson, Emlyn

    Rhodes James, R.

    TELLERS FOR THE NOES:

    Howe, Rt Hon Sir Geoffrey

    Ross, Stephen (Isle of Wight)

    Mr. Anthony Berry and

    Johnston, Russell (Inverness)

    Smith, Cyril (Rochdale)

    Lord James Douglas-Hamilton.

    Lawrence, Ivan

    Question accordingly agreed to.
    Clause 1 ordered to stand part of the Bill.

  Clause 2

    SHORT TITLE AND EXTENT
    Question proposed, That the clause stand part of the Bill.
    1.0 a.m.
    Mr. Tim Renton: I am pleased to have caught your eye, Sir Myer. There have been long periods when I wondered whether I should ever have that privilege. I am also fortunate because this important debate is taking place in the presence of the Prime Minister, the Chancellor of the Exchequer and a number of other Ministers.
    One point that is often stressed in the House, notably by my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton), is the need for clarity in our legislation. [Hon. Members: "Where is he?"] I have no doubt that my right hon and learned Friend is wait-to take part in the debate shortly. If there is to be clarity in legislation, it must obviously start with the nomenclature of Bills. There is little point in having clarity within a Bill unless the outsider is able to see clearly to what a Bill refers. Otherwise, he will be misled from the start.
    I am surprised, therefore, to see that the Title contains no reference to the Long Title and that it is proposed to call the Bill the Dividends Act 1978. It must be clear from our debates that that is not the right Title for the Bill. Whatever it is, it is not a Dividends Act. It may be a Restraint or Restriction of Dividends Act, it may even be a Non-Dividends or Lack of Dividends Act, but it is not a dividends Act. A Minister should justify the Bill's Title.
    1994
    I am glad that the Chamber is fuller than it was between 10.15 p.m. and 12 o'clock. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) waves his arm at me, but I can assure him that since 10.15 p.m. there have been many more of my hon. Friends in the Chamber than Labour Members.
    Mr. Aitken: Is my hon. Friend aware that the tendency to produce a misleading Title is not confined to the Bill? The Police Act 1976 should have been entitled the Complaints against the Police Bill. It dealt exclusively and extravagantly with an unnecessary measure and it should not have been titled the Police Act.
    The First Deputy Chairman: Order. The hon. Member for Thanet, East (Mr. Aitken) must confine his remarks to the Bill.
    Mr. Renton: Thank you, Sir Myer, for your protection. I think that my hon. Friend the Member for Thanet, East (Mr. Aitken) was drawing us a little wide. Bearing in mind your strictures earlier, Sir Myer, it is important that we stick to the issues before us.
    Mr. Hodgson: Will my hon. Friend bear in mind that we might consider calling it the Manipulation of Dividends Bill? The Minister has suggested that there will be no way in which the Treasury will be able to work out precisely what is required. It seems that there will have to be horse trading with the Treasury.
    Mr. Renton: That is another logical consideration. I thank my hon. Friend for that suggestion.
    You will recall, Sir Myer, that in the earlier debate, which you brought to a slightly quick end—I say that without criticising your judgment in any way—the Minister of State said that one reason for it being so important that the period of dividend restraint should run on to the

    1995
    end of July was that he did not want another period of pay control—I think that those were his words—interfered with by dividend controls coming to an end when the Government of the day might be in negotiation with, for example, the National Union of Mineworkers, about the next wage claim.
    The First Deputy Chairman: Order. I think that the hon. Member for Mid-Sussex (Mr. Renton) will be grateful to me if I remind him that we are now discussing the Title of the Bill. We are not discussing the principle of the Bill. We are discussing the Title. I hope that he will stick to that.
    Mr. Renton: I thank you, Sir Myer. I was advancing a reason to the Minister of State for accepting that the Bill has been given the wrong Title. If the present Title stands, the impression could well be given that the Bill aids dividends. If it is called the Dividends Bill, the implication must be that it liberates dividends from the restraints that they have been under for the past five years.
    Mr. Michael Stewart: Would the hon. Gentleman say similarly that if a measure is called the Rent Act it means that it decontrols rents?
    Mr. Renton: I am extremely glad that the right hon. Gentleman has raised that point. I have a Ten-Minute Rule Bill next Wednesday on the subject of the Rent Acts. I hope that he will be in the Chamber to listen to my arguments.
    I am arguing that the Title of the Bill is a misnomer and that the Bill will have an effect contrary to the aims of Labour Members—with some of which I do not agree—that dividend restraint should run simultaneously and contemporaneously with wage control. If it is called the Dividends Bill, the wrong impression will be given.
    Therefore, I respectfully submit that the Government should think again even at this late stage. I should be prepared to accept a handwritten amendment to the effect that the Bill should be entitled the Restraint on Dividends Bill or the Restriction on Dividends Bill. After all, that is precisely what it is. Let the Bill be known as such.
    Mr. Viggers: In an exchange a short time ago you said, Sir Myer, that the
    1996
    clause was about the Title of the Bill. With respect, Sir Myer, on my reading of the clause that is not strictly so. It seems that it is concerned with whether the measure shall apply to Northern Ireland. That is an extremely important point of principle that we should not let pass without some careful consideration. Northern Ireland is a separate part of the United Kingdom where special considerations can apply.
    There have been special wishes and desires to attract investment to Northern Ireland. Foreign investment will be curtailed in areas where the Bill applies. My hon. Friend the Member for Eastbourne (Mr. Gow) may wish to disagree with me—if so, I should be happy to hear his comments—but it is arguable that areas where unemployment is high should have special protection. I speak as a privileged Member for a south-east constituency which has high unemployment, but not as high as in some other parts of the United Kingdom, including Northern Ireland. It is arguable that the restriction of dividends restricts external investment in those areas.
    Not much investment is by way of retained profits, although that is one area from which investment comes. Most investment is by way of new money, which will be discouraged if dividends are restricted. New money is encouraged into new issues and rights issues by showing that the dividend record of a company is successful and increasingly profitable.
    If the clause stands part of the Bill, the Bill will apply to Northern Ireland. Therefore, it will restrict companies' dividend records and prevent investment from going to that part of the United Kingdom. Generally speaking, I take the view that the United Kingdom is composed of four parts which are indivisible, but in this instance I believe that we should think carefully before we allow the Bill to extend to Northern Ireland. I urge my right hon. and hon. Friends to ponder that point. Indeed, I wonder whether we should allow the clause to stand part of the Bill. Perhaps we should consider voting against it.
    Mr. Gow: My hon. Friend the Member for Mid-Sussex (Mr. Renton) put forward a cogent argument for renaming the Bill. It would certainly be very much clearer, if it should reach the statute book

    1997
    after amendments have been made to it in another place, if it were called the Dividends (Restriction) Act. No Member of this place and no Member of another place would assent to the proposition that this measure was more accurately described as the Dividends Act than if it were amended to the Dividends (Restriction) Act. Indeed, there was an amendment to that effect—not selected by the Chairman of Ways and Means—which would have made the change suggested by my hon. Friend the Member for Mid-Sussex.
    I hope that the Minister of State will address himself to subsection (2). It is notable that the Counter-Inflation Act 1973, whose child in a sense the Bill is, did not contain the words in subsection (2). Section 10 of the 1973 Act extends to companies which are incorporated in
    "any part of the United Kingdom".
    The exact wording of section 10(4) of the 1973 Act is:
    "This section shall apply to every company incorporated under the law of any part of the United Kingdom; but nothing in this section shall apply to companies not so incorporated."
    If the 1973 Act—notably section 10—is still in force, as we know that it is and that it will be extended after 31st July should the Bill reach the statute book, then, with the benefit of the advice of the Attorney-General, whom we are particularly glad to see in his place, perhaps we shall be told why it is necessary to include clause 2 (2) when the parent Act applies to companies—[HON. MEMBERS: "Oh! He has gone".] Anyway, perhaps the Lord Advocate—an intermittent attender at the proceedings on the Scotland Bill—can be sent for to explain this point to us.
    1.15 a.m.
    It is astonishing that we should put into a Bill something which I believe I have shown to be wholly superfluous. There is seated on the Back Bench opposite a Minister from the Northern Ireland Office. Perhaps he could be prevailed upon to come to the Front Bench to explain to the Committee whether the submission that I have made is right, that subsection (2) is superfluous. I say that it is unnecessary. It may be that if the Chief Secretary could persuade his right hon. Friend the Minister of State, Northern Ireland Office, to come down from Mount
    1998
    Olympus on to the Front Bench we could avoid a Division on whether clause 2 should stand part of the Bill. That could be of great assistance to the Committee and enable us to make that progress on the Bill which we on this side have so clearly demonstrated to be our desire.
    Mr. Aitken: I wish to support the valid points put forward by my hon. Friend the Member for Eastbourne (Mr. Gow), and in supporting them—[Interruption]—I agree wholeheartedly that the title should be the Restriction of Dividends Bill or the Restraint on Dividends Bill. [Interruption.] Above all, the reason—
    Mr. Gow: On a point of order, Sir Myer. My hon. Friend is in the course of delivering a cogent speech. [Interruption.] It is precisely about those sedentary interjections that I am protesting. I am finding it very difficult to hear my hon. Friend because of the noise that is coming from below the Gangway. Would you kindly restrain those who are making the noise?
    The First Deputy Chairman: I am obliged to the hon. Gentleman. He can rest assured that I shall do what I can to maintain order in the Committee.
    Mr. Aitken: I am most grateful to you, Sir Myer. I understand the irritation of Labour Members, because I am coming to the central point, which is that this is a misleading title as it stands and they do not like to be reminded of that. Labour Members are very quick to criticise such things as advertisements and newspaper headlines for being misleading. Indeed, they have set up, with all the paraphernalia and bureaucracy of Socialism, bodies to make sure that advertisements and newspapers are not misleading. We have the Press Council and the Advertising Standards Association, the purpose of which is to make sure that titles are not misleading. [Interruption.]
    The First Deputy Chairman: Order. Interventions, particularly from a sedentary position, unnecessarily lengthen the proceedings.
    Mr. Aitken: As I was saying, this is a misleading title as it stands. One realises that by considering the plight of a future Gibbon or Macaulay referring back in a hundred or so years' time to the deliberations of this House during 1978, thumbing

    1999
    through the already far too numerous pages of the statute book and wondering what the Dividends Act could possibly refer to. The man of the future will surely believe that it must have referred to the need to increase national prosperity, to increase productivity in industry and to increase employment prospects, whereas this mean, miserable little measure is doing absolutely the reverse, and it should say so in the Title, clearly and unequivocally.
    Also, the Title should make clear that the Bill refers only to investment dividends. Labour Members have many constituents who shop at the Co-op. Dividends from the Co-op are not being restricted by the Bill. Perhaps, also, the social historian of the future will be baffled to find that a very narrow definition was applied.
    In one way or another this is an unhappy and misleading title. It needs clarification. It needs complete alteration. I fully support the point made by my hon. Friend the Member for Mid-Sussex (Mr. Renton) that this should be called the Restriction of Dividends Bill.
    Mr. Richard Wainwright: The hon. Members for Eastbourne (Mr. Gow) and Thanet, East (Mr. Aitken) have been competing with each other in staking their claims to be Ministers for the elderly in any Administration which their party might form in the future. I admire their attention to the needs of the elderly, but their attitude to the Title of the Bill is misconceived. It is better that Bills should have their Titles confined to the subject matter of the measure. We should give Bills such titles as "Dividends Bill", "Rents Bill" and "Housing Bill". We should not import into a Title a quality which the Government of the day allege that the Bill has but which it does not possess.
    It would be wrong to call this the Dividend Restriction Bill, because the last thing the Bill does is to restrict an enormous number of dividends. That is what makes it such a mockery. The Bill will do nothing to restrict the dividends of companies with shareholders who are wealthy enough to make rights issues. It will do nothing to restrict the dividends of companies with some overseas interests such as Inchcape, Ocean Wilson and Nigerian Electricity, which have already
    2000
    driven a coach and four through the dividend control of successive Governments. It will do nothing to restrict the dividends of companies such as Marchwiel, which has restructured to escape the elementary and rambling controls. If there had to be a description from this side of the Committee it would be Dividend (Arbitrary Interference) Bill.
    Since all sides of the House have conflicting ideas about what the Bill is supposed to do, I believe that, for once, the Government have it right and that Dividends Bill is a fair description and the best that can be put on this rather miserable measure.
    Question put and agreed to.
    Clause 2 ordered to stand part of the Bill.
    Bill reported, without amendment.
    Motion made, and Question proposed, That the Bill be now read the Third time.
    1.22 a.m.
    Mr. Higgins: Is this motion debatable, Mr. Deputy Speaker?
    Mr. Deputy Speaker (Sir Myer Galpern): The motion is debatable.
    Mr. Higgins: I am delighted to learn that the motion is debatable, because after the proceedings this evening I was beginning to wonder whether anything was debatable.
    Mr. Deputy Speaker: Order. I ask the hon. Member for Worthing (Mr. Higgins) to withdraw that accusation against the Chair. I told the House that the matter was debatable because the hon. Member did not seem to be aware of that.
    Mr. Higgins: I withdraw any remark which appears to be a criticism of the Chair. I was about to say that it seems that the Government have adopted an unbelievably restrictive attitude to the debate today. I was referring not to you, Mr. Deputy Speaker, but to the Government. The closure was moved after only two hours' debate when a number of hon. Members were still waiting to take part. There was no further opportunity to pursue a number of arguments. This motion is debatable and we wish to discuss what remains in the Bill. I was criticising

    2001
    not you, Mr. Deputy Speaker, but the way in which the Government have proceeded. We had a debate on whether the Bill should extend to Northern Ireland, and the Government made no reply. That is intolerable. That was why I said that I wondered whether we should have any debate.
    A number of issues need clarification. A number of issues are still unanswered from the Minister of State's earlier replies. We have not had a satisfactory reply on them, and it would be in order for him to repair that omission on Third Reading. We are concerned in particular about the way in which the Bill will be operated by the Government. To our surprise, we discovered that the Minister of State was apparently unaware by precisely which criteria the Government will decide whether relaxation will apply on dividends when the cover of the dividends in a particular company has risen above the previous level. The Minister of State did not feel competent at the earlier stage to give a specific answer, but this is surely a point of considerable importance if industry and those who will have to operate under the Act are to know whether it is fair.
    It is not satisfactory to refer to the new accounting principles adopted by the Institute of Chartered Accountants in ED19 if we do not know whether their application to previous periods when they did not apply would be relevant in deciding whether the dividend cover had increased.
    This is a matter on which the Minister should know the answer. It determines whether the change that is now proposed will have a sensible effect. I therefore hope that, in a spirit of a sensible debate on the matter, we can have a satisfactory answer from the Minister on a highly important technical point of deep concern to a number of firms.
    Another point to which we have not had a satisfactory answer is whether the Bill is necessary. Much debate so far has centred upon whether dividends are being treated fairly compared with wage claims. We are entitled to have figures to show what has happened as between the two since dividend control was first introduced. Only on that basis can we decide whether the Government are, as they claim, being equitable. I do not
    2002
    believe that they are, but the House is entitled to know the figures so that we may judge the Government's claims on the matter.
    1.28 a.m.
    Mr. Aitken: I believe that the Bill should not have a Third Reading, because I come from a constituency in which there is considerable poverty among those who are struggling to live off small fixed incomes which are seriously affected by dividend control.
    Mr. Ted Leadbitter: That is not the case with the hon. Member.
    Mr. Aitken: Labour Members may scoff, but they are clearly not concerned about the way in which the balance of power has shifted in this country in the last four years. In my kind of constituency one is very well aware that there are a new rich and a new poor in our society. The new rich are those who belong to the big unions which fought for massive wage increases during the early years of this Government. In 1975, 1976 and 1977, wage increases of 25 or 35 per cent. were secured.
    Those who were left on small fixed incomes suffered gravely as a result of inflationary pressure. They suffer still today because the value of their savings has been whittled away, and the dividends which they receive from their investments, which are the fruits of a lifetime of toil, are being smashed by today's inflationary pressures. The Bill gives them no hope for the future. It also restricts and inhibits investment in productive industry, and in the long run it will inhibit employment and growth. For that reason, I am glad to oppose it on Third Reading.
    1.30 a.m.
    Mr. Nicholas Winterton: The House is being very unfairly treated by the Government. As my hon. Friend the Member for Worthing (Mr. Higgins) has said, very valid points have been put to the Treasury Bench during our debates on the Bill but very little in the way of answers has been forthcoming.
    My hon. Friend the Member for Walsall, North (Mr. Hodgson) raised a very interesting matter, to which we have received a totally unsatisfactory reply. If I correctly interpreted the Minister of

    2003
    State's answer at an earlier stage, I believe he was indicating that the Government were legislating for horse trading. That is a most extraordinary state of affairs. The Minister was clearly indicating that Treasury officials would have to negotiate with each and every company on the situation that will be created by the Bill.
    This is quite extraordinary. The Government are not legislating for order and efficiency. They are legislating for chaos and horse trading. It is certainly my understanding that whatever Government hold power in Britain, that is not the sort of situation for which legislation is passed through Parliament.
    I pass on to the important matters raised by my hon. Friends the Members for Eastbourne (Mr. Gow) and for Thanet, East (Mr. Aitken). Have the Government given serious consideration to the many elderly people who are at present trying to maintain some standard of living from investment income? Of course, investment income rings all sorts of bells in the minds of Labour Members, particularly those below the Gangway. They think that it is merely inherited wealth. The fact is that today that is very far from the truth. In the main, many of those who are living on investment income have accrued that money out of the money they have earned and saved during their working lives. Dividend restraint in recent years has held down the return which those people are fully justified in feeling they should have on the money that has been invested. That money, which they have struggled to save from their wages and salaries during their working lives, is probably maintaining jobs. If the Government are to pay more than lip service to employment, they should understand this.
    I said earlier in our proceedings that the Bill would probably have very little effect. As the hon. Member for Colne Valley (Mr. Wainwright) has clearly indicated, there are many companies, particularly the larger ones, which have solicitors and accountants who can advise them on these matters. There are ways of driving a coach and four, perhaps even a coach and six, through this legislation.
    I believe that the seed corn of the prosperity of this country is the small firm. The small firm needs investment, and it
    2004
    gets it from the market. But if there is dividend restraint, that investment will not be forthcoming. Therefore, far from really caring about the 1½ million people out of work, the Government are kicking them in the teeth and providing very little opportunity for the additional jobs needed to reduce the present intolerable level of unemployment.
    The present Government inherited only 600,000 unemployed. In the four years of their term of office, they have succeeded in increasing unemployment from 600,000 to 1½ million. That is a serious indictment. [HON. MEMBERS: "Out of order."] I shall take "Order" only from the Chair, not from the rabble in sedentary positions on the Labour Benches below the Gangway.
    This is a very serious Bill. I am gravely concerned about the levels of unemployment. I hope that the Chief Secretary, who comes from the same part of the country as I do, is concerned about the very high level of unemployment in Greater Manchester and the north-west. It is a level to which he has contributed by the present Government's policies. He has contributed to the disastrous levels of unemployment that the people are now having to tolerate.
    If the Chief Secretary is not to reply to this debate, I hope that he will instruct the Minister who is to reply to deal seriously with the very valid points that have been raised by Opposition Members. It is not unique for a Bill such as this one to be pushed through the House in a day, but hurrying through in one day a measure of this importance is misusing the procedures of the House. There is concern not only in the Conservative Party but in the Liberal Party. I am sorry that the party which helped the Government to their majority on Second Reading has not been represented here during the later debates. This is a serious Bill and I hope that we shall have a serious reply.
    I am here because I am concerned about unemployment. The small businesses, which do not have the facilities of larger companies to get around such a Bill, should be encouraged to expand and provide extra jobs. They, and not the ICIs and the other large companies, will solve the unemployment problem. They will be disadvantaged by the Bill. The

    2005
    Chancellor of the Duchy of Lancaster, who was here briefly earlier, has responsibility for small businesses. I hope that he has had a quiet word with Ministers and that one or two amendments will be considered to ensure that the Government do not press ahead with this ill-considered, unnecessary and badly drafted legislation.
    1.37 a.m.
    Mr. Ivan Lawrence: I have been appalled by the attitude of Labour Members during the speeches of my hon. Friends. Most of this Parliament has been concerned with one of the worst unemployment situations we have had, probably in this century and certainly since the 1930s. I am a member of the Sub-Committee of the Select Committee which has been looking into the problem over the last 12 months, and I had understood that that concern was shared throughout the House. There has been conflict about what can be done, but not about the seriousness of the problem.
    I seek to make not a party point but one which should arouse the concern of Labour Members when I say that in February 1974 there were 600 people out of work in my constituency and that the figure is now 1,800—a threefold increase. Whether that is due to the state of the world economy or to the behaviour of this Government—
    Mr. Deputy Speaker (Mr. Oscar Murton): Order. I think the hon. Gentleman knows the rule that on Third Reading one may refer only to what is in the Bill. We are discussing dividends, not unemployment.
    Mr. Lawrence: I am coming to the point which is directly referable to the Bill, but to do so I had to say why it was important. If unemployment is the most serious matter that this Parliament has had to consider, and if little seems likely to be done in the foreseeable future to deal with it, the Bill is directly referable to that problem. I cannot understand the behaviour of Labour Members during discussion of an important aspect of this legislation—its effect on unemployment. I do not know how many hon. Members on the Government side have ever thought about the system of private enterprise and how it works. A large number of com-
    2006
    panies, approaching 1 million, I believe, provide work under a free enterprise system for a very high proportion of employees.
    One of our problems is that there are not enough small businesses taking on new workers. That should be a matter of concern to everyone, not just to us on the Opposition side but to Labour Members. Perhaps, if hon. Members opposite thought a little more about these problems, they would not be supporting a Bill which presents a direct disincentive to both small and large businesses to invest capital in the sort of assets and equipment which will enable them to make profits and take on more workers.
    The strongest objection to the Bill is that its effect will run directly counter to the desire of all those of us in this place who want to see more people in employment. Not enough attention has been paid to that by hon. Members on the Government side. They seem only to think back to the past idea that someone with unearned income must be rich and that, because in the old days the unions worked for and supported those who were poor, there thus being a conflict, to placate the unions one somehow must reduce any benefit which went to the rich.
    That has gone. It went years ago. We now live in a new situation. It has been made absolutely clear that not only is 50 per cent. of the investment in industry investment by organisations, by pension funds and insurance companies, but a high proportion of that investment is the investment of small and poor people.
    I think that it was one of the reports put to the committee headed by the right hon. Member for Huyton (Sir H. Wilson), or, if not that, certainly to the Diamond Commission, which pointed out—[Laughter.] It is not a name which should cause any laughter, although I seem to recall that the Diamond Commission has been headed by a gentleman who was at one stage a member of a Labour Government.
    The fact is that, in 1972 and 1973, 50 per cent. of individual shareholders in these institutions had a total statutory income from all sources of less than £2,000 a year, and 25 per cent. had a total statutory income of under £1,000. Hon. Members opposite who seem to

    2007
    wear on their jackets the badge of conscience that they speak for the poorest sectors of society might pause for a moment and recognise that the poorest at present are often people who are investing in pension funds and institutions. [Laughter.] I find it appalling to see hon. Members below the Gangway opposite—some of the faces there are a little unfamiliar tonight—laughing and joking. I assure them that there are many people in my constituency who do not earn substantial incomes, who perhaps live in private rented accommodation because they cannot get on to council housing lists and cannot afford mortgages—
    Mr. Deputy Speaker: Order. Council housing is not a matter of dividends. The hon. Gentleman must confine himself on Third Reading to what is in the Bill.
    Mr. Lawrence: I think that you misunderstood me, Mr. Deputy Speaker. I am making the point that what is in the Bill is harming not only those who are at present unemployed but those who are very poor in my constituency and many other constituencies throughout the country. I cannot understand what hon. Members find so funny in that and why they come here at this hour of the morning to hoot when a matter of this importance is being discussed. They should be ashamed to behave in that way. 'They only make it the more obvious to people outside that the Labour Party does not really care either for the unemployed or for the poor. [HON. MEMBERS: "We have got the point."] If Labour Members have the point, perhaps they will reflect that the best thing that can be done with the Bill is not to give it a Third Reading. Perhaps they can have time to reflect, and the proceedings on the Bill can be completed at a time when they have given the matter more consideration. [Interruption.] When the hon. Member for Hartlepool (Mr. Lead-bitter) speaks, he wishes to command the silence of the whole House—[HON. MEMBERS: "Order."]—
    Mr. Deputy Speaker: The question of order is a matter for the Chair and not for any right hon. or hon. Member.
    Mr. Lawrence: I seek the protection of the Chair, Mr. Deputy Speaker, when I am making not spurious points but points of substantial importance. It is difficult
    2008
    to make myself heard above the cacophony from Labour Members. I can only conclude that they do not take seriously the Bill or the two underlying matters which I have drawn to the attention of the House. For all I know, they have been drawn to the attention of the House repeatedly during the debate. Maybe Labour Members have not heard them before because they have not been in the Chamber.
    The Bill is harmful to the unemployed—unemployment is the greatest problem in our society at present—and to the poor, for whom Labour Members always claim to be the spokesmen. They are not, By their shouting and their attitude towards the Bill, they have shown the people that they do not care a fig for the poor and the unemployed.
    1.47 a.m.
    Mr. Ian Gow: I hope that the Minister who replies to the debate will deal with the point about clause 2(2), which deals with the necessity or otherwise of having the reference to Northern Ireland in the Bill.
    The Bill is a sham and deception, because although its purpose is to give the people the impression that somehow the Government can do battle with inflation, a Bill of this kind is irrelevant to defeating inflation. I do not believe that its enactment will in any way affect the rate of Inflation.
    I think that the Bill will do great damage, because it applies to all shareholders in companies incorporated in the United Kingdom, whether or not those shareholders are resident in the United Kingdom. It is very likely that the continuation of this legislation will make it that much more difficult to raise capital from overseas for investment in the United Kingdom, because we have a restriction on dividends which does not apply in many of our industrial competitor countries.
    Therefore, I think that the Bill is a deception. It is to give the impression that the Government can, by legislation, do something about inflation, whereas the key to inflation lies in very strict control of the money supply. I repeat that I think that it will make it much more difficult for us to attract overseas capital and overseas investment into this country.

    2009
    For those reasons, I shall oppose the Third Reading of the Bill.
    1.49 a.m.
    Mr. Peter Rees: We can part with the Bill without sorrow, without regret, and with no praise. There has been no serious defence of the Bill, even from the Treasury Bench. [Interruption.] All interventions from the Labour Benches have been from a sedentary position, except, as far as I can recall, those from the Treasury Bench.
    The principles and details of the Bill have been thoroughly canvassed from the Opposition Benches. Indeed, the Bill has had a more thorough examination than perhaps it deserved.
    The Financial Secretary said that dividend restraint could not be continued indefinitely. He also made the rather challenging statement that when inflation was firmly under control we could dispense with the measure. As I understood it from our debates—we have had many over the past months—the Government's proudest claim on our affections and respect is that they have now got inflation under control. They concede that unemployment has not been remedied and that industrial production has not gone up, but, they say, inflation is under control. Mr. 8.4 per cent. still presides.
    This is a bad Bill. It has been thoroughly debated from the Opposition side of the House but not from the Government side. We shall go on reminding the Government, for as long as they survive, that they have said that dividend restraint cannot be continued indefinitely; we shall go on reminding them that they have said that it can be discarded as soon as inflation is firmly under control. We wait for an assurance that inflation is properly under control.
    Subject to that, I have no more to say, except that we on the Opposition Benches have endeavoured to inject a little sense into the debate. We have met with no corresponding response from Labour Members. I hope that the Financial Secretary will at least have the courtesy to deal with the various points made in deep seriousness and based on considerable experience from the Opposition side.
    1.52 a.m.
    The Financial Secretary to the Treasury (Mr. Robert Sheldon): The hon. and learned Member for Dover and Deal (Mr. Rees) said that the Opposition had injected some sense into our debates, but the comment that the Bill does damage to the poor and the unemployed and injures the economy is a grossly exaggerated statement, which bears no relation to the purposes and measures that we have been debating.
    What we have been discussing during the lengthy debates that started at 4 o'clock on Thursday afternoon has been whether pay and prices should be regarded separately from dividends. The view that the Government have put forward is the same as Governments in 1940, 1947, 1962, 1967, 1972 and 1973 put. They all came to the same conclusion—that pay, prices and dividends were inseparable as a means of control when once one enters these areas.
    In the Bill, the Government have presented the question of dividend limitation in a more flexible form. I thought that that would have been received with greater enthusiasm by the Opposition. This is a valuable measure, brought forward to extend the provisions for one further year, and it should claim the approval of the House.
    Question put and agreed to.
    Bill accordingly read the Third time and passed.

MR. D. P. MERFIELD (INJURY BENEFIT)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Stallard.]
1.55 a.m.
Mr. Neil Macfarlane: I have sought leave to raise this subject because the question of my constituent, Mr. D. P. Merfield, raises many disquieting aspects of delay within the Department of Health and Social Security which, although to some extent they have been resolved in several ways during recent weeks, still continue. But I would say to the Minister that I recognise the complexity of the situation, and he may

2011
well wish to have more time to reply in detail, during the next few weeks, to the points that I raise tonight. I do not expect him to answer every point this evening, but I hope that he will be able to acknowledge these points before we get into the high part of the summer. I trust that there will be a speedy conclusion to the points that I have raised.
In November 1974 my constituent, Mr. D. P. Merfield, a dentist working in the National Health Service, was seriously injured by mercury poisoning while treating NHS patients. As a result of the injury, his kidneys were damaged and he has been under intensive therapy for high blood pressure and kidney disease ever since. Mr. Merfield, at the time of this injury, was 44 years of age. He has a young family.
In February 1975, Mr. Merfield made a claim for injury benefit but the DHSS wrote back and said that he was not eligible. This, as time has shown, was incorrect, but Mr. Merfield accepted it at the time.
In June 1975, Mr. Merfield was able to resume in practice in a very part-time capacity, but his health deteriorated and by 1976 he had to give up altogether. About two months later he had the first of two severe heart attacks, but at this time he was advised that he had the right to claim a benefit. He did so, he was again rejected, but he persevered by establishing the regulations with the DHSS. This process took about five months.
By now we had entered the early part of 1977. His perseverance was this time rewarded, with the DHSS agreeing to his having a medical examination, which took place in October 1977—a delay of about eight months since the DHSS agreed the regulations, and of about two and a half years since he first inquired.
Even though the medical panel upheld my constituent's claim, it was March 1978 before the DHSS finally admitted liability and agreed that he was, after 23 years of service in the NHS, entitled to 85 per cent. of remuneration for the period under review. Alas, somebody prevaricated at this stage and suggested that 85 per cent. was too high, and that he should accept 15 per cent.
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At this time Mr. Merfield wrote to me, and I duly sent on his letter to the Under-Secretary of State on 24th March He replied to me on 21st April, which, alas, was almost a month later. Happily, as a result of my approach to the Minister, some action began, but given that Mr. Merfield's condition, and the medical report on the DHSS files that he could suffer a third and fatal heart attack at any time, any delay, in my opinion, would have been too much. At least an official at the Fleetwood superannuation office of the DHSS rang Mr. Merfield on 17th April and had the good grace to admit to my constituent that there had been considerable departmental laxity.
Within recent weeks my constituent has received some of the benefit to which he is entitled, but the saga is, alas, still continuing in another way. It appears to me, and to many of those who have looked at the case very closely, that there has been deliberate obstruction, because Mr. Merfield's superannuable remuneration was calculated at £10.654·60 by the office of the DHSS at Fleetwood, which asked the family practitioner unit in the Sutton, Merton and Wandsworth area health authority to pay. On this basis my constituent thought that the sum of money due to him would be £5,280—in other words, seven months of his incapacity based on £754½70 per month
Astonishingly, the family practitioner unit at Zeta House in Putney wrote to my constituent suggesting that he would receive a cheque for ony £847, which is less than one-sixth of the proper amount In a lengthy telephone call, at his own expense, my constituent then queried this directly with the officer to whom he had spoken some weeks previously at Fleetwood. After several hours of conversation the officer agreed that he was entitled to the £5,280. Mr. Merfield naturally thought that his worries were over. But he was told soon after that the basis for the original calculation was incorrect, that a mistake had been made in the figure of £10,654·60, and that on the basis of the revised calculation the figure should be reduced to £7,957·20.
We have a new complication, which is not of my constituent's making. The Department of Health reduced the super annuable figure by virtue of Mr. Merfield deciding, in 1973, to buy added years for

2013
his pensionable service. The Department of Health is incorrect in considering that the superannuation contributions paid from Mr. Merfield's resources during his incapacity to comply with statutory regulations were income. To add to the atmosphere of confusion and obstruction, when Mr. Merfield decided to exercise his option to purchase added years of service the old South-West London and Surrey Executive told him in a letter that it did not have the information that he sought and that he ought to write to the superannuation division at Fleetwood.
This he duly did. Two months later the division replied, astonishingly, to the effect that he had left the National Health Service and had not returned. This of course was totally untrue and Mr. Merfield queried this in a telephone call and in a letter. He was reassured, two months later, that his records were in order. Alas, this, equally, was not correct. Problems arose. Perhaps there was even duplicity. I am not certain at this stage and I do not make any allegation. Only time can tell.
The Department of Health at Fleetwood was also wrong because all of Mr. Merfield's contributions had been incorrectly recorded in the name of a Miss C. L. Newbold. This was, perhaps, human error. But the Minister may now begin to see the dawning and perhaps his officials will understand all the ramifications of the problems that we have been discussing over the past three months. The fact is that there has been delay by the Department of Health and Social Security. Its poor record-keeping is responsible for hampering my constituent's request for a quotation between July and November 1974. In the event, he could not begin payments until June 1975, after he had partially recovered.
At this early hour I shall conclude as soon as I can. I hope that the Minister will respond to this latter aspect of the matter, on the basis of these complications. It is a very complicated subject. I will send him all the correspondence that I have had from my constituent. I must stress the need for speed. My constituent has had to take up many queries. He is a sick man. I have no need to tell the House the precise nature of mercury poisoning. It is a sad and serious acci-
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dent, and no doubt the Minister is aware of its details.
Mr. Merfield is anxious to have everything in order for his family. He recognises what faces him. At every turn be seems to have been the victim of obstruction and delay. Indeed, I venture to suggest that he may have been at some stage the victim of duplicity. I demand that on this occasion the Department responds immediately, not in a month's time. Mr. Merfield is an anxious man. I have no need to tell the House of the gravity of his condition.
I ask the Minister these questions. Why was Mr. Merfield told, three and a half to four years ago, that he was not eligible for benefit? Why was there a delay of five months in setting up a medical panel? Why was there a delay of six months after the medical panel had agreed his condition? Why has there been a switching of tactics, with the basis of calculations being altered and a reduction in the superannuable remuneration? Why have all these things occurred? I hope that the Minister can answer these points, in the immediate future if not tonight. Eventually I shall have no alternative but to request that the Ombudsman reviews this case. Now I seek urgent action. I hope that the Minister will respond accordingly to the serious situation facing my constituent and his family.
2.5 a.m.
The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): The hon. Member for Sutton and Cheam (Mr. Macfarlane) has outlined clearly the case of his constituent, Mr. D. P. Merfield BDSc(Melb), LDS(Vic).
I think that it might help if, at the outset, I make two points clear. The first is that the claim for injury benefit which is the subject of this debate is one arising out of the National Health Service (Injury Benefits) Regulations 1974 and is not related in any way to the provisions of the National Insurance (Industrial Injuries) Acts.
These regulations provide for the payment of injury benefits to or in respect of any person engaged in the National Health Service in England and Wales whose earning ability is reduced or who dies as a result of an injury or disease contracted in the course of his duties.

2015
The second point is that it has undoubtedly taken some time for this case to be resolved—to be precise, from May 1977 to July 1978—but I hope that when I have detailed its rather complicated history, relative to the legal requirements, the hon. Member will conclude that any delay that occurred was not unreasonable, having regard to the lengthy inquiries that were necessary for its resolution.
On 3rd May 1977 Mr. D. P. Merfield, who is a principal dental practitioner, claimed injury benefit under the National Health Service (Injury Benefits) regulations 1974 by letter to the Merton, Sutton and Wandsworth family practitioner committee, on whose list he was and still is. His claim was based on a deterioration in his health which occurred following an incident in his surgery in August 1974, when there was a spillage of mercury and he was affected by mercury poisoning.
The National Health Service (Injury Benefits) regulations to which I have referred contain a twofold provision for the payment of benefits. The first allows for the payment of benefits on a permanent basis if a person ceases to be employed and his earning ability is permanently reduced by more than 10 per cent. as a result of an injury or disease contracted in the course of National Health Service employment. The second allows for the payment of a temporary allowance to a person who, althought still employed, has suffered a reduction in pay when absent as a result of the injury or disease. The scheme also provides for the payment of certain benefits to widows and specified dependants of persons who may die as a result of such injury or disease.
Mr. Merfield is still on the dental list of a family practitioner committee, having made arrangements for his patients to be treated by two different dental partnerships which are acting as locums. He can qualify, therefore, only for the temporary injury allowance payable during any period when his remuneration was reduced through illness and it could be established that the illness was the result of mercury poisoning.
Early in November 1974 Mr. Merfield became ill as a result of the surgery incident in August. He claimed sickness benefit and national insurance injury
2016
benefit at his local social security office. He was awarded sickness benefit but was refused benefits under the National Insurance (Industrial Injuries) Acts because he was a self-employed person. This was not a claim for benefits under the National Health Service (Injury Benefits) regulations.
The arrangements for the administration of the Health Service superannuation scheme are made both locally, through the agencies of the various Health Service employing authorities, and centrally, by the Department's superannuation branch at Fleetwood. This arrangement has been well publicised. An easy-to-read guide on the National Health Service scheme contains information about the provisons for the payment of the injury benefits associated with the scheme, and this booklet had been made available to all its members at the time of the incident affecting Mr. Merfield in 1974. Indeed, he had been referred to the booklet in a letter sent to him by the superannuation branch on 6th September 1974 about his general pension position.
The Department's records indicate that the first intimation that Mr. Merfield wished to claim injury benefits under the occupational scheme was contained in a letter dated 3rd May 1977 to the Merton, Sutton and Wandsworth family practitioner committee. A formal claim was then completed and received in the Department on 10th May 1977. This was accompanied by correspondence that showed that Mr. Merfield had reported the incident to the family practitioner committee on 20th December 1977, when he gave the required notice for the alternative arrangements made for the treatment of patients. No suggestion was made at that time that he intended to claim injury benefits.
At the time that he did make his claim in 1977, inquiries made by the Department showed that the dental estimates board had continued to make payments to Mr. Merfield during the period of his incapacity at a level not less than he had formerly received. Accordingly, as it did not appear that there had been the reduction in earning capacity necessary to establish title to benefits, the family practitioner committee was advised that the claim could not be allowed.

2017
There then followed further correspondence involving solicitors acting for the Medical Protection Society on behalf of Mr. Merfield, the family practitioner committee and the Department, as a result of which it was established that Mr. Merfield had made his own arrangements for the employment of a locum or locums during the relevant period. The Department accepted that in these circumstances there was a prima facie case for the award of a temporary injury allowance, but it still remained to be established by reference to medical opinion that the absence from the practice was directly related to the incident of mercury spillage. It would have been pointless to pursue the medical aspects involving examination, and so on, when, in the first instance, it appeared that the claim failed on the first count.
The Department, through its medical advisers, therefore arranged for Mr. Merfield to be examined by a consultant specialising in mercury poisoning. An examination took place on 19th October 1977, but there was undoubtedly some delay before the consultant reported her findings to the Department on 12th January 1978. After the physical examination, however, she had found it necessary to obtain further information from Mr. Merfield, which did not become available until the end of November.
However that may be, the consultant's report indicated that Mr. Merfield's state of health at the time of the examination was not attributable to mercury poisoning. From the terms of the report, however, it seemed to officials reasonable to conclude that his absence from his practice from 16th November 1974 to 13th June 1975 was so attributable and that entitlement to a temporary injury allowance was established. This decision was notified to Mr. Merfield on 28th February 1978.
In accordance with the provisions of the regulations, any such award would cover any period during which Mr. Merfield's remuneration may have fallen below 85 per cent. of his average remuneration after taking into account social security benefits. It had also now been agreed that it was reasonable to deduct the payments made to locums in establishing the loss.
Unfortunately, there then arose further difficulties in this necessarily protracted
2018
investigation of title, for it was by no means easy for my officials to establish the amount paid by Mr. Merfield to the two partnerships acting as locums and it was only after several communications and telephone calls to him that the correct position began to be established. This position affected the level of benefits.
A further difficulty arose when it transpired that at some time in February Mr. Merfield had been engaged in part-time work at his surgery, and as that again might affect the level of the award, yet more inquiries were necessary, in which the Department awaited statements from the locums before the question was established in Mr. Merfield's favour. Because of the successive nature of these difficulties, each affecting the level of benefits, payment was made by the area health authority on behalf of the family practitioner committee—three stages between 20th March 1978 and 18th July 1978.
I hope that what I have said so far has demonstrated that while there has been delay in reaching a final outcome to this rather complex case, there has been no neglect and that the time taken to establish title to benefits was necessary in relation to the circumstances. There has been considerable correspondence in the case, with letters, averaging about one a week over the year in question, being supplemented by frequent telephone calls between the various parties.
I am sorry that in the unfortunate circumstances of Mr. Merfield's present illness it has not been possible, based on the best medical advice available to the Department, to show a causal connection with the incident of mercury spillage.
Mr. Macfarlane: Is the Minister suggesting that there is a limitation, in a medical sense, on the general awareness of what mercury poisoning does which makes it difficult to analyse precisely the effect of such poisoning?
Mr. Deakins: I am not a medical man and I am guided, as are my officials, by advice from the consultant who is a specialist in mercury poisoning. We have not had proved a causal connection with the incident of mercury spillage. If, however, Mr. Merfield has any other medical evidence to the contrary, my medical advisers will happily consider

2019
this, and he has been advised to this effect.
Mr. Macfarlane: I believe that the lady surgeon is no longer resident in the United Kingdom but has emigrated.
Mr. Deakins: I am not sure that that necessarily makes her advice any more or less valid. It may be that she reached retirement age. I have no doubt that other specialists are available and I am sure that Mr. Merfield has access to them.
There is another aspect that is worth mentioning. It may assist Mr. Merfield, if not now, perhaps at some time in the future. As I have said, on present medical evidence he has not established title to benefits under the injury provisions because his condition is unrelated to the incident in 1974, which is subject to the point that I have already made. None the less, if his condition, however caused, can be said permanently to prevent him from carrying out his responsibilities as a dental practitioner to the family practitioner committee, he would, if he were obliged to come off the list because of that condition, have title to benefits in respect of early retirement on health grounds under the normal superannuation provisions of the Health Service scheme.
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These provisions allow for retirement at any age where it can be established that a member is permanently incapable of following his employment. The incapacity need bear no relationship to the member's occupation, unlike a case falling to be dealt with under the injury benefit provisions. If Mr. Merfield were able to satisfy this medical condition of permanent incapacity, his pension would be built up to recognise the circumstances of his enforced early retirement, six and two-third years being added to his contributing service. In addition, he would be credited in full with the further six years which he is in process of purchasing by instalments, any outstanding balance then being waived. Mr. Merfield's actual service of approximately 20 years would thus be effectively increased to almost 33 years, on which basis a pension and lump sum would be calculated
I have taken note of the other matters raised by the hon. Gentleman and I shall, of course, consider them seriously with my officials and write to him about them.
Question put and agreed to.
Adjourned accordingly at seventeen minutes past Two o'clock.

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Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Southward):
The LORD CHANCELLOR on the Woolsack.

NHS: DISCUSSIONS ON INDUSTRIAL ACTION
Lord CARR of HADLEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what progress has been made in the discussions initiated by the Secretary of State for Social Services between representatives of the trade unions, the British Medical Association, and the Royal Colleges involved in the Health Service with the objective of agreeing on a procedure to reduce the risk of industrial action liable to endanger the life and health of patients in the Health Service.
Lord WELLS-PESTELL: My Lords, the discussions are continuing. As I stated in reply to my noble friend Lord Leatherland on 22nd June, one of the purposes of these discussions is to seek ways of ensuring that there are agreed procedures for settling disagreements quickly, before there is resort to industrial action. As a result of these discussions, my right honourable friend the Secretary of State for Social Services wrote to the chairmen of Health Authorities on 9th June requesting their views on proposals for an improved disputes procedure in the National Health Service.
Lord CARR of HADLEY: My Lords, I think that we all agree that this is an extremely important matter. The noble Lord says that discussions are continuing. I am not quite clear what is the nature of these discussions. Are all the parties involved in this matter taking part in the discussions? I have in mind the various Royal colleges, the trade unions, and the other people involved. Have they yet
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met together, or is it at the moment simply a matter of the Secretary of State writing to them all and asking for reactions? A month seems rather a long time just to have reached that stage.
Lord WELLS-PESTELL: My Lords, I am grateful to the noble Lord for giving me an opportunity of speaking more fully on this matter; I try to keep the Answers as brief as I can. The Secretary of State saw a number of people representing the various groups that make up the National Health Service. Since then he has charged the Under-Secretary of State for Health and Social Services to chair a committee which is made up of representatives of the British Medical Association, the Royal College of Nursing, the Royal College of Midwives, and the four trade unions involved; namely, COHSE, NUPE. NALGO, and ASTMS. They have met, and they are meeting again tonight.
This meeting is not as a result of the noble Lord's Question; it was arranged two or three weeks ago. They are trying to arrive at a formula which would improve the procedures for dealing with disputes, and which would cover all the disputes which are likely to arise. This approach is being based on past disputes in the National Health Service. If they can come to some agreement on what the procedures should be, recommendations will be made to the Whitley Council. As the noble Lord will know better than I know, the Whitley Council has certain responsibilities in some fields and none in the others. If the Whitley Council agree to the procedures they will be adopted by the Area Health Authorities; that is to say, by the employing authority in each district.
Lord CARR of HADLEY: My Lords, I am grateful to the noble Lord for those further details. As I understand it, a committee of the various representatives is now formed under the chairmanship of the Under-Secretary. I believe that that is the right way to proceed, and I should like to ask the noble Lord to do all he can to ensure that progress is as urgent and as speedy as possible.
Lord WELLS-PESTELL: My Lords, this is the whole purpose of what is being done. We hope that eventually, when the procedures have been agreed,

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if there is a dispute it can be dealt with at local level within, say, about 14 days.
Lord ROCHESTER: My Lords, would the Government consider whether, apart from the Health Service, the pay of people employed in certain other occupations that are vital to the immediate support of life should be determined by a single independent body, rather than by the various ad hoc committees that have been recently used for this purpose? Would not the establishment of such a body provide that continuity of policy which has, under successive Governments—first with the abolition of the Prices and Incomes Board, and then with the rejection of the Relativities Board—been recently so sadly lacking?
Lord WELLS-PESTELL: My Lords, if I have understood the noble Lord correctly, he is concentrating on the question of the pay structure. There are established panels and groups which are already dealing with that matter. There is the Doctors' and Dentists' Review Body and, with regard to the ordinary employees in the National Health Service, there is the Whitley Council. The whole object of the committee which I have already mentioned to the noble Lord, Lord Carr of Hadley, and to the House, is to deal with all those matters which are rather "non-Whitley", and not those which are to do with pay structure, which applies overall.
Lord SEGAL: My Lords, does my noble friend agree that the crucial issue in these discussions centres on the right of hospital staffs to strike? Can he say whether, in the midst of these discussions, any conclusion has yet been reached on that aspect of the problem?
Lord WELLS-PESTELL: My Lords, to the best of my knowledge there has not been any discussion at all at this stage on whether it is right that people in the public service—and this is what it comes down to—should have the right to strike. I believe that the country as a whole has accepted that people have the right to withdraw their labour if they wish. However, in reply to my noble friend, so far as I know the point he raises has not been considered. I do not know
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whether it will be considered, but I shall certainly convey to my right honourable friend the remarks that have been made.
Baroness WARD of NORTH TYNESIDE: My Lords, I fully support the Question asked by my noble friend Lord Carr of Hadley, and I received some satisfaction from the Answer given by the noble Lord opposite. Can the noble Lord kindly say how, with all these very important inquiries going on, we in the House will know what is to happen? Can we be given some information while we are in Recess?
Lord WELLS-PESTELL: My Lords, I have had two questions on this matter in less than a month, and I do not think that your Lordships would allow my Department not to report on this matter in one form or another. With regard to the question of giving information to your Lordships during the Recess, I think that we must face the fact that the matter under discussion will take some time. There are many points to be considered. It is important that the formula arrived at should be the right formula. Many interests are involved, and so we must bear in mind that it may take longer than the period of the Summer Recess to arrive at the right kind of formula. I should be very glad if, upon our return after the Recess, a noble Lord tables a Question for me to answer.
Lord PORRITT: My Lords, would the Minister be able to say, on behalf of Her Majesty's Government, that in such a dispute the doctors, without taking any part in the actual dispute, should, with the representatives of the unions and others concerned, immediately form a local committee to safeguard patients?
Lord WELLS-PESTELL: My Lords, as I pointed out, the whole purpose of this exercise is to bring in everybody who is engaged in the National Health Service. I am tempted to say—and I think I must say it—that it is all very well to talk about the doctors safeguarding the position of patients, but the consultants worked to rule for eight months in 1976 and the junior hospital doctors worked to rule for five months. There was not so much bother then about the needs of patients.

AIR TRANSPORT USERS' COMMITTEE: STATUS
3.11 p.m.
Baroness BURTON of COVENTRY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in view of the further discussion that has taken place, they are willing to reconsider the anomaly whereby, while recognising the Air Transport Users' Committee as the consumer body specifically promoting the interests of all air travellers, the Committee at present remains the only committee thus recognised to which the Government intend to refuse statutory status with the corrollary right of advance information and consultation on the relevant consumer aspects affecting air travellers by the industry concerned; and whether they will make a Statement.
Baroness STEDMAN: My Lords, the Government have noted the new terms of reference which have been given to the Air Transport Users' Committee as well as the changes in its chairmanship and structure. We are following the implementation of these new arrangements with interest, and will be glad to learn what consequences have flowed from them. However, I can assure my noble friend that we are well aware of her reservations about the AUC's lack of statutory status, and we shall pay particular attention to this in our considerations.
Baroness BURTON of COVENTRY: My Lords, is my noble friend aware that I am very sorry that she had to say what she did in the first half of her Answer, because that is very old stuff which goes back a long way and really has no validity at all? With regard to the rest of her Answer, is my noble friend aware that I am glad to have seen both the Parliamentary Under-Secretaries of State concerned and that they will consider what I have said on this matter? Is she also aware that I hope that, when we return after the Recess, we shall at last have reached some conclusion whereby air travellers are not discriminated against in comparison with all other sections of the community?
Baroness STEDMAN: My Lords, I am aware that my noble friend has seen both my honourable friends in the Department of Trade and in the Department of Prices and Consumer Protection. As to any progress which is being made, I am much too modest to claim any credit for it—I put it all at the door of the doggedness of my noble friend in pursuing this subject—but I hope that when we get back after the Recess we might have something more firm to report to the House.
Baroness ELLIOT of HARWOOD: My Lords, is it not possible for the Government Departments to realise that they really are discriminating against the Air Transport Users' Committee? All the other consumer committees which were started some years ago—and I was responsible, when I was chairman of the Consumer Council, for some of them—have real position and status in their various interests. This one does not. Surely it is most unfair that the air transport users should be discriminated against in this matter. I really think it is time that the Government took this matter seriously and tried to do more about it than just giving charming and very nice answers, but not saying, "We intend to do something".
Baroness STEDMAN: My Lords, I must rebut the charge that the Government are not trying to do anything about this, but there are differences. We accept that there is an anomaly in so far as the Air Transport Users' Committee is concerned, but there are differences between the public service nationalised industries, such as gas and electricity, and the air travel industry which is marked by the existence of a number of separate airlines, both British and foreign. That is where we have the problems because we are not dealing solely with the British airlines. In the past, the AUC has been treated differently from the nationalised industry consumer councils. For the future, as I said, my noble friend has been making personal representations to both the Departments concerned, and we shall continue to look at ways of strengthening the consumer representation, including whether it would be beneficial to give the AUC the same sort of responsibilities and position as the other consumer councils.
Lord BRUCE of DONINGTON: My Lords, in view of the number of exchanges on this particular subject which have taken place over the past two years owing to the diligence of my noble friend, (which will be within the recollection of noble Lords), will my noble friend confirm that her right honourable friend, as a Minister, still retains the final power of direction over the public authorities concerned?
Baroness STEDMAN: My Lords, the CAA are not in the same position as an ordinary nationalised industry, in that they are responsible for all the airlines; and, as I have said, there are difficulties and there are differences between the Air Transport Users' Committee and the other consumer committees. What we are doing at the moment is getting together the Department of Trade and the Department of Prices and Consumer Protection to see whether there is a justifiable way around this situation which will be to everyone's satisfaction, as a result of which we might perhaps be able to make the Air Transport Users' Committee a statutory committee with exactly the same terms and responsibilities as all the others. But the negotiations are only just starting. Perhaps after the Recess I shall be able to give better news.

INTERNATIONAL YEAR OF THE CHILD
3.16 p.m.
Baroness VICKERS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government, as the General Assembly of the United Nations Resolution 31/169 of 21st December 1976 proclaimed 1979 as the International Year of the Child, what action is to be taken in regard to Resolution 20 (XXXIV) adopted by the Commission on Human Rights at its 1472 Meeting on 8th March 1978.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, the Secretary-General of the United Nations has requested Governments to communicate
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to him by 31st October 1978 their views on Resolution 20 (Session XXXIV) of the Commission on Human Rights, concerning the question of a Convention on the Rights of the Child. Her Majesty's Government are at present preparing their reply.
Baroness VICKERS: My Lords, I thank the noble Lord for that reply. May I ask him whether he does not think it is essential to consider having an International Year of the Child in view of the fact that, in the other place the other day, it was stated in reply to a Question that there were 24 children in prison with their mothers and 16 babies in prison and borstal? Does he not think that this is very unfortunate, and that we should look into this matter to see whether we cannot make other arrangements?
Lord GORONWY-ROBERTS: Yes, indeed, my Lords. It is that kind of incidence of bad treatment of little children and their mothers which will figure very largely, I hope, in the national and the international activities which the International Year of the Child is designed to promote.
Baroness PHILLIPS: My Lords, would my noble friend agree that the British Government must take the initiative in this? We have too many battered children in this country and too many children whose rights are not considered, and this is our opportunity to do something that will show the world that Britain does love its children.
Lord GORONWY-ROBERTS: My Lords, I very strongly agree, and I am very glad that these points are being ventilated as a result of the initiative of the noble Baroness in asking this Question. We are making substantial sums and accommodation available to the United Kingdom association which is co-ordinating the work of the non-Governmental organisations—the voluntary organisations—which have a splendid record of fine work in this country, as the House knows. I am looking forward to the International Year of the Child in 1979 achieving substantial results, not least in the directions mentioned by the two noble Baronesses who have spoken.
Baroness ELLES: My Lords, in view of his earlier reply, can the Minister say whether the Government are supporting the idea that there should be a Convention, as a change from a Declaration, and that the Government would therefore be obliged to ensure that legislation in this country was in conformity with the terms of the Convention?
Lord GORONWY-ROBERTS: Yes, certainly, my Lords. There is a draft Convention, as the noble Baroness knows, and the Secretary-General has invited the views of all countries on it. We are now collating the views of the various Whitehall Departments—my own is not the only one involved in this, of course—so that, in good time for 31st October, which the Secretary-General has laid down, we shall be putting forward an answer to the Secretary-General which I am absolutely confident will be positive.
Lord NOEL-BAKER: My Lords, is the Minister aware that Mr. Macnamara, the President of the International Bank, has asserted that there are 290 million children in the world who have no schools to go to? In view of this lamentable fact, will the Government urge Mr. Macnamara to make larger loans to developing countries during the International Year of the Child for the provision of schools, and will they consult Mr. Macnamara about the provision of the necessary funds?
Lord GORONWY-ROBERTS: My Lords, it is very probable that there are that number of children in the world who are not in receipt of, or in prospect of receiving, basic education. This House yesterday debated via the European orders which we took through the House certain provisions whereby soft loans throught the IDA will, we hope, be made available in very substantial quantities for purposes of advance in such countries. I would not for a moment rule out educational, and child educational, projects from the ambit of the proposals that we discussed yesterday. I welcome what my noble friend has said.
Lord DAVIES of LEEK: My Lords, the year 1979 being the Year of the Child, will my noble friend use his influence with Her Majesty's Government to stop the vulgar publicity and the
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network of cash that has surrounded the magic of the creative of a child through a wonderful breakthrough of gynaecologists that may help women who are childless? Rather than that it should be vulgarised, will he see that the publicity is stopped?
Lord GORONWY-ROBERTS: My Lords, my noble friend has asked me at least two questions of tremendous import. I must resist the temptation to discuss with him the merits of any scientific breakthrough, as he called it. I have my views on this which may not be very much at variance with those of my noble friend; but I do not think that this is the place, and certainly it is not the time, to go into this adequately.
As to the question of publicity, there again, I think we all broadly share the concern and reservation which my noble friend has indicated. I hope that our hearing this concern expressed may lead those responsible themselves to attain a decent reserve in regard to certain matters from time to time.

RHODESIA: NON-RECOGNITION OF ADMINISTRATION
3.23 p.m.
Lord BARNBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what plans they now have for recognition of the de facto Administration of Rhodesia.
Lord GORONWY-ROBERTS: My Lords, the Government have no plans for recognition of any Administration in Rhodesia until there has been a return to legality following a genuine transfer of power under a settlement that is acceptable to the people of Rhodesia as a whole.
Lord BARNBY: My Lords, is the Minister aware that that reply is disappointing? I had looked forward, in pursuit of the exchange of views in this House two weeks ago, to his being able today to give some new information. Is it not plain that the British Government

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policy is every weakening the position of the black majority de facto Administration of Rhodesia; and that, secondly, it also weakens and encourages confrontation which will generate carnage such as we have seen elsewhere in Africa? Mr. Nkomo declines invitation to join his internal compatriots.
May I ask three points. First, does it not seem that the Government agencies which they encourage externally are financed by Russia and that the Russian resources for disruption are unlimited? Secondly, are not the five points in the Kissinger agreement already confirmed? Thirdly, do all individuals, black or white, in Rhodesia who are entitled to British passports have unrestricted entry into the United Kingdom?
Lord GORONWY-ROBERTS: My Lords, I think that the noble Lord would be advised to put his last point as a separate question because it would take some time and detail to reply to it. As to the second point, I am sure his disappointment will not supersede our friendship. It is my fate to disappoint him ideologically, but I hope that he will agree that we may politically deplore and personally rejoice. As to the question of how far the Salisbury agreement meets the Five, or possible Six, Principles, I have already said (as my right honourable friend said in another place) that they are seriously deficient. We have constantly said that if they substantially met the requirements of the Anglo-US proposals—that is, the Five, possibly Six, Principles—then indeed we would join the noble Lord in welcoming them. But that is not the position.
As to the attitude of the Patriotic Front, what we know is that the Patriotic Front have accepted the principle of free and fair elections and have said that they will attend a round table conference, with far fewer reservations than, I fear, the Salisbury régime through Mr. Smith has already stated. As to the point whether Russia is financing or promoting disturbances in Rhodesia, all I would say is that Africa is not the opportunity for self-interested disturbances by any Power in Europe. We have constantly warned that external intervention in any part of Africa is a very dangerous thing indeed.
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The noble Lord's point relating to the Salisbury agreement I covered when replying to his second point.
Lord SHINWELL: My Lords, in view of the time which has elapsed—and it seems that the noble Lord's right honourable friend the Foreign and Commonwealth Secretary made optimistic statements about progress—is there any assurance at all that Mr. Nkomo and Mr. Mugabe are likely to come to some agreement with any members of the Rhodesian Administration? Is the noble Lord aware that those of us who perhaps are not so well conversant with the nature of this problem and are merely interested spectators, but anxious nevertheless for a settlement, are beginning to think—I would not rate it higher than a thought—that we might have to rely on a de facto or alleged de facto Administration rather than wait for a long period of time before the substance of a reasonable agreement is realised?
Lord GORONWY-ROBERTS: My Lords, I have, of course, very great respect indeed for my noble friend's views. I would ask him to reconsider the last point he made: whether we could, without serious risk, recognise a de facto Administration. We should be operating against the unanimous view of the continent of Africa and, indeed, the pretty unanimous view on the rest of the world, and in an adverse sense, if we took that step. I merely ask him to think over that one. As to the question of progress, I believe that since the Graham-Low Mission began its tour of capitals and persons there has been perceptible, if small, progress towards bringing the parties closer together. Mr. Graham has returned and we are talking to him. It is possible that Mr. Graham and Ambassador Low will return to South Africa to continue their task of bringing the various parties together.
As to my noble friend's suggestion about Mr. Nkomo and Mr. Mugabe, they have understandably so far said that they will not join the Salisbury régime. They have also made—and this is of importance—two points: that they are both in favour of fair and free elections and, indeed, in favour of a transitional period presided over by an administrator. It may be a resident commissioner, as

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we have suggested. Finally, they have said that they will attend a round table conference, and, as I see it, with far fewer reservations at this stage than the Salisbury régime, through Mr. Smith, have stated.
Lord GLADWYN: My Lords, is it not a fact that, whatever the reasons, recognition of the de facto régime in Salisbury would necessarily imply the immediate unilateral lifting of sanctions by this country, which is surely something that, in view of our international obligations, we would be unable to do?
Lord GORONWY-ROBERTS: My Lords, the noble Lord spells out the second part of the observation that I made in regard to the dangers of launching into such a policy. I said that it would be against the background not only of opinion in Africa but also world wide opinion which is pretty unanimous on this. By that means, as he rightly said, decisions of the United Nations are binding on this country as on others.
Lord CARRINGTON: My Lords, I wonder whether I might follow something which the noble Lord, Lord Shinwell, said. On a number of occasions now over the past few weeks the noble Lord, Lord Goronwy-Roberts, has said that progress is being made over the Anglo-American agreement. Would he not agree that the situation in Rhodesia is deteriorating very rapidly, and something is needed now more than vague promises of progress? Could he give us an indication of when some concrete proposals are going to be made?
Lord GORONWY-ROBERTS: My Lords, nobody is making promises of progress. This is a desperately dangerous and difficult situation. What we have said is that there is a slow, perceptible progress as a result of the dual mission of Ambassador Low and Mr. Graham. It is my duty to measure my words and I have tried to do so. It is very slow but perceptible, and added that they may well return. Nobody can guarantee progress. If we could have done so, then we would have done it in the past 11 years where so many opportunities of doing a little of the right thing were thrown away by Smith and his régime.
Lord BARNBY: My Lords, relating to the first reply of the Minister when he referred to elections, since we are, as my noble Leader has just said, galloping towards the dangerous confrontation, cannot something be done—and I was hoping my noble Leader would say it—o regarding the excellent recommendation of the noble Baroness, Lady Vickers, recently that the Government should do something to assist the holding of elections and counter the inevitable intimidation which is endemic to Africa?
Lord GORONWY-ROBERTS: My Lords, there will be no complaints about any appeal or abjuration to the British Government so long as an equally strong appeal is made to the Smith Government.
Lord HATCH of LUSBY: My Lords, would my noble friend accept that this whole House—indeed, the whole of our nation—is facing a terrible and horrific prospect during the next few weeks while we are in Recess? Whatever policy is followed, there will be hundreds—maybe thousands—of British citizens, black and white, who will be murdered in the most terrible way. Would he agree that one mitigating attempt could be made to assist the British Government in this terrible responsibility? That would be if the Leader of the Opposition and his colleagues were to agree with their official Conservative spokesman on foreign affairs that the internal settlement in Rhodesia is no longer credible to the Rhodesian people, rather than misleading their friends in Rhodesia that there may be some other way out; that is, to give their full support on a bipartisan basis to the proposals that Her Majesty's Government have made for a joint conference.
Lord GORONWY-ROBERTS: My Lords, I hope and believe that nobody is trying to mislead anybody. I hope that the substantially bipartisan approach which has characterised the attitude of both Houses of Parliament and the people of this country to this very dangerous situation for many years now will be maintained. I hope that in any criticism that arises about the shortcoming of the British Government we will cast our minds back over 11 years over the not inconsiderable deficiencies of the illegal régime which is the one that is responsible for the situation which we now are in.
The Marquess of SALISBURY: My Lords, is the noble Lord now aware that this very serious process of intimidation, being carried out by the followers of Mr. Nkomo and Mr. Mugabe, is directed to preventing progress towards majority rule for their own reasons? In view of what he said about their acceptance of a free election, can he also say what prospects he sees of having a free election so long as they are carrying out this process of intimidation?
Lord GORONWY-ROBERTS: The present situation, my Lords, I fear may continue until all parties are equally prepared to come to a round table conference to arrange free elections and a proper transitional stage. I repeat that the Patriotic Front have said that they are willing to do this. Let the rest of us, including the Salisbury régime, take them at their word and come together in such a meeting to arrange precisely what the noble Marquess has been asking about; that is, free and fair elections.

SUMMER RECESS
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, may I announce that, subject to progress of business, the House will adjourn for the Summer Recess next Wednesday, 2nd August, until Tuesday, 24th October.

HOUSE OF LORDS' OFFICES
The CHAIRMAN of COMMITTEES (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Fourth Report from the Select Committee be agreed to.—(The Chairman of Committees.)
The Report was as follows:
1. SECURITY
The Committee were informed of a recommendation to increase the complement of Security Officers and approved provision to meet the additional cost.
2. PARLIAMENT OFFICE AND LIBRARY
The Committee approved the appointment of an additional Executive Officer for the Information Office and an additional Personal Secretary
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for the Library. The Committee also agreed to the regrading of the following posts in the Overseas Office:

1 Personal Secretary to Senior Personal Secretary

1 Clerical Officer (shared duties with Hansard) to Hansard Typists' Supervisor, and

1 Attendant to Clerical Officer.

The Committee authorised the consequential revision of scales of pay for these posts and the payment of a Responsibility Allowance to one Clerical Officer in the Parliament Office.
3. REVISED SCALES OF PAY AND ALLOWANCES
The Committee confirmed the application of the following Civil Service memoranda:

CM/302—Scales of Pay

CM/311—Responsibility Allowances

CM/313—Proficiency Payments

GM/147—Fees to Academic Consultants

giving revised rates of pay and allowances to applicable permanent and temporary staff.
4. UNIFORM ALLOWANCE
The Committee approved an increase in the initial allowance paid to Clerks appointed to the Table and the Gentleman Usher of the Black Rod.
5. SUPERANNUATION
The Committee were notified of the following awards:—

(a) Pension and lump sum to Mr. L. T. George, BEM, Principal Doorkeeper, who retired on 28th June 1978.

(b) Pension and lump sum to Mrs. M. I. Haynes, Clerical Officer, who retired on 1st June 1978.

6. COMPUTER DEVELOPMENTS
A Report from the Sub-Committee on Computers was made.
The Committee agreed in principle a recommendation that a Computer Officer, with technical knowledge and experience in the use of computers, should be appointed jointly by the two Houses.
The Earl of LISTOWEL: My Lords, may I ask whether the noble Lord the Chairman of Committees will thank the Offices Committee for their proposal to increase the staff of the Library which, if I may say so, was a commendably quick response to a request made from all quarters of the House in the debate on the report of the Library.
The CHAIRMAN of COMMITTEES: My Lords, I am most grateful for what the noble Earl has said. I shall convey what he said to the chairman of the Library Sub-Committee and to the Librarian.
On Question, Motion agreed to.

SCOTLAND BILL
3.38 p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones: My Lords, I beg to move that the Commons Reason and Amendment be considered forthwith.
Moved, That the Commons Reason and Amendment be considered forthwith.—(The Lord Chancellor.)
On Question, Motion agreed to.

COMMONS REASON FOR DISAGREEING TO LORDS AMENDMENTS IN LIEU OF LORDS AMENDMENTS DISAGREED TO BY THE COMMONS AND A COMMONS AMENDMENT IN LIEU OF A LORDS AMENDMENT IN LIEU
[References are to Bill (82) as first printed for the Lords]

LORDS AMENDMENTS IN LIEU
1 Clause 20, page 9, line 31, leave out "A Scottish" and insert "The First"
2 Clause 20, page 9, line 34, leave out "him" and insert "a Scottish Secretary"
3 at end insert—
"Provided that he has obtained the consent of the Minister for the Civil Service as to the number of officers and servants in each grade."
The Commons disagreed to the above Amendments for the following Reason:
4 Because the appointment of the officers and servants of Scottish Secretaries should be the concern of Scottish Secretaries.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): My Lords, I beg to move that this House doth not insist on Amendments in lieu Nos. 1 to 3 to which the Commons have disagreed for the Reason numbered 4. When the noble Lord, Lord Campbell of Croy, pressed these Amendments he said that he did so because he believed that the other place should be given the opportunity to discuss the matter, which they had not been able to do at the previous stage. The other place have now had the opportunity as a result of what this House did at the invitation of the noble Lord, Lord Campbell of Croy. They have clearly expressed their support for the Government's view. Your Lordships may know that the matter was debated for some two hours in the other place and the Government's view was supported by a majority of 33 in a substantial vote.
Briefly, on the merits we believe that the requirement for the consent of the
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Minister for the Civil Service as to the numbers and grades of staff of the Scottish Executive would provide for unnecessary intervention by a United Kingdom Minister in the affairs of the Assembly. We have always sought to exclude unnecessary intervention and we still do. The other place have now considered this matter and they have decided that they cannot agree to these Amendments. I trust therefore that noble Lords opposite, and the House, will be content to let the matter rest there. I beg to move.
Moved, That this House doth not insist on Amendments in lieu Nos. 1 to 3, to which the Commons have disagreed for the Reason numbered 4.—(Lord McCluskey.)
Lord CAMPBELL of CROY: My Lords, we are grateful to the noble and learned Lord for having briefly restated the Government's case. Last Thursday, this House referred to another place three of the issues remaining between the Government and these Benches. Only one has returned, and it is this group of Amendments. On the subjects of what is known as the "West Lothian question" and forestry, the Commons yesterday agreed with our Amendments.
It is gratifying that the variations of previous Amendments, which were devised and voted upon by your Lordships, have now found favour with a majority in another place. It is a vindication of the revising and redrafting skills of your Lordships. We still think, as regards this group of Amendments, that the Bill would have been improved if the manner in which an unknown number of new Departments are to be established in Edinburgh had been accepted, too; but I will say at the outset that I am not recommending to the House that we should insist on this group of Amendments. After all, two out of three is not a bad score! I suggest we should now be content, for these Amendments have achieved part of their purpose.
First, they have been discussed in another place. On the previous occasion there was no discussion of the variations of the Amendments because of the guillotine. Secondly—and I think this is more important—they have elicited at least one important assurance from the

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Government. The Minister has said that the United Kingdom Government will determine the initial staff levels. That meets most of what is required by our Amendments. Indeed, it goes further than our Amendments would have done at the initial stage, because the United Kingdom Government are "to determine" rather than merely "consenting". We cannot see why on earth this should not have been put into the Bill; but once the new Scottish Executive has taken over there is nothing in the Bill to stop them expanding, doubling or trebling the establishment, if they think fit. In that way the initial level set by the United Kingdom Government could be nullified unless some control is retained through the Civil Service Department. My own reading between the lines of the Government's statement is that this control will in fact be retained, for if the Minister's statement about initial staff levels is to have any real meaning, subsequent staff levels are bound to be a matter of continuing dialogue between Edinburgh and London. It seems, therefore, that the Government intend to carry out by administrative means very much what we intended in these Amendments.
The number of Scottish Secretaries is still unknown. This was debated on probing Amendments during earlier stages in this House. We then agreed that there was some strength in the argument not to put a maximum number into the Bill, because that maximum might then become the target and more Scottish Secretaries might be brought into existence than was necessary. Again, it is reassuring that the United Kingdom Government will determine the initial establishments: whether there are to be 20 new Departments with 20 Scottish Secretaries, or five, and the numbers and grades of civil servants will no doubt be set out accordingly.
We agree with the Reason numbered 4 which the other place have sent to us. The appointments should be the concern of Scottish Secretaries: there has been no argument about that. What we have said is that in addition it should be of concern to the first Secretary, as head of the Scottish Executive. It should also be a matter of interest, to put it no higher than that, to the Minister for the Civil
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Service. He is in charge of the whole Civil Service, from whose ranks the appointments are to be filled. In recent years he has been a Member of your Lordships' House, and he is now. He must be concerned, and I am sure that he and his predecessors have been concerned, with the welfare of the home Civil Service, with their careers and with standards. We believe it would have been better to acknowledge his position in the text of the Bill.
I have only two more points to make. The first arises from the debate yesterday evening in another place on this group of Amendments. The second concerns the effect of our Parliamentary debates on the public in Scotland. On the first point, a Labour Member of Parliament suggested—and I shall, of course, paraphrase and summarise what he said in order to observe the convention that exists between the two Houses—that this House should restrict itself to subjects within its expertise in dealing with this group of Amendments. For his enlightenment and for the enlightenment of those who may have been misled, I am sure unwittingly, by what he said, I should like to say that this House is singularly well equipped and supplied with expertise on the subject. As I pointed out on an earlier occasion, it includes former Ministers for the Civil Service on both sides. There are distinguished Cross-Benchers, who have spent their working lives in the home Civil Service until retirement, and who supported these Amendments here in the Division Lobbies.
I cannot compare myself with them but I am not a novice in these matters and I moved these Amendments. In all modesty I can say that I have some credentials, because I was myself a professional civil servant before entering Parliament, and although I was in what was then called "the Foreign Service" and worked in Foreign Office posts abroad, I was for a period assigned to the home Civil Service to be the private secretary of the late Lord Normanbrook when he was Secretary of the Cabinet. I worked personally for him and also for the late Lord Bridges, both of whom I regard as among the greatest of our heads of the Civil Service. I could not have failed to learn something from them about the system and the Service.

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My second point is that I must dispel some false impressions which are being given currency in Scotland about our proceedings in Parliament upon this Bill. Many letters have appeared in the Press, and there have been comments elsewhere in Scotland, to the effect that the Lords have "mutilated" or "mangled" this Bill. It is important to get the facts straight. We do not, as I have said, intend to insist on this group of Amendments. As a result, there will have been 11 subjects on which the Government disagreed with us, causing Divisions in which they lost in this House but on which the Amendments have found their way into the Bill: they are now in the Bill. I will not enumerate many other Amendments made by the Government, or the points which they have conceded, because I know that my noble friend Lord Ferrers intends to say some words about that; but on all these 11 subjects— among them doctors' and dentists' pay and conditions, betting and gaming and the six weeks' minimum period for the referendum campaign—the Amendments were accepted or made by Divisions in another place. On every single one of the 11, the Lords' view was endorsed by the other place. So when the word "mangling" is used, it cannot be attributed to this House.
Several noble Lords:Hear, hear!
Lord CAMPBELL of CROY:My Lords, there are some on all sides of this House and, I understand, also in another place, who would have liked to apply "a ringer" to this Bill and consider that the Bill would have benefited from it. But in the interests of truth and accuracy, it must clearly be stated that that was not done by this House. We provided the other place with opportunities to discuss subjects, particularly those which had not been discussed as a result of the guillotine. We also enabled them to have second thoughts and to take some of these decisions. They took those final decisions, which have led to the Amendments which are now incorporated in the Bill.
I believe that we have carried out the traditional role of this House, as I have always understood it, as a revising Chamber, which has enabled another place to think again. I trust that the media in Scotland will now point out, when necessary, to those members of the
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public who aspire to have letters published about these Parliamentary proceedings, or to pontificate in broadcasts, that any statement that the Lords have wrecked or mutilated this Bill would be no longer in the category of a simple mistake, but would be a thoroughly misleading and inexcusable mischief.
3.51 p.m.
Lord McCLUSKEY:My Lords, I had not quite expected the noble Lord, Lord Campbell of Croy, to broaden the matter as much as he has done and I shall not follow him entirely. But he mentioned the "West Lothian Amendment", as it is known, as if this were a matter for pride and self-congratulation. My Lords, it is not. Every one knows that this Amendment is misconceived, offensive in principle and probably unworkable in practice. No one believes that it will ever work and few believe that the Resolution which is necessary to bring that clause into effect will ever be passed by the other place.
May I just say this, in relation to the note of self-congratulation that entered the words of the noble Lord, Lord Campbell of Croy: We know why the SNP and Plaid Cymru voted for that clause last night. They have made it plain that they see that clause as a possible step to separate Scotland and Wales, and to provide separate Parliaments for those countries. That is a proposition which, from them, we can understand. What we fail to understand is how it could be that the official Opposition, the Party to which the noble Lord, Lord Campbell of Croy, belongs, followed the nationalist Parties into the Lobbies in order to vote for that destructive clause. However, they will no doubt explain that in their own way on another occasion.
As to the role of the House of Lords, I had expected that the noble Earl, Lord Ferrers, would make some observations about that. I did not expect a trailer from the noble Lord, Lord Campbell of Croy. I do not suggest, and will not suggest, that this House has mangled or mutilated the Bill, and, indeed, when I come to reply to the noble Earl, Lord Ferrers, on that matter I may say that in some detail.
On Question, Motion agreed to.

LORDS AMENDMENT
5 Schedule 14, page 77, line 10, after "Scotland" insert "(whether or not it also concerns directly or indirectly any other part of the United Kingdom)."
The Commons disagreed to the above Amendment but proposed the following Amendment in lieu thereof:
6 Page 77, line 10, leave out (" concerning Scotland") and insert (" which concerns Scotland (whether or not it also concerns any' other part of the United Kingdom) but").
3.53 p.m.
Lord McCLUSKEY:My Lords, I beg to move that this House doth not insist on their Amendment No. 5, to which the Commons have disagreed, and agree with the Commons in their Amendment numbered 6 proposed in lieu thereof. Amendment No. 5 was moved by the noble Viscount, Lord Colville, in order to bring the wording of the planning intervention provisions in Schedule 14 more closely into line with that for the general intervention provisions of Clause 36. The Government accepted the Amendment in principle, but subject to later adjustment as to its drafting. This adjustment is achieved by the Amendment in lieu proposed by the Commons, and I hope that your Lordships will accept it. I believe that the noble Viscount would certainly do so.
Moved, That this House doth not insist on their Amendment No. 5, to which the Commons have disagreed, and agree with the Commons in their Amendment numbered 6 proposed in lieu thereof.—(Lord McCluskey.)
Earl FERRERS:My Lords, the Commons Amendment which the noble and learned Lord has just moved, and invited us to agree with, is in lieu of one which, as he said, my noble friend Lord Colville moved earlier, and which the Government accepted in principle. My noble friend, who is unable to be here today, nevertheless knew that his drafting might not be wholly perfect and it therefore comes as no surprise to learn that the Government wish to alter it a little. We are grateful to the Government for having considered that Amendment, and for having altered it in the way in which they have, and we are of course happy to accept the Amendment in lieu.
With that last Amendment, or last Commons Reason, the Bill comes to the
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end of its passage through Parliament. It will soon become an Act, and will then be presented to the people of Scotland for a referendum before it becomes operative. As this is the Bill's last debatable occasion, perhaps I may be permitted to make one or two observations—which, happily, the noble and learned Lord, Lord McCluskey, seemed to wish for—and also to ask him a question. Perhaps he did not wish for that, but at least he anticipated it. I hope that I shall not "needle" him, because that is the last thing I would wish to do on an occasion like this, although I thought I detected a sense of "needle" when he replied to my noble friend. So I hope that that will be absent.
The noble and learned Lord, Lord McCluskey, has always done his best to be helpful, despite his understandable ministerial constraints, and I should like to ask him one last question. It is one which is of huge interest to all of us, and particularly to the people of Scotland to whom this Bill is directed, and it becomes even more important as the first shots appear to have been fired in the run-up to a General Election. The question is simply this. When do the Government intend to hold the referendum? Will it be this autumn or will it be in the spring, and will it be before the General Election? If there is to be a General Election in the autumn, will the referendum be held before it or after it?
I realise that much depends on the date of the General Election. If the noble and learned Lord, Lord McCluskey, could give us that information, too, I am sure that it would be very helpful. But I doubt whether even the noble and learned Lord's magnaminity would extend so far, even if his knowledge did; and, if it did, it would doubtless cost him his ministerial office. But that would merely be preempting what will be to him, and indeed to us, a disagreeable experience anyhow. As the next stage of implementing this considerable constitutional upheaval is a referendum, obviously everyone wants to know what the Government have in mind. Clearly, the Government must have an opinion and, if the noble and learned Lord is coy about giving firm dates, then an indication of an anticipated time, allowing for certain eventualities, might be helpful.
We all of us have our own views as to the merits of this Bill and I do not propose

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to rehearse mine again, other than to say that I doubt whether historians will invite future generations to glory in the day when the Bill received the Royal Assent. There are still too many flaws in the Bill, too many omissions and too many innovations which will allow the future course of events to unroll in ways which many of us would not wish, in ways which we cannot at present begin to visualise and, which, if we could so visualise them, we would wish to prevent. But that is past.
We have done our best in Parliament, and your Lordships' House, as I venture to suggest, carried out its role and its duty—and it is a duty—as a revising Chamber, properly and constitutionally, and the Bill has emerged as an infinitely better Bill because of your Lordships' work. We have considered all the clauses of the Bill, and amended the Bill where we thought it appropriate. Those Amendments we have sent to another place for their consideration. They have approved some and rejected others. There has been no confrontation between the two Houses. When another place has not felt minded to agree to your Lordships' views, then your Lordships have not exercised your right to insist.
Therefore, if some people are tempted to say that it is the unelected House of Lords which has altered the Bill, let them reflect that what is in the Bill is nothing more and nothing less than that which has had the approval of the House of Commons. They might also reflect that had it not been for a second Chamber making suggestions to which the Commons have agreed, the Bill might be very different from what it now is. The mere existence of your Lordships' House, irrespective of powers or composition, has given time for the Government and others to reflect and think again, and even to change their mind. That is good and that is our purpose.
Not everyone would realise that of the 239 Amendments made to the Bill in your Lordships' House, no less than 170 were agreed to by another place; of the 239 Amendments made by your Lordships, 96 were made by the Government to their own Bill in this House, and a further 46 I Amendments were Government concessions to arguments and representations which were made by your Lordships.
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How would that have been possible without a second Chamber? The remaining 97 Amendments were put forward from other parts of your Lordships' House.
So much for the Amendments. If we consider the issues to which the Amendments referred, we find that the Government made 23 substantive concessions when the Bill was in your Lordships' House. In addition, your Lordships decided by vote—admittedly against Government advice—to send a further 29 issues of substance to another place to consider. Of those 29 issues, the Government accepted eight in another place which they had rejected here. While we all appreciate the wisdom of an open mind and the ability to change it, we cannot help but reflect that it would have been so much easier and might have saved a lot of time if the Government had been prepared to make such a change of mind earlier. However, we are happy that the Government made the change of mind when they did.
In addition to those eight issues which the Government accepted in another place, another place decided to accept a further change which your Lordships suggested—
against Government advice—and this was on abortion. Yesterday, another place accepted by vote—but not by a free vote and against Government advice—a further two Amendments on forestry and the "West Lothian question". Therefore, of the 29 issues which your Lordships sent to another place, another place accepted 11.
No one can say—and here I agree with my noble friend Lord Campbell of Croy—that your Lordships' time and effort have been wasted and that your Lordships have not carried out your role and duty as a revising Chamber. May I re-emphasise what my noble friend said: that not one change to this Bill was made against Government advice which was not a decision of the House of Commons.
The most significant of all the changes which another place accepted was on the "West Lothian question", to which the noble and learned Lord, Lord McCluskey, has already cursorily referred. If it had not been for the mere fact of the existence of your Lordships' House, with its different rules and procedures, such an Amendment—which another place showed that they wanted to be made, even though I

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accept that the Government did not, for reasons which they have frequently explained—could not have been made, because the rules of scope in another place prevented them from putting down such an Amendment when the Bill was with them. Yet our rules of procedure permitted us to do so and, having done so, enabled another place to discuss the problem and, as they did yesterday, to accept the Amendment.
As the Bill concludes its Parliamentary passage, I hope that it will not he considered immodest to recognise and record the fact that your Lordships' House has played a significant part in shaping and improving it. Yet there are those who perpetually castigate your Lordships' House. Of course, we all accept that your Lordships' House has always been a good whipping boy, but there are now those—and they are an influential lot—who are hoping to get the abolition of the House of Lords accepted as part of the Labour Party's Manifesto in the forthcoming General Election.
Of course, the Party opposite must seek to do what they think best to secure their return to Government, and I would hesitate to comment on their domestic issues. However, being a helpful sort of fellow, I wonder whether I might be permitted to give a little bit of advice to the noble and learned Lord, Lord McCluskey—or, perhaps, to the noble and learned Lord the Lord Chancellor, because he carries even more weight than the noble and learned Lord, Lord McCluskey; and his is considerable. If I do this, I do so, as it were, on my knees—in a stance not of supplication but of humility.
It is that the setting up of Assemblies in Scotland and Wales is constitutional upheaval enough for the body politic to assimilate at any one time. To follow this, hotfoot, with the permanent abolition of one of our two Chambers of Parliament at Westminster will commend itself to very, very few people indeed. There are not many votes there. Although the House of Lords does not always find itself in the forefront of news, the public as a whole are pretty discriminating in realising that the work of the House of Lords is today, probably more than ever before, a valuable contribution to our Parliamentary
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processes and that it has never worked harder, more conscientiously, or more effectively than it does now. It probably stands higher now in the public's esteem than it did at any time in history.
My respectful and humble advice to the noble and learned Lord the Lord Chancellor is that, when discussing with his colleagues whether to put the abolition of the House of Lords into the Labour Party's Manifesto, he should say, "Don't touch it with a barge pole. It won't do you any good".
Lord HAILSHAM of SAINT MARYLEBONE:My Lords, may I be forgiven for saying just a word or two, in a sense reinforcing the words of my noble friend but from a rather different point of view. When the autumn comes, I shall have been a Member of Parliament, in one House or the other, continuously for 40 years. In the nature of things, obviously I cannot look forward to very many more years of useful life, but I have become increasingly disturbed and worried about the whole legislative process in this country. I am not making a Party point and I am not really discussing, although there are implications, the relative roles of the two Houses of Parliament. However, every Government of which I have been a Member, or which I have seen from the Opposition Benches, has made use of the guillotine to an increasing degree.
The whole system of legislation which the Government—and before it Great Britain, and before it England—have depended upon over so many centuries has been predicated upon the supposition that every line and every section of every Bill should receive some discussion and opportunity for amendment in each of the two Houses of Parliament. That is the supposition upon which we act today. We have had the Scotland Bill, which we are now discussing. We have had the Wales Bill, which was discussed on Second Reading to some extent from this point of view by my noble friend Lord Elton. We had the Industrial Relations Bill when we were in Office. We had the European Communities Bill when we were in Office. They were all very important Bills.
I could go on enumerating the Bills which I have played some part in or listened to the discussions on during the

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last 40 years. Nearly all of the most important Bills have been guillotined, which means that to an increasing extent their details have never been discussed line by line or section by section in both !louses of Parliament. If we were to create a situation in this country in which we had a unicameral Legislature, whether it was elected or non-elected, the effect would be not less work for that Legislature; the effect would be more work for that unicameral Legislature. The use of the guillotine would not be less; it would be more. The whole idea upon which our legislation has succeeded in establishing a free Legislature in this country for over 700 years would, in fact, be destroyed if that were done. I do beg Members of another place and, indeed, of this place, to remember that you cannot abolish this House without replacing it, unless you destroy the system upon which the freedom of England, of Great Britain and of the United Kingdom has been founded for 700 years.
4.9 p.m.
Lord SHINWELL:My Lords, I was not aware that it was the intention, in what might be regarded as the concluding chapter of this controversy, to embark upon a discussion about what should or should not appear in the Labour Party's Election Manifesto. If I had known that this was the intention, I should have asked my speech writer to prepare a rational analysis of the situation and, of course, offer some conclusion. But my speech writer was not available; every summer he goes to the Riviera, while I have to content myself with a modest visit to Southend. However, I must say that in what is the concluding or the twilight performance—who can tell?—before next Wednesday when we rise for the Recess, somebody from another place, or somebody in your Lordships' House, may find some rational reason why reference should be made to the Scottish devolution Bill, and we shall then be back again to square one.
The noble and learned Lord, Lord Hailsham of Saint Marylebone, usually indulges—and I enjoy it every time—in a philosophical treatise. I am bound to say, though I do not want to make too much of it, that I am inclined to follow him in his philosophical views. What he
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has said about his disappointment with the legislative process is welcome to my ears. I go perhaps a little further than he does. I was in another place before he made his entry. He was rather more successful than I was. But in fact whenever I arrived and listened, particularly to the products of the high scholastic institutions, I was convinced that the legislative process was doomed to disappointment; that in the long run it would be discovered that it required substantial emendation, and indeed that much of' it should be thrown into the dustbin anyhow. That was my opinion, because, after all—I content myself with what seems to be the most reasonable argument in support of my contention—look at the results; vast unemployment, inflation to the highest possible degree and no likelihood of an early solution, all kinds of problems; every day we hear about them in your Lordships' House. We get the same type of questions and the same type of answers. There we are. So I think the noble and learned Lord, Lord Hailsham, was justified in expressing some disappointment—I would not say disgust; I would not take it as far as that—with the legislative process. Sooner or later it has got to be reconstructed, restructured; let that he understood.
Let us dismiss the Election Manifesto for the time being. We will come to it in due course and we shall have our say. There will be no consensus; there will he adequate confrontation, and let the best man win. Perhaps I ought not to confine it to one sex, but I was using a familiar phrase: let the best man win. Let us leave it at that. I hope it is not regarded as a political allusion, and if it is so regarded by Mrs. Thatcher I offer my apology at once; that was not my intention.
I want to come now to what I think is the proper course towards the end of the performance. The principal actors have bowed their acknowledgments—the noble Lord, Lord Campbell of Croy, who has played a very active part in the course of the play; the noble Earl, Lord Ferrers, has rendered noble assistance, and there have been many others. But I want to convey my congratulations, strange as it may seem, to my noble and learned friend the Solicitor-General for Scotland—and I mean what I say—who has piloted this Bill with remarkable skill;

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there can be no question about it. Sometimes I have thought—perhaps it was a misunderstanding on my part—that he was a little too ministerial, particularly when I ventured to intervene in the course of the debates. But he always adopted the right course for a Minister: that is, in replying to a discussion in which several Members have played their part always to leave out the name of the one you dislike; mention everybody else, the noble Lord, Lord So-and-;So, the noble Earl, Lord So-and-So, the noble Viscount, Lord So-and-So, but do not mention the name of the other one, because that is how to snub him. I used to play that game myself, so therefore I know what is done. But leaving that aside, there can be no question about it that the skill deployed by my noble and learned friend is worthy of our acknowledgments.
He was assisted by a somewhat less ministerial but capable colleague, my noble friend Lord Kirkhill. There was a difference. The Solicitor-General was a little too legalistic—anyway, of course, I could not understand the language very often; I am a Doctor of Laws but that does not mean I know anything about the subject. My noble friend Lord Kirkhill I could understand clearly; there was clarity in what he said, although I frequently disagreed with him. Anyway, I offer my acknowledgments.
Now I go even further still before I sit down. There can be no question that the Members of the House of Lords have played their part in this performance and have done their duty. Their actions have been justified. It is not a question of how many Amendments have been accepted by another place. But as long as your Lordships' House exists the Members are entitled to justify their existence by intervening in debates, by initiating debates on various topics of the utmost national and international importance. As to when this place is going to be abolished, I wonder. I have held the view for many long years that the Labour Party—of which I have been a Member since the year 1903; and that is a long time ago—always must have a grievance. What better grievance than the House of Lords?
What they are going to replace it with, I do not know. I want it to go on; I
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want the House of Lords to go on. There might be some reduction in the numbers on the other side of the House. I think even my noble friend Lord Carrington—I say that because in private we are quite friendly; we agree rather than disagree about some things—has declared in your Lordships' House that there might be a reduction in the number of Members on the Conservative side, in order to escape from the imbalance that exists, which perhaps causes more trouble and more controversy than the existence of your Lordships' House itself. Anyway, it will not matter very much to me. Of course, if a Conservative Government comes in we have got to put up with this place—what can we do?—but perhaps with some restructuring. However, if a Labour Government should come in, I understand that they do not intend to implement what is to appear in the Manifesto about the abolition of the House of Lords until the 1980s. So I shall escape. I shall not he here. Those who have been siding with me all these years will discover their mistake. It simply cannot be done. In fact, I shall not resign. I shall disappear, as will most of the others. They will accompany me. Where we are going I am not sure. I wish I knew.
What are we trying to do? Are we trying to have another confrontation at the end of the day? I beg the Members of your Lordships' House to do nothing of the kind. Skill has been deployed on both sides of the House. Many Members of your Lordships' House have been rational in their observations. What has been done has been done in the best interests of a United Kingdom. After all, that is the primary consideration. Let us stand by that. Let us be proud that we were privileged to take part in this performance.
4.21 p.m.
Lord POLWARTH:My Lords, perhaps it would not be out of order for a Back-Bencher on this side of the House to say one word before the final question is put. May I, as a former occupant of the seat now held by the noble Lord, Lord Kirkhill, opposite, simply associate probably most Back-Benchers on all sides of the House with what the noble Lord, Lord Shinwell, said about the Government team's handling of this measure, and especially the

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extraordinary skill and good humour of the noble Lord, Lord McCluskey, when faced with such complexity? If ever justification was needed for the proposition which I urged for long but did not succeed in bringing about—that the Government team should enjoy the presence of a noble and learned Scottish Lord to back up the humble efforts of lay Ministers of State such as the noble Lord, Lord Kirkhill, and myself—surely the proof has been in the handling of this Bill. I hope that this innovation will be continued by Governments of any shade in this place.
Secondly, it would be unfair if we did not all recognise the assiduity, the stamina and the good humour with which my noble friend Lord Ferrers—good Englishman that he is—has carried the heat and burden of the day on this side of the House. I hope that the House will agree with those proportions.
4.24 p.m.
Lord BANKS:My Lords, in supporting acceptance of the Amendment in lieu, perhaps I may be allowed briefly to say on behalf of my noble friends that we made it clear at the outset that we supported this Bill, although we should have liked to see it go very much further. We wanted a federal solution. I do not know that we have come much nearer to the ideal which we have in the course of the debates in both Houses. Nevertheless, we recognise the important part played by this House in the consideration of this Bill.
We join fully in the tributes paid in particular to the noble and learned Lord, Lord McCluskey, and to others who have been concerned with the explanation and advocacy of this measure in this House. Whatever reservations we may have about the Bill—wishing it had gone further than it has—we nevertheless hope that it will in due course receive the approval of the people of Scotland.
Lord MCLUSKEY:My Lords, it would be appropriate for me to mention by name at least one noble Lord, my noble friend Lord Shinwell. I hope that others will excuse me if I do not mention all the names. I acknowledge what my noble friend and others said about the role played by the Government Ministers, not just by the noble Lord, Lord Kirkhill and myself, but by the noble and learned
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Lord the Lord Chancellor and the noble Baroness, Lady Stedman, without whom we would not have got where we did.
On the general matters that have been discussed—the Manifesto and the House of Lords—it would be inappropriate for me, as a Government Minister and a junior Member of this House, to enter into the wider debate. However, I should like to acknowledge the good humour, the kindness and the quality of the debate in the House which has made such an impact on the discussion of this Bill.
Let me turn to matters which are within my domain. First, I refer to the date of the General Election. I do not see why the House should be kept in suspense on this matter. I have this to say. There will certainly be a General Election in October 1979 or earlier. As to the date of the referendum, I have to be rather more circumspect. In relation to that, I have to say this. As the House knows, there have to be two orders made. They cannot be made before the Recess. It is not practicable to do so. Draft orders need to be considered by the Special Orders Committee and the Joint Committee on Statutory Instruments, which has to report on them. That cannot be initiated until after the Royal Assent has been received. The Government have constantly reiterated their intention of ensuring that both referendums are held as soon as practicable. The first practicable date would, I suppose, be in the autumn. But that is a matter for Parliament to decide. As to the intervening of a General Election, subject to what I have said before, that is a somewhat hypothetical question. Parliament may run until October 1979. I do not think that I should address myself further to that.
On Question, Motion agreed to.

WALES BILL
4.26 p.m.
The LORD CHANCELLOR:My Lords, I beg to move that the Commons Reason and the Amendments be now considered.—(The Lord Chancellor.)
Moved, That the Commons Reason and the Amendments be now considered.—(The Lord Chancellor.)
On Question, Motion agreed to.

COMMONS REASON FOR DISAGREEING TO LORDS AMENDMENTS IN LIEU OF LORDS AMENDMENT DISAGREED TO BY THE COMMONS, AND COMMONS AMENDMENTS IN LIEU OF CERTAIN OTHER LORDS AMENDMENTS IN LIEU, AND A COMMONS AMENDMENT TO A LORDS AMENDMENT IN LIEU
[References are to Bill (158) as first printed for the Lords]

LORDS AMENDMENT
1 Clause 12, page 6, leave out lines 30 to 32 and insert—
"(1)The Assembly shall not, unless authorised to do so by order made by the Secretary of State, review the structure of local government in Wales.
(2) No such order shall be made unless a draft thereof has been laid before and approved by resolution of each House of Parliament."
The Commons disagreed to the above Amendment for the following Reason:
2 Because the 4ssembly should he under a duty to review tic! structure of local government in Wales.
The LORD CHANCELLOR:My Lords, I beg to move that this House doth not insist on their Amendment No. 1, to which the Commons have disagreed for the reason numbered 2. This relates to Clause 12, with its requirement upon the Assembly to review the structure of local government in Wales. It has been debated on several occasions. If I may say so, the factor which perhaps influenced your Lordships' House in deciding that it should be considered again in another place was the fact that the Government's proposal to retain the provisions of Clause 12 was only sustained in another place by one vote. Since then the matter has again been considered and the other place has rejected the Lords Amendment by a margin of 21 votes. I hope that in these circumstances your Lordships may not think it necessary to recapitulate the matters which were so eloquently and fully debated on the previous occasion and will now bow to the view of the other place upon this matter.
Lord ELTON: My Lords, I admire the succinctness of the approach of the noble and learned Lord the Lord Chancellor to this question. I did take care to read in Hansard the account of the debate on this Amendment in another place, which was a matter of some difficulty because it was nowhere in print. There are only two photostat copies of the stenographers'
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transcripts available in another place. I noticed that in that debate it was suggested that this House had sought to mutilate this Bill and that the other place had wisely restored most of the Amendments. I do not wish to try to tread again the ground which my noble friend Lord Ferrers trod so extremely effectively perhaps half an hour ago. This is the first time that we have considered stages of the Wales and Scotland Bills on the same day with a proportion of the same audiences, and I should not wish to be compared with him, although I endorse everything which he has said. However, I think that one must say something in the context of this Bill to debunk that myth and I shall satisfy myself by saying that, in fact, more than half of the 197 Amendments sent by the Lords to the Commons were Government Amendments, and had they all been excluded from the Bill it would have been unworkable. That seems to me a very cogent and completely nonpolitical argument in favour of our two Chamber system.
As to the Amendment itself, it relates to Clause 12 of the Bill which your Lordships will recall lays upon the Assembly the duty to review the organisation of local government and report on it to the Secretary of State, with the implication that it should be altered-—that is, the organisation should be altered—and that that alteration should be upon the lines set out by the Assembly. That may seem a pretty straightforward proposition and the clause may seem a pretty dull thing. In fact, it proves upon inspection to be something of a collector's specimen.
If it is to become part of the Bill it is important that I should spend three minutes explaining why that is so. First, we must note that there was never any intention under the White Paper or under the Scotland and Wales Bill to lay such a duty on the Assembly. Secondly, we must note that the power to carry out a review of local government already exists in the Bill without the inclusion of Clause 12. All that Clause 12 does is to convert that power to a duty. Thirdly, we must note that the power already exists under the Bill, without the inclusion again of Clause 12, to review a great many other areas of administrative organisation as well as that of local government. Yet it is only in this one

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area that the Government will go to such great lengths to tell the Assembly not only what it may do, but what it must do.
Those three observations lead us to ask three obvious questions. First, if the need for local government review and reorganisation is so obvious and urgent, as Her Majesty's Government have incessantly told us that it is, why was it not recognised in the White Paper and incorporated in the Scotland and Wales Bill? Secondly, why, if it is not so obvious and urgent, do the Government not lay a similar duty on the Assembly to review all the other areas which it might review? Thirdly, if, as they assure us on the contrary, it is urgent and obvious, why do the Government not trust the Welsh Assembly to recognise it and get on with the job of its own accord instead of giving it a peremptory and some would say an insulting order to do so?
The answers are profoundly significant as an illustration of the kind of exercise in which the Party opposite is really indulging. What happened was as follows: As they were climbing out of the wreckage of the Scotland and Wales Bill and considering how best they might replace it with something else, they discovered that the very principle of devolution for Wales was itself the subject of a profound distrust and a natural dislike among a great many of the Welsh people. At about the same time, they also discovered that a sharp and recent rise in the level of rates, largely resulting from their own policies, had acted as a catalyst to the doubt and discontent about the recent reorganisation of local government in England and Wales. That was a pretty general phenomenon, and especially marked in Wales for local considerations at which we need not look.
Clause 12 is a clever device to harness one discontent to overcome the other. Mark my words, they will go to the Welsh in the referendum and say: "Are you fed up with your local government? Do you want it reorganised into something much better? In that case vote for the Welsh Assembly, because that is the only way that you will get it." That is what they will say, but what they will not say is that the Welsh could have had their local government review together with the English by another means, without devolution;
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and what they will certainly not say is that the bill for local government reform by devolution is not just £12½ million once, but £12½ million and more, every year that the Assembly exists from now until the end of time or when it collapses. We shall not return this Amendment to the Commons but we are telling the Welsh that we have rumbled what the Government are up to. They are trying to get the Welsh people to buy devolution on a false prospectus and in my experience Welsh men and Welsh women are not so easily hoodwinked as the Government seem to hope.
Lord LLOYD of KILGERRAN:My Lords, may I presume to congratulate the noble Lord, Lord Elton, on foregoing confrontation on this matter in the twilight of the discussions on the Wales Bill His speech was brief and it was not so rhetorical as his other admirable speeches during the course of these debates. However, I congratulate him on the speech which he has made today because it is one of the best speeches on behalf of devolution and on behalf of the Welsh Assembly that I have heard from the Conservative Benches.
I also took the precaution of reading the speech of the Conservative spokesman in the other place yesterday. I did so because the Conservative spokesman is, at present—perhaps not for long—the Member of Parliament for Pembrokeshire in which county my father was born in the village of Kilgerran. I was surprised that when he talked about local government he did not remember that a vast number of his own constituents are anxious to preserve the name "Pembrokeshire". He dismissed that movement which is both liberal, with a small "I" and which takes the view, generally held in his constituency, that the name "Pembrokeshire" somehow should be kept going. That, in itself, does not matter. A name does not matter. But it shows that even in parts of Wales there is still great unhappiness about the local government structure which was forced upon it by the Conservative Government, before Kilbrandon, and against the wishes of many Welsh Members of the other place. I end as I began by saying how pleased I am that at this stage there is no confrontation and that I believe by the vote in the other place

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last night, which I heard about on the news on the radio this morning, the other House has brought some more sanity and balance into Welsh affairs.
The LORD CHANCELLOR:My Lords, I, like the noble Lord, Lord Lloyd of Kilgerran, am grateful to be assured that there is no intention of confrontation in considering these last stages of the Wales Bill. However, there was certainly verbal confrontation of which the noble Lord, Lord Elton, has become a most distinguished exponent. If his speech was an example of foregoing confrontation, I do not think that I should like very much to meet him when he is undergoing confrontation.
The whole debate and discussion of the Wales Bill has been dealt with seriously and conscientiously by noble Lords. Although we have permitted cheerfulness to break in from time to time—as is indeed right for any civilised assembly of men and women—nevertheless I am second to none in acknowledging the great and notable part that your Lordships' House has played in this important piece of (I shall use the neutral phrase) "constitutional change". This is an important piece of constitutional change with inevitable consequences, I think, for local government.
It was inevitable that two factors should go in harness: consideration of the Assembly itself and a review of the consequences for local government. If I may say so, the noble Lord, Lord Elton, has misrepresented the motivation of the Government in linking those two factors together. I also—being myself again a "foregoer" of confrontation—believe that he has caricatured the attitude of the people of Wales to this Bill and whether he is right or I am right we shall learn when the referendum takes place. In the meantime, I am grateful for the forbearance of the noble Lord in not pressing further the opposition on this matter which has hitherto been sustained.
On Question, Motion agreed to.

LORDS AMENDMENTS IN LIEU
3 Clause 37, page 14, leave out lines 29 to 35.
4 Clause 37, page 14, leave out line 37.
5 Clause 37, page 14, leave out line 42.
6 Clause 48, page 19, leave out lines 29 and 30.
7 Schedule 2, page 52, leave out lines 20 to 49.
8 Schedule 2, Page 54, leave out lines 2 to 38.
9 Schedule 2, Page 63, leave out lines 35 to 38.
10 Schedule 6, page 64, leave out line 14.
11 Schedule 6, page 64, leave out line 16.
12 Schedule 10, page 71, leave out lines 35 to 45.
13 Schedule 11, page 84, leave out lines 13 to 28.
14 Schedule 11, Page 85, leave out lines 12 to 31.
The Commons disagreed with the above Amendments but propose the following Amendments in lieu thereof:
15 Page 52, leave out lines 20 and 21.
16 Page 52, leave out line 30 and insert—
'and 13.
The functions under section 14 except so far as exercisable in relation to property held by or on behalf of the Assembly or by a company all of whose shares are so held or by a wholly owned subsidiary of such a company.
The functions under section 19(7) and (8).'
17 Page 54, line 22, leave out 'paragraphs 16(3) and 48' and insert 'paragraph 16(3)'.
18 Page 54, line 22, leave out lines 26 to 31 and insert—
'The functions under paragraphs 46 to 50 of Schedule 3 so far as exercisable by virtue of representations made by excepted statutory undertakers.
The powers under paragraph 53 of Schedule 3 so far as their exercise is incidental to functions which remain exercisable by a Minister of the Crown.'
19 Transfer lines 22 on page 52 to 38 on page 54 to Part VIII of Schedule 2 to the Bill.
20 Page 84, line 28, at end insert—
'(3) The Welsh Assembly shall publish each report received by it under this paragraph.'
21 Page 85, line 13, leave out In section 3(1)(e)' and insert (1) In subsection (1)(e) of section 3'
22 Page 85, line 16, at end insert—
'(2) At the end of subsection (8) of that section there shall be added the words"; and the Welsh Assembly shall publish every report made to it under that provision." '.
4.40 p.m.
The LORD CHANCELLOR: My Lords, I beg to move that this House doth not insist on their Amendments Nos. 3 to 14, to which the Commons have disagreed, and doth agree with the Commons in their Amendments Nos. 15 to 22 in lieu thereof. These Amendments relate to the relationship between the Assembly, the Welsh Development Agency and the Development Board for Rural Wales. The proposals in the Bill that they should be devolved to the Assembly if the

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Amendments that were moved by the Opposition were sustained, mean that responsibility would be reserved. If the Amendments to the Lords Amendments are now agreed, it would result in devolving responsibility for the Agency and the Board. There are also some minor technical changes to the original entries in the Bill constituted by the Government's Amendments.
The Government's view remains that responsibility should be devolved, but a very important change has been made in another place, and I concede that this is partly the result of views expressed in your Lordships' House. Amendments Nos. 24 to 28 to Clause 60 of the Bill mean that neither of those two bodies—the Welsh Development Agency or the Development Board for Rural Wales—may be "subsumed" (that seems to be a fashionable piece of jargon these days; "taken over" is perhaps as good a phrase as any) or "taken over" by the Assembly without both Houses of Parliament agreeing by Affirmative Resolution to that being done.
Therefore, I think that the major fear that influenced the minds of those who originally voted for reservation has been met by this change, to which I shall be returning formally when we consider the Amendments to Clause 60. In those circumstances, again I hope that the view that the Government have taken about this matter will satisfy your Lordships that this is a reasonable course to take. I beg to move.
Moved, That this House doth not insist on their Amendments Nos. 3 to 14, to which the Commons have disagreed, and doth agree with the Commons in their Amendments Nos. 15 to 22 in lieu thereof.—(The Lord Chancellor.)
Baroness ELLES: My Lords, I should say straight away that there is no question of confrontation on this matter; nor even of being in total agreement with the Commons in what they have done. Nevertheless, from these Benches I think that we shall be prepared to accept their Amendments, which is putting it in a slightly different way. We shall have no conflict over the Amendments which the Commons have put forward. However, I join my noble friend Lord Elton in saying that it is quite impossible to debate
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these particular Amendments with any sense. Today I went into the House of Lords Library only to find that there is not even a galley proof of the debate of last night in another place. I really do not see how we, on this side of the House, can be expected to do any reasonable work without even having a document on what was debated in another place.
In view of the general feeling of bonhomie and the fact that we are drawing to an end after having debated these somewhat unpalatable Bills, I did not want to introduce a note of sourness. But it is fair to say that when we were debating the Wales Bill very late into the night, we were most appreciative of the effort made personally by the noble Baroness, Lady Stedman, to ensure that a galley proof of our debates was available in the Library of the House of Lords early the following morning. We very much appreciated the personal effort that she made to ensure that we, on this side of the House, should know what had been said and be able to refer to it when we were considering our Amendments and the procedures. So I wish to make only a mild protest, but nevertheless a protest, that no effort was made to provide that even a galley copy of the debate in another place was laid in the Library of your Lordships' House. I should also point out, of course, that the Hansard of yesterday only goes up to the middle of the debate on Clause 12. So what we are now discussing, or having the possibility of discussing, has not been available in any form.
Having said all that, of course we realise that we have lost this Amendment, and perhaps before the noble and learned Lord puts the Question he might be kind enough to tell us what was the vote on this Amendment, because I am not aware of the results. There has been no publication of the voting on these particular Amendments which went from your Lordships' House to another place. We recognise the reasons why these Amendments have been rejected. After all, the arguments have been put forward, both in your Lordships' House several times and in another place, and we accept that a vote in another place has decided to reject our Amendments. Nevertheless, I think that there has been some slight improvement on their return from the

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Commons, so it has not all been in vain; there has been the addition in Amendments Nos. 20 and 22 that reports shall be published by the Welsh Assembly on matters which have been dealt with by the Welsh Development Agency and the Development Board for Rural Wales, I think that this is a slight improvement which we recognise. Anyway, we are grateful for this slight modification of the original Bill.
I was not quite sure whether the noble and learned Lord was intending to speak again on Clause 60, or whether he said all that he was going to say on that.
The LORD CHANCELLOR: My Lords, I am afraid that there is just a little to add. I simply want to refer also to the intervention of the Secretary of State, which is provided for in the provisions in regard to Clause 60. That is merely a further improvement, but it is not of great substance.
Baroness ELLES: My Lords, I thank the noble and learned Lord for that intervention. Clearly it is a matter which concerns these particular bodies. Like him, I would also just touch on this matter while I am dealing with the others. We are also grateful to another place for having put in this particular Amendment to Clause 60 which, to some extent, allays the fears of my Party in this place and in another place.
But at least no statutory body can be "taken over"—if I may use a more acceptable phrase than the word "subsumed" which I find thoroughly objectionable both as a literary term or in any other way—without the matter having been brought before Parliament. As they are statutory bodies, I think that that is the proper way in which to proceed. We are grateful for at least the modification again in Clause 60. With those words, from this side of the House I merely say that we shall not object to the Amendments put forward by the Commons.
Lord LLOYD of KILGERRAN: My Lords, in the spirit of non-confrontation in which we find ourselves, may I at once agree with the words of the noble Baroness, Lady Elles, in her mild protest about the unavailability of what was said in the other place as regards these matters.
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In pursuing my studies and researches on the Wales Bill, I had no assistance whatever and, therefore, I also did not find the galley proof which I had expected to find and which had been provided in other circumstances by the noble Baroness, Lady Stedman, in this matter.
In those circumstances my tribute to the noble Baroness, Lady Elles, is even higher than it would have been. I should like to say how much she has impressed the House, myself and these Benches by the vast amount of work that she has done in connection with the Amendments she has tabled. May I conclude by saying how much we value her contribution to the debate.
Lord DAVIES of LEEK: My Lords, from this side of the House, in one minute. may I also congratulate the noble Baroness, Lady Elles. In those congratulations may I also include, as I did the other day, the noble Lord, Lord Elton, and those on the other side of the House who have obviously improved this Bill by their labours.
The LORD CHANCELLOR: My Lords, it may well be that the subsequent matters which we have to discuss will give an ultimate opportunity for the usual courtesies. Otherwise there will be an embarras de courloisie if we go on at this rate. There was a certain Bishop who went to some function on one occasion and he was so flattered by the observations that he said, "I have heard of the milk of human kindness, but this is the first time that I have met the cow." However, that is a very ungallant observation on my part.
I apologise for the fact that the galleys of the proceedings in another place where not available. The relevant part of the proceedings took place after midnight. Their absence is not due to any lack of concern or courtesy on my part. I am grateful to noble Lords who have struggled on—and this not for the first time—with consideration of these matters without the full assistance that would have been welcome.
I am grateful to the noble Baroness for her acknowledgement that, at any rate from her point of view, there has been improvement, and I think from the point of view of the Bill there has been improvement

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in this part of it by reason of the changes made in another place, which I now invite your Lordships to accept.
On Question, Motion agreed to.

LORDS AMENDMENT IN LIEU
23 Page 25, line 12, leave out "with the approval of the Secretary of State and".
The Commons disagree to the above Amendment but propose the following Amendments in lieu thereof:
24 Page 25, line 4, leave out from first 'Assembly' to 'provide' in line 5 and insert 'a Minister of the Crown may by order'.
25 Page 25, line 6, leave out 'it' and insert 'he'.
26 Page 25, line 10, leave out 'Assembly' and insert Minister making the order'.
27 Page 25, line 12, leave out from 'except' to end of line 13 and insert 'at the request of the Assembly and after the Assembly has consulted'.
28 Page 25, line 15, leave out subsection (4).
4.51 p.m.
The LORD CHANCELLOR: My Lords, I beg to move that this House doth not insist on their Amendment No. 23 to which the Commons have disagreed, and doth agree with the Commons in their Amendments Nos. 24 to 28 in lieu thereof. The previous Amendments, that an order made under Clause 60 should he subject to Parliamentary scrutiny—that is to say, Affirmative Resolution by both Houses—we have considered and agreed to. The Government, however, believe that if the Amendments as they then stood had remained, they would have resulted in the Assembly's order being put to Parliament, and the view that we have take is that it is desirable that the link between the Assembly and Parliament should be through the Secretary of State. I think that that is the common view in the House as a whole.
To achieve that result another place has proposed a modified procedure whereby the Assembly puts its proposals to the Secretary of State. If he agrees with the proposals he will lay an order before Parliament for approval by the Affirmative Resolution procedure. Your Lordships may think that that is a further improvement on giving effective Parliamentary and ministerial control in this clearly very important field. I beg to move.
Moved, That this House doth not insist on their Amendment No. 23 to which the
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Commons have disagreed and doth agree with the Commons in their Amendments Nos. 24 to 28 in lieu thereof. —(The Lord Chancellor.)
On Question, Motion agreed to.

LORDS AMENDMENT IN LIEU
29 Clause 15, page 7, line 18, at end insert—
"( ) The standing orders shall include provision for the admission of the public to meetings of the Assembly and of its committees."
The Commons agree to the above Amendment and propose the following Amendment thereto:
30 Line 1, leave out 'for the admission of the public' and insert 'as to the circumstances in which the public may be admitted'.
4.54 p.m.
The LORD CHANCELLOR: My Lords, I beg to move that this House doth not insist on their Amendment No. 29 to which the Commons have disagreed, and doth agree with the Commons in their Amendment No. 30 in lieu thereof. This related to the question of admission of the public to meetings of the Assembly. We indicated in earlier debates on this matter that we thought it unnecessary to make express provision in the Bill for the public to be admitted to meetings of the Welsh Assembly because we thought it was inconceivable that the Assembly would shut the public out other than in exceptional circumstances.
However, noble Lords took a different view and thought that there should he a statutory provision, and the effect of their intervention was the provision that standing orders shall include provision for the admission of the public to meetings of the Assembly and of its committees. That gave the impression that there could not be circumstances in which the public could be excluded, but it is conceded that there could be such occasions when there should be meetings in private. The Amendment which has been moved in another place reads:
"The standing orders shall include provision as to the circumstances in which the public may be admitted to meetings of the Assembly and of its committees."
It is really only a drafting Amendment to achieve a purpose which noble Lords on the opposite side really had in mind. I beg to move.
Moved, That this House doth not insist on their Amendment No. 29 to

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which the Commons have disagreed, and doth agree with the Commons in their Amendment No. 30 in lieu thereof.—(The Lord Chancellor.)
Lord ELTON: My Lords, when I recall the vehemence with which the Government resisted the original introduction of this principle by my noble friend Lord Swansea, I am sure that he will agree with me that this is a significant concession on their part and we are glad to welcome it. When we recognise that this is the end of a quite impressive list of concessions by Her Majesty's Government, 28 in all, and when we consider also that on two occasions the other place has agreed on a Division to Amendments your Lordships put into the Bill in this House, it is clear that this House is in fact assisting the other place to carry out its functions.
Perhaps those honourable Members who—rather like train spotters—laboriously count the numbers of hereditary Peers who vote through the Lobbies on each occasion when the Government are beaten in a Division in this House will recall also that if those Peers had not so voted those self-same Members of another place would have been denied any opportunity to open their mouths at all in support of the interests of those who elected them on a whole range of important issues.
They may also reflect that on several occasions decisions arrived at in this House, by the means to which they object, were taken on subjects which they had themselves never discussed, and that the decisions that we then arrived at were such that they actually agreed to them, either individually and tacitly themselves by their support of Government concessions, or twice, as I said, on a vote. I do not want to make too much of this because my noble friend Lord Ferrers has already done it much better than I can. What I would say, since we are now at the end of this whole exercise, is that I do not know what other noble Lords think but I have protested frequently at the onset of exhaustion and the pre-occupation that drove everything else out of one's life but Wales, but I must say on reflection that I enjoyed it. I think that your Lordships probably have
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done so as well. I think that we have achieved changes in the Bill that are worthwhile.
Since it is the end of term one has to say nice things about the prefects even if they have given us a lot of extra work, and many of us have been impressed by the efficiency with which noble Lords and noble Baronesses opposite have worked, especially the noble Baroness, Lady Stedman, who has worked very hard: so hard, indeed, that she has become unwell. We do sympathise with her on this. The noble Lord, Lord Donaldson, saw the danger signs and left the country for a short time to recover. I thought that others had too, but I see that the noble Lord, Lord Harris, has rejoined us for the last phases of Speech Day. What we have done I think we have done in a spirit of good will not only towards each other but also towards the Welsh, and I hope that that is the note on which we can conclude.
Lord LLOYD of KILGERRAN: My Lords, the last Amendment put forward by the Government indicates the advantage of having full discussions on a Bill in this House. The Amendment leaves to the Welsh Assembly the circumstances of admission of the public, and that seems to me to be the right and commonsense view. As I have said before, this Bill has one great merit above all others in spite of its imperfections: it gives the people of Wales the greatest opportunity they have had for centuries of having an elected body to speak for them.
Bearing in mind the fear of the noble and learned Lord the Lord Chancellor that there may be an embarrass—if that is the correct pronunciation—of courtesies at the conclusion of this debate, may I presume to conclude by thanking all noble Lords who have participated in the debate on the Wales Bill, and who have in their own way put forward so sincerely, sometimes very resolutely, their contributions in the interest of the people of my country.
5 p.m.
Lord SKELMERSDALE: My Lords, I hope it will not be considered presumptious of me if I make a brief comment on the Bill before it leaves your Lordships' House and reaches the Statute Book. I

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hold the unusual view on this side of the House that there will be a Welsh Assembly. I, with my very limited experience of matters in this House, have been deeply impressed by the very full answers the Government team gave to the various Amendments that were tabled. I would only express the hope that copies of our debates in the Official Reports of both Houses will be presented to every officer and Member of the Assembly, which I am sure will come into being.
5.1 p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, this discussion now draws the final curtain on the debates on the Wales Bill. I do not suppose many bouquets will be thrown in our direction, but I am happy to thank all who have taken part in this important and difficult discussion. On my own side of the House, I am deeply grateful to my four colleagues. Unlike the debates on the Scotland Bill, there was a paucity of peers from the Principality, and indeed in the quintet I had the honour of being the only Welshman, which perhaps accounts for the fact that possibly I spoke more frequently than any of my team. However, I am grateful to them.
Indeed, I am grateful to noble Lords in all parts of the House—on the Back Benches, on the Government side, on the Opposition side and indeed on the Liberal side—and I hope the noble Lord, Lord Skelmersdale, does not think I was meaning to affront him when he did not quite catch my eye the other night. I certainly did not mean that, and I am glad that, nevertheless, he made a contribution today. To the noble Lord, Lord Lloyd of Kilgerran, hwyl has been manifested by him from time to time, and it has been good to hear the stentorian celtic voice of my noble friend Lord Davies of Leek from time to time, as well at the voices of other noble Lords. Then, on the Government side, the noble Lord, Lord Elton, and the noble Baroness, Lady Elles—
A noble Lord: On the Government side?
Baroness ELLES: Yes, my Lords, in October.
The LORD CHANCELLOR: Na, na, no, no, my Lords. On the Opposition
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side, I am second to none in my admiration of the contribution of the noble Baroness on some most technical and difficult matters, and of course of the leadership of Lord Elton and other colleagues of his. Lord Elton must have been an entertaining schoolmaster; the flood of pictorial language and prose that accumulated as the debates went on proved that. Alas, this has now come to an end.
The Cross-Benches should not be overlooked on this occasion, and in particular the noble and learned Lord and my friend and fellow countryman Lord Morris of Borth-y-Gest: diolch yn fawl annwyl gyfaill; we speak to each other only in Welsh, though I am told that is out of order—we may need instantaneous interpretation in your Lordships' House, but not yet. My Lords, thank you.
On Question, Motion agreed to.

CHRONICALLY SICK AND DISABLED PERSONS (NORTHERN IRELAND) BILL
House in Committee; Bill reported without amendment; Report received; then, Standing Order No. 43 having been suspended (pursuant to Resolution), Bill read 3a.
5.6 p.m.
Baroness PHILLIPS: My Lords, I beg to move that the Bill do now pass. In moving this Motion, having been charged by my Front Bench not to make a speech, I must take this opportunity to thank noble Lords who have not tabled any Amendments in response to an appeal not do do so. Bearing in mind that I suggested that the Bill would not go through if Amendments were tabled, noble Lords have not tabled any, and I am greatly appreciative of that. I wish also to pay tribute to the Government, who have made it possible for the Bill to go through.
The Bill will make further provision with respect to the welfare of chronically sick and disabled persons in Northern Ireland, and while I agree with the noble Lord, Lord Sandys, that there are too many words like "practicable" and "reasonable" in the Bill for some of us to be happy, nevertheless we accept that the measure will bring great comfort and succour to people in Northern Ireland.

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As we have had such a marvellous spate of oratory, I will only say that I am reminded of the lady who said that she ate with nice people, worked with nice people, and hoped she would have the opportunity of sleeping with nice people. My Lords, I beg to move.
Moved, That the Bill do now pass.—(Baroness Phillips.)
Lord SANDYS: My Lords, I feel I must respond to the remarks of the noble Baroness, Lady Phillips—
A noble Lord: Oh!
Lord SANDYS:—and congratulate her on piloting the Bill through with such skill and success. We have observed the remarks she made on Second Reading and accordingly have not tabled any Amendments, observing the caution that the Bill would not otherwise have reached the Statute Book. This is a shorter Bill than the one which applied to other parts of the United Kingdom. Nevertheless, we have had eight years in which to ensure that the practicalities of the Bill will prove satisfactory and we therefore believe that this measure will, as she said, give succour to people in Northern Ireland.
The MINISTER of STATE, NORTHERN IRELAND OFFICE (Lord Melchett): My Lords, I wish briefly to thank the noble Lord, Lord Sandys, and without following the interesting remarks of my noble friend Lady Phillips, simply assure noble Lords that my Department in Northern Ireland will be anxiously waiting to implement the various provisions of the Bill. It will be widely welcomed by people in Northern Ireland, particularly the handicapped, and on their behalf I say "Thank you" to your Lordships for giving it such a speedy passage.
On Question, Bill passed.

MINISTERIAL AND OTHER SALARIES ORDER 1978
5.10 p.m.
The LORD PRIVY SEAL (Lord Peart)The LORD PRIVY SEAL (Lord Peart) rose to move, That the draft Ministerial and other Salaries Order 1978, laid before the House on 20th July, be approved
The noble Lord said: My Lords, the draft order now before the House is designed to increase the pay of Ministers and Office Holders in this House and in another place by 10 per cent., in accordance with the pay policy guidelines for this year. The order is made under the Ministerial and other Salaries Act 1975. The operative date of the increase will be the date on which the order is made, which is expected to be Monday next, 31st July.
The revised salaries set out in the order are the maximum amounts payable and not necessarily the actual rates in payment, which, in the case of Ministers in another place who received increases to their Parliamentary pay in earlier pay rounds, may be lower than the promulgated rates. The governing Act contains no power to differentiate between the rates paid to Members of this House and those paid to Members of another place, but it does permit a lesser amount to be paid than those authorised. I beg to move.
Moved, That the draft Ministerial and other Salaries Order 1978, laid before the House on 20th July, he approved. —(Lord Peart.)
Lord CARRINGTON: My Lords, I suppose at the outset I should declare an interest, though a derisory interest, as the noble Lord will find some time after October. I rise to ask two questions and I apologise to the noble Lord for not having given him notice of them. I must confess that I had not done my homework soon enough. Can he explain why it is that the Chief Secretary to the Treasury, if he is a member of the Cabinet, should get £228 more than his boss; why the Lord President of the Council gets paid a different sum of money from all the other Secretaries of State; and why a Minister of State, if he is in the Cabinet, gets £228 more than anybody else in the Cabinet except the Prime Minister? I draw the noble Lord's attention to Schedule 1 of the order. It may very well be a misprint but it seems extremely mysterious. No doubt there is a simple explanation which, if the noble Lord does not know now, will be sent to him from his advisers before I sit down.
The second question I should like to ask him is, supposing that the noble Lord is not the Lord Privy Seal, as he may very well not be—and indeed when I

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was Leader of the House once I was not Lord Privy Seal but Minister without Portfolio—or Lord President of the Council or Chancellor of the Duchy of Lancaster, how does he get paid at all under this order? Again it seems rather mysterious. I think reinforcements are coming and the noble Lord will be able to answer these questions.
While the noble Lord is assimilating the information that his noble friend is giving him, perhaps I may just add that, although of course we shall pass this order and we only ask these questions for elucidation, it seems to me that not only are all these salaries fairly derisory in modern terms but also that it is ridiculous, in the context of the amount of work that your Lordships' House now does, that the Chief Whip in this House, the noble Baroness the Captain of the Gentlemen-at-Arms, should be paid rather less than half what the Chief Whip in the House of Commons gets paid, and that noble Lords opposite who are Lords in Waiting should be treated worse than almost anybody else. They cannot draw allowances, they cannot draw their attendance allowance and they are paid a pittance for the work they do. The time is very fast approaching when all of us on all sides of the House ought to march in to another place to say we are not going to put up with it any more.
Lord PEART: My Lords, I am grateful for the words of the noble Lord. I agree with him about salaries and especially about the salary of the Chief Whip and others who do such an important job in this House. But, as always, we tend to treat ourselves in a derisory way. I think this matter must be faced. We must have a change. That applies to all Governments and I am glad the noble Lord has raised it.
On the detailed questions, I have not done my homework either and I understand that the information is not yet available in the Box, so I shall have to write to the noble Lord. I am not trying to dodge this question. It is an important one and I very much appreciate what the noble Lord has said.
Lord CARRINGTON: My Lords, I wonder in point of fact whether it is a
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misprint and, if that figure is a misprint, it ought to be corrected.
Lord PEART: Yes, I am grateful to the noble Lord.
Lord WIGG: My Lords, does the Minister not think that it would be appropriate if he withdrew the motion now so that we can wait to see what will be the Government's attitude on the Parliamentary Pensions Bill. If they accept the Amendment which this House has put down in order to do justice, then it will be a very strong argument indeed, for, having done justice to all the Members of the House of Commons, the Government should also have public opinion backing them in doing justice to Ministers.
Lord PEART: My Lords, I hope that the House will not oppose the Motion. As my noble friend knows, I have very strongly defended the position of Members who are in another place and have been affected by proposals. There was a debate the other night in another place which the noble Lord will probably read about. I should like to get this order through. If there is a mistake, then it will have to be corrected, but that can be done quite easily.
On Question, Motion agreed to.

SHIPBUILDING (REDUNDANCY PAYMENTS SCHEME) (NORTHERN IRELAND) ORDER 1978
5.16 p.m.
Lord MELCHETT Lord MELCHETT rose to move, That the draft Shipbuilding (Redundancy Payments Scheme) (Great Britain) Order 1978, laid before the House on 6th July, be approved. The noble Lord said: My Lords, with the permission of the House, I should like to speak to both these orders together. They are virtually identical in wording, and have exactly the same effect. They will establish, under powers provided by Sections 1 and 2 of the Shipbuilding (Redundancy Payments) Act 1978, a scheme for the making of

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payments to certain classes of employees of British Shipbuilders, Harland and Wolff Limited and specified subsidiaries of either, who are made redundant or transferred to less well paid employment as a result of closure or contraction of the undertaking employing them.
Your Lordships have considered the background to these orders both during the debates on the Act under which they are made, and earlier this month when the House considered the Select Committee's report on the European Commission's proposals for the reorganisation of the Community shipbuilding industry. An outline of the scheme brought into operation by these orders was given by my right honourable friend the Secretary of State for Industry in another place on 7th February. The orders fill in the precise details of the scheme, and I am afraid that they are necessarily rather complicated. Because of this, explanatory pamphlets are being produced which will explain to those who may be affected what they can expect to receive under the scheme. Given the detail contained in the orders, I intend simply to cover the main points in them in addressing your Lordships' House this evening.
The orders will come into effect the day after they are made, but they are partially retroactive since the effective commencing date of the two-year period of eligibility for payment will be 1st July last year. In fact, some 2,000 employees who have already been made redundant since that date are expected to benefit under the scheme. The details of the scheme are set out in the schedules to the orders. Eligibility for payment depends among other things upon being aged between 19 and normal retiring age and having at least one year's service with a qualifying company engaged in shipbuilding, ship repair, slow speed diesel marine engine building or ancillary activities. There is also a provision intended to ensure as far as possible that the payments are made in compensation for redundancies which are the result of permanent contraction: we do not intend these payments to be made for short-term lay-offs. If, in a rare and exceptional case, a person is re-employed in shipbuilding after a relatively short time, the
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orders provide for him to repay some of his benefit.
The level of the payments made to an individual redundant worker depends on age, length of service and pay. Payment will be partly in the form of a lump sum on redundancy and partly as income support payments for a period of up to two years afterwards. There are special provisions covering redundant workers who find other employment in that period. The central part of the scheme is, of course, concerned with redundancy payments, because the scope for redeployment in shipbuilding is very limited given the depressed market for ships. But we have made some provision for payments to workers undergoing retraining as an alternative to redundancy. There is also some provision for payments towards the additional travelling or removal expenses of workers who can be transferred rather than made redundant.
It is impossible to forecast the total cost of the scheme because we do not know how many people will benefit under it. The best estimate I can give is that, if the average age and length of service of those receiving benefit is the same as the average for the industry as a whole, as estimated by British Shipbuilders, and taking account of the latest assessment of current wage rates, then the cost per 1,000 persons receiving benefit is likely to be of the order of £1·725 million. This is higher than the previous estimate mainly because average wage rates have risen, not only because of pay awards made under Phase 3, but also because of awards made by the Central Arbitration Committee under the Fair Wages Resolution 1946 or the Employment Protection Act 1975. Also, the estimate of average pay at September 1977 has been slightly revised in the light of some new data.
My Lords, the Government believe that this scheme is needed, given the very difficult problems faced by the shipbuilding industry throughout the world. It follows from the Act recently passed by Parliament, and I hope your Lordships will welcome it. I beg to move.
Moved, That the draft Shipbuilding (Redundancy Payments Scheme) (Great Britain) Order 1978, laid before the House on 6th July, be approved.—(Lord Melchett.)
5.19 p.m.
Lord CAMPBELL of CROY: My Lords, we are grateful to the noble Lord, Lord Melchett, for explaining the two orders, one relating to Great Britain and the other to Northern Ireland, and I agree with him that it would be convenient that they be taken together. They arise from the Bill, now enacted, which we examined in your Lordships' House earlier this Session. Some of us have been waiting to see what the schemes would contain, because Ministers in both Houses were unable to give much indication until an outline scheme appeared in reply to a Question for Written Answer in another place. The noble Lord confirmed one's impression upon comparing the two schemes that they were similar, if not identical. I should like to know whether there is any difference in the payments; whether it will mean that a worker doing exactly the same kind of work as, and with the same qualifications as, another worker might receive a larger sum under one of the schemes than he would under the other—a larger sum in either Northern Ireland or in Great Britain.
It is very appropriate that the noble Lord, Lord Melchett, should be introducing the schemes. He has been in the Northern Ireland Office for many months, and before that, when he was in the Department of Industry, he handled with great stamina the very long Bill we considered two years ago, which dealt with shipbuilding in particular.
I have been able to give the noble Lord some notice of my main points, and my second question is whether the schemes have been agreed by the trade unions concerned. We have been aware from a distance—not being party to the negotiations that have been going on—that the unions have not been prepared to accept the need for anything but voluntary redundancy. I wonder whether they have yet moved from that position, and whether they recognise, as, unfortunately, many of us have to, that there may well need to be more than voluntary redundancy, though one hopes that the reduction in the industry will be carried out as far as possible by normal wastage; that is to say, by way of people retiring voluntarily, or on grounds of age.
I must point out that the schemes do not cover the whole of the shipbuilding
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and ship repairing industries. When the Bill was going through Parliament, we made clear that we thought it inequitable that 10 per cent. of the industries were not to be covered by the schemes. I refer here to the private sector. I do not propose to rehearse what was said then, but I wish to point out that the private sector exists as the result of a deliberate decision by the Government. When they introduced the Shipbuilding and Aircraft Industries Bill, which included nationalisation of the shipbuilding industry, they deliberately left out certain companies which they decided should remain as a private sector, rather in the same way as the nationalisation of the steel industry deliberately left a private sector which exists and continues today. We must once more reiterate that it is unfair that part of the industry, which through no fault of its own is in a different category as a result of the choice of the present Government, is not to benefit from the schemes. It means that some men in certain firms, doing exactly the same jobs as other workers in other firms, will not be eligible for the schemes simply because they are in the private sector; and neither they, nor their employers, had had any say in the matter.
We are grateful to the noble Lord for today giving us some information which has not previously been given to Parliament. I understand that the orders were considered in a Committee in another place this morning. The noble Lord has told us today that 2,000 men, who have already been made redundant, are likely to benefit from the scheme; and I think that this is the first time that this information has been forthcoming. The period of eligibility started in July of last year, and we are now already more than halfway through it. This brings me to my next question. Under the Act the period of eligibility is two years, and this is due to expire at the end of June 1979. Under the Act the Government can extend the period for another two years. As we are now more than halfway through the period which the orders cover, what is the latest view of the Government on this question? Are they contemplating the need to make the extension of another two years, which is possible under the parent Act?
The noble Lord drew attention to the complications in the formulae covering

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the payments. Those noble Lords who have examined the orders in detail will have seen that the formulae include a considerable amount of algebra, and it will certainly not be easy for an individual becoming redundant to work out what his entitlement is likely to be. I do not believe that this matters greatly provided there is satisfaction that the scheme is fair taking into account, for example, the considerations of the time spent in the industries, moves to lesser paid work, or retraining. If it can be made quite clear that the schemes are fair, the complications of working out eligiblity will not be so important.
I should like to put to the noble Lord another question, which I believe may be helpful. There has been considerable working out of what the average payment is likely to be under the scheme. Can the noble Lord give an indication—I realise that it may be only an approximate figure—of what is the maximum for which an individual might qualify under the scheme? It would be helpful to know this; otherwise, the media may speculate and suggest that individuals could qualify for enormous sums when in fact that would not be so.
The noble Lord, Lord Melchett, attempted to give some information about the total cost of the scheme. The Government found it impossible to give this information when the Bill was before us. Today the noble Lord has improved upon the estimates which were made previously. He has given us the Government's estimate of the cost per 1,000 men made redundant, but we are still in ignorance both as to the Government's estimate of the number of men likely to be made redundant and the total cost of the scheme; I do not think the noble Lord told us anything about that today. If he can give an estimate of the total numbers, it will give an idea of the total cost. I appreciate that he has today given an estimate in relation to the cost per 1,000 men.
About three weeks ago the Secretary of State for Industry, in reply to a Question for Written Answer in another place, gave some very important information which he described as the financial discipline which he had issued to British Shipbuilders—the nationalised corporation. He had told British Shipbuilders
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that it must not incur a loss of more than £45 million in the current financial year. That figure was the estimate given by British Shipbuilders itself of the loss it expected, and so I do not think it unfair for the figure to have been given to the corporation. However, if the total cost of the schemes is still completely unknown, how are the financial discipline and the loss of £45 million affected? Has some allowance been made in regard to the cost of the schemes?
In preparing the orders the Government's aim has clearly been to provide definitions about which there could be as little doubt as possible, and to a large extent they have been successful. However, [wish to draw attention to the definition of "qualifying activities", because this is vague, and yet it is one of the most important matters in the orders. It raises, for example, the whole question of diversification. Subsidiaries of British Shipbuilders may in the future be given work unconnected with shipbuilding or ship repairing, and it is not at all clear how that would affect men who are made redundant, because the subsidiaries employing them would not then be mainly occupied with shipbuilding and ship repairing. I should like some assurance that men in such a company would not fare worse under these schemes than their colleagues in another subsidiary which was not being diversified.
Here I would draw attention to a particular case, because the noble Lord will know that British Shipbuilders have announced recently that one of their companies, Barclay Curie, a marine diesel engine builder, is to become a subsidiary of the Vickers Shipbuilding Group. The new relationship, to use the words of their statement, is:
"To increase general engineering productive capacity, permitting additional work to be undertaken in both the defence and commercial equipment fields at each works. Moreover, when engineering concerns have in the past concentrated on the manufacture of marine engines and components, the current lack of new orders can be countered by turning to a wider range of highly-specialised engineering products".
If the diversification contemplated in that statement reaches the point where the company is not mainly engaged in activities relating to the shipbuilding industry, and if men who had worked in the firm before diversification are made redundant, will they be eligible for redundancy payments

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under the scheme although the company is no longer engaged in a qualifying activity? That is another side of the same question.
Lastly, I come to the relationship with the EEC, and the views of the Commission. This came up in the debate that we had only a few days ago, on 10th July, on the report of your Lordships' Select Committee on Europe on the shipbuilding industry. It is clear that the Government have been discussing with the Commission whether the Commission accepts some of the United Kingdom schemes to help the industry. I think it is clear—and the Government confirmed it at the time—that the setting up of the intervention fund last year and the amount of money that was put into it was approved by the Commission. The Government have announced a further sum to be added to the fund for this year, but it is still not clear whether that is a matter which is still at issue with the Commission or whether the Commission have approved that, too. Then there are these schemes; and I should like to know whether the Commission have approved them as well, as further financial help for the industry. As there have been reports in the Press that the Government are still not in full agreement with the Commission on help for the industry, I would end by asking this: Are there any further proposals which the Government have put to the industry which are still a matter of argument with the Commission?
5.33 p.m.
Viscount SIMON: My Lords, I, too, should like to thank the noble Lord, Lord Melchett, for explaining these two orders, which, as he rightly says, are really identical except that one relates to British Shipbuilders and the other to the shipbuilders in Northern Ireland. I thought, if I may say so, that there was one aspect missing from his explanation—an aspect which perhaps led the noble Lord, Lord Campbell of Croy, astray. Because my recollection is that the Act under which these orders are made provided that in fact the Government would underwrite the payments under the orders; so that, although the orders in form provide for payments by the employers—that is, British Shipbuilders or the Northern Ireland employers—the amount is in fact paid by the Government because they have underwritten it. I think that probably
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answers the question of the noble Lord, Lord Campbell of Croy.
Lord MELCHETT: My Lords, perhaps I can just confirm that the noble Viscount is quite right; that is the answer to the noble Lord's question.
Viscount SIMON: My Lords, I thought it as well to remind ourselves that what we are talking about is something which is paid by the general body of taxpayers. Apart from that, I really have only two minor points, and I apologise to the noble Lord, Lord Melchett, that I did not find time to communicate them to him. I am afraid I saw these orders to study only a short time ago, so if he cannot reply to my points I shall well understand. My first question arises out of a paragraph on page 2. It is in Article 1(1), and it is in the fourth paragraph, defining "current earnings". It there says:
"'current earnings' … means the average amount of … weekly earnings in employment or as a self-employed person …"
But since, in order to qualify, the employee has to have been employed by the company for two years, I do not understand how any earnings as a self-employed person can arise. I was wondering whether, if not now then perhaps later, the noble Lord could tell me how self-employed persons got into this particular order.
The other point, I am afraid, is an even more esoteric one. When we turn to pages 4 and 5, where they work out what the lump sum payments will be, we find a very complicated piece of calculation. If we turn first to Article 3(2), which refers to an abatement—and this, I think, will illustrate my difficulty—we find that it says:
"The abatement … is the amount by which the aggregate of the employee's age amount, the amount equal to twice his adjusted previous earnings and the amount of any payments he is entitled to under … the Redundancy Payments Act"—
those three all added together—exceeds the product of two years' earnings. But what happens if it does not exceed the product of two years' earnings? To a mathematician, if the result is a minus quantity it would then be added, instead of being subtracted, as the abatement. I do not think that is what is intended, and I think the wording would have been happier if it had said,
"the amount (if any) by which it exceeds"

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this or that. I leave those two points with the noble Lord, because I do not expect him to answer them today.
5.37 p.m.
Viscount ROCHDALE: My Lords, I should like to say a very few words on these two orders, and I shall be as brief as possible. When, the other day, we debated shipbuilding generally, the enormous imbalance in shipbuilding capacity worldwide was quite apparent; but at the end of the debate it was very obscure what practical steps any of the member countries could take. I therefore welcome these orders, because they show that the Government have taken a lead in introducing practical steps to help to mitigate the problem. The intervention fund, of course, was the first step they took in this direction, and this is the second one; and, like my noble friend Lord Campbell of Croy, I welcome the two orders.
There are just three points I should like to make on the orders themselves. The first has been mentioned, both by the noble Lord, Lord Melchett, and by my noble friend, and it concerns the complexity of the orders. I was very glad indeed to hear the noble Lord say that the Government were preparing explanatory pamphlets. I think this is much more important than it may appear to be on the surface. Naturally, one wants as few people as possible to be redundant within the terms of increased efficiency; but you cannot tell how many people are going to be made redundant, and it is really important that all who might be liable to redundancy should have the opportunity of seeing this pamphlet and of knowing where they stand. In industry these days we hear a great deal about good communications. I think this is an example, a very important example, of good communications. I hope the pamphlet to which the noble Lord referred will be disseminated as widely as possible throughout the industry. That is tremendously important, because these orders are complex. I have read them several times myself, and there are two questions that I am now coming to which show that I am not absolutely clear on them.
The first question I want to ask deals with Article 5. Article 5 deals with the
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case of an employee who has been made redundant, who has received financial benefit under the order and who is then, perhaps, in due course, offered back by his old firm the same job that he was doing when he was made redundant. The Article says that "he shall be liable to repay" a certain proportion of the money. I do not know the significance of the words "liable to repay". It does not say "he shall repay"; it says "liable to repay". I hope the noble Lord will deal with that, because it seems to me that if he has to repay the money it may very well prohibit him, he having spent the money, from taking back his old job if it is offered to him. This could be harmful both to the industry and to the man. I hope that something will be said on that.
The other question that I wanted to raise is on Article 7. This deals with retraining. When somebody has been made redundant and undertakes retraining for some other skill, he can obtain certain periodic financial help. It may be rather a foolish question; but I want to he quite sure that if the other job is in the same company from which he was made redundant but in a different division, are the financial helps that he could get still available; or does he have to go to another company altogether? I suspect that they may be able to be paid to him, but let me give an example. A steelworker, because there are too many steelworkers, is made redundant. But it might happen, due to a change of demand, that the outfitting trades were short. Therefore, the man, in his own company, is retrained for an outfitting job. Can he still get financial help?
Those are the only questions that I want to ask. I am sorry that I did not give the noble Lord notice of the questions, but they are not very difficult ones and I hope that he will be able to answer them. Subject to that, I welcome the two orders.
Baroness VICKERS: My Lords, the noble Lord, Lord Melchett, will know that the Statutory Instruments Committee interviewed the civil servants who drew up this draft. I hope that he has had the opportunity of reading the report. I am not going over the various questions we asked except for one on which we did not seem to get a clear answer. This is Question No. 2A, on page 4, the question

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of age. It says that the relevant age is 19. We wondered why 19 and not 18; which I understand is now the age of consent. When we asked the question, we were told that it varied for different industries. I should like to know whether the noble Lord can give any information on why the basic ages in Question 2A have been put into the Bill.
I note that the Northern Ireland order says it is to be laid before Parliament—and it gives the date. But there is no date on the order for Great Britain. Are they both going to be brought in at the same time or not?
5.44 p.m.
Lord MELCHETT: My Lords, I am grateful to all who have spoken for their welcome to the orders. I shall do my best to answer the various points that have been raised. I will start with what seems to me to be a neat answer to one of the points raised by the noble Viscount, Lord Simon, about the excess amount and what would happen if there was not an excess amount. I am advised that if the excess amount is zero, it is zero and not negative; and, therefore, the problems which the noble Viscount foresaw in mathematical terms do not arise. While dealing with that perhaps I may do my best to answer another point that the noble Viscount raised about the definition of "current earnings" and the inclusion under that definition of somebody who is self-employed. As I understand it, this part of the order is concerned with what people earn after they have been made redundant rather than with what they earn before they have been made redundant. By then, the person, by definition, will have ceased to be an employee of British Shipbuilders and therefore might be in self-employment I hope that that answers the noble Viscount's point satisfactorily.
Turning now to a point which was made by the noble Lord, Lord Campbell of Croy, he first went over ground on which I think it is fair to say this House and Parliament spent some time, about the inclusion or exclusion of private sector companies. I think that the noble Lord will forgive me if I do not traverse that ground myself again, and simply say that it is clear that these orders, as they are made under the provisions of the Act,
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cannot include things which are not included in the Act itself. Parliament decided in the end that the Act should include only the public sector companies.
The noble Lord also asked about whether there would be any difference in payment between Northern Ireland and Great Britain. Of course, the way the schemes are applied will be exactly the same. The only difference that will arise will occur if there are differences in length of service on average between those made redundant in Northern Ireland and those in Great Britain. That is a possibility. But, as the noble Lord knows, we will not know this until the orders are in operation and we can see what happens. The noble Lord asked also about the cost of the Scheme. He will know that, while I have been able to give him a more accurate and more up-to-date figure of the cost per thousand of those eligible under the scheme who are made redundant, the number of redundancies is quite impossible to foretell.
If I could give the noble Lord the benefit of my own brief experience in this, I have been staggered, since leaving the Department of Industry and going to Northern Ireland, at the success we have had, in an appallingly difficult world market, in attracting orders to Harland and Wolff, which is a specialist shipyard not necessarily well placed to benefit from some of the orders which British shipbuilders (and I am talking about the Polish orders) have been able to attract. Nevertheless, I think—and I take no credit for it for it was my right honourable friends who were responsible for this area of activity in Northern Ireland—that we have done exceptionally well and have done much better than could have been foreseen even two years ago. I think that that underlines the impossibility of making any estimate of the number of people who are likely to be affected by the scheme and, therefore, of what the total cost will be.
The noble Viscount, Lord Rochdale—and I am grateful for his welcome—mentioned the pamphlet. I would agree with him about the importance of this. From my personal experience of the questions that I have been asked this afternoon, a simple explanation is clearly badly needed for those introducing the orders, let alone those who will be

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affected by them. I agree with what the noble Viscount said about the importance of ensuring that all those concerned have this information made available to them in simple form. Those who are likely to be affected by the scheme are represented by trade unions and the noble Lord, Lord Campbell of Croy, asked about their attitude to the scheme and said that negotiations had been going on for some time. That is the case. The Confederation of Shipbuilding and Engineering Unions have consistently made plain their distate for redundancies, as such, and I do not think that that would surprise noble Lords on any side of the House. They agreed however to involve themselves fully with British Shipbuilders and Harland and Wolff in negotiating the outline of the scheme, and the detailed scheme now set out in the orders is based on proposals made jointly to the Government as a result of discussions between British Shipbuilders and the CSEU. Some features of the scheme, for example, the limitation of benefits to a maximum of two years of previous earnings—and I was going to come to that later—and other features, for example, the tapering down of lump sum payments for older workers which the Government thought it right to introduce, modified the agreed proposals which came from British Shipbuilders and the CSEU. It is fair to say that not all these meet with CSEU's full approval; nevertheless, although the scheme is not in all respects what they would like, I have no reason to suppose they do not recognise the scheme is fair to all those concerned; certainly it is as fair as is possible in what is an already complicated situation.
The noble Lord, Lord Campbell, also asked about the possibility of extending the scheme. As he pointed out, the Act would empower my right honourable friend the Secretary of State to make orders varying the terms of the scheme and, in particular, the possibility of extending it for another two years. Given the current very gloomy outlook for shipbuilding demand, I am afraid that we may need to look for such an extension. However, the details of the scheme were the product of extensive consultation and the Government have no plans for altering it. Some amendment may prove desirable in due course, as a result of experience;
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but the Government hope that that will not be the case. Should there be any need for alteration, including extension, Parliament will have to be consulted because any alteration will be made by order subject to the Affirmative Resolution, as are these two orders that we are discussing this afternoon.
The noble Lord, Lord Campbell of Croy, also asked about the attitude of the EEC Commission to the scheme and, in particular, to the proposed second tranche of the intervention fund. If I am right, this is relevant to something which the noble Viscount, Lord Rochdale, said about the international problems which the shipbuilding industry is facing and the general welcome to anyone who is taking the steps which the Government are taking in these orders. Indeed, the Commission have been kept in touch with the development of the Government's plans for redundancy payments schemes and have raised no objection to them. As I said, the scheme is consistent with the Commission's view that rationalisation of the industry in the Community is essential because of the very low demand for ships.
So far as the second tranche of the shipbuilding intervention fund is concerned, as I think the noble Lord himself said negotiations are still continuing with the Commission. The Government have no reason to think that the outcome will be other than satisfactory. The noble Baroness, Lady Vickers, asked about the age at which people are eligible. As I understand it and as the noble Baroness will know, for anybody to be eligible under the scheme they must have completed one year's service in the industry. In effect the age of 18 which the noble Baroness wanted is the one which has been chosen: but everybody must have done one year's service after that, so the age at which they are eligible for the scheme is 19. If I have understood the point correctly, we are at one with the noble Baroness and people will come into the scheme at 18 but will be eligible for payments once they have been in the industry for a year—in other words, when they are 19. I hope that answers the question.
The noble Lord, Lord Campbell of Croy, made a helpful suggestion, as he himself suggested it might be, that it would be useful to place on record the fact that there is an upper limit to the scheme. There is

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no question of people being given very large sums of money as a result of this. The upper limit is in fact £10,400. That is the aggregate of the payments any person may receive under this scheme and the Redundancy Payments Act 1965 taken together. I am grateful to the noble Lord for making the suggestion that we should put that on the record.
The noble Viscount, Lord Rochdale, asked about Article 5 and the use of the phrase "liable to pay". I am advised that on re-employment the amount of the refund is to be a debt due to British Shipbuilders. Payment will he enforceable as with ordinary debts. That is the effect of the phrase "liable to pay". I hope that meets the noble Viscount's point.
Baroness VICKERS: My Lords, can the noble Lord say anything about the dates? Are they both coming into operation on the same day?
Lord MELCHETT: My Lords, so far as I know, that is the case. If I am wrong, perhaps the noble Baroness will allow me to write to her. Certainly everything I have heard from the Northern Ireland end, where I have been most concerned, shows that the two schemes are identical, and this has been something which those working in Harland and Wolff have been concerned about. The dates for the coming into operation of the two schemes are the same—in effect, the operative date already started earlier this year, as the noble Lord, Lord Campbell of Croy, pointed out.
Lord CAMPBELL of CROY: My Lords, I should like to thank the noble Lord for replying to the large number of questions which I raised. There is one matter he did not refer to—and I quite understand he may need notice. That is concerning diversification and the effect on men who may be moved into other work not connected with shipbuilding or ship repairing. There is also the question of the costs of redundancies. The noble Viscount, Lord Simon, answered part of the question because he reminded us that payments from these schemes were coming from the taxpayer: but the number of redundancies—which the noble Lord indicated is still a question mark—will affect employers, too, because my under-
1004
standing is that in any case they will have to pay the statutory employers' payments under the redundancy payments legislation. So the numbers of thousands of men who may become redundant will have an effect, not just on the monies under this scheme but on the monies that will have to be produced by British Shipbuilders. I was asking whether that had been taken into account in setting the financial discipline for British Shipbuilders for the current financial year. I recognise that this may not be a question to which the noble Lord can give an off-the-cuff answer.
Lord MELCHETT: My Lords, knowing the care with which my former Department organises these matters, I have absolutely no doubt that it has taken this into account. If I am wrong, I hope the noble Lord will allow me to write to him to put the matter straight. The noble Lord's intervention has given me the opportunity to receive some advice about the question of diversification. If a qualifying company diversifies and still remains a qualifying company, an employee who has been transferred and then is made redundant would still he eligible under the scheme notwithstanding the transfer. I hope that answer the point which the noble Lord raised. May I thank all those who asked me questions for putting them clearly enough to enable me to answer at least some of them. If there are any I have not answered, I will write to noble Lords.
Viscount ROCHDALE: My Lords, if the noble Lord cannot answer the other question on retraining perhaps he will write to me.
Lord MELCHETT: My Lords, I will undertake to write to the noble Viscount. It has been a great pleasure for me to return to the subject of shipbuilding after a long absence. I hope that the fact that this scheme is unlikely to be nearly as widely used as many people thought at the time when we were debating the Bill—now the Act—which nationalised the Shipbuilding industry, to which the noble Lord, Lord Campbell of Croy, referred, will convince any remaining sceptics in your Lordships' House that the Act was a thoroughly worthwhile measure, well worth putting on the Statute Book.
On Question, Motion agreed to.

SHIPBUILDING (REDUNDANCY PAYMENTS SCHEME) (NORTHERN IRELAND) ORDER 1978
Lord MELCHETT: My Lords, I beg to move.
Moved, That the draft Shipbuilding (Redundancy Payments Scheme) (Northern Ireland) Order 1978, laid before the House on 6th July, be approved.—(Lord Melchett.)
On Question, Motion agreed to.

OIL POLLUTION: CONTROL AND COMPENSATION
5.57 p.m.
The Earl of KINNOULL The Earl of KINNOULL rose to ask Her Majesty's Government what national and international arrangements are being made for the better protection of our shares against oil pollution and tighter control of our shipping lanes; and what compensation is available to local authorities and individual businesses that have been affected. The noble Earl said: My Lords, I feel that my first duty is to apologise to the House, and to those who were due to take part on the last occasion when the debate was put down, for my unavoidable absence on that occasion. I should like to thank Her Majesty's Government and, in particular, the Deputy Chief Whip, for making it possible to hold this debate today in what is always a difficult period in the Session. My relief in being in my place on this occasion on time was only matched by the zealous attention that I had inadvertently attracted from the Opposition Chief Whip, whose enthusiasm for discipline among his Back-Benchers of course is renowned. May I also thank in advance all those noble friends and noble Lords who have indicated their intention to speak and who will add greatly to the value of the debate. I should like to mention particularly the noble Viscount, Lord Simon, whose very wide commercial experience in shipping and indeed running the port of London Docks for over 20 years gives great value to his words. Finally, I should like to welcome my noble friend Lord Buxton, who has chosen this occasion to make his maiden speech. My noble
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friend is serving on the Royal Commission on Pollution and has done so for the past five years. We are all looking forward to what he has to say.
The purpose of my Unstarred Question tonight is not to hold a post-mortem on the "Amoco Cadiz", which is still subject to an inquiry and indeed is sub iudice. It is to express yet again a growing anxiety and increasing impatience felt by many people at the apparent lack of positive Government control on oil pollution around our shores, and the lack of enforceable protective measures to minimise the possibility of further tanker collisions. The subject is wide ranging and I expect to cover less than 10 per cent., leaving plenty of room for other noble Lords to follow.
The control of sea pollution around our shores is a subject about which neither House of Parliament could be accused of complacency. In another place the Sub-Committee on Expenditure is at present taking evidence on the measures to prevent collisions around our coasts. In this House our last debate was initiated by the noble Lord, Lord Ritchie-Calder, last January. The noble Lord's knowledge and work outside the House—he is chairman of the Advisory Committee on Pollution of the Sea—is well recognised. His debate was timed just before one of the now frequent international meetings and conferences called by IMCO: I think on that occasion it was demanded rather than called by America.
That debate covered the precise area of tanker safety and pollution prevention. It is perhaps tragic that that debate had almost a prophetic ring about it because since then our seas have suffered two major tanker collisions. First, there was the "Amoco Cadiz", which brought about the largest spillage of oil the world has seen, of over 220,000 tons of oil, which caused havoc on the Brittany coast and in parts of the Channel Islands. Then there was the "Eleni V", which caused havoc on over 50 miles of the coast of Suffolk. I do not think anyone would disagree, and certainly not the Government, that on the subject of sea collisions Britain has at its very front door a unique and special problem as regards the water round our Southern coasts: I refer, of course, to the Channel.
It is unique because the Channel has now become one of the busiest shipping straits in the world, and it is special in that it is now used by no fewer than six giant tankers a day, carrying oil, liquid gas or some other substance. Its record of accidents is unhappily bad, and I think it could he described as somewhat of a black spot for tanker collisions. I am told that traffic in the Channel is parallel to conditions, in motoring terms, in Piccadilly Circus during the rush-hour but, unlike Piccadilly Circus, there are no enforceable shipping lanes and no enforceable speed limits, although, as the noble Lord, Lord Ritchie-Calder, pointed out to me before this debate, tankers take five miles to stop. There are no MOT tests on a ship's equipment and there are no enforceable standards of crew training. Of course, we know that 80 per cent. of accidents occur through human error and we know that IMCO and the various member countries have been discussing these points, but as things stand today there is no enforceable law. Despite the density of shipping in the Channel and the now daily danger of collision, the Government's policy sticks doggedly to the powers of protection and control afforded to them under international laws, while at the same time the Government are pursuing with the French voluntary controls which have been shown to have very brittle teeth.
What are the powers granted under international law to the Government, and what are these international powers of protection for the Channel? I think everyone—certainly everyone taking part in this debate—knows that the powers are very limited. IMCO has been struggling for years to strengthen them, and committee after committee has made recommendations. Regular conferences have been called and agreements have been reached on training and standards in regard to ships. But the vital stage of ratification by member States to put into effect the law, is slow and tortuous. I am told that it takes on average eight years for a law to be ratified from the stage of its being agreed by IMCO. By that time, events have very often overtaken the purpose behind a law. That is what we rely on principally: the enforcement of control of shipping around our coasts. Surely, with the bitter experience of the "Amoco Cadiz" and the "Eleni V" in one year, one must seriously question
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whether the slow process of up-dating international law through IMCO is any longer acceptable in conditions such as those which exist in the Channel.
What have other countries done about similar sensitive waters? Some years ago, Canada took unilateral action to protect her Arctic waters. Malaysia, Indonesia and Singapore are at present taking concerted action to protect the Malacca Straits, an area of water which is far less busy than the Channel. Both these precedents have neither called forth reprisals nor weakened international law, and both have been accepted as special cases, I suggest. Britain and France have a special case in connection with the Channel. They have tried voluntary schemes but are powerless to enforce them or to impose penalties on ships other than those which are registered in their own countries. I strongly believe that the Government should seriously examine the possibility of taking bilateral action with France in controlling the Channel. I do not believe anyone would argue that such action would do anything but strengthen the protection against another "Amoco Cadiz" disaster.
In saying that, I am not trying to minimise the voluntary steps which both Governments have attempted to take in the last few years—the separated lanes, for example, on which my noble friend Lord Greenway will be commenting, the monitoring of ship movements by the coastguards and their French opposite numbers; but this is merely scratching the surface of the problem. If the Government remain steadfast in their policy against taking unilateral action, I hope they will consider more positive stiffening of the voluntary steps. It would help, for intance, if a start could be made to take steps to increase the limit of territorial waters from three to six miles. The French already have this. It would also help to try to reach agreement with all tanker owners that when their ships are passing through the Channel they will accept French or British pilots. It would help if ships unloading in EEC ports had to carry double-banking on equipment and steerage. It would help if the Navy were perhaps to play a more active part in patrolling, and it would help if oil companies could be persuaded not to use sub-standard tankers.
But, my Lords, what of the emergency action which the Government can take in the event of collision—is that satisfactory? If one supposes that a tanker has collided 12 miles off our shores, surely one must assume that the Government can take immediate steps. What can they do? the initial stage, very little. They must wait until perhaps the Greek owner of a Panamanian-registered tanker has argued with a Dutch salvage company on the merits and the commercial viability of a contract. While that goes on, we just hope that the wind is in the right direction. It seems most inconsistent that we can claim 200 miles to conserve and protect out fishing, and yet we are powerless to act even for 12 miles off-shore to protect the same fish stocks, which could well be killed through oil pollution.
Tanker collisions are, of course, far more dramatic than the cases of deliberate oil spillage; yet, as the noble Lord, Lord Ritchie-Calder, has pointed out on more than one occasion, the latter represents over 80 per cent. of oil pollution. Because of this, I find it very surprising that the Government were so deaf to the rich advocacy of the noble Lord on the vital need of retro-fitting segregated ballast tanks to existing tankers or imposing a compulsory fitting of such tanks on new tankers. I never saw, and I am not stile whether the Government ever published, their calculations and their crossed arguments. I suppose we should be grateful that IMCO recently agreed to the crude oil-washing technique as an alternative. I hope the noble Lord will be able to tell us when that will be introduced.
The second half of my Question deals with compensation. When one first looks at the compensation available to Government, local authorities or individuals, in the case of oil pollution, one is impressed that the industry, some years ago of its own accord, set up two schemes, one for the tanker operators and one for the oil companies. But like so many insurance policies, the small print has a peculiar sting in the tail, which is that you have to prove the origin of the source. To see how this works in practice, one can look at the figures published by the Advisory Committee on Pollution of the Sea in 1977. There were 432 cases of oil pollution—perhaps naturally, the heaviest
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were recorded on the South coast—and only a could identify the source and were eligible for an insurance claim. In other words, despite a legitimate claim for damage, the hope of success under these schemes is very small, and is at present running at only 25 per cent
One poses the question: what happens with the "Eleni V"? We know that there was a lot of heavy oil sunk on the seabed, which is bound to float up from time to time. For how many years will it be floating up, and how will this insurance scheme operate? I do not think many people can be very happy with the present compensation arrangements, except perhaps the insurance companies. I hope that the industry will look again at the current schemes and be prepared, to pay any reasonable claim from a central fund, whether or not the source is identified. Compensation is particularly important when one thinks of the "Amoco Cadiz", and I hope that the noble Lord will be able to tell us what support the Government have given over the past few months, both to local authorities and to any businesses that have been severely affected.
My last question concerns the safety of liquid natural gas tankers. Ever since the horrific accident in Spain, those who know about this problem have expressed increasing concern. We know that accidents involving these ships have been reported in America and in Japan. We know what happens when there is a leak below the water level; the water turns to ice. We know what happens when there is a leak above the water level; a gas cloud forms which can be ignited by one small spark. We know that the problem is lethal. At present, tankers go in and out of the Thames Estuary every week. They are of varying sizes and shapes. Apparently, they are built to withstand a collision at 8 knots, and yet there has been a report that a tanker was seen doing 11 knots in the Thames Estuary. If ever there was a case for licensing these ships, this is it. These ships could cause a catastrophe far greater than the Spanish tragedy. Control must surely now be paramount, and I hope that the noble Lord will have something to say.
The protection of our seas against dangers from increasing pollution is

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today a vitally important responsibility of any Government. As I have said, I do not believe that we have a sufficient degree of protection at the moment, either under international law or under voluntary schemes which have recently been introduced. The day has surely come when we need it. We have a special problem, the Government have a special responsibility and I hope that the noble Lord's reply will assure us that they do not intend to shirk it.
6.14 p.m.
Viscount SIMON: My Lords, I feel sure that everyone in your Lordships' House is grateful to the noble Earl for asking this Question, so giving the Government the opportunity to report to your Lordships, both on the steps which have been taken or which are in contemplation to protect our shores from oil pollution, and on the present arrangements for compensation to those affected when pollution occurs; or perhaps to tell us what developments in that direction they have in mind. As the noble Earl has said, these are matters of very grave concern to the nation and to the whole population, particularly those who live near the coasts. In the case of an Unstarred Question, I always think it best for those who take part to concentrate on one or two points, and not to try to cover the whole field. I want to raise only three issues on which I hope the noble Lord, Lord Strabolgi, when he comes to reply, may be able to make some comment.
The first is this. On 10th July, when we debated the EEC shipbuilding proposals, the noble Lord, Lord Bruce of Donington, made a short but very powerful speech calling attention to the excessive number of sub-standard ships which are now sailing the seas; sub-standard not only in their equipment, but sub-standard in their manning. I am very sorry to see that the noble Lord, Lord Bruce of Donington, has had to withdraw from this debate, because I should have liked to hear what he had to say.
However, the question that I want to put to the noble Lord, Lord Strabolgi, rather picks up something which the noble Earl said in his interesting introduction. We were warned that all sorts of plans were afoot and that conventions had been agreed upon, but that it takes such a
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long time to bring them into force. But is it really not possible for us in this case not to act unilaterally, nor even to act in concert with our French friends, but perhaps to act in concert with all the Members of the European Economic Community and, indeed, with our Scandinavian friends who are outside the Community, and to agree among ourselves that we will not accept tankers into our ports unless they satisfy the conditions of the conventions, even though the conventions have not yet been ratified? Practically all the tankers coming up the Channel come into ports of one of those countries that I have mentioned, so why could we not say that we will not accept such tankers?
I realise that in the past we have been very unwilling to take unilateral or separate action, partly, as the noble Earl hinted, for fear of retaliation, and I was glad to hear him point out that some action of a unilateral kind has been taken elsewhere without producing the retaliation that we seem to be so frightened of. In a rather similar field, I might remind your Lordships that a small country, Iceland, succeeded in acting unilaterally as regards its fishing industry. There was precious little that we could do about it, and, eventually, we had to negotiate an agreement with Iceland on the basis of what it had done.
This would be a very much easier proposition, because we are very large importers of oil and if the countries bordering on the Channel, the North Sea and the Baltic—perhaps not so far as the Soviet Union—were to say "From a date in the near future, we will not accept ships unless they satisfy the conditions of the conventions which are now awaiting ratification", we might well find a great improvement in the position. That is the first point I wanted to put to the Government.
My second point does not really arise from what the noble Earl said, because he did not say what I thought he might say. But we sometimes hear in your Lordships' House and outside that we should bar the arrival of these very large super-tankers. On that, I must say that if there is a given quantity of oil which has to come to our refineries here and on the Continent, then if we refuse to accept very large tankers the only answer is that we shall have more

1013
ships; and if, in fairly narrow seas like the Channel and the Strait of Dover, there are more ships, then the risk of accidents is increased. When an accident occurs, it does not make much difference whether you spill 200,000 tons of oil, 100,000 tons of oil or even 70,000 tons of oil. It is still a disaster and it has to be coped with. But, on balance, I should have thought that it would be unwise to follow the idea that we should refuse to receive these very large tankers.
The third point I want to make is this. We all agree that prevention is better than cure, and prevention is what most of us have been speaking about, but I just wonder whether enough consideration and research has been undertaken into the method of dealing with accidents when they occur. I am bound to say that if every ship bringing oil into this area were well found, well manned and in perfect, tip-top condition, we should still have accidents from time to time. The sea is a fairly cruel place in which to trade. I just wonder whether we are doing enough to work out schemes for dealing with accidents when they arise.
The noble Earl touched on one point which arose very obviously in the case of the "Eleni V" The problems seem to me to fall into two categories. There are legal and administrative problems and there are technical problems. The legal and administrative problems are undoubtedly very difficult when, as the noble Earl pointed out, one can have accidents which create a real risk to our coast and to the coasts of Europe but which are outside territorial waters. This is an issue which I feel ought to be followed up. It would have to be followed up, I take it, on an international basis, but the issue might be followed up successfully on a fairly narrow basis by the countries which are so deeply concerned with it, instead of trying to reach agreement with the enormous number of countries which are members of the United Nations.
Turning to the technical problems, I just wonder whether we have really discovered what is the best way of dealing with oil spillage, either in the sea or when it comes ashore. My suggestion is that there should be extensive further research into these matters so that we can find out how these accidents can best
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be dealt with, if and when they occur, because I very much doubt whether we can ever hope that we shall never have an accident of this kind.
Finally, may I say a few words about something which the noble Earl said. It seemed to me that the noble Earl painted a picture of entirely irresponsible shipowners sending their ships around improperly prepared and improperly manned. He appeared to underestimate the amount of self-discipline that has been achieved by all the principal shipping countries of the world in the International Chamber of Shipping and in other bodies of that kind. A tremendous amount has been achieved.
Although these disasters—which are not, after all, so very numerous—have been quite properly described as disasters, it is quite remarkable that, compared with the amount of oil which is successfully brought up through the Channel and through the Strait of Dover (I am told that today it runs at something like 1 million tons a day) they have succeeded, by means of shipping lanes and in other ways, to reduce the amount of pollution to the figure which now exists. I do not think, therefore, that we ought to take too gloomy a view. Nevertheless, I think that there is something that we can do here. If we could get together with all our friends on the Continent to bring into force within our own ports the terms of the conventions which we are waiting to be ratified, that in itself would surely be a spur to ratification.
6.25 p.m.
Lord BUXTON: My Lords, may I express my sincere appreciation of your Lordships' indulgence on this occasion. I should also like to thank my noble friend Lord Kinnoull for his kind remarks. I ought to explain that I was a founder member of the Royal Commission on Pollution and that I ceased to be a member four or five years ago when my term came to an end.
I wish to make two somewhat philosophical points, compared with the very practical and important matters which have been raised by the noble Earl and by the noble Viscount, Lord Simon. While they may seem to be philosophical, I believe that they are of immense importance

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and that they lie at the back of all the other matters which they were considering.
Sometimes I worry and wonder whether the human race, or the individual, is really competent or at all capable of handling huge contraptions like supertankers, but since we cannot put back the clock it is as well to review the point and see what it means. While technology seems to have no bounds and races ahead of the competence of human beings to operate new contraptions, in my view what tends to be overlooked and not properly discussed and brought to the surface in the ultimate exploitation of technology at sea are the limitations of the individual.
Obviously, laws are vital, as has been described, but incidents can always happen through the limitations of the individual: whether it be through inexperience, ineptitude, preoccupation with private or vested interests, simply dozing off, too much drink or just losing one's head. These are characteristics which do not occur in the same way in the rest of nature but which have so often accounted for major failures and disasters.
The problem is, I believe, that technology is running ahead of biology, if that is the way to put it. Nature is reliable within certain limits, and all organisms respond to certain familiar signals and stimuli. But uncertainty, and even confusion, arises in any species in the face of the unusual, as soon as the familiar pattern is broken. The unreliability of man, compared with other forms of nature, probably emerged when he started to outstrip the rest of nature and to contend to an increasing degree with the unfamiliar. There are examples of this within living memory, even in this century. Motorists at the start of this century—one of my uncles was among them—used to wind up their cars at the front and promptly run themselves over. Another example which takes place today—there was one recently in East Africa—is that pilots of light aircraft tend to go to the front of the plane when the chocks are off, wind up their aircraft and mow themselves down.
This is simply evidence of science and technology getting ahead of biology, and it is evidence that this particular organism
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—man—is, like the rest of nature, unpredictable in the face of the unfamiliar. And if it can happen with cars and aircraft, it can, of course, happen, with infinitely more devastating consequences, with supertankers, oil rigs, power stations and so forth.
Today, far too much emphasis, to my mind, is placed on the need for further technology in order to protect us against disasters. That, of course, is vital; but equally, surely, we have to consider most carefully the selection, the training and the competence of the individuals involved. Our primitive ancestors were, in their daily lives, probably more reliable than we are because the demands on them were less complicated and less daunting. Two or 3 million years later, modern man is less reliable because he has not evolved and adapted with the same speed as science and technology, and all the time we are providing people, whose behaviour is uncertain, with technical developments which demand precision. Human individuals cannot guarantee precision.
It was not the "Torrey Canyon" which decided to run on to the reef. It was not the "Amoco Cadiz" that decided to float for 12 hours towards the French coast, and it was not the "Eleni V" which went out and decided to have a collision and break in two. These disasters prove that far higher international standards have got to be secured for the selection and training of people. A vital part of this should be the enforcement by international agreement of far higher standards, totally new conceptions of standards, for the training of look-outs, watch-keepers, pilots and the masters of all ships.
The whole question of safety at sea has always been far behind, and is falling further behind, the standards applied on land and in the air, because sailing the seas is enshrined and embedded in the history of mankind, whereas land and air traffic are newfangled devices for which legislation has not been resisted. The obstacles to adequate legislation are the cherished and outmoded traditions of the sea, one of which is the nations' obsession with freedom of the seas. So preoccupied are we, the human race, with the freedom of the seas, for very good reasons because of national security and survival, that the world still lives really today in a dream age

1017
of Vasco da Gama and Cortez. Whatever happens, however hideous the prospects of pollution, nothing must apparently interfere with the freedom of the seas.
My Lords, I served, as I said, for five years on the Royal Commission on Environmental Pollution, and I am not concerned only with tanker traffic and sea lanes, serious as these are, but with the danger of collision with oil rigs. I am bound to say that I have never heard anything yet which persuades me that a collision with a rig could not occur. In fact I remain convinced that in due course, one cannot possibly predict when or where or how, a disaster in the North Sea involving a rig seems almost inevitable as things stand at present, simply because of this human individual factor. We have got to reconcile nations' preoccupation with the freedom of the seas with the necessity for the same degree of control of sea traffic as applies on land and in the air. Until that is achieved, there is no way of ensuring that a vessel will not go blundering into a danger zone and ram a rig, with tragic consequences.
It is again because of this human factor, which as technology races ahead of us will become of continually mounting significance, that legislation and control must always be stricter than necessary or than seems necessary, and no discipline or precaution can possibly be excessive. Above all, we must resolve this question of the outmoded traditions, because over the next century the biology of man is not going to change to any discernible degree, but technology will continue to advance further and further ahead of the individual. It will take time, obviously, globally, but meanwhile, as the noble Earl and the noble Lord, have suggested, we should get together more locally, with our partners in Europe and do our best to control the Channel and the North Sea with the fiercest courage that we can muster. My Lords, I thank you once again for your kind indulgence.
6.34 p.m.
Lord RITCHIE-CALDER: My Lords, I am very pleased that I am able to express my own gratitude, and I am sure the gratitude of your Lordships, to the noble Lord, Lord Buxton, for that very thoughtful and thought-provoking speech, with
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which I have so much sympathy. I am very glad to welcome him also to the not very happy band but the band of people in this House who are concerned about these problems. I am quite sure that we will listen to him with great attention and appreciation in the future.
I am glad that the noble Earl, Lord Kinnoull, persisted with this Unstarred Question. The more this matter is brought to the attention of Parliament and people the better. We cannot have government by catastrophe. We cannot wait until disasters happen to learn how to prevent disasters. We cannot go on improvising measures to deal with "incidents" fraught with dangerous consequences of such magnitude, as has just been expressed by the noble Lord, Lord Buxton, and others. I do not want to be a harbinger of doom, but I have all the encouragement I need from the noble Earl, Lord Kinnoull. I would remind your Lordships of the horrors of the Spanish road tanker and the similar horror which happen in Mexico, when in both cases liquid gas exploded. I think what would happen in our congested Western Approaches—the ones that I hope we shall persuade the Government, by whatever measures, better to control—and in the Channel if a similar disaster were to happen to a liquid gas carrier. When liquid gas escapes at atmospheric pressure it vaporises and a spark can detonate it as a fireball which would envelop other ships in those highly congested waters. Francis Drake's fire-ships would seem like fire crackers by comparison.
If that should happen, and it is only an extreme version of what we are talking about tonight, no Government would he excused or should be excused by saying, "We have a committee sitting; we are co-ordinating departmental thinking; we are waiting for others to ratify this or that convention". The circumstances would be totally and completely unforgivable, and I am trying, as I hope we all are, to persuade the Government and those responsible that we have to anticipate because we know what is going to happen.
I would remind the House and my noble friend the Minister that we have had the "Torrey Canyon". We did not particularly learn the admirable lessons which the noble Lord, Lord Zuckerman, as

1019
Chief Scientific Adviser and his officers have tried to teach us. We have not really learned from that adequately. We have had Ekofisk and Bravo; we have had the "Amoco Cadiz"; we have had the "Eleni V". And now every day all over the world we have accidents and spills. If anyone asked me the date when the next serious accident is going to be I could tell them almost certainly that it is happening now somewhere in the world. It is no consolation, none whatever, to be told that really big disasters are infrequent. A "Torrey Canyon" or an "Amoco Cadiz" is enough for a whole generation.
It is clear that the two principal causes of accidents to ships are human error and design. The noble Lord, Lord Buxton, has just been illustrating—and I agree with him completely—how vulnerable we as human beings are to error and how in fact we do condone and have really condoned shockingly bad designs, including, if I may say so, the very super tankers themselves. The very concept of the super-tanker in terms of design seems to me to be quite intolerable. This is not just a question in human terms of poor training of the crews, with which the International Maritime Organisation, IMCO, is seeking to deal, but indeed of human stress and opportunities for error in the operation of the ships.
The "Amoco Cadiz", for example, was one of the most modern of the supertankers. It had a very highly qualified staff; in fact it was almost overmanned by officers. And we know what happened—a rudder failure, with no alternative means to correct it, and confusion, as pointed out by Lord Buxton, about who was calling whom, all the delays which again were human failure. We must insist on the highest safety standards for navigational and cargo transfer equipment for these ships. We must insist on the application of ergonomics, as necessary, trying somehow to reconcile Lord Buxton's difficulty about how we adapt man to technology.
We must have integration of man and machines, which I can tell your Lordships is quite inadequately expressed in the type of ships' equipment we have today. We want to see a hazard and safety audit to be conducted on all types of vessels carrying noxious cargo likely to traverse British coastal waters so that we can
1020
identify high risk areas and operation. If any of your Lordships have seen a radar scan of ships crowding into the Western approaches and into the bottleneck of the Channel, you will know the degree of traffic congestion which exists at any hour of the day and night. As the noble Viscount, Lord Simon, pointed out, something like 1 million tons of oil is going through that gullet of the Channel every day. We need proper traffic lanes and we are trying, the French and British between us, to install some kind of traffic lanes; and we have traffic lanes now which Trinity House themselves want to improve upon. We must have traffic lanes and proper policing of those traffic lanes. And we need compulsory identification of ships in those traffic lanes.
Another thing we need is the proper charting of the seas. It is tragic and pathetic that at this moment, when we are talking about all kinds of possibilities we see around us, we are neglecting the services of the hydrographer's department. Britain, which led the world in the charting of the world's oceans, is now deficient in survey ships even to survey the waters in which we are at hazard. I am not talking about our great contribution to charting the great wide open spaces. We are haggling about which Department should be financially responsible for maintaining this indispensable service.
I hope and believe that I am a good internationalist. I believe in, and respect, international law. I have for a long time been very closely involved in the Law of the Sea Conference, which drags on and on, as we all deplore, at this moment, because all the subjects raised are, we say, involved in the Law of the Sea Conference. I respect the efforts IMCO is making. I am heavily involved with IMCO in trying to secure international agreements on the measures which are manifestly necessary if we are going to avoid continuing and accumulating disasters. I want to underscore that the process of securing and implementing agreements is slow. Time is definitely not on our side. The 1969 amendment to the 1954 International Convention on the Prevention of Pollution of the Sea by Oil became operative in January 1978. The 1973 International Convention on the Prevention of Pollution from Ships

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—the deliberate discharging of waste—has so far been ratified by only three States. It had already become obsolete and was amended by Protocol in February this year.
Even that protocol, with its rules for ship design, is already, or soon will be, completely and totally inadequate, because it demonstrates what happened with the "Amoco Cadiz" disaster. The French Government submitted to IMCO amendment proposals which included, as a result of the "Amoco Cadiz" disaster, requirements for all new tankers to have complete duplication of steering gear, propulsion systems and electric power generating systems.
Conventions are binding only on those States which have become parties to them. Non-signatories need not comply with these rules. Let me point out what will happen. There will be a multiplication of ships of non-signatory-State flags using our waters. We are reminded sometimes of the high safety record of vessels flying the United Kingdom flag. I agree with the noble Viscount, Lord Simon, that on paper we have, apparently, a very good record. Maybe. But what that record conceals is the common practice, for British and other ship owners wishing to use ships which have lower standards but which are cheaper to operate, to register their vessels in flags of convenience States. I suggest it is imperative that the British Government should prevent and prohibit British nationals and legal persons from registering sub-standard ships or employing sub-standard crews under other flags. Many sub-standard vessels have been on charter to oil companies of very high repute when accidents have occurred. I suggest—or at least the Advisory Committee on Oil Pollution at Sea would suggest—that Her Majesty's Government should impose on charterers of vessels the same obligations as are imposed on the owners of vessels.
Let me give you two pathetic figures. In 1976 the Department of Trade prosecuted only three ships for polluting our waters. In 1977 it prosecuted only two ships for intentional discharges of oil at sea. We and the local authorities, with their defiled beaches, know just how common those discharges are. We know that the example of "Eleni V" was taken
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and used as a cynical pretext by masters of tankers to discharge oil waste. We know that because we can identify the types of oil that came ashore in many places and which by their nature could not have come from the "Eleni V". This is cynicism. These were unidentified ships. However, if they had been identified and had been reported to their flag States, would those States have instituted proceedings? We do not know. We do not know how far our Government have pursued such matters. I strongly recommend—and here I support the noble Viscount, Lord Simon—Her Majesty's Government, along with the North-West European Governments, to legislate for the incorporation of port-State jurisdiction in regional agreements to ensure action against such ships passing through our territorial seas.
Apart from the departmental anomaly which we have, that the Department of the Environment is responsible for up to one mile of our shores and the Department of Trade, beyond, for up to three miles, it seems obvious that our regulative powers to prevent pollution should be extended at least to 12 miles. Her Majesty's Government should go further and see that in the law of the seas an internationally acceptable pollution control regime should be incorporated in the Exclusive Economic Zone of 200 miles.
I come to a point which was raised by the Question: ACOPS—the advisory committee—is concerned, on behalf of its local government members, with the cost of cleaning up oil pollution. It is possible to recover the cost if the source of pollution has been identified. As was pointed out, often it cannot be identified. I may say that we in the Advisory Committee have much better pollution figures than the Department of Trade has. Most of the oil deposited on our beaches cannot be identified.
Her Majesty's Government must surely provide the ways and means, the cleaning-up equipment, the policing, the pollution monitoring, and the cost of clean-up and of compensation. How they will finance it is another matter, but there must be provision. There should perhaps be a rate levy on all shipping entering British ports—similar to that which applies to the lighthouse levies—to compensate those who suffer from the oil industry's

1023
unavoidable and often unidentifiable accidents. At the moment we have complete and total cynicism. It is now possible for anyone to insure themselves against the fines they will be called upon to pay for their misdemeanours. At least we should ensure administratively that these fines are not insurable, and that it falls back on somebody somewhere to take the responsibility for seeing ultimately that those events do not happen.
6.49 p.m.
Lord DUNLEATH: My Lords, I also am grateful to the noble Earl for having given us the opportunity to discuss this extremely important and indeed worrying topic. I am also grateful to him for having given us the opportunity of hearing for the first time in your Lordships' House the noble Lord, Lord Buxton. I very much nope that there will be many more such occasions when we shall have that privilege.
So far, noble Lords have referred, and quite rightly, to the more major oil pollution disasters in our waters—disasters whereby there is an accident and suddenly at the time of the accident tens if not hundreds of thousands of tons of oil are released on to the surface of the sea. With your Lordships' permission, I should like to spend a few moments considering a different aspect of pollution. The major accident may be avoidable and, as noble Lords have said, every precaution should be taken to avoid such accidents, but they are not predictable. The type of pollution to which I wish to refer is, I submit, predictable.
I am referring to the case of a vessel which sinks with its oil tanks intact. In the case of such a vessel, it is not possible to predict exactly when pollution will occur, but in my view it is possible to predict that pollution will occur at some time. I quote the example—and it is a very small example compared with what your Lordships have been talking about—of the "Ella Hewitt", a trawler which sank some 13 years ago in Church Bay, Rathlin Island, which lies between the Mull of Kintyre in Scotland and the north-east coast of County Antrim, Northern Ireland. Most distressing was the fact that this is an extremely important area for the breeding of wild seabirds both resident and more important still, migratory. Also, it is an important area for shellfish.
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Briefly, the story was as follows. After something like 12 years and when the sunken vessel had virtually been forgotten, a small oil leak was observed during the winter of 1976–1977. It was not enough to do any damage but—with hindsight—I have no doubt that it ought to have been looked upon as being a warning, because the following winter, in November/December 1977, a serious leakage occurred from the fuel oil tanks of the sunken trawler. On 29th November, 25 dead birds were picked up on the shores of Rathlin Island. The leakage continued and the Department of the Environment was notified in early or mid-December 1977, but it disclaimed responsibility because the emission of oil was more than one mile off shore. However, it agreed to make itself responsible for trying to clean up the oil if it came ashore, though not for tackling the source of its emission.
Throughout January 1978 pressure was put on the Department of Trade to try to have some action taken. I personally tabled a Question in your Lordships' House as, indeed, did the Member who represents that part of the country in another place. It was at about that time —about February—that a regrettable delay occurred. In the meantime, on 28th January 1978, a Royal Naval salvage team arrived and subsequently reported—not until March, I am told—that private tenders should be invited to deal with this sunken vessel. When the tenders were received they were unacceptable and eventually it was decided that the Royal Navy could do the work. But, by that time, it was too late because the nesting season for the wild fowl starts in about mid-April and by then it was the end of March.
The interested bodies, such as the Royal Society for the Protection of Birds, felt that the danger of trying to cope with the vessel after the nesting season had started was such that it would be better to postpone it until after the end of August when the migratory birds would have gone away again and the nesting season would have finished. However, there is still the danger that between now and then there could be another seepage. There was a slight one towards the end of June due to rough weather and that is why we consider it so regrettable that there was this delay and that the vessel could not be dealt with prior to the nesting season.

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To the best of my knowledge the damage to bird life, fish—especially shellfish—and fishing tackle has not yet been estimated, but it is certainly very considerable.
So, I venture to ask Her Majesty's Government why there was that unfortunate delay and why there was doubt as to whose responsibility it was to deal with the problem over the period between December 1977 and March/April 1978, especially when it is known that the considerable damage done was caused by only some 10 tons of oil leaving the vessel, while there were still another 170 tons on board. With respect, I should like to seek assurances from the noble Lord on the Front Bench that work will be put in hand without fail in the early autumn so that another winter will not pass in which inevitably the winter storms will break up the vessel further and release more oil.
So much for that particular case. I now turn to the generalities. It seems strange to me that there was no emergency drill for coping with this, as I say, predictable situation. No one knew as the vessel gradually deteriorated under water, when the oil would come out, but sooner or later it was bound to do so. And now it has started. Is there no procedure for this? Is no one responsible? Is there no way in which it can he dealt with without such delay and such lengthy negotiations with the further damage which is thus caused?
That raises a worrying thought: how many more vessels are there lying on the sea bed with oil in tanks which are gradually corroding and deteriorating and which will begin to emit oil sooner or later? After all, this is a comparatively modern problem as conversion to fuel oil as the general motive power for ships has really only taken place in the last 50 years. It is horrifying to think of the number of sunken vessels such as the "Princess Victoria", which went down in 1952, which are still lying on the sea bed and which could well emit oil at some time.
Therefore, if Her Majesty's Government can give us any indication of what plans they have in mind for dealing with this problem I should be extremely grateful and so indeed should those who have
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suffered from this rather less spectacular but, at the same time, distressing and worrying sort of damage through pollution.
6.58 p.m.
Baroness VICKERS: My Lords, first, I should like to congratulate my noble friend Lord Buxton on the very interesting intervention which he made. He comes from an area with very beautiful countryside and a good sea line, and I am sure he is very concerned lest it may be damaged from time to time. I was very glad to know that on the last occasion no great disaster resulted. I should like to say how much we look forward to hearing from him again.
My reason for speaking is that regrettably I had the opportunity of seeing for myself the wreck of the "Torrey Canyon" and taking part in some of the meetings which were held to try to solve the problem of what should be done about it. The difficulty is that no two wrecks are quite the same so the plans that one may make for one do not fit the other. In my view, ships have grown far too large and, as several noble Lords have mentioned, the seas are too crowded. However, as the noble Viscount, Lord Simon, will know, an Inquiry is at present being held, concerning hydrography. I agree with the noble Viscount that it is absolutely essential to get some of the seas re-mapped because ships are drawing so much lower in the water and we want an idea of what will happen. The Inquiry was undertaken some years ago by the Royal Navy by two excellent ships called "HMS Fox" and "HMS Fawn". I hope that they will continue this work because it is not expensive, it is a job which they like doing, and they have done it very well in the past.
When I say that ships are too large I am talking in terms of the "Torrey Canyon" being two and a half times the length of a football pitch. Propped up beside the Eiffel Tower she would have been only 10 feet less than the Eiffel Tower itself. As the noble Lord. Lord Buxton, said, so much depends on individuals. However good one's steering gear and so on may be, it is bound to go wrong from time to time because even modern instruments are not infallible. Therefore, I think that it is unwise to have such large ships. Times have

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changed since the Reverend John Troutbeck, who was an 18th-century vicar in the Isles of Scilly is said to have prayed:
"We pray thee O Lord, not that wrecks should happen, but if wrecks do happen, Thou wilt guide them into the Scilly Isles for the benefit of the poor inhabitants."
In those days they were very good smugglers. At present they are poor in a different sense.
A committee, under the chairmanship of the noble Lord, Lord Greenwood of Rossendale, was set up to inquire into the circumstances of the "Torrey Canyon" disaster. I should like to pay tribute to the noble Lord for the stepping-stones he made in the guidance that he gave. He had a very difficult task to perform. There was then set up the Zuckerman Committee, which stated that the first course to be taken in attempting to save the standard tanker was to avoid large-scale pollution, and that the Government had to try in the light of the professional advice that they had been given. At that time there was very little professional advice and it came rather later.
However, I am very interested in the recent report—Cmnd. 7217, of May 1978 by the Department of Trade—entitled Action on Safety and Pollution at Sea: New Merchant Shipping Bill. I hope that the noble Lord. Lord Strabolgi, will be able to say that that Bill is now in draft form and ready to go on the stocks. I hope that whatever Government come to power after the next General Election, they will be able to get on with this very necessary Bill. It has five very useful Protocols. I should like to quote one:
"Taken together these instruments"—
these five Protocols
"Will both reduce the risk of tanker casualites and operational pollution from tank cleaning and improve the means of dealing with them, should they occur. In addition, the Bill would permit the ratification of "
a great many of the United Nation's suggestions; we could join with other countries on these. There is also a clause which suggests that there should be compulsory pilotage. I think that that would be a very great safeguard to many ships. Clause 17 deals with the prevention of pollution from the ships themselves.
Following the "Torrey Canyon" disaster the Marine Biological Association
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carried out a considerable amount of work into the way in which oil floats tend to travel. If they are fortunate enough to follow the prevailing wind, I gather that they travel at about 3·3 per cent. of the wind's velocity. Perhaps the noble Lord, Lord Strabolgi, would be kind enough to say how successful was the "Black Watch" exercise which, I gather, was held at Milford Haven on 9th June, and what has been learned from it and the two previous exercises at Belfast Lough and off Shetland.
As the United Kingdom ratified the Paris Convention for the Prevention of Marine Pollution from Land-based Sources in April 1978, we can now join with 13 States which have signed, six so far having ratified the Convention. Therefore, we shall be able to play a full part and attend the meetings of the Paris Commission. Contracting parties have agreed to adopt measures to combat and monitor marine pollution and to cooperate in scientific and technical research. Therefore, that should be helpful to our members now that we can attend.
Noble Lords have raised the question of the Department of Trade being given responsibility for dealing with oil spills in 1969. But what has it done and what action is now the responsibility of the local authorities? In 1975 the Standing Committee on Pollution Clearance at Sea was set up. What progress has it made? I understand that the Shell Company has invested £800,000 into a study to discover the fate of oil when it is left on the surface. I gather that this will include the effect it has on marine life, in which the noble Lord, Lord Dunleath, is so interested. There has been a recent study of a "blowout" North-East of the Shetlands which shows that oil spills would drift away into the North Atlantic. Norway, however, is not in danger, and particularly its marine life. Perhaps the noble Lord would like to mention the reaction to that exercise.
Eight North Sea and Channel nations might, I suggest, begin to enforce the joint new regulations on training, which have been mentioned by several noble Lords, on equipment and construction standards for all ships of whatever nationality or origin which enter their ports—a matter which was particularly mentioned by the noble Viscount, Lord Simon.

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There really must be better search for the real owners of these different ships.
I should like to end by making two suggestions. First, I understand that the British and French have joined forces to call for a major intervention by the United Nations in order to straighten out the differences with regard to Spain. All the experts who have been kind enough to give me some information say that the great thing is to stop the oil from spreading and to destroy the ships involved as quickly as possible. One of the main difficulties arising from destroying the ships is that they always have different plans. I should like to suggest that we might ask the United Nations or some other organisation—perhaps IMCO—to insist that the plans of all ships should be deposited at, perhaps, Lloyd's Register. Therefore, when a ship is stranded, in trouble or on the rocks, those going to tackle the problem will have some ideas of its design. As I understand it, various methods are used for the storage of oil in ships. So perhaps we could have a library of ships' plans which might be kept at Lloyd's Register. As the noble Lord, Lord Buxton, mentioned, there could be better training for the people concerned. Regrettably, the captain of the "Torrey Canyon" was ruined for life; he had a very bad breakdown; but it was due to an error of judgment on his part that the ship went on to those rocks.
Finally, I suggest that there should be a team of trained men to go on to the ships as soon as possible and take action. I suggest that men of Her Majesty's Forces—in particular the Army and the Air Force—should be specially trained so that they are on alert and can be called in at once. They would have a knowledge of the type of ship; they would have the necessary training and would take action, as they do in such incidents as the detonation of bombs. I suggest that we could call for volunteers from the Services who would be interested in this work. Then we should have some trained teams always at hand for emergencies. I think that they would find it an interesting exercise. The Services do not have many very interesting exercises at present, so this is something which the noble Lord, Lord Strabolgi, might perhaps think about.
7.18 p.m.
Lord GREENWAY: My Lords, I should like to start by congratulating the noble Lord, Lord Buxton, on his excellent maiden speech. We certainly all look forward to hearing from him often in the future. I should also like to thank the noble Earl, Lord Kinnoull, for raising this important subject yet again in your Lordships' House. I very much agree with what the noble Lord, Lord Buxton, said, that nothing must interfere with the freedom of the seas. Indeed, from the mariner's point of view it is important that there should be as few restrictions as possible to navigation.
We are dealing here with pollution, an emotive subject. I am inclined to go against what the noble Viscount, Lord Simon, and the noble Lord, Lord Ritchie-Calder, have said as regards doing things in a hurry. I believe that it is much better that people—and preferably seamen, who are people with experience of going to sea—should sit down and carefully consider all aspects of these important questions before coming to any conclusions. Indeed, I think that the noble and learned Lord, Lord Gardiner, said in your Lordships' House quite recently that any legislation adopted in a hurry was almost always bad legislation. I can see great dangers in rushing into all sorts of new legislation connected with this subject, as I believe our Gallic friends across the Channel would dearly like to do.
This brings me to the first question that I should like to ask the Government. The Anglo-French Accidents Technical Group and the Anglo-French Safety of Navigation Group have sponsored a joint Anglo-French contingency plan known as the "Manche Plan" to deal with all types of maritime disasters in the English Channel. This plan was exercised on the 10th and 11th June last year. Another exercise was planned for this year. Unfortunately, the "Amoco Cadiz" incident intervened, and I believe it was decided to use the "Amoco Cadiz" incident as an exercise. I should therefore like to ask the Government whether they are satisfied with the arrangements made under the Manche Plan agreement in the light of what happened in the "Amoco Cadiz" disaster.

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The noble Viscount, Lord Simon, mentioned in passing a speech made in your Lordships' House recently about sub-standard ships and flags of convenience. I believe that to ban flags of convenience has been mooted in certain circles. I should like to say something briefly about this. You have sub-standard ships under all flags and not necessarily under the Liberian and Monrovian flags, et cetera. In fact, our own flag is one of the most attractive flags of convenience at this moment in time. For instance, I believe it costs only about £63 to register a ship under the British flag, and there is no annual levy, whereas taking, for instance, Liberia—and I shall use as an example a 200,000-ton tanker—the annual tax per annum is 10,000 dollars, and if a Greek crew is used there is a further Greek levy of 95,000 dollars a year, thus making the cost of registering a Greek crewed ship under the Liberian flag about 100,000 dollars a year. This is something that is not generally realised.
May I just toss in an idea that I hope the Government will study with a view to the steps that are taken in dealing with major pollution after an accident has occurred. There is a new French idea, that has been brought out by a combination of French shipbuilding companies, of a large ship known, I think I am right in saying, as a de-polluting vessel, and which is described as a "peculiar oil tanker". This ship is based on a design that is in use commercially and with the Navy. Large ships carry landing craft or barges. These can be floated into the stern and then the doors can be shut and the parent ship lifts itself up and steams off.
This particular ship carries its own little fleet of ships which can go out and gather the oil and bring it into this large ship, which then has the capacity of separating the oil and the seawater on the spot. I think I am right in saying that the provisional cost of such a ship is £23 million. I just toss that idea in as something that the Government might like to look at, as I do not think that anything successful has been done so far with regard to cleaning up the mess once it has occurred.
I come now to the major matter that I want to talk about, and that is the business of ship routing. One noble Lord has already mentioned the number of tankers that pass through the Channel every day,
1032
and we have an even greater number of cargo ships, container ships, and what-have-you. Something that is probably not generally thought about when we are discussing these matters, and particularly disasters like the "Torrey Canyon" and the "Amoco Cadiz", is that between those two disasters over 21,000 VLCCs—very large crude carriers—safely traversed the Channel. The statistics look very good when looked at from that aspect.
Shipping lanes were brought in initially in the English Channel in, I think, 1967 when a voluntary scheme was adopted—the first of its kind in the world, I might add. This has evolved over the course of years and has come to what we have today in the Dover Straits Separation Scheme—undoubtedly the best example of a ship separation scheme in the world today. Our expertise here is something that could well be exported to other countries.
In case your Lordships do not know it, the basic idea is to send inward bound ships on the French side of the Channel and outward bound ships down our side of the Channel. This scheme is surveyed by the Dover Straits Information and Surveillance Service, which is run by the coastguard from St. Margaret's Bay. The French have a similar set-up on Cap Gris Nez on the other side of the Channel which I believe is manned, in the main, by French national servicemen.
From St. Margaret's Bay, which I have visited, they oversee all shipping going through the Channel and they report rogues, as they are known, or ships which are contravening the shipping lanes.
As from last year it was internationally agreed that these lanes should be observed, and that fines could be imposed—and certainly have been imposed by our country and also by countries such as Liberia. I think that the desired effect has been achieved to a certain extent. The number of collisions occurring in the Channel has fallen dramatically.
We are using at St. Margaret's Bay some of the most sophisticated radar in the world for this purpose of ship routing. I should like here to pay a tribute to the men who man the coastguard station and the Channel surveillance system at St. Margaret's Bay because they have done a very good job. The Dover Straits Scheme has been in existence for some

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time, as have various schemes in several parts of the world and also round our own coastline. Two other major schemes are the ones off Ushant, which is very relevant to the "Amoco Cadiz" question, and one off the Casquets and the Cotentin Peninsula.
Before I pass on to the new schemes to which IMCO have agreed, and which are coming into effect from 1st January next year, I should like to mention one final point in respect of these separation lanes, and that is several incidents which have occurred recently with regard to large, deep-draught tankers passing through the Dover Straits. That is described as a "RIAM", or "restriction inability to manoeuvre". The internationally agreed rule of the sea is that a ship should give way to a ship coming in from its starboard or right-hand side. I know personally that pilots in charge of some of these large tankers proceeding through the Channel will not necessarily give way to a ship coming in from the starboard side. I am not saying that that is entirely wrong in the circumstances, although it goes right against the internationally agreed "rule of the road" at sea. I, for one, would not like to put my helm over on a large super tanker 20 degrees when I am in the middle of the Dover Straits.
We must look at this carefully and perhaps we shall have to agree on some special local rule to use when going through the Dover Straits, as is used at present in certain harbour areas—Southampton is one, I believe. Somebody described this rather nicely recently as "blinkered navigation"; officers on super tankers enter a shipping lane, think they are on a motorway and think they are all right and can steam straight through without worrying about any other ship. That is a dangerous precedent to set. The noble Baroness, Lady Vickers, mentioned pilotage and compulsory pilotage. Pilots are available for all waters in northern Europe at the moment, and indeed the other day I heard of one pilot who held a Trinity House licence from Europa Point in Gibraltar to the north cape of Norway, so facilities exist for pilots.
I come now to the new IMCO-agreed scheme, which I believe is backed by the
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Government—I shall ask about that later—which will come into operation on 1st January 1979; I believe the new charts are about ready. This scheme provides a new lane for in-bound deep-draught tankers and other ships carrying hazardous cargoes between 27 and 33 miles off Ushant. Inside this lane, and separated from it by six miles, will be a new five-mile wide lane for outward bound ships, including tankers. Since these will normally be in ballast, the scheme says, there will not be so much danger from pollution if there is a breakdown.
Something that has not been mentioned before is that we are now an exporter of oil, so it will not necessarily be light ships going westbound down the English Channel. Inside these lanes is an eight-mile wide lane for other ships entering the Channel. There is a new scheme further up the Channel for the Casquets area which pushes the existing separation lanes further out to sea and gives a five-mile wide lane for westbound ships and a seven-mile wide lane for eastbound ships, separated by a three-mile zone. This is a scheme which has been agreed by IMCO and will come into effect—I think it will be mandatory—for any ship navigating in that area from 1st January next year.
This scheme has one grave defect. As it stands, the in-bound deep-draught tankers and ships carrying dangerous cargoes have to cross the out-bound lane about 30 miles south of Start Point and the ships will have to cross at a fairly fine angle; and there is nothing a seaman fears more than a head-on situation. It is probably only a matter of time before we witness a major collision in the area south of Start Point when the scheme comes into operation. Another drawback is that by pushing the lanes further out to sea in the Casquets area, those deep-draught tankers which at the moment steam up the middle of the Channel—and there is nothing to stop their doing that; as a yachtsman I see it every week-end—will now be forced to mix with other ships and use the separation scheme.
Trinity House have recently come up with a new routing proposal for the Channel, their argument being that in the course of time ships will get pushed further and further out into the middle of the Channel, so we might as well start by

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putting them down the middle straight away. Their scheme is basically a logical extension of the existing Dover Straits separation scheme. It has two through routes, east and west, to provide safe offshore channels at least six to eight miles wide for the main flow of traffic from the Atlantic to north European ports, routes which arc relatively straight for about 200 miles. All deep-draught and potentially hazardous cargoed ships—which, indidentally, are the ones which would be forced to use this scheme—would therefore be kept as far away from the shore as possible.
A major floating aid, or possibly a lightship, would be placed 20 miles south of Start Point to mark the centre line and provide a sophisticated navigational aid at mid-Channel point. Two further buoys would he placed west of that as reference entry points, and those would he fitted with sophisticated navigational aids for ships to home in on. The scheme would involve four cross-Channel gateways at crossing points down the Channel and these would be marked by a large buoy which would line the mid-Channel lane from the existing Greenwich buoy on the Greenwhich meridian, which notifies the start of the Dover scheme, and would be placed at approximately 50-mile intervals down the Channel. I apologise to the House for taking so long at this hour, but this is an important matter which has not arisen in your Lordships' House before.
The only cross-over point in the Trinity House scheme would be 40 miles south of Land's End, where shipping bound outwards for the south Atlantic would cross north Atlantic inbound traffic, and it is considered that the collision regulations as they exist would be sufficient in this open sea area, and if necessary ships could also be instructed to report their position at set times relative to the crossing point of the buoys along the Channel. This scheme is not perfect but it provides a useful discussion point and the Government should look at it. Are the Government satisfied that the IMCO-agreed scheme, which is shortly to be implemented, is, in their opinion, satisfactory?
As a matter of interest, I have with me two letters written in answer to a query raised in the Nautical Review, the journal
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of the Joint Nautical Institute, 70 per cent. of whose members are sea-going, and Lloyd's of London, and these letters show—in fact the majority of letters show—that seamen favour the Trinity House scheme. One letter is from the master of the Liberian tanker "Universe Kuwait" in which he writes:
"I favour the alternative scheme proposed by Trinity House because … the IMOC plan, where off the Casquets loaded tankers come into a crossing situation with other vessels, gives me an uneasy feeling … I feel that, should the IMOC scheme be adopted, another disaster of 'Amoco Cadiz' proportions off the Casquets will have become a very distinct possibility."
The other letter, from another master, referring to the IMCO scheme, says:
"I do not like this scheme. I believe it will create a very dangerous crossing area north-west of Casquets and a three-lane scheme off Ushant may be confusing."
I ask the Government to consider those views, which appear to be shared by the men who are steaming up and down the Channel every day.
My final comments are about communications—and communications problems exist. For example, there was recently an occasion when a tanker was seen to be steaming in loaded towards the Dorset coast. All the authorities were alerted and a helicopter was sent out. The helicopter flew round the tanker trying to turn her round, but eventually it transpired that the tanker had merely been going into anchor, which of course he was perfectly within his right to do. On the subject of communications and this business of ships reporting in—the noble Lord, Lord Ritchie-Calder, referred to mandatory reporting—I believe there is a French proposal under which all deep-draught ships and ships with dangerous cargoes must report in when approaching Ushant. I believe it will be voluntary for a start. Ships would be required to report in quite a considerable amount of information—name, position, course, speed, general destination, cargo, draught—a lot of things which the man on the bridge of a large super tanker, who may well be busy plotting his position and watching the positions of other ships, will not necessarily have the time to run over to the radio telephone to report to a coastal station.
We also have the problem of which language to use if there is to be any reporting in. The French are very keen

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that French should be used as well as English. Indeed, there is nothing to stop anybody navigating the seas from speaking any language he likes. I can see enormous problems here. Finally, I would ask the Government whether they are in agreement with the French idea of ships reporting in? As a final word, my Lords, ship routing is basically done in the interests of safety and when the problem has been solved I think there will be less danger of pollution occurring in the English Channel.
7.31 p.m.
Lord STRATHCONA and MOUNT ROYAL: My Lords, this debate has confirmed what I very quickly found when I started to look at it, that this subject is rather more far-reaching than one might have imagined when one saw the noble Earl's Motion on the Order Paper. I hope that we shall have some opportunity to come back to have a full debate about it at some time, but this will act as an extremely useful trailer this evening and I am very grateful to the noble Earl. I am sure that we all accepted his handsome apology at the beginning. I have to tell him that there were two beneficial results of his little local difficulty, in that a lot of us benefited from the extra briefing that we were able to get upon the subject and in that it flushed out a very distinguished and thoughtful maiden speech from my noble friend behind me. I hope that in future speeches his philosophy is not going to get any deeper, because if it does I doubt that I shall be able to follow him. Nevetherless, it was a very valuable contribution.
Most noble Lords have referred to a number of accidents and I am very glad that we all followed the advice of the noble Earl, Lord Kinnoull, and did not try to act as a court of inquiry into what happened to the "Amoco Cadiz". Curiously enough, nobody mentioned the other tanker—whose name escapes me—which went ashore on its maiden voyage, happily when it was empty, and not so far away from the same area either. What has happened in the three events we have been talking about—the sinking of the "Amoco Cadiz", the "Eleni V" and the "Torrey Canyon"—has shown us that tankers must be added to the list of ships which can be defined as carrying
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noxious cargoes which can inflict their blight, danger and damage hundreds of miles away from where the accident takes place. That was mentioned by a number of noble Lords in different ways and, as somebody who lives 30 miles down-wind from Rathlin Island, I view with some apprehension my forthcoming holiday in that area and hope that the fuel tank of the trawler in question remains intact for long enough or at least that the oil comes out slowly enough for natural forces to control it.
The other point that we have to recognise is that this is a problem which is not going to get better: it will get worse unless we learn the lessons and tackle them urgently. To that extent, I am bound to say that I disagree with the noble Lord, Lord Greenway. We can say without much fear of contradiction that in none of these incidents is the sequence of events and reactions to them wholly beyond criticism. These accidents might be said to represent the tip of an iceberg lurking rather menacingly just below the surface. Having said that, it is also fair to say that I am told that there were something like 21,000 successful passages of tankers up the Channel between the "Torrey Canyon" and the "Amoco Cadiz" incidents, so we must keep a sense of proportion.
I am aware that IMCO and the General Council of British Shipping are considering these problems but I want to suggest that their time-scale may be too long. It is also fair to repeat here the old adage that the best may be the enemy of the good. At the end of my speech, I am going to make what I hope will be one or two constructive suggestions. I agree with most noble Lords, but, in particular, with the noble Viscount, Lord Simon, who emphasised that the best way to get at the problem of pollution is to try to prevent it happening at all. I had chosen Hyde Park Corner as my analogy but the noble Earl, Lord Kinnoull, used Piccadilly Circus at rush hour. What is beyond question, however, is that this area is a very busy one and that that concentration creates special dangers which may need special preventive measures, a special legal regime for minimising the resulting damage after an accident or an incident—whichever you care to call it—and also, special arrangements once an accident has taken place.

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The first curious feature is the strange legal situation to which a number of noble Lords have referred. For example, strictly speaking, Trinity House have authority only out to the territorial limits, but for many years they have operated lightships outside the territorial limits and nobody, so far as I am aware, has complained about that. Indeed, they have long since agreed a median line with the French when it comes to wreck clearance. Their record here is a remarkable example of practical good sense. I suggest, therefore, that it is not all that impossible to make the lawyers see sense. We have the precedent of the 200-mile exclusive economic zone and the 50-mile fishery limits, as the noble Earl, Lord Kinnoull, suggested.
Secondly, there is the question of the manning and the training. Here, I would specifically say that I am not trying to get at the operators of flags of convenience. I should like to suggest to the noble Lord, Lord Ritchie-Calder, that countries operating flags of convenience are becoming increasingly responsible—if that is the right word—and are tightening the standards which they demand. But we have to recognise, as the noble Lord, Lord Buxton, pointed out, that there are tremendous pressures being put on crews these days. The commercial pressures are very great and, without saying so specifically, he indicated to us that the existence of radar in many ways puts an extra strain on the people on the bridge rather than reducing that strain.
The fact remains that some masters—and I am sure they are a tiny minority—have certificates which are either not of an acceptable standard or have been acquired in an improper manner. We ought to be satisfied that any master bringing a ship up the channel has a properly attested and authorised qualification. The pilot service could make a contribution here. I am quite sure that any pilot on boarding a ship is not aboard very long before he has a very clear impression as to whether or not the vessel is efficiently equipped, managed and manned. There might be something to be said for requesting all pilots to make a confidential report on every ship they visit, so that it would quite quickly become abundantly clear when a ship was inadequately run, in the broadest sense of that term.
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There is also the question of routing, and here I do not think that I should add anything to what my friend—if I may call him that—Lord Greenway told us about. From what I know—and I confess that I have been got at—I would support the Trinity House scheme in preference to the IMCO Scheme. I have details of it here, if the noble Lord would care to look at it before he answers the debate, though I dare say he has already seen it. Here a point arises which I think is worth making. I understand that the idea was once mooted of routing very large carriers around the north end of this island, and down in through the North Sea, but apparently, despite our inadequate hydrography, we know that there is not enough water for them there, so that simply is not an option that is open to us.
I also consider that the point made by the noble Lord, Lord Greenway, about transponders and communications is a good one. I cannot believe that it would be so difficult to have transponders on all ships coming into the Channel. I am a pure chauvinist about the matter of language of communications. I do not suppose that we shall ever get the French to agree, but the plain fact is that English is the nearest thing to an international maritime language, in much the same way as it is the international airline language. It seems to me that there would be a good case for saying that every ship that comes up the Channel should have on board someone who speaks either French or English, for starters; and I believe that it will end up by being English only before very long. I turn to another point which I think was mentioned by the noble Lord, Lord Buxton. We must recognise that seafarers have become—dare I say it?—conservative. They have been at it for over 7,000 years, whereas we have been flying for only 70 years, and aviators have had a rather fresh approach.
When it comes to construction standards, I again find that I would not go all the way with the noble Lord, Lord Ritchie-Calder. It seems to me that the classification societies and the insurers ought to address themselves to this matter. If they do not take care of their own interests as well as they might, it is high time that they looked to this. It seems to me that they are the people to do it. Two specific points have been suggested to me. One is the provision of bow thrusters for

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very large vessels. I know that these do not work once a ship is under way, but if there is a breakdown at least one can keep the ship pointing in the right direction. The other point that has been made is that a very large vessel might usefully provide itself with its own towing gear for use in an emergency, because one of the major problems is passing the towing equipment. My recollection, from 30 years ago, is that it is the practice in the Navy that the towed vessel always provides the tow.
On the question of salvage, surely it must be right that international arbitration should be compulsory. I gather that in many cases this occurs now. The concept of arguing over the money while a danger builds must be wrong. However, we should not get over-emotional about the issue. In an article the other day, a picture was painted of the salvage tugs as vultures hovering rather like Lady Vickers' Cornish pirates of yore, waiting for disasters to occur. If we are to have an alternative arrangement as regards disaster provision it will be exceedingly expensive unless the rewards for the curing of a disaster are very substantial.
A number of noble Lords have referred to the need for better techniques and better emergency services to deal with pollution once it has occurred. I feel that this, too, can to some extent be put back to the insurance companies. We know that there is the difficulty of establishing claims and obtaining compensation. Here I think I would again disagree with the noble Lord, Lord Ritchie-Calder. I am not trying to pick on him in any way. He said that he does not think that shipping companies should be indemnified by insurance companies. But it seems to me that it would be very much in the interests of an insurance company which is asked to indemnify a shipping company to make jolly sure that an indemnity is not called for—
Lord RITCHIE-CALDER: My Lords, objected to their being indemnified for fines.
Lord STRATHCONA and MOUNT ROYAL: I quite accept that; and it is obviously objectionable that legal obligations arising from contravening the law should be insured against, although I
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suppose that there is no law against doing that. I should not disagree with the noble Lord if he would go along with me in the view that the insurers can quite properly pick up that kind of indemnification. The idea of the noble Baroness, Lady Vickers, that plans should be made available within the limits of commercial confidentiality was very practical. because there must be a real problem here.
So much for the principles. We return to the question of what to do in order to get quick, practical action. I agree with the noble Earl, Lord Kinnoull, that the Channel and the North Sea must be regarded as special situations. It is perfectly true that, historically, this country has always asserted the freedom of the seas, and that implies the right of innocent passage, which I think was originally meant to mean unwarlike passage. It seems to me doubtful whether innocence can be extended through naivety into irresponsibility. We now know the dangers that we face. As potential sufferers we surely have the right to demand special care and to impose special precautions on those who seek to carry noxious cargoes through the narrow waters. I believe that they must prove that they have taken all reasonable precautions before they do so.
So I am forced to the conclusion that the Channel and the North Sea should be declared a special control zone from, say, a line between Ushant and the Scillies, up to somewhere north of the Scheldt estuary. It seems to me that the quickest way to impose this—and I mean impose it—would be to seek an agreement between the riparian States, as was done under the spur of the discovery of the resources under the North Sea. It did not take very long for it to be decided how best to carve up that particular bonanza, and happily no one has challenged the right so to do. I suppose that that suggestion involves the United Kingdom, France, Belgium, Holland, and perhaps Ireland and Germany. The noble Viscount, Lord Simon, was on very much the same point when he talked about the EEC, though I should have thought that the riparian States constituted a marginally better proposal, but the general idea is the same.
We certainly ought to take IMCO along with us; and here I do not need to add very much to what the noble Lord,

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Lord Ritchie-Calder, said about the endless delays regarding the Law of the Sea Conference, and what the noble Earl, Lord Kinnoull, said about it having taken eight years for IMCO to achieve very much. It is a United Nations arm. That is not a body which is noted for enormously quick action. It is a big body; it is ponderous and slow-moving; it is subjected to political attitudinizing, if I may use that word; and sometimes, regrettably, those who are taking these attitudes are nations with only minimal maritime experience, whereas the nations I am talking about would be those most vitally concerned, all of whom have been at it for a very long time.
I should have thought that any ship entering this special zone should be deemed to be accepting certain special conditions and obligations—that is to say, the certification of the master, the acceptance of the routing, the notification of noxious cargoes (however one cares to define those), agreement on identification and communication, and the undertaking to notify any incident or potentially hazardous situation and acceptance of immediate salvage action subject to international arbitration.
It seems to me that it would not be awfully difficult for infringement of any of these accepted rules to lead the riparian States politely to decline to accept the ship the next time round unless its contempt had been discharged, which I believe is the legal expression for it. I hope I do not make this sound too simple, but I really believe that something on these lines would command the support of the shipping industry, the insurance interests, the pilots, Trinity House and I hope perhaps even the Government.
7.53 p.m.
Lord STRABOLGI: My Lords, as the noble Lord, Lord Strathcona, has said, this has been a far-reaching debate. I agree with him and other noble Lords that it has been a very useful debate, and it is one that I welcome. I should like to thank the noble Earl, Lord Kinnoull, for putting down this Question. I appreciate all that he said, and, wearing my other hat of Deputy Chief Whip, I congratulate him on his insistence in ensuring that this debate took place before the Recess. Before replying to all the speeches, I should like to join with my
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noble friend Lord Ritchie-Calder in congratulating the noble Lord, Lord Buxton, most warmly on his maiden speech. His family and my family are very old friends, and we are very glad to see him here. His speech, I think, has been a most notable contribution, and we look forward to hearing from him on many other occasions.
My Lords, the Government are determined that in the future, just as in the past, the United Kingdom should play a leading role in the search for effective measures to reduce oil pollution from ships. This involves the pursuit, not only of measures to reduce deliberate oil pollution as a result of routine ship operations—for example, tankers washing out their tanks, which has been referred to today—but also of measures to improve the safety of ships, particularly oil tankers, and thereby to reduce the number of shipping casualties which can result in this serious problem of oil pollution, with all its far-reaching consequences. As has been said, our coasts may be polluted by vessels of any nation. The problen can therefore be dealt with only on an international basis if we are to avoid the anarchy of conflicting national requirements. Consequently, we have directed our main efforts—I shall have something to say about our other efforts later on—towards action in IMCO, which is the United Nations specialised agency and which has its headquarters in London, in recognition of the traditional leading role of this country in maritime affairs.
But, my Lords, we must also recognise that there are no quick or straightforward solutions to the problem of oil pollution. We must progress step by step through unremitting efforts by all the nations concerned. I am glad to say that there have been a number of important advances so far this year. In January, the 1969 amendments to the International Convention for the Prevention of Pollution of the Sea by Oil 1954 finally came into force internationally. The amended convention lays down discharge standards which, if universally adopted, should substantially eliminate oil pollution as a result of routine ships' operations. It is worth noting, I think, that the adoption of these standards was made possible by the development, largely at the initiative of the British oil industry, of the "load on top" system. Under this system,

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oily tank washings are pumped into a special slop tank. When the oil content of the washings has risen to the top of the tank, the sea water element is pumped off from below, and then the next cargo is loaded on top of the remaining oily residues.
In February, agreement was reached at the IMCO Conference on Tanker Safety and Pollution Prevention on protocols to the 1973 International Convention for the Prevention of Pollution from Ships and to the 1974 International Convention for the Safety of Life at Sea. These protocols should improve safety by requiring all tankers of 10,000 tons gross and above to have two separately-operable remote steering gear control systems, and to be fitted with at least two independent radars, as well as by requiring more frequent inspection of the equipment of older tankers. These protocols should also reduce the potential for operational oil pollution by adopting requirements for segregated ballast tanks and crude oil washings. Of course, safety depends very much on the human factor, as has been recognised today, and with this in mind IMCO has recently held a conference in London on the training and certification of seafarers. At this conference, a convention was concluded on minimum standards of training for certificates of competency, including special training requirements for the officers and crews of oil tankers and of other ships carrying noxious cargoes in bulk.
Conventions and protocols also have to be brought into effect. IMCO agreed a target date of mid-1979 for the 1974 Safety of Life at Sea Convention and its protocol, and a target date of mid-1981 for the 1973 Prevention of Pollution from Ships Convention and its protocol. The United Kingdom has also ratified the 1974 Safety of Life at Sea Convention. In May, the Government published a White Paper, which I was asked about earlier, which includes draft clauses of a new merchant shipping Bill. I should like to say in answer to the noble Baroness, Lady Vickers, that the Bill will be introduced into Parliament as soon as possible, and it contains the powers necessary to implement the protocol to the 1974 Safety of Life at Sea Convention as well as the protocol to the 1973 Prevention of Pollution from Ships Convention.
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Conventions and protocols have to be enforced, of course, as the noble Viscount, Lord Simon, recognised. This is primarily a matter for the flag State of the ship concerned, but there is also a role for the State at whose port the ship sails. The marine administrations of eight North Sea States have recently signed a memorandum of understanding designed to concert control procedures over the standards of merchant ships visiting their ports. This memorandum came into force on 1st July this year, and covers both safety conventions agreed under the auspices of IMCO and a series of conventions dealing with crew matters agreed under the auspices of the International Labour Organisation.
My Lords, I should like to say a little more about enforcement in answer to the noble Viscount, who suggested that we might, with other like-minded States, enforce international conventions before they have been ratified. I am sure that noble Lords will accept the very strong arguments in favour of multilateral action in this area. If we were to enforce new conventions immediately, this would constitute a real deterrent in the way of reaching agreement on new conventions. This is particularly so because they frequently necessitate some preparation on the part of maritime States.
I should like now to say a few words about oil spillage. The central objective of our contingency arrangements for dealing with oil spills from ships is to minimise the pollution damage which may be done to seabirds, fisheries and ecologically sensitive areas and amenity beaches. These contingency arrangements fall into two parts. The Department of Trade are responsible for dealing with oil spills at sea and the coastal and local authorities are responsible for dealing with any oil that comes close inshore or actually comes ashore. The Department of Trade's action plan is to spray chemical dispersants from ships. So far, this is the only method proven to be generally reliable and effective in the often turbulent waters found around our coasts.
The Department have centralised responsibility to the principal officers of the nine survey districts which together cover the United Kingdom coastline. Within a framework of general guidelines, each principal officer has drawn up his

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own contingency plan which provides for close consultation with the local authorities, with local officials of the appropriate fisheries department and with local officials of the Nature Conservancy Council and other wild-life interests. This local co-ordination is a cardinal feature of the contingency arrangements. Stocks of spraying gear and dispersants are held at various points around the coast, and principal officers have made provisional arrangements to hire suitable vessels as and when the need arises. The local authorities have substantial resources of men, vehicles and mechanical equipment for their other functions which can also be used for beach clearance. They have also acquired necessary items of specialist beach-cleaning equipment. A number of systems for containing and then recovering oil mechanically from the sea surface, while generally ineffective in the open seas, can, of course, be useful in sheltered or inshore waters. Booms may also be useful in protecting particularly sensitive areas and entrances to harbours or small rivers.
An interdepartmental group of officials reviewed our contingency arrangements in 1975/76. Their report concerned the basic structure and recommended a number of more detailed changes and improvements. That report was published in September 1976 to provide an opportunity for debate and comment. It was subsequently broadly endorsed by the Government in July last year. Since that time, we have experienced the massive pollution of the Britanny coast, resulting from the tragedy of the stranding of the "Amoco Cadiz", and the serious pollution of our own East Anglian coast following the collision involving the "Eleni V" which has been mentioned by several noble Lords today.
I must emphasise that our contingency arrangements are geared to the generality of oil spills. They could not prevent coastal pollution following a spill of "Amoco Cadiz" dimensions. Indeed, in the present state of technology, no realistic at-sea organisation can give anything approaching a guarantee against coastal pollution following a major oil spillage. The "Eleni V" presented its own difficulties. Although the quantity of oil spilled was not particularly great, chemical dispersants and mechanical recovery systems were relatively ineffective
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when faced with heavy fuel oil. This particular viscous oil has to be heated for pumping and congeals, as your Lordships know, into a semi-solid state at sea temperatures.
My Lords, these incidents have underlined the need to learn from all available experience, as my noble friend Lord Ritchie-Calder said, and a comprehensive stocktaking of our contingency arrangements has been set in hand—which I say to the House quite frankly. In addition, the Select Committee on Science and Technology has been undertaking an inquiry into the management of the "Eleni V" problem by the Government and other public authorities. I think your Lordships will agree that it would not be appropriate for me to comment further until the Select Committee of another place has reported. It is, of course, having a very close look at this matter.
I should also mention that our arrangements have an international dimension. The 1969 (Bonn) Agreement for Cooperation in Dealing with Pollution of the North Sea by Oil provides for the exchange of information between the eight parties about oil spills likely to affect other member countries and for mutual assistance in dealing with major oil pollution incidents. In the case of the Channel, mentioned by the noble Lord, Lord Greenway, in his constructive and interesting speech, Britain and France have developed a joint contingency plan for dealing with all types of maritime disaster—Mancheplan—which in essence lays down procedures for co-ordination and joint operations in major emergencies. I am glad to say in answer to the noble Lord, Lord Greenway, that we shall be having a joint British-French test exercise early next year.
The Department of Industry's Warren Spring Laboratory is nearing the end of a two year research programme aimed at developing a containment and mechanical recovery system for oil on the sea surface, which can be used in the open seas around our coasts. Results so far, I am glad to tell the House, are promising. Work is also in hand to evaluate the potential of spraying dispersant front both large and small aircraft. This could significantly improve our response capability. We also intend to set further work in hand with the object of developing useable

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techniques for burning oil remaining aboard a stricken tanker. As in the case of measures to improve tanker safety and reduce oil pollution, the development of oil spill clearance measures is a continuing process in which there are no quick or easy solutions.
My noble friend Lord Ritchie-Calder asked about the 1969 Amendments. The 1969 Amendments to the 1954 Oil Pollution Convention which regulate operational discharges of oily water from ships came fully into force internationally in January this year, as my noble friend said. However, the United Kingdom and several other major maritime nations had already applied these provisions to their own ships for some years previously—the United Kingdom since early 1973.
The noble Lord, Lord Dunleath, referred to the "Ella Hewitt". This trawler sank in Church Bay, off the Rathlin Islands, in 1963. It took with it about 150 tons of fuel oil. The owner of the wreck has the primary responsibility to take measures to deal with any spillage. The Department of Trade agreed in the spring of this year to take action to protect the public interest. A proposal to lift and remove the wreck proved to be disproportionately expensive and alternative means of disposing of the oil are being considered. Action was deferred during the bird breeding season (which the noble Lord mentioned) but it is planned to carry out the operation in the autumn. The Department will be writing to the noble Lord, Lord Dunleath, to give him details.
The noble Baroness, Lady Vickers, referred to exercise "Black Watch" which took place off Milford Haven and simulated collision between a large oil tanker and a passenger-carrying ferry. It tested both search and rescue and antipollution facilities, and involved action by several authorities, including the Department of Trade and the Services, mentioned by the noble Baroness, and the Milford Haven Conservancy Board. The contingency arrangements worked well; but detailed improvements will be made to local arrangements as well as being disseminated to similar organisations in other parts of the country.
In answer to the noble Lord, Lord Greenway, the news of the French
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depolluting vessel is noted. In general, anti-pollution vessels are expensive, especially when only used infrequently. Our own Warren Springs Laboratory has in recent months been developing a system of recovering oil from the sea surface to be used by vessels of opportunity, though it is not yet fully developed but the results are encouraging. The noble Lord, Lord Greenway, also spoke about ship routing schemes. The United Kingdom has also played a leading role in securing improvements in the safety of navigation through international agreements on ship routing schemes in international waters.
The first internationally adopted separation scheme was that in the Dover Strait. The Anglo-French Safety of Navigation Group's recent report shows how, as a result of sustained efforts over a period of years, ship behaviour has improved in that busiest of all sea lanes. Collisions, I am glad to say, have fallen from an annual average of 12 before 1972 to a yearly total of six or less in subsequent years, and only three in 1977. There has been a similar dramatic fall in the number of contraventions of the scheme. Elsewhere in the Channel we have acted with France and through IMCO, as the noble Lord, Lord Greenway, said, to amend the separation schemes off Ushant and the Casquets so as to keep tankers further off-shore. It is too early to say yet what the results will be, but we hope that they will be successful.
We are currently putting forward Amendments in IMCO to the schemes off our own South-West coasts. When framing our proposals, we have had the benefit of the advice of Trinity House, as mentioned by the noble Lord. In the coming months, we shall be looking carefully at their suggestion for a shipping "motorway" through the Channel, and other proposals on ships' routing. We shall be helped in this by the results—to be published shortly—of a survey made last year of traffic throughout the Channel.
I should also mention that we are in the final stages of a joint study with France of a ship movement "reporting in" system as they pass through the traffic separation schemes in the Channel. This would cover large tankers, gas and chemical carriers and other ships that might be a danger to them, and would be subject to

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international agreement in IMCO. We shall be submitting our detailed plans to IMCO next week.
The noble Lords, Lord Greenway and Strathcona and Mount Royal, mentioned the very important matter of communications and the problems of language. It is not thought that this will be a problem in this particular connection, because English is of course the international maritime language and will probably be used for the great majority of the reports. We note what both noble Lords have said.
Our efforts have not, however, been confined solely to the busy seaways of the Channel and the Dover Straits. After a survey of traffic and its behaviour in the other United Kingdom separation schemes around the Irish Sea, we shall shortly be proposing various improvements in IMCO. We have also been encouraged by the action of the Marine Advisory Committee, representing most of the major oil companies working in British waters, in drawing up suggested routes for tankers sailing near the Shetlands and in the Irish and North Seas. I understand that these routes may soon be published. This is a useful self-help scheme to improve the safety of navigation.
The noble Earl, Lord Kinnoull, raised the question of the intervention after a casualty. He referred to the possibility of a tanker collision outside our territorial waters. In such circumstances, we would indeed first endeavour to contact the ship-owner and flag State. However, if there were insufficient time to do so, we have power to intervene under the Prevention of Oil Pollution Act 1971. We would of course use these powers as appropriate.
The noble Earl also asked: What are the penalties for disregarding separation lanes? Contraventions of the rules governing behaviour of shipping in separation schemes are at present subject to a maximum fine of £100. This of course has for some time been considered inadequate. I think that it is ludicrous. It was proposed in the White Paper published in May, which contained draft clauses of a new merchant shipping Bill, that the maximum penalty should be increased at £1,000. In view of the great harm which may result from various contraventions, however, this maximum
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sum, I am glad to say, is now being examined with a view to ensuring that it is established at an appropriately severe level.
With regard to United Kingdom territorial waters, I may say in answer to the noble Earl, Lord Kinnoull, that the question of a possible extension of United Kingdom's territorial waters has been raised, and I can confirm that this issue is now under consideration by the Government. The noble Earl also asked about liquefied gas carriers. IMCO codes for the construction and equipment of ships carrying liquefied gasses in bulk and for existing ships carrying liquefied gasses in bulk, lay down minimum standards of equipment for gas carriers which take full account of the hazardous nature of the cargo. Nearly all gas carriers built since 1972 have been designed to meet the code standards. The recent IMCO Conference reorganised the need for special training for the crews of gas carriers as well as of oil tankers.
The noble Earl, Lord Kinnuoll, asked if the Lloyd's open form is satisfactory. As a result of the uncertainty which appears to have surrounded events leading up to the stranding of the "Amoco Cadiz", a range of studies on the present international salvage regime has been set in hand. The council of IMCO have accepted the need for urgent attention to be given to this subject. The secretariat have therefore been instructed to prepare a report setting out existing weaknesses and measures to remove them.
In answer to the noble Earl's question about spillages, reports received by Her Majesty's Coastguard of sitings of oil around United Kingdom coasts, either at sea or on the beach, totalled 169 in 1976 and 164 in 1977. No figures are yet available for this year. It is not possible to say how many of these sitings are genuine and how many were what I may describe seriously as "false alarms" through heightened interest. We shall certainly take note of what the noble Baroness said about the possibility of a Lloyd's register of stranded ships, and I will write to her if I may about that.
I should like now to say a few words about compensation and the general position, a point which was raised by my noble friend Lord Ritchie-Calder. The arrangements for compensation for

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oil pollution damage have been greatly improved since the stranding of the "Torrey Canyon". The first major step forward was the International Convention on Civil Liability for Oil Pollution Damage in 1969. Under this Convention, the owner of an oil tanker is generally liable for oil pollution damage whether or not the damage results from his fault or negligence. The owner of the oil tanker may limit his liability within a maximum of about £9 million per incident, unless the incident results from his own fault, when his liability is unlimited. The owner of a tanker carrying more than 2,000 tons of oil as cargo must carry insurance to cover his maximum liability. This Convention has been ratified by 35 countries and came into force on 19th June 1975. The Merchant Shipping (Oil Pollution) Act 1971 made the necessary changes to United Kingdom law.
It was realised in 1969 that there would still be circumstances in which the shipowner would not be liable or in which his liability would be insufficient to meet the cost of the oil pollution damage. As a result, the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage was agreed in 1971. This convention will increase the amount of compensation available to those who suffered damage from oil pollution or who take action to avoid or minimise such damage to about £19½ million, and includes a procedure to increase that amount up to about £39 million at any time. This topping-up fund will derive its monies from a levy on oil importing companies. The United Kingdom ratified this convention in April 1976 and the powers required to implement it are available in the Merchant Shipping Act 1974. The convention will come into force on 16th October 1978.
The oil industry had, of course, as is well known, voluntarily set up a scheme to supplement the 1969 convention, and this is known as the Contract Regarding an Interim Supplement to Tanker Liability for Oil Pollution, which in its abbreviated form is known as CRISTAL. This came into effect on 1st April 1971 and covered (and indeed still covers) nearly all the crude oil and fuel oil moved by sea. The purpose of CRISTAL is to increase the amount available from all sources to
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reimburse reasonable expenditure on avoiding or minimising oil pollution damage or as compensation for such damage. Until recently the maximum amount available from all sources was made up by CRISTAL to about £16 million per incident. Since 1st June, CRISTAL has increased this figure to about £19 million. Compensation is available to private parties as well as to Governments, and does not depend on the tanker owner's fault or negligence. The tanker owner's "clean-up costs" are, however, a first charge on CRISTAL.
CRISTAL, which is largely a voluntary scheme, as I said, will be largely superseded by the statutory 1971 Fund Convention, when this comes into force. I understand the 1969 convention and the CRISTAL scheme apply to the "Eleni V" incident: consequently, we expect that there will be up to £16 million available to meet claims for compensation. It is soo soon to estimate what the claims will be. At a rough estimate, the Government expect to claim some £2 million. The main items covered are the hire of dispersant spraying vessels, the cost of the dispersants used and the cost of the salvage operation.
Then there is the question of the local authorities. Local authorities, like anyone else, can make a claim under the Merchant Shipping (Oil Pollution) Act 1971 which implements the 1969 convention and, of course, under CRISTAL. For the most part, one would expect their claims to be for expenditure on preventing or reducing pollution damage or on cleaning up oil pollution. It has now been decided that in the initial stages the Government will negotiate on a without-prejudice basis with the "Eleni V" insurers and CRISTAL for the recovery of the costs of the East Anglian local authorities as well as its own coasts. I am sure that will be of interest to the noble Lord, Lord Buxton, who conies from East Anglia.
Private parties—very important—such as fishermen and hoteliers can also make a claim under the Merchant Shipping (Oil Pollution) Act 1971 which implements the 1969 convention, or under CRISTAL. Apart from claims for actual physical damage, for example, fouled fishing nets, we would expect most of these claims to be for loss of earnings resulting from oil pollution damage.

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The noble Lord, Lord Ritchie-Calder, asked about insurance against fines. The feasibility of preventing shipowners from taking out insurance against fines is under consideration by the Government. There are difficulties, including the fact that this form of insurance is offered by insurers who are not necessarily based in the United Kingdom; but it is something that is in hand.
I should like to say, in conclusion, that this has been a very interesting and useful debate. I hope I have answered most of the points that have been raised by your Lordships, but if there is anything I have not covered I shall be glad to write to noble Lords and answer them in more detail.

PARLIAMENTARY PENSIONS BILL
Returned from the Commons with certain Lords Amendments agreed to; and with the remaining Lords Amendment disagreed to with a Reason for such disagreement.
GREATER LONDON COUNCIL (GENERAL POWERS) (No. 2) BILL
Returned from the Commons with the Amendments agreed to.
VALE OF GLAMORGAN (BARRY HARBOUR) BILL
Returned from the Commons with the Amendments agreed to.
  QUANGOS: INFORMATION ON MEMBERSHIP AND REMUNERATION
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  NUTRITION OF CHILDREN
  NUTRITION OF CHILDREN
  THE JAY COMMITTEE: COMPLETION OF REPORT
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  LOCAL GOVERNMENT ACT 1966: SECTION 11
  LOCAL GOVERNMENT ACT 1966: SECTION 11